in Re Lett Estate
314 Mich. App. 587
| Mich. Ct. App. | 2016Background
- John and Nancy Lett divorced by judgment entered August 24, 2009; the judgment canceled any interest either spouse had in life-insurance proceeds existing at the time and required John to maintain a separate life policy naming Nancy as beneficiary in an amount at least equal to his half of a HELOC ($28,500) until that debt was satisfied.
- John removed Nancy as beneficiary after the divorce but later (April 6, 2010) executed a Kent County beneficiary form naming Nancy 100% beneficiary of his employer group life policy; form did not limit proceeds to $28,500 or include a sunset or contingent beneficiary.
- John paid the HELOC in full in July 2012 but did not change the beneficiary designation before his death on July 27, 2014; proceeds totaled roughly $120,000.
- Craig Lett, personal representative of John’s estate, petitioned the probate court to void Nancy’s post-divorce beneficiary designation, arguing the divorce judgment and MCL 552.101 barred Nancy’s receipt and that allowing her to receive the proceeds would be unjust.
- Probate court held a bench trial, found John named Nancy only to avoid contempt/enforcement, and ordered proceeds distributed according to the policy to John’s children; Nancy appealed.
- The Court of Appeals vacated the probate court’s order and remanded with instructions to dismiss Craig’s petition and enter judgment for Nancy, concluding neither MCL 552.101 nor the divorce judgment invalidated a post-judgment beneficiary designation and Craig alleged no grounds (fraud, mutual mistake, duress) to reform or set it aside.
Issues
| Issue | Plaintiff's Argument (Craig) | Defendant's Argument (Henson) | Held |
|---|---|---|---|
| Whether John’s post-divorce beneficiary designation is void under the divorce judgment and MCL 552.101 | Divorce judgment and MCL 552.101 (and the judgment’s waiver language) void or limit Nancy’s interest; designation was only to secure debt and avoid contempt | MCL 552.101 and the judgment affect only pre-judgment designations; nothing prohibits post-judgment designation and Craig alleges no independent legal basis to void it | Court: designation valid; MCL 552.101 and the judgment only addressed interests existing at entry of judgment and do not invalidate post-judgment designations |
| Whether petition stated a claim to reform or void the designation based on mistake, fraud, duress, or severe stress | John named Nancy under coercion/pressure from contempt proceedings and to avoid enforcement; allowing full proceeds is unjust | No allegations or evidence of fraud, mutual mistake, duress, or such severe stress that John could not understand his act; unilateral mistake/inertia insufficient | Court: petition failed as a matter of law; no pleaded or admissible basis to reform/set aside designation, so dismissal required |
Key Cases Cited
- Moore v. Moore, 266 Mich. App. 96 (2005) (statute requires court to determine pre-divorce beneficiary rights; does not void post-judgment designations)
- MacInnes v. MacInnes, 260 Mich. App. 280 (2004) (interpreting judgment/settlement language on insurance beneficiary issues)
- Casey v. Auto Owners Ins. Co., 273 Mich. App. 388 (2006) (reformation requires clear-and-convincing proof of mutual mistake; unilateral mistake insufficient)
- Keyser v. Keyser, 182 Mich. App. 268 (1990) (relief from contracts requires fraud, duress, mutual mistake, or severe stress)
- Starbuck v. City Bank & Trust Co., 384 Mich. 295 (1970) (statutory precursor discussion: MCL 552.101 prevents inadvertent payment to divorced spouse but does not prohibit renaming or retaining ex-spouse as beneficiary)
- Maiden v. Rozwood, 461 Mich. 109 (1999) (standards for summary disposition review)