61 Mass. App. Ct. 414 | Mass. App. Ct. | 2004
The plaintiff, Richard Foster, brought an action in the Superior Court seeking the proceeds of two insurance policies owned by his former wife, Janice Hunter (decedent), which designated the decedent’s new husband, Michael J. Hurley, as beneficiary.
In his answer, Hurley claimed that Foster had not submitted sufficient evidence to support the elements of an unjust enrichment claim. Hurley also argued in regard to Foster’s request for equitable substitution that, under the separation agreement, the decedent was free to designate the beneficiary of her choice on the specific policies in question. Hurley also claimed that any relief to which Foster may be entitled was limited by the terms of the separation agreement to a creditor’s claim against the decedent’s estate.
Upon application by Foster, a Superior Court judge entered a temporary restraining order, ordering Hurley to pay the insurance proceeds he received, up to $200,000, to the special administrator, to be held in escrow. When that order expired, Foster was denied further injunctive relief. The administrator then distributed the proceeds of the two policies to Hurley on April 9, 2001.
Foster moved for partial summary judgment on his theory of equitable substitution, and Hurley moved for judgment on the pleadings. A Superior Court judge, after a hearing, allowed Foster’s motion with respect to the UNUM policy and awarded Foster the $168,000 in proceeds under that policy insofar as Foster was acting for the benefit of the children. The judge also allowed Hurley’s motion as it concerned the $31,338.19 Prudential policy and awarded Hurley those proceeds. On cross appeal, both parties claim error by the motion judge, and each party asserts his entitlement to the proceeds of both policies.
“12. Life Insurance. . . . [U]ntil the children are emancipated as defined in this Agreement, the Wife shall maintain and keep in effect one or more life insurance policies on her life totaling no less than $200,000 naming the Husband as primary beneficiary.”
There was a reciprocal obligation on the part of Foster. The life insurance policies on his life, however, needed to total no less than $240,000.
In 1995, when the separation agreement was executed, the decedent had a group life insurance policy with UNUM through her employment with Children’s Hospital, and Foster was the named beneficiary on the UNUM policy.
The decedent died on August 31, 2000, at which time her two children were unemancipated (as defined by the separation agreement). At the time the decedent died, she did not have any life insurance policies naming Foster as beneficiary. Hurley applied for the insurance proceeds from both policies and received
Analysis. Lacking controlling Massachusetts precedent, we begin our analysis of the cross appeals by examining decisions in other jurisdictions that have addressed the issue raised in this matter. Those decisions, we note, are grounded on principles of restitution and unjust enrichment.
“[A] promise in a separation agreement to maintain an insurance policy designating a spouse as beneficiary vests in the spouse an equitable interest in the policy specified, and that spouse will prevail over a person in whose favor the decedent executed a gratuitous change in beneficiary.” National Benefit Life Ins. Co. v. Kelly, 160 A.D.2d 570, 570-571 (N.Y. 1990), quoting from Rogers v. Rogers, 63 N.Y.2d 582, 586-587 (1984). See Brunnenmeyer v. Massachusetts Mut. Life Ins. Co., 66 Ill. App. 3d 315, 318 (1978); Lincoln Natl. Life Ins. Co. v. Watson, 71 Ill. App. 3d 900, 902 (1979); Appelman v. Appelman, 87 Ill. App. 3d 749, 753 (1980); In re Schwass, 126 Ill. App. 3d 512, 514 (1984); IDS Life Ins. Co. v. Sellards, 173 Ill. App. 3d 174, 177 (1988); Perkins v. Stuemke, 223 Ill. App. 3d 839, 842 (1992); Hirsch v. Travelers Ins. Co., 134 N.J. Super. 466, 470-471 (1975); Simonds v. Simonds, 45 N.Y.2d 233, 239 (1978); Markwica v. Davis, 64 N.Y.2d 38, 40 (1984); In re Estate of Tanenblatt, 160 Misc. 2d 490, 492 (N.Y. Sur. Ct. 1994); Torchia v. Torchia, 346 Pa. Super. 229, 233 (1985).
It has been held that if sufficient consideration supports the insured’s promise to make the claimant the beneficiary or not to change the designation so as to deprive the named beneficiary of his interest therein, the claimant takes a vested interest in the proceeds.
It has been stated that a settlement of property rights arising from a contemplated divorce is satisfactory consideration for the acquisition of such a vested interest in a policy designation. See Hunter v. Hunter, 41 Conn. Supp. at 292, quoting from Kulmacz v. New York Life Ins. Co., 39 Conn. Supp. 470, 475 (1983); Brunnenmeyer v. Massachusetts Mut. Life Ins. Co., 66 El. App. 3d at 318; Appelman v. Appelman, 87 Ill. App. 3d at 754-755; Perkins v. Stuemke, 223 Ill. App. 3d at 844-845; Hundertmark v. Hundertmark, 372 Pa. at 142. See also Appleman, supra. Massachusetts law appears to agree in principle. See Green v. Green, 13 Mass. App. Ct. 340, 342-343 (1982) (“cases are legion in which wives or children who were removed as beneficiaries of life insurance policies in violation of the terms of separation agreements or divorce judgments have been permitted to recover the proceeds of such policies . . . from the improperly substituted beneficiaries. . . . The beneficiary . . . has a vested equitable interest”).
The principles guiding our discussion were found to be apphcable even where the required designation as beneficiary had never been effected. See Lincoln Natl. Life Ins. Co. v. Watson, 71 Ill. App. 3d at 902. Thus, courts have also recognized an equitable interest in the proceeds of after-acquired insurance policies. See Appelman v. Appelman, 87 Ill. App. 3d at 754-755 (constructive trust proper for policy which differed from that named in marital settlement agreement); In re Schwass, 126 Ill. App. 3d at 516 (court imposed constructive trust on proceeds of replacement policy); Perkins v. Stuemke, 223 Ill. App. 3d at 843-844 (constructive trust proper even though policy at issue differed from that named in divorce decree); Simonds v. Simonds, 45 N.Y.2d at 240 (constructive trust proper on insurance proceeds from after-acquired policies).
A. The UNUM Policy
While agreeing with the general principles above, Hurley argues on appeal that the motion judge committed error as to
In Gleed, while a divorce action was pending, a Probate Court judge issued a temporary order prohibiting both parties from transferring or otherwise disposing of their marital assets while their divorce action was pending. Id. at 499. The husband changed the beneficiary of his insurance policies from his wife to his daughter. Ibid. The Supreme Judicial Court ruled that the husband did not violate the temporary restraining order because there was no specific order preventing or prohibiting the beneficiary change. Id. at 500.
We agree with Hurley that there was no specific order in the separation agreement requiring the decedent not to change the beneficiary on any of her insurance policies. However, the order in Gleed was a temporary order issued prior to the underlying issues being litigated. Such orders, issued prior to trial, must be specific and unambiguous to maintain the status quo before the case is actively litigated. In contrast, a court order, such as the one under scrutiny here, is necessarily less restrictive because circumstances may arise where a party may no longer be able to maintain a specific policy or secure a different policy at a lower price. Therefore, Gleed does not control here.
Foster claims that Green v. Green, supra, controls the disbursement of the UNUM policy proceeds. In Green, the husband and the wife, in connection with divorce proceedings, entered into a stipulation, which was merged in the divorce judgment, by which the husband agreed to maintain their children as beneficiaries under certain life insurance policies. Green v. Green, 13 Mass. App. Ct. at 340. The husband remarried and substituted his second wife as beneficiary on his life insurance policies. Id. at 340-341. The husband later died and the children brought an action against the second wife. Id. at 341.
This court ruled that “[b]y reason of the power typically reserved by the terms of the policy to the insured to change
Hurley argues, however, that Green does not control because, in that decision, the separation agreement referred to “certain insurance policies,” whereas the separation agreement under scrutiny here does not refer specifically to the UNUM policy and did not require Foster to be named as beneficiary of any specified policies. Therefore, the UNUM policy, according to Hurley, became the decedent’s exclusive property, to which Foster released all claims, under another section of the separation agreement.
We agree that section 12 of the separation agreement does not specifically refer to the UNUM policy or otherwise identify it. Furthermore, we recognize that Massachusetts decisions that are concerned with similar issues refer to existing policies, or otherwise identify them.
There is no question that the separation agreement in this matter was poorly drafted.
B. The Prudential Policy
The motion judge awarded the proceeds of the Prudential policy to Hurley because he interpreted Green v. Green, 13 Mass. App. Ct. at 342-343, to apply only to those policies that were in existence at the time that the separation agreement was signed. Therefore, because the Prudential policy was acquired after that event, the judge reasoned, Hurley was entitled to the proceeds of that policy.
We do not read the Green decision as being so restrictive. As we have noted earlier, other jurisdictions, notably Illinois and New York, have imposed a constructive trust on insurance proceeds from after-acquired policies. By removing Foster as beneficiary of the policy in existence at the time the agreement was made, as well as by failing to name Foster as beneficiary on an after-acquired policy that would nearly have completed her $200,000 obligation, the decedent violated the separation agreement. Hurley, having furnished no consideration for the receipt of the proceeds of the life insurance policies, has received a gratuitous benefit and would be unjustly enriched in the eyes of the law were he to retain those proceeds against the claims of Foster. But this is not to suggest that Hurley acted improperly: unjust enrichment is not necessarily “unlawful” or “wrongful” enrichment. See, e.g., Lengel v. Lengel, 86 Misc. 2d 460, 465 (N.Y. Sup. Ct. 1976); Torchia v. Torchia, 346 Pa.
The appropriate remedy here, equitable in origin, which we now order is the imposition of a constructive trust in Foster’s favor on both policies.
C. Conclusion. We find no error in the allowance of Foster’s motion for partial summary judgment with respect to equitable substitution of Foster on the UNUM life insurance policy, but conclude that the denial of Foster’s claims as to the Prudential policy was improper. We also find erroneous the allowance of Hurley’s motion for judgment on the pleadings with respect to Foster’s claims for unjust enrichment and equitable substitution with respect to the Prudential policy.
Accordingly, for the sake of administrative convenience, we reverse both judgments entered in the trial court. A new judgment shall issue providing that Hurley, as constructive trustee of the benefits of the Prudential and UNUM policies, shall convey those benefits to Foster, together with such interest accrued thereon as the trial judge shall, in his discretion, deem just. The order entered December 21, 2001, allowing Hurley’s motion to amend his notice of appeal also is affirmed.
So ordered.
The two insurance policies in question are policies issued by UNUM Provident (UNUM) and Prudential Insurance Company (Prudential).
Although the motion judge found this fact to be true, Foster’s status as beneficiary at the time of the agreement is disputed by Hurley. Whether this fact is true does not change our analysis because it is undisputed that the UNUM policy did exist at the time that the separation agreement was signed and the divorce decree entered.
“[A] substitution of policies, or even substitution of insurance companies, does not defeat the equitable interest of one who has given sufficient consideration for a promise to be maintained as beneficiary under an insurance policy.” Simonds v. Simonds, 45 N.Y.2d at 239.
See Massachusetts Linotyping Corp. v. Fielding, 312 Mass. 147, 148 (1942); Handrahan v. Moore, 332 Mass. 300, 301 (1955); Green v. Green, supra; Hurlbut v. Hurlbut, 40 Mass. App. Ct. 521, 525-526 (1996).
We hasten to add that appellate counsel for both parties played no part in the drafting of the agreement. See 2A Kindregan & Inker, Family Law & Practice § 51.64 (3d ed. 2002), for a model clause.
Hurley argues that, under a provision in the separation agreement, Foster was restricted to bringing a creditor’s claim against the decedent’s estate.
The provision in question states as follows:
“If the policy or policies are not in full force and effect at the time of a party’s death, then notwithstanding anything to the contrary contained in this Agreement, the surviving party shall have a creditor’s claim against the deceased’s estate for the difference between the face amount of the policy or policies required to be maintained under this Agreement and the amount actually paid under the deceased’s policy.”
We read the provision to encompass and be limited to those situations where, at the time of a party’s death, no policy or policies were in full force and effect. Here, there is no question that at the time of the decedent’s death both the UNUM and Prudential policies were in full force and effect.
We also reject, as did the motion judge, Hurley’s claim that Foster is disqualified from maintaining the action because of his own violations of the agreement. Hurley points to three separate contempt charges that the decedent brought against Foster. However, there were no findings of contempt made against Foster. Therefore, Foster may bring this action. See Broome v. Broome, 43 Mass. App. Ct. 539, 546-547 (1997).
We also reject Hurley’s claim that summary judgment could not be allowed because there were present genuine issues of material fact. See ibid.