30 F.3d 554 (4th Cir. 1994), 93-2119, Phoenix Mut. Life Ins. Co. v. Adams

Docket Nº:93-2119.
Citation:30 F.3d 554
Party Name:PHOENIX MUTUAL LIFE INSURANCE COMPANY, Plaintiff, v. William Jackson ADAMS, IV, Defendant-Appellant, Rosita L. Adams, Defendant-Appellee.
Case Date:July 27, 1994
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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30 F.3d 554 (4th Cir. 1994)



William Jackson ADAMS, IV, Defendant-Appellant,

Rosita L. Adams, Defendant-Appellee.

No. 93-2119.

United States Court of Appeals, Fourth Circuit

July 27, 1994

Argued April 13, 1994.

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[Copyrighted Material Omitted]

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ARGUED: William Ussery Gunn, Holcombe, Bomar, Cothran & Gunn, P.A., Spartanburg, SC, for appellant. Blaney A. Coskrey, III, Glenn, Irvin, Murphy, Gray & Stepp, Columbia, SC, for appellee. ON BRIEF: Perry D. Boulier, Holcombe, Bomar, Cothran & Gunn, P.A., J. Mark Hayes, II, Harrison & Hayes, Spartanburg, SC, for appellant. Wilmot B. Irvin, Glenn, Irvin, Murphy, Gray & Stepp, Columbia, SC, for appellee.

Before ERVIN, Chief Judge, MURNAGHAN, Circuit Judge, and HARVEY, Senior United States District Judge for the District of Maryland, sitting by designation.

Affirmed by published opinion. Judge MURNAGHAN wrote the opinion, in which Chief Judge ERVIN and Senior Judge HARVEY joined.


MURNAGHAN, Circuit Judge:

Following the death of William Jackson Adams III (Bill), his son William Jackson Adams IV (Jack), and his wife Rosita, both claimed the proceeds of one of Bill's life insurance policies. The insurer, Phoenix Mutual Life Insurance Company (Phoenix), filed an interpleader action with the United States District Court for the District of South Carolina on December 16, 1991. Phoenix deposited the proceeds of the policy with the registry of the court and asked the court to determine the proper beneficiary of the policy. Phoenix was subsequently dismissed from the action. The district court concluded that South Carolina's substantial compliance law is preempted by ERISA and that a federal common law doctrine of substantial compliance applies. 828 F.Supp. 379. Because the court found that Bill Adams intended to change his beneficiary from Jack to Rosita and that he took reasonable steps toward that end, the court concluded that Rosita was entitled to judgment and awarded the proceeds accordingly. Jack has appealed the district court's ruling. We agree with the district court's analysis, and, accordingly, affirm the judgment below.


Bill Adams owned two insurance policies when he died in September 1990. The first, purchased from Mensa, had a face value of $50,000 and named his son, Jack, as the beneficiary. Jack testified that his father told him in the Fall of 1989 that he was the beneficiary on a life insurance policy. Jack also said that, when they had the conversation, he briefly saw the policy which had the amount $50,000 written on its face. He did not discuss the matter with his father again.

Bill acquired the second policy through his employer, Texfi Industries, Inc. Texfi provided life insurance to participating employees through a group insurance policy issued by Phoenix. Bill obtained both medical and life insurance through this program. When he acquired the policy in 1987, he designated his son Jack as the beneficiary.

The Group Certificate issued to Bill, which detailed the insurance provided by the group policy, contained the following language regarding the policy holder's right to change the beneficiary:

You may change the beneficiary by written notice to us signed by you. You may file it at any one of the following:

1. [The Insurance Company's] Home Office

2. The office of the Policyholder

3. The home office of your Employer.

Whether or not you are living on the date the notice is received, the change will take effect as of the date it was signed by you. However, the change will be without prejudice to us on account of any payments made by us before we received the notice.

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Bill married Rosita in January 1990. They had lived together since 1986. Rosita testified that her husband told her sometime after they returned from their honeymoon that he wanted her to be the beneficiary of his life insurance policy with Phoenix. Rosita recalled that, shortly after their honeymoon, she heard Bill talking on the phone with an unidentified third party about his life insurance policy. Bill had called Rosita into the room during the phone call to ask her some questions about Martina, Rosita's daughter. When she came into the room, Bill was "talking about wanting to put Martina ... on his insurance." During the course of that conversation, Rosita also heard Bill tell the other party that he wanted to change the beneficiary on his life insurance policy to his new wife, Rosita.

A few days after that conversation, on February 22, 1990, Bill visited Texfi's home office in Rocky Mount, North Carolina in order to add his stepdaughter to his medical insurance and to change the beneficiary on his life insurance policy. While there, he spoke with a clerk in the personnel department, and they signed a "Dual Purpose" form designed to accomplish both goals. Bill did not, however, fill out the blank line next to the "Changed Beneficiary to" designation on the form. The Form did not indicate what actions Bill wished to take with respect to his beneficiary. The clerk immediately changed Bill's medical coverage to include his stepdaughter, but was unable to execute the change of beneficiary on the life insurance policy because she did not have access to his salary information.

The clerk told Bill that the Form would need to be submitted to Texfi's Corporate Finance Department to enable the change of beneficiary, and she forwarded the form to Jerry Holcombe. From 1984 until May 1990, Holcombe was the Financial Accounting Manager for Texfi Industries. Holcombe had the responsibility to see that benefits were handled through the personnel department. Because of the confidentiality of some of the salaries of the corporate division employees and the requirement that the benefits be calculated in accordance with those salaries, Holcombe had personal responsibility for a limited number of employees' benefits. 1 Bill Adams was one of those employees.

When Holcombe received the form forwarded by the clerk, he noted on the form that Bill had switched to family coverage but he did not complete the "Change Beneficiary to" line at that time. Two weeks later, on March 6, 1990, Bill phoned Holcombe directly to confirm the change to his policy. Holcombe testified that he recalled his conversation with Bill and that he specifically remembered that Bill requested him to make Rosita his new beneficiary. During or immediately after the telephone call, Holcombe wrote the following note to himself, "3-6-90 Bill Adams--Change beneficiary on life insurance to Roseta [sic] Adams (new wife)." 2 The note was added to a "to do" list he kept by the phone. He did not, however, make the necessary change to the Form at that time.

Holcombe quit working for Texfi in May 1990, several months before Bill died. At that time, he took all of his papers and personal belongings from his office and stored them at his residence in Rocky Mount, North Carolina. The note dated March 6, 1990 was among those papers. Holcombe did not explain why he did not make the necessary change to Bill's policy prior to quitting his job with Texfi.

On September 25, 1990, Bill died when the plane he was flying for Texfi crashed. His will directed that his debts and funeral expenses be paid and that the residue of his estate go to Rosita. Rosita gave Jack the

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Mensa policy on which Jack was the named beneficiary, but Jack was unable to collect the proceeds on that policy due to the circumstances surrounding his father's death.

When Bill died, Dane Vincent, Holcombe's successor at Texfi, called Holcombe to ask whether Bill had attempted to change his beneficiary on the Phoenix policy. Holcombe responded that Bill had wanted to change the beneficiary and that he recalled the telephone conversation with Bill. He went through his papers that he had stored at home and found the Note dated "3-6-90." He provided that note to Texfi. Holcombe did not explain why he had failed to make the necessary change to the form at any time between the March 6, 1990 conversation and his May 1990 decision to leave the company. Because Holcombe took the note he wrote to himself with him when he left the company, no Texfi employee other than Holcombe could have made the requested changes to the form. At some point after Bill died, someone at Texfi finally wrote Rosita's name on the "Change Beneficiary to" line of the Form that Bill had signed.

After gathering the necessary information from Holcombe, Texfi indicated to Phoenix that Rosita was the designated beneficiary. In the course of its routine investigation, Phoenix discovered that Bill had never expressed in writing his intention to name Rosita as the new beneficiary. Phoenix wrote a letter to Jack, the named beneficiary, apprising him of the situation and asking him to relinquish any claim he might have to the proceeds or to come to some kind of agreement with Rosita. Rosita received a copy of the letter. Jack refused either option, and Phoenix's interpleader action followed.

Phoenix is a citizen of Connecticut and both Rosita and Jack Adams are citizens of South Carolina. The district court exercised diversity jurisdiction and, based on the role of ERISA in the case, exercised subject matter jurisdiction as well. Dismissed from the case on June 17, 1992, 3 Phoenix deposited the proceeds of the policy, $300,763.06, with the registry of the court. Following Phoenix's dismissal, the court issued a ruling based upon a record prepared jointly and submitted by both parties. The district court concluded that ERISA preempted the application of state law, and, applying a federal common law doctrine of substantial compliance, found in favor of Rosita.



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