Simonds v. Simonds

• Citation: 380 N.E.2d 189,408 N.Y.S.2d 359,45 N.Y.2d 233
• Parties: , 380 N.E.2d 189 Mary SIMONDS, Respondent, v. Reva B. SIMONDS, Individually and as Executrix of Frederick L. Simonds, Deceased, Appellant.
• Decision Date: 11 July 1978
• Court: New York Court of Appeals

Page 359

408 N.Y.S.2d 359

45 N.Y.2d 233, 380 N.E.2d 189

Mary SIMONDS, Respondent, v. Reva B. SIMONDS, Individually and as Executrix of Frederick L. Simonds, Deceased, Appellant.

Court of Appeals of New York.

July 11, 1978.

Philip D. O'Donnell, Herkimer, for appellant.

Carl G. Scalise, Herkimer, for respondent.

OPINION OF THE COURT

BREITEL, Chief Judge.

Plaintiff Mary Simonds, decedent's first wife, seeks to impress a constructive trust on proceeds of insurance policies on decedent's life. The proceeds had been paid to the named beneficiaries, defendants Reva Simonds, decedent's second wife, and their daughter Gayle. Plaintiff, however, asserts as superior an equitable interest arising out of a provision in her separation agreement with decedent. Special Term granted partial summary judgment to plaintiff and impressed a constructive trust to the extent of $7,000 plus interest against proceeds of a policy naming the second wife as beneficiary, and the Appellate Division affirmed. ^* Defendant Reva Simonds, the second wife, appeals.

The separation agreement required the husband to maintain in effect, with the wife as beneficiary to the extent of $7,000, existing life insurance policies or, if the policies were to be canceled or to lapse, insurance policies of equal value. The issue is whether that provision entitles the first wife to impress a constructive trust on proceeds of insurance policies subsequently issued, despite the husband's failure to name her as the beneficiary on any substitute policies once the original life insurance policies had lapsed.

There should be an affirmance. The separation agreement vested in the first wife and equitable right in the then existing policies. Decedent's substitution of policies could not deprive the first wife of her equitable interest, which was then transferred to the new policies. Since the proceeds of the substituted policies have been paid to decedent's second wife, whose interest in the policies is subordinate to plaintiff's, a constructive trust may be imposed.

On March 9, 1960, decedent Frederick Simonds and his wife of 14 years, plaintiff Mary Simonds, entered into a separation agreement which, on March 31, 1960, was incorporated into an Illinois divorce decree granted to plaintiff on grounds of desertion. The agreement provided, somewhat inartfully: "The husband agrees that he will keep all of the policies of Insurance now in full force and effect on his life. Said policies now being in the sum of $21,000.00 and the Husband further agrees that the Wife shall be the beneficiary of said policies in an amount not less than $7,000.00 and the Husband further agrees that he shall pay any and all premiums necessary to maintain such policies of Insurance and if for any reason any of them now existing the policies shall be cancelled or be caused to lapse. He shall procure additional insurance in an amount equal to the face value of the policies having been cancelled or caused to lapse." Thus, the husband was to maintain, somehow, at least $7,000 of life insurance for the benefit of his first wife as a named beneficiary.

On May 26, 1960, less than two months after the divorce, decedent husband married defendant Reva Simonds. Defendant Gayle Simonds was born to the couple shortly thereafter.

Sometime after the separation agreement was signed, the then existing insurance policies were apparently canceled or permitted to lapse. It does not appear from the record why, how, or when this happened, but the policies were not extant at the time of decedent husband's death on August 1, 1971. In the interim, however, decedent has acquired three other life insurance policies, totaling over $55,000, none of which named plaintiff as a beneficiary. At his death, decedent had one policy in the amount of $16,138.83 originally issued in 1962 by Metropolitan Life Insurance Company, a second policy for $34,000 issued in 1967 through decedent's employer by Travelers Insurance Company, and a third policy for $5,566 issued in 1962 by the Equitable Life Assurance Society of Iowa. The first two policies named Reva Simonds, their daughter. Hence, at the time of decedent's death he had continuously violated the separation agreement by maintaining no life insurance naming the first wife as a beneficiary.

The first wife, on March 11, 1972, brought an action against the second wife for conversion of $7,000 and to recover $13,600 in back alimony payments. This action was dismissed, essentially on the ground that the causes of action alleged could properly be brought only against decedent's estate, not against the second wife. The estate, however, is insolvent.

Subsequently, the first wife brought this action against both the second wife and the daughter, seeking to impose a constructive trust on the insurance proceeds to the extent of $7,000. A second cause of action, dealing with alimony arrears, is not involved on this appeal. Special Term granted partial summary judgment to the first wife and imposed a constructive trust on the proceeds in the hands of the second wife. A unanimous Appellate Division affirmed in a thoughtful and scholarly opinion by Mr. Justice Richard D. Simons.

There is no question that decedent breached his obligation to maintain life insurance with his first wife as beneficiary. Consequently, the first wife would of course be entitled to maintain an action for breach against the estate. The estate's insolvency, however, would make such an action fruitless. Thus, the controversy revolves around plaintiff's right, in equity, to recover $7,000 of the insurance proceeds.

Born out of the extreme rigidity of the early common law, equity in its origins drew heavily on Roman law, where equitable notions had long been accepted (see 1 Pomeroy, Equity Jurisprudence (5th ed.), §§ 2-29). "Its great underlying principles, which are the constant sources, the never-failing roots, of its particular rules, are unquestionably principles of right, justice, and morality, so far as the same can become the elements of a positive human jurisprudence" (Id., § 67, at p. 90). Law without principle is not law; law without justice is of limited value. Since adherence to principles of "law" does not invariably produce justice, equity is necessary (Aristotle, Nichomachean Ethics, Book V, ch. 9, pp. 1019-1020 (McKeon, ed. Oxford: Clarendon Press, 1941)). Equity arose to soften the impact of legal formalisms; to evolve formalisms narrowing the broad scope of equity is to defeat its essential purpose.

Whatever the legal rights between insurer and insured, the separation agreement vested in the first wife an equitable interest in the insurance policies then in force. An agreement for sufficient consideration, including a separation agreement, to maintain a claimant as a beneficiary of a life insurance policy vests in the claimant an equitable interest in the policies designated (Stronge v. Knights of Pythias, 189 N.Y. 346, esp. at pp. 351-352, 82 N.E. 433, at pp. 434-435 (Hiscock, J.); Salinas v. Salinas, 187 Misc. 509, 515, 62 N.Y.S.2d 385, 390 (Shientag, J.), affd. 271 App.Div. 917, 67 N.Y.S.2d 692; see Ferro v. Bologna, 31 N.Y.2d 30, 35, 334 N.Y.S.2d 856, 858, 286 N.E.2d 244, 245). This interest is superior to that of a named beneficiary who has given no consideration, notwithstanding policy provisions permitting the insured to change the designated beneficiary freely.

This is not to say that an insurance company may not rely on the insured's designation of a beneficiary. None of this opinion bears on the rights or responsibilities of the insurer in law or in equity.

Obviously, the policies now at issue are not the same policies in existence at the time of the separation agreement. But it has been held that mere 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 (see Locomotive Engrs. Mut. Life & Acc. Ins. Assn. v. Locke, 251 App.Div. 146, 149, 295 N.Y.S. 689, 692 (Lewis, J.), affd. 277 N.Y. 584, 13 N.E.2d 781; see, also, Dixon v. Dixon, 184 So.2d 478, 481 (Fla.App.), cert. den. 194 So.2d 897). The persistence of the promisee's equitable interest is all the more evident where the agreement expressly provides for a change in policies, and in effect provides further that the promisee's right shall attach to the new policies.

For a certainty, the first wife's equitable interest would be easier to trace if the new policies were quid pro quo replacements for the original policies. The record does not reveal whether this was so. But inability to trace plaintiff's equitable rights precisely should not require that they not be recognized, much as in the instance of damages difficult to prove (cf., e. g., Randall-Smith v. 43rd St. Estates Corp., 17 N.Y.2d 99, 105-106, 268 N.Y.S.2d 306, 311-313, 215 N.E.2d 494, 498-499). The separation agreement provides nexus between plaintiff's rights and the later acquired policies. The later policies were expressly contemplated by the parties, and it was agreed that plaintiff would have an interest in them. No reason in equity appears for denying plaintiff that interest, so long as no one who has given value for the policies or otherwise suffered a detriment is involved. The second wife's innocence does not offset the wrong by the now deceased husband.

The conclusion is an application of the general rule that equity regards as done that which should have been done (2 Pomeroy, Equity Jurisprudence (5th ed.), § 364; see, e. g., Wallace v. First Trust Co. of Albany, 251 App.Div. 253, 256, 295 N.Y.S. 769, 771). Thus, if an insured, upon lapse or cancellation of insurance, followed by replacement with new insurance, has a contractual obligation to designate a particular person as beneficiary, equity will consider the obligee as a beneficiary.

In this case, then, the first wife's...