507 F.3d 952 (6th Cir. 2007), 06-6068, Liberty Life Assurance Co. of Boston v. Gilbert

Docket Nº:Irene K. Wolfe (06-6068); Singer Asset Finance Company, LLC (06-6078), Defendants-Appellants/Cross-Appellees,
Citation:507 F.3d 952
Party Name:LIBERTY LIFE ASSURANCE COMPANY OF BOSTON and Sun Life Assurance Company of Canada (U.S.), Plaintiffs-Appellees/Cross-Appellants (06-6079), v. Lloyd F. GILBERT, Jr., Defendant,
Case Date:November 13, 2007
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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507 F.3d 952 (6th Cir. 2007)

LIBERTY LIFE ASSURANCE COMPANY OF BOSTON and Sun Life Assurance Company of Canada (U.S.), Plaintiffs-Appellees/Cross-Appellants (06-6079),

v.

Lloyd F. GILBERT, Jr., Defendant,

Irene K. Wolfe (06-6068); Singer Asset Finance Company, LLC (06-6078), Defendants-Appellants/Cross-Appellees,

Stephanie Muschlitz, Defendant-Appellee.

Nos. 06-6068, 06-6078, 06-6079.

United States Court of Appeals, Sixth Circuit.

November 13, 2007

Argued: September 13, 2007

Appeal from the United States District Court for the Eastern District of Tennessee at Greeneville. No. 02-00341-J. Ronnie Greer, District Judge.

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[Copyrighted Material Omitted]

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ARGUED:

Carrollyn C. Cox, Cox & Cox, Virginia Beach, Virginia, Christopher H. Howard, Schwabe, Williamson & Wyatt, Seattle, Washington, Todd A. Shelton, Rogers, Laughlin, Nunnally, Hood & Crum, Greeneville, Tennessee, for Defendants.

H. Mark Stichel, Gohn, Hankey & Stichel, Baltimore, Maryland, for Plaintiffs.

ON BRIEF:

Carrollyn C. Cox, Cox & Cox, Virginia Beach, Virginia, Jerry W. Laughlin, Rogers, Laughlin, Nunnally, Hood & Crum, Greeneville, Tennessee, Howard E. Jarvis, Woolf, McClane, Bright, Allen & Carpenter, Knoxville, Tennessee, H. Scott Reams, Taylor, Reams, Tilson & Harrison, Morristown, Tennessee, for Defendants.

H. Mark Stichel, Gohn, Hankey & Stichel, Baltimore, Maryland, for Plaintiffs.

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Before: MARTIN, GUY, and CLAY, Circuit Judges.

OPINION

BOYCE F. MARTIN, JR., Circuit Judge.

This Court is faced with the unenviable task of deciphering what would surely be an excellent law school exam question in first-year civil procedure. Liberty Life Assurance of Boston and Sun Life Assurance Company of Canada filed the present interpleader and declaratory relief action in order to determine who was due annuity payments originally received by the decedent, Lloyd Gilbert. Gilbert's ex-wife, Irene Wolff, claims she is due the annuity payments based on her separation agreement with Gilbert. A loan company, Singer Asset Finance Company, claims it loaned Gilbert a substantial sum of money in exchange for a security interest in Gilbert's annuity payments. Finally, Gilbert's daughter, Stephanie Muschlitz, is the named beneficiary on the annuity. We believe the district court correctly decided the numerous legal issues and did not abuse its discretion in weighing the equities, and accordingly affirm its decision.

I.

The district court adequately set out the facts in its order granting summary judgment to Stephanie Muschlitz:

The decedent, Lloyd Gilbert ("Gilbert"), was injured in an accident November 24, 1992, and subsequently filed a lawsuit in the Circuit Court for the City of Virginia Beach, Virginia, in an effort to recover damages for his personal injuries suffered as a result of the accident. The defendants in the Virginia action were insured by Liberty Mutual Insurance Company ("Liberty Mutual") and, in 1995, [Gilbert] entered into a negotiated settlement of his claims. The Settlement Agreement and Release ("the [Settlement] Agreement") entered into between Gilbert and Liberty Mutual provided for an immediate cash payment to Gilbert of $107,000 plus periodic payments of $666 per month for thirty six years commencing November 25, 1995.

The [Settlement] Agreement provided that Liberty Mutual could make a qualified assignment of its liability to make the agreed upon periodic payments, within the meaning of Section 130(c) of the Internal Revenue Code. Liberty Mutual then made such an assignment to Keyport Life Insurance Company ("Keyport"). The [Settlement] Agreement further provided that Liberty Mutual or its assignee could satisfy its obligations under the settlement agreement through the purchase of an annuity. Keyport did, in fact, purchase an annuity from Liberty Life. Keyport is the owner of the annuity and the annuity payments were directed to Gilbert to meet Liberty Mutual's liability to Gilbert for the agreed upon periodic payments. The [Settlement] Agreement further provided that Gilbert does not have the power to "sell, mortgage, encumber, or anticipate the Periodic Payments, or any part thereof, by assignment or otherwise." The original [Settlement Agreement] provided that upon the annuitant's (i.e. Gilbert's) death, payments would be made to the annuitant's estate, but the annuitant was permitted by the terms of the [Settlement Agreement] to change the beneficiary by written request during the annuitant's lifetime.

At the time of Gilbert's injuries in 1992, he was married to Wolff During the course of Gilbert's personal injury lawsuit, Gilbert and Wolff determined to be divorced and entered into a handwritten [separation] agreement dated June 29, 1995, which purports to obligate Gilbert to pay certain amounts to Wolff "if

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and when I receive any compensation for the accident dated 11/24/92." Wolff and Gilbert were apparently divorced on June 10, 1999, and the Court's decree incorporated and ratified the June 29, 1995 agreement between Gilbert and Wolff.

On March 22, 1999, Gilbert entered into a "Loan Application and Loan Agreement," with Merrick Bank pursuant to which Gilbert received $51,105.00. In the loan agreement, the defendant/counter plaintiff, Singer Asset Finance Company, is listed as the "processing agent." Singer is also Merrick Bank's assignee of the loan agreement. In the agreement, Gilbert agrees to repay the "loan," in 240 monthly payments of $666.00 each, commencing on May 25, 1999 and concluding on April 25, 2019.

As required by the loan agreement, Gilbert pledged and granted a security interest to Merrick Bank [-...

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