Kelly v. Medical Life Ins. Co.

• Decision Date: 24 June 1987
• Docket Number: No. 86-1449,86-1449
• Citation: 509 N.E.2d 411,31 Ohio St.3d 130,31 OBR 289
• Parties: , 31 O.B.R. 289 KELLY et al., Appellants, v. MEDICAL LIFE INSURANCE COMPANY; Kelly, Appellee.
• Court: Ohio Supreme Court

Page 130

31 Ohio St.3d 130

509 N.E.2d 411, 31 O.B.R. 289

KELLY et al., Appellants, v. MEDICAL LIFE INSURANCE COMPANY; Kelly, Appellee.

No. 86-1449.

Supreme Court of Ohio.

June 24, 1987.

Syllabus by the Court

1. The intent of the parties to a contract is presumed to reside in the language they chose to employ in the agreement. (Blosser v. Enderlin [1925], 113 Ohio St. 121, 148 N.E. 393, paragraph one of the syllabus, approved and followed.)

2. A constructive trust is the appropriate remedy to ensure that insurance proceeds are paid to those who were to be named beneficiaries of an insurance policy by the terms of a separation agreement embodied in a divorce decree.

Appellants, James Joseph Kelly and Patricia Ann Kelly, brought this action through their mother and next friend, Cordelia E. Kelly, seeking to recover the proceeds of an insurance policy insuring the life of appellants' father, James Kelly. Appellants' parents, James and Cordelia E. Kelly, were divorced effective March 16, 1984. Under the settlement agreement essentially incorporated into the divorce decree, James Kelly was required to pay $100 per week in child support, to provide health and medical insurance for appellants, and to pay appellants' health, medical, dental and optical expenses. The decree required James Kelly to "name the minor children as beneficiaries on all life insurance he has through his place of employment and Veterans Administration so long as his support obligation exists."

James Kelly died on April 23, 1984 without having named appellants as beneficiaries on a life insurance policy acquired by James Kelly through his employment and issued by Medical Life Insurance Company. At the time of James Kelly's death, the beneficiary named on the policy was appellee, Joseph Kelly, the deceased's brother.

By their complaint filed June 21, 1984, appellants sought a judgment declaring them to be the rightful and proper beneficiaries of the subject insurance policy, as well as an injunction restraining the insurance company from disbursing any of the proceeds to Joseph Kelly.

The trial court granted appellants' motion for summary judgment without elucidation and ordered that all proceeds be paid to the appellants' legal guardian, Cordelia E. Kelly. The court of appeals affirmed the judgment of the trial court "insofar as that court found that the insurance proceeds at issue are subject to a constructive trust for the benefit of * * * [appellants]," but reversed "insofar as that court found the constructive trust to extend to the entire amount of insurance proceeds * * *." The appellate court reasoned that a material issue of fact remained as to the intent of the parties to the settlement agreement and the circumstances surrounding the agreement. The court stated that the evidence, when construed most favorably to appellee, would permit a conclusion that James Kelly intended that the designation of appellants as beneficiaries would serve merely as a security for the payment of child support, and that appellants would only be entitled to so much of the insurance proceeds as would be necessary to satisfy James Kelly's support obligation.

The cause is now before this court upon the allowance of a motion to certify the record.

Kemp, Schaeffer & Rowe Co., L.P.A., and Harold R. Kemp, Columbus, for appellants.

W. Richard Hayes, Columbus, for appellee.

DOUGLAS, Justice.

Appellee Joseph Kelly concedes that a constructive trust should be imposed in appellants' favor on the insurance proceeds at bar. The sole question remaining for our determination is whether the constructive trust is to be imposed on the entire amount of such proceeds, or only on that portion which would be necessary to satisfy James Kelly's child support obligation. For the following reasons, we conclude that appellants are entitled to the imposition of a constructive trust on the entire amount of the insurance proceeds in this case.

The settlement agreement between Cordelia E. Kelly and appellants' father James Kelly was essentially incorporated into the decree of divorce effective March 16, 1984, approximately five weeks before James Kelly's death. The decree set forth the obligations of James Kelly as follows:

"IT IS FURTHER ORDERED, ADJUDGED AND DECREED that * * * [James Kelly] shall pay directly to * * * [Cordelia E. Kelly], as and for child support, the sum of One Hundred Dollars ($100) per week until his obligation to pay child support ceases.

"IT IS FURTHER ORDERED, ADJUDGED AND DECREED that * * * [James Kelly] shall pay to * * * [Cordelia E. Kelly], as and for a property settlement, the sum of Three Thousand Dollars ($3,000). * * *

"IT IS FURTHER ORDERED, ADJUDGED AND DECREED that * * * [James Kelly] shall provide health and medical insurance for the minor children of the parties and he shall pay all health, medical, dental and optical expenses for said children not covered by insurance until his support obligation ceases.

"IT IS FURTHER ORDERED, ADJUDGED AND DECREED that * * * [James Kelly] shall name the minor children as beneficiaries on all life insurance he has through his place of employment and Veterans Administration so long as his support obligation exists. * * * (Emphasis added.)

The court of appeals held that a genuine issue of fact remained as to whether appellants were entitled to the entire amount of the proceeds or to only that portion...