Aetna Life Ins. Co. v. Bunt

• Decision Date: 28 April 1988
• Docket Number: No. 54133-7,54133-7
• Citation: 110 Wn.2d 368,754 P.2d 993
• Parties: , 56 USLW 2663 AETNA LIFE INSURANCE COMPANY, Respondent, v. Sandra Wick BUNT, Petitioner, and Ann R. Bunt, individually and as the natural mother and guardian of Michael D. Bunt and Patrick D. Bunt, minors, Respondent.
• Court: Washington Supreme Court

Page 368

110 Wn.2d 368

754 P.2d 993, 56 USLW 2663

AETNA LIFE INSURANCE COMPANY, Respondent, v. Sandra Wick BUNT, Petitioner and Ann R. Bunt, individually and as the natural mother and guardian of Michael D. Bunt and Patrick D. Bunt minors, Respondent.

No. 54133-7.

Supreme Court of Washington En Banc.

April 28, 1988.

As Amended on Denial of Reconsideration July 28, 1988.

Fleck Law Offices,

Rynold C. Fleck, Renton, for petitioner.

J. Robert Walker, Bellevue, for respondent.

UTTER, Justice.

Petitioner Sandra Wick Bunt, the second wife of George M. Bunt (deceased), seeks a reversal of a Court of Appeals decision, 48 Wash.App. 238, 738 P.2d 322 which granted one-half of the proceeds of the deceased's term life insurance policy to his minor children by a former marriage, and granted her the other half only if she could prove upon remand to the trial court that the last premium payment was made from community funds. We reverse in part and grant full summary judgment to the minor children.

Aetna Life Insurance Company brought this interpleader action to determine the ownership of the proceeds of a policy on the life of George M. Bunt, a divorced and remarried man. The proceeds are claimed by his surviving wife, Sandra (petitioner), and the two minor children of his former marriage who are represented in this action by their mother.

On June 26, 1981, George and his first wife entered into a separation agreement under which George agreed to name their two minor children as irrevocable beneficiaries of the Aetna life insurance policy available to George as a Boeing employee. He agreed to maintain that policy for the children's benefit during their dependency. The agreement further provided that George would retain ownership of the policy as his separate property. George and his first wife were divorced on October 1, 1981. The dissolution decree incorporated their separation agreement and, in addition, expressly required George to name the children as beneficiaries of the policy to be maintained for their benefit. George promptly made the necessary changes to his life insurance policy and the two boys were designated as sole beneficiaries of the policy.

One year later George married Sandra. Contrary to express court order, George changed the beneficiary designation on the Aetna policy in January 1983 to his second wife. The following year, Sandra petitioned for legal separation from George. The petition stated that the couple had been separated since January 1, 1984. While this separation action was pending, George died. At the time of Mr. Bunt's death, the two children were ages 13 and 14 and the value of the life insurance was $84,370.

Aetna was unaware of the children's interests in the proceeds. Upon receiving confirmation of George's death, Aetna advanced $8,437 to Sandra, 10 percent of the face value of the term insurance. Upon learning of the children's claims, Aetna brought the present interpleader action naming the second wife, first wife and the two children as defendants. The children submitted a claim for $96,300, of which $11,000 was for current unpaid support.

On cross motions for summary judgment, the trial court ordered the remaining funds to be paid to the first wife, as guardian for the two children, and entered judgment in favor of the children against Sandra, the second wife, in the amount of the advance from Aetna. Sandra appealed to the Court of Appeals, which affirmed as to half of the policy proceeds. This court granted Sandra's petition for discretionary review.

This court's review of a summary judgment is de novo. Accordingly, a summary judgment will be affirmed if the pleadings, affidavits and admissions on file show that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982).

I

Petitioner suggests two arguments to support her claim to the entire proceeds. First, she urges that she is entitled to receive all of the money because she is the deceased's "surviving spouse". As surviving spouse, petitioner claims that community property law entitles her to take one-half of the proceeds, citing this court's opinions in Porter v. Porter, 107 Wash.2d 43, 726 P.2d 459 (1986) and Aetna Life Ins. Co. v. Wadsworth, 102 Wash.2d 652, 689 P.2d 46 (1984). Second, petitioner claims that her status as designated beneficiary entitles her to the remaining half of the proceeds because her husband was free to dispose of his separate share of the policy however he wished.

Mere status as surviving spouse is not a sufficient basis for a community property claim. A surviving spouse has a community property interest in a life insurance policy only to the extent that community funds were used to purchase the policy. See Francis v. Francis, 89 Wash.2d 511, 573 P.2d 369 (1978); and Wadsworth, 102 Wash.2d at 659, 689 P.2d 46. Petitioner has presented us no authority for recognizing a community property interest in a term life insurance policy solely on the basis of being a "surviving spouse"; if community funds were not used to pay the last premium, there is no community interest in the policy.

The ownership character of a term life insurance policy depends upon the character of the funds used to pay the premium for the most recent term. Wadsworth, at 659, 689 P.2d 46. Where the last insurance premium payment was paid as a fringe benefit of employment to a married employee, the premiums presumptively constitute community earnings. Stephen v. Gallion, 5 Wash.App. 747, 749-50, 491 P.2d 238, (1971), overruled on other grounds in Wadsworth, 102 Wash.2d at 659-60, 689 P.2d 46. This follows from the strong presumption that assets acquired during marriage are community property. See RCW 26.16.030. Since the petitioner and the deceased were lawfully married at the time of his death, ¹ and since the premium payments were paid as a fringe benefit of his employment with the Boeing Company, the community property presumption applies.

The community property presumption is not conclusive, however. RCW 26.16.140 provides that the respective earnings of a husband and wife who are living separate and apart "shall be the separate property of each." See Beakley v. Bremerton, 5 Wash.2d 670, 105 P.2d 40 (1940); Hokenson v. Hokenson, 23 Wash.2d 908, 162 P.2d 592 (1945). The law distinguishes between a "marital" and a "community" relationship, the latter concept encompassing more than mere satisfaction of the legal requirements of marriage. It is the fact of community that gives rise to the community property statute; when there is no "community", there can be no community property. See Cross, The Community Property Law in Washington (Revised 1985), 61 Wash.L.Rev. 13, 33 (1986).

While mere physical separation does not dissolve the community, Kerr v. Cochran, 65 Wash.2d 211, 396 P.2d 642 (1964), it is not necessary for the operation of RCW 26.16.140 that a dissolution action be final or even pending. Togliatti v. Robertson, 29 Wash.2d 844, 190 P.2d 575 (1948). Rather, this statute applies to those marriages that are for all practical purposes "defunct". Rustad v. Rustad, 61 Wash.2d 176, 180, 377 P.2d 414 (1963).

Petitioner stated in her separation petition (signed on March 20, 1984) that she and the decedent were separated as of January 1, 1984. The decedent died on December 18, 1984. The fact that a dissolution petition had been filed and that petitioner and the deceased were separated and living apart for the 11 1/2 months prior to his death strongly suggests that for all practical purposes their marriage was "defunct". Petitioner does not argue otherwise.

Petitioner's claim to a community property interest in the proceeds of George Bunt's life insurance policy is seriously undermined by the Petition for Legal Separation she signed in March 1984. That petition states categorically that she and George Bunt "have accumulated no community property". (Italics ours.) The petition further states that "[a]ll life, health or disability policies on the husband [George Bunt]" belonged to him "as his sole and separate property". Supplemental Clerk's Papers, at 30, 31. Petitioner did not controvert this evidence. She does not argue that the final premium was paid out of community funds; only that she is the "surviving spouse". Clerk's Papers, at 37-42 and 45-47; Brief of Appellant, at 16-19. Mere status as surviving spouse is not a sufficient basis for a community property claim.

Thus, on the basis of the pleadings, affidavits, and admissions on file, there appears to be no genuine issue regarding the community versus separate character of this insurance policy. Although no specific allegation has been made by either party regarding the character of the funds used to pay the last premium on this policy, the guardian has argued and submitted evidence showing that there was no community property between petitioner and deceased, and that the particular insurance policy in question was deceased's separate property. Petitioner failed to present any evidence or arguments that would suggest otherwise. Therefore, we conclude that the insurance policy was George Bunt's separate property and that petitioner's status as surviving spouse gave her no special rights to the proceeds.

II

Petitioner argues alternatively that the ownership character of the policy makes no difference in this case since she is the designated beneficiary of the policy and is entitled to take free of all creditors, including minor children for whom the deceased had an antenuptial support obligation. As authority for this position, she relies upon the insurance proceeds exemption statute, RCW 48.18.410 and .420, and our recent decision in Porter v. Porter, supra. In both instances, the reliance is misplaced.

An insured's designation of a beneficiary in a term insurance policy will generally be upheld. Even if the policy is community...