Ehrhardt v. Penn Mut. Life Ins. Co., s. 93-1408

• Decision Date: 23 May 1994
• Docket Number: 93-1731,Nos. 93-1408,s. 93-1408
• Citation: 21 F.3d 266
• Parties: Maxine H. EHRHARDT, Appellant, v. PENN MUTUAL LIFE INSURANCE COMPANY, Appellee. PENN MUTUAL LIFE INSURANCE COMPANY, Third Party-plaintiff, v. David G. DEMPSEY, as Trustee of the Eugene J. Ehrhardt Children's Trust; Patrick O. Boyle, as Trustee of the Eugene J. Ehrhardt Children's Trust; David G. Dempsey, as Trustee of the Eugene J. Ehrhardt Living Trust, Third Party-defendant. Maxine H. EHRHARDT, Plaintiff, v. PENN MUTUAL LIFE INSURANCE COMPANY, Defendant. PENN MUTUAL LIFE INSURANCE COMPANY, Third Party-plaintiff-Appellant, v. David G. DEMPSEY, as Trustee of the Eugene J. Ehrhardt Children's Trust; Patrick O. Boyle, as Trustee of the Eugene J. Ehrhardt Children's Trust; David G. Dempsey, as Trustee of the Eugene J. Ehrhardt Living Trust, Third Party-defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 266

21 F.3d 266

Maxine H. EHRHARDT, Appellant, v. PENN MUTUAL LIFE INSURANCE COMPANY, Appellee.

PENN MUTUAL LIFE INSURANCE COMPANY, Third Party-plaintiff, v. David G. DEMPSEY, as Trustee of the Eugene J. Ehrhardt

Children's Trust; Patrick O. Boyle, as Trustee of the

Eugene J. Ehrhardt Children's Trust; David G. Dempsey, as

Trustee of the Eugene J. Ehrhardt Living Trust, Third

Party-defendant.

Maxine H. EHRHARDT, Plaintiff, v. PENN MUTUAL LIFE INSURANCE COMPANY, Defendant.

PENN MUTUAL LIFE INSURANCE COMPANY, Third Party-plaintiff-Appellant, v. David G. DEMPSEY, as Trustee of the Eugene J. Ehrhardt

Children's Trust; Patrick O. Boyle, as Trustee of the

Eugene J. Ehrhardt Children's Trust; David G. Dempsey, as

Trustee of the Eugene J. Ehrhardt Living Trust, Third

Party-defendants-Appellees.

Nos. 93-1408, 93-1731.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 11, 1993.

Decided April 11, 1994.

Rehearing Denied May 23, 1994.

Alan J. Agathen, St. Louis, MO, argued, for appellant.

P. Terence Crebs, St. Louis, MO, argued, for appellee.

Before McMILLIAN, Circuit Judge, BRIGHT, Senior Circuit Judge, and MAGILL, Circuit Judge.

PER CURIAM.

Following her husband's death, Maxine Ehrhardt (Maxine), claiming entitlement to all proceeds of a life insurance policy on her husband, sought damages from Penn Mutual Life Insurance Company (Penn Mutual) based upon Penn Mutual's alleged erroneous prior distribution of the insurance proceeds to two trusts, three-fourths of the proceeds to a trust benefitting the daughters of the deceased and one-fourth to Maxine, as designated by the insured. In a third-party complaint, defendant Penn Mutual sought indemnification from the trustees, David Dempsey and Patrick Boyle (trustees), in the event of a determination contrary to Penn Mutual's distribution of the insurance proceeds.

The jury in the first trial returned a verdict in favor of Maxine and the trustees. This court reversed that judgment and remanded the case to the district court for a new trial. Ehrhardt v. Penn Mut. Life Ins. Co., 902 F.2d 664 (8th Cir.) (Ehrhardt I ), cert. denied, 498 U.S. 855, 111 S.Ct. 152, 112 L.Ed.2d 118 (1990). The subsequent trial resulted in a jury verdict for Penn Mutual and the trustees and a dismissal of Maxine's claim. Maxine now appeals from that judgment contending that the entire proceeds of the policy belonged to her.

The pertinent facts stated here derive from the court's prior opinion.

Maxine was a licensed life insurance agent in Missouri working for Penn Mutual. She sold a $200,000 life insurance policy to her husband, Eugene Ehrhardt (Eugene), on July 26, 1982. Maxine was the original owner of the policy. The beneficiaries of the policy were designated as follows: three-fourths of the proceeds to go equally to Eugene's three daughters from a previous marriage; one-fourth to go to Maxine. Thereafter, Maxine twice redesignated herself the owner and redesignated the original beneficiaries.

After Eugene was diagnosed as suffering from leukemia, his behavior became erratic. Fearing disinheritance and mounting medical bills, Maxine requested a change-of-beneficiary form from Penn Mutual. Penn Mutual sent a cover letter ¹ and multipurpose blank form 6955. Part I of the form vested all privileges of ownership in the "INSURED" unless otherwise indicated "below." Maxine left this part blank. She filled in Part III by redesignating herself sole primary beneficiary and her two daughters contingent beneficiaries. She signed the bottom of the form under "policyowner" on June 3, 1985. Penn Mutual then changed ownership of the policy to Eugene.

In February 1986, Eugene summoned his attorney, David Dempsey, to his hospital room regarding an estate plan. Maxine was present at the meeting in which a plan In June 1986, Kahn learned that the Ehrhardts had a prenuptial agreement. In order to avoid conflict with the trusts, a postnuptial agreement was drafted. The postnuptial agreement recognized the living trust as beneficiary of one-fourth of the policy proceeds and stated that Eugene "shall not alter or amend such designation of beneficiary." Both Eugene and Maxine signed the agreement.

placing the policy proceeds into trust for Eugene's daughters was discussed. Eugene acknowledged that Maxine owned the policy. Eugene decided that he wanted three-fourths of the policy proceeds to go into the children's trust and one-fourth into a living trust for Maxine's benefit. During creation of the trust documents, Dempsey's associate, Robert Kahn, discovered from Penn Mutual that Eugene was the record owner of the policy. Accordingly, on February 14, 1986, Eugene designated the two trusts as beneficiaries of the policy insuring his life. Maxine was present and did not object.

When Eugene died, Penn Mutual paid the policy proceeds ($215,317.08) to the trustees: $161,360 for the children's trust; $53,957.08 for the living trust. Maxine then sued Penn Mutual alleging: Count I--breach of contract; Count II--vexatious refusal to pay; and Count III--negligence (in connection with Penn Mutual's treatment of form 6955). Penn Mutual filed a third party complaint against the two trustees. [At the first trial Maxine abandoned Count I and dismissed Count II]. Count III was submitted to the jury which found Maxine twenty percent negligent and Penn Mutual eighty percent negligent and assessed damages against Penn Mutual at $172,253.67 (eighty percent of $215,317.08). The jury returned a verdict against Penn Mutual on its third party complaint.

Ehrhardt I reversed the judgment entered on the verdict returned for Maxine and the trustees. Upon retrial, the district court at the close of the evidence granted Penn Mutual's motion for judgment of dismissal as a matter of law as to Count I of Maxine's complaint alleging breach of contract. The jury then returned a verdict for Penn Mutual which dismissed Maxine's negligence count (Count III), and for the trustees on Penn Mutual's third party complaint seeking indemnification.

Maxine in her appeal contends that the district court committed numerous errors, including retrying the entire case following remand, dismissing plaintiff's breach of contract claim (Count I) and erroneously instructing the jury. Penn Mutual conditionally appeals, arguing that if judgment in its favor against Maxine is reversed, the judgment for trustees should also be reversed.

Maxine first argues that the district court erred in retrying the entire case anew, on the ground that the court of appeal's remand was limited to allowing Penn Mutual to present its affirmative defense of estoppel and waiver. Maxine asserts that relitigating liability not only was unnecessary but not mandated. Consequently, "Penn Mutual's liability and the amount of damages in this case are conclusively established as the law of the case." Appellant's Br. at 13.

In Ehrhardt I, this court concluded the following: (1) that the district court properly admitted parol evidence as Form 6955 was ambiguous as a matter of law; (2) that the district court did not err in failing to enter a judgment notwithstanding the verdict on Maxine's negligence count; (3) that the district court erroneously precluded Penn Mutual from presenting evidence of its waiver and estoppel defense; (4) that the jury should have been instructed on Penn Mutual's affirmative defense based on the postnuptial agreement as set forth in Instruction A; (5) that there was no error in Maxine's verdict director charging Penn Mutual with negligence in providing Form 6955; (6) that no error resulted from the district court's clarifying instruction; (7) that the district court did not abuse its discretion in not changing the amount of damages awarded; (8) that any error resulting from Penn Mutual's preclusion from using a federal tax return to refresh a witnesses' recollection was [T]he district court's judgment is reversed and the case remanded for a new trial with instructions that Penn Mutual be allowed to submit and argue its waiver and estoppel defense. Having remanded the case in chief, that portion of the district court's order regarding the third party complaint is also reversed and remanded.

harmless; and (9) that it would be unjust for the trustees to retain the insurance proceeds in light of Maxine's unjust enrichment under the verdict. In summary, the court stated:

Ehrhardt I, 902 F.2d at 671.

Because this court, in its opinion in Ehrhardt I did not limit its new trial to only certain issues, the trial court properly construed the remand to require a new trial on all issues.

CONTRACT CLAIM

Maxine next asserts that the district court erroneously granted Penn Mutual's motion for judgment as a matter of law on her breach of contract claim. The essence of the claim is that Penn Mutual breached its insurance contract by changing the policy ownership to her husband without her permission. Maxine makes this argument based upon her characterization of the change of beneficiary form as ambiguous. Maxine also contends that the postnuptial agreement is ambiguous, and that consequently the district court erred in taking the contract issue from the jury. Penn Mutual's response focuses on the postnuptial agreement as...