Flanigan v. Munson
Citation | 818 A.2d 1275,175 N.J. 597 |
Parties | Lawrence FLANIGAN and Anne Flanigan, custodians for John E. Titus, III and Stacy A. Titus, Plaintiffs-Respondents, v. Craig MUNSON, Defendant-Appellant. |
Decision Date | 03 April 2003 |
Court | United States State Supreme Court (New Jersey) |
Joseph C. Nuzzo, Wayne, argued the cause for appellant.
Stephen E. Samnick, West Caldwell, argued the cause for respondents. The opinion of the Court was delivered by VERNIERO, J.
This case involves a property settlement agreement under which a former wife and husband agreed to name their "children as the irrevocable beneficiaries (until emancipation) on any life insurance policies either of them avail[ed] themselves of through employment." Subsequent to that agreement, the former wife obtained two insurance policies through her employer, but she listed no beneficiaries. In the wake of that party's death, the issue before us is whether the Appellate Division properly imposed a constructive trust on the insurance proceeds in favor of the decedent's children. We hold that a constructive trust is the appropriate remedy in those circumstances.
Our summary of the underlying facts is derived largely from the parties' certifications and from their testimony before the trial court. Except when indicated, the parties do not dispute those facts. Lori Flanigan, now deceased, was born with hypotrophic cardiomyopathy, a genetic heart condition that thickens the walls of the heart and obstructs blood flow. In 1980, Flanigan married John E. Titus, Jr. The couple had two children, John E. Titus, III, and Stacy A. Titus, born respectively May 4, 1982, and July 5, 1984. Stacy was born with the same heart condition as her mother.
The couple divorced in January 1989. The divorce judgment includes a property settlement agreement that contains a provision regarding life insurance for the benefit of John III and Stacy. The provision states that "[t]he parties warrant and agree that each will name the children as the irrevocable beneficiaries (until emancipation) on any life insurance policies either of them avail themselves of through employment." The agreement also provides that it "shall be binding upon [the parties'] respective heirs, next of kin, executors and administrators."
In September 1989, Flanigan began work at Exxon Company, U.S.A. As a benefit of employment, Exxon provided Flanigan with a life insurance policy in the amount of $34,000 representing her annual salary. Flanigan did not designate a beneficiary for that policy.
Five years later, in December 1994, Flanigan married Craig Munson (defendant). The couple purchased a home in Rockaway, Morris County. About four months into the marriage, Flanigan purchased a contributory life insurance policy through Exxon's employee-benefits program. The employer withheld money from Flanigan's paychecks to finance the premiums for the additional coverage. The parties do not dispute that, given her heart condition, Flanigan would have been unable financially to obtain such insurance without taking advantage of Exxon's program. The additional coverage amounted to $183,600. Flanigan named no beneficiary on the policy.
According to defendant, the couple decided to purchase the contributory policy because they had planned to renovate their home and purchase a new car. He explained that they had wanted additional coverage as protection to cover a possible second home mortgage or other indebtedness incurred to finance the intended purchases.
Due to complications of her heart ailment, Flanigan became critically ill and fell into a coma. That regrettable circumstance apparently prompted family members to contemplate Flanigan's death. Defendant expressed concern to Flanigan's sister, Lisa Salberg, that in the event of Flanigan's passing, his wages would be insufficient to pay his home mortgage and to meet other expenses. Salberg assured defendant that she and her family would assist financially because they did not want him to lose the house. Later sold by defendant, the house is located in close proximity to Flanigan's parents, Lawrence and Anne Flanigan, the grandparents of John III and Stacy (grandparents).
At about the same time, Salberg consulted an attorney regarding custody arrangements for her sister's children. (Salberg could not recall the exact date of her initial consultation but believed that it might have been before her sister's death.) Flanigan died on June 16, 1995. The grandparents then initiated a custody action against Titus, the children's father. Those parties ultimately entered into a consent judgment awarding joint legal custody to the grandparents and to Titus, and awarding residential custody to the grandparents only. We cannot discern from the record whether the children, now over eighteen years of age, continue to reside with their grandparents.
Anne Flanigan stated that her daughter was "deeply concerned" that if she died, the children would be left without financial resources. The Flanigans (the grandparents and Salberg) were of the view that Titus was not a financially responsible person. Anne Flanigan contended that Titus was in arrears in his child support, owed more than $2,000 in medical expenses incurred for the children, and had no steady job. She also indicated that she was aware of Stacy's own medical condition. The Flanigans testified that Lori Flanigan had told them that she believed that her former husband would not continue child support payments in the event she passed away.
Because Flanigan had not named a beneficiary in either life insurance policy, Exxon distributed the policies' proceeds to defendant. Specifically, defendant was paid $217,600 (representing $34,000 from the employer-provided insurance, in addition to $183,600 from the employee-purchased policy), plus interest. When defendant received that sum, John III and Stacy were ages 13 and 11 respectively.
Defendant qualified as administrator of Flanigan's estate shortly after his wife's death. Salberg then visited defendant's home. After discovering the divorce judgment and property settlement agreement among Flanigan's papers, Salberg and defendant reviewed the life insurance provision concerning the children. The record does not indicate whether defendant found the property settlement agreement before or after he had received the insurance proceeds. It does, however, indicate that defendant expended some of the proceeds, as more fully described below, after he had read the agreement.
According to Salberg, defendant agreed orally that he would extinguish his home mortgage, satisfy other debts, and then turn over the balance of the insurance proceeds to John III and Stacy. She testified that defendant acknowledged that all of the proceeds belonged to the children and that he promised to reimburse them the full amount when he sold the house or when they were ready to enter college. Defendant denies that he had made that commitment. Instead, he contends that Flanigan's property settlement agreement with her first husband covered only the smaller employer-provided policy. In any event, after receiving the proceeds of both policies, defendant paid off his home mortgage (which cost about $84,000) and paid other expenses, leaving him an approximate balance of $111,000. The parties agreed that that sum should be held in trust for the children. They asked the attorney who had represented the grandparents in their custody dispute with Titus to prepare a trust fund agreement. Defendant attended at least one meeting with Salberg at the attorney's office for that purpose.
The parties signed the trust agreement in August 1995. Defendant is the named trustor under the agreement, and Salberg and her mother, Anne Flanigan, are named trustees. The trust agreement's preamble refers to the prior property settlement agreement. Specifically, it describes that earlier agreement's insurance provision as applying only to "employer provided" insurance. The trust agreement also provides:
The italicized language, "And Funds Gifted By `Trustor,'" had been inserted just prior to the parties' execution of the agreement. According to defendant, that language reflects an understanding among the parties that all sums placed in the trust in excess of the $34,000 employer-provided insurance policy had been a gift from defendant to Flanigan's children. According to Salberg, defendant had asked for that insertion. She also testified that sh...
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