Funeral Financial Systems v. U.S.A., 00-1404

• Decision Date: 13 December 2000
• Docket Number: No. 00-1404,00-1404
• Citation: 234 F.3d 1015
• Parties: (7th Cir. 2000) Funeral Financial Systems, Plaintiff-Appellant, v. United States of America, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1015

234 F.3d 1015 (7th Cir. 2000)

Funeral Financial Systems, Plaintiff-Appellant, v. United States of America, Defendant-Appellee.

No. 00-1404

In the United States Court of Appeals For the Seventh Circuit

Argued September 15, 2000

Decided December 13, 2000

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 7905--James B. Zagel, Judge.

Before Flaum, Chief Judge, Kanne, and Williams, Circuit Judges.

Kanne, Circuit Judge.

Plaintiff-Appellant, Funeral Financial Systems ("Funeral Financial"), asks this Court to find that the district court incorrectly held the assignment of a World War II veteran's insurance benefits to Funeral Financial violative of the policy's terms and, thereby, erroneously granted the United States' motion for summary judgment. For the reasons stated below, we agree with the district court's determination regarding the validity of the assignment, and we affirm that court's decision.

I. History

World War II veteran Chafois Gilliam ("Gilliam") died on January 9, 1998. As a result of his service to his country, Gilliam obtained a National Service Life Insurance ("NSLI") policy from the United States Government in 1947, valued at $10,000, pursuant to the National Service Life Insurance Act of 1940, 38 U.S.C. sec.sec. 1901- 1963 (1994). Gilliam designated his wife, Shirley Gilliam, and son, Dwight Gilliam, as joint beneficiaries of the policy.

Four days after Gilliam's death, Shirley and Dwight Gilliam assigned all rights, title, and interest in $6,517.22 of the insurance benefits available to them¹ as joint beneficiaries of the policy to another of Gilliam's sons, Keith Gilliam. On the very next day, Keith Gilliam purported to assign the interest he had just acquired to the Hall-Jordan Funeral Home ("Hall- Jordan") in return for funeral services for Gilliam. Hall-Jordan, in turn, purported to assign this interest to Funeral Financial in exchange for immediate funds from Funeral Financial to pay for Gilliam's funeral expenses.

Funeral Financial attempted to collect the life insurance policy proceeds by contacting the United States Department of Veterans Affairs ("the Veterans Administration"). Funeral Financial provided the Veterans Administration with written notice of the purported assignment from Hall-Jordan, and copies of the preceding purported assignments of the insurance benefits. Upon review of this information, the Veterans Administration notified Funeral Financial that "the proceeds of a Government Life Insurance policy cannot be assigned to a funeral home or to any funeral financial service company."

Responding to the government's refusal to pay Funeral Financial the proceeds from Gilliam's NSLI policy, Funeral Financial filed a civil action in the Chancery Division of the Circuit Court of Cook County, Illinois, seeking declaratory relief against National Service Life Insurance Company. Funeral Financial urged a determination that the assignments were valid and that the Veterans Administration must pay Funeral Financial $6,517.23. The United States removed the case to the United States District Court for the Northern District of Illinois, Eastern Division, pursuant to 28 U.S.C. sec. 1441(a). Additionally, because National Service Life Insurance is not a separate entity, but instead is a program implemented by the Department of Veterans Affairs, the United States was substituted as the proper party defendant. Funeral Financial then sought relief pursuant to 38 U.S.C. sec. 1984(a), which provides for federal district court review of claims against the United States involving NSLI policies.

The United States filed a motion for summary judgment arguing that the assignment clause in Gilliam's policy restricts the assignability of his NSLI death benefits and renders the purported assignments invalid. Additionally, the government argued that 38 U.S.C. sec. 5301 prohibits any assignment of NSLI benefits that is not "specifically authorized by law," and mandates that these benefits "shall be exempt from the claim of creditors," such as Funeral Financial.

The district court agreed with the government that the purported assignments were invalid. In explaining its conclusion, the district court focused on the assignment clause in Gilliam's policy, which states, "This policy is not assignable by the Insured. A beneficiary may assign all or any part of his/her interest in this policy to the Insured's widow, widower, child, father, mother, grandfather, grandmother, brother, or sister, when the designated contingent beneficiary, if any, joins in the assignment." The district court found that this language, which is taken from the language of 38 U.S.C. sec. 1918(a) (1994), clearly prohibits the assignment from Keith Gilliam to Hall-Jordan, as well as the subsequent assignment from Hall- Jordan to Funeral Financial.

The district court further held that 38 U.S.C. sec. 5301 rendered the assignments invalid. Referring to sec. 5301, the court explained that "the statute makes clear that veteran's benefits are assignable only as specifically authorized by law, and no such specific authorization exists for the assignments at issue here." Funeral Fin. Serv., Ltd. v. United States, No. 98 C 7905, 2000 WL 91919, at *2 (N.D. Ill. Jan. 18, 2000). Having found the assignments allegedly obligating the Veterans Administration to pay Funeral Financial invalid, the district court granted the United States' motion for summary judgment.

II. Analysis

We review the district court's decision to grant summary judgment de novo. Wyatt v. Unum Life Ins. Co. of America, 223 F.3d 543, 545 (7th Cir. 2000). Summary judgment is proper when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 91 L. Ed.2d 265 (1986). In determining whether summary judgment is appropriate, that is to say when deciding whether a genuine issue of material fact exists, we must review the record in the light most favorable to the non-moving party, in this case Funeral Financial, and make all reasonable inferences in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed.2d 202 (1986). If, after having reviewed the record in this manner, we were to conclude that the evidence is such that a reasonable jury could return a verdict for Funeral Financial, then the district court incorrectly granted the United States's motion for summary judgment. See id. at 249. If, however, we conclude that the evidence favoring Funeral Financial is insufficient for a jury to return a verdict for that party, then summary judgment was properly granted. See id. at 250.

Funeral Financial asserts numerous arguments in support of its position that summary judgment was improperly granted because the attempted assignment of $6,517.23 of Gilliam's insurance benefits to Funeral Financial was valid. We find all of these arguments unpersuasive. Thus, we need only address three of Funeral Financial's strongest arguments in explaining why the district court correctly granted the government's motion for summary judgment.

A. The Language of the Assignment Clause

The validity of the assignment at issue can be determined by examining the language of the assignment clause in Gilliam's insurance policy. Gilliam's policy, issued pursuant to a federal statute providing military veterans with insurance, is a written government contract. See Prudential Ins. Co. of America v. Athmer, 178 F.3d 473, 475 (7th Cir. 1999) (discussing life insurance policy issued pursuant to the Servicemen's Group Life Insurance Act of 1965, 38 U.S.C. sec.sec. 1965-1979). Interpreting the meaning of a provision in a federal government contract is a matter of federal common law, and therefore, we must apply federal common law rules of contract interpretation to determine whether the purported assignments of Gilliam's insurance proceeds were valid. See id. at 475; see also Pitcher v. Principal Mut. Ins. Co., 93 F.3d 407, 411 (7th Cir. 1996).

When applying the federal common law rules of contract interpretation we must first determine whether the clause of the contract at issue is ambiguous. Grun v. Pneumo Abex Corp., 163 F.3d 411, 420 (7th Cir. 1998) (citing Ryan v. Chromalloy American Corp., 877 F.2d 598, 602 (7th Cir. 1989)). The language of a contract is ambiguous if a section of that contract "is subject to reasonable alternative interpretations." Id. (citing Hickey v. A.E. Stanley Mfg., 995 F.2d 1385, 1389 (7th Cir. 1993)). In reviewing contract language for other possible interpretations, we are required to interpret the language "'in an ordinary and popular sense as would a person of average intelligence and experience.'" Id. (quoting Pitcher, 93 F.3d at 411). If a contract is not open to any other reasonable interpretations, and is therefore unambiguous, then the written words of the contract must dictate the disposition of a dispute involving that contract. Central States, Southeast and Southwest Areas Pension Fund v. Kroger Co., 226 F.3d 903, 911 (7th Cir. 2000). Furthermore, except for the highly unusual instance "where literal application of a text would lead to absurd results or thwart the obvious intentions of its drafters," if a contract is found to be unambiguous, then we are not to examine any extrinsic evidence. Grun, 163 F.3d at 420 (internal quotation marks and citations omitted). When the language of an unambiguous contract "provides an answer, then the inquiry is over." Id. (citing Wikoff v. Vanderveld, 897 F.2d 232, 238 (7th Cir. 1990)).

There is nothing ambiguous about the assignment clause in Gilliam's NSLI policy. The clause provides that "[a] beneficiary may assign all or part of...