Gray v. Estate of Gray

• Decision Date: 16 December 1998
• Citation: 993 S.W.2d 59
• Parties: Elenia GRAY, Claimant-Appellant, v. The ESTATE OF Charles Henry GRAY, III, Defendant-Appellee.
• Court: Tennessee Court of Appeals

Page 59

993 S.W.2d 59

Elenia GRAY, Claimant-Appellant, v.The ESTATE OF Charles Henry GRAY, III, Defendant-Appellee.

Court of Appeals of Tennessee Western Section, at Jackson.

Dec. 16, 1998.

Application for Permission to Appeal

Denied by Supreme Court May 10, 1999.

Blanchard E. Tual, Memphis, for Appellant.

R. Alan Pritchard; Baker, Donelson, Bearman & Caldwell, Memphis, for Appellee.

CRAWFORD, Presiding Judge, Western Section.

This case involves a dispute over the proceeds of a life insurance policy.Appellant, Elenia Gray(Ms. Gray), appeals from the probate court's order in favor of Appellee, the Estate of Charles Henry Gray, III(Estate).

Ms. Gray and Mr. Gray married on June 2, 1990.No children were born of the marriage.In 1996, Ms. Gray filed a complaint for divorce on the grounds of irreconcilable differences, and the parties entered into a Marital Dissolution Agreement (MDA) on April 29, 1996.Subsequently, a final decree of divorce was entered in May 1996 which approved and incorporated the MDA.

Under the MDA, Ms. Gray was awarded periodic alimony, certain amounts from the division of personal property, health insurance, and automobile insurance.The MDA provided in pertinent part 8.LIFE INSURANCE.Husband agrees to maintain Wife as the beneficiary of Group PolicyNo. GO-14273 with the Prudential Insurance Company of America or any other life insurance coverage on Husband to the extent of the amount of his outstanding total alimony obligation to Wife.

In accordance with the MDA, Mr. Gray maintained a life insurance policy with $250,000.00 in coverage with Wife as beneficiary.The policy contains a double indemnity provision which is triggered in the event of accidental death.

On July 17, 1996, Mr. Gray died in the crash of TWA FlightNo. 800 in New York City.As a result, on September 12, 1996, Ms. Gray received $500,000.00 in proceeds as the beneficiary of the life insurance policy maintained by Mr. Gray in accordance with the MDA.

Subsequently, Mr. Gray's two sons were appointed co-administrators of the Estate.After the co-administrators published their notice to creditors, four claims were filed against the Estate which included a claim by Ms. Gray.She seeks amounts due her under the MDA as follows:

(1) Division of personal property claim of $375,000.00 plus eight percent (8%) interest from May 1, 1996 until paid in full;

(2) Alimony of $2,000.00 per month until such time as the home located at 4903 East Crestwood, Little Rock, Arkansas is sold, and $4,500.00 per month beginning on the first day of the month following the sale of the Little Rock home through January, 2001;

(3) Health insurance premium in the amount of $1,690.82; and

(4) Automobile insurance premium for five years in the amount of $5,000.00.¹

The co-administrators paid all claims except the claim filed by Ms. Gray.The Estate did not file an exception to Ms. Gray's claim because it did not dispute the fact that the funds were owed to Ms. Gray under the terms of the MDA.However, the Estate contends that the amount of Ms. Gray's claim should be reduced by the $500,000.00 she received as proceeds under the life insurance policy.

On July 21, 1997, Ms. Gray filed a Petition for Order of Judgment and Order Directing Co-Administrators to Pay Judgment.On October 28, 1997, the probate court filed a memorandum opinion finding that although Ms. Gray's claim should be allowed because no timely exception was filed, the amount of the claim should be reduced by the $500,000.00 proceeds of the life insurance policy.The court said:

The language of [the MDA] clearly indicates that the purpose of the life insurance policy was to satisfy any of Mr. Gray's obligations to Ms. Gray under the MDA in the event of his death.Principles of equity demand that Ms. Gray should not receive the amount of the insurance proceeds and also recover on the entire amount of her claim against the estate.Thus, the $500,000 that Ms. Gray received as a result of the Decedent's death should serve as a setoff against the amount of her claim against the Decedent's estate.

* * *

... Subsequent to the filing of the claim, Ms. Gray received a payment.While the payment was not from the estate, it was from a source provided by the Decedent and, in fact, was provided pursuant to the MDA for that very purpose.The Court believes that it would be unfair and inequitable not to allow the estate credit for the payment so made.

* * *

For the reasons set forth above, the Court finds that the amount of the judgment on the claim of Elenia Gray against the estate of Charles Henry Gray, III should be reduced by the $500,000 received by Ms. Gray as the beneficiary of a life insurance policy provided by the Decedent to insure the payment of his obligations to Ms. Gray under the parties' marital dissolution agreement.

After filing the memorandum opinion, the probate court heard oral argument concerning calculation of the final amount of Ms. Gray's claim.The trial court subsequently entered its order that the $500,000.00 in life insurance proceeds be credited against Ms. Gray's claim against the Estate, resulting in a final balance of the claim in the amount of $79,208.00.²

Ms. Gray has appealed and presents the following issues, as stated in her brief, for our review:

(A) Whether the trial court erred in its determination that the proceeds received by Appellant as the named beneficiary of an insurance policy insuring the life of her deceased ex-husband can properly be considered as a credit towards the Appellant's claim against the estate of her deceased ex-husband (1) pursuant to the terms of the marital dissolution agreement, (2) pursuant to the laws of the state of Tennessee, or (3) pursuant to the court's equitable powers.

(B) Whether the trial court correctly calculated the final amount of the claim filed by Appellant against the estate of her deceased ex-husband for amounts due her under the marital dissolution agreement.

Ms. Gray asserts that the proceeds she received from the life insurance policy cannot be considered as payment of her claim against the Estate except to the extent provided for and specifically stated in the MDA, i.e., to satisfy any alimony obligation remaining at Mr. Gray's death.According to Ms. Gray, the MDA does not contain any terms that require or imply that any of the proceeds received offset Mr. Gray's additional obligations under the MDA.She argues that as the named beneficiary under the life insurance policy she is entitled to the insurance proceeds and that the only offset made should be for the alimony obligation.

Ms. Gray further contends that the probate court's erroneous decision that the life insurance proceeds she received must offset her entire claim rather than offsetting only the alimony obligation resulted in the final judgment to be erroneous for two reasons.First, the MDA requires interest at a rate of 8% to accumulate on the division of property claim of $375,000.00 to begin running on May 1, 1996 and continue until the entire amount is paid.Thus, according to Ms. Gray, the probate court erred when it terminated the accumulation of interest on September 12, 1996, the day Ms. Gray received the insurance proceeds.Second, the amount by which the claim should have been reduced as a result of the insurance proceeds should have been limited to the $188,372.00 alimony portion of Ms. Gray's claim.Ms. Gray also asserts that the probate court erred in failing to award the exact amounts filed in her claim for health and automobile insurance since her claim became a judgment against the Estate because no exception to the claim was filed.³

The Estate contends that the probate court was correct in ruling that it was entitled to reduce Ms. Gray's claim by the $500,000.00 she received as beneficiary under the life insurance policy.The Estate asserts that any other ruling would result in an unjustifiable windfall to Ms. Gray and an unjustifiable detriment to the Estate.The Estate argues that Ms. Gray's rights under the life insurance policy were expressly limited by the MDA to the alimony obligation owed to her and once that obligation was paid, Ms. Gray's right to the insurance proceeds ceased.The Estate asserts that the probate court correctly calculated the amount of funds due Ms. Gray and the calculation is according to the intention of the parties as expressed in the MDA.The Estate argues that if credit is not given for the excess funds received, Ms. Gray will receive not only a windfall of over $300,000.00 in excess insurance proceeds but also interest in an amount of over $100,000.00 on the $375,000.00 obligation that has accrued during the time the Estate believed it was going to receive the credit and while the issues were litigated.

The Estate does not seriously question the validity of the payment of the insurance proceeds to Ms. Gray, but primarily rests its position on the provision of the MDA.As heretofore noted, the crucial language in the MDA concerning life insurance states:

8.LIFE INSURANCE.Husband agrees to maintain Wife as the beneficiary of Group PolicyNo. GO-14273 with the Prudential Insurance Company of America or any other life insurance coverage on Husband to the extent of the amount of his outstanding total alimony obligation to Wife.

In construing the MDA as it pertains to the life insurance policy, the probate court stated in the memorandum opinion:

The language of this provision clearly indicates that the purpose of the life insurance policy was to satisfy any of Mr. Gray's obligations to Ms. Gray under the MDA in the event of his death.

To resolve the first issue, we must determine if the trial court's interpretation of the MDA is correct.

The interpretation of a written agreement is a matter of law and not of fact, therefore, our review is de novo on the record with no presumption of correctness of the trial court's conclusions of law.Union Planters Nat'l Bank v. American...