Grothe v. Grothe
| Decision Date | 31 October 2014 |
| Docket Number | 109,002. |
| Citation | 337 P.3d 72 (Table) |
| Parties | Nancy A. GROTHE, Appellee, v. Mary J. GROTHE and Estate of George W. Grothe, Appellants. |
| Court | Kansas Court of Appeals |
Michael R. Ong, of Ong Law Firm, of Leawood, for appellant.
Christopher J. Sherman, of Payne & Jones, Chartered, of Overland Park, for appellee.
Before LEBEN, P.J., ATCHESON and SCHROEDER, JJ.
Nancy and George Grothe's 1993 divorce decree stated that George would maintain a $100,000 life-insurance policy naming Nancy as the sole beneficiary. But when George died in 2009, he only had a $250,000 life-insurance policy benefitting his current wife, Mary Grothe. Nancy sued George's estate and Mary within 2 years of his death, and the district court found that George had breached the contract contained in the divorce decree and that Mary had been unjustly enriched. The court imposed a constructive trust on the assets Mary purchased or improved with the insurance proceeds from the $250,000 policy: her house, an insurance policy, and a bank account.
On appeal, Mary makes three arguments—that Nancy's breach-of-contract claim was filed after the 5–year filing deadline, that the district court shouldn't have imposed the constructive trust because Mary's insurance proceeds could not be traced to property that belonged to Mary, and that the district court should not have awarded prejudgment interest from the date Mary received the insurance proceeds. First, we find that Nancy's breach-of-contract claim was timely because in Kansas, when a person is contractually obligated to provide a death benefit and fails to do so, the intended beneficiary's claims accrue when the person obligated to provide the benefit dies. See Estate of Draper v. Bank of America, 288 Kan. 510, 533–35, 205 P.3d 698 (2009). Second, as to the constructive trust sought against Mary's property, there's no dispute that George breached his duty to Nancy to maintain a life-insurance policy for her benefit or that he instead purchased insurance benefitting Mary. The only question is whether Nancy can meet any asset-tracing requirement if one applies: Mary argues that Nancy must show that proceeds from the policy George purchased to benefit her ended up being used to purchase the policy that paid benefits to Nancy. If such a requirement applies, it was met. The district court concluded factually that Nancy made that showing, and circumstantial evidence supports its conclusion. George purchased the policy benefitting Mary in part with the assignment of prior insurance policies benefitting Nancy. Third, we affirm the district court's award of prejudgment interest because Mary was entitled to $100,000 at George's death and has been denied the use of that money since that time. Prejudgment interest may be awarded to compensate a party for the loss of use of his or her money. Varney Business Services, Inc. v. Pottroff, 275 Kan. 20, 44, 59 P.3d 1003 (2002) ; Mitchelson v. Travelers Ins. Co., 229 Kan. 567, 573, 629 P.2d 143 (1981).
Nancy and George Grothe were married from 1983 to 1993. Their June 25, 1993, divorce decree, which was filed in their home state of Minnesota, stated that George was required to maintain a $100,000 life-insurance policy naming Nancy as the sole beneficiary:
In October 1993, Nancy's attorney sent George's attorney a letter asking him for information about the $100,000 policy. Nancy testified that she was not aware of any response from George or his attorney, and she did not have her attorney pursue the matter further. But in 1994, she called Ted Simonson, an insurance agent with Massachusetts Mutual Insurance Company (Mass Mutual), from whom George purchased insurance when he and Nancy lived in Nebraska in the early years of their marriage. Simonson told Nancy he could not give her any information about George's policies, and at that point, Nancy stopped trying to get information about the policy.
Mass Mutual's records indicated that George had purchased seven different policies, but Mass Mutual did not have details about them when contacted after George's death because it destroys its policy files 7 years after a policy is terminated.
George married Mary Grothe in 1995. They moved to Kansas in 1996, and George purchased a $250,000 universal-life-insurance policy—which accumulated cash value but also had a death benefit—from Thrivent Financial for Lutherans (Thrivent) in 1998. When George purchased the Thrivent policy, he had three whole-life-insurance contracts with Mass Mutual totaling $120,000 in death benefits (with a cash value of $9,846.96) and had $180,000 in term life insurance. To help pay the Thrivent premiums, he assigned his three whole-life-insurance contracts to Thrivent. Mary was not aware of George's policy with Thrivent during their marriage.
Between April 1998 and May 2009, George paid approximately $6,000 in premiums to Thrivent from his joint checking account with Mary. On two different occasions, the Thrivent policy nearly lapsed because George had failed to pay the premiums on time.
George died on July 17, 2009. At the time of his death, there was no evidence of an insurance policy naming Nancy as the beneficiary. George owned the $250,000 Thrivent policy and a policy from his employer with a death benefit of about $11,000; Mary received the death benefits under both policies.
After Nancy learned of George's death, she opened a probate estate on January 14, 2010, and Mary was appointed its administrator. Nancy asserted a claim against the estate for $100,000. George's estate had no assets that could be used pay Nancy, so on June 28, 2011, Nancy filed suit against George's estate and Mary, claiming breach of contract against the estate and unjust enrichment against Mary.
Aware of Nancy's claim for $100,000, Mary used the proceeds of the Thrivent policy to pay off the mortgage on her home, a line of credit, and the remaining premiums for her life insurance in 2010. She deposited the remaining funds-about $68,000–in her personal checking account.
After a bench trial, the district court found that George had breached the contract contained in their divorce decree and that Mary had been unjustly enriched. The court imposed a constructive trust on Mary's home, life-insurance policy, and bank account and ordered that Nancy receive $100,000 plus prejudgment interest from August 25, 2009. Mary and the estate have appealed to this court.
Mary argues that Nancy filed her breach-of-contract claim in the district court out of time and that as a result, the court had no basis to impose a constructive trust, which can only be imposed when there is proof that a defendant has transferred property fraudulently or in violation of a duty. See Nelson v. Nelson, 288 Kan. 570, 581, 587, 205 P.3d 715 (2009). Before we consider the merits of Mary's claim, we must apply Kansas choice-of-law rules to determine whether to apply the Minnesota or Kansas filing deadline for property settlements incorporated into divorce decrees. See ARY Jewelers v. Krigel, 277 Kan. 464, Syl. ¶ 11, 85 P.3d 1151 (2004).
Kansas applies the Restatement (First) of Conflict of Laws to determine which state's law to apply. ARY Jewelers, 277 Kan. 464, Syl. ¶ 1 0. In this case, because the underlying rights arose from a divorce property-settlement agreement, which is a contract, we apply the Restatement's choice-of-law rules for contract disputes. See Dozier v. Dozier, 252 Kan. 1035, 1039, 850 P.2d 789 (1993). Under those rules, all matters of procedure—such as filing deadlines—are governed by the law of the place the action was filed. See Garcia v. International Elevator Co., 358 F.3d 777, 779 (10th Cir.2004) (applying Kansas law) ; Green v. Kensinger, 199 Kan. 220, 223–24, 429 P.2d 95 (1967) ; Western Video Collectors v. Mercantile Bank, 23 Kan.App.2d 703, 705, 935 P.2d 237 (1997) ; Muzingo v. Vaught, 18 Kan.App.2d 823, 825, 859 P.2d 977 (1993) ; Restatement (First) of Conflict of Laws § 585 (1934). So we apply the Kansas deadline—which is 5 years from when the cause of action arises. K.S.A. 60–511(1).
The parties disagree about when the cause of action arose. Mary asserts that Nancy's breach-of-contract claim accrued on the date of the divorce decree—June 25, 1993—or shortly after that when Nancy suspected George was not maintaining a life-insurance policy. If that were the case, Nancy's 2011 lawsuit would have been filed well after the 5–year deadline. Nancy asserts that her cause of action arose when George died in 2009.
Nancy is correct. In Kansas, when a person is contractually obligated to provide a death benefit, the cause of action doesn't arise until the person obligated under the contract dies. See Estate of Draper v. Bank of America, 288 Kan. 510, 533–35, 205 P .3d 698 (2009) ; Engelbrecht v....
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