Lincoln Nat. Life Ins. Co. v. Johnson

• Decision Date: 08 February 1999
• Docket Number: Civil Action No. 2:98CV439.
• Parties: LINCOLN NATIONAL LIFE INSURANCE COMPANY, Plaintiff, v. Bridget JOHNSON, Jeremy Johnson, Frances Clark Johnson, and Sara Clark Johnson, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

38 F.Supp.2d 440

LINCOLN NATIONAL LIFE INSURANCE COMPANY, Plaintiff, v. Bridget JOHNSON, Jeremy Johnson, Frances Clark Johnson, and Sara Clark Johnson, Defendants.

Civil Action No. 2:98CV439.

United States District Court, E.D. Virginia, Norfolk Division.

February 8, 1999.

COPYRIGHT MATERIAL OMITTED

Kenneth Hincks Lambert, Jr., Williams, Kelly & Greer, P.C., Norfolk, VA, for plaintiff.

David Harlen Sump, Crenshaw, Ware & Martin, Norfolk, VA, Robert Griffith Jones, Virginia Beach, VA, for defendants.

ORDER and OPINION

MORGAN, District Judge.

This matter came before the Court on Defendants Bridget Johnson ("Bridget") and Jeremy Johnson's ("Jeremy") Motion to Dismiss the Interpleader Claims of Defendants Frances Clark Johnson ("Frances") and Sara Clark Johnson ("Sara"), ("Motion to Dismiss"). For the reasons set forth below the Court GRANTS the Motion to Dismiss and DISMISSES Frances's and Sara's interpleader claims to the Proceeds of the Plaintiff's, Lincoln National Life Insurance Company ("Lincoln National"), life insurance policy ("the Policy" and "the Proceeds") by which the Plaintiff has insured Douglas Johnson ("Douglas"), the deceased. The effect of such dismissal is to award all of the Policy's Proceeds to Bridget and Jeremy.

I. Factual¹ and Procedural History

Plaintiff, Lincoln National, filed this Complaint for Interpleader and Declaratory Relief on April 22, 1998, against Defendants Bridget, Jeremy, Frances, and Sara (collectively "Defendants"). Plaintiff alleges in its Complaint that this Court has jurisdiction based upon diversity of citizenship and upon the federal interpleader statute, 28 U.S.C. § 1335. Lincoln National is incorporated in Indiana, and has its principal place of business there. Bridget is a citizen of the state of North Carolina, while Jeremy, Frances, and Sara are all citizens of the Commonwealth of Virginia. The Defendants are all rival claimants to the Proceeds of Lincoln National's policy of group insurance pursuant through which Lincoln National insured the life of Douglas. The Plaintiff states that the sum payable under the policy is greater than $500.

The Plaintiff states that on July 1, 1980, it insured the life of Douglas Johnson for $90,000 through its Group Policy Number G-39989, issued to the Military Benefit Association. The application for the Policy, listed Elena E. Johnson ("Elena"), Douglas' first wife, as the primary beneficiary, and designated as contingent beneficiaries, "all children to share and share alike." Douglas and Elena's marriage produced two children, Bridget and Jeremy. Elena and Douglas divorced on April 26, 1994, and the final divorce decree ("Divorce Decree") incorporated their August 19, 1991, stipulation and agreement ("Stipulation and Agreement") in accordance with Virginia Code §§ 20-109 and 20-109.1.

On December 17, 1994, Douglas married Frances Clark. Sara Clark is Frances' daughter from a previous marriage. Douglas passed away on September 27, 1997, in Chesapeake, Virginia. Lincoln National states that it received no change in beneficiary designation from Douglas prior to his death, a fact which none of the Defendants dispute. The Plaintiff further alleges that under Virginia Code § 20-111.1 and the provisions of the Stipulation and Agreement, specifically paragraph 12, that Elena is not a potential claimant to the Proceeds. Furthermore, Elena has not asserted any claim to the Proceeds of the Policy. Sara and Frances have both asserted claims to part of the Proceeds. Sara asserts that she is the adopted daughter of Douglas, and thus, a contingent beneficiary to the Policy. Frances states that she is entitled to the proceeds because of Douglas' intent to include her as a beneficiary. Frances alleges that such intent is evidenced by a change in beneficiary form found among Douglas' personal effects, which he purportedly executed before his death. Bridget and Jeremy claim the Proceeds pursuant to the provisions of the Divorce Stipulation and Agreement and as contingent beneficiaries. All four of the Defendants are above eighteen years of age.

Lincoln National deposited the $92,116.85 owed on the Policy with the Court when it filed its Complaint. The Plaintiff's Complaint requested the following relief: (1) that each of the Defendants be restrained from instituting any action against the Plaintiff for the insurance proceeds or any part thereof; (2) that the Defendants be required to interplead among themselves their rights to the insurance proceeds; (3) that the Plaintiff be discharged from all liability except to the person or persons to whom the Court awards the proceeds; and (4) that the Plaintiff recover its costs and attorneys' fees. By Order of April 27, 1998, the $92,116.85 was paid to the Court, and that money was invested by the Clerk of this Court the following day.

On June 24, 1998, Defendant Frances filed her Answer ("Frances' Answer"), which stated that Douglas had repeatedly told her prior to his death that he had provided well for her in the event of his death. Frances' Answer further contends that she relied on Douglas' promises by not taking more actions to protect her own interests, actions which she asserts she would otherwise have taken. Upon her husband's death, Frances discovered that he had failed to finalize the form changing the beneficiary designation by sending it to Lincoln National, as she alleges he had promised to do. Frances' Answer claims that she is entitled to part of the Proceeds because Douglas intended her to have them, as evidenced by the change in beneficiary form received by the Plaintiff after Douglas' death.

Sara filed her Answer ("Sara's Answer") on June 24, 1998. Her Answer states that Douglas had reasonably led her to believe that he would provide for her in the event of his death. Sara's Answer alleges that Douglas' adoption of her, notwithstanding her majority, and the many hours they spent together, evidence his intent to provide for her after his death. Alternatively, Sara argues that as an adopted child of Douglas she should be awarded part of the Proceeds as one of the Policy's contingent beneficiaries.

Defendant Bridget sent her Waiver of Service to the Plaintiff's counsel on July 17, 1998. On August 7, 1999, Defendants Bridget and Jeremy filed a Motion for Enlargement of Time to File a Responsive Pleading and Brief in Support. None of the parties opposed that Motion, and this Court granted it on August 10, 1998. On August 19, 1998, Bridget and Jeremy filed their Answer ("Bridget and Jeremy's Answer"). Bridget and Jeremy's Answer contends that the Lincoln National never received a valid form changing the beneficiary designation of the Policy prior to Douglas' death. Furthermore, their Answer asserts that the Stipulation and Agreement entered into by Douglas and Elena on August 19, 1991, provided that the parties would maintain all life insurance policies in effect at that time. That Agreement also required Douglas to maintain Elena as the designated beneficiary until a final divorce decree was entered. According to Bridget and Jeremy's interpretation of the Stipulation and Agreement, Douglas was then required to name the "...children of the parties" as the Policy's beneficiaries. The final Divorce Decree dissolving the marriage of Douglas and Elena was entered on April 26, 1994. The Divorce Decree ratified and incorporated the prior Stipulation and Agreement. Bridget and Jeremy also contend that none of the parties dispute the fact that they were Douglas and Elena's only children in 1991 and 1994.

Bridget and Jeremy further contend that VA Code § 20-111.1 does not apply to revoke the beneficiaries contained in the Policy because the Divorce Decree, through the incorporation of the Stipulation and Agreement, provides for a contrary result as to the Policy. They contend that under Virginia law they are the only beneficiaries of the Policy, and that Douglas' adoption of Sara has no bearing on this result. According to Bridget and Jeremy, Virginia law dictates that the Stipulation and Agreement, as incorporated by the Divorce Decree, supersedes the terms of the Policy. They ask the Court to award them all of the Proceeds.

On November 12, 1999, Bridget and Jeremy filed a Motion to Dismiss the Interpleader Claims of Frances and Sara. On December 9, 1998, Frances and Sara filed an untimely Objection to the Motion to Dismiss ("Frances and Sara's Objection"). Two weeks later, on December 23, 1998, Frances and Sara filed a Motion for an Enlargement of Time to File Their Objection. On December 14, 1998, Bridget and Jeremy filed a Reply to Frances and Sara's Objection ("Reply"). On December 29, 1998, this Court entered an Order dismissing the Plaintiff from this case and enjoining the Defendants from instituting any actions against the Plaintiff relating to this matter. On December 30, 1998, Bridget and Jeremy filed an Objection to Frances and Sara's Motion for an Enlargement of Time. Neither party requested a hearing on the Motion to Dismiss in any of their pleadings or correspondence with the Court.

II. Jurisdiction

The Court notes that the diversity between adverse claimants necessary for statutory interpleader under Title 28 U.S.C. § 1335 is not present because although Bridget is a citizen of North Carolina, Jeremy, Frances and Sara are all citizens of Virginia. Prudential Insurance Company of America v. Coffman, 829 F.2d 1120, 1120 (4th Cir.1987)(citing 7 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1703, at 498 (2d ed.1986)). However, this Court does have jurisdiction to entertain this interpleader action by reason of the diversity of the citizenship of between the Plaintiff (a citizen of Indiana) and the claimants (citizens of Virginia and North Carolina), and the fact that the amount in controversy is greater than $75,000 ($92,116.85). Title 28 U.S.C. § 1332; Fed. R.Civ.P. 22. Furthermore, because the Court's jurisdiction is based...