Moore v. John Hancock Life Ins. Co.

• Decision Date: 05 September 2003
• Parties: John A. MOORE et al. v. JOHN HANCOCK LIFE INSURANCE COMPANY and Susan Moore Davis.
• Court: Alabama Supreme Court

876 So.2d 443

John A. MOORE et al. v. JOHN HANCOCK LIFE INSURANCE COMPANY and Susan Moore Davis.

1020405.

Supreme Court of Alabama.

September 5, 2003.

J. Gusty Yearout and Jason L. Yearout of Yearout & Traylor, P.C., Birmingham, for appellants.

Howard K. Glick and J. Clinton Pittman of Spain & Gillon, LLC, Birmingham, for appellee John Hancock Life Insurance Company.

WOODALL, Justice.

John A. Moore, J. Ryan Moore, and Barbara Ann Moore appeal from a summary judgment for John Hancock Life Insurance Company ("John Hancock"), in their action against John Hancock and Susan Moore Davis. We vacate the summary judgment and dismiss the appeal.

I.

John A. Moore and Susan L. Moore married in 1972. They had two children, J. Ryan Moore and Barbara Ann Moore. On April 27, 1999, John and Susan were divorced. Susan has remarried and is now known as Susan Moore Davis.

On April 26, 1984, John created the John A. Moore Family Trust ("the Trust"). The Trust designated Susan as its trustee. By its terms, the Trust was created for the benefit of Susan, as John's wife, and Ryan and Barbara Ann, as John's children. Susan, as the trustee, was given broad rights with respect to any insurance policies forming any part of the trust estate:

"The Trustee shall be vested with all right, title and interest in and to any policies of insurance forming any part of the trust estate, and is authorized to exercise all options, benefits, rights, and privileges under such policies, including the rights to collect the cash surrender value, to borrow on such policies, to receive any dividends on such policies, distributions of surplus, or other refunds of a similar nature, to collect payments upon the face amount of such policies, payments by way of endowment, and any other proceeds of such policies, and the insurance companies which have issued such policies are empowered to deal with the Trustee as the absolute assignee and owner thereof. The Grantor hereby relinquishes all rights and powers in such policies which are not assignable and will, at the request of the Trustee, execute all other instruments reasonably required to effectuate this relinquishment."

(Emphasis added.) Also, the Trust included a provision addressing the possibility that John and Susan might divorce:

"Any provision in this entire Trust Agreement to the contrary notwithstanding, the provisions made herein for the benefit of Grantor's wife are being made on the assumption that she and Grantor shall remain husband and wife at all times prior to Grantor's death. In the event Grantor and his wife shall be divorced at any time prior to Grantor's death, then on the date that such divorce shall become final, all rights and benefits of Grantor's wife under the terms of this entire Agreement, both prior and subsequent to Grantor's death, shall cease, terminate and become null and void, including, but not limited to, any special power of appointment which may have been granted to Grantor's wife, exercisable by specific provision in the Will of Grantor's wife, to alter the disposition made by Grantor under the terms hereof of the trust assets among Grantor's lineal descendants. In the event that Grantor and his wife shall be divorced at any time prior to Grantor's death, then upon the date that such divorce decree becomes final, Grantor's wife, if then serving as a Trustee hereunder, shall no longer remain as Trustee, but, on the contrary, shall be required to resign forthwith and to transfer, deliver and pay over all assets included in the trust to the successor Trustee named herein, and the administration of this trust and disposition of assets shall thereafter be handled in the same manner as herein directed following the death of Grantor's wife."

(Emphasis added.)

In 1987, John Hancock issued a policy of life insurance, designating John as the insured. The policy was issued to Susan, as trustee of the Trust, and, in that same capacity, Susan was designated the owner and sole beneficiary of the policy. The policy provided that "`you' and `your' refer only to the Owner of this policy." Regarding the rights of the owner of the policy, including the right to change the owner or beneficiary, the policy provided, in pertinent part:

"The Owner, the Contingent Owner (if any) and the Beneficiary will be as shown in the application unless you change them or they are changed by the terms of this provision.

"You shall have the sole and absolute power to exercise all rights and privileges without the consent of any other person unless you provide otherwise by written notice....

"....

"While the Insured is alive, you may change the Owner, Contingent Owner and Beneficiary by written notice. A change will take effect when the notice is signed if we acknowledge receipt on the notice. The change will take effect whether or not you or the insured is alive. A change shall be subject to the rights of any assignee of record with us and subject to any payment made or other action taken by us before we acknowledge receipt."

The owner's address on the application for the John Hancock policy was the mailing address of International Oil Company, Inc. ("International Oil"), where John was then employed. International Oil paid the premiums on the John Hancock policy.

As International Oil paid the premiums, the policy began to accumulate a cash value, against which the owner was entitled to obtain policy loans. Beginning in 1990, John, by his own admission, obtained loan proceeds from John Hancock by signing Susan's name to the necessary loan-request forms. John admittedly used the loan proceeds to pay his personal financial obligations, after intercepting the loan checks, which were payable to Susan, as trustee of the Trust.

As previously mentioned, John and Susan were divorced in April 1999. After the divorce, John continued to obtain loan proceeds from the policy for his personal use by signing Susan's name, as trustee, to the necessary loan-request forms.

In March 1999, International Oil stopped paying the premiums on the John Hancock policy. As a result, the policy's cash value began to diminish by virtue of the fact that the cash was being used to pay the premiums. John "decided in early 2000 to cash surrender the John Hancock life insurance policy." Appellants' brief, at 5. However, under the terms of both the Trust and the John Hancock policy, only Susan, acting in her capacities as trustee of the Trust and as owner of the policy, was entitled to surrender the policy for cash. Therefore, according to John, he "intended to obtain the cash surrender form from John Hancock, discuss the cash surrender with [Susan], and determine the best way to proceed with the cash surrender of the policy." Id. Barbara Ann and Ryan were aware of John's plans to obtain the cash-surrender proceeds and to use them to pay his personal financial obligations and living expenses. Neither of the adult children objected to John's plans.

John contacted a John Hancock agent to request the necessary cash-surrender form. John Hancock mailed the form to Susan at International Oil's address. International Oil, where John was no longer employed, forwarded the form to Susan, who telephoned John to discuss the matter.

John and John Hancock agree that Susan initially agreed to obtain the cash-surrender benefits for John, as both he and their children had requested. However, they also agree that Susan changed her mind, deciding, instead, to surrender the policy for cash for her personal benefit.

On February 14, 2000, Susan, as owner of the policy, signed the cash-surrender form, requesting that John Hancock make its check payable to "Policy/Contract Owner" and that it mail the check to her at a new address. John Hancock received Susan's cash-surrender form on February 16, 2000. On February 18, John Hancock issued its check for the cash-surrender value of the policy. The check was payable to "Susan L. Moore, Trustee," and was mailed to Susan at the new address. Before that payment, John Hancock had not received any request from Susan for a change of the ownership of the policy.

John had attempted to prevent Susan's cash surrender of the policy. On February 15, 2000, a former John Hancock agent, at John's request, had an employee telephone John Hancock to notify it that there was a "dispute" over the ownership of the policy. On February 16, 2000, the former agent faxed copies of the Trust and the divorce judgment to John Hancock.

II.

On December 6, 2000, John, Ryan, and Barbara Ann filed a complaint against John Hancock and Susan, in which they "sought compensatory and punitive damages against John Hancock and [Susan] for the wrongful cash surrender of [the] life insurance policy insuring the life of John A. Moore and held in trust for J. Ryan Moore and Barbara Ann Moore." Appellants' brief, at 1. As later amended, the complaint stated claims alleging negligence, wantonness, conversion, fraudulent misrepresentation, breach of contract, bad faith, fraudulent suppression, and conspiracy.

On March 16, 2001, John Hancock answered the complaint, denying its material allegations and asserting various affirmative defenses. On June 7, 2002, John Hancock filed a motion for a summary judgment, which, after oral arguments and the submission of briefs, the trial court granted on August 15, 2002. In its order granting John Hancock's motion for a summary judgment, the trial court stated, in part, its conclusion that the "[p]laintiffs lack standing to bring this action against John Hancock."

On September 13, 2002, John, Ryan, and Barbara Ann filed a motion to alter, amend, or vacate the summary judgment in favor of John Hancock. The trial court denied that motion on October 23, 2002. The trial court later made the summary judgment for John Hancock final, pursuant to Ala. R. Civ. P. 54(b), and John, Ryan, and Barbara Ann timely appealed to this Court.

III.

We review de novo the trial court's summary judgment for John Hancock.

"We

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