Richards v. Richards
| Decision Date | 20 April 1973 |
| Docket Number | No. 22,22 |
| Citation | 58 Wis.2d 290,206 N.W.2d 134 |
| Parties | Mark Steven RICHARDS et al., Appellants, v. Patricia K. RICHARDS, a/k/a Patricia K. Lew, Respondent, Anchor S & L Assn., Defendant. |
| Court | Wisconsin Supreme Court |
Pfannerstill, Camp & Tyson, Wauwatosa, for appellants.
Donald S. Eisenberg & Associates, Madison, for respondent.
This action was brought by the children of Jack Richards to recover the proceeds of a life insurance policy on the life of their father which were paid to Patricia K. Richards, the second wife of the decedent. The case was submitted to the court on stipulated facts. These facts show that Jack Richards was divorced from Joan Richards, the mother of the three children who are parties plaintiff herein, in December of 1967.
Pursuant to a written stipulation, the divorce judgment provided:
Subsequently, Jack Richards entered into a ceremony of marriage with Patricia K. Lew, who is the principal defendant in this action.
On April 9, 1969, Jack Richards changed the beneficiary designation in the State Group Term Insurance policy from his minor children to Patricia Lew Richards but did not procure any other insurance to replace it. This charge was made without the knowledge of his first wife, and the existence of the policy was unknown to Patricia until after Jack's death in September of 1970. She first became aware of this policy of insurance when she received a letter from the Minnesota Mutual Life Insurance Company, the underwriter of the State Group Term Insurance policy, stating that she was the beenficiary under the policy. On October 20, 1970, Minnesota Mutual issued its check to 'Patricia K. Richards, Widow of Jack Richards, Deceased' in the sum of $11,000. Patricia deposited $9,000 of the proceeds of this check in savings accounts at the Anchor Savings and Loan Association at Madison, Wisconsin. Two thousand dollars was spent by Patricia. Subsequently, after the service of process in this action, Patricia withdrew the sum of $1,000 from one of the savings accounts. The proceeds of the National Service Life Insurance policy were paid for the benefit of the children. Jack Richards died without any assets in his estate.
In the action commenced by the plaintiffs, they argued that, by virtue of the divorce decree, they received a vested interest in the Minnesota Mutual Life Insurance Company policy which could not be defeated by a change of beneficiary. They argued also that a constructive trust had arisen by operation of law ant that the court should order that the funds in the hands of the defendant be subject to that trust.
The trial judge held that, since the divorce judgment permitted Richards to substitute other insurance policies, the plaintiffs received no vested interest in the policy in question. He resolved the contention that the insurance policies were impressed with a constructive trust by concluding that that doctrine was not applicable when Patricia Richards, the recipient, was not guilty of any wrongdoing. The trial judge concluded that Patricia Richards was entitled to the insurance proceeds and dismissed the plaintiffs' complaint.
The Anchor Savings and Loan Association is not a party to this appeal, and it appears that its only function is that of a garnishee defendant or a stakeholder.
It is true, as the defendant Contends, that one who purchases a life insurance policy and pays the premium may change the beneficiary at will. Rawson v. Milwaukee Mutual Life Ins. Co. (1902), 115 Wis. 641, 645, 92 N.W. 378. The beneficiary has a 'mere expectancy,' which may be defeated by the act of the insured acting in conformance with the rights under the policy. Slocum v. Northwestern National Life Ins. Co. (1908), 135 Wis. 288, 292, 115 N.W. 796. Nevertheless, we conclude that, under the circumstances of this case, the children of the deceased were equitably entitled to the proceeds of the insurance policy and that a constructive trust should be imposed on the proceeds for their benefit.
Our conclusion is supported by two fairly recent cases decided by this court. Lee v. Preiss (1962), 18 Wis.2d 109, 118 N.W.2d 104, and Estate of Boyd (1963), 18 Wis.2d 379, 118 N.W.2d 705.
In Lee v. Preiss, a divorce judgment was entered which provided that the husband make child support payments. The husband orally promised the wife that he would maintain an insurance policy on his wife, naming her as beneficiary, to compensate for his failure to pay support during the pendency of the divorce action. Although the husband made representations from time to time that either his first wife or his children were the beneficiaries of the policy, nevertheless, after the divorce, he changed the beneficiary to Miss Preiss. The first wife and the decedent's children brought suit against Preiss to recover the proceeds. Preiss argued that, since under the insurance policy, she had been properly named the beneficiary, the proceeds were free of any claim of the first wife or the children. The trial court agreed with Preiss' contention, but on appeal this court reversed. It agreed that Preiss was entitled to the proceeds as against the insurer and held that the insurance company could make payments in reliance on its policy provisions in the absence of any notice to the contrary. Significantly, in respect to the problem which arises in the instant case, the court held that the husband's promises to the plaintiffs gave them equitable rights in the insurance policy superior to those of the named beneficiary. In so doing, the court overruled two cases relied upon by the defendant herein: Faubel v. Eckhart (1912), 151 Wis. 155, 138 N.W. 615, and Malancy v. Malancy (1917), 165 Wis. 642, 163 N.W. 186. In respect to those two cases, the court in Lee v. Preiss stated 18 Wis.2d at page 116, 118 N.W.2d at page 108:
'Insofar as Faubel v. Eckhart and Malancy v. Malancy hold that an agreement between the insured and another with respect to designation of a beneficiary of a life insurance contract can confer on the promisee, in equity, no rights in the proceeds superior to those of the named beneficiary, they are overruled.'
In Estate of Boyd, supra, 18 Wis.2d page 380, 118 N.W.2d page 705, the divorce judgment carried the provision:
"6. . . . and the name of Beatrice M. Boyd, the plaintiff herein, shall be inserted as beneficiary in Policy No. C--0651--9765 with the Equitable Life Assurance Society for two thousand Dollars ($2,000)."
About a month after the divorce judgment, Boyd removed the name of his former wife, Beatrice, as a beneficiary of the policy. Upon the death of Boyd, Beatrice filed a claim against his estate for the amount of the policy. The trial court concluded that the claim had to be disallowed because Beatrice Boyd did not have a vested right in the insurance contract and, accordingly, her husband was entitled to remove her as the beneficiary. In his memorandum opinion the trial judge noted that the divorce judgment contained no express prohibition against a change in beneficiary. This court reversed. We pointed out that the provision in the divorce decree was pursuant to a stipulation of the parties. We relied upon the rule of Miner v. Miner (1960), 10 Wis.2d 438, 444, 103 N.W.2d 4, which holds that a stipulation in a divorce action is in the nature of a contract and that a contract should be given a construction which will effectuate what appears to have been the intention of the parties. In considering the facts of Boyd, this court concluded that the interpretation urged to contravene the claim of the first wife would only be tenable if the parties to the divorce action had intended to stipulate 'to something valueless and that the judgment based thereon was intended to mirror such emptiness.'
Boyd apparently left a solvent estate, and the court permitted a...
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