Singer Asset v. Connecticut Gen. Life Ins.

• Decision Date: 01 June 2007
• Docket Number: 2060157.
• Citation: 975 So.2d 375
• Parties: SINGER ASSET FINANCE COMPANY, L.L.C. v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY.
• Court: Alabama Court of Civil Appeals

975 So.2d 375

SINGER ASSET FINANCE COMPANY, L.L.C. v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY.

2060157.

Court of Civil Appeals of Alabama.

June 1, 2007.

Dayna R. Burnett and Charles N. Parnell III of Parnell & Crum, P.A., Montgomery, for appellant.

Joseph H. Driver of Carr, Allison, Pugh, Howard, Oliver & Sisson, P.C., Birmingham, for appellee.

THOMAS, Judge.

On December 29, 2005, Singer Asset Finance Company, L.L.C. ("Singer"), sued Connecticut General Life Insurance Company ("CGLIC"), alleging breach-of-contract, conversion, and negligence claims. CGLIC answered and filed motions, pursuant to Rule 12(b)(6), Ala. R. Civ. P., to dismiss Singer's claims.¹ The trial court granted CGLIC's motions and dismissed Singer's claims; with respect to the negligence claim, the trial court awarded CGLIC an attorney fee and costs pursuant to the Alabama Litigation Accountability Act ("ALAA"), § 12-19-270 et seq., Ala. Code 1975.

Singer appeals, arguing that the dismissal of its claims against CGLIC was erroneous because, it says, it can prove a set of circumstances that would entitle it to relief under each claim. Singer further argues that the trial court's order awarding CGLIC an attorney fee and costs was erroneous.

We are also releasing today an opinion in another appeal by Singer; in that appeal, Singer sought review of a summary judgment against it on Singer's claim against the estate of Richard H. Rutherford. See Singer Asset Fin. Co. v. Estate of Rutherford, [Ms. 2050500, June 1, 2007] ___ So.2d ___ (Ala.Civ.App.2007). The facts underlying both appeals are essentially the same and are undisputed.

Richard H. Rutherford was injured in an Atlantic City, New Jersey, casino. In settlement of his claim against the casino, he agreed in 1985 to a structured settlement with North River Insurance Company ("North River"), the casino's insurer. The settlement agreement provided, among other things, that Rutherford would receive five periodic payments according to the following schedule:

$15,000.00 payable on April 1, 1990;

$15,000.00 payable on April 1, 1995;

$20,000.00 payable on April 1, 2000;

$35,000.00 payable on April 1, 2005; and

$50,000.00 payable on April 1, 2010.

In accordance with the settlement agreement, North River purchased a guaranteed investment annuity contract from CGLIC in order to fund its obligation to make the periodic payments to Rutherford. North River paid CGLIC a lump-sum payment, and in return, CGLIC obligated itself to North River to make the annuity payments to the payee, Rutherford, according to the terms of the settlement agreement between North River and Rutherford.

According to the settlement agreement between Rutherford and North River — and as provided in the annuity contract between CGLIC and North River — if Rutherford died before the final proceeds of the settlement were disbursed, then CGLIC was to pay the commuted value of any remaining proceeds to Rutherford's named beneficiary or to Rutherford's estate. The named beneficiary of the annuity contract was Rutherford's wife, Sue. Sue Rutherford died in 1996.

On April 30, 1998, Rutherford assigned his right to receive two of the periodic payments to Mutual BanCorp in return for an immediate cash payment of $23,421. The assigned payments were the April 1, 2000, payment for $20,000, and the April 1 2005, payment for $35,000. On the same day, Mutual BanCorp provided written notice of the assignment and a change of the payee's address to CGLIC and North River. On May 11, 1998, Mutual BanCorp assigned to Singer its right to receive the two periodic payments. CGLIC made the April 1, 2000, payment of $20,000 to Singer. Before the April 1, 2005, payment became due, however, Rutherford died on May 24, 2002.

On April 2, 2003, almost a year after Rutherford's death, Roy F. King, Jr. was appointed as the administrator of Rutherford's estate (King is hereinafter referred to as "the administrator"). Singer alleges that it did not have knowledge of Rutherford's death or of the probate of Rutherford's estate until approximately November 9, 2004. Some time after November 9, 2004, Singer also learned that CGLIC had previously made a single lump-sum payment of $46,704.65 — representing the commuted value of the remaining annuity payments — to the estate. On November 12, 2003, the administrator paid substantially all of the assets of the estate to Rutherford's son and sole heir, Christopher Rutherford.

I. Standard of Review

When a complaint is dismissed pursuant to Rule 12(b)(6), the following standards apply:

"`"On appeal, a dismissal is not entitled to a presumption of correctness. The appropriate standard of review under Rule 12(b)(6) is whether, when the allegations of the complaint are viewed most strongly in the pleader's favor, it appears that the pleader could prove any set of circumstances that would entitle [him or her] to relief. In making this determination, this Court does not consider whether the plaintiff will ultimately prevail, but only whether [he or she] may possibly prevail. We note that a Rule 12(b)(6) dismissal is proper only when it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief."'"

Culver v. Lang, 935 So.2d 475, 477 (Ala. Civ.App.2006) (quoting Marks v. Tenbrunsel, 910 So.2d 1255, 1258 (Ala.2005)) (internal citations omitted). The annuity contract between CGLIC and North River was attached to Singer's complaint, along with copies of the settlement agreement between North River and Rutherford, the "Notice of Assignment" from Mutual BanCorp to both CGLIC and North River, and a letter from CGLIC in response to Mutual BanCorp's "Notice of Assignment." Therefore, those documents became part of Singer's pleadings pursuant to Rule 10(c), Ala. R. Civ. P.

II. Breach of Contract

As the only payee named in the annuity contract between CGLIC and North River, Rutherford was the third-party beneficiary of the annuity contract. Singer argues that, as the assignee of Rutherford's assignee, it stepped into Rutherford's shoes and became the third-party beneficiary of the annuity contract insofar as it obligated CGLIC to pay Rutherford $35,000 on April 1, 2005.

"`[I]t has long been the rule in Alabama that one who seeks recovery as a third-party beneficiary of a contract must establish that the contract was intended for his direct, as opposed to his incidental, benefit.' Mills v. Welk, 470 So.2d 1226, 1228 (Ala.1985). `To recover under a third-party beneficiary theory, the complainant must show: 1) that the contracting parties intended, at the time the contract was created, to bestow a direct benefit upon a third party; 2) that the complainant was the intended beneficiary of the contract; and 3) that the contract was breached.' Sheetz, Aiken & Aiken, Inc. v. Spann, Hall, Ritchie, Inc., 512 So.2d 99, 101-02 (Ala.1987)."

McGowan v. Chrysler Corp., 631 So.2d 842, 848 (Ala.1993).

CGLIC argues that because Rutherford did not have the right to alter the payee of the contract, he therefore had no right to obligate CGLIC to make any of the payments due under the annuity contract to his assignee. This argument assumes that because the third-party beneficiary could not change the named payee, then the third-party beneficiary could not assign its own right to receive payment so long as it was the named payee. It was this right to receive payment that Rutherford assigned, as a third-party beneficiary, not the right to alter the terms of the agreement. Mutual BanCorp — the original assignee — did not request that the payee be changed, it requested only that the payment address be changed, and that North River and CGLIC be on notice that Rutherford had assigned his right to receive the payments. Although Rutherford had no right to change the terms of the annuity contract, including the right to change the payee, there is no language in the annuity contract that prevented Rutherford from assigning whatever interests or rights he had under the contract, i.e., the right to receive the payments from CGLIC, so long as he was named as the payee.

When a party assigns its rights under a contract to an assignee, the assignee steps into the shoes of the assignor and possesses all the rights the assignor originally possessed, but nothing more. Green Tree Fin. Corp. v. Channell, 825 So.2d 90, 95 (Ala.2002); and Broadwell v. Imms, 14 Ala.App. 437, 441, 70 So. 294, 295 (1915). See also Ocwen Loan Servicing, LLC v. Washington, 939 So.2d 6 (Ala. 2006); Brookwood Med. Ctr. v. Celtic Life Ins. Co., 637 So.2d 1385 (Ala.Civ.App. 1994).

In Georgia Power Co. v. Partin, 727 So.2d 2 (Ala.1998), the Alabama Supreme Court repeated the rule that a third-party beneficiary may not claim the benefits of a contract without being bound by the limitations of the contract:

"It is a well-established principle of Alabama law that a contract made for the benefit of a third person may, at his election, be accepted and enforced by him. Michie v. Bradshaw, 227 Ala. 302, 149 So. 809 (1933). However, `[i]f he claims the benefits [of the contract], he also assumes the burdens.' Michie, 227 Ala. at 308, 149 So. at 814. See, also, Ex parte Dyess, 709 So.2d 447 (Ala.1997) (nonsignatory plaintiff claiming the benefit of a contract as a third-party beneficiary is subject to arbitration agreement within that contract). `The law is clear that a third party beneficiary is bound by the terms and conditions of the contract that it attempts to invoke. "The beneficiary cannot accept the benefits and avoid the burdens or limitations of a contract."' Interpool Ltd. v. Through Transport Mut. Ins. Ass'n Ltd., 635 F.Supp. 1503, 1505 (S.D.Fla.1985), quoting Trans-Bay Engineers & Builders, Inc. v. Hills, 551 F.2d 370, 378 (D.C.Cir. 1976). See, also, Dunn Constr. Co. v. Sugar Beach Condominium Ass'n, Inc., 760 F.Supp. 1479 (S.D.Ala.1991); Lee v. Grandcor Medical Systems, Inc., 702 F.Supp. 252, 255 (D.Colo.198...