Sun Life Assur. Co. of Canada v. Dunn, CIV.A. H-00-245.
| Decision Date | 15 March 2001 |
| Docket Number | No. CIV.A. H-00-245.,CIV.A. H-00-245. |
| Citation | 134 F.Supp.2d 827 |
| Parties | SUN LIFE ASSURANCE COMPANY OF CANADA, Plaintiff/Interpleader, v. Gloria A. DUNN and Kelly M. Dunn (By Next Friend Marcia M. Dunn), Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Craig Stephen Wolcott, Hays Mc Conn Rice & Pickering, Houston, TX, for Plaintiff.
Frank A. Hale, Attorney at Law, Houston, TX, for Gloria A. Dunn.
Cheri Duncan, Attorney at Law, Houston, TX, for Kelly M. Dunn and Marcia M. Dunn.
Pending before the Court is Defendant Kelly M. Dunn's Motion for Partial Summary Judgment. Having considered the motion, submissions, and application of law, the Court determines that the motion for partial summary judgment should be granted.
This is an interpleader action. Plaintiff Sun Life Assurance Company of Canada ("Sun") sued Defendants Kelly M. Dunn ("Kelly") and Gloria A. Dunn ("Gloria") to determine the recipient of the benefits in John F. Dunn's ("John") life insurance policy. Sun brings this action pursuant to 28 U.S.C. § 1331 (federal question jurisdiction), § 1332 (diversity jurisdiction) and § 1335 (federal interpleader jurisdiction).
Defendant Marcia M. Dunn ("Marcia"), the mother and next friend of Kelly, divorced John on January 8, 1996. The final divorce decree named Marcia as sole managing conservator of Kelly and John as possessory conservator. The divorce decree also required that John pay child support in the amount of $1,028.00 per month. Kelly was found to require "substantial care and personal supervision" due to mental and physical disabilities; therefore, the divorce decree provided that John pay child support until Kelly's death or emancipation from her disabilities.1
In addition to the monthly child support payments, the divorce decree required John to supply several forms of "additional" child support. Specifically, John was required to maintain a life insurance policy of no less than $200,000.00, which designated Kelly as the irrevocable beneficiary and Marcia as the trustee. According to the divorce decree, the life insurance policy was to be carried as long as John was obliged to pay monthly child support.
The divorce decree further provided that John furnish Marcia with written proof of insurance by December 31 of each year to ensure that John provided the necessary life insurance coverage. John took out a series of insurance policies to comply with the order. One such policy was for $160,00.00 with Sun and was established on June 6, 1996, six months after the divorce. In addition to the Sun policy, John enrolled in a smaller policy with Business Men's Assurance Company of America ("BMA"). The BMA policy is worth between $40,000.00 and $60,000.00. John originally designated Kelly as the primary beneficiary of both policies. However, Kelly was never designated as an irrevocable beneficiary as required by the divorce decree.
On October 10, 1997, John changed the designated primary beneficiary of the Sun policy from Kelly to Gloria, in direct violation of the divorce decree. Kelly remained as a secondary beneficiary to the Sun policy and was entitled to thirty seven percent of the policy in the event of John's death. By decreasing Kelly's percentage on the Sun policy, the total value of the combined policies at this time fell well below the minimum total required by the divorce decree. John's actions went undetected because he changed Kelly's percentage back to the minimum requirement just prior to the December 31 reporting deadline, and then re-altered the percentages in violation of the divorce decree after copies had been furnished to Marcia.
This pattern of altering the primary beneficiary and the overall percentages of the policy continued until John's death on September 29, 1999. At that time, Kelly was designated to receive thirty seven percent of the Sun policy, totaling approximately $59,200.00. The total amount Kelly was to receive from the combined Sun and BMA policies was somewhere between $100,000.00 and $120,000.00, well below the $200,000.00 required by the divorce decree.
Sun filed the instant interpleader action against Kelly and Gloria to determine who should receive what percentage of John's life insurance policy. Sun was discharged from the suit on April 12, 2000, and Defendants were enjoined from taking action against Sun. Kelly filed her answer and cross-claim against Gloria on March 27, 2000, asking the Court to award her equitable title to the Sun policy by imposing an equitable trust on the proceeds. Kelly further argues theories of tortious interference with contract, fraud, conspiracy and breach of contract.
Gloria responded to Kelly's cross-claim on April 14, 2000, arguing that Kelly had failed to state a claim upon which relief could be granted. Additionally, Gloria cross-claimed against Kelly alleging tortious interference with contract. Kelly filed the instant motion for partial summary judgment, arguing that the divorce decree vested Kelly with an equitable interest in the Sun policy, therefore entitling her to the proceeds through a constructive trust. Kelly also seeks summary judgment on Gloria's tortious interference with contract claim.
Summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Initially, the movant bears the burden of demonstrating to the Court that there is an absence of a genuine issue of any material fact. Id. at 323, 106 S.Ct. 2548. The burden then shifts to the party who bears the burden of proof on the claims on which summary judgment is sought to present evidence beyond the pleadings to show there is a genuine issue for trial. Id. A genuine issue for trial exists when Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Kelly moves for partial summary judgment on the theory that the divorce decree between John and Marcia vested Kelly with an equitable interest in John's life insurance proceeds. Kelly argues that the Court should therefore impose a constructive trust on the proceeds of the Sun policy. She also argues that her claims are not barred by either the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), applicable state statutory law or current case law. Finally, Kelly argues that Gloria's tortious interference with contract claim has no merit because Kelly is seeking to recover property in which she has a vested interest.
Determining the proper beneficiary of an employee welfare insurance plan falls under the purview of ERISA.2 Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1325 (5th Cir.1994). Federal courts must apply "federal common law to disputes between a non-beneficiary claimant and the named ERISA beneficiary to life insurance proceeds." Manning v. Hayes, 212 F.3d 866, 874 (5th Cir.2000). The court looks either to the statutory language of ERISA, or if that is not determinative, to the federal common law. Brandon, 18 F.3d at 1325. The federal common law in turn, may draw guidance from analogous state law. Id. Therefore, state and federal law are both applicable in determining the proper beneficiary of an insurance policy covered under ERISA. Id.
Kelly first argues that she is entitled to the insurance proceeds based on a vested interest created through the divorce decree. She asks this Court to impose a constructive trust on the proceeds to ensure that she is not deprived of her interest. Gloria counters that in the cases cited by Kelly, the courts only imposed constructive trusts on insurance policies which were in existence at the time of or before the divorce decrees named the children as irrevocable beneficiaries. She notes that in the instant case, the Sun policy did not come into existence until well after the divorce decree and the imposition of a constructive trust is therefore improper. Kelly responds that a pre-existing policy is a common link, but not a determinative factor, in any of the cases she relies on. Therefore, she argues, that as long as the essential requirements for a constructive trust exist, this Court may impose such a trust.
For the Court to impose a constructive trust as an equitable remedy, Kelly must prove three elements:
1. breach of an informal relationship of special trust or confidence arising prior to and apart from the transaction in question, or actual fraud;
2. unjust enrichment of the wrongdoer; and
3. an identifiable res.
Monnig's Dep't Stores Inc. v. Azad Oriental Rugs Inc., 929 F.2d 197, 201 (5th Cir. 1991) (). The Court will address each element in turn.
The critical inquiry in recognizing a constructive trust is whether the parties have a confidential or fiduciary relationship. Harris v. Sentry Title Co., 727 F.2d 1368, 1370 (5th Cir.1984). In the absence of fraud, there must be a preexisting confidential or fiduciary relationship between the parties. Id. Here, the parties had a pre-existing fiduciary relationship — that of father to daughter. See S.V. v. R.V., 933 S.W.2d 1, 8 (Tex.1996). The divorce decree confirms this relationship, with John agreeing to provide child support for Kelly even after she reaches adulthood. Additionally, this...
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