Thomas v. Stone

• Decision Date: 29 March 2006
• Docket Number: No. 20050269.,20050269.
• Parties: Joan M. THOMAS, Plaintiff and Appellee and Brittany M. STONE and Megan M. Stone, Plaintiffs v. Wendy A. Stone, Defendant and Appellant.
• Court: North Dakota Supreme Court

711 N.W.2d 199

2006 ND 59

Joan M. THOMAS, Plaintiff and Appellee and Brittany M. STONE and Megan M. Stone, Plaintiffs v. Wendy A. Stone, Defendant and Appellant.

No. 20050269.

Supreme Court of North Dakota.

March 29, 2006.

Todd W. Foss, Stefanson, Plambeck & Foss, Moorhead, MN, for plaintiff and appellee.

Thomas D. Fiebiger and Sara K. Sorenson (on brief), Ohnstad Twichell, P.C., Fargo, N.D., for defendant and appellant.

CROTHERS, Justice.

[¶ 1] Wendy A. Stone, the surviving spouse of Michael Stone, appeals from a judgment declaring that Michael Stone's former wife, Joan M. Thomas, was entitled to one-half of the proceeds from a life insurance policy provided by his employer. We conclude the plain and unambiguous language of a divorce decree entitles Thomas to one-half of the insurance proceeds, and we affirm.

I

[¶ 2] Michael Stone and Thomas were divorced in 1995 under a decree that incorporated their custody and property settlement agreement, granted Thomas custody of the parties' two minor daughters, Brittany and Megan Stone, and required Michael Stone to pay Thomas child and spousal support. The divorce decree required Michael Stone to pay Thomas $2,556 per month in child support until the oldest daughter turned 18 or graduated from high school and thereafter decreased his child support obligation to the then effective guideline amount for one child until the youngest daughter turned 18 or graduated from high school. The decree initially required Michael Stone to pay Thomas $800 per month in spousal support for 12 months and then $500 per month for an additional 24 months.

[¶ 3] Relevant to the claim for the life insurance proceeds, the divorce decree provided:

Life Insurance. Michael [Stone] has certain life insurance provided by his employer, MeritCare Medical Systems. Joan [Thomas] shall remain a beneficiary on one-half of such insurance so long as Michael [Stone] remains obligated by the terms of this stipulation to provide child or spousal support to Joan [Thomas]. Michael [Stone] shall make the children beneficiaries of the remaining one half of the policy. Joan [Thomas] is the owner of a $10,000 term life policy. Joan [Thomas] shall retain Michael [Stone] as a beneficiary on that policy until the children reach the age of majority or are emancipated.

[¶ 4] In July 1996, Michael Stone executed an enrollment form for a $250,000 basic life insurance policy provided by his employer, MeritCare. The enrollment form designated Thomas as a beneficiary for one-half of the policy and his two daughters as joint beneficiaries for the other half of the policy. Michael Stone thereafter married Wendy Stone, and in 1998, he designated her as the beneficiary for the entire life insurance policy provided by MeritCare. In 2002, after the oldest daughter had turned 18 and graduated from high school, Michael Stone and Thomas agreed to an amended judgment that reduced his child support obligation to $1,538 per month, but did not change the life insurance provision. Because they shared custody of their youngest daughter, Thomas and Michael Stone also entered into a "side agreement" that Thomas would refund $738 per month in child support to him, leaving him with an $800 per month net child support obligation to Thomas.

[¶ 5] Michael Stone died on July 8, 2004. When he died, his spousal support obligation had terminated and his child support obligation was scheduled to terminate in August 2004, the date of his last scheduled child support payment for his youngest daughter. When Michael Stone died, Thomas had not yet reimbursed him under the "side agreement" for child support for July 2004, and after an offset for his August 2004, obligation, his net remaining child support obligation was $62.

[¶ 6] The insurer deposited the insurance proceeds with the district court, and Thomas, Brittany Stone, and Megan Stone sued Wendy Stone for a declaration of their rights to the proceeds. The parties agreed there were no factual disputes and submitted the case to the court on the record. The court granted judgment for Thomas and the daughters, concluding the property settlement agreement and divorce decree clearly and unambiguously entitled Thomas to one-half of the insurance proceeds and the daughters to the other half of the proceeds.

II

[¶ 7] In the district court and on appeal, Wendy Stone does not challenge the daughters' claim to one-half of the insurance proceeds. Wendy Stone argues, however, the court erred in determining Thomas was entitled to the other one-half of the proceeds, because the divorce decree required Michael Stone to designate Thomas as a beneficiary as security for his child support obligation and he had only one child support payment in the net amount of $62 remaining at the time of his death. Wendy Stone argues Thomas is only entitled to $62 in proceeds from the insurance policy. Wendy Stone argues awarding Thomas one-half of the insurance proceeds would give her an unintended and inequitable windfall, because the divorce decree required her to be designated as a beneficiary only for so long as Michael Stone's support obligation remained. Thomas responds the clear and unambiguous language of the divorce decree controls and entitles her to one-half of the proceeds.

[¶ 8] In Peters-Riemers v. Riemers, 2002 ND 72, ¶ 28, 644 N.W.2d 197, this Court recognized a district court may order a child support obligor to maintain a life insurance policy under N.D.C.C. § 14-08.1-03 as security for court ordered child support payments. However, Riemers involved the authority of a district court to require an obligor to maintain life insurance; it did not involve competing claims to the proceeds from a policy. Here, the parties agreed to a life insurance provision and a conforming judgment was entered, so we look only to terms of that judgment. This Court's decision in Riemers does not control the disposition of the life insurance proceeds.

[¶ 9] Generally, insureds are free to designate beneficiaries in their life insurance policies, and the designated beneficiaries are entitled to the proceeds on the death of the insured. 4 Lee R. Russ and Thomas F. Segalla, Couch on Insurance § 59:1 (3d ed.2005); 44A Am.Jur.2d Insurance § 1677 (2003). However, an insured's right to designate beneficiaries may be limited by agreements or court orders relating to marital and family rights. 4 Russ, Couch on Insurance, supra §§ 59:1, 59:3, and 64:18; 44A Am. Jur.2d, supra § 1683; John J. Michalik Annotation, Divorce: Provision in Decree That One Party Obtain or Maintain Life Insurance for Benefit of Other Party or Child, 59 A.L.R.3d 9, § 2 (1974).

[¶ 10] In Nunn v. Equitable Life Assur. Soc'y, 272 N.W.2d 780, 781 (N.D. 1978), this Court considered a claim by an insured's surviving wife against his former wife for proceeds of a group life insurance policy. During their marriage, the insured had designated his former wife as the beneficiary of the group life insurance policy. Id. The insured and his former wife both remarried after their divorce, and the insured did not thereafter change the beneficiary on his life insurance policy. Id. After the insured died, his...