Transamerica Occidental Life Ins. Co. v. Burke

• Decision Date: 11 March 1988
• Docket Number: No. 18013,18013
• Citation: 368 S.E.2d 301,179 W.Va. 331
• Court: West Virginia Supreme Court
• Parties: TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, a Corporation, and Kelly Foundry and Machine Company, Inc. v. Karen D. BURKE, Brian K. Ferguson, David S. Ferguson, an Infant, Jeffrey R. Ferguson, an Infant, Diana Marie Lothes, Anthony D. Nelson and Donna K. Nelson, as Guardian of the Infants.

Page 301

368 S.E.2d 301

179 W.Va. 331

TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, a Corporation, and Kelly Foundry and Machine Company, Inc. v. Karen D. BURKE, Brian K. Ferguson, David S. Ferguson, an Infant, Jeffrey R. Ferguson, an Infant, Diana Marie Lothes, Anthony D. Nelson and Donna K. Nelson, as Guardian of the Infants.

No. 18013.

Supreme Court of Appeals of West Virginia.

March 11, 1988.

Syllabus by the Court

1. With reference to the beneficiary(ies), it has frequently been said that a policy of life insurance is testamentary in nature, and the rules for interpreting a will may guide the courts in ascertaining the legal effect of a clause in a life insurance policy designating the beneficiary(ies).

2. The term "children" ordinarily does not include stepchildren, but it may include stepchildren when a contrary intent is found from additional language or circumstances.

3. If a will was drafted by one who is not a lawyer, a court will be more inclined to assume that the will was written in the language of the lay person and will be more inclined to give effect to the language of the will in accordance with the subjective sense employed by the testator or testatrix, and not according to the technical meaning of the language. The same principle applies to other documents which contain dispositions of property which are testamentary in nature, such as the beneficiary-designation clause of an insurance policy providing death benefits.

4. A class description such as "children" ordinarily raises a latent ambiguity if there are, for example, stepchildren, so that evidence of the testator's or insured's relations with and attitude toward them is admissible to determine whether it was the testator's or insured's intent to include them in the gift.

5. "A witness who is not a party to an action[,] or has no interest in that action, is not precluded by W.Va.Code, 57-3-1 [1937], commonly referred to as the 'Dead Man's Statute,' from testifying with regard to a personal transaction or communication between such witness and a decedent." Syl. pt. 1, Papenhaus v. Combs, 170 W.Va. 211, 292 S.E.2d 621 (1982).

6. Where the formal designation of the beneficiary(ies) of a life insurance policy or of other death benefits is ambiguous in light of the circumstances at the time of such designation, a declaration of the insured as to whom he or she intended to be the beneficiary(ies) is admissible as evidence of such intent under the exception to the hearsay rule for declarations of intent, W.Va.R.Evid. 803(3).

Richard W. Cardot, Elkins, for Brian K. Ferguson.

Vaughn R. Groves, Jackson, Kelly, Holt & O'Farrell, Charleston, for Transamerica Occidental Life Ins.

R. Mike Mullens, Elkins, Guardian ad Litem: for David & Jeffrey Ferguson.

George R. Triplett, Elkins, for Anthony D. Nelson.

McHUGH, Chief Justice:

This interpleader action is before this Court upon appeal from a final order of the Circuit Court of Randolph County, West Virginia. The appellant, Brian K. Ferguson, seeks our review on behalf of himself and Jeffrey R. Ferguson and David S. Ferguson. Based upon our review of the petition, all matters of record and the briefs and oral argument of counsel, we reverse and remand for a new trial.

I

Richard Wayne Nelson ("the decedent") was married twice. From his first marriage he had three children, namely, Anthony D. Nelson, Diana Marie Nelson Lothes (Phares) and Karen D. Nelson Burke.

In 1972, the decedent married Donna Kay Nelson. She had three children from a previous marriage, namely, Brian K. Ferguson, Jeffrey R. Ferguson and David Shawn Ferguson. From 1971 until the decedent's death in 1986, the decedent, Donna K. Nelson, and her three children lived together as a family. The decedent and Donna K. Nelson had no children born of their marriage.

The decedent was covered under an employee life insurance plan and under an employee pension plan established by his employer, Kelly Foundry & Machine Company, Inc. Transamerica Occidental Life Insurance Company was the insurer for both plans. In 1976, the decedent in his "enrollment cards" designated the beneficiaries of the death benefits under both plans as follows: "50%--Donna K., 50%--children." The enrollment cards stated that if a beneficiary is not a relative, the complete address of the beneficiary was to be given. The decedent did not give any address for the beneficiaries designated by him.

Upon the decedent's death in July, 1986, life insurance benefits in the sum of $29,910.00 and pension benefits in the sum of $4,932.96 were due to the beneficiaries. The insurer subsequently paid fifty percent of these death benefits to Donna K. Nelson. The insurer intended to pay the remaining fifty percent of these death benefits equally to each of six individuals, namely, the three natural children of the decedent and the three stepchildren of the decedent. Anthony Nelson, one of the decedent's natural children, objected to this proposed six-way distribution and, through his attorney, notified the insurer by letter that he believed the term "children" in the beneficiary designation referred to only the three natural children of the decedent.

The insurer thereafter paid each of the three natural children one-sixth of these death benefits, totalling one-half of the remaining fifty percent. The insurer then deposited the other one-half of the remaining fifty percent with the Circuit Court of Randolph County ("the trial court") in an interpleader action to determine who was entitled to the proceeds in question. Two of the natural children of the decedent, namely, his two daughters, answered the interpleader by averring that they had no objection to the decedent's three stepchildren's receiving the proceeds in question as "children."

The interpleader action was tried by the court without a jury. Documentary evidence was admitted which indicated that the decedent provided hospitalization insurance for his three stepchildren; that one of his stepchildren, Jeffrey R. Ferguson, had received "supplemental security income" benefits, taking into account the earnings of the decedent as "parent"; and that the decedent listed his three stepchildren, as well as his three natural children, as dependents on his federal income tax returns.

Two witnesses testified. A coemployee, a Mary Raines, testified that she was the custodian of the employee life insurance and pension plan records and that the decedent, upon or shortly after execution of the enrollment cards, had conversed with her about his intent as to which children were to be considered his beneficiaries under such plans. The attorney for Anthony Nelson, one of the decedent's natural children, objected to Mary Raines' testimony as to the content of those conversations. The trial court sustained this objection and refused to hear such testimony on the grounds that the same was inadmissible (1) under the "Dead Man's Statute," W.Va.Code, 57-3-1 [1937] and (2) as hearsay. The attorney for Brian K. Ferguson, the only one of the decedent's three stepchildren who had reached majority at the time of trial, objected on the record to this ruling of the trial court.

The second witness who testified was the widow of the decedent, Donna K. Nelson. She testified, over Anthony Nelson's attorney's continuing objection, that the decedent provided shelter, food, clothing and transportation for his three stepchildren, disciplined them as his own children and otherwise treated them as his own children. Mrs. Nelson also testified, over objection, that sometime in 1980 or 1981, the decedent and she contacted an attorney about the decedent's adopting his three stepchildren. Before the adoptions could be completed, the decedent was laid off from his job, and he decided, for financial reasons, not to pursue the adoptions until he was employed again. ¹ The trial court ruled that all of these facts from Mrs. Nelson's testimony were irrelevant.

The trial court found, over the stepchildren's objection, that there was no admissible evidence to establish that anyone except the decedent's natural children, and his wife, were to be beneficiaries under the life insurance and pension policies. The trial court held that, as a matter of law, the term "children" does not include stepchildren. The trial court consequently awarded the proceeds in question to the three natural children, and not to the three stepchildren.

II

At the outset we observe that there is nothing in the group life insurance statute, W.Va.Code, 33-14-14 [1957], or in the group life insurance or pension policies in this case which restricts an insured's right to designate any person(s), including stepchildren, as beneficiary(ies). ² Columbian Mutual Life Insurance Co. v. Davis, 35 Misc.2d 26, 228 N.Y.S.2d 843 (Sup.Ct.1962) (interpleader action by life insurance company to determine beneficiaries of life insurance; reputed wife and stepchildren of insured held to be beneficiaries, as that was intent of insured).

The statutory laws of intestate descent and distribution and the technical, common-law definitions of terms such as "children" are not controlling in construing a life insurance contract to determine the beneficiary(ies) thereof. See, e.g., Turner v. Metropolitan Life Insurance Co., 56 Cal.App.2d 862, 865-66, 133 P.2d 859, 860, 861 (1943), review denied (Cal. Mar. 29, 1943). On the other hand, with reference to the beneficiary(ies), it has frequently been said that a policy of life insurance is testamentary in nature, and the rules for interpreting a will may guide the courts in ascertaining the legal effect of the clause in a life insurance policy designating the beneficiary(ies). Equitable Trust Co. v. Epling, 168 S.C. 494, 496-98, 167 S.E. 820, 821-22 (1933). ³

In syllabus point 2 of Davis Trust Co. v. Elkins, 114 W.Va. 742, 175 S.E. 611 (1934), the Court held that "[t]he term 'children' in its primary sense, and in the absence of qualifying words and provisions,...