U.S. Life Ins. Co. in the City of N.Y. v. Logus Mfg. Corp.

• Citation: 845 F.Supp.2d 1303
• Decision Date: 31 January 2012
• Docket Number: Case No. 10–81244–CIV–ZLOCH.
• Parties: The UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, f/k/a American General Life Insurance Company, Plaintiff, v. LOGUS MANUFACTURING CORP., and George S. Hack Irrevocable Trust (Virginia C. Hack, Trustee), Defendants.
• Court: U.S. District Court — Southern District of Florida

845 F.Supp.2d 1303

The UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, f/k/a American General Life Insurance Company, Plaintiff,

v.LOGUS MANUFACTURING CORP., and George S. Hack Irrevocable Trust (Virginia C. Hack, Trustee), Defendants.

Case No. 10–81244–CIV–ZLOCH.

United States District Court,

S.D. Florida.

Jan. 31, 2012.

Gary John Guzzi, Akerman Senterfitt, Miami, FL, for Plaintiff.

Kenyetta Nicole Alexander, Mark R. Osherow, Katz Barron Squitero Faust, P.A., Ft. Lauderdale, FL, Stephen Charles Page, Preethi Sekharan, Page Mrachek Fitzgerald & Rose, Stuart, FL, for Defendants.

ORDER

WILLIAM J. ZLOCH, District Judge.

THIS MATTER is before the Court upon Plaintiff American General's Motion For Summary Judgment Regarding The George S. Hack Irrevocable Trusts's Counterclaims (DE 61), Defendant, Logus Manufacturing Corp.'s Motion For Summary Judgment (DE 32), and Defendant/ Counterclaimant / Cross Claimant / Cross Defendant George S. Hack Irrevocable Trust's Motion For Summary Judgment On Its Counterclaims For Breach Of Contract, Negligence, And Declaratory Judgment And Cross Claim For Declaratory Judgment And On Plaintiff's Complaint For Interpleader (DE 35). The Court has carefully reviewed said Motions, the entire court file and is otherwise fully advised in the premises.

This interpleader action was filed to determine the rightful owner to the proceeds of an American General Life Insurance Policy insuring the life of George Hack, the former President of Logus Manufacturing Corporation (hereinafter “Logus”), a closely-held family business that he co-owned equally with his brother, Thomas Hack. In 2001, George Hack attempted to change the Policy's beneficiary from Logus to the George S. Hack Irrevocable Trust (hereinafter “the Trust”)—a personal trust of which his wife, Virginia, is the Trustee. Plaintiff American General Life Insurance Company (hereinafter “American General”) received but did not record his requested change. In 2010, George Hack died unexpectedly and Virginia made claim to the proceeds. Thomas Hack, now President of Logus, asserts that the proceeds belong to the Corporation because his brother lacked authority to change the beneficiary and because his requested change was contractually insufficient.

To resolve this dispute, Plaintiff American General filed an interpleader action. See DE 1. By prior Order (DE 53), the Court ordered Plaintiff to deposit the proceeds of the Policy into a Court registry and required Defendants to interplead and resolve their claims to those proceeds. Each Defendant then filed a cross-claim against the other claiming to be the rightful owner and beneficiary of the Policy. Defendant Logus added a second cross-claim against the Trust for tortious interference with Logus's contract rights. In addition, Defendant Trust filed counterclaims against Plaintiff American General alleging that it breached the policy and committed negligence in failing to record George Hack's requested change. In light of these counterclaims, the Court required American General to remain as a party to this action.

Both Defendants have now filed cross-motions for summary judgment as to their cross-claims. DE Nos. 32 & 35. In addition, Defendant Trust and Plaintiff American General have filed cross-motions for summary judgment on the Trust's counterclaims. DE Nos. 35 & 61. For the reasons detailed below, the Court will declare Logus the rightful owner and beneficiary of the Policy, grant the Trust judgment as a matter of law on Logus's cross-claim for tortious interference with contract, and grant American General judgment as a matter of law on the Trust's counterclaims.

I. Background

Logus Manufacturing Corporation was founded by George Hack, Sr., in 1962. In 1988, he handed the business off to his sons, George S., Thomas, and Steven. George S. Hack (hereinafter “George Hack”) became the President and Chief Executive Officer and allegedly carried out all details of Logus's daily business, including its financial affairs, with minimal oversight. DE 36, ¶ 13. Once a year, Logus's Board of Directors retroactively approved his actions. Virginia Hack served as Logus's Bookkeeper for over seventeen years, beginning in approximately 1992. See DE 36, ¶ 15. In that capacity, she assisted her husband with all administrative, financial, and clerical affairs. Id. Thomas Hack served as Secretary of Logus and allegedly had “little to no involvement” in Logus's daily management, operation, administrative, or financial affairs. Id. at ¶ 17.

In April 1997, Logus Manufacturing became 100 percent wholly owned by Logus Microwave Corporation (hereinafter interchangeably referred to as “Logus”). By 2001, Steven Hack had left the business and George and Thomas had each become 50 percent owners of Logus.

A. The Life Insurance Policy

On March 5, 1992, George Hack, on behalf of Logus, applied for a life insurance policy naming himself as the proposed insured and Logus as the proposed owner and beneficiary.¹ George Hack signed as the insured and Thomas Hack signed as the owner on behalf of Logus. On April 24, 1992, American General issued the requested Policy to Logus. It listed “George S Hack” as the insured, and Logus as the owner and beneficiary. See DE 14–3, p. 8 (“The owner and beneficiary shall each be as designated in the application unless either is subsequently changed as provided in this policy.”).

Under the Policy, only the owner was authorized to change the owner or beneficiary. It stated:

While the insured is alive, the Owner or Beneficiary may be changed by the Owner. Such change shall be made by written request to us at our Home Office. If the change is not subject to the rights of any assignee of record or irrevocable Beneficiary, it will take effect when it is recorded by us. The change will then be deemed to be effective as of the date of the request for change, even though the insured may have died before the change was recorded. The change, however, will be subject to any payment that we have made or action we have taken before the request is recorded. If required by us, the policy must be sent to us for endorsement of the change.

DE 14–3, p. 15 (emphasis added).

According to Virginia Hack, in the fall of 2000, she and her husband met with their life insurance agent and estate planner, James Larschan. DE 40, ¶¶ 48–51. When they informed him of their financial needs, Larschan allegedly offered two pieces of advice. First, he advised them to create the George S. Hack Irrevocable Trust and fund the Trust with the instant Policy. Id. To accomplish this, Larschan allegedly referred the Hacks to attorney Randall C. Doane, who helped them create the Trust and attempt to change the Policy's beneficiary from Logus to the Trust. DE 37, ¶¶ 6 & 12. Specifically, in March of 2001, Doane aided George Hack in completing two forms from American General: (1) a “Request for Change of Ownership” form dated March 6, 2001 (hereinafter “the Ownership Form”) (DE 32–1, p. 49); and (2) a “Beneficiary Designation” form dated March 5, 2001 (hereinafter “the BeneficiaryForm”) (DE 32–1, p. 51) (collectively “the Change Forms”).²See id. at ¶ 12. Both George and Virginia Hack signed these forms in Doane's presence, and Doane then transmitted the forms to American General. DE 37, ¶ 13.

Second, Larschan allegedly advised George Hack to replace the instant Policy with a new life insurance policy from Northwestern Mutual worth two million dollars, and to purchase a matching policy on Thomas Hack's life. This, George Hack undisputedly did. George Hack's Northwestern Policy named him the insured and Thomas Hack the owner. The matching Policy named Thomas Hack the insured and George Hack the owner. According to the Trust, the goal of these Policies was to provide the surviving brother with enough money to buy the shares of the brother who died first.

B. The Change of Ownership and Beneficiary Forms

The Ownership Form required the “Signature of Present Owner.” Here, George Hack signed his name but did not include his corporate title. See DE 32–1. In the space calling for the “Owner's Tax I.D./Soc. Sec. Number,” George Hack provided his own social security number. On the lines for telephone number and address, he listed his home phone number and his home address. Beneath this, Virginia Hack filled out the “Signature of New Owner” section. On the “Name” line, she signed her name and listed her title of “Trustee.” The Beneficiary Form required the name of the insured and the name of the owner. George Hack signed as both.

The reverse side of the Ownership Form contained instructions on how to complete it. DE 64, p. 7. Those instructions provided, in relevant part:

Instructions For Signing Request / How To Sign Present—Owners/ If signed by: (1) corporation, a copy of the corporate resolution authorizing the change and empowering a certain officer or officers of the corporation to act for it in changing this contract must accompany the request for change, signed by such officer or officers.

DE 32–1, p. 50.

Similarly, the reverse side of the Beneficiary Form contained instructions, which provided in relevant part:

Signature Requirements / 2. The current policy owner must sign this form. / 5. Corporate and Pension Trust Policyowners must show title and complete corporate name or pension plan name with each original signature.

DE 32–1, p. 52.

C. American General's Response

It is undisputed that American General received Hack's completed Change Forms on March 12, 2001. However, the Parties dispute whether American General ever notified Logus that it considered these Change Forms to be insufficient. American General alleges that Corrine Horace, one of its representatives, called and spoke with Virginia Hack on April 5, 2001, and informed her that American General would need additional proof of George Hack's corporate authority. According to American General, Virginia Hack asked Horace to put these demands in writing. DE 64...