Wear v. Mizell

• Decision Date: 31 October 1997
• Docket Number: No. 77443,77443
• Citation: 946 P.2d 1363,263 Kan. 175
• Parties: William B. WEAR, Appellant, v. James C. MIZELL and Arilla A. Mizell, Appellees.
• Court: Kansas Supreme Court

Page 1363

946 P.2d 1363

263 Kan. 175

William B. WEAR, Appellant, v. James C. MIZELL and Arilla A. Mizell, Appellees.

No. 77443.

Supreme Court of Kansas.

Oct. 31, 1997.

Syllabus by the Court

1. Where a right to change the beneficiary is reserved in a life insurance policy, the beneficiary has no vested or indefeasible interest during the lifetime of the insured, but only a revocable expectancy contingent upon being the beneficiary at the time of the insured's death. A beneficiary has only an inchoate right to the proceeds of a policy, subject to being divested any time during the lifetime of the insured by transfer, assignment, or change of beneficiary.

2. A divorce action is purely personal and ends on the death of either spouse.

3. The marital property ownership interest created under K.S.A. 23-201(b) is for a property division under K.S.A. 60-1610. If there is no divorce because of the death of a spouse, there is no division of marital property. Absent entry of a K.S.A. 60-1607 order restraining the parties from changing beneficiaries on life insurance policies, K.S.A. 23-201(b) imposes no restrictions on either party from making such changes during a pending divorce.

John T. Bird, of Glassman, Bird & Braun, L.L.P., Hays, argued the cause and was on the brief for appellant.

Thomas C. Boone, of Law Office of Thomas C. Boone, argued the cause, and Joseph W. Jeter, of Jeter Law Firm, Hays, was with him on the brief for appellees.

SIX, Justice:

The proceeds of two life insurance policies are at issue here. A wife changed the beneficiary from her husband to her parents after filing for divorce. The wife died of injuries received in a vehicle accident while the divorce action was pending. No restraining order had been filed in the divorce action. After a bench trial on the validity of the beneficiary change, the district court ruled for the parents. The plaintiff husband, William B. Wear, appeals.

Our jurisdiction is under 20-3018(c) (transfer on this court's motion).

We affirm the district court. Death ended the divorce action. The wife as the designated owner of the policy exercised her contractual right to change the beneficiary. Equity as a matter of law did not apply.

FACTS

A summary of the district court's findings of fact sets the stage for presentation of the issues.

William and Arilla Wear were the parents of two daughters. William is retired from the Army. In January 1993, William and Arilla moved back to Hays, Kansas, where both were employed at various jobs. They decided to purchase a $75,000 life insurance policy on Arilla's life. William was the named beneficiary. Arilla was designated as the owner in the application. Arilla applied in 1993, through her employer, for a $25,000 life insurance policy. William was also the initial beneficiary of this policy.

On February 7, 1994, Arilla filed a petition for divorce. Approximately 10 days after filing, Arilla changed the beneficiaries on both life insurance policies from William to the defendants, James C. Mizell and Arilla (Dolly) A. Mizell, her parents. During the pendency of the divorce, the parties maintained separate homes. William paid child support. The premiums on the $75,000 policy were paid by automatic withdrawals from a joint tenancy checking account.

William and Arilla had discussed reconciling. They planned a camping trip with their children for April 29, 1994, which was Arilla's birthday. The day before, while driving to pick up camping equipment, Arilla was fatally injured in a one-vehicle accident.

William learned that the beneficiary on both policies had been changed to the Mizells. The $75,000 policy contained a double indemnity clause for accidents. Ultimately, the proceeds of both policies, $177,694.56, were paid to the Mizells. At the time of Arilla's death, she and William had substantial credit card indebtedness and also various bills, including a debt to William's mother of approximately $9,450.

The parties to this action discussed how the insurance proceeds should be used for the benefit of the two minor children. They also discussed whether the Mizells should pay some of William's indebtedness. The Mizells decided to make a gift to William of $20,000. Eventually, they made payments of approximately $20,000 directly to William's creditors.

The Mizells told William the insurance proceeds were theirs and that they intended to use the funds as they saw fit for the benefit of their two granddaughters. This lawsuit followed.

DISCUSSION

The district judge, although acknowledging K.S.A. 23-201(b), concluded that

"once the death of Arilla occurred, this matter went from a question to be determined under domestic relations law, to one of intestate succession and contract. No restrictions were entered on either party during the pendency of the divorce action which would prevent them from changing beneficiaries on their insurance policies."

The Mizells were the beneficiaries and were entitled to the proceeds. The district judge did not view the matter as a case in equity. The Mizells argued that an accord and satisfaction existed, because William had accepted approximately $20,000 after his demand for the insurance proceeds. The district judge decided that the Mizells had intended the payment as a gift.

The Mizells did not cross-appeal on the accord and satisfaction issue. Thus, our only question is: Was the district court correct in ruling, as a matter of law, that equity did not apply? The answer is, "Yes."

William argues that the district court erred in refusing to exercise its equitable powers. The resolution of this appeal involves a review of the district court's conclusions of law. Our review of conclusions of law is unlimited. Gillespie v. Seymour, 250 Kan. 123, 129, 823 P.2d 782 (1991).

Beneficiary Interest

We described the interest of a beneficiary in a life insurance policy in Hollaway v. Selvidge, 219 Kan. 345, 349, 548 P.2d 835 (1976) (quoting 4 Couch on Insurance 2d § 27:58, pp. 561-64), as follows:

" 'Where a right to change the beneficiary is reserved in the policy, the beneficiary has no vested or indefeasible interest during the lifetime of the insured, but only a revocable expectancy contingent upon being the beneficiary at the time of the insured's death. A beneficiary has only an inchoate right to the proceeds of a policy, subject to being divested at any time during the lifetime of the insured, by transfer, assignment, or change of beneficiary....' "

Hollaway is factually distinguishable from this case. In Hollaway, we considered an attempted beneficiary change made after a property settlement agreement and divorce decree were entered. Leo (the insured) had accumulated KPERS benefits and obtained a life insurance and disability/accident policy while married to Rosalyn, who was designated as the beneficiary. As part of their divorce, Leo and Rosalyn reached a settlement agreement dividing their assets and relinquishing all claims against each other. Several months later, Leo married Judy. Within a few weeks Leo was killed. He had attempted to change the beneficiary from Rosalyn to Judy for both his KPERS benefits and the life insurance policy. His employer did not have the right forms on hand to accomplish the change. Despite the lack of beneficiary change, we affirmed the district court's determination that Judy, the second wife, as administrator of Leo's estate, was entitled to the KPERS benefits and the insurance proceeds. "We think a fair reading of [the settlement agreement] amounts to a relinquishment of [Rosalyn's] inchoate rights or expectancies both to the insurance proceeds and the KPERS benefits and the decedent's estate is therefore entitled to them." 219 Kan. at 350-51, 548 P.2d 835. Also, the district court concluded that Leo had done everything that he could to accomplish the beneficiary change.

William asserts that he and Arilla had a "tacit understanding that they would maintain life insurance on their own lives to protect the other." However, a tacit understanding does not amount to a contract. William, as the initial beneficiary on Arilla's life insurance policies, had no vested interest in the policies. His interest, if any, must arise under our domestic relations law.

Applicable Domestic Relations Statutes

A review of the pertinent domestic relations statutes is appropriate. K.S.A. 23-201 provides:

"(a) The property, real and personal, which any person in this state may own at the time of the person's marriage, and the rents, issues, profits or proceeds thereof, and any real, personal or mixed property which shall come to a person by descent, devise or bequest, and the rents, issues, profits or proceeds thereof, or by gift from any person except the person's spouse, shall remain the person's sole and separate property, notwithstanding the marriage, and not be subject to the disposal of the person's spouse or liable for the spouse's debts.

"(b) All property owned by married persons, including the present value of any vested or unvested military retirement pay, whether described in subsection (a) or acquired by either spouse after marriage, and whether held individually or by the spouses in some form of co-ownership, such as joint tenancy or tenancy in common, shall become marital property at the time of commencement by one spouse against the other of an action in which a final decree is entered for divorce, separate maintenance, or annulment. Each spouse has a common ownership in marital property which vests at the time of commencement of such action, the extent of the vested interest to be determined and finalized by the court, pursuant to K.S.A. 60-1610 and amendments thereto."

Arrilla's filing of the divorce petition activated K.S.A. 23-201(b). We said in Cady v. Cady, 224 Kan. 339, 344, 581 P.2d 358 (1978):

"[T]he filing of a petition for divorce or separate maintenance creates a species of common or co-ownership in one spouse in the jointly acquired...