Opinion
DOCKET NO. A-0855-13T3
04-22-2015
ESTATE OF PATRICIA QUINN, Plaintiff-Respondent, v. MICHAEL F. QUINN, Defendant.
Marita Quinn, appellant pro se. Post, Polak, Goodsell, MacNeill & Strauchler, P.A., attorneys for respondent (John N. Post, of counsel and on the brief; Siobhan Beere, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Reisner, Koblitz and Higbee. On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Union County, FM-20-9858-69. Marita Quinn, appellant pro se. Post, Polak, Goodsell, MacNeill & Strauchler, P.A., attorneys for respondent (John N. Post, of counsel and on the brief; Siobhan Beere, on the brief). PER CURIAM
This appeal concerns a dispute over the proceeds of a $225,000 life insurance policy insuring Michael Quinn. The original named beneficiary was his second wife, Marita Quinn. However, the policy was later used as security for the satisfaction of several post-judgment matrimonial orders and a settlement agreement between Michael and his ex-wife, Patricia Quinn. In that context, the beneficiary designation was changed from Marita to Patricia. However, the pertinent orders and agreements provided that once Michael paid certain sums to Patricia and her attorneys, the ownership of the policy would revert to Michael. Additionally, in an on-the-record exchange between Michael's attorney and Patricia's attorney in 2005, they agreed that once Michael satisfied a bank lien on a specific piece of property, "the entire policy [would] [i]nure[] to the benefit of Mr. Quinn or his beneficiaries."
Because the various parties share the same last name, we will refer to them by their first names for the sake of clarity.
In 2011, the parties agreed that Patricia's attorneys, Ceconi & Cheifetz, would continue to hold the policy pending Michael's payment to the attorneys of about $4000 in fees plus about $12,500 to Patricia and would then release the policy to Michael. However, Michael died before paying Patricia's attorneys. As a result, ownership of the policy was not returned to Michael, and the beneficiary designation was not changed to Marita before his death. After Michael's death, Patricia and Marita engaged in litigation over the policy proceeds.
In an April 19, 2013 order, the Family Part judge awarded a very limited amount of the policy proceeds to Patricia and her attorneys, but ordered that the remainder of the policy proceeds be paid to Michael's estate rather than to Marita. On this appeal, Marita challenges the disposition of the remainder, but not the award to Patricia or her counsel. Marita also appeals from orders dated June 26, 2013, August 16, 2013, and October 4, 2013, denying her motions for reconsideration of this issue. For the reasons that follow, we reverse.
If the funds are paid to Michael's estate, they will become subject to estate taxes and, presumably, also to the claims of his estate's creditors. Marita is the executrix of Michael's estate.
Patricia did not cross-appeal from the portion of the April 19 order limiting the amounts to which she or her counsel were entitled. Nonetheless, first Patricia and then after her death, her estate, have defended the orders on appeal. We will not address the issue of their standing here, but the issue may be raised should there be any further appellate proceedings in this case.
I
Michael and Patricia were divorced in 1970, after fifteen years of marriage. However, their post-judgment litigation went on for more than four decades. The history of that litigation is described in detail in the trial court's written and oral opinions and need not be repeated here.
We further describe only one pertinent development in the matrimonial litigation prior to Michael's death. Patricia and Michael entered into a consent order on October 27, 2011, which was intended to resolve all outstanding issues, including a pending appeal. The settlement order provided that Michael would pay Patricia $12,409.26 within thirty days to reimburse her for life insurance premiums she had paid, and he would pay Ceconi & Cheifetz $3815.33 within thirty days for legal fees incurred in trying to recoup the money held in escrow after the sale of Michael and Patricia's former Connecticut residence. The order also provided that Patricia and/or Ceconi & Cheifetz would execute the necessary documents to transfer ownership of the life insurance policy back to Michael.
In a later exchange of emails, Michael and Patricia agreed that the $12,409.26 owed to Patricia pursuant to the October 27, 2011 order could be paid by naming Patricia as the beneficiary of $6245 and their daughter Cindy as the beneficiary of $6156 on Michael's life insurance policy. They also agreed that once that was accomplished and once Michael paid Patricia's attorneys, the attorneys would transfer ownership of the policy to Michael. Michael passed away on December 2, 2012, before making the required payments to Ceconi & Cheifetz. As a result, the policy remained in the ownership of Ceconi & Cheifetz, and Michael was not able to change the beneficiary designations prior to his death.
Since the beneficiary designations were never changed, the insurance company issued a check for $234,705.74 to Patricia shortly after Michael's death. Marita notified the insurance company that Patricia was not entitled to the entire policy proceeds. The company responded that it was legally obligated to make payment to Patricia as the beneficiary on the policy, but deferred payment on the check.
That sum was apparently the entire proceeds of the policy.
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Patricia then filed an order to show cause, seeking deposit of the policy proceeds into court, payments of $6245 to Patricia Quinn, $6156 to Cindy Quinn, and $3815.33 to Ceconi & Cheifetz, and asking the court to determine how the remainder of the death benefit should be disbursed. Marita filed an application requesting that she be designated the beneficiary of the policy, and asking the court to direct payment of $12,409.26 to Patricia and $3,815.33 to Ceconi & Cheifetz. Both parties filed certifications supporting their respective motions.
In an oral opinion issued on April 19, 2013, the trial judge found that there were no material facts in dispute. He found that Patricia's attorneys were holding the insurance policy solely as security for payments of about $12,500 to Patricia and about $4000 to the attorneys. He concluded that Patricia would be unjustly enriched if she received the entire policy proceeds. The judge therefore determined that the sums Michael owed Patricia and her attorneys should be paid to them, and "the remainder of the policy shall revert back to [Michael's] estate and be distributed in accordance with the law." The judge concluded that was "the only equitable thing to do." The judge observed that the probate court in Massachusetts, where Michael died, would determine how the estate should be distributed.
Marita filed a motion for reconsideration, asking the court to release the policy proceeds to her, instead of to the estate. In a June 26, 2013 written opinion, the trial judge concluded that he had no discretion to award the policy proceeds to Marita, because she was not the named beneficiary on the policy at the time of Michael's death. He reasoned that "[t]he procedural history demonstrates that the reversion provision in all of the prior orders would have transferred the policy back to [Michael]." The judge found that he did not have "authority to determine and name the beneficiary of the policy." Thus, the judge reasoned that he had no discretion to direct that the remaining proceeds be paid to Marita rather than to Michael's estate.
II
On this appeal, our review of the trial court's legal interpretations is de novo. Whitfied v. Bonanno Real Estate Grp., 419 N.J. Super. 547, 552 (App. Div. 2011). Based on our reading of Vasconi v. Guardian Life Insurance Company of America, 124 N.J. 338 (1991), we conclude that the trial judge took too narrow a view of his authority. In the unusual circumstances of this case, we conclude that the court had discretion to award the remaining policy proceeds to Marita and should have done so.
It is clear that, at all times, Michael intended that Marita be the beneficiary of the policy, and he in fact named her as the beneficiary when he bought the policy in 2000. He did not voluntarily change the beneficiary designation. Rather, the designation was changed by court order, solely to satisfy Michael's obligations to Patricia and her attorneys in the matrimonial litigation. At least since 2005, the parties had agreed that once Michael satisfied those obligation, the policy would be returned to Michael "and his beneficiaries." Marita was his "beneficiary" at the time the policy was removed from Michael's control, and the conclusion is inescapable that, had the attorneys returned control of the policy to Michael, he would have changed the beneficiary designation back to Marita.
In those circumstances, we perceive a contradiction between the Family Part judge's conclusion that, as a matter of equity, the court could prevent Patricia from receiving all of the policy proceeds, although she was the named beneficiary, but the court could not, as a matter of equity, order that the remainder of the proceeds be paid to Marita because she was not the named beneficiary. As in Vasconi, the issue is "whether New Jersey compels an inequitable result that the divorced decedent would have never intended." Supra, 124 N.J. at 340. As in Vasconi, we conclude it does not.
Vasconi began by recognizing the tremendous importance of life insurance as an estate planning device to avoid probate:
For many couples, life insurance is, apart from their home, the largest single estate-planning device that they possess. . . . The reasons for the popularity of life insurance are well known. Life insurance "shelters the insured from income taxes during his life, provides an immediate source of funds to meet taxes and expenses of the estate upon death, keeps the insurance proceeds out of the insured's estate, and avoids [some local] estate taxes in the process." Life insurance rivals the will, then, as the principal modern means of
transferring assets to the decedent's estate.
[Id. at 342-43 (alteration in original) (citations omitted).]
Analogizing life insurance policies to wills, the Court questioned why a divorce should result in the revocation of a will in favor of the now ex-spouse, but the same result should not apply to a beneficiary designation in favor of the now ex-spouse. The Legislature would later codify precisely such a rule in N.J.S.A. 3B:3-14, providing that divorce automatically revokes the divorcing individual's prior insurance designation in favor of the former spouse. See Fox v. Lincoln Financial Group, ___ N.J. Super. ___, ___ (App. Div. 2015) (slip op. at 12-13). However, at the time no such statute existed.
In Vasconi, the Court declined to reach the broader issue, and instead rested its decision on the parties' divorce settlement in that case. The Court held that, where the parties to a divorce settlement agree that the settlement encompasses their entire interest in distribution of the marital assets, "[s]uch a settlement agreement and waiver of interest in the property of the deceased spouse should be regarded as presumptively revoking the nonprobate transfer of the insurance proceeds." Id. at 346. The Court also observed that "[l]ife insurance is often used to secure the continued payment of alimony in the event of death. . . . Obviously, what can be ordered, . . . can be waived." Id. at 346 (citations omitted). The Court concluded:
There is no reason why an insurance-beneficiary designation should be sacrosanct at least between the competing beneficiaries. As we have explained, this body of law arose in an entirely different context and for the purpose of effectuating, not invalidating, the intention of the parties. A beneficiary designation must yield to the provisions of a separation agreement expressing an intent contrary to the policy provision.
[Id. at 347 (citations omitted).]
The Court further invoked the law concerning the creation of constructive trusts to do equity:
In Carr v. Carr, 120 N.J. 336 (1990), we noted the confluence in policy between principles of probate law and family law and ruled that the familiar principles of the constructive trust should "'be impressed in any [marital-separation] case where to fail to do so will result in an unjust enrichment.'" Id. at 352 (quoting D'Ippolito v. Castoro, 51 N.J. 584, 588 (1968)). In the procedural posture of this case we must assume that it would be unfair and unjust for the former wife to retain this property. The only question is whether the law is powerless to remedy the injustice. We hold that the law is fully capable of effectuating marital distributions "derived from notions of fairness, common decency, and good faith." Carr v. Carr, supra, 120 N.J. at 349.In addressing the enforcement of such an equitable remedy, the Court noted that the remedy would not burden insurance companies because, "if notified of any dispute before payment, the insurer may avoid involvement by paying the proceeds into court." Id. at 348-49.
[Id. at 347-48 (alteration in original).]
We reach a similar conclusion in this case. Plainly, the purpose of the various orders and settlements here was to eventually return the insurance policy to the status quo ante, which was a policy owned by Michael with Marita as the beneficiary. In the circumstances of this case, the Family Part did not need to order a change to the beneficiary designation on the policy, from Patricia to Marita. The policy proceeds had already been paid into court. Employing its equitable powers, the court should have enforced the underlying purpose of the various matrimonial orders and settlements, by impressing the remaining insurance proceeds with a constructive trust in Marita's favor. The court should then have ordered that those proceeds be released to her.
Accordingly, we reverse the orders on appeal, and remand to the trial court for the limited purpose of entering an order consistent with this opinion, directing the release of the funds to Marita.
Reversed and remanded.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION