Opinion
Case No. 2:16-cv-01193-JNP
07-16-2019
The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. Neil SAGERS, an individual; and Diane Sagers, an individual, Defendants; Neil Sagers, an individual, Crossclaim Plaintiff, v. Diane Sagers, an individual; and Richard Sagers, an individual, Crossclaim/Third-Party Defendants.
Rodney R. Parker, Snow Christensen & Martineau, Salt Lake City, UT, for Crossclaim/Third-Party Defendants. Michelle L. Christensen, Dunn Law Firm, St. George, UT, William O. Kimball, Jr., Pia Anderson Moss Hoyt LLC, Rodney R. Parker, Snow Christensen & Martineau, Salt Lake City, UT, for Defendant/Cross Claim plaintiff.
Rodney R. Parker, Snow Christensen & Martineau, Salt Lake City, UT, for Crossclaim/Third-Party Defendants.
Michelle L. Christensen, Dunn Law Firm, St. George, UT, William O. Kimball, Jr., Pia Anderson Moss Hoyt LLC, Rodney R. Parker, Snow Christensen & Martineau, Salt Lake City, UT, for Defendant/Cross Claim plaintiff.
ORDER GRANTING IN PART DIANE SAGERS' MOTION FOR SUMMARY JUDGMENT AND DENYING NEIL SAGERS' MOTION FOR SUMMARY JUDGMENT
Jill N. Parrish, United States District Court Judge This matter is currently before the court on cross-motions for summary judgment filed by defendant Diane Sagers ("Diane") and third-party/crossclaim defendant Richard Sagers ("Richard") and defendant and crossclaim/third-party plaintiff Neil Sagers ("Neil"). Diane and Neil (collectively "Defendants") seek summary judgment in their favor on their conflicting claims to the $1,000,000.00 life insurance proceeds (the "Death Benefit") due as a consequence of the death of Mr. David L. Sagers ("Mr. Sagers") under his group life insurance policy, Group Policy No. GO-14273 (the "Policy") issued by Plaintiff The Prudential Insurance Company of America ("Prudential"). Diane and Richard also sought summary judgment on Neil's third cause of action, a state law claim against them for tortious interference with electronic communications.
The court held oral argument on June 13, 2019. At the hearing, Neil's attorney, Mr. William Kimball ("Mr. Kimball"), made an oral motion to dismiss the third cause of action without prejudice under Fed. R. Civ. P. 41. Diane and Richard did not object and the court granted the motion. The court took the remaining issues under advisement. The court now grants Diane's motion for summary judgment and orders that a constructive trust be imposed in her favor.
I. BACKGROUND
A. PROCEDURAL HISTORY
This suit was originally brought as an interpleader action under 28 U.S.C. § 1335 by Prudential on April 7, 2016 in the United States District Court for Western District of Pennsylvania. On June 17, 2016, Diane filed her answer, asserting a claim to the Death Benefit, as well as a motion to transfer the cause pursuant to 28 U.S.C. § 1404(a). On July 15, 2016, the court entered a consent order discharging Prudential from any further liability under the Policy, dismissing all claims against Prudential with prejudice, and dismissing Prudential from the action. On November 22, 2016, the court adopted the Report and Recommendation of Magistrate Judge Susan Paradise Baxter and granted Diane's motion to transfer. The case was then transferred to the United States District Court for the District of Utah. On March 23, 2017, Neil filed his answer to the complaint setting out his claim to the Death Benefit, and filed a crossclaim complaint against Diane and a "third-party" complaint against Richard asserting claims for intentional interference with contractual relations, tortious interference with electronic communications, civil conspiracy, and punitive damages. The state law claims are not at issue in the motions now before the court.
B. EVIDENTIARY OBJECTIONS
In the motion for summary judgment, Diane and Richard provide twenty-eight statements of allegedly undisputed material fact. Neil objects to twenty-five of the statements on evidentiary grounds and provides an additional fourteen statements of material fact in his opposition to their motion on which he also relies in his motion for summary judgment. Neil's additional statements are undisputed.
Under Fed. R. Civ. P. 56(c)(2) "[a] party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence." In the Tenth Circuit, that "does not mean that [summary judgment] evidence must be submitted ‘in a form that would be admissible at trial.’ " Trevizo v. Adams , 455 F.3d 1155, 1160 (10th Cir. 2006) (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). Rather, only "the content or substance of the evidence must be admissible." Brown v. Perez , 835 F.3d 1223, 1232 (10th Cir. 2016), as amended on reh'g (Nov. 8, 2016) (quoting Argo v. Blue Cross & Blue Shield of Kansas, Inc. , 452 F.3d 1193, 1199 (10th Cir. 2006) ). In this case, Neil makes conclusory objections on grounds of hearsay that fail entirely to allege how "the material cited ... cannot be presented in a form that would be admissible in evidence." See Fed. R. Civ. P. 56(c)(2). He also objects to certain statements on relevance grounds. Finally, Neil objects to three statements of material fact on the grounds that the underlying documents were not provided in discovery, but does not reference the Federal Rule under which the evidence should be excluded. The court addresses these objections briefly, but encourages the parties to be more thorough in making future evidentiary objections or risk forfeiture of the argument. "The objecting party must make its objection clear; the trial judge need not imagine all the possible grounds for an objection." Angelo v. Armstrong World Indus., Inc. , 11 F.3d 957, 960–61 (10th Cir. 1993).
1. Relevance
Neil objects on relevance grounds to the "majority of the Undisputed Facts appearing in [Diane]'s Motion for Summary Judgment." Specifically, he objects to all statements of material fact related to the state court divorce proceedings as irrelevant. These objections are overruled. While the state court proceeding has no bearing on the interpretation of the insurance contract itself, Diane's claim for unjust enrichment is based on whether or not Mr. Sager's allegedly fraudulent representations in the state court entitle her to equitable relief. Because the statements form much of the basis for her claim for equitable relief, they are certainly relevant. The objections are overruled.
See Neil's Opp'n Mot. S.J., objecting to ¶¶ 2, 3, 5–26, 28 of Diane's Mot. S.J.
2. Hearsay
Neil objects to seventeen statements of material fact offered by Diane and Richard on the grounds that they constitute inadmissible hearsay. Specifically, Neil argues that any representations made by Diane or Mr. Sagers in the state court divorce proceedings or orders entered by the state court in the divorce proceedings are hearsay. These objections are overruled.
See Neil's Opp'n Mot. S.J. objecting to ¶¶ 5, 11 (Statements by Diane); ¶¶ 6, 7, 10, 12, 14, 17, 21, 22 (Statements by Mr. Sagers); and ¶¶ 8, 9, 13, 18, 19, 20, 23 (Statements by the Court).
a. Statements by Diane and Mr. Sagers Hearsay is an out-of-court statement offered into evidence to prove the truth of the matter asserted. The statements made by Diane and Mr. Sagers in state court are not offered in this proceeding for the truth of the matter asserted, but rather are offered for the purpose of establishing that the statements were made. In fact, Diane's point is that the statements were false and fraudulent. She is certainly not offering them here to prove their truth. And "[i]f the significance of an offered statement lies solely in the fact that it was made, [and] no issue is raised as to the truth of anything asserted ..., the statement is not hearsay." United States v. Dupree , 706 F.3d 131, 136 (2d Cir. 2013) (quoting Fed. R. Evid. 801(c) advisory committee's note); see also George v. Celotex Corp. , 914 F.2d 26, 30 (2d Cir. 1990) ("To be sure, an out of court statement offered not for the truth of the matter asserted, but merely to show that the defendant was on notice of a danger, is not hearsay.").
At the June 13, 2019 hearing, Neil's attorney suggested that statements made in pleadings filed with a court are not statements made by the party on whose behalf they are filed but rather are statements made by the party's counsel. The court disregards this argument. Absent some allegation that Mr. Sagers' counsel in the divorce court did not inform Mr. Sagers of the contents of the pleadings and purposefully misrepresented the truth without his knowledge, thereby violating the Rules of Professional Conduct, the court will impute the statements made in Mr. Sagers' pleadings to Mr. Sagers.
For example, at ¶ 14 of their motion, Diane and Roger assert that "on January 10, 2014, [Mr. Sagers] filed a Memorandum in Support of Second Motion to Amended Temporary Orders in the divorce and stated, in relevant part" that "[t]he parties currently have two life insurance policies one on [Mr. Sagers] and one on [Diane]." The statement by Mr. Sagers was made out of this court, but it is not offered to prove that the Sagers had two life insurances policies, one on Diane and one on Mr. Sagers. Rather, it is offered to demonstrate that Mr. Sagers told the court about the two life insurance policies but did not disclose that Diane was no longer the beneficiary. Thus, the statement is not hearsay, but rather a statement offered to establish Mr. Sagers' fraud, which is an element of Diane's unjust enrichment claim. And fraudulent statements are not hearsay when they are offered as proof of the fraud. See Giove v. Stanko , 977 F.2d 413, 417 (8th Cir. 1992) (holding that a false affidavit was not offered for the truth of the matter asserted but for the fact that it existed and that it constituted fraud).
b. Court Orders
The statements made by the state court in its orders, both oral and written, are also not hearsay. See Dupree , 706 F.3d at 137 ("[T]he question whether a court's command imposes legal obligations on a party is outside the hearsay rule's concerns."). This is because orders by the court are not offered for the truth of those statements, but rather to demonstrate the legal effect of the statements on the parties. And "statements affecting the legal rights of parties are excluded from the definition of hearsay." Id. (citing Fed. R. Evid. 801(c) advisory committee's note); see also United States v. Boulware , 384 F.3d 794, 806 (9th Cir. 2004) ("A prior judgment is not hearsay ... to the extent that it is offered as legally operative verbal conduct that determined the rights and duties of the parties."). Neil's objections to the admissibility of the statements from the court orders are overruled.
3. Failure to Provide Discovery
Neil objects to Diane's statements of fact at paragraphs 15, 16, and 24 on the grounds that Diane allegedly failed to provide documents related to her payment of insurance premiums during discovery. Specifically Neil asserts in response to paragraphs 15, 16, and 24:
At the hearing, Neil's attorney represented that Neil objected to all the evidence relied upon by Diane in her entire motion for summary judgment on the grounds that Diane had not produced a single document to Neil during discovery. However, in Neil's opposition, his objections are clearly limited to ¶¶ 15, 16, and 24 which rely upon the records of the insurance premium payments. He does not mention the failure to produce discovery in any of his other objections. In addressing his objections now, the court disregards this argument. Had Neil wished to object to all of the documents, he needed to make the argument clear in his briefing.
[D]uring discovery, [Neil] requested any evidence of insurance premiums paid by [Diane]. She provided no evidence of any insurance premiums paid by her. [Neil] followed up to ask for the documents again, but they were never produced. In fact, [Diane] failed to produce a single document during discovery. Therefore, [Diane] should not be allowed to use such documents at this point in the case.
Neil does not specify in writing under which Federal Rule of Civil Procedure the documents should be excluded. At the hearing, he argued that the documents should be excluded under Fed. R. Civ. P. 37(c) which states: "If a party fails to provide information ... as required by Rule 26(a) or (e), the party is not allowed to use that information ... to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." First the court addresses whether Diane violated Rule 26(e) before turning to whether the failure was substantially justified or is harmless.
Under Fed. R. Civ. P. 26(e) :
A party ... who has responded to an interrogatory, request for production, or request for admission—must supplement or correct its disclosure or response ... in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process[.]
In their reply, and at the hearing, Diane and Richard did not dispute that they failed to provide evidence of the insurance payments during discovery. But they argue that because the evidence of the payments was an exhibit at the May 24, 2016 trial in the probate court and Neil was a party to that trial and was represented at that trial by the same firm that represents him in this matter, Neil and Neil's legal team should already have the documents. At the June 13, 2019 hearing, Diane's counsel, Mr. Rodney Parker, further represented that Diane had specifically directed Neil to all documents produced in the probate action in her response to Neil's requests for production and that she believed a further response was unnecessary.
However, while this may be true regarding Diane's Response to Neil's First Request, it is not true of Diane's Response to Neil's Fourth Request:
See Neil's Opp'n, Ex. A, Diane's Discovery Reponses Dated September 25, 2018:
REQUEST FOR PRODUCTION NO. 1: Please produce all documents that support your claims in this case.
RESPONSE: See documents produced in the probate action as PET00001–00532, as well as the trial exhibits from that case.
REQUEST FOR PRODUCTION NO. 4: Please produce any and all documents that show you made monthly insurance payments.
RESPONSE: Ms. Sagers interprets this as a request for documents showing that she made payments while the divorce case was pending, and will produce responsive records .
See Neil's Opp'n, Exhibit A, Diane's Discovery Responses Dated September 25, 2018 at 4 (emphasis added). Thus, in her response, Diane promised to provide additional records. But, at the hearing, Mr. Parker admitted that Diane did not produce the documents showing that she made monthly insurance payments. Because Diane represented that she would provide the documents and failed to do so, Diane failed to comply with her discovery obligations and has violated Fed. R. Civ. P. 26(e).
The court therefore must consider whether this failure was harmless. Neil and the firm representing Neil had received the documents at issue in the probate court. If Neil truly did not have the payment records or could not find them, Neil could have made a discovery motion to compel the documents. Additionally, whether or not the insurance payments had been made by Diane or by Mr. Sagers during the pendency of the divorce proceedings is not dispositive to this motion. Thus, Neil has not been prejudiced by the failure to produce and his objection is overruled.
C. UNDISPUTED MATERIAL FACTS
Diane is a citizen of Utah, residing in Sandy, Utah. She is the widow of Mr. Sagers. Neil is a citizen of Pennsylvania. Neil is Mr. Sagers' brother. Neil and Diane bring competing claims to the $1,000,000.00 life insurance proceeds (the "Death Benefit") payable upon the death of Mr. Sagers under the Policy issued by Prudential. Richard is the son of Diane and Mr. Sagers. Richard resides in Sandy, Utah.
1. Life Insurance Policy
Diane and Mr. Sagers married on July 14, 1981. They had four children. Richard is their son. During their marriage, Diane and Mr. Sagers both obtained life insurance policies. Each was the beneficiary of the other's policy. Mr. Sagers was insured for $1,000,000.00 through a policy issued by Prudential to The American Institute of Certified Public Accountants Insurance Trust ("AICPA"), his professional association (the "Prudential Policy"). Mr. Sagers was the owner of the Prudential Policy, meaning he had the right to select the beneficiary of the Death Benefit and to change the named beneficiary at any point. Diane was the named beneficiary of the Prudential Policy from the inception of the policy in 1994 until August 27, 2012, when Mr. Sagers changed the beneficiary and designated Neil as the beneficiary. Mr. Sagers did not inform Diane of this change.
Mr. Sagers and Diane separated on September 4, 2012. Diane filed for divorce on December 12, 2012, in the Third District Court, Salt Lake County, Utah. The Prudential Policy was one of the assets at issue in the divorce proceedings and was subject to numerous Temporary Orders entered by that court. Before a final resolution could be reached in the divorce proceedings, Mr. Sagers committed suicide on February 11, 2015. Following Mr. Sagers' death, Neil submitted a claim for the Death Benefit on February 24, 2015. Diane sent Prudential a claim on February 27, 2015.
In 2016, Diane and Neil both laid claim to the Death Benefit during the state court probate trial. In that proceeding, the state court held that determining the proper beneficiary of the Prudential Policy was outside the scope of the probate court. Following the court's ruling, Prudential filed this interpleader action. Neil and Diane both claim the Death Benefit. While Neil is the named beneficiary, Diane argues that she should be awarded the Death Benefit through a constructive trust or other equitable remedy under a theory of unjust enrichment.
2. State Court Proceedings
The divorce proceedings began on December 12, 2012. In January, 2013, Diane moved the divorce court for a temporary order that Mr. Sagers "continue to pay for and maintain each and every of his current life insurance policies on his life naming [Diane] and the minor children as the beneficiaries thereof" and for "an order preventing [Mr. Sagers] from making any changes to the amounts of any life insurance policies in effect at the date of separation." Diane's Mot. S.J. at ¶ 5. Mr. Sagers responded with a request for an order "requiring [Diane] to continue paying for the life insurance policies if she would like to maintain them." Id. at ¶ 6. In his February 28, 2013 Financial Declaration, Mr. Sagers disclosed three life insurance policies. He disclosed two policies maintained through his professional association, AON/AICPA, the Prudential Policy insuring him for $1,000,000.00, and a second policy insuring Diane for $750,000.00. He also disclosed a policy maintained through his work, insuring him for $150,000.00 and Diane for $45,000.00. He did not disclose the beneficiaries of the policies. On March 21, 2013, the court entered a temporary order instructing the parties to maintain the life insurance policies currently in place and to not change the beneficiaries. At that time, Neil was already the named beneficiary on the Prudential Policy, but neither Diane nor the state court were aware of that fact.
Diane moved to amend the temporary order. In October, 2013, Mr. Sagers opposed Diane's motion for an amended temporary order. He represented to the court that he could not afford to maintain multiple policies and that he believed the policy maintained through his work would be more than sufficient to cover any unpaid child support. He also represented that if Diane wanted to maintain the other policies, she should pay the premiums herself. In her reply, Diane states that Mr. Sagers had represented to her that he had already stopped making payments on the Prudential Policy. She requested that Mr. Sagers be ordered to maintain both policies. The court entered an amended temporary order requiring the parties to maintain all life insurance policies as previously ordered. Neil was still the unknown named beneficiary on the Prudential Policy.
In his disclosure, Mr. Sagers stated that he was insured under the work policy for $150,000. In his opposition memorandum he stated the policy was in the amount of $145,000.00.
On January 10, 2014, Mr. Sagers moved to amend the temporary order a second time following his loss of his job. In his memorandum in support of that motion, Mr. Sagers argued that Diane should be ordered to pay for his two life insurance policies, or at least share the cost of maintaining them because "[Diane] will be the one benefitting from the policy." Id. at ¶ 14. Through this statement, Mr. Sagers affirmatively represented to the court that both policies were maintained to benefit Diane. The divorce court held a hearing on Mr. Sager's motion on January 24, 2014. Because of Mr. Sagers' loss of his death benefit life insurance maintained through his job, the court ordered that Mr. Sagers maintain the Prudential Policy and pay the $338.00 monthly premium.
On February 5, 2014, Mr. Sagers submitted his amended asset disclosure in the divorce proceeding, listing six life insurance policies, four through Challenger Schools, and two through AON/AICPA, Mr. Sagers' professional association. The policies through Challenger Schools are all less than $25,000.00. Of the AON/AICPA policies, one is listed at $1,000,000.00, the Prudential Policy, and the other is blank. Mr. Sagers again does not disclose the beneficiaries of the policies. Mr. Sagers then objected to the state court's amended temporary order on February 7, 2014, arguing that because Diane would benefit from the policy, she should pay to maintain it. Starting in February 2014, Diane began making the premium payments for both AON/AICPA policies from her Mountain American Credit Union account. The payments were made from this account until Mr. Sagers' death. However, on May 2, 2014, the court ordered Mr. Sagers to pay Diane $338.00 per month to cover his share of the premiums. Diane represents to the court that Mr. Sagers rarely made these payments.
The divorce had not been finalized when Mr. Sagers died on February 11, 2015. Upon his death, the divorce proceedings abated and any temporary orders in place were dissolved. The divorce case was formally dismissed on October 20, 2015. It was after Mr. Sager's death that Diane first learned that he had changed the beneficiary on the Policy.
II. LEGAL STANDARD
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). When considering a motion for summary judgment, the court must examine all of the evidence in the light most favorable to the nonmoving party. Jones v. Unisys Corp. , 54 F.3d 624, 628 (10th Cir. 1995) (citation omitted). This requires that all reasonable inferences be drawn in favor of the nonmoving party. Sports Unltd., Inc. v. Lankford Enters., Inc. , 275 F.3d 996, 999 (10th Cir. 2002). A dispute of fact is genuine only if "a reasonable [trier of fact] could find in favor of the nonmoving party on the issue." Macon v. United Parcel Serv., Inc. , 743 F.3d 708, 712 (10th Cir. 2014). "At the summary judgment stage, the judge's function is not to weigh the evidence and determine the truth of the matter." Concrete Works of Colo., Inc. v. City & Cty. of Denver , 36 F.3d 1513, 1518 (10th Cir. 1994) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "Nonetheless, ‘[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,’ summary judgment in favor of the moving party is proper." Id. (alteration in original) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).
III. ANALYSIS
A. JURISDICTION
This suit is an interpleader action brought by Prudential, the plaintiff, against Neil and Diane under 28 U.S.C. § 1135. "[A]n interpleader action is concluded in two stages, the first determining that the requirements of § 1335 are met and relieving the plaintiff stakeholder from liability, and the second adjudicating the adverse claims of the defendant claimants ...." New York Life Ins. Co. v. Connecticut Dev. Auth. , 700 F.2d 91, 95 (2d Cir. 1983) (citing 3A J. Moore & J. Lucas, Moore's Federal Practice ¶¶ 22.14[1], [2] (2d ed. 1982)). The first stage was resolved in the United States District Court for the Western District of Pennsylvania where Prudential brought the interpleader action. Prudential had standing to bring the interpleader action because it was the holder of the $1,000,000.00 Death Benefit that is subject to adverse claims by Neil, a citizen of Pennsylvania, and Diane, a citizen of Utah. Magistrate Judge Susan Paradise Baxter entered a consent order directing Prudential to deposit the life insurance proceeds with the court, discharging Prudential from any further liability, and dismissing Prudential from the action, thus resolving stage one. See ECF No. 19. The case was subsequently transferred to this court.
Now before this court is the second stage of the litigation, which "involves the determination of the respective rights of the claimants to the stake." 7 Wright, Miller, & Kane, Fed. Prac. & Proc. Civ. § 1714 (3d ed.). This second stage proceeds "like any other action." Id. "[E]ach defendant ... occup[ies] the position of a plaintiff and must state his [or her] own claim and answer that of the other ...." Reconstruction Fin. Corp. v. Aquadro , 7 F.R.D. 406, 409 (W.D. Pa. 1947). Properly before the court are Neil and Diane's adverse claims to the Death Benefit. The court has subject matter jurisdiction over Neil and Diane's respective claims to the Death Benefit because Neil is a citizen of Pennsylvania and Diane is a citizen of Utah. See State Farm Fire & Cas. Co. v. Tashire , 386 U.S. 523, 530–31, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967) (holding that only minimal diversity is required between adverse claimants in an interpleader action). The court also has personal jurisdiction over the defendants because the Death Benefit has been deposited with the court, Diane is a citizen of Utah, and Neil has consented to personal jurisdiction in Utah.
Although asserted as "cross-claims," Diane and Neil's respective answers setting out their adverse claims to the Death Benefit are not crossclaims. Rather, the adverse claims to the death benefit are the necessary second stage of an interpleader action where "claimants ... set up their claims to the fund in their answers to the bill of complaint" and "traverse the claims of the other claimants" so that the "issue is joined between them for trial." Westinghouse Elec. Corp. v. United Elec. Radio & Mach. Workers of Am. , 99 F. Supp. 597, 600 (W.D. Pa. 1951), aff'd , 194 F.2d 770 (3d Cir. 1952) (citing Moore's Federal Practice, 2d Ed., Vol. 3, page 3049); see also Miller, Wright, & Kane, 7 Fed. Prac. & Proc. Civ. § 1715 (3d ed.).
B. ADVERSE CLAIMS TO THE DEATH BENEFIT
The court must now determine who is entitled to the Death Benefit under Utah Law.
Although choice of law has not been addressed by either party, they appear to have stipulated to the application of Utah Law and the court addresses the claims under Utah law. See Erie R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).
Neil seeks summary judgment on his "declaratory judgment" claim. In reality, however, Neil is merely making a claim that he is the proper beneficiary of the Death Benefit and that the interpleader action should be resolved in his favor.
Neil's claim to the Death Benefit is that 1) he was the named sole beneficiary under the Prudential Policy at the time of Mr. Sagers' death; 2) all temporary orders dealing with the policy in the divorce court were dissolved; and 3) there was no final judgment in the divorce court giving Diane a "vested right in the policy." These propositions are undisputed.
It is undisputed that on August 27, 2012, Mr. Sagers changed the policy and named Neil as the beneficiary of the Death Benefit. It is undisputed that, at that time , Mr. Sagers had the right to change the policy and to select as beneficiary anyone he chose without informing the former beneficiary, Diane. It is also undisputed that because Mr. Sagers died before the divorce judgment was finalized, the proceedings abated and all temporary orders were dissolved. See Nelson v. Davis , 592 P.2d 594, 597 (Utah 1979) ; and Porenta v. Porenta , 416 P.3d 487, 496 (Utah 2017).
There is also no suggestion that Neil committed any fraud upon the divorce court. What is disputed is whether Diane should be entitled to equitable relief based on Mr. Sagers' fraudulent behavior prior to his death. 2. Diane's Claim
Diane seeks summary judgment on her "unjust enrichment" claim. In reality, however, Diane is merely making a claim that she is entitled to the Death Benefit and that the interpleader action should be resolved in her favor.
Diane does not contest that Neil was the named beneficiary at the time of Mr. Sagers' death. Nor does she argue that she has an enforceable court order or other document awarding her the Death Benefit. Instead, Diane argues that a constructive trust should be imposed because otherwise Neil would be unjustly enriched. Neil opposes her motion arguing that Diane is not entitled to the Death Benefit under a claim for unjust enrichment because 1) Mr. Sagers did not make fraudulent misrepresentations to the court and 2) even if he did, Neil did not act wrongfully and an element of an unjust enrichment claim is a wrongful action by the beneficiary.
At the June 13, 2019 hearing, Neil raised the argument that Diane cannot prevail on her claim for unjust enrichment because it is a claim in equity and she has remedies available at law. The court rejects this argument for two reasons. First, this argument was not raised in Neil's motion for summary judgment or his opposition to Diane's motion for summary judgment. Nor is it responsive to any argument raised for the first time in Diane's reply in support of her motion for summary judgment. Second, Diane does not have a remedy at law. She cannot sue Mr. Sagers for fraudulent or negligent misrepresentation because he is deceased. She cannot bring a claim to recover the life insurance proceeds against his estate because 1) the life insurance proceeds do not pass through the estate and 2) she is the sole beneficiary of the estate and would be suing herself. Finally, this is an interpleader action. Diane is not actually bringing a claim for unjust enrichment as much as she is basing her claim to the proceeds on an unjust enrichment theory. For these reasons, the court finds that her claim is proper.
a. Unjust Enrichment
In Utah, to prevail on a claim for unjust enrichment, a plaintiff must establish three elements:
(1) a benefit conferred on one person by another; (2) an appreciation or knowledge by the conferee of the benefit; and (3) the acceptance or retention by the conferee of the benefit under such circumstances as to make it inequitable for the conferee to retain the benefit without payment of its value.
Jeffs v. Stubbs , 970 P.2d 1234, 1248 (Utah 1998) (citations omitted). When a claimant establishes unjust enrichment, the remedy is to impose a constructive trust. Rawlings v. Rawlings , 240 P.3d 754, 762 (Utah 2010) ("[C]laims of unjust enrichment can support the imposition of a constructive trust.").
The first two elements are not at issue in this case. Neil is the named beneficiary of the Death Benefit and he was and is fully aware that he was the named beneficiary. The issue the court must decide is whether allowing Neil to accept and retain the death benefit would be inequitable under the circumstances. "Unjust enrichment occurs when a person has and retains money or benefits that in justice and equity belong to another ...." Hess v. Johnston , 163 P.3d 747, 754 (Utah Ct. App. 2007) ; see also Restatement (First) of Restitution § 1 (1937) ("[a] person is unjustly enriched if the retention of the benefit would be unjust."). As a preliminary matter, there are no allegations that Neil acted wrongfully. He is merely the gratuitous beneficiary of the Death Benefit. Ordinarily he would be entitled to keep the benefit. But, while there is "nothing ‘unjust’ about allowing [a beneficiary] to retain the gifts [he] received ... in the absence of fraud, overreaching or some other circumstance," in this case there are other circumstances that would render Neil's receipt and retention of the benefit unjust. Hess , 163 P.3d at 754 (quoting Cooper v. Smith , 155 Ohio App. 3d 218, 221, 800 N.E.2d 372, 374 (2003) ).
"The fact that a person benefits another is not itself sufficient to require the other to make restitution." Hess , 163 P.3d at 754 (quoting Fowler v. Taylor , 554 P.2d 205, 209 (Utah 1976) ). And "[s]ervices officiously or gratuitously furnished are not recoverable." Jeffs , 970 P.2d at 1248.
i. Wrongful Behavior by Grantor or Donor Can Sustain a Claim for Unjust Enrichment
Neil first argues that under Utah law, a claim for unjust enrichment cannot be sustained unless the beneficiary acted unjustly. While the Utah Supreme Court has not ruled on this issue directly, it is clear from cases addressing the issue that a claim for unjust enrichment can be established when the grantor and not the beneficiary has acted wrongfully. For example, in The Corporation of the President of the Church of Jesus Christ of Latter-Day Saints v. Jolley , 24 Utah 2d 187, 467 P.2d 984, 985 (Utah 1970), the Utah Supreme Court upheld the imposition of a constructive trust on an automobile bought with stolen funds when the vehicle had been given to a third-party recipient with no knowledge of the source of the funds. While in that case the trust could be imposed against the recipient because she was not a bona fide purchaser of a stolen object, the court held that her lack of knowledge regarding the wrongfulness of the grantor's behavior was not a defense requiring a different result. Id. Meanwhile, in Parks v. Zions First National Bank , 673 P.2d 590, 600 (Utah 1983), the Supreme Court upheld the imposition of a constructive trust on assets belonging to a deceased woman's estate in favor of her widower when the assets absorbed by the trust had been acquired with marital assets. The estate itself was not accused of any wrongdoing, but the court held that the "total inclusion of such [marital] property in the estate of [the deceased] constituted an ‘unjust enrichment.’ " Id.
Other Utah cases have focused more directly on when the imposition of a constructive trust is appropriate. In Wilcox v. Anchor Wate, Co. , 164 P.3d 353, 362 (Utah 2007), the Utah Supreme Court held that "[c]ourts recognize a constructive trust as a matter of equity where there has been (1) a wrongful act, (2) unjust enrichment, and (3) specific property that can be traced to the wrongful behavior." But Wilcox was a unique case "where an insurer was forced into involuntary liquidation," Rawlings v. Rawlings , 240 P.3d 754, 767 n62 (Utah 2010), and accordingly the Wilcox court relied on bankruptcy law regarding constructive trusts in reaching its decision. See Wilcox , 164 P.3d at 362 (citing In re Capital Mtg. Loan Corp. , 60 B.R. 915, 918 (Bankr. D. Utah 1986), aff'd , 99 B.R. 462 (D. Utah 1987), aff'd , 917 F.2d 424 (10th Cir. 1990) ). Because the case presently before this court is not a bankruptcy case, "a preferential transfer case, or a closely analogous case," there are no such special considerations and "unjust enrichment, in the traditional sense of an inequitable retention of benefits, will support imposition of a constructive trust, even absent wrongful conduct." Rawlings , 240 P.3d at 767.
Having found that Utah law would support a claim for unjust enrichment absent wrongful conduct by the beneficiary, the court now looks to Tupper v. Roan , 349 Or. 211, 243 P.3d 50 (2010), an Oregon Supreme Court case that while not binding, is persuasive because it addressed a fact pattern substantially similar to the present case. In Tupper , the wife of a recently deceased individual sought the imposition of a constructive trust on a death benefit paid out to the deceased's girlfriend, who was the named beneficiary of the policy in violation of a divorce court order that the deceased maintain a policy in favor of his wife. In that case, the Oregon Supreme Court held that "inequitable conduct" by a grantor or donor, rather than by the recipient, "might support a claim for unjust enrichment." Id. at 57. The court relied on other cases involving unjust enrichment and decided "the common thread [between them] is the acquisition or retention of property in a way that is in some sense wrongful[.]" Id. "[W]hen a person possesses property that, in equity and good conscience belongs to another, the fact that person is innocent of any affirmative wrongdoing with respect to the property will not, standing alone, prevent the equitable owner from obtaining a constructive trust." Id. at 58. Because Diane can establish a claim for unjust enrichment based on the behavior of Mr. Sagers absent any wrongful conduct by Neil, the court now turns to whether Mr. Sagers acted wrongfully.
Diane also directs the court to Ridgway v. Ridgway , 454 U.S. 46, 58, 102 S.Ct. 49, 70 L.Ed.2d 39 (1981) and Yiatchos v. Yiatchos , 376 U.S. 306, 309, 84 S.Ct. 742, 11 L.Ed.2d 724 (1964) discussing unjust enrichment in the context of federal statutory schemes preempting state law. Both cases address state laws regarding whether a beneficiary may maintain proceeds when the grantor acted fraudulently without making any rulings on the basis of state law.
See also Restatement (First) of Restitution § 160 (1937) : "A constructive trust is imposed not because of the intention of the parties but because the person holding the title to property would profit by a wrong or would be unjustly enriched if he were permitted to keep the property."
ii. Mr. Sagers Acted Wrongfully
Diane alleges that Mr. Sagers made fraudulent representations to her and the divorce court. In Utah, a plaintiff may sustain an action for fraudulent misrepresentation when nine elements are present:
(1) [A] representation was made (2) concerning a presently existing material fact (3) which was false and (4) which the representor either (a) knew to be false or (b) made recklessly, knowing that there was insufficient knowledge upon which to base such a representation, (5) for the purpose of inducing the other party to act upon it and (6) that the other party, acting reasonably and in ignorance of its falsity, (7) did in fact rely upon it (8) and was thereby induced to act (9) to that party's injury and damage.
Cardon v. Jean Brown Research , 327 P.3d 22, 24 (Utah Ct. App. 2014) (quoting State v. Apotex Corp. , 282 P.3d 66 (Utah 2012) ). In this case, Diane does not need to prove all of these elements because she has not brought a fraud claim. But the court looks to these elements for the purpose of determining whether Mr. Sagers acted wrongfully. The court finds that he did.
Mr. Sagers made fraudulent representations to the state divorce court by representing, multiple times, that Diane was the beneficiary of the Prudential Policy, even though he had already changed the policy to designate Neil as the beneficiary. Mr. Sagers made those statements even though he knew they were false. He made those statements so that the court would order Diane to pay to maintain his life insurance policy and he made them knowing that she would not benefit. In reliance on those representations, Diane, and the court, reasonably assumed that Diane was the named beneficiary. Thus, all temporary orders entered by the divorce court only instructed Mr. Sagers to maintain the life insurance policies and not to make any changes during the proceedings—orders that he technically complied with. Had Mr. Sagers revealed that Neil, not Diane, was the beneficiary of the Policy, it is fair to assume that the court would likely have ordered him to restore Diane as the beneficiary, or to take out a new policy benefiting Diane. His fraudulent statements therefore cost Diane the Death Benefit.
For example, in October, 2013, Mr. Sagers opposed Diane's motion for an amended temporary order representing to the court that if Diane wanted to maintain the Prudential Policy for her benefit, she should pay the premiums herself. And on January 10, 2014, Mr. Sagers moved to amend the temporary order arguing that Diane should be ordered to pay for his two life insurance policies, or at least share the cost of maintaining them because "[Diane] will be the one benefitting from the policy."
Mr. Sagers' fraudulent statements also induced Diane to make premium payments on the Policy. Although the divorce court never ordered Diane to make payments on the policy, Mr. Sagers stopped making the payments and Diane began making the payments. Diane would never have maintained the policy had she known that she was not the beneficiary. At the very least, she would not have made the payments without an agreement that she was entitled to reimbursement for the payments made during the divorce and likely for the payments made since the inception of the life insurance policy, which had always been paid with marital assets.
See Wentworth v. Equitable Life Assur. Soc. , 65 Utah 581, 238 P. 648, 654 (1925) (discussing property liens to recover premiums paid by someone not the beneficiary).
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b. Diane is Entitled to the Death Benefit
Mr. Sagers made fraudulent representations regarding the beneficiary of the Death Benefit on which Diane reasonably relied to her detriment. Although Neil did not act wrongfully, it would be inequitable for him to retain the Death Benefit when he is only the designated beneficiary because of Mr. Sagers' fraudulent misrepresentations. The court finds that Diane is entitled to the Death Benefit.
IV. ORDER
Neil's motion for summary judgment is denied (ECF No. 68). Diane's motion for summary judgment is granted in part (ECF No. 66). The court hereby orders that Diane is the rightful recipient of the Death Benefit and that the interpleader action is resolved in her favor. The funds on deposit with the Court Registry Investment System shall be withdrawn and disbursed into a constructive trust naming Diane as the beneficiary. Because the parties stipulated to the dismissal of Neil's claim for tortious interference with electronic communications, Diane and Richard's motion for summary judgment as to that claim, Neil's Third Cause of Action, is denied as moot.