Opinion
No. 1D21-1795
06-01-2022
Nathanael J. STEVENS, as Guardian and Personal Representative of B.R., a Minor, and E.R., a Minor, Appellant, v. Kimberly Ann STEVENS, in Her Capacity as Personal Representative of the Estate of Gene Andrew Redding, Deceased, and Brian Redding, an Individual, Appellees.
Daniel K. Bean of Abel Bean Law, P.A., Jacksonville, for Appellant. James J. Taylor and Katelyn T. Hardwick of Taylor Arrubla Hardwick P. A., Keystone Heights, for Appellee Brian Redding.
Daniel K. Bean of Abel Bean Law, P.A., Jacksonville, for Appellant.
James J. Taylor and Katelyn T. Hardwick of Taylor Arrubla Hardwick P. A., Keystone Heights, for Appellee Brian Redding.
Lewis, J.
Appellant, Nathanael J. Stevens, as guardian and personal representative of B.R. and E.R., minors, challenges the trial court's Final Judgment, arguing that the court erred by concluding that his claims against Appellee Brian Redding and his request for a constructive trust are precluded by federal preemption. For the reasons that follow, we affirm.
BACKGROUND
The marriage of Appellee Kimberly Ann Stevens and Gene Andrew Redding was dissolved in April 2015 by a Consent Final Judgment of Dissolution of Marriage, which required Gene to obtain or maintain a life insurance policy with a death benefit of at least $400,000 and to designate B.R. and E.R., their minor children, as sole beneficiaries so long as he had a child support obligation. At the time of the entry of the consent final judgment, Gene had a Servicemembers’ Group Life Insurance ("SGLI") policy in the amount of $400,000, and he had designated his children as beneficiaries of that policy. Kimberly married Appellant in August 2015. Unbeknownst to her, Gene changed the beneficiary designation on his life insurance policy from the children to his father, and upon his father's death, in November 2015, to his brother, Appellee Brian Redding. Gene unexpectedly died in September 2016, leaving behind his children as the sole beneficiaries of his estate. Kimberly, as their mother, was appointed personal representative of the estate. Appellant legally adopted the children in 2018, and he sued Brian, as well as Kimberly in her capacity as personal representative of Gene's estate.
In his Amended Complaint for Damages and Constructive Trust, Appellant brought against Brian claims for tortious interference with expectancy, conspiracy to commit conversion, constructive trust, accounting, and breach of third-party beneficiary contract. Appellant sought a court order imposing a constructive trust on the assets that are traceable to Brian's use of the life insurance proceeds. Appellant alleged that Brian encouraged and conspired with Gene to breach the consent final judgment and name him as beneficiary, and that Brian breached an oral agreement with Gene by not using the insurance proceeds for the benefit of Gene's children as he had promised.
Brian denied all the material allegations and raised as affirmative defenses the arguments that he is entitled to Gene's SGLI policy proceeds pursuant to the Servicemembers’ Group Life Insurance Act ("SGLIA") and that the action is preempted by federal law pursuant to the Supremacy Clause of the United States Constitution. The trial court denied Brian's subsequent motion for summary judgment, finding that although the case is governed by Ridgway v. Ridgway , 454 U.S. 46, 102 S.Ct. 49, 70 L.Ed.2d 39 (1981), where the Supreme Court held that the SGLIA's provisions prevail over inconsistent state laws pursuant to the Supremacy Clause and that the imposition of a constructive trust on SGLI policy proceeds is inconsistent with the SGLIA, disputed issues of material fact remained regarding Brian's alleged fraud and wrongdoing, which might support an exception to Ridgway .
The parties stipulated, and Brian testified accordingly at the non-jury trial, that he first became aware of the consent final judgment's life insurance policy requirement shortly after Gene's death and that the sum of $400,131.11 representing the death benefit payable under Gene's SGLI policy was directly deposited into his bank account in September 2016.
Kimberly testified in part as follows. The life insurance policy provision of the consent final judgment was Gene's idea, and he said the insurance policy would always follow the children. Gene subsequently mentioned to Kimberly that he wanted to make Brian the beneficiary of his life insurance policy, saying that he trusted Brian to manage the money for the children. Following Gene's death, Kimberly and Brian had several conversations about the insurance policy proceeds, during which Brian stated that he was managing the insurance money for Gene's children and that he would not place the money in a trust for them as suggested by her because he was trying to uphold Gene's wish of keeping the money from her. Brian knew that Gene intended for his children to receive the money, and he never claimed that the money was his to use as he pleased. Brian did not tell Kimberly that he was spending the insurance proceeds, and she did not learn that he had spent the money on himself until he filed a second affidavit in January 2020.
Brian had a different account of his conversations with Kimberly, and he testified as follows. Upon their father's death, Gene asked Brian for his social security number, saying he wanted to make him the beneficiary of his life insurance policy and he did not want Kimberly to have any of the money. Gene did not provide any other instruction about the use of his life insurance proceeds or make any mention of his children in that context, and Brian did not tell Gene that he would use the insurance proceeds for the children. Brian never told Kimberly that Gene had asked him to hold or use the insurance proceeds for his children, that he had told Gene that he would use the money for his children, or that he was handling the children's money. Brian believes the insurance proceeds belong to him to do with as he sees fit, and he does not believe that he betrayed Gene or breached a moral obligation to Gene in the way he used the money. By February 2018, Brian had spent the entirety of the life insurance money on paying off his mortgage and various bills, purchasing vacant lots and a life insurance annuity, and making donations. He did not use any of the money for the benefit of Gene's children, but he believes he has been carrying out Gene's wish by ensuring that Kimberly does not have the money.
The trial court entered a Final Judgment, concluding that the claims against Brian are precluded by the SGLIA and federal preemption. The court explained that in order to prevail against Brian, Appellant had to prove an extreme fact situation or that the insurance proceeds were obtained through fraudulent or illegal means. The court accepted Kimberly's testimony over Brian's conflicting testimony regarding Gene's intent with respect to the use of the insurance proceeds, finding that Brian was aware that Gene intended the money to be used for the benefit of his children. However, the trial court also found as follows:
There is no evidence that Brian was aware of the terms of the divorce final judgment at the time of the change in beneficiary designation. There is no direct evidence that Gene and Brian had an oral contract to apply the proceeds for the benefit of the children. There is no evidence that Brian induced Gene to do anything with respect to the beneficiary designation, and in fact, Gene's prior designation change to his father belies that contention. Brian had no contractual or other financial arrangement with Kimberly or the children. On these facts, the most that can be said is that Brian's conduct, while morally indefensible, is a failure to honor Gene's wishes regarding disposition of the insurance proceeds.
The court concluded that the evidence does not rise to the level of an extreme fact situation or that the proceeds were obtained through fraudulent or illegal means and, therefore, is insufficient to create an exception to the SGLIA's preemption under Ridgway . This appeal followed.
ANALYSIS
A trial court's findings of fact are affirmed on appeal if they are supported by competent, substantial evidence, while its application of the law to the facts is reviewed de novo . Thomas v. State , 312 So. 3d 156, 157 (Fla. 1st DCA 2021). The issue of federal preemption is subject to de novo review. R.J. Reynolds Tobacco Co. v. Marotta , 214 So. 3d 590, 595 (Fla. 2017).
The SGLIA was enacted by Congress in 1965, and it provides in relevant part that any insurance proceeds shall be paid "[f]irst, to the beneficiary or beneficiaries as the member or former member may have designated by a writing received prior to death," and that any payments due under an SGLI policy "shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary." 38 U.S.C. § 1970(a), (g) (2018) (providing an order of precedence in subsection (a) and an anti-attachment provision in subsection (g)). Under the SGLIA, the insured has the absolute right to designate the policy beneficiary and to alter that choice at any time, and "Congress has spoken with force and clarity in directing that the proceeds belong to the named beneficiary and no other." Ridgway v. Ridgway , 454 U.S. 46, 55, 59, 102 S.Ct. 49, 70 L.Ed.2d 39 (1981) (internal citation omitted).
In Ridgway , a state divorce judgment pursuant to settlement negotiations ordered the insured to pay child support and to keep in force life insurance policies for the benefit of his children. Id. at 48, 102 S.Ct. 49. At the time of the divorce, the insured's former wife/the mother of his children was designated beneficiary of his SGLI policy. Id. Months after the divorce, the insured remarried, and he changed his life insurance policy's beneficiary designation to his widow. Id. at 48–49, 102 S.Ct. 49. Following the insured's death, both his widow and his former wife, on behalf of the children, filed claims for the policy proceeds, and his former wife filed a cross-claim against his widow for the imposition of a constructive trust for the benefit of the children. Id. at 49, 102 S.Ct. 49.
The Supreme Court held that an insured's beneficiary designation under an SGLI policy prevails over a constructive trust imposed upon the policy proceeds by a state court decree because the provisions of the SGLIA prevail over and displace inconsistent state laws pursuant to the Supremacy Clause of the United States Constitution. Id. at 47, 55, 60, 102 S.Ct. 49. Additionally, any diversion of the SGLI policy proceeds by the imposition of a constructive trust on the proceeds would operate as a forbidden seizure of the proceeds, in violation of the SGLIA's anti-attachment provision. Id. at 60, 102 S.Ct. 49. The Court recognized "that this unpalatable case suggests certain ‘equities’ in favor of the respondent minor children and their mother," but added that such a result may be avoided only "if Congress chooses to avoid it." Id. at 62–63, 102 S.Ct. 49. The Court noted that it did not have to "address the legal aspects of extreme fact situations or of instances where the beneficiary has obtained the proceeds through fraudulent or illegal means as, for example, where the named beneficiary murders the insured service member," and it reserved for another day "ruling on a situation of that kind." Id. at 60 n.9, 61 n.12, 102 S.Ct. 49.
Appellant acknowledges Ridgway ’s holding, but he argues that the trial court erred by not finding that this case presents the "extreme fact situation" that the Supreme Court alluded to as an exception to preemption. However, the trial court found that Brian was not aware of the terms of the consent final judgment at the time Gene changed the beneficiary designation, that Brian did not induce Gene to do anything with respect to the beneficiary designation, that Brian and Gene did not have an oral contract to use the insurance proceeds for the children's benefit, and that Brian did not have any contractual or financial arrangement with Kimberly or the children. These findings, contrary to Appellant's argument, are based upon competent, substantial evidence. As such, the evidence in this case does not rise to the level of an extreme fact situation or to fraud or illegal means and, thus, is insufficient to create an exception to the SGLIA's preemption under Ridgway .
CONCLUSION
Therefore, we conclude that the trial court correctly determined that federal preemption precludes Appellant's claims against Brian and the imposition of a constructive trust. Accordingly, we affirm the final judgment.
AFFIRMED .
Bilbrey and Jay, JJ., concur.