Volk v. Goeser, 2016 MT 61 (March 8, 2016) (Wheat, J.; Rice, J., concurring; Shea, J., concurring; McKinnon, J., dissenting) (6-1, rev’d)
Issue: Whether the district court properly granted summary judgment to Valerie and denied the imposition of a constructive trust on life insurance proceeds in favor of RBV, a minor child.
Short Answer: No.
Summary judgment reversed, remanded to fashion constructive trust
Facts: Roy and Pamela Volk married in April 1996, and had a son, RBV, in 2000. In June 2010, Roy filed for divorce and the district court issued the statutorily mandated summons and TRO. The dissolution decree was entered in December 2011.
Roy and Pamela entered into a marital settlement agreement (MSA) the day before the final decree of dissolution. The MSA included several agreements, including a “future instruments” clause under which Roy agreed to execute a will naming his son as beneficiary of his estate and giving all assets to his son. Attached to the MSA was a list of assets and liabilities of each party, in which Roy indicated his New York Life insurance Policy 936 was an asset. The MSA further provided that if either party failed to disclose an asset it would be grounds for the court to award that asset to the other party.
At the time of the divorce, Roy owned two life insurance policies – Policy 799 with a benefit of $1.5 million and Policy 936 with a benefit of $1 million. Policy 799 was not disclosed in the divorce. Pamela was the sole beneficiary of 799, but did not know the policy existed. Pamela and Roy’s business were 50-50 beneficiaries of Policy 936, with a $200,000 assignment to a bank. On July 15, 2010, while the TRO was in effect, Roy changed the beneficiary designations on both policies and designated I sister, Valerie Goeser, the new beneficiary.
Roy also had a daughter, Saraya. Roy and Saraya’s mother entered into a child support agreement in 2005 under which Roy agreed to purchase a $100,000 life insurance policy naming Saraya the sole owner and beneficiary. The child support agreement was approved by the district court in July 2005. Roy did not purchase the policy required by the agreement, and did not name Saraya a beneficiary of any life insurance policy.
Roy died unexpectedly in April 2012, at age 45. He did not have a will. Valerie received $2,306,103.13 in insurance proceeds from Policies 799 and 936, and invested the proceeds in a home and real property in California.
Pamela learned that the proceeds from both policies had been paid to Valerie, and filed creditor’s claims for a payment Roy had agreed to make to her, and for child support and health insurance for RBV. The estate did not have sufficient funds to pay the child support claim, and in 2013, Pamela filed suit on behalf of RBV seeking a constructive trust over the insurance policy payouts. The complaint named Saraya, a co-PR of Roy’s estate, as a defendant, as well as Valerie. Pamela filed two additional actions that are not part of this appeal – to reopen the dissolution based on Roy’s violation of the TRO, and to seek policy proceeds through the probate. Valerie was not served in the other two actions.
Saraya sought a constructive trust to fulfill the $100,000 liability to her. She and Pamela entered into an agreement under which Pamela would pay Saraya’s claim from RBV’s constructive trust if RBV prevails.
Procedural Posture & Holding: Both parties moved for summary judgment. Shortly after, Saraya sought leave to amend her answer and assert cross-claims against her co-defendant, Valerie. After hearings, the district court entered summary judgment for Valerie on all claims and denied Saraya’s motion for leave to amend. Pamela, RBV, and Saraya appeal, and the Court reverses.
Reasoning: While a violation of the restraining order in a dissolution proceedings does not automatically void the beneficiary change, the courts possess equitable power to order a return to the status quo when a party who violated a TRO has died. Briese.
The district court determined that Roy’s violation of the TRO had no effect on the beneficiary change because the divorce was final prior to his death, and he would have had been free to change the beneficiary any time after the final decree. Additionally, had Roy not changed beneficiaries, Pamela would have been removed as a beneficiary by operation of law under § 72-2-814, MCA.
Had Roy not changed the beneficiary of Policy 936, which is listed as an asset in the MSA, Pamela’s share of the proceeds would have passed to Roy’s estate, and then to Roy’s children via the intestacy statutes. This would have fulfilled Roy’s express intent in the MSA to name RBV the beneficiary of his estate. To argue that Roy would have changed the beneficiary to Valerie after the final decree is speculative, particularly where both of his parenting agreement required him to ensure support for his children and he failed to do so.
Regarding Policy 799, the district court found that Roy failed to disclose it in the MSA, but held the failure had no effect on the value of the marital estate because it had no value until Roy died. However, the Court holds that the dispose is the improper change of beneficiary while the TRO was in place. Because Roy improperly changed the beneficiaries of both policies in violation of the statute and the TRO, the beneficiary changes are invalid and must be set aside.
However, returning the parties to the status quo is complicated because the life insurance proceeds have been invested in real property. Pamela argues that Valerie is unjustly enriched and that the Court should impose a constructive trust on behalf of RBV. Valerie disagrees, and contends that all issues in this case are controlled by written agreements in the underlying divorce action.
The central issue in dispute is the third element of unjust enrichment, i.e., whether allowing Valerie to retain the benefits incurred creates an unjust result. Roy’s improper change of beneficiary resulted in his estate being unable to pay claims to his children or provide for their future as was intended and promised in the MSA and the parenting agreement for Saraya. The third element of unjust enrichment is met.
Although Valerie has done nothing wrong, she is holding title to property and has an equitable duty to convey some or all of it to another. Thus, a constructive trust is the proper remedy. The Court remands to the district court to fashion the remedy so that it will accomplish justice in light of the circumstances.
Justice Rice’s Concurrence (joined by Justice Baker): Justice Rice notes that the Court is not ordering all of the contested proceeds to be placed in trust for RBV, but rather that the district court should design equitable relief that will take into account all parties’ reasonable claims.
Justice Shea’s Concurrence (joined by Chief Justice McGrath): Justice Shea would provide more precise guidance to the district court as to the equitable objectives. Roy violated the restraining order. But for that violation, Valerie would not have received any of the insurance proceeds. The amount Valerie received is known down to the last penny, leading Justice Shea to wonder why the Court suggests that Valerie may only have to return a “portion” of the proceeds. Justice Shea would instruct the district court that the objective should be recoupment, to the fullest extent possible, of the entire life insurance proceeds.
Justice McKinnon’s Dissent: Justice McKinnon believes the Court has not accorded proper deference to the trial court. The majority decision reforms the MSA, ignore the final parenting plan, and invalidates life insurance contracts. Moreover, it must be inequitable for Valerie to retain the benefit of Roy’s life insurance proceeds to impose a constructive trust. The fact that Roy actually did change the beneficiary designation means no speculation is required to determine Roy’s intent or that he would have effected that intent by executing a valid change of beneficiary post-dissolution. Neither the MSA nor the parenting plan require either party to procure or maintain a life insurance policy for the benefit of anyone.