PRUDENTIAL INSURANCE COMPANY OF AMERICA v. DORIAN CAPUTO and JOSEPH PEZZINO, SR.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0902-05T50902-05T5

PRUDENTIAL INSURANCE COMPANY

OF AMERICA,

Plaintiff,

v.

DORIAN CAPUTO and JOSEPH PEZZINO,

SR.,

Defendants,

and

CHERYL DONAHUE and RYAN ALFORD,

a minor,

Defendants-Appellants,

and

JANINE PEZZINO,

Defendant-Respondent.

________________________________________________________________

 

Argued June 7, 2006 - Decided August 11, 2006

Before Judges Parker and Grall.

On appeal from the Superior Court of New

Jersey, Law Division, Essex County,

Docket No. L-5695-04.

James V. Segreto argued the cause for

appellants.

Riley E. Horton, Jr., argued the cause for

respondent.

PER CURIAM

Defendants Cheryl Donahue and Ryan Alford appeal from an order entered on September 9, 2005 granting summary judgment in favor of defendant Janine Pezzino and awarding her the proceeds of a group TPAF life insurance policy issued by Prudential Insurance Company of America (Prudential) to Joseph Pezzino through his employer. We affirm.

The background facts pertinent to this appeal are as follows. Janine is the adopted daughter of Elizabeth Pezzino and Joseph Pezzino, both now deceased. Elizabeth and Joseph were divorced on February 22, 1993 when Janine was nine. Pursuant to a Property Settlement Agreement incorporated into the judgment of divorce, Joseph was obligated to pay child support and "maintain any and all life insurance benefits available through his employment for the benefit of [Janine] naming Elizabeth as trustee."

Elizabeth died in April 2001 and shortly thereafter Joseph moved to terminate his child support and life insurance obligation while Janine was still a full-time college student and not yet emancipated. On July 31, 2001, Joseph's motion was denied.

On August 21, 2001, Joseph married defendant Cheryl Donahue. On August 27, 2001, Joseph designated Cheryl and her son, defendant Ryan Alford, as beneficiaries of the TPAF policy. Joseph and Cheryl subsequently divorced.

After Joseph died, Prudential filed an interpleader action in the United States District Court, which was subsequently withdrawn and filed in New Jersey Superior Court on June 20, 2004. Prudential deposited the policy amount, plus interest, into the court and was relieved of any further participation in the action.

On August 11, 2005, Janine moved for summary judgment and on September 9, 2005, the motion was granted. In his oral decision, Judge Stephen J. Bernstein found that Janine was not emancipated at the time of her father's death, that Joseph's child support obligations continued to the time of his death, and that

the language of paragraph 5 [obligating decedent to maintain life insurance] clearly states that Janine is entitled to all benefits, not those benefits representing just the payment of child support. Although the purpose behind Paragraph 5 may have been security to ensure some of these payments, we are certainly dealing with a situation where the amount of the payments when there are intangibles, college tuition expenses, medical expenses, medical insurance, dental coverage, dental expenses, besides just the normal child support, does not make this a case in which a specific number is appropriate to designate to the beneficiary and here the agreement clearly did not designate that this was to be limited in any way.

Relying on Travelers Ins. Co. v. Johnson, 579 F. Supp. 1457 (D.N.J. 1984), a case with a similar factual background, the judge found that Janine had a superior right to the policy.

In this appeal, defendants Cheryl Donahue and her son, Ryan Alford, argue that (1) their designation as beneficiaries of the policy is controlling; (2) the designation is binding under ERISA; (3) the trial judge was required to accept Cheryl Donahue's certification as true for purposes of the summary judgment cross-motions; and (4) the judge erred in his application of the law.

We have carefully reviewed the record in light of defendants' arguments and the applicable law. We are satisfied that summary judgment was properly granted. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

I

The threshold issue here is which document grants a superior right in the TPAF policy: (1) the judgment of divorce requiring decedent to "maintain any and all life insurance benefits available through his employment for the benefit of [Janine];" or (2) the TPAF enrollment form listing Cheryl and her son as beneficiaries. The case law solidly supports Judge Bernstein's ruling in favor of Janine.

In Travelers, the decedent Steven Johnson signed a support and separation agreement which was incorporated into the judgment of divorce. The agreement provided that

[h]usband is covered by life insurance in a group policy through his employment. Husband shall continue said policy in force and effect and pay the premiums thereon.

Husband shall make Wife, as trustee for the children, as primary beneficiary of said policy.

[579 F. Supp. at 8.]

The decedent retained an existing policy and obtained a new one, but listed his second wife as the beneficiary on both policies prior to his death. Id. at 1459. The decedent's daughter and second wife each claimed the amount due under the policies. Ibid. After surveying the case law, the Federal District Court held:

Thus, the recovery of the first wife (or children) from a life insurance policy has not been limited to the narrow situation in which the husband changes the beneficiary of his existing life insurance policy from the first wife (or children) in contravention to the divorce decree. Rather, courts have found that the first wife (or children) has [have] a superior equitable interest in the proceeds of a life insurance policy even when the husband has failed to act - by not naming the first wife as the beneficiary and/or by not even acquiring the insurance required by the divorce decree.

. . . .

Whether by inadvertence or bad faith, [decedent] failed to comply with his support obligations as set out in the divorce decree. This failure, however, does not defeat the superior equitable interest that his children have in his existing work-related life insurance policy.

[Id. at 1463 (emphasis added).]

In Della Terza v. Estate of Della Terza, 276 N.J. Super. 46 (App. Div. 1994), a judgment of divorce provided that the decedent "shall maintain the child of the marriage as the beneficiary of his life insurance policy until she becomes emancipated." Id. at 48. The decedent had only one child, Leah, and one insurance policy through the Belleville Board of Education when the judgment of divorce was entered. Ibid. The decedent subsequently remarried and filed a designation of beneficiary form naming his second wife as "primary beneficiary," along with Leah, and a child of the second marriage as "contingent beneficiary." Ibid.

On June 22, 1987, an order entered in the Family Part following upon [decedent's first wife's] motion required [decedent], inter alia, to "provide proof . . . that the minor child of the marriage[, Leah,] is named as beneficiary on his life insurance policy, pursuant to the Judgment for Divorce. . . ." [Decedent] never complied with this portion of the order. He died on July 16, 1989.

[Ibid.]

The decedent's policy through the Belleville Board of Education was the only one in effect at the time of his death. Ibid. The decedent's second wife was paid as the primary beneficiary under the policy and Leah sued, claiming a superior right to the policy proceeds. Ibid. The trial court granted Leah's motion for summary judgment and the second wife appealed. We held:

As to the basic issue presented in this case, i.e., whether an obligation to maintain life insurance with a dependent child as beneficiary, established in a judgment of divorce, translates into a right on the part of the beneficiary to seek the proceeds of the policy paid to another because the obligor failed to comply with the terms of the judgment, we are in substantial agreement with that portion of [the trial judge's] bench decision . . . holding [Leah] to be entitled to [the] insurance proceeds, especially to the extent that decision relied upon the reasoning . . . in Travelers . . . and the cases cited therein. . . . In consideration of the State's interest in assuring continued support for unemancipated children, even after the death of a parent, we agree that a provision such as was contained in the judgment of divorce . . . to maintain the child as beneficiary in a life insurance policy until emancipation creates an equitable assignment where such a designation has not, in fact, occurred.

[Id. at 49 (citations omitted).]

For the same policy reasons, we remanded the matter to the trial court for a determination in light of the interests of the decedent's unemanicipated child of his second marriage which was still intact at the time of his death. Thus, the circumstances of Della Terza differ materially from those presented here in that: (1) Ryan Alford was not the decedent's son; and (2) the second marriage had ended in divorce prior to his death.

In Prudential Insurance Co. v. Prashker, 201 N.J. Super. 553 (App. Div.), certif. denied, 101 N.J. 334 (1985), Prudential filed an interpleader action, as it did here, for the court to determine who should receive the proceeds of a TPAF life insurance policy. The decedent's brother appealed the final judgment awarding the proceeds to the decedent's son. Id. at 555. The brother was the designated beneficiary on the policy. Ibid. The son sought the proceeds pursuant to a judgment of divorce that obligated the decedent to continue the son as the designated beneficiary of the TPAF policy. Ibid.

We affirmed the trial court's holding that "the terms of the judgment of divorce control the disposition of the proceeds of the insurance and the provisions of N.J.S.A. 18A:66-51 dealing with exemption from court process of monies due by reason of a person's membership in the [TPAF] do not require a different result." Ibid. We added the following caveat:

[W]e do not intend by our result to open the door to a modification of the general principle that the designated beneficiary of a life insurance policy has a vested right to the insurance proceeds payable in the event he survives the insured subject to divestment only if the insured changes the beneficiary in the manner provided by the policy. Clearly, the entry of a divorce judgment requiring a party to name a beneficiary to a specific insurance policy gives rise to a situation justifying treatment departing from ordinary principles. Our result is required so that an insured by reliance on standard insurance law is not able to frustrate a judgment of a court. But if the court permitted changes of beneficiaries in other situations to be made except in accordance with the policy provisions great uncertainties could arise as to the proper recipient of the insurance proceeds. Thus, we consider the divorce situation to be sui generis.

[Id. at 557 (citation omitted) (emphasis added).]

II

Defendants next argue that their designation in the policy is binding under the Employee Retirement Income Security Act (ERISA). They rely on Egelhoff v. Egelhoff, 532 U.S. 141, 121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001), in which the United States Supreme Court addressed the issue of whether ERISA preempted a Washington State statute "provid[ing] that the designation of a spouse as the beneficiary of a nonprobate asset is revoked automatically upon divorce." Id. at 143. The controlling ERISA provision, 29 U.S.C.A. 1144(a), states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. The Court held that the ERISA statute preempted the Washington statute because it had a "prohibited connection with ERISA." Egelhoff, supra, 532 U.S. at 141, 147.

Defendants' reliance on Egelhoff is misplaced, however. As noted by the trial court, this case does not implicate a statutory scheme contrary to ERISA as in Egelhoff. The only evidence presented by defendants to support their claim that ERISA governs the TPAF policy is the policy and correspondence from Prudential and the Division of Pensions and Benefits regarding payment to the designated beneficiary. The policy itself, however, indicates that it is a life and disability insurance policy, not a retirement benefit. The policy is not preempted by ERISA. Ibid.

III

Defendants next argue that for the purposes of a summary judgment motion, the trial court is obligated to accept as true the fourteen-page certification submitted by Cheryl. Defendants' argument is correct to the extent that the certification states facts, rather than legal argument. Accepting all of the relevant, material facts stated in Cheryl's certification as true, the following are undisputed: (1) the judgment of divorce required the decedent to "maintain any and all life insurance benefits available through his employment" for Janine's benefit; (2) on July 31, 2001, decedent's motion to terminate his child support and life insurance obligation while Janine was still an unemancipated full-time college student was denied; (3) on August 21, 2001, Joseph married Cheryl; (4) on August 27, 2001, Joseph designated Cheryl and her son as beneficiaries of his TPAF policy; and (5) Joseph and Cheryl subsequently divorced.

Cheryl argues in her certification that the TPAF policy did not exist at the time of the divorce because it was issued to decedent in 2001 and consequently could not have been contemplated by Janine's parents in formulating their property settlement agreement. The policy's existence at the time of the judgment of divorce is not the issue. The judgment of divorce and the July 31, 2001 order obligated the decedent to provide life insurance to secure Janine's continued support until she was emancipated. It is that obligation - not the issuance date of the policy - that is dispositive. Travelers, supra, 579 F. Supp. at 1463; Prashker, supra, 201 N.J. Super. at 557.

IV

Finally, we find no merit in defendants' argument that the trial judge erred in his application of the law. As we have discussed previously, Judge Bernstein correctly interpreted and applied the case law to the undisputed facts presented in the motion for summary judgment. Accordingly, we affirm. Brill, supra, 142 N.J. at 540 (1995).

Affirmed.

 

Cheryl's certification includes seven pages quoting the policy and arguments relating to her interpretation of the policy, along with numerous irrelevant and immaterial facts.

(continued)

(continued)

12

A-0902-05T5

August 11, 2006