In re Estate of Price

In re Estate of Price (2005-173); 180 Vt. 548; 904 A.2d 1196

2006 VT 62

[Filed 07-Jul-2006]

                                 ENTRY ORDER

                                 2006 VT 62

                      SUPREME COURT DOCKET NO. 2005-173

                             OCTOBER TERM, 2005


  In re Estate of Gregory G. Price    }          APPEALED FROM:
                                      }
                                      }          Chittenden Superior Court  
                                      }
                                      }
                                      }          DOCKET NO. S0908-04 CnC

                                                 Trial Judge: Richard W. Norton

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  Plaintiff Susan Teaford appeals from the superior court's
  order granting summary judgment in favor of defendant Lucille Price,
  thereby allowing defendant to retain $50,000 she received as beneficiary of
  a life insurance policy of decedent Gregory Price. (FN1)  The order on appeal
  reversed the decision of the probate court, which had allowed plaintiff's
  claim to the full amount of the insurance proceeds.  We agree with the
  result reached by the probate court and reverse the decision of the
  superior court.

       ¶  2.  Plaintiff married decedent in 1976.  They had two children:
  Andrew, born on September 5, 1980, and Emily, born on February 14, 1985. 
  Emily has a developmental disability and cannot live independently. 
  Plaintiff is her guardian.

       ¶  3.  Plaintiff and decedent were divorced in Virginia in 1988. 
  Paragraph 8(d) of the separation agreement governing the divorce required
  that: 

    The Husband shall maintain a policy of life insurance insuring him
    and shall name the children of the parties as beneficiary and
    shall keep such policy in full force and effect until his
    obligation herein to support the children of the parties shall
    cease.  The amount of said insurance shall be no less than One
    Hundred Thousand Dollars.  

  This provision was added in its final form through an addendum which also
  modified decedent's child support obligation as follows:

    The Husband agrees to pay to the Wife for the support,
    maintenance, and education of each of the children . . . the sum
    of Two Hundred Fifty Dollars ($250.00), per month, . . .
    commencing with April 1, 1988 and continuing until each of said
    children attains the age of eighteen (18) years, or sooner becomes
    fully employed, married, or otherwise becomes fully emancipated.  

       ¶  4.  In 1991, decedent married defendant, and the couple moved to
  Vermont.  After Andrew reached majority in 1998, decedent changed the
  beneficiary designation of the life insurance policy, making plaintiff (as
  Emily's guardian) and defendant co-beneficiaries.  Decedent did not attempt
  to modify the separation agreement between him and plaintiff, nor did he
  seek court approval of the new beneficiary designation.  

       ¶  5.  On January 21, 2003, decedent and defendant divorced. 
  Decedent died on February 5, 2003, during the nisi period.  Emily had not
  yet attained majority at the time of decedent's death.

       ¶  6.  Defendant was appointed executrix of decedent's estate. 
  After the insurance proceeds were paid as per the changed beneficiary
  designation-$50,000 to plaintiff as Emily's guardian and $50,000 to
  defendant-plaintiff presented a timely claim to the estate on Emily's
  behalf for the $50,000 paid to defendant.  Defendant, as executrix,
  disallowed the claim, and plaintiff appealed to the probate court.  The
  probate court allowed the claim, directing defendant to pay plaintiff
  $50,000.  The court held that the separation agreement between decedent and
  plaintiff provided for neither division of the policy proceeds nor a
  unilateral change of beneficiaries.  It interpreted the agreement as
  requiring decedent to maintain the beneficiary designations called for in
  the agreement until his support obligation as to both children expired, or
  until decedent obtained a court order allowing a change.

       ¶  7.  Defendant appealed the probate court's ruling to the superior
  court.  Both parties moved for summary judgment.  The superior court
  reversed the probate court ruling and granted summary judgment for
  defendant, allowing her to keep the $50,000 she had received as a
  beneficiary of the life insurance policy.  Noting that the separation
  agreement's requirement to maintain the life insurance policy had a
  termination date-namely, the endpoint of decedent's obligation to support
  the children-the court concluded that "the parties did not intend to make
  this benefit a property settlement but rather intended it as a means to
  protect the children's support."  The court went on to opine that when
  Andrew reached majority "any right he might have had to the life insurance
  money ended."  At that point, the court held, decedent was free to name
  another beneficiary. 

       ¶  8.  On appeal, plaintiff argues that a noncustodial parent cannot
  unilaterally reduce a support payment when each child of the marriage
  reaches majority, absent a court order.  Therefore, because the life
  insurance provision at issue was intended to secure decedent's support
  obligation for the children, he could not name a new beneficiary without a
  court order. (FN2)  Defendant counters that the insurance provision, like
  the child support provision, was divisible by its terms and thus terminated
  as to each child when the support obligation to that child terminated. 
  Defendant also contends that Emily received the full benefit of the
  bargain-decedent made all of his support payments on her behalf, and she
  received the $50,000 due under the insurance provision. 

       ¶  9.  This Court reviews a summary judgment ruling de novo,
  employing the same standard applied by the trial court.  Hardwick Recycling
  & Salvage, Inc. v. Acadia Ins. Co., 2004 VT 124, ¶ 14, 177 Vt. 421, 869 A.2d 82.  To prevail on a motion for summary judgment, the moving party
  must show there is no genuine issue as to any material fact and that it is
  entitled to judgment as a matter of law.  V.R.C.P. 56(c)(3).  We agree with
  the probate court that the plain language of the separation agreement
  between decedent and plaintiff barred decedent from unilaterally altering
  the beneficiary designation without court approval.  Thus, we reverse the
  superior court's order granting summary judgment to defendant and hold that
  plaintiff is entitled to judgment as a matter of law.  

       ¶  10.  As the superior court correctly recognized, plaintiff and
  decedent were free to negotiate the terms of the dissolution of their
  marriage, and they are bound by the plain meaning of the words they chose. 
  Duke v. Duke, 140 Vt. 543, 546, 442 A.2d 460, 462 (1982).  The meaning of a
  contractual term "cannot exist in a vacuum" and must be assessed in light
  of "the circumstances surrounding the making of the agreement" while
  viewing the agreement "in its entirety."  Isbrandtsen v. N. Branch Corp.,
  150 Vt. 575, 578, 580, 556 A.2d 81, 84-85 (1988).

       ¶  11.  The separation agreement's life insurance provision required
  decedent to keep an insurance policy of at least $100,000 "in full force
  and effect until his obligation herein to support the children . . . shall
  cease."  Because plaintiff and decedent elected to frame that provision in
  terms of decedent's "obligation herein to support the children" (emphasis
  added), they agreed that decedent would maintain at least $100,000 of
  insurance coverage for the children's benefit until both children attained
  majority or otherwise became emancipated.  Thus, the superior court's
  holding that Andrew's right to a share of the insurance proceeds terminated
  and reverted back to decedent when Andrew reached majority subverts the
  intention of plaintiff and decedent as reflected in the plain language of
  their separation agreement. 

       ¶  12.  Allowing decedent to designate defendant as a beneficiary
  would also run counter to this Court's refusal to allow unilateral
  modifications of support obligations.  In Morancy v. Morancy, we held that
  a party cannot unilaterally terminate an unallocated support award and must
  seek court approval to reduce the payment when one child attains majority. 
  173 Vt. 609, 611, 800 A.2d 435, 437 (2001) (mem.).  The same rule applies
  to the life insurance provision at issue here because it conferred an
  unallocated benefit on the children as a group and because, as defendant
  recognizes, it was intended to provide a source of funds for decedent's
  support obligation in the event he died while support payments were still
  due.
   
       ¶  13.  We are mindful that courts in other jurisdictions have held
  otherwise.  For example, in Riser v. Riser, the court had to interpret a
  divorce decree that required the father to maintain his children as
  irrevocable beneficiaries of two life insurance policies "until such time
  as said children shall have attained the age of majority or become
  otherwise emancipated."  501 P.2d 1069, 1070 (Wash. Ct. App. 1972).  The
  father remarried after the divorce and changed the beneficiaries on each
  policy from his son and daughter, share and share alike, to his new wife. 
  At the time of the father's death, the son was emancipated and the daughter
  was not.  The court held that the father properly redesignated his second
  wife as a beneficiary as to the son's share of the insurance policy, for
  two reasons.  First, the life insurance provision was not merely to secure
  the support payments, but was in addition to them, and the father had the
  right to place limitations on this additional obligation.  Id. at 1072. 
  Second, the father's intention was to treat each child equally, as
  evidenced by the share-and-share-alike beneficiary designation and the
  absence of evidence to the contrary.  Id.  Thus, in order to give effect to
  the father's intent, the court held that the son's interest reverted to the
  father when the son attained majority so that the father was free to
  re-designate the son's share.  Id.  Accord In re Estate of Comiskey, 465 N.E.2d 653, 658 (Ill. App. Ct. 1984) (following Riser and holding that
  where divorce decree obligated father to name the parties' two minor
  children as irrevocable beneficiaries of certain insurance policies during
  their minority, child's interest in policies lapsed and reverted to father
  when child reached majority so that father could designate a new
  beneficiary as to that child's interest); In re Estate of Monreal, 375 N.W.2d 329, 332 (Mich. 1985) (holding that provision requiring maintenance
  of life insurance policies with children as beneficiaries until husband's
  support obligation was completed was intended to benefit only minor
  children).

       ¶  14.  We decline to follow the Riser approach for two reasons. 
  First, unlike Riser, the parties and the superior court here characterize
  the life insurance provision as intended to secure decedent's support
  payments, not as an additional obligation.  Thus, unlike the father in
  Riser, decedent was not free to place limitations on his obligation to
  fulfill the life insurance provision.  Second, even assuming that Andrew's
  beneficiary interest in the life insurance policy lapsed and reverted to
  decedent when Andrew attained majority, the unallocated nature of the
  benefit conferred on the children by the life insurance provision, filtered
  through our holding in Morancy, precludes decedent from re-allocating that
  interest without court approval.  In other words, because the life
  insurance provision allocated a benefit to the children as a group, as long
  as Emily remained a minor, decedent was required to seek court approval of
  any re-allocation of the beneficiary designation.  In light of his failure
  to do so, we agree with the ruling of the probate court.

       The order of the superior court is reversed and plaintiff's motion for
  summary judgment is granted.


                                       BY THE COURT:


                                       _________________________________________
                                       Paul L. Reiber, Chief Justice

                                       _________________________________________
                                       Denise R. Johnson, Associate Justice
     
                                       _________________________________________
                                       Marilyn S. Skoglund, Associate Justice

                                       _________________________________________
                                       Brian L. Burgess, Associate Justice

                                       _________________________________________
                                       Frederic W. Allen, Chief Justice (Ret.), 
                                       Specially Assigned


------------------------------------------------------------------------------
                                  Footnotes


FN1.  Plaintiff was married to decedent from 1976 to 1988, and defendant was
  married to decedent from approximately 1991 to 2003.

FN2.  Plaintiff also contends that the divorce decree between defendant and
  decedent released any interest defendant may have had as a beneficiary.  It
  is not clear that the release argument was presented to the probate court,
  but the parties did raise the issue in their summary judgment motion papers
  filed with the superior court.  Neither court addressed the issue, and we
  decline to address it in light of our decision on the issue of the
  beneficiary designation.