Notice: Seventh Circuit Rule 53(b)(2) States Unpublished Orders Shall Not Be Cited or Used As Precedent Except to Support a Claim of Res Judicata, Collateral Estoppel or Law of the Case in Any Federal Court Within the Insurance Company of America, Plaintiff, v. Ann Kaltofen and William Stewart,defendants-cross/plaintiffs-appellees, v. John M. Friedrich, Defendant-cross/defendant-appellant, 951 F.2d 352 (7th Cir. 1991)

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U.S. Court of Appeals for the Seventh Circuit - 951 F.2d 352 (7th Cir. 1991) Argued Sept. 13, 1991. Decided Dec. 23, 1991

Before POSNER, FLAUM and MANION, Circuit Judges.


The Prudential Insurance Company of America ("Prudential") insured the life of Emily J. Freidrich. When she died opposing parties claimed the proceeds of the policy. Prudential filed a federal interpleader action pursuant to 28 U.S.C. § 1335 against the opposing claimants. The district court dismissed Prudential once a final decree of interpleader was entered. Upon consent of the opposing claimants, the case was heard before a magistrate judge applying New York law. The magistrate judge found in favor of Ann Kaltofen and William Stewart, whom Emily had recently designated as beneficiaries. Emily's brother John Friedrich, whom she had originally designated, seeks reversal of the judgment. Because we find that the magistrate judge properly applied New York law and made no clearly erroneous factual findings, we affirm the district court's judgment.

Emily Friedrich died on October 28, 1987. The life insurance policy underwritten by Prudential, which she acquired through her employer, Time, Inc. ("Time"), is the subject of this interpleader action in which Ann Kaltofen, William Stewart, and John Friedrich each claim to be properly named beneficiaries.

Emily changed the beneficiary on her life insurance policy several times during the course of her employment at Time. Significant in this controversy is the process used by Time's Benefits Department for changing beneficiaries. Prudential provided Time's Benefits Department with the forms for processing routine matters such as benefit changes for employees. An employee wishing to change beneficiaries would obtain a "Change of Beneficiary and/or Name" form ("Beneficiary Change Form") from Time's Benefits Department. After executing the Beneficiary Change Form, the employee would submit his insurance policy certificate with the Beneficiary Change Form to Time's Benefits Department. Time's Benefits Department would then attach to the insurance policy one of the pre-printed beneficiary riders provided by Prudential. Each rider bore the pre-affixed signature of the Secretary of Prudential, explicitly indicating that she was signing on behalf of Prudential. Time's Benefits Department would date the rider, an authorized Benefits Department employee would sign it in a space labelled "Checked by _____," and the Benefits Department would return the certificate to the employee shortly thereafter. The Benefits Department routinely did not contact Prudential for such simple matters as a straightforward change of beneficiary.

If a Time employee desiring a beneficiary change contacted the Benefits Department and indicated that he could not find his policy, the Benefits Department would send the employee a "Lost Certificate Statement" form (a white card) stapled to the back of the Beneficiary Change Form (a yellow card). Karin Fredrickson, a supervisory employee in the Benefits Department at all relevant times, testified that the Benefits Department considered the two forms to be one document. After receiving the composite Beneficiary Change Form/Lost Certificate Statement, the Benefits Department would issue a duplicate certificate with the beneficiary rider attached to the front.

Emily made two changes in beneficiaries which occasioned the dispute in this case. On March 2, 1973, following her mother's death, Emily signed a Beneficiary Change Form by which she removed her mother as beneficiary of her life insurance policy and substituted "John M. Friedrich, brother." The next change was not as clear-cut. In late July, 1986, Emily requested an employee she supervised, Joanne Waugh, to witness her signature on a Lost Certificate Statement. Emily told Waugh that she needed to sign the form in order to change her life insurance beneficiary. Waugh testified that she signed a white card that was attached to the back of a yellow card. Waugh stated that the white card had already been dated when she signed it. Although Waugh was not certain of the date written on the card, she thought the date shown on the card was the same as the date on which she signed it.

After Emily died in 1987, Karin Fredrickson, the Time benefits counselor, found an undated and unsigned Beneficiary Change Form stapled to a signed, dated and witnessed Lost Certificate Statement in Emily's file in the Benefits Department. Neither form bore a date stamp indicating receipt by Time. Except for the missing date and signature, the Beneficiary Change Form had been completely executed and designated Ann Kaltofen and William Stewart as beneficiaries. The Lost Certificate Statement was dated July 31, 1986.

At Fredrickson's request, Ann Kaltofen provided Fredrickson with Emily's duplicate life insurance certificate and beneficiary designation rider dated July 31, 1986 which Ann located in a box with other papers in Emily's apartment. Ann testified that she found the duplicate certificate and rider in an open envelope bearing the return address of Time's Benefits Department and postmarked August 4, 1986. The beneficiary designation rider was signed by "M. Sliwinski" in the space labelled "Checked by _____." At trial, Fredrickson identified "M. Sliwinski" as Margaret Sliwinski, a benefits assistant under Fredrickson's supervision in 1986.

New York law sets forth four requirements for a designation of a change of death benefit beneficiary. The designation must be (1) in writing, (2) signed, (3) agreed to by the employer or made in accordance with the rules prescribed, and (4) agreed to by the insurer.1  N.Y. Est. Powers & Trusts § 13-3.2(d) (McKinney 1967) (hereinafter § 13-3.2(d)). The magistrate judge found based on the facts recited above that Emily had designated Ann and William as beneficiaries.

The magistrate judge specified three intermediary conclusions that led to her decision. First, the magistrate judge found that Emily's signature on the Lost Certificate Statement, stapled to the back of the Beneficiary Change Form, satisfied the signature requirement in the New York statute since the two forms were considered one document. Second, she found that Prudential authorized Time to issue beneficiary riders and duplicate policies to eligible employees. Third, she concluded Time's approval of the change of beneficiary is implicit in the issuance of the amended rider.

On appeal, John argues that the magistrate judge vitiated the requirements of the New York statute by focusing on Emily Friedrich's intent and that the evidence indicates that Emily Friedrich had not complied with the requirements of the New York statute. Also he claims that the magistrate judge erred by admitting testimony based on hearsay. We disagree and affirm the district court's judgment.

Before beginning our review in this case, we must address the dispute between the parties regarding our standard of review. While Rule 52 of the Federal Rules of Civil Procedure provides that in cases tried without a jury the court's findings of fact shall not be set aside unless they are clearly erroneous, the rule does not apply to conclusions of law which are reviewed de novo. Pullman-Standard v. Swint, 456 U.S. 273, 287 (1982). The Supreme Court has noted the elusive nature of the distinction between questions of law and questions of fact. Id. at 288 (citing Baumgartner v. United States, 322 U.S. 665, 671 (1944)). Ann and William, the appellees, maintain that the magistrate judge's findings are simply findings of fact. John, the appellant, characterizes the magistrate judge's findings as conclusions of law. He argues that the magistrate judge focused on Emily's intent and therefore misconstrued the governing law in New York in determining that Emily signed the beneficiary change form.

Section 13-3.2(d) appears to call for findings of fact. The magistrate judge's findings fulfill that requirement. Therefore, we will apply the deferential clearly erroneous standard in our review. However, we will first review the district court's interpretation of § 13-3.2(d) de novo because we cannot defer to any findings of fact predicated on a misunderstanding of the governing rule of law. See Daniels v. Essex Group, Inc., 937 F.2d 1264, 1269-70 (7th Cir. 1991) (citing Bose Corp. v. Consumers Union, 466 U.S. 489, 501 (1984) (We apply the deferential clearly erroneous standard to findings of fact, but our review is more "searching" if a finding of fact is predicated on a misunderstanding of the governing rule of law. Therefore, we will first determine whether the lower court correctly interpreted the law.)

In interpreting § 13-3.2, the New York courts have held that the fulfillment of the statutory requirements rather than the intent of the parties dictates whether the law will recognize a change of beneficiary. Mohawk Airlines, Inc. v. Peach, 402 N.Y.S.2d 496, 498 (N.Y.App.Div.1978), appeal denied, 406 N.Y.S.2d 758 (N.Y.1978), appeal denied, 406 N.Y.S.2d 1026 (N.Y.1978). The statutory requirements were designed to remove uncertainty as to the beneficiary. See, e.g., Kane v. Union Mutual Life Insurance Co., 445 N.Y.S.2d 549, 551 (N.Y.App.Div.1981) (the predecessor of § 13-3.2 was recommended to remove any doubt as to the validity and effectiveness of beneficiary designation.). In keeping with New York law, the magistrate judge recognized that the existence of the signature and not the decedent's intent would control her finding. John contends, however, that the magistrate judge merely paid lip service to the statute in the following excerpt from her opinion:

Although the court agrees with the defense [John] that the existence of a signature, rather than intent, is the key issue here, and that New York law is designed to remove uncertainty as to the identity of the beneficiary, [citations omitted], the court concludes that given that the two documents were attached when they were sent to Emily and, from all we are able to determine, attached when they were received back by Time ... and given that the combined document was indisputably signed, the fact that the front card was not signed is not an adequate reason to frustrate Emily's intent. As submitted to Time, the document--viewed by Time as one document--bore Emily's signature.

Mem.Op. at 8-9 (emphasis in text).

We do not find that the magistrate judge's holding was premised on an erroneous view of the law. The magistrate judge's observation that her finding was in keeping with Emily's intent muddled her analysis but did not negate the magistrate judge's earlier finding as follows:

Emily's signature on the Lost Policy Statement, affixed to the back of the Beneficiary Change Form, satisfies the requirement of a signature, given that the two documents were given to her as one....

Id. at 7-8. Apart from any determination of Emily's intent, the magistrate judge's determination that the Lost Certificate Statement and the Beneficiary Change Form constituted one document enabled the magistrate judge to find that Emily had signed the beneficiary change as required under § 13-3.2(d). Therefore, we cannot say that the magistrate judge made a factual determination premised on a misconstruction of New York law.

John argues that the trial court's determination regarding the signature requirement is inconsistent with the New York court's interpretation of § 13-3.2(d) in Mohawk. In Mohawk, the decedent's second wife contended that the decedent had named her as the beneficiary of his retirement plan, but the decedent's first wife and children of his first marriage maintained that the change of beneficiary executed by the decedent did not comply with the requirements of § 13-3.2(d). The trial court found that the decedent had typed and initialed two memoranda regarding changes of beneficiary for his various employee benefits. The first memorandum did not mention the retirement plan. The second memorandum, from the decedent employer's personnel director to the decedent, requested the decedent to designate beneficiaries to the listed insurance policies and the Retirement Plan. The decedent initialed six insurance policy changes but did not initial the Retirement Plan entry. The decedent's employer had relied on these memoranda to change the beneficiary of the decedent's Retirement Plan. The trial court found that the typed and handwritten initials in the two memoranda were adopted by the decedent as his signature. Furthermore, since the signatures were in the benefits file, albeit not specifically with reference to the Retirement Plan, the trial court ordered payment of the retirement funds to the decedent's second wife. Mohawk at 498.

The appellate court reversed the trial court. The appellate court held that the initials on the memoranda could not be adopted as a signature for the change of beneficiary for the Retirement Plan. The first memoranda did not mention the Retirement Plan and the second omitted initials next to the Retirement Plan but included initials next to all the other insurance policy changes. Accordingly, the appellate court found that regardless of the decedent's intentions, the decedent had not satisfied the signature requirement in § 13-3.2(d).

This case is distinguishable from Mohawk. In Mohawk, there was little basis for the trial court's decision to adopt the initials as the decedent's signature on the change of beneficiary on the Retirement Plan. In one memorandum the decedent placed his initials next to each of six plans but omitted them from the Retirement Plan. In a second memorandum, the decedent did not mention the Retirement Plan. As the appellate court noted, this omission suggested that the decedent drew a distinction between the Retirement Plan and the insurance policies. Id. at 498. In this case, the magistrate judge found that the Lost Certificate Statement and the Change of Beneficiary Form were treated as one document. Time sent it to the Emily as one document and received it in return as one document. Emily completed both sides of the document and signed her name on what the trial court found to be the back of the composite document. To decide that a single signature suffices to execute all parts of a document that Emily fully completed, the magistrate judge did not have to disregard cogent contrary evidence like the trial court in Mohawk did.

Based on our review of the magistrate judge's decision and the meager case law in New York construing the signature requirement in § 13-3.2(d), we cannot say that the magistrate judge misconstrued the law. Therefore, we review the magistrate judge's factual findings under the deferential clearly erroneous standard.

A finding of fact is clearly erroneous only if, after reviewing all the evidence, " 'the reviewing court is left with the definite and firm conviction that a mistake has been committed.' " United States v. Herrera, 878 F.2d 997, 1000 (7th Cir. 1989) (quoting Anderson v. Bessemer City, 470 U.S. 564, 573 (1985)). Since we have held that one signature on a composite document may suffice to satisfy the signature requirement of § 13-3.2(d), there remains little in the magistrate judge's opinion pertaining to the signature to examine for factual error. John raised no doubt about the authenticity of Emily's signature on the composite Lost Certificate Statement/Beneficiary Change Form. He pointed out that the composite document did not have the date stamp indicating receipt by Time's Benefits Department. However, Fredrickson testified that although the Benefits Department employees normally date stamp documents they receive, the employees sometimes fail to adhere to the procedure. All told, John raised no more than speculation about foul play. There is nothing in the record to leave us with a "definite and firm conviction" that the magistrate judge erred by disregarding John's speculations. Therefore, we conclude that the magistrate judge did not clearly err in finding that Emily satisfied the signature requirement in § 13-3.2(d).

The magistrate judge did not explicitly find that Time approved Emily's beneficiary change. Nevertheless, the magistrate judge stated that such approval was necessary under § 13-3.2(d), recited that § 13-3.2(d) had been satisfied, and recited the evidence sufficient to find that Time had approved the change. Therefore, the magistrate judge implicitly found that Emily's employer approved her beneficiary change as required to satisfy § 13-3.2(d) (1).

John argues that Ann and William did not produce sufficient evidence that the change of beneficiary satisfied § 13-3.2(d) (1). Fredrickson testified as to Time's procedures for employees to change their beneficiaries and admitted that the Benefits Department's actions with respect to Emily's change of beneficiary varied somewhat from that procedure. John points out that the composite Lost Certificate Statement/Beneficiary Change Form contained no date stamp from Time's Benefits Department to show that it was received by Time and processed according to procedures. John also noted that Fredrickson's testimony suggested that she could only speculate as to why the duplicate certificate was mailed instead of transferred to Emily by an interoffice packet. These variances from procedure, however, do not defeat Ann and William's position. Section 13-3.2(d) (1) is stated in the disjunctive ("(1) agreed to by the employer or made in accordance with the rules...."). As long as Ann and William show Time's approval, Time's deviations from its normal procedures are inconsequential.

John argues, however, that Ann and William failed to produce sufficient evidence of Time's approval. John points out that Fredrickson had no personal knowledge that Time had properly approved Emily's beneficiary change before issuing the duplicate certificate and rider that Ann found in Emily's possessions. John points out that the master insurance policy controls the contractual agreement between an employer and an employee regarding insurance. Van Ostrand v. National Life Assurance Company, 371 N.Y.S.2d 51, 55 (N.Y.App.Div.1975). Since Ann and William did not produce the master insurance policy expressing how Time would approve Emily's beneficiary changes, John argues, without citation to authority, that Ann and William have failed to produce sufficient evidence to show that Emily's employer agreed to her beneficiary change. We disagree. Section 13-3.2(d) (1) does not specify any particular type of evidence necessary to prove the approval of an employer. Our search of New York case law has failed to produce any New York cases that construe § 13-3.2(d) (1) to require any particular proof of an employer's approval.

In the absence of any specific evidence requirements in § 13-3.2(d), we believe the record adequately supports the magistrate judge's finding that Time approved Emily's beneficiary change. The existence of the composite Beneficiary Change Form/Lost Certificate Statement in Emily's file indicated that Emily had requested a change of beneficiary and sent it to Time. The duplicate certificate and rider signed by M. Sliwinski of Time's Benefits Department were sufficient for the magistrate judge to infer that Time had approved the change. The magistrate judge credited Ann's testimony that she found the duplicate certificate in Emily's papers and discounted the inconsistencies in procedure. We will not disturb credibility determinations by the magistrate judge unless they are without support in the record. See, e.g., United States v. Brown, Nos. 90-2382, 90-2414, 90-2478, 90-2572, and 90-3179, slip op. at 3 (7th Cir. Sept. 30, 1991). In short, there is no basis for disturbing the inference drawn by the magistrate judge that Time had approved Emily's change of beneficiary.

John further argues that the evidence was insufficient to prove Prudential's approval of the change. This argument lacks merit. Other than the rider attached to Emily's duplicate insurance policy, Ann and William produced no documents showing that Prudential approved Emily's change of beneficiary. Nevertheless, Fredrickson testified that based on her understanding of Time's arrangement with Prudential, except in cases where there was a complicated beneficiary designation, Prudential authorized Time's Benefits Department to issue riders with Prudential's Secretary's signature pre-printed on them. Prudential provided Time's Benefits Department with the pre-signed riders for this purpose. Based on this evidence, the magistrate judge found that Prudential had authorized Time to process routine matters such as a change of life insurance beneficiaries for Time's employees.

We will not graft additional requirements onto the statute that the New York legislature did not include. Section 13-3.2(d) (2) does not specify that the proof of the insurance company's approval must take a particular form. Although John argues that there are no documents showing that Prudential authorized Time to approve beneficiary changes, John has offered no cases construing § 13-3.2(d) (2) to require certain evidence, and our own search has produced none. John further argues that to allow Prudential to delegate to Time its authority to consent to simple changes in beneficiary amounts to a waiver of the statutory requirement. Again, nothing in the statute or New York case law indicates that Prudential's duty to approve the change of beneficiary cannot be delegated. Prudential has not contractually dispensed with its obligation to approve of changes in beneficiaries. Instead, it has arranged for its duty to be carried out through a third party, the insured's employer.

As a final argument to dislodge the principal evidence against his position, John argues that Fredrickson's testimony was inadmissible because she derived key facts from hearsay. Although Fredrickson found the composite Beneficiary Change Form/Lost Certificate Statement in Emily's file, she had no personal knowledge that Time received it from Emily before her death. Furthermore, there was no stamp to indicate the date Time received it. In addition, Fredrickson had no personal knowledge that Time approved the beneficiary change and sent the duplicate certificate and attached rider to Emily in August, 1986. The July 31, 1986 date on the rider indicated only the date that the change of Beneficiary Change Form was signed, not the date Time approved it. Fredrickson explained, however, that the August 4, 1986 postmark on the envelope in which the duplicate certificate and rider were found indicated to her that Time issued the duplicate certificate and rider in response to a request from Emily shortly before that time. John argues that the envelope constituted inadmissible hearsay; Fredrickson's testimony based on inadmissible hearsay was itself inadmissible; and in the absence of any other evidence as to the timeliness of the request for a change and its approval by Time, the magistrate judge could not find that the requirements of § 13-3.2(d) were satisfied.

An unauthenticated postmark may constitute hearsay evidence. United States v. Cowley, 720 F.2d 1037, 1044 (9th Cir. 1983). A postmark is a written assertion that a letter passed through the hands of officials at a particular post office on a particular day. It is therefore a "statement" within the meaning of Fed.R.Evid. 801(a). Id. In the present case, the postmark is offered to prove that a letter passed through the hands of officials at a post office on a particular day. It is therefore hearsay since it is "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Fed.R.Evid. 801(c); accord id. The question is whether it is admissible hearsay.

The postmark is very reliable, and although it does not fit any of the enumerated hearsay exceptions, it is a "perfect candidate" for the residual exception in Fed.R.Evid. 803(24).2  Cowley, 720 F.2d at 1045. First, the postmark is offered to show when the duplicate certificate was mailed, which is a material fact in the case. Second, the postmark is more probative as to the issue than any other evidence reasonably available. Third, the general purpose of the hearsay rules is to promote justice by preventing the admission of evidence that is inherently unreliable, not to frustrate justice by preventing the admission of reliable probative evidence. Therefore, the general purpose of the rules will be served by the admission of the postmarked envelope.

The proponent of a statement may not rely on the residual exception, however, unless he "makes known to the adverse party sufficiently in advance of the trial or hearing ... his intention to offer the statement and the particulars of it...." Fed.R.Evid. 803(24). Here, John was aware of Ann and William's intention to offer the envelope as evidence well in advance of trial. In his opening statement, John's counsel stated that "we have objected to several exhibits, most notably the envelope that they [Ann and William] are asserting carried certain documents back and forth between Time in New York and Time in Washington. The major objection we have raised to that is a hearsay objection." (Tr. 11). Since Ann and William's reliance on the envelope came as no surprise to John, he cannot avoid the operation of the residual exception by relying on its notice requirement.

Alternatively, even if the postmark does not fit the residual exception to the hearsay rule, John has not preserved his right to appeal the introduction of Fredrickson's testimony based on the envelope. John raised only one hearsay objection to Fredrickson's testimony at trial, and the testimony did not mention the envelope postmarked August 4, 1986.3  Furthermore, John did not move to strike Fredrickson's testimony when his cross-examination and questioning by the court revealed that Fredrickson based her testimony in part on the postmark on the envelope. The trial rules require contemporaneous objections. When counsel fails to object he loses his basis for attack on direct appeal. A party has a right to exclude testimony based on hearsay if he objects, but it does not follow that just because testimony is based on hearsay it is error. See, Linn v. Andover Newton Theological School, Inc., 874 F.2d 1 (1st Cir. 1989) (absent extraordinary circumstances, court would not excuse failure to make a contemporaneous objection in a civil case). Although John's counsel stated in his opening statement that he would be objecting to the use of testimony based on the envelope, he failed to follow through on his plan at trial. Consequently, he waived the right to come to this court and ask us to discard testimony at trial that was based on hearsay.

Since Fredrickson's testimony was properly considered by the magistrate judge, and since we cannot find that the magistrate judge clearly erred in holding that Emily's change of beneficiary complied with § 13-3.2(d), Ann and William are properly named beneficiaries to the proceeds of Emily's life insurance policy.

For the reasons stated above, the judgment of the district court is



N.Y. Est. Powers & Trusts § 13-3.2(d) (McKinney 1967): "A designation of a beneficiary or payee to receive payment upon death of the person making the designation or another must be made in writing and signed by the person making the designation and be: (1) Agreed to by the employer...."


Fed.R.Evid. 803(24):

The following are not excluded by the hearsay rule, even though the declarant is available as a witness:

* * *


The Witness: ... The duplicate certificate that had been issued indicated the changes of beneficiary to Ann Kaltofen and William Stewart. It was issued as a duplicate certificate dated July 31, 1986, which is the same date that the lost certificate statement is signed

The Court: Okay.

The Witness: And on that same date Emily had changed two other plan benefit beneficiaries. So there was not reason to doubt that at that July 31 date she changed all of her--those three plans. The assistant indicated that the life insurance had been changed.

Mr. Lewis: Objection, hearsay. That is popping in.

* * *

The Court: We know that the--I think that there is no dispute that the certificate was issued, right?

Mr. Lewis: Well, one exists. When and how it was issued I guess is the question. And part of our point from the beginning of this case has been that we haven't heard any factual testimony as to when that first appeared.

(TR. 67-68).