Allton v. Hintzsche ( 2007 )

No. 3--05--0771
_________________________________________________________________
Filed June 6, 2007.
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2007
COLLEEN ALLTON, ) Appeal from the Circuit Court
) of the 12th Judicial Circuit,
Plaintiff-Appellee, ) Will County, Illinois,
)
)
v. ) No. 03--D--2023
)
LISA HINTZSCHE, as independent )
administrator of the Estate of )
GUY BLAKE ALLTON, deceased, ) Honorable
) Robert P. Brumund,
Defendant-Appellant. ) Judge, Presiding.
_________________________________________________________________
PRESIDING JUSTICE LYTTON delivered the Opinion of the court:
_________________________________________________________________
The defendant, Lisa Hintzsche, the independent administrator
of the estate of Guy Blake Allton, appeals from the circuit court's
order directing an insurance company to pay the proceeds of a life
insurance policy to the plaintiff, Colleen Allton. Hintzsche
argues that Guy and Colleen’s children were entitled to the life
insurance proceeds because the marital settlement agreement
required Guy to change the policy’s beneficiary from Colleen to the
children. We reverse and remand.
FACTS
Colleen and Guy married on August 8, 2000. They had two
children together. On August 10, 2000, Guy obtained a life
insurance policy for $100,000. He named Colleen as the primary
beneficiary and his father as the successor beneficiary.
Colleen filed for divorce on December 12, 2003. The circuit
court entered a judgment for dissolution of marriage on May 19,
2004. In its order, the court adopted a Marital Settlement
Agreement (Agreement) into which the parties entered. The
Agreement contained the following property settlement provision
regarding life insurance benefits:
"Each party shall maintain a life insurance policy upon
his or her life, such that upon the death of said party,
each child of the parties shall be entitled to receive
death benefits, in an amount of not less than $50,000.00
per child. Each party shall be obligated to maintain
said policies so long as the parties have an obligation
to support the children or contribute to their
post-secondary education. Neither party shall cause
liens to be secured against said benefits, which would
diminish the aforesaid proceeds to a child of the
parties. Following the execution hereto, each party
agrees to obtain and keep said policies in full force and
effect and to designate the children of the parties as
the sole irrevocable beneficiaries under said policies.
Each party shall provide the other with proof of the
existence, terms and provisions of said policies within
30 days of the entry of a Judgment herein and thereafter
annually provide proof that said policies have been
maintained."
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The Agreement also contained the following provision in its
"Miscellaneous Provisions" section:
"Each of the parties, his or her heirs, executors and
administrators, in accordance with the terms hereof, upon
the demand of the other party, will execute any and all
instruments and documents as may be designated herein or
as may be reasonably necessary to make effective the
provisions of this agreement and release his or her
respective interests in any property, real or personal
belonging to or awarded to the other. It is the
intention of the parties that this Agreement shall
constitute a complete adjustment of the property rights
of the parties hereto and that each party will perform
all subsidiary acts to accomplish same."
The Agreement did not specifically mention Guy's existing life
insurance policy.
On November 23, 2004, Guy died in a car accident. Hintzsche,
the administrator of Guy's estate, filed a Petition to Enforce
Divorce Decree and Reform Beneficiary Designation on June 30, 2005.
In the petition, Hintzsche stated that State Farm Insurance Company
requested a court order directing the payment of the proceeds of
Guy's life insurance policy because Colleen was claiming that the
proceeds should be paid to her despite the Agreement's provisions.
Hintzsche alleged that the life insurance proceeds should be paid
to the children, rather than to Colleen.
At the hearing on the petition, the court found that:
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"There is nothing in this judgment that required the
specific policy that he had at the time of his death or
at the time of the judgment to name the children. It
specifically says, 'following the execution hereto, each
party agrees to obtain and keep in full force.' Well, it
says that the parties agree to obtain. That doesn't mean
that the parties agree to change the beneficiaries on the
policies as they existed prior to the judgment for
dissolution of marriage."
The court denied Hintzsche's petition and ordered State Farm to pay
the policy's proceeds to Colleen.
ANALYSIS
On appeal, Hintzsche argues that the circuit court erred when
it ordered State Farm to pay the policy's proceeds to Colleen.
Specifically, Hintzsche argues that the fact that Guy did not
change beneficiaries on the life insurance policy does not affect
the rights of the children, who were the intended beneficiaries, as
evidenced by the Agreement's language. Colleen contends that the
trial court correctly found that the Agreement did not require Guy
to make the children the beneficiaries of his existing life
insurance policy because the Agreement did not specifically refer
to that policy.
In Illinois, a divorce decree does not affect the rights of
the divorced wife as beneficiary of the husband's life insurance
policy. O'Toole v. Central Laborers' Pension & Welfare Funds, 12
Ill. App. 3d 995, 299 N.E.2d 392 (1973). However, the rights of
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the divorced wife could be affected if a property settlement
agreement specifically includes a termination of the beneficiary's
interest. See O'Toole, 12 Ill. App. 3d 995, 299 N.E.2d 392. If,
pursuant to a divorce decree, the parties agree to change
beneficiaries on a life insurance policy but do not do so, equity
requires that the proceeds be paid to the persons who should have
been named as beneficiaries. Home Insurance Co. v. Hortega, 193
Ill. App. 3d 941, 550 N.E.2d 688 (1990); In re Estate of Comiskey,
125 Ill. App. 3d 30, 465 N.E.2d 653 (1984); Travelers Insurance
Company v. Daniels, 667 F.2d 572 (1981) (child entitled to father's
life insurance proceeds when a divorce decree required father to
change beneficiaries, but he failed to do so).
When interpreting a marital settlement, courts seek to give
effect to the parties’ intent. In re Marriage of Dundas, 355 Ill.
App. 3d 423, 425-26, 823 N.E.2d 239, 241 (2005). The language used
in the marital agreement is generally the best indication of the
parties’ intent. Dundas, 355 Ill. App. 3d at 426, 823 N.E.2d at
241. When the terms of the agreement are unambiguous, we determine
the parties’ intent solely from the language of the instrument. In
re Marriage of Michaelson, 359 Ill. App. 3d 706, 714, 834 N.E.2d
539, 546 (2005). An ambiguity exists when an agreement contains
language that is susceptible to more than one reasonable
interpretation. Ford v. Dovenmuehle Mortgage, Inc., 273 Ill. App.
3d 240, 244, 651 N.E.2d 751, 754 (1995). Where the language is
ambiguous, parol evidence may be used to decide what the parties
intended. Michaelson, 359 Ill. App. 3d at 714, 834 N.E.2d at 546.
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We review de novo an interpretation of a marital settlement
agreement and a determination of whether the agreement’s terms are
ambiguous. Dundas, 355 Ill. App. 3d at 426, 823 N.E.2d at 242.
The Agreement’s provision on life insurance benefits requires
the parties to "maintain" a life insurance policy for the benefit
of the children so long as the parties have an obligation to
support the children or contribute to their post-secondary
education. The same provision also requires the parties to
“obtain and keep said policies in full force and effect and to
designate the children of the parties as the sole irrevocable
beneficiaries under said policies.”
We find that the Agreement’s language is ambiguous because it
is susceptible to two different, yet equally plausible,
interpretations. On the one hand, the provision can be read to
require Guy to maintain the insurance policy he possessed at the
time of the divorce and name the children as the beneficiaries of
that policy. See Lincoln National Life Insurance Co., 71 Ill. App.
3d 900, 390 N.E.2d 506 (settlement agreement providing that the
deceased would “maintain” life insurance and name his child as
beneficiary required deceased to change the beneficiary of his
insurance policy). Alternatively, the provision can be read to
require Guy to obtain an entirely new insurance policy for the
benefit of his children. Because the terms of the Agreement are
susceptible to two different reasonable interpretations, parol
evidence should be introduced to determine the intent of the
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parties. See Michaelson, 359 Ill. App. 3d at 714, 834 N.E.2d at
546.
The judgment of the circuit court of Will County is reversed
and remanded.
Reversed and remanded.
CARTER, J., specially concurring:
I agree with the majority opinion that the divorce settlement
agreement’s language is ambiguous and susceptible to different
interpretations regarding the entitlement to insurance proceeds.
Thus, the matter should be reversed and remanded to determine the
intent of the parties. I specially concur because I believe, on
remand, the trial court should consider whether to impose a
constructive trust.
The appellant in this case had filed a petition to enforce the
judgment and reform the beneficiary designation of a certain life
insurance policy on the father. In the brief the appellant also
argues that the children had a right to the proceeds of the
insurance upon the death of the insured. A vested equitable right
to the proceeds of insurance in Illinois can be enforced through
the imposition of a constructive trust, if appropriate. See In re
Estate of Beckhart, 371 Ill.App.3d 1165, 864 N.E.2d 1002, 1006
(2007).
When a settlement agreement requires a parent to name his
children as beneficiaries of a life insurance policy and the parent
fails to do so, a constructive trust may be imposed on the life
insurance proceeds to protect the children’s interests.
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See Beckhart, 371 Ill.App.3d 1165, 864 N.E.2d at 1007. A
constructive trust is an equitable remedy that may be imposed to
redress unjust enrichment caused by one party’s conduct. Charles
Hester Enterprises Inc. v. Illinois Founders Insurance Co., 114
Ill. 2d 278, 499 N.E.2d 1319 (1986).
The purpose of a life insurance provision in a settlement
agreement is to ensure that the children are adequately supported
following the death of a parent. See Beckhart, 371 Ill.App.3d
1165, 864 N.E.2d at 1005. According to the Agreement, Guy and
Colleen were required to perform all necessary acts to accomplish
that purpose. Guy was required to make his children beneficiaries
of an insurance policy, and Colleen had a responsibility to make
sure that Guy fulfilled his obligations to the children by
enforcing the obligation to obtain insurance and providing proof of
that coverage. It appears that both Guy and Colleen failed to
fulfill their duties under the Agreement to ensure that their
children were properly named as beneficiaries of insurance
following the death of a parent.
On remand, I would have the trial court consider whether
equity allows Colleen to benefit from her nonfeasance and to divest
her children of the interest she and Guy intended under the
Agreement. If the trial court finds that Colleen would be unjustly
enriched by retaining the insurance proceeds, the court should
impose a constructive trust to hold the proceeds solely for the
benefit of the children. See Beckhart, 371 Ill.App.3d 1165, 864
N.E.2d at 1007.
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HOLDRIDGE, J., dissenting:
I respectfully dissent. This case presents us with the sole
issue of whether the Agreement required Guy to change beneficiaries
on his life insurance policy. When construing a contract, courts
give the contractual terms their plain and ordinary meaning.
Reaver v. Rubloff-Sterling, L.P., 303 Ill. App. 3d 578, 708 N.E.2d
559 (1999). If the contract's language is unambiguous, courts must
determine the parties' intent solely from the words of the
contract. Reaver, 303 Ill. App. 3d 578, 708 N.E.2d 559. We review
the circuit court's determination of a contract de novo. Reaver,
303 Ill. App. 3d 578, 708 N.E.2d 559.
Here, the Agreement reveals that the provision on life
insurance benefits does not specifically mention Guy's life
insurance policy. Furthermore, the provision's plain language
requires the parties to obtain life insurance policies, not change
an already-existing policy. The two uses of the word "maintain"
are not dispositive and refer to the requirement that the parties
keep the policies in effect once they have obtained the policies.
In addition, I do not believe that the generic language of the
miscellaneous provision required Guy to change the beneficiary
designation on his life insurance policy. Nothing in these
provisions can reasonably be construed to indicate that the parties
intended the children to be the beneficiaries of Guy's life
insurance policy.
Lincoln National Life Insurance Co. v. Watson, 71 Ill. App. 3d
900 (1979),cited by the majority, does not support the disposition.
In Lincoln National, the court ordered that the child receive the
proceeds of the father's life insurance policy, even though the
father did not change beneficiaries as was required by a previous
court order. However, in Lincoln National, unlike the instant
matter, the divorce decree specifically required the father to name
his children as beneficiaries of his existing life insurance
policy. The same cannot be said for this case. I would hold that,
under the plain language of the Agreement, Guy was not required to
change the beneficiary designation on his life insurance policy,
and thus the circuit court properly ordered State Farm to pay the
policy's proceeds to Colleen. I dissent on that basis.
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