Shawarby, R. v. Shawarby, A. ( 2015 )

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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
RASHA KHEDR SHAWARBY, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
v. :
:
AMR OMAR SHAWARBY AND THE : No. 1972 WDA 2013
ESTATE OF AMR OMAR SHAWARBY, :
A/K/A AO SHAWARBY, DECEASED :
Appeal from the Order Dated November 20, 2013,
in the Court of Common Pleas of Cambria County
Civil Division at No. 2003-1149
BEFORE: FORD ELLIOTT, P.J.E., SHOGAN AND MUSMANNO, JJ.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED FEBRUARY 25, 2015
Appellant, Rasha Khedr Shawarby (“Ex-Wife”), appeals the order of
the Cambria County Court of Common Pleas that granted in part and denied
in part her petition for special relief seeking to freeze life insurance proceeds
pending equitable distribution. We affirm.
The trial court summarized the relevant facts of this matter as follows:
Ex-Wife and Amr Omar Shawarby [“Decedent”]
married on April 26, 1984; separated in 2003; and
were divorced by Decree dated December 27, 2012.
Pursuant to the Decree, the Court retained
jurisdiction over equitable distribution; counsel fees
and costs; and alimony and alimony pendente lite.
DECREE IN DIVORCE DATED DECEMBER 27, 2012.
In March of 2013, Decedent married Lisa Jean
Nelson Shawarby [“Executrix”]. PETITION FOR
SPECIAL RELIEF [“PETITION”], ¶11(F). On July 25,
2013, Decedent died. Id. at ¶2. On August 2,
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2013, Executrix opened an Estate in Cambria
County.
During his marriage to Ex-Wife, Decedent
purchased two life insurance policies from State
Farm Life Insurance Company. At the time of
purchase, both policies listed Ex-Wife as beneficiary.
BRIEF IN SUPPORT OF THE ESTATE OF AMR OMAR
SHAWARBY AND ON BEHALF OF LISA SHAWARBY,
WIDOW OF AMR SHAWARBY [collectively referred to
as “BRIEF OF EXECUTRIX”], pp. 2-3. The first policy
is a term policy with a face value of $385,000.00;
the second policy is a universal life policy with a face
value of $140,000.00. Id. at 2. In 2003, Decedent
changed the beneficiary designation from Ex-Wife to
the children of Ex-Wife and Decedent. BRIEF IN
SUPPORT OF A CLAIM FOR LIFE INSURANCE
PROCEEDS BY RASHA KHEDR SHAWARBY FOR
PURPOSES OF EQUITABLE DISTRIBUTION OF
PROPERTY [“EX-WIFE’S BRIEF”], Ex. 4. In 2011,
Decedent changed the beneficiary designation to
Executrix. Id. Ex-Wife learned of the insurance
policies and the changes to the beneficiary
designations after Decedent’s death. EX-WIFE’S
BRIEF, p.5.
On August 7, 2013, Ex-Wife filed the instant
Petition requesting, inter alia, the Court to freeze
the life insurance proceeds pending the outcome of
equitable distribution. PETITION, ¶18. The Court
temporarily granted the freeze by Order dated
August 7, 2013. ORDER DATED AUG. 7, 2013. This
Court conducted a Hearing on September 27, 2013
and deferred ruling pending submission of briefs.
Executrix filed a brief on October 4, 2013; Ex-Wife
filed her Brief on October 17, 2013.
Trial court opinion, 11/22/13 at 2-3.
On November 21, 2013, the trial court docketed the following order
which is the subject of this appeal:
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ORDER
AND NOW, this 20th day of November, 2013, it
is hereby ORDERED AND DECREED as follows:
1. The Petition for Special Relief filed on
behalf of Rasha Khedr-Shawarby is
GRANTED IN PART and DENIED IN PART.
2. The temporary injunction filed for record
at Case Number 2013-2999 on August 7,
2013 is VACATED.
3. The Cambria County Prothonotary is
DIRECTED to distribute the proceeds of
the term policy issued by State Farm
Insurance Company, policy number
LF 1733-2552, plus any interest thereon,
to the beneficiary, Lisa Jean Nelson
Shawarby.
4. The Cambria County Prothonotary is
further DIRECTED to freeze the universal
life policy issued by State Farm
Insurance Company, policy number
LF 1733-2511, until such time as the
parties determine the cash surrender
value at the time of separation and
provide a proposed Order to the Court
for the continued freezing of the
surrender value only.
5. The parties shall mutually determine the
benefits payable for each policy and shall
instruct the Prothonotary accordingly.
Order, Certified record, document #48.
The above order directed that the term life insurance policy proceeds
in the amount of $385,000 be paid to the Executrix, and the $140,000
proceeds of the universal life insurance policy continue under the freeze
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order until the marital component was determined. Ex-Wife filed a motion
for stay or supersedeas that was denied by the trial court. Consequently,
the proceeds of the term policy have been paid to the Executrix. Ex-Wife
was ordered to file a Rule 1925(b) statement and she complied.
Ex-Wife raises two issues for our consideration:
A. The trial court abused its discretion in
dissolving the injunction previously granted by
order dated August 7, 2013.
B. The trial court abused its discretion in failing to
designate the proceeds of both life insurance
policies as marital property subject to equitable
distribution, and in distributing the proceeds of
the term life policy (#LF 1733-2552) to a
beneficiary who is a third party to the divorce
action.
Ex-Wife’s brief at 8. We note both issues are combined into one argument;
therefore, we will address them together.
Ex-Wife claims this case presents a novel question of whether or not
life insurance proceeds are “marital property.” We disagree, as this court
has addressed this question. In Lindsey v. Lindsey, 492 A.2d 396
(Pa.Super. 1985), following the husband’s death, the wife brought an action
to have the beneficiary changes on her husband’s two life insurance policies
declared null and void, and to have the proceeds distributed to her because
there was an order enjoining the husband from disposing of marital
property. Id. at 397. The trial court agreed with the wife and found that
the changes in beneficiary designations were in violation of a court order.
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Id. The third party beneficiary appealed. This court reversed the decision
of the trial court. The primary issue we addressed concerned whether a
change in the beneficiary designation on a life insurance policy is a violation
of an order enjoining a party from disposing of “any marital property.” Id.
at 398. In discussing this issue, we opined:
It is clear that the naming of a beneficiary on a
life insurance policy vests nothing in that person
during the lifetime of the insured; the beneficiary has
but a mere expectancy. Furthermore, the naming of
a beneficiary on a life insurance policy is
sui generis; it is not a conveyance of the insured’s
assets. Thus, when Mr. Lindsey changed the
designation of the beneficiary on his two life
insurance policies from Mrs. Lindsey to appellant, he
did not thereby “convey” any assets to appellant.
The changes, therefore, were not disposals of marital
assets in violation of the injunction.
Id. (internal citations omitted). The Lindsey decision went on to hold that
only the cash surrender value of life insurance policies could be considered
marital property. Id.
The case sub judice involves two insurance policies: one, a term
policy for $385,000, and the other, a universal life policy for $140,000. By
its very nature, the term policy has no value until the death of the principal.
Ex-Wife and Decedent separated in 2003 and were divorced on
December 27, 2012. Decedent changed the beneficiary designation to
Executrix in July of 2011. Decedent died on July 25, 2013. Clearly, Ex-Wife
has no claim on the term policy that had no value until the death of
decedent.
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The second insurance policy is a universal life policy. According to the
Executrix, the cash surrender value of the $140,000 universal life policy on
the date of Ex-Wife’s separation from Decedent has been determined to be
$1,481.35. (Executrix’s brief at 4, 6, 10-11. See letter from State Farm
Insurance Co. dated October 4, 2013, RR at 285.) Executrix contends the
$1,481.35 sum is the amount due Ex-Wife as marital property.
In another case decided shortly after Lindsey, this court determined
that the proceeds of a life insurance policy do not constitute marital
property. In Oswald v. Olds, 493 A.2d 699 (Pa.Super. 1985), the wife and
the decedent were married at the time a life insurance policy was purchased.
Id. at 700. The wife was designated the beneficiary. Subsequently, the
wife commenced a divorce action, and the decedent changed the beneficiary
to a third party, Evelyn Olds. Id. The wife was made aware of the
beneficiary change during the course of divorce proceedings. Id. The
decedent died while the divorce action was still in progress. Id.
This court determined upon the death of the decedent, the divorce
action abated, and as a consequence, the wife could no longer assert her
rights under the Divorce Code. Id. at 701. We went on to state:
Even if [wife’s] right to equitable distribution did not
cease with the abatement of the divorce action by
appellee’s decedent’s death, the proceeds would still
not constitute marital property, which is defined as
property acquired during the marriage. 23 Pa.C.S.
401(f). The proceeds of a life insurance policy on a
spouse cannot, obviously, be acquired during the
marriage since proceeds are paid upon death.
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Consequently, that is not an asset acquired during
lifetime or marriage. While the potential of
subsequently acquiring the proceeds did, naturally,
arise during the marriage, that could never arise to
an actuality during the marriage.
Id. Thus, according to Lindsey, supra, and Olds, supra, the face value of
an insurance policy is its benefit value and is a mere expectancy and
therefore not capable of distribution.
Ex-Wife and Executrix both discuss Schubert v. Schubert, 580 A.2d
1351 (Pa.Super. 1990), a divorce case, decided five years after Lindsey and
Olds, where the wife appealed the trial court’s equitable distribution award.
In Schubert, the husband owned two insurance policies on the life of the
parties’ daughter. Id. at 1353-1354. The daughter died after the parties
separated, and the husband received the death benefits. Id. at 1354. This
court declined to apply the holding in Lindsey, explaining as follows:
While Section 401(f) of our Divorce Code
generally provides that all property “acquired by
either party during the marriage is presumed to be
marital property,” Section 401(e)(4) excludes
“[p]roperty acquired after final separation until the
date of divorce, except for property acquired in
exchange for marital assets (emphasis added).”
This section of the divorce code is applicable here,
unlike in Lindsey, because appellee/husband
received the proceeds of the policy subsequent to
the parties’ separation. In Lindsey, as noted
supra, the insurance proceeds were paid to a third
party. Furthermore, we find that these proceeds
constitute marital property subject to equitable
distribution since they were acquired in exchange for
marital assets.
Id. at 1354-1355.
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Instantly, the trial court discussed both Lindsey and Schubert and
concluded:
In the case at bar, this Court cannot apply the
reasoning in Schubert because the instant policy
proceeds were not paid to either Ex-Wife or
Decedent after separation. Here, like Lindsey, the
proceeds of the policies accrued to a third party, i.e.,
Executrix, and only the cash surrender value of the
policies is subject to distribution. The cash surrender
value of the universal life policy has yet to be
determined; the term policy, by definition, has no
cash surrender value. [] Thus, it is necessary to
continue to freeze the proceeds of the universal life
policy until the cash surrender value at separation is
determined and the property is addressed in
equitable distribution.
Trial court opinion, 11/22/13 at 4 (footnote omitted).
We note life insurance proceeds are unlike pensions and retirement
benefits that are marital property subject to equitable distribution regardless
of whether the benefit is vested or has matured. If the benefits resulted
from employment during the marriage, these benefits are marital property
because they are conferred, not as a gift by the employer, but as part of the
employee’s compensation package.
Life insurance proceeds are also different from personal injury
settlements. Section 3501(a)(8) of the Divorce Code excludes “[a]ny
payment received as a result of an award or settlement for any cause of
action or claim which accrued prior to the marriage or after the date of final
separation regardless of when the payment was received.” 23 Pa.C.S.A.
§ 3501(a)(8). In Focht v. Focht, 32 A.3d 668, 674 (Pa. 2011), our
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supreme court held that settlement monies received by the husband,
post-separation from the wife, in his personal injury tort action, were marital
property because his cause of action accrued prior to separation.
Life insurance is a contract (insurance policy) in which the insurer
(insurance company) agrees for a fee (insurance premiums) to pay the
insured party all or a portion of any loss suffered by accident or death. As a
practical matter, Decedent could have let the policies lapse through failure to
pay or he could have canceled them altogether. Ex-Wife could not have
forced Decedent to maintain life insurance just as she could not force him to
keep her as a beneficiary under the policies.1
Based on the above, we find no error or abuse of discretion when the
trial court dissolved the injunction releasing the insurance proceeds to
Executrix.
Order affirmed. Motion to quash filed by Executrix is denied.2
Judgment Entered.
1
We recognize the Divorce Code allows trial courts to direct the continued
maintenance and beneficiary designations of existing life insurance policies.
See 23 Pa.C.S.A. § 3502(d). However, that was not the case instantly.
2
Although this matter occurs within the context of an equitable distribution
proceeding, we determine that to the extent these proceedings dissolve an
injunction and allow for the proper distribution of life insurance proceeds as
between Executrix and a third party, the trial court’s order dated
November 20, 2013, is a final order.
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Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/25/2015
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