Baxter v. Wing

Cite as 2016 Ark. App. 589
ARKANSAS COURT OF APPEALS
DIVISION II
No. CV-16-21
SUSANNAH BAXTER Opinion Delivered December 7, 2016
APPELLANT
APPEAL FROM THE BENTON
V. COUNTY CIRCUIT COURT
[NO. 04CV-14-775-6]
JOHN WING HONORABLE DOUG SCHRANTZ,
APPELLEE JUDGE
REVERSED
RITA W. GRUBER, Judge
This case involves a dispute about life-insurance proceeds received by Susannah Baxter
upon the death of her stepfather, Bazel Winstead. Susannah’s brother, John Wing, sued her,
contending that the policy proceeds were intended to be split equally between Susannah,
John, and their two siblings, Stephen Wing and Lanie Martin. The Benton County Circuit
Court entered an order imposing a constructive trust on the proceeds after finding that Bazel
and Susannah had entered into an oral contract requiring Susannah to divide the proceeds
with her siblings. Susannah has appealed from that order. We hold that the court’s finding
of an oral contract is clearly erroneous, and we reverse the circuit court’s order.
John, Stephen, Lanie, and Susannah are the stepchildren of Bazel Winstead, who
married their mother, Betty, in 1988. At that time, Susannah was in eighth grade; the other
three children were grown, married, or out of the house. Susannah was the only sibling who
grew up with Bazel acting as her father. In January 2011, Betty died. Shortly thereafter,
Cite as 2016 Ark. App. 589
Bazel began updating his estate plan. In February 2011, Bazel updated one of his life-
insurance policies, naming Susannah as his sole beneficiary. In March 2011, he updated his
will, leaving his estate to the four siblings “share and share alike.” In April 2011, he applied
for additional life insurance and named Susannah as the sole beneficiary. In the spring of
2011, Bazel called Susannah and told her what he had done with his estate. According to
Susannah, he told her that the will divided the estate four ways and that the life insurance was
in Susannah’s name only. She said that he told her to “just share some with your brothers and
sister.”
Bazel died on September 16, 2013. The proceeds from his life-insurance policies, in
the total amount of $208,004.74, were eventually all paid to Susannah. The parties dispute
exactly what conversations occurred between the siblings after Bazel’s death, but they do
agree that Susannah said that she would share some of the proceeds with her siblings. John
believed it was incumbent on Susannah to divide the proceeds evenly: 25 percent to each
sibling. Susannah believed that the proceeds were hers and that Bazel’s instructions to her
were to “share some” as she chose. John sent numerous messages to Susannah inquiring
about her intent regarding the life-insurance proceeds and eventually filed a complaint against
her. He initially filed the lawsuit in Garland County on February 7, 2014, but it was
transferred to Benton County on June 6, 2014.
The circuit court held a bench trial in March 2015 at which testimony was given by
all four siblings; Susannah’s husband, Josh Baxter; and the father of the four siblings, Franklin
Wing. John testified first. He said that he was in his late twenties when his mother married
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Bazel and that he had never lived near them. He said that he lived in Austin, Texas, and had
two grown children. He admitted that, before Bazel died, John had no knowledge about
Bazel’s estate plan, no idea whether he had life insurance, and no conversation with Bazel
or any of his siblings about either subject. He testified that he and Bazel had not been close.
He said that he had learned about the life insurance the day after Bazel’s funeral when Lanie
told him that Susannah had approached her and suggested they not tell John about the life
insurance and split it three ways. He also referred to a conversation among the four siblings
during lunch at Subway in which Susannah had told the siblings that everyone would get
some of the proceeds. He admitted that he had continued to email and text Susannah and
Josh, stating that he was waiting on his “portion” and asking if Susannah was going to follow
Bazel’s instructions. John said he did not dispute that Susannah was the named beneficiary
on all of the life-insurance policies, but he had been told by Lanie and by his father, Franklin,
that Bazel had given Susannah specific instructions regarding those proceeds. His opinion was
that Susannah had “some sort of oral contractual agreement to distribute the life insurance
equally at the specific instruction of Mr. Winstead,” although he admitted that he did not
have first-hand knowledge about those instructions. He said that Lanie had not told him
about any specific instructions but had merely said that they would all “be taken care of.”
Franklin Wing testified that he had a very close relationship with his son John and was
not at all close to his daughter Susannah. He explained his relationships on a scale of 1 to 10
as being a 10 with John, an 8 or 9 with Lanie, and a -3 with Stephen and Susannah. He
testified that Susannah had called him several times after Bazel’s death to discuss the insurance
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policy. He said that he had asked her if Bazel had given her any instructions and then had
told her that she should follow them. Franklin testified that Susannah had said that Bazel told
her to divide the proceeds “evenly and fairly.” He said one time when he had spoken with
Susannah, she told him that Bazel told her to divide the insurance proceeds just as his will
was dividing the property. He said that he had emailed Susannah in January and pleaded with
her to follow Bazel’s instructions and to “do the moral and ethical thing.” Franklin admitted
that he had no first-hand knowledge about the insurance policy and that he had never
spoken with Bazel about his estate or life insurance.
Lanie testified that, after their mother passed away, Bazel had told her that they would
all “be taken care of.” She said that she assumed he meant both the will and the life
insurance, but she admitted that this was Bazel’s only comment to her about it and that he
did not give her any specifics. She testified that Susannah had never told her what Bazel
wanted her to do with the life-insurance money. She said that she did tell John about
Susannah’s comments to split the money three ways and leave John out but that she did not
take Susannah’s comment to mean that, if John were included, the money would be split
four ways. She said, “It just didn’t sit well with me. We are four children. It should be split
four ways.” She testified that she now interpreted Susannah’s comments to mean that she was
obligated to split the money four ways. She said that she did not have any other
conversations with Susannah about the life insurance.
Susannah testified that she had lived with her mother and Bazel from eighth grade
until she was twenty-three years old except for her senior year in high school, when she lived
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with Lanie in order to graduate with her friends in Hot Springs. She said that she moved
back in with her parents when she was twenty-five and lived with them until she was
twenty-eight. She testified that when her mother died in 2011, Susannah was the named
beneficiary of a life-insurance policy in the amount of $20,000 to $25,000. She said that after
the funeral expenses had been paid, she gave the remainder of the money to Bazel for home
repairs.
Susannah testified that Bazel called her in the spring of 2011 and told her, “This is
what I’ve done.” He said that he had taken care of burial insurance, split his property equally
among the four siblings in his will, and left life insurance in Susannah’s name. He told her
to “share some” with her siblings. She said that she did not respond to this, because it was
a declarative statement and not a question seeking a response. She also testified that she was
not clear after Bazel died whether the life-insurance proceeds were part of probate. When
the siblings had lunch at Subway before they met with the estate attorney, she told them that
everyone would get some of the life-insurance proceeds. She did not indicate any particular
amount. She said that she had always intended to share some with her siblings, as Bazel had
instructed. She testified that the estate attorney clarified after lunch that the proceeds
belonged to Susannah and were not part of probate.
Susannah testified that she had spoken several times with Franklin and that he had told
her to split the life insurance “just like the will said.” She testified that Franklin did most of
the talking in their conversations and that he “spent a lot of time trying to explain to me how
I could split it up evenly.” She said that he kept telling her that she was wrong and acting like
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she was confused. She said that she had been frustrated talking to him and had felt like he was
not listening to her. She testified that Franklin’s version of their conversations was
“completely false.”
Stephen testified that he had been appointed by Bazel as the executor of the estate
sometime in early 2011. He testified that Bazel had never told him anything specific about
the will, talked with him about life insurance, or given any specific instructions to him. He
said that he had found no instructions or notes contrary to the will or life-insurance policy
after Bazel’s death. He described Susannah as Bazel’s only “dependent . . . his daughter” and
testified that the other siblings did not have a “real relationship” with Bazel. He said that it
made “perfect sense” to him that Bazel had left the life insurance to Susannah and her young
family.
On June 22, 2015, the circuit court entered an order finding that Bazel and Susannah
had entered into an oral contract whereby, upon receipt of the insurance proceeds, Susannah
was to divide the proceeds evenly among her and her three siblings. The court found that,
by not dividing the proceeds, Susannah had breached the contract. Thus, the circuit court
imposed a constructive trust on the proceeds and awarded judgment to John against Susannah
in the amount of $52,001, one-fourth of the total proceeds. The court also awarded him
$20,000 in attorney’s fees.
Susannah appeals the circuit court’s order, arguing that the court clearly erred in
finding that she and Bazel had entered into an oral contract and that it improperly imposed
a constructive trust on the proceeds. Our standard of review on appeal from a bench trial is
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whether the circuit court’s findings were clearly erroneous or clearly against the
preponderance of the evidence. Foundation Telecomm., Inc. v. Moe Studio, Inc., 341 Ark. 231,
238, 16 S.W.3d 531, 536 (2000). We defer to the circuit court’s credibility assessments. Id.
at 240, 16 S.W.3d at 537. Because the court’s imposition of a constructive trust was based
on its finding of an oral contract, we review that issue first.
The question before us is whether Bazel and Susannah entered into an oral contract
pursuant to which she agreed to distribute the life-insurance proceeds equally among her and
her siblings after Bazel’s death in exchange for his promise to refrain from revoking his
beneficiary designation. The parties do not dispute that it was Bazel’s expressed desire for
Susannah to share some of the life-insurance proceeds with her siblings after his death. They
do dispute exactly how much he told her to share and whether he “instructed” her to divide
the money equally or “suggested” that she simply share some of the money. A resolution of
this dispute would be neither relevant nor helpful, however, to the basic issue before us.
Because, even if Susannah had a moral obligation to do what her stepfather asked of her, she
did not have a legal obligation to do so under the facts of this case.
We turn to the law governing contracts. It is black-letter law that this court cannot
make a contract for the parties but can only construe and enforce the contract that they have
made. City of Dardanelle v. City of Russellville, 372 Ark. 486, 491, 277 S.W.3d 562, 566
(2008). The traditional definition of a “contract” is “a promise or set of promises for breach
of which the law gives a remedy, or the performance of which the law in some way
recognizes as a duty.” 1 Richard A. Lord, Williston on Contracts § 1:1 (4th ed. 2007). A
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promise is “a manifestation of intention to act or refrain from acting in a specified way, so
made as to justify a promisee in understanding that a commitment has been made.” Id. § 1:2.
Our supreme court has stated that the purpose of the law of contract is to see that promises
are performed. Bankston v. Pulaski Cty. Sch. Dist., 281 Ark. 476, 479, 665 S.W.2d 859, 862
(1984).
Under Arkansas law, a contract must include the following essential elements: (1)
competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5)
mutual obligation. City of Dardanelle, 372 Ark. at 490, 277 S.W.3d at 565–66. Mutual
promises may constitute consideration, each for the other. Capel v. Allstate Ins. Co., 78 Ark.
App. 27, 40, 77 S.W.3d 533, 541 (2002). While mutual promises will sustain a contract, there
is no valid agreement if there is no promise by one party as a consideration for the other’s
promise. Essential Accounting Sys., Inc. v. Dewberry, 2013 Ark. App. 388, at 6, 428 S.W.3d
613, 617.
According to the law set forth above, the foundation of a contract is a promise. Here,
John argues that even though Susannah was already the designated beneficiary of the life-
insurance policies at the time of the alleged contract, Bazel had the ability to change the
beneficiary at any time. Thus, he claims, Bazel’s promise to refrain from changing the
beneficiary was sufficient consideration in exchange for Susannah’s promise to divide the
proceeds. While a true-enough proposition, the court did not make this finding. Rather, the
circuit court determined that Bazel and Susannah had entered into an oral contract based on
its finding credible the testimony that Bazel’s “instructions were to divide the insurance
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proceeds evenly.” While it may very well be a clear expression of Bazel’s intent, his
instructions do not constitute an oral contract. The court did not find, and the evidence does
not support a finding, that either Bazel or Susannah made any promise at all. John’s witnesses
testified that Bazel merely instructed Susannah to divide the proceeds evenly. No one
testified that Bazel expressed any intention or desire to revoke his beneficiary designation if
Susannah did not agree to these instructions. Moreover, no one testified that Susannah made
any promise to Bazel to follow his instructions. Accordingly, we hold that the circuit court
clearly erred in finding that Bazel and Susannah entered into an oral contract regarding
distribution of the life-insurance proceeds.
Given our holding herein, we reverse the circuit court’s order in its entirety, including
the imposition of a constructive trust and the award of costs and attorney’s fees.
Reversed.
HARRISON and HOOFMAN, JJ., agree.
Matthews, Campbell, Rhoads, McClure & Thompson, P.A., by: Sarah L. Waddoups, for
appellant.
Reece Moore Pendergraft LLP, by: B.R. Price, for appellees.
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