Great American Life Insurance Company v. Brown-Kingston

[7] 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA [10] 11 GREAT AMERICAN LIFE No. 2:18-cv-02783-MCE-KJN INSURANCE COMPANY, [12] Plaintiff, 13 MEMORANDUM AND ORDER v. [14] SAUNDRA LEE BROWN-KINGSTON, 15 et al., 16 Defendants. [17] 18 Through this interpleader action, Plaintiff Great American Life Insurance Company 19 (“Plaintiff”), deposited into the Court’s registry death benefits from a life insurance policy 20 subject to competing claims by Defendants Saundra Lee Brown-Kingston (“Brown21 Kingston”) and Christine Leora Bailey (“Bailey”) (collectively “Defendants”). Compl., ECF 22 No. 1, at 2. The insurance policy covered the life of Michael James MacFarland 23 (“Decedent”), who at the time of death was Brown-Kingston’s uncle and Bailey’s ex24 husband. Plaintiff has been discharged, and, presently before the Court are Defendants’ 25 Cross-Motions for Summary Judgment, which are fully briefed. ECF Nos. 43 (“Bailey’s 26 /// 27 /// 28 /// 1 Motion”), 47 (“Brown-Kingston’s Motion”). For the reasons that follow, Bailey’s Motion is 2 GRANTED, and Brown-Kingston’s Motion is DENIED.1 [3] 4 BACKGROUND2 [5] 6 Plaintiff issued a term life insurance policy to Decedent in the State of Hawaii on 7 May 9, 1999, with a face value of $500,000 (“the Policy”). The death benefits under the 8 Policy, valued at the time at $502,334.70 plus interest, became due upon the Decedent’s 9 death on or around August 20, 2018. 10 The application for the Policy, dated March 22, 1999, listed “Christine L. 11 MacFarland” (whose maiden name was Bailey), Decedent’s ex-wife, as the primary 12 beneficiary, with Decedent’s children listed as contingent beneficiaries. On October 28, 13 2011, Decedent and Bailey entered into an Agreement in Contemplation of Divorce 14 (“Agreement”). See Bailey’s Motion, Ex. 1. The Agreement required that Decedent 15 “shall keep in full force and effect the Great American Life Insurance Co., policy number 16 BB9900481 . . . and pay all premiums due and shall continue to designate [Bailey] as the 17 sole beneficiary of the policy.” Bailey’s Motion, Ex. 1, ¶ 8. The Agreement was filed with 18 the family court on January 25, 2012. The following month, a divorce decree issued 19 approving and incorporating the Agreement as an order of the court. 20 On June 25, 2012, Decedent changed the name of the primary beneficiary on the 21 Policy to “Christine L. Bailey,” reflecting Bailey’s return to use of her maiden name. 22 However, four years later, on September 21, 2016, Decedent submitted a policy change 23 request to Plaintiff to change the primary beneficiary to his niece “Saundra Lee Brown 24 Kingston [sic].” As a result, following Decedent’s death, Bailey and Brown-Kingston both 25 claimed to be the rightful beneficiaries of Decedent’s death benefits. [26] 1 Because oral argument would not have been of material assistance, the Court ordered this [27] matter submitted on the briefs. ECF No. 48; see E.D. Cal. Local Rule 230(g). 28 2 The following material facts are uncontested. 1 In response, Plaintiff brought this action for interpleader pursuant to 28 U.S.C 2 § 1335 asking this Court to resolve the conflicting claims. Plaintiff deposited the death 3 benefits with the Clerk of the Court and was thereafter discharged from this action. 4 Presently before the Court are the cross-motions for summary judgment as to the 5 competing claims of Bailey and Brown-Kingston. Bailey contends that under the 6 Agreement, Decedent assumed an ongoing obligation to maintain the Policy for her 7 benefit. Brown-Kingston, on the other hand, argues that Decedent’s obligations 8 terminated when the divorce became final. [9] 10 STANDARD [11] 12 The Federal Rules of Civil Procedure provide for summary judgment when “the 13 movant shows that there is no genuine dispute as to any material fact and the movant is 14 entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). One of the principal 15 purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex 16 Corp. v. Catrett, 477 U.S. 317, 325 (1986). 17 In a summary judgment motion, the moving party always bears the initial 18 responsibility of informing the court of the basis for the motion and identifying the 19 portions in the record “which it believes demonstrate the absence of a genuine issue of 20 material fact.” Id. at 323 . If the moving party meets its initial responsibility, the burden 21 then shifts to the opposing party to establish that a genuine issue as to any material fact 22 actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 , 23 586-87 (1986). 24 In attempting to establish the existence or non-existence of a genuine factual 25 dispute, the party must support its assertion by “citing to particular parts of materials in 26 the record . . . ; or showing that the materials cited do not establish the absence or 27 presence of a genuine dispute, or that an adverse party cannot produce admissible 28 evidence to support the fact.” Fed. R. Civ. P. 56(c)(1). The opposing party must 1 demonstrate that the fact in contention is material, i.e., a fact that might affect the 2 outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 3 242, 248, 251-52 (1986). The opposing party must also demonstrate that the dispute 4 about a material fact “is ‘genuine,’ that is, [] the evidence is such that a reasonable jury 5 could return a verdict for the nonmoving party.” Id. at 248. In other words, the judge 6 needs to answer the preliminary question before the evidence is left to the jury of “not 7 whether there is literally no evidence, but whether there is any upon which a jury could 8 properly proceed to find a verdict for the party producing it, upon whom the onus of proof 9 is imposed.” Id. at 251 (quoting Improvement Co. v. Munson, 81 U.S. 442, 448 (1871)) 10 (emphasis original). As the Supreme Court explained: “When the moving party has 11 carried its burden under Rule [56(a)], its opponent must do more than simply show that 12 there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586 . 13 Therefore, “[w]here the record taken as a whole could not lead a rational trier of fact to 14 find for the nonmoving party, there is no ‘genuine issue for trial.’” Id. at 587 (citing First 15 Nat. Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288 (1968)). 16 In resolving a summary judgment motion, the evidence of the opposing party is to 17 be believed, and all reasonable inferences that may be drawn from the facts placed 18 before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 19 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party’s 20 obligation to produce a factual predicate from which the inference may be drawn. 21 Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff’d, [22] 810 F.2d 898 (9th Cir. 1987). [23] 24 ANALYSIS [25] 26 “It is well settled . . . that a husband and wife, in contemplation of separation and 27 divorce, may contract between themselves to settle and adjust all their property rights 28 which have arisen out of the marital relationship.” 5 Richard A. Lord, Williston on 1 Contracts § 11:7 (4th ed.) (collecting cases); see id. (“[I]nterspousal agreements are 2 generally governed by the same principles that apply to ordinary contracts . . . .”). 3 Courts generally concur that valid separation agreements are contracts binding on the 4 parties, subject to standard contractual restraints. See, e.g., Balogh v. Balogh, 332 P.3d 5 631, 641 (Haw. 2014) (citing Hawaiian law). Under Hawaiian law, “all valid and 6 enforceable . . . divorce agreements pertaining to the property division issue . . . must be 7 enforced.” Epp v. Epp, 905 P.2d 54, 56-57 (Haw. Ct. App. 1995). 8 Although there appears to be no binding authority directly on point, the vast 9 majority of authority supports Bailey’s position that under the Divorce Agreement a 10 contract existed between her and “[Decedent] wherein he agreed to keep the Policy in 11 full force and effect with Ms. Bailey as the primary Beneficiary.” Bailey’s Motion, at 7. 12 Brown-Kingston’s contention that Decedent “was only required to keep Bailey listed as 13 the beneficiary until the divorce was finalized” is unpersuasive. Brown-Kingston’s 14 Motion, at 2. First, Brown-Kingston’s argument is belied by the fact that the Agreement 15 was incorporated into the final divorce decree. There would be no reason to incorporate 16 a term that dissolved once the divorce was finalized. Indeed, not only does the contract 17 here lack any language to the effect that the life insurance provision would only last 18 through the divorce, it expressly contemplates that the parties would have ongoing 19 obligations. See Bailey’s Mot., Ex. 1, ¶ 17 (“For so long as a party shall live, all of that 20 party’s agents and assigns shall be bound by this Agreement, and they are irrevocably 21 so instructed.”); id., ¶ 8 (using phrases such as “shall keep in full force and effect” and 22 “shall continue to designate”). Second, months after the decree issued, Decedent 23 changed the primary beneficiary to reflect Bailey’s maiden name. This change is 24 consistent with the understanding that Bailey was to remain the beneficiary throughout 25 the Policy’s term. 26 /// 27 /// 28 /// 1 Brown-Kingston’s remaining arguments fare no better. She cites no authority for 2 the position that disparate divorce agreements may be void for lack of consideration. To 3 the contrary, the settlement of claims contained in the separation agreement itself 4 constitutes consideration. See Long v. Long, 413 P.3d 117, 123 (Wyo. 2018) (collecting 5 cases). Here, Bailey agreed to surrender property, undertake obligations (e.g., related to 6 tax matters), and waive future claims to settled property dispositions. See generally 7 Bailey’s Motion, Ex. 1. The Court thus concludes that the Agreement between Bailey 8 and Decedent was supported by sufficient consideration. 9 Nor is the Agreement unconscionable. “In general, a postmarital agreement is 10 unconscionable if it is impermissibly one-sided and is the result of unfair surprise.” 11 Balogh, 332 P.3d at 642 ; see Kramer v. Kramer, 711 N.W.2d 164, 168 (N.D. 2006) (“[A]n 12 unconscionable agreement is an agreement no rational, undeluded person would make, 13 and no honest and fair person would accept.”) (internal quotation marks omitted). 14 Brown-Kingston contends this is such a case because after the policy term expired, the 15 premiums required to keep the policy in effect would have increased exponentially, 16 making the policy more expensive than it was worth. Even if that was the case — and it 17 is not clear to the Court that Decedent would have been obligated to continue the policy 18 in effect beyond its term in any event — the fact that the Agreement may have been 19 more favorable to Bailey does not make it unconscionable. Courts frequently find 20 agreements that benefit one party to be enforceable, even when noticeable disparity 21 exists. See, e.g., Balogh, 332 P.3d at 645 (holding that even if the terms inequitably 22 favored the wife, the property division did not reach of an impermissible level of 23 unconscionability); Smith v. Doe, 268 So. 3d 457, 459 (Miss. 2018) (finding that despite 24 an agreement strongly favoring the wife, the husband understood the terms, could 25 financially afford the payments, and voluntarily entered the agreement); Mays v. Mays, [26] 541 S.W.3d 516, 525 (Ky. Ct. App. 2018) (determining that “the fact that a party . . . may 27 have made a bad bargain does not render an agreement unconscionable”) (emphasis in 28 /// 1 | original).* Because the Court concludes as a matter of law that the Agreement bound 2 | Decedent to maintain Bailey as the life insurance beneficiary, she is entitled to judgment. [3] 4 CONCLUSION [5] 6 For the foregoing reasons, Bailey’s Motion for Summary Judgment (ECF No. 43) 7 | is GRANTED, and Brown-Kingston’s Motion for Summary Judgment (ECF No. 47) is 8 | DENIED. The Clerk of Court is DIRECTED to distribute all remaining funds deposited 9 | with this Court related to this case to Christine Leora Bailey and to CLOSE this case. 10 IT 1S SO ORDERED. [11] 12 Dated: June 9, 2021 Eo 13 { late rf LEK. " eNIOR UNITED STATES DISTRICT JUDGE [25] 26 3 The fact that Decedent was not represented by counsel during the divorce proceedings does not change the outcome. “[M]Jerely because parties are not represented by counsel when they sign a written 27 agreement dividing their marital property is not, by itself, sufficient justification for relief from a judgment.” Kramer, 711 N.W.2d at 169 (finding that despite the lack of counsel, the agreement was enforceable when 28 | it was entered voluntarily and with thorough knowledge of its contents).