The opinion of the court was delivered by: Veronica L. Duffy United States Magistrate Judge
REPORT AND RECOMMENDATION
This matter is before the court on a complaint filed by plaintiff American General Life Insurance Company ("American General") interpleading the funds from a life insurance policy on decedent Patrick M. Jenson with the court and seeking a declaration from the court as to who is entitled to those policy proceeds. Jurisdiction is premised on diverse citizenship of the parties and an amount in controversy in excess of $75,000. See 28 U.S.C. § 1332. Defendant Amy Jenson, Patrick's ex-wife, is the only party to make an appearance and assert a claim to the life insurance proceeds. She now moves for the entry of summary judgment in her favor on undisputed facts. See Docket No. 15. The district court, the Honorable Jeffrey L. Viken, referred Ms. Jenson's motion to this magistrate judge for a recommended disposition pursuant to 28 U.S.C. § 636(b)(1)(B).
The facts upon which Ms. Jenson bases her motion are entirely undisputed by American General. As such, the following is a recitation of the facts taken from Ms. Jenson's statement of undisputed facts found at Docket No. 17. Additional facts have been added from the depositions of Ms. Jenson and Hugh Boyle and from the life insurance policy at issue.
Amy Jenson and Patrick Jenson were married in South Dakota on July 5, 2003, after having dated for 15 years. They lived together in Rapid City, South Dakota. They had a son in 2004 and a daughter in 2006. Those children are still minors today. Amy and Patrick each had their own, separate checking account. They never maintained a joint checking account for household expenses.*fn1
In 2002, before their marriage, Pat and Amy met Hugh Boyle of BMS Financial Advisors in Rapid City. Mr. Boyle provided estate planning services, selling life insurance and securities. He had his series 7, 63, 65, 24, and 51 licenses. As part of his overall estate planning advice, Mr. Boyle recommended that Pat and Amy purchase life insurance for themselves. In 2006, the Jensons, now husband and wife, followed Mr. Boyle's advice, purchasing policies from American General through Mr. Boyle.
On May 18, 2006, American General issued to Patrick Jenson a "20 year renewable level benefit term life insurance" policy in the amount of $500,000. See Docket No. 20-1, page 4. Under the terms of the policy, Patrick was required to pay an annual premium in the amount of $645.00 (which was broken down into 12 equal installments that were billed and paid monthly), and American General agreed to pay $500,000 upon Patrick's death. American General promised to keep the premium payment the same for the first 20 years of the policy, after which American General reserved the right to change the premium. Amy was named as the beneficiary on Patrick's policy. See Docket No. 26-1, page 11.
The policy says nothing about the effect of divorce upon one's designation of beneficiary, although the policy and accompanying materials make specific references to other provisions of South Dakota law, as well as specific provisions of California, New Mexico and Vermont law. See Docket No. 20-1 at pages 5, 12-13. The policy provisions state that the owner may change the beneficiary by written notice to American General. See Docket No. 26-1, page 2. The policy states that the beneficiary remains as stated in the policy unless the owner changes it. Id. The policy states that its terms may not be changed except in writing by an officer authorized to make such changes. Id. Mr. Boyle never told the Jensons about any change in beneficiary by operation of law after a divorce because, quite simply, he himself was unaware of any such possibility.
A mirror-image American General policy in the same amount insuring Amy's life was issued. Amy's policy named Patrick as the beneficiary. Throughout the life of Patrick's American General life insurance policy, Amy paid the premiums on the policy out of her personal, separate checking account via direct electronic funds transfer. She never missed any premium payment at any time. Patrick's life insurance policy did not list any contingent beneficiary other than Amy. Id. The couple met annually with Mr. Boyle to review their financial circumstances.
Patrick developed a problem with alcohol that became an issue in the Jensons' marriage. Amy wanted Patrick to seek help for his alcohol problem. When he refused, Amy divorced Patrick. A default divorce decree was entered on February 24, 2008. Amy told Patrick that he needed to get help with his alcohol consumption and the divorce was intended to motivate him to do so.
Patrick never moved out of the marital residence. Amy and Patrick continued to live together and to function as a couple, raising their children and enjoying marital relations. Patrick did seek help for his alcoholism, attending inpatient treatment in 2007, 2008, and 2009.*fn2 Other than the times when he attended inpatient treatment or when he was drinking, Patrick continued to reside with Amy and their children in their home in Rapid City. Patrick never had a separate residence.
Patrick continued to list the address at which he and Amy lived as his residence post-divorce. The couple sent out Christmas cards featuring them and their children. Patrick wrote letters in which he continued to refer to Amy as his "wife." Many of the couple's friends did not even know that Amy and Patrick had divorced.
Following the divorce, Amy and Patrick had an agreement regarding child care, household and other expenses. Patrick contributed $500.00 per month, a figure that coincided with his child support obligation pursuant to the stipulated divorce decree. This $500 payment satisfied all Patrick's monetary obligations to the family and was his sole financial contribution.
During the divorce, Amy changed the beneficiary on her life insurance policy to her mother. In 2010, after Patrick had finished a six-month treatment program for alcohol abuse the previous year, Amy changed the beneficiary designation on her own life insurance policy back to Patrick. She indicated that she wanted Patrick to have the life insurance money if she should die.
Part of the divorce decree split an Individual Retirement Account ("IRA")in Patrick's name 50:50 between Patrick and Amy. Patrick met with Mr. Boyle to discuss this change in Patrick's IRA. At that time, Mr. Boyle asked Patrick if he wanted to remove Amy as the beneficiary on his life insurance policy. Patrick told Mr. Boyle he did not want to change his policy--he wanted Amy to remain as the beneficiary. The post-divorce arrangement was the same as when the couple was married--Amy continued to pay the premiums on Patrick's policy every month out of her own personal checking account. Patrick knew of and consented to this arrangement. Amy would not have continued to pay the premiums on Patrick's policy if she had not been named as the beneficiary on that policy.
Patrick expressed this agreement to Hugh Boyle, the parties' financial advisor, at annual face-to-face meetings that the couple had with Mr. Boyle post-divorce. The couple told Mr. Boyle of their divorce. Mr. Boyle asked Patrick if he still wanted to keep Amy as the beneficiary on his policy. Patrick told Mr. Boyle that he did want to keep Amy as the beneficiary. Patrick told Mr. Boyle that he wanted Amy to have the proceeds of his life insurance policy.
Mr. Boyle did not have Patrick fill out any additional paperwork as Amy was already the beneficiary on the policy. Specific post-divorce discussions occurred between Mr. Boyle and Patrick regarding Amy continuing as the beneficiary on Patrick's life insurance policy in the years 2009 and 2010. In each instance, Patrick told Mr. Boyle that it was his intention that Amy remain as his beneficiary. Patrick never changed the beneficiary designation on his life insurance policy. Mr. Boyle never had Patrick fill out a new designation of beneficiary form post-divorce because Mr. Boyle did not believe such a redesignation was necessary. Mr. Boyle had no knowledge of SDCL § 29A-2-804 or the effect of that statute.
Patrick died on January 2, 2011. At the time of his death, all premiums had been timely paid by Amy. There were no contingent beneficiaries on Patrick's life insurance policy. There are no conflicting claims or claimants regarding the proceeds to this policy. Defendant Amy Jenson was and is the only person making a claim to the benefits.
This lawsuit was filed by American General because of a South Dakota probate statute, SDCL § 29A-2-804, which generally provides that a divorce automatically revokes any revocable disposition of property to an ex-spouse. This statute is discussed in more detail below. The two issues presented by Amy's motion are: (1) is the revocation provided by SDCL § 29A-2-804 absolute, or does it establish only a presumption which can be rebutted by showing a contrary intent on the part of the decedent, and (2) was there a "contract" between Patrick and Amy within the meaning of the exception to the revocation provided for under § 29A-2-804?
The court notes at the outset what is not at issue here: American General's obligation to pay out the proceeds from Patrick's life insurance policy. American General must pay those proceeds, but the question presented is whether those proceeds go to Amy as the designated beneficiary under the policy, or whether they are paid into Patrick's estate.
DISCUSSION A. Summary Judgment Standard
Under Rule 56(c) of the Federal Rules of Civil Procedure, a movant is entitled to summary judgment if the movant can "show that there is no genuine issue as to any material fact and that [the movant] is entitled to judgment as a matter of law." In determining whether summary judgment should issue, the court views the facts, and inferences from those facts, in the light most favorable to the nonmoving party. See Matsushita Elec. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). The burden is placed on the moving party to establish both the absence of any genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a).
Once the movant has met its burden, the nonmoving party may not simply rest on the allegations in the pleadings, but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); FED. R. CIV. P. 56(e)(each party must properly support its own assertions of fact and properly address the opposing party's assertions of fact, as required by Rule 56(c)). In determining whether a genuine issue of material fact exists, the court views the evidence presented in light of which party has the burden of proof under the underlying substantive law. Id. Summary judgment will not lie if there is a genuine dispute as to a material fact, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.
The substantive law identifies which facts are "material" for purposes of a motion for summary judgment. Anderson, 477 U.S. at 247. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. at 248 (citing 10A C. Wright, A. Miller, & M. Kane, FEDERAL PRACTICE AND PROCEDURE § 2725, pp.
93-95 (1983)). The Supreme Court has further explained that: the issue of material fact required by Rule 56(c) to be present to entitle a party to proceed to trial is not required to be resolved conclusively in favor of the party asserting its existence; rather, all that is required is that sufficient evidence supporting the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial.
Anderson, 477 U.S. at 248-49 (quotingFirst National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968)(emphasis added)). Essentially, the availability of summary judgment turns on whether a proper jury question is presented. SeeAdickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970). "The inquiry performed is the threshold inquiry of determining whether there is the need for a trial-whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson, 477 U.S. at 250.
American General cannot properly be said to oppose Amy's motion for summary judgment as it never affirmatively argues for entry of judgment against Amy and, as stated above, does not contest any of the facts asserted by her. Nevertheless, a failure by an opposing party to resist summary judgment "does not automatically compel resolution of [the motion] in favor of" the movant. United States v. One Parcel of Real Property, 27 F.3d 327, 329 n.1 (8th Cir. 1994); Canada v. Union Elec. Co., 135 F.3d 1211, 1213 (8th Cir. 1997). Federal Rule of Civil Procedure 56(e) allows for the possibility that a party may fail to resist another party's assertion of fact. When this happens, the court must still make a determination as to whether the moving party is entitled to judgment in her favor on the merits. One Parcel of Real Property, 27 F.3d at 329 n.1. See also Fed. R. Civ. P. 56(e)(3) (upon a party's failure to contest facts asserted by the movant, the district court may grant summary judgment if the facts and the law show that the movant is entitled to judgment in her favor).
B. Whether SDCL § 29A-2-804 Creates an Absolute Revocation or Only a Presumption of Revocation that May be Rebutted?
This case is before the court on diversity jurisdiction. Accordingly, the
substantive law of the forum state--here, South Dakota--must be applied. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Where there is no direct state court decision on point, this court must attempt to predict how the state court would decide the issue, using decisions from other jurisdictions as guides.
Midwest Oilseeds, Inc. v. Limagrain Genetics Corp., 387 F.3d 705, 715 (8th Cir. 2004).
Section 29A-2-804 of the South Dakota Codified Laws is adopted from the Revised Uniform Probate Code ("UPC"). The South Dakota statute provides that ". . . a divorce or annulment of a marriage . . . [r]evokes any . . . revocable disposition of property made by a divorced individual to a former spouse in a governing instrument . . ." See SDCL § 29A-2-804(b)(1).
The proceeds of a life insurance policy are a "disposition of property" covered by the statute. Section 29A-2-804 defines "disposition of property" as follows:
(1) "Disposition or appointment of property" includes a transfer of an item of property or any other benefit to a beneficiary ...