IN THE COURT OF APPEALS OF TENNESSEE
EASTERN SECTION FILED July 25, 1997 GINGER REED and DAVID REED, ) C/A NO. 03A01-9703-CV-00075 ) Cecil Crowson, Jr. Appellate C ourt Clerk Plaintiffs-Appellees, ) BLOUNT CIRCUIT ) v. ) HON. W. DALE YOUNG, ) JUDGE ROSIE L. CLARK REED, ) ) AFFIRMED AND Defendant-Appellant. ) REMANDED
R0BERT N. GODDARD, GODDARD & GAMBLE, Maryville, for Plaintiffs- Appellees.
DUNCAN V. CRAWFORD and STEPHEN S. OGLE, CRAWFORD, CRAWFORD & NEWTON, Maryville, for Defendant-Appellant.
OPINION
Franks. J.
In this action, the Trial Court on stipulations of fact entered judgment
against defendant, for proceeds paid to the defendant on a life insurance policy.
Defendant has appealed.
The genesis of this dispute is a property settlement agreement entered by
the deceased Lowell Kenneth Reed and his wife, Carolyn Margaret Wehunt Reed, as a
part of their 1978 divorce decree.
That agreement reads in part:
It is agreed to by the Party of the Second Part [Kenneth Reed] that any and all life insurance policies obtained by the Party of the Second Part through any source, as of the date of filing the Complaint for Absolute Divorce, September 8, 1978, shall be maintained in full force and effect, without any encumbrances thereon, and the premium shall be maintained by the Party of the Second Part. It is further agreed that the designated beneficiaries as of said date, September 8, 1978, shall remain as of said date, unless and until the Party of the First Part [Carolyn Reed] remarries, then, in such event, the Party of the First Part shall be removed as designated beneficiary on such insurance policies and substituted thereon shall be the children of the parties, each to share equally; (Emphasis added.)
The Reeds had three children: Bobby Lon Reed, Ginger Gayle Reed,
and David Lee Reed. The life insurance policy in effect at the time of the divorce was
for $162,000.00. M rs. Reed was the first beneficiary and second beneficiaries were
the children. Mrs. Reed remarried in 1984 and Kenneth Reed remarried in 1991. In
1992, he changed the beneficiaries on his life insurance to give his second wife,
defendant Rosie Clark Reed, a 75% share of the insurance proceeds and his son
Bobby a 25% share. The proceeds were distributed in this manner upon his death in
1993.
Plaintiffs are the two children who were not made beneficiaries. In
previous litigation, they filed suit against their father’s estate and won a judgment in
probate court for two thirds of the insurance benefits, i.e., $107,840.00. Estate of
Lowell Kenneth Reed v. Reed, 1995 WL 614180 (Tenn. App. 1995). Prior to the filing
of this claim, defendant was not aware of the provisions of the divorce decree and did
not know that it required her husband to name his children as beneficiaries of his life
insurance.
Due to the insolvency of the estate, plaintiffs filed this claim in Circuit
Court, seeking to collect the money from defendant.
The Trial Court ordered judgment against defendant, and imposed a
constructive trust on the proceeds of the life insurance policy. The judgment provided
for the sum of $107,840.00 plus pre-judgment interest. To prevent a double recovery,
defendant is entitled to credit on the judgment for any money collected by plaintiffs
from the estate of their father.
The prior litigation resulted in a judgment against the estate for the
2 proceeds owed to plaintiffs as the proper beneficiaries of the policy. The issue in this
action is whether the proceeds of the life policy can be collected from defendant. This
is a question of law and the standard of review is de novo with no presumption of
correctness for the Trial Court’s findings. T.R.A.P. Rule 13.
Defendant argues that plaintiffs’ suit against their father’s estate was an
election of remedies which should prevent this action. This case is analogous to
Allied Sound, Inc., v. Neely, where plaintiffs obtained a judgment for damages arising
out of a contractual dispute with a resort. Unable to recover from the resort, the
plaintiffs sued the officers and directors of the resort in their individual capacity for
misrepresentation. 909 S.W.2d 815 (Tenn. App. 1995). Defendants argued that the
plaintiff was collaterally estopped from using the same set of facts, without alleging
any additional damages, to seek another judgment. The Court determined that while
double recovery of damages would be barred, successive judgments seeking a single
recovery was appropriate. Id. at 821; citing 47 Am.Jur.2d Judgments §1008 (1995).
The doctrine of election of remedy did not bar recovery either, since its purpose was
similarly “to prevent double redress for a single wrong.” Id. at 822.
The Trial Court’s inclusion of the provision giving defendant credit for
any money collected from the estate, serves to prevent any double recovery 1 here and
1 As part of its argument that Ap pellees elected their re med y and were barred from se eking another, Appellant argued that Appellees might have been allowed to pursue alternative remedies if Appellant had been joine d to the probate court litigatio n pursuant to T.R .C.P. 19, which reads in p art:
A person who is subject to the jurisdiction of the court shall be joined as a party if (1) in the person’s absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person’s absence may (I) as a practical matter impair or im ped e the person ’s ability to protect that interest, or (ii) leave any of the persons already subject to substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reasons of the claimed interest. If the perso n has no t been so joined, the court shall ord er that the perso n be m ade a party.
T.R.C.P. 19.01.
Appellees responded that Appellant was not joined at that time because the probate court was without jurisdiction to award a judgment against the defendant personally. The parties’ brief included substantial discussion of this jurisdiction question.
The failure to joint Appellant pursuant to Rule 19 and limits to the jurisdiction of the Blount County Probate Court were no t raised as affirmative defenses in A ppe llant’s answer. They are sub-issue s to
3 the suit against the defendant is not precluded by the unsatisfied judgment against the
estate.
Next, defendant argues that plaintiffs may not reach the life insurance
proceeds because the damages awarded in the previous litigation have become a “debt
of the decedent” from which the insurance proceeds are shielded by the statute:
Any life insurance effected by a husband or wife on such person’s own life shall, in the case of that person’s death, inure to the benefit of the surviving spouse and children, and the money thence arising shall be divided between them, according to the statutes of distribution, without being in any manner subject to the debts of the decedent. . . .
T.C.A. §56-7-201.
The plaintiffs are not judgment creditors, within the meaning of the
above statute, they are vested beneficiaries of the policy. Herrington v. Boatright, 633
S.W.2d 781 (Tenn. App. 1982); LeMay v. Dudenbostel, 1992 WL 74584 (Tenn. App.
1992).
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IN THE COURT OF APPEALS OF TENNESSEE
EASTERN SECTION FILED July 25, 1997 GINGER REED and DAVID REED, ) C/A NO. 03A01-9703-CV-00075 ) Cecil Crowson, Jr. Appellate C ourt Clerk Plaintiffs-Appellees, ) BLOUNT CIRCUIT ) v. ) HON. W. DALE YOUNG, ) JUDGE ROSIE L. CLARK REED, ) ) AFFIRMED AND Defendant-Appellant. ) REMANDED
R0BERT N. GODDARD, GODDARD & GAMBLE, Maryville, for Plaintiffs- Appellees.
DUNCAN V. CRAWFORD and STEPHEN S. OGLE, CRAWFORD, CRAWFORD & NEWTON, Maryville, for Defendant-Appellant.
OPINION
Franks. J.
In this action, the Trial Court on stipulations of fact entered judgment
against defendant, for proceeds paid to the defendant on a life insurance policy.
Defendant has appealed.
The genesis of this dispute is a property settlement agreement entered by
the deceased Lowell Kenneth Reed and his wife, Carolyn Margaret Wehunt Reed, as a
part of their 1978 divorce decree.
That agreement reads in part:
It is agreed to by the Party of the Second Part [Kenneth Reed] that any and all life insurance policies obtained by the Party of the Second Part through any source, as of the date of filing the Complaint for Absolute Divorce, September 8, 1978, shall be maintained in full force and effect, without any encumbrances thereon, and the premium shall be maintained by the Party of the Second Part. It is further agreed that the designated beneficiaries as of said date, September 8, 1978, shall remain as of said date, unless and until the Party of the First Part [Carolyn Reed] remarries, then, in such event, the Party of the First Part shall be removed as designated beneficiary on such insurance policies and substituted thereon shall be the children of the parties, each to share equally; (Emphasis added.)
The Reeds had three children: Bobby Lon Reed, Ginger Gayle Reed,
and David Lee Reed. The life insurance policy in effect at the time of the divorce was
for $162,000.00. M rs. Reed was the first beneficiary and second beneficiaries were
the children. Mrs. Reed remarried in 1984 and Kenneth Reed remarried in 1991. In
1992, he changed the beneficiaries on his life insurance to give his second wife,
defendant Rosie Clark Reed, a 75% share of the insurance proceeds and his son
Bobby a 25% share. The proceeds were distributed in this manner upon his death in
1993.
Plaintiffs are the two children who were not made beneficiaries. In
previous litigation, they filed suit against their father’s estate and won a judgment in
probate court for two thirds of the insurance benefits, i.e., $107,840.00. Estate of
Lowell Kenneth Reed v. Reed, 1995 WL 614180 (Tenn. App. 1995). Prior to the filing
of this claim, defendant was not aware of the provisions of the divorce decree and did
not know that it required her husband to name his children as beneficiaries of his life
insurance.
Due to the insolvency of the estate, plaintiffs filed this claim in Circuit
Court, seeking to collect the money from defendant.
The Trial Court ordered judgment against defendant, and imposed a
constructive trust on the proceeds of the life insurance policy. The judgment provided
for the sum of $107,840.00 plus pre-judgment interest. To prevent a double recovery,
defendant is entitled to credit on the judgment for any money collected by plaintiffs
from the estate of their father.
The prior litigation resulted in a judgment against the estate for the
2 proceeds owed to plaintiffs as the proper beneficiaries of the policy. The issue in this
action is whether the proceeds of the life policy can be collected from defendant. This
is a question of law and the standard of review is de novo with no presumption of
correctness for the Trial Court’s findings. T.R.A.P. Rule 13.
Defendant argues that plaintiffs’ suit against their father’s estate was an
election of remedies which should prevent this action. This case is analogous to
Allied Sound, Inc., v. Neely, where plaintiffs obtained a judgment for damages arising
out of a contractual dispute with a resort. Unable to recover from the resort, the
plaintiffs sued the officers and directors of the resort in their individual capacity for
misrepresentation. 909 S.W.2d 815 (Tenn. App. 1995). Defendants argued that the
plaintiff was collaterally estopped from using the same set of facts, without alleging
any additional damages, to seek another judgment. The Court determined that while
double recovery of damages would be barred, successive judgments seeking a single
recovery was appropriate. Id. at 821; citing 47 Am.Jur.2d Judgments §1008 (1995).
The doctrine of election of remedy did not bar recovery either, since its purpose was
similarly “to prevent double redress for a single wrong.” Id. at 822.
The Trial Court’s inclusion of the provision giving defendant credit for
any money collected from the estate, serves to prevent any double recovery 1 here and
1 As part of its argument that Ap pellees elected their re med y and were barred from se eking another, Appellant argued that Appellees might have been allowed to pursue alternative remedies if Appellant had been joine d to the probate court litigatio n pursuant to T.R .C.P. 19, which reads in p art:
A person who is subject to the jurisdiction of the court shall be joined as a party if (1) in the person’s absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person’s absence may (I) as a practical matter impair or im ped e the person ’s ability to protect that interest, or (ii) leave any of the persons already subject to substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reasons of the claimed interest. If the perso n has no t been so joined, the court shall ord er that the perso n be m ade a party.
T.R.C.P. 19.01.
Appellees responded that Appellant was not joined at that time because the probate court was without jurisdiction to award a judgment against the defendant personally. The parties’ brief included substantial discussion of this jurisdiction question.
The failure to joint Appellant pursuant to Rule 19 and limits to the jurisdiction of the Blount County Probate Court were no t raised as affirmative defenses in A ppe llant’s answer. They are sub-issue s to
3 the suit against the defendant is not precluded by the unsatisfied judgment against the
estate.
Next, defendant argues that plaintiffs may not reach the life insurance
proceeds because the damages awarded in the previous litigation have become a “debt
of the decedent” from which the insurance proceeds are shielded by the statute:
Any life insurance effected by a husband or wife on such person’s own life shall, in the case of that person’s death, inure to the benefit of the surviving spouse and children, and the money thence arising shall be divided between them, according to the statutes of distribution, without being in any manner subject to the debts of the decedent. . . .
T.C.A. §56-7-201.
The plaintiffs are not judgment creditors, within the meaning of the
above statute, they are vested beneficiaries of the policy. Herrington v. Boatright, 633
S.W.2d 781 (Tenn. App. 1982); LeMay v. Dudenbostel, 1992 WL 74584 (Tenn. App.
1992). This statute does not prevent the plaintiffs from reaching the proceeds of the
policy.
Finally, defendant questions the Court’s imposition of an equitable trust
without a pleading in the complaint requesting such relief. Plaintiffs’ complaint
requested money damages, and “other, further and general relief to which they may be
entitled at the hearing.” Under a prayer for general relief, a court may grant “any
other and different relief from that which is justified by the pleadings and the proof,”
including equitable relief. Aaron v. Aaron, 909 S.W.2d 408, 412 (Tenn. 1995).
A constructive trust is created by equity against one who, by fraud, actual or constructive, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal title to property which he ought not, in equity
the election of re med ies discu ssion. B ecause we find that Ap pellee’s pursuit of the claim against the estate and then against Appellant does not present a case of where the election of one remedy prevents another, we do not reach the issue of whether joining Appellant to the claim against the estate would have made a difference. The issue of whether B lount Cou nty probate court had jurisd iction to join her is therefore also not reached.
4 and good conscience hold and enjoy.
Livesay v. Keaton, 611 S.W.2d 581, 584 (Tenn. App. 1980).
Defendant argues that she, as an innocent party, does not meet the above
criteria. Although there is no allegation or evidence that defendant committed fraud,
she was in privity with the deceased and profited from his breach of contract. See
LeMay. Defendant’s rights are derivatives of the deceased, and she can “stand on no
higher ground than he does” despite her lack of knowledge as to her husband’s failure
to honor the obligation to this children. Goodrich v. Mass. Mutual Life Insur. Co.,
240 S.W.2d 263, 270 (Tenn. App.. 1951); see generally Bell v. Bell, 896 S.W.2d 559,
561 (Tenn. App. 1994). In this case the plaintiffs had acquired a vested interest in the
policy which was property divided at the time of the divorce, and had a right to the
policy proceeds. Under these facts, defendant holds legal title to the proceeds which
she “ought not, in equity and good conscience, hold and enjoy.” The Trial Court
properly invoked the use of a constructive trust on the circumstances of this case.
We affirm the judgment of the Trial Court and remand at appellant’s
cost.
________________________ Herschel P. Franks, J.
CONCUR:
___________________________ Don T. McMurray, J.
___________________________ William H. Inman, Sr.J.