SCOTT THOMAS v. CHRISTINE THOMAS (2013)

This matter involves the distribution of the proceeds of the $1 million life insurance policy (the policy) maintained by the decedent, Scott Thomas (Scott Sr.).¹  The trial judge awarded 50% of the insurance proceeds to Scott Sr.'s ex-wife, plaintiff Christine Thomas (Christine), 25% to his second wife, defendant Laura Thomas (Laura), and 12.5% to each of his children, defendants Scott Thomas, Jr. (Scott Jr.) and Kimberly Thomas (Kimberly).   Laura appeals from the November 14, 2011 Family Part order that denied her motion for distribution of 60% of the insurance proceeds to her and other relief.   She also appeals from the January 3, 2012 order, which denied her motion for reconsideration and awarded Christine counsel fees.   We affirm the awards to Christine and reverse the awards to Laura and the children.

Scott Sr. and Christine were married in November 1976, and divorced in March 2000.   Their Property Settlement Agreement (PSA), which was incorporated into their final judgment of divorce, required Scott Sr. to pay permanent alimony of $3250 per month until the sale of the marital home, and $2500 per month thereafter.   The PSA also required Scott Sr. to pay child support until the children were emancipated.

To secure alimony and child support, Article V of the PSA required Scott Sr. to maintain a life insurance policy “irrevocably naming [Christine] as beneficiary for $500,000 and each child as beneficiary for $125,000 each [,]” and “annually provide [Christine] with proof of said insurance.”   Article V also provided that

[Scott Sr.'s] obligation to maintain said insurance for [Christine] as beneficiary shall terminate upon the termination of his obligation to provide alimony as set forth in Article II or be modified if the alimony obligation is modified.  [Scott Sr.'s] obligation to maintain said insurance for the children shall terminate upon emancipation.

Article II.5 provided that the PSA could only be modified by mutual consent “in writing and duly signed and witnessed.”   In compliance with this provision, the parties modified the PSA three times by filing three consent orders:  (1) a February 13, 2004 consent order, which reduced alimony from $2500 per month to $2000, effective February 1, 2004;  (2) a December 3, 2004 consent order, which emancipated Scott Jr. as of May 2004;  and (3) a September 6, 2007 consent order, which emancipated Kimberly as of May 2007.   There was no written consent or consent order modifying Article V to reduce Scott Sr.'s life insurance obligation to Christine.

In an August 17, 2007 e-mail to Scott Jr. and Kimberly, Scott Sr. confirmed that he had a life insurance policy “as part of the divorce settlement [with Christine] named as a beneficiary” (the August 2007 e-mail).   He also advised that he chose to keep the children as 12.5% beneficiaries for $125,000 each despite their emancipation.²

Scott Sr. and Laura married in May 2008.   Sometime thereafter, Scott Sr. sought to obtain additional life insurance, but was declined after a medical examination revealed he had advanced stage IV prostate cancer.   Unbeknown to Christine, Scott Sr. changed the beneficiaries on the policy as follows:  Laura 60%;  Christine 15%;  and the children 12.5% each (the 2009 beneficiary designation).

Scott Sr. died in March 2011, at the age of sixty.   Christine filed a proof of claim with defendant Reassure America Life Insurance Company (Reassure) for payment of $500,000 and Scott Jr. and Kimberly filed a proof of claim for $125,000 each.   Christine later discovered that Laura had filed a proof of claim for $600,000.   In June 2011, Christine filed a complaint, seeking to impose a constructive trust on the life insurance proceeds, compel Reassure to pay her $500,000, and restrain Laura from receiving more than $250,000.   Scott Jr. and Kimberly filed a cross-claim, each seeking 12.5% of the insurance proceeds.   Laura filed a counterclaim, seeking to impose a constructive trust on the life insurance proceeds in the amount of $600,000 in accordance with the 2009 beneficiary designation, and enjoin Christine from receiving more than $150,000.   Laura also filed a crossclaim against Reassure to restrain any payment to Christine beyond $150,000, and against the children to restrain them from receiving any insurance proceeds at all unless she received $600,000.   Pursuant to a consent order, Reassure deposited $1 million plus $13,057.81 in interest into court, and was dismissed from the case.

Laura filed a motion for an order retroactively modifying the PSA to reduce alimony based on Scott Sr.'s alleged change in financial circumstances.³  Arguing that Article V was self-executing, she also sought to retroactively reduce the amount of life insurance for Christine.   Laura requested a plenary hearing to present expert evidence estimating the amount of alimony Scott Sr. owed at death and reducing the amount of insurance proceeds payable to Christine to that amount.   Laura posited that $500,000 of the insurance proceeds over-insured Scott Sr.'s at-death alimony obligation and resulted in a windfall to Christine.

Alternatively, Laura asserted that she and the children were vested beneficiaries in the insurance proceeds with none having an equitable preference.   Thus, if the court awarded 50% of the insurance proceeds to Christine, then the remaining 50% should be distributed to Laura and the children in accordance with the portions reflected in the 2009 beneficiary designation, which reflected Scott Sr.'s intent that they would share proportionally in those remaining proceeds.   Laura calculated the proportionate shares as 71% to her and 29% to the children.

Christine filed a cross-motion for an order enforcing the PSA and distributing 50% of the insurance proceeds to her.   She argued there was no authority permitting a post-mortem modification of the PSA;  Article V was not self-executing;  compliance with the PSA was court-ordered;  and the PSA could not be modified except by written consent or a court order.   Christine also asserted that Scott Sr.'s modification of the PSA without her knowledge or consent was wrongful, and thus, the court should impose a constructive trust on the insurance proceeds.

Scott Jr. and Kimberly filed a cross-motion for an order enforcing the 2009 beneficiary designation and distributing 12.5% of the insurance proceeds to each of them.   They argued that the 2009 beneficiary designation and the August 2007 e-mail confirmed their father's intent to maintain each of them as 12.5% beneficiaries under the policy with no reduction.

In an October 28, 2011 oral decision, the trial judge concluded that Article V was not self-executing and the PSA could only be modified by the parties' written consent or a court order.   Relying on Flanigan v. Munson, 175 N.J. 597 (2003), the judge held that pursuant to the PSA, Christine was an irrevocable beneficiary of and entitled to 50% of the insurance proceeds, and Scott Sr. wrongfully breached the PSA by unilaterally reducing that amount and designating Laura as a 60% beneficiary.   The judge determined that because Scott Sr. had wrongfully designated Laura as a 60% beneficiary, the children were each entitled to 12.5% of the insurance proceeds and Laura was entitled to the remaining 25%.   The judge memorialized her decision in a November 14, 2011 order.

Laura filed a motion for reconsideration and a stay, raising the same arguments she had previously raised.⁴  Christine filed a cross-motion for an order awarding her counsel fees and costs.   In a January 3, 2012 order and written statement of reasons, the judge denied Laura's motion, granted Christine's cross-motion, and awarded Christine $1510 for counsel fees.   The judge held that Laura's motion was procedurally “deficient” in that it was untimely filed and Laura failed to provide the necessary supporting documents and certification.

Addressing the merits, the judge determined the motion presented nothing to warrant reconsideration and was “substantively meritless.”   The judge denied a stay for failure to satisfy the Crowe ⁵ criteria, and determined that Christine was entitled to an award of $1510 for counsel fees for having to defend Laura's procedurally deficient and substantively meritless motion.   This appeal followed.

On appeal, Laura raises the same arguments she raised before the trial judge.   She additionally argues that the judge erred in denying her motion for reconsideration and a stay and awarding Christine counsel fees.

Our review of a trial judge's findings is a limited one.  Cesare v. Cesare, 154 N.J. 394, 411 (1998).  “Because of the family courts' special jurisdiction and expertise in family matters, [we] should accord deference to family court factfinding.”  Id. at 413.   We will not “ ‘engage in an independent assessment of the evidence as if [we] were the court of first instance,’ ” N.J. Div. of Youth & Family Servs. v. Z.P.R., 351 N.J.Super. 427, 433 (App.Div.2002) (quoting State v. Locurto, 157 N.J. 463, 471 (1999)), and will “not disturb the ‘factual findings and legal conclusions of the trial judge unless [we are] convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice.’ ”  Cesare, supra, 154 N.J. at 412 (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974)).   Where our review addresses questions of law, a trial judge's findings “are not entitled to that same degree of deference if they are based upon a misunderstanding of the applicable legal principles.”  Z.P.R., supra, 351 N.J.Super. at 434 (citing Manalapan Realty, L.P. v. Twp. Comm. Of Manalapan, 140 N.J. 366, 378 (1995)).

As for the denial of the motion for reconsideration, we have determined,

Reconsideration itself is a matter within the sound discretion of the [c]ourt, to be exercised in the interest of justice[.]  It is not appropriate merely because a litigant is dissatisfied with a decision of the court or wishes to reargue a motion, but should be utilized only for those cases which fall into that narrow corridor in which either 1) the [c]ourt has expressed its decision based upon a palpably incorrect or irrational basis, or 2) it is obvious that the [c]ourt either did not consider, or failed to appreciate the significance of probative, competent evidence.

[Palombi v. Palombi, 414 N.J.Super. 274, 288 (App.Div.2010) (citations and (internal quotation marks omitted).]

We will not disturb a trial judge's denial of a motion for reconsideration absent an abuse of discretion.  Id. at 289.

Applying the above standards, we discern no reason to disturb the judge's decision as to Christine.   Article V was not self-executing;  the PSA required mutual consent in writing to modify it.   Absent written consent, a court order was required.   We agree with the trial judge that Scott Sr.'s unilateral modification of Article V without Christine's written consent or a court order was wrongful and violated the PSA, thus entitling Christine to a constructive trust on $500,000 of the insurance proceeds.  Flanigan, supra, 175 N.J. at 607;  Prudential Ins. Co. of Am. v. Prashker, 201 N.J.Super.   553 (App.Div.), certif. denied, 101 N.J. 334 (1985).   Accordingly, the award to Christine was correct.

The judge also correctly awarded Christine attorney's fees.   In addition to its procedural deficiencies, that part of Laura's motion for reconsideration involving Christine had no merit whatsoever.   Christine should not have to bear the financial burden of defending a procedurally deficient and substantively meritless motion.

We reach a different conclusion as to the awards to Laura and the children.   The 2009 beneficiary designation gave each of them a vested interest in the insurance proceeds without any preference.  Haynes v. Metro.   Life Ins. Co., 166 N.J.Super. 308, 313 (App.Div.1979).   The children cite no authority permitting a preference over Laura.   Thus, once the judge determined that Christine was entitled to $500,000 of the insurance proceeds, the remaining $500,000 had to be proportionally distributed in accordance with Scott's intent, as expressed in the 2009 beneficiary designation, that out of $850,000 not going to Christine, Laura would receive $600,0000 or 71%, and the children would receive a total of $250,000 or 29%.   Accordingly, from the remaining 50% of insurance proceeds, Laura was entitled to 71% or $355,000 and the children were entitled to 29%, $145,000 or $72,500 each.

Affirmed in part, and reversed in part.

FOOTNOTES

FN1. We use the parties' first names to identify them.   We mean no disrespect in doing so..  FN1. We use the parties' first names to identify them.   We mean no disrespect in doing so.

FN2. As of August 2007, the policy designated Christine as 50% beneficiary, each of the children as 12.5% beneficiaries, and Scott Sr.'s father as beneficiary of the remaining 25%..  FN2. As of August 2007, the policy designated Christine as 50% beneficiary, each of the children as 12.5% beneficiaries, and Scott Sr.'s father as beneficiary of the remaining 25%.

FN3. Because she had no proof that Scott Sr. suffered a change in financial circumstances, Laura withdrew this request at oral argument of the motion..  FN3. Because she had no proof that Scott Sr. suffered a change in financial circumstances, Laura withdrew this request at oral argument of the motion.

FN4. Laura also improperly attempted to revive her previously withdrawn request for a retroactive modification of alimony based on a change in financial circumstances, which the judge properly declined to address.   The judge also properly declined to address Laura's new legal theory, raised for the first time on reconsideration, that after payment to Christine, the remaining $500,000 should be distributed to her and the children in accordance with the statutory provisions for distribution of estate assets.  Cummings v. Bahr, 295 N.J.Super. 374, 384 (App.Div.1996).   Laura has raised this legal theory on appeal, which we decline to address as well.  Alloway v. Gen. Marine Indus., L.P., 149 N.J. 620, 643 (1997)..  FN4. Laura also improperly attempted to revive her previously withdrawn request for a retroactive modification of alimony based on a change in financial circumstances, which the judge properly declined to address.   The judge also properly declined to address Laura's new legal theory, raised for the first time on reconsideration, that after payment to Christine, the remaining $500,000 should be distributed to her and the children in accordance with the statutory provisions for distribution of estate assets.  Cummings v. Bahr, 295 N.J.Super. 374, 384 (App.Div.1996).   Laura has raised this legal theory on appeal, which we decline to address as well.  Alloway v. Gen. Marine Indus., L.P., 149 N.J. 620, 643 (1997).

FN5. Crowe v. De Gioia, 90 N.J. 126, 132–34 (1982)..  FN5. Crowe v. De Gioia, 90 N.J. 126, 132–34 (1982).

PER CURIAM