Opinion
Civil No. JFM-01-0007
July 21, 2003
MEMORANDUM
Donald Farb initiated this suit against Federal Kemper Life Assurance Company ("Kemper") claiming proceeds of a Kemper life insurance policy insuring the life of Charlotte Shaffer. Now pending before me is Kemper's motion for summary judgment on the amended complaint. For the reasons stated below, the motion will be granted in part and denied in part.
Farb has filed what he calls a cross-motion for partial summary judgment. Farb is actually requesting legal rulings on Kemper's motion for summary judgment. While I will be ruling in Farb's favor on some legal issues, I will deny his motion for partial summary judgment.
I.
On May 22, 1997, Leonard Kopp and Joseph DiPietro, as trustees of the "Shareholders Cross Purchase Agreement dated 11/17/92" ("SCPA"), applied for a life insurance policy with Kemper. The proposed insured was identified as Charlotte Shaffer. The owner/applicant was identified as SCPA. The beneficiary was designated as SCPA. No contingent beneficiaries were identified. Additionally, Kopp and DiPietro signed the application on the line for "Signature of Owner/Applicant, if other than Proposed Insured" as "Trustees."The SCPA is an agreement between Farb and Mrs. Shaffer, which provided in part that upon the death of either Farb or Shaffer, certain jointly owned business interests would be transferred from the decedent's estate to the surviving partner. The SCPA required the parties to maintain life insurance on each party's life in order to compensate the decedent's estate for its interest in the jointly owned property.
In March 1997, the SCPA was amended to reflect Shaffer's acquisition of Farb's interest in their kennel business, Ovation Kennels, Inc. Farb and Shaffer continued to jointly own certain real property.
On August 15, 1997, Kemper issued policy number FK2447591 (the "policy") to Kopp and DiPietro, insuring the life of Mrs. Shaffer for the amount of $400,000. The policy contained a suicide provision stating that:
We will limit the proceeds we pay under this policy if the insured commits suicide, while sane or insane:
1. within 2 years from the Date of Issue; and
2. after 2 years from the Date of Issue, but within 2 years from the effective date of the last reinstatement of this policy.
The limited amount will equal all premiums paid on this policy.
(Def.'s Ex. 2 at FK000461.)
On July 7, 1998, Mrs. Shaffer was found dead in the bedroom of her Damascus, Maryland home. The cause of death was a single gunshot wound to the head from a .45 caliber colt revolver. Shaffer's body, which was unclothed, was discovered by her husband, Richard Shaffer on the couple's bed. Upon discovering the body, Richard Shaffer contacted the Howard County Police Department and reported that his wife had committed suicide. Both the Howard County Police, after an investigation, and the doctor who performed the autopsy concluded that Mrs. Shaffer committed suicide.
On July 23, 1998, Sean Walsh, the general agent for the Shaffer policy notified Kemper that Mrs. Shaffer had died. Kemper advised Walsh that because the policy had been in effect for less than two years, an investigation was required. Additionally, Kemper advised Walsh that the beneficiary was the SCPA.
On August 12, 1998, Kopp and DiPietro completed a claimant's statement for the proceeds of the policy and submitted the necessary paperwork. Kopp and DiPietro's claim noted that they were the beneficiaries of the policy as the trustees under the SCPA. On April 15, 1999, Kemper advised Kopp and DiPietro that it had denied their claim pursuant to the suicide exclusion in the policy and tendered $1,149.60, the amount of premiums paid under the policy. Kopp and DiPietro deposited the check issued by Kemper on April 23, 1999.
On June 1, 1999, Farb filed an action in Circuit Court for Carroll County, Maryland against Kopp, DiPietro, Sheldon Singer, as personal representative of the estate of Mrs. Shaffer, Ovation Kennels, Inc. ("Ovation"), and Richard Shaffer. In that action, Farb alleged that the defendants had failed to properly obtain life insurance in the amount of $400,000 in violation of the SCPA. On June 1, 1999, Kopp and DiPietro wrote to Farb to inform him that they were resigning as co-trustees.
Farb brought this suit in his individual capacity on January 3, 2001. Essentially Farb alleged that Mrs. Shaffer did not commit suicide and, therefore, he was entitled to the full value of the Kemper policy. Farb made clear that he was pursuing his claim under the theory that the rights to the insurance policy had been assigned to him. The basis for this allegation was a document entitled "Settlement Agreement," dated November 28, 2000.
During discovery, Farb submitted to Kemper a copy of the Settlement Agreement, which was an agreement between Donald Farb and Lynn Farb, on one hand, and Ovation, Richard Shaffer, the Estate of Mrs. Shaffer, and Shelden Singer, on the other hand. In the Settlement Agreement, the Estate of Mrs. Shaffer, Mr. Shaffer, and Ovation assigned all interests that they may have had as beneficiaries of the Kemper insurance policy to Farb. Kopp and DiPietro, however, were not parties to the Settlement Agreement.
On May 14, 2002, Kemper informed Farb that it intended to challenge his standing to bring the action because the policy was not properly transferred or assigned to him by the alleged owners of the policy — Kopp and DiPietro. Thereafter, Farb petitioned the Circuit Court for Carroll County to appoint him successor trustee to the SCPA. On July 12, 2002, Farb's petition was granted.
On September 4, 2002, a motions hearing was held before me to address the then-pending motions for summary judgment. Following the hearing, I denied both parties' motions for summary judgment without prejudice and set forth a schedule for Farb to move to amend his complaint. On February 11, 2003, I issued a memorandum opinion granting Farb's motion to amend his complaint. Farb v. Fed. Kemper Life Assurance Co., 213 F.R.D. 264 (D.Md. 2003). In his amended complaint, Farb sets forth two causes of action: a claim against Kemper in his individual capacity and a claim against Kemper in his capacity as successor trustee.
II. A.
Kemper first moves for summary judgment on Count One — Farb's claim in his individual capacity. In Count One, Farb alleges that he is entitled to the full policy proceeds because "[a]ll persons and entities having any interest in the proceeds of the Federal Kemper contract have, for value received, assigned any interest in the Federal Kemper contract to Plaintiff, who is solely entitled to payment thereof." (Am. Compl. ¶ 6.) Farb's claim fails for three reasons.
First, the policy was not properly assigned to Farb. In addressing assignment, the policy provides:
You may assign this policy if you file the assignment or a certified copy with us. When filed, your rights and those of the beneficiary are subject to the assignment. No assignment is binding on us unless we receive it in writing. We are not responsible for the validity or sufficiency of any assignment. Any claim is subject to due proof of the interest of the assignee.
(Def.'s Ex. 3 at FK000461.) Kopp and DiPietro, however, never assigned the policy and were not parties to the Settlement Agreement. Additionally, no alleged assignment, including the Settlement Agreement, was ever filed with Kemper.
Second, Farb was not the owner of the policy. The policy provides: "While the insured is living you may change the owner by request." (Id. at FK000462.) Mrs. Shaffer died on July 7, 1998. Kopp and DiPietro made no attempt to change the ownership of the policy before that date. Moreover, the Settlement Agreement was reached more than two years after Mrs. Shaffer died.
Finally, Farb was not the beneficiary of the policy. The policy provides:
Unless otherwise provided by request, you may change the beneficiary while this policy is in force. We may require you to send the policy to us. Such changes is subject to any existing assignment of this policy. The change becomes effective when we record it. Once recorded, the effective date is the date the request was signed. The change is subject to any proceeds paid or other action taken by us before the change was recorded.
(Id.) The policy was no longer "in force" after Mrs. Shaffer died in 1998 and the only attempt to change the beneficiary occurred more than two years after Mrs. Shaffer's death and more than one year after Kemper tendered the premiums paid under the policy to Kopp and DiPietro. Thus, the beneficiary was not changed in accordance with the policy. Accordingly, summary judgment will be granted in favor of Kemper on Count One.
Farb has consistently maintained that the policy was assigned to him in the Settlement Agreement. In his opposition to Kemper's motion, he suggests for the first time, that the Settlement Agreement actually terminated the trust and assigned him only the right to pursue a claim against Kemper. (See Pl.'s Opp'n at 6-8.) This theory directly conflicts with Farb's successor trustee claim. Nevertheless, I will briefly address it. As an initial matter, even viewing the allegations in the light most favorable to him, Farb does not allege the trust was terminated in his amended complaint. For this reason alone, his termination theory fails.
Even assuming, however, that Farb had made allegations in his amended complaint consistent with his termination theory, the theory nonetheless fails. Farb argues that pursuant to section 13 of the SCPA, "[i]f after the death of a party a trustee herein appointed becomes disqualified or refuses to serve, a successor may be appointed by agreement of the parties . . . ." This provision, however, does not govern termination and is, therefore, irrelevant. Moreover, the clause in the Settlement Agreement that Farb alleges terminated the trust, provision 11, does not demonstrate any intention by the parties to terminate the trust and does not comply with the termination provision in the SCPA itself. Finally, even if the parties had validly terminated the trust in the Settlement Agreement, they still did not properly assign the policy to Farb under the requirements of the policy itself. Accordingly, Farb's new termination theory fails. Because I am granting summary judgment in favor of the defendant as to Count One, I will deny as moot a motion filed by Kemper to take additional discovery as to that count.
B.
Kemper next seeks summary judgment on Count Three — Farb's claim as successor trustee. Kemper argues: (1) Farb's claims as trustee are barred by the doctrine of accord and satisfaction; and (2) Farb's claims as trustee are barred by the statute of limitations. I have already addressed both of these issues in my opinion addressing Farb's motion for leave to amend his complaint. See generally Farb, 213 F.R.D. at 266-68 (D.Md. 2003).1.
In rearguing that accord and satisfaction applies, Kemper essentially asks me to reconsider my application of Parker v. Prudential Ins. Co., 900 F.2d 772 (4th Cir. 1990). In Parker, the Fourth Circuit held that in order to establish the affirmative defense of accord and satisfaction, a defendant must prove three elements:
1. a bona fide dispute has arisen between the parties as to the existence or extent of liability,
2. subsequent to the arising of that dispute, the parties entered into an agreement under the terms of which the dispute is compromised by the payment by one party of a sum in excess of that which he admits he owes and the receipt by the other party of a sum less in amount than he claims is due him, all for the purpose of settling a dispute, and
3. a performance by the parties of that agreement.
Id. at 776. Kemper contends that: (1) the second element enunciated by the Fourth Circuit is dictum; (2) the second element is not in accordance with Maryland law; and (3) the facts of Parker are distinguishable.
The Fourth Circuit's recitation of the elements necessary to establish accord and satisfaction is not dictum. The Fourth Circuit found that the second element had not been established as a matter of law in determining that the trial court erred in granting a directed verdict in favor of the defendant on the issue of accord and satisfaction. Id. at 776-77. Thus, that was necessary to the court's decision.
Parker is also in accordance with Maryland law. The Court in Parker specifically noted, "Maryland has adopted a similar formulation" of the elements of accord and satisfaction. Id. at 776 n. 4 (citing Air Power, Inc. v. Omega Equip. Corp., 54 Md. App. 534, 459 A.2d 1120 (1983)). Moreover, in the most recent Maryland case discussing the doctrine of accord and satisfaction, the court stated:
Accord and satisfaction is an affirmative defense. To prevail, the defendant must prove: 1) that a dispute arose between the parties about the existence or extent of liability; 2) that, after the dispute arose, the parties entered into an agreement to compromise and settle the dispute by the payment by one party of a sum greater than that which he admits he owes and the acceptance by the other party of a sum less than that which he claims is due; and 3) that the parties performed that agreement.
Wickman v. Kane, 766 A.2d 241, 245 (Md.Ct.Spec.App. 2001) (citing Air Power, 54 Md. App. at 538-39).
Finally, Parker is not factually distinguishable from this case in any material respect. In Parker, the defendant life insurance company sent the plaintiff a refund of the premium paid plus interest ($79.60), which the plaintiff cashed, because it determined that the plaintiff's husband had failed to disclose his smoking or drug usage in his application. The Court concluded:
[Defendant] has admitted from the beginning that, at minimum, it would have to refund the insurance premiums, regardless of what was said on the insurance application form. The dispute was not whether [Defendant] owed anything but whether it owed more than $76.90. [Plaintiff] could have reasonably accepted the amount conceded by [Defendant] and then pursued the disputed amount in court.
Parker, 900 F.2d at 777. Similarly, in this case, Kemper admitted from the beginning that, at minimum, it would have to refund Kopp and DiPietro the insurance premiums. The dispute was whether Kemper owed $1,149.60 or the full $400,000. The fact that Kopp and DiPietro did not proceed to pursue the remaining disputed amount in court does not necessarily demonstrate accord and satisfaction — especially considering that within a month and a half of receiving the check for $1,149.60, Kopp and DiPietro attempted to resign as trustees. Accordingly, I will not reconsider my previous ruling denying Kemper's summary judgment motion based upon accord and satisfaction.
In support of its argument, Kemper cites Hopkins Constr. Co. v. American Building Co., No. Civ. JFM-99-2691, 2000 WL 1481646 (D.Md. Aug. 25, 2000), where I held that the plaintiff's acceptance and cashing of a check for $25,000 constituted accord and satisfaction. Hopkins is distinguishable for at least two reasons. First, unlike in this case, the defendant did not admit from the beginning that it owed plaintiff, at minimum, $25,000, and then simply issue a check for that amount. Second, the cover letter accompanying the check in Hopkins made clear that the check was intended to satisfy all claims. Id. at *2. In this case, the accompanying letter did not explicitly state that it was intended to satisfy all claims. (See Def.'s Ex. 8 at FK 000403 ("If you believe there are any additional facts which should be taken into consideration by the Company, or if you have any additional information for us to review, please let us know and we shall be happy to again evaluate this matter.").)
2.
Kemper next argues that Farb's trustee claim is barred by the statute of limitations. Kemper argues that the trustees' claims against it began to accrue on April 23, 1999 — the date Kopp and DiPietro deposited the Kemper check. Because Farb was not appointed successor trustee until July 17, 2002 — more that three years after the statute of limitations began to run — Kemper asserts that Farb's claim as trustee fails.
Kemper, however, completely ignores the application of Fed.R.Civ.P. 15(c). For the reasons stated in my previous opinion, Farb's amended claim as successor trustee is not barred by the statute of limitations. See Farb, 213 F.R.D. at 266-68.
A separate order is being entered herewith.
ORDER
For the reasons stated in the accompanying memorandum, it is, this 21st day of July 2003 ORDERED that
1. Defendants' motion for summary judgment on the amended complaint is granted in part and denied in part;
2. Plaintiff's motion for partial summary judgment is denied; and
3. Summary judgment is granted in favor of Defendant as to Count I.