Opinion
Case No. A1-03-116, Docket No. 27.
December 20, 2004
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Before the Court is the Defendant's Motion for Summary Judgment filed on September 29, 2004. The Defendant also requested an evidentiary hearing on the matter. On December 7, 2004, the Plaintiff filed a response opposing the motion. For the following reasons, the motion is granted.
I. BACKGROUND
A non-party, Castenada C. Hanning, was a resident of North Dakota. She was married to Roy W. Hanning. In 1995, Castenada Hanning and Roy Hanning prepared Powers of Attorney designating each other as a Power of Attorney over the other's affairs including their finances. Castenada's niece, Connie Neumiller, was granted a secondary Power of Attorney and would become the Power of Attorney for the remaining spouse upon the incapacitation or death of either.
On April 28, 1998, Castenada Hanning executed her will which provided the following: (1) ten percent of her estate and designated land would go to her sister Lavina Hofer; (2) ten percent of her estate and forgiveness of a loan would go to her brother Marvin Hofer; (3) twenty percent of her estate would go to three relatives of her deceased husband Roy; and (4) twenty percent of her estate would go to each of her three nieces; Gayle Redmond, Connie Neumiller, and Karen Lelm.
Article VI of Castenada Hanning's will provided that non-probate assets, namely annuities, would go to charities. It provided in relevant part:
C. By way of explanation, I am at the present time purchasing annuities and other investments which will not be part of the probate process with my surviving spouse as the primary beneficiary, and various charities acting as contingent beneficiaries who will take the annuities at the death of the second to die between my spouse and myself.
D. It is my intent to avoid paying as much estate tax as possible by making these non-probate assets described in subsection C payable to charities. . . .See Defendant's Ex. B.
In 1998, Castenada Hanning expressed concern to her financial advisor, Teddi Jo Paulson of American Express Financial Advisors, Inc. ("AEFA") that Connie Neumiller, when she became the Power of Attorney, would not fulfill her wishes regarding the charitable designations on her annuities. As a result, the AEFA office in Jamestown corresponded with Bismarck attorney Clark Borman regarding ways to prevent the change of beneficiaries.
Similar discussions took place between Castenada Hanning and Paulson in July of 2000. Paulson's notes reflect Castenada's continued concern. In her notes, Paulson refers to Castenada Hanning as "Cassie." The notes read in relevant part:
7/28/2000: met with Cassie to review beneficiaries and confirm that the amounts going to each beneficiary are correct [. . . .] Cassie expressed some concern that POA, Connie Neumiller, her niece, doesn't think much of the church and thought that giving money to the church wasn't a good idea.See Defendant's Ex. 1; Paulson Aff., ¶ 8. Paulson advised Castenada Hanning of possible solutions but no further action was taken at that time.
On August 25, 2000, Roy Hanning passed away. As a result, Connie Neumiller ascended to attorney-in-fact for Roy Hanning based on the Power of Attorney executed in 1995.
On September 14, 2000, after Roy's passing, Castenada Hanning met with Paulson to get the estate in order. Paulson's notes from that meeting reveal that she was becoming concerned about Neumiller's intentions:
9/14/2000: met with Cassie to help her get Roy's estate in order. Roy died 8/25/00 and it was fairly expected. We signed annuity settlement forms for all of Roy's annuities at AEFA (4) and for the two TC accounts here. There is a TC account at Ed Jones, and the HH bonds at the bank are just in Roy's name. Connie Neumiller, the POA and niece, was there and Cassie sent me to lunch with her while Cassie was getting treatment at the hospital. I felt very uncomfortable around Connie, her sisters Gayle and Karen and their mother (Cassie's sister-in-law). They went on to tell me that they felt like Cassie was rude to Connie expected her to do a lot of work helping Cassie write checks and go through her mail, etc. . . . They also wanted to have Cassie move her bank accounts all to Turtle Lake so it would be easier to manage. They also thought it would be good to have Connie's name on the checking account in case Cassie had a stroke and the POA kicked in. Since Cassie had been in the nursing home (swing bed at the hospital) she has been paying to keep her apt. and they want her to get rid of it. They also think Connie should get paid to write check [sic] and stuff for Cassie. I felt like they were ganging up on me to try to influence Cassie to do what they wanted. I did agree that it may be in Cassie's best interest to have as many of her things consolidated as possible and maybe have Connie's name on the checking account. I said I would discuss things with Cassie, but not all at once.
After lunch Connie (alone) expressed concern that Cassie was leaving so much money to churches and such and that Connie didn't think that was right. She even suggested that her kids were in low tax brackets and they could be put on the annuities.
When I was alone with Cassie I discussed consolidating assets from Ed. Jones and the banks and once that was done considering to start gifting money to the churches while Cassie still was able to do so (and before Connie becomes POA). Based on past discussions with Cassie, she questions Connie's feelings about the charities and wonders if Connie will carry out Cassie's wishes. Based on Connie's discussion with me, I question it too. I will contact an attorney and see what Cassie's options are.See Defendant's Ex. 1; Paulson Aff., ¶ 9.
Periodically, over the next nine months, Castenada Hanning would express her concerns to Paulson about Connie Neumiller. The relevant notes read as follows:
6/6/2001: Cassie's concern is that Connie, if she were acting as POA in the event of Cassie's incapacitation, would change beneficiaries on the annuities, which are currently designated to go to various churchs and charities. Connie had made comments to me, too, at different times in Turtle Lake that made me concerned about the same thing. She said "no church should get $50,000 at one time. Then they can do with it whatever they want . . . I wish she (Cassie) would change the beneficiary on some of those annuities to my kids. They wouldn't have a tax problem." This concerned me.
6/7/2001: called Cassie to discuss adding codicil to will to prevent unwanted changing of beneficiaries on annuities in the event of incapacity. She liked that idea and I offered to call David Lindell (atty) and have draft a document and send it to her at the hospital.
6/11/2001: call to set appointment with Cassie and David Lindell to come to hospital and discuss options available to Cassie so the beneficiaries cannot be changed by POA acting against Cassie's wishes.See Defendant's Ex. 1; Paulson Aff., ¶ 10.
On June 21, 2001, Castenada Hanning met with Paulson and attorney David Lindell. Hanning and Paulson expressed their concern about Connie Neumiller and attorney Lindell suggested that the annuity beneficiaries could be made irrevocable. Hanning agreed with Lindell's suggestion. Paulson completed seven change of beneficiary forms and hand wrote the word "Irrevocable" on the cover page of each. Hanning signed each of the seven forms. No further alterations were made to the boiler-plate change of beneficiary forms. See Defendant's Ex. 2.
On June 9, 2002, Connie Neumiller called Paulson and told him that Castenada Hanning wished to change the annuity beneficiaries. The next day, Neumiller faxed a letter purportedly written by her and Hanning that set forth how the annuity beneficiaries were to be changed. The letter was dated May 25, 2002. The exact text of the letter provides as follows:
Being fully aware of all decisions, I fully give my P.O.A. Connie Neumiller fully responsibility the just say in how all my annuities will be distributed. She has my full authority to add the following beneficiaries to each one of my annuities. I wish to share a portion to the following:
9.5% Marvin or Clarice Hofer
9.5% Gayle Redmond
9.5% Connie Neumiller
9.5% Karen Lelm
9.5% Mitchell Neumiller
9.5% Carmen Maier
9.5% Ryan Lelm
9.5% Brittany Lelm
9.5% Sonja Redmond
9.5% Lavina Hofer
5% To each named organization that is already listed on each of my contracts.
This is my wishes, Castenada C. Hanning requests at this time dated 5-25-02.See Defendant's Ex. D. The letter was signed by Castenada Hanning and Connie Neumiller along with two witnesses. The witnesses only viewed Neumiller signing the letter and they were not privy to its contents.
Castenada Hanning passed away on June 11, 2002. The defendant, AEFA, did not honor the letter and paid the proceeds from the various annuities to the charitable entities designated by Hanning as beneficiaries. Pursuant to Hanning's will, the devisees received approximately $710,000 and the designated charities received approximately $466,000.
On August 25, 2003, the Plaintiffs filed an action against AEFA in the South Central Judicial District in the State of North Dakota. The Plaintiffs, whose names appear in the May 25, 2002, letter, alleged that AEFA denied them their rightful distributions from Hanning's annuities which amounted to a breach of contract. On September 23, 2003, AEFA removed the action to the United States District Court for the District of North Dakota pursuant to 28 U.S.C. §§ 1441(a) and 1446.
II. STANDARD OF REVIEW
It is well-established that summary judgment is appropriate when, viewed in a light most favorable to the non-moving party, there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Graning v. Sherburne County, 172 F.3d 611, 614 (8th Cir. 1999). A fact is "material" if it might effect the outcome of the case and a factual dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The basic inquiry for purposes of summary judgment is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. Quick v. Donaldson Co., Inc., 90 F.3d 1372, 1376 (8th Cir. 1996). The moving party has the initial burden of demonstrating to the Court that there are no genuine issues of material fact. If the moving party has met this burden, the non-moving party cannot simply rest on the mere denials or allegations in the pleadings. Instead, the non-moving party must set forth specific facts showing that there are genuine issues for trial. Fed.R.Civ.P. 56(e). A mere trace of evidence supporting the non-movant's position is insufficient. Instead, the facts must generate evidence from which a jury could reasonably find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
III. LEGAL DISCUSSION
The Defendant's argument in support of summary judgment is twofold: (1) the charities were irrevocable beneficiaries and their consent was required for any change in beneficiary which consent was not given; and (2) there is a presumption of undue influence on the part of Castanada Hanning that cannot be overcome.
A. IRREVOCABLE BENEFICIARIES
"When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone if possible. . . ." N.D. Cent. Code § 9-07-04. The North Dakota Supreme Court has held that the "[c]onstruction of a written contract is a question of law." Garofalo v. Saint Joseph's Hospital, 615 N.W.2d 559, 561 (N.D. 2000). "If the intent of the parties can be ascertained from the agreement alone, interpretation of the contract is a question of law." Id. "Whether a contract is ambiguous is a question of law." National Bank of Harvey v. International Harvester Co., 421 N.W.2d 799, 801 (N.D. 1988). "A contract is ambiguous when rational arguments can be made for different positions about its meaning." Id. "Extrinsic evidence is properly considered if the language of the agreement is ambiguous and the parties' intentions cannot be determined from the writing alone." Miller v. Schwartz, 354 N.W.2d 685, 689 (N.D. 1984). The Supreme Court has said that "an unambiguous contract is particularly amenable to summary judgment." Rogstad v. Dakota Gasification Co., 623 N.W.2d 382, 387 (N.D. 2001) (citing Garofalo v. Saint Joseph's Hosp., 615 N.W.2d 160 (N.D. 2000)).
North Dakota law provides that "[t]he language of a contract is to govern its interpretation if the language is clear and explicit and does not involve absurdity." N.D. Cent. Code § 9-07-02. Contracts should be interpreted as a whole and the "words of a contract are to be understood in their ordinary and popular sense." See N.D. Cent. Code §§ 9-07-06 and 9-07-09.
Following North Dakota law, the Court finds that the change of beneficiary forms, taken as a whole, are unambiguous and that the parties' intentions, as expressed by the language used in the forms, can be ascertained from the writing alone. All seven change of beneficiary forms signed by Castenada Hanning contain the word "Irrevocable" at the top. See Defendant's Ex. 2. The word "Irrevocable" is unambiguous and clear. The Plaintiffs only argument as to why the change of beneficiary forms are ambiguous is the existence of a "Right of Revocation Reserved" clause which appears on page 2. The clause provides as follows:
Right of Revocation Reserved. The right to revoke this instrument and to change the designated beneficiaries upon written notice to, and acceptance by, the Company is reserved to the Owner without the consent of the revocable beneficiaries. Unless a specific contrary provision is contained herein, election of a different settlement option, consistent with Policy/Contract provisions, may be made after the Insured/Annuitant's death by the beneficiary or class of beneficiaries then immediately entitled to demand and received full payment of the proceeds.Id. A plain reading of the clause reveals that there is no contradiction in terms. Pursuant to the revocation clause, Castenada Hanning retained the right to revoke the instrument or change beneficiaries without the consent of the revocable beneficiaries. By including the word "Irrevocable" at the top of each page of the beneficiary forms, it is clear that the intent was to create irrevocable beneficiaries in the annuities. The creation of irrevocable beneficiaries and the "Right of Revocation Reserved" clause are not in conflict, but mutually exclusive.
Further, any contradiction in terms is rectified by Section 9-07-16 of the North Dakota Century Code which provides as follows:
Written part of contract controls printed part. When a contract is partly written and partly printed, or when part of it is written or printed under the special directions of the parties and with a special view to their intention and the remainder is copied from a form originally prepared without special reference to the particular parties and particular contract in question, the written parts control the printed parts and the parts which are purely original control those which are copied from a form and if the two are absolutely repugnant the latter must be disregarded insofar as such repugnancy exists.
N.D. Cent. Code § 9-07-16; see Olson v. Peterson, 288 N.W.2d 294 (N.D. 1980) (holding that where a provision was typewritten and obviously added to a contract which otherwise was on a printed form, to the extent that there was a conflict the added provision controlled over the form).
The parties agree that the word "Irrevocable" was hand-written on the top of boiler-plate change of beneficiary forms. Following Section 9-07-16, the Court should disregard the pre-printed "Right of Revocation Reserved" clause and rely on the hand-written heading. Because the contract in question is unambiguous, the Court is not permitted to look at extrinsic evidence. See Roen Land Trust v. Frederick, 530 N.W.2d 355, 357 (N.D. 1995) (citingSchmitt v. Berwick Township, 488 N.W.2d 398, 400 (N.D. 1992)) ("if the language of the contract is clear and unambiguous, and the intent is apparent from its face, there is no room for further interpretation."). The Court finds that the intent of the change of beneficiary forms signed by Castenada Hanning on June 21, 2001, was to create irrevocable charitable beneficiaries for her annuities.
It is also well-established that "[w]here the policy of life insurance does not reserve any power to change the beneficiary, the beneficiary acquires a vested interest under the policy as soon as it becomes effective, particularly when the policy expressly states that the beneficiary may not be changed." Lee R. Russ Thomas F. Segalla, Couch on Insurance § 58:11 (3d ed. 2004); see Anderson v. Northern Dakota Trust Co., 288 N.W. 562, 563 (N.D. 1939). "In accordance with the rule that a beneficiary of an ordinary life insurance policy that does not authorize a change of beneficiary acquires a vested and absolute interest, which cannot be divested without the beneficiary's consent, and because an absolute agreement has the effect of divesting the named beneficiary of any interest in the policy, the insured cannot assign such a policy without the beneficiary's consent. . . ." 44 Am. Jur. 2d Insurance § 793 (2004).
By creating irrevocable beneficiaries, Castenada Hanning gave up the power to change beneficiaries in the future. Any attempt to do so would be ineffective without the consent of the irrevocable beneficiaries. Hanning purportedly made such an attempt in the letter written on May 25, 2002. However, the letter did not contain the consent of the irrevocable beneficiaries and, without such consent, the letter could not alter the beneficiaries of the annuities. The Court finds that AEFA properly distributed the proceeds to the charitable beneficiaries as specifically designated by Castenada Hanning in the June 21, 2002, change of beneficiary forms. No future act was legally sufficient to alter those contractual agreements. As a result, the Court finds there are no genuine issues of material fact for a jury to resolve regarding the breach of contract claim.
B. UNDUE INFLUENCE
The parties agree that Connie Neumiller is a trustee and agent under North Dakota law, and as trustee and agent, she owed a fiduciary duty to Castenada Hanning. See N.D. Cent. Code through 59-01-19; see also In re Estate of Mehus, 278 N.W.2d 625, 629 (N.D. 1979) ("[b]ecause the power of attorney creates an agency relationship, the principles of the law of agency are applicable in determining the authority and duites of an attorney-in-fact."). As a result, Neumiller was "bound to act in the highest good faith" toward Hanning and was prohibited from obtaining "any advantage therein over [Castenada Hanning] by the slightest misrepresentation, concealment, threat, or adverse pressure of any kind." N.D. Cent. Code § 59-01-09;see In re Estate of Mehus, 278 N.W.2d 625, 631 (stating "an agent is a fiduciary and has an obligation to his principal analogous to that of a trustee towards his beneficiary, and that the acts of the agent will be judged with substantially the same degree of strictness as those of a trustee."). The parties also agree that a statutory presumption of undue influence arises under Section 59-01-16 of the North Dakota Century Code, which provides as follows:
Section 59-01-08 of the North Dakota Century Code provides:
One assuming relation of personal confidence is trustee. Everyone who voluntarily assumes arelation of personal confidence with another is deemed a trustee within the meaning of this chapter not only as to the person who reposes such confidence, but as to all persons of whose affairs the person thus acquires information which was given to the person in the like confidence, or over whose affairs the person, by such confidence, obtains any control.
Presumption against trustee. All transactions between a trustee and the trust's beneficiary during the existence of the trust or while the influence acquired by the trustee remains, by which the trustee obtains any advantage from the trust's beneficiary, are presumed to be entered into by the latter without sufficient consideration and under undue influence.
Neumiller would have received a substantial monetary benefit if the annuity beneficiaries were changed by the letter she co-authored on May 25, 2002. See In re Zins, 420 N.W.2d 729, 730 (N.D. 1988) ("if a person assumes a relation of personal confidence he becomes a trustee, and any transaction he enters into with the other person by which he gains an advantage is presumed to be made under undue influence."). However, the Court need not address the issue of whether the presumption of undue influence has been rebutted. In light of the Court's finding that summary judgment is appropriate on the contract claim, the issue of whether undue influence occurred need not be addressed. IV. CONCLUSION
The Court notes that the presumption of undue influence is strong in this case whereas evidence to rebut the presumption is weak.
The defendant American Express Financial Advisors' Motion for Summary Judgment (Docket No. 18) is GRANTED. The Defendant's request for an evidentiary hearing is denied as moot.
IT IS SO ORDERED.