No. 91-483 IN THE SUPREME COURT OF THE STATE OF MONTMA

BURKE A. ESCHLER, LORI L. ESCHLER and JAM1 G. ESCHLER, individually and as Co-Personal Representatives of the ESTATE OF JAMES P. ESCHLER, Deceased, and SHARON L. ILLE, Plaintiffs and Appellants,

-vJANET ETHEL ESCHLER and MUTUAL BENEFIT LIFE INSURANCE COMPANY, a New Jersey corporation, Defendants and Respondents.

APPEAL FROM: District court of the ThirteenthJudicial District, In and for the County of Yellowstone, The Honorable G. Todd Baugh and Maurice Colberg, Judges presiding.

COUNSEL OF RECORD: For Appellant: AllenD. Gunderson,Todd D. Gunderson,Gunderson Law Firm, Billings, Montana, for Sharon L. Ille: Jerome J. Cate,Cate Law Firm, Whitefish, Montana forBurke A. Eschler, Lori L. Eschler and Jami G. Eschler For Respondent: DonaldL. Harris, StevenR. Milch, Crowley,Baughey, Hanson, Toole & Dietrich, Billings, Montana, for Janet E. Eschler

Submitted on Briefs: November 12, 1992

Filed: Decided: March 26, 1993stice R. 6,McDonough delivered the Opinion of the Court.

This isanappeal fromthe Thirteenth Judicial DistrictCourt, County of Yellowstone, of two orders the Defendant. We affirmThe sole issue 

### on appeal iswhether the District Courts erred in granting s ry judgments in favor of the Defendant Janet Eschler {Defendantj. Janet and James Eschler (Eschler)were divorced in August of 1989 afterapproximately 16years ofmarriage. Although therewere no childrenborn of thismarriage, JamesEschlerhad three children from a previous marriage. At the time of his death, October 2, 1383, James Eschler was engaged to be married to Sharon Ille (Ille)

# . Defendantwas thenamedbeneficiaryof threeof Eschler's life insurance policies at the time of his death. Two policies were issued by Minnesota Mutual Life Insurance Company (Minnesota Mutual), one dated January 1, 1980 for the amount of $50,000 and

one dated December 1,1983 for the amount of $100,000. In 1986,he purchased a $75,000 life insurancepolicy fromMutual Benefit Life

(Mutual Life). Shortly before Eschler and Defendant's dissolutionwas final, Eschler requested a change of beneficiary form for his two Minnesota Hutual insurance policies and tine company forwarded the required forms. The forms were sent with specific instructions which stated in part: Here 

### is the Change of BenefFeia whichyou recently
2requested for the above numbered policy. Please complete, date, and sign this form and return all copies in the envelope provided,,, en %he form is received in our office, it will be endorsed and a copy will be returned to you for attachment to the above numbered policy, Eschler filled out part of the Po B providing for change of beneficiary. He wrote the names of his children as the new beneficiary under the $50,000policy and the name of his fiance&, Sharon Ille, as the primary beneficiaryv and his three children as contingentbeneficiaries on the $100,000 olicy, However, Eschler did not provide the required addresses and social securitynumbers of the new beneficiaries nor did he sign or date the forms. They

were never mailed to Minnesota Mutual. These forms were found among Eschlersspersonal effects after his death. On August 7, 1989, Eschler purchased a new life insurance policy fromMutual Benefit for $100,000naming Ille, his fianceeas the primary beneficiary and his children as contingent beneficiaries. On August 8,1989,Eschler increased the amount of the policy to $250,000 and this change became effective on September 14, 1989. On September 21, 1989, he changed the beneficiary designation. Ille was to receive forty percent of the proceeds of the $250,000 and each of his children was to receive twenty percent of the total proceeds. Eschler made no changes on his other Mutual Benefit policy, which named Janet Eschler the beneficiary of the policy for $95,060. However,he did not make the premiumpa ent due on this policy on August of 1989. Eschlergsdeath from suiefde on October 2, 1989 lef 3payment on these four insurance policies somewhat open to Mutual Benefit did not pay on the $250,000 policy because of a suicide exclusion clause. Ille and the Eschler children dispute the clai~ that Janet s~hier 

### is e baneficia the remainin three insurance policies, nk is proper i the record discloses no genuine issues of material fact, and the moving party is entitled to judgment as a natter of law.'* Kaseta

v. N. Western Agency of Gr. Falls (1992), 252 Mont. 135, 138, 827 P.2d 804, 806. "[Olur standard of review relating to conclusions of law.. .is whether the tribunal's interpretation of the law is correct." Steer Inc. v. Dept. of Revenue (1990), 245 Mont. 470,

Ille and the Eschler childrenmake three arguments as to why they are the beneficiaries of the insurance policies which remain valid. First, they assert the property settlement agreement, incorporated into the decree at the dissolution sf Defendant and Eschlerls marriage, terminated Defendant's rights as the beneficiary of the life insurance policies. Second, they argue that the fact that Eschler filled in the names of the new beneficiaries on the change of beneficiary forms, evidenced an intent by Eschler sufficient to change the beneficiary of the two liiinnesotaHutual insurance policies. Third, 111e and the Esrshler children argue that when Eschler purchased the $75,000Mutual Life insurance policy, he actually designated himself, the owner as the beneficiary, and not Defendant. If he was the designatedbeneficiary, the proceeds sf the policy would pass through his estate to llle and the Eschler children. Plaintiffs contend that the trial courts were premature in granting au at 

### in favor ef endant bec proparty settlement agreement gives rise to a question of material fact on the issue of who is the rightful beneficiary. They claim that Soha u. West (1981), 196 Plent. 95, 637 P.2d 1185,establishes the rule of law that a general property settlement agreement gives rise to this question of material fact. In 

## , Frederick Soha and Cynthia West were married and lived together as husband and wife for 79 days. They separated shortly thereafter and executed a property settlement and separation agreementwhichwas later incorporated intotheir decree of dissolution. The agreement contained a mutual release that stated: Inconsiderationof the execution of this agreement, and the terms and conditions thereof, each party hereto releases and forever discharges the other party, his or her personal representative,and assigns fromanyand all right, claims, demands and obligations except as herein specifically provided and each party is forever barred from having or asserting any such right, chiat, demana or obligation at any time hereafter for any purpose... Soha 637 P.2d at 1189. The settlement agreement contains a full r disclosure provision which states: Each of the parties hereto represents and warrants to the other as an integral part of this agreement that there has been a full disclosure of assets between parties. Soha 637 P.2d at 1187. Frederick Soha never told his wife about -I the life insurance policy nor did he tell her that she was theprimary beneficiary, Several months later, Frederick Soha die in an accident, leavingbehind the life insurance policy naming CynthiaWest as the arents as conti beneficiaries, This Court, inreversingthe trial court" grant of ent for Cynthia West, dete ined that the "intent s thedecedent as to the 

### effect sft epolicybeneficia designation in the light of theproperty settlement agreementa is a question of fact. 

## w, 637 P.2d at 1187. The Court also stated that Frederick's failure to reveal the presence of the insurancepolicy may have been a breach of the full disclosure provision. Therefore, the Court concluded that the trial court needed to conduct furtherproceedings to determine the nature and extent of the parties*consents to the property settlement agreement. The present case differs from

## w in three minor respects. First, the Sohas lived together as husband and wife for only 79 days whereas the Eschlers were married for 16 

### m. Second, Cynthia West was unaware of an insurancepolicy naming her as the beneficiary but Janet Eschler was fully aware of the three insurance policies naming her as primary beneficiary. The third difference is the mutual release clauses in the two settlement agreements. The Sohas had a very general property settlement agreement with a general mutual release clause. The only specific asset listed was the house Frederick Soha purchased before he married Cynthia. Janet and James Eschler had a very detailed propertysettlement agreement, plus the general release clauses. The agreement contains an itemized division of real property, automobiles, retirement accounts, debt liability and articles of

The following are the eneral release clauses: 5. Waiver of Pr hts. Afl money received by the es pursuant he the separatepropertyof the respective parties, freeand clear of any right, interest, or elaila of the other party, and eachparty shall have the right to deal with, and dispose of, his or her separate property, both real and personal, as fullyand effectively as if the parties had never been married. 6. Waiver of Support Rights. Except as expressly provided in Paragraph 3 of this Agreement, each party shall be fully released by the other fromany obligation for alimony, support, maintenance, attorney's fees, or court costs,and eachpartyacceptstheprovisions herein in full satisfaction sf all property rights and all obligations for support or otherwise arising out of the marital relationship of the parties. Eachparty, except with respect to payments accruing hereunder, hereby releases the otherparty and his or her respective legal representatives,successors,and assigns, fromany claim of any kind, and specifically relinquishes any right, title, or interest in or to any earnings, accumulations, future investments, money, or property of the other party. 7. Waiver of Rights to Estate, Etc. Except as set forth herein, @ach of the parties waives all rights of inheritance in the estate of the other, any right to elect to take against the Will of the other, and the right to act as executor or administratorof the Will or estate of the otherparty. TheWife expresslywaives the right to claim or receive family allowance from the estate of the Husband. Each of the parties waives any additional rights which suchparty has, or may have, by reason of their marriage, including rights of dower or curtesy,except the rights saved or createdby the terms of this Agreement.



# . , * 9. Hutual Release and Division of Debts. In consiaeration of the execution of this Agreement ancl other terms and conditions thereof, each of the parties hereto releases and forever discharges the other party, his or herpersonal repre ves and assigns, fromany and all rights, claims, 

## ,and obligations, exceptas herein specifically provided; and each party is forever barred from having or asserting any such rights, s, or obliga any time for any purpose, It is hereby agreed that the personal obligations hereinabove set forth and the personal obligations hereinafter incurredby the parties shall.be and remain their respective obligations, shall pay and hold the other free and ha obligations or bills for merchandise or se sequent to date of Decree.



# . .. 15. Entire Agreement. The parties hereto understand and agree that this written ligre represents the entire agreement between the Wife and Husband; and further, that there are no promises, agreements, understandings, or representations of any kind other than those contained herein. Although there were conflicting affidavits from both parties concerning Eschler's intent in signing the property settlement, there is

## no mention anywhere in the settlement agreement about any insurance or any of the insurance policies, even though both parties knew the policies to be assets BE the marriage. In bath this case and

# m,there is no mention of insurance assets. The parties have also put forward positions relative to the effect of a property settlement agreement on a beneficiary designation as discussed in Sowell v, Teachers' Retirement System (19841,214Hont. 290, 693P.2d 1222, althoughthe action~0nCerned teacher retirement benefits. The decedent's widow brought an action to declare her rights under retirement and death benefits for an account initiatedby the decedent whenhe wasmarried tohis firstwife. The Court concluded that thedecedent's ex-wife should receive his retirement benefits because she was nominated by a written designation filed with the retirement board. This conclusion was reached even though she and the decedent executed aproperty settlement agreement. The Court noted tha the general release la age in the agreement did not l'specifically cover Carolyn's inchoate right to

re event,

## " Sowell, 693 P.2& st 1224- The Court distinguished because, although the release language was similar in both property settlement agreements, the teacher retirement benefits were to be pai according to a specific statute,which provided that the benefits be paid to the estate or the beneficiary designated by the retirement and death benefit application. The Court also noted that Mr. Sowell had done nothing to indicate an intent to change the beneficiary designation. The present issue is whether Defendant contracted away her interest as beneficiary om Eschler's life insurancepoiicies when she entered into the property settlement agreement. Girard v. Pardun (S.D. 1982), 318 N.W.2d 137. Girard cites the general rule in such cases: In conseqblence of the fact that ordinarily divorce does not affect the right of the named beneficiary, it follows that where the husbanc? does not change the beneficiary of hispolicy afterhavingbeendivorced, the divorced wife is entitled to the proceeds of the policy upon the death of the insured. Thedivorcedwifemay, however,have surrendered her right asbeneficiary by a property settlement agreement, which may or may not have been incorporated into the decree of divorce. For example, a divorce decree thehusband all insurance policies on his life divested the wife of any interest shemight have as a beneficiary under a policy conceded to be cornunity property. Likewise, where the property settlement agreement contemplated a disposition of all property rights and other matters and soecifically described a lifepolicy inwhich thewifewasbeneficiary and stated that the husband was to receive 

### the policiesfree and clear of any claims of the wife thereto, the wife waived and relinquished all right to the insurance proceeds of the policy in which she was beneficiary and that divestment was complete when the agreement was executed and incorporated into the divorce decree, notwithstanding that at the time of the insured's death as still the 

# '.. Moreover, while a settlfment agreement may require the beneficiary wife to surrender or 'turn over' the policy to the insured, that fact alone does not destroy her rightasbeneficiarywhere the insured thereafterdid not change her designation as beneficiary. Whether a property settlement agreement should be deemed to bar the divorced wife is a question of the construction of the acgreeinent itself. Where there is no provision that the effecting of the settlement agreement shoulddeprive her of her rightsasnamedbeneficiaryand she in fact remains named asbeneficiary, the settlement agreement will not be siven a broader scope than its express terms specifyand shewill not be barred fromher right as the named beneficiary. Girard, 318 N.W.2d at 138-139. (Emphasis in original.) (Citation oroitted.) The Girard Court continued,

The agreement does not contain a renunciation of her expectancy in the policy and, absent such a specific disclaimer, we will not construe the agreement so as to include a renunciation of her right to take as beneficiary under the policy. It is not the duty of the court to make new contracts for the parties, but merely to interpret the one as written, The agreement has 

### no application to the policy itself. Girard, 318 N.W.2d at 139. (Emphasis in original.) (Citation omitted.) Defendant here claims that the property settlement agreement did not divest her of her right to the proceeds of the policies. We agree with the Defendant. As the District Court stated: @&No specific mention is made in the settlement agreement of any life insurance of either of the parties or beneficiary designations related to life insurance policies." We agree with the logic inGirard and conclude that a mutual release,which does not mention insurance, in a property settlement agreement, does not divest a former spouse of the right to the proceeds of insurance policies

policy. As in Sowell, the Defendant did not relinquish her *fiinchoate right to acquire property upon the happening of a future

A cogent statement of the policy reasons for this conclusion is contained in Nunn v. Equitable Life Assur. Society, Etc. (N.D. 1979), 272 N.W.2d 780,which states: Theplaintiff ia inthis casearguing that in effect the person entitled to the proceeds of the policy is whoever the decedent intended it to be, even if not the named beneficiary. It requires little imagination to envision the mischief that would be caused by the adoption of such a rule. Disputes among friends, relatives, and heirs of the decedent would be a regular occurrence. Insurance companies presumably invariably deposit theproceeds incourtbecause they couldnot rely on their records. The adoption of such a rule, in the long run, would be detrimental to the administration of justice, just as it would be if permitted in the case of wills or land transfers. It should also be observed that we are not dealing here with 

### a situation inwhich the decedent did anything within his power to effectuate his intention. The proble~ was caused by the decedent

### *s ow. carelessness. It would have been a simplematter for him to determine who was, in fact, the beneficiary of the policy. The result may be unfortunate, but that condition alone no more furnishes justification for the Court to intervene than it would in the case of errors of judgment or frustrated expectations in the case of contracts generally. 

## m, 272 N.W.2d at 781-782. ( hasis in original.f We find these reasons apply to the present action as well. &&,g is expressly overruled on this point. See also; Prudential Ins. Co. 

### v. Weatherford 

### (Or. l98O), 621P.2d 83;Nicholsv, Nichols (Texas 1987): 727 S,W,Z& 303, Plaintiffs8 second contention is that the fact that Eschler filled in the names of the new beneficiaries on the change of

s for the Piinnesots; Nutua intent sufficient to change the beneficiaries on the twopolicies, The view taken by the majority of courts is that a change of beneficiary can be effected without complete compliance 

### with the provisions of the policy regarding notice and endorsement. The courts upholding this view accept substantial compliance as a sufficient standard fordeteminingwhe eravalid change sfbeilefieia~y has been effected....The test to establish whether substantial compliance hasbeen satisfiedhas twoprongs: There must be evidence that (1) the insured had determined to change the beneficiary, and (2) that the insured had done everythingto thebest ofhis abilityto effect the change. IDS Life Ins. Co. v. Estate of Groshsng (Idaho IN$?), 736 P.2d 1301, 1303 (citations omitted). See also Bell v. Criviansky (1934), 98 Mont. 109, 37 P.2d 673. In 

# m, the Court concluded that the insured had substantiallycompliedwith the provisions of the policy to change the beneficiary designation on his insurance policy when he had requested the forms from the insurance company but fell seriously ill and died of a brain tumor before he could complete and return the change of beneficiary form. In concluding that he had changed the beneficiary designation, the Court stated: We think the true rule is that, if the insured has pursued the course pointed out by the laws of the association and has done all in his power, under the facts and circumstances of the case, to change the beneficiary, but before the new certificate is actually issued or the change of beneficiary is indorsed on the old, he dies, a court of equity will decree that to be done which ought to be done, and act as though the certificate had been issued or the indorsementmade.

# m,37 P,261 at 678, See also: Prudential.Ins, 60,of Cooper (D, Idaho 1987), 666 F, upp, 190, 192; Bergenv. Travelers Ins. Co. of Illinois (UtahApp. 1989), 776 P.2d 659, 663; IDS Life Ins, 60,v, Estate sf Gros ?), 736 E"2d 1301, 13 Manhattan Life Insurance Company v, Barnes (9th Cir. 1972), 452

Eschlarnsactions do not evidence 

### a sufficient deta to change the beneficiary designation, or that he substantially complied with the requirements to change the designation. Eschlerhad the change of beneficiary forms inhis possession for approximately 6 months. There was no evidence that he was unable to complete the forms and return them to the company unlike the insured in 

# u.We conclude that Eschler did not do everythinghe could have done to change the beneficiaries. Plaintiffs1 final argument concerns the $75,000 policy for which plaintiffs believe the estate is the beneficiary. Section 8 of the application form requests a beneficiary designation. The potential insuredmay choose the owner of thepolicy asbeneficiary

ormyfill inthe blank immediately below ta name thebeneficiary. Also, the applicant may mark an "XI1in the box next to choice 1, the owner, or the second choice, the blank space filled in by the applicant. In Eschler's case, he filled in the following in the blank space: "Janet Eschler, wife, if living, if not surviving children share alike." (This was handwritten by insurance agent Mr. Solie as he recorded Eschlerlsanswers at the time of the application.)However, there is an nXpg in box 1 next to the designation,

e ownerBB, but no 19X58

### next to Eschiargs handwri ten designation of Defendant as the primary beneficiary. Defendant provided the affidavit of Robert Solie, t frm1Piutual Benefit who sold the policy to Eschler i ain the presence sf the igPX9n box 1. He states that Eschlerwished to name hiswife Janet Eschler,as theprimarybeneficiary,andhis childrenascontingent beneficiaries. In addition, the K marked in box 1 of the beneficiary designation (for "the ownerm)is a clerical errormade by Mr. Solie. Eschler did not ask that he be made the beneficiary of the policy nor were the proceeds to go to his estate. Inmotions for summary judgment, if themovingparty shows the absence of genuine factual issues, the nran-moving party must set forth facts dewonstratilng tnat a genuine issue exists. Grenz 

### v. Medical Management Northwest (1991), 250 Mont. 58, 62, 817 P.2d 1151, 1154. Defendant brought forth evidence in the form of Mr. Solie's affidavit, to prove that Defendant was the intended beneficiary of the $75,000 lvIutual Benefit policy. The burden then shifted to the plaintiffs to demonstrate that a genuine issue existed concerning the beneficiary of the policy. However, the plaintiffs brought forth no evidence to counter Defendant's contention and summary judgment was appropriately granted on this issue, TheDistrict Court ordersgrantingJanet Eschlerls motions for summary judgment are affirmed. AFFIMarch26, 1993 CERTIFICATEOFSERVICE 

### Iherebycertifythatthe followingorderwas sentby United Statesmail,prepaid,tothe followingnamed:

JeromeJ.Cate CateLawFirm P.O. Box 3274 Billings,h4T 59103-3274 AUenD. Gunderson GundersonLawFirm P. 0.Box926 Billings,

### MT 59103 BrentR.Cromley Moulton,Bellingham,Longo&Mather 1900SheratonPlaza,P.O. Box2559 Billings,

### MT 59103-2559 DonaldL.HamsandStevenR.Milch Crowley,Haughey,Hanson,Toole&Dietrich P.O. Box2529 Billings,h5T 53103-2523

DonM.Hayes Hemdon,Hartman,Sweeney&Halverson P.O. Box80270 Billings,MT 59108-0270 EDSMITH CLERKOFTHESUPREE,ME COLJT STAqOFMONTANA I