# FILED

December 16, 1998

Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

______________________________________________ ELENIA GRAY, Claimant-Appella

nt, Shelby Law No. B-27870 Vs. C.A. No. 02A01-9803-PB-00061 THE ESTATE OF CHARLES HENRY GRAY, III, Defendant-Appellee.

________________

___________________________________________________________ _ FROM THE PROBATE COURT OF SHELBY COUNTY THE HONORABLE DO NN SOUTHERN

Blanchard E. Tua

l of Memphis For Appellant R. Alan Pritchard;

Baker, Donelson,

Bearman & Caldwel

l of Memphis For Appellee

REVERSED AND REMANDED

Opinion filed:

W. FRANK CRAWFORD,

PRESIDING JUDGE, W.S.

CONCUR: ALAN E. HIGHERS, JUDGE HOLLY KIRBY LILLARD, JU DGE

This case involves a dispute over the proceeds of a life insura nce po licy. Appellant, Elenia Gray (Ms. Gray) , appeals from the probate court’s

order in favor of

Appellee, the Est

ate of Charles Henry Gray, III (Estate).1 Ms. Gray also included in her claim the following: an antique headboard and

nightstand anda contingent claim for any income tax liability that may arise from any joint tax returns filed by her and Mr. Gray. 2 Ms. Gray and Mr. Gray married on June 2, 1990. No children were born of the marriage. In 1996, Ms. Gray filed a complaint for divorce on the gr

ounds of irrecon

cilable differe

nces, and the parties entere

d into a Marital Dis so lution Agreement (MDA) on April 29, 1996. Subsequently, a final decree of divorce was entered in May 1996 which approved and incorporated the MDA. Under the MDA, Ms. Gray was awarded periodic a limony, certain amounts from the division of personal property, health insurance, and automobile insurance. The MDA provided in pertinent part:

8. LIFE

INSURANCE . Husbandagrees to maintain Wife as the beneficiary of Group Policy No. GO-14273 with the Prudential Insurance Company o f America or any other life insurance coverage on Husband to the extent of the amount of his outstanding total alimony obligation to Wife. In accordance with the MDA, Mr. Gray maintained a life insurance policy wi th $250,000.00 in coverage with Wife as benef icia ry. The policy con

tains a double inde

mnity provision which is triggered in the event of accidental death. On July 17, 1996, Mr. Gray died in the crash of TWA Flight No. 800 in New York City. As a result, on September 12, 1996, Ms. Gray received $500,000.00 in proceeds as the beneficiary of the life insurance policy maintained by Mr. Gray in accordance with the MDA.

Subsequen tly, Mr. Gray’s two son s were appointed

co-administrator

s of the Estate. Af

te r the co-administrator

s published their no

tice to creditors , four claims were filed against the E

state which included a c

laim by Ms. Gray. She

seeks amounts due

her under the MDA

as follows: (1) Division of

personal property claim of $375,000.00 plus eight percent (8%) in

terest from May 1,

1996 until paid in ful

l; (2) Alimony of $2,000.00 per month until such time as the home locatedat 49 03 East

Crestwood, Little Rock, Arkansas is sold, and$4,500.00 per month beginning on the first day of the month following the sale of the Little Rock home through January, 2001; (3) Health insurance premium in the amount of $1,690.82; and (4) Automobile insurancepremium for five years in the amount of $5,000.00. 12 The probate court reached this amount asfollows: $375,000.00 as payment due on the

saleof the Little Rock pr

operty with $10,000.00 for 8% interest from May 1, 1996 to September

3 The co-administrator

s paid all claims except

the claim filed by M

s. Gray. The Esta

te did notfile an exception to Ms. Gray’s claim because it did not dispute the fact that the funds were owedto Ms. Gray under t he termsof the MDA. However, the Estate contends that the amount of Ms. Gray’s claim should be reduced by the $500,000.00 she received as proceeds under the life insurance policy. On July 21, 1997, Ms. Gray filed a Petition for Order of Judgment and Order Directing Co-Administrators to Pay Judgment. On October 28, 1997, the probate court filed a memorandum

opinion finding that although Ms. Gray’s c laim should be allowed because no timelyexception was fi

led, the amo

unt of the claim should be reduced by the $500,000.00 proceeds of the

life insurance p

olicy. The court s

aid: The language of [the MDA] cle arlyindicates that the purpose of the life ins uran ce policy was to satisfy any of Mr. Gray’s obligations to Ms. Gray under the MDA in the event of his death. Principles of

equity demand that Ms. Gray should not receive the amount of the insuranceproceeds and also recover on the entire amo untof her claim against the estate. Thus, the $500,000 that Ms. Gray received

as a result of the Dec

edent’s death sho

uld serve as a setoff agai

nst the amount of he

r cla im a gainst the Decedent’s estate.

* * *

. . . Subsequent to the

fil ing of th e claim, Ms. Gray received a payment. While the payment was not from theestate, it was from a source provided

by the Decedent a

nd, in fact, was p

ro vided pursuant to the MDA for that very purpose. The Court believes that it would be unfair a

nd inequitable not t o allow the estate credit for the payment so made.

* * * For the reasons set forth above, the Court finds that the amount of the judgment on the claim of Elenia Gray against the estate of Charles Henry Gray, III shou ld be reduced by the $500,000 received by Ms. G ray as t he beneficiary of a life insurance policy providedby the Decedent to insure the payment of his obligations to Ms. Gray under the parties’ mari tal dissolution agree

ment. After filing the memoran

dum opinion, the pro

bate court heard oral argument concerning calculation of

the final amount of

Ms. Gray’s claim. The trial court subsequently entered its order that the $500,000.00 in life insuranceproceeds becredited against Ms. Gray’s claim against the Estate, resulting in a final balance of the claim in the amount of $79,208.00. 212, 1996; $24,000.00 for 12 months of alimony at $2,000.00 per month and $164,372.00 for 42 months of alimony at $4,500 .00 per month discounted at 8% for payment in advance; $2,183.00 for health insurance; and $3,653.00 for 42 months of automobile insurance at $100.00 per month discounted at 8% for payment in advance. The subtotal on the foregoing equaled $579,208.00. The trial court then subtracted $500,000.00 for the life insuran ce proceeds for a total of $79,208.00. 4 Ms. Gray has appe

aled and presen

ts the following issues, as stated in her brief, for our review: (A) Whether the trial court erred in its determ ination that the proceeds received by App ellant as t he named beneficiary of an insurance policy insuring the life of her deceased ex-husband can properly be considered as a credit towards the Appellant’s claim against the estate of her deceased ex-husband (1) pursuant to the terms of the marital dissolution ag ree ment, (2) pursuant to the laws of the state

of Ten nessee, or (3) pursuant to the court’s equitable power

s. (B) Whether thetrial court correctly calculated the final amount of the claim filed by Appellant

against the estate of her deceased ex-husband

for amounts due he

r under the marita

l d isso lution agreement. Ms. Gray asserts that theproceeds she received from the life insurance policy cannot be considered

as payment of her clai m against the Estate except to the extent provided for and specifically

stated in the MDA, i.e., to satisfy any alimony obligation remaining at Mr. Gray’s death. According to Ms. Gray, the MDA does not contain any terms that require or imply that any of th e proceeds received offset Mr. Gray’s additional obligations under the MDA. She argues that as the named beneficiary under the life ins urance policy she is entitled to the insurance proceeds and that the only offset made should be for the alimony obligation. Ms. Gray further c

ontends t h at the probate court’s erroneous decision that the life insurance proceeds she re ceived must offse

t her entir

e cl aim rather than offsetting only the alimony obligation resulted in the final judgment to be erroneous for twore asons. First, the MDA requires intere

st at a rate of 8% t

o accumulate on th

e division of property claim of $375,000.00 to begin running on May 1, 1996 a n d continue until the entire amount is paid. Thus, according to Ms. G ray, the probate

court e rred when it terminated the accumulation of interest on September 12, 1996, the day Ms. Gray received the insurance proceeds. Second, the amount by which the claim

sho uld have been reduced as a result of the insurance proceeds should have been limi ted to the $188,372.00 alimony portion of Ms. Gray’s claim. Ms. Gray also asserts that the probate court erred in failing to award the exact amounts filed in her claim3 According to Ms. Gray’s calculations, she is to receive $495 ,859.67, a n antique

headboard

and nightstand, and a contingent amount for any income tax liability that may arise from any joint income tax returns filed by her and Mr. Gray from the Estate to satisfy her claim. She reaches this final monetary sum by reducing her claim of $684,231.67, by $188,372.00 off the insurance proceeds received as alimony. Specifically, Ms. Gray requests this Court to enter a ju dgment against the Estate as follows: $375,000.00 due on the sale of Little

Rock property with

$114,168.85 in interest at 8% if paid by Se

ptember 1, 1998; $1 ,690.82 for healt h insurance; $5,0

00.00 for automobi

le insurance less $188,372.00 paid from the insurance proceeds as alimony. 5 for health and automobile insura nce since her c

laim became a jud

gment against the E

state because no exception to the claim was filed. 3 The Estate contends that the probate co urt was corre ct in ruling that it wa s entitled to reduceMs. Gray’s claim by the $500,000.00 she received as beneficiary under the life insurance policy. The Estate

asserts that any other

ruling would result

in an unjustifiable

windfall to Ms. Gray and an unjustifiable detriment to the Estate. The Estate argues that Ms. Gray’s rights under the life insurance policy were expressly limited by the MDA to the alimony obligation owed to her and once that obligation was paid, Ms. Gray’s right to the insurance proceeds ceased. The Estate asserts that

the probate court correctly calculated the amount of funds due Ms. Gray and the calculation is ac

cording to the inte

ntion of the partie

s as expressed in

the MDA. The Estate argues that if credit is not given for the excess funds received, Ms. Gray will rec eive not only

a windfall of over $300,000.00 in excess insurance proceeds but also interest in an amount of over $100,000.00 on the $375,000.00 obligation that has accrued during the time the Estate believed it was going to receive the credit and while the issues were litigated. The Estate does not ser

iously question the v

alidity of th

e paymen t of the insurance proceeds to Ms. Gray, but primarily rests its position on t he provisi on of the MDA. As heretofore note

d, the crucial la

nguage in the MDA c

oncerning life in

surance states: 8. LIFE

INSURANCE

. Husband agrees to maintain Wife as the beneficiary of Group Policy No. GO-14273 with the Prudential Insurance Co mpan y of America or any other life insurance coverageon Husband to the extent of the amou nt of his outstanding total alimony obligation to Wife. In construing the MDA as it pertains to the life insurance policy, the probate court stated in the memorandum opinion:

The language of

this provision clearl

y indicates that the

purpose of the life insura n ce policy was to satisfy any of Mr. Gray’s obligations to Ms. Gray under the MDA in the event of his death.6

To resolve the first issue, we must determine if the trial court’s interpre tatio n of the MDA is correct. The interpretation of a written agreement is a matter of law and not of fact, therefore, our review is de novo on the record with no presumption of correctness of the trial court’s conclusions of law. Union Planters Nat ’ l Bank v. American Home Assurance Co. , 865 S.W.2d 907, 912 (Tenn. App. 1993). A marital dissolution a

greement is

essentially a contract between a husband and wife

in contemplation of divorce proceedings. See Towner v. Towner , 858 S.W.2d 888 (Tenn. 1993). “A property settlement agre eme nt between a husband and wife is ‘within the category of contracts and is to be looked upon and en forced as an ag

reement, and is to be construed as other contracts as respects its interpretation, its meaning and effect.’” Bruce v. Bruc e , 801 S. W.2d 102, 105 (Tenn. App . 1990) (quoting Mathews v. Mathews , 24 Tenn. App. 580, 593, 148 S.W.2d 3, 11-12 (1940)). Although a copy of the divorce decree is not in the record, the MDA provid es for its incorpora tion into the decre

e, so we can assu

me this was done. An

ali mon y agreement

incorporated into a divorce decree loses its contractual nature and is a judgment of the court. See Hays v. Hays , 709 S.W.2d 625 (Tenn. App. 1986). Court judgment s are to be construedlike other written instruments. Livingston v. Livi ngs ton , 58 Tenn. App. 271, 429 S.W.2d 452, 456 (1967). The same is true for insura nce polici es. “Insurance contracts are subject to much the same rules of enforcement and construction wh ich apply to contract

s generally.” Draper v. Great Am. Ins. Co. , 224 Tenn. 552, 560, 458 S.W.2d 428, 432 (1970). The cardinal rule for

interpretation of

contracts is to asc

ertain the intention of the parties from the contract

as a whole and to give effect to that intention consistent with legal princip

les. Winfree v. Educators Credit Union , 900 S.W.2d 285, 289 (Tenn. App. 1995) ; Rainey v. Stansell , 836 S.W.2d 117, 118 (Tenn. App. 1992). In construing contracts, the words expressing the parties’ intentions should be given their usual, natural, and o rdin ary meaning. Taylor v. White Stores, Inc. , 707 S.W.2d 514, 516 (Tenn. App. 1985). In the absence of fraud or mistake,

a contract must be in

terpreted and e

nforced as writt

en, even though it

contains terms whichmay

seem harsh or unjust. Heyer-Jordan & Assocs. v. Jordan , 801 S.W.2d 814, 821 (Ten n. A pp. 1990). With

the foregoing principles in mind, we will examine the MDA. We should first not e7

that we disagreewith the trial court’s interpretation that the purpose of the life insurance policy was to satisfy any of Mr. Gray’s obligations under the MDA. The languageis quite clear that Mr. Gray agreed to maintain life insurance “to the extent of the amount of his outstanding total alimony obligation.” Giving this languag e its usual, natural and ordin ary meaning, it is d

ifficult to see how anything but alimony obligations could be included. Insofar as property and financial rights are concerned, marital disputes involve a division of marital property and spou

sal support. These are distinctly different and are governed by sepa rate statutes. See T.C.A. § 36-4-121 (1996) and T.C.A. § 36-5-101 (Supp. 1998). Moreover, the effect of su bsequent events o

n these awards is va stly different. For example, alimony is subject to future modification while a division of marital property, even though providing for payment of money, is not. See Towner

v. Towner , 858 S.W.2d 888 (Te nn. 1993). Alimony is

not dischargeab

le in bankruptcy,

while future payments as a division of marital property are dischargeable. See Her rera v. Herre

ra , 944 S.W.2d 379 (Tenn. App. 1996). That there is a distinct difference between a division of marital property and alim ony is so well reco

gnized that citati

on of additional au

thorit y i s unnecessary. Therefore, we hold that the MDA requires life insurance protection only for Mr. Gray’s total alimo ny obligation. We must now determine the extent of the alimony obligation. A review of the MDA in light of the authorities re

veal th at the follo wing items are alimony obligations to which the insurance proceeds are to be applied:

A. Interest on the $375,000.00 cash awarded as a division of ma rital property in Paragraph 3(A) of the MDA. In thi s paragraph of the agreement, the interest payment is designated as periodic alimony. Moreover, the agree me nt’s provision in Paragraph

4 Alimony

resolves any doubt concerning the nature of the interest pa

yment:

. . . Beginning May 1, 1996, Husbandshall pay an a d ditional Four Hundred Seventy-Five Dollars ($475.00) per month asperiodic alimony to cover the interest due on the $37 5,000 .00 payment for the division of assets (if H usband pre-pays all or a portion of the $375,000.00 lump sum, set interest payment shall

be reduced

proportionately to said prepayment). (emphasis added). B. Pay m ents provided for in Paragraph 4 Alimony , including interest as set out above. C. Health insuranc

e premiums prov ided for in Paragraph 5 Health Insurance

. Kemp v. Kemp , 1988 WL 116368, at *3 (Tenn.8 App. Nov. 2, 1988) (A pr ayer for alimony

includes health in sur ance premiums as additional alimony. Such payment constitutes support and mainte nance.); Arnott v. Smolinski , 210 B.R. 651, 655, 657 (Bankr. S.D. Fla. 1997) (Debtor’s obligation to provide health insurance coverage is a nondischargea ble support obligation pursuant to 11 U.S.C. § 523 (a)(5)). D. Automobile

insurance premiums as provided for in Paragraph 7 Automobile Insurance . Maintenanceof an automobile and the insur ance premiums for automobile insurance are additional s upport and maintenance and thus constitutes alimony. See Graves v. Hart

, 69 B.R. 626, 628-29 (Bankr. S.D. Fla. 1987). E. Attorney fees as provided for in Paragraph10 Court Costs and Attorney Fees . Herrera v. Herrera , 944 S.W.2d 379, 390 (Tenn. App. 1996) (attorney fees constitute alimony in so lido ); Cranf ord v. Cranford , 772 S.W.2d 48, 52 (Tenn. App. 1989) (attorney fees are deemed to be alimony). The Estate also asserts that Ms. Gray is not entitled to the insur

ance proceeds

in excess of the alimony obligation. In Claiborne v. Claiborne , No. 03A01-9708-CH-00353, 1998 WL 259893 (Tenn. App. May 14, 1998) , we dealt with a similar situation involving insurance proceeds. There, the divorce decree provided that the husband would pay the wife $36,000.00 cash in 72 monthly installments to equalize the division of marital property. He was ordered to maintain a life insurance policy naming the wife as irrevocable beneficiary with a minimum face value of $50,000.00 for the first three years and $25,000.00 for the remaining three years. The husband had an existing policy with a face amount of approximately $140,000.00 and the wife

was designated as sole beneficiary. The husband did not make any changes in the policy and di ed aft er having paid $12,000.00 of the $36,000.00 debt. The executrix of his estate filed a petition to modify the final judgment and/or for declaratory judgment and asserted that

the wife

was entitled to receive only $50,000.00 of lifeinsurance proceeds as re quired by the cour

t. This Courtaffirmed the judgment of the trial court that Wife was entitled to the entire amount

of the policy proceeds. In affirming the trial court, we noted that the parties in a divorce case “are free to make su ch an agreement as they desire governing insurance, or let the matter stand and be governed by the policy as is.” Id. at *4. As in Claib orne , we see nothing that is inconsistent with respect to the terms of th e divorce judgment (MDA) and the policy beneficiary remaining as designated by Mr. Gray. In Claiborne, the judgment

required Husband to maintain a policywith a minimum face value of $50,000. 00, and we noted that contemplates that a greater amount of insurance might be9

maintained. In the case at bar, Husband agreed to provide coverage “to the extent

of the amount of his outstanding total alimony obligation. ” Provisions in both cases provide for a minimum amount of insurance an

d should notbe construed to prohibit a policy with increased coverage. Moreover, in the case at bar, the face amount of the policy was $250,000 .00, but Mr. Gray purchased

the optional coverage of double indemnity resulting in a much larger amount of insurance proc

eeds. In summary, the life insurance policy maintained by Mr. Gray provides that Ms. Gray is the sole designated beneficiary. A provis ion within an insurance policy which is plain and unambiguous must be applied as it reads. In re Estate of Clement , 220 Tenn. 114, 414 S.W.2d 644 (Tenn. 1967); Drexel Chem. Co. v. B itumino us Ins. Co. , 933 S.W.2d 471 (Tenn. App. 1996). Mr. Gray co uld hav e maintained a lif e insurance polic

y without a double in

demnity provision, or he could have s pecified that some

one else was to

receivethe difference between the policy coverage and

the amount owed to Ms. Gray. Furthermore, Ms. Gray’s rights as the designated benefici ary under the insu rance policy we

re not altered by

the MDA. Thus, Ms. Gray, as the sole beneficiary, is entitled to receive the entire amount of the insurance proceeds withoutany offset to her cla im against the Estat

e except to the extent of the alimony obligation. The second issue for r

eview is whether

the trial court co

rrectly calc

ulated the final

amoun t of Mrs. Gray’s claim filed against the Estate. We previously touched on matters pertinent to the claims but will now consider Mrs. Gray’s assertion that because no exceptions were filed to the claims they should have been allowed. The trial court stated in its m emorandum opinion t

hat because

no exceptions were filed the claim should have been allowed, but continued by stating that the “real question remains regarding whether the insurance proceeds should be credited against the estate’s liability on the claim.” As for the c l aims filed against the Estate for what we heretofore noted to be alimony obl igations, we agree with the trial court that pr

inciples of equity

require that Mrs.

Gray no t recei v e these claims against the Estate because the proceeds of the insurance policy provided pursuant to the MDA cover

the exact same c

laims. We should

note at this point that the record reflects that the Estate pai d the claim filed for attorney fees. This was an erroneous payment since the award of attorneyfees is an alimony obligation. In any event, no exception was filed to the clai m of the amount due as a div ision of marital pr

operty and there

fore the claim is a10

judgment against the Estate. In sum, the judgment of the probate court is reversed, and this case is remanded to the probate court for furthe

r proceedings t

o determine the net amount of the claim due Mrs. Gray consistent with this opinion. Costs of the appeal areassessed one-ha lf to Mrs. Gray and

one-half to the Estate.

_________________________________ W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.

____________________________________ ALAN E. HIGHERS, JUDGE

____________________________________ HOLLY KIRBY LILLARD, JU DGE