In the

United States Court of Appeals

For the Seventh Circuit

No. 10-2085

PROTECTIVE LIFE INSURANCE COMPANY,

Plaintiff-Appellee,

v.

MEGAN HANSEN,

Defendant-Appellant,

v.

B&K ENTERPRIZES,

Defendant-Appellee,

and

ROBERT K. STEUER, as Assignee of 

B&K Enterprizes,

Intervenor-Appellee.

Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 1:08-cv-00312-WCG—William C. Griesbach, Judge.

ARGUED SEPTEMBER 29, 2010—DECIDED JANUARY 19, 2011
2 No. 10-2085

Before BAUER, WOOD and WILLIAMS, Circuit Judges.

BAUER, Circuit Judge. Upon the death of Richard

McDonald, Protective Life Insurance Company

(“Protective”) filed this interpleader action, naming both

Megan Hansen and B&K Enterprizes (“B&K”) as defendants. Hansen and B&K filed cross motions for summary judgment, each claiming to be the beneficiary of

McDonald’s one-million-dollar life insurance policy.

The district court granted summary judgment in favor

of B&K, and Hansen appealed. We have reviewed the

district court’s decision de novo, construing all facts

and reasonable inferences in Hansen’s favor. Finding

no error, we affirm.

I. BACKGROUND

B&K is a Wisconsin limited liability company (“LLC”)

that developed, built, owned, and operated a gas station

and convenience store in Manitowoc, Wisconsin. McDonald was a founding member of the LLC, and he was also

the manager and day-to-day operator of the station.

Because lenders considered McDonald to be a “key man,”

B&K was able to finance its operations by purchasing

a one-million-dollar life insurance policy on McDonald’s

life and then assigning its interest in the insurance proceeds as security for various loans.

In 2007, McDonald’s personal life was in disarray. He

was in the midst of a divorce while living in a motel and

dating Hansen, a friend of his ex-wife’s daughter. His

professional life was not faring much better. B&K was
No. 10-2085 3

operating at a loss and members of the LLC suspected

that McDonald was mismanaging the company. Confirming the members’ suspicions, an audit of B&K’s

books revealed that McDonald appropriated $48,351.85

of B&K’s funds, some of which was used to purchase

items for Hansen and Hansen’s brother.

Although B&K quickly removed McDonald as the

manager of the station, his actions financially ruined the

company. The members therefore hired Michael Culligan

to wind up B&K and liquidate its assets, including

the life insurance policy. At the time of liquidation, the

policy had been paid through March 1, 2008, and

although it had a cash surrender value of $217.50, B&K

decided to dispose of the policy by simply letting it

lapse. However, unbeknownst to B&K, Culligan signed

and submitted a change of ownership form to Protective

in January 2008, essentially asking it to immediately

transfer ownership of the policy from B&K to McDonald.

Subsequently, while believing himself to be the new

owner of the policy, McDonald signed and submitted a change of beneficiary form in order to change the

beneficiary of the policy from B&K to Hansen. McDonald

then committed suicide.

According to Protective’s terms and requirements,

the owner of a life insurance policy may transfer ownership of the policy by signing and submitting a change

of ownership form. However, while an LLC may

submit this form with only one officer’s signature, a

corporation must submit this form with at least

two corporate officers’ signatures. Although B&K was

unquestionably an LLC, the owner named on the policy
4 No. 10-2085

was incorrectly recorded as “B&K Inc.” Thus, following

its own policies, when Protective received the change of

ownership form signed only by Culligan, it sent the

form back to Culligan and explained that he would need

to obtain the signature of another corporate officer and

resubmit the form in order to transfer ownership of the

policy. For unknown reasons, Culligan never did so. As

a result, Protective never changed the owner of the policy.

Protective’s terms and requirements also provided

that only the owner of a policy can change the beneficiary

of the policy. Thus, McDonald’s attempt to change

the beneficiary from B&K to Hansen is only effective if

McDonald was the owner of the life insurance policy

when he submitted the change of beneficiary form.

B&K is currently in receivership. The liquidation of

B&K’s assets did not generate enough proceeds to pay

its secured debt, and all members of the LLC were therefore compelled to make substantial cash contributions

to help pay off the debt. Although McDonald was still a

member of the LLC and owned the largest portion of

the LLC at the time of liquidation, he refused to make

any cash contributions, thereby forcing other members

to cover his share. The record reveals that non-member

creditors currently have claims totaling approximately

$83,000, while members have claims totaling approximately $400,000.

 Upon Hansen’s and B&K’s cross motions for summary judgment, the district court entered judgment in

favor of B&K. Hansen appealed, claiming that McDonald

owned the policy and that Hansen is the rightful beneficiary of the policy.
No. 10-2085 5

II. DISCUSSION

We review the district court’s grant of summary judgment de novo, construing all facts and reasonable inferences in Hansen’s favor. Winsley v. Cook County, 563

F.3d 598, 602 (7th Cir. 2009); Milwaukee Metro. Sewerage

Dist. v. Am. Intern. Specialty Lines Ins. Co., 598 F.3d 311, 316-

17 (7th Cir. 2010). Summary judgment in favor of B&K

is proper only if the pleadings, discovery materials,

disclosures, and affidavits demonstrate no genuine issue

of material fact such that B&K is entitled to judgment as

a matter of law. Fed R. Civ. P. 56(c). Both parties agree

that we should apply Wisconsin state law because a

federal court sitting in diversity applies the substantive

law of the state in which it is sitting. See, e.g., Allstate

Ins. Co. v. Keca, 368 F.3d 793, 796 (7th Cir. 2004).

A. B&K Is the Owner and Beneficiary of the Life

Insurance Policy

Although Protective’s records indicate that B&K is the

owner and beneficiary of the policy, Hansen contends

that in January 2008 McDonald became the owner of the

policy and Hansen became the beneficiary of the policy.

She reaches this conclusion by setting forth a series

of interlocking arguments, which proceed as follows:

(1) B&K and Protective made a mutual mistake when

they named “B&K Inc” the owner of the policy, and we

should reform the policy to read “B&K LLC” in order

to reflect the contracting parties’ true intentions;

(2) after reforming the policy to read “B&K LLC,” we

should find that Culligan transferred ownership of the
6 No. 10-2085

policy from B&K to McDonald because an LLC may

transfer ownership of its policy by submitting a

change of ownership form that bears only one officer’s

signature; and (3) after finding that McDonald owned

the policy, we must find that Hansen is the beneficiary

of the policy because McDonald, as the owner of the

policy, had the authority to name Hansen as the new

beneficiary. Alternatively, should we reject this series of

arguments, Hansen contends that McDonald owned the

policy because B&K and McDonald formed a binding

contract to transfer ownership of the policy, and Hansen

can enforce this contract because she is an intended

third-party beneficiary. We address each of these arguments in turn.

Hansen begins her series of interlocking arguments by

asserting that B&K and Protective made a mutual

mistake when they named “B&K Inc” the owner of the

policy and that we should reform the contract to read

“B&K LLC” in order to reflect the true intention of

B&K and Protective. Under Wisconsin law, a contract

may be reformed “when the writing that evidences or

embodies an agreement in whole or in part fails to

express the agreement because of a mistake as to the

contents or effect of the writing.” Addison Ins. Co. v. Korsmo,

694 N.W.2d, ¶ 11 (Wis. Ct. App. 2005) (citing Vandenberg

v. Cont’l Ins. Co., 628 N.W.2d 876, 829 (Wis. 2001)). Establishing the existence of a mutual mistake in an insurance

contract, however, requires less proof than is needed

for any other contract. Jewell v. United Fire & Cas. Co.,

131 N.W.2d 276, 280 (Wis. 1964). Putting our concerns with standing aside, we will assume without de-
No. 10-2085 7

ciding that reforming the contract to read “B&K LLC”

is proper.

Hansen next contends that once we reform the

contract to read “B&K LLC,” we must find that Culligan

transferred ownership of the policy to McDonald. For

support, Hansen relies upon Kathleen Britton, the vice

president in charge of Protective’s life insurance

policies, who testified that if B&K had been properly

listed as an LLC, then Culligan’s signature alone would

have satisfied Protective’s terms and requirements.

In effect, therefore, Hansen urges us to find that

McDonald was the owner of the policy because B&K

should have been listed as an LLC and Protective therefore should have accepted Culligan’s signature as sufficient to transfer the policy. The problem with Hansen’s

argument is that we have no authority to do so.

We begin by noting that we cannot presume to know

what Protective would or should have done if B&K

had been listed as an LLC. Although Protective’s terms

and requirements were clear, there is nothing in the

record to suggest that transferring ownership of this

policy would have been a simple ministerial task.

Hansen’s reliance upon Britton’s testimony is misplaced

because although Britton testified about Protective’s

general business practices and about whether

Culligan’s signature satisfied Protective’s terms and

requirements for LLCs, she never testified that Protective would have actually transferred ownership of the

policy from B&K to McDonald if B&K had been listed as

an LLC. There is in fact nothing in the record to prevent
8 No. 10-2085

us from assuming that instead of transferring the policy,

Protective would have commenced an investigation or

otherwise refused to transfer ownership of the policy.

Hansen’s assumption about what would have happened

is thus nothing more than speculation, and we have no

reason to believe that Hansen’s assumption is more

correct than any other assumptions that could be made.

Nevertheless, even if we could somehow discover

what Protective would have done had B&K been named

an LLC, the proper focus here is not on what should

have happened but rather on what actually happened.

Hansen argues that because Protective should have

accepted Culligan’s signature as sufficient to transfer

ownership of the policy, we must find that B&K transferred the policy to McDonald. This is not a legal theory,

and “what should have happened” is not a governing

standard. Instead, what matters here is what actually

happened: Culligan signed a change of ownership form,

Protective rejected it either rightly or wrongly (we

will presume wrongly) and sent the form back to

Culligan, Culligan never mailed the form back, and

Protective never changed the owner of the policy. Absent

some viable legal theory, we cannot simply unwind

this series of events and declare Hansen the beneficiary

of the policy.

To the extent Hansen argues that we can reform the

contract twice, first to make B&K LLC the owner and

then to make McDonald the owner, we reject this argument. Although reformation may change “B&K Inc” to

“B&K LLC,” it certainly does not change the owner
No. 10-2085 9

from “B&K” to “McDonald.” Reformation is an equitable

remedy that is available only when a document fails to

fully or accurately reflect the contracting parties’ actual

agreement either because the contracting parties made

a mutual mistake or because one party made a mistake

while the other party committed a fraud. See, e.g., Hoem

v. Town of Franklin, 774 N.W.2d 475, ¶ 15 (Wis. Ct. App.

2009); Korsmo, 694 N.W.2d at ¶ 9 (stating that “reformation

is an equitable remedy. If the circuit court determines

[that] . . . the terms of an insurance contract are not fully

or accurately set forth, it may, at its discretion, reform

the contract to express the parties’ actual intent”). Here,

B&K and Protective intended to create a contract that

named B&K as both the owner and beneficiary of a life

insurance policy on McDonald’s life. They succeeded

in doing so. While the contracting parties might have

made a mistake in characterizing B&K as a corporation,

Hansen does not allege that the contracting parties

made any additional mistakes or that one party made

a mistake while the other party committed a fraud. There

is thus nothing left to reform. Because Hansen points to

no legal theory under which we could find that

McDonald was the owner of the policy, Hansen’s series

of interlocking arguments fail.

At oral argument, however, Hansen argued that even

if we reject her series of arguments, we should still find

that McDonald was the owner of the policy because

B&K and McDonald formed a binding contract to transfer

ownership of the policy, and Hansen can enforce this

contract because she was an intended third-party beneficiary. We disagree. First, assuming the change of owner-
10 No. 10-2085

ship form was a contract, it was a contract between

B&K and Protective. McDonald was not a party to this

contract because he had no control over the contents

of the form, whether B&K would submit the form, or

whether Protective would find the form sufficient.

Because McDonald was not a party to this contract,

Hansen has no authority to enforce it. Second, there is

no evidence in the record proving that Hansen is an

intended third-party beneficiary. In Wisconsin, “A

person may enforce a contract as third-party beneficiary

if the contract indicates that he or she was either specifically intended by the contracting parties to benefit from

the contract or is a member of the class the parties

intended to benefit.” Milwaukee Area Technical Coll. v.

Fronteir Adjusters of Milwaukee, 752 N.W.2d 396, ¶ 20 (Wis.

Ct. App. 2008). Here, even if the change of ownership

form was a contract between B&K and McDonald,

it made no mention of Hansen or any other beneficiary;

it was merely a contract to transfer ownership of the

policy. It is thus impossible to conclude that Hansen

was an intended third-party beneficiary who is entitled

to enforce the contract.

Accordingly, for the reasons set forth above, we find

that B&K is both the owner and the beneficiary of the

life insurance policy. We therefore affirm summary judgment in favor of B&K. Given our holding, we need not

address B&K’s arguments that McDonald did not give

adequate consideration and that Culligan did not have

authority to transfer the policy.
No. 10-2085 11

B. The Equities Favor B&K

The district court held that even if Hansen had

satisfied all elements of reformation, reformation

would nevertheless be improper because the equities

do not lie in Hansen’s favor. We agree.

B&K purchased a one-million-dollar life insurance

policy on McDonald’s life as a way to finance its business.

It paid the premium on this policy for four years. Meanwhile, McDonald was a dishonest employee who exploited his position in the company and misappropriated B&K’s funds. In an effort to swindle even more

from B&K, McDonald attempted to transfer ownership

of the policy from B&K to himself so that he could make

Hansen the beneficiary of the policy before he killed

himself. Although Hansen denies any knowledge of

McDonald’s planned suicide, the evidence on the

record strongly suggests otherwise. And while creditors

who invested in B&K remain unpaid, Hansen seeks a

windfall in the amount of one million dollars from the

very policy which was purchased in order to protect

the creditors. She does so despite the fact that she never

had any connection with B&K’s business, despite the

fact that neither McDonald nor Hansen ever paid any

insurance premium on the policy, and despite the fact

that her relationship with McDonald was apparently

over at the time of his death. Given the record before

us, there is no doubt that the equities favor B&K and

its creditors. We therefore affirm summary judgment

in favor of B&K. See, e.g., Richards v. Land Star Grp., Inc.,

593 N.W.2d 103, 111 (Wis. Ct. App. 1999) (holding that
12 No. 10-2085

reformation is an equitable remedy that is meant to

grant relief to parties only when the equities lie in their

favor).

III. CONCLUSION

B&K is the owner and beneficiary of the life insurance

policy because it never transferred ownership of its

policy to McDonald. Reformation cannot change this

result, and even if it could, reformation would be

improper because the equities favor B&K, not Hansen.

We therefore AFFIRM the judgment of the district court.

1-19-11