J. A27012/14

NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37 RASHA KHEDR SHAWARBY, : : IN THE SUPERIOR COURT OF

PENNSYLVANIA Appellant : : v. : : AMR OMAR SHAWARBY AND THE ESTATE OF AMR OMAR SHAWARBY, A/K/A AO SHAWARBY, DECEASED : : : No. 1972 WDA 2013

Appeal from the Order Dated November 20, 2013, in the Court of Common Pleas of Cambria County

Civil Division at No. 2003-1149

BEFORE: FORD ELLIOTT, P.J.E., SHOGAN AND MUSMANNO, JJ.

MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED FEBRUARY 25, 2015 Appellant, Rasha Khedr Shawarby (“Ex-Wife”), appea ls the order of the Cambria County Court of Common Pleas that grant ed in part and denied in part her petition for special relief seeking to freeze life insurance proceeds pending equitable distribution. We affirm.

The trial court summarized the relevant facts of t his matter as follows:

Ex-Wife and Amr Omar Shawarby [“Decedent”] married on April 26, 1984; separated in 2003; and were divorced by Decree dated December 27, 2012. Pursuant to the Decree, the Court retained jurisdiction over equitable distribution; counsel f ees and costs; and alimony and alimony pendente lite

. DECREE IN DIVORCE DATED DECEMBER 27, 2012. In March of 2013, Decedent married Lisa Jean Nelson Shawarby [“Executrix”]. PETITION FOR SPECIAL RELIEF [“PETITION”], ¶11(F). On July 25, 2013, Decedent died. Id. at ¶2. On August 2,J. A27012/14

- 2 - 2013, Executrix opened an Estate in Cambria County. During his marriage to Ex-Wife, Decedent purchased two life insurance policies from State Farm Life Insurance Company. At the time of purchase, both policies listed Ex-Wife as beneficia ry. BRIEF IN SUPPORT OF THE ESTATE OF AMR OMAR SHAWARBY AND ON BEHALF OF LISA SHAWARBY, WIDOW OF AMR SHAWARBY [collectively referred to as “BRIEF OF EXECUTRIX”], pp. 2-3. The first polic y is a term policy with a face value of $385,000.00; the second policy is a universal life policy with a face value of $140,000.00. Id. at 2. In 2003, Decedent changed the beneficiary designation from Ex-Wife to the children of Ex-Wife and Decedent. BRIEF IN SUPPORT OF A CLAIM FOR LIFE INSURANCE PROCEEDS BY RASHA KHEDR SHAWARBY FOR PURPOSES OF EQUITABLE DISTRIBUTION OF PROPERTY [“EX-WIFE’S BRIEF”], Ex. 4. In 2011, Decedent changed the beneficiary designation to Executrix. Id. Ex-Wife learned of the insurance policies and the changes to the beneficiary designations after Decedent’s death. EX-WIFE’S BRIEF, p.5. On August 7, 2013, Ex-Wife filed the instant Petition requesting, inter alia , the Court to freeze the life insurance proceeds pending the outcome of equitable distribution. PETITION, ¶18. The Court temporarily granted the freeze by Order dated August 7, 2013. ORDER DATED AUG. 7, 2013. This Court conducted a Hearing on September 27, 2013 and deferred ruling pending submission of briefs. Executrix filed a brief on October 4, 2013; Ex-Wife filed her Brief on October 17, 2013. Trial court opinion, 11/22/13 at 2-3. On November 21, 2013, the trial court docketed the following order which is the subject of this appeal:J. A27012/14

- 3 - ORDER AND NOW, this 20 th day of November, 2013, it is hereby ORDERED AND DECREED as follows: 1. The Petition for Special Relief filed on behalf of Rasha Khedr-Shawarby is GRANTED IN PART and DENIED IN PART. 2. The temporary injunction filed for record at Case Number 2013-2999 on August 7, 2013 is VACATED. 3. The Cambria County Prothonotary is DIRECTED to distribute the proceeds of the term policy issued by State Farm Insurance Company, policy number LF 1733-2552, plus any interest thereon, to the beneficiary, Lisa Jean Nelson Shawarby. 4. The Cambria County Prothonotary is further DIRECTED to freeze the universal life policy issued by State Farm Insurance Company, policy number LF 1733-2511, until such time as the parties determine the cash surrender value at the time of separation and provide a proposed Order to the Court for the continued freezing of the surrender value only. 5. The parties shall mutually determine the benefits payable for each policy and shall instruct the Prothonotary accordingly. Order, Certified record, document #48.

The above order directed that the term life insura nce policy proceeds in the amount of $385,000 be paid to the Executrix, and the $140,000 proceeds of the universal life insurance policy con tinue under the freezeJ. A27012/14

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order until the marital component was determined. Ex-Wife filed a motion for stay or supersedeas that was denied by the trial court. Consequently, the proceeds of the term policy have been paid to t he Executrix. Ex-Wife was ordered to file a Rule 1925(b) statement and sh e complied.

Ex-Wife raises two issues for our consideration:

A. The trial court abused its discretion in dissolving the injunction previously granted by order dated August 7, 2013. B. The trial court abused its discretion in failing to designate the proceeds of both life insurance policies as marital property subject to equitable distribution, and in distributing the proceeds of the term life policy (#LF 1733-2552) to a beneficiary who is a third party to the divorce action.

Ex-Wife’s brief at 8. We note both issues are comb ined into one argument; therefore, we will address them together. Ex-Wife claims this case presents a novel question of whether or not life insurance proceeds are “marital property.” We disagree, as this court has addressed this question. In Lindsey v. Lindsey , 492 A.2d 396 (Pa.Super. 1985), following the husband’s death, th e wife brought an action to have the beneficiary changes on her husband’s tw o life insurance policies declared null and void, and to have the proceeds di stributed to her because there was an order enjoining the husband from dispo sing of marital property. Id. at 397. The trial court agreed with the wife and found that the changes in beneficiary designations were in vio lation of a court order.J. A27012/14

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Id. The third party beneficiary appealed. This court reversed the decision of the trial court. The primary issue we addressed concerned whether a change in the beneficiary designation on a life ins urance policy is a violation of an order enjoining a party from disposing of “an y marital property.” Id. at 398. In discussing this issue, we opined:

It is clear that the naming of a beneficiary on a life insurance policy vests nothing in that person during the lifetime of the insured; the beneficiary has but a mere expectancy. Furthermore, the naming of a beneficiary on a life insurance policy is sui generis ; it is not a conveyance of the insured’s assets. Thus, when Mr. Lindsey changed the designation of the beneficiary on his two life insurance policies from Mrs. Lindsey to appellant, he did not thereby “convey” any assets to appellant. The changes, therefore, were not disposals of marit al assets in violation of the injunction.

Id. (internal citations omitted). The Lindsey decision went on to hold that only the cash surrender value of life insurance pol icies could be considered marital property. Id.

The case sub judice involves two insurance policies: one, a term policy for $385,000, and the other, a universal lif e policy for $140,000. By its very nature, the term policy has no value until the death of the principal. Ex-Wife and Decedent separated in 2003 and were div orced on December 27, 2012. Decedent changed the beneficiar y designation to Executrix in July of 2011. Decedent died on July 2 5, 2013. Clearly, Ex-Wife has no claim on the term policy that had no value u ntil the death of

decedent.J. A27012/14

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The second insurance policy is a universal life po licy. According to the Executrix, the cash surrender value of the $140,000 universal life policy on the date of Ex-Wife’s separation from Decedent has been determined to be $1,481.35. (Executrix’s brief at 4, 6, 10-11. See letter from State Farm Insurance Co. dated October 4, 2013, RR at 285.) E xecutrix contends the $1,481.35 sum is the amount due Ex-Wife as marital property. In another case decided shortly after Lindsey , this court determined that the proceeds of a life insurance policy do not constitute marital property. In Oswald v. Olds , 493 A.2d 699 (Pa.Super. 1985), the wife and

the decedent were married at the time a life insura nce policy was purchased.

Id. at 700. The wife was designated the beneficiary. Subsequently, the wife commenced a divorce action, and the decedent c hanged the beneficiary to a third party, Evelyn Olds. Id. The wife was made aware of the beneficiary change during the course of divorce pro ceedings. Id. The

decedent died while the divorce action was still in progress. Id. This court determined upon the death of the decede nt, the divorce action abated, and as a consequence, the wife could no longer assert her rights under the Divorce Code. Id. at 701. We went on to state:

Even if [wife’s] right to equitable distribution di d not cease with the abatement of the divorce action by appellee’s decedent’s death, the proceeds would sti ll not constitute marital property, which is defined a s property acquired during the marriage. 23 Pa.C.S. 401(f). The proceeds of a life insurance policy on a spouse cannot, obviously, be acquired during the marriage since proceeds are paid upon death.J. A27012/14

- 7 - Consequently, that is not an asset acquired during lifetime or marriage. While the potential of subsequently acquiring the proceeds did, naturally, arise during the marriage, that could never arise t o an actuality during the marriage.

Id. Thus, according to Lindsey , supra , and Olds , supra , the face value of an insurance policy is its benefit value and is a m ere expectancy and therefore not capable of distribution.

Ex-Wife and Executrix both discuss Schubert v. Schubert , 580 A.2d 1351 (Pa.Super. 1990), a divorce case, decided five years after Lindsey and

Olds , where the wife appealed the trial court’s equitab le distribution award.

In Schubert , the husband owned two insurance policies on the l ife of the parties’ daughter. Id. at 1353-1354. The daughter died after the parties separated, and the husband received the death benef its. Id. at 1354. This court declined to apply the holding in Lindsey , explaining as follows:

While Section 401(f) of our Divorce Code generally provides that all property “acquired by either party during the marriage is presumed to be marital property,” Section 401(e)(4) excludes “[p]roperty acquired after final separation until t he date of divorce, except for property acquired in exchange for marital assets (emphasis added).” This section of the divorce code is applicable here , unlike in Lindsey , because appellee/husband received the proceeds of the policy subsequent to the parties’ separation. In Lindsey , as noted supra , the insurance proceeds were paid to a third party. Furthermore, we find that these proceeds constitute marital property subject to equitable distribution since they were acquired in exchange f or marital assets.

Id. at 1354-1355.J. A27012/14

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Instantly, the trial court discussed both Lindsey and Schubert

and

concluded: In the case at bar, this Court cannot apply the

reasoning in Schubert because the instant policy proceeds were not paid to either Ex-Wife or Decedent after separation. Here, like Lindsey , the proceeds of the policies accrued to a third party, i.e., Executrix, and only the cash surrender value of the policies is subject to distribution. The cash surr ender value of the universal life policy has yet to be determined; the term policy, by definition, has no cash surrender value. [] Thus, it is necessary to continue to freeze the proceeds of the universal li fe policy until the cash surrender value at separation is determined and the property is addressed in equitable distribution. Trial court opinion, 11/22/13 at 4 (footnote omitte d). We note life insurance proceeds are unlike pension s and retirement benefits that are marital property subject to equit able distribution regardless

of whether the benefit is vested or has matured. I f the benefits resulted from employment during the marriage, these benefits are marital property because they are conferred, not as a gift by the em ployer, but as part of the employee’s compensation package. Life insurance proceeds are also different from pe rsonal injury settlements. Section 3501(a)(8) of the Divorce Cod e excludes “[a]ny payment received as a result of an award or settlem ent for any cause of action or claim which accrued prior to the marriage or after the date of final separation regardless of when the payment was recei ved.” 23 Pa.C.S.A. § 3501(a)(8). In Focht v. Focht , 32 A.3d 668, 674 (Pa. 2011), ourJ. A27012/14

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supreme court held that settlement monies received by the husband, post-separation from the wife, in his personal inju ry tort action, were marital property because his cause of action accrued prior to separation. Life insurance is a contract (insurance policy) in which the insurer (insurance company) agrees for a fee (insurance pre miums) to pay the insured party all or a portion of any loss suffered by accident or death. As a practical matter, Decedent could have let the polic ies lapse through failure to pay or he could have canceled them altogether. Ex- Wife could not have forced Decedent to maintain life insurance just as she could not force him to keep her as a beneficiary under the policies. 1 Based on the above, we find no error or abuse of d iscretion when the trial court dissolved the injunction releasing the insurance proceeds to

Executrix. Order affirmed. Motion to quash filed by Executri x is denied. 2

Judgment Entered.

1 We recognize the Divorce Code allows trial courts to direct the continued maintenance and beneficiary designations of existin g life insurance policies. See 23 Pa.C.S.A. § 3502(d). However, that was not the case instantly.

2 Although this matter occurs within the context of an equitable distribution proceeding, we determine that to the extent these p roceedings dissolve an injunction and allow for the proper distribution of life insurance proceeds as between Executrix and a third party, the trial cour t’s order dated November 20, 2013, is a final order.J. A27012/14

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Joseph D. Seletyn, Esq. Prothonotary Date: 2/25/2015