Opinion ID: 773302
Heading Depth: 2
Heading Rank: 5

Heading: Releases/Bona Fide Purchasers

Text: 22 Our analysis in this case is limited to a review of the factual determinations made by the district court. We review the factual findings of the district court for abuse of discretion. Lincoln Benefit Life Co. v. Edwards, 2001 WL 252862  (8th Cir. 2001); Sherman v. Runyon, 235 F.3d 406, 408 (8th Cir. 2000); Milligan v. City of Red Oak, 230 F.3d 355, 359 (8th Cir. 2000). We review the factual findings of the district court for clear error, and we do not reverse the findings of the district court unless we have a 'definite and firm conviction that a mistake has been made. Griffin v. City of Omaha, 785 F.2d 620, 625 (8th Cir. 1986), (quoting Anderson v. City of Bessemer City, 470 U.S. 564 (1985)). 23 The district court found that Harold Gander fraudulently induced Christian Gander into signing the release. The court concluded that Christian did not know he was a beneficiary under the policy; that there was no consideration; that his father lied to him regarding signing the release; that his father breached the modification agreement; and that Harold Gander could not sign the release on behalf of Melissa Gander. Further, the court concluded that Harold Gander breached a confidential and fiduciary duty that he had with his children. 24 Livoti and McMahen first contend that Christian and Melissa Gander relinquished their claims under the Hartford policy by the execution of releases. On or about June 20, 1996, Harold Gander entered into an agreement with Mutual Benefits Corporation, wherein Harold Gander signed an Absolute Assignment and Beneficiary Form (Assignment Agreement) in exchange for $31,500.00. Harold Ganders transferred and assigned all of his right, title and interest in the policy to Livoti. Then, on or about July 2, 1996, McMahen paid $52,817.00 to Mutual Benefits, a brokerage company, and Livoti named McMahen an irrevocable beneficiary of the policy. 25 On or about June 20, 1996, Christian Gander signed a release and consented to a change in the beneficiary. Christian was of legal age at the time he signed the release. On that same day Harold Gander signed a release as the Parent and Guardian of Melissa Gander. Mutual Benefits then paid $31,500.00 to Harold Gander for the policy. Livoti and McMahen argue that the releases are valid, as Christian was 22 years of age at the time his was signed, and Harold Gander signed on behalf of his daughter. 26 Christian and Melissa Gander argue otherwise. Christian states that he was not told by his father that he was the beneficiary under the insurance policy and that he had no knowledge that he was in fact a beneficiary. Further, he contends that his father induced him into signing the release by promising money to purchase a truck. The money for the truck never materialized. Thus, he argues, there was no consideration for the signing of the release. Melissa, only 17 at the time, contends that her father had no legal authority to sign the release on her behalf. She was unaware that he signed it. Additionally, the modification required that the sums be held by Deborah Gander until the children reached the age of 25, at which time they would be distributed equally to both children. She further contends that both Viatical Settlements, Inc. 3 and Mutual, the brokers, had knowledge that her mother, Deborah Gander, should sign the release. Terrell Evans of Barnes Jewish Christian Center and Bill Crust of Viatical Settlements Inc. knew of this issue, and a statement made between them became part of the file. The statement reads: 27 It states in the V.O.C. [Verification of Coverage] that this goes to the child in the Divorce Decree. . . . Make up an [sic] release and his former wife will sign it. Her name is Deborah J. Gander. The kids are almost of age anyway. App. 120. 28 Melissa and Christian contend that Livoti and McMahen either knew Deborah's signature was required or the knowledge of Viatical and Mutual Benefits should be imputed to them. 29 Second, Livoti and McMahen argue that they are bona fide purchasers for value. The district court concluded that Livoti and McMahen did not have superior rights to Melissa/Christian Gander. The court relied on the Ninth and Fourth Circuit cases that state a bona fide purchaser for value is one who purchases in good faith without notice of adverse claims. Southwest Administrators, Inc. v. Rozay's Transfer, 791 F.2d 769, 774 (9th Cir. 1986); In re Tudor Assoc. Ltd., 20 F.3d 115, 119 (4th Cir. 1994). In the case before us, the district court found: 30 It is clear from the record that both Viatical Settlements, Inc. (Viatical), which brokered the viatication with Mutual Benefits Corp. (Mutual) and Mutual, which received funds for the policy from McMahen, who assigned it to Livoti, had notice of Plaintiffs' claim to the policy. Viatical's June 11, 1996 Addendum to its Group Policy Verification of Coverage (which apparently was completed by BJC) includes the following notation as to question 12: 'Note: Record of Motion to Modify Divorce Decree with regard to children as beneficiaries of life insurance in September, 1992. It is unknown if any legal restriction is in force on employee's current coverage.' Pl. Ex. 4a at 3. In a June 13, 1996 letter to the President of Viatical, Bill Crust, Terrel Evans of BJC addressed this issue as follows: 'As relates to the legal instrument to which I referred in the addendum to question 12, I am unable to find any modification to or later document to cancel it. If there is an updated filing, I would think we should be sent a copy.' Pl. Ex. 5 at 1. Bill Crust communicated to Les Steinger, president of Mutual about this information as follows: 'It states in the V.O.C. [Verification of Coverage] that this goes to the child in the Divorce Decree. Make up an [sic] release and his former wife will sign it. He[r] name is Deborah J. Gander. The kids are almost of age anyway. 31 Dist. Ct. Op. at 11-12. The district court concluded that Viatical and Mutual had ample notice of the competing claims on Harold Gander's life insurance policy. The court then concluded that Livoti and McMahen had constructive knowledge of the plaintiffs' interests in the policy. St. Paul Fire & Marine Ins. Co. v. F.D.I.C., 968 F.2d 695, 700 (8th Cir. 1992). Further, the district court found that the equity lies in favor of the plaintiffs, Melissa and Christian. We agree. 32 Livoti and McMahen were attempting to purchase the beneficial interest in a life insurance policy. They are allowed by law to purchase only what the owner has the legal right to transfer. They and their agents, the brokers of this contract, clearly understood the risk of purchasing a life insurance contract that may have been subject to restrictions due to the owner's divorce. The divorce decree notified the buyers that this policy was for the benefit of the owner's children until they reached age twenty- five. Neither of the children had reached that age and the youngest was a minor, legally incapable of transferring her interest in the policy. The appellants, Livoti and McMahen, purchased this contract of insurance at their own risk without adequately investigating the right of the owner to transfer ownership. They are not bona fide purchasers of this contract and are not entitled to protection from the beneficiaries. 33 We have carefully reviewed the record and conclude that the findings of the district court are not clearly erroneous.