Court Opinion

ID: 2782016
Source: CourtListenerOpinion
Date Created: 2015-02-25 17:07:52.292812+00
Date Added: 2024-06-11T11:28:22.074183
License: Public Domain

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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37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                 :         No. 1972 WDA 2013
ESTATE OF AMR OMAR SHAWARBY,              :
A/K/A AO SHAWARBY, DECEASED               :

               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”), appeals the order of

the Cambria County Court of Common Pleas that granted 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 this 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 fees
            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,
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            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 beneficiary.
            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 policy
            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:

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                                  ORDER

                 AND NOW, this 20th 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 insurance policy proceeds

in the amount of $385,000 be paid to the Executrix, and the $140,000

proceeds of the universal life insurance policy continue under the freeze

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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 the Executrix. Ex-Wife

was ordered to file a Rule 1925(b) statement and she 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 combined 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, the wife brought an action

to have the beneficiary changes on her husband’s two life insurance policies

declared null and void, and to have the proceeds distributed to her because

there was an order enjoining the husband from disposing of marital

property. Id. at 397. The trial court agreed with the wife and found that

the changes in beneficiary designations were in violation of a court order.

                                    -4-
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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 insurance policy is a violation

of an order enjoining a party from disposing of “any 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 marital
             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 policies 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 life 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   divorced   on

December 27, 2012.        Decedent changed the beneficiary designation to

Executrix in July of 2011. Decedent died on July 25, 2013. Clearly, Ex-Wife

has no claim on the term policy that had no value until the death of

decedent.

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      The second insurance policy is a universal life policy. 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.) Executrix 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 insurance policy was purchased.

Id. at 700.     The wife was designated the beneficiary.       Subsequently, the

wife commenced a divorce action, and the decedent changed the beneficiary

to a third party, Evelyn Olds.        Id.    The wife was made aware of the

beneficiary change during the course of divorce proceedings.             Id.   The

decedent died while the divorce action was still in progress. Id.

      This court determined upon the death of the decedent, 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 did not
              cease with the abatement of the divorce action by
              appellee’s decedent’s death, the proceeds would still
              not constitute marital property, which is defined as
              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.

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            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 to
            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 mere 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 equitable distribution award.

In Schubert, the husband owned two insurance policies on the life of the

parties’ daughter. Id. at 1353-1354. The daughter died after the parties

separated, and the husband received the death benefits. 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 the
            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 for
            marital assets.

Id. at 1354-1355.

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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 surrender
             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 life
             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 omitted).

      We note life insurance proceeds are unlike pensions and retirement

benefits that are marital property subject to equitable distribution regardless

of whether the benefit is vested or has matured.         If the benefits resulted

from employment during the marriage, these benefits are marital property

because they are conferred, not as a gift by the employer, but as part of the

employee’s compensation package.

      Life insurance proceeds are also different from personal injury

settlements.    Section 3501(a)(8) of the Divorce Code excludes “[a]ny

payment received as a result of an award or settlement 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 received.”           23 Pa.C.S.A.

§ 3501(a)(8).    In Focht v. Focht, 32 A.3d 668, 674 (Pa. 2011), our

                                      -8-
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supreme court held that settlement monies received by the husband,

post-separation from the wife, in his personal injury 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 premiums) 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 policies 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 discretion when the

trial court dissolved the injunction releasing the insurance proceeds to

Executrix.

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

Judgment Entered.

1
 We recognize the Divorce Code allows trial courts to direct the continued
maintenance and beneficiary designations of existing 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 proceedings dissolve an
injunction and allow for the proper distribution of life insurance proceeds as
between Executrix and a third party, the trial court’s order dated
November 20, 2013, is a final order.

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Joseph D. Seletyn, Esq.
Prothonotary

Date: 2/25/2015

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