Court Opinion

ID: 771408
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:51:03+00
Date Added: 2024-06-11T17:55:57.434490
License: Public Domain

234 F.3d 1015 (7th Cir. 2000)
Funeral Financial Systems, Plaintiff-Appellant,v.United States of America, Defendant-Appellee.
No. 00-1404
In the  United States Court of Appeals  For the Seventh Circuit
Argued September 15, 2000Decided December 13, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 98 C 7905--James B. Zagel, Judge.
Before Flaum, Chief Judge, Kanne, and Williams,  Circuit Judges.
Kanne, Circuit Judge.

1
Plaintiff-Appellant,  Funeral Financial Systems ("Funeral Financial"),  asks this Court to find that the district court  incorrectly held the assignment of a World War II  veteran's insurance benefits to Funeral Financial  violative of the policy's terms and, thereby,  erroneously granted the United States' motion for  summary judgment. For the reasons stated below,  we agree with the district court's determination  regarding the validity of the assignment, and we  affirm that court's decision.

I.  History

2
World War II veteran Chafois Gilliam ("Gilliam")  died on January 9, 1998. As a result of his  service to his country, Gilliam obtained a  National Service Life Insurance ("NSLI") policy  from the United States Government in 1947, valued  at $10,000, pursuant to the National Service Life  Insurance Act of 1940, 38 U.S.C. sec.sec. 1901-  1963 (1994). Gilliam designated his wife, Shirley  Gilliam, and son, Dwight Gilliam, as joint  beneficiaries of the policy.

3
Four days after Gilliam's death, Shirley and  Dwight Gilliam assigned all rights, title, and  interest in $6,517.22 of the insurance benefits  available to them1 as joint beneficiaries of  the policy to another of Gilliam's sons, Keith  Gilliam. On the very next day, Keith Gilliam  purported to assign the interest he had just  acquired to the Hall-Jordan Funeral Home ("Hall-  Jordan") in return for funeral services for  Gilliam. Hall-Jordan, in turn, purported to  assign this interest to Funeral Financial in  exchange for immediate funds from Funeral  Financial to pay for Gilliam's funeral expenses.

4
Funeral Financial attempted to collect the life  insurance policy proceeds by contacting the  United States Department of Veterans Affairs  ("the Veterans Administration"). Funeral  Financial provided the Veterans Administration  with written notice of the purported assignment  from Hall-Jordan, and copies of the preceding  purported assignments of the insurance benefits.  Upon review of this information, the Veterans  Administration notified Funeral Financial that  "the proceeds of a Government Life Insurance  policy cannot be assigned to a funeral home or to  any funeral financial service company."Responding to the government's refusal to pay  Funeral Financial the proceeds from Gilliam's  NSLI policy, Funeral Financial filed a civil  action in the Chancery Division of the Circuit  Court of Cook County, Illinois, seeking  declaratory relief against National Service Life  Insurance Company. Funeral Financial urged a  determination that the assignments were valid and  that the Veterans Administration must pay Funeral  Financial $6,517.23. The United States removed  the case to the United States District Court for  the Northern District of Illinois, Eastern  Division, pursuant to 28 U.S.C. sec. 1441(a).  Additionally, because National Service Life  Insurance is not a separate entity, but instead  is a program implemented by the Department of  Veterans Affairs, the United States was  substituted as the proper party defendant.  Funeral Financial then sought relief pursuant to  38 U.S.C. sec. 1984(a), which provides for  federal district court review of claims against  the United States involving NSLI policies.

5
The United States filed a motion for summary  judgment arguing that the assignment clause in  Gilliam's policy restricts the assignability of  his NSLI death benefits and renders the purported  assignments invalid. Additionally, the government  argued that 38 U.S.C. sec. 5301 prohibits any  assignment of NSLI benefits that is not  "specifically authorized by law," and mandates  that these benefits "shall be exempt from the  claim of creditors," such as Funeral Financial.

6
The district court agreed with the government  that the purported assignments were invalid. In  explaining its conclusion, the district court  focused on the assignment clause in Gilliam's  policy, which states, "This policy is not  assignable by the Insured. A beneficiary may  assign all or any part of his/her interest in  this policy to the Insured's widow, widower,  child, father, mother, grandfather, grandmother,  brother, or sister, when the designated  contingent beneficiary, if any, joins in the  assignment." The district court found that this  language, which is taken from the language of 38  U.S.C. sec. 1918(a) (1994), clearly prohibits the  assignment from Keith Gilliam to Hall-Jordan, as  well as the subsequent assignment from Hall-  Jordan to Funeral Financial.

7
The district court further held that 38 U.S.C.  sec. 5301 rendered the assignments invalid.  Referring to sec. 5301, the court explained that  "the statute makes clear that veteran's benefits  are assignable only as specifically authorized by  law, and no such specific authorization exists  for the assignments at issue here." Funeral Fin.  Serv., Ltd. v. United States, No. 98 C 7905, 2000  WL 91919, at *2 (N.D. Ill. Jan. 18, 2000). Having  found the assignments allegedly obligating the  Veterans Administration to pay Funeral Financial  invalid, the district court granted the United  States' motion for summary judgment.

II.  Analysis

8
We review the district court's decision to  grant summary judgment de novo. Wyatt v. Unum  Life Ins. Co. of America, 223 F.3d 543, 545 (7th  Cir. 2000). Summary judgment is proper when the  "pleadings, depositions, answers to  interrogatories, and admissions on file, together  with the affidavits, if any, show that there is  no genuine issue as to any material fact and that  the moving party is entitled to a judgment as a  matter of law." Fed. R. Civ. P. 56(c); see also  Celotex Corp. v. Catrett, 477 U.S. 317, 322-23,  106 S. Ct. 2548, 91 L. Ed.2d 265 (1986). In  determining whether summary judgment is  appropriate, that is to say when deciding whether  a genuine issue of material fact exists, we must  review the record in the light most favorable to  the non-moving party, in this case Funeral  Financial, and make all reasonable inferences in  its favor. See Anderson v. Liberty Lobby, Inc.,  477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed.2d  202 (1986). If, after having reviewed the record  in this manner, we were to conclude that the  evidence is such that a reasonable jury could  return a verdict for Funeral Financial, then the  district court incorrectly granted the United  States's motion for summary judgment. See id. at  249. If, however, we conclude that the evidence  favoring Funeral Financial is insufficient for a  jury to return a verdict for that party, then  summary judgment was properly granted. See id. at  250.

9
Funeral Financial asserts numerous arguments in  support of its position that summary judgment was  improperly granted because the attempted  assignment of $6,517.23 of Gilliam's insurance  benefits to Funeral Financial was valid. We find  all of these arguments unpersuasive. Thus, we  need only address three of Funeral Financial's  strongest arguments in explaining why the  district court correctly granted the government's  motion for summary judgment.

A.  The Language of the Assignment Clause

10
The validity of the assignment at issue can be  determined by examining the language of the  assignment clause in Gilliam's insurance policy.  Gilliam's policy, issued pursuant to a federal  statute providing military veterans with  insurance, is a written government contract. See  Prudential Ins. Co. of America v. Athmer, 178  F.3d 473, 475 (7th Cir. 1999) (discussing life  insurance policy issued pursuant to the  Servicemen's Group Life Insurance Act of 1965, 38  U.S.C. sec.sec. 1965-1979). Interpreting the  meaning of a provision in a federal government  contract is a matter of federal common law, and  therefore, we must apply federal common law rules  of contract interpretation to determine whether  the purported assignments of Gilliam's insurance  proceeds were valid. See id. at 475; see also  Pitcher v. Principal Mut. Ins. Co., 93 F.3d 407,  411 (7th Cir. 1996).

11
When applying the federal common law rules of  contract interpretation we must first determine  whether the clause of the contract at issue is  ambiguous. Grun v. Pneumo Abex Corp., 163 F.3d  411, 420 (7th Cir. 1998) (citing Ryan v.  Chromalloy American Corp., 877 F.2d 598, 602 (7th  Cir. 1989)). The language of a contract is  ambiguous if a section of that contract "is  subject to reasonable alternative  interpretations." Id. (citing Hickey v. A.E.  Stanley Mfg., 995 F.2d 1385, 1389 (7th Cir.  1993)). In reviewing contract language for other  possible interpretations, we are required to  interpret the language "'in an ordinary and  popular sense as would a person of average  intelligence and experience.'" Id. (quoting  Pitcher, 93 F.3d at 411). If a contract is not  open to any other reasonable interpretations, and  is therefore unambiguous, then the written words  of the contract must dictate the disposition of  a dispute involving that contract. Central  States, Southeast and Southwest Areas Pension  Fund v. Kroger Co., 226 F.3d 903, 911 (7th Cir.  2000). Furthermore, except for the highly unusual  instance "where literal application of a text  would lead to absurd results or thwart the  obvious intentions of its drafters," if a  contract is found to be unambiguous, then we are  not to examine any extrinsic evidence. Grun, 163  F.3d at 420 (internal quotation marks and  citations omitted). When the language of an  unambiguous contract "provides an answer, then  the inquiry is over." Id. (citing Wikoff v.  Vanderveld, 897 F.2d 232, 238 (7th Cir. 1990)).

12
There is nothing ambiguous about the assignment  clause in Gilliam's NSLI policy. The clause  provides that "[a] beneficiary may assign all or  part of his/her interest in the policy." The  clause also provides, however, a very specific  and limited list of individuals to whom such a  beneficiary may assign all or part of his or her  interest. A beneficiary of an NSLI policy may  only assign his or her interest to "the Insured's  widow, widower, child, father, mother,  grandfather, grandmother, brother or sister."

13
Applying the limitations of the unambiguous  assignment clause, we conclude that the two  assignments at issue are invalid.Although the  initial assignment from Shirley and Dwight  Gilliam to Keith Gilliam was proper, the next two  assignments are clearly prohibited by the  policy's assignment clause. Keith Gilliam is the  son of Gilliam and is, therefore, one of the  limited individuals to whom the assignment clause  permits Shirley and Dwight Gilliam to assign all  or part of their interest in the policy's  proceeds. Neither Hall-Jordan, to whom Keith  Gilliam attempted to assign his interest in the  policy, nor Funeral Financial, to whom Hall-  Jordan tried to assign its purported interest in  the policy, however, can claim to be included in  the limited group of individuals to whom Shirley  and Dwight Gilliam could permissibly assign their  interest in the policy. Thus, we find these two  assignments to be in direct violation of the  assignment clause and invalid.

14
Funeral Financial asserts that the restrictions  on the assignability of Gilliam's NSLI proceeds  only apply to the first assignment, from the  initial beneficiary, Shirley and Dwight Gilliam,  to the initial assignee, Kevin Gilliam. Funeral  Financial contends that any re-assignment of the  insurance proceeds is not hindered by the  restrictions placed on the original beneficiary.  This argument fails for two reasons. First, when  a party to a contract assigns its interest in  that contract to another party, the assignee,  then that second party "stands in the shoes of  the assignor and assumes the same rights, title  and interest possessed by the assignor." Perry v.  Globe Auto Recycling, Inc., 227 F.3d 950, 953 (7th  Cir. 2000) (internal quotation marks and  citations omitted). When Shirley and Dwight  Gilliam properly assigned their interest in  Gilliam's policy to Keith Gilliam, he stepped  into the role of beneficiary, and the  restrictions of the assignment clause limited his  ability to assign his newfound interest in the  insurance proceeds. Thus, Keith Gilliam's  assignment of his interest in his father's policy  to Hall-Jordan is forbidden by the assignment  clause. It follows that the attempted assignment  from Hall-Jordan, who never actually obtained any  interest in the policy, to Funeral Financial, an  impermissible assignee, is also invalid.

15
Secondly, Funeral Financial's interpretation of  who is bound by the assignment clause undermines  the purpose of including any assignment  restrictions in the insurance policy. The  assignment clause in Gilliam's policy,  implemented pursuant to 38 U.S.C. sec. 1918(a),  is one of several steps Congress has taken to  ensure that NSLI proceeds reach those individuals  Congress and the policyholders intended these  policies to benefit.2 Applying the same  restrictions to those individuals who have  themselves been assigned an interest in the  policy through a proper assignment protects the  rights of those individuals who stand ready to  benefit from future valid assignments. As the  district court pointed out, allowing an initial  assignee to re-assign the interest in the  proceeds he or she received from the designated  beneficiary without any restrictions whatsoever  "would create an end-run around the anti-  assignment provisions of the statute." Funeral  Fin. Serv., Ltd. v. United States, No. 98 C 7905,  2000 WL 91919, at *2 (N.D. Ill. Jan. 18, 2000).  We will neither create nor endorse a method for  individuals to bypass restrictions intentionally  implemented by Congress.

B.  38 U.S.C. sec. 5301

16
The assignments at issue in this case are also  rendered invalid by 38 U.S.C. sec. 5301. Section  5301, a part of the "special provisions relating  to benefits," states that:

17
Payments of benefits due or to become due under  any law administered by the Secretary shall not  be assignable except to the extent specifically  authorized by law, and such payments made to, or  on account of, a beneficiary shall be exempt from  taxation, shall be exempt from the claim of  creditors, and shall not be liable to attachment,  levy, or seizure by or under any legal or  equitable process whatever, either before or  after receipt by the beneficiary.

18
38 U.S.C. sec. 5301(a) (1994) (emphasis added).  The "Secretary" referred to in this provision is  the Secretary of the United States Department of  Veterans Affairs. 38 U.S.C. sec. 101(1) (1994).  The NSLI is one of many programs implemented by  the Secretary and the Department of Veterans  Affairs, and the benefits from Gilliam's NSLI  policy are part of that group "of benefits due or  to become due under law administered by the  Secretary." 38 U.S.C. sec. 5301; see 38 U.S.C.  sec. 1904(b) (1994). Thus, for any of the  assignments at issue to be valid, they must be  "specifically authorized by law." 38 U.S.C. sec.  5301. As we have previously explained, however,  no such authorization exists for either Keith  Gilliam's purported assignment to Hall-Jordan, or  Hall-Jordan's purported assignment to Funeral  Financial. The assignment clause in Gilliam's  policy describes a limited group of individuals  to whom an assignment can be considered as being  "specifically authorized by law." Id. The two  assignments at issue are not included in this  group, and they are therefore barred by 38 U.S.C.  sec. 5301.

C.  Congressional Intent

19
Although we have already explained several  reasons why the purported assignments at issue  are invalid, we feel compelled to briefly express  our disagreement with Funeral Financial's final  assertion that the district court's decision  fails to effectuate congressional purposes and,  more importantly, fails to serve veterans and  their families in a proper manner. Funeral  Financial highlights a situation that may arise  when the Veterans Administration enforces the  restrictions on the assignment of insurance  proceeds like those from Gilliam's policy. There  may be instances where the families of recently  deceased veterans are unable to immediately  produce the funds needed to pay for a proper  funeral service and burial. Although most of  these families would be receiving the proceeds  from their relatives' policies, a time delay in  the distribution of those benefits could  admittedly create a gap in time from when funeral  expenses must be paid and when insurance benefits  would be received. Thus, Funeral Financial argues  that a determination that the assignment clause  prohibits assignments like those at issue in this  case would dishonor veterans by preventing their  families to provide appropriate funeral  arrangements.

20
We first note that Congress has provided NSLI  policyholders and their families the means to  avoid this situation. A 1946 amendment to the  NSLI program enabled insured veterans to  designate policy beneficiaries outside of the  limited group of relatives originally  established. See 38 U.S.C. sec. 1917(a) (1994).  Furthermore, policyholders are able to have these  insurance proceeds paid to their selected  beneficiaries in "one sum" or in monthly  installments. 38 U.S.C. sec. 1917(b) (1994).  Thus, an NSLI policyholder could anticipate  funeral expenses, even make specific  arrangements, and then designate a funeral  services provider as the direct beneficiary of  the amount of money needed for those services.  Although the funeral services provider would  encounter a delay in distribution as do all  beneficiaries, the provider could spend or borrow  the immediate funds needed knowing that it would  be paid by the government. Thus, the situation  described by Funeral Financial only arises where  no such arrangements are made, or where a funeral  services provider refuses such an arrangement.

21
When formulating the NSLI program, Congress was  undoubtedly aware of the delay that might occur  between the death of a veteran with an NSLI  policy and the distribution of that veteran's  benefits to his designated beneficiaries. The  Supreme Court stated as much in United States v.  Henning, 344 U.S. 66, 73 S. Ct. 114, 97 L. Ed.  101 (1952), where, in analyzing an issue  involving an NSLI policy, the Court noted that  Congress was "fully aware of the sometimes  inevitable delays in payment." Id. at 75. The  Court also explained that in developing programs  like the NSLI, Congress works to avoid certain  problems, knowing that other difficult situations  may arise. See id. at 75-76. Specifically, with  regard to the NSLI program, the Court stated that  in putting together this legislation, Congress  "preferred the occasionally harsh result" that  might arise from a delay in payment under the  current program, to an alternative program that  would allow funds from NSLI policies to fall into  the hands of individuals or entities Congress did  not intend to benefit. Id. at 76. Although  Congress did not intend for any individual or  family to encounter difficulties when dealing  with the NSLI program, Congress ultimately  designed the program to operate in a way that it  believed would best serve veterans and their  families. Therefore, our decision does not  dishonor veterans, rather, it merely ensures that  the policies and programs designed by Congress to  reward veterans' commitment are interpreted and  enforced consistent with the intent of Congress.

III.  Conclusion

22
Because we agree with the district court's  conclusion that the assignment clause in  Gilliam's insurance policy prohibits the  assignments at issue in this case, we AFFIRM.

Notes:

1
 Although the NSLI policy included proceeds of  $10,000, at the time of Gilliam's death, the  policy was subject to an outstanding loan of  $2,213.20. Thus, $7,786.80 of the policy's  proceeds was available to Shirley and Dwight  Gilliam.

2
 "From the beginning, the underlying policy of  National Service Life Insurance has been to  benefit living people and to care for the  families and friends of men who gave their lives  for their country." United States v. Short, 240  F.2d 292, 298 (9th Cir. 1956).