Court Opinion

ID: 9964116
Source: CourtListenerOpinion
Date Created: 2024-04-27 06:12:13.767891+00
Date Added: 2024-06-11T08:25:10.475805
License: Public Domain

Opinion filed April 25, 2024

                                     In The

        Eleventh Court of Appeals
                                   __________

                               No. 11-22-00130-CV
                                   __________

                       TERESA SHUMSKIE, Appellant
                                        V.
                          TRINA FINNELL, Appellee

                      On Appeal from the 441st District Court
                             Midland County, Texas
                         Trial Court Cause No. CV56097

                                  OPINION
       On August 16, 2019, approximately two weeks before his death, Gary
Shumskie transmitted a form to American General Life Insurance Company
(American General) naming Appellee Trina Finnell, his spouse at the time, as the
primary beneficiary of his $500,000 life insurance policy. Previously, the primary
beneficiary had been Appellant Teresa Shumskie, his former spouse. Teresa had
been named beneficiary pursuant to a 2010 divorce decree that obligated Gary to
make periodic payments on a judgment that was secured in part by the policy
proceeds. Following a bench trial, the court rendered a declaratory judgment,
awarding Teresa $65,000, the amount that Gary owed her at the time of his death.
The balance of the policy proceeds were then awarded to Trina. Dissatisfied with
this result, Teresa has appealed, seeking to recover all of the policy proceeds.
        We affirm the judgment of the trial court.
                                         Background Facts
        Gary and Teresa divorced on August 27, 2010. In order to equalize the
division of property between the parties, the divorce decree awarded Teresa a
judgment of $600,000, which was to be paid by Gary in monthly installments of
$5,000. The decree required Gary to obtain a life insurance policy that designated
Teresa as the beneficiary. Per the decree, the policy—along with several other
assets—would provide Teresa with “an equitable lien and express legal lien” on
Gary’s debt. The decree further clarified that Teresa’s interest therein was “in the
nature of a purchase-money lien.” It also stated that “[t]he amount on the life
insurance policy may be reduced by [Gary] as the debt to [Teresa] is reduced.”
        At the time of the divorce, Gary already owned the American General policy,
which he had acquired in 2004,1 and it is undisputed that the lien that is described in
the decree should attach to that policy.
        Gary attempted to amend the beneficiary designation twice: once in 2016 and
once in 2019.
            In November 2016, Gary submitted a letter to American General which
expressed his intention to limit Teresa’s beneficial interest in the policy to the

        1
         In order to satisfy the requirement that he acquire $600,000 in life insurance coverage, Gary also
obtained a $100,000 insurance policy, which he later allowed to lapse.
                                                    2
amount of his ongoing debt, paying the balance to Tyler Shumskie and Wesley
Shumskie—his sons—–in equal shares. The letter was accompanied by a form that
designated Teresa as primary beneficiary and named Tyler and Wesley as contingent
beneficiaries. Subsequently, American General responded with a letter requesting
that Gary fill out a new change of beneficiary form, which included blanks for the
percentages that should be given to each primary beneficiary. It also indicated that
further changes of the percentages for each beneficiary designation would require a
new form. However, there is no indication in the record that Gary took action in
response to American General’s letter.
      On August 16, 2019, Gary again submitted a written request to change
beneficiaries, this time adding Trina as the primary beneficiary. The request was
provided on a form that was promulgated by American General and was signed by
Gary. Thereafter, on August 29, Gary executed a document entitled the “Last Will
and Testament of Gary Shumskie.” Although most of the will contains terms
disposing of Gary’s estate, paragraph III(A) also contains the following language:
      By Final Decree of Divorce . . . I agreed and was ordered to pay my
      former wife, Teresa Lou Shumskie, the total sum of $600,000.00,
      payable in monthly installments of $5,000.00 each. I hereby give to
      Teresa Lou Shumskie the balance of any sums I may still owe Teresa
      Lou Shumskie by reason of this $600,000.00 obligation set out in this
      Final Decree of Divorce existing at the time of my demise, the balance
      to be paid wholly from my [bank account] and [the American General
      policy].
Trina testified that, based on this language, it was clear that Gary had “made
provision” for the balance of his debt to be satisfied before she would receive any
policy proceeds.
      Gary died on September 1, 2019. Thereafter, both Trina and Teresa made
claims to American General for the policy’s proceeds. In response, American
General sent a letter to the parties indicating that it did not know “to whom, and in
                                         3
what amount, it may be liable.” On the same day, Trina filed suit against Teresa and
American General, seeking injunctive relief, as well as a declaration that she was
entitled to the policy proceeds.
      American General tendered the policy proceeds, plus accrued interest thereon,
into the registry of the court in exchange for a release from Trina and Teresa. After
a brief bench trial, the trial court found that Trina was the beneficiary under the
policy but awarded $65,000 out of the funds in the court’s registry to Teresa in
satisfaction of Gary’s remaining debt obligation.
                                       Analysis
      Teresa brings five issues challenging the trial court’s judgment. In her first
issue, Teresa asserts that she was “the sole primary and unrestricted beneficiary” of
Gary’s life insurance policy with American General, and that Trina failed as a matter
of law to show her entitlement to any of the policy proceeds. Her second issue
presents an alternative argument—that she was a co-owner of the policy, entitled to
$250,000 plus $65,000 for the amount that Gary owed her at the time of his death.
Teresa asserts in her third issue a factual sufficiency argument as a follow-up to her
first two issues. In her fourth issue, Teresa challenges sixteen specific findings of
fact and conclusions of law. Finally, Teresa asserts in her fifth issue that the trial
court erred by refusing her requests for additional findings of fact and conclusions
of law with respect to her first two issues.
      Declaratory Judgments
      The Texas Uniform Declaratory Judgment Act allows a court to “declare
rights, status, and other legal relations” among the parties. TEX. CIV. PRAC. &
REM. CODE § 37.003(a) (West 2020). In such cases, the party designations of
plaintiff and defendant do not necessarily determine the manner in which the
burden of proof is allocated. Berthelot v. Brinkmann, 322 S.W.3d 365, 369 (Tex.

                                           4
App.—Dallas 2010, pet. denied). Rather, it is the party who asserts an affirmative
claim for relief that has the burden of proving its allegations. Id.; see Garden Oaks
Maint. Org. v. Chang, 542 S.W.3d 117, 129 (Tex. App.—Houston [14th Dist.] 2017,
no pet.).
      In this case, Trina and Teresa each make conflicting claims regarding the
allocation of the policy proceeds. As such, each party bears the burden of proving
her own claim.
      Jurisdictional Issues
      Teresa asserts that the trial court erred when it found that Trina had standing
to seek a declaration that she was the policy beneficiary (Issue No. 4(a)). Similarly,
Teresa challenges the trial court’s findings that it had subject-matter jurisdiction over
Trina’s claim to policy benefits (Issue No. 4(b)), and that Teresa failed to prove her
claim of release and waiver (Issue No. 4(o)).
      “The issue of standing focuses on whether a party has a sufficient relationship
with the lawsuit so as to have a ‘justiciable interest’ in its outcome.” Austin Nursing
Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). “[T]he standing doctrine
requires that there be (1) ‘a real controversy between the parties,’ that (2) ‘will be
actually determined by the judicial declaration sought.’” Id. at 849; Stephens v.
Three Finger Black Shale P’ship, 580 S.W.3d 687, 704 (Tex. App.—Eastland 2019,
pet. denied). “Without standing, a court lacks subject matter jurisdiction to hear the
case.” Lovato, 171 S.W.3d at 849. We review standing issues de novo. Stephens,
580 S.W.3d at 704.
       In this case, Trina introduced evidence showing that Gary attempted to name
her as the beneficiary under the policy by transmitting a change-of-beneficiary form
to American General in August 2019. Where a plaintiff can introduce even partial
provisions of an insurance contract that would compel recovery under a policy, such

                                           5
evidence is sufficient to establish the plaintiff’s standing. Paragon Sales Co., Inc. v.
New Hampshire Ins. Co., 774 S.W.2d 659, 661 (Tex. 1989). Similarly, a former
beneficiary under a life insurance policy has standing to bring suit to contest a
change of beneficiary on the grounds of undue influence. Cobb v. Justice, 954
S.W.2d 162, 168 (Tex. App.—Waco 1997, pet. denied). While not identical to the
evidence that plaintiffs introduced in Paragon Sales and Cobb, Trina’s evidence that
Gary attempted to substitute her as beneficiary under the policy demonstrates that
she has a colorable claim, and therefore a similar, justiciable interest in a controversy
concerning the disposition of the funds.
      In her brief, Teresa does not offer an explanation as to why she believes
subject-matter jurisdiction is at issue. However, in her pleadings below, she tied the
issue of subject-matter jurisdiction into her defenses of release and waiver.
Specifically, Teresa claimed that Trina released all of her claims against American
General as a part of the order that placed the funds into the registry of the court, and
that the release “necessarily includes all claims asserted by [Trina] in this suit.”
However, Trina does not and could not, in any event, seek damages from American
General, which has not denied her claim, and has instead taken the position that it
does not know how the claim should be paid. Furthermore, having tendered the
funds into the registry of the court, American General is in the same position as a
stakeholder that is dismissed after filing an interpleader action, and it is no longer a
necessary party to any judgment disposing of the funds. See Clayton v. Mony Life
Ins. Co. of Am., 284 S.W.3d 398, 402 (Tex. App.—Beaumont 2009, no pet.)
(“Generally, the stakeholder is discharged from liability to the rival claimants in the
first stage of the process.”). As such, Teresa’s claims of waiver and release are
inapplicable.

                                           6
      The trial court cannot allow funds to sit in its registry indefinitely. See
Madeksho v. Abraham, Watkins, Nichols & Friend, 112 S.W.3d 679, 686 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied) (because a trial court “cannot simply
toss the money back out the clerk’s window,” the trial court unquestionably has quasi
in rem jurisdiction to determine who owns funds tendered into the registry). As
such, it must take action to identify the person(s) to whom the funds belong. Teresa
has adequately demonstrated a justiciable claim that—if proven true—will allow the
trial court to resolve the issue and distribute the funds. See Brooks v. Northglen
Ass’n, 141 S.W.3d 158, 163–64 (Tex. 2004) (“A declaratory judgment requires a
justiciable controversy as to the rights and status of parties actually before the court
for adjudication, and the declaration sought must actually resolve the controversy.”).
On that basis, we overrule Issue Nos. 4(a), 4(b), and 4(o).
      Teresa’s Lack of Affirmative Pleadings
      Teresa did not make any affirmative claims for relief in her pleadings.
Normally, such a failure to plead a claim would operate to prohibit Teresa from
securing affirmative relief. See TEX. R. CIV. P. 301 (A “judgment of the court shall
conform to the pleadings.”); Cunningham v. Parkdale Bank, 660 S.W.2d 810, 812–
13 (Tex. 1983) (“[T]he judgment of the court must conform to the pleadings of the
parties.”). However, an issue may also be tried by consent of the opposing party.
See In re P.M.G., 405 S.W.3d 406, 417 (Tex. App.—Texarkana 2013, no pet.) (“A
judgment, absent issues tried by consent, must conform to the pleadings.”); Elliott v.
Hollingshead, 327 S.W.3d 824, 837 (Tex. App.—Eastland 2010, no pet.) (“A trial
court cannot grant relief to a party in the absence of pleadings supporting that relief,
unless the issue has been tried by consent.”).
      In this instance, Teresa’s claim that she is a beneficiary under the policy was
tried by consent. From the outset, the parties appear to have shared an understanding

                                           7
that the identity of the beneficiary of the policy was at issue. In his opening
argument, Trina’s counsel framed the disputed issue by stating that Teresa was the
original beneficiary, that Gary purportedly named Trina as a new beneficiary just
before his death, that Teresa claims the change of beneficiary is ineffective, and that
the trial court’s role would be to “determine the payment of the proceeds . . . between
Mrs. Finnell and Mrs. Shumskie.” Because Trina recognized and disputed Teresa’s
claim that she was a policy beneficiary, she expressly consented to a trial of that
claim. See Paint Rock Operating, LLC v. Chisholm Expl., Inc., 339 S.W.3d 771,
775 (Tex. App.—Eastland 2011, no pet.).
        However, the issues that are raised by Teresa on appeal are not limited to her
status as a policy beneficiary. In her second issue, Teresa also claims that, because
the American General policy was not divided or otherwise disposed of in her divorce
decree with Gary, the evidence conclusively supports a finding that she is the owner
of one-half of the policy.2 Furthermore, as a part of her third issue, Teresa also
complains that the trial court’s refusal to render a finding on the question of her co-
ownership of the policy was against the great weight and preponderance of the
evidence. Similarly, Issue No. 4(c) complains that the trial court erred in ruling that
Gary was the sole owner of the policy.
        Trina argues that Teresa’s status as an owner of the policy is a new issue,
which may not be raised post-judgment or on appeal. In response, Teresa does not
claim that she raised the issue in her pleadings or during trial, but instead asserts that
she may, for the first time on appeal, raise her complaints relating to the trial court’s
refusal to render her requested findings on co-ownership, citing Rule 33.1(d) of the

        2
         Although we do not reach the issue, Teresa’s assertion that the American General policy was not
among the property that was divided in the divorce decree appears to be incorrect. While the policy is not
expressly named and awarded to Gary as such, it is included in a list of assets that are characterized as
“property awarded to [Gary] by this Decree.”

                                                    8
Texas Rules of Appellate Procedure. 3 Teresa’s interpretation of Rule 33.1(d) is
incorrect.     Rule 33.1(d) provides that “[i]n a civil nonjury case, a complaint
regarding the legal or factual insufficiency of the evidence . . . as distinguished from
a complaint that the trial court erred in refusing . . . to make an additional finding
of fact—may be made for the first time on appeal.” TEX. R. APP. P. 33.1(d)
(emphasis added). There is nothing in Rule 33.1(d) that allows Teresa to assert a
basis for recovery post-judgment that was not included in her pleadings or tried by
consent. 4 See Cunningham, 660 S.W.2d at 812–13; Elliott, 327 S.W.3d at 837.
        We have reviewed the record and have found no indication that Teresa made
a claim that she was a co-owner of the policy prior to the close of evidence. We
likewise find no indication that the issue of co-ownership was tried by consent. For
that reason, we hold that Teresa is not entitled to relief on the issue of co-ownership,
and we overrule Teresa’s second issue, as well as Issue No. 4(c). We also overrule
Teresa’s third and fifth issues, to the extent that they address the sufficiency of the
evidence supporting Teresa’s status as a co-owner of the policy.
        Additionally, in Issue No. 4(p), Teresa complains about the trial court’s
findings that she failed to plead a claim for relief. We sustain Issue No. 4(p) to the
extent it argues that Teresa did not successfully litigate her claim that she was a
policy beneficiary. Otherwise, we overrule Issue No. 4(p).

       Teresa’s reply brief cites Rule 33.1(d) of the Texas Rules of Civil Procedure, which does not exist.
        3

However, from her argument, it is clear that Teresa intends to cite the corresponding appellate rule.

        4
         Teresa also asserts that she made the trial court aware of her requested issues and her supporting
arguments through her motion to modify the judgment, the hearing on her motion to modify judgment, and
her requests for factual findings and legal conclusions. All of these actions were undertaken post-judgment
and were never supported by her pleadings.
                                                    9
      The Effect of the Divorce Decree
      In her first issue, Teresa complains that the evidence that Trina was the
beneficiary of the policy was legally insufficient, and that the evidence instead
conclusively establishes that Teresa is the proper beneficiary of the policy.
Similarly, in her third issue, Teresa complains in part that the evidence was factually
insufficient to support a finding that Trina was the beneficiary, and that the evidence
instead points to Teresa as the primary beneficiary.
      When parties challenge the legal sufficiency of the evidence supporting an
adverse finding on which they did not have the burden of proof at trial, they must
demonstrate that there is no evidence to support the adverse finding. See City of
Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005); Croucher v. Croucher, 660
S.W.2d 55, 58 (Tex. 1983). Under a legal sufficiency review, we consider all of the
evidence in the light most favorable to the prevailing party, make every reasonable
inference in that party’s favor, and disregard contrary evidence unless a reasonable
factfinder could not. City of Keller, 168 S.W.3d at 807, 822, 827. We cannot
substitute our judgment for that of the factfinder if the evidence falls within this zone
of reasonable disagreement. Id. at 822.
      The evidence is legally insufficient to support a finding only if (1) the record
discloses a complete absence of a vital fact, (2) the court is barred by rules of law or
evidence from giving weight to the only evidence offered to prove a vital fact, (3) the
only evidence offered to prove a vital fact is no more than a mere scintilla, or (4) the
evidence conclusively establishes the opposite of a vital fact. Id. at 810. “Anything
more than a scintilla of evidence is legally sufficient to support the finding.”
Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d
41, 48 (Tex. 1998). “More than a scintilla of evidence exists when the evidence
would enable reasonable and fair-minded people to reach different conclusions.”

                                           10
Burbage v. Burbage, 447 S.W.3d 249, 259 (Tex. 2014). “However, if the evidence
is so weak that it only creates a mere surmise or suspicion of its existence, it is
regarded as no evidence.” Waste Mgmt. of Tex., Inc. v. Tex. Disposal Sys. Landfill,
Inc., 434 S.W.3d 142, 156 (Tex. 2014).
      If a party attacks the factual sufficiency of an adverse finding on an issue in
which the other party had the burden of proof, the attacking party must demonstrate
that there is insufficient evidence to support the adverse finding. Croucher, 660
S.W.2d at 58. In a factual-sufficiency challenge, we consider and weigh all of the
evidence, both supporting and contradicting the finding. See Mar. Overseas Corp. v.
Ellis, 971 S.W.2d 402, 406–07 (Tex. 1998). We may set aside the finding only if it
is so contrary to the overwhelming weight of the evidence as to be clearly wrong and
unjust. Id. at 407. We may not substitute our own judgment for that of the factfinder
or pass upon the credibility of witnesses. Id.
      Teresa contends that, independent of the terms of the policy, the decree and
the agreement relating to the decree operate to nullify any change of beneficiary.
Contrary to Teresa’s position, we conclude that the effectiveness of a request for a
change of beneficiary should be considered solely in light of the terms of the policy.
      Life insurance policies often contain provisions that allow the insured to
change the beneficiary at will. See Alexander v. Alexander, 701 S.W.2d 48, 50 (Tex.
App.—Dallas 1985, writ ref’d n.r.e.); Box v. S. Farm Bureau Life Ins. Co., 526
S.W.2d 787, 789 (Tex. App.—Corpus Christi–Edinburg 1975, writ ref’d n.r.e.). In
such circumstances, the beneficiary has no vested interest prior to the insured’s
death. Volunteer State Life Ins. Co. v. Hardin, 197 S.W.2d 105, 107 (Tex. 1946);
Alexander, 701 S.W.2d at 50; Box, 526 S.W.2d at 789.
      In addition, insureds may enter into a separate contract by which they agree
to maintain a particular person or group of people as beneficiaries. See Alexander,

                                         11
701 S.W.2d at 50; Box, 526 S.W.2d at 789. In such an event, the beneficiaries
described in the separate contract acquire a vested right in the policy proceeds, even
though the terms of the policy contract allow the insured to designate a different
beneficiary. Alexander, 701 S.W.2d at 50 (the rule that a beneficiary does not have
a vested right in life insurance proceeds does not apply where the insured has
contracted to designate and maintain such a beneficiary by way of a separate
agreement).
      Arrangements such as this often arise in connection with divorce settlement
agreements. See Alexander, 701 S.W.2d at 50; Box, 526 S.W.2d at 788. Likewise,
trial courts have the authority to order a child support obligor to obtain and maintain
a life insurance policy for the benefit of the minor. TEX. FAM. CODE ANN. § 154.016
(West Supp. 2023). The purpose of the policy is to ensure that the support obligation
is fully paid in the event of the insured’s death. See FAM. CODE § 154.016(a) (Courts
may order obligors to pay insurance requirements “that will satisfy the support
obligation under the child support order in the event of the obligor’s death.”).
      The arrangement that is described in Gary and Teresa’s divorce decree, which
characterizes Teresa’s interest as a lien and which requires Gary to maintain a policy
naming Teresa as beneficiary, is consistent with the arrangements in cases such as
Box and Alexander. However, the existence of such an arrangement does not—as
Teresa suggests—automatically void an attempted change of beneficiary that is
consistent with the terms of the policy. Rather, it creates an equitable interest that
attaches to the policy proceeds, regardless of the person(s) who receive the proceeds
pursuant to the insurance contract.
      The relationship between the insured and the insurer is governed solely by the
terms of the insurance agreement, without reference to any external factors. This
principle is illustrated in State Farm Life Ins. Co. v. Martinez, 174 S.W.3d 772 (Tex.

                                          12
App.—Waco 2005), rev’d on other grounds, 216 S.W.3d 799 (Tex. 2007). In that
case, an insurer refused to process a change-of-beneficiary form because it suspected
that the insured was prohibited from doing so under a divorce agreement. Id. at 780.
In holding that the insurer’s refusal was improper, the Tenth Court of Appeals stated
that the insurer is required to be indifferent as to the identity of the beneficiary. Id.
at 779–80. Furthermore, it is under a contractual duty to effectuate any requested
change of beneficiaries. Id. at 780. Thus, “even if the insured’s first wife had a
community interest in the policy proceeds when payable, the insurer had neither the
contractual right nor legal standing to prevent the insured from changing the
beneficiary.” Id. at 779.
      We agree with the Tenth Court of Appeals that the insurance carrier’s duties
must be directed to the terms of their policy agreement with the insured, to whom
they owe contractual obligations, as well as numerous statutory duties, particularly
with respect to the adjustment and payment of claims. Allowing divorce decrees to
nullify otherwise valid policy changes places the carrier in a position where it cannot
know that it is paying the correct beneficiary despite its clear obligations under the
terms of the policy, adding uncertainty and delay to the claims process.
      However, persons who are required to be designated as beneficiaries because
of agreements outside of the policy may still pursue their interest in the policy
proceeds by seeking an equitable remedy. In Box, for example, the parties to a
divorce entered into an agreement whereby a husband was obligated to maintain a
policy for the benefit of two children. 526 S.W.2d at 788. The divorce agreement
provided that the beneficiaries could not be changed. Id. Notwithstanding the
parties’ agreement, the husband named his new spouse as the beneficiary several
years later. Id. After the husband died, the insurance carrier interpleaded the funds.
Id.

                                           13
      In ruling that the children were entitled to the policy proceeds, the Thirteenth
Court of Appeals observed that, while “the insured has the right, under the terms of
the insurance policy, to change the designated beneficiary,” “the equity of the case
requires that [he] . . . observe his contract.” Id. at 789 (quoting Locomotive
Engineers’ Mut. Life & Accident Ins. Ass’n v. Waterhouse, 257 S.W. 304 (Tex.
App.—El Paso 1924, writ ref’d)). Based on this analysis, the court held that the
property settlement agreement gave the children a “vested equitable interest” in the
proceeds of the insurance policy. Id.
      We arrived at the same resolution several years later in Gutierrez v. Madero,
564 S.W.2d 185 (Tex. App.—Eastland 1978, writ ref’d n.r.e.). In Guitierrez, a
spouse was required to designate his children as beneficiaries under a life insurance
policy. Id. at 187. However, the agreed decree incorrectly described the policy. Id.
After determining that the jury had properly found that the incorrect policy
designation was a mutual mistake, we addressed the question of whether the children
were therefore entitled to the proceeds from the policy, even though the policy
beneficiary had been changed following the divorce. Id. at 186, 189. In so doing,
we did not determine that the change of beneficiary under the policy was void, but
instead held that a constructive trust could be imposed on the policy proceeds so that
the funds could be awarded to the intended beneficiaries. Id. at 190.
      In support of our decision in Gutierrez, we cited Blankenship v. Citizens
National Bank of Lubbock, 449 S.W.2d 77 (Tex. App.—Amarillo 1969, writ ref.
n.r.e.) for the proposition that, under circumstances “amounting to fraud,” property
is impressed with a constructive trust to provide relief “against one whom, by any
means or in any way against equity and good conscience, either has obtained or holds
legal title to property which [they] ought not in good conscience hold or enjoy.”
Gutierrez, 564 S.W.2d at 189 (quoting Blankenship, 449 S.W.2d at 79). We also

                                         14
favorably cited Hirsch v. Travelers Ins. Co., 341 A.2d 691 (N.J. Super. Ct. App. Div.
1975), a case in which a spouse improperly altered his children’s beneficiary
designation under similar circumstances, resulting in an award of restitution.
Gutierrez, 564 S.W.2d at 189–90; see also Tomlinson v. Lackey, 555 S.W.2d 810,
813 (Tex. App.—El Paso 1977, no writ) (holding that a minor child possessed “a
vested equitable interest in the proceeds of the insurance policy,” and affirming trial
court’s imposition of a trust on same).
      In short, a change of beneficiary that is properly effectuated under the terms
of an insurance policy is not rendered void, even where the change of beneficiary is
in violation of an agreement outside of the insurance contract. However, the person
that the insured has agreed to name as beneficiary holds a vested equitable interest,
which can be enforced by way of a constructive trust on the policy proceeds.
      The Substantial Compliance Standard
      The trial court found that Trina became the primary beneficiary under the
policy as a result of Gary’s submission of the August 2019 form. Teresa argues that
the August 2019 form was not effective because it was never recorded by American
General. The policy provides as follows:
      While this policy is in force the owner may change the beneficiary or
      ownership by written notice to us [American General]. When we
      record the change, it will take effect as of the date the owner signed the
      notice, subject to any payment we make or other action we take before
      recording.

Teresa asserts that American General never recorded the change-of-beneficiary
form, and that—since the form was “unrecorded”—it never took effect. This
argument is inconsistent with Texas law.
      “Generally, an insured’s right to change beneficiaries is governed by the terms
of the policy.” Martinez, 216 S.W.3d at 802. However, strict compliance with the

                                          15
policy terms is not necessary. Todd v. Mut. Ben. Life Ins. Co., 483 S.W.2d 889, 891
(Tex. App.—Waco 1972, writ ref’d n.r.e.). Instead, a change of beneficiary is
effectuated when the insured substantially complies with the policy requirements.
Id.; Porter v. Garner, 386 S.W.2d 618, 619 (Tex. App.—El Paso 1965, writ ref’d
n.r.e.); see also Garabrant v. Burns, 111 S.W.2d 1100, 1104 (Tex. Comm’n App.
1938) (applying substantial compliance rule to policies issued by mutual benefit
societies). Once the insured has substantially complied, the insurer must honor the
request and effect the change. Prudential Ins. Co. v. Durante, 443 S.W.3d 499, 507
(Tex. App.—El Paso 2014, pet. denied). This duty to honor the request is ministerial
in nature. Martinez, 174 S.W.3d at 780. As such, once an insured has substantially
complied, the request becomes effective, even if the insurer claims to have rejected
the form. See Todd, 483 S.W.2d at 892 (change of beneficiary became effective
despite insurer’s rejection of the form due to the absence of contingent
beneficiaries).
        Teresa argues that, because the American General policy requires that a
change of beneficiary be recorded before it is effective, the August 2019 form never
took effect. In support of this position, she points to Rotating Services Indus., Inc. v.
Harris, in which the First Court of Appeals partially distinguished its facts from
substantial compliance cases on the grounds that the policy therein contained a
recording requirement. 245 S.W.3d 476, 483 (Tex. App.—Houston [1st Dist.] 2007,
pet. denied).5 We do not read Harris as holding that, where recording is required by
the policy, the absence of a recorded change of beneficiary will operate to nullify

        5
          Teresa also points to Garabrant, supra, for the proposition that a policy’s recording requirements
must be satisfied. The Garabrant court questioned whether a recording requirement can be waived.
Garabrant, 111 S.W.2d at 1104 (“We . . . assume, without deciding, that the provision that no change in
beneficiary shall be effective unless and until such change is entered on the records of the home office of
the association . . . might be waived by the association.”). In so doing, the court appears to have assumed
that a recording requirement was otherwise enforceable. However, it did not directly rule on the issue.
                                                    16
the request, even in the face of substantial compliance by the policyholder.
Nevertheless, to the extent it may do so, we disagree.
      In determining whether the August 2019 request effectuated a change of
beneficiary, the issue is not whether American General recognized or recorded the
change. Rather, the question is whether Gary’s submission of the August 2019 form
was in substantial compliance with the policy requirements. In resolving this
question, we are mindful that there is no hard-and-fast rule; instead, each case must
be decided on its own set of facts. Durante, 443 S.W.3d at 507.
      With these principles in mind, we now turn to the question of whether, under
the particular facts of this case, Gary’s August 2019 change of beneficiary was in
substantial compliance with the policy.
      Teresa’s Consent/Status as Irrevocable Beneficiary
      Although Teresa maintains that she should prevail solely on the grounds that
the August 2019 change was unrecorded, she also argues that the trial court erred in
finding that Gary’s August 2019 change-of-beneficiary form was in substantial
compliance. Specifically, she offers three reasons that Gary was not in substantial
compliance.
      First, Teresa argues that Gary did not substantially comply because the policy
required her consent before a different beneficiary could be named. Specifically,
she asserts that, under the terms of the policy, Gary’s rights are “subject to the
consent of any living irrevocable beneficiary,” and that she qualified as such a
beneficiary.   This argument raises two questions: (1) whether Teresa was an
“irrevocable beneficiary,” as she claims, and (2) if so, whether Gary failed to
substantially comply with the irrevocable beneficiary requirement described above.

                                          17
               A. Was Teresa an “Irrevocable Beneficiary”?
      Teresa became the policy beneficiary by way of Gary’s designation at the
inception of the policy in 2004, long before the divorce decree. This designation
does not describe Teresa’s interest as “irrevocable,” and Teresa does not argue that
she was an irrevocable beneficiary when the policy was initially issued. Instead, she
argues that the divorce decree operated to transform her into an irrevocable
beneficiary.
      While the policy does not define the term “irrevocable beneficiary,” Texas
courts have defined the word “irrevocable” as “incapable of being recalled, or
revoked[;] past recall[;] unalterable.” Villasan v. O’Rourke, 166 S.W.3d 752, 759
(Tex. App.—Beaumont 2005, pet. denied) (quoting WEBSTER’S THIRD NEW
INTERNATIONAL DICTIONARY 1196 (1986)); see also Hintz v. Lally, 305 S.W.3d 761,
770 (Tex. App.—Houston [14th Dist.] 2009, pet. denied). Under such definition,
the arrangement described in the divorce decree does not qualify as one that is
“irrevocable.” Gary was free, for example, to unilaterally reduce the face amount of
the policy as his debt was paid. Likewise, Teresa’s interest, which is expressly
limited to that of a lienholder, can be fully extinguished by payment of the debt. As
counsel for Teresa argued to the trial court in a post-trial motion, Gary was free to
name a co-beneficiary under the policy to the extent it did not affect the balance that
was owed on Teresa’s lien. Under these circumstances, Teresa’s beneficial interest
is neither “past recall” nor “unalterable.”
      When the divorce decree was negotiated, the parties could have required Gary
to update his designation of Teresa in the policy, expressly describing her as an
“irrevocable beneficiary.” Likewise, the terms of the decree could have explicitly
characterized Teresa’s interest in the policy as “irrevocable.” However, the parties
did neither of these things. Instead, they created a lienholder-like interest that was

                                          18
subject to reduction and modification as Gary’s debt was satisfied. For these
reasons, the trial court did not err in finding that the right to change the beneficiary
belonged solely to Gary. 6
                B. Substantial Compliance with the Consent Requirement
        In any event, we believe that, in the context of Gary’s overall efforts to protect
Teresa’s lienholder interest in the policy, there was factual support for a finding that
Gary was in substantial compliance.
        Trina asserts that paragraph III(A) of the will demonstrates Gary’s intent to
honor his debt to Teresa, if any remained at the time of his death, by way of payment
from his estate and/or, alternatively, the policy proceeds. None of the trial court’s
findings explicitly rely on the contents of the will. However, the trial court does
acknowledge that Trina’s “pleadings and proof” state that her rights to the policy
proceeds “are subject to the payment of the remaining indebtedness” that was owed
to Teresa.
        Although Trina does not describe it as such, we think that her characterization
of paragraph III(A) is properly understood as a directive that the funds received by
Trina under the policy should be held in trust, subject to any debt that was still owed
to Teresa. No particular words of expression are essential for the creation of a trust.
Perfect Union Lodge No. 10, A.F. & A.M., of San Antonio v. Interfirst Bank of San
Antonio, N.A., 748 S.W.2d 218, 220 (Tex. 1988). To create a trust, the beneficiary,
the res, and the trust purpose must be identified. Id. The language of paragraph
III(A) does all three of these, identifying Teresa as the person for whom the funds

        6
         The trial court did not make a finding as to whether Teresa was an irrevocable beneficiary for
purposes of the policy. However, it did find as a matter of law that “the right to change beneficiary was
reserved to . . . Gary Shumskie” such that “the designation of Trina Finnell as beneficiary . . . became
effective on the date of execution.”
                                                   19
are held, identifying the policy, and describing the debt as the reason that the funds
should be held for the benefit of Teresa.
      Furthermore, while the inclusion of terms relating to an inter vivos trust within
a will are unusual, they are not unprecedented. In Sanderson v. Aubrey, 472 S.W.2d
286 (Tex. App.—Fort Worth 1971, writ ref’d n.r.e.), for example, a testator revoked
an inter vivos trust as a part of her will based on the erroneous assumption that the
trust was instead testamentary in nature. Id. at 287. The Second Court of Appeals
noted that it was “not troubled” by the testator’s confusion regarding the non-
testamentary nature of the trust. Id. Instead, it found that the language in the will
constituted a “definitive manifestation” of an intent to revoke the trust and found the
revocation—while not testamentary in nature—was nonetheless valid as of the date
of the will. Id. at 288; see also Appling v. Jay, 390 S.W.2d 799, 802 n.3 (Tex. App.—
Texarkana 1965, writ ref’d n.r.e.) (“[I]t sometimes happens that an instrument is so
drawn that part of its provisions may be sustained as a will and the remainder,
relating to another distinct subject matter, as another instrument.”) (quoting 94 C.J.S.
Wills § 165, p. 963).
      The facts of this case are different from those in Rector v. Metro. Life Ins. Co.,
506 S.W.2d 696 (Tex. App.—Houston [1st Dist.] 1974, writ ref’d n.r.e.), a case on
which Teresa relies. In Rector, the insured had designated his minor daughter as a
beneficiary under his policy, while his will provided that the executor would serve
as trustee over “all . . . property coming into [the] Trustee’s possession as a result of
my death (including . . . insurance on my life).” Id. at 697. The First Court of
Appeals held that, because the executor was not the policy beneficiary, the will did
not operate to make her trustee over the policy proceeds. Id. This case is similar to
Rector inasmuch as the will therein created a trust that could include non-
testamentary assets. However, Gary’s will describes Trina as both the beneficiary

                                            20
and the person who is responsible for protecting Teresa’s interest. Additionally,
Gary took steps to name Trina as the beneficiary under the terms of the policy. As
such, unlike the will in Rector, Gary’s will reasonably presumes that Trina will have
possession of the policy proceeds.
      Furthermore, even if Gary’s will did not create a trust, it was certainly Trina’s
understanding, that Gary had “made provision” that Teresa’s interest should be paid
from his estate and/or the policy proceeds, and Trina’s conduct has indicated her
own belief that she was bound by Gary’s intentions. Given Gary’s clear efforts to
protect Teresa’s lien interest, we believe that, even if Teresa qualified as an
irrevocable beneficiary under the terms of the policy, the trial court’s finding that
Gary was in substantial compliance was not so against the great weight and
preponderance of the evidence as to be manifestly unjust.
      The Absence of a Date on the August 2019 Form
      Teresa also argues that Gary was not in substantial compliance with the policy
because he did not date the August 2019 form. In this regard, the record indicates
that American General decided not to record the form because it was undated.
Teresa points out that a dated change of beneficiary is helpful to an insurer, because
it may sometimes become necessary to determine the order in which conflicting
change-of-beneficiary forms were signed.
      However, the issue before the trial court was not whether a dated form would
be more useful than an undated form. Rather, the issue was whether the form
substantially complied with the requirements set forth in the policy. In that regard,
the American General policy provided only that “the owner may change the
beneficiary . . . by written notice to us.”
      Teresa also points to policy language indicating that the change of beneficiary
“will take effect as of the date the owner signed the notice.” She argues that this

                                              21
language required Gary to include a date on the August 2019 form. However, Teresa
reads too much into this provision. While this language assumes that the parties will
have an understanding of the date that a change-of-beneficiary form was signed
when a claim is made, it does not require a date to be affixed to a change-of-
beneficiary form.
      It is undisputed that Gary provided a “written notice” requesting a change of
beneficiary on August 16, utilizing a form that was provided to him by American
General. As such, the evidence before the trial court was factually and legally
sufficient to support its finding that the change of beneficiary was submitted in a
format that substantially complied with the requirements of the policy.
      Conditional Language in the August 2019 Form
      In her second argument against the trial court’s finding on substantial
compliance, Teresa maintains that conditional language in the August 2019 form
operated to nullify its stated purpose of making Trina the policy beneficiary. The
language at issue is contained in section D of the change-of-beneficiary form. It
reads as follows:
      [Gary] warrants that the above-referenced beneficiary change is not
      subject to any prior agreements, contractual obligations . . . or
      court/administrative orders, including but not limited to divorce . . .
      proceedings (“Obligations”), which restrict, limit, or otherwise prohibit
      such change of beneficiary as contemplated. [Gary] acknowledges and
      agrees that in the event any obligations become known subsequent to
      the above-referenced beneficiary change being made, which if then-
      known to [American General], would have caused [American General]
      not to process the beneficiary change on the policy (or not to process
      the beneficiary change without the consent of a party other than [Gary],
      the beneficial change will become immediately void and [Gary] shall
      indemnify and hold [American General] harmless from any and all
      losses associated with the beneficiary change.

                                         22
The language in section D has two effects, neither of which are germane under these
facts.
         As its first effect, section D provides American General with a warranty that
the beneficiary change is not subject to any existing court or administrative orders
or other obligations. These provisions lay the groundwork for American General to
assert a claim for breach of warranty against Gary’s estate, a claim that may well
have been asserted had it paid the claim to Trina. However, while this clause may
expose Gary’s estate to litigation, it does not operate to void the change of
beneficiary at the time it was submitted.
         As its second effect, section D provides that, in the event American General
discovers that it processed a change-of-beneficiary form that it would not have
otherwise processed, the change of beneficiary will become void, and Gary will be
required to indemnify American General. This condition was not met because
American General never recorded the policy and never recognized that the claim
should be paid to Teresa. To the contrary, upon learning of Teresa’s interest, it
announced that it did not know who should receive the benefits and tendered the
proceeds into the registry of the trial court.
         Section D may provide American General with legal protections under
circumstances that are similar to this case, but it does not alter the clear and
unambiguous purpose of the change-of-beneficiary form. For that reason, the trial
court did not err when it rejected Teresa’s arguments relating to Section D and found
that Gary’s submission of the form was in substantial compliance with the terms of
the policy.
         Because the trial court did not err in finding that Gary was in substantial
compliance, we overrule Teresa’s first issue, the remainder of Teresa’s third issue,

                                            23
Issue Nos. 4(d), 4(e), 4(f), 4(g), 4(i), 4(j), 4(k), 4(l), 4(m), 4(n), and the remainder of
Teresa’s fifth issue.
      Teresa’s Interest in the Policy Proceeds
      In Issue No. 4(h), Teresa argues that the trial court erred when it found that
Teresa’s interest in the policy proceeds was limited to her status as a security/lien
interest holder. In support of this argument, she claims that, because the divorce
decree does not expressly limit her interest to that of a lienholder, it must necessarily
put her in the same place as an unqualified primary beneficiary under the policy.
Such a position is not consistent with the facts of this case or the applicable law.
      The stated purpose of the decree in requiring Gary to maintain the policy was
“to secure the payment” by Gary of various debts, including the cash award of
$600,000. The decree also described Teresa’s interest in the policy as “in the nature
of a purchase-money lien.” There is nothing in the decree to suggest that the policy
plays any other role in the parties’ agreement, nor is there any indication that the
parties intended to provide Teresa with funds that are in excess of her share of the
community property upon Gary’s death. Accordingly, we overrule Issue No. 4(h).
Having overruled each of Teresa’s sub-issues, we overrule her fourth issue.
      In connection therewith, we note that, even if Teresa were the proper
beneficiary under the policy, her position would be that of any other lienholder in
possession of a windfall. That is, Teresa, holding the funds as a secured creditor “in
the nature of a purchase money-lien,” would have been obligated to return the
surplus funds that she collected from the policy proceeds to Gary’s estate. See First
Nat. Bank of Seminole v. Hooper, 104 S.W.3d 83, 86 (Tex. 2003) (“A secured
creditor is not entitled to collect more than the amount of the debt from” the
liquidation of collateral.) (quoting Anand v. Nat’l Republic Bank, 210 B.R. 456, 459
(Bankr. N.D. Ill. 1997)); see also TEX. BUS. & COM. CODE ANN. § 9.615(d)(1) (West

                                            24
2021) (requiring a party holding a security interest to account to and pay the debtor
for any surplus received after disposition of security interest). Had the trial court
determined that Teresa was the correct beneficiary under the terms of the policy,
such a determination may have raised questions about whether the estate should have
been joined as a party so that it could assert its own claim to the proceeds. However,
it does not appear that the trial court should have, in any event, awarded the balance
of the policy proceeds to Teresa.
      Conclusion
      We recognize that, in changing the policy beneficiary, Gary violated a
contractual and court-ordered obligation. We also recognize that—under other,
similar circumstances—such actions could have and should have invited serious
repercussions. However, the question of whether a requested change of beneficiary
is effective must be resolved based on the terms of the policy, without reference to
any agreements or court-ordered obligations that are beyond the scope of the
insurance contract. As such, the trial court was called on to determine whether
Gary’s August 2019 request was in substantial compliance with the policy. In that
regard, we have concluded that the trial court did not err when it found that Gary had
the right to and did, in fact, successfully effectuate a change of beneficiary. The trial
court’s findings of substantial compliance are appropriate given the particular facts
of this case. Specifically, the record shows that Gary’s request was submitted in a
form that was consistent with the policy requirements, and that, during the same time
frame, Gary was acting in good faith in order to protect Teresa’s lienholder interest.
For these reasons, we conclude that the trial court’s disposition of the case was not
erroneous.

                                           25
                                   This Court’s Ruling
      We affirm the judgment of the trial court.

                                                JOHN M. BAILEY
                                                CHIEF JUSTICE

April 25, 2024
Panel consists of: Bailey, C.J.,
Trotter, J., and Williams, J.

                                           26