Goodwin v. Goodwin

280 A.3d 937

Johanna L. GOODWIN, Appellee

v.Scott M. GOODWIN, Appellant

No. 70 MAP 2021

Supreme Court of Pennsylvania.

Argued: March 9, 2022

Decided: August 16, 2022

Paul W. Rauer, Esq., Richboro, PA, for Appellant.

Shannon Kanavy Mercando, Esq., Repko Law, LLC, for Appellee.

BAER, C.J., TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

JUSTICE BROBSON

Pursuant to Section 3501(a)(3) of Pennsylvania's Divorce Code, 23 Pa. C.S. § 3501(a)(3), "[p]roperty acquired by gift, except between spouses, bequest, devise or descent or property acquired in exchange for such property" is not considered marital property subject to equitable distribution between divorcing parties. In this discretionary appeal, we must determine whether certain life insurance and individual retirement account (IRA) proceeds that Johanna L. Goodwin (Wife) acquired as sole beneficiary prior to the dissolution of her marriage to Scott M. Goodwin (Husband) fall within the purview of Section 3501(a)(3). We hold that, under the circumstances presented herein, such proceeds constitute "gifts" as the term is used in Section 3501(a)(3), and, thus, they are excluded from the marital estate for equitable distribution purposes. Because the Superior Court reached the same conclusion, we affirm the judgment of that court.

I. BACKGROUND

The relevant facts and procedural history underlying this matter are as follows. Husband and Wife married on March 31, 1990. At the time, Wife had a three-year-old son, Nicholas Campellone (Son), from a previous relationship. No children were born to the marriage between Husband and Wife, and, while Son lived with the parties, Husband never adopted Son. On February 17, 2009, Wife filed a complaint in divorce with a claim for equitable distribution of marital property. The parties subsequently reconciled, though Wife never withdrew the divorce complaint. Years later, on January 1, 2017, Son died intestate at the age of 30 and without any children or heirs other than Wife. Through his employment as an attorney, Son had acquired four life insurance policies; he also had an IRA. With respect to the life insurance policies and IRA, the parties do not dispute the following: (1) Son named Wife as the sole beneficiary of each of the four life insurance policies and IRA;¹ (2) no marital assets were used to pay for the life insurance policies or fund the IRA; (3) upon Son's death, Wife received all of the proceeds of the four life insurance policies, which totaled $633,301.72, as well as $3,455.00 in total proceeds from Son's IRA; and (4) Wife never jointly titled any proceeds from Son's passing in Husband's name or in the name of any other third party.

Approximately four months after Son's death, on March 27, 2017, the parties separated. Wife bought a house using a portion of the proceeds she received upon Son's passing. On April 6, 2017, Wife filed a praecipe to reinstate her divorce complaint. Husband then filed an answer and counterclaim seeking alimony. The parties attended a master's hearing on August 20, 2018. Thereafter, on August 31, 2018, the master issued a report containing recommendations relative to, inter alia , the entry of a divorce decree, equitable distribution, and alimony. On September 11, 2018, Husband filed a motion for a hearing de novo . The trial court granted the motion and conducted evidentiary hearings on February 2, 2019, March 29, 2019, and May 13, 2019.

On July 22, 2019, the trial court entered a decree and order terminating the marriage of Husband and Wife, distributing the marital estate, and obligating Wife to pay Husband alimony through January 1, 2027. Relevant here, the trial court determined that the proceeds of Son's life insurance policies and his IRA that Wife received upon Son's death were not marital property, citing Section 3501(a)(3) of the Divorce Code. The trial court further concluded that all investments, real estate, or other assets Wife purchased or acquired with those proceeds were likewise not marital property. In so doing, the trial court observed that Wife received the proceeds at issue in her name only; that Husband did not adopt Son; that Son did not name Husband "as a beneficiary on any policy or successor on any accounts, or in any [w]ill;" and that Wife never jointly titled any proceeds from Son's passing in Husband's name or in the name of any other third party. (Trial Ct. Decree and Order, 7/22/2019, at 4.)

Husband appealed to the Superior Court, challenging, inter alia , the trial court's determination that the proceeds from Son's life insurance policies and IRA were not marital property under Section 3501(a)(3) of the Divorce Code. Addressing Husband's claim in its opinion issued pursuant to Pennsylvania Rule of Appellate Procedure (Rule) 1925(a), the trial court first agreed with Husband's position that the life insurance proceeds were not a bequest, devise, descent, or any other form of inheritance from Son, opining that it was "well established that the assignation of an individual as a life insurance beneficiary is a mere expectancy." (Trial Ct. Pa.R.A.P. 1925(a) Op., 9/16/2019, at 5 (relying upon Knoche v. Mut. Life Ins. Co. of New York , 317 Pa. 370, 176 A. 230, 230-31 (1934).) The trial court further observed that, because neither Son nor his estate ever possessed the life insurance policy proceeds themselves, Son could not have given those proceeds as gifts—testamentary or otherwise—to Wife.

Nonetheless, the trial court observed that Wife possessed the life insurance proceeds because Son "assigned the expectancy of th[e] insurance contracts specifically to [Wife] alone," which Son did as a gift—i.e. , "voluntarily, ‘without [any] consideration or compensation as an incentive or motive for the transaction.’ " ( Id. (quoting Bundy v. Wetzel , 646 Pa. 248, 184 A.3d 551, 556 (2018).) The trial court noted that, while Wife did not have a legally protectable interest against Son extinguishing this expectancy during Son's life, "a contingent interest is still ‘a thing of value which [the] courts, under appropriate circumstances, will protect.’ " (Id. at 5-6 (quoting Hunt v. Mestrezat , 361 Pa. 415, 65 A.2d 389, 390 (1949).) The trial court further observed that "[a]ssignments of contingent interests are valid and are governed under the principles of contract law," which dictate that "the meaning of the contract will be ascertained from the writing alone when that meaning is clear and unambiguous," especially in cases involving sophisticated parties. (Id. at 6 (relying upon Emps. Ins. of Wausau v. Dep't of Transp ., 581 Pa. 381, 865 A.2d 825, 830-31 (2005) ; Pops PCE TT, LP v. R & R Rest. Grp., LLC , 208 A.3d 79, 87 (Pa. Super.2019), appeal denied , 656 Pa. 688, 223 A.3d 656 (2020).) The trial court then emphasized that, when Son assigned the expectancy of his life insurance agreements to Wife, he did so in her name only; Son named Wife as sole beneficiary in each instance and did not include Husband as a beneficiary or even as a contingent beneficiary. The trial court, thus, inferred that Son, a licensed attorney, "knew precisely the legal effect of the words" used when he executed the insurance contracts conveying the life insurance expectancy to Wife alone, "presumably to ensure his mother was cared for should something befall him." ( Id. ) The trial court also reiterated that Wife never placed any of the life insurance proceeds into a joint account with Husband. Accordingly, the trial court concluded that the life insurance proceeds were not marital property.²

In a divided, published opinion, a three-judge panel of the Superior Court affirmed. Goodwin v. Goodwin , 244 A.3d 453 (Pa. Super. 2020). The Superior Court majority agreed with the trial court that the life insurance and IRA proceeds were not marital property, although its rationale differed from the trial court's. Specifically, the Superior Court concluded that the life insurance and IRA proceeds were gifts within the meaning of Section 3501(a)(3) of the Divorce Code. In support, the Superior Court opined that the life insurance and IRA proceeds vested in Wife upon Son's death prior to the date of the parties’ separation and that Wife's receipt of the proceeds perfected the gift. Goodwin, 244 A.3d at 458. The Superior Court also observed that the parties agreed that the proceeds were not commingled into a joint account, that Wife used a portion of the money to buy a home solely in her name and put the remainder into accounts that were also solely in her name, and that Son used his own money to pay for the life insurance policies and fund the IRA. Id. at 459. The Superior Court continued by observing:

The list of exceptions contained in Section 3501(a)(3) [of the Divorce Code] have a common element: the intent of the donor to transfer the property in question to only one of the spouses. The Divorce Code honors this intent, giving it priority over the general rules concerning the nature of property acquired during marriage. By listing someone as the sole beneficiary on an insurance policy or IRA, the giver makes the proceeds into a gift which vests at the time of death. Moreover, because such policies allow for the designation of co-beneficiaries and contingent beneficiaries, the failure to list any makes the intent of the giver clear. To find otherwise would make for a chaotic situation where certain forms of gifts would be considered marital property while other forms were not and the intent of the giver would be completely disregarded.

Id.

Noting the dearth of Pennsylvania precedent addressing the precise scenario at issue, the Superior Court identified two cases that classified life insurance proceeds as marital property, but based on distinguishable circumstances presented in those cases: Sutliff v. Sutliff , 361 Pa.Super. 504, 522 A.2d 1144 (1987), affirmed in part, reversed in part on other grounds, and remanded , 518 Pa. 378, 543 A.2d 534 (1988), and Rohrer v. Rohrer , 715 A.2d 463 (Pa. Super. 1998). In...