Nw. Mut. Life Ins. Co. v. Moore

511 F.Supp.3d 723

The NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, Plaintiff,

v.Martin MOORE, and David Yohannan, as trustee for the benefit of Emma Yohannan and Ethan Yohannan, Defendants.

David Yohannan, individually and as trustee for the benefit of Emma Yohannan and Ethan Yohannan, Third-Party Plaintiffs,

v.Martin Moore, as executor of the Estate of Kristin Yohannan Moore and Martin Moore, as trustee of The Moore Family Joint Trust u/a January 19, 2007, Third-Party Defendants.

Civil Action No. 1:19-cv-1312

United States District Court, E.D. Virginia, Alexandria Division.

Signed January 5, 2021

Herbert Stanley Rosenblum, Herbert S. Rosenblum PC, Alexandria, VA, for Third-Party Defendant Martin Moore.

David Philip Korteling, Axelson, Williamowsky, Bender & Fishman, PC, Rockville, MD, for Defendant/Third-Party Plaintiff David R. Yohannan.

Herbert Stanley Rosenblum, Herbert S. Rosenblum PC, Alexandria, VA, for Defendant Martin Moore.

MEMORANDUM OPINION

T.S. Ellis, III, United States District Judge

Plaintiff Northwestern Mutual Life Insurance Company ("Northwestern") filed this Rule 22, Fed. R. Civ. P. interpleader action following the death of Kristin Yohannan Moore ("Decedent"), seeking a determination of the proper beneficiary or recipient of the funds payable under Decedent's $500,000 life insurance policy (the "Policy"). The two interpleaded claimants for the Policy funds are Decedent's surviving spouse, Martin Moore ("Moore") and Decedent's surviving former spouse, David Yohannan ("Yohannan"). At issue now on Yohannan's motion for summary judgment is a determination of the proper disposition of the Policy funds.¹ Both Yohannan and Moore agree that the Policy funds must ultimately be disbursed for the benefit of Emma Yohannan ("Emma") and Ethan Yohannan ("Ethan"), children of Decedent's marriage to Yohannan and who are now 26 and 23 years old, respectively. However, Yohannan and Moore disagree on whether the Policy funds must be held in a trust that withholds distribution of the Policy funds until Emma and Ethan each turn 35 years old. The matter has been fully briefed and argued, including a telephonic hearing that occurred on July 22, 2020. Accordingly, the matter is now ripe for disposition.²

I.

The following undisputed facts are pertinent to the parties' dispute over the proper disposition of the Policy funds.

• Northwestern is a Wisconsin insurance company. See Compl. ¶ 1.

• Yohannan is Decedent's first husband and is a citizen of Virginia. Seeid. ¶ 3; see also JSF ¶ 1 (Dkt. 34).

• Moore is Decedent's second husband and is a citizen of Virginia. See Compl. ¶ 2; see also JSF ¶ 12.³

• Emma and Ethan are children of Decedent's marriage to Yohannan. See JSF ¶ 2. Emma and Ethan, now 26 and 23 years old, respectively, are currently both pursuing graduate degrees.⁴

• Decedent and Yohannan were married on September 12, 1992. See JSF ¶ 1.

• On March 31, 2003, Decedent purchased the Policy, a $500,000 life insurance policy with Northwestern. Seeid. ¶ 3; Policy (Dkt. 39-1).

• The Policy named Yohannan as the primary beneficiary and Emma and Ethan as the contingent beneficiaries.⁵See Policy at 16.

• In August 2003, Decedent and Yohannan separated. See JSF ¶ 4.

• On October 20, 2003, Decedent changed the beneficiary designations in the Policy. Specifically, Decedent removed Yohannan as the primary beneficiary, naming her father, Richard Woycik, as the new primary beneficiary, and renaming Emma and Ethan as the contingent beneficiaries. See Policy at 22.

• On January 14, 2004, Decedent and Yohannan executed a Property Settlement Agreement ("PSA"). See JSF ¶ 7; see also PSA (Dkt. 22-1).

• The PSA contains the following provisions.

• The PSA requires Decedent to maintain the Policy until Emma and Ethan each turn 25 years old. See PSA ¶ 22.

• The PSA requires Decedent to maintain "Husband as Trustee for the benefit of the children" as the sole beneficiary of the Policy. Id. The PSA also states that, within 30 days of signing the PSA, Decedent must provide Yohannan "written proof of this beneficiary designation." Id. ¶ 23.

• The PSA states that "the welfare and best interests of the children, Emma and Ethan, are the paramount consideration" of Decedent and Yohannan. Id. ¶ 6.

• The PSA states that Decedent and Yohannan are not responsible for paying Emma and Ethan's educational expenses once Emma and Ethan each turn 23 years old. Seeid. ¶ 24.

• The PSA, by its terms, is governed by Virginia law. Seeid. ¶ 43.

• No party disputes that "Husband" in the PSA means Yohannan, that "Wife" in the PSA means Decedent, that the "children" in the PSA are Emma and Ethan, and that the PSA contemplates a trust for the benefit of Emma and Ethan.⁶

• Although the PSA does not state who must create and determine the provisions of the referenced trust for Emma and Ethan, the PSA's primary provisions about the Policy, Paragraphs 22 and 23, direct each obligation with respect to the Policy at "Wife."⁷

• As of February 14, 2004, thirty days after the PSA was signed, Decedent had not changed the Policy beneficiary to "Husband as Trustee for the benefit of the children." Nor, as of this date, had Decedent or Yohannan created and determined the terms of a trust for the benefit of Emma and Ethan, as required by the PSA.

• On November 9, 2004, the Circuit Court of Fairfax County, Virginia, adopted Decedent's and Yohannan's agreed-upon PSA into a Final Decree of Divorce. See JSF ¶ 8.

• On October 18, 2009, Decedent married Moore. Seeid. ¶ 12; see also Woycik Decl. ¶ 6.

• On March 25, 2015, Decedent again changed the beneficiary designations in the Policy. Specifically, Decedent removed Woycik as the primary beneficiary, naming Moore as the new primary beneficiary, and renaming Emma and Ethan as the contingent beneficiaries. See Policy at 24.

• On January 19, 2017, Decedent and Moore created The Moore Family Revocable Joint Trust, a trust requiring the trustees, Decedent and Moore, to pay the trust principal and accumulated trust income to Emma, Ethan, and Moore's four children of a previous marriage. See Moore Family Trust at 1, 3 (Dkt. 22-6).

• On May 1, 2019, Decedent died, and the Policy's $500,000 benefit became due and payable. See JSF ¶ 15. At this time, the Policy beneficiary designations on-file with Northwestern were Moore as primary beneficiary and Emma and Ethan as contingent beneficiaries. See Compl. ¶ 10.

• On June 3, 2019, Yohannan filed a claim with Northwestern, requesting disbursement of the Policy funds to a trust bank account created on an unknown date in June 2019. See Yohannan Decl. ¶ 21.

• On June 8, 2019, after Yohannan filed his initial claim, Yohannan created two separate but identical irrevocable trusts, one for the benefit of Emma and one for the benefit of Ethan (collectively, the "Yohannan Trusts"). See Yohannan Trust for Emma (Dkt 24-5); Yohannan Trust for Ethan (24-4).

• The Yohannan Trusts, identical in all relevant respects, contain the following terms:

• Yohannan is trustee and as of June 8, 2019, each trust holds $1. See Yohannan Trust for Emma at 1; Yohannan Trust for Ethan at 1.⁸

• Until Emma and Ethan each turn 35 years old, Yohannan has sole discretion to decide whether or not to distribute the trust funds to Emma and Ethan. If so, Yohannan may distribute the trust funds as he "deems necessary for [Emma and Ethan's] health, support, maintenance, comfort, and education." Yohannan Trust for Emma ¶ 3; Yohannan Trust for Ethan ¶ 3.

• Until Emma and Ethan each turn 35 years old, Yohannan can use the trust funds for a variety of purposes, including to acquire property "such as homes, art work [sic], jewelry, furniture and vehicles." Yohannan Trust for Emma ¶ 5; Yohannan Trust for Ethan ¶ 5.

• Until Emma and Ethan each turn 35 years old, Yohannan has "absolute discretion" to decide whether or not Emma and Ethan can make use of property the Yohannan Trusts acquire. Yohannan Trust for Emma ¶ 5; Yohannan Trust for Ethan ¶ 5.

• Once Ethan and Emma each turn 35 years old, the Yohannan Trusts terminate and Yohannan must award "the remaining principal and the accumulated net income of the trust" to Emma and Ethan. Yohannan Trust for Emma ¶ 4; Yohannan Trust for Ethan ¶ 4.

• On June 11, 2019, following the establishment of the Yohannan Trusts, Yohannan filed another claim with Northwestern, requesting disbursement of the Policy funds to a trust bank account. See Yohannan Decl. ¶ 21.

• Around this time, Moore filed a claim with Northwestern, requesting disbursement of the Policy funds.⁹

• On October 14, 2019, Northwestern filed this Rule 22 interpleader action, asking "[t]his Court to determine to whom the Benefits should be paid under the Policy." Id. ¶ 18.

• On April 15, 2020, Northwestern deposited the $503,750.34¹⁰ payable under the Policy into the Clerk's Registry. See Interpleader Deposit (Dkt. 20).

II.

In support of summary judgment on the Rule 22 interpleader action, Yohannan, Decedent's first husband and former spouse, argues that the Policy funds must go to "Yohannan as Trustee for the benefit of the children," arguing that this beneficiary designation in the PSA takes priority over any contrary beneficiary designation. Moore, Decedent's second husband, opposes this outcome but does not address the applicable Virginia law that Yohannan cites to support Yohannan's claim. Rather, Moore argues that the Policy funds should go directly to Emma and Ethan, children of Decedent's marriage to Yohannan, as neither Emma nor Ethan requires a trustee and since the Yohannan Trusts, created after Yohannan filed a claim for the Policy funds, do not satisfy the PSA's requirements on appropriate trust terms. Alternatively, Moore argues that if the Policy funds must be distributed to a trust, then the funds should be distributed to the Moore Family Trust.

Analysis of Yohannan's Motion for Summary Judgment on the Rule 22 interpleader action properly begins with recognition and application of the settled Virginia rule that a property settlement agreed to by the...