Sun Life Assurance Co. of Canada v. Lee

SUN LIFE ASSURANCE COMPANY OF CANADA, Plaintiff, v. HEIDI A. LEE, Appellant, And ABRIEL C. LEE, Respondent.

No. 48971-6-II

Court of Appeals of Washington, Division 2

August 15, 2017

UNPUBLISHED OPINION

BJORGEN, CJ.

During the process of dissolving Ronald and Heidi Lee's marriage, Ronald violated a temporary order and final dissolution decree by naming his daughter, Abriel Lee beneficiary of his life insurance policy.^[1] Ronald died before he had fulfilled his obligations under the final dissolution decree. Heidi and Abriel separately submitted a claim to Sun Life Assurance Company of Canada (Sun Life) for the proceeds from Ronald's life insurance policy. In response, Sun Life filed an interpleader action, naming Heidi and Abriel as defendants.

Abriel offered twice to settle with Heidi early in litigation believing the dissolution court's^[2] intent was only that Ronald name Heidi as his life insurance beneficiary to ensure that Heidi was paid the maintenance and a judgment awarded to her in the final dissolution decree. Heidi rejected the settlement offers, contending that the dissolution court's intent was for her to receive the entire life insurance policy. Heidi also argued that equity, particularly under an unclean hands theory, required that she receive the entire amount of the proceeds because of Ronald's purposeful conduct in violating the temporary order and final dissolution decree.

The trial court granted summary judgment in favor of Abriel finding that Heidi was only entitled to what Ronald still owed her under the judgment awarded in the final dissolution decree. It also sanctioned Heidi and awarded attorney fees under Jefferson County Local Rule (JCLR) 7.8, ruling that continuing litigation was frivolous from the point that Abriel first offered to settle with Heidi.

Heidi appeals these rulings, arguing that the trial court (1) erred in interpreting the dissolution decree and (2) abused its discretion (a) in making an equitable determination that Ronald's violation of the temporary order and final dissolution decree did not entitle Heidi to the entire life insurance proceeds, (b) in sanctioning Heidi for frivolous litigation and awarding attorney fees to Abriel, (c) in admitting a letter from Ronald, and (d) in admitting documentation evidencing Abriel's two settlement offers. Abriel requests attorney fees on appeal under RAP 18.1 and JCLR 7.8.

We hold that the trial court properly interpreted the dissolution decree and that no abuse of discretion occurred in its equity determination. We also hold that the trial court abused its discretion by awarding attorney fees to Abriel for Heidi's frivolous litigation under JCLR 7.8. Given our holdings and reasoning in this opinion, we do not address the propriety of the trial court's evidentiary rulings. Finally, we deny Abriel's request for attorney fees on appeal.

Accordingly we affirm in part and reverse in part.

FACTS

Ronald and Heidi were married from 2001 to 2011. In March 2011, Heidi petitioned for dissolution of their marriage. A temporary dissolution order was entered, which stated in part:

Both parties are restrained and enjoined from assigning, transferring, borrowing, lapsing, surrendering or changing entitlement of any insurance policies of either or both parties whether medical, health, life or auto insurance.

Clerk's Papers (CP) at 178-79. At the time the temporary dissolution order was entered, Ronald possessed a life insurance policy through Sun Life totaling $150, 000, which named Heidi as beneficiary. In September 2013, while the temporary dissolution order was still in effect, Ronald designated his daughter, Abriel, as the sole beneficiary of his life insurance policy.

In March 2014, Heidi and Ronald proceeded to a dissolution trial in superior court. Heidi contended that Ronald should pay her $2, 000 a month spousal maintenance because of their different incomes and a sum that restored her financial position to when they were first married. After arguing for these obligations, Heidi's counsel proposed the following disposition of Ronald's life insurance policy:

Finally, in [Ronald's] financial declaration he referenced a life insurance policy. . . . We would ask that given the state of his health that he continue to - as long as he has a spousal maintenance obligation, as long as he still is paying on any judgment awarded [Heidi] that he continue to maintain that life insurance policy and continue to name [Heidi] as the beneficiary.

CP at 195.

After Ronald's attorney gave closing argument, the court extensively outlined Ronald and Heidi's financial obligations and property assets and predominantly agreed with Heidi's position, awarding her a $35, 384 judgment and $2, 000 a month in maintenance for eight months. After making these determinations, the court ruled on the life insurance policy issue:

And [Heidi's attorney] asked that [Ronald] continue to have the life insurance on his life until the loan - until the judgment and the maintenance is paid, and I'll order that too given his health situation.

CP at 222.

Following the oral ruling, the court entered a written final dissolution decree on April 9, 2014, with the following pertinent provisions:

I. JUDGMENT SUMMARIES

. . . .

3.7 MAINTENANCE

. . . .

Other: The husband shall continue to name the wife as the beneficiary on his life insurance policy to secure future payment of both his spousal maintenance obligtion and the judgment entered herein.

. . . .

III. DECREE

3.15 OTHER

The husband shall continue to name the wife as the beneficiary of his life insurance policy until both his spousal maintenance obligation terminates and the judgment is paid in full.

CP at 91-92, 94. Ronald signed the decree despite having already changed the beneficiary of his life insurance policy to Abriel.

On April 16, 2015, Ronald died. Although he had paid all his spousal maintenance obligations, Ronald still owed $32, 384 plus interest on the judgment.

On June 11 and 21, 2015, Heidi and Abriel, respectively, submitted a claim to Sun Life for the entirety of the payout under Ronald's life insurance policy. Because of the competing claims, Sun Life filed an interpleader complaint on July 27, naming Heidi and Abriel as defendants. Sun Life, Heidi, and Abriel jointly stipulated to release Sun Life from the case after it deposited the contested $150, 000 life insurance benefit into the superior court's account.

On August 24, 2015, Heidi responded to the interpleader complaint, asserting a cross claim against Abriel for a declaratory judgment that Heidi was entitled to the entire $150, 000 life insurance benefit. On September 10, Abriel sent a letter to Heidi offering to resolve Heidi's claim against Ronald's insurance policy for the amount still owed Heidi under the final dissolution decree. Heidi declined that offer.

On October 19, 2015, Abriel responded to the interpleader complaint and Heidi's cross claim for declaratory judgment, arguing that Heidi was entitled to $32, 384 plus interest according to Ronald's obligation under the final dissolution decree, but that the remaining proceeds belonged to Abriel. Attached to Abriel's response was a typed, unsigned letter purported to be from Ronald. In the letter, Ronald directs Abriel, among other things, to pay Heidi what she is still owed under the final dissolution decree. In early November, Abriel offered to settle the case for $45, 000, exceeding the amount still owed under the final dissolution decree. Heidi also rejected this offer.

On January 8, 2016, Heidi moved for summary judgment. She argued that she was entitled to all the life insurance proceeds because (1) Ronald violated the March 2011 temporary dissolution order by changing the beneficiary from Heidi to Abriel and (2) Ronald violated the April 2014 final dissolution decree when he signed it because he had not named Heidi as the beneficiary of his life insurance policy. Heidi also asked the court for an award of attorney fees from Abriel "for being forced to file an action to collect on [Ronald] 's outstanding financial obligations to her." CP at 168.

Abriel submitted opposing argument, along with documentation related to the September and November settlement offers and Ronald's letter. Abriel also moved for a sanction against Heidi under JLCR 7.8, ^[3] which allows a court to "impose sanctions or terms for any frivolous motion." CP at 322. Heidi moved to strike Ronald's letter and the September and November settlement offers.^[4]

The same judge who presided over Ronald and Heidi's dissolution trial ruled on these motions on February 5, 2016. The trial court denied Heidi's motion to strike. As to Heidi's motion for summary judgment, the trial court agreed with Abriel that under the pertinent case law, including In re Marriage of Sager, 71 Wn.App. 855, 863 P.2d 106 (1993), Heidi was only entitled to what Ronald still owed her under the final dissolution decree and that Ronald's violation of the temporary order and final decree did not entitle her to receive the entire life insurance proceeds.

The trial court made the following relevant observations during the oral proceeding:

[Ronald]'s dead. Contempt remedy is not available. We're not here to punish somebody. Nobody can file contempt against a dead person. . . so how does giving Heidi a windfall make any sense?

. . . .

[T]o me it's crystal, crystal clear that the reason for the insurance was to secure these obligations because Ron[ald] was ill and there was a concern about whether she would get all of her money.

. . . .

I don't think the issue at all is how much is a violation of a Court order worth? I think that's a complete mischaracterization of it. I mean, people violate this Court's orders all the time. And, but, I

...