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Fort Dearborn Life Insurance Company v. Holcomb

August 28, 2000

FORT DEARBORN LIFE INSURANCE COMPANY,
PLAINTIFF, V.
JANET HOLCOMB, DEFENDANT-APPELLANT
(SUSAN V. DOWNING, DEFENDANT-APPELLEE).



Appeal from the Circuit Court of Cook County 95 CH 9183 Honorable Dorothy Kinnaird, Judge Presiding

The opinion of the court was delivered by: Justice Cohen

Following the death of Paul Downing, plaintiff Fort Dearborn Life Insurance Company filed an interpleader action (735 ILCS 5/2-409 (West 1998)) against Susan Downing, the decedent's widow, and Janet Holcomb, the decedent's companion at the time of his death. The action sought to resolve competing claims to the proceeds of two insurance policies decedent held with the plaintiff. Defendant-appellant Janet Holcomb appeals from the circuit court of Cook County's grant of summary judgment in favor of defendant-appellee Susan Downing which declared Susan the proper beneficiary under the life insurance policies. Janet argues that the trial court erred in applying the provisions of the Illinois Power of Attorney Act (755 ILCS 45/1-1 et seq. (West 1998)) to the uncontested facts with regard to two issues: (1) the scope of the agent's authority pursuant to the subject power of attorney and (2) whether the agent's authority had been revoked. For the following reasons, we reverse and remand for further proceedings consistent with this opinion.

I. FACTS

Paul and Susan Downing were married on February 27, 1967. The couple had three children. On June 27, 1990, Paul executed a document entitled "Power of Attorney" (1990 power) which appointed his wife Susan as his agent to act on his behalf in certain enumerated property transactions. The agency created by the 1990 power became effective only upon Paul's disability. In 1992, Paul and Susan experienced marital difficulties which culminated in Paul's departure from the marital home in June of 1992. In 1993, Susan filed a petition for dissolution of marriage in the circuit court of Cook County under case number 93 D 6708.

On December 22, 1993, Paul and Susan entered into a formal separation agreement (1993 agreement) which provided for the equitable distribution of most of their assets in the event that their current attempts at reconciliation failed. Assets accounted for in the 1993 agreement included the Downings' marital home, located at 1015 Pine Street in Winnetka, Illinois, a single-family residence in Galena, Illinois, which the Downings owned jointly through a land trust, jointly held investment accounts with a total value of $1,328,400 and retirement funds owned by Paul totaling $1,099,950. The agreement further provided that neither party would by beneficiary designation, will, inter vivos trust or in any other way allow the property subject to the agreement to become the property of any other person at the death of the party holding title.

At the time the 1993 separation agreement was executed, Paul was the named insured on two group life insurance policies issued by the Fort Dearborn Life Insurance Company. The first policy was issued to the Safer Foundation, Paul's employer, as policyholder with a death benefit equal to $158,000. The second policy was issued to Healthcare Services Corporation, as policyholder, with a death benefit of $120,000. The 1993 agreement did not account for or include any reference to the subject life insurance policies. The policies named Susan Downing as the sole beneficiary.

Sometime prior to 1994, Paul returned to the marital home. On April 19, 1994, Paul and Susan executed an additional agreement whereby Paul agreed to leave the marital home and to remove most of his possessions. Paul and Susan lived separate and apart from that time forward. In 1995, a second petition for dissolution of the Downing marriage was filed in the circuit court of Cook County under case number 95 D 3620.

In early June 1995, Paul became seriously ill and sought medical treatment at Northwestern Memorial Hospital. During a series of admissions to Northwestern, Paul was diagnosed with a widespread, virulent cancer. His health rapidly deteriorated. Paul died from cancer on July 7, 1995, leaving three adult sons and his estranged wife Susan surviving him.

For several years prior to and continuing until his death, Paul Downing was involved in a romantic relationship with Janet Holcomb. While confined to Northwestern for tests and treatment, Paul requested that his private secretary, Laverne Anderson, obtain change of beneficiary forms for his life insurance policies with Safer Foundation and Healthcare Services Corporation. On June 21, 1995, Anderson delivered the forms to the hospital and observed Paul complete and sign them. After signing the forms, Paul then instructed Anderson to deliver the change of beneficiary forms to the human resource department at the Safer Foundation. The change of beneficiary forms executed by Paul on June 21, 1995, named his companion Janet Holcomb as the sole beneficiary.

The power of attorney executed by Paul in 1990 states that the agency created therein would become effective upon a written declaration of his disability by his personal physician, Neal Stone, M.D. On June 27, 1995, at the request of Daniel Hales, attorney for Paul's wife Susan, Dr. Stone declared Paul disabled. On June 30, 1995, Susan faxed a copy of the 1990 power to the Safer Foundation as insurance transactions were included in the agency. In response, Paul's attorney, Anthony J. Pauletto, immediately faxed a letter to both Susan's attorney and the Safer Foundation denying the validity of the 1990 power based on the acrimonious nature of the Downings' relationship and the pending litigation for the dissolution of their marriage.

On July 2, 1995, Dr. Stone reexamined Paul and notified both Janet and Susan that Paul was now competent to make decisions. Shortly after Dr. Stone's declaration, Paul drafted and signed a statement, dated July 2, 1995, which appointed Janet Holcomb as his attorney-in-fact for the purpose of making medical decisions and granted her unlimited visiting privileges. Paul also stated that Susan was not allowed to make decisions regarding his care or finances. Paul further stated that Susan was prohibited from visiting or contacting him absent the express consent of his attorney, Anthony J. Pauletto. This statement was not communicated to Susan or the Safer Foundation until after Paul's death.

On July 5, 1995, Paul was again declared disabled by Dr. Stone. On this date, considering herself acting as Paul's agent pursuant to the 1990 power, Susan executed a change of beneficiary form for the life insurance policy held by Health Care Services Corporation. On July 6, 1995, Susan executed an additional change of beneficiary form for the life insurance policy held by the Safer Foundation. On each change of beneficiary form, Susan named herself as the sole beneficiary. After Paul's death on July 7, 1995, Susan submitted a claim to Fort Dearborn Life Insurance Company for death benefits under the subject policies.

In light of the foregoing facts, Fort Dearborn instituted an interpleader action in the circuit court of Cook County, under case number 95 CH 9183, alleging that the rightful claimant to the insurance proceeds remained unclear. In response to this action, Janet Holcomb filed a counterclaim against Susan Downing and Fort Dearborn claiming that she is entitled to the death benefit proceeds as a result of the June 21, 1995, beneficiary designations by Paul Downing. Susan Downing then filed a cross-claim alleging in counts I and II that the June 21, 1995, change of beneficiary forms executed by Paul were void and unenforceable due to Paul's lack of mental capacity and Janet's exercise of undue influence. In count III, Susan further alleged that she was the named beneficiary at the time of Paul's death because the change of beneficiary forms executed by her in July 1995 were a proper exercise of the authority granted to her in the 1990 power.

Following a hearing on July 31, 1996, the trial court denied Janet's motion for partial summary judgment pursuant to section 2-1005(d) of the Illinois Code of Civil Procedure (735 ILCS 5/2-1005(d) (West 1998)) which sought a determination that the 1990 power did not authorize Susan to execute change of beneficiary forms. In ruling, the trial court determined as a matter of law that the power of attorney in the case at bar was not a "Statutory Short Form Power of Attorney for Property" (Short Form) thereby entitling its provisions to be given the meaning and effect prescribed in Article III of the Illinois Power of Attorney Act, also known as the "Statutory Short Form Power of Attorney for Property Law" (Short Form Act) 755 ILCS 45/3-1 et seq. (West 1998). Instead, the court ruled that the 1990 power was a "non-statutory" property power governed by Article II of the Illinois Power of Attorney Act, also known as the "Durable Power of Attorney Law" (755 ILCS 45/2-1 et seq. (West 1998)). As such, the court determined that the 1990 power granted Susan broad plenary powers, including the power to change beneficiaries on Paul's life insurance policies. The trial court then instructed the parties that further proceedings would be limited to whether Paul properly revoked the 1990 power.

On September 27, 1999, after hearing argument on the parties' cross-motions for summary judgment, the trial court reaffirmed its prior ruling that the 1990 power was "durable" and granted Susan authority to change the beneficiary on Paul's life insurance policies. The court further determined that the agency created by the 1990 power had not been revoked by Paul prior to his death. Thus, summary judgment was granted in favor of Susan Downing on count III of her second amended cross-claim and Janet Holcomb's motion for summary determination of major issues was denied. In addition, counts I and II of Susan's second amended cross-claim, alleging lack of mental capacity and undue influence, were rendered moot. This appeal followed.

II. ANALYSIS

Janet contends on appeal that the trial court erred by (1) failing to apply the provision in section 3-4 of the Short Form Act that expressly states that an agent does not have the power to change any beneficiary designated by the principal, (2) determining that the 1990 power was a "broad form" or "durable" power of attorney not subject to the limitations in section 3-4 of the Short Form Act, (3) interpreting a "catchall" provision in the 1990 power as authorization to change beneficiaries, and (4) finding that the agency created by the 1990 power was not effectively revoked. It is important to note that Janet, as appellant, does not argue that the evidence before the trial court gave rise to a triable issue of material fact, thereby precluding summary judgment. Thus, the sole issue on appeal is whether the trial court properly applied the relevant law to the uncontested facts of this case.

Summary judgment is proper when the pleadings, depositions, admissions on file and any affidavits show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1998). The interpretation of a formal power of attorney and the effect of relevant statutory provisions on the powers granted the agent named therein are questions of law that are appropriately decided on a motion for summary judgment. See Wirtz Realty Corp. v. Freund, 308 Ill. App. 3d 866, 873 (1999). The standard of review on a summary judgment ruling involving statutory interpretation is de novo. King v. Industrial Comm'n, 189 Ill. 2d 167,171 (2000); McNamee v. State, 173 Ill. 2d 433, 438 (1996). A. Statutory Short Form Power of Attorney for Property Law

At issue in this appeal is whether the subject power of attorney is governed by the provisions of the Short Form Act (755 ILCS 45/3-1 et seq. (West 1998)). It is uncontested that if the 1990 power is a Short Form, Susan Downing would have been statutorily precluded from changing the beneficiary on Paul's life insurance policies as such authority was not expressly granted in the power. If, however, the 1990 power is a non-statutory property power governed by the Durable Power of Attorney Law, the court must interpret the provisions of the 1990 power to determine if the language therein granted Susan full plenary powers that would include authority to change Paul's beneficiary designation.

The Short Form Act was enacted by the legislature for the purpose of creating a standardized form that individuals could readily use to authorize an agent to act for them in dealing with their property and financial affairs. 755 ILCS 45/3-1 (West 1998). Section 3-3 of the Short Form Act sets forth the conditions necessary for a power of attorney to be considered a Short Form. Specifically, this section provides:

"The following form may be known as 'statutory property power' and may be used to grant an agent powers with respect to property and financial matters. When a power of attorney in substantially the following form is used, including the 'notice' paragraph at the beginning in capital letters and the notarized form of acknowledgment at the end, it shall have the meaning and effect prescribed in this Act." (Emphasis added.) 755 ILCS 45/3-3 (West 1998).

The question of what constitutes "substantial" compliance with the Short Form is one of first impression in Illinois.

When construing a disputed statutory provision, the court's primary goal is to ascertain and give effect to the legislature's intent. In re J.R., 307 Ill. App. 3d 175, 180 (1999). To determine the legislative intent, we first consider the statutory language. State Farm Fire & Casualty Co. v. Yapejian, 152 Ill. 2d 533, 540-41 (1992). The language within each section of a statute must be examined in light of the entire statute. Stone v. Department of Employment Security Board of Review, 151 Ill. 2d 257, 261 (1992). The court may also consider the reason and necessity for the law, the evils to be remedied, and the objectives to be attained. Koperski v. Amica Mutual Insurance Co., 287 Ill. App. 3d 494, 497 (1997). The court will assume that the legislature did not intend to produce an absurd or unjust result. Yapejian, 152 Ill. 2d at 541.

The trial court determined that the power of attorney executed by Paul Downing in 1990 was not in "substantially" the form set forth in the section 3-3 and was therefore not entitled to the meaning and effect prescribed in the Short Form Act. The court stated:

"If it had been a short form power of attorney, yes, Susan Downing could not change the beneficiary unless it was specifically indicated therein, but this document doesn't follow the statutory form and I have interpreted it as being a long form or a general doable [sic] power of attorney ***." (Emphasis added).

The trial court, after acknowledging that the first paragraph of the 1990 power specifically references the Short Form Act, went on to state, "after that everything kind of falls apart and is totally different than the short form in the statute." The trial court also stated, "[u]ndoubtedly, the [s]section 3 form is used as a model for Paul's power of attorney, but internal evidence suggests it was not intended to be limited by section 3." (Emphasis added.) We disagree.

The disposition of this case turns on whether the form outlined in section 3-3 of the Short Form Act, for use when creating a "statutory property power," is mandatory. Whether a statutory provision is mandatory or merely directory depends upon the intent of its drafters. North Shore Community Bank & Trust Co. v. Kollar, 304 Ill. App. 3d 838, 846 (1999). As noted, intent is first ascertained from the language of the statutory provision. Yapejian, 152 Ill. 2d at 541. When construing a statute, words must ...


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