The opinion of the court was delivered by: Harold A. Baker United States District Judge
The plaintiff, Life Insurance Company of North America ("the insurer") filed this interpleader action to determine the rightful claimants to life insurance proceeds. The insurer deposited the stake of $40,000 with the registry of the court and was discharged from this case.
The facts are undisputed. The insured, Leonard C. Davis, Jr. ("the decedent"), was married at least three times. Defendants Leonard C. Davis III ("Leonard") and Kimberly Jo Davis ("Kimberly") were born as a result of a relationship prior to the decedent's marriage to his second wife, defendant Teresa Lynn Davis ("Teresa"), in 1984. Teresa and the decedent had two children, Jacquilyne Lee Davis and Sean Michael Davis (collectively, "Teresa's children"). Teresa and the decedent divorced in 1992. The decedent later married defendant Susan R. Davis ("Susan"); they remained married until his death in 2002.
When Teresa and the decedent divorced, they entered into Marital Settlement Agreement ("MSA"), which was incorporated into the Judgment for Dissolution of the marriage. The MSA states, in relevant part, LIFE INSURANCE
The [decedent] shall continue to provide life insurance on his life for the benefit of [Teresa's] children that is available to him through his employment. The [decedent] shall name another party as trustee over life insurance benefits for the benefit of [Teresa's] children.
At the time of his divorce, and until his death, the decedent was employed by Firestone Tire and Rubber Company ("Firestone"). When Teresa and the decedent divorced, his life insurance benefit was $23,000. The benefit increased to $30,000 in 1994, and to $35,000 in 1997. The benefit increased again, to $40,000, in 2000. Firestone provided the insurance coverage without charge.*fn1
In 2000, the decedent made Susan the sole beneficiary of his Firestone life insurance policy, contrary to the MSA. Teresa learned of the change and filed a petition for a rule to show cause. On March 13, 2002, the Tazewell County Circuit Court entered the following:
1. Court finds [the decedent] has removed children as beneficiary in violation of court order.
2. [The decedent] shall appear before this Court on March 27, 2002 at 1:30 p.m.
3. [The decedent] shall provide a copy of his life insurance policy to the Court and [Teresa] showing . . . [Teresa's] children, . . . as the beneficiaries of said life insurance policy.
One day before the decedent was scheduled to appear in court, a motion to continue was filed. Over the next few months, several notices of hearing were issued but the docket does not reflect that a hearing was ever held.
On April 23, 2002, the decedent executed his last will and testament. Among other things, the will incorporated provisions for the creation of the Leonard Davis Family Trust, with Teresa's children as beneficiaries and Susan as trustee. The trust was to be funded with "my life insurance proceeds from my Bridgestone/Firestone life insurance[.]"
Then on May 2, 2002, the decedent executed a Life Insurance Beneficiary Designation for his Firestone life insurance policy. He divided the proceeds as follows: $12,000 to Susan, $7,000 to Leonard,*fn2 $7,000 to Kimberly, and $14,000 to the Leonard C. Davis Family Trust, Susan R. Davis, Trustee.
The decedent passed away on September 26, 2002. The final entry on the circuit court's docket sheet is dated sometime in late 2002: "Parties present by counsel. ...