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USAA Life Insurance Co. v. Benvenuto

United States District Court, N.D. Illinois, Eastern Division

September 3, 2014

USAA LIFE INSURANCE COMPANY, a Texas corporation, Plaintiff,
v.
LORI L. DUNN BENVENUTO and KATHERINE ST. CLAIR, mother, guardian and next friend of E.A.B. and H.M.B., Defendants. KATHERINE ST. CLAIR, mother, guardian and next friend of E.A.B. and H.M.B., Cross-Plaintiff,
v.
LORI L. DUNN BENVENUTO, Cross-Defendant.

MEMORANDUM OPINION & ORDER

JOAN B. GOTTSCHALL, District Judge.

Two insurance companies, USAA and MetLife, filed complaints for interpleader against Katherine St. Clair and Lori Dunn Benvenuto, both of whom made claims to life insurance policies that the companies issued to Paul Benvenuto. USAA and MetLife deposited the proceeds of the policies with the court and have been dismissed as parties in this case. Katherine then filed a three-count cross-complaint against Lori. The first count relates to the USAA policy, the second to the MetLife policy, and the third to Lori's personal assets.

Now before the court are Katherine's motion for summary judgment on Count I and Lori's motion to dismiss Counts II and III. For the reasons explained below, Katherine's motion for summary judgment is granted insofar as it seeks a declaratory judgment and imposition of a constructive trust for the benefit of her children. Lori's motion to dismiss is denied.

I. BACKGROUND

Paul Benvenuto, a federal employee, was married to Katherine St. Clair, with whom he had two children. In 2009, Paul and Katherine divorced. The divorce decree ordered Paul to maintain a life insurance policy in the amount of $500, 000 for the benefit of his children until they graduated from college. Paul maintained two life insurance policies: a USAA policy for $250, 000, and a MetLife policy for $812, 000. The decree also required Katherine and Paul to maintain a joint savings account to pay for their children's college education.

Paul died in October 2012. Before his death, Paul changed the beneficiary designations on his USAA life insurance policy from his children to his second wife, Lori Dunn Benvenuto. He also designated Lori as the beneficiary of his MetLife policy and withdrew half of the money from the joint savings account.

II. LEGAL STANDARD

A. Summary Judgment

Summary judgment is appropriate when the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Smith v. Hope Sch., 560 F.3d 694, 699 (7th Cir. 2009). "[A] factual dispute is genuine' only if a reasonable jury could find for either party." SMS Demag Aktiengesellschaft v. Material Scis. Corp., 565 F.3d 365, 368 (7th Cir. 2009). The court ruling on the motion construes all facts and makes all reasonable inferences in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is warranted when the nonmoving party cannot establish an essential element of its case on which it will bear the burden of proof at trial. Kidwell v. Eisenhauer, 679 F.3d 957, 964 (7th Cir. 2012).

B. Motion to Dismiss

To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint must "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim satisfies this pleading standard when its factual allegations "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555-56; see also Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010) ("[P]laintiff must give enough details about the subject-matter of the case to present a story that holds together."). For purposes of the motion to dismiss, the court takes all facts alleged by the plaintiff as true and draws all reasonable inferences from those facts in the plaintiff's favor, although conclusory allegations that merely recite the elements of a claim are not entitled to this presumption of truth. Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011).

III. ANALYSIS

A. Katherine's Motion for Summary Judgment on Count I

In Count I, Katherine seeks (1) a declaration that her children have an equitable right to the proceeds of the USAA policy that is superior to any other claimant's right and (2) the imposition of a constructive trust on those proceeds for the benefit of her children.

Lori does not dispute that Katherine's children have an equitable right to the USAA proceeds. Under settled Illinois law, "When marital settlement agreements require an insured to maintain life insurance for the benefit of a particular beneficiary, that beneficiary has an enforceable equitable right to the proceeds of the insurance policies against any other named beneficiary except one with a superior equitable right." In re Schwass, 467 N.E.2d 957, 959 (Ill.App. Ct. 1984). Nor does Lori argue that she has a superior equitable right to the proceeds. Indeed, she now "disclaim[s] any and all interest she may have in the proceeds of the policy of life insurance issued by USAA." (ECF No. 76, ¶ 2.)

It is also settled under Illinois law that when a beneficiary possesses an equitable right to life insurance proceeds because of a marital settlement agreement, the imposition of a constructive trust on the insurance proceeds is an appropriate remedy to enforce the beneficiary's equitable right. IDS Life Ins. Co. v. Sellards, 527 N.E.2d 426, 428 (Ill.App. Ct. 1988). Again, Lori does not dispute this. Thus, under the undisputed facts of this case, Katherine is entitled to the relief that she seeks as a matter of law.

Lori agues, however, that because she has now disclaimed any interest she may have in the USAA proceeds, the court should not grant Katherine's motion for summary judgment, but instead "deny [it] as moot." (ECF No. 76, ¶ 4.) It is unclear whether Lori means to argue that the motion is "moot" in the sense that it "has no practical significance, " or in the sense that the court now lacks jurisdiction under 28 U.S.C. § 1335, which grants district courts jurisdiction over ...


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