Mony Life Insurance Company v. Sweet et al

Brief/Memorandum in Support

N.D. Tex.March 16, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS WICHITA FALLS DIVISION MONY LIFE INSURANCE COMPANY, Plaintiff, § § § § § CIVIL ACTION NO. 7:16-CV-00134-0 § § § § VS. BETH ANN SWEET and MADISON LYNN SWEET, Defendants. PLAINTIFF MONY LIFE INSURANCE COMPANY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS AMENDED COUNTERCLAIMS OF BETH SWEET PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 24251 19.I/SPSA/33651/0104i031617 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 1 of 28 PageID 192 Table of Contents Table of Contents 2 Index of Authorities 3 I. Introduction 5 II. Factual Background 6 III. Motion to Dismiss Standard 11 IV. Argument and Authorities 11 A. Beth Sweet's breach of contract claim must be dismissed because her designation as primary beneficiary of the Policy was revoked pursuant to Texas Family Code § 9.301(a) upon her divorce from the Insured 12 B. Beth Sweet's breach of contract claim must be dismissed for the additional reason that the Divorce Decree expressly provided that Madison Sweet was to be named the sole beneficiary of the Policy and the Decree became the judgment of the Court once entered 15 C. Beth Sweet's Texas Insurance Code and DTPA counterclaims should be dismissed because the Policy's death benefit is not payable to Beth Sweet. 16 V. Conclusion and Prayer 19 MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119, I/SPSA/3365 1/0 104/031617 2 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 2 of 28 PageID 193 Index of Authorities Cases Abrams v. Salinas, 467 S.W.3d 606 (Tex. App.-San Antonio 2015, no pet.) 16 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .11 Bilotta v. Allied Prop. & Cas. Ins. Co., 79 F. Supp. 3d 660 (W.D. Tex. 2015) 17 Branch v. Monumental Life Ins. Co., 422 S.W.3d 919 (Tex. App.-Houston 2014, no pet.) .13 Copeland v. Alsobrook, 3 S.W.3d 598 (Tex. App.-San Antonio 1999, pet. denied) 14 Douglas v. State Farm Lloyds, 37 F. Supp. 2d 532 (S.D. Tex. 1999) .17 Ex parte Gorena, 595 S.W.2d 841 (Tex. 1979) 16 Fernandez-Montes v. Allied Pilots Ass 'n, 987 F.2d 278 (5th Cir. 1993) 11, 18 Gray v. Nash, 259 S.W.3d 286 (Tex. App.-Ft. Worth 2008, pet. denied) .15 Hallsted v. McGinnis, 483 S.W.3d 72 (Tex. App.-Houston 2015, no pet.) 16 Harris v. Am. Prot. Ins. Co., 158 S.W.3d 614 (Tex. App.-Fort Worth 2005, no pet.) 17 Henry v. Mut. of Omaha Ins. Co., 503 F.3d 425 (5th Cir. 2007) 16 In re The Group Life Ins. Proceeds of Curtis B. Mallory, Deceased, 872 S.W.2d 800 (Tex. App.-Amarillo 1994, no pet.) 14 Interest of Madison Lynn Street, Case No. CVll.08.604 , 6 MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 24251 19. I/SPSAJ3365 1/0 104/031617 3 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 3 of 28 PageID 194 JA W The Pointe, L.L. C. v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) 17 Lincoln Benefit Life Co. v. Manglona, No. H-13-2196, 2014 U.S. Dist. LEXIS 90502, at *5-6 (S.D. Tex. 2014) 13 Lockett v. Prudential Ins. Co. of Am., 870 F. Supp. 735 (W.D. Tex. 1994) 17 Northwinds Abatement, Inc. v. Employers Ins. of Wausau, 258 F.3d 345 (5th Cir. 2001) .l7 Provident Life and Accident Ins. Co. v. Cleveland, 460 Fed. Appx. 359, 360 (5th Cir. 2012) .l4 Ray-Marshall v. Ray, No. SA-12-CA-597, 2013 U.S. Dist. LEXIS 194555, *4 (W.D. Tex. 2013) 14-15 Russell v. Russell, 478 S.W.3d 36 (Tex. App.-Houston 2015, no pet.) 16 15626 Ft. Bend Ltd. DBA Mercedes-Benz of Sugar land v. Sentry Select Ins. Co., 991 F.Supp.2d 932 (S.D. Tex. 2014) .l8 Statutes TEX.FAM.CODEANN.§ 7.006 (West 2016) .l6 TEX.FAM.CODEANN. § 9.301 (West 2016) 5, 7, 9,10-15, 18 TEX. INS.CODEANN. § 541.060 (West 2016) .l8 TEX. INS.CODEANN. § 542.058 (West 2016) 10, 18 TEX. INS.CODEANN. § 1103.l02 (West 2016) 10, 18 Rules FED.R. CIY.P. 12(b)(6) .l1 MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.IISPSN3365110104!031617 4 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 4 of 28 PageID 195 I. Introduction This is an interpleader action concerning the proceeds of a life insurance policy issued in 1993 by Plaintiff, The Mutual Life Insurance Company of New York, now known as MONY, to Beth Sweet's ("Beth Sweet") former husband, James Sweet (sometimes hereinafter the "Insured"). In 2002, the Insured designated Beth Sweet as First Beneficiary of the policy and the Sweet's then minor daughter, Madison Lynn Sweet ("Madison Sweet") as the Second Beneficiary. Simultaneously, the Insured also transferred ownership of the policy jointly to Beth Sweet and Madison Sweet. In 2013, in divorce proceedings between Beth Sweet and the Insured, a Final Decree of Divorce ("Divorce Decree") was entered in Wise County, Texas. The Divorce Decree, which incorporated and approved a written property agreement between Beth Sweet and the Insured, expressly provided that Madison Sweet, who by that time had reached the age of majority, was to be the sole beneficiary of the MONY policy. Following the Insured's death in April 2016, Beth Sweet made a demand on MONY for payment of the policy proceeds. MONY informed Beth Sweet that because of her divorce from the Insured, she was disqualified from receiving the policy's death benefit pursuant to Texas Family Code § 9.301. MONY then contacted Madison Sweet regarding her potential claim to the proceeds as she was designated as the sole beneficiary in the Divorce Decree. Madison Sweet responded, inaccurately, that she was not the co-owner of the policy or a beneficiary and that she therefore had no rights under the policy. Subsequently, MONY sent Madison Sweet, among other documents, a copy of the Divorce Decree and a Hold Harmless and Waiver Agreement ("Waiver Agreement"), informing her that if she did not wish to make a claim under the policy, she should execute and return the Waiver Agreement, or in the alternative, she MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.1 ISPSA/33651 10104/031617 5 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 5 of 28 PageID 196 should communicate to MONY that she was not prepared to give up any potential claim that she might have. When Madison Sweet did not return an executed Waiver Agreement or otherwise respond to MONY's correspondence, MONY commenced this interpleader action. II. Factual Background On October 8, 1993, MONY issued life insurance Policy No. 1379-14-78 JF (the "Policy") to James H. Sweet in the face amount of $100,000. In the Application for the Policy which was incorporated in and a part of the Policy, Beth Sweet, the Insured's then spouse, was designated as the beneficiary. See Application and Policy Schedule attached to the Complaint collectively as Exhibit A. On February 20, 2002, the Insured submitted a Title Change Form designating Beth Sweet as First Beneficiary; Madison Sweet as Second Beneficiary; and transferring "Rights (Ownership) Under Policy" jointly to Beth Sweet and Madison Sweet. See copy of the Title Change Form attached to the Complaint as Exhibit B. On May 6, 2013, a Final Decree of Divorce was entered by the Wise County, Texas County Court of Law in the Matter of the Marriage of James Henry Sweet and Beth Ann Sweet and in the Interest of Madison Lynn Street, Case No. CV11-08-604 (hereinafter "Divorce Decree"), attached to the Interpleader Complaint as Exhibit D. In the Divorce Decree, the Court found: [T]he parties have entered into a written agreement as contained in this decree by virtue of having approved this decree as to both form and substance. To the extent permitted by law, the parties stipulate the agreement is enforceable as a contract. The Court approves the agreement of the parties as contained in this Final Decree of Divorce. Ex. D to Complaint, at p. 2. MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.I/SPSN3365110104/031617 6 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 6 of 28 PageID 197 In the Divorce Decree, the Policy was awarded to Beth Sweet as her sole and separate property and the Insured was divested of all right, title, interest and claim to the Policy. Id. at W- 7. The Divorce Decree further expressly provided that the "Mutual New York - $100,000" insurance policy "shall name Madison Lynn Sweet as the sole beneficiary." Id. at W-8. At the time the Divorce Decree was entered, Madison Sweet was 18 years old, having reached the age of majority on January 21,2013. On April 3, 2016, the Insured died and the proceeds of the Policy became payable. At the time of the Insured's death, Beth Sweet remained the designated First Beneficiary of the Policy and Madison Sweet remained the designated Second Beneficiary, according to MONY's records. On May 16, 2016, MONY received a completed claim form from Beth Sweet indicating she was the ex-wife of the Insured. See Beth Sweet's claim form attached to the Complaint as Exhibit C. At MONY's request, Beth Sweet provided a copy of the Divorce Decree to MONY. On June 16, 2016, MONY wrote Beth Sweet informing her that she was disqualified from receiving the Policy's death benefit pursuant to Texas Family Code § 9.301; that the Divorce Decree stated that Madison Sweet was to be the sole beneficiary of the Policy; and that MONY believed the rightful payee of the proceeds was Madison Sweet. MONY provided Beth Sweet a claim form to be completed by Madison Sweet and a Withdrawal of Claim form that MONY requested be completed and returned by Beth Sweet. See copy of MONY's June 16, 2016 letter to Beth Sweet, attached to Complaint as Exhibit E. On July 21, 2016, MONY received a letter from attorney Robert Aldrich, advising of his representation of Beth Sweet and demanding payment of the Policy proceeds to her. Mr. Aldrich stated his opinion that Beth Sweet was not disqualified from receiving the Policy proceeds by Texas Family Code § 9.301 because that statute "only applies when the insured spouse keeps the MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119. IISPSA/3365 1/0 104/031617 7 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 7 of 28 PageID 198 policy after the divorce;" and that Madison Sweet "has no intention or desire to file a claim on the proceeds." See copy ofMr. Aldrich's July 18, 2016 letter to MONY, attached to Complaint as Exhibit G. On July 27 and 28 and August 2, 2016, MONY emailed Mr. Aldrich inquiring whether Madison Sweet would be willing to sign a sworn disclaimer affidavit since Mr. Aldrich stated in his July 18, 2016 letter that Madison Sweet had no intention of claiming the proceeds to the Policy. Mr. Aldrich replied that he saw "no reason to do something that is not necessary .... " On September 2, 2016, Protective Life Insurance Company ("Protective"), the parent company of MONY, reached out to Madison Sweet via LinkedIn. The LinkedIn message stated that Madison Sweet was the co-owner of a MONY policy insuring her father, James Sweet; that the Policy's death benefits may be payable to her unless she intended to waive her rights in favor of her mother; and Madison Sweet was provided the contact information for Protective's in- house attorney, Bill McCarty. Madison replied to Protective's LinkedIn message on September 2, 2016, stating, inaccurately, the following: "per the policy agreement, I am NOT the co-owner of a MONY life insurance policy that insured my father, James Sweet ... ;" that "Beth Sweet is the sole owner and beneficiary ... ;" and that "I do not have a legal claim to these proceeds and therefore cannot waive my right to them." On September 6, 2016, Protective's in-house attorney, Bill McCarty, emailed Madison Sweet and provided her a copy of: (1) the 2002 Title Change Form designating Beth Sweet and Madison Sweet as the co-Rightsholders (Owners) of the Policy and designating Madison Sweet as the Second Beneficiary; (2) a 2011 Statement of Coverage listing Beth Sweet and Madison Sweet as co-Rightsholders of the Policy; (3) excerpts from the Divorce Decree including the MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119, IISPSAI3365110 104/031617 8 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 8 of 28 PageID 199 division of the marital estate and the provision that the Policy "shall" name Madison Sweet as the "sole beneficiary." Mr. McCarty explained MaNY's belief that the Divorce Decree possibly gave Madison Sweet a legal basis to claim the Policy proceeds regardless of MaNY's records showing Beth Sweet as the primary beneficiary on the Policy. Mr. McCarty asked that Madison Sweet let him know that she was either prepared to give up her potential claim and MONY would send her the waiver form to sign, or that she was not prepared to give up her potential claim. Madison Sweet responded on September 8, 2016, stating, inaccurately, that she was "fully aware" Beth Sweet "is the sole policy owner as well as the beneficiary;" that Madison Sweet was "not the policy owner; co-owner or beneficiary and therefore [she had] no rights to this policy." On September 9, 2016, Mr. McCarty emailed Madison Sweet stating he would provide a waiver form for her to consider signing, the effect of which would confirm for MaNY's records that Madison Sweet was not making and never intends to make a claim to the Policy proceeds despite being aware of everything that MaNY's records show. On September 16, 2016, attorney Robert Aldrich wrote MaNY demanding payment of the Policy's $130,000 death benefits to Beth Sweet, $25,000 in attorney's fees and $50,000 for MaNY's "knowing violations" of the Texas Deceptive Trade Practices Act and the Texas Insurance Code. On September 19, 2016, Bill McCarty emailed Madison Sweet a Hold Harmless and Waiver Agreement ("Waiver Agreement"), attached to Complaint as Exhibit H; a copy of Texas Family Code § 9.301 which was referenced in the Waiver Agreement; and another copy of the 2002 Title Change Form naming Beth Sweet and Madison Sweet as co-Rightsholders (owners) MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119. I/SPSN33651/0104!03 1617 9 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 9 of 28 PageID 200 of the Policy and designating Madison Sweet as the Second Beneficiary. In his correspondence, Mr. McCarty stated that if Madison Sweet did not wish to make a claim to the Policy benefits "after knowing all of the facts," she could sign the Waiver Agreement before a notary and return it to Mr. McCarty. Mr. McCarty's email concluded with a request that Madison Sweet either sign and return the Waiver Agreement or, alternatively, communicate her clear intention that she was not prepared to give up any potential claim under the Policy that she might have. Madison Sweet did not return an executed Waiver Agreement or otherwise respond to Mr. McCarty's September 19,2016 email. As a result of the Insured's divorce from Beth Sweet in 2013, the Divorce Decree's express direction that Madison Sweet was to be named as the sole beneficiary of the Policy, the provisions of Texas Family Code § 9.301(a) and (b), the failure to submit a change of beneficiary form designating Madison Sweet as the sole beneficiary following rendition of the Divorce Decree, Beth Sweet's claim for the Policy benefits, and Madison Sweet's failure to waive any right to make a claim under the Policy, MONY initiated this interpleader action in order for this Court to determine the rightful recipient of the Policy's death benefit. With her Answer, Beth Sweet filed a counterclaim against MONY alleging the following three causes of action: (1) breach of contract; (2) violations of the Texas Insurance Code; and (3) violations of the Texas Deceptive Trade Practices Act ("DTP A"). Answer and Counterclaim, ECF Doc. 5, at ~~ 42-58. Beth Sweet subsequently filed an amended answer and amended counterclaim against MONY alleging the following four causes of action: (1) breach of contract; (2) violation of Texas Insurance Code § 1103.102(a); (3) violation of Texas Insurance Code § 542.058; and (4) MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.I/SPSA/33651/0104/031617 10 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 10 of 28 PageID 201 violations of the Texas Deceptive Trade Practices Act ("DTP A"). Answer and Amended Counterclaim, ECF Doc. 15, at ~~ 48-60. Beth Sweet's amended counterclaim should be dismissed in its entirety because her designation as primary beneficiary of the Policy was revoked by operation of law pursuant to Texas Family Code § 9.301(a). Upon her divorce from the Insured, the Divorce Decree did not name Beth Sweet as the beneficiary of the Policy and it did not designate her to receive the Policy proceeds in trust for, on behalf of, or for the benefit of Madison Sweet. Moreover, after rendition of the Divorce Decree Beth Sweet was not re-designated as the beneficiary. Because none of the events required by Texas Family Code § 9.301(a) occurred, Beth Sweet is not entitled to receive the Policy proceeds. Thus, Beth Sweet's claims for breach of contract, violations of the Texas Insurance Code and the Texas DTPA fail as a matter of law. III. Motion to Dismiss Standard A court may dismiss a complaint for "failure to state a claim upon which relief can be granted." FED. R. CIv. P. 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotations and citations omitted). All well-pleaded facts must be accepted as true; however, "conclusory allegations or legal conclusions masquerading as factual conclusions will not prevent dismissal." Fernandez- Montes v. Allied Pilots Ass 'n, 987 F.2d 278, 284 (5th Cir. 1993). IV. Argument and Authorities Beth Sweet's amended counterclaim must be dismissed in its entirety for the following critical reasons: her designation in 2002 as primary beneficiary of the Policy was revoked by operation law pursuant to Texas Family Code § 9.301(a) upon her divorce from the Insured in MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.IISPSA133651101041031617 11 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 11 of 28 PageID 202 2013, and the Divorce Decree expressly provided that Madison Sweet was to be named the sole beneficiary of the Policy, which became the judgment of the Court when the Decree was entered. The Policy's death benefit is therefore not due or payable to Beth Sweet, a necessary prerequisite for her breach of contract, DTP A and Texas Insurance Code causes of action. A. Beth Sweet's breach of contract claim must be dismissed because her designation as primary beneficiary of the Policy was revoked pursuant to Texas Family Code § 9.301(a) upon her divorce from the Insured. Texas Family Code § 9.301 provides: (a) If a decree of divorce or annulment is rendered after an insured has designated the insured's spouse as a beneficiary under a life insurance policy in force at the time of rendition, a provision in the policy in favor of the insured's former spouse is not effective unless: (1) the decree designates the insured's former spouse as the beneficiary; (2) the insured redesignates the former spouse as the beneficiary after rendition of the decree; or (3) the former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either former spouse. (b) If a designation is not effective under Subsection (a), the proceeds of the policy are payable to the named alternate beneficiary or, if there is not a named alternate beneficiary, to the estate of the insured. Id. Beth Sweet concedes in her amended counterclaim that the Insured designated her as the First Beneficiary in 2002; that she and the Insured divorced in May 2013; that their daughter, Madison Sweet, was a legal adult at the time of the divorce; that the Divorce Decree provided that the Policy "shall name Madison Lynn Sweet as the sole beneficiary;" and that no change of beneficiary form re-designating her as beneficiary was submitted to MONY following Beth MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.I/SPSA/33651/0104/031617 12 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 12 of 28 PageID 203 Sweet's divorce from the Insured. Amended Counterclaim, at ~~ 42-43. Consequently, Beth Sweet does not and cannot dispute that the Divorce Decree did not name her as the beneficiary of the Policy; that she was not re-designated as the beneficiary after the divorce; and that the Divorce Decree did not designate Beth Sweet to receive the proceeds in trust for, on behalf of, or for the benefit of Madison Sweet. Beth Sweet therefore cannot dispute that none of the exceptions set forth in § 9.301(a)(1)-(3) were met. When a beneficiary designation is not effective under subsection (a), § 9.301(b) provides that the proceeds become payable to "the named alternate beneficiary," or to the estate of the insured if an alternate beneficiary is not named. Id. Because Beth Sweet's designation as beneficiary was revoked by operation of § 9.301(a), the proceeds became payable to Madison Sweet, the named alternate beneficiary pursuant to § 9.301(b). See Branch v. Monumental Life Ins. Co., 422 S.W.3d 919 (Tex. App.-Houston 2014, no pet.) where the court explained: By statute, if an insured's spouse is designated as a life-insurance beneficiary but the couple later divorces or their marriage is annulled, the earlier designation of the spouse as a policy beneficiary is ineffective. See TEX.FAM.CODEANN. § 9.301(a) ... If that happens, then the policy proceeds are payable to the named alternate beneficiary, or if there is none, then the proceeds are payable to the insured's estate. Id. § 9.301(b). It is undisputed that [the insured's former spouse] was married to [the insured] when she was designated as the policy's named beneficiary, and that they subsequently divorced; thus, as a matter of law, her designation as the policy beneficiary was of no effect unless one of the three statutory exceptions applies .... . . . Because [the insured's former spouse] does not contend that any of the statutory exceptions apply, we conclude that [the insured's] designation of her as a life-insurance beneficiary is ineffective as a matter of law .... Id. at 923. See also Lincoln Benefit Life Co. v. Manglona, No. H-13-2196, 2014 U.S. Dist. LEXIS 90502, at *5-6 (S.D. Tex. 2014) ("Under § 9.301 of the Texas Family Code, if an insured MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.I/SPSN33651/0 104/031617 13 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 13 of 28 PageID 204 designates his or her spouse as a beneficiary to a life insurance policy and they subsequently divorce, the designation of the former spouse is not effective unless one of the three conditions [in § 9.301(a)] is met. . .. If none of the conditions are met, a final divorce automatically revokes the status of the designated spouse as a beneficiary and terminates his or her right to the life insurance proceeds of the former spouse."); Ray-Marshall v. Ray, 2013 U.S. Dist. LEXIS 194555, *4 (W.D. Tex. 2013) ("Because none of the exceptions to Section 9.301 apply, [the former spouse's] interest in the policy vanished by operation of law as soon as the couple divorced."); Provident Life and Accident Ins. Co. v. Cleveland, 460 Fed. Appx. 359, 360 (5th Cir. 2012) ("Because none of the exceptions to § 9.301 are applicable, we agree with the district court that [the former spouse's] interest vanished by operation of law when the couple subsequently divorced."); Copeland v. Alsobrook, 3 S.W.3d 598, 601 n. 2 (Tex. App.-San Antonio 1999, pet. denied) ("By operation of law, [the former spouse's] interest as a beneficiary vanished when she divorced [the insured]", citing the predecessor to Texas Family Code § 9.301); In re The Group Life Ins. Proceeds of Curtis B. Mallory, Deceased, 872 S.W.2d 800, 803 (Tex. App.-Amarillo 1994, no pet.) ("Similarly, the Family Code specifically provides that if the beneficiary designation of a former spouse is rendered ineffective by virtue of [what is now § 9.301] the proceeds must be paid to the alternate beneficiary named in the policy, if any."). In her amended counterclaim, Beth Sweet offers the argument that because she was the owner of the policy, the court that entered the Divorce Decree was without jurisdiction to affect any division of the life insurance policy at issue. Amended Counterclaim, at ~~ 42-43, p.7 n.1, ~ 49. However, this argument does not comport with the plain meaning of the language in Texas Family Code § 9.301(a) which applies to "a life insurance policy in force at the time of rendition." FAM.CODE§ 9.301(a). MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425 J 19. I/SPSA/3365 1/0 104/031617 14 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 14 of 28 PageID 205 Nowhere does Texas Family Code § 9.301 provide an exception for policies owned by the former spouse and Texas courts have embraced this interpretation by ruling that an ownership interest does not entitle a former spouse to policy proceeds. In Ray-Marshall v. Ray, the court held that the fact the life insurance policy was community property did not entitle the former wife to one half of the proceeds, even though she was the designated beneficiary at the time the policy was issued. The court discussed §9.301(a) and (b), and explained that because none of the exceptions to § 9.301 applied, the former wife's "interest in the policy vanished by operation of law as soon as the couple divorced." Ray-Marshall, 2013 U.S. Dist. LEXIS 194555 at *4. "It is a well-settled rule of statutory construction that every word of a statute must be presumed to have been used for a purpose. . . . Likewise, every word excluded from a statute must also be presumed to have been excluded for a purpose." Gray v. Nash, 259 S.W.3d 286, 291 (Tex. App.-Ft. Worth 2008, pet. denied). Section 9.301 does not address the ownership of a life insurance policy. The legislature's exclusion of "ownership" from the statute therefore must be presumed intentional. Accordingly, Beth Sweet's breach of contract counterclaim should be dismissed. B. Beth Sweet's breach of contract claim must be dismissed for the additional reason that the Divorce Decree expressly provided that Madison Sweet was to be named the sole beneficiary of the Policy and the Decree became the judgment of the Court once entered. In the Divorce Decree, the Wise County, Texas Court found that Beth Sweet and the Insured stipulated their written agreement, as contained in the Decree and approved by the Court, was "enforceable as a contract." See Ex. D to Complaint, at p. 2. The Divorce Decree expressly provided that Madison Sweet was to be the sole beneficiary of the Policy. Jd. at W-8. MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.I/SPSA/33651/0104/031617 15 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 15 of 28 PageID 206 Texas law is clear that when a court approves an agreement made by the divorcing parties, "the court may set forth the agreement in full or incorporate the agreement by reference in the final decree." Russell v. Russell, 478 S.W.3d 36, 46 (Tex. App.-Houston 2015, no pet.), citing Texas Family Code § 7.006(b). "Once the agreement of the parties has been approved by the court and made a part of its judgment, the agreement is no longer merely a contract between private individuals but is the judgment of the court." Russell, 478 S.W.3d at 46, citing Ex parte Gorena, 595 S.W.2d 841, 844 (Tex. 1979) (orig. proceeding). See also Hallsted v. McGinnis, 483 S.W.3d 72, 74 (Tex. App.-Houston 2015, no pet.) (same); Abrams v. Salinas, 467 S.W.3d 606,610 (Tex. App.-San Antonio 2015, no pet.) (same). The Wise County, Texas court approved and incorporated in the Divorce Decree the written agreement of Beth Sweet and the Insured that Madison Sweet was to be named the sole beneficiary of the Policy. That agreement, once entered, became the judgment of the Court. By virtue of the divorce judgment that was entered directing that Madison Sweet was to be named the sole beneficiary of the Policy, the proceeds became payable to Madison Sweet upon the death of the Insured. It does not matter that no change of beneficiary form naming Madison Sweet as the sole beneficiary was submitted to MONY following the rendition of the divorce decree. Beth Sweet's claim for the Policy proceeds was insupportable in light of the judgment of divorce. Accordingly, Beth Sweet's breach of contract counterclaim should be dismissed for this additional reason. C. Beth Sweet's Texas Insurance Code and DTPA counterclaims should be dismissed because the Policy's death benefit is not payable to Beth Sweet. Beth Sweet's causes of action under the Texas Insurance Code and DTPA are predicated upon MONY's purported wrongful denial of Beth Sweet's claim for the Policy's death benefit. "According to Texas law, extra-contractual tort claims pursuant to the Texas Insurance Code and MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119. I/SPSN3365 1/0104/03 16 17 16 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 16 of 28 PageID 207 the DTPA require the same predicate for recovery as bad faith causes of action." Douglas v. State Farm Lloyds, 37 F. Supp. 2d 532,544 (S.D. Tex. 1999) (citation omitted). Thus, "in order to establish a statutory violation under the Insurance Code or the DTP A, the elements necessary to demonstrate an insurer's breach of the common law duty of good faith and fair dealing must be proven." Id. To establish a breach of the common law duty of good faith and fair dealing under Texas law, a Plaintiff must show: "(1) there is an absence of a reasonable basis for denying or delaying payment of benefits under the policy and (2) the carrier knew or should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim." Bilotta v. Allied Prop. & Cas. Ins. Co., 79 F. Supp. 3d 660,674 (W.D. Tex. 2015). Generally, "an insured may not prevail on a bad faith claim without first showing that the insurer breached the contract." Id. See also JAW The Pointe, L.L.C v. Lexington Ins. Co., 460 S.W.3d 597, 602 (Tex. 2015) ("[a]s a general rule there can be no claim for bad faith when an insurer has promptly denied a claim that is in fact not covered.") (quotations omitted). Where there has been no breach of contract or violation of the duty of good faith and fair dealing, "the bar for establishing extra-contractual liability is high: the insurer must commit some act, so extreme, that [it] would cause injury independent of the policy claim." Northwinds Abatement, Inc. v. Employers Ins. oJ Wausau, 258 F.3d 345, 353 (5th Cir. 2001) (quotations omitted). I I See also Henry v. Mut. of Omaha Ins. Co., 503 FJd 425,429 (5th Cir. 2007) ("causes of action against insurers for bad faith under the DTP A and the Insurance Code require the same predicate for recovery as common law claims: Plainly put, an insurer will not be faced with a tort suit for challenging a claim of coverage if there was any reasonable basis for denial of that coverage.") (citation and quotations omitted); Lockett v. Prudential Ins. Co. of Am., 870 F. Supp. 735, 741 (W.D. Tex. 1994) ("[I]n order to establish statutory violations under the DTPA and the insurance code, the same elements necessary to establish the insurer's common law duty of good faith and fair dealing need to be proved .... A statutory violation is dependent upon a determination pursuant to law that the insurer breached the duty of good faith and fair dealing. Obviously, unless the breach of the duty of good faith and fair dealing is first established, the essential determination pursuant to law is absent.") (internal citation and quotations omitted); Harris v. MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 24251 19. I/SPSA/3365 1/01 04/03 16 I 7 17 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 17 of 28 PageID 208 Upon Beth Sweet's divorce from the Insured, the designation of her as pnmary beneficiary was revoked pursuant to Texas Family Code § 9.301(a), and the Policy proceeds became payable to Madison Sweet, the named alternate beneficiary, pursuant to § 9.301(b). Moreover, the Divorce Decree incorporated and approved the written agreement of Beth Sweet and the Insured that Madison Sweet was to be the sole beneficiary of the Policy. Once the Divorce Decree was entered on May 6, 2013, the parties' agreement became the judgment of the Court. When the Insured died, the Policy proceeds became payable to Madison Sweet in accordance with the judgment entered by the court and pursuant to § 9.301(b) as Madison Sweet was the named alternate beneficiary of the Policy. In her amended counterclaim, Beth Sweet asserts causes of action under Texas Insurance Code §§ 1103.l02(a), 542.058, and 541.060(a)(2)(A). Amended Counterclaim ~~ 52-60. Each of these statutes applies liability only if the insurer fails to timely pay the designated beneficiary. See generally TEX. INS.CODEANN. §§ 1103.l02(a), 542.058, and 541.060(a)(2)(A) (West 2016). However, as established above, Beth Sweet was not a beneficiary; both by operation of law through Texas Family Code § 9.301 and by judicial decree through the Divorce Decree. Beth Sweet offers no legal analysis beyond unsupported legal conclusions to support her claim that MONY incorrectly relied on Texas Family Code § 9.301 or to support her claim that Section 9.301 does not apply to her in spite of its plain language. Cf Fernandez-Montes, 987 F.2d at 284 ("[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not prevent dismissal. "). Am. Prot. Ins. Co., 158 S.W.3d 614, 623 (Tex. App.-Fort Worth 2005, no pet.) ("An insurer will not be held liable for violating [the prompt payment statute] unless it is found liable for the underlying insurance claim."); 15626 Ft. Bend Ltd. DBA Mercedes-Benz of Sugarland v. Sentry Select Ins. Co., 991 F.Supp.2d 932,947 (S.D. Tex. 2014) ("There is no liability under the [prompt payment statute] if the insurer is not liable on the insurance claim ... "). MaNY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119.I/SPSN33651/0104/031617 18 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 18 of 28 PageID 209 MONY cannot be held liable for failing to promptly pay a beneficiary when the person asserting the claim was not a beneficiary. Moreover, Beth Sweet's Amended Counterclaim is devoid of any allegation of extreme acts that would cause injury to her independent of her alleged Policy claim. For these reasons, Beth Sweet's Texas Insurance Code and DTPA claims should be dismissed. V. Conclusion and Prayer For the reasons stated above, MONY respectfully requests that the Court dismiss Beth Sweet's Amended Counterclaims with prejudice. Dated: March 16,2017. Respectfully submitted, STRASBURGER & PRICE, LLP 2301 Broadway St. San Antonio, Texas 78215 Telephone: (210) 250-6000 Facsimile: (210) 250-6100 By: /s/ Mark G. Sessions MARK G. SESSIONS State Bar No. 18039500 mark.sessions@,strasburger.com Attorneys for Plaintiff MaNY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119, I/SPSA/33651 10 104/031617 19 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 19 of 28 PageID 210 Certificate of Service This is to certify that on March 16, 2017, the undersigned electronically submitted the foregoing document with the Clerk of the Court for the U.S. District Court, Northern District of Texas, and using the electronic case filing system, I served all counsel of record electronically or by another manner authorized by Federal Rule of Civil Procedure 5(b)(2). /s/ Mark G. Sessions MARK G. SESSIONS MONY'S BRIEF IN SUPPORT OF ITS FIRST AMENDED MOTION TO DISMISS 2425119,IISPSN3365110104i031617 20 Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 20 of 28 PageID 211 Lexist-lexis- User Name: Frank Scaglione Date and Time: Thursday, February 9,20174:15:00 PM CST Job Number: 43213300 Document (1) 1. Client/Matter: 33651.0104 Search Terms: 2013 U.S. Dist. LEXIS 194555 Search Type: Natural Language Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 21 of 28 PageID 212 No Shepard's Signal™ As of: February 9,20175:15 PM EST United States District Court for the Western District of Texas May 2,2013, Decided; May 2,2013, Filed Civil No. SA-12-CA-597 Reporter 2013 U.S. Dist. LEXIS 194555 * RAENELL RAY-MARSHALL, Plaintiff Counter- Defendant v. DOROTHY L. RAY and EDWARD SOMMERS III, administrator, Defendants Counter- Plaintiffs Core Terms beneficiary, proceeds, life insurance policy, divorce, spouse, reimbursement claim, community property, summary judgment, reimbursement, designated, decree Counsel: [*1] For Raenell Ray-Marshall, Plaintiff, Cross Claimant: Thomas W. Dietrich, LEAD ATIORNEY, Law office of Thomas W. Dietrich PLLC, Scottsdale, AZ. For Dorothy L Ray, Edward Sommers, III, Administrator of the Estate of Edward N. Ray, Deceased, Defendants, Counter Plaintiffs: Joe A. Gamez, LEAD ATTORNEY, Law Office of Joe A. Gamez, San Antonio, TX. Judges: HARRY LEE HUDSPETH, SENIOR UNITED STATES DISTRICT JUDGE. Opinion by: HARRY LEE HUDSPETH nion ORDER GRANTING MOTION FOR SUMMARY JUDGMENT This is an interpleader action involving the proceeds of a life insurance policy on the life of Edward Norris Ray, Deceased. In 1985, Edward Ray obtained a life insurance policy in the amount of $50,000.00 from USAA Life Insurance Company, Inc. (USAA). At the time the policy was issued, Ray's wife, Plaintiff and Counter-Defendant Raenell Ray-Marshall, was named as the primary beneficiary. In 1988, Raenell Ray- Marshall and Edward Ray were divorced, but no change of beneficiary was ever submitted to USAA. Edward Ray subsequently married Dorothy Ray, and they were still married at the time he died in December 2011. When Edward Ray died, Raenell Ray-Marshall and Dorothy Ray asserted competing claims to the life insurance proceeds. On June [*2] 18, 2012, USAA filed this interpleader action, seeking a ruling by the Court regarding the proper distribution of the policy benefits. On January 18, 2013, the Court entered an Order directing USAA to interplead the proceeds of Edward Ray's life insurance policy into the registry of the Court and dismissing USAA as a party (Docket No. 35). On February 26, 2013, the Court issued an Order realigning the parties to reflect their respective claims and counterclaims to the policy proceeds (Docket No. 37).1 Before the Court is a motion for summary judgment by Defendant and Counter-Plaintiff Dorothy Ray (Docket No. 41). Plaintiff and Counter-Defendant Raenell Ray- Marshall has filed a response claiming (1) that she is entitled to one half of the proceeds because the life insurance policy is community property acquired by the community during her marriage to Ray and never divided, and (2) that she is entitled to reimbursement for premiums she paid to keep the policy in force. Having considered the motion and response, the Court finds that there is no genuine issue of material fact, and that the motion for summary judgment should be granted. In this diversity case, Texas law provides the rule [*3] of decision. The Texas Family Code provides that "[c]ommunity property consists of the property, other than separate property, acquired by either spouse during marriage." There is a presumption under the Family Code that property held during marriage is community property: "[p]roperty 1 On January 22, 2013, Hon. Tom Rickhoff of Bexar County Probate Court #2 appointed Edward Sommers III as the administrator of the estate of Edward Ray (Docket No. 36). Sommers, in his capacity as administrator of the estate, was subsequently added as a Defendant and Counter-Plaintiff in the instant suit. Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 22 of 28 PageID 213 2013 U.S. Dist. LEXIS 194555, *3 Page 2 of 2 possessed by either spouse during or on dissolution of marriage is presumed to be community property." Id. at ~~""~'",o,"' Generally, whether property is separate or community is determined by its character at inception, and this general rule applies to life insurance policies.=~~~~~L...~~~~~'~_~~...C~~.~ ~~~~_~~~'.~~~U.' It is undisputed that the life insurance policy was acquired while Edward Ray and Raenell Ray-Marshall were married, so it is presumed to be community property. However, the fact that the life insurance policy is community property does not entitle Raenell Ray- Marshall to one half of the proceeds, even though she was the designated beneficiary at the time the policy was issued. Under another section of the Texas Family Code, a pre-divorce decree designation of a spouse as the beneficiary of an insurance policy is ineffective unless (1) the divorce decree designates the former spouse as the beneficiary; (2) the insured re-designates the former spouse after [*4] rendition of the decree; or (3) the former spouse is designated as a beneficiary in trust for the benefit of a child or dependent. _,=:..'"--'-=-=. ==_J-_"-:"",~~='<.' If a pre-divorce decree designation of a beneficiary is found to be ineffective, then the proceeds of the policy are payable to the estate of the insured. Id. at The Plaintiff and Counter- Defendant has offered no evidence that the decree of divorce between Edward Ray and Raenell Ray-Marshall designated Raenell Ray-Marshall as the beneficiary of the policy; that Edward Ray re-designated Raenell Ray- Marshall as the beneficiary of the policy after their divorce; or that Raenell Ray-Marshall was designated to receive the proceeds of the policy in trust for, on behalf of, or for the benefit of a child or dependent of either Raenell Ray-Marshall or Edward Ray. Because none of the exceptions to apply, Raenell Ray- Marshall's interest in the policy vanished by operation of law as soon as the couple divorced. There is also no evidence that Edward Ray made any new designation of beneficiaries after his divorce. Thus, the proceeds of his policy go to his estate. In the alternative, Plaintiff and Counter-Defendant Raenell Ray-Marshall contends that she is entitled [*5] to reimbursement for the policy premiums she claims to have paid since their divorce. Reimbursement is an equitable right that arises when the funds or assets of one estate are used to benefit and enhance another Reimbursement claims are governed by ""-=-_~_'"..',","' ..."".':.==:. ~"-'-'':'='",-C.~.=J---=''-= and can arise from a variety of expenditures or contributlons.f See Tex. Fain. Code. Ann. (identifying nine categories of expenditures that are included within the meaning of "a claim for reimbursement"). The party claiming the right of reimbursement has the burden of pleading and proving that the expenditures were made and that they are reimbursable. A trial court's discretion in evaluating a claim for reimbursement is equally as broad as that discretion exercised by a trial court in making a just and right division of the community estate. ~~'-'-"-'-'--~.~-'-""" Plaintiff and Counter- Defendant Raenell Ray-Marshall has offered no summary judgment evidence to support her claim that she paid the premiums on her ex-husband's life insurance policy after their divorce. Even if she were to offer such evidence, the payment of insurance premiums is not one of the nine categories of expenditures that are included within [*6] the meaning of "a claim for reimbursement." See Tex. Fain. Code. Ann. Thus, Plaintiff and Counter-Defendant Raenell Ray-Marshall has not stated a claim for reimbursement out of the decedent's estate. It is therefore ORDERED that Defendant and Counter- Plaintiff Dorothy Ray's motion for summary judgment (Docket No. 41) be, and it is hereby, GRANTED. It is further ORDERED that judgment be, and it is hereby, entered in favor of Defendants and Counter- Plaintiffs Dorothy Ray and Edward Sommers III, as administrator of the estate of Edward Ray, and that Plaintiff and Counter-Defendant Raenell Ray-Marshall take nothing by her suit. SIGNED AND ENTERED THIS 2nd day of May, 2013. lsI Harry Lee Hudspeth HARRY LEE HUDSPETH SENIOR UNITED STATES DISTRICT JUDGE End of Document 2 Plaintiff incorrectly relies on .OO.:....:.."_,, .... "J., which requires a court to impose an equitable lien on property of a marital estate to secure a claim for economic contribution. Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 23 of 28 PageID 214 l.exislvexis- User Name: Frank Scaglione Date and Time: Thursday, February 09,20174:18:00 PM CST Job Number: 43213414 Document (1) Client/Matter: 33651.0104 Search Terms: 2014 U.S. Dist. LEXIS 90502 Search Type: Natural Language Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 24 of 28 PageID 215 No Shepard's Signal™ As of: February 9, 2017 5:18 PM EST United States District Court for the Southern District of Texas, Houston Division July 3, 2014, Decided; July 3, 2014, Filed CIVIL ACTION NO. H-13-2196 Reporter 2014 U.S. Dist. LEXIS 90502 *; 2014 WL 3608893 LINCOLN BENEFIT LIFE COMPANY, Plaintiff, VS. MARTIN ADA MANGLONA, et aI., Defendants. Core Terms divorce, beneficiary, insured, proceeds, parties, amend, ex-husband, beneficiary designation, law applies, choice-of-Iaw, designated, realigned, conflicting claims, motion for leave, summary judgment, former spouse, insurance proceeds, ex-spouse, decree Counsel: [*1] For Martin Ada Manglona, Defendant: Thomas Clayton Hollis, LEAD ATTORNEY, Attorney at Law, San Antonio, TX. For Lorna Manglona-Alexander, Agnes Manglona Kallewaard, Martin Joseph Manglona, Defendants: Dean Allen Gehring, LEAD ATTORNEY, Attorney at Law, Conroe, TX. For Agnes Manglona Kallewaard, Cross Claimant: Dean Allen Gehring, LEAD ATTORNEY, Attorney at Law, Conroe, TX. For Martin Ada Manglona, Cross Defendant: Thomas Clayton Hollis, LEAD ATTORNEY, Attorney at Law, San Antonio, TX. Judges: Lee H. Rosenthal, United States District Judge. Opinion by: Lee H. Rosenthal nion MEMORANDUM AND ORDER This suit began as an interpleader action filed under _~L'~"':c~c~~~"_L,"-" (Docket Entry No.1). The insurer and stakeholder, Lincoln Benefit Life Co., faced conflicting claims to a life-insurance policy issued to Florence Manglona. (ld.). The claimants are Martin Ada Manglona, the ex-husband of the deceased insured, and the insured's surviving children (the "Children"). (ld.). They dispute whether the ex-husband or the Children are entitled to the $400,000 in proceeds. (Id.). The minimal diversity required under was met. Lincoln is a Nevada corporation. (Docket Entry No. 1 at 1). One of the claimants, Martin Ada Manglona, [*2] is a citizen of Guam. (Docket Entry No. 21 at 2). The why realignment was unnecessary. (Docket Entry No. 20, "Minute Entry"). Instead, the Children filed a cross-claim against Martin Ada Manglona, (Docket Entry No. 29), who moved to strike it, (Docket Entry No. 30). The Children responded to the motion to strike and moved to amend. (Docket Entry No. 31). Martin Ada Manglona responded and opposed the motion for leave to amend, (Docket Entry No. 32), which led to a surreply, (Docket Entry No. 34). In addition, the Children moved for summary judgment as to the claims Martin Ada Manglona pleaded in his answer, (Docket Entry No. 36), and he replied, (Docket Entry No. 39). Based on the pleadings, motions, record, and law, this court: • realigns the parties, making Martin Ada Manglona, the insured's ex-husband, the plaintiff, and the Children the defendants, which results in complete diversity; • denies the Children's motion for summary judgment dismissing Martin Ada Manglona's claims; • grants the Children's motion for leave to amend to assert certain additional claims; and • dismisses Martin Ada Manglona's motion to strike the cross-claim as moot. The reasons for these rulings are set out below. I. [*3] Background While married to Martin Ada Manglona and living in Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 25 of 28 PageID 216 2014 U.S. Dist. LEXIS 90502, *3 Page 2 of 4 Guam, Florence Manglona applied for and obtained a life insurance policy (the "Policy"). (Docket Entry No.1, Ex. B). The Policy designated Martin Ada Manglona as the beneficiary and the surviving Children as the contingent beneficiaries. (ld. at 12). The Policy included a choice-of-Iaw clause stating: "This policy is subject to the laws of the state where the app[lication] was signed." (ld. at 10). In 2011, Florence Manglona obtained a divorce from Martin Ada Manglona in Texas. (Docket Entry No.1, Ex. E). Both parties signed the final divorce decree, which included an agreement dividing property. (ld.). The agreement did not specifically refer to the previously issued Policy. (Docket Entry No. 1 at 4). Florence Manglona died in April 2013 in Houston, Texas. (Docket Entry No.1, Ex. C). After receiving conflicting claims to the Policy proceeds from the ex-husband and from the Children, Lincoln sued to resolve the conflict. (Docket Entry No.1). This court granted Lincoln's motions to deposit the Policy proceeds, in the amount of $400,000, (Docket Entry No.7), and to dismiss Lincoln from the lawsuit, (Docket Entry No. 23). II. [*4] Analysis A. Realigning the Parties Thefirst issue is realignment. "In ascertaining the proper alignment of parties for jurisdictional purposes, courts have a duty to look beyond the pleadings, and arrange the parties according to their sides in the dispute." ~_,_"-=,_, __, "''''" _"'-"''''"J "'""'_"'-_'-,~-'"-'"-=,_'c,_,,~~_'-_~ (internal quotation marks and citation omitted). "[T]he generally accepted test of proper alignment is whether the parties with the same 'ultimate interests' in the outcome of the action are on the same side." (citation omitted). "This test is meant to ensure that there is an actual, substantial, controversy between citizens of different states, all of whom on one side of the controversy are citizens of different states from all parties on the other "[R]ealignment is determined according to the principal purpose of the suit and the primary and controlling matter in dispute." (internal quotation marks [*5] and citation omitted). Once the insurer holding Policy proceeds subject to conflicting claims is dismissed, the usual step is to realign the claimants. The "principal purpose" of this suit is to determine which set of claimants - the ex- husband or the Children of the insured - is entitled to the life-insurance proceeds. The parties are realigned to make the ex-husband the plaintiff and the Children the defendants. B. The Children'S Motion for Summary Judgment The Children moved for summary judgment on the basis that Texas law applies to the division of marital property. The Children argue that when the divorce was granted in Texas, Martin Ada Manglona subjected himself to the jurisdiction of the Texas family court by entering into an agreement to divide the marital property and signing the agreed divorce decree. (Docket Entry No. 36). designates his or her spouse as a beneficiary to a life insurance policy and they subsequently divorce, the designation of the former spouse is not effective unless one of three conditions is met. -'-=~~=--=""'-~'-'-="-'- (West 1997). These three conditions are: the decree designates the insured's former [*6] spouse as the beneficiary; the insured re-designates the former spouse as the beneficiary after the divorce is issued; or the former spouse is designated to receive the proceeds for the children or dependents of either former spouse. Id. If none of the conditions are met, a final divorce automatically revokes the status of the designated spouse as a beneficiary and terminates his or her right to the life insurance proceeds of the former spouse. Id. None of these conditions were met here. As a result, if Texas law applies, Martin Ada Manglona lost his right as a beneficiary when he and Florence Manglona divorced. The Children of Florence Manglona assert that Texas law applies because she obtained the divorce in Texas and Martin Ada Manglona agreed to the property division in the decree. The Children assert that they, not their mother's ex-husband, are entitled to the proceeds. The Policy contains a provision that selects the law of the place where the insured applied for the Policy as the law governing any contractual disputes. (Docket Entry No.1, Ex. B at 10). The provision states: "This policy is subject to the laws of the state where the app[lication] was signed. If any of the policy [*7] does not comply with the law, it will be treated by [Lincoln] as if it did." (ld.). The Policy also states that the "beneficiary is as stated in the app[lication] unless changed." (ld. at 7). The Policy gives instructions for changing the beneficiary designation, with a statement that the death Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 26 of 28 PageID 217 2014 U.S. Dist. LEXIS 90502, *7 Page 3 of 4 benefit will be paid "according to the most recent written instructions we have received from [the insured]." (Id.). The application designated Martin Ada Manglona as the primary beneficiary and the surviving Children, in equal shares, as the contingent beneficiaries. (Id. at 12). The application was made in Guam. (Id. at 15). The beneficiary designation was not changed after the divorce. (Docket Entry No.1, Ex. D at 2). Martin Ada Anglona disputes that Texas law applies. He asserts that Guam law applies to the insurance contract under the choice-of-law provision. Guam follows the majority rule that divorce does not affect an ex-spouse's beneficiary status. Kristen P. Raymond, Note, Double Trouble - An Ex-Spouse's Life Insurance Beneficiary Status & State Automatic Revocation upon Divorce Statutes: Who Gets What, ~~-'='~"--'-' ..'-=~.:O--'""-'-;"-",,"~:J_'-"..;.... Under the majority rule, the insurance [*8] contract terms are upheld if the ex-spouse is still listed as the beneficiary and the policy terms do not condition the ex-spouse's beneficiary status on the continuance of the marriage. Id. The designated beneficiary remains the beneficiary after he becomes an ex-spouse. Id. If Guam law applies, Martin Ada Manglona is entitled to the proceeds, not the Children. The Children argue that Texas law applies because Martin Ada Manglona appeared in a Texas court in the divorce action and subjected himself to Texas law on the division of the marital estate. Martin Ada Manglona argues that the insurance contract's choice-of-law provision governs, making Guam law - the law of the place where the application was made - apply. "In making a choice of law determination, a federal court exercising diversity jurisdiction must apply the choice of law rules of the forum state, here Texas." typically enforce contractual choice of law provisions. =~=","~~..';!..-,.-,~" •.='''J.._~C=.".~~L.':~.-2.:.~~' Quicksilver Res. Inc. v. Eagle Drilling. LLC. 792 F. Supp. 2d 948. 951 (S.D. Tex. 2011). Texas law enforces a contractual choice-of-law provision if the issue raised is "one which the parties could have resolved by an explicit provision in thei r agreement." .""~"".::'.~L""'-''-'-':':L''.'=.'~!.'.-''''''''."'.'"'.'':'" ...",~.'='. S.W.2ci...§ZQ, 677-78 (Tex. 1990). Even if the issue could not have been resolved with a provision in the agreement, Texas courts will enforce choice-of-law provisions if the law of the chosen state has a reasonable relationship with the parties and is not contrary to a fundamental policy of the forum. The conflict between the Children and Martin Ada Manglona could have been prevented by including an explicit provision in the insurance contract. A provision requiring re-designation of the beneficiary after a divorce between the insured and the original beneficiary would have resolved the issue. The choice-of-law provision is enforceable under [*10] Texas law. The Children do not identify legal authority supporting their argument that Texas law, which would invalidate the beneficiary designation because the beneficiary and insured later divorced in Texas, trumps the contract's selection of Guam law, which would uphold the contract's beneficiary designation designation despite the later divorce. Applying Texas choice-of-law rules recognizes the insurance contract provision making Guam law apply to the dispute over whether the beneficiary designation remains valid after the beneficiary and insured divorced, regardless of whether the divorce occurred in Texas or in Guam. The Children's motion for summary judgment dismissing Martin Ada Manglona's claim to the proceeds by on the basis of is denied. C. The Motion for Leave to Amend, the Motion to Strike, and the Motion for a Jury Trial The Children have moved for leave to amend to assert a claim for fraud on the community estate. (Docket Entries No. 29, 31). In response, Martin Ada Manglona argues that Texas law does not recognize such a claim, citing (Docket Entry No. 32). The Children argue that the relief [*11] they seek is consistent with Texas law because they do not assert an independent claim for damages, but rather seek to obtain "recoupment" of the community property lost as a result of the alleged wrongful conduct. The Children have also moved for leave to amend to allege that the proceeds at issue are part of the marital estate that was not addressed in the divorce decree. The Children argue that the rights to those proceeds must be determined in this proceeding. (Docket Entries Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 27 of 28 PageID 218 Page 4 of 4 2014 U.S. Dist. LEXIS 90502, *11 No. 29, 31). Martin Ada Manglona opposes the motion on the basis that the Children are seeking a division under (Docket Entry No. 32). The interpleader action requires this court to determine the conflicting claims to the insurance proceeds. This determination will be based on the Policy language, including the beneficiary designation, the Policy language on the effect of a beneficiary designation, and the results of applying the choice-of-law rules. The Children's motion for leave to amend to allege that this court must decide whether the ex-husband or the Children are entitled to the $400,000 in life-insurance proceeds is granted. Because the Children are asking this court [*12] to do more than rule on the conflicting claims to the insurance proceeds, the motion for leave to amend is denied. The Children's motion for leave to amend is denied to the extent it seeks to allege that this court must decide community property issues beyond the conflicting claims to the insurance proceeds. Finally, Martin Ada Manglona has sought a jury trial. (Docket Entry No. 30). The interpleader action seeks a declaratory judgment as to entitlement to the insurance proceeds. (Docket Entry No.1). There is no entitlement to a jury trial on this claim. The motion is denied. III. Conclusion The parties are realigned. The surviving beneficiary - the insured's ex-husband - is the plaintiff, and the Children are the defendants. The motion to strike the Children's cross-claim is denied. The Children's motion for summary judgment is denied. The Children's motion for leave to amend to allege fraud on the community estate, seek a division of community assets, and other claims, is denied. Martin Ada Manglona's motion for a jury trial is denied. A status and scheduling conference is set for July 28, 2014, at 8:30 a.m. in Courtroom 11-B. SIGNED on July 3,2014, at Houston, Texas. /s/ [*13] Lee H. Rosenthal Lee H. Rosenthal United States District Judge Frank Scaglione Case 7:16-cv-00134-O-BP Document 25 Filed 03/16/17 Page 28 of 28 PageID 219