March 16, 2009
LINCOLN BENEFIT LIFE COMPANY, PLAINTIFF,
LINDA OCCHIPINTI, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF JOAN E. GREGORY, SUSAN BRUNO, PATRICIA SMITH, ALBERT WYNN, GREGORY WYNN, AND ROBERT WYNN, DEFENDANTS-APPELLANTS, AND SANDRA LOPEZ KEEFER, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-1228-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 5, 2009
Before Judges Reisner and Sapp-Peterson.
This matter arises out of a dispute over an annuity contract which the decedent, Joan Gregory (Gregory), purchased in August 2004 from plaintiff, Lincoln Benefit Life Company (Lincoln). Gregory's children, Linda Occhipinti, individually and as executrix of the decedent's estate, Susan Bruno, Patricia Smith, and Albert Wynn (collectively "defendants"), appeal from the grant of summary judgment in favor of plaintiff. The court declared that the funds Lincoln deposited into court should be disbursed to Gregory's remaining child, defendant Sandra Lopez (Lopez). We affirm.
When Gregory purchased the policy in 2004, she did not designate a beneficiary. Rather, she stated that a trust was being prepared. No trust was prepared prior to Gregory's death in 2005. She died testate. Under the terms of the annuity, in the absence of a designated beneficiary, the proceeds of the policy were to be distributed as follows:
i. Your spouse, or if he or she is no longer living,
ii. Your surviving children equally, or if you have no surviving children,
iii. Your estate.
For the purposes of this Certificate, children are natural children and adopted children only.
Unless you have provided written directions to the contrary, in a form satisfactory to us, the Beneficiaries will take equal shares. If there is more than one Beneficiary in a class and one of the Beneficiaries predeceases the Owner, the deceased Beneficiary's entire share will be divided among the remaining Beneficiaries in that class in proportion to the remaining Beneficiaries' original shares.
Gregory died testate. In Gregory's will, she expressly disinherited Lopez. Lincoln filed a complaint in interpleader seeking declaratory relief (1) determining the rights of the surviving children, (2) authorizing it to deposit the proceeds into court until the rights of the parties could be determined, and (3) releasing it as a party once the funds were deposited into court. On September 7, 2007, the court entered an order directing that "1/7th of the annuity is to be paid to each of the following: Susan Bruno, Patricia Smith, Albert Wynn, Gregory Wynn, Robert Wynn, Linda Occhipinti and Clerk of the Superior Court of New Jersey."
Thereafter, Lopez moved for summary judgment, declaring that she was entitled to distribution of the remaining 1/7th share of the annuity proceeds deposited into court in accordance with the terms of the annuity contract. The court granted the motion, rejecting defendants' contention that Gregory's Will, in which she expressly disinherited Lopez, was controlling, not the annuity contract:
The argument that's made to me is that the Will that she executed is the method by which the money was to be disposed of. However, I find that there's a valid contract between Lincoln Benefit Life Insurance Company and the decedent, and under the terms of that agreement if the party to the annuity did not instruct who the beneficiaries are, there is a provision in the contract; it goes to the spouse if there is one, and if there is no spouse it goes to the surviving children equally. If there's no children, it then goes to the Estate. But there are children, and this document falls outside of the Will. Therefore, the defendant is entitled to her portion of the payment. It falls outside the terms of the Will. It's a separate contract, and that's what has to follow.
On appeal, defendants urge that the wishes of Gregory, as expressed in her Will, should prevail over the terms of the annuity contract.*fn1 We disagree and affirm substantially for the reasons expressed by Judge Reward M. Oles in his oral opinion of November 7, 2007. We add the following comments.
A variable annuity is "an annuity whose periodic payments depend upon some uncertain outcome, such as stock market prices." Black's Law Dictionary (5th Ed. 1979). An annuity is distinguished from an insurance policy:
The risks assumed under life insurance policies and under annuity contracts are diametric opposites. Life insurance involves the traditional elements of insurance, i.e., shifting of risk of loss and distribution of risk of loss over a broad base. Annuity contracts, on the other hand, are basically investments. The fundamental distinction is aptly set forth in 1 Appleman, Insurance Law and Practice, § 83, p. 76 (1941), as follows:
Ordinarily, it is recognized, even by laymen, that contracts of life insurance and of annuity are distinctly different. One involves payments of stated amounts known as premiums, by the insured over a period of years in return for which the insurer creates an immediate estate in a fixed amount in the event of his death while in good standing. There is an immediate hazard of loss thrown upon the insurer, with the required performance by the insured of certain obligations at designated intervals of time.
[Prudential Ins. Co. v. Howell, 29 N.J. 116, 122 (1959) (quotations omitted).]
Although they serve diametrically opposed purposes, ibid., annuities, like insurance policies, are treated as contracts and are therefore interpreted under ordinary contract principles.
Here, the trial judge, in applying contract principles, found that the terms of the contract were clear and unambiguous.
In our review of a trial court's grant of summary judgment, we owe no special deference to a trial court's legal conclusions. See Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). In this matter, however, we discern no basis to disagree with the determinations made by the trial court in its decision.
It is undisputed that Gregory failed to designate a beneficiary in the variable annuity contract. That Gregory made clear in her Will her intent to disinherit Lopez does not prevail over her acceptance of the terms of the annuity contract she purchased. Its terms clearly and unambiguously stated that in the absence of a specific designation of a beneficiary, the annuitant's remainder passed to the surviving children, one of whom, indisputably, is Lopez. Moreover, Gregory's death did not render the terms of the annuity contract unenforceable and subject to Gregory's Will. See Ross v. Ross, 308 N.J. Super. 132, 159-60 (App. Div. 1998) (affirming that portion of the trial court order holding that property settlement agreement between divorced parties that designated the wife as beneficiary of specifically identified annuity contract owned by former spouse was enforceable after his remarriage and death).
Finally, nothing in the record before the trial court in any way suggested that Gregory lacked the mental capacity to understand the implications of not specifically designating a beneficiary when she purchased the variable annuity contract.