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In re Estate of Brown

March 31, 2010

IN THE MATTER OF THE ESTATE OF PAUL BROWN, DECEASED.


On appeal from the Superior Court of New Jersey, Chancery Division - Probate Part, Gloucester County, Docket No. 07-1019.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 15, 2010

Before Judges Lisa and Baxter.

This appeal involves a dispute between the decedent Paul Brown's third and final wife, Pamela Brown, and the two adult sons from his first marriage, Paul H. Brown, III and Malik O. Brown, over their respective rights to the proceeds of decedent's $436,800 life insurance policy. The judge resolved that dispute by applying equitable principles to the interpretation of the language of the Property Settlement Agreement (PSA) between decedent and his sons' mother, Iskla, which required decedent to:

Keep in full force and effect . . . those life insurance policies in existence at the time of this Agreement . . . and to designate the minor children, [Paul III and Malik,] as beneficiaries of such policies and the wife [Iskla] as trustee therefor[e] until both children have attained 25 years of age at which time husband shall name his then living children as beneficiaries thereof to take under the policy in equal shares.

It is undisputed that: at the time the PSA was adopted, decedent's life insurance policy, which had been issued to him by his employer, the New York Times, had a face value of $63,300 equal to one year's salary, for which decedent paid no premium; by the time of his death, decedent was earning an annual salary of $109,200; decedent, in violation of the express provisions of the PSA, deleted his sons as beneficiaries on each of the three occasions that he increased the face value of the policy; decedent paid additional premiums throughout his life commensurate with each of those three increases; the final of those three increases on January 18, 2006 resulted in a face value of $436,800, four times his yearly salary, with Pamela, whom decedent had married on December 9, 2005, as the sole beneficiary; and when decedent died on July 14, 2007, the Times paid the entire $436,800 policy to Pamela.

Recognizing that decedent's final designation of Pamela as the sole beneficiary on January 18, 2006 was in violation of the terms of the PSA, Judge Rafferty was faced with the decision of how to equitably apportion the $436,800 policy proceeds. The judge concluded that the most equitable distribution was one that recognized both decedent's obligations under the PSA and decedent's desire to provide financial security to Pamela. In a thorough and well-reasoned written opinion, the judge held that the sons were entitled to "an amount equal to decedent's base salary plus the first and second increases, . . . a total of $327,600." The judge reasoned:

Based on an analysis of the case law, this issue can only be resolved by a balancing of the equities. It is clear that Decedent named [Pamela] as the beneficiary on the Policy because he wanted to be able to provide her with some support should he pass away. If the Court were to agree with [Paul III and Malik's] argument, the intent of the Decedent would be completely ignored. That being said, the increases to the policy that were made after the [PSA was executed] were not all made while decedent and [Pamela] were together. According to the New York Times Company Flexible Benefits Program Enrollment Forms provided to the Court, the first two increases went into effect on January 1, 1991 and January 1, 1992. If [the sons] should not be entitled to this increase because they didn't contribute to it or Decedent did not intend for them to benefit from these increases, [Pamela's] entitlement to these increases must also fail. The beneficiary named at the time of the first increase was Decedent's sister and the beneficiary named at the time of the second increase was Decedent's then fiancée and soon-to-be second wife, Marilyn Moore. Equity dictates that these increases would more appropriately go to the [sons] than [Pamela] who was not even an anticipated beneficiary at the time of these increases.

In regards to the final increase, [the sons] point out that Decedent and [Pamela] were not married at the time of this increase. The Court does not accept this argument as persuasive as the Decedent and [Pamela] were together for many years before they were married. The court can infer that the Decedent intended to provide for his widow by the fact that he named her as the sole beneficiary before he died. As she was the anticipated beneficiary at the time of the final increase, equity dictates that this increase should go to her regardless of her and Decedent's marital status at the time.

Based on the foregoing, the Court holds that [the sons] are entitled to an amount equal to Decedent's base salary plus the first and second increases, which would be a total of $327,600. [Pamela] is entitled to the final increase that Decedent intended to go towards her support in the amount of $109,200. Because both parties acknowledge that the gift from Decedent to [the sons] came out of the Policy proceeds, [the sons'] total should be decreased by $50,000, the gift amount, so that [they] are entitled to a recovery of $277,600 from [Pamela].

On appeal, Pamela raises the following claims:

I. THE COURT ERRED WHEN IT DISPOSED OF A PORTION OF THE INSURANCE PROCEEDS BY ATTEMPTING TO ASCERTAIN THE INTENT OF THE PARTIES TO THE PROPERTY SETTLEMENT AGREEMENT AND IMPOSING A CONSTRUCTIVE TRUST WITHOUT A HEARING.

II. WHILE THE COURT BELOW CORRECTLY FOUND THAT [THE SONS] WERE ENTITLED TO ONE YEAR OF DECEDENT'S SALARY, THE COURT ERRED IN DETERMINING THAT THE AMOUNT WAS DECEDENT'S ANNUAL SALARY AT THE TIME OF HIS DEATH, AND IN DETERMINING THE ...


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