On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-1902-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Carchman, Baxter and Maven.
The issues raised in this appeal are whether Judge Yolanda Ciccone: 1) properly conducted a Rule 4:67 summary proceeding; 2) correctly determined the identity of an insurance policy beneficiary; and 3) properly excluded witnesses' testimony. We answer these questions in the affirmative. Accordingly, we affirm and dismiss defendant's demand for a jury trial on the issue of beneficiary status because the trial judge appropriately resolved this issue as a matter of law. We remand for resolution of the remaining issues, which shall be resolved by a jury trial.
The critical facts are not in significant dispute. The various claims arise from the death of defendant Dr. Jeryl Natofsky (Natofsky),*fn1 who withdrew as a shareholder from a partnership shortly before his death.
On January 1, 2004, Natofsky joined third-party defendant Fertility and Gynecology Center, P.A. (FGC) as a shareholder.
To acknowledge his shareholder interest, Natofsky entered into a Shareholders' Agreement and a Stock Purchase Agreement with FGC. Pursuant to the Stock Purchase Agreement, the other shareholders of FGC, Dr. Susan Treiser and Dr. Michael Darder,*fn2 agreed to sell to Natofsky a combined one-third interest in FGC.
Plaintiff IVF Investment is a New Jersey limited liability company that was created by the members of FGC as a legal entity, separate and distinct from FGC.*fn3 The shareholders of FGC were also shareholders of IVF Investment, which was the beneficiary of insurance policies taken out in the name of each shareholder. IVF Investment was not a party to the FGC Shareholders' Agreement and did not employ Natofsky, nor did it have an obligation to purchase Natofsky's FGC stock in the event of his death.
Pursuant to the Shareholders' Agreement, upon severance, disability, death or withdrawal of a shareholder, FGC was required to purchase all shares of the withdrawing shareholder's stock (Buy-Out Provision). To fund a buy-out in the event of a shareholder's death, the Shareholders' Agreement also authorized FGC to purchase life insurance on the lives of the shareholders. Paragraph 14 of the Shareholders' Agreement provides:
(a) The Corporation may from time to time purchase policies of insurance, insuring the lives of one or more of the Shareholders . . . . The Corporation shall be the owner of the Policies, have custody of the Policies and be named as beneficiary of the Policies. The Corporation shall pay the premium on the Policies so long as the Board determines to maintain such insurance. . . . .
(b) Upon the death or permanent disability of a Shareholder, the Corporation shall promptly submit a claim for payment on any such insurance policies. The proceeds of the policies shall be used first to pay the acquisition costs of the Decedent's or Disabled Shareholder's shares. In the event that the insurance proceeds exceed the redemption price, the excess shall be used to discharge any compensation payment obligations of the Corporation to the Selling Shareholder, including prepayment of the promissory note for the redemption price, then to pay any liabilities of the Corporation secured by the guarantee of the Selling Shareholder, and the balance of the proceeds, if any, shall be paid to the Corporation.
In January 2005, Natofsky applied for a $3,000,000 life insurance policy (Natofsky policy) through defendant U.S. Financial Life Insurance Co. (U.S. Financial). Natofsky was identified as the policy's sole owner and insured. Natofsky signed the policy and designated IVF Investment as the 100% beneficiary, with no contingent beneficiary. Insurance agent Susan Pollard advised that she needed to obtain a co-signature on behalf of the insurance policy's owner, IVF Investment. Natofsky told Pollard that his signature on the policy was on behalf of IVF Investment, not himself individually.
U.S. Financial issued the Natofsky policy on May 21, 2005. Thereafter, consistent with Paragraph 14, either FGC or IVF Investment paid the annual renewal premiums associated with the Natofsky policy; Natofsky never paid any policy premiums. The beneficiary designated by Natofsky on the policy -- IVF Investment -- was never changed.
Pursuant to other provisions of the Shareholders' Agreement, which outlined the procedure for the repurchase of a withdrawing shareholder's shares, the parties negotiated for Natofsky to withdraw from FGC in February 2010. During the negotiations, FGC directed Pollard to inquire whether Natofsky wanted to continue the policy at his own expense and assume responsibility from IVF Investment for payment of the policy's premiums. Natofsky advised Pollard that he already had enough life insurance because his wife worked for an insurance company. During telephone conversations between Pollard and Natofsky in March and April 2010, Natofsky did not mention changing the beneficiary on the policy.
Natofsky entered into a Settlement and Release Agreement (Release Agreement) with the IVF parties on June 26, 2010. The parties memorialized Natofsky's desire to withdraw from FGC and release all of his interest in the affiliated entities. Additionally, FGC agreed to purchase Natofsky's fifty shares of stock for $100,000. Plaintiff purchased Natofsky's shares on June 16, 2010, pursuant to a Corporate Redemption Agreement that was incorporated in the Release Agreement. With FGC having satisfied its obligation to purchase Natofsky's stock, IVF Investment released its claims against Natofsky and his property.
Natofsky was paid $100,000 for compliance with the restrictive covenant provisions of the Shareholder Employment Agreement and $550,000 in deferred compensation. In consideration for these payments, Natofsky agreed in the Release Agreement that "[n]o other compensation, benefits or other monies are owed him by Physicians . . . [or] IVF Investment . . . ." Natofsky and the IVF Parties exchanged mutual releases wherein they waived any and all claims they might have against each other "[a]rising out of or relating to any conduct, matter, event or omission existing or occurring prior to the signing of this Settlement Agreement . . . ." The Release Agreement made no mention of IVF Investment's releasing its beneficiary status under the Natofsky policy.
Natofsky died on June 19, 2010. IVF Investment submitted a claim for the proceeds of the Natofsky policy on August 13, 2010. A month later, the Estate also submitted a claim for the same proceeds. Because of these competing claims, U.S. Financial refused to pay the proceeds until the parties resolved their dispute over beneficiary status.
Plaintiff filed a four-count complaint in the Law Division, seeking a declaration that IVF Investment was the owner and beneficiary of the Natofsky policy, seeking turnover of the $3,000,000 policy benefit and claiming that the Estate tortiously interfered with its right as 100% designated beneficiary to claim the policy's death benefit.
Defendant filed an answer, counterclaim, cross-claim, third-party complaint and jury demand. Defendant asserted nine defenses, including that IVF Investment "lacks standing to bring this claim as it: had no insurable interest in the life of the insured party"; "has released any claim it had as a beneficiary of the U.S. Financial Policy"; "has relinquished any right to claim that it is the beneficiary of the U.S. Financial Policy"; and has alleged claims ...