Skelton v. Saia et al

Filing 30

MEMORANDUM OPINION. Signed by Magistrate Judge John E Ott on 10/6/2017. (KAM)

FILED
2017 Oct-06 PM 04:07
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
LORETTA JOYCE SKELTON, as the
Personal Representative of the
ESTATE OF RHETA S. SKELTON
and as the Trustee of THE RHETA S.
SKELTON 2015 REVOCABLE
TRUST,
Plaintiff,
v.
PAUL LEE SAIA; PAULA SAIA
WADE; LINCOLN FINANCIAL
ADVISORS CORPORATION;
LINCOLN NATIONAL LIFE
INSURANCE COMPANY;
EVANGELA R. TAYLOR
SKELTON, as the Personal
Representative of the ESTATE OF
BRIAN L. SKELTON, SR., et al.,
Defendants.

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Case No. 2:17-cv-00277-JEO

MEMORANDUM OPINION
Plaintiff Loretta Joyce Skelton (“Plaintiff”), in her capacity as the Personal
Representative of the Estate of Rheta S. Skelton (“Rheta’s Estate”) and as the
Trustee of the Rheta S. Skelton 2015 Revocable Trust (the “Trust”), filed this
action in the Circuit Court of Jefferson County, Alabama, naming Lincoln
Financial Advisors Corporation (“Lincoln Financial”), Lincoln National Life
Insurance Company (“Lincoln National”), Paul Lee Saia, and Paula Saia Wade as

defendants. (Doc. 1-1 at 3-12). She subsequently amended her complaint to add
Evangela R. Taylor Skelton, as the Personal Representative of the Estate of Brian
L. Skelton, Sr., as a defendant.1 (Doc. 1-1 at 16-18). Plaintiff’s complaint, as
amended, asserts claims against all of the defendants for breach of fiduciary duty,
conversion, fraudulent misrepresentation, deceit, fraudulent suppression, and civil
conspiracy. All of the claims relate to a universal life insurance policy that insured
the life of Brian Skelton. Plaintiff contends that Brian should have designated his
mother, Rheta Skelton, as the owner and sole beneficiary of the policy, but instead
designated himself as the owner and, ultimately, his wife Angel Skelton as the sole
beneficiary. Plaintiff alleges that because Rheta was never designated as the owner
and sole beneficiary of the policy as she should have been, Rheta’s Estate and the
Trust were wrongly deprived of the policy proceeds following Brian’s death.
Lincoln National and Lincoln Financial (collectively, the “Lincoln
Defendants”) timely removed the case to this Court, asserting diversity jurisdiction
pursuant to 28 U.S.C. § 1332. (Doc. 1). The Lincoln Defendants argue that there is
complete diversity of citizenship between the parties, notwithstanding that

1

In their various filings, the parties do not use a consistent shorthand reference for defendant
Evangela R. Taylor Skelton, as the Personal Representative of the Estate of Brian L. Skelton, Sr.
The defendant is variously referred to as “Angel,” “Angel Skelton,” “Defendant Skelton,” and
“the Estate of Brian Skelton.” Here, the Court will refer to the defendant as “the Estate of Brian
Skelton.” References to “Angel” or “Angel Skelton” are to Evangela R. Taylor Skelton in her
individual capacity.
2

Plaintiff, Saia, Wade, and the Estate of Brian Skelton are all citizens of Alabama. 2
The Lincoln Defendants contend that the citizenship of Saia, Wade, and the Estate
of Brian Skelton should be ignored because they were fraudulently joined to evade
federal jurisdiction.
Following removal, Saia and Wade filed a motion to dismiss Plaintiff’s
claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 4).
The Estate of Brian Skelton filed a separate motion to dismiss pursuant to Rule
12(b)(1) and Rule 12(b)(6). (Doc. 8). The motions to dismiss are substantially
similar, except that the Estate of Brian Skelton not only challenges the legal
sufficiency of Plaintiff’s claims but also challenges Plaintiff’s standing to bring
claims on behalf of Rheta’s Estate.
Plaintiff has conceded that Wade is due to be dismissed from this case, but
otherwise opposes the motions to dismiss. (Docs. 11 & 14). In addition, Plaintiff
has filed a motion for leave to amend her complaint to add an unjust enrichment
claim against the Estate of Brian Skelton. (Doc. 13). She has also filed a motion to
remand the case to Jefferson County Circuit Court, asserting that Saia and the
Estate of Brian Skelton were not fraudulently joined and that their citizenship
defeats diversity jurisdiction. (Doc. 15).

2

Lincoln National and Lincoln Financial are not Alabama citizens. (Doc. 1 at ¶ 6).
3

All four of the pending motions have been fully briefed and are ripe for
decision. For the reasons that follow, Plaintiff’s motion to remand and motion to
amend will be denied, Saia and Wade’s motion to dismiss will be granted, and the
Estate of Brian Skelton’s motion to dismiss will be granted.
FACTS 3
At all relevant times, Rheta Skelton was the majority shareholder of South
Haven Corporation (“South Haven”), a family-owned business that operates South
Haven Nursing Home. Her son, Brian Skelton, served as South Haven’s President.
In 1992, Rheta Skelton directed Brian Skelton and Paul Saia, a financial
advisor for Lincoln Financial, to procure a “key man” insurance policy in the
amount of $1 million insuring Brian’s life and naming Rheta as the owner and
beneficiary of the policy. Brian promised Rheta that he would purchase such a
policy, but instead purchased a policy naming himself as the owner, Rheta as a
50% beneficiary, and his wife, Angel Skelton, as a 50% beneficiary (the “Policy”).
Brian purchased the Policy from Lincoln National, with the assistance of Saia and
Lincoln Financial. The Policy was a universal life insurance policy that included a

3

Except where noted, these are the facts as alleged in Plaintiff’s complaint, as amended. They
may not be the actual facts.
4

cash value account. 4 Rheta was unaware that the Policy did not name her as the
owner and sole beneficiary as she had directed.
South Haven paid all of the premiums on the Policy. In 2009, unbeknownst
to Rheta, Brian removed Rheta as a 50% beneficiary under the Policy and made his
wife, Angel, the 100% beneficiary. In 2012, Rheta discovered for the first time
that Brian had named Angel as a 50% beneficiary when he purchased the Policy in
1992 and had then made Angel the 100% beneficiary in 2009. Rheta demanded
that Brian change the Policy to make her, and not Angel, the 100% beneficiary,
and Brain promised to do so. At the same time, Plaintiff directed Saia to change
the Policy to conform to Rheta’s original instructions, and Saia, like Brian,
promised to do so. The changes were never made.
Rheta Skelton died in 2015. Plaintiff alleges that she was named the
Personal Representative of Rheta’s Estate in Rheta’s Will and was also named the
Trustee of the Trust.
Brian Skelton died in 2016. Plaintiff alleges that, because the Policy “never
named the correct beneficiary and owner, [Rheta’s] Estate and the Trust have been
4

Although the Policy is referenced throughout Plaintiff’s complaint and is central to her claims,
a copy of the Policy was not attached to the complaint and it is never expressly identified in the
complaint as a universal life insurance policy. However, Lincoln National and Lincoln Financial
have submitted a copy of the Policy in support of their opposition to Plaintiff’s motion to
remand, along with an affidavit authenticating the Policy and confirming that it is a universal life
insurance policy. (Doc. 27-1). Plaintiff has not challenged the Policy’s authenticity.
Accordingly, the Court may consider the Policy in ruling on the pending motions. See, e.g., Fin.
Sec. Assur., Inc. v. Stephens, Inc., 500 F.3d 1276, 1285 (11th Cir. 2007).
5

deprived of the proceeds they should have received under the Policy” following
Brian’s death. (Doc. 1-1 at 8, ¶ 23).
ANALYSIS
I.

PLAINTIFF’S MOTION TO REMAND
Because Plaintiff’s motion to remand raises the threshold issue of whether

this Court has subject matter jurisdiction over this case, the Court must address that
motion first. As noted above, the Lincoln Defendants removed the case from
Alabama state court based on diversity jurisdiction. Diversity jurisdiction exists
where the plaintiffs and defendants are of diverse citizenship and the amount in
controversy exceeds $75,000.00, exclusive of interest and costs. 28 U.S.C. § 1332.
Section 1332 “requires ‘complete diversity’—the citizenship of every plaintiff
must be diverse from the citizenship of every defendant.” Legg v. Wyeth, 428 F.3d
1317, 1320 n.2 (11th Cir. 2005).
Here, the Lincoln Defendants admit that Paul Saia and the Estate of Brian
Skelton are non-diverse defendants, but they argue that the citizenship of both
defendants should be disregarded because they were fraudulently joined. 5
“Fraudulent joinder is a judicially created doctrine that provides an exception to
the requirement of complete diversity.” Triggs v. John Crump Toyota, Inc., 154
F.3d 1284, 1287 (11th Cir. 1998). Fraudulent joinder is established “when there is
5

Paula Saia Wade is also a non-diverse defendant, but, as noted above, Plaintiff has conceded
that Wade is due to be dismissed from the case. (Doc. 11 at 2).
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no possibility that the plaintiff can prove a cause of action against the resident
(non-diverse) defendant.” Id. The defendant must demonstrate fraudulent joinder
by “clear and convincing evidence.” Henderson v. Washington Nat. Ins. Co., 454
F.3d 1278, 1281 (11th Cir. 2006). If fraudulent joinder is shown, the court “must
ignore the presence of the non-diverse defendant and deny any motion to remand
the matter back to state court.” Id. As always, “[the] removing defendant bears the
burden of proving proper federal jurisdiction.” Leonard v. Enterprise Rent A Car,
279 F.3d 967, 972 (11th Cir. 2002).
In their notice of removal, the Lincoln Defendants assert that Saia and the
Estate of Brian Skelton were fraudulently joined because “there is no reasonable
possibility that Plaintiff can prove a cause of action against them.” (Doc. 1 at ¶ 12).
In their opposition to Plaintiff’s motion to remand, they similarly argue that
Plaintiff has “no possibility of recovery” against Saia and the Estate of Brian
Skelton. (Doc. 19 at 1). All told, the Lincoln Defendants have advanced five
arguments for why Plaintiff cannot possibly prevail on her claims against Saia and
the Estate of Brian Skelton. The Court, however, need only address the Lincoln
Defendants’ first argument: namely, that none of the claims Plaintiff has asserted
against Saia and the Estate of Brian Skelton survived Rheta Skelton’s death in

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favor of her estate. 6 (Doc. 1 at ¶ 13). As discussed below, the Court agrees with
the Lincoln Defendants that Alabama’s survival statute bars Plaintiff’s claims. As
a result, Plaintiff cannot possibly prevail on any of her claims against Saia and the
Estate of Brian Skelton, whose citizenship does not defeat diversity jurisdiction
due to their fraudulent joinder. Because Plaintiff’s motion to remand is due to be
denied for this reason, the Court will pretermit consideration of the other
arguments advanced by the Lincoln Defendants. 7
As noted, Plaintiff, in her capacity as the Personal Representative of Rheta’s
Estate and as the Trustee of the Trust, has asserted six claims against Saia and the
Estate of Brian Skelton: breach of fiduciary duty, conversion, fraudulent
misrepresentation, deceit, fraudulent suppression, and civil conspiracy. All of

6

The Lincoln Defendants’ other arguments are that Plaintiff’s claims are barred by Alabama’s
rule of repose (Doc. 1 at ¶14); that Plaintiff’s claims are barred by the applicable statutes of
limitation (id. at ¶¶ 15-17); that Plaintiff’s claims fail on the merits as a matter of law (id. at ¶¶
18-22); and that Plaintiff does not have standing to pursue her claims (Doc. 19 at 11-12).
7

The issues raised in the Lincoln Defendants’ notice of removal and Plaintiff’s motion to
remand are also discussed at length in Saia and Wade’s motion to dismiss (Doc. 4), Plaintiff’s
opposition thereto (Doc. 11), and Saia’s reply (Doc. 12), and in the Estate of Brian Skelton’s
motion to dismiss (Doc. 8), Plaintiff’s opposition thereto (Doc. 14), and the Estate of Brian
Skelton’s reply (Doc. 17). In her motion to remand, Plaintiff has incorporated by reference her
opposition to Saia and Wade’s motion to dismiss and her opposition to the Estate of Brian
Skelton’s motion to dismiss. (Doc. 15 at 5). Likewise, in the Lincoln Defendants’ opposition to
the motion to remand, the Lincoln Defendants have incorporated by reference Saia and Wade’s
motion to dismiss, the Estate of Brian Skelton’s motion to dismiss, and their respective replies.
(Doc. 19 at 2 n.2).
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these claims fail as a matter of law because they are barred by Alabama’s survival
statute, ALA. CODE § 6-5-462. 8
“Under the Alabama survival statute … an unfiled claim sounding in tort
will not survive the death of the person with the claim[.]” Brooks v. Hill, 717 So.
2d 759, 763 (Ala. 1998) (citations omitted); see also Gillilan v. Federated Guar.
Life Ins. Co., 447 So. 2d 668, 674 (Ala. 1984) (“A claim sounding in tort for which
no action has been filed does not survive death in favor of the personal
representative.”). Here, all of Plaintiff’s claims against Saia and the Estate of
Brian Skelton sound in tort and they were all unfiled at the time of Rheta Skelton’s
death. Consequently, none of the claims survived in favor of Rheta’s Estate. See,
e.g., Brooks, 717 So. 2d at 764 (widow’s claim for breach of fiduciary duty
sounded in tort and “did not survive the decedent’s death”); McCulley v.
SouthTrust Bank of Baldwin Cnty., 575 So. 2d 1106, 1107 (Ala. 1991) (a
conversion claim “does not survive in favor of the death of the allegedly injured
party in favor of her personal representatives”); Miller v. Dobbs Mobile Bay, 661
8

ALA. CODE § 6-5-462 provides:
In all proceedings not of an equitable nature, all claims upon which an action has
been filed and all claims upon which no action has been filed on a contract,
express or implied, and all personal claims upon which an action has been filed,
except for injuries to the reputation, survive in favor of and against personal
representatives; and all personal claims upon which no action has been filed
survive against the personal representative of a deceased tort-feasor.

9

So. 2d 203, 205 (Ala. 1995) (“Any claim based on a fraud perpetrated on [the
decedent] would not survive in favor of his personal representative.”); Boyles v.
Union Sec. Ins. Co., 2014 WL 1329549, *6 (N.D. Ala. Apr. 1, 2014) (where fraud
claim failed under Alabama’s survival statute, related claim for conspiracy to
commit fraud also failed because “‘[a] civil conspiracy cannot exist in the absence
of an underlying tort’”) (quoting Goolesby v. Koch Farms, LLC, 955 So. 2d 422,
430 (Ala. 2006)).
Effectively conceding that her claims fall within and are barred by
Alabama’s survival statute, Plaintiff argues that the Court should adopt a
“discovery rule” exception to the statute. (Doc. 11 at 3-6; Doc. 14 at 3-6). The
Court is unwilling to do so. Even assuming (without deciding) that one or more of
Plaintiff’s claims were not discoverable until after Rheta Skelton’s death,
Alabama’s survival statute does not provide for a “discovery rule” exception. The
statute provides that all personal claims “upon which an action has been filed”
survive in favor of the personal representative; it does not carve out an exception
for unfiled personal claims that were not discoverable by the decedent prior to
death. Indeed, Plaintiff has cited no Alabama authority recognizing such an
exception.9 It is not within the province of this Court to engraft an exception onto
an Alabama statute. See, e.g., Honeycutt v. Employees’ Ret. Sys. of Ala., 431 So. 2d
9

Plaintiff concedes that “Alabama courts have yet to determine whether the discovery rule
applies to survivorship actions.” (Doc. 11 at 3; Doc. 14 at 3).
10

961, 964 (Ala. 1983) (“[I]t is not the function of this court to usurp the role of the
legislature and to amend statutes under the guise of construction.”); Sustainable
Forests, LLC v. Ala. Dep’t of Rev., 80 So. 3d 270, 273 (Ala. Civ. App. 2011) (“It
would be the province of the legislature, not this court, to create such an exception
from the broad coverage of the statute.”). Under the plain language of Alabama’s
survival statute, the only tort claims that would have survived Rheta Skelton’s
death were those upon which an action had already been filed. Because none of
Plaintiff’s claims against Saia and the Estate of Brian Skelton was the subject of an
action filed before Rheta’s death, the survival statute bars all of Plaintiff’s claims.
In Plaintiff’s reply in support of her motion to remand, Plaintiff argues that
“at a minimum” her conversion and conspiracy to convert claims are not barred by
the survival statute. (Doc. 21 at ¶ 3). She argues that “it was only when the
proceeds of the Policy were paid out following Brian’s death on July 2, 2016 that a
claim for conversion accrued.” (Id.) Plaintiff’s argument fails for at least two
reasons. First, Plaintiff’s conversion claim alleges that “Defendants have
wrongfully taken, illegally assumed ownership of, and wrongfully interfered with
the insurance proceeds to be paid under the Policy.” (Doc. 1- at 9, ¶ 30). If any
such wrongful taking, illegal assumption of ownership, or wrongful interference
occurred, it occurred back in 1992, when Brian Skelton made himself the owner of
the Policy and his wife a 50% beneficiary, in contravention of Rheta Skelton’s
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alleged instructions to Brian and Saia to make her the owner and sole beneficiary
of the Policy. Plaintiff has alleged no facts indicating that Saia or the Estate of
Brian Skelton ever took possession of the insurance proceeds when they were paid
out, assumed ownership of those proceeds, or interfered with how the proceeds
were paid out. Therefore, any conversion claim against Saia and the Estate of
Brian Skelton accrued in 1992 and did not survive Rheta’s death.
Second, a claim for conversion requires “a wrongful taking, detention, or
interference, or an illegal use or misuse of another’s property.” Willingham v.
United Ins. Co. of America, 628 So. 2d 328, 333 (Ala. 1993). “The gist of the
action is the wrongful exercise of dominion over property to the exclusion of or in
defiance of a plaintiff’s rights, where the plaintiff has a general or specific title to
the property or the immediate right to possession.” Greene Cnty. Bd. of Educ. v.
Bailey, 586 So. 2d 893, 898 (Ala. 1991). Here, it is undisputed that Angel Skelton
was the 100% beneficiary of the Policy at the time of Brian Skelton’s death. (Doc.
1-1 at 6, ¶ 14). Plaintiff had no ownership interest in the Policy or its proceeds, no
title to the Policy or its proceeds, and no right to possess the proceeds when they
were paid out, whether in her capacity as the Personal Representative of Rheta’s
Estate or her capacity as the Trustee of the Trust. Indeed, the crux of Plaintiff’s
complaint is that the Policy “never named the correct beneficiary and owner ….”
(Doc. 1-1 at 8, ¶ 23). Because Plaintiff had no ownership interest in the Policy and
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no right to the Policy proceeds, her conversion claim fails as a matter of law in
addition to being barred by Alabama’s survival statute.
In sum, Plaintiff cannot possibly prove any of her claims against Saia and
the Estate of Brian Skelton, because none of her claims survived Rheta Skelton’s
death. Accordingly, the Lincoln Defendants have established that Saia and the
Estate of Brian Skelton were fraudulently joined in this action, and their citizenship
will be ignored for purposes of diversity jurisdiction. It being undisputed that
Plaintiff and the Lincoln Defendants are of diverse citizenship, diversity
jurisdiction exists in this Court and Plaintiff’s motion to remand is due to be
denied.
II.

PLAINTIFF’S MOTION TO AMEND HER COMPLAINT
In an apparent effort to rescue her complaint from the dictates of Alabama’s

survival statute, Plaintiff has moved the Court for leave to amend the complaint to
add an unjust enrichment claim against the Estate of Brian Skelton, an equitable
claim that would not be barred by the survival statute. 10 (Doc. 13). Ordinarily, a
court should “freely give leave [to amend] when justice so requires.” FED. R. CIV.
P. 15(a)(2). However, a court may properly deny a motion to amend for, among

10

Alabama Code § 6-5-464(b) provides: “All claims equitable in nature upon which no action
has been filed shall survive in favor of and against the personal representatives, heirs, or
successors of deceased persons who, but for their death, could have enforced such claims or
against whom such claims could have been enforced.”
13

other reasons, “futility of amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962).
Here, Plaintiff’s motion to amend is due to be denied for futility.
“To prevail on a claim of unjust enrichment under Alabama law, a plaintiff
must show that: (1) the defendant knowingly accepted and retained a benefit, (2)
provided by another, (3) who has a reasonable expectation of compensation.”
Portofino Seaport Vill. v. Welch, 4 So. 3d 1095, 1098 (Ala. 2008). Plaintiff seeks
to add an unjust enrichment claim against the Estate of Brian Skelton. (Doc. 13-1
at ¶ 53). However, Plaintiff has not shown, and cannot possibly show, that the
Estate of Brian Skelton ever “knowingly accepted and retained” the benefit at
issue—the proceeds of Brian Skelton’s life insurance policy. As previously noted,
Plaintiff’s complaint specifically alleges that Angel Skelton, Brian’s wife, was the
100% beneficiary of the Policy. (Doc. 1-1 at 6, ¶ 14). In addition, Plaintiff has
confirmed in her briefs that “the proceeds of the [P]olicy were disbursed to Brian’s
wife” after his death. (Doc. 11 at 5; Doc. 14 at 5). Because the Policy proceeds
were payable to Angel Skelton individually, and were disbursed to her following
Brian’s death, they did not become property of the Estate of Brian Skelton. See
Stroeker v. Harold, 111 So. 3d 138, 143-44 (Ala. Civ. App. 2012) (“in Alabama
life-insurance proceeds made payable to parties other than the deceased person, the
estate of the deceased person, or the personal representative of the estate of the
deceased person do not become a part of the estate”); Ex parte Ghafary, 738 So. 2d
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778, 780 (Ala. 1998) (an estate is a “separate legal entity”). Accordingly,
Plaintiff’s proposed amendment is futile. There is no possibility that Plaintiff
could recover on her unjust enrichment claim, because the Estate of Brian Skelton
never received or retained the life insurance proceeds she seeks to recover.
III.

THE MOTIONS TO DISMISS
After the Lincoln Defendants removed the case to this Court, Paul Saia,

Paula Saia Wade, and the Estate of Brian Skelton filed motions to dismiss,
asserting the same grounds for dismissal as the Lincoln Defendants had asserted in
support of their claim of fraudulent joinder. 11 (Docs. 4 & 8). Based on the above
analysis, all of Plaintiff’s claims against Saia and the Estate of Brian Skelton are
barred by Alabama’s survival statute, and both defendants are due to be dismissed
from the case as a matter of law. Plaintiff having conceded to Wade’s dismissal,
the motions to dismiss are due to be granted in their entireties.
CONCLUSION
Based on the foregoing, Plaintiff’s motion to remand (Doc. 15) will be
DENIED, Plaintiff’s motion to amend (Doc. 13) will be DENIED, Paul Lee Saia
and Paula Saia Wade’s motion to dismiss (Doc. 4) will be GRANTED, and the

11

The Estate of Brian Skelton also asserted that Plaintiff did not have standing to bring claims on
behalf of Rheta’s Estate, an argument that was not raised in the Lincoln Defendants’ notice of
removal.
15

Estate of Brian Skelton’s motion to dismiss (Doc. 8) will be GRANTED. An
appropriate order consistent with this opinion will be entered.
DATED this 6th day of October, 2017.

_________________________________
JOHN E. OTT
Chief United States Magistrate Judge

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