Northwestern Mutual Life Insurance Company v. Cull et al
Filing
29
MEMORANDUM Opinion and Order Signed by the Honorable Milton I. Shadur on 11/13/2013. Mailed notice by judge's staff. (srb,)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY,
)
)
)
Original Plaintiff,
)
)
v.
)
)
ELEONORE M. CULL, et al., etc., )
)
Original Defendants/
)
Counterplaintiffs.
)
No.
13 C 5957
MEMORANDUM OPINION AND ORDER
Northwestern Mutual Life Insurance Company (“Northwestern
Mutual”) initiated this interpleader action against (1) Eleonore
Cull (“Eleonore”), the first wife of decedent John Cull (“John”),
and (2) Linda Cull (“Linda”), John’s wife at the time of his
death, seeking a determination as to which of them was entitled
to $125,000 in proceeds from insurance policies on John’s life.1
By leave of this Court, Northwestern Mutual deposited the
contested $125,000 in an escrow account and was dismissed from
the suit, leaving Linda and Eleonore alone to dispute ownership
of the funds.
For the reasons discussed below, Eleonore
ultimately carries the day.
According to both parties, the basic facts are these.
Eleonore and John divorced in 1980 pursuant to a Judgment of
Dissolution of Marriage entered on February 20 of that year.
1
Federal jurisdiction is based on diversity of
citizenship.
Incorporated into that judgment was a separation agreement
(“Agreement”), whose terms this Court is now called upon to
interpret.
In accordance with the Agreement’s terms, throughout John’s
lifetime and up to the time of his death John maintained two life
insurance policies with Northwestern Mutual.
Agreement ¶8, the
principal (though not the sole) key to resolution of the parties’
dispute, is reproduced as Ex. 1 to this opinion.
From 1980 until 1999 John complied with Agreement ¶8 by
retaining Eleonore as a named beneficiary of those policies.
Then, however, he designated himself and Linda as Trustees of the
John J. Cull Living Trust as the primary beneficiary.
As the
result of John’s death, Linda is now the sole Trustee and, in
that capacity, the primary beneficiary.
Eleonore reads the
Agreement as requiring John to have maintained her as beneficiary
of at least $125,000 in life insurance proceeds, so that she is
entitled to the entire proceeds in escrow.
Linda disagrees,
arguing that John’s obligation to carry insurance in Eleonore’s
favor ended in 1993.
Linda (in her capacity as trustee) and Eleonore have filed
cross-motions for judgment on the pleadings in accordance with
Fed. R. Civ. P. (“Rule”) 12(c).2
Linda and Eleonore agree on all
2
Judgment on the pleadings is appropriate when, based on
the admitted facts, “no material factual issue remains to be
resolved and [a movant] is entitled to judgment as a matter of
2
relevant facts, so that the case turns on the application of
principles of contract interpretation familiar to any first-year
law student.
Entitlement to the Policy Proceeds
Agreement ¶22 provides that its terms shall be construed in
accordance with Illinois law.
And Illinois law calls for this
Court to interpret divorce-related property settlement agreements
(such as the Agreement) just as it would any other contract (Cohn
v. Metro. Life Ins. Co., 202 Ill.App.3d 86, 89, 559 N.E.2d 790,
792 (1st Dist. 1990)).
Contract construction under Illinois law involves the twostep inquiry set out in Lumpkin v. Envirodyne Indus., Inc., 933
F.2d 449, 456 (7th Cir. 1991).
Here, with citations and internal
quotation marks and brackets omitted, is Lumpkin’s teaching:
First, it is necessary to look to the plain language of
the provision at issue. Reviewing Illinois law, this
Court has noted that the starting point must be the
contract itself. If the language of the contract
unambiguously provides an answer to the question at
hand, the inquiry is over. If the plain language of
the contract is ambiguous, then the court must go on to
declare the contract's meaning. If the court finds
that a contract is ambiguous and that extrinsic
evidence is undisputed, then the interpretation of the
contract remains a question of law for the court to
decide. However, if the parties dispute the extrinsic
evidence on an ambiguous contract, then a fact-finder
law” (Nat’l Fid. Life Ins. Co. v. Karaganis, 811 F.2d 357, 358
(7th Cir. 1987)). Linda and Eleonore agree upon all material
facts here--differing only on the proper reading of the
Agreement--so that the case is fully capable of resolution at
this stage.
3
must be called upon to determine the intent of the
parties.
In that respect In re Doyle, 144 Ill. 2d 451, 468, 581
N.E.2d 669, 676 (1991) (citations omitted) instructs:
The objective to be reached “in construing a contract
is to give effect to the intention of the parties
involved.” Provided no ambiguity exists within the
contract, the intentions of the parties, at the time
the contract was formed, must be ascertained from the
language of the contract.
Shelton v. Andres, 106 Ill. 2d 153, 158, 478 N.E.2d 311, 314
(1985)(citations and internal quotation marks omitted) elaborates
on the court's search for intention:
Generally, where there is no ambiguity, courts will
look to the deed itself as the only criterion of the
intention of the parties. However, it is also true
that an instrument should be given a fair and
reasonable interpretation based on consideration of all
its language and provisions. In attempting to arrive
at a fair and reasonable construction, courts are not
confined to a strict and literal construction of the
language used, when such construction will frustrate
the intention of the parties, gathered from a
consideration of the whole instrument.
Because the Agreement is hardly a model of contractual
drafting, deciphering the contracting parties’ intention requires
an examination of the language and structure of the entire
instrument.
To that end a brief overview of the Agreement is
called for.
For that purpose it is important to know that the children
referred to in Agreement ¶8, four in number, were then
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respectively 20, 18, 17 and 8 years old (Agreement Recital ¶C).3
Agreement ¶6 required John to pay for four years of college
education for each child, an obligation that terminated when each
child reached 22 years of age.
Vital as well to the analysis of the Agreement’s insurance
provisions and their purpose are the obligations that John
undertook in Agreement ¶5 for the support and maintenance of
Eleonore and the couple’s minor children.
In addition to
specified lump sums based on the children’s status as minors when
residing with Eleonore, John committed to the monthly payment of
$2,000 as Eleonore’s maintenance, subject to abatement of $500
when either of the two minor children “reaches age eighteen
respectively, is attending college at the expense of the Husband,
or is otherwise emancipated, whichever event occurs first.”
That
monthly maintenance payment to Eleonore, however, could never
fall below $1,500:
However, in no event will the aforesaid payments to the
Wife by the Husband be less than $l,500.00 per month
(“floor”) subject to the provisions of Paragraph 11.4
Linda and her counsel would have this Court ignore those
facts and what they teach as the obvious purpose of the
3
John and Eleonore also had one adopted child who, because
she was already 27 years old at the date of the Agreement, was
not the subject of John’s undertakings under the Agreement.
4
[Footnote by this Court]
implicated here.
That latter provision is not
5
Agreement ¶8 insurance requirements.
Those requirements, with
their designation of Eleonore and the children as irrevocable
beneficiaries of those policies, were not merely purposeless and
gratuitous as to Eleonore any more than they were as to the
children.
No, those insurance provisions clearly served a classic
purpose of insurance:
to underwrite a contractual undertaking by
providing security against the contingency that the death of the
promissor (John) could jeopardize the performance of his
promises.
Put a bit differently, each provision for insurance
plainly served the purpose of assurance that John’s contractual
undertakings would be buttressed by the availability of insurance
proceeds if John were to die--proceeds that would provide
security to that extent for the performance of the promises even
if that contingency were to occur.
Look at the provisions for the children:
$16,750 to each to
assure him or her the promised college education--why else would
each child be made an irrevocable beneficiary, with the $16,750
in coverage to abate “[a]s each child reaches age eighteen or
completes a college education, unless earlier emancipated,
whichever shall last occur”?5
Again the insurance provision was
5
Remember that the parties to the Agreement were speaking
in 1980, long before the explosion in the cost of secondary
education, which has far outstripped any effects attributable to
inflation as such, reached today’s astronomical level. Although
the current generation of lawyers may have difficulty believing
6
integral to an assurance that John’s commitment ro provide each
child with a college education would be honored even if his death
intervened to put that commitment at possible risk.
Just so with the additional guaranteed $125,000 in insurance
coverage, with Eleonore designated as its irrevocable
beneficiary.
At the guaranteed $1,500 per month ($18,000 per
year) floor to provide her with permanent maintenance,6 $125,000
in life insurance coverage would serve as security for seven
years of the required maintenance payments.
And with the couple
having freely negotiated for no abatement in that $125,000 level,
as contrasted with the abatement provisions regarding the
children’s entitlements, neither this Court nor (certainly) Linda
as John’s second wife has the right to rewrite the parties’
bargain simply because Eleonore is now 33 years older than when
the divorcing couple made that bargain in 1980.
Any such (or any other) logical explanation of why Article
¶8’s insurance provision extends to Eleonore at all is
conspicuously absent from Linda’s submission.
Instead she and
her counsel treat it as wholly gratuitous, making nothing of the
provision’s requirement of irrevocability in designating her as a
it, there was a time when $16,750 would provide a college
education at a good university.
6
It is no accident that John confirmed the permanence of
that arrangement--he continued to pay Eleonore $1,500 monthly
right up to the time of his death.
7
beneficiary.
Instead they point to two ambiguities in language,
obviously hoping to divert attention from the obvious question
“why?”
First of those language issues is the sentence that says
that John must carry insurance while he has “any obligations
under this agreement” to Eleonore “and” the children, which Linda
attempts to portray as meaning that John’s obligation to carry
insurance for Linda’s benefit ceased when he fulfilled his
obligations to the children.
And the second is a later sentence
that says John’s obligation “under this provision” shall
terminate when each child reaches the age of 22.
But read
Linda’s way, those sentences would make nonsense of much of
Agreement ¶8 and would conflict directly with the alreadyexplained clear purpose of the parties.
As for the first sentence that Linda seeks to invoke, she
and her counsel fail to acknowledge that giving the word “and” a
literal conjunctive meaning would promote absurdity.
If for
example Eleonore had died shortly after finalizing the Agreement,
under Linda’s reading the consequent cessation of John’s
obligations to Eleonore would also erase John’s obligations to
maintain the children as beneficiaries--because, as Linda would
have it, he would no longer have obligations to Eleonore “and”
the children.
Nonsense--that would frustrate what Linda also
recognizes as the carefully crafted successive abatements of
8
$16,750 each.
It is far more sensible to read that sentence as
collectivizing the “Wife” (Eleonore) and “the children” as the
intended beneficiaries of the life insurance that Agreement ¶8
sets up as performing that double duty.
And if the provision has
been drafted in an awkward way to convey that purpose, Illinois
law permits “and” to be read as the disjunctive “or” to carry out
the parties’ clear intent.
While the use of “and” between two elements generally
indicates that both elements must be satisfied, the Illinois
Supreme Court “has also recognized that ‘and’ is often used
interchangeably with ‘or,’ the meaning being determined by the
context” (County of DuPage v. Ill. Labor Relations Bd., 231
Ill.2d 593, 606, 900 N.E.2d 1095, 1102 (2008)).
As Chicago Land
Clearance Comm’n v. Jones, 13 Ill.App.2d 554, 559, 142 N.E.2d
800, 803 (1st Dist. 1957) has put it, “in order to effectuate the
intention of the parties to a contract, where the intention is
evident, the word ‘and’ may be construed to mean ‘or’.”
In
short, where (as here) reading “and” in its literal sense would
create an inconsistency or render the sense of an instrument
dubious, the substitution of “or” for “and” is fully justified
(id.).
To turn to Linda’s second effort to substitute the claimed
inflexibility of rules of construction for common sense, her
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counsel points to this later sentence in Agreement ¶8:
The Husband’s obligation to maintain life insurance on
his life under this provision shall terminate when each
child, attending college, attains the age of twenty-two
years.
Linda argues that “this provision” refers to the whole of
Agreement ¶8, so that John’s obligation to maintain life
insurance in favor of Eleonore also terminated along with his
obligation to maintain insurance for his children.
But read in
context, the sentence merely provides that John’s obligation to
maintain the additional $16,750 for each child will terminate as
each child reaches 22 years.
More sensibly read in light of the
earlier-explained overall purpose of the insurance as assurance,
“this provision” refers not to the whole of Agreement ¶8, but
rather to its parts dealing with John’s insurance obligations to
his children.
Linda’s proposed reading of that sentence would eviscerate
many of the protections preserved in Agreement ¶8.
That
paragraph’s mandate that John’s insurance coverage could “in no
event” drop below $125,000 would lose its entire force, as would
the paragraph’s prohibition on any borrowing against the policy
that would reduce the net death benefit below that figure.
Once again Linda’s proposed reading is at war with common
sense.
Under that reading John’s obligation to carry insurance
for three of the children (all of whom were at least 17 years of
age) would cease within five years.
10
But John would be required
to maintain not only the remaining $16,750 for the fourth child
but also the $125,000 floor for an additional eight years--only
to be entirely freed from that much larger obligation when the
youngest child reached 22, thereby leaving no insurance to secure
his continuing lifetime obligation to Eleonore.7
Once more that
construction attributes no logical purpose to the $125,000
coverage:
As Linda would have it, that coverage could not be
intended for Eleonore, for she would soon lose any protection,
and it could hardly be intended for the one remaining child when
the other three children had each been insured for just an
additional $16,750.
Moreover, recall that Agreement ¶8 repeatedly specifies that
John’s insurance coverage could not fall below $125,000.
But so
long as John had any child under the age of 22, he was obliged to
carry more than $125,000 (at the least, he would have to carry
the base $125,000 in addition to $16,750).
Only once all four
children had graduated or reached 22 would the $125,000 “floor”
even become relevant--hence Agreement ¶8 plainly contemplates
that John’s insurance obligation would continue past that date.
And for whom?
For Eleonore, of course.
Finally, Linda’s proposed reading is at odds with other
provisions of the Agreement as well.
7
John’s obligations to pay
John clearly recognized that lifetime obligation--he
continued to pay Eleonore the $1,500 in monthly maintenance right
up to the date of his death.
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for his children’s college education, to pay for their medical
and dental care and to pay maintenance and support while they
were home from college all terminated as each child reached 22
years of age.
By total contrast, none of John’s obligations to
Eleonore were designated to terminate when the children reached
the age of 22.
To suggest that John and Eleonore intended that
the moment at which their last child reached 22 should serve as a
magic date that would end Eleonore’s insurance that was there to
protect her against the risk of losing her right to support and
maintenance defies reason as well.
Conclusion
For the reasons discussed here at some length, this Court
rejects the effort by Linda and her counsel to read snippets of
the Agreement’s language in a manner divorced from reality.
Hence Linda’s motion (Dkt. 23) is denied, while Eleonore’s
(Dkt. 24) is granted.
All the escrowed funds are ordered to be
paid over to Eleonore forthwith, and with Northwestern having
previously been dismissed from the litigation, that final order
terminates this action.
________________________________________
Milton I. Shadur
Senior United States District Judge
Date:
November 13, 2013
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