Lincoln Benefit Life Company et al v. Kelly et al

Filing 51

ORDER denying 45 Motion for Summary Judgment. Signed by Magistrate Judge Docia L Dalby on June 13, 2012. (SR)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
LINCOLN BENEFIT LIFE COMPANY, ET
AL.

CIVIL ACTION
NUMBER 10-823-DLD

VERSUS
KIM THOMAS KELLY, ET AL

CONSENT CASE

ORDER
This interpleader action is before the court on a motion for summary judgment filed
by claimant/interpleader defendant Bethany World Prayer Center (Bethany) (rec. doc. 45).
Bethany seeks a judgment awarding it 10% of the proceeds of three of the four annuity
policies at issue in this case based on the current beneficiary forms in each policy, which
were executed on March 5, 2008.1 The motion is opposed by the Halpin defendants, who
were also named as beneficiaries by the March 5, 2008, change of beneficiary forms, but
is not opposed by the Thomas/Hart defendants, who were completely removed as
beneficiaries by two of the March 5, 2008, change of beneficiary forms.2
Background
This lawsuit originated as an interpleader action instituted by plaintiffs, Lincoln
Benefit Life Company ( Lincoln) , Allstate Life Insurance Company (Allstate), and American

1

Bethany seeks 10% of three of the four annuity policies at issue in this case. Lincoln Benefit policy
LBC0031465 is not at issue in Bethany’s motion for summary judgment because Bethany was never named
as a beneficiary on that policy.
The most recent change of beneficiary forms on all three policies at issue were executed on March
5, 2008 (rec. docs. 1-1, p. 24 (Allstate), 45-2, p. 18 (Lincoln), p. 28 (American Heritage)).
2

The Thomas/Hart defendants, were completely removed as beneficiaries from the American
Heritage and Lincoln policies by the March 5, 2008, change of beneficiary forms. Although most of the
Thomas/Hart defendants were also removed by the March 5, 2008, change of beneficiary form on the Allstate
policy, a few of the Thomas/Hart defendants remained as beneficiaries on that policy.

Heritage Life Insurance Company (American Heritage) (collectively referred to as
“Insurers”), who issued annuity policies to the decedent Woodrow Thomas (decedent
Thomas) during his lifetime and has evolved into an action between the current and former
beneficiaries of the annuity policies for the policy proceeds. The annuity policies at issue
in this motion are as follows: American Heritage annuity policy AHL200826 - issued on May
26, 2000, with a death benefit of $99,200.583; Allstate annuity policy GA0081035 - issued
on April 17, 2000, with a death benefit of $191,992.14; and Lincoln annuity policy
LBC0031563- with a death benefit of $246,170.00.4
The insurers instituted this interpleader action, deposited the policy proceeds in the
amount of $673,973.57 into the registry of the court, and were dismissed (rec. docs. 1 and
7). The named claimants/interpleader defendants filed three separate answers based on
their interests: (1) the Thomas/Hart defendants (those previously named as beneficiaries
who are challenging the decedent’s capacity to contract and contesting the March 5, 2008,
change of beneficiary designations): Kim Thomas Kelly, Brett Bailey Thomas, Kenneth
Michael Thomas, Jeanie Thomas Adams, Patricia B. Thomas, Casie Lynn Hart, Emmitt
David Hart, Jaime Leigh Hart, Ashley Nicole Hart, and Rosa Thomas; (2) the Halpin
defendants (the current beneficiaries): Elizabeth Halpin Smith, Clarence R. Halpin, Marsha
Jones Halpin; and (3) Bethany World Prayer Center.

3

The death benefit of all annuity contracts includes interest through the date of filing on December

8, 2010.
4

American Heritage annuity policy AHL200826 and Allstate annuity policyGA0081035 were issued
pursuant to an application made directly by the deceased Woodrow Thomas. The Lincoln annuity policies,
LBC0031465 and LBC0031563, were issued pursuant to applications submitted and signed by Clarence
Halpin, pursuant to a power of attorney for Woodrow Thomas (rec. doc. 1). The date of issuance of the
LBC0031563 policy is unclear as the complaint alleges that it was issued on October 8, 2007, but the first
change of beneficiary form is dated July 27, 2007.

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It is undisputed that sometime after April 2000, the decedent Thomas executed a
power of attorney in favor of Clarence Halpin (the validity of power of attorney is in
dispute).5 During the terms of policy numbers AHL200826, GA0081035, and LBC0031563,
Thomas and/or Clarence R. Halpin, through the power of attorney, made several changes
to the designated beneficiaries, including removing certain designated beneficiaries and
changing the percentages assigned to certain designated beneficiaries (rec. doc. 45-2,
Exhibits A-E). The most recent beneficiary change was made on March 5, 2008, in all three
policies and resulted in a substantial increase in the percentage of the policy proceeds
designated to beneficiary Clarence Halpin in all three policies, and in the case of the
American Heritage and Lincoln Benefit policies, the removal of previously identified
beneficiaries (the Thomas/Hart beneficiaries). The decedent Thomas passed away on or
about March 29, 2009 (rec. doc. 1).
The Thomas/Hart defendants take the position that the decedent Thomas suffered
from dementia and lacked the legal capacity to contract from June 2006 until his death on
March 29, 2009, at 93 years old (rec. doc. 28).6 They are challenging the validity of the
power of attorney executed in favor of Halpin, the beneficiary changes made by Halpin
pursuant to the power of attorney, and the decedent’s capacity to make beneficiary
changes after 2006. The Thomas/Hart defendants request that the proceeds be dispersed
pursuant to the “beneficiary designations made by [the decedent] prior to his incapacity.”

5

The record does not contain a copy of the power of attorney. The Thomas/Hart defendants
represent in the status report that on March 28, 2007, Woodrow Thomas executed a power of attorney in favor
of Clarence Richard Halpin. One of the exhibits, which is attached to the complaint, the motion for summary
judgment, and the opposition memorandum, indicates that the power of attorney may have been signed on
September 30, 2004 (rec. doc. 1-1; rec. doc. 45-2; Exhibit D, rec. doc. 46-4).
6

The parties outline their positions in the status report (rec. doc. 28).

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Additionally, Rosa Thomas contends that the life insurance policies were obtained during
the community property regime, and the alienation of and/or donation of that property by
Halpin by means of the power of attorney deprived her of her community interest in the
proceeds (rec. doc. 28). The Halpin defendants contend that Thomas was competent to
change the beneficiaries to the policies. Bethany does not take a position on Thomas’
capacity.
The overarching issue in this matter is which of the beneficiary forms signed during
the decedent’s lifetime is valid considering the allegations of the decedent’s lack of capacity
to contract. The issue before the court on Bethany’s motion for summary judgment is
whether Bethany is entitled to 10% of the proceeds of each of the policies because it was
designated as a beneficiary of the policies both before and after the contested March 5,
2008, change of beneficiary designations (rec. doc. 45).
Arguments of the Parties
Bethany argues that it was designated as a 10% beneficiary before and after the
March 5, 2008, beneficiary changes; therefore, regardless of whether the change of
beneficiary forms are valid (whether Thomas had the capacity to change the beneficiaries),
it is entitled to 10% of the proceeds of each annuity policy. Bethany further argues that only
the Thomas/Hart defendants have standing to oppose the motion, but they do not oppose
the motion and, in fact, they executed a “letter of understanding” in support of Bethany
wherein they agree to the entry of judgment in favor of Bethany for 10% of the proceeds

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of the policies at issue.7 The Halpin defendants, who are current beneficiaries of the
policies as a result of the March 5, 2008, change of beneficiary designations, are not
challenging the decedent’s capacity to contract, but they do oppose Bethany’s motion for
summary judgment by arguing that there are not enough facts in evidence at this time to
identify the proper beneficiaries to the annuity policies.
Summary Judgment Standard and Substantive Law
Summary judgment shall be granted when there are no genuine issues as to any
material facts and the moving party is entitled to a judgment as a matter of law. Fed. R.
Civ. P. 56. The party moving for summary judgment bears the initial responsibility of
informing the district court of the basis for its motion, and identifying those portions of the
record which it believes demonstrate the absence of a genuine issue of material fact. Stults
v. Conoco, 76 F.3d 651 (5th Cir.1996), (citing Skotak v. Tenneco Resins, Inc., 953 F.2d
909, 912–13 (5th Cir.1992) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986)). When the moving party has carried its burden under Rule
56(c), the nonmoving party must come forward with “specific facts showing that there is a
genuine issue for trial.” Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S.
574, 588, 106 S.Ct. 1348, 89 L.Ed .2d 538 (1986); see also, Tubacex, Inc. v. M/V Risan,
45 F.3d 951, 954 (5th Cir.1995). An issue as to a material fact is “genuine” if the evidence
is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v.

7

Bethany originally argued that it was entitled to 10% of the proceeds of the Allstate policy pursuant
to the “letter of understanding” executed by the Thomas/Hart defendants because it was unaware that it was
designated as a 10% beneficiary prior to the March 5, 2008, change of beneficiary form (rec. doc. 45). The
“letter of understanding” served as a settlement of the issues between Bethany and the Thomas/Hart
defendants in the event the March 5, 2008, change of beneficiary form was declared invalid. Bethany learned
through documents filed in support of the Halpin defendants’ opposition memorandum that it was designated
as a 10% beneficiary of the Allstate policy prior to the March 5, 2008, change of beneficiary form.

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Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986). The
non-movant's evidence is to be believed for purposes of the motion and all justifiable
inferences are to be drawn in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, at
255.
The substantive law dictates which facts are material. Littlefield v. Forney
Independent School Dist., 268 F.3d 275, 282 (5th Cir. 2001). Contracts entered into by a
noninterdicted deceased person may be attacked based on incapacity on the following
exclusive grounds: (1) when the contract is gratuitous; (2) when the contract evidences lack
of understanding; (3) when the contract was made within 30 days of his or her death; (4)
when an application for interdiction was filed before his or her death. See La. Civ. Code art.
1926; Gipson v. Fortune, 30 So.3d 1076 (La. App. 2 Cir. 2010); American General Life Ins.
Co. v. Wilkes, 619 F.Supp.2d 252 (M.D. La. 2008). Capacity to contract is presumed;
therefore, evidence of lack of capacity must be proven by clear and convincing evidence.
See Skannal v. Bamburg, 33 So.2d 227 (La. App. 2 Cir. 2010); Atkins v. Bridgewater, 803
So.2d 290 (La. App. 2 Cir. 2001).
Discussion
Bethany attempts to focus the issue in this case only on the March 5, 2008, change
of beneficiary form designations by arguing in its motion that “irrespective of the validity of
the March 5, 2008, change of beneficiary forms,” because it was designated as a 10%
beneficiary of the policies before and after the contested March 5, 2008, change of
beneficiary forms were executed, it is entitled to 10% of the proceeds of the three policies

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(rec. doc. 50).

8

Bethany’s focus on the fact that it is designated as a 10% beneficiary

before and after the contested March 5, 2008, change of beneficiary forms were executed,

8

Bethany offers copies of the beneficiary forms for each annuity policy from 2007 and copies of the
March 5, 2008, change of beneficiary forms to prove that it was a 10% beneficiary on all three annuity policies
before and after the March 5, 2008, change of beneficiary forms. It is undisputed by the parties and supported
by the evidence that Bethany was a 10% beneficiary before and after the March 5, 2008, change of beneficiary
forms were executed. The following beneficiary information was submitting by the parties:
American Heritage AHL200826 (issued May 26, 2000)
C
May 29, 2007, Beneficiary Change Form, signed by Halpin on behalf of Thomas, and May
30, 2007, Beneficiary Change Form, signed by Thomas, which changed the beneficiary
designations to the following: Bethany World Prayer Center - 10%, Kim Thomas Kelly - 15%,
Brett Bailey Thomas - 15%, Kenneth Michael Thomas - 15%, Clarence Richard Halpin - 20%,
Jeanie Thomas Adams - 5%, Patricia B. Thomas - 5%, Elizabeth Halpin Smith - 5%, Marsha
Jones Halpin - 5%, Kasey Lynn Hart - 1.25% Emmit David Hart - 1.25%; Jaime Leigh Hart 1.25%; Ashley Nicole Hart - 1.25% (rec. doc. 45-2, pp. 23, 26).
C
March 5, 2008, Beneficiary Information, signed by Thomas, which changed the beneficiary
designations as follows: Bethany World Prayer Center - 10%; Clarence Richard Halpin - 57
%; Marsha Jones Halpin - 26%; Elizabeth Halpin Smith - 7 % (rec. docs. 45-2, p. 28).
Allstate GA0081035 (issued on April 17, 2000)
C
May 20, 2003, Thomas signed a change of beneficiary form and designated the beneficiaries
as follows: Brett Bailey Thomas - 63 %, Kasey Lynn Hart - 9.25%, David Hart - 9.25%, Jamie
Leigh Hart - 9.25%, Ashley Nicole Hart - 9.25% (rec. doc. 1-1, p. 14).
C
May 29, 2007, Beneficiary Information, signed by Halpin on behalf of Thomas, and May 30,
2007, Beneficiary Information, signed by Thomas, which changed the beneficiaries as
follows: Bethany World Prayer Center - 10%, Kim Thomas Kelly - 15%, Brett Bailey Thomas 15%, Kenneth Michael Thomas - 15%, Clarence Richard Halpin - 20%, Jeanie Thomas
Adams - 5%, Patricia B. Thomas - 5%, Elizabeth Halpin Smith - 5%, Marsha Jones Halpin 5%, Kasey Lynn Hart - 1.25% Emmit David Hart - 1.25%; Jaime Leigh Hart - 1.25%; Ashley
Nicole Hart - 1.25% (rec. docs. 1-1, p. 17, 20; 46-7, p. 1).
C
March 5, 2008, Beneficiary Information, signed by Thomas which changed the beneficiary
designations as follows: Bethany World Prayer Center - 10%, Jeanie Thomas Adams - 5%,
Clarence Richard Halpin - 65%, Elizabeth Halpin Smith - 8%, Kasey Lynn Hart - 3%, Emmit
David Hart - 3%, Jamie Leigh Hart - 3%, Ashley Nicole Hart - 3% (rec. docs. 1-1, p. 24, 45-2,
46-8).
Lincoln annuity policy LBC0031563 (issued October 8, 2007)
C
July 27, 2007, Beneficiary Information, signed by Thomas which designated the
beneficiaries as follows: Bethany World Prayer Center -10%, Kim Thomas Kelly 15%, Brett Bailey Thomas - 15%, Kenneth Michael Thomas - 15%, Clarence Richard
Halpin - 31%, Jeannie Thomas Adams - 2%, Patricia B. Thomas - 6%, Elizabeth
Halpin Smith - 6%, Marsha Jones Halpin - 6%, Casie Lynn Hart - 1%, Emmit David
Hart - 1%, Jaime Leigh Hart - 1%, Ashley Nicole Hart - 1% (rec. docs. 1-1, 45-2, p.
16, 46-1, p. 1).
C
March 5, 2008, Beneficiary Information, signed by Thomas which designated the
beneficiaries as follows: Bethany World Prayer Center - 10%, Clarence Richard
Halpin - 57 %, Marsha Jones Halpin - 27%, Elizabeth Halpin Smith - 6% (rec. docs.
1-1, p. 33; 45-2, p. 18; 46-2, p. 1).

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ignores the larger issue in this case, which is the challenge to the decedent’s capacity to
contract as of June 2006.9
In summary, although it is undisputed that Bethany was designated as a 10%
beneficiary before and after the contested March 5, 2008, change of beneficiary forms in
all three policies, it remains disputed whether the decedent had the capacity to contract
from June 2006 through the date of death in 2009, which raises issues regarding the
validity of the power of attorney executed by Thomas, the validity of the numerous change
of beneficiary forms executed in each of the policies during those years by either the
decedent or the power of attorney, and the identity of the proper beneficiaries of the
policies, all of which are genuine issues of material fact precluding summary judgment at
this time. Accordingly,
IT IS ORDERED that Bethany World Prayer Center’s motion for summary judgment
(rec. doc. 45) is DENIED.
Signed in Baton Rouge, Louisiana, on June 13, 2012.

MAGISTRATE JUDGE DOCIA L. DALBY

9

Bethany attaches a “letter of understanding” executed by the Thomas/Hart defendants in support
of its motion originally to support its argument that it is entitled to 10% of the proceeds of only the Allstate
policy, but later in support of 10% of the proceeds of all three policies. The letter is offered as a settlement
between the Thomas/Hart beneficiaries and Bethany for 10% of the policy proceeds because Bethany is a
“religious organization” and because of the “work done by that organization,” while reserving the Thomas/Hart
defendants’ right to challenge the decedent’s capacity with respect to the Halpin defendants (rec. doc. 45-2).
As explained herein, because capacity is challenged as of 2006, issues remain as to who are the proper
beneficiaries of the policies; therefore, it is unclear whether the Thomas/Hart defendants have standing to
enter into a settlement agreement with Bethany for 10% of the proceeds of the policies.

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