AROMANDO v. STATE FARM LIFE INSURANCE COMPANY

Filing 13

OPINION. Signed by Judge Stanley R. Chesler on 11/15/2017. (ek)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

JOYCE AROMANDO, Individually, and
Guardian and Trustee for the Infants, DANIEL C.
AROMANDO and JACK AROMANDO
Plaintiffs
v.
STATE FARM LIFE INSURANCE COMPANY
Defendant.

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Civil Action No. 17-02418 (SRC)
OPINION

CHESLER, District Judge
This matter comes before the Court on a motion for summary judgment by Plaintiff Joyce
Aromando (Docket No. 6), and a cross motion for interpleader relief and attorneys’ fees by
Defendant State Farm Life Insurance Company (Docket No. 10).
The Court has reviewed the papers filed by the parties, and will rule on the two motions
without oral argument, pursuant to Federal Rule of Civil Procedure 78. For the reasons that
follow, Plaintiff’s motion for summary judgment is granted and Defendant’s cross motion for
interpleader and attorneys’ fees is denied with prejudice.
I.

Background

In 2008, Daniel Aromando (“Decedent”) applied to be the owner and insured of a
$500,000 adjustable premium life insurance policy issued by Defendant. While applying for the
policy, Decedent designated Plaintiff, to whom he was married at the time, as the primary
beneficiary and Plaintiff’s two children as successor beneficiaries. In 2014, Decedent and

Plaintiff divorced, pursuant to a dual judgment of divorce entered by the Superior Court of New
Jersey, Chancery Division of Essex County. The divorce incorporated a settlement agreement,
which stated in relevant part that:
“For so long as the children are unemancipated, Husband agrees to
provide $100,000 of life insurance on his life for the benefit of the
parties’ unemancipated children, naming the children as
beneficiaries and Wife as trustee for the children’s benefit. Husband
shall name Wife as owner of his existing State Farm policy with a
face value of $500,000 . . . The existing State Farm policy satisfies
Husband’s obligation to provide life insurance.” Exhibit B, Docket
No. 6.
Subsequent to the divorce, ownership of the policy was never transferred to Plaintiff, nor
were the beneficiary designations changed. In 2016, while the life insurance policy was in full
effect and while Plaintiff’s children were unemancipated, Decedent passed away. Plaintiff
subsequently submitted to Defendant due notice and proof of death of the insured, and sought
payment of $500,000 in life insurance benefits under the terms of the policy. In 2017, Defendant
paid $100,000 of the claim to an account held by Plaintiff as custodian for Plaintiff’s children.
This payment to the unemancipated children appears to satisfy the $100,000 life insurance
provision contained in the divorce settlement agreement. When Defendant refused to pay
Plaintiff the $400,000 balance of the life insurance benefits, Plaintiff brought suit for breach of
contract. Plaintiff’s present motion for summary judgment (Docket No. 6) seeks to compel
Defendant to pay Plaintiff the balance of the life insurance policy.
In its cross motion for interpleader, Defendant states that it is a disinterested stakeholder
in possession of life insurance benefits that are subject to potential and actual competing claims
between Plaintiff and Plaintiff’s children. Because Defendant states that it cannot determine the
rightful beneficiaries to these proceeds, Defendant requests interpleader relief, to deposit the
benefits with the Clerk of the Court, to have the Court determine which party receives the
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remainder of the life insurance benefits, to be discharged from all liability, and to be awarded
attorneys’ fees and costs associated with seeking interpleader relief.
II.

Analysis

For the reasons discussed below, the Court will grant Plaintiff’s motion for summary
judgment and deny Defendant’s cross motion for interpleader relief and attorneys’ fees and costs.
a. Legal Standard for Summary Judgment

Summary judgment is appropriate under Federal Rule of Civil Procedure 56 where “the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 32223 (1986). The moving party must support their motion by citing to “particular parts of materials
in the record, including depositions, documents, electronically stored information, affidavits or
declarations, stipulations (including those made for purposes of the motion only), admissions,
interrogatory answers, or other materials.” Fed.R.Civ.P. 56(c).
The moving party bears the burden of showing no genuine issue of material fact, and the
nonmovant opposes the motion by presenting affirmative evidence to the contrary. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 256–57 (1986); Mitchell v. MacMinn, 2010 WL 2667419
(D.N.J. 2010). “[W]ith respect to an issue on which the nonmoving party bears the burden of
proof . . . the burden on the moving party may be discharged by ‘showing’ – that is, pointing out
to the district court – that there is an absence of evidence to support the nonmoving party’s case.”
Celotex, 477 U.S. at 325.

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In light of this standard, the Court should grant Plaintiff’s motion for summary judgment
if there is no genuine dispute of a material fact that Defendant breached the life insurance
contract by failing to pay Plaintiff the $400,000 balance from Decedent’s life insurance policy.
b. Validity and Enforceability of the Decedent’s Life Insurance Policy

In deciding Plaintiff’s motion for summary judgment, the Court must evaluate whether
there is any genuine dispute regarding the validity or enforceability of the underlying life
insurance policy.
Under New Jersey law, “a plaintiff must allege three elements to state a cause of action
for breach of contract: (1) a valid contract, (2) breach of that contract, and (3) damages resulting
from that breach. Ramada Worldwide Inc. v. Courtney Hotels USA, LLC, No. 11-896, 2012 WL
924385, at *3 (D.N.J. Mar. 19, 2012). The Court must first make a “determination as to whether
an ambiguity exists,” which is an issue of law. Emerson Radio Corp. v. Orion Sales, Inc., 253
F.3d 159, 163 (3d Cir. 2001). In the context of a motion for summary judgment for breach of
contract, the motion should be granted only if “the contract is so clear that it can only be read one
way.” Pennbarr Corp. v. Ins. Co. of N. Am., 976 F.2d 145, 149 (3d Cir. 1992). “Where the terms
of the contract are clear,” however, “the court must enforce those terms as written.” Atl. City
Racing Ass'n v. Sonic Fin. Corp., 90 F. Supp. 2d 497, 506 (D.N.J. 2000).
Defendant does not dispute that it entered a valid life insurance contract with Decedent in
2008, in which Plaintiff was named as primary beneficiary, nor does Defendant dispute that the
terms of this life insurance contract are ambiguous. Defendant likewise does not dispute that
Plaintiff would suffer damages if she does not receive life insurance benefits to which she is
otherwise entitled to under the terms of the contract. Rather, Defendant has filed for interpleader
relief because it argues that it is unclear to whom the life insurance benefits are entitled, in light
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of the potential application of New Jersey Statutes Annotated 3B:3-14, titled “Revocation of
probate and non-probate transfers by divorce or annulment; revival by remarriage to former
spouse.” The statute states in relevant part:
a. Except as provided by the express terms of a governing instrument, a court order,
or a contract relating to the division of the marital estate made between the divorced
individuals before or after the marriage, divorce or annulment, a divorce or
annulment:
(1) revokes any revocable:
(a) dispositions or appointment of property made by
a divorced individual to his former spouse in a
governing instrument and any disposition or
appointment created by law or in a governing
instrument to a relative of the divorced individual's
former spouse; . . .
b. For purposes of this section: (1) “divorce or annulment” means any divorce or
annulment, or other dissolution or declaration of invalidity of a marriage including
a judgment of divorce from bed and board; (2) “governing instrument” means a
governing instrument executed by the divorced individual before the divorce or
annulment; . . .
In short, Defendant argues that N.J.S.A. 3B:3-14 may revoke Decedent’s designation of
Plaintiff as primary beneficiary of the life insurance benefits, and thus expose Defendant to legal
action from Plaintiff’s children, who were designated successor beneficiaries under the policy.
As the statute indicates, however, this revocation of transfers by divorce does not apply when
there is a valid “governing instrument, a court order, or a contract.”
Defendant does not dispute the validity and enforceability of the divorce and settlement
agreement entered into between Decedent and Plaintiff during their divorce in 2014, which
names Plaintiff as the owner of the underlying life insurance policy. By its terms, the 2014
divorce and settlement agreement divides the marital estate between Decedent and Plaintiff, and
names the Plaintiff as the owner of the life insurance policy. The agreement was placed on the
record in April 2014, and the Superior Court of New Jersey appears to have incorporated this
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agreement in its court order issuing a dual judgment of divorce in October 2014. Accordingly,
this divorce agreement constitutes a valid exception to N.J.S.A. 3B:3-14 for a “court order, or a
contract relating to the division of the marital estate.” As a result, the divorce in 2014 did not
revoke, under N.J.S.A. 3B:3-14, Decedent’s designation of Plaintiff as primary beneficiary of the
life insurance benefits.
Besides the potential application of N.J.S.A. 3B:3-14, the parties raise no other genuine
dispute as to the breach of contract, or as to the validity, enforceability or interpretation of the
life insurance policy. Since N.J.S.A. 3B:3-14 does not apply, the Court is thus bound to enforce
the written terms of the life insurance contract, which require that Defendant pay the primary
beneficiary Plaintiff the sum of $500,000 on proof of death of the insured Decedent during the
term of the policy. Accordingly, the Court grants Plaintiff’s motion for summary judgment to
compel Defendant to pay Plaintiff the $400,000 balance of Decedent’s life insurance benefits.
c. Interpleader Relief and the Award of Attorneys’ Fees are Not Appropriate

In the equitable remedy of interpleader, the moving party is a “stakeholder that admits it
is liable to one of the claimants, but fears the prospect of multiple liability. Interpleader allows
the stakeholder to file suit, deposit the property with the court, and withdraw from the
proceedings.” Metro. Life Ins. Co. v. Price, 501 F.3d 271, 275 (3d Cir. 2007). Interpleader may
be brought in federal court under two different procedural devices: 28 U.S.C. § 1335 or Federal
Rule of Civil Procedure 22. Id. When evaluating whether to grant interpleader relief, the Court
“must determine whether the interpleader complaint was properly brought and whether to
discharge the stakeholder from further liability to the claimants.” For an interpleader to be
properly brought, there must be “two or more claimants to the fund who are ‘adverse” to each
other.” New Jersey Sports Prods., Inc. v. Don King Prods., Inc., 15 F. Supp. 2d 534, 539 (D.N.J.
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1998). This requirement is not satisfied where “one of the claims clearly is devoid of substance.”
Id.
The only argument Defendant raises regarding its potential exposure to competing legal
claims to the life insurance benefits is that the 2014 divorce may have statutorily revoked
Plaintiff as the primary beneficiary, pursuant to N.J.S.A. 3B:3-14. For the reasons stated above,
however, this statute does not apply, as the divorce and settlement agreement falls squarely
within the statutory exception for a “court order, or a contract relating to the division of the
marital estate.” Defendant presents no other basis for why its contractual obligation to Plaintiff,
as Decedent’s primary beneficiary under a valid life insurance contract, would be subject to
competing claims. As such, the Court determines that Defendant’s interpleader motion (Docket
No. 10) was not properly brought, and denies Defendant’s motion.
With regard to Defendant’s motion for attorneys’ fees, it is within the discretion of the
court whether to award an interpleader plaintiff attorneys fees and costs. Metropolitan Life Ins.
Co. v. Kubichek, 83 Fed.Appx. 425, 431 (3d Cir. 2013); see also Prudential Ins. Co. of Am. v.
Richmond, 2007 WL 1959252, at *4 (D.N.J. July 2, 2007). As Defendant’s interpleader was not
properly brought, the Court, in its discretion, denies Defendant’s motion for attorneys’ fees and
related costs related to seeking interpleader relief.

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