Maldonado-Vinas et al v. National Western Life Insurance Co.

Filing 25

OPINION AND ORDER re 11 Motion to Dismiss. The Court DENIES defendant National Western's motion to dismiss pursuant to Rule 12(b)(7). Signed by Judge Francisco A. Besosa on 11/10/2014. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
DAMARIS MALDONADO-VINAS, et al.,
Plaintiffs,
Civil No. 14-1192 (FAB)

v.
NATIONAL WESTERN LIFE INSURANCE
CO.,
Defendant.

OPINION AND ORDER
BESOSA, District Judge.
Before
Insurance’s

the

Court

is

defendant

National

Western

Life

motion to dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(7).

(Docket No. 11.)

For the reasons explained

below, the Court DENIES the motion to dismiss.
I.

BACKGROUND
A.

Factual Background as Alleged in the Complaint
On

April

30,

2011,

Carlos

Iglesias-Alvarez

(“Carlos

Iglesias”) submitted $1,467,500 with an annuity application to
defendant National Western Life Insurance (“National Western”).
(Docket No. 1 at ¶ 8.)

Carlos Iglesias named his brother,

Francisco Iglesias, as the annuity’s beneficiary.

Id. at ¶ 9.

This annuity was signed by Marangelis Rivera, who represented
herself as National Western’s agent but who did not have an agent’s
license in the Commonwealth of Puerto Rico.

Id. at ¶¶ 10-11, 20.

Civil No. 14-1192 (FAB)
On
$1,467,500

May

2,

2

2011,

Carlos

Iglesias

submitted

another

with a second annuity application to National Western.

(Docket No. 1 at ¶ 12.)

This second annuity identified Carlos

Iglesias as the annuitant and Francisco Iglesias as the owner and
beneficiary.

Id. at ¶ 13.

second annuity application.

Francisco Iglesias did not sign the
Id. at ¶ 14.

Carlos Iglesias died on November 2, 2011.

(Docket No. 1

at ¶ 15.) Damaris Maldonado-Viñas, Juan Carlos Iglesias-Maldonado,
and Jose Carlos Iglesias-Maldonado (collectively, “plaintiffs”) are
Carlos Iglesias’s widow and two surviving sons.

Id. at ¶¶ 5-7.

Plaintiffs first learned of the two annuities through discovery in
a Puerto Rico court proceeding.

Id. at ¶ 16.

Francisco Iglesias – Carlos Iglesias’s brother who was
named as the beneficiary of both annuities and the owner of the
second annuity – is a resident of Madrid, Spain, and a citizen of
Spain.1

(Docket No. 11 at ¶ 5.)

National Western paid Francisco

Iglesias his claim benefits for both annuities on February 23,
2012, and

March

13,

2012,

sending

checks for

$1,643,600

and

$1,500,000 directly to Francisco Iglesias’s address in Spain.

Id.

at ¶ 11; Docket No. 11-1 at pp. 10-11.

1

Defendant National Western provided the facts recounted in this
paragraph. Plaintiffs state explicitly that they do not contest
these facts. See Docket No. 12 at p. 2.

Civil No. 14-1192 (FAB)
B.

3

Plaintiffs’ Complaint
On March 11, 2014, plaintiffs filed a complaint against

National Western seeking $2,935,000, which is the amount Carlos
Iglesias paid National Western for the two annuities.
No. 1.)

(Docket

Plaintiffs allege: (1) that the first annuity is null and

void because it was signed by a person fraudulently claiming to be
a licensed agent, in violation of Puerto Rico law; (2) that the
second annuity is null and void because it was never perfected
insofar

as

the

owner,

Francisco

Iglesias,

never

signed

the

application; and (3) that both annuities are null and void because
the payment tendered with the annuity applications came from money
of the conjugal partnership between Damaris Maldonado-Viñas and
Carlos Iglesias, and Damaris Maldonado-Viñas never consented to the
use of the funds for the annuities, as required by Puerto Rico law.
Id. at ¶¶ 17-22.
C.

Defendant National Western’s Motion to Dismiss
Defendant National Western moved to dismiss the complaint

pursuant

to

12(b)(7)”).

Federal

Rule

of

(Docket No. 11.)

Civil

Procedure

12(b)(7)

National Western alleges:

(“Rule

(1) that

pursuant to Federal Rule of Civil Procedure 19(a)(1), Francisco
Iglesias is a required party to this action; (2) that joinder of
Francisco Iglesias is not feasible because he is a citizen and
resident of Spain who does not maintain regular contacts with
Puerto Rico,

and

therefore the

Court

does

not

have personal

Civil No. 14-1192 (FAB)

4

jurisdiction over him; and (3) that pursuant to Federal Rule of
Civil Procedure 19(b), the Court should dismiss the action because
the action cannot proceed “in equity and good conscience” in
Francisco Iglesias’s absence.

Id.

Defendant National Western

submitted exhibits to support its motion to dismiss, including the
two annuity contracts.

(Docket Nos. 11-1 - 11-5.)

Plaintiffs

opposed the motion to dismiss, (Docket No. 12), and defendant
National Western replied, (Docket No. 15).
II.

DISCUSSION
Federal Rule of Civil Procedure 19 (“Rule 19”) outlines a

three-step approach to determine whether an action should be
dismissed pursuant to Rule 12(b)(7) for failure to join a required
party.

Fed. R. Civ. P. 19.

First, the Court determines whether

the absent person is a “required party” to the action.
Civ. P. 19(a)(1).

Fed. R.

If the person is required, then the Court

ascertains whether joinder is feasible.

Id.

Finally, if the

person is required and joinder is not feasible, then the Court must
“determine whether, in equity and good conscience, the action
should proceed among the existing parties or should be dismissed.”
Fed. R. Civ. P. 19(b).
Rule

19

“calls

for

courts

to

make

pragmatic,

practical

judgments that are heavily influenced by the facts of each case.”
Bacardi Int’l. Ltd. v. V. Suarez & Co., 719 F.3d 1, 9 (1st Cir.
2013).

Courts “should keep in mind the policies that underlie

Civil No. 14-1192 (FAB)

5

Rule 19, ‘including the public interest in preventing multiple and
repetitive litigation, the interest of the present parties in
obtaining complete and effective relief in a single action, and the
interest of absentees in avoiding the possible prejudicial effect
of deciding the case without them.’”

Picciotto v. Cont’l. Cas.

Co., 512 F.3d 9, 15-16 (1st Cir. 2008) (citing Acton Co. v. Bachman
Foods, Inc., 668 F.2d 76, 78 (1st Cir. 1982)).
A.

Rule 19(a)(1): Required Party
Rule 19(a)(1) sets forth three tests, any one of which,

if satisfied, results in deeming an absent person a required party.
A person is a required party if:
(A) in that person’s absence, the court cannot accord
complete relief among existing parties; or
(B) that person claims an interest relating to the
subject of the action and is so situated that disposing
of the action in the person’s absence may:
(i) as a practical matter impair or impede the
person’s ability to protect the interest; or
(ii) leave an existing party subject to a
substantial risk of incurring double, multiple, or
otherwise inconsistent obligations because of the
interest.
Fed. R. Civ. P. 19(a)(1).

The Court proceeds to apply each test to

determine whether Francisco Iglesias is a required party to this
action.
1.

Rule 19(a)(1)(A): Accord Complete Relief
A person is a required party if, “in that person’s

absence, the court cannot accord complete relief among existing

Civil No. 14-1192 (FAB)
parties.”

6

Fed. R. Civ. P. 19(a)(1)(A).

The Court here can accord

the relief that plaintiffs seek by voiding both annuities and
ordering defendant National Western to return to plaintiffs the sum
of the annuity premiums paid by Carlos Iglesias.

Granting this

relief does not require the presence of Francisco Iglesias, and
defendant National Western advances no argument as to why it would.
Thus, Francisco Iglesias is not a required party pursuant to
Rule 19(a)(1)(A).
2.

Rule 19(a)(1)(B)(i): Impair Absent Person’s Ability
to Protect his Interest
A person is a required party if disposing of the

action in the person’s absence would “as a practical matter impair
or impede” his ability to protect an interest he has in the
litigation. Fed. R. Civ. P. 19(a)(1)(B)(i). A court’s judgment is
not legally enforceable against a nonparty.
Bank

&

Trust

Co.

v.

Patterson,

390

Provident Tradesmens

U.S.

102,

110

(1968).

Accordingly, the parties here do not dispute that if Francisco
Iglesias remains a nonparty and the Court issues a judgment voiding
the annuities, that judgment will not bind Francisco Iglesias or
compel him

to

return

the

annuity

benefits

that

he

received.

(Docket Nos. 11 at p. 14; 12 at pp. 8-9.)
The

appropriate

inquiry

is

whether

a

judgment

voiding the annuities would “as a practical matter impair or
impede” Francisco Iglesias’s ability to protect an interest he may
claim in this case.

See Fed. R. Civ. P. 19(a)(1)(B)(i) (emphasis

Civil No. 14-1192 (FAB)
added).

7

To this end, defendant National Western argues that if

this Court, in Francisco Iglesias’s absence, voids the annuities
and orders National Western to return to plaintiffs the premiums
paid by Carlos Iglesias, then Francisco Iglesias “will confront a
claim to refund [the annuity benefits he collected] in the proper
jurisdiction,

while

possibly

facing

the

disadvantage

that

a

decision by this Court, applying Puerto Rico law in his absence,
could be deemed highly persuasive against him.”
p. 14.)

(Docket No. 11 at

The Court finds National Western’s argument unpersuasive

in light of plaintiffs’ reasoned analysis on this point.
As plaintiffs explain, to prevail in this case,
plaintiffs have to establish (1) that only licensed agents can
legally

sell

annuities

pursuant

to

Puerto

Rico

law,

and

an

unlicensed National Western agent sold Carlos Iglesias the first
annuity; (2) that annuity contracts are not perfected until the
owner signs them, and National Western failed to get the owner’s
signature on the second annuity; or (3) that Carlos Iglesias’s
spouse’s consent was necessary to purchase both annuities, and
National Western failed to obtain this consent.
p. 9.)

(Docket No. 12 at

In other words, based on plaintiffs’ specific causes of

action, the Court can void one or both annuities only if it finds
that National Western illegally or negligently sold the annuities.
Francisco Iglesias may actually benefit from such a ruling:

if

National Western brings a claim against Francisco Iglesias to

Civil No. 14-1192 (FAB)

8

return the benefits he collected, Francisco Iglesias could possibly
assert a defense that but for National Western’s negligence, the
annuities would have remained valid.
This case is easily distinguished from the three
cases upon which defendant National Western relies.
Nos. 11 at pp. 8-9; 15 at pp. 2-3.

See Docket

In Carbajal v. Dorn, No. CV-09-

283-PHX-DGC, 2009 WL 3756694 (D. Ariz. Nov. 5, 2009), Belcher ex
rel. Belcher v. Prudential Insurance Co. of America, 158 F. Supp.
2d 777 (S.D. Ohio 2001), and United States v. Fried, 183 F. Supp.
371 (E.D.N.Y. 1960), the respective district courts ruled that
absent beneficiaries of life insurance policies were required
parties

in

actions

that

sought

to

either

change

the

named

beneficiary (Carbajal and Belcher) or order that the cash surrender
value of the life insurance policies be paid to the United States
to satisfy the insured’s arrears of income taxes (Fried).

None of

the defendant insurance companies in these three cases had already
paid the absent beneficiaries their benefits.

Therefore, even

without res judicata effect, judgments changing the beneficiary or
ordering that the policy funds be paid to someone else would have
automatically diminished or extinguished the absent beneficiaries’
vested

interests

in

the

insurance

benefits.

Here,

because

Francisco Iglesias has already received the annuity benefits, a
judgment

voiding

the

annuities

in

his

absence

would

not

automatically extinguish his right to the benefits. Thus, National

Civil No. 14-1192 (FAB)

9

Western’s reliance on Carbajal, 2009 WL 3756694, Belcher, 158 F.
Supp. 2d 777, and Fried, 183 F. Supp. 371, is unpersuasive.
Defendant National Western raises a new argument in
its reply to plaintiffs’ opposition to the motion to dismiss.

It

avers that because Francisco Iglesias is the named “owner” of the
second annuity, and thus a “direct party to the contract at hand,”
he must be a required party in this action to void the annuity.
(Docket No. 15 at pp. 2-3.)
argument.

The Court is unpersuaded by this

Pursuant to Article II, Section 2.1, of the annuity

contract, the annuity owner may exercise his or her rights only
“while the Annuitant is alive.”
of

Francisco

Iglesias’s

(Docket No. 11-3 at p. 25.)

rights

as

the

terminated upon Carlos Iglesias’s death.

“owner,”

All

therefore,

See id. at pp. 5, 25.

Thus, Francisco Iglesias has no interest in this action to void the
second annuity by virtue of his designation as the annuity’s
“owner.”
Francisco Iglesias is not a required party pursuant
to Rule 19(a)(1)(B)(i) because disposing of this action in his
absence would not, as a practical matter, impair or impede his
ability to protect any interest he may claim relating to the
subject of this action.
3.

Rule
19(a)(1)(B)(ii):
Inconsistent Obligations

Risk

of

Double

or

A person is a required party if disposing of the
action in his absence would “leave an existing party subject to a

Civil No. 14-1192 (FAB)
substantial

risk

inconsistent

of

10

incurring

obligations.”

double,

Fed.

R.

multiple,

Civ.

P.

or

otherwise

19(a)(1)(B)(ii).

Defendant National Western argues that a decision by the Court
ordering National Western to return to plaintiffs the premiums paid
by Carlos Iglesias would expose National Western to a risk of
incurring inconsistent obligations “should another court deem that
[Francisco

Iglesias]

need

not

[return

contradiction to a decision here.”

the

benefits]

in

(Docket No. 11 at p. 9.)

open
In

raising this argument, however, defendant National Western ignores
the distinction between inconsistent obligations and inconsistent
adjudications or results that the First Circuit Court of Appeals
has explicitly drawn in the Rule 19 context.

“‘Inconsistent

obligations are not . . . the same as inconsistent adjudications or
results,’ because ‘[i]inconsistent obligations occur when a party
is unable to comply with one court’s order without breaching
another court’s order concerning the same incident.’”

Bacardi

Int’l. Ltd., 719 F.3d at 12 (quoting Delgado v. Plaza Las Americas,
Inc., 139 F.3d 1, 3 (1st Cir. 1998)).

If the Court orders

defendant National Western to return the premiums paid by Carlos
Iglesias and another court rules that Francisco Iglesias does not
have to return to National Western the benefits he received,
National Western could comply with each order without breaching the
other.

Thus, National Western has failed to explain how it would

Civil No. 14-1192 (FAB)

11

be subject to a risk of “inconsistent obligations,” as the term is
narrowly construed by the First Circuit Court of Appeals.
Although defendant National Western never argues
that it would be subject to a risk of double obligations, the Court
will address this point briefly.

If the Court orders National

Western to return the premiums paid and another court rules that
Francisco Iglesias does not have to return to National Western the
benefits he received, then National Western would certainly have
paid out double on the annuities.

But even this is not the “double

obligation” that Rule 19(a)(1)(B)(ii) seeks to avoid. As the First
Circuit Court of Appeals explains, “where two suits arising from
the same incident involve different causes of action, defendants
are not faced with the potential for double liability because
separate suits have different consequences and different measures
of damages.”

Delgado, 139 F.3d at 3.

Any claim that defendant

National Western may bring against Francisco Iglesias for a refund
would involve a different cause of action and a different theory of
recovery than those raised in this case.
this

case

in

Francisco

Iglesias’s

Therefore, disposing of

absence

would

not

subject

National Western to a risk of double obligation.
Thus, Francisco Iglesias is not a required party
pursuant to Rule 19(a)(1)(B)(ii) because disposing of this action
in his absence would not leave defendant National Western “subject

Civil No. 14-1192 (FAB)

12

to a substantial risk of incurring double, multiple, or otherwise
inconsistent obligations.”
B.

Francisco Iglesias Is Not a Required Party
Having not met any of the three tests set forth in Rule

19(a)(1), the Court concludes that Francisco Iglesias is not a
required party to this action.

This ends the Rule 19 analysis.

The Court need not determine whether joinder would be feasible or
whether the action should proceed or be dismissed pursuant to
Rule 19(b).
III. CONCLUSION
For the reasons explained above, the Court DENIES defendant
National Western’s motion to dismiss pursuant to Rule 12(b)(7).
IT IS SO ORDERED.
San Juan, Puerto Rico, November 10, 2014.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE