Primerica Life Insurance Company v. Purselley et al

Filing 35

MEMORANDUM OPINION AND ORDER: The court grants Sherry's motion for summary judgment and denies the Children's motion for summary judgment. The claims of all defendants except Sherry are dismissed with prejudice. The court awards Sherry the interpleaded funds plus accrued interest, and it dismisses this action by judgment entered today. (Ordered by Judge Sidney A Fitzwater on 8/31/2017) (sss)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
PRIMERICA LIFE INSURANCE
COMPANY,
Plaintiffs,
VS.
SHERRY PURSELLEY, et al.,
Defendants.

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§ Civil Action No. 3:16-CV-0455-D
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MEMORANDUM OPINION
AND ORDER
In this interpleader action brought by plaintiff Primerica Life Insurance Company
(“Primerica”) to determine ownership of life insurance proceeds, codefendants Henslee
Purselley and Lee Purselley (collectively, the “Children”) and Sherry Purselley (“Sherry”)
cross-move for summary judgment on all claims. For the reasons explained, the court grants
Sherry’s motion, denies the Children’s motion, awards Sherry the interpleaded funds plus
accrued interest, and dismisses the balance of this action by judgment filed today.
I
This interpleader action involves a dispute over a Primerica life insurance policy (“the
Policy”) that insured the life of decedent Lee R. Purselley, Jr. (“Lee”), who died in 2015. In
1989 Lee purchased the Policy, which provided coverage of $300,000. The Policy named
Lee the owner, his then-wife Sherry the primary beneficiary, and the children of the marriage
contingent beneficiaries. In August 1992 Lee executed a Multi-Purpose Change Form
(“Change Form”) that designated Sherry the Policy owner. The Change Form transferred

“ownership of said Policy, along with all right, title, and interest in said Policy to Sherry
Keeton Purselley[.]” Jt. App. 40.1 The name “Sherry Keeton Purselley” is handwritten in
the blank on the form for the “Name of New Owner.” Id.
Less than one year later, in May 1993, Sherry and Lee divorced. A state court entered
a divorce decree, agreed to by both parties, that allocated to Lee “any and all policies of life
insurance in his name,” and to Sherry “any and all policies of life insurance in her name.”
Jt. App. 248. Sherry continued to pay the Policy’s monthly premiums until Lee’s death in
September 2015. After his death, she filed a claim under the Policy as owner and primary
beneficiary. When Primerica processed the claim, it learned for the first time that Sherry and
Lee had divorced.

Primerica notified the Children of their status as contingency

beneficiaries. After being notified, the Children then informed Primerica that they also
intended to file a claim for Policy proceeds. Primerica then filed the instant interpleader
action against, inter alia, Sherry and the Children. The court concluded that the interpleader
action was proper, and it dismissed Primerica from the lawsuit. Sherry and the Children now
cross-move for summary judgment, agreeing that only questions of law remain to be
decided.2

1

The parties in briefing the cross-motions submitted a joint appendix, to which the
court will refer by the abbreviation “Jt. App.”
2

In a January 25, 2017 order, the court granted the parties’ agreed motion concerning
summary judgment briefing, noting that Primerica had been dismissed from the case, that
defendant John Purselley had expressly waived and disclaimed any claim to the disputed
proceeds and had been dismissed from the case, and that defendant Susie Thompson could,
but was not required to, participate in the agreed summary judgment briefing process.
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II
The court “has broad powers in an interpleader action.” Rhodes v. Casey, 196 F.3d
592, 600 (5th Cir. 1999). Interpleader actions are decided through two stages.
First, the court determines whether the requirements for an
interpleader action have been met by deciding if there is a single
fund at issue and whether there are adverse claimants to that
fund. Second, if the court determines that the requirements for
interpleader are met, the court determines the rights of the
claimants.
Jackson Nat’l Life Ins. Co. v. Dobbins, 2016 WL 4268770, at *2 (N.D. Tex. Aug. 15, 2016)
(Fitzwater, J.) (citing Rhodes, 196 F.3d at 600). Absent special circumstances, this second
stage “will proceed like any other action.” 7 Charles Alan Wright, Arthur R. Miller & Mary
Kay Kane, Federal Practice and Procedure § 1714, at 628 (3d ed. 2001). Accordingly, if
there is no genuine issue of material fact that requires proceeding to trial, the second stage
may be adjudicated through summary judgment. Rhodes, 196 F.3d at 600. Because the court
has already determined that interpleader is proper, it begins its analysis at the second stage.
A movant’s summary judgment burden depends on whether the motion for relief is
on a claim for which the movant will have the burden of proof at trial. In an interpleader
action, each claimant must prove his or her right to the fund by a preponderance of evidence.
Id. To be entitled to summary judgment on a claim for which the movant will have the
burden of proof, the moving party “must establish ‘beyond peradventure all of the essential
elements of the claim or defense.’” Bank One, Tex. N.A. v. Prudential Co. Of Am., 878 F.
Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.) (quoting Fontenot v. Upjohn Co., 780 F.2d

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1190, 1194 (5th Cir. 1986)). This means that the moving party must demonstrate that there
are no genuine and material fact disputes and that the moving party is entitled to summary
judgment as a matter of law. See Martin v. Alamo Cmy. Coll. Dist., 353 F.3d 409, 412 (5th
Cir. 2003). “The court has noted that the ‘beyond peradventure’ standard is ‘heavy.’”
Carolina Cas. Ins. Co. v. Sowell, 603 F.Supp.2d 914, 923-24 (N.D. Tex. 2009) (Fitzwater,
C.J.) (quoting Cont’l Cas. Co. v. St. Paul Fire & Marin Ins. Co., 2007 WL 2403656, at *10
(N.D. Tex. Aug. 23, 2007) (Fitzwater, J.)).
III
Sherry contends that she is the sole owner and primary beneficiary of the Policy after
the 1992 transfer of ownership.3 She maintains that her ownership survived the divorce, and
that she is therefore entitled to all Policy proceeds. The Children maintain that ownership
of the Policy never transferred from Lee to Sherry under Texas community property law; that
the divorce decree’s assignment of “all policies of life insurance in [Lee’s] name” made him
the sole owner of the Policy; and that because Texas law presumes a divorced spouse should
not collect life insurance proceeds absent evidence of a contrary intention, the proceeds
rightfully belong to the Children as contingent beneficiaries.

3

The Children contend that Sherry did not properly plead this theory and thus cannot
raise it at summary judgment. They point to her initial answer, which they contends contains
no mention of her ownership of the Policy. The court disagrees. Sherry admits in her answer
to Primerica’s complaint the allegation that Lee transferred ownership to her in 1992. Sherry
Answer ¶ 10.
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A
In Texas, property acquired during marriage is generally considered to be community
property of the marriage. See Tex. Const. Art. XVI, § 15. Community property remains the
joint property of both spouses during the marriage, and upon one spouse’s death, the
surviving spouse receives outright ownership of her one-half of the community estate. See
Estate of Merkel v. United States, 2008 WL 3152986, at *3 (N.D. Tex. July 29, 2008)
(Fitzwater, C.J.) (citing United States v. Stapf, 375 U.S. 118, 128 (1963)), vacated and
dism’d on other grounds sub nom. Merkel v. Pollard, 354 Fed. Appx. 88 (5th Cir. 2009).
The remaining one-half interest goes to the decedent’s estate. Id. If a spouse acquires
property by gift, however, the property is the spouse’s separate property. Tex. Const. Art.
XVI, § 15.
B
The court addresses first the question whether Lee gifted his ownership of the Policy
to Sherry in 1992. If so, the Policy became Sherry’s separate property.
1
Under Texas law, one spouse may gift all of his interest in community property to the
other spouse. Parkhurst v. Weitinger & Tucker, 850 S.W.2d 726, 730 (Tex. App. 1993, writ
denied). To establish that a gift was made, a party must prove (1) delivery, (2) acceptance,
(3) and intent to make the gift. Kiel v. Brinkman, 668 S.W.2d 926, 929 (Tex. App. 1984, no
writ). To establish intent, a person must “perform an affirmative act which would clearly
reflect an intention to make a gift of [the] community share.” Freedman v. United States,
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382 F.2d 742, 747 (5th Cir. 1967). Such intent may be evidenced by “a clause expressly
purporting to transfer [the] community interest to [the spouse’s] separate estate[.]” Id. The
party asserting that a gift has been made bears the burden of proof. Powell v. Powell, 822
S.W.2d 181, 183 (Tex. App. 1991, writ denied). The party must overcome the presumption
of community property and “create a contrary presumption of separate property.” Gaides v.
Gaides, 2001 WL 460049, at *9 (Tex. App. May 3, 2001, pet. denied) (not designated for
publication).
2
Only the final element of the tripartite test—intent—is at issue here. Sherry contends
that the Change Form shows Lee’s intent to transfer all of his interest in the Policy to
Sherry’s separate estate. The form states that Lee is “transfer[ring] ownership of said Policy,
along with all right, title and interest in said Policy to Sherry Keeton Purselley[.]” Jt. App.
40.
Two cases are instructive to the court’s decision. In Gaides the court held that a
husband’s signing a policy application that named his wife the sole owner of the policy,
when using funds from the couple’s joint account, was insufficient to indicate an intent to
make a gift. Gaides, 2001 WL 460049, at *9.
In Parson v. United States, 460 F.2d 228 (5th Cir. 1972), however, the Fifth Circuit
affirmed the district court’s decision holding that a spouse’s execution of a third party
ownership statement as part of an application for accidental death benefits operated as an
effective assignment or gift of his community interest in the policy. Id. at 232. The
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stipulated facts showed that, in executing the third party ownership option, the spouse
applying for accidental death benefits expressly stated “that all right and title to the insurance
applied for shall vest in and every incident of ownership thereof may be exercised and
enjoyed irrevocably without the consent of any other person by: Name of Owner [the name
of the applicant’s wife was inserted as owner].” Id. at 230. In distinguishing a case on which
the government relied, the panel held that “here [the applicant] was forced to make a
conscious decision between irrevocably assigning all rights, title and every incident of
ownership to [his wife], or expressly retaining ownership and naming a beneficiary. He
chose the former and [his wife] received the proceeds as third party owner.” Id. at 231. The
panel, in rejecting another of the government’s arguments noted, that it had held in a prior
case that “[a] husband may unconditionally make his wife the owner and beneficiary of an
insurance policy on his life when it is issued, or later if he desires, so as to bar inclusion of
it in his estate.” Id. at 232 (brackets in original; emphasis omitted) (quoting Prichard v.
United States, 397 F.2d 60, 64 (5th Cir. 1968)). The panel affirmed the district court,
concluding that it did not clearly err in holding that the applicant’s intent was clear, and that,
in executing the application and naming his wife as the third-party owner, the applicant “had
performed the ‘affirmative act’ which irrevocably transferred every incident of ownership
to [the applicant’s wife] and effectuated a gift of his community interest to her.” Id.
Lee’s intent is at least as clear as that deemed sufficient in Parson. The language in
the Change Form—transferring all “right, title and interest”—is similar to that in
Parson—vesting “all right and title . . . and every incident of ownership thereof may be
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exercised and enjoyed irrevocably without the consent of any other person.” Moreover, this
language was not included in an initial application; it was necessary for Lee to affirmatively
transfer his ownership of the Policy to Sherry, “along with all right, title and interest in said
Policy.” Jt. App. 40. This affirmative post-application documentation—like a deed in a
transfer of real property—bolsters the conclusion that Lee intended to transfer to Sherry all
of his ownership interest in the Policy. Accordingly, the court concludes that Sherry has
established beyond peradventure that Lee gifted to her all of his interest in the Policy when
he executed the Change Form. And because under Texas law a gift became Sherry’s separate
property, the Policy became part of her separate estate and was no longer the community
property of Lee and Sherry.
C
Having concluded that Sherry has established that her ownership interest in the Policy
became a part of her separate estate after Lee executed the Change Form, the court must next
decide whether Sherry has established beyond peradventure that the divorce decree did not
affect her separate property ownership of the Policy.
1
Under the Texas Constitution, a court in a divorce proceeding “has no authority to
divest a spouse’s interest in separate property, even [if] the interest is small.” Powell, 822
S.W.2d at 183. When a court does transfer one spouse’s interest in separate property to the
other spouse, the decree is considered void. See Hagen v. Hagen, 282 S.W.3d 899, 902 (Tex.
2009).

If a divorce decree is ambiguous and subject to more than one reasonable
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interpretation, “courts should adopt the construction that correctly applies the law.” Shanks
v. Treadway, 110 S.W.3d 444, 447 (Tex. 2003).
2
Sherry and the Children disagree about whether the divorce decree reallocated
Sherry’s ownership interest. As noted, the decree simply states that any life insurance
policies a spouse’s name are to be awarded to that spouse. The decree does not indicate the
specific policies or the owner of the policies. Nor does the decree explicitly limit itself only
to community property policies. Regardless, if this court were to conclude that the divorce
decree did transfer Sherry’s separate property interest in the Policy to Lee, the decree would
be void on the ground that it impermissibly divested her interest in separate property. See
Powell, 822 S.W.2d at 183. To avoid this incorrect application of Texas law, the court
therefore concludes that the divorce decree does not intend to apply to Lee’s and Sherry’s
respective separate property, including Sherry’s ownership interest in the Policy. See
Shanks, 110 S.W.3d at 447. Because under this construction of the divorce decree Sherry
retained her ownership interest in the Policy, and has maintained her ownership since, the
court holds that Sherry has established beyond peradventure that she is entitled to the Policy
proceeds as the Policy owner and primary beneficiary.
IV
The court now turns to the Children’s assertion that, regardless of Sherry’s ownership
interest in the Policy, the Texas Family Code prohibits Sherry from being the Policy’s
primary beneficiary.
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A
Section 9.301(a) of the Texas Family Code provides that “[i]f a decree of divorce or
annulment is rendered after an insured has designated the insured’s spouse as a beneficiary
under a life insurance policy in force at the time of rendition,” then the provision in the
policy in favor of the former spouse is ineffective. Tex. Fam. Code Ann. § 9.301(a) (West
2006). The statute provides three exceptions to this general rule: when the divorce decree
designates the insured’s former spouse as the beneficiary; when the insured redesignates the
former spouse as the beneficiary after rendition of the decree; and when the former spouse
is designated to receive the proceeds in trust for the benefit of a child or dependent. Id.
§ 9.301(a)(1)-(3).
B
The parties disagree about how the ownership of the Policy affects the application of
§ 9.301(a). The Children contend that ownership of the Policy at the time of divorce is
irrelevant, and that so long as the insured designates the former spouse as the beneficiary
before the divorce decree is entered, the general rule of § 9.301(a) controls. Sherry counters
that the insured’s ownership of the policy at the time of divorce is a prerequisite to the
application of § 9.301(a).
The court holds under the plain language of § 9.301(a) and the relevant case law that
§ 9.301(a) does not apply here. The language of § 9.301(a) assumes that an insured has
designated the insured’s spouse as a beneficiary under a life insurance policy, see Tex. Fam.
Code Ann. § 9.301(a) (“after an insured has designated the insured’s spouse”), not, as here,
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that the insured has gifted ownership of the policy to the other spouse. One of the statutory
exceptions likewise assumes that the insured spouse has retained ownership of the policy
when redesignating a former spouse as beneficiary. See id. § 9.301(a)(2) (“the insured
redesignates the former spouse[.]”). Thus in reported cases the statute has been applied only
to situations in which the insured retains some ownership of the policy and therefore has the
authority to designate the beneficiary. This commonly occurs when the policy is community
property at the time of divorce, or when the insured spouse is awarded the policy in the
divorce decree. See e.g., Provident Life & Acc. Ins. Co. v. Cleveland, 460 Fed. Appx. 359,
360-61 (5th Cir. 2012) (per curiam) (applying § 9.301(a) to policy that was purchased by
insured and owned by insured at time of divorce); Branch v, Monumental Life Ins. Co., 422
S.W.3d 919, 923-25 (Tex. App. 2014, no pet.) (applying § 9.301(a) when divorce decree
awarded policy to insured husband); Camacho v. Montes, 2006 WL 2660744, at *1 (Tex.
App. Sept. 15, 2006, no pet.) (mem. op.) (same).
Moreover, this comports with the court’s foregoing analysis of community property
and separate property. As stated above, the Family Code does not provide the authority to
alter the separate property rights of two spouses. See Powell, 822 S.W.2d at 183. It provides
only for the division of “the estate of the parties,” also referred to as community property.
Tex. Fam. Code Ann. § 7.001 (West 2006); see also Eggemeyer v. Eggemeyer, 554 S.W. 2d
137, 139 (Tex. 1977) (interpreting § 7.001’s predecessor statute). To hold that § 9.301(a)
allows a Texas court to interfere with separate property rights—in which the insured has no

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interest— runs counter to Texas law.4
Here, Lee transferred ownership of the Policy to Sherry prior to their divorce by
executing the Change Form. Because this constituted a gift, the Policy became Sherry’s
separate property. At that point, Lee had no authority under the Policy to designate its
beneficiaries. See Jt. App. 7 (providing that policy owner has “all of the rights described in
this policy,” and that insured only obtains such rights if owner dies without naming a
contingent beneficiary). The authority to designate primary and contingent beneficiaries fell
to Sherry as owner of the Policy. Id. Because the Policy remained Sherry’s separate
property, § 9.301(a) did not divest Sherry of her status as primary beneficiary when she and
Lee divorced.
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*

For the foregoing reasons, the court grants Sherry’s motion for summary judgment
and denies the Children’s motion for summary judgment. The claims of all defendants
except Sherry are dismissed with prejudice. The court awards Sherry the interpleaded funds

4

Indeed, § 9.301(a) has an obvious purpose that is wholly consistent with Texas
community property law. It is a catch-all provision that eliminates the problem of
beneficiary designations that are made before divorce or annulment and are left unresolved
by a decree of divorce or annulment. Section 9.301(a) sensibly provides that, if an insured
designates his spouse as a beneficiary under a life insurance policy before a decree of divorce
or annulment is rendered, and the life insurance policy is still in force at the time the decree
is rendered, the provision in the policy in favor of the former spouse is ineffective unless an
exception applies. The exceptions are: when the divorce decree designates the insured’s
former spouse as the beneficiary; when the insured redesignates the former spouse as the
beneficiary after rendition of the decree; or when the former spouse is designated to receive
the proceeds in trust for the benefit of a child or dependent.
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plus accrued interest, and it dismisses this action by judgment entered today.
SO ORDERED.
August 31, 2017.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

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