AXA Equitable Life Insurance Company v. Lynn L. Cherry , 496 F. App'x 917 ( 2012 )

Case: 11-15929 Date Filed: 11/09/2012 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-15929
Non-Argument Calendar
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D. C. Docket No. 5:11-cv-00065-RS-CJK
AXA EQUITABLE LIFE INSURANCE COMPANY,
Plaintiff,
KAY J. CHERRY,
Defendant - Cross Defendant -
Cross Claimant - Appellant,
versus
LYNN L. CHERRY,
Defendant - Cross Claimant -
Cross Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Florida
________________________
(November 9, 2012)
Before CARNES, WILSON and EDMONDSON, Circuit Judges.
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PER CURIAM:
Kay J. Cherry appeals the district court’s award of the entirety of the
proceeds from her former husband’s life insurance policy with AXA Equitable
Life Insurance Company (“AXA”) -- except for the remaining balance of alimony
she was owed -- to his surviving spouse, Daratha Lynn Littleton Gager Cherry
(“Lynn Cherry”). No reversible error has been shown; we affirm.
Briefly stated, in January 1988, AXA issued a $100,000 life insurance
policy to James Ashley Cherry. In his application for the policy, James Cherry
designated Kay Cherry (his then-spouse) as his primary beneficiary. The marriage
was dissolved in October 2002, pursuant to a Final Judgment of Dissolution of
Marriage, which incorporated a Mediation Settlement Agreement (“MSA”) signed
by both parties. The MSA established that James Cherry’s alimony obligation to
Kay Cherry totaled $180,000, payable in 120 monthly installments.1 The
agreement further provided, in part:
The above alimony will be secured by the Husband maintaining the
“Equitable” and “Ohio” life insurance policies on his life with the
Wife as sole irrevocable beneficiary. The Husband agrees to not
encumber or decrease the face value so long as he has an alimony
1
The MSA required James Cherry to pay Kay Cherry $2,000 per month for a period of 60 months
starting in November 2002, followed by payments of $1,000 per month for an additional 60 months.
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obligation. The Husband shall provide the Wife with documentary
proof of said insurance. In the event that the Husband dies while he
has an alimony obligation to the Wife, the proceeds from said life
insurance policies shall be held in trust and transferred to the Wife.2
In 2009, James Cherry sent AXA a request for a beneficiary change,
designating Kay Cherry and his current wife, Lynn Cherry, as equal 50 percent
primary beneficiaries of the policy proceeds. As part of his request, James Cherry
submitted documentation showing that he had successfully met part of his alimony
obligation and, therefore, was entitled to add his present wife as a partial
beneficiary under the Policy.3 Following James Cherry’s death on 2 December,
2010, both Kay Cherry and Lynn Cherry submitted claims to AXA for the life
insurance benefits under the policy. This appeal stems from AXA’s interpleader
complaint, filed pursuant to Fed.R.Civ.P. 22, seeking clarity on the parties’
respective rights, if any, to the policy proceeds.4
2
James Cherry also had a $100,000 life insurance policy with Americo, formerly known as The
Ohio Life Insurance Company. Only the AXA policy is at issue in this appeal.
3
In a letter dated 9 April, 2009, James Cherry advised AXA that he had fulfilled the first part of
his alimony obligation: paying $120,000. He also had paid $13,000 of the second part of his alimony
commitment. As of January 2009, James Cherry advised AXA that he still had approximately
$34,000 left of his total alimony payments.
4
Lynn Cherry also filed a cross-claim for a declaratory judgment against Kay Cherry, pursuant
to Fed.R.Civ.P. 13. Kay Cherry, in turn, filed a cross-claim for the imposition of a constructive trust
on the proceeds of the AXA policy pending a resolution in the case.
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The district court ruled that Kay Cherry was only entitled to the amount of
alimony that James Cherry still owed to her when he died from the proceeds of the
AXA life insurance policy; the remaining balance was awarded to Lynn Cherry.
On appeal, Kay Cherry argues that the district court erred by determining
the intent of the parties contrary to the plain meaning of the contract. She
maintains that she is entitled to all the proceeds from the AXA policy because the
MSA unambiguously states “[i]n the event that the Husband dies while he has an
alimony obligation to the Wife, the proceeds from said life insurance policies shall
be held in trust and transferred to the Wife.” Lynn Cherry counters that the AXA
life insurance policy simply was security for outstanding alimony and that Kay
Cherry is entitled only to the $26,500 of the policy proceeds: the remaining
balance on the unpaid alimony.
Interpretation of a contract is a question of law that we review de novo.
Tobin v. Michigan Mut. Ins. Co., 398 F.3d 1267, 1274 (11th Cir. 2005). We
likewise review de novo a district court’s construction of a settlement agreement.
Waters v. Int’l Precious Metals Corp., 237 F.3d 1273, 1277 (11th Cir. 2001).
The parties agree that Florida law controls the issues in this appeal. Under
Florida law, settlement agreements are governed by contract law. U.S. Fire Ins.
Co. v. Caulkins Indiantown Citrus Co., 931 F.2d 744, 749 (11th Cir. 1991). “In
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construing a contract, the court should place itself as nearly as possible in the
position of the parties when the contract was executed, and should consider the
object sought to be accomplished by the agreement.” Ballantyne v. Ballantyne,
666 So. 2d 957, 959 (Fla. Dist. Ct. App. 1996). When a MSA is ambiguous, the
terms of the agreement need to be read in the context of the entire contract. See
Liss v. Liss, 937 So. 2d 760, 763 (Fla. Dist. Ct. App. 2006).
The insertion of life insurance policies in a MSA might potentially have two
separate purposes: (1) security for unpaid support obligations, or (2) as part of the
property distribution to minimize economic harm to the family. Id. at 763. If the
life insurance proceeds are intended as security for unpaid support obligations,
only the unpaid portion may be encumbered. Id. at 763-64; see also Smith v.
Smith, 912 So. 2d 702, 705 (Fla. Dist. Ct. App. 2005).
In this case, the MSA clearly states that the “alimony will be secured” by
the two life insurance policies. In addition, the structure of the agreement also
supports the view that the AXA policy was intended as security for unpaid
alimony, if James Cherry died before the total amount was paid.
The MSA is divided into three sections. The first section divides the
parties’ assets and liabilities. The second section establishes the alimony
obligation and security for the payments. The third and final section is for
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miscellaneous issues. To accept the interpretation urged by Kay Cherry is to insert
a property interest into a section devoted to protection of support. If the proceeds
of the AXA policy were intended to be part of the property distribution -- thereby
resulting in Kay Cherry receiving a full 50 percent share of the total face value of
the policy -- then it would naturally follow that the policy should have been
included in the assets and liabilities section; it was not.
Kay Cherry maintains that the MSA clearly outlined that, until James
Cherry fulfilled his entire alimony obligation, she would remain the “sole
irrevocable beneficiary” of the AXA policy. The provision in the MSA requiring
James Cherry to provide life insurance as security for payment of his “non-
modifiable” alimony obligation, however, was subject to both diminution in
amount and revocation in accordance with the remaining balance of the alimony
commitment. James Cherry only changed the beneficiary designation on the
policy after paying most of the required $180,000 alimony: with less than Kay
Cherry’s revised 50 percent share of the $100,000 face value of the policy still
due. Because the record demonstrates that the insurance proceeds were intended
as security for unpaid alimony, Kay Cherry has not shown that she was entitled to
more than the unpaid alimony left to be paid following James’s death. See Liss,
937 So. 2d at 763-64.
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AFFIRMED.
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