In re Estate of Beckhart ( 2007 )

No. 3--06--0269
Filed March 23, 2007.
_________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2007
In the Matter of the Estate of ) Appeal from the Circuit Court
RONNIE BECKHART, ) of the 14th Judicial Circuit,
) Rock Island County, Illinois,
Deceased )
)
(JAYNE LAISNER, mother and next )
friend of RYAN BECKHART, a )
minor, )
)
Petitioner-Appellant, ) No. 04--P--126
)
v. )
)
PATRICIA BECKHART, )
Administrator of Estate of )
Ronnie Beckhart, deceased, ) Honorable
) Mark A. VandeWeile,
Respondent-Appellee). ) Judge, Presiding.
_________________________________________________________________
JUSTICE CARTER delivered the opinion of the court:
_________________________________________________________________
The petitioner, Jayne Laisner, mother and next friend of
minor Ryan Beckhart, filed first a probate claim for insurance
proceeds in the deceased's estate, then a motion for constructive
trust, alleging that the respondent, Patricia Beckhart,
improperly used the proceeds from a life insurance policy. The
circuit court found that laches barred the petitioner's claim.
On appeal, the petitioner argues that the circuit court erred
when it denied her motion for constructive trust. We reverse and
remand.
FACTS
The parties entered a joint statement of facts, which
revealed the following relevant facts:
On December 7, 2001, the circuit court entered an order in a
separate case that adopted a settlement agreement between the
petitioner and the decedent, Ronnie Beckhart. In relevant part,
the agreement required that "[b]oth parties shall name [their
son, Ryan Beckhart] as a direct or indirect beneficiary on any
life insurance policies provided to them at no cost from the
employer." The decedent's employer provided him a life insurance
policy at no cost, on which the decedent named his estate as
beneficiary. The decedent never changed the beneficiary on this
policy.
The decedent died intestate on March 7, 2004. The circuit
court issued a letter of administration on March 18, 2004, which
named the respondent the administrator of the decedent's estate.
On March 24, 2004, the respondent published a legal notice
of the decedent's death, and stated that any estate claims must
be made on or before October 30, 2004. The advertisement ran
until April 7, 2004.
On April 1, 2004, the petitioner's attorney filed an estate
claim on Ryan's behalf. In relevant part, the claim requested
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"the proceeds of any life insurance policies provided to decedent
by his employer in effect as of the date of the entry of the
court's order of December 7, 2001, in Case No. 01 F 210, for
which the decedent was ordered to name the minor child as a
direct or indirect beneficiary." The claim was filed with the
circuit court on April 7, 2004.
On April 23, 2004, the insurance company paid the proceeds
of the decedent's life insurance policy to his estate.
On May 5, 2004, the respondent filed an inventory of the
decedent's estate, which included real estate valued at
$14,877.74, the life insurance policy valued at $25,000, a
savings account containing $1,584.71, a checking account
containing $1,059.72, and a share account containing $5.
On March 10, 2005, the petitioner's attorney filed a motion
to withdraw, which she made at the petitioner's request. The
court granted the motion to withdraw on March 24, 2005.
On March 30, 2005, the petitioner's new attorney filed his
entry of appearance and filed a motion to establish a
constructive trust. In the motion, the petitioner's attorney
alleged that the respondent had been improperly using the
proceeds from the life insurance policy for estate expenses.
The respondent filed her answer on October 13, 2005. In
relevant part, she asserted the affirmative defense of laches,
alleging that the motion for constructive trust was not filed
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until one year after the insurance policy proceeds were
distributed, and that the delay prejudiced the estate because the
proceeds were used for estate expenses.
The circuit court issued its decision on March 10, 2006.
The court found that the 12-month delay in filing for a
constructive trust was solely attributable to the petitioner,
which served to bar the petitioner's claim via the doctrine of
laches. Accordingly, the circuit court denied the petitioner's
motion for a constructive trust. The petitioner appealed.
ANALYSIS
On appeal, the petitioner argues that the circuit court
erred when it denied her motion for a constructive trust.
Specifically, she argues that the estate claim was timely filed,
the delay in bringing the motion for constructive trust was not
prejudicial, and that a constructive trust is the appropriate
remedy for Ryan to receive the policy's proceeds. However,
resolution of this issue requires us to initially determine who
was entitled to the policy's proceeds.
The Probate Act of 1975 (755 ILCS 5/1--1 et seq. (West
2004)) does not govern the rights of a beneficiary to the
proceeds of a life insurance policy. Bergheger v. Boyle, 258
Ill. App. 3d 413, 629 N.E.2d 1168 (1994). Section 1 of the Third
Party Beneficiary Contract Act (755 ILCS 30/1 (West 2004))
provides that "[t]he designation in accordance with the terms of
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any insurance *** contract *** shall not be subject to or
defeated or impaired by any statute or rule of law governing the
transfer of property by *** intestacy."
In this case, the settlement agreement of December 7, 2001,
required that the decedent name Ryan as the beneficiary of the
life insurance policy the decedent had through his employer. The
decedent failed to do so before he died. The petitioner did not
file a claim with the insurance company; rather, the insurance
company paid the proceeds to the decedent's estate, who was the
listed beneficiary. The respondent used the proceeds to pay the
estate's expenses, despite the fact that the petitioner filed an
estate claim asserting that Ryan had a superior right to the
proceeds. It is not unusual in a settlement agreement to impose
an obligation to maintain life insurance to secure a child's
support. See In re Estate of Downey, 293 Ill. App. 3d 234, 687
N.E.2d 339 (1997). It is also not unusual for parents to agree
to secure this type of benefit for a child in discharge of their
moral obligations, and as a token of parental affection. Ryan
obtained a vested, contingent right to those benefits when the
settlement agreement was entered and the judgment became final.
See Smithberg v. Illinois Municipal Retirement Fund, 192 Ill. 2d
291, 735 N.E.2d 560 (2000).
A settlement agreement that requires an insured to name his
child as the beneficiary of a life insurance policy vests the
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child with an equitable right that can be enforced. Estate of
Comiskey, 125 Ill. App. 3d 30, 465 N.E.2d 653 (1984). If the
insured fails to name his child as the beneficiary, equity
mandates that courts treat the policy as if the child had been
named as the beneficiary. Comiskey, 125 Ill. App. 3d 30, 465
N.E.2d 653. Because equity will regard as done what ought to be
done, we find that Ryan was entitled to the proceeds as the
proper beneficiary of the policy, not the estate, and that the
respondent was without authority to use the proceeds for estate
expenses. See Smithberg, 192 Ill. 2d 291, 735 N.E.2d 560;
Lincoln National Life Insurance Co. v. Watson, 71 Ill. App. 3d
900, 390 N.E.2d 506 (1979).
A constructive trust may be imposed when one party receives
property belonging to another under circumstances in which the
receiver would be unjustly enriched if allowed to retain the
property. In re Estate of Wallen, 262 Ill. App. 3d 61, 633
N.E.2d 1350 (1994); Restatement of Restitution §160 (1937). When
a beneficiary's right to a policy's proceeds vests before the
insured changes the beneficiary, the court should impose a
constructive trust on the policy's proceeds to protect the
intended beneficiary's equitable, vested right. Perkins v.
Stuemke, 223 Ill. App. 3d 839, 585 N.E.2d 1125 (1992). As a
remedy, imposing a constructive trust requires any other party
who receives the insurance proceeds, but who has an inferior
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equitable right to them, to hold the proceeds solely for the
vested beneficiary. Perkins, 223 Ill. App. 3d 839, 585 N.E.2d
1125.
"The remedial character of the constructive trust is
brought out by Chief Judge Cardozo in several cases decided
by the Court of Appeals of New York.
'A constructive trust is the formula through which the
conscience of equity finds expression. When property has
been acquired in such circumstances that the holder of the
legal title may not in good conscience retain the beneficial
interest, equity converts him into a trustee.' Beatty v.
Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378(1919).
'A constructive trust is then the remedial device
through which preference of self is made subordinate to
loyalty to others.' Meinhard v. Salmon, 249 N.Y. 458, 467,
164 N.E. 545, 62 A.L.R. 1 (1928)." Restatement of
Restitution §160 (Supp. 1937).
By court order, Ryan had a vested interest in the proceeds of the
insurance policy superior to others.
Once the administrator was put on notice of the claim, and
so indicated had an inferior equitable right to the insurance
proceeds, the administrator had an obligation to hold the
proceeds solely for Ryan, the vested beneficiary. None of the
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facts in this case make the estate administrator's equitable
intent superior to the equitable intent of the claim. In a
probate proceeding, a claim founded upon an equitable theory,
such as constructive trust, is within the jurisdiction of the
court. Hobin v. O'Donnell, 115 Ill. App. 3d 940, 451 N.E.2d 30(1983); see also Wallen, 262 Ill. App. 3d 61, 633 N.E.2d 1350.
No formal pleading need be set forth as long as the claim states
sufficient information to describe the nature of the claim or the
relief sought. Sheetz v. Morgan, 98 Ill. App. 3d 794, 424 N.E.2d
867 (1981); see also In re Estate of Engel, 87 Ill. App. 3d 273,
408 N.E.2d 1134 (1980). The duty of the constructive trustee is
to transfer the insurance proceeds to the proper beneficiary.
See Smithberg, 192 Ill. 2d 291.
The petitioner argues that the circuit court erred when it
found that laches operated to bar her claim and motion for
constructive trust. We agree.
The defense of laches requires a showing that (1) a party
has exhibited an unreasonable delay in asserting a claim; and (2)
the opposing party has suffered prejudice as a result of the
delay. Tully v. State, 143 Ill. 2d 425, 574 N.E.2d 659 (1991);
see Restatement of Restitution §148 (1937). The doctrine of
laches is grounded in the principle that courts are reluctant to
come to the aid of a party who knowingly slept on rights to the
detriment of the other party. Tarin v. Pellonari, 253 Ill. App.
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3d 542, 625 N.E.2d 739 (1993). We review the circuit court's
application of laches for an abuse of discretion. Kurtz v.
Solomon, 275 Ill. App. 3d 643, 656 N.E.2d 184 (1995).
In this case, the circuit court abused its discretion when
it applied laches for several reasons. First, laches does not
apply to minors. Kurtz, 275 Ill. App. 3d 643, 656 N.E.2d 184.
Second, the respondent knew that Ryan was asserting his right to
the policy's proceeds when the petitioner timely filed the estate
claim. Accordingly, the respondent cannot now argue that the
one-year delay in filing the motion was prejudicial. See Tully,
143 Ill. 2d 425, 574 N.E.2d 659. Third, actions for a
constructive trust are subject to a five-year statute of
limitations. 735 ILCS 5/13--205 (West 2004); Frederickson v.
Blumenthal, 271 Ill. App. 3d 738, 648 N.E.2d 1060 (1995). For
these reasons, we find that the circuit court erred when it found
that laches applied to bar the petitioner's motion for a
constructive trust. We find nothing unreasonable about the
actions of the child's mother in filing a claim within a month
against the estate for the insurance proceeds, and then a year
later filing a constructive trust motion.
In this case, it is clear that the circuit court should have
granted the petitioner's motion for a constructive trust. See
Wallen, 262 Ill. App. 3d 61, 633 N.E.2d 1350; Perkins, 223 Ill.
App. 3d 839, 585 N.E.2d 1125. Because the claimant ought to be
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able to enforce his claim, the claimant made a sufficient showing
to require the administrator to sort out and account for the
insurance proceeds. See Wallen, 262 Ill. App. 3d 61, 633 N.E.2d
1350. On appeal, the respondent has indicated that the policy's
proceeds have been spent, possibly in whole. On remand, the
circuit court must determine what is left in the estate and what
must be done about Ryan's right to immediate possession and
ownership of the res, and to fashion an appropriate and just
remedy. See Wallen, 262 Ill. App. 3d 61, 633 N.E.2d 1350; see
also Sadacci v. Monhart, 128 Ill. App. 3d 250, 470 N.E.2d 589(1981).
The judgment of the circuit court of Rock Island County is
reversed, and the cause is remanded for proceedings consistent
with this decision.
Reversed and remanded.
LYTTON, P. J. and HOLDRIDGE, J. concur.
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