Contestant does not appear. Contestant loses

They say half of life is showing up.  That is demonstrated by a case out of Nevada. In Thrivent Financial for Lutherans, Nevada federal district court Judge Mahan considered a beneficiary dispute where one of the contestants did not show up in court.  Not surprisingly, that contestant lost. 

The decedent had designated her husband as beneficiary of two life insurance policies.  They subsequently divorced.  The divorce was in California. The divorce decree did not mention the life insurance policies.  

Decedent's Executor challenged policy payouts to the former husband. The Executor contended that the designations in favor of the former husband were revoked by operation of Nevada law.

The life insurance company filed the interpleader and served both the former husband and the Executor with the lawsuit.  The former husband hired a lawyer and appeared in the lawsuit. The Executor did not appear.  The former husband filed a motion for default judgment.

The court noted that it is typically the plaintiff who files for a default judgment.  But an interpleader case is different than the normal lawsuit.  In an interpleader, the plaintiff is a holder of funds who is uncertain as to the proper recipient. In this circumstance, it is proper for one defendant who is seeking the policy proceeds to seek a default against another defendant who is seeking the proceedings, but who does not answer and appear. 

The court then noted:

The choice whether to enter a default judgment lies within the discretion of the court. In the determination of whether to grant a default judgment, the court should consider the seven factors set forth in Eitel: (1) the possibility of prejudice to plaintiff if default judgment is not entered; (2) the merits of the claims; (3) the sufficiency of the complaint; (4) the amount of money at stake; (5) the possibility of a dispute concerning material facts; (6) whether default was due to excusable neglect; and (7) the policy favoring a decision on the merits. In applying the Eitel factors, “the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.’

The court granted the default judgment and awarded the benefits to the former husband.  But not before the judge provided a concise analysis of the the deciding issue.  The court noted that Nevada law revoked life insurance designations in this circumstance.  California law did not include such a revocation provision. 

The Court decided that California law applied in this situation:

The court holds that California law applies to this dispute. Bloomquist and decedent were divorced in California, and the divorce decree was entered pursuant to California law. Further, the divorce decree states that each party is aware of Family Code Section 2024, which states, in relevant part, ‘[d]issolution or annulment of your marriage ... does not automatically cancel your spouse’s rights as beneficiary of your life insurance policy. If these are not the results that you want, you must change your will, trust, account agreement, or other similar document to reflect your actual wishes.’ Finally, decedent did not move to Nevada until well after the divorce was finalized in California.

This conclusion seems reasonable given the record available to the court.  Perhaps the Executor would have lost even if he had appeared in the interpleader dispute.  But by not showing up, he did not give himself much of a chance. 

J. Michael YoungComment