Sherry R. Fallon, United States Magistrate Judge.
The plaintiff, Christopher L. Pedrick ("Plaintiff"), brought this action seeking legal and equitable relief to obtain a two-thirds distribution of the proceeds of an annuity account maintained by defendant, TIAA-CREF Individual and Institutional Services, LLC ("TIAA-CREF"). (D.I.59) Plaintiff and his two daughters, defendants Katherine Roten ("Roten") and Jessica Pedrick ("Pedrick"), are the beneficiaries of the annuity contract. TIAA-CREF distributed the proceeds of the account in equal one-third shares to Plaintiff, Roten and Pedrick in accordance with the original beneficiary designation made by decedent Nancy T. Pedrick, Plaintiff's mother. Prior to her death, Nancy Pedrick attempted to change the beneficiary of the annuity account. TIAA-CREF did not implement the change. Plaintiff sued TIAA-CREF for breach of contract, and Roten and Pedrick for unjust enrichment. (D.I.59)
Based on the findings of fact and conclusions of law below,
Plaintiff initiated this action on December 12, 2011, seeking imposition of a constructive trust over the annuity proceeds, reformation of the annuity beneficiary designation, and recovery of damages against Roten and Pedrick for unjust enrichment. (D.I.1) Plaintiff also asserted claims against TIAA-CREF for negligence and breach of contract. (Id.) Plaintiff sought judgment against TIAA-CREF and the individual defendants, jointly and severally, for compensatory damages. (Id.) On January 20, 2012, Roten and Pedrick filed cross-claims against TIAA-CREF for negligence. (D.I 8; D.I. 9)
Roten and Pedrick filed a Motion for Judgment on the Pleadings on February 3, 2012. (D.I.13) On February 24, 2012 TIAA-CREF joined the co-defendants' Motion, and filed its own Motion for Partial Judgment on the Pleadings. (D.I. 19; D.I. 20) All parties signed a stipulation on March 13, 2012, dismissing with prejudice Count III (negligence) of the complaint. (D.I.22) Thereafter, on May 7, 2012, Plaintiff filed a Motion for Leave to File an Amended Complaint ("Motion to Amend"). (D.I.24)
On September 5, 2012, the court held oral argument on the Defendants' motions for judgment on the pleadings and Plaintiff's Motion to Amend. On January 29, 2013, the court entered a Memorandum Opinion granting in part the Defendants' motions for judgment on the pleadings, and granting Plaintiff's Motion to Amend. See Pedrick v. Roten, 2013 WL 351667, at *1 (D.Del. Jan. 29, 2013). (See also D.I. 58)
Pedrick v. Roten, 2013 WL 351667, at *11. Plaintiff filed his First Amended Complaint on January 30, 2013. (D.I.59)
On February 5, 2013, the court held a pretrial conference, wherein the parties elected to present this matter to the court through briefing in lieu of trial. The parties submitted a Revised Proposed Pretrial Order on February 11, 2013 (D.I.60), which the court subsequently entered on February 14, 2013. On March 15, 2013, the parties filed a Joint Appendix, including a statement of undisputed facts. (D.I.63, Ex. Al) On April 19, 2013, the parties stipulated to a modified briefing schedule, with briefing to be completed by May 6, 2013. (D.I.64) On August 5, 2013, the court held oral argument on the briefing on the merits.
This is the decision on the merits based on the briefs and oral argument.
1. Nancy T. Pedrick (the "Decedent") was Plaintiffs mother, and grandmother of defendants Roten and Pedrick. (D.I. 63, Ex. Al ¶ 2)
2. On July 21, 2005, the Decedent executed a last will and testament (the "Will")
3. On September 7, 2010, the Decedent revised her estate plan by executing a codicil to the Will (the "Codicil") (id., Ex. A6) and an amendment to the Trust (the "Trust Amendment") (id., Ex. A7). The Codicil directed a distribution of the Decedent's tangible personal property equally between Roten and Pedrick. (Id., Ex. A6) The Trust Amendment altered the Trust's distribution ratio such that Plaintiff would receive two-thirds (2/3) of the Trust assets, and Roten and Pedrick would split the remaining one-third (1/3) of the assets. (Id., Ex. A7)
4. At all times relevant to this matter, the Decedent held an annuity account with TIAA-CREF. (Id., Ex. Al ¶ 1) Under the terms of the annuity contract, the Decedent had the right to change the beneficiary of the annuity proceeds "by written notice satisfactory to TIAA." (Id., Ex. A12 at 100) The contract further provided that a change of beneficiary would "take effect as of the date it was signed, whether or not the signer is living at the time we [TIAA-CREF] receive it." (Id.)
5. Consistent with the Trust's original dispositional scheme, the Decedent initially listed Plaintiff, Roten, and Pedrick as equal one-third beneficiaries of the annuity account. (Id., Ex. Al ¶ 10) In accordance with her revised estate plan, however, the Decedent sought to change the annuity account beneficiary to the Trust entity (as amended), so that Plaintiff would receive two-thirds of the annuity account proceeds, and Roten and Pedrick would split the remaining one-third of the proceeds. (See id., Ex. A2)
6. On October 16, 2010, the Decedent attempted to carry out the beneficiary change by executing a beneficiary designation form ("Beneficiary Designation"). (Id., Exs. Al ¶ 11, A2) The form was preprinted by TIAA-CREF and was the standard change-of-beneficiary form for the type of annuity contract in issue. (See id., Exs. Al ¶ 12, A29 at 452)
7. The Decedent properly completed Sections 1 and 2 of the Beneficiary Designation. (Id., Ex, A2)
8. Section 3 of the Beneficiary Designation is entitled "CHOOSE YOUR BENEFICIARIES... Tell us who should receive your account balance after your death." (Id.) Section 3 includes a blank box with the following instructions; "Check this box and attach a signed and dated page, to list additional primary and/or contingent beneficiaries, a trust, or to provide additional instructions." (Id.) Below the box are spaces designated for information for two primary and two contingent beneficiaries. (Id.) The categories of information include: first name, middle initial, last name, social security number/tax identification number, date of birth, percentage, relationship, and gender. (Id.)
9. The Decedent drew a check in the box, and left blank the spaces designated for primary and contingent beneficiary information. (Id.) The Decedent attached a copy of the Trust Amendment to the Beneficiary Designation. (Id.) The Trust Amendment included the Decedent's signature, the dates of the Trust and Trust Amendment, dispositional instructions, the beneficiaries' first names and their respective relationships to the Decedent. (Id.,
10. The Decedent passed away on October 19, 2010. (Id., Ex. A1 ¶ 16)
11. On October 21, 2010, Plaintiff notified TIAA-CREF via telephone that the Decedent had passed away. (Id., Ex. A29 at 447-49)
12. On October 22, 2010, TIAA-CREF received the Decedent's Beneficiary Designation. (Id., Ex. ¶ 17)
13. On November 1, 2010, TIAA-CREF's Beneficiary Services department sent a letter to the Decedent's address explaining that it was unable to process the requested beneficiary change:
(Id., Exs. A3, A29 at 461-62)
14. Sometime in early November 2010, Plaintiff discovered TIAA-CREF's letter addressed to the Decedent,
15. This put Plaintiff in a difficult position. Plaintiff was aware of the Trust Amendment and revised distribution of the Trust assets. (Id., Ex. A25 at 255-57) Plaintiff was also aware of the Decedent's attempt to change the beneficiary of the annuity account, by virtue of TIAA-CREF's letter requesting information about the Beneficiary Designation. (Id., Ex. A25 at 246-68) Yet, because TIAA would not disclose the annuity account beneficiary, Plaintiff was concerned that submitting the Decedent's death certificate could prevent him from receiving the correct distribution of annuity proceeds, assuming the wrong beneficiary information was on file.
16. TIAA-CREF explained to Plaintiff that it could delay distribution of the account proceeds "for [ten] days" if it received written notice from the executor of the Decedent's estate directing TIAA-CREF to withhold the proceeds. (Id., Ex. A25 at 258) Following the ten-day period, however, TIAA-CREF would require a "court order" to stop the distribution of
17. On November 8, 2010, Plaintiff sent TIAA-CREF several documents, including a copy of the Decedent's death certificate, and a letter that stated, in relevant part: "[P]lease stop all distributions.... There may be litigation due to intended changes [to the annuity account beneficiary] that were not applied before the untimely death of my mother." (Id., Ex. A19 at 166-70)
18. TIAA-CREF subsequently advised Plaintiff that its legal department would not accept the Beneficiary Designation (see id., Ex. A14 at 138), and that the annuity proceeds would be distributed in equal, one-third shares between Plaintiff, Roten and Pedrick, pursuant to the original designation. (Id., Exs. A25 at 232-34, A21 at 208)
19. Plaintiff notified TIAA-CREF that he disputed its proposed distribution of the annuity account proceeds prior to the distribution being made to the beneficiaries. (Id., Ex. Al ¶ 19; see also id., Ex. A19 at 167, Ex. A25 at 228-29, 235-36, 241-42, 251-52, 256-57, 259-61, 276-78) Plaintiff also notified Roten and Pedrick that he disputed TIAA-CREF's proposed distribution of the proceeds. (Id., Ex. Al ¶ 20)
20. On Friday, January 7, 2010, TIAA-CREF advised Plaintiff that it had received account distribution forms from Roten and Pedrick, and would begin settlement of the annuity account the following Monday, unless Plaintiff provided a "restraining order" before then. (See D.I. 63, Ex. 21 at 208-09; id., Ex. 25 at 221)
21. TIAA-CREF ultimately distributed the annuity account proceeds in equal one-third shares to Plaintiff, Roten and Pedrick, despite Plaintiff's repeated protests. (Id., Ex. Al ¶ 21)
As a preliminary matter, it is necessary to address the fact that Plaintiff was not a contracting party to the annuity contract between the Decedent and TIAA-CREF before reaching the merits of Plaintiff's breach of contract claim. "It is well settled in Delaware that a third-party may recover on a contract made for his benefit.... But in order for there to be a third party beneficiary, the contracting parties must intend to confer the benefit." Pierce Assoc., Inc. v. Nemours Found., 865 F.2d 530, 535 (3d Cir.1988) (quoting Ins. Co. of North America v. Waterhouse, 424 A.2d 675, 679 (Del.Super.1980)). Specifically,
Delmar News, Inc. v. Jacobs Oil Co., 584 A.2d 531, 534 (Del.Super.Ct.1990) (citing Restatement (Second) of Contracts § 302 (1981)). On the other hand, where "the parties to the contract did not intend to benefit the third-party but the third-party happens to benefit from the performance of the contract either indirectly or coincidentally, such third person has no rights under the contract." Id. (citing Insituform of North America, Inc. v. Chandler, 534 A.2d 257, 269 (Del.Ch.1987)).
There are generally three categories of third party beneficiary status: creditor beneficiary, donee beneficiary (also called intended beneficiary
Here, Plaintiff is an intended beneficiary of the annuity contract because the Decedent intended to secure performance of a promised act — the payment of annuity proceeds — for the benefit of Plaintiff (among others), and made a contract with TIAA-CREF to do so. Thus, Plaintiff has standing to enforce the annuity contract.
In order to establish a claim for breach of contract, a plaintiff must demonstrate: (1) the existence of a contract; (2) the breach of an obligation imposed by the contract; and (3) resulting damages. VLIW Tech., L.L.C. v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del.2003).
The parties do not dispute the existence of a valid annuity contract between the Decedent and TIAA-CREF. As to the second element, Plaintiff contends that TIAA-CREF breached the annuity contract by improperly rejecting the Beneficiary Designation because the Decedent "complied with the requirements set forth by TIAA-CREF to effectuate a change of beneficiary ..., or alternatively, substantially complied with such requirements." (See D.I. 59 ¶ 26; D.I. 67 at 1) At its essence, Plaintiff's argument is that TIAA-CREF failed to distribute the annuity account proceeds in accordance with the contract, as modified by the Beneficiary Designation. Consequently, Plaintiff's breach of contract claim turns on the issue of whether the Beneficiary Designation effectively changed the beneficiary of the annuity contract. If so, then TIAA-CREF distributed the annuity account proceeds improperly, and Plaintiff is entitled to damages because he did not receive the entire amount due to him under the contract. On the other hand, if the Beneficiary Designation was ineffective, then TIAA-CREF properly distributed the annuity account proceeds, and Plaintiff's breach of contract claim fails.
The court finds that the Beneficiary Designation effectively accomplished a change of beneficiary because the Decedent strictly complied with the contractual requirements to complete the change,
The Decedent complied with the "written notice" requirement by executing the Beneficiary Designation and submitting it to TIAA-CREF, The notice was in writing (both typewritten and handwritten) on a form prepared by TIAA-CREF, and designated the Trust as the new beneficiary of the annuity account. (See id., Ex. A2)
The Decedent's intent to designate the Trust as the beneficiary is apparent from the manner in which she completed the Beneficiary Designation. The instructions in Section 3 of the form
(Id., Exs. A2, A7) The Amendment of Trust, when considered as an attachment in the context of the Beneficiary Designation's instructions, represents "a signed and dated page" that "list[s] ... a trust." (Id., Ex, A2) Thus, the Decedent intended to change the beneficiary of the annuity account to the Trust.
The court is not persuaded by TIAA-CREF's arguments that the Decedent's intent is unclear, and the form is incomplete, both of which are based on the fact that the Decedent did not fill in part of Section 3 in the Beneficiary Designation.
Turning to the second part of the change-of-beneficiary provision, TIAA-CREF argues that the phrase "satisfactory to TIAA" reserves a contractual right for it to exercise discretion in approving beneficiary changes.
The court disagrees with TIAA-CREF's assertion, and finds that the language is ambiguous.
The phrase "satisfactory to TIAA" in the context of "written notice" is ambiguous in two ways. First, construing the provision raises the question of what must be satisfactory to TIAA-CREF. It is not clear whether "satisfactory to TIAA" means "written notice [in a form] satisfactory to TIAA" or "written notice [substantively] satisfactory to TIAA." This distinction is particularly relevant here, in light of the fact that TIAA-CREF provides contract holders with preprinted forms to change beneficiaries. (See D.I. 63, Exs. A2, A29 at 452-55) Furthermore, the annuity contract defines "Beneficiaries" as "the persons you name, in a form
The other ambiguous aspect of the provision relates to discretion. In one respect, "written notice satisfactory to TIAA" confers no discretion, since the phrase could be construed as simply stating the truism that TIAA-CREF is the party who initially must be notified of a change of beneficiary before any change to the contract actually is made. See generally Cosey v. Prudential Ins. Co. of Am., 735 F.3d 161, 166 (4th Cir.2013); Herbert v. Prudential Ins. Co. of Am., 2014 WL 4186553, at *2 (E.D.Pa. Aug. 22, 2014).
Alternatively, "written notice satisfactory to TIAA" could be interpreted to mean that, subject to the implied covenant of good faith and fair dealing,
A third reading of "written notice satisfactory to TIAA" applies "satisfactory" to whether the written notice is adequate to accomplish a change of beneficiary, but construes the word "satisfactory" as objective rather than subjective. See Restatement (Second) of Contracts § 228 (1981) (Where a contract contains a condition that the obligor be "satisfied," "and it is practicable to determine whether a reasonable person in the position of the obligor would be satisfied, an interpretation is preferred under which the condition occurs if such a reasonable person in the position of the obligor would be satisfied.").
There are several fair readings of the provision with quite different consequences and, therefore, the phrase is inherently ambiguous. In resolving the ambiguity, the court considers two rules of construction under Delaware contract law. First, where an insurance contract is ambiguous, "the doctrine of contra proferentem requires that the language ... be construed most strongly against the insurance company that drafted it." Rhone-Poulenc, 616 A.2d at 1196 (citing Steigler v. Ins. Co. of N. Am., 384 A.2d 398, 400 (Del.1978)). The policy behind this principle is that the insurer is the entity in control of the process of articulating the contractual terms. See Penn Mut. Life Ins. Co. v. Oglesby, 695 A.2d 1146, 1150 (Del.1997). Therefore, "[i]t is the obligation of the insurer to state clearly the terms of the policy." Id. at 1149. Second, "`an insurance contract should be read to accord with the reasonable expectations of the purchaser so far as the language will permit.'" Steigler, 384 A.2d at 401 (quoting
Applying these principles, the court holds that "written notice satisfactory to TIAA" does not alert the contract holder to the possibility that TIAA-CREF may arbitrarily deny a change of beneficiary simply because it is not personally satisfied with every aspect of the written notice supporting the change.
Annuity contracts, such as the one in issue, are typically executed on a strictly commercial basis and, thus, TIAA-CREF has no interest as to whom a contract holder designates as beneficiary, except to protect itself against duplicate liability. Here, TIAA-CREF certainly had the opportunity to protect itself by interpleading the funds with the court, so that the court could properly have determined the respective apportionment, and distributed the annuity proceeds accordingly. Instead, TIAA-CREF acted at its own risk by erroneously deciding that the Decedent had not effectively changed the beneficiary of the contract.
In sum, the court holds that the Decedent strictly complied with all of the requirements to change the beneficiary of the annuity contract to the Trust, and the Beneficiary Designation effectively accomplished that change.
The doctrine of equitable estoppel may be invoked "when a party by
In the present case, TIAA-CREF contends that Plaintiff is "estopped from recovery" because he "acquiesced to TIAA's distribution." (D.I. 65 at 14) TIAA-CREF's argument is based on the notion that Plaintiff "ignore[d] TIAA's repeated reminders to enjoin distribution of the Annuity Account," and "completed and submitted distribution forms to TIAA requiring it to distribute the Annuity Account based on the original distribution scheme." (Id.)
TIAA-CREF's argument is unpersuasive, for several reasons. First, even though Plaintiff could have obtained a court order to enjoin the distribution, he was not obligated (contractually or otherwise) to do so. TIAA-CREF has not pointed to any provision in the annuity contract requiring a beneficiary to obtain a court order to prevent TIAA-CREF from distributing disputed proceeds. Moreover, TIAA-CREF was equally capable of filing, and perhaps in a better position to file, an interpleader action. Indeed, TIAA-CREF is a financial services organization in the business of insurance and annuities.
TIAA-CREF's assertion that Plaintiff "acquiesced" to the distribution because he completed distribution forms is an unfair "gotcha" argument. TIAA-CREF required Plaintiff to complete the distribution forms in order to receive the funds, yet it now claims that Plaintiff is precluded from seeking additional funds because he completed the forms. Under any set of circumstances, Plaintiff was eligible for a one-third distribution at a minimum and was required to complete the forms to receive it. Receipt of the undisputed one-third share does not prejudice Plaintiff from pursuing a claim for an additional one-third share.
Furthermore, it must be noted that Plaintiff expressly notified TIAA-CREF in writing that "[t]here may be litigation due to intended changes [to the annuity contract] that were not applied."
(Id. Ex. A25 at 228-29) Consequently, there is no merit to TIAA-CREF's argument that Plaintiff's recovery is barred under the doctrine of estoppel.
"Unjust enrichment is defined as `the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.'" Schock v. Nash, 732 A.2d 217, 232 (Del.1999) (quoting Fleer Corp. v. Topps Chewing Gum, 539 A.2d 1060, 1062 (Del.1988)). A party claiming unjust enrichment must prove: "`(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) the absence of justification and (5) the absence of a remedy provided by law.'"
"Courts developed unjust enrichment, or quasi-contract, as a theory of recovery to remedy the absence of a formal contract." ID Biomedical Corp. v. TM Techs., 1995 WL 130743, at *15 (Del. Ch. Mar. 16, 1995) (citing Freedman v. Beneficial Corp., 406 F.Supp. 917, 923 (D.Del.1975)).
In the present case, Plaintiff, Pedrick and Roten are third party beneficiaries to the annuity contract between the Decedent and TIAA-CREF, and the contract is the measure of Plaintiffs right. Because Plaintiff has sought, and obtained, a legal remedy against TIAA-CREF, by prevailing on his breach of contract claim, he cannot (and has no need to) seek a remedy for unjust enrichment. See Seihold v. Camulos Partners LP, 2012 WL 4076182, at *22 (Del. Ch. Sept. 17, 2012); see also 12-66 Corbin on Contracts § 66.10 (2014) (explaining that "[e]xpectancy damages and restitution will not ordinarily be given as concurrent remedies for the same injury, although they may be pleaded as alternatives").
"Interest is awarded in Delaware as a matter of right and not of judicial discretion." Moskowitz v. Wilmington, 391 A.2d 209, 210 (Del.1978) (citations omitted). A plaintiff is entitled to recover prejudgment interest for a breach of contract claim pursuant to 6 Del. C. § 2301. See Brandywine Smyrna, Inc. v. Millennium Builders, LLC, 34 A.3d 482, 485-87 (Del.2011).
Pursuant to 28 U.S.C. § 1961, a party is entitled to postjudgment interest on any money judgment in a civil case recovered in a district court from the date of entry. 28 U.S.C. § 1961(a) (2014). Thus, Plaintiff is entitled to postjudgment interest beginning on the date of this judgment to the date of full payment.
Plaintiff seeks attorney's fees in his Complaint. (D.I. 59 at 6) In legal actions in Delaware, attorney's fees will not be awarded "unless clearly provided for by statute or contract." Honaker v. Farmers Mut. Ins. Co., 313 A.2d 900, 904
The Court will enter a final judgment as follows:
The parties are directed to submit a form of order consist with the court's Opinion outlining the total amount due to Plaintiff, including prejudgment and postjudgment interest. An appropriate order shall issue.
At Wilmington this 29th day of
(D.I. 63, Ex. A2 at 3-4 (emphasis added))
