Simonds v. Simonds, 45 N.Y.2d 233 (1978)

A separation agreement requiring a party to maintain life insurance for the benefit of a former spouse creates an equitable interest in existing and subsequently acquired policies, which can be enforced through a constructive trust even if the named beneficiary is someone else.

Summary

Mary Simonds, the decedent’s first wife, sought to impose a constructive trust on life insurance proceeds paid to Reva Simonds, the decedent’s second wife, and their daughter. The separation agreement between Mary and the decedent required him to maintain life insurance policies with Mary as the beneficiary for $7,000. After the original policies lapsed, the decedent obtained new policies naming Reva and their daughter as beneficiaries. The court held that Mary had an equitable interest in the original policies that extended to the substituted policies, justifying a constructive trust on the proceeds paid to Reva, who was unjustly enriched by the decedent’s breach of the separation agreement. This secured the promised benefit to the first wife despite the decedent’s non-compliance.

Facts

Decedent Frederick Simonds and plaintiff Mary Simonds entered into a separation agreement in 1960, incorporated into their divorce decree, requiring Frederick to maintain existing life insurance policies, with Mary as the beneficiary to the extent of $7,000.
Frederick remarried Reva Simonds shortly after the divorce. The original insurance policies lapsed or were canceled at some point after the separation agreement. Frederick acquired three new life insurance policies totaling over $55,000, naming Reva and their daughter Gayle as beneficiaries.
At the time of Frederick’s death in 1971, he had failed to maintain any life insurance with Mary as a beneficiary, violating the separation agreement.

Procedural History

Mary Simonds initially sued Reva Simonds for conversion and back alimony; this action was dismissed. She then brought this action against Reva and Gayle Simonds, seeking to impose a constructive trust on the insurance proceeds. Special Term granted partial summary judgment to Mary, imposing a constructive trust on the proceeds in Reva’s hands. The Appellate Division affirmed.

Issue(s)

Whether a separation agreement requiring a spouse to maintain life insurance for the benefit of the other spouse creates an equitable interest in subsequently issued insurance policies, even if the former spouse is not named as the beneficiary on the new policies, such that a constructive trust can be imposed on the proceeds when paid to a different beneficiary.

Holding

Yes, because the separation agreement vested in the first wife an equitable right in the then-existing policies, and the substitution of policies could not deprive the first wife of her equitable interest, which was then transferred to the new policies. Since the proceeds of the substituted policies have been paid to decedent’s second wife, whose interest in the policies is subordinate to plaintiff’s, a constructive trust may be imposed.

Court’s Reasoning

The Court of Appeals reasoned that the separation agreement created an equitable interest in the original insurance policies for Mary’s benefit. This equitable interest persisted even when the original policies were replaced with new ones. The court emphasized that “an agreement for sufficient consideration, including a separation agreement, to maintain a claimant as a beneficiary of a life insurance policy vests in the claimant an equitable interest in the policies designated.” This interest is superior to that of a named beneficiary who has given no consideration.

The court found that Frederick’s failure to maintain the insurance policy constituted a breach of the separation agreement. Although a legal action against the insolvent estate would be fruitless, equity could provide relief. The court invoked the principle that “equity regards as done that which should have been done,” meaning that Frederick’s obligation to name Mary as beneficiary on the new policies would be enforced in equity.

The court addressed the concern that the new policies were not direct replacements for the old ones, stating that the separation agreement itself provided the necessary “nexus” between Mary’s rights and the later-acquired policies. The court also highlighted the concept of unjust enrichment, noting that the second wife and daughter were unjustly enriched because they received proceeds that Mary would have received had Frederick kept his promise. “What is required, generally, is that a party hold property ‘under such circumstances that in equity and good conscience he ought not to retain it.’”

Notably, the court acknowledged that other jurisdictions had decided similar cases differently, but it criticized those decisions for relying too heavily on “formalisms” and not enough on “basic equitable principles.”