Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 86-2959.
In this interpleader action we are called upon to determine which party is entitled to the proceeds of a life insurance policy purchased after the separation but before the divorce of Thomas and Martha Bammer. We conclude that under Pennsylvania law the children of the decedent and not the named beneficiary are entitled to the proceeds of the policy in this case. We will, therefore, affirm the decision of the district court.
Martha Bammer and Thomas Bammer, Jr. were married in 1971. They had two children, Thomas III and Samantha. After several separations and reconciliations they were finally separated in November, 1981. In February, 1982 Mr. Bammer filed for divorce in the Court of Common Pleas of Lehigh County, Pennsylvania and Mrs. Bammer filed an answer and counterclaim. In March, 1984, Mr. Bammer filed an inventory and appraisement of property. That inventory listed three life insurance policies not at issue here, but did not include the policy which is in issue as it had not yet been purchased.
Pursuant to Pennsylvania law a Report of Master and Examiner was filed on March 11, 1985 which included the following recommendation:
Each party shall retain his or her respective life insurance policies except that the Plaintiff-Husband shall designate the minor children as irrevocable beneficiaries in equal shares, on his current policies of life insurance. Additionally, should the Plaintiff-Husband receive as an employee benefit any group life insurance plan from his present or future employers, he shall designate the minor children as irrevocable beneficiaries in equal shares.
Approximately four months later, on July 24, 1985 Mr. Bammer applied to SMA Life Assurance Company ("SMA") for a policy insuring his life and was issued policy No. L328,640 in the amount of $50,000.00. The beneficiary of this policy was Mary Ann Piller ("the beneficiary"), the woman with whom Bammer was living. It is undisputed that this policy's premium was paid for by Mr. Bammer and Ms. Piller.
On November 22, 1985 a Divorce Decree ending Mr. and Mrs. Bammer's marriage was entered in the Court of Common Pleas of Lehigh County, Pennsylvania. The decree provided, in regard to insurance policies, that:
[Mr. Bammer] shall designate his two minor children as irrevocable beneficiaries on his present policies of life insurance. However, [he] shall not be required to designate any specific beneficiary on any policy of insurance which he may obtain in the future.
(Emphasis added.) The court at that time had no knowledge of the existence of the SMA policy. Mr. Bammer took no appeal from the final decree of the Common Pleas Court.
Thomas Bammer, Jr. died on February 23, 1986 and SMA instituted an interpleader action on May 1, 1986 in the United States District Court for the Eastern District of Pennsylvania to determine the beneficiary of the policy. The district court granted SMA's motions for summary judgment and SMA was released from the case. The district court determined that the state court had the authority to order the beneficiary designation of this policy and that since the policy was a "present" (i.e., existing) policy at the time of the Divorce Decree, the proceeds of the policy should go to the children, Thomas III and Samantha. The district court also entered an order governing the management of the proceeds and income of the policy during the minority of the Bammer children. This appeal by Mary Ann Piller followed.
We conclude that (1) the relevant state statute conferred upon the Court of Common Pleas the power to require Mr. Bammer to designate his children as the beneficiaries of the disputed policy, (2) that court in fact exercised this power, and (3) the applicable state law accordingly ...