Present: All the Justices
LUCY WILLS HARRISON JONES, ET AL.
v. Record No. 941229 OPINION BY JUSTICE HENRY H. WHITING
June 9, 1995
MARY DONNAN TODMAN HARRISON, ETC.
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
Frederick B. Lowe, Judge
In this appeal, we decide whether the provisions of a
property settlement and support agreement entitle a decedent's
children of a former marriage to impose a constructive trust upon
part of the proceeds of his life insurance policies payable to
the decedent's second wife.
John Burton Harrison, Jr., (Harrison) and his wife, Lucy
Boyd Harrison, were divorced on February 24, 1971. At that time,
they had three minor children, Lucy Wills Harrison, born July 18,
1955, Lewellen Thurman Harrison, born December 11, 1957, and John
Burton Harrison, III, born July 31, 1959. 1
The final divorce decree incorporated a property settlement
and support agreement between the parties as contained in a
contract and stipulation dated February 5, 1971 (the contract).
Paragraph seven of the contract stated:
Husband is presently the grantor of a revocable
unfunded life insurance trust agreement pursuant to
which the proceeds of certain life insurance policies
or contracts insuring his life are payable upon his
death to Fidelity National Bank, as Trustee under said
Agreement, to be held and administered for the
1
Harrison's daughters, Lucy and Lewellen, later married and
took the last names of their husbands, respectively Jones and
Simek.
beneficiaries named in said Agreement at the time of
Husband's death. Husband agrees either to continue
said trust agreement in effect changing the
beneficiaries thereunder to the children and to keep
said life insurance policies in full force and effect
or to simply make the children beneficiaries of said
policies, whichever he may elect, from time to time.
Nothing contained herein shall limit or restrict
Husband's right to alter, amend or revoke said trust
agreement, except that should he elect to remove Wife
as a beneficiary thereof, he must make the children
beneficiaries thereof. However, he may provide that
the children's shares will be held as a single fund by
the Trustee until the youngest child reach[es]
twenty-five.
In November 1971, nine months after the divorce, Harrison
modified the trust agreement provisions relating to the payment
of the insurance proceeds upon his death in the following
respects:
1. He eliminated the provisions for his former wife and
provided that each child would be entitled to receive $220 per
month from the proceeds of his life insurance policies until
reaching the age of 21, but directed that those monthly payments
continue while that child was in an "accredited school."
However, all payments to that child were to cease when the child
reached the age of 25. These support provisions for the children
were substantially the same as those in Harrison's contractual
support agreement.
2. Harrison directed that the trustee pay $150 per month to
each of his parents for their respective lives.
3. Harrison directed that the trust terminate on January 1,
1984, more than seven months prior to the time that John Burton
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Harrison, III, would attain the age of 25 on July 31, 1984, and
that the trust assets be paid, one-half to the plaintiffs and the
other half to Harrison's "legal wife." Harrison married the
defendant, Mary Donnan Todman, in 1972.
In January and February 1984, Harrison canceled all the
policies listed in the trust agreement, the face amounts of which
aggregated $70,000. However, Harrison obtained other life
insurance policies in which he named the defendant as
beneficiary. When Harrison died on August 10, 1991, the net
proceeds of those policies aggregating $553,805 were paid to the
defendant.
Harrison's estate was insolvent upon his death; debts and
claims totalled $433,225, and assets available to pay those debts
and claims totalled $195,592.63. Asserting rights under
paragraph seven of the contract, Harrison's three children by his
marriage to Lucy Boyd Harrison sued the defendant in her
individual capacity and as executrix of Harrison's estate. The
children claimed that Harrison breached the contract and, among
other remedies requested, sought to impose a constructive trust
upon $70,000 of the life insurance proceeds and a money judgment
against the estate and the defendant individually.
The court referred the issues to a commissioner in chancery,
who heard the evidence. The defendant successfully persuaded the
commissioner (1) that Harrison had not breached the contract
because his insurance obligations under paragraph seven of the
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contract continued only for a "reasonable time," which, the
commissioner held, was the period in which Harrison was legally
obligated to support the children under the agreement, and (2)
that even if Harrison had breached the contract, a constructive
trust could not be imposed upon the life insurance proceeds in
the defendant's hands since she had nothing to do with Harrison's
breach.
Overruling the plaintiffs' exceptions to the commissioner's
report, the trial court agreed with the defendant's first
contention and did not address her second contention. The
plaintiffs appeal.
The plaintiffs contend that since the contract provided no
earlier termination date for Harrison's insurance obligation, it
continued until his death. The defendant asserts the same
contentions in this appeal as she did in the trial court. 2
In support of her claim that the contract must be construed
to require Harrison to provide life insurance benefits to his
2
In neither the trial court nor this Court did the parties
address the effect of the provision in paragraph seven that
"[n]othing contained herein shall limit or restrict Husband's
right to alter, amend or revoke said trust agreement, except that
should he elect to remove Wife as a beneficiary thereof, he must
make the children beneficiaries." Accordingly, we do not
consider the effect of this provision.
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three children for a "reasonable time," the defendant observes
other provisions in the contract referring to Harrison's
obligation to support his "minor children." From this
observation, defendant concludes that a "reasonable time" had
passed when Harrison canceled the insurance policies described in
the contract. There are two flaws in this contention.
First, the contract makes specific provision for Harrison's
right to require that the children's shares be held as a single
fund until the youngest child reaches the age of 25. Thus, it
contemplates that Harrison's insurance obligation would continue
beyond the children's minorities. The second flaw is that
Harrison's contract indicates that the performance of his
insurance obligation terminated at his death, no earlier time
having been specified. And, if a time is specified in a contract
for the performance of an act, we do not imply a promise to
perform at an earlier and possibly more reasonable time. See
Galloway Corp. v. Wise, 244 Va. 344, 346 n.*, 421 S.E.2d 431, 433
n.* (1992).
Although the defendant argues that it would be unreasonable
to assume that Harrison had agreed to provide this insurance
coverage to his children if he had lived to be 90 years old, the
contract contains no such limitation. And, we have stated on a
number of occasions that we do not rewrite contracts to insert
provisions that have been omitted by the parties. Westbury Coal
Mining Partnership v. J. S. & K. Coal Corp., 233 Va. 226, 229,
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355 S.E.2d 571, 572-73 (1987); Lipps v. First American Serv.
Corp., 223 Va. 131, 139, 286 S.E.2d 215, 220 (1982). Indeed, in
one case we indicated that we would not circumvent this principle
by construing contracts without termination dates to imply a
reasonable time for its period of performance. Plaskitt v. Black
Diamond Trailer Co., 209 Va. 460, 467-68, 164 S.E.2d 645, 650-51
(1968) (service contract with no fixed period deemed contract
terminable at will).
We think that the contractual provisions required Harrison
to maintain the life insurance coverage described therein for the
balance of his life. Hence, we conclude that Harrison breached
the contract by canceling that coverage.
Next, the defendant notes that even if Harrison had breached
the contract, two of what she contends are essential requirements
for the imposition of a constructive trust are missing in this
case. The defendant claims that the plaintiffs were required to
prove (1) that Harrison's wrongdoing was either a breach of a
fiduciary duty he owed the plaintiffs or an act of actual or
constructive fraud on his part, and (2) that she either
participated in such conduct or knew that Harrison's gift was in
breach of his contract. We do not agree.
In another context, we recently reviewed the principles of a
constructive trust in Cooper v. Cooper, 249 Va. 511, ___ S.E.2d
___ (1995). When property is given or devised to a defendant in
breach of a donor's or testator's contract with a plaintiff,
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equity will impose a constructive trust upon that property in the
hands of the recipient even though (1) the transfer is not the
result of breach of a fiduciary duty or an actual or constructive
fraud practiced upon the plaintiff, and (2) the donee or devisee
had no knowledge of the wrongdoing or breach of contract. See
Story v. Hargrave, 235 Va. 563, 569, 369 S.E.2d 669, 672-73
(1988); Williams v. Williams, 123 Va. 643, 647 96 S.E. 749, 750-
52 (1918). In Story and Williams, although the testators'
devises of real estate were merely breaches of contract,
constructive trusts were imposed upon the property in the
devisees' hands even though there was no evidence that they had
knowledge of the breach.
The defendant cites Overby v. White, 245 Va. 446, 449, 429
S.E.2d 17, 19 (1993), for the proposition that the plaintiffs
must prove improper conduct on her part in order to establish a
constructive trust in the insurance proceeds in her hands.
Overby is inapplicable because there the plaintiff sought to
divest the defendant of an interest in property she had properly
acquired long before the conduct occurred that allegedly gave
rise to the constructive trust. Here, as in Story and Wright,
the defendant did not own the property sought to be subjected to
a constructive trust before the breach, she merely became a
gratuitous donee of the property as a result of the breach.
And because the other elements necessary to establish a
constructive trust are present, the defendant's gratuitous
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receipt of a portion of the insurance proceeds forms the basis
for imposing a constructive trust on that property. Constructive
trusts "occur not only where property has been acquired by fraud
or improper means, but also where it has been fairly and properly
acquired, but it is contrary to the principles of equity that it
should be retained, at least for the acquirer's own benefit."
Richardson v. Richardson, 242 Va. 242, 245, 409 S.E.2d 148, 150
(1991); Leonard v. Counts, 221 Va. 582, 589, 272 S.E.2d 190, 195
(1980) (quoting 1 Minor on Real Property § 462 at 616 (2d ed.
Ribble 1928)).
In Richardson, the transferee of the property had done
nothing improper in bringing about the transfer. However, since
the transferee had furnished no consideration for the transfer,
her unjust enrichment at the plaintiff's expense was the
equitable justification for imposing a constructive trust upon
the property in the defendant's hands. Richardson, 242 Va. at
247, 409 S.E.2d at 151. Likewise, in this case, the defendant's
lack of participation in the contractual breach or knowledge
thereof is not a defense to the imposition of a constructive
trust upon the property the plaintiffs should have received under
3
the contract.
3
We find no merit in the defendant's summary contentions
that the children had no right to enforce Harrison's agreement
against her since (1) there were no life insurance policies in
existence for the children's benefit at the time he made the
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Accordingly, we conclude that the court erred in failing to
impose a constructive trust upon $70,000 of the insurance
proceeds in the defendant's hands, together with interest at the
judgment rate from the date of Harrison's death. Therefore, we
will reverse the judgment and remand the case for entry of a
decree consistent with this opinion.
Reversed and remanded.
(..continued)
contract, (2) they were not the beneficiaries of his life
insurance trust when he made the contract, and (3) the life
insurance policies in effect at the time Harrison made the
agreement were no longer in effect at the time of his death. In
our opinion, the provisions of paragraph seven of the contract
gave these children a contractual claim against Harrison's estate
for $70,000. And because the estate is insolvent, we think they
could claim a constructive trust in $70,000 of the proceeds of
the insurance policies on Harrison's life.
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