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MADDUX v. PHILADELPHIA LIFE INS. CO.

December 1, 1999

ROBERT MADDUX, DENNIS MADDUX, DONALD MADDUX, SUCCESSORS-IN-INTEREST OF DECEDENT MARY MANLEY-CAINE, PLAINTIFFS,
v.
PHILADELPHIA LIFE INSURANCE COMPANY, CONSECO, INC., CHRISTY MANLEY, CHERYLL GREAR, CARLA COOPER, DEFENDANTS.



The opinion of the court was delivered by: Whelan, District Judge.

ORDER GRANTING PHILADELPHIA LIFE'S MOTION FOR SUMMARY JUDGMENT;
  DENYING MOTION TO BIFURCATE AS MOOT; DENYING MOTION TO ISSUE
  RULE 54(B) CERTIFICATION

Defendant, counterclaimant and third party plaintiff Philadelphia Life Insurance Company ("Philadelphia Life") moves for summary judgment, or alternatively partial summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure. Plaintiffs Robert Maddux, Dennis Maddux and Donald Maddux, (successors-in-interest to decedent Mary Manley Caine) ("Plaintiffs") oppose. All parties are represented by counsel. This Court has jurisdiction pursuant to 28 U.S.C. § 1335, 1367. For the reasons expressed below, the Court GRANTS Philadelphia Life's motion for summary judgment.

I. BACKGROUND

A. OVERVIEW

On March 6, 1998 Plaintiffs commenced this action alleging claims sounding in breach of contract, breach of the implied covenant of good faith and fair dealing and fraud based on Philadelphia Life's refusal to pay Plaintiff Mary Manley Caine ("Caine") the proceeds of a $25,000 life insurance policy. The policy was issued by Philadelphia Life to Omer L. Manley ("Manley"), Policy No. 0080421510. Manley, Caine's former husband, was born in Oklahoma on January 27, 1925.

Philadelphia Life subsequently interpled the policy benefits pursuant to 28 U.S.C. § 1335. Notwithstanding the interpleader, however, the Court retained pendent and supplemental jurisdiction over Plaintiffs' contract and tort claims. Philadelphia Life now seeks summary judgment against those claims.

B. THE MANLEY MARRIAGE, LIFE INSURANCE, DIVORCE

On January 16, 1989 Manley married Plaintiff Mary Caine ("Caine") in Sacramento, California. On July 25, 1990, while residing in Kansas, Manley applied for and received a $25,000 life insurance policy. Philadelphia Life's agent, Ken Thomas, also signed the application on the same date and at the same location. According to the application, "[a]ny policy issued on this application will be deemed to be delivered in and governed by the laws of the jurisdiction in which this application was signed." (See Pls.' Ex. 1). The application identified Caine as the primary beneficiary and Union National Bank as the contingent beneficiary. Philadelphia Life subsequently issued the policy on September 12, 1990.

Manley and Caine continued to reside in Kansas as husband and wife until mid-1993 when they separated. Caine moved back to California and Manley relocated to Oklahoma. In December 1993 Manley filed for divorce in Oklahoma. Caine did not contest the divorce, and signed a waiver of summons and entry of general appearance while she remained in California. On February 14, 1994 a divorce decree was entered in the District Court of Creek County in Oklahoma. According to the decree, Manley had resided in Oklahoma for more than six months preceding the initiation of his divorce petition. The decree also awarded Manley and Caine, as their separate property, all items in their respective possession. As to the policy, Oklahoma law provides "that in the event of divorce, the decedent's former spouse shall be treated for all purposes under the [insurance] contract as having predeceased the decedent." See 15 Okla. Stat. Ann. § 178.

After the divorce was final, Manley moved to Oregon and then to California where he died on March 29, 1997. Manley's death certificate listed his final residence as Sacramento, California. Manley's former wife Caine and his four daughters from a former marriage ("the Manley sisters") later asserted conflicting claims to the policy benefits.

C. THIS ACTION

On February 5, 1998 Mary Caine filed this action in California Superior Court. On March 6, 1998 Philadelphia Life timely removed the action to federal court on the basis of diversity of citizenship.

On April 24, 1999 Plaintiff Mary Caine passed away. On July 20, 1999 Plaintiffs Robert Maddux, Dennis Maddux and Donald Maddux substituted into this action as Caine's successors-in-interest by filing a Second Amended Complaint alleging six claims against Philadelphia Life. The first claim alleges that Philadelphia Life breached the terms of the policy by failing to pay Caine the insurance proceeds. The second claim asserts that Philadelphia Life breached the implied covenant of good faith and fair dealing by withholding the insurance proceeds for an improper purpose. Plaintiffs' third claim alleges fraud based on Philadelphia Life's issuance of a policy it allegedly never intended to pay. Plaintiffs' fourth claim alleges a conspiracy between Philadelphia Life and the Manley sisters. Plaintiffs' remaining claims seek declaratory relief, punitive damages and damages for emotional distress.

To resolve the competing claims to the insurance proceeds, Philadelphia Life deposited the policy benefits of $25,000 with the Court pursuant to 28 U.S.C. § 1335 naming Mary Caine and the Manley Sisters as parties to the interpleader action. By order dated January 22, 1999 the Court granted Philadelphia Life's motion for judgment in interpleader, finding that Philadelphia Life could properly interplead the insurance proceeds. Philadelphia Life now moves for summary judgment as to the remaining claims brought against it.

II. LEGAL STANDARD

Summary judgment is appropriate when there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A fact is "material" when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). A dispute about a material fact is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.

A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2553. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the non-moving party's case or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. Id. at 322-23, 106 S.Ct. at 2552-53. If the moving party fails to discharge this initial burden, summary judgment must be denied and the court need not consider the non-moving party's evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60, 90 S.Ct. 1598, 1609-10, 26 L.Ed.2d 142 (1970).

However, once the moving party meets this initial burden, the non-moving party cannot defeat summary judgment by merely demonstrating "that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995) (citing Anderson, 477 U.S. at 252, 106 S.Ct. at 2512) ("The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient."). Rather, the non-moving party must "go beyond the pleadings and by her own affidavits, or by `the depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324, 106 S.Ct. at 2553 (quoting Fed. R.Civ.P. 56(e)).

When making this determination, all inferences drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. at 1356. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, [when] he [or she] is ruling on a motion for summary judgment." Anderson, 477 U.S. at 255, 106 S.Ct. at 2513.

III. DISCUSSION

Philadelphia Life seeks summary judgment against Plaintiffs' claims for breach of contract, breach of the implied ...


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