## Facts

- Virginia M. Johnson married Dr. Richard M. Johnson in December 1963 and lived with him until his death in June 1967.
- Shortly after the marriage, Dr. Johnson designated Virginia as beneficiary of his life-insurance policy and told her of the designation.
- Virginia and Dr. Johnson opened a joint bank account for household expenses; Virginia alleged she deposited over $30,000 of her separate funds into the account to support home remodeling and related expenses, relying on being protected by the policy.
- Dr. Johnson became seriously ill; Virginia alleged extensive caregiving and logistical support during his illness, including dialysis assistance.
- In 1966, a bank required a mortgage on the home and Virginia’s participation to secure additional loans; Virginia alleged she agreed and incurred related burdens in consideration of Dr. Johnson’s promise that she would remain the policy beneficiary.
- After receiving the benefit of Virginia’s performance, Dr. Johnson allegedly changed the policy beneficiary without her knowledge, naming his two minor children as beneficiaries.
- Dr. Johnson died allegedly insolvent; the insurer was obligated to pay the proceeds to the children (through their guardian).
- Virginia sued the insurer and the named beneficiaries in equity, seeking a declaration that the beneficiaries held the proceeds in constructive trust for her benefit.
- The trial court dismissed for failure to state a cause of action, reasoning her remedy lay at law against the decedent’s estate; Virginia appealed.

## Issues

1. Whether a promisee who gave consideration for an insured’s agreement to name or maintain her as life-insurance beneficiary may seek equitable relief (including a constructive trust) against the named beneficiaries and insurer, rather than being limited to contract damages against the insured’s estate.
2. Whether the complaint sufficiently pleaded an enforceable agreement, consideration, breach by change of beneficiary, and entitlement to equitable relief in the policy proceeds.

## Decision

- The appellate court reversed the dismissal and remanded.
- The court held that equity may enforce a contract to name or maintain a beneficiary, upon adequate consideration, by impressing a constructive trust on the policy proceeds in the hands of the named beneficiaries.
- The court held the complaint adequately alleged an agreement, consideration, a wrongful change of beneficiary, and a proper request for equitable relief, making dismissal at the pleading stage improper.
- The court rejected the argument that Virginia’s exclusive remedy was an action at law against the estate, particularly where the insured allegedly died insolvent and the disputed fund was the policy proceeds paid to others.

## Legal Principles

- A contract, supported by consideration, to designate or maintain a person as beneficiary of a life-insurance policy is enforceable in equity.
- When an insured breaches such a contract by changing the beneficiary, equity may treat the named beneficiary as holding only legal title and impose a constructive trust for the promisee’s benefit.
- At the motion-to-dismiss stage, well-pleaded allegations of an agreement, consideration, breach, and identifiable proceeds sought for constructive trust relief are sufficient to state an equitable claim.
- A legal remedy against the decedent’s estate may be inadequate where the estate is insolvent and the contract contemplated a specific fund (insurance proceeds) diverted to third parties.

## Conclusion

The court held that a spouse who alleges she materially changed her position in exchange for an insured’s promise to keep her as beneficiary may pursue equitable relief to reach life-insurance proceeds, and her complaint stated a valid constructive-trust claim against the named beneficiaries and insurer.


Johnson v. N. Am. Life & Cas. Co., 100 Ill. App. 2d 212, 241 N.E.2d 332 (Ill. App. Ct. 5th Dist. 1968)