## Facts

- Mary Simonds and Frederick L. Simonds executed a 1960 separation agreement, later incorporated into an Illinois divorce decree.
- The agreement required Frederick to keep existing life insurance in force and to keep Mary as beneficiary “in an amount not less than $7,000,” and to obtain replacement insurance of equal value if the existing policies were canceled or lapsed.
- Frederick later allowed the original policies to lapse and obtained new policies exceeding $55,000 in coverage, naming only his second wife, Reva B. Simonds, and their daughter as beneficiaries; Mary was not named on any later policy.
- After Frederick’s death, the insurance proceeds were paid to Reva and the daughter; Frederick’s estate was insolvent.
- Mary sued to impose a constructive trust on the insurance proceeds to the extent of $7,000 (plus interest) based on the separation agreement.
- The trial court granted partial summary judgment for Mary against Reva (and dismissed claims against the daughter); the Appellate Division affirmed.

## Issues

1. Whether a separation agreement requiring the insured to maintain life insurance for a former spouse as beneficiary up to a stated amount creates an equitable interest enforceable against proceeds of later-acquired substitute policies.
2. Whether a constructive trust may be imposed on insurance proceeds paid to an innocent later-named beneficiary who did not give value.
3. Whether the former spouse’s remedy is limited to a claim for damages against the decedent’s estate rather than equitable relief against the proceeds.

## Decision

- The New York Court of Appeals affirmed.
- The separation agreement vested Mary with an equitable right in the life insurance coverage contemplated by the agreement, at least to the $7,000 amount.
- Frederick’s substitution of new policies after the originals lapsed could not defeat Mary’s equitable interest; equity treated her interest as transferring to the substitute policies.
- Because Reva received the proceeds without giving value and her interest was subordinate to Mary’s prior equitable interest, a constructive trust was properly imposed on $7,000 of the proceeds in Reva’s hands, plus interest.

## Legal Principles

- A separation agreement requiring maintenance of life insurance for a former spouse can create an equitable, property-like interest in the insurance proceeds, not merely a contract claim for damages.
- When an insured obligated to maintain coverage allows policies to lapse and obtains substitute policies, the promisee’s equitable interest may attach to the substitute policies under the principle that equity treats as done what ought to have been done.
- A constructive trust may be imposed to prevent unjust enrichment even absent fraud or wrongdoing by the recipient, including when proceeds are paid to an innocent later beneficiary who is not a purchaser for value.
- A later beneficiary designation is subject in equity to a prior contractual obligation creating an equitable interest in proceeds to a specified extent.

## Conclusion

The court enforced the life-insurance provision of the separation agreement by recognizing the first wife’s equitable interest in $7,000 of coverage and imposing a constructive trust on that portion of substitute-policy proceeds paid to the second wife, preventing the insured’s lapse-and-substitution from defeating the promised protection.


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