Today, six months after oral argument, the Wisconsin Supreme Court unanimously ruled in favor of our client, Lynnea Landsee-Pulikkila, and reversed a 2019 decision of the Wisconsin Court of Appeals. The majority opinion, authored by Justice Ann Walsh Bradley, recognized that the court of appeals “jumped the gun” by imposing a constructive trust in this case “in the absence of any factfinding by the circuit court” and even before the circuit court adjudicated several procedural issues that themselves could end the dispute. Joining Justice Ann Walsh Bradley’s majority opinion were Chief Justice Patience Roggensack, as well as Justices Annette Ziegler and Daniel Kelly.
“This decision is a victory for the rule of law and due process,” said lead counsel Jeff Mandell, who co-chairs Stafford Rosenbaum’s litigation and appellate practice groups. Attorneys Jared Potter and Eileen Kelley, with the assistance of law clerk Katie Tompson, helped Mandell present this case to the Supreme Court.
Justice Rebecca Grassl Bradley wrote a separate opinion, arguing not only that the court of appeals had erred but also that the legal principles were so clear that there was no need for a remand to the trial court. In her view, the marital settlement agreement in this case foreclosed any constructive trust.
Justices Rebecca Dallet and Brian Hagedorn did not participate in this case. (Justice Hagedorn, while still serving on the court of appeals, had agreed with Lynnea’s position and dissented from that court’s decision, which was under review here.)
The facts of this case are simple and unfortunate. James and Joan Pulkkila were divorced in 2009. They negotiated and entered into a marital settlement agreement (MSA), which was reviewed and approved by the trial court. One provision of their MSA required both James and Joan to maintain life insurance for the benefit of their two minor daughters. It expressly authorized either parent to check at any time on the other’s compliance with the insurance requirement, and it provided that, if a parent violated the insurance requirement, the remedy would be a lien in favor of the minor daughters against the deceased parent’s estate. In 2014, James designated his new wife, Lynnea, as beneficiary of a life insurance policy. The next year he was killed in a tragic accident.
The legal proceedings are less straightforward. Joan filed a motion for relief in her original divorce action against James. She asked the court to make Lynnea a party to the divorce action and to use an equitable remedy, known as a constructive trust, to transfer the life insurance proceeds from Lynnea to the daughters. The trial court held that the constructive trust was legally unavailable and therefore never ruled upon a variety of procedural issues or held an evidentiary hearing to determine the relevant facts. The court of appeals disagreed, but instead of sending the case back to the trial court for additional proceedings, it decided to impose the constructive trust, without regard to the lack of an evidentiary hearing or the outstanding procedural disputes.
We asked the Supreme Court to review the court of appeals decision, both on the availability of a constructive trust and because the court of appeals denied Lynnea due process by taking the life insurance proceeds from her without a full and fair hearing in the trial court. Today’s ruling by the Supreme Court ensures that Lynnea will get due process, even as it leaves open the question of whether a constructive trust is appropriate under these circumstances.
This is an important ruling for the rule of law. We look forward to addressing the merits of the procedural objections, and, if necessary, the constructive trust, on remand to the circuit court.
This entire case also counsels greater care in thinking through all eventualities in negotiating marital settlement agreements. As Anthony Menting, chair of Stafford Rosenbaum’s family law practice group notes: “If the situation permits, it is better for the intended beneficiary to be awarded the policy to avoid these circumstances. When the intended beneficiary owns the policy, the life insurance proceeds are protected so long as the premiums are paid.” This is not always possible: in some cases, the only policy is through work and it cannot be assigned; in other cases, parties agree to divide life-insurance proceeds among several, differently situated beneficiaries (including children from other marriages, new spouses, payments on a business or other loan, etc.). In any or all of these circumstances, careful preparation can avoid the pitfalls that arose in this case.
The Supreme Court’s decision is available here.