Citation NR: 9720619 Decision Date: 06/10/97 Archive Date: 06/19/97 DOCKET NO. 95-23 573 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office and Insurance Center in Philadelphia, Pennsylvania THE ISSUE Entitlement to the proceeds of the veteran’s National Service Life Insurance (NSLI) policy, FV [redacted]. REPRESENTATION Appellant represented by: Peter G. Wales, Esquire Appellee represented by: Robert L. Pegg, Esquire ATTORNEY FOR THE BOARD D. Joe, Associate Counsel INTRODUCTION The veteran had active military service from October 1942 to December 1946. This matter comes before the Board of Veterans’ Appeals (Board) on appeal from an April 1993 determination of the Department of Veterans Affairs (VA) Regional Office and Insurance Center (RO&IC) in Philadelphia, Pennsylvania. This is a contested claim. The appellant is the veteran’s widow. The appellee was at one time married to the veteran; however, that union was later annulled by a state court, and the appellant was reinstated as the veteran’s spouse. CONTENTIONS OF APPELLANT ON APPEAL The appellant contends that she is entitled to the proceeds of the veteran’s NSLI policy, V [redacted]. The appellant asserts that the veteran lacked the necessary testamentary capacity to execute changes in the designations of the beneficiary of the insurance policy at issue. As argued by the appellant, the veteran was unable to manage his personal and financial affairs at the time of his death. Citing evidence of the veteran’s diminished mental capacity at the time of his death, the appellant points out that the veteran believed that he was legally married to the appellee, when a state court had annulled an earlier union; was unaware of the exact number of children he had with the appellant; and could not recall his medical history. The appellant maintains that the presumption that the veteran possessed testamentary capacity is sufficiently rebutted by medical evidence chronicling several years of mental incapacity, and statements provided by family members and other acquaintances, who bore witness to his mental deterioration, marked by memory loss, loss of consciousness, and confusion. The appellant argues alternatively that the changes of designation of beneficiary of the NSLI policy resulted from undue influence exerted by the appellant. The appellant contends that the appellees influence over the veteran was evidenced by a dramatic change in the veteran’s spending habits. According to the appellant, the appellee took advantage of the veteran’s advanced age and precarious state of health, in order to effect the change of designation of beneficiary in her favor. The appellee, through her attorney, argues that she is entitled to the proceeds of the NSLI policy, as she was the stated beneficiary of record. DECISION OF THE BOARD The Board, in accordance with the provisions of 38 U.S.C.A. § 7104 (West 1991 & Supp. 1996), has reviewed and considered all of the evidence and material of record in the veteran's claims files. Based on its review of the relevant evidence in this matter, and for the following reasons and bases, it is the decision of the Board that the preponderance of the evidence is against the appellant’s claim for the proceeds of the veteran’s NSLI policy, V [redacted]. FINDINGS OF FACT 1. All relevant evidence necessary for the disposition of the appellant’s claim has been obtained. 2. The veteran was the owner of NSLI policy, V [redacted]. The policy was in full force and effect at the time of the veteran’s death in October 1992. 3. On April 27, 1992, and May 11, 1992, the veteran signed change of designation of beneficiary forms, in which he named the appellee as the principal beneficiary of the proceeds of the NSLI policy. 4. At the time the veteran executed the beneficiary designations in April and May 1992, he reasonably comprehended the nature and significance of his act, recognized the object of his bounty, and appreciated the consequence of his act, uninfluenced by any material delusion as to the property or persons involved. 5. The record does not establish a sufficient basis to conclude that the April and May 1992 beneficiary designations were not free and voluntary acts and that the veteran was unduly influenced by the appellee. CONCLUSION OF LAW The appellant is not entitled to the proceeds of NSLI policy, V [redacted]. 38 U.S.C.A. §§ 1917, 5107 (West 1991); 38 C.F.R. §§ 3.355, 8.22 (1996). REASONS AND BASES FOR FINDINGS AND CONCLUSION Nature of the Claim This is a contested matter to resolve the conflicting claims to proceeds of NSLI policy, V [redacted]. All contested claims procedures have been followed, to include notification of the actions taken by the RO&IC, and the matter is ready for appellate disposition. 38 C.F.R. §§ 19.100, 19.101, 19.102 (1996). Factual Background Of record is an application for NSLI coverage, dated and signed by the veteran in January 1979. The insurance policy named the appellant as the sole beneficiary to the proceeds of that policy. On April 27, 1992, the veteran signed a formal designation of beneficiary form, wherein he designated the appellee, identified as his wife, as principal beneficiary of the NSLI policy. At that time, the veteran designated his son, [redacted], as the contingent beneficiary. The April 1992 designation of beneficiary was witnessed by [redacted]. Thereafter, on May 11, 1992, the veteran executed another formal designation of beneficiary form, again naming the appellee (described as his wife) and [redacted] as the principal and contingent beneficiaries, respectively, of the NSLI policy in question. (Although the veteran entered a date of “May 11, 1993,” on the second change of beneficiary form, the document was recorded by VA on May 18, 1992. Therefore notice is taken of the incorrect date entered by the veteran, and it is acknowledged that the document was executed by the veteran on May 11, 1992.) The veteran passed away on October [redacted] 1992. In November 1992, the appellee’s attorney filed with the RO&IC a copy of the veteran’s official death certificate, and requested payment of the benefits of the insurance policy. Later that month, the appellant’s former attorney petitioned that the proceeds of the NSLI policy be withheld from the appellee, since the veteran’s estate was under contest. The attorney argued that any change removing the appellant as the designated beneficiary of the NSLI policy was due to the veteran’s precarious health. The attorney also questioned the authenticity of the signatures appearing on the change of designation of beneficiary forms. Still in November 1992, a representative of the RO&IC was contacted by the appellant, who insisted that she was entitled to the proceeds of the NSLI policy based on the care she had provided the veteran over the years. Thereafter, the RO&IC wrote to the appellant, explaining that she would be required to submit evidence to support her claim, if she intended to protest payment of the NSLI proceeds to the latest beneficiary of record. The appellant thereafter submitted evidence in support of her claim seeking entitlement to the NSLI proceeds. Included in the evidence was a letter prepared by the Social Security Administration, designating the appellant as the representative payee of the veteran’s disability benefits. Also received was a physician’s statement, confirming that the veteran became totally disabled in December 1974, as a result of organic brain syndrome. In May 1975, an occupational therapist observed that the veteran lacked mental coordination. Those observations were essentially echoed by J.D. Meehan, M.D., who, writing in July 1975, noted that the veteran suffered a cerebral hemorrhage in December 1974. It was Dr. Meehan’s observation that the veteran’s psychological stamina was limited and the smallest of tasks became a major undertaking. In statements dated in April 1982 and March 1983, Drs. R.A. Gormley and J.N. Williams expressed their opinions that the veteran was not mentally capable of handling his own personal and financial affairs. Similarly, Lisa Zocco, Psy.D, who had reportedly treated the veteran since December 1984, opined that the veteran was not competent to live independently, and required a structured inpatient milieu in order to control his aggressive impulses and ensure his personal safety. The appellant filed a formal claim for one sum payment of the proceeds of the veteran’s NSLI policy. Attached to the claim was a U.S. District Court order dated in March 1979, assigning a Guardian ad Litem to the veteran in an unrelated civil matter. As reflected in the order, that action was taken because of the veteran’s inability to take proper care of his person or properly manage his estate. The appellant also furnished copies of greeting cards she received from the veteran, with postmarks demonstrating mailings to her in 1991 and 1992. In response to VA’s request for information, Ms. [redacted] returned a completed questionnaire to the RO&IC in December 1992. Describing the circumstances surrounding the April 1992 designation of beneficiary, Ms. [redacted] recalled that she had been a friend of the veteran, who asked her to witness the designation. She further recalled that on the date in question, there was no other person present in her home besides the veteran. As related by Ms. [redacted], the veteran was alert and lucid and clear as to the persons named as beneficiaries. Ms. [redacted] explained that the veteran changed the designation of his beneficiary because he had married the appellee, and wanted to provide for her financially. According to Ms. [redacted], the veteran also expressed dissatisfaction with the appellant, who, he complained, had asked him to leave their home after she assumed control over his money, believing that he was unable to manage his affairs properly. Assessing the veteran’s mental status on April 27, 1992, Ms. [redacted] indicated that he was competent, as evidenced by an awareness of his financial obligations. Ms. [redacted] reported that the veteran was not intoxicated or under the influence of medication on April 27, 1992, and acted of his own free will in executing the change of designation of beneficiary. Received in March 1993, was a copy of a report generated in February 1993, reflecting the veteran’s treatment at a VA facility in July 1985, for a psychiatric condition. In a statement received later in March 1993, the appellee’s attorney again demanded payment of the policy proceeds to his client. Accompanying the letter was a statement prepared that same month by J.S. Suen, M.D. Noting that he was one of the veteran’s last treating physicians, Dr. Suen expressed his opinion that the veteran was “fully competent” during the period of treatment which extended from August to October 1992. Dr. Suen further opined that the veteran was of sound mind and capable of making decisions related to his everyday existence. Based on the evidence of record, the RO&IC determined in March 1993, that the veteran possessed testamentary capacity to change the designation of beneficiary of the NSLI policy. In a decision of April 1993, it was held that the appellant was not entitled to the proceeds of the NSLI policy, since she was not the last designated beneficiary of record. Notices of the above determinations were mailed to the appellant and appellee that same month. In a statement dated in June 1993, the appellant explained that the veteran left their family home because he “wanted to be free.” She also submitted a copy of correspondence from VA, dated in 1987, reflecting the veteran’s receipt of disability compensation for several disorders, including a psychiatric condition. Additionally, the appellant submitted a report detailing different aliases used by the appellee. The appellant contacted the RO&IC in July 1993, at which time she complained that the appellee did not deserve the proceeds from the NSLI policy, since it was she, and not the appellee, who raised nine children with the veteran. Additional evidence, including personal statements from members of the veteran’s family and friends, was received in November 1993. In her statement, [redacted], the veteran’s daughter, reported that when she last visited the veteran in Florida in April 1992, his speech was slower. It was her opinion that the brain damage suffered by the veteran in 1974 was permanent, leaving him in need of care and supervision until his death in October 1992. [redacted] and [redacted], the veteran’s sons, also expressed their opinions as to their father’s mental condition during the period leading up to his death. According to [redacted], the veteran did not enjoy full use of his mental faculties following the 1974 incident, and from that time forward was unable to understand the nature and consequences of his actions, “other than for the moment.” [redacted] also observed that the veteran was easily led and prone to manipulation by others. [redacted] also recalled that the veteran demonstrated limited mental capacity following the 1974 episode. He also reported that the veteran’s spending habits changed during the final year of his life. Providing an example of the veteran’s unexpected spendthrift ways, [redacted] recalled that the veteran purchased a large van on credit, even though he did not like vans and was no longer able to drive. [redacted], the veteran’s daughter, reported that she last saw the veteran in June or July 1992, during a court hearing. She recalled that the veteran was confused and experienced a great deal of difficulty with concentration and memory. It was Ms. [redacted] belief that the veteran never regained the capacity to manage his personal affairs after the brain hemorrhage in 1974. [redacted], the veteran’s friend, recalled that the veteran’s spending patterns changed considerably after he met the appellee in 1991. Mr. [redacted] described the appellee as a “very domineering woman,” who would not allow the veteran to have visitors or receive phone calls. It was Mr. [redacted] opinion that the appellee was able to wield control over the veteran because of his age and fragile health. In a report dated in October 1993, Dr. Zocco acknowledged treating the veteran from the end of 1984 to 1985. Noting that the veteran suffered a massive subarachnoid hemorrhage and communicating hydrocephalus, she explained that such condition did not typically reverse itself, but instead tended to worsen over time. Dr. Zocco opined that it was highly unlikely that the veteran was competent to render significant decisions at the time of his death in 1992. Responding to a letter from the appellant’s attorney, Dr. Suen, writing in October 1993, again expressed his belief that the veteran was of sound mind was sufficiently competent during the last days of his life. However, Dr. Suen cautioned that he had not been well enough acquainted with the veteran to offer an assessment as to his testamentary capacity. In a sworn statement dated in October 1993, W.H. Foer, M.D., who is certified by the National Board of Medical Examiners and the American Board of Neurological Survey, acknowledged that he had reviewed the veteran’s medical records and case file. Dr. Foer indicated that he had reviewed the medical records prepared by several of the veteran’s treating physicians, and based on that review, believed that the veteran lost the mental capacity to manage his affairs due to the massive brain hemorrhage sustained in 1974. Although Dr. Foer did not believe that the veteran’s mental capacity improved significantly during the last ten years of his life, to the point that he was competent to manage his affairs, he did believe that the veteran may have adapted to the neurological damage to the point that he could perform modest tasks incident to his daily living. The appellant also submitted copies of the veteran’s terminal hospital reports. Highlighted sections of those records reflect, among other things, his statements to treating physicians that he had quit smoking, did not consume alcoholic beverages, was married to his second wife, and had three children from a prior marriage. In her sworn affidavit, the appellant recalled that the veteran required constant care following his hemorrhage in 1974. According to the appellant, when she last saw the veteran in 1991, he walked with some difficulty, and had experienced deterioration of his faculties, as evidenced by slowness of speech and impairment of his concentration and memory. Analysis As previously stated, the appellant contends that she is the rightful beneficiary to the proceeds of NSLI policy, V [redacted]. She maintains that the beneficiary designations signed by the veteran in April and May 1992, are, essentially, invalid because the veteran lacked testamentary capacity at the time he signed the documents and because the appellee unduly influenced the veteran to effect the change. Basically, an NSLI policy is a contract between the veteran and the Federal Government, which assigns duties and responsibilities to the parties of the legally binding agreement. The terms of the NSLI policy are to be construed by Federal law. See Dyke v. Dyke, 122 F.Supp. 529 (E.D. Tenn. N.D. 1954). The insured shall have the right at any time, and from time to time, and without the knowledge or consent of the beneficiary to cancel or change a beneficiary and/or optional settlement designation. A change of beneficiary to be effective must be made by notice in writing signed by the insured and forwarded to the VA by the insured or designated agent, and must contain sufficient information to identify the insured. Upon receipt by the VA, a valid designation or change of beneficiary or option shall be deemed to be effective as of the date of execution. 38 U.S.C.A. § 1917; 38 C.F.R. § 8.22. The veteran’s privilege, as the insured party, to change the designation of beneficiary must be recognized by VA so long as the designation of beneficiary is valid. The appellant argues that the April and May 1992 designations of beneficiary were not valid, insofar as the veteran lacked testamentary capacity due to his mental impairment and undue influence exerted by the appellee over the veteran, who was weak of mind and unable to freely determine whether he wished to divest the appellant of any entitlement to the proceeds of NSLI policy, V [redacted]. When cases are referred to a rating agency involving the testamentary capacity of the insured to execute designations or changes of beneficiary, or designations or changes of option, the following considerations will apply: (a) Testamentary capacity is that degree of mental capacity necessary to enable a person to perform a testamentary act. This, in general, requires that the testator reasonably comprehend the nature and significance of his act, that is, the subject and extent of his disposition, recognition of the object of his bounty, and appreciation of the consequence of his act, uninfluenced by any material delusion as to the property or persons involved. (b) Due consideration should be given to all facts of record, with emphasis being placed on those facts bearing upon the mental condition of the testator (insured) at the time or nearest the time he executed the designation or change. In this connection, consideration should be given to lay as well as medical evidence. (c) Lack of testamentary capacity should not be confused with insanity or mental incompetence. An insane person might have a lucid interval during which he would possess testamentary capacity. On the other hand, a sane person might suffer a temporary mental aberration during which he would not possess testamentary capacity. There is a general but rebuttable presumption that every testator possesses testamentary capacity. Therefore, reasonable doubts should be resolved in favor of testamentary capacity. 38 C.F.R. § 3.355. The governing regulatory criteria strongly suggest that the evidence of mental impairment alone does not signal incapacity to enter into a legally binding agreement, such as a designation of the beneficiary to a life insurance policy. Rather, pertinent medical and lay evidence must be carefully reviewed for the purpose of determining whether, due to mental impairment, the veteran was unable to clearly comprehend the legal effects of his actions in April and May 1992, or because of a state of mental weakness, he was susceptible to undue pressures exerted by the appellee. The appellant has not satisfied the burden of rebutting the presumption that the veteran knew and fully appreciated the nature of his act when he designated the appellee as the principal beneficiary of the NSLI policy. On the whole, the record does not lead to the conclusion that the veteran lacked the mental capacity to effect the change in the beneficiary of his NSLI policy. It is indisputable that evidence exists showing incapacitation in the years preceding the veteran’s death in October 1992. In this regard, due consideration has been given to the affidavits submitted by the veteran’s family members and personal acquaintances. From these statements, it can easily be discerned that the veteran’s behavior towards his family, friends, and situations in general, changed significantly during the years following his brain hemorrhage in 1974. Similarly, the medical opinions on file, particularly those provided by Drs. Zocco and Foer, suggest that the impairment resulting from the brain injury was irreversible and ultimately rendered the veteran incompetent to manage his personal affairs. Also, the fact that the appellant was named payee of the veteran’s benefits for Social Security disability purposes is a matter to be considered with respect to the question of whether he possessed testamentary capacity to alter the terms of his NSLI policy. While some probative weight must be accorded the evidence described above, critical analysis in this case must focus on the evidence reflecting the veteran’s mental condition on or near the dates on which the designations were executed. In this regard, Ms. [redacted] recollections are not singularly determinative on the central question in this case, but do constitute important evidence of the veteran’s mental status at the time of the April 1992 designation of beneficiary. In her statement, Ms. [redacted] recalled that the veteran understood and appreciated the nature of his act. Furthermore, upon questioning of the veteran at that time, she learned that the purpose of the change in April 1992 was clear: the veteran wished to provide for the appellee, who had earlier become his wife. Ms. [redacted] statement demonstrates that the veteran not only knew that nature of the act that he was performing in designating the appellee as his beneficiary, but was equally aware of the natural objects of his bounty. See Prudential Insurance Company of America v. Mehlbrech, 878 F.Supp. 1382 (1995). Again, in order to rebut the presumption that the veteran possessed testamentary capacity in April and May 1992, when he executed the beneficiary designations, the appellant must prove conclusively that he did not comprehend or appreciate the nature of his actions. Thus, while the medical opinions submitted in support of the appellant’s claim provide a picture of progressive deterioration over a period of several years following the 1974 episode, they must be accorded slightly less probative weight than other evidence on file, since the opinions are not based on observations of the veteran at or near the time of the designations. In fact, the opinions rendered by Drs. Foer and Zocco, in particular, should be accorded less probative weight than the conclusions of Dr. Suen, who was one of the last physicians of record to treat the veteran, and who believed that the veteran was of sound mind and competent in his final days. The appellant speculates that the veteran may have been under some material delusion at the time he executed the designations in April and May 1992. She has asked that attention be given to the various statements attributed to the veteran regarding his medical history and association with the appellee. In particular, the appellant notes the veteran’s references to the appellee as his “wife,” even though his marriage to the appellee had been invalidated by a state court. In view of the circumstances described in the documents on file, the overall body of evidence does not show that the veteran’s actions in April and May 1992 were uncontrolled responses to material delusions. It is quite reasonable to conclude that under the circumstances, the veteran himself reasonably considered the appellee as the natural object of his bounty, since he was married to her, albeit briefly, and continued to receive care from her even after the annulment. Thus, while the multiple medical opinions and personal statements submitted by the appellant, discussing the veteran’s capacity to execute a beneficiary designation in April 1992 and May 1993, appear to, at a minimum, approach equipoise with the evidence less favorable to the appellant’s claim, there is no tenable basis to conclude that the appellant is entitled to the proceeds of NSLI policy, V [redacted]. Near balance of the weight to be accorded favorable and unfavorable evidence is simply not sufficient to rebut the presumption that the veteran possessed testamentary capacity in April and May 1992, since all reasonable doubt must be resolved in favor of testamentary capacity. 38 C.F.R. § 3.355(c). The appellant argues, alternatively, that the appellee exerted undue influence over the veteran at the time that he changed the beneficiary of the NSLI policy. Whereas Federal law governs the question of an insured’s mental capacity to change beneficiary designation, state law applies to the issues of undue influence, duress, and fraud. Prudential Insurance, at 1387. The actions which are the subject of this appeal were executed in the State of Florida, where both the veteran and appellee were domiciled. Apparently, the appellant was a resident of the Commonwealth of Virginia at the time of the April and May 1992 designations. No material differences are apparent in the legal standards applied in the two jurisdictions with respect to matters involving undue influence; thus, there is no conflict in the factors to be considered in determining whether undue influence exists in this case. Generally, undue influence is defined as that influence exerted which deprives a person of his or her free will, resulting in an act which is essentially the act of another. See Nuckols v. Nuckols, 320 S.E. 2d, 743, 741 (1984) (undue influence occurs when manifest irresistible coercion controls and directs the action of the person executing the deed or will and deprives him of his volition to dispose of his property as he wishes); Atlantic First National Bank of Dayton Beach v. Cripe, 389 So.2d. 224, 226, (1980), quashed in part, approved in part, 422 So.2d. 820 (Fla. 1982) (undue influence is that which amounts to overpersuasion, duress, force, coercion, or artful or fraudulent contrivances to such degree that there is destruction of free agency and willpower of one making will or gift). The record in this case does not reflect suppression of the veteran’s free will by the appellee. It is accepted that the veteran may very well have been influenced, to some degree, on different matters during the course of his relationship with the appellee. The record confirms that he was at one time married to her, and it appears that he shared a home and other property with the appellee until his death in October 1992. The appellant has provided several statements by friends and family members to the effect that, through her beguiling ways, the appellee effectively manipulated the veteran, who was of advanced years and in poor mental and physical condition. Several writers have also commented on the veteran’s sudden willingness to incur debt for the attainment of luxury items, and cited these instances as examples of the appellee wielding undue influence over the debilitated veteran. Such examples do not constitute conclusive evidence that the veteran was prevented from exercising his free will at the time of the April and May 1992 designations. Ms. [redacted] stated that the appellee was not present on the occasion of the April 1992 designation, which was the act that divested the appellant of any entitlement to the proceeds of the NSLI policy. Moreover, Ms. [redacted] confirmed that the veteran acted of his own free will when he changed the designation of beneficiary in April 1992. Thus, there is no evidence suggesting that the beneficiary change was due solely to machinations on the part of the appellee, other than the statements of the family members and friends, none of whom were present on either of the occasions in question. The appellant’s attorney has also argued that the appellant is entitled to the benefits described herein, under equitable considerations. Specifically, he argues that the appellant should receive the policy proceeds since she paid the premiums with the understanding that she would be designated as the beneficiary. In support of his argument, counsel has cited several state court rulings. At this juncture, it must be reiterated that Federal law exclusively governs insurance policies such as the one at issue. Suydam v. U.S., 404 F.2d. 1329 (1968). The governing legal and regulatory criteria does not support establishment of entitlement to the NSLI proceeds on the equitable grounds suggested by the appellant’s counsel. Consequently, the April 1992 and May 1993 designations may not be set aside because of an equitable interest enjoyed by the appellant. The appellant has not met the burden of proof necessary to overcome the veteran’s legal right to make such a beneficiary change at any time. Accordingly, the April and May 1992 designations may not now be invalidated on the grounds that the appellant lacked testamentary capacity or was unduly influenced by the appellee. And since the appellee was designated as the principal beneficiary by the veteran’s uninfluenced acts of April and May 1992, she is entitled to the proceeds of the policy as the last validly designated principal beneficiary. ORDER The appellee, as the last validly designated beneficiary of NSLI policy, V [redacted], at the time of the veteran’s death, is entitled to the proceeds thereof. G. H. SHUFELT Member, Board of Veterans' Appeals 38 U.S.C.A. § 7102 (West Supp. 1996) permits a proceeding instituted before the Board to be assigned to an individual member of the Board for a determination. This proceeding has been assigned to an individual member of the Board. NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C.A. § 7266 (West 1991 & Supp. 1996), a decision of the Board of Veterans' Appeals granting less than the complete benefit, or benefits, sought on appeal is appealable to the United States Court of Veterans Appeals within 120 days from the date of mailing of notice of the decision, provided that a Notice of Disagreement concerning an issue which was before the Board was filed with the agency of original jurisdiction on or after November 18, 1988. Veterans' Judicial Review Act, Pub. L. No. 100-687, § 402, 102 Stat. 4105, 4122 (1988). The date which appears on the face of this decision constitutes the date of mailing and the copy of this decision which you have received is your notice of the action taken on your appeal by the Board of Veterans' Appeals. - 2 -