CHAZZ ALDEN HUGHES, ET AL.
R ALLEN HUGHES
Session September 14, 2016
from the Chancery Court for Carter County No. 28680 John C.
appeal concerns a dispute over the proceeds of a
decedent's federal group life insurance policy. The
decedent presumably intended to designate his brother, the
appellee in this matter, as the sole beneficiary. The
appellants, children of the decedent, allege fraud on the
part of the brother and seek to impose a constructive trust
upon the funds he received. The trial court granted summary
judgment for the brother based on the application of the
federal preemption doctrine as well as the Tennessee and
federal law of fraud and the Tennessee Rules of Evidence. The
appellants appeal. We affirm.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Affirmed; Case Remanded
B. McKinnon, III, and Penny J. White, Johnson City,
Tennessee, for the appellants, Chazz Alden Hughes and
Tessarai Lee-Hughes Powers.
C. Huret and Rebecca J. Ketchie, Kingsport, Chattanooga,
Tennessee, for the appellee, Allen Hughes.
W. McClarty, J., delivered the opinion of the court, in which
Charles D. Susano, Jr., J., and D. Michael Swiney, C.J.,
W. MCCLARTY, JUDGE.
to his death, Brady Lee Hughes ("Decedent") was
employed by the United States Postal Service. As a federal
employee, he was entitled to participate in the Federal
Employee Group Life Insurance ("FEGLI") program.
Metropolitan Life Insurance Company ("Metlife")
provided the FEGLI policy purchased by Decedent. On January
28, 1991, Decedent designated his brother, R. Allen Hughes
("Brother"), as the sole beneficiary of his FEGLI
policy. After he designated Brother as the beneficiary of the
FEGLI policy, Decedent and his wife, Cathy Ann Young Hughes
(now Cathy Ann Young-Hilton), divorced. The final decree of
divorce, which was entered October 8, 1992, incorporated the
Marital Dissolution Agreement ("MDA") with a
provision that stated: "Life Insurance: The
husband shall maintain his current policy of life insurance
with the children, beneficiaries." There is no
suggestion in the record that Decedent ever owned any policy
other than the MetLife policy under FEGLI. The appellants,
Chazz Alden Hughes and Tessarai Lee Hughes-Powers
(collectively, "the Children"), are Decedent's
children and Brother's nephew and niece respectively.
died on December 16, 2011. MetLife paid all of the proceeds
of his FEGLI insurance policy to Brother, in accordance with
the beneficiary designation previously executed on January
28, 1991. According to the Children, the approximate sum of
the death benefit was $340, 000.
Children subsequently filed suit to impose a constructive
trust on the proceeds of Decedent's FEGLI insurance
policy, citing the MDA provision as proof that the benefits
belong to them. They contend "that at some point in the
history of the said life insurance policy, that either they
or [their mother] for the benefit of them, had been
designated as the beneficiaries of the death benefits."
The Children also allege that Brother received the insurance
proceeds by fraud: they argue that Brother had promised
Decedent that he would hold the proceeds in trust for the
Children, and Decedent named him beneficiary of the policy in
reliance on that promise. In support of their claims, the
Children submitted, inter alia, an affidavit from Dr. Victor
Young ("Dr. Young"), their maternal uncle, which
recounts a conversation he had with Brother about the
conversations Brother had with Decedent. They note that
Brother used some of the proceeds (approximately $37, 000) to
pay for the Children's student loans and other living
denies that there was any prior agreement with Decedent that
he was to hold the FEGLI proceeds in trust for the benefit of
the Children. In fact, he contends that he did not know until
after Decedent's death that he had been named the sole
beneficiary on the FEGLI policy. Brother further asserts that
Decedent's policy is governed by federal law, which
preempts Tennessee state law through the Supremacy Clause of
the United States Constitution. He notes that in situations
similar to this one, the United States Supreme Court has held
that a constructive trust created by state law cannot
override the federal insurance policyholder's valid
beneficiary designation. Brother also argues that the
Children cannot, as a matter of law, prove that Brother
committed fraud to receive the insurance proceeds. He
contends that he assisted the Children financially "only
because I wanted to and not because I was under any explicit
instructions from my late brother to do so." According
to Brother, his "desire to honor his late brother's
memory by looking after his children does not mean that they
are legally entitled to the FEGLI proceeds."
trial court granted summary judgment to Brother on the bases
that the creation of a constructive trust based on the MDA
was preempted by federal law and that the Children did not
satisfy the requisite elements to support their fraud claims.
The court specifically held that FEGLI's provisions
preempt all Tennessee law that would impose a constructive
trust. The Children timely appealed the rulings of the trial
The issues raised by the Children are restated as follows:
a. Whether the holding in Hillman v. Maretta
controls the outcome of this case in which the beneficiary is
alleged to have committed constructive fraud in acquiring
life insurance proceeds and when a state domestic relations
order, "based on specific judicial recognition of
particular needs" has directed a different disposition.
b. Whether the grant of summary judgment can be upheld when
the chancery court failed to consider the Children's
constructive fraud claim and admissible evidence supporting
c. Whether the federal preemption doctrine shields fraud
committed by the beneficiary of a federal life ...