                     United States Court of Appeals
                             FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 00-2173
                                   ___________

Christian Lee Gander and                  *
Melissa Renee Gander,                     *
                                          *
             Appellees,                   *
                                          *
      v.                                  *
                                          *
Harold Ray Gander, et al.,                *
                                          *
             Appellees,                   *
                                          *
      v.                                  *
                                          *
Anthony Livoti, Jr., P.A.,                *
and Laird McMahen,                        *
                                          *
             Appellants.                  *

                                   ___________

                           Submitted: January 12, 2001
                   Filed: May 14, 2001 - Corrected May 31, 2001
                                   ___________

Before LOKEN and HEANEY, Circuit Judges, and BATAILLON,1 District Judge.
                            ___________

BATAILLON, District Judge

      1
      The Honorable Joseph F. Bataillon, United States District Judge for the District
of Nebraska, sitting by designation.
       Appellants, Anthony Livoti, Jr., and Laird McMahen, appeal from the district
court’s findings in favor of Appellees, Christian and Melissa Gander. After careful
review of the record, we affirm the district court. Jurisdiction is invoked pursuant to
29 U.S.C. § 1144(a), ERISA § 514(a).

      Facts

      A decree of dissolution was entered in 1988 between Harold and Deborah
Gander, parents to Christian and Melissa Gander. Paragraph 10 of the Separation
Agreement contained a clause that required Harold Gander to maintain a policy of
insurance on Deborah. That clause stated:

      Respondent [Harold Gander] agrees to keep in force a $75,000 insurance
      policy on his life with Petitioner [Deborah Gander] as sole beneficiary.
      Respondent agrees to keep in force a $2,500.00 life insurance policy on
      the life of each minor child with Petitioner as beneficiary.

      In 1992 the agreement was modified. Both Deborah and Harold agreed that the
insurance money would be held in trust for their two children, Melissa and Christian
Gander. That modification as set forth in Articles 8 and 9 states:

             Petitioner [Deborah Gander] agrees that any and all sums received
      from the $75,000.00 life insurance policy in effect on Respondent’s
      [Harold Gander’s] life shall be held in trust for the benefit of the parties’
      children, Melissa Renee Gander and Christian Lee Gander, and said sums
      are to be used for the equal benefit of the children. Any and all such sums
      remaining after the youngest child reaches the age of 25 shall be divided
      equally between the children. Petitioner agrees to provide a yearly
      accounting to Bruce Edward Gander, Respondent’s brother, for how any
      and all such sums are expended. Respondent shall provide to Petitioner
      proof of insurance and beneficiary designation within 15 days of this
      agreement.


                                          -2-
             Respondent recognizes and releases Petitioner from any liability
      and responsibility should the $75,000.00 life insurance policy presently
      in effect be cancelled through no fault of Respondent; provided, however,
      that Respondent shall exercise any available right to continue said life
      insurance and keep it in effect (including, but not limited to, any COBRA
      rights.)

       Harold Gander was an employee of Barnes Jewish Christian Center. ITT
Hartford was the policyholder for Barnes Jewish Christian Center. Harold Gander
maintained a life insurance policy through his employer with ITT Hartford in the
amount of $75,000.00.

       However, on or about June 20, 1996, Harold Gander assigned his rights in the
policy to Anthony Livoti. This agreement, known as a viatical agreement or viatication,
resulted in a payment of cash to Harold Gander.2


      2
        Eterna Benefits L.L.C. v. Hartford Life and Accident Insurance Co. defines a
viatical agreement as follows: “A viatical settlement is an agreement under which an
insured sells a life insurance policy for an immediate payment approximating the
discounted face value of the policy. An investor acquires an interest in a life insurance
policy of a terminally ill person at a discount, depending upon the insured’s life
expectancy. When the insured dies, the investor receives the benefits of the insurance.”
1999 WL 202592, at *1 (N.D. Tex. April 5, 1999) (internal citations omitted).

      See also, Joseph M. Belth, ed. "The Frightening Secondary Market for Life
Insurance Policies," THE INSURANCE FORUM, March 2000 at 1; Joseph M. Belth, ed.,
"Arson v. Murder: The Insurance Interest Anomaly and the Frightening Secondary
Market for Life Insurance Policies," THE INSURANCE FORUM, December 2000 at 154;
Joseph M. Belth, ed., "An Update on Florida’s Viatical Reports," THE INSURANCE
FORUM, October 2000 at 131; Joseph M. Belth, ed., "Who Should Regulate the Viatical
Industry?", THE INSURANCE FORUM, January 2001 at 164; Joseph M. Belth, ed.,
“Federal Criminal Allegations in California Relating to Viatical Fraud,” THE
INSURANCE FORUM, July 2000 at 60; Joseph M. Belth, ed., "The First Viatical Fraud
Convictions," THE INSURANCE FORUM, August 2000 at p. 84; Joseph M. Belth, ed.,

                                          -3-
       On July 2, 1996, Livoti named Laird McMahen as a beneficiary under this
policy. Also, on June 20, 1996, Christian Gander signed a release/consent to permit
the change of beneficiary. Harold Gander signed a release on behalf of his minor
daughter, Melissa Gander. The validity of these releases will be discussed herein. On
May 27, 1998, Melissa and Christian Gander filed suit asking for a declaration of their
rights under the insurance policy.

       The district court ordered that plaintiffs, Christian and Melissa Gander, are the
sole joint beneficiaries of the ITT Hartford Policy No. OGL-205634 and would receive
the entire proceeds of said policy upon the death of their father, Harold Gander.
Further, the district court ordered that any and all documents which conflict with its
court order regarding the sole joint ownership by Christian and Melissa Gander of the
policy in question are void and unenforceable. The district court further awarded
attorney’s fees and costs.

      Discussion

      A. District Court Hearing

       During a status hearing, both parties agreed to submit the case to the court on the
basis of the briefs and affidavits. However, after reviewing the same, the court chose
to order a hearing and to allow Deborah Gander to testify as a witness on the issue of
intent with regard to both the 1988 and 1992 decree/modification. The district court
allowed this evidence because it determined that the settlement agreement was
ambiguous.


"The Huge Commissions Paid to Viatical Brokers," THE INSURANCE FORUM, June 2000
at p. 49; Joseph M. Belth, ed., "Life Partners and the Nonregulation of the Viatical
Industry," THE INSURANCE FORUM, November 2000 at 133.

                                           -4-
       Livoti and McMahen contend that the district court erred in holding an
evidentiary hearing once the parties agreed to submit the case on the basis of briefs and
affidavits. They argue that fairness dictates that the court enforce the agreement of the
parties to so submit the case. Christian and Melissa Gander argue that the court has
discretionary authority pursuant to Fed. R. Civ. P. 16(a) to order the hearing.

       The law is clear that stipulations of law are not binding on the court. Sanford’s
Estate v. Comm'r. of IRS, 308 U.S. 39, 51 (1939); Harbor Ins. Co. v. Essman, 918
F.2d 734, 738 (8th Cir. 1990); Minneapolis Brewing Co. v. E. B. Merritt, 143 F. Supp.
146, 149 (D.N.D. 1956). However, stipulations by the parties regarding questions of
fact are conclusive. Burstein v. United States, 232 F.2d 19, 23 (8th Cir. 1956). Trial
courts are bound by the facts established by the stipulation. Id. Valid stipulations are
controlling and conclusive, and courts must enforce them. Id.; 83 C.J.S., Stipulations,
§ 12, p. 30. Courts cannot make contrary findings. H. Hackfield & Co. v. United
States, 197 U.S. 442, 447 (1905). It appears that the parties agreed that they would
submit affidavits and briefs to the court. However, nothing is set forth in the record
before us that would indicate that a stipulation of facts exists. There might have been
some tacit agreement at the status conference, but there is no record of what the parties
stipulated to in terms of the facts of this case. Consequently, we find that there exists
no stipulation that would be binding on the district court so as to preclude the taking
of additional evidence.

      B. Extrinsic Evidence

       Livoti and McMahen argue that the settlement agreement and 1992 modification
were unambiguous, so no extrinsic evidence was needed. Parole evidence, they argue,
was inappropriate in this case. They contend that the 1992 modification did not require
Harold to name Melissa and Christian as beneficiaries under the policy. Instead, they
argue, the settlement agreement required that the policy be maintained for the benefit
of the ex-wife, Deborah, not the children. Melissa and Christian Gander argue that

                                          -5-
Deborah Gander’s testimony on intent was permissible, as the contract was clearly
ambiguous. Paglin v. Saztec International, Inc., 834 F. Supp. 1184, 1192 (W.D. Mo.
1993).

       The district court concluded that the language of the settlement agreement and
the decree of modification were ambiguous on the issue of whether the documents
require Harold Gander to maintain the $75,000.00 life insurance policy with his
children as the beneficiaries. Like the district court, we conclude that an ambiguity
exists. The settlement agreement clearly stated that Deborah Gander was to be the
beneficiary. However, the decree of modification lists Deborah Gander as beneficiary,
but requires that Deborah Gander use the proceeds for the benefit of the children. She
is required to account for all monies spent to Harold Gander’s brother, Bruce Gander.
We agree that under these circumstances extrinsic evidence is permissible. John
Morrell & Co. v. Local Union 304A, 913 F.2d 544, 551 (8th Cir. 1990) (extrinsic
evidence cannot be used to contradict intentions of the parties, but it can be used to
demonstrate the ambiguity).

       The district court ordered a hearing and allowed Deborah Gander to testify as
to the parties’ intentions in these agreements. She testified that under the decree of
modification, it was the intention of Harold Gander to make the children the
beneficiaries of the life insurance proceeds. Harold’s brother was to oversee the
accounting and assure that both children were treated equally. Deborah Gander was
no longer a beneficiary under the policy, which is further substantiated by the
elimination of the maintenance payments to her as set forth in the 1992 modification.
We agree with the district court that the language of the 1992 modification of decree
and the testimony of Deborah Gander support an interpretation that the beneficiaries
under this modification were intended to be Christian and Melissa Gander.




                                         -6-
      C. Specific Policy of Insurance

       The Appellants next argue that there exists no evidence identifying a "specific"
policy of insurance that Harold Gander was required to maintain on his two children.
Melissa and Christian Gander argue that Deborah Gander specifically testified that the
policy was for their benefit, and the only policy Harold Gander maintained was the one
through his work at Barnes Jewish Christian Center.

       Livoti and McMahen argue that the requirement of a "general policy of
insurance" is not sufficient to establish a vested right in the policy on Melissa and
Christian. Prudential Insurance v. Gibson, 421 S.W.2d 26, 33 n.3 (Mo. Ct. App.
1967). Because we have concluded that extrinsic evidence was permissible in this
case, it was also permissible for the district court to determine which policy flowed to
the benefit of Melissa and Christian Gander. Principal Mutual Life Ins. Co. v. Karney,
5 F. Supp. 2d 720, 729-39 (E.D. Mo. 1998). Deborah Gander testified that the only
policy in effect at the time of the settlement agreement was the one through Harold
Gander’s employment; that the insurance and trust were created for the children,
Christian and Melissa; and that Christian and Melissa were to be the beneficiaries of
this policy. No contrary evidence was offered. We conclude, as did the district court,
that the agreement between Harold and Deborah Gander referred to the Barnes Jewish
Christian Center policy and not to a specific monetary amount of insurance.
Consequently, we determine that the evidence adduced by the court was sufficient as
a matter of law to identify the specific policy of insurance in question.

      D. Posthumous Child Support

      It is unlawful under Missouri law to create an order for posthumous child
support, an order that secures a child support obligation through life insurance. Amyx
v. Collins, 914 S.W.2d 370, 372 (Mo. Ct. App. 1996). Such insurance is void under
Missouri law where the liability for future child support stops upon the death of the

                                          -7-
obligor. Id. Melissa and Christian argue that this is not posthumous child support,
relying on Wheeler v. McDonnell Douglas Corp., 999 S.W.2d 279 (Mo. App. 1999).
They argue that the Wheeler court allows insurance provisions which are part of a
voluntary property settlement derived from the parties. The Amyx case is
distinguishable because it dealt with court-ordered insurance that became, in essence,
child support. We conclude that the parties in this case voluntarily chose to include the
insurance provision in their settlement agreement and, consequently, it is valid under
Missouri law. Wheeler v. McDonnell Douglas Corp., 999 S.W.2d at 287.

      E. Releases/Bona Fide Purchasers

       We review the factual findings of the district court for clear error, and we do not
reverse the findings of the district court unless we have a “‘definite and firm conviction
that a mistake has been made.” See Griffin v. City of Omaha, 785 F.2d 620, 625 (8th
Cir. 1986), (quoting Anderson v. City of Bessemer City, 470 U.S. 564 (1985)).

       The district court found that Harold Gander fraudulently induced Christian
Gander into signing the release. The court concluded that Christian did not know he
was a beneficiary under the policy; that there was no consideration; that his father lied
to him regarding signing the release; that his father breached the modification
agreement; and that Harold Gander could not sign the release on behalf of Melissa
Gander. Further, the court concluded that Harold Gander breached a confidential and
fiduciary duty that he had with his children.




                                           -8-
       Livoti and McMahen first contend that Christian and Melissa Gander
relinquished their claims under the Hartford policy by the execution of releases. On or
about June 20, 1996, Harold Gander entered into an agreement with Mutual Benefits
Corporation, wherein Harold Gander signed an Absolute Assignment and Beneficiary
Form (“Assignment Agreement”) in exchange for $31,500.00. Harold Ganders
transferred and assigned all of his right, title and interest in the policy to Livoti. Then,
on or about July 2, 1996, McMahen paid $52,817.00 to Mutual Benefits, a brokerage
company, and Livoti named McMahen an irrevocable beneficiary of the policy.

      On or about June 20, 1996, Christian Gander signed a release and consented to
a change in the beneficiary. Christian was of legal age at the time he signed the release.
On that same day Harold Gander signed a release as the “Parent and Guardian of
Melissa Gander.” Mutual Benefits then paid $31,500.00 to Harold Gander for the
policy. Livoti and McMahen argue that the releases are valid, as Christian was 22
years of age at the time his was signed, and Harold Gander signed on behalf of his
daughter.

       Christian and Melissa Gander argue otherwise. Christian states that he was not
told by his father that he was the beneficiary under the insurance policy and that he had
no knowledge that he was in fact a beneficiary. Further, he contends that his father
induced him into signing the release by promising money to purchase a truck. The
money for the truck never materialized. Thus, he argues, there was no consideration
for the signing of the release. Melissa, only 17 at the time, contends that her father had
no legal authority to sign the release on her behalf. She was unaware that he signed it.
Additionally, the modification required that the sums be held by Deborah Gander until
the children reached the age of 25, at which time they would be distributed equally to




                                            -9-
both children. She further contends that both Viatical Settlements, Inc.3 and Mutual,
the brokers, had knowledge that her mother, Deborah Gander, should sign the release.
Terrell Evans of Barnes Jewish Christian Center and Bill Crust of Viatical Settlements
Inc. knew of this issue, and a statement made between them became part of the file.
The statement reads:

      It states in the V.O.C. [Verification of Coverage] that this goes to the
      child in the Divorce Decree. . . . Make up an [sic] release and his former
      wife will sign it. Her name is Deborah J. Gander. The kids are almost of
      age anyway. App. 120.

Melissa and Christian contend that Livoti and McMahen either knew Deborah’s
signature was required or the knowledge of Viatical and Mutual Benefits should be
imputed to them.

       Second, Livoti and McMahen argue that they are bona fide purchasers for value.
The district court concluded that Livoti and McMahen did not have superior rights to
Melissa/Christian Gander. The court relied on the Ninth and Fourth Circuit cases that
state a bona fide purchaser for value is one who purchases in good faith without notice
of adverse claims. Southwest Administrators, Inc. v. Rozay’s Transfer, 791 F.2d 769,
774 (9th Cir. 1986); In re Tudor Assoc. Ltd., 20 F.3d 115, 119 (4th Cir. 1994). In the
case before us, the district court found:

      It is clear from the record that both Viatical Settlements, Inc. (“Viatical”),
      which brokered the viatication with Mutual Benefits Corp. (“Mutual”)
      and Mutual, which received funds for the policy from McMahen, who
      assigned it to Livoti, had notice of Plaintiffs’ claim to the policy.
      Viatical’s June 11, 1996 Addendum to its Group Policy Verification of
      Coverage (which apparently was completed by BJC) includes the


      3
      Viatical Settlements, Inc. brokered the viatication with Mutual Benefits, Harold
Gander and Livoti.

                                          -10-
      following notation as to question 12: ‘Note: Record of Motion to Modify
      Divorce Decree with regard to children as beneficiaries of life insurance
      in September, 1992. It is unknown if any legal restriction is in force on
      employee’s current coverage.’ Pl. Ex. 4a at 3. In a June 13, 1996 letter
      to the President of Viatical, Bill Crust, Terrel Evans of BJC addressed this
      issue as follows: ‘As relates to the legal instrument to which I referred in
      the addendum to question 12, I am unable to find any modification to or
      later document to cancel it. If there is an updated filing, I would think we
      should be sent a copy.’ Pl. Ex. 5 at 1. Bill Crust communicated to Les
      Steinger, president of Mutual about this information as follows: ‘It states
      in the V.O.C. [Verification of Coverage] that this goes to the child in the
      Divorce Decree. Make up an [sic] release and his former wife will sign
      it. He[r] name is Deborah J. Gander. The kids are almost of age anyway.


Dist. Ct. Op. at 11-12. The district court concluded that Viatical and Mutual had ample
notice of the competing claims on Harold Gander’s life insurance policy. The court
then concluded that Livoti and McMahen had constructive knowledge of the plaintiffs’
interests in the policy. St. Paul Fire & Marine Ins. Co. v. F.D.I.C., 968 F.2d 695, 700
(8th Cir. 1992). Further, the district court found that the equity lies in favor of the
plaintiffs, Melissa and Christian. We agree.

       Livoti and McMahen were attempting to purchase the beneficial interest in a life
insurance policy. They are allowed by law to purchase only what the owner has the
legal right to transfer. They and their agents, the brokers of this contract, clearly
understood the risk of purchasing a life insurance contract that may have been subject
to restrictions due to the owner's divorce. The divorce decree notified the buyers that
this policy was for the benefit of the owner's children until they reached age twenty-
five. Neither of the children had reached that age and the youngest was a minor, legally
incapable of transferring her interest in the policy. The appellants, Livoti and
McMahen, purchased this contract of insurance at their own risk without adequately



                                         -11-
investigating the right of the owner to transfer ownership. They are not bona fide
purchasers of this contract and are not entitled to protection from the beneficiaries.

       We have carefully reviewed the record and conclude that the findings of the
district court are not clearly erroneous.

A true copy.

      ATTEST:

               CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                        -12-
