                        T.C. Memo. 1996-237



                      UNITED STATES TAX COURT



      ESTATE OF ROBERT WELLFORD LINEWEAVER, DECEASED, NORTH
        CAROLINA TRUST COMPANY, EXECUTOR, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 26399-93.                       Filed May 22, 1996.



     Howard L. Williams and Daniel M. Sroka, for petitioner.

     Edwina L. Charlemagne, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PARKER, Judge:   Respondent determined a deficiency in the

amount of $48,198.59 in Federal estate tax.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect at the time of decedent's
death, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

     The issue for decision is whether the amount of $100,000

paid to decedent's former wife may be deducted as a claim against

the estate under section 2053(a)(3).

                       FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits attached thereto are

incorporated herein by this reference.

     Robert Wellford Lineweaver (decedent) died testate on

June 14, 1990.   The executor of decedent's estate is the North

Carolina Trust Company.1   The principal place of business of the

executor was in Greensboro, North Carolina, at the time it filed

the petition in this case.   Decedent was domiciled in North

Carolina on the date of his death.

     Decedent and his first wife, now Kathleen Powell Lyon

(Kathleen), were married on August 28, 1965.   They had three

children:   Kelly, born February 12, 1969; Kathryn, born January

28, 1971; and Allison, born April 13, 1973.

     During October of 1980, decedent and Kathleen asked Clifford

Frazier, Jr., an attorney practicing in Greensboro, North

Carolina, to prepare a deed of separation in anticipation of the

termination of their marriage.   Mr. Frazier provided legal


     1
        The North Carolina Trust Company is a coexecutor, and
decedent's brother, Francis B. Lineweaver, is the other
coexecutor of the estate.
                                - 3 -

services to Unifi, Inc. (Unifi), a corporation of which decedent

was then the president.    Mr. Frazier informed the couple that if

the separation was other than voluntary, Kathleen should consider

obtaining separate counsel due to his position as Unifi's

attorney.

     Mr. Frazier prepared the Deed of Separation which decedent

and Kathleen executed on December 1, 1980.    He considered himself

to be the scrivener of the Deed of Separation, drafting the

document according to the parties' wishes, but not representing

either party individually.    Mr. Frazier had prepared at least two

earlier drafts of the Deed of Separation.

Deed of Separation

     The Deed of Separation granted Kathleen custody of the

children.    Decedent agreed to provide Kathleen, until the time of

their divorce, with a monthly maintenance allowance of $2,500 for

the support of herself and the children.    Decedent agreed to pay

child support of $1,500 per month after the divorce; this amount

would increase to $1,800 per month on December 2, 1983.2    The

     2
         However, this $1,800 amount would be reduced as follows:

     when Kelly reaches the age of eighteen (18) years, and
     has completed or no longer is attending high school,
     the monthly payments shall be reduced to $1,500.00 per
     month, when Kathryn reaches the age of eighteen (18)
     years, and has completed or no longer is attending high
     school, the payment shall be reduced to $1,000.00 per
     month, and when Allison reaches the age of eighteen
     (18) years, and has completed or is no longer attending
     high school, these support payments for said children
                                                   (continued...)
                               - 4 -

Deed of Separation set alimony at $1,000 per month from the time

of the divorce until Kathleen's remarriage or the death of

Kathleen or decedent.

     Decedent was to provide for accident and health insurance

for Kathleen until the earlier of his death or her remarriage,

and for each child until the time the child turned 21 years old.

Were Kathleen to become disabled as a result of sickness or

accident so that she would be unable to work, and the monthly

amount received from the accident or health insurance provided by

decedent be less than $1,000, then decedent was to provide her

with a sum so the combination of these payments equaled $1,000

per month.   This obligation would end upon the earlier of

decedent's death or Kathleen's remarriage.

     The Deed of Separation allowed Kathleen to reside in the

marital home until she remarried and to retain its furnishings as

her separate property.   The Lineweavers had two cars; the Deed of

Separation granted Kathleen one car and decedent the other.

Kathleen was to receive the $1,700 in one joint savings account

plus a check for $3,300, for a total of $5,000.   The Deed of

Separation did not grant Kathleen any interest in decedent's

     2
      (...continued)
     shall cease. In the event any of the children shall
     marry, or enter into the armed forces, or die, the
     monthly payments shall be reduced $300 per month for
     the first child to marry, or enter the armed forces, or
     die, $500 for the second child to do so, and all
     payments shall cease when the third child does so.
                               - 5 -

Unifi stock or in any of decedent's other assets.    The Deed of

Separation also contained provisions regarding maintenance and

future sale of the marital home and the payment of debts, the

children's educational expenses, and income taxes.

     Paragraph 12 of the Deed of Separation provided in regard to

certain life insurance policies on decedent's life as follows:

     LIFE INSURANCE: Mr. Lineweaver has various policies of
     life insurance, upon which Mrs. Lineweaver and/or the
     children are the beneficiaries. Mr. Lineweaver agrees
     that he will not change the beneficiaries of said
     policies, which shall be delivered to Francis B.
     Lineweaver for safe keeping, until after he and Mrs.
     Lineweaver are divorced. After the divorce, Mrs.
     Lineweaver shall, until she remarries, remain the
     beneficiary of life insurance policies providing
     regular coverage (as opposed to double indemnity) in an
     amount of not less than $100,000.00, with the
     beneficiaries of the remaining life insurance policies
     being the children, provided however that Mr.
     Lineweaver has the right to designate someone other
     than the children as beneficiaries of policies
     providing regular coverage (as opposed to double
     indemnity) of up to $100,000.00. Mr. Lineweaver, after
     all the children have reached the age of twenty-one
     (21) years, and Mrs. Lineweaver has remarried, may make
     whomever he wishes the beneficiaries of any or all of
     his life insurance.

     During the course of preparing the Deed of Separation, Mr.

Frazier had revised certain provisions in response to the

parties' requests.   In the early draft of the Deed of Separation,

the life insurance paragraph (then paragraph 11) did not provide

for Kathleen to remain a beneficiary of any of the husband's life

insurance after the divorce.   The first two sentences of life

insurance paragraph 11 were essentially the same as in the final

version, but the third sentence (the "After the divorce"
                               - 6 -

sentence) and the fourth sentence were different.   The pertinent

third and fourth sentences of that early draft read:

     After the divorce, the beneficiaries of said policies
     will be changed to the children, provided however that
     Mr. Lineweaver has the right to designate someone other
     than the children as beneficiaries of policies
     providing regular coverage (as opposed to double
     indemnity) of up to $100,000.00. Mr. Lineweaver, after
     all the children have reached the age of eighteen (18)
     years, may make whomever he wishes the beneficiaries of
     any or all of his life insurance.

Kathleen wanted to remain a beneficiary after the divorce until

she remarried and also wanted the children to remain

beneficiaries until they reached age 21.   In a later draft the

following third and fourth sentences appeared:

     After the divorce, Mrs. Lineweaver shall, until she
     remarries, remain the beneficiary of life insurance
     policies providing regular coverage (as opposed to
     double indemnity) in an amount of up to $100,000.00,
     with the beneficiaries of the remaining life insurance
     policies being the children. Mr. Lineweaver, after all
     the children have reached the age of twenty-one (21)
     years, and Mrs. Lineweaver has remarried, may make
     whomever he wishes the beneficiaries of any or all of
     his life insurance.

In the final version of the "After the divorce" sentence, the

version the spouses ultimately executed, the "up to $100,000.00"

language in regard to Kathleen's interest was changed to "not

less than $100,000.00".   In the final version the proviso in

regard to Mr. Lineweaver's naming beneficiaries other than the

children for insurance up to $100,000, which had appeared in the

third sentence of the earlier draft, was added to the end of the

new third sentence.   The fourth sentence remained the same in
                               - 7 -

this later draft and in the final version of the Deed of

Separation.   Mr. Frazier never saw any of decedent's insurance

policies.

     Kathleen was not represented by an attorney during the

drafting of the Deed of Separation.    She asked her father, a

businessman, to review at least one of the drafts, and he

apparently showed it to a lawyer.   However, Kathleen never met

with that lawyer.   Decedent had told her that he would not leave

the marital home until the agreement was signed, and that

engaging an attorney would delay the separation.   She wanted

decedent out of the house as soon as possible to end her

emotional distress.   At the time Kathleen and decedent first went

to Mr. Frazier's office to sign the final version, decedent had

not secured a new residence.   Mr. Frazier would not permit them

to postdate the document, so a few days later, after decedent had

actually moved out of the marital home, they returned to Mr.

Frazier's office to sign the Deed of Separation on December 1,

1980.

Divorce and Equitable Distribution Action

     Sometime after the execution of the Deed of Separation,

North Carolina enacted an equitable distribution statute that

became effective for divorces obtained after October 1, 1981.

N.C. Gen. Stat. secs. 50-20, 50-21 (1987).    The statute created a
                               - 8 -

type of "deferred community property law system" governing

marital property in the case of divorce.3

     On June 1, 1982, Kathleen filed a complaint in the District

Court of Guilford County, North Carolina, seeking an absolute

divorce4 and equitable distribution of marital property.   In her

Complaint, Kathleen alleged that the couple had accumulated

marital property in excess of $2,000,000.   Decedent's Answer,

filed June 22, 1982, denied this allegation and asserted that the

Deed of Separation, referred to as a Separation Agreement, was a

bar to Kathleen's claim, having "settled all alimony, support and

property rights".

     The Judgment of Divorce granting an absolute divorce was

entered on June 29, 1982.   The Judgment recited, among other

things, that

     the purported Separation Agreement dated December 1,
     1980, is at issue between the parties and that the
     validity thereof and its enforceability is retained for
     further proceedings. In the event said purported
     Separation Agreement is finally adjudged valid and
     binding and the Court concludes that [Kathleen] is not
     entitled to the benefits of the Equitable Distribution
     Act, said Agreement shall be incorporated nunc pro tunc
     in this Divorce Decree.

On July 1, 1982, Kathleen married Edwin R. Lyon, Jr.

     3
        See Estate of Waters v. Commissioner, 48 F.3d 838, 842
(4th Cir. 1995), affg. in part and revg. and remanding in part
T.C. Memo. 1994-194.
     4
        At the time of the separation from Mr. Lineweaver,
Kathleen did not contemplate remarriage, but about a year later
she began seeing Edwin R. Lyon, Jr. and by mid-1982 wished to
remarry.
                               - 9 -

     On August 29, 1982, Kathleen filed a Reply to the Answer,

alleging circumstances around the time of signing the Deed of

Separation that would cause the instrument to be "null and void,

or voidable, and of no legal effect".   Her Reply asserted that

the Deed of Separation, irrespective of its validity or

invalidity, did not bar her claim for equitable distribution.

     Decedent's counsel took Kathleen's deposition on January 27,

1983.   During the deposition, Kathleen reconstructed the couple's

negotiations based on the various drafts of the Deed of

Separation and the handwritten notes thereon.    With regard to

decedent's life insurance, Kathleen had wanted $100,000 of the

benefits for herself if she had not remarried.    Also, it was

Kathleen who wanted the children to reach 21, instead of 18,

years of age before decedent could designate whomever he wished

as beneficiaries.   In the deposition, Kathleen did not suggest

that her benefits were dependent on the children's ages, or that

the children's benefits were dependent on her marital status.

     Decedent and Kathleen agreed to settle the equitable

distribution action.   Decedent agreed to pay Kathleen $400,000

"in full and complete settlement of her marital property and

other claims alleged or which could have been alleged in the * *

* action.   The parties agree that the settlement shall be treated

as a marital property division."   The termination of decedent's

obligations under the Deed of Separation was never discussed

during the settlement negotiations.
                                 - 10 -

     The Guilford County District Court entered a Consent

Judgment on August 3, 1984, recording its approval of the

settlement agreement.   A portion of the Consent Judgment reads:

     it appearing to the Court that this is an action for
     Absolute Divorce and Equitable Distribution and that
     [decedent] has pled a prior separation agreement in bar
     of [Kathleen's] marital property and money demands;

          And it further appearing to the Court that * * *
     the only matter currently pending is the claim of
     [Kathleen] for Equitable Distribution and sums
     allegedly due arising from the marital relationship;

          And it further appearing that [Kathleen] and
     [decedent] have agreed to a marital property settlement
     in a certain amount to be paid by [decedent] to
     [Kathleen] in full and complete satisfaction of all
     claims alleged or which could have been alleged in the
     pleadings;

                    *    *   *     *      *   *   *

The Consent Judgment contains no decision on the Deed of

Separation, nor did the court enter a separate judgment in regard

to it.

     Decedent made the settlement payment on August 3, 1984.   On

that same date, Mr. L. P. McLendon, Jr., as Kathleen's attorney-

in-fact, signed a Release of All Claims forever discharging

decedent

     from any and all actions, causes of action, damages,
     costs, loss of services, expenses, compensation, suits,
     debts, claims, demands and obligations whatsoever, both
     in law and in equity, which I ever had, now have, or
     may hereafter have against [decedent] upon or by reason
     of any matter, case or thing up to the date of the
     execution of this release.
                               - 11 -

The Release also stated:    "This release contains the entire

agreement between the parties hereto, and the terms of this

release are contractual and not mere recitals."

Child Support

     After the settlement, decedent continued to make child

support payments.    However, a disagreement arose over the

language in the Deed of Separation setting forth the amounts of

child support to be paid.    Kathleen made a claim on decedent

prior to his death for what she believed was the correct amount

of child support.

Insurance Policies

     Kathleen was the sole beneficiary on a policy on decedent's

life in the face amount of $100,000 issued on May 18, 1978, by

Provident Mutual Life Insurance Company of Philadelphia

(Provident).    On March 10, 1982, Provident filed decedent's

Change of Beneficiary with respect to this policy, naming

Kathleen and decedent's executors as cobeneficiaries.    Upon

decedent's death, Kathleen received $50,680.34 as a cobeneficiary

of this insurance policy.

     On December 1, 1980, none of decedent's children was a

beneficiary of insurance policies on decedent's life; however,

the children were beneficiaries of a revocable trust decedent had

established on March 28, 1975.    The purpose of this trust was to

fund a marital deduction trust for Kathleen and a residuary trust

for the benefit of "the Grantor's wife, Kathleen Powell
                                - 12 -

Lineweaver, so long as she remains unmarried and/or the children

or descendants of any deceased child of the Grantor".      On

December 1, 1980, this trust was funded by nine insurance

policies on decedent's life with face amounts totaling $375,000.

Effective February 19, 1982, decedent changed the beneficiary on

seven of these policies from the trust to decedent's estate.      On

March 10, 1982, decedent made the same change on one more policy.

At decedent's death, the executor of his estate received

$251,206.97 in insurance proceeds and the trust received

$312,095.88, from the one remaining policy, which had a face

amount of $250,000.

Wills

        Decedent executed a will on February 15, 1982.   This will

contained the following:

                        CONTRACTUAL OBLIGATIONS

             I entered into a Deed of Separation with my former
        wife, Kathleen Powell Lineweaver, hereinafter referred
        to as Kitty, under date of December 1, 1980. The Deed
        of Separation contained among other things, provisions
        with reference to Kitty's continuing to live in the
        home known as 2 St. Francis Court, Greensboro, North
        Carolina, and to Kitty's remaining the beneficiary on
        life insurance policies providing regular coverage (as
        opposed to double indemnity) on my life in an amount of
        not less than $100,000.00. I direct my Executor to
        carry out those obligations of mine set forth in the
        aforementioned Deed of Separation which survive my
        death.

At that time, Kathleen had not yet filed the divorce action and

was still decedent's wife.
                               - 13 -

     On October 2, 1984, after the divorce and after settlement

of the equitable distribution action, decedent executed a new

will (1984 will).    Attorney Ronald P. Johnson prepared the 1984

will.    Decedent had provided Mr. Johnson with a copy of the 1982

will, requesting only minor changes in the above quoted article

and major changes in the other provisions.    Article IV of the

1984 will stated:

          I entered into a Deed of Separation with my former
     wife, Kathleen Powell Lineweaver, hereinafter referred
     to as "Kittie," under date of December 1, 1980. The
     Deed of Separation contained among other things a
     provision requiring that Kittie remain the beneficiary
     on life insurance policies providing regular coverage
     on my life in an amount of not less than One Hundred
     Thousand Dollars. I direct my Executor to see that
     Kittie receives the sum of One Hundred Thousand Dollars
     upon my death, either my [sic] means of life insurance
     or other assets if she is not then named the
     beneficiary of at least One Hundred Thousand Dollars of
     life insurance.

     On November 12, 1987, decedent executed his final will (1987

will).    Mr. Johnson also prepared this will.   In the 1987 will,

Article IV reads:

          I entered into a Deed of Separation with my former
     wife, Kathleen Powell Lineweaver, hereinafter referred
     to as "Kittie," under date of December 1, 1980. The
     Deed of Separation contains among other things a
     provision requiring that Kittie remain the beneficiary
     on life insurance policies providing regular coverage
     on my life in an amount not less than One Hundred
     Thousand Dollars. If at the time of my death, Kathleen
     Powell Lineweaver does not receive said one hundred
     thousand ($100,000.00) dollars of life insurance, I
     direct that my Executor distribute to Kathleen Powell
     Lineweaver cash in an amount which when added to the
     amount of life insurance she receives by reason of my
     death will equal one hundred thousand ($100,000.00)
     dollars.
                              - 14 -

     Mr. Johnson, who drafted the 1984 and 1987 wills, thought

that decedent was satisfied that Article IV mirrored his

obligation under the Deed of Separation.   Mr. Johnson had not

seen and did not review a copy of the Deed of Separation when

preparing either the 1984 or 1987 will.    At the time he drafted

the 1984 and 1987 wills, he was not aware of the nature of the

domestic matter his firm had handled for decedent.   Mr. Johnson

was not familiar with either the Consent Judgment or the Release

of All Claims.   It is uncertain whether in 1984 and 1987 Mr.

Johnson knew of the divorce and Kathleen's remarriage.   All three

wills refer to Kathleen as Kathleen Powell Lineweaver, even

though she had remarried a few months after the 1982 will was

executed and had taken the name of Kathleen Powell Lyon in 1982.

Mr. Johnson did not make any independent investigation as to the

nature of any obligation decedent had in regard to paying

Kathleen an amount of $100,000 either by means of life insurance

or other assets.

     Article II of the 1987 will directed that decedent's

executor

     shall make such claim as is permitted by law for any
     such death taxes assessed against my estate as a result
     of the inclusion in my estate of * * * any insurance
     policies payable to beneficiaries other than my
     Executor * * *

Estate Administration

     After Kathleen received the $50,680.34 of life insurance

proceeds, she made a claim against decedent's estate for the
                                - 15 -

shortfall of nearly $50,000.    The estate paid Kathleen $25,000 by

check dated October 19, 1990.    In keeping with decedent's

instructions in Article II of the 1987 will, the estate withheld

the remaining amount pending resolution of the estate taxes due.

     The estate issued Kathleen a check in the amount of $20,000

on March 8, 1991, in settlement of her claim for back child

support.   On March 12, 1991, Kathleen signed a Release of All

Claims for Child Support "accrued at any time through the date of

this release, specifically including, but not limited to, the sum

of Three Hundred and No/100 ($300.00) Dollars per month

additional child support due from September 1984, through March

1990."

     On Schedule K of the Federal estate tax return, the estate

claimed a deduction of $100,000 listed as "Kathleen L. Lyon -

insurance owed per separation agreement."    Schedule K contained a

notation that $25,000 of the $100,000 remained unpaid.

Respondent disallowed the $100,000 deduction in full.

                                OPINION

     Section 2053(a)(3) provides a deduction from the value of

the gross estate for the amount of a claim against the estate as

allowable by the law of the jurisdiction under which the estate

is being administered.   In the case of a claim founded on a

promise or agreement, the deduction is "limited to the extent

that [it was] contracted bona fide and for an adequate and full
                               - 16 -

consideration in money or money's worth * * * ".    Sec.

2053(c)(1)(A).

     Respondent has disallowed the estate's deduction of $100,000

on the ground that decedent was under no obligation on the date

of his death to pay Katherine such an amount.5   The estate argues

that decedent was obligated to provide Kathleen with at least

$100,000 of insurance proceeds until such time as she remarried

and all three children had reached age 21.    Respondent argues

that under the Deed of Separation, decedent was obligated to

maintain Kathleen as beneficiary only until she remarried.

Alternatively, respondent argues that the Consent Judgment and

Release of All Claims executed on August 3, 1984, settled all

marital property rights and terminated decedent's obligation

under the Deed of Separation to name Kathleen as beneficiary.

     We are faced with the task of construing the life insurance

provisions in the Deed of Separation in accordance with North

Carolina law.    The construction of a separation agreement is

governed, in general, by the rules and provisions applicable in

the case of other contracts.    Bowles v. Bowles, 237 N.C. 462,

465, 75 S.E.2d 413, 415 (1953).    The heart of a contract is the

intention of the parties which must be determined from the

language of the contract, the purposes of the contract, the

subject matter, and the situation of the parties at the time the

     5
       Respondent does not dispute the adequacy of consideration
for the promises contained in the Deed of Separation.
                                - 17 -

contract is executed.   Bolton Corp. v. T.A. Loving Co., 317 N.C.

623, 628, 347 S.E.2d 369, 372 (1986); Bowles v. Bowles, supra.

     Evidence of the parties' subsequent conduct is admissible;

if the language used in the contract gives rise to a doubtful

meaning, the parties are presumed to know best their intent.

Management Systems Associates v. McDonnell Douglas Corp., 762

F.2d 1161, 1171-1172 (4th Cir. 1985); Commercial Natl. Bank of

Charlotte v. Charlotte Supply Co., 226 N.C. 416, 432, 38 S.E.2d

503, 514 (1946) ("The conduct of the parties in dealing with the

contract indicating the manner in which they themselves construe

it is important, sometimes said to be controlling in its

construction by the court.").    Where the meaning of a written

contract is unclear, parol evidence may be used to explain the

agreement of the parties, but it cannot be used to alter or

contradict any of its provisions.    Jaftex Corp. v. Aetna Casualty

& Surety Co., 617 F.2d 1062, 1063 (4th Cir. 1980); Bost v. Bost,

234 N.C. 554, 558, 67 S.E.2d 745, 747 (1951).    "All parts of a

contract are to be given effect if possible.    It is presumed that

each part of the contract means something."     Bolton Corp. v. T.A.

Loving Co., 317 N.C. at 628, 347 S.E.2d at 372.

     The estate argues that decedent's conduct of including

Kathleen in three wills, two of which were written after their

divorce, indicates that the spouses intended decedent's

obligation to continue until after all the children reached 21

and Kathleen had remarried (hereinafter both conditions).    At the
                               - 18 -

time he executed his 1982 will, decedent was clearly under a

legal obligation to retain Kathleen as a beneficiary on his life

insurance in an amount of at least $100,000, since the spouses

were not then divorced and Kathleen had of course not remarried.

The 1982 will directs decedent's executor "to carry out those

obligations of mine set forth in the aforementioned Deed of

Separation which survive my death."     No such language appears in

Article IV of the 1984 and 1987 wills.    The 1984 and 1987 wills

make no reference to any event terminating decedent's obligation,

yet, it is clear that once both conditions were met, decedent

would no longer have any such obligation under the Deed of

Separation.    Mr. Johnson, the attorney who drafted the 1984 and

1987 wills, failed to consult the Deed of Separation and, if he

knew about the divorce and Kathleen's remarriage, he failed to

consider the effect of Kathleen's remarriage when drafting those

later wills.    Mr. Johnson was wholly unfamiliar with the terms of

the Deed of Separation; he simply accepted decedent's

representation that the 1982 will mirrored the terms of the Deed

of Separation and that decedent did not want any changes in

Article IV of the will except a few minor word changes which Mr.

Johnson made.   The Court accepts that the 1982 will did mirror

decedent's obligation under the Deed of Separation at the time

that will was executed; however neither Mr. Johnson nor decedent

seems to have considered the fact that in the intervening period

there had ensued a divorce and Kathleen's remarriage.    In any
                              - 19 -

event, the language of the respective wills does not lend

assistance in determining the intent of decedent and Kathleen in

executing the 1980 Deed of Separation.

     Kathleen's testimony at trial is of minimal assistance due

to her limited recollection of events 14 years ago.6   A review of

the chronological evolution of the drafts of the Deed of

Separation and Kathleen's deposition testimony in early 1983 in

the equitable distribution action provide the most probative and

most contemporaneous construction of the Deed of Separation.

     There are two drafts and the final version of the life

insurance paragraph of the Deed of Separation, numbered paragraph

12 in the final version and numbered paragraph 11 in the two

drafts.   In both drafts and in the final version, the first

sentence recites that decedent had various life insurance

policies of which Kathleen and/or the children were the

beneficiaries.7   The second sentence in both drafts and in the

     6
        The testimony of the various lawyers involved in drafting
the Deed of Separation, in drafting the 1984 and 1987 wills, and
in prosecuting or defending the equitable distribution action was
generally conclusory and not particularly informative on the
critical issue in this case. None of them had any files or notes
on the issue in this case. Mr. Frazier admitted he was simply a
scrivener writing down the parties' wishes in the Deed of
Separation and not representing either spouse. Mr. Johnson knew
nothing about the Deed of Separation or the nature of the
domestic matter his firm had handled for decedent. It is not
clear that in 1984 and 1987 Mr. Johnson even knew about
Kathleen's remarriage.
     7
        In fact the children were not beneficiaries of any of the
policies at the time the Deed of Separation was executed or
                                                   (continued...)
                              - 20 -

final version stated that decedent will not change the

beneficiaries of these policies until the divorce.8   The third

sentence, which we refer to as the "After the divorce" sentence,

involved the most changes in the evolution of the life insurance

paragraph.   In the early draft, the "After the divorce" sentence

read as follows:

     After the divorce, the beneficiaries of said policies
     will be changed to the children, provided however that
     Mr. Lineweaver has the right to designate someone other
     than the children as beneficiaries of policies
     providing regular coverage (as opposed to double
     indemnity) of up to $100,000.00.

Kathleen objected to that language because she wanted to be a

beneficiary for an amount of $100,000 of life insurance after the

divorce and until she remarried.9   At the time the Deed of

     7
      (...continued)
thereafter.
     8
        This provision remained essentially the same in both
drafts and in the final version, the only difference being as to
who was to hold the policies for safekeeping. In the early
draft, there was a blank for the person's name and handwritten in
the blank was the name of decedent's brother, Francis B.
Lineweaver. In the next draft the name of Francis B. Lineweaver
was typed in, and no further changes were made in that second
sentence in the final version.
     9
        During her deposition on January 27, 1983, Kathleen was
questioned about the first draft of the life insurance paragraph
(which is paragraph 11 of what we have called the early draft) as
follows:
          Q All right. Now what was your next change on
     the first draft?
          A Under life insurance, Paragraph 11, same page.
     There was a blank on the end of the fourth line. It
     was talking about--- "Mr. Lineweaver agrees that he
     will not change the beneficiaries of said policies,
                                                   (continued...)
                              - 21 -

Separation was being drafted, Kathleen was not contemplating

remarriage.   See supra note 4.   In the next draft this "After the

divorce" sentence was revised to read:

     After the divorce, Mrs. Lineweaver shall, until she
     remarries, remain the beneficiary of life insurance
     policies providing regular coverage (as opposed to
     double indemnity) in an amount of up to $100,000.00,
     with the beneficiaries of the remaining life insurance
     policies being the children. [Emphasis added.]

Kathleen objected to the "up to $100,000.00" language, and

decedent still wanted to be able to name a beneficiary other than

the children for some of the insurance up to $100,000.   In the

final version both spouses seem to have gotten what they wanted.



     9
      (...continued)
     which shall be delivered to 'blank'." And he put his
     brother's name there.
          Q And that was carried into the final form?
          A I assume it was.
          Q I will again show you the agreement which we
     marked this morning in the final form and ask you if
that was not, in fact, included in the final document.
          A Yes.
          Q All right.
          A It says, "After the divorce, the beneficiaries
     of said policies will be changed to the children,
     provided, however, that Mr. Lineweaver has the right to
     designate someone other than the children as
     beneficiaries."
          I wanted part of that to go to me - a hundred
     thousand - if I had not remarried.
          Q All right. Now that was also, in fact, carried
     into the final document, was it not?
          A Yes.
          Q So the final showed that if you had not
     remarried, a hundred thousand dollars worth of life
     insurance would be made payable to you as beneficiary?
          A Right. [Emphasis added.]
                             - 22 -

In the final version that the parties executed, the "After the

divorce" sentence read as follows:

     After the divorce, Mrs. Lineweaver shall, until she
     remarries, remain the beneficiary of life insurance
     policies providing regular coverage (as opposed to
     double indemnity) in an amount of not less than
     $100,000.00, with the beneficiaries of the remaining
     life insurance policies being the children, provided
     however that Mr. Lineweaver has the right to designate
     someone other than the children as beneficiaries of
     policies providing regular coverage (as opposed to
     double indemnity) of up to $100,000.00. [Emphasis
     added.]

The evolution of this third sentence of the life insurance

paragraph clearly shows that Kathleen was to remain a beneficiary

of policies after the divorce and "until she remarries".10

     Contrary to that clear "until she remarries" language in the

third sentence, the estate argues that the fourth sentence of the

life insurance paragraph imposes two conditions for the

termination of her right to be named as a beneficiary on

insurance policies in an amount of at least $100,000; namely both

her remarriage and having all three children reach the age of 21.

The Court finds this to be a strained and illogical reading.   In

the early draft where Kathleen was not a beneficiary at all after

the divorce, the proposed fourth sentence read:


     10
        Much of the confusion at trial on the part of counsel
for both parties and the Court was caused by a collective failure
to consider the evolution of the language of this third sentence.
The Court found confusing and ambiguous the final "provided
however" clause because its derivation was not clear to the Court
during the trial. The Court did not find confusing or ambiguous
the "until she remarries" language.
                               - 23 -

      Mr. Lineweaver, after all the children have reached the
      age of eighteen (18) years, may make whomever he wishes
      the beneficiaries of any or all of his life insurance.

Kathleen objected and wanted the children to be covered until

they reached age 21.   In the next draft, the age was changed to

21.   Also in that next draft Kathleen was, until she remarries,

to remain a beneficiary of policies in an amount up to $100,000.

The remarriage of Kathleen was also added to the fourth sentence

of that next draft.    That addition to the fourth sentence is not

in conflict with the "until she remarries" language in the third

sentence.   Without such an addition, an ambiguity could be

injected; namely, it could be argued that she would no longer

remain a beneficiary once the daughters reached age 21 even if

she had not remarried by that time.     The fourth sentence in that

draft read:

      Mr. Lineweaver, after all the children have reached the
      age of twenty-one (21) years, and Mrs. Lineweaver has
      remarried, may make whomever he wishes the
      beneficiaries of any or all of his life insurance.

This fourth sentence was not changed in the final version.

      The estate reads the fourth sentence as extending Kathleen's

coverage beyond her remarriage, contrary to the language in the

third sentence.   A more logical interpretation is that the fourth

sentence protects her against termination if she has not

remarried by the time the children reach 21, terminating the

children's rights when they reach 21 and terminating her right

when she remarries.    This reading is consistent with the "until
                              - 24 -

she remarries" language in the third sentence.   This reading

reconciles the two sentences rather than nullifying the "until

she remarries" language of the third sentence.

     In addition to being a common sense reading of the life

insurance paragraph as a whole, considered in the light of the

evolution of the language of sentences three and four, the

Court's reading is consistent with Kathleen's testimony at the

deposition in 1983 when she was much closer in time to the

pertinent events and before the present controversy arose.11

     Based on the above, we conclude that the spouses intended

that Kathleen be named the beneficiary of at least $100,000 of

decedent's life insurance until she remarried.   To give effect to

Kathleen's interpretation that both conditions must be met in

order to terminate decedent's obligation is to render superfluous

the words "until she remarries" in the third sentence, which we

decline to do.   We hold that decedent on the date of his death

was no longer obligated to maintain Kathleen as beneficiary on



     11
        Kathleen is essentially the real party in interest in
this case. The estate declined to prosecute the present claim,
but permitted Kathleen through her attorneys and at her expense
to bring the present case in the estate's name. The estate is
required to pay $100,000 to Kathleen, regardless of whether the
$100,000 is deductible as a debt of decedent. However, under
Article II of the 1987 will, Kathleen is liable for any estate
tax due with respect to the life insurance proceeds she received
as a cobeneficiary under one policy of life insurance on
decedent's life; if the estate is allowed a deduction for the
$100,000 as a claim against the estate, Kathleen will not be
liable for any estate tax in regard to the insurance proceeds.
                             - 25 -

$100,000 worth of life insurance.   Because of our holding, we

need not address respondent's alternative argument.12

     In keeping with the above holding,

                                          Decision will be entered

                                    for respondent.




     12
        For completeness, we have, however, included the
pertinent facts in regard to the settlement agreement and release
in the equitable distribution action.
