[Cite as LeBlanc v. Wells Fargo, 134 Ohio St.3d 250, 2012-Ohio-5458.]
LEBLANC ET AL., APPELLANTS, v. WELLS FARGO ADVISORS, L.L.C.;
BURCHFIELD, APPELLEE.
[Cite as LeBlanc v. Wells Fargo, 134 Ohio St.3d 250, 2012-Ohio-5458.]
Civil procedure—Interpleader—Contract—When the custodian of an individual
retirement account files an interpleader action against the parties
claiming to be the beneficiaries of the account, the custodian waives its
contractual change-of-beneficiary procedures, and a person who proves
that the owner clearly intended to designate him or her as the beneficiary
does not need to also prove that the owner substantially complied with the
change-of-beneficiary procedures in order to recover. Instead, the
account owner’s clearly expressed intent controls.
(Nos. 2011-2160 and 2011-2073—Submitted July 11, 2012—Decided
November 28, 2012.)
APPEAL from and CERTIFIED by the Court of Appeals for Montgomery County,
No. 24348, 196 Ohio App.3d 213, 2011-Ohio-5553.
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SYLLABUS OF THE COURT
When the custodian of an individual retirement account files an interpleader
action against the parties claiming to be the beneficiaries of the account,
the custodian waives its contractual change-of-beneficiary procedures, and
a person who proves that the owner clearly intended to designate him or
her as the beneficiary does not need to also prove that the owner
substantially complied with the change-of-beneficiary procedures in order
to recover. Instead, the account owner’s clearly expressed intent controls.
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SUPREME COURT OF OHIO
O’CONNOR, C.J.
{¶ 1} In this appeal, we resolve a conflict between the decisions of the
Ninth District Court of Appeals and the Second District Court of Appeals
concerning the effect of an individual retirement account (“IRA”) custodian’s
filing of an interpleader action against competing claimants. We hold that when
the custodian of an individual retirement account files an interpleader action
against the parties claiming to be the beneficiaries of the account, the custodian
waives its contractual change-of-beneficiary procedures, and a person who proves
that the owner of the account clearly intended to designate him or her as the
beneficiary does not also need to prove that the owner substantially complied with
the change-of-beneficiary procedures in order to recover. Instead, the account
owner’s clearly expressed intent controls.
{¶ 2} Because our holding rejects the analysis adopted by the Second
District Court of Appeals in this case and because there exists a genuine issue of
fact as to the intent of the account owner, John F. Burchfield, we reverse the court
of appeals’ judgment and remand this case to the common pleas court for trial.
RELEVANT BACKGROUND
The disputed accounts
{¶ 3} This is a dispute over money that Wells Fargo Advisors, L.L.C.,
was holding in two IRAs for John F. Burchfield when he committed suicide on
December 16, 2009. In 2002, John designated his mother, appellant Gloria
Welch, and his stepfather, Bruce Leland, as beneficiaries, 75 percent and 25
percent respectively.
{¶ 4} On May 5, 2007, John married appellee Cynthia Burchfield.
Shortly before the marriage, John designated Cynthia as the sole beneficiary on
both accounts.
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January Term, 2012
The disputed intent
{¶ 5} On October 28, 2009, John sent an e-mail to his Wells Fargo
advisor, Aaron Michael, stating that he and Cynthia were getting divorced and
requesting paperwork to remove Cynthia as the beneficiary on his IRAs.
Thereafter, by telephone, John gave Michael specifics regarding a change in the
beneficiary designation for the IRAs. Michael prepared change-of-beneficiary
forms that again designated Welch and Leland as the beneficiaries, 75 percent and
25 percent respectively. In addition, John’s sister, appellant Lori LeBlanc, was
listed as the contingent beneficiary. Michael predated the forms “November 2,
2009” and mailed them to John, along with a self-addressed, stamped envelope.
{¶ 6} On November 2, 2009, Cynthia filed a divorce complaint against
John. Around the same time, John spoke with Michael and informed him that the
change-of-beneficiary forms were “already taken care of.” Approximately six
weeks later, John committed suicide. He left a note that contained a postscript in
which he expressed his love for Cynthia.
{¶ 7} After John’s death, Leland and LeBlanc asked Michael to look
through John’s financial documents to wind up John’s affairs. Around January
25, 2010, Michael and one of John’s co-workers discovered the signed change-of-
beneficiary forms in an envelope among John’s papers.1 That same morning,
Michael gave the forms to his manager at Wells Fargo. Cynthia, LeBlanc, and
Welch made conflicting demands of Wells Fargo for the IRA proceeds.
PROCEDURAL HISTORY
{¶ 8} In March 2010, LeBlanc2 and Welch filed a complaint against
Wells Fargo and Cynthia,3 seeking a declaratory judgment4 that Cynthia was not
1. The parties dispute whether the signatures on the forms are John’s.
2. LeBlanc filed suit on behalf of John’s estate and in her individual capacity.
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entitled to the proceeds of John’s IRAs. In turn, Cynthia sought a contrary
declaration that she, as the beneficiary named on the form in Wells Fargo’s
possession at John’s death, was solely entitled to the proceeds.
{¶ 9} In response, Wells Fargo filed an action in interpleader against
LeBlanc, Welch, and Cynthia, in which it represented that it was “unable to
determine the validity of the conflicting demands.” Wells Fargo disclaimed any
interest in the proceeds of John’s IRA accounts and offered to deposit the funds
with the court’s clerk or to maintain the account until the dispute was resolved.
The trial court granted summary judgment to Cynthia, the beneficiary designated
on the form in Wells Fargo’s possession at the time of John’s death.
{¶ 10} The Second District Court of Appeals affirmed. LeBlanc v. Wells
Fargo Advisors, L.L.C., 196 Ohio App.3d 213, 2011-Ohio-5553, 962 N.E.2d 872.
In doing so, it emphasized that John had not complied with the Wells Fargo
policy, which required that change-of-beneficiary forms be returned to the
company. Id. at ¶ 12. And it concluded that Wells Fargo had not waived
compliance with its change-of-beneficiary procedure by filing an action in
interpleader against the claimants. Id. at ¶ 11.
{¶ 11} In reaching that conclusion, the Second District rejected the Ninth
District Court of Appeals’ decision in Kelly v. May Assoc. Fed. Credit Union, 9th
Dist. No. 23423, 2008-Ohio-1507, which held that an IRA custodian waives
compliance with its change-of-beneficiary procedures when it interpleads
disputed funds.
{¶ 12} The Second District further held that even if Kelly’s holding on
this narrow legal point was correct and the custodian’s filing of an interpleader
3. Leland was also named as a defendant, but he disclaimed any interest in the IRAs, along with
all of John’s other probate and nonprobate assets. The plaintiffs voluntarily dismissed Leland as a
party.
4. The complaint set forth a number of other causes of action that are not relevant here.
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January Term, 2012
action waived its right to enforce the change-of-beneficiary procedure, the parties
claiming to be the “clearly intended” beneficiaries must still prove that the
decedent had substantially complied with the change-of-beneficiary procedure.
LeBlanc at ¶ 13. In doing so, it again rejected yet another Kelly holding—that the
account holder’s clearly expressed intent controls.
{¶ 13} Accordingly, the Second District concluded that John’s failure to
return the forms to Wells Fargo before his death constituted a failure to
substantially comply with Wells Fargo’s procedure and that that failure was fatal
to Welch and LeBlanc’s claims, without regard to John’s actual intent. It
affirmed summary judgment in favor of Cynthia.
{¶ 14} We granted LeBlanc and Welch’s discretionary appeal, 131 Ohio
St.3d 1456, 2012-Ohio-648, 961 N.E.2d 1135, and certified that a conflict exists
between the Second District’s decision in this case and the Ninth District’s
decision in LeBlanc, 131 Ohio St.3d 1455, 2012-Ohio-648, 961 N.E.2d 1134. We
consolidated the actions, which present the same legal question.
QUESTION PRESENTED
{¶ 15} The question certified by the Second District is: “In a dispute
between (1) a specifically designated and (2) a clearly intended beneficiary of an
individual retirement account (IRA), where the account custodian files an
interpleader action and purportedly waives compliance with its change of
beneficiary procedure, is the ‘clearly intended’ beneficiary required to show that
the owner of the IRA account substantially complied with the change of
beneficiary procedure in order to recover?”
{¶ 16} We answer the certified question in the negative.
ANALYSIS
{¶ 17} Resolution of the issues before us requires that we answer two
unsettled questions. First, when an IRA custodian files an interpleader action
against competing claimants, does it waive its contractual change-of-beneficiary
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procedures? And if so, what is the test for determining who is entitled to the
disputed funds?
{¶ 18} Because we agree with the Ninth District’s analysis and holding,
we first turn our discussion to its opinion in Kelly, which squarely dealt with both
questions.
The Ninth District Opinion
{¶ 19} Barbara Kelly opened an IRA at May Associates Federal Credit
Union in 1992 and named her nephew, Richard Wachter, as the beneficiary.
Kelly, 2008-Ohio-1507, at ¶ 4. She also granted Richard a general power of
attorney and named him co-owner of a number of certificates of deposit.
{¶ 20} Barbara later granted a power of attorney to her daughter, Janice
Kelly, and revoked the one she had given Richard. Barbara also made Janice the
co-owner of her certificates of deposit and told Richard that she was going to
make Janice the beneficiary of her IRA.
{¶ 21} On November 19, 1998, Barbara telephoned May Associates to
name Janice the beneficiary of her IRA. Even though May Associates required
that a beneficiary could be changed only by the member completing and signing
an IRA beneficiary-designation form, the teller with whom Barbara spoke
completed the change-of-beneficiary form and wrote “per member” on the
signature line. The teller mailed a copy of the form she had completed to
Barbara, placed a copy in the credit union’s file, and sent a copy to the third-party
administrator handling the IRA. Barbara was not told that she needed to sign the
form.
{¶ 22} Barbara died in 2003. By that time, May Associates was using a
different third-party administrator for the IRA. The new company had the
designation of Richard on file that Barbara made when she opened the account
but had no information about the form the teller filled out in 1998. The
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January Term, 2012
administrator told Richard that he was the beneficiary. Janice and Richard made
competing claims for the IRA proceeds. No money was paid out.
{¶ 23} Janice filed a complaint against Richard and May Associates,
seeking a declaratory judgment that she was entitled to the IRA proceeds. May
Associates filed an interpleader action against Janice and Richard. The trial court
granted summary judgment to Janice on the ground that Barbara had clearly
expressed her intent that Janice be the beneficiary of the IRA.
{¶ 24} The Ninth District Court of Appeals affirmed. Kelly, 2008-Ohio-
1507, at ¶ 2. In doing so, it acknowledged that Barbara had not complied with the
May Associates procedures, which required that changes to beneficiaries “be
made by completing and signing an IRA beneficiary designation form.” Id. at ¶ 5.
But it concluded that May Associates waived the signature requirement when it
filed the interpleader action. Id. at ¶ 13.
{¶ 25} To reach that conclusion, the Kelly court applied our holdings in
cases dealing with life-insurance-policy proceeds and justified doing so because
life-insurance policies and individual retirement accounts share a salient feature—
they both “typically include a procedure for designating and changing
beneficiaries.” Id. The court then explained that “[i]t has long been the rule in
Ohio that those procedures are intended to protect the insurer from duplicate
liability and the insurer is free to waive them.” Id., citing Rindlaub v. Travelers
Ins. Co., 175 Ohio St. 303, 305, 194 N.E.2d 577 (1963), and Atkinson v. Metro.
Life Ins. Co., 114 Ohio St. 109, 150 N.E. 748 (1926), paragraph four of the
syllabus.
{¶ 26} Indeed, “if, in the face of conflicting claims to insurance proceeds,
the insurer interpleads those proceeds, it has waived any interest in the resolution
of the claims, including enforcement of the procedure set forth in its policy for
designating and changing beneficiaries.” Id., citing Rindlaub and Atkinson. “In
such a case, if the insured communicated to the insurer her ‘clearly expressed
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SUPREME COURT OF OHIO
intent’ to change beneficiaries, the proceeds will be paid to the newly designated
beneficiary rather than the originally designated beneficiary * * *.” Id., citing
Rindlaub at paragraph two of the syllabus.
{¶ 27} There was no question that Barbara had telephoned May
Associates and told a teller to change her beneficiary designation. “Based on [the
teller’s] testimony, coupled with the change of beneficiary form completed by the
teller,” the Ninth District concluded that there was no genuine issue of fact
whether Barbara had clearly expressed to May Associates her intent to change her
beneficiary. Kelly, 2008-Ohio-1507, at ¶ 27. Accordingly, it affirmed summary
judgment in favor of Janice. Id. at ¶ 32.
The Second District opinion
{¶ 28} The Second District refused to apply our holdings in the life-
insurance cases to the dispute over John’s IRA proceeds, and it therefore
concluded that Wells Fargo did not waive its change-of-beneficiary procedures by
interpleading the disputed funds. See LeBlanc, 196 Ohio App.3d 213, 2011-Ohio-
5553, 962 N.E.2d 872, ¶ 23. In its view, an IRA is fundamentally different from a
life-insurance policy because an IRA is a present asset of the account holder
during her life, but a life-insurance policy—in one form—has no value to the
insured during the insured’s life. But in so holding, the Second District conceded
that “there are many and varied financial products that come under the heading of
‘life insurance’ * * * some of which have a cash value that the owner of the
policy can withdraw or borrow against.” Id. at fn. 5.
{¶ 29} The appellate court concluded that IRAs are more akin to joint and
survivorship accounts. Id. It reasoned that both are present assets of an account
holder and both transfer outside of probate upon the death of the account holder.
Id. For that reason, the Second District applied our holding in Wright v. Bloom,
69 Ohio St.3d 596, 635 N.E.2d 31 (1994), which is the leading case law
applicable to disputes over joint bank accounts.
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January Term, 2012
{¶ 30} In Wright, we held that in the absence of fraud, duress, undue
influence, or lack of capacity, the opening of a joint and survivorship account was
conclusive evidence of an intent to transfer the balance of the account upon the
death of an account holder. Id. at paragraphs one and two of the syllabus. And
there is “no need to go beyond the account contract to ascertain the creator’s
intent.” Id. at 605. Instead, the dispositive question is simply whether the
signature card or account documents specify that the joint account holders have
survivorship rights. Id. at 606.
{¶ 31} In deciding LeBlanc, the Second District conceded that joint and
survivorship accounts transfer purely by virtue of contract, while IRA proceeds
transfer by virtue of the Uniform Transfer-On-Death Security Registration Act,
which provides:
“Any transfer-on-death resulting from a registration in beneficiary
form is effective by reason of the contract regarding the
registration between the owner of the security and the registering
entity and by reason of sections 1709.01 to 1709.11 of the Revised
Code and is not testamentary.”
LeBlanc, 196 Ohio App.3d 213, 2011-Ohio-5553, 962 N.E.2d 872, ¶ 16, quoting
R.C. 1709.09(A). It therefore justified applying the contracts rule developed in
the joint-and-survivorship-account cases by emphasizing that the transfer of IRA
proceeds “derives its effectiveness from the contract.”5 Id. Accordingly, the
Second District concluded that Wells Fargo’s requirements for a change of
5. On that point, the Second District warned: “[I]f a transfer upon death is effective by reason of
the ‘clearly expressed intent’ of the insured, * * * R.C. 1709.09(A) does not save it from being
included in the estate, subject to the formalities of the statute of wills and subject to the statutory
benefits and elections that a surviving spouse may choose to receive.” LeBlanc at ¶ 16. Our
decision here makes clear that that result would be improper.
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beneficiary controlled, and “because John did not comply with them, he did not
change the beneficiary before his death.” Id. at ¶ 23.
{¶ 32} The Second District also held, in the alternative, that even if
insurance law applies and an IRA custodian waives its change-of-beneficiary
procedures when it interpleads disputed funds, a party claiming that the account
holder clearly intended to designate him or her as beneficiary is nonetheless
required to prove that the account holder substantially complied with the
custodian’s change-of-beneficiary procedures in order to recover. Id. at ¶ 25. The
appellate court concluded that John’s failure to return the forms naming LeBlanc
and Welch as beneficiaries was also a failure to substantially comply with the
policy, even if John had otherwise clearly expressed his intent to change his
beneficiary. Id. at ¶ 27.
{¶ 33} The Second District’s holding applied the substantial-compliance
test often used in disputes between life-insurance companies and claimants. Id. at
¶ 25. See State Mut. Life Assur. Co. of Am. v. Holmes, 10th Dist. No. 88AP-377,
1988 WL 92435 (Aug. 30, 1988) (holding that in a dispute between an insurance
company and a life-insurance claimant, the insured, before his death, substantially
complied with the insurance company’s procedures in converting a whole-life
policy to a universal-life policy, and thus the insurance company was required to
pay the insured’s beneficiary and not the insurance company’s beneficiary under
the temporary insurance agreement); see also Benton v. United Ins. Co. of Am.,
110 Ohio App. 151, 159 N.E.2d 912 (1st Dist.1959) (holding that in a dispute
between an insurance company and a life-insurance claimant, the insurance
company was required to pay the party whom the account holder clearly intended
to designate as his beneficiary because the insured had substantially complied
with the insurance company’s change-of-beneficiary procedures).
{¶ 34} The Second District also claimed that its holding was not
inconsistent with our decision in Rindlaub, because “substantial compliance with
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January Term, 2012
the rules for a change of beneficiary was a part of the Rindlaub result.”6 LeBlanc,
196 Ohio App.3d 213, 2011-Ohio-5553, 962 N.E.2d 872, ¶ 26. We do not agree
with either assertion.
{¶ 35} In Rindlaub, Bruce Rindlaub purchased two life-insurance policies
from the Travelers Insurance Company. Rindlaub, 175 Ohio St. at 304-305, 194
N.E.2d 577. Travelers’ procedures provided that a change of beneficiary had to
be made in writing and had to be approved in writing by Travelers.
{¶ 36} Initially, Bruce designated his wife, Alice Rindlaub, as his primary
beneficiary and his daughter, Cornelia, as the contingent beneficiary. Thereafter,
Bruce and Alice divorced and Bruce sent Travelers a witnessed statement “clearly
indicating his intention to cancel all previous designations of beneficiaries,” to
name Margaret Walker as the new primary beneficiary, and to rename Cornelia as
the contingent beneficiary. Id. at 306.
{¶ 37} Travelers responded by letter inquiring as to the relationship
between Bruce and his newly designated primary beneficiary. The letter stated
that the contracts had been issued in a community-property state and therefore
Alice had certain rights under the policies unless she had waived those rights or a
court action had disposed of them.
{¶ 38} There was no proof that Bruce ever received the letter. Nothing
further was done, either by Bruce or by Travelers. Six months later, Bruce and
Margaret married. Thirteen years later, Bruce died. At the time of Bruce’s death,
the life-insurance policies listing Alice as the primary beneficiary were in his
possession. Alice and Margaret made conflicting demands of Travelers for the
IRA proceeds. No money was paid out.
6. The Second District also relied on Magruder v. Northwestern Mut. Life Ins. Co., 512 F.2d 507
(6th Cir.1975), a federal court of appeals’ decision applying Tennessee law. In Magruder, the
insured completed a change-of-beneficiary form but did not mail it to the insurer before his death.
We find its reliance on Magruder unpersuasive.
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{¶ 39} Margaret sued Travelers for the proceeds, and Travelers responded
by filing an interpleader action against Margaret and Alice. We rejected Alice’s
claim to the proceeds, which was based on the fact that she was the beneficiary
named on the policies. In describing the strength of Margaret’s claim that she
was the clearly intended beneficiary, we noted that absent evidence that Bruce
had received the insurer’s letter, it was “entirely reasonable to infer that [Bruce]
believed he had done all that was necessary to effectuate a change of beneficiary.”
Id. at 306. We explained, therefore, that there was “no basis for inferring that
[Bruce] abandoned his purpose * * * to change the beneficiary,” as Alice had
contended. Id.
{¶ 40} But we made clear that change-of-beneficiary procedures are for
the benefit of the insurance company only. Id. at paragraph one of the syllabus.
Indeed, they are “a means of establishing the fact that the insurer has received
notice of the change of beneficiary.” Id. at 305.
{¶ 41} We explained that such procedures may be determinative in
litigation between an insurance company and the insured or a single beneficiary,
but when “the insurer ‘washes its hands’ by interpleader,” the controversy is
between the parties who claim to be the rightful beneficiary. Id. “In such case the
relative rights of the litigants should depend upon the expressed intention of the
insured. If he has clearly indicated to the insurer his intention to change
beneficiaries, his intention must be given effect.” Id.
We adopt the Ninth District’s view
{¶ 42} The Ninth District’s rationale and holdings represent the better-
reasoned view.
{¶ 43} We agree that it is material that life-insurance policies and IRAs
both typically have a procedure for designating and changing beneficiaries. We
recognize that the Uniform Transfer-On-Death Security Registration Act, which
the parties agree governs distribution of IRA proceeds, establishes that a security
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January Term, 2012
may be registered in beneficiary form. R.C. 1709.03; see R.C. 1709.01(A)
(defining “beneficiary form” as “a registration of a security that indicates the
present owner of the security and the intention of the present owner regarding the
person who will become the owner of the security upon the death of the present
owner”). And we recognize that the act establishes how a security registered in
beneficiary form is transferred upon the death of the account holder. R.C.
1709.07 (upon the death of the account holder, ownership of a security registered
in beneficiary form “shall pass to the beneficiary”).
{¶ 44} But the transfer of IRA proceeds derives its effectiveness from the
contract, as the Second District emphasized, and “from R.C. 1709.01 to 1709.11.”
R.C. 1709.09(A). And R.C. 1709.01 through 1709.11 provide protections to the
custodian. R.C. 1709.08(A) (“If a registration in beneficiary form is offered by a
registering entity, the owner requesting registration in beneficiary form assents to
the protections given to the registering entity by sections 1709.01 to 1709.11 of
the Revised Code”).
{¶ 45} For all these reasons, we conclude that IRA change-of-beneficiary
procedures are intended to protect the IRA custodian, and the custodian alone.
Id.; see also Rindlaub, 175 Ohio St. at 305, 194 N.E.2d 577 (change-of-
beneficiary procedures are “a means of establishing the fact that the insurer has
received notice of the change of beneficiary,” thereby avoiding duplicate liability
for the insurer). Therefore, a custodian is free to waive the procedures by filing
an action in interpleader against the claimants.
{¶ 46} We also adopt the “clearly expressed intent” test from our
insurance cases. See Rindlaub at paragraph two of the syllabus. Therefore, if an
IRA custodian files an interpleader action, and the account owner’s intent to
change beneficiaries was clearly communicated to the custodian, the proceeds
will be paid to the newly designated beneficiary rather than to the original
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beneficiary. Id. In such a case, proof of substantial compliance with the
custodian’s procedures for changing the beneficiary is not required.
CONCLUSION
{¶ 47} We answer the certified question in the negative and, therefore,
reverse the court of appeals’ judgment. Because there is a genuine issue of fact as
to the clearly expressed intent of the account owner, this case is remanded to the
trial court for trial.
Judgment reversed
and cause remanded.
PFEIFER, LUNDBERG STRATTON, O’DONNELL, LANZINGER, CUPP, and
MCGEE BROWN, JJ., concur.
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Brannon & Associates and David D. Brannon, for appellants.
Dungan & LeFevre Co., L.P.A., and James D. Brookshire, for appellee.
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