No. 84-197
IN THE SUPREME COURT OF THE STATE OF MONTANA
1984
JANET SOWELL,
Plaintiff and Appellant,
TEACHERS' RETIREMENT SYSTEM OF THE
STATE OF FIONTANA, and CAROLYN WHEELON,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighteenth ~udicialDistrict,
In and for the County of Gallatin,
The Honorable Thomas Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Monte D. Beck argued, Bozeman, Montana
For Respondents:
J. Michael Young argued for Teachers' Retirement,
Dept. of Administration, Helena, Montana
Kirwan & Barrett; Stephen Barrett argued for Wheelon,
Bozeman, Montana
Submitted: November 1, 1984
Decided: December 27, 1984
Filed: [If. !: ' ' 1984
Clerk
Mr. Justice Frank B. Morrison, Jr. delivered the Opinion of
the Court.
This is an appeal from a judgment entered pursuant to
findings of fact and conclusions of law filed by the Eight-
eenth Judicial District Court in and for Gallatin County.
Plaintiff, the surviving widow of Larry Sowell, brought this
action to declare her rights with respect to the retirement
and death benefit account of Larry Sowell, deceased. The
trial court entered judgment for Carolyn Wheelon and Janet
Sowell appeals.
Larry Sowell (Larry), a music professor at Montana State
University, died of cancer on October 7, 1982. Larry was
first married to Carolyn Wheelon (Carolyn), on December 18,
1955. They had three children, all of whom are now a-dults.
La.rry became a member of Teacher's Retirement System (TRS) in
1966 while still married to Carolyn. Larry designated
Carolyn as beneficiary on a form provided by the TRS. That
designation remains unchanged to this date.
Larry and Carolyn were divorced in September of 1973.
After the 1973 divorce, Larry married Janet Sowell (Janet),
and they were married at the time of Larry's death, eight
years later. Several days prior to Larry's death, and while
in the hospital, he wrote and executed a valid holographic
will leaving all of his estate to Janet.
At the time of Larry' s divorce from Carolyn, a property
settlement agreement was executed providing for the disposi-
tion of the marital property. Carolyn's lawyer prepared the
agreement. Larry received an automobile and all his tools,
personal clothing and effects. Carolyn received as part of
the property settlement agreement most of the rest of the
marital assets. The principal asset was $39,000 equity in
the home, which was given to Carolyn. Larry was required to
continue a Business Men's insurance policy with his children
remaining as beneficiaries until they married or reached
majority. Both Larry and Carolyn individually had retirement
accounts through their respective employers. Carolyn was
employed by the Bozeman Public Schools. After the divorce,
Carolyn withdrew her accumulated contributions from her
account.
The property settlement agreement provided that the
division of property was:
11 . .in full settlement, satisfaction and
relinquishment of all rights of dower, support,
maintenance, succession, homestead, inheritance or
heirship, which he or she may at this time or
hereafter might be otherwise entitled to, in and to
all property, both real and personal, which the
other party now has or may hereafter acquire ."..
Testimony from Janet indicated that she and Larry had
discussed the TRS. She stated that Larry advised her she
would receive the death benefits should he predecease her.
Both periodically reviewed forms listing beneficiary informa-
tion and accumulation amount sent semi-annually by the TRS.
In each case, the word beneficiary was followed by "spouse."
Janet testified that Larry specifically told her that since
she was his spouse, she was also his beneficiary.
Larry's original membership form, dated September 12,
1966, designated Carolyn Sowell as beneficiary. During the
sixteen years Larry was a member, he was apparently never
provided a copy of the original form showing the named bene-
ficiary. Rather, the TRS sent biannual statements of a
member's a.ccount which did not show the specifically named
beneficiary, but rather listed categories such as spouse,
son, daughter, etc.
Carolyn was notified of her right to benefits as Larry's
designated beneficiary following Larry's death. Larry's TRS
account then amounted to $20,171, of which more than $15,000
accrued during his marriage to Janet. Janet, who is the
widowed "spouse" of Larry, also applied for the benefits.
Her application was denied by the TRS.
The trial court found that Larry may have intended for
Janet to receive his teacher's retirement account, but that
such intent must be coupled with an affirmative act to change
the beneficiary before Janet could prevail. Absent the
coupling of intent and affirmative act, the trial court held
that the designated beneficiary controlled disposition of the
proceeds of the account. Judgment was entered in favor of
Carolyn Wheelon.
We are presented with the following issues on appeal:
1. Did the property settlement agreement divest
Carolyn Wheelon of her interest in the TRS a.ccount?
2. Does the clear and convincing evidence show that it
was Larry Sowell's intent to leave the proceeds of the ac-
count to Janet Sowell and, if so, is such clear evidence of
intent sufficient without the presence of an affirmative act
to accomplish that result?
3. What effect, if any, does a wife's marital interest
in her husband's pension fund have upon the ownership of the
proceeds of the account following her husband's death?
Appellant contends that the property settlement agree-
ment relinquished Carolyn's interest in the TRS account. The
property settlement agreement does not specifically refer to
Carolyn's designation as beneficiary, but rather, relinquish-
es Carolyn's rights of "dower, support, maintenance, succes-
sion, homestead, inheritance or heirship" and her right to
"all property, both real and personal which the other party
now has or may hereafter acquire." This language does not
specifically cover Carolyn's inchoate right to acquire prop-
erty upon the happening of a future event.
A similar question was addressed by this Court in Soha
v. West (1981), 196 Mont. 95, 637 P.2d 1185. In that case,
the husband purchased an insurance policy naming his wife as
first beneficiary and his parents as alternate beneficiaries.
A very short time later the parties were divorced. The
husband then died. The former wife remained the first-named
beneficiary. An action was instituted tc declare the rights
of the respective parties to the insurance proceeds. The
trial court entered summary judgment in favor of the former
wife who was named as first beneficiary. In the Soha case,
the decedent's parents argued that the property settlement
agreement entered into by the parties was a relinquishment by
the former wife of any interest in the insurance proceeds.
The applicable language from the property settlement agree-
ment was similar to the language before us in this case. The
Soha agreement provided:
"In consideration of the execution of this a.gree-
ment, and the terms and conditions thereof, each
party hereto releases and forever discharges the
other party, his or her personal representative,
and assigns from any and all right, claims, demands
and obligations except as herein specifically
provided and each party is forever barred from
having or asserting any such right, claim, demand
or obligation at any time hereafter for any purpose
. . Soha, 637 P.2d at 1187.
. . I 1
This Court noted that there is a division of authority
on whether a property settlement zgreement affects
beneficiary rights under a life insurance policy. The Court
noted the division without adopting either position. Rather,
we remanded the case for a factual hearing on the intent of
the parties at the time the property settlement agreement was
executed. We distinguish the case at bar from Soha in that
the proceeds in the TRS account are to be paid according to
the provisions of yj 19-4-1001, MCA. That section provides,
in part:
"Allowances for death of member. (1) If a member
d.ies before retirement, his accumulated contribu-
tions shall be paid to his estate or such person as
he may have nominated by a written designation
filed with the retirement board prior to his death
in the manner prescribed by the board."
Pursuant to the provisions of the controlling statute,
the proceeds of the Teacher's Retirement System account can
only be paid to one nominated by a written designation or, in
the absence of such nomination, to the decedent's estate.
Here, there was a written designation nominating Ca.rolyn
Wheelon. The operation of the TRS is governed by statute,
including the payment of death benefits. We feel that the
stability of the system depends upon adherence to the statu-
tory scheme. Therefore, we hold that the person nominated in
the written designation is entitled to the proceeds except as
discussed in the next issue.
Appellant contends that the evidence clearly showed
decedent's intent was to have his surviving widow, Janet
Sowell, take the proceeds and all other property owned by
him. Appellant argues the holographic will clearly and
unequivocally shows such intent. Respondent argues that if
any exception be made to the provisions of .
§ 19-4-1001, MCA,
the exception be limited to the situation where intent is
coupled with an overt act seeking to accomplish a change in
the written designation so that all that remains to be done
is a ministerial act.
The court's are divided concerning whether the designat-
ed beneficiary a.bsolutely controls disposition of the surviv-
al benefits. Some courts take the position that the named
beneficiary controls under all circumstances. See, Rogers v.
Rogers (Fla. 1963), 152 So.2d 183; Kurtz v. Dickson (Va.
1953) , 76 S.E. 2d 219. Other courts have adopted a view that
literal compliance with the regulation is not necessary.
However, before a deviation from the written nomination will
be permitted, those courts require that an intent to change
designation be coupled with some specific affirmative action
evidencing a desire to make the change. Watenpaugh v. State
Teacher's Retirement System (Cal. 1959), 336 P.2d 165;
Aguilar v. United States (9th Cir. 1955), 226 F.2d 414.
Appellant does not prevail on appeal under the more liberal
view permitting one not named to take under limited
circumstances. Here the trial court found there was no
affirmative action evidencing decedent's desire to make a
change. There is substantial credible evidence to support
this finding on the part of the trial court. The record
shows decedent never took steps to have the beneficiary
changed on the forms.
The third issue presented to the Court is whether Janet
Sowell had a marital interest in her deceased husband's
pension trust which was vested and entitled her to claim
against the designated beneficiary. It is well established
in Montana that retirement, annuity, pension and
profit-sharing benefits earned by either spouse during the
marital relationship are part of the marital estate and
subject to equitable division upon divorce. In re the
Marriage of Glasser and Glasser (Mont. 1983), 669 P.2d 685,
40 St.Rep. 1518; In re the Marriage of Kis and Kis (1982),
196 Mont. 296, 639 P.2d 1151.
This Court has not been called upon to determine whether
a surviving spouse has a vested interest in the pension funds
accumulated by decedent. We have found no case from a for-
eign jurisdiction directly on point. In Valdez v. Ramirez
(Texas 1977), 558 S.W.2d 88, the court held that under the
community property laws of Texas, a wife was entitled to
one-half of the retirement benefits as an "earned property
right. " Likewise, the California Supreme Court in Life
Insurance Co. of North America v. Cassidy (Cal. 1984) , 676
P.2d 1 0 5 0 , held that the interest of a surviving spouse in
life insurance proceeds could not be defeated by a gift of
the proceeds to a third-party named as beneficiary without
the surviving spouse's consent. The California court held
that a spouse placed in this position could recover his or
.
her community share in the proceeds.
Even though Montana recognizes that the pension fund of
one spouse must be included in the marital estate at the time
of a divorce action, we have not adopted the community prop-
erty concept in this state. Property can be owned and sepa-
rately controlled by one spouse without the permission of the
other. We hold that, consistent with this separate ownership
concept, a spouse has the right to nominate the beneficia-ry
of retirement account proceeds without consultation or per-
mission from the other spouse and can designate a beneficiary
other than the spouse. Although the retirement account
proceeds must be included as a marital asset at the time of
divorce, at the time of death those proceeds can be excluded
from the decedent's estate and from any claim by the
survivor.
We affirm the jud.gment of District Court.
We concur:
Justices
Mr. Justice John C. Sheehy, dissenting:
In my opinion, the marital dissolution agreement
settled the rights of both parties f ~ l l yand finally.
I would therefore disregard the lack of change of bene-
ficiary in this case.
Mr. Justice John Conway Harrison joins in the dissent of
Mr. Justice Sheehy.
Mr. Justice Daniel J. Shea dissents and will file a written
dissent later.
DISSENT OF MR. JUSTICE DANIEL J. SHEA
NO. 84-1.97
SOWELL V. TEACHERS' RETIREMENT SYSTEM
?4r. Justice Daniel J. Shea, dissenting:
T dissent. 7: would reverse the judgment of the trial
court and order that plaintiff, Janet Sowell, is entitled to
the retirement benefits of her deceased husband. I believe
the majority applied the wrong law in reaching its result,
and if it had applied the correct law, it would have reached
the opposite result.
Al-though it is not dispositive of the entire issue, Soha
v. West (Mont. 1981), 637 P . 2 d 1185, does apply, and its
application requires a starting point from which it was the
duty of the first wife (the defendant here), to prove that
after the divorce and property dissolution, Larry Sowell by
his conduct and words, intended that she remain the
beneficiary of his retirement fund. Not a scintil-la of
evidence supports this conclusion (certainly not substantial
evidence) and therefore the second wife, Janet Sowell, is
entitled to the benefits of the retirement fund.
When the parties signed the property settlement
agreement, they agreed that it was a final settlement, and
that each would make no claim on the other's property. T~arry
Sowell had a retirement fund and his first \rife had a
retirement fund (in another system). At the time of divorce,
these retirement funds became marital assets. Although not
disposed of in the settlement agreement, based on the
authority of Soha, supra, Larry's retirement fund no longer
was a marital asset and his first wife's retirement fund was
no longer a marital asset. Therefore, each no longer had a
claim to the other's after the distribution agreement was
approved by the trial court. The first wife withdrew her
retirement fund; unfortunately, Larry Sowell did not withdraw
his, and even more unfortunatel-y, he did not withdraw the
name of hj s first wife as the designated beneficiary. As a
legal. consequence, however, this did not impose the burden of
proof on the second wife.
Mot a scj-ntilla of evidence supports a finding that
after the property settlement, Larry Sowell, by his acts and
words, intended to leave the name of his first wife on the
retirement fund as the designated beneficiary. To the
contrary, all the circumstantial evidence supports a
conclusj.on that Larry Sowe11 intended his second wife to
receive all of - property upon his death.
his
The majority, in effect, a.pplies the wrong presumption.
They require Janet Sowell, the second wife, to prove that
Larry Sowell, by his acts and words, evinced an unequivocal
intent to remove the first wife as the designated
beneficiary. While I believe the record does demonstrate
this intent, nonetheless, the majority in effect presumes
that even after the marital settlement agreement, the first
wife is entitled to the property simply because her name
remained as the designated beneficiary. I would, on the
other hand, apply a presumption that should apply under Soha,
supra. We should have applied a presumption that Larry
Sowe11 did intend that his first wife no longer have an
interest in the retirement fund because she released this
right as a result of the settlement agreement. Therefore,
even if the first wife's name remained as the designated
beneficiary after the settlement agreement was approved by
the trial court, I would require the first wife to prove that
Larry Sowell, by his acts and words after the property
settlement, evidenced an unequivocal intent to continue her
as the designated beneficiary of - retirement fund.
his That
proof is manifestly lacking.
I therefore would vacate the jud.gment and ord.er the
benefits to go to the second wife, Janet Sowel.1.