NO. 94-017
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
IN THE MATTER OF THE ESTATE OF
GLENDON CECIL BRUCE, Deceased:
ALISON T. BRUCE, JONATHAN S.
BRUCE and ISABEL S. NOBLE,
interested parties,
DONNA BRUCE, surviving spouse, and
NORWEST CAPITAL MANAGEMENT & TRUST
co., MONTANA, personal representative,
Respondents and Respondents.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Michael H. Keedy, Judge presiding.
COUNSEL OF RECORD:
For Petitioners and Appellants:
Kent P. Saxby, Warden, Christiansen, Johnson
and Berg, Kalispell, Montana
For Respondents and Respondents:
Kirby S. Christian, Christian & Samson, P.C.,
Missoula, Montana (Donna Bruce)
Walter S. Murfitt and Dale E. Reagor, Luxan and
Murfitt, Helena, Montana (Nor-west)
Jeffrey Bruce and Christian Bruce, San Diego,
California (Pro Se)
Submitted on Briefs: June 2, 1994
Decided: June 30, 1994
Filed:
Chief Justice 3. A. Turnage delivered the Opinion of the Court.
This is an appeal from an order certified pursuant to Rule
54(b), M.R.Civ.P. In that order, the District Court for the
Eleventh Judicial District, Flathead County, determined that a
PaineWebber individual retirement account (IRA) is part of the
estate of Glendon Cecil Bruce. We reverse.
The issue is whether the court erred in ruling that the
designated contingent beneficiaries of the PaineWebber IRA, Alison
Bruce and Jonathan Bruce, are not entitled to the proceeds of the
IRA.
In 1986, Glendon Cecil Bruce established a PaineWebber IRA
account. He named his wife, Isabel, as the primary beneficiary of
the account, and their children, appellants Alison Bruce and
Jonathan Bruce, as contingent beneficiaries. The Custodial
Agreement for the IRA account provided, at paragraph 5.5:
The term "Beneficiary" means the person or persons
designated as such . . . on a form acceptable to the
Custodian . . . . The form may name persons or estates
to take upon the contingency of survival. However, if no
such designation on such a form effectively disposes of
the IRA as of the time such distribution is to commence,
the term "Beneficiary" shall mean the designating
person's estate.
In 1988, the marriage of Glendon and Isabel was dissolved.
They entered a property settlement agreement which provided:
Husband has two Individual Retirement Accounts (IRAs)
with Paine Webber [sic] (in the approximate amount of
$360,000.00) and with Fidelity Funds (in the approximate
amount of $15,000.00), which IRA-s shall remain the sole
and separate property of Husband.
The agreement also contained a comprehensive mutual release of
claims, which provided in part as follows:
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[E]ach party hereto releases and forever discharges the
other party, his or her personal representatives and
assigns from any and all rights, claims, demands and
obligations except as herein specifically provided. Each
party is forever barred from having or asserting any such
right, claim, demand or obligation at any time hereafter
for any purpose . .~ . .
Glendon later married respondent Donna Bruce and was married
to her at the time of his death in February 1992. Despite the
dissolution of his marriage to Isabel and his remarriage to Donna,
he had never changed the named beneficiaries of his PaineWebber
IRA.
After Glendon died, Isabel filed with the District Court a
renunciation and disclaimer pursuant to § 72-2-101, MCA (1991),
renouncing her interest in the PaineWebber IRA as the named primary
beneficiary. Both the contingent beneficiaries (Glendon's children
Alison and Jonathan) and the personal representative of Glendon's
estate, Norwest Capital Management & Trust Co., have asserted
claims to the proceeds of the PaineWebber IRA.
The District Court ruled that the 1988 property settlement
agreement constituted an affirmative act evidencing Glendon's
intent that Isabel not receive the IRA. It ruled that Isabel lost
the ability to renounce her interest in the account when she
entered the property settlement agreement, pursuant to § 72-2-101,
MCA (1991). It then concluded that neither Isabel nor the
contingent beneficiaries are entitled to the account.
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Did the court err in ruling that the designated contingent
beneficiaries of the PaineWebber IRA, Alison Bruce and Jonathan
Bruce, are not entitled to the proceeds of the IRA?
Section 72-2-101, MCA (1991), provides:
(1) A person . . . who is [a] . . . beneficiary under a
. . . nontestamentary instrument . . . may renounce, in
whole or in part, the right of succession to any property
or interest therein . . . by filing a written renuncia-
tion under this section. . . .
. . . .
(4) Unless the transferor of the interest has otherwise
provided, the property or interest renounced devolves as
though the person renouncing had predeceased the decedent
. . . .
(5) (a) The right to renounce property or an interest
therein is barred by:
(i) an assignment, conveyance, encumbrance, pledge, or
transfer of property or interest . . . .
In the opinion of the District Court, the 1988 property settlement
agreement constituted an assignment under subsection (5) (a)(i)
above, and Isabel was thereafter barred from exercising a right to
renounce. The respondents argue that the contingent beneficiaries
are not entitled to the IRA because Isabel did not predecease them.
They argue that there exists no effective designation of a
beneficiary of the IRA, and therefore, under the terms of the
Custodial Agreement, the estate is the beneficiary.
In Sowell v. Teachers' Retirement System (1984), 214 Mont.
zoo, 693 P.2d 1222, this Court ruled that a marital property
settlement agreement did not operate as a relinquishment of a right
to be designated as the beneficiary of a retirement account. The
Court stated:
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[t]he property settlementagreementdoes not specifically
refer to Carolyn's designation as beneficiary, but
rather, relinquishes Carolyn's rights of "dower, support,
maintenance, succession, 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 property upon the
happening of a future event.
Sowell, 693 P.2d at 1224.
The respondents rely upon Soha v. West (1981), 196 Mont. 95,
637 P.2d 1185. In that case, this Court held that a property
settlement agreement created a question of fact as to decedent's
intent concerning a previously-executed designation in a life
insurance policy which named the ex-spouse as the beneficiary.
That holding, however, was specifically overruled in Eschler v.
Eschler (1993), 257 Mont. 360, 849 P.2d 196. In Eschler, we quoted
the following language with approval:
[W]hile a settlementagreementmay require the beneficia-
ry wife to surrender or l'turn over" the policy to the
insured, that fact alone does not destroy her right as
beneficiary where the insured thereafter did not change
her designation as beneficiary.
Whether a property settlement agreement should be
deemed to bar the divorced wife is a question of the
construction of the agreement itself. Where there is no
provision that the effecting of the settlement agreement
should deprive her of her rights as named beneficiary and
she in fact remains named as beneficiary, the settlement
agreement will not be siven a broader scooe than its
express terms specify and she will not be barred from her
right as the named beneficiary.
Eschler, 849 P.2d at 201; quoting Girard v. Pardun (S.D. 1982), 318
N.W.2d 137, 138-39 (emphasis in original).
The respondents argue that neither Sowell nor Eschler applies
here, because, unlike the retirement account and life insurance
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policy involved in those cases, the PaineWebber IRA was specifical-
ly awarded to Glendon in the property settlement agreement.
However, the property settlement agreement did not refer to
Isabel's interest as a beneficiary of the PaineWebber IRA, but only
referred to the account in general. Under the language and logic
of Sowell and Eschler, when she entered the property settlement
agreement, Isabel relinquished any immediate ownership interest in
the IRA by virtue of her marital interest therein. She did not,
however, relinquish her right as a named beneficiary of the IRA.
After the dissolution of the marriage of Glendon and Isabel,
and until the time of his death, Glendon retained complete control
over who was named as the beneficiary of the IRA. The personal
representative states that it is difficult to speculate on
Glendon's intent as to who should be the beneficiary of the IRA.
However, it is not necessary to speculate, because Glendon specifi-
cally named a beneficiary and two contingent beneficiaries. He, at
any time before his demise, possessed the power to change any
beneficiary named in the IRA; either intentionally or inadvertent-
ly, he did not change the beneficiaries.
We hold that the property settlement agreement did not
constitute a relinquishment of Isabel's inchoate interest in the
PaineWebber IRA as a beneficiary. Pursuant to § 72-2-101(4), MCA
(1991) I her renunciation of that right after Glendon's death
operated as if she had predeceased him and brought into effect the
provision of the Custodial Agreementthatthe contingent beneficia-
ries "take upon the contingency of survival." The right to the
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Painewebber IRA then vested in Alison Bruce and Jonathan Bruce, the
contingent beneficiaries.
Reversed and remanded for further proceedings consistent with
this Opinion.
Chief Justice
We concur:
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June 30, 1994
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
followhlg named:
Kent P. Saxby
WARDEN, CHRISTIANSEN, JOHNSON & BERG
P. 0. Box 3038
Kalispell, MT 59903-3038
Kirby S. Christian
CHRISTIAN & SAMSON, P.C.
P. 0. Box 8479
Missoula, MT 59807
Walter S. Murfitt & Dale E. Reagor
LUKAN & MURFITT
P. 0. Box 1144
Helena, MT 59624
Jeffrey Bruce
7096 Park Mesa Way, #58
San Diego, CA 92111
Christian Bruce
262 Lausanna Drive
San Diego, CA 92114
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA