Thrivent Financial for Lutherans v. Andronescu

January 22 2013
OP 12-0408
IN THE SUPREME COURT OF THE STATE OF MONTANA
2013 MT 13THRIVENT FINANCIAL FOR LUTHERANS,
Plaintiff-Appellee,
v.
LUCIA E. ANDRONESCU, FKA Lucia E. Anderson,
Defendant-Cross-defendant-Appellee,
v.
JOHANNA M. ANDERSON,
Defendant-Cross-claimant-Appellant.
APPEAL FROM: Certified Question, U.S. Court of Appeals for the Ninth Circuit
Cause No. 11-35437
COUNSEL OF RECORD:
For Appellant:
Roberta Anner-Hughes; Anner-Hughes Law Firm; Billings, Montana
For Appellee:
Gary Zadick; Ugrin, Alexander, Zadick & Higgins, PC; Great Falls,
Montana
Submitted on Briefs: November 7, 2012
Decided: January 22, 2013
Filed:
__________________________________________
Clerk
Justice Beth Baker delivered the Opinion of the Court.
¶1 We accepted the following certified question from the U.S. Court of Appeals for
the Ninth Circuit, which we have reformulated in accordance with M. R. App. P. 15(4)
and our order of July 17, 2012:
¶2 Does § 72-2-814, MCA, apply to a life insurance policy owner’s designation of his
spouse as the beneficiary, where the parties were later divorced prior to enactment of
§ 72-2-814, MCA, and the policyholder died after enactment of the statute?
¶3 Our answer is “yes” because § 72-2-814, MCA, operates at the time of the
insured’s death and applies to any divorce that took place during the insured’s lifetime.
FACTUAL AND PROCEDURAL BACKGROUND
¶4 We summarize the undisputed facts from the Ninth Circuit’s certification order.
In August 1990, Brent Anderson (Brent) purchased life insurance from Thrivent
Financial for Lutherans and named the following beneficiaries: first, his then-wife Lucia,
second, his parents, and third, his sister. In June 1993, Brent and Lucia divorced in
Arizona. Brent was awarded his life insurance policy in the divorce decree. Later that
same year, in October 1993, § 72-2-814, MCA, became effective in Montana.1 The
statute provides that a divorce revokes “any revocable disposition or appointment of
property made by a divorced individual to the individual’s former spouse in a governing
instrument[.]” Section 72-2-814(2)(a)(i), MCA.
¶5 Brent died in Montana in August 2010. He had never changed his designation of
Lucia as primary beneficiary under his life insurance policy. Thrivent filed an
1
Section 72-2-814, MCA, was enacted during the 1993 legislative session and became effective
on October 1, 1993, because the statute did not provide a different effective date. Section 1-2-
201(1)(a), MCA.
2
interpleader action to determine the rightful beneficiary under Brent’s policy. The U.S.
District Court for the District of Montana granted judgment on the pleadings in favor of
Lucia, based in part on the fact that § 72-2-814, MCA, became effective after Brent and
Lucia’s divorce.
STANDARD OF REVIEW
¶6 When answering a certified question as permitted by M. R. App. P. 15(3), this
Court’s review is “purely an interpretation of the law as applied to the [pertinent] facts
underlying the action.” BNSF Ry. Co. v. Feit, 2012 MT 147, ¶ 6, 365 Mont. 359, 281
P.3d 225 (quoting State Farm Fire & Cas. Co. v. Bush Hog, LLC, 2009 MT 349, ¶ 4, 353
Mont. 173, 219 P.3d 1249).
DISCUSSION
¶7 Our precedents establish that the interest of an insurance policy beneficiary is like
that of a legatee under a will—“a mere expectancy of a gift at the time of the insured’s
death.” In re Guardianship & Conservatorship of Anderson, 2009 MT 344, ¶ 23, 353
Mont. 139, 218 P.3d 1220 (quoting Grimm v. Grimm, 157 P.2d 841, 842-43 (Cal. 1945));
see also Feely v. Lacey, 133 Mont. 283, 297, 322 P.2d 1104, 1111 (1958). A life
insurance policy owner, like a testator, may alter or revoke designations at any time until
death; thus, either instrument—whether will or insurance policy—must be interpreted
and applied at death in order to effectuate the transferor’s final intent.
¶8 The Official Comments to § 72-2-814, MCA, support the conclusion that the life
insurance policy, like a will, is not given effect until the time of death. Montana adopted
the revocation-upon-divorce statute from the Uniform Probate Code (UPC) in order to
3
“unify the law of probate and nonprobate transfers.” Tit. 72, ch. 2, Mont. Code Ann.,
Annotations, Official Comments at 635 (2012). The Comments indicate that the
revocation statute operates at the time the “governing instrument is given effect” and the
provision to the former spouse is to be treated “as if the divorced individual’s former
spouse (and relatives of the former spouse) disclaimed the revoked provisions[.]” Tit. 72,
ch. 2, Mont. Code Ann., Annotations, Official Comments at 636 (2012).
¶9 The Comments reference two law review articles that provide “[t]he theory of this
section[.]” See Tit. 72, ch. 2, Mont. Code Ann., Annotations, Official Comments at 636
(2012) (citing Lawrence W. Waggoner, The Multiple-Marriage Society and Spousal
Rights Under the Revised Uniform Probate Code, 76 Iowa L. Rev. 223 (1991) and John
H. Langbein, The Nonprobate Revolution and the Future of the Law of Succession, 97
Harv. L. Rev. 1108 (1984)). The articles discuss the history and purpose of revocation-
upon-divorce statutes and confirm that, under those statutes, life insurance is to be treated
in the same manner as a will. According to Langbein:
The label aside, life insurance is functionally indistinguishable from a will,
for it satisfies the twin elements of the definition of a will. We say that a
will is revocable until the death of the testator and that the interests of the
devisees are ambulatory—that is, nonexistent until the testator’s death.
Unless specially restricted by contract, the life insurance beneficiary
designation operates identically.
Langbein, 97 Harv. L. Rev. at 1110 (emphasis added).
¶10 This commentary is consistent with the interpretation of other jurisdictions that
apply the revocation-upon-divorce statute as a rule of construction at the time the
governing instrument is given effect. See e.g. Buchholz v. Storsve, 740 N.W.2d 107, 111
4
(S.D. 2007); Stillman v. Teachers Ins. & Annuity Assn. College Ret. Equities Fund, 343
F.3d 1311, 1317-18 (10th Cir. 2003) (“Revocation-upon-divorce statutes ‘reflect the
legislative judgment that when the transferor leaves unaltered a will or trust or insurance
beneficiary designation in favor of an ex-spouse, this failure to designate substitute takers
more likely than not represents inattention rather than intention.’”) (quoting Statement of
the Joint Editorial Board for Uniform Probate Code Regarding the Constitutionality of
Changes in Default Rules as Applied to Pre-existing Documents at 3-4 (1991)).2
¶11 Lucia argues that revoking her status as beneficiary would require impermissible
retroactive application of the law. Section 1-2-109, MCA (“No law contained in any of
the statutes of Montana is retroactive unless expressly so declared.”). A statute is
retroactive if it “takes away or impairs vested rights, acquired under existing laws, or
creates a new obligation, imposes a new duty or attaches a new disability, in respect to
transactions already past.” Allen v. A. Richfield Co., 2005 MT 281, ¶ 16, 329 Mont. 230,
124 P.3d 132 (quoting Williams v. Wellman-Power Gas, Inc., 174 Mont. 387, 390, 571
P.2d 90, 92 (1977)); see also Porter v. Galarneau, 275 Mont. 174, 183, 911 P.2d 1143,
1150 (1979). A statute is not given retroactive effect “merely because it is applied in a
case arising from conduct antedating the statute’s enactment.” Porter, 275 Mont. at 183,
911 P.2d at 1148.
2
Both South Dakota and Utah law, construed in Buchholz and Stillman, respectively, include the
UPC’s “rule of construction” statute expressly providing that the law applies to governing
instruments executed before its effective date. See Utah Code Ann. § 75-2-1301(2); S.D.
Codified Laws § 29A-8-101(b)(2). Although Montana’s code lacks the express statutory
provision, the Official Comments nonetheless suggest that the statute operates at the time the
instrument is given effect—i.e., upon death. Tit. 72, ch. 2, Mont. Code Ann., Annotations,
Official Comments at 636 (2012).
5
¶12 Because § 72-2-814, MCA, operates at the time of the transferor’s death, the
statute is not given retroactive effect when applied to a divorce predating its enactment.
Prior to Brent’s death, Lucia had no vested rights in the proceeds of his insurance policy.
Anderson, ¶ 23. Instead, her property interest was equivalent to that of a devisee under a
will—“ambulatory” and “nonexistent.” Langbein, 97 Harv. L. Rev. at 1110. The
operation of the revocation-upon-divorce statute therefore does not “impair[] vested
rights” and did not result in a different legal effect from that which the transaction had
under the law at the time it occurred. Porter, 275 Mont. at 183, 911 P.2d at 1148-49.
The designation of Lucia as beneficiary had no legal effect before the date of Brent’s
death.
¶13 Lucia also points out the U.S. District Court’s reliance on Eschler v. Eschler, 257
Mont. 360, 849 P.2d 196 (1993), a case decided prior to the effective date of § 72-2-814,
MCA, which held that the life insurance policyholder’s designation of his wife as
beneficiary was not revoked by subsequent divorce. There, the insured died having
begun, but not completed, the necessary paperwork to change his policy beneficiary and
we determined that his “actions do not evidence a sufficient determination to change the
beneficiary designation[.]” Eschler, 257 Mont. at 369, 849 P.2d at 202. Eschler does not
apply here because § 72-2-814, MCA, establishes the insured’s intention to revoke an
ex-spouse’s beneficiary status and would have affected the analysis in that case. Eschler,
moreover, is not relevant to the question certified for our review—whether the
revocation-upon-divorce statute applies to a divorce that pre-dates the statute’s
6
enactment. The language of § 72-2-814, MCA, and the authorities we discuss address
that question and direct us to answer in the affirmative.
/S/ Beth Baker
We concur:
/S/ Mike McGrath
/S/ Michael E Wheat
/S/ Patricia O. Cotter
/S/ Jim Rice
7