Mearns v. ScharbachMearns v. Scharbach
- Reporters:
- ,
- Before:
- Kurtz, Schultheis, Kato
KURTZ, C.J.
FACTS
Christine Scharbach married Jerrold Mearns on March 5, 1982. Mr. Mearns applied for term life insurance in June 1992. The Guardian Life Insurance Company (Guardian) issued a renewable term policy on August 12, 1992. Mr. Mearns was designated as the “Owner” of the policy and the policy named “Christine A. Mearns, wife” as the “Primary Beneficiary.” Mr. Mearns‘s two adult children, Joel C. Mearns and Nanette Mearns,2 were designated as the contingent beneficiaries. The policy renewed on a yearly basis. If the annual premium was not paid, the policy would lapse within 31 days of the expiration date. Mr. Mearns committed suicide on September 12, 1998, within the policy‘s grace period.
At the time of his death, Mr. Mearns was single, having divorced Ms. Scharbach on October 17, 1997. The Guardian policy was not mentioned in the decree of dissolution and Mr. Mearns did not change the beneficiary designation on the policy after the divorce. A few weeks after the divorce, Mr. Mearns called his insurance agent and cancelled a $200,000 term policy designating Ms. Scharbach as the primary beneficiary. Mr. Mearns and the agent also discussed the Guardian policy. Mr. Mearns told the insurance agent that he wanted to keep the policy. The agent reminded Mr. Mearns of the recent divorce and asked whether Mr. Mearns wanted to change the primary beneficiary to someone other than Ms. Scharbach. Mr. Mearns responded that he did not wish to make this change and that he wanted to leave the designation the way it was. Mr. Mearns never contacted the agent about changing the designation of the primary beneficiary.
In May 1998, seven months after the divorce, Mr. Mearns changed the beneficiaries on his retirement and life insurance policies held through his employer. He changed the designation from Ms. Scharbach to Joel
Joel Mearns administered his father‘s estate. Joel and Nanette were designated beneficiaries under their father‘s two policies through his employer. The Mearns children submitted claims to the Guardian policy even though the policy listed them as contingent beneficiaries. Ms. Scharbach also submitted a claim to Guardian for the proceeds of the policy. The Mearns children filed this action seeking the policy proceeds and Guardian interpleaded the money into court. The Mearns children filed a motion for summary judgment, but agreed to continue the motion to allow for discovery. Ms. Scharbach filed a cross-motion for summary judgment.
The court granted summary judgment in favor of the Mearns children, awarding them the policy proceeds. The court denied Ms. Scharbach‘s motion for summary judgment and motion for reconsideration. Ms. Scharbach appeals.
STANDARD OF REVIEW
Summary judgment is proper only when the pleadings, depositions, and admissions in the record, together with any affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
ANALYSIS
Does RCW 11.07.010 automatically revoke the beneficiary designation naming Ms. Scharbach?
Operation of RCW 11.07.010.
(1) This section applies to all nonprobate assets, wherever situated, held at the time of entry by a superior court of this state of a decree of dissolution of marriage or a declaration of invalidity.
(2)(a) If a marriage is dissolved or invalidated, a provision made prior to that event that relates to the payment or transfer at death of the decedent‘s interest in a nonprobate asset in favor of or granting an interest or power to the decedent‘s former spouse is revoked. A provision affected by this section must be interpreted, and the nonprobate asset affected passes, as if the former spouse failed to survive the decedent, having died at the time of entry of the decree of dissolution or declaration of invalidity.
. . . .
(5) As used in this section, “nonprobate asset” means those rights and interests of a person having beneficial ownership of an asset that pass on the person‘s death under only the following written instruments or arrangements other than the decedent‘s will:
(a) A payable-on-death provision of a life insurance policy, employee benefit plan, annuity or similar contract, or individual retirement account.
(Emphasis added.)
This section is remedial in nature and applies as of July 25, 1993, to decrees of dissolution and declarations of invalidity entered after July 24, 1993, and this section applies as of January 1, 1995, to decrees of dissolution and declarations of invalidity entered before July 25, 1993.
Mr. Mearns obtained the Guardian policy in 1992 and named “Christine A. Mearns, wife,” as primary beneficiary.
Legislative purpose. Ms. Scharbach contends
To the extent no community property rights are invaded, the named beneficiary will generally be entitled to the proceeds. A dissolution decree will divest the former spouse of his or her expectancy as named beneficiary, however, if (1) the dissolution decree, in clear and specific language, states that the former spouse is to be divested of his or her expectancy as beneficiary and (2) the policy owner formally executes this stated intention to change the beneficiary within a reasonable time after the dissolution decree has been entered. Thus, if the insured spouse dies within this reasonable time period without formally executing the previously stated intention to change the beneficiary, the former spouse will not be entitled to the proceeds. After a reasonable time has passed, however, the clause in the dissolution decree will be ineffective and the former spouse, if named beneficiary, will be entitled to the proceeds. In any event, 1 year after dissolution, it shall be conclusively presumed that the policy owner intended to retain the named beneficiary as the one entitled to the proceeds.
Wadsworth, 102 Wash.2d at 662-63, 689 P.2d 46. Applying this rule, the Wadsworth court determined that the former spouse was entitled to the life insurance proceeds because the language in the decree made no mention of the former spouse‘s expectancy as named beneficiary and over three years had passed between the date of dissolution and the date of the insured‘s death. Id. at 663-64, 689 P.2d 46.
The Wadsworth rule was adopted to “encourage individuals to consider carefully the disposition of life insurance policies in dissolution” and to “simplify the procedure of determining to whom life insurance proceeds are to be distributed.” Id. at 663, 689 P.2d 46. But the result in Wadsworth was criticized as being contrary to what most divorcing couples would want. As a result, the Washington State Bar Association recommended the enactment of an automatic revocation provision. House Comm. on Judiciary,
Contrary to the assertions of Ms. Scharbach,
In short,
Effect of oral statements. Ms. Scharbach next asserts that Mr. Mearns‘s oral statements are sufficient to negate the operation of the statute because the post-divorce designation here need not be in writing. Relying on Waldron v. Home Mut. Ins. Co., 16 Wash. 193, 196, 47 P. 425 (1896), Ms. Scharbach agrees that the requirement of a written designation is appropriate for wills, which must be in writing, but she asserts that this requirement is inappropriate for insurance policies, which can be oral. Stated differently, Ms. Scharbach maintains that the insurance revocation statute does not require that a post-divorce redesignation of a former spouse as a beneficiary must be in writing.
In the final bill report for
Moreover, the adoption of
After considering the intent and operation of the insurance revocation statute, we conclude that any redesignation of Ms. Scharbach as a beneficiary had to be in writing. The evidence of oral statements made by Mr. Mearns is insufficient to contradict the operation of the statute. We note that this result is consistent with the Guardian policy, which also requires written changes as to the designation of a beneficiary.
Applicability of statutory exception. Ms. Scharbach next argues she is entitled to the insurance proceeds because of the statutory exception set forth in
(b) This subsection does not apply if and to the extent that:
. . . .
(ii) The decree of dissolution or declaration of invalidity requires that the decedent maintain a nonprobate asset for the benefit of a former spouse or children of the marriage, payable on the decedent‘s death either outright or in trust, and other nonprobate assets of the decedent fulfilling such a requirement for the benefit of the former spouse or children of the marriage do not exist at the decedent‘s death.
The decree of dissolution permitted one of the parties to purchase the other party‘s
The statutory exception set forth in
Is RCW 11.07.010 unconstitutional as applied to beneficiary designations made prior to its enactment?
Ms. Scharbach contends that the retroactive application of
Issues raised on appeal. Relying on State v. McFarland, 127 Wash.2d 322, 899 P.2d 1251 (1995), the Mearns children contend Ms. Scharbach cannot challenge the constitutionality of
Standing to raise impairment claim. Ms. Scharbach relies primarily on Whirlpool to support her argument that the Washington insurance revocation statute is unconstitutional as applied here. The Whirlpool court held that the Oklahoma insurance revocation statute was an unconstitutional impairment of contracts when applied to insurance contracts entered before the statute became effective. Whirlpool, 929 F.2d at 1324. But the Whirlpool court addressed only the impairment of contract question and did not consider whether the surviving divorced spouse had standing to pursue this claim.
Relying on In re Estate of Dobert, 192 Ariz. 248, 963 P.2d 327 (1998), the Mearns children contend Ms. Scharbach lacks standing to assert the claim that Mr. Mearns‘s contract rights were impaired by the enactment of
Ms. Scharbach concedes that the constitutional right in question belongs not to her but to Mr. Mearns, who was one of the contracting parties. In other words, she agrees with the Dobert court‘s conclusion that a surviving divorced spouse has no impairment of contract claim arising out of his or her contingent interest as a beneficiary to
Acknowledging that she cannot demonstrate an impairment of her contract rights, Ms. Scharbach argues that she has third party standing to assert Mr. Mearns‘s constitutional claim.3 Ordinarily, a person may not claim standing to challenge a statute in order to vindicate the constitutional rights of third parties. Singleton v. Wulff, 428 U.S. 106, 114, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976) (citing Barrows v. Jackson, 346 U.S. 249, 255, 73 S.Ct. 1031, 97 L.Ed. 1586 (1953)); State v. Myers, 133 Wash.2d 26, 31, 941 P.2d 1102 (1997). However, courts have applied the rules of third party standing to permit a party to assert the rights of others in some circumstances. Singleton, 428 U.S. at 112-16, 96 S.Ct. 2868; Myers, 133 Wash.2d at 31, 941 P.2d 1102 (First Amendment rights); State v. Burch, 65 Wash.App. 828, 837, 830 P.2d 357 (1992) (equal protection claims).
The third party standing rules require a showing that: (1) the litigant has suffered an injury-in-fact, giving them a sufficiently concrete interest in the outcome of the disputed issue, (2) the litigant has a close relationship to the third party, and (3) there exists some hindrance to the third party‘s ability to protect his or her own interests. Burch, 65 Wash.App. at 837, 830 P.2d 357 (citing Powers v. Ohio, 499 U.S. 400, 410-11, 111 S.Ct. 1364, 113 L.Ed.2d 411 (1991)). Taking the evidence in the light most favorable to Ms. Scharbach, we must assume that Mr. Mearns intended to retain Ms. Scharbach as the primary beneficiary when he spoke to the insurance agent shortly after the October 1997 divorce. Joel Mearns administered his father‘s estate; because the Mearns children are contingent beneficiaries under the life insurance policy in question, the estate is unlikely to pursue an impairment of contract claim here. For these reasons, we conclude Ms. Scharbach has standing to assert Mr. Mearns‘s impairment of contract claim.
Contract clause analysis. A statute is presumed constitutional and the party challenging the statute has the burden of proving its unconstitutionality. Myers, 133 Wash.2d at 31, 941 P.2d 1102.
Both the federal and the state constitution prohibit the impairment of contractual obligations.
In Whirlpool, a former spouse, Darleen Ritter, challenged the constitutionality of the Oklahoma insurance revocation statute. James and Darlene Ritter were married in 1972, and James enrolled in a group life insurance plan in 1985 and named Darlene as his beneficiary. Whirlpool, 929 F.2d at 1319. The Oklahoma Legislature passed an insurance revocation provision in 1987. Unlike the Washington statute which was triggered by the date of the entry of the dissolution decree or declaration of invalidity, the Oklahoma provision applied to life insurance contracts
Applying the contract clause analysis, the Whirlpool court determined that the Oklahoma insurance revocation statute impaired the insured‘s contract with the insurance company. The Whirlpool court further concluded that this impairment was substantial and that the statute, as applied retroactively, was “inappropriate in light of its intended purpose and underlying rationale.” Id. at 1323.
We reach a different conclusion applying the contract clause analysis to the Washington insurance revocation statute. Legislation impairing contractual obligations may be upheld if the legislation advances a legitimate public purpose. Birkenwald Distrib. Co., 55 Wash.App. at 9, 776 P.2d 721. The Whirlpool court determined that the intent of the Oklahoma statute was to discern the insured‘s intent after a divorce. The Whirlpool court also concluded that no general societal concerns were served by the statute‘s attempt to anticipate an insured‘s desire to change beneficiaries after the dissolution of a marriage. Whirlpool, 929 F.2d at 1322-23. In other words, the Whirlpool court viewed the Oklahoma statute as a new rule for interpreting insurance contracts and concluded that the statute was inappropriate as it would either effectuate or frustrate the insured‘s intent.
We view the purpose of our statute more broadly and conclude that it serves a legitimate public purpose. The Washington statute was not designed merely to provide guidance for the interpretation of an insured‘s intent with regard to the designation of a beneficiary in an insurance contract.
ATTORNEY FEES
This action was brought pursuant to
Affirmed.
SCHULTHEIS, J., and KATO, J., concur.