Patricia Hayes v. Allison Hayes, Brian Hayes and LPL Financial, LLC
No. 2018-021
Supreme Court of Vermont
2018 VT 102
On Appeal from Superior Court, Addison Unit, Civil Division. May Term, 2018. Helen M. Toor, J.
NOTICE: This opinion is subject to motions for reargument under
Michele B. Patton and James W. Swift of Langrock Sperry & Wool, LLP, Middlebury, for Plaintiff-Appellant.
Joan W. D. Donahue of Brennan Punderson & Donahue, PLLC, Middlebury, for Defendants-Appellees Allison Hayes and Brian Hayes.
PRESENT: Reiber, C.J., Skoglund, Robinson and Carroll, JJ., and Davenport, Supr. J. (Ret.), Specially Assigned
¶
¶ 2. The following facts are undisputed. Husband and wife married in December 1973 and separated in 2006. In June 2016, husband filed for divorce. Husband died in September 2016. During his lifetime, husband had a deferred compensation retirement plan through his work. Wife was the beneficiary of this account. In June 2015, husband withdrew the money in this account (approximately $119,000) and rolled it into a traditional IRA managed by defendant LPL Financial, LLC. Husband designated his niece and nephew as co-primary beneficiaries. Husband was close to his niece and nephew, and they visited him regularly.
¶ 3. Husband died testate. His will, executed in December 2001, left the rest and residue of his estate to wife. The probate division allowed the will in October 2016, finding that it was properly executed and authenticated and that wife consented to its allowance. Wife inherited husband’s personal estate valued at $95,000 (less a lien against a vehicle), as well as husband’s probate estate. Wife also obtained sole
¶ 4. In June 2017, wife filed this declaratory judgment action, arguing that husband’s IRA beneficiary designation was void under
¶ 5. Section 321 was part of a much larger bill that both restated and revised existing law. See 2009, No. 55, § 5. Section 321 is entitled “Conveyance to defeat spouse’s interest,” and it provides:
A voluntary transfer of any property by an individual during a marriage or civil union and not to take effect until after the individual’s death, made without adequate consideration and for the primary purpose of defeating a surviving spouse in a claim to a share of the decedent’s property so transferred, shall be void and inoperative to bar the claim. The decedent shall be deemed at the time of his or her death to be the owner and seised of an interest in such property sufficient for the purpose of assigning and setting out the surviving spouse’s share.
The court concluded that
¶ 6. The court reasoned that wife relied solely upon the effect of the beneficiary designation, the exact reasoning rejected in Dunnett. The undisputed facts showed that husband was close to his niece and nephew and that he otherwise provided for wife. These facts, in the court’s view, supported an inference that husband did not intend to disinherit wife but instead intended to lawfully provide for his niece and nephew. The court thus held that wife failed to establish an essential element of her case. See Burgess v. Lamoille Hous. P’ship, 2016 VT 31, ¶ 17, 201 Vt. 450, 145 A.3d 217 (“Summary judgment is mandated where, after an adequate time for discovery, a party fails to make a showing sufficient to establish the existence of an element essential to the party’s case and on which the party has the burden of proof at trial.” (quotation and alterations omitted)).
¶ 7. The court further found that the reference to a surviving spouse’s “share” in
¶ 8. On appeal, wife challenges each of the grounds offered by the court in support of its summary judgment decision. We find it necessary to address only wife’s challenge to the meaning of the term “share” in
¶ 9. “The interpretation of a statute is a question of law that we review de novo.” State v. Therrien, 2011 VT 120, ¶ 9, 191 Vt. 24, 38 A.3d 1129. In interpreting
¶ 10. We begin with a brief review of the law in this area prior to 2009, mindful that much of this law “changed very little over time.” S. Willbanks & J. Secrest, Changes to Vermont’s Probate Law: Increasing the Surviving Spouse’s Share and Other Measures, Vt. B.J., Summer 2009, at 26 (“More than two hundred years ago—in 1787 to be precise—Vermont enacted an intestacy statute as well as dower and curtesy provisions that have changed very little over time.”).1 Under prior law, a widow had the statutory right to “(1) Homestead; (2) statutory dower; [and] (3) one-third, at least, of [her husband’s] personal property.” O’Rourke’s Estate, 106 Vt. at 333, 175 A. at 26.
¶ 11. A widow’s right to dower, historically defined in Vermont statutory law as the right to “one-third of the real estate of which her husband died seized,” was long recognized as “a favorite of the law.” Thayer, 14 Vt. at 108, 118 (quotations omitted)
was designed to ensure a wife’s “subsistence . . . during her life,” and was historically recognized as “a favorite of the law”). In Thayer, we also recognized a husband’s right to alienate real property during his lifetime as long as he acted in good faith. We found that this approach prevented an “unreasonable and unnecessary clog upon the free alienation of estates” and it “[did] not essentially impair the rights of the wife for a support during widowhood.” Id. at 119 (explaining that Vermont and other states considered “common law doctrine of dower in all the lands of which the husband was seized during coverture . . . as an unreasonable and unnecessary clog upon the free alienation of estates, and . . . of little practical use”).2 If a husband conveyed property with the intent to defeat his wife’s dower right, the conveyance “would be fraudulent and void as against the widow, and as to her, the husband would die seized” of this property. Id. at 118.
¶ 12. A husband could also dispose of his personal property during his lifetime if done in good faith. See Dunnett, 97 Vt. at 429, 123 A. at 631; see also O’Rourke’s Estate, 106 Vt. at 330, 175 A. at 25 (setting forth history of surviving spouse’s right to share of personal estate of decedent). This too promoted “trade and commerce.” See, e.g., Holzbeierlein v. Holzbeierlein, 91 F.2d 250, 253 (D.C. Cir. 1937) (“To hold that a wife has a vested interest in her husband’s personal estate that he is unable to divest in his lifetime, would be disastrous to trade and commerce.” (citing cases)). As summarized in Dunnett:
It is settled that the law imposes no restraint upon the husband in the free and unlimited exercise of his right to alienate his personal property at will, and his real estate also, except his wife’s homestead right therein, even though in the exercise of this right he strips himself of all means of supporting and maintaining his wife, provided he does so bona fide, and with no design of defrauding her of her just claims upon him and his estate, the intent in all such cases being the true test of the validity of the transaction. If it be done with a fraudulent intent as to the wife, the transaction is invalid, and
she may assail the same under the statute. The intended fraud works the invalidity.
97 Vt. at 428, 123 A. at 631 (quotation and alteration omitted); see also O’Rourke’s Estate, 106 Vt. at 331, 175 A. at 25 (“The right of the wife to any part of the husband’s personal property is inchoate as long as he lives, and may be defeated by him by sale or gift thereof made in good faith. But at his decease, her inchoate right immediately becomes vested and complete.” (citation omitted)).
¶ 13. In Thayer, the husband, “in expectation of soon dying,” conveyed his entire estate, real and personal, to his son from a prior marriage in trust for the son and the husband’s other children from the prior marriage. 14 Vt. at 107. There was no consideration for the conveyance beyond love and goodwill, and the husband, through a lease, “secured to himself the possession and use of all the property, so conveyed, during his life, upon a nominal annual rent for the real estate.” Id. Under the trust agreement, in addition to the real property, the children would be entitled to distribution of whatever remained of the husband’s personal property at the time of the husband’s death. Id. at 122.
¶ 14. The Court found that the conveyance was “made with the intent to defeat the [wife] of her dower in the lands, and her share of the personal estate, of her . . .
Court concluded that the wife had certain “rights as should be recognized, protected and enforced; that the attempt to elude these rights, in the manner disclosed in this case, was mala fide, and a fraud upon the law and upon the marital rights of the [wife], and that as a consequence, the husband, so far as respect the widow, must be regarded, at the time of this death, as being the owner and having seizin of the property in question.” Id. at 123.
¶ 15. In Dunnett, 97 Vt. at 427, 123 A. at 630-31, the Court again discussed the nature of a wife’s right to property that her husband possessed or might acquire during coverture. It reiterated that the wife’s interest “during coverture in the husband’s property is not a vested interest.” Id. at 427, 123 A. at 630. Instead, “the wife, during the life of the husband, has such an interest in his property as the law recognizes and protects”; it “is not a present estate in his property, but it gives her an equitable right of action to protect her against any conveyance thereof, made by him with the fraudulent intent to deprive her of such rights therein, as, by statute, would accrue to her at his decease.” Id. The Court also discussed the high threshold for establishing fraudulent intent as referenced above. See id. at 428, 123 A. at 631 (“If the rule were that a fraudulent intent to deprive a wife of her marital rights is necessarily presumed from knowledge of the effect of the conveyance by the husband of his property, his sole deed during coverture would be as a rope of sand.”).
¶ 16. By 2008, the law continued to provide surviving spouses the right to elect against a will and claim their statutory share of the decedent’s personal estate and real estate. See
A voluntary conveyance by husband of any of his real estate made during coverture and not to take effect until after his decease, and made with intent to defeat his widow in her claim to her share of his real estate, shall be void and inoperative to bar her claim to her share of such real estate. The husband shall be deemed at the time of his death to be the owner and seised of such real estate for the purpose of assigning and setting out such share to his widow.
Under the case law set forth above, the prohibition against fraudulent transfers applied to transfers of personal property as well.
¶ 17. Act 55, enacted in 2009, made various changes to existing law, including increasing a surviving spouse’s elective and intestate shares. See 2009, No. 55, § 5 (codified at
¶ 18. Section 321 states:
A voluntary transfer of any property by an individual during a marriage or civil union and not to take effect until after the individual’s death, made without adequate consideration and for the primary purpose of defeating a surviving spouse in a claim to a share of the decedent’s property so transferred, shall be void and inoperative to bar the claim. The decedent shall be deemed at the time of his or her death to be the owner and seised of an interest in such property sufficient for the purpose of assigning and setting out the surviving spouse’s share.
This provision is found within a subchapter addressing “Survivors’ Rights and Allowances,” which also sets forth the “Share of surviving spouse,”
¶ 19. It is evident that the “share” to which a surviving spouse has a claim, referenced in
¶ 20. We find it apparent that
¶ 21. We note that to the extent that wife is claiming some type of contractual right to the IRA funds by virtue of
death, “beneficiary merely has an expectancy in the IRA because until the owner’s death, the owner can do with the IRA as desired, including changing the beneficiary designation or cashing out the account altogether”). Additionally, wife offers no persuasive support for her assertion that because husband’s IRA was not distributed in his will, he died “intestate” with respect to the IRA. Cf. id. (describing IRA as “a contract with an institution that involves a third-party beneficiary designation,” and “[u]pon the IRA owner’s death, . . . the beneficiary’s expectancy becomes an interest that attaches to the proceeds of the IRA, and those proceeds pass directly to the beneficiary; they do not pass through the estate”); In re Estate of Wellshear, 2006 OK CIV APP 90, ¶ 21, 142 P.3d 994, 998 (“We believe federal law intends for a custodian/administrator to rely on the disposition scheme recognized by federal law, including beneficiary designations, in effecting a disposition of an IRA upon the death of the owner.”). Because wife is arguing that she has the right to certain property that should have been included in husband’s estate, she needed to pursue this argument by waiving husband’s will and claiming her elective share of husband’s estate under
¶ 22. Because wife took under husband’s will, however, she is now barred from seeking her statutory share. As noted above, “[i]t is a familiar rule that one cannot take under a will and against it. One who accepts a bequest does so on condition of conforming to the will. No one is allowed to disappoint a will under which he accepts a benefit.” O’Rourke’s Estate, 106 Vt. at 332, 175 A. at 26; see also In re Sharon’s Estate, 121 Vt. 322, 324, 157 A.2d 475, 476 (1960) (stating that surviving spouse has no right to statutory share “in a testate estate unless such surviving spouse
waives the provisions made for him or her in the will of the decedent”). As one court has explained, “[e]lection . . . means a choice between two courses of action; acquiescence by the widow in her husband’s disposition of his property, or disregard of it and assertion of the rights the law gives her. There is no third or mixed course.” In re Cunningham’s Estate, 20 A. 714, 715 (Penn. 1890) (internal quotation marks omitted). Wife acquiesced in the provisions of husband’s will and, thus,
Affirmed.
FOR THE COURT:
Associate Justice