Bielat v. Bielat

• Decision Date: 05 January 2000
• Docket Number: No. 98-2386.,98-2386.
• Citation: 721 NE 2d 28,87 Ohio St.3d 350
• Parties: BIELAT, EXR., APPELLANT, v. BIELAT, APPELLEE.
• Court: Ohio Supreme Court

87 Ohio St.3d 350

721 NE 2d 28

BIELAT, EXR., APPELLANT, v. BIELAT, APPELLEE.

No. 98-2386.

Supreme Court of Ohio.

Submitted September 15, 1999.

Decided January 5, 2000.

Joseph C. McLeland and Terence E. Scanlon, for appellant.

Witschey & Witschey Co., L.P.A., Frank J. Witschey and Jeffrey T. Witschey, for appellee.

COOK, J.

The issue before the court is whether R.C. 1709.09(A) and 1709.11(D) of Ohio's Transfer-on-Death Security Registration Act constitute retroactive laws in violation of Section 28, Article II of the Ohio Constitution when applied to the designation of a death beneficiary in an IRA executed prior to the effective date of the Act. Because we conclude that the applicable sections of R.C. Chapter 1709 constitute remedial, curative statutes that do not affect substantive rights, we affirm the judgment of the court of appeals and uphold the validity of the beneficiary clause in the IRA Adoption Agreement executed between Mr. Bielat and Merrill Lynch.

The Test for Unconstitutional Retroactivity

Section 28, Article II of the Ohio Constitution prohibits the General Assembly from passing retroactive laws and protects vested rights from new legislative encroachments. Vogel v. Wells (1991), 57 Ohio St.3d 91, 99, 566 N.E.2d 154, 162. The retroactivity clause nullifies those new laws that "reach back and create new burdens, new duties, new obligations, or new liabilities not existing at the time [the statute becomes effective]." Miller v. Hixson (1901), 64 Ohio St. 39, 51, 59 N.E. 749, 752.

This court has articulated the procedure that a court should follow to determine when a law is unconstitutionally retroactive. State v. Cook (1998), 83 Ohio St.3d 404, 410, 700 N.E.2d 570, 576, citing Van Fossen v. Babcock & Wilcox Co. (1988), 36 Ohio St.3d 100, 522 N.E.2d 489, paragraph one of the syllabus. We emphasize the phrase "unconstitutionally retroactive" to confirm that retroactivity itself is not always forbidden by Ohio law. Though the language of Section 28, Article II of the Ohio Constitution provides that the General Assembly "shall have no power to pass retroactive laws," Ohio courts have long recognized that there is a crucial distinction between statutes that merely apply retroactively (or "retrospectively") and those that do so in a manner that offends our Constitution. See, e.g., Rairden v. Holden (1864), 15 Ohio St. 207, 210-211; State v. Cook, 83 Ohio St.3d at 410, 700 N.E.2d at 576-577. We also note that the words "retroactive" and "retrospective" have been used interchangeably in the constitutional analysis for more than a century. Id. Both terms describe a law that is "made to affect acts or facts occurring, or rights accruing, before it came into force." Black's Law Dictionary (6 Ed.1990) 1317.

The test for unconstitutional retroactivity requires the court first to determine whether the General Assembly expressly intended the statute to apply retroactively. R.C. 1.48; State v. Cook, 83 Ohio St.3d at 410, 700 N.E.2d at 576, citing Van Fossen, 36 Ohio St.3d 100, 522 N.E.2d 489, at paragraph one of the syllabus. If so, the court moves on to the question of whether the statute is substantive, rendering it unconstitutionally retroactive, as opposed to merely remedial. Cook at 410-411, 700 N.E.2d at 577. Dorothy argues that Ohio's Transfer-on-Death Security Registration Act is both expressly retroactive and substantive. In Part I of this opinion, we engage in the first step of the analysis and find that the Act expressly applies retroactively. In Part II, however, we conclude that the retroactivity of R.C. 1709.09(A) and 1709.11(D) comports with the Ohio Constitution because these provisions are remedial and curative rather than substantive.

I

Because R.C. 1.48 establishes a presumption that statutes are prospective in operation, our inquiry into whether a statute may constitutionally be applied retrospectively continues only after a threshold finding that the General Assembly expressly intended the statute to apply retrospectively. State v. Cook, 83 Ohio St.3d at 410, 700 N.E.2d at 576, citing Van Fossen, supra, at paragraph one of the syllabus. In this case, by its own terms, R.C. Chapter 1709 applies to registrations of securities made "prior to, on, or after" the effective date of the Act. R.C. 1709.11(D). When R.C. 1709.09(A) and 1709.11(D) are read together, therefore, the Act declares that transfers on death resulting from those registrations in beneficiary form described therein are always nontestamentary, even if such registrations were made before the statute's effective date. The Act became effective on October 1, 1993, and Chester designated Stella as his IRA beneficiary a decade earlier, in 1983. The General Assembly expressly intended for the Act to reach back in time and apply to Chester's 1983 designation of Stella as his IRA beneficiary.

II

The second critical inquiry of the constitutional analysis is to determine whether the retroactive statute is remedial or substantive. State v. Cook, 83 Ohio St.3d at 410-411, 700 N.E.2d at 577. A purely remedial statute does not violate Section 28, Article II of the Ohio Constitution, even when it is applied retroactively. Id. at 411, 700 N.E.2d at 577. On the other hand, a retroactive statute is substantive—and therefore unconstitutionally retroactive—if it impairs vested rights, affects an accrued substantive right, or imposes new or additional burdens, duties, obligations, or liabilities as to a past transaction. Id. In Part A, below, we conclude that R.C. 1709.09(A) and 1709.11(D) constitute remedial, curative statutes that merely provide a framework by which parties to certain investment accounts can more readily enforce their intent to designate a pay-ondeath beneficiary. In Part B, we support our conclusion that the relevant sections of the Act are remedial by demonstrating that because the statutes do not impair vested rights, impose new duties, or create new obligations, they cannot be construed as substantive provisions for purposes of the constitutional prohibition against retroactive laws.

A

In our view, R.C. 1709.09(A) and 1709.11(D) constitute remedial provisions that merely affect "the methods and procedure by which rights are recognized, protected and enforced, not * * * the rights themselves." (Emphasis added.) Weil v. Taxicabs of Cincinnati, Inc. (1942), 139 Ohio St. 198, 205, 22 O.O. 205, 208, 39 N.E.2d 148, 151. Our conclusion is supported by cases that have defined remedial laws as those that "merely substitute a new or more appropriate remedy for the enforcement of an existing right." State v. Cook, 83 Ohio St.3d at 411, 700 N.E.2d at 577. Legislation is remedial, and therefore permissibly retroactive, when the legislation seeks only to avoid "the necessity for multiplicity of suits and the accumulation of costs [or to] promote the interests of all parties." Rairden v. Holden, 15 Ohio St. at 211.

Consistent with the tests for remedial legislation articulated in Weil, Cook, and Rairden, 15 Ohio St. 207, the relevant provisions of R.C. Chapter 1709 remedially recognize, protect, and enforce the contractual rights of parties to certain securities investment accounts to designate a pay-on-death beneficiary. Before the Act, Ohio courts did not consistently recognize and enforce similar rights. For example, when a decedent's certificates of deposit were made payable on death to his daughters, the decedent's wife successfully argued that the beneficiary designation in the certificates constituted an "ineffectual attempt at a testamentary disposition of the deposits involved." In re Estate of Atkinson (P.C. 1961), 85 Ohio Law Abs. 540, 542, 175 N.E.2d 548, 549. In order to enforce a bank depositor's passbook death beneficiary designation, Ohio courts developed a requirement that the depositor open the account jointly with the named beneficiary so that the beneficiary shared a present joint interest in the account. Cleveland Trust Co. v. Scobie (1926), 114 Ohio St. 241, 151 N.E. 373, syllabus. In the absence of such a present interest in the account, if the pay-on-death obligation extended to a third-party beneficiary, the courts deemed the transfer to be testamentary. See Atkinson, supra, 85 Ohio Law Abs. at 544, 175 N.E.2d at 550, citing Rowley, Living Testamentary Dispositions and the Hawkins Case (1929), 3 U.Cin.L.Rev. 361, 389.

R.C. 1709.09(A) and 1709.11(D) remedially changed Ohio law, therefore, by resolving a conflict between the relatively informal beneficiary designation found in an IRA and the more rigid formalities required by the Statute of Wills for testamentary dispositions. By avoiding this conflict, the Act promotes the interests of the parties to the securities accounts by validating the beneficiary designation as originally agreed. The statutes do not directly affect the rights of the parties to the securities accounts; rather, as Weil and Rairden permit, they simply protect what the parties intended to be non-probate investments. Realizing that many pay-on-death beneficiary registrations were made prior to 1993, the General Assembly made the Act retroactive to recognize, protect, and enforce even those beneficiary registrations executed before then. R.C. 1709.11(D).

Our conclusion that R.C. 1709.09(A) and 1709.11(D) are remedial is strengthened by our state's recognition of the validity of retrospective curative laws. As this court noted long ago, the language that immediately follows the prohibition of retroactive laws contained in Section 28, Article II of our Constitution expressly permits the legislature to pass statutes that "`authorize courts to carry into effect, upon such terms as shall be just and equitable, the manifest intention of parties and officers, by curing omissions, defects, and errors in instruments and proceedings, arising out of their want of conformity with the laws of this state.'" (Emphasis added.) Burgett v. Norris (1874), 25 Ohio St. 308, 316, quoting Section 28....