Carmack v. Carmack

• Decision Date: 23 June 2020
• Docket Number: WD 83184
• Citation: 603 S.W.3d 900
• Parties: Marilyn CARMACK, Respondent, v. Travis CARMACK and Temple I. Baxley, Appellants.
• Court: Missouri Court of Appeals

603 S.W.3d 900

Marilyn CARMACK, Respondent,

v.Travis CARMACK and Temple I. Baxley, Appellants.

WD 83184

Missouri Court of Appeals, Western District.

OPINION FILED: June 23, 2020

Dana J. Macoubrie, Chillicothe, MO, for respondent.

Joshua J. Meyer, Kirksville, MO, for appellants.

Before Division One: Lisa White Hardwick, Presiding Judge, Cynthia L. Martin, Judge and Thomas N. Chapman, Judge

Cynthia L. Martin, Judge

Travis Carmack and Temple Baxley ("Siblings") appeal the trial court's judgment ("Judgment") in favor of Marilyn Carmack ("Wife") finding that Terry Carmack ("Husband") designated Siblings as the primary beneficiary of Husband's Individual Retirement Account ("IRA") in fraud of Wife's marital rights under section 474.150.1.¹ Siblings argue the trial court erred because (1) the trial court's Judgment was not supported by substantial evidence, and (2) section 474.150.1 does not apply to IRAs. Finding no error, we affirm.

Factual and Procedural Background²

After more than 20 years of marriage to Wife, Husband died on October 11, 2018. At the time of his death, Husband held an ownership interest in bank accounts, vehicles, and a house, with a collective value of $94,450. Husband also owned an IRA account at the time of his death with a balance of $386,031.40.

When Husband opened the IRA account in 2002, he designated Wife as the primary beneficiary. Wife remained the primary beneficiary on the IRA account until September 2016, at which time the IRA had an approximate balance of $450,000.

In 2016, Wife's health deteriorated. Among numerous other ailments, Wife suffered from dementia

. In August 2016, Wife was placed in a long-term care facility so that she could receive additional nursing care. On September 22, 2016, Husband removed Wife as the primary beneficiary on the IRA account, and instead designated Siblings as the primary beneficiaries.³ Around that same time, Husband asked Wife's daughter to file an application for Medicaid to assist with paying for Wife's health care at the long-term care facility. Eventually, Wife left the long-term care facility and returned home, where she resided with Husband until his death in 2018. Husband did not thereafter change the beneficiary designated on his IRA account.

After Husband's death, Wife filed a petition requesting the trial court to find that the change in the beneficiary designation on Husband's IRA account was "a gift in fraud of marital rights" pursuant to section 474.150.1. After a trial to the court, the trial court entered its Judgment, including findings of facts and conclusions of law, in favor of Wife. The Judgment found that Husband's designation of Siblings as primary beneficiaries on the IRA account was intended to be a "gift in fraud of [Wife's] marital rights" pursuant to section 474.150.1.

Siblings filed this timely appeal. Additional facts will be discussed as relevant.

Standard of Review

In a bench-tried case, we affirm the judgment of the trial court "unless it misapplied or erroneously declared the law, or the judgment is not supported by substantial evidence, or the judgment is against the weight of the evidence." JAS Apartments, Inc. v. Naji , 354 S.W.3d 175, 182 (Mo. banc 2011) (citing Murphy v. Carron , 536 S.W.2d 30, 32 (Mo. banc 1976) ); see also Rule 84.13(d). When reviewing whether substantial evidence supported a judgment, "we accept as true the evidence and reasonable inferences therefrom in favor of the prevailing party and disregard the contrary evidence." Burris v. Mercer County , 252 S.W.3d 199, 201 (Mo. App. W.D. 2008). "We defer to the credibility determinations of the trial court." Id. We review questions of law de novo to determine whether the trial court misapplied the law. JAS Apartments, Inc. , 354 S.W.3d at 182.

Analysis

Siblings raise two points on appeal. The first point asserts that the trial court erred because there "was no competent evidence [Husband] made a gift with an intent to defraud [Wife] of her marital right to share in [Husband's] estate" as the court relied on facts "not in evidence" and "considered facts not applicable" to an IRA. Siblings' second point asserts that the trial court erred as a matter of law by applying section 474.150.1 to Husband's IRA. We address the points out of order, because we must first determine whether section 474.150.1 applies to IRA accounts before determining whether the trial court's application of the statute to Husband's IRA was supported by substantial evidence.

Point Two

Siblings assert that section 474.150.1 does not apply to Husband's IRA account because the beneficiary designation resulted in a nonprobate transfer such that the IRA was not part of Husband's estate, and section 474.150.1 only permits recovery of assets in a decedent spouse's estate. We disagree.

Section 474.150.1 provides:

Any gift made by a married person, whether dying testate or intestate, in fraud of the marital rights of the surviving spouse to whom the decedent was married at the time of such gift and who may share in the decedent's estate, shall, at the election of such surviving spouse, be treated as a testamentary disposition and may be recovered from the donee and persons taking from the decedent without adequate consideration and applied to the payment of the spouse's share, as in case of his or her election to take against the will.

Section 474.150.1 codified the common-law rule against transfers of assets "in fraud of the marital rights." Nelson v. Nelson , 512 S.W.2d 455, 459 (Mo. App. K.C. 1974) (The adoption of the phrase "in fraud of the marital rights" in section 474.150.1 "was intended to adopt the meaning of that term as it existed at common law").

At common law, "fraud of the marital rights" was recognized as a unique type of fraud. See Potter v. Winter , 280 S.W.2d 27, 35 (Mo. 1955) ; see also Estate of Bernskoetter , 693 S.W.2d 249, 253 (Mo. App. W.D. 1985) (discussing fraud of the marital rights as "different than an action of fraud between two parties dealing at arm's length" because it imposes a greater duty of candor between spouses in a confidential relationship). Fraud of the marital rights was viewed at common law as a claim in equity brought by a surviving spouse to defeat a conveyance or transfer of property by a decedent spouse made "without consideration and with the intent and purpose to defeat [the surviving spouse's] marital rights in [decedent's] property." Merz v. Tower Grove Bank & Trust Co. , 344 Mo. 1150, 130 S.W.2d 611, 617 (Mo. 1939). If established, the equitable claim would result in the fraudulent conveyance being set aside, and in the fraudulently conveyed property being recovered by the surviving spouse to the extent of the surviving spouse's interest therein. Id. The central inquiry was whether the decedent spouse conveyed or transferred property "with the intent and purpose to defeat" the surviving spouse's marital rights. Potter , 280 S.W.2d at 35-36 (emphasis original). The form of the instrument or device used to transfer or convey the property was immaterial. See Merz , 130 S.W.2d at 617 (discussing that "the form of the instrument or the device resorted to is wholly immaterial, when the intent to defeat the widow's marital rights is made apparent to the chancellor").

Following enactment of section 474.150.1, and consistent with the common law, our courts have consistently applied the statute to any asset in which the surviving spouse had a marital right or interest that could have been recovered in the decedent spouse's estate but for a conveyance or transfer during the marriage. See Nelson , 512 S.W.2d at 459 (joint bank account held by decedent and third party); Bernskoetter , 693 S.W.2d at 252 (joint bank accounts held by decedent and third party); Matter of LaGarce's Estate , 532 S.W.2d 511, 517 (Mo. App. S.L. 1975) (saving's certificate); In Estate of McKenna , 500 S.W.3d 850, 855-57 (Mo. App. E.D. 2016) (trust); Hathman v. Waters , 586 S.W.2d 376, 385-6 (Mo. App. W.D. 1979) (corporate stock transferred by third-party contract). Application of section 474.150 in each of these cases was not susceptible to differentiation based on the form or nature of the asset transferred. Instead, application of the statute focused solely on whether the asset was transferred with the intent and purpose to defeat the surviving spouse's marital rights. See McKenna , 500 S.W.3d at 856.

Despite consistent application of section 474.150.1 to transferred assets regardless their form or nature, Siblings maintain that IRA accounts are not subject to recovery by a surviving spouse because IRA accounts designate a beneficiary and are thus excluded from a decedent's estate under the Nonprobate Transfers Law of Missouri ("Nonprobate Transfers Law"). Siblings' argument is unavailing.

Under the Nonprobate Transfers Law, a "nonprobate transfer" is "a transfer of property taking effect upon the death of the owner, pursuant to a beneficiary designation." Section 461.005(7). The effect of the beneficiary designation is that "on death of the owner, property passes by operation of law to the beneficiary." Section 461.031.3; see also section 461.021. A beneficiary designation may be "revoked or changed in whole or in part during the lifetime of the owner." Section 461.033.1.

The plain language of section 474.150.1 does not differentiate between the transfer of an asset that is completed during a spouse's lifetime, and the transfer of an asset facilitated during a spouse's lifetime with a beneficiary designation that takes effect by operation of law on the spouse's death. Instead, the plain language of section 474.150.1 expresses the legislature intended to ensure that a surviving spouse can recover the marital interest in any asset transferred by a decedent spouse during the marriage, so long as the transferred asset would otherwise have been a part of the decedent spouse's testate or intestate estate, thus complementing the surviving spouse's right to elect to take against a will. See ...