Hayes v. Allison Hayes, Brian Hayes & LPL Fin., LLC, 2018-021

• Decision Date: 14 September 2018
• Docket Number: No. 2018-021,2018-021
• Parties: Patricia Hayes v. Allison Hayes, Brian Hayes and LPL Financial, LLC
• Court: Vermont Supreme Court

2018 VT 102

Patricia Hayes v. Allison Hayes, Brian Hayes and LPL Financial, LLC

No. 2018-021

Supreme Court of Vermont

May Term, 2018

September 14, 2018

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.

On Appeal from Superior Court, Addison Unit, Civil Division

Helen M. Toor, J.

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

¶ 1. CARROLL, J. This case involves a dispute over a husband's designation of his niece and nephew, defendants Allison Hayes and Brian Hayes, as the beneficiaries of his Individual Retirement Account (IRA) rather than his wife, plaintiff Patricia Hayes. Husband is now deceased. Wife filed a declaratory judgment action, arguing that the beneficiary designation should be declared void under 14 V.S.A. § 321 and that the IRA funds should pass through husband's estate. The trial court granted summary judgment to defendants, concluding for several reasons that wife was not entitled to relief under § 321. We agree with the trial court that § 321 does not apply here because wife took under husband's will rather than electing her statutory share of his estate. We therefore affirm.

¶ 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 possession of husband's primary residence, which the couple owned as tenants by the entirety at the time of husband's death.

¶ 4. In June 2017, wife filed this declaratory judgment action, arguing that husband's IRA beneficiary designation was void under 14 V.S.A. § 321. Defendants maintained that the statute did not apply, but even if it did, that the undisputed facts showed that husband did not violate it.

¶ 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 andinoperative 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 § 321 was a modern articulation of a longstanding rule that a spouse cannot convey property to others to fraudulently deprive the surviving spouse of property to which he or she has a right, that is, commit "a fraud upon . . . [the surviving spouse's] marital rights." Thayer v. Thayer, 14 Vt. 107, 123 (1842) (emphasis omitted). The court emphasized that "an intent to defraud must be found as a fact" and that a fraudulent intent could not be "presumed from the knowledge that [a diminished estate] would be the effect of the conveyance." Dunnett v. Shields, 97 Vt. 419, 426, 428-29, 123 A. 626, 630-31 (1924) (emphasis omitted) (stating that "the law in no case presumes fraud," and "[o]ne who seeks to set aside a conveyance on the ground that it is fraudulent must establish that fact so clearly and conclusively as to put it beyond a reasonable doubt"), overruled on other grounds by Trepanier v. Getting Organized, Inc., 155 Vt. 259, 583 A.2d 583 (1990).

¶ 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 § 321 referred to a spouse's share under 14 V.S.A. § 311 when the decedent dies intestate or to a spouse's elective share under 14 V.S.A. § 319. See 14 V.S.A. § 311 (describing intestate share of surviving spouse); id. § 319 (providing that spouse can "waive the provisions of the decedent's will and in lieu thereof elect to take one-half of the balance of the estate, after the payment of claims and expenses"). In this case, husband died testate and wife chose to take under husband's will. It followed that wife was barred from seeking her elective share under § 319, and thus, § 321 did not apply. See In re O'Rourke's Estate, 106 Vt. 327, 332, 175 A. 24, 26 (1934) ("It is a familiar rule that one cannot take under a will and against it."). The court also concluded that wife failed to demonstrate, as a matter of law, that a beneficiary designation constituted a "voluntary transfer of any property" under § 321. For all these reasons, the court granted summary judgment to defendants.

¶ 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 § 321. Wife argues that this term is not limited to a spouse's elective or intestate share. She maintains that a surviving spouse might have a claim to a share of an asset that "would have been distributed pursuant to the will, if not for the voided transfer, and the surviving spouse was a beneficiary under the will." Wife suggests that a spouse might also have a claim to an asset if he or she had been a named beneficiary of an asset and the designation was then changed. Even if the statute does refer to an intestate or elective share, wife argues that her share of the IRA should be determined under intestacy law because the IRA was a "part of a decedent's estate not effectively disposed of by will." 14 V.S.A. § 301(a) ("Any part of a decedent's estate not effectively disposed of by will passes by intestate succession to the decedent's heirs, except as modified by the decedent's will.").

¶ 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 14 V.S.A. § 321, "[o]ur goal . . . is to effectuate the intent of the Legislature." Dep't of Taxes v. Montani, 2018 VT 21, ¶ 24, ___ Vt. ___, 184 A.3d 723 (quotation omitted). "In looking at any particular statutory scheme, we look to the whole and every part of it, its subject matter, and its effect and consequences in determining intent." Id. (quotation omitted). "If the language [of the statute] is clear, we apply the statute in accordance with its plain meaning." Wright v. Bradley, 2006 VT 100, ¶ 6, 180 Vt. 383, 910 A.2d 893. As set forth below, we conclude that the term "share" in § 321 plainly refers to a surviving spouse's elective or intestate share. This is consistent with the history of the law in this area, the statutory scheme, and the purpose of § 321.

¶ 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) (explaining that dower rightwas designed to ensure a wife's "subsistence . . . during her life," and was...