In re Estate of DeWitt

Decision Date09 September 2002
Docket Number No. 01SC248., No. 01SC136
Citation54 P.3d 849
PartiesIn the Matter of the ESTATE OF Michael D. DeWITT, deceased. Rebecca Hill, Personal Representative of the Estate of Michael D. DeWitt, Deceased, Petitioner, v. Janet DeWitt and USAA Life Insurance Company, Respondent. In the Matter of the Estate of Darwin J. Becker, a/k/a Darwin James Becker, deceased. Donna Fasi, f/k/a Donna Becker or Donna Sue Becker, Petitioner, v. Douglas J. Becker, Personal Representative of the Estate of Darwin J. Becker, a/k/a Darwin James Becker, deceased, Respondent.
CourtColorado Supreme Court

Howard and Francis, LLP, Steven G. Francis, Fort Collins, Colorado, Attorneys for Petitioner Rebecca Hill.

Lathrop Law Office, P.C., Diane M. Lathrop, Fort Collins, Colorado, Attorneys for Respondent Janet DeWitt.

Kutak Rock, LLP, Ira J. Bornstein, Denver, Colorado, Attorneys for Respondent USAA Life Insurance Company.

John H. Licht, Attorney at Law, John H. Licht, Denver, Colorado, Anne Whalen Gill, P.C., Anne Whalen Gill, Castle Rock, Colorado, Attorneys for Petitioner Donna Fasi.

Fairfield and Woods, P.C., John M. Tanner, Denver, Colorado, Attorneys for Respondent Douglas Becker.

Justice MARTINEZ delivered the Opinion of the Court.

These two cases, which we consolidated for purposes of this opinion, concern the question of whether a designation of a spouse as beneficiary of a life insurance policy survives the dissolution of marriage. Prior to July 1, 1995, Colorado law provided that the dissolution of marriage did not revoke a former spouse's designation as beneficiary of a life insurance policy absent an intent to the contrary expressed by the insured. See, e.g., Napper v. Schmeh, 773 P.2d 531, 533 (Colo. 1989)

; Christensen v. Sabad, 773 P.2d 538, 540 (Colo.1989); Mullenax v. Nat'l Reserve Life Ins. Co., 29 Colo.App. 418, 424, 485 P.2d 137, 140 (1971). In 1995, the general assembly enacted section 15-11-804(2), 5. C.R.S. (2001),1 which is based on the Uniform Probate Code (UPC) section 2-804 (1990 revision). Section 2-804 represents a legislative determination that the failure of an insured to revoke the designation of a spouse as beneficiary after dissolution of the marriage more likely than not represents inattention. Thus, section 15-11-804(2) attempts to give effect to the presumptive intent of the decedent. This section revokes all probate and non-probate transfers to a spouse upon dissolution of a marriage, thus preventing an individual from receiving property from her former spouse's estate at death unless certain express provisions to the contrary apply. See § 15-11-804, 5 C.R.S. (2001); see also JEB Statement Regarding the Constitutionality of Changes in Default Rules as Applied to Pre-Existing Documents, 17 Am. Coll. Tr. & Est. Couns. 184 app. II (1991).

Section 15-11-804(2) specifically provides that it applies to estates, wills, and governing instruments of decedents who die on or after July 1, 1995. The decedents in these cases died after July 1, 1995, but their marriages to the beneficiaries dissolved before July 1, 1995. Thus, these cases present the specific question of whether section 15-11-804(2) automatically revoked the designation of a former spouse as the beneficiary of a life insurance policy, where the designation and the dissolution of marriage occurred before the statute's effective date, but the decedent's death occurred after the statute's effective date.

In Hill v. DeWitt, 32 P.3d 550 (Colo.Ct. App.2000), a panel of the court of appeals held that the application of section 15-11-804(2) in this case would be unconstitutionally retrospective, and therefore held that the former spouse, who was named as a beneficiary in the insurance policy, was entitled to the proceeds of that policy. DeWitt, 32 P.3d at 555. In Fasi v. Becker, 32 P.3d 557 (Colo.Ct.App.2000), a different panel of the court of appeals held that the application of section 15-11-804(2) violated neither the constitutional ban on retrospectivity nor the constitutional ban on impairment of contracts, and thus held that the statute acted to revoke the decedent's designation of his former spouse as the beneficiary of his life insurance policy. Becker, 32 P.3d at 563-64. Given this split in the court of appeals, we granted certiorari. We hold that the general assembly intended section 15-11-804(2) to be retroactive and that such retroactive application is neither unconstitutionally retrospective nor unconstitutionally impairs contracts. We thus reverse the court of appeals' decision in DeWitt and affirm the court of appeals' decision in Becker.

After reviewing the relevant facts and procedure in each case, we address the issue of retroactivity. We first determine that the general assembly intended section 15-11-804(2) to be applied retroactively. Based on this determination, we must then decide whether such application is unconstitutionally retrospective. Given the unique nature of a life insurance policy, which concerns not only the insurer and the insured but also the named beneficiary, we proceed to engage in two retrospectivity analyses of section 15-11-804(2)'s impact. First, we consider section 15-11-804(2)'s impact on the named beneficiaries and determine that it is not retrospective. Second, we consider section 15-11-804(2)'s impact on the decedents and determine that it is not retrospective.

Finally, we address the contention that section 15-11-804(2) violates the constitutional prohibition on impairment of contracts. As we do in our analysis of retrospectivity, we also address the contract clause claim from the perspective of both the named beneficiaries and the decedents because of the nature of a life insurance policy. After distinguishing between the donative and contractual aspects of a life insurance policy, we determine that the named beneficiaries do not have a contract clause claim. After holding that the beneficiaries have standing to assert a contract clause claim on behalf of the decedents, we determine that application of section 15-11-804(2) does not unconstitutionally impair the decedents' contract with their insurers.

I. Facts and Procedure
A. Hill v. DeWitt

In 1988, while decedent Michael DeWitt (decedent DeWitt) was married to respondent Janet DeWitt (DeWitt or named beneficiary), he purchased a life insurance policy from respondent USAA Life Insurance Company (USAA) in which he named DeWitt as the beneficiary. Decedent DeWitt and DeWitt divorced in 1992. After the dissolution, decedent continued to pay his insurance premiums until his death in 1997, but never changed the designation of his beneficiary. Section 15-11-804(2) became effective July 1, 1995, two years before decedent's death.

Upon decedent DeWitt's death, USAA began paying the proceeds of the policy to DeWitt, the named beneficiary. Petitioner Rebecca Hill (Hill), the personal representative of decedent DeWitt's estate, filed a petition for declaratory judgment to determine whether section 15-11-804(2) applied retroactively to prohibit DeWitt from receiving the proceeds. DeWitt filed a motion for summary judgment arguing that the statute could not be applied retroactively, thus mandating that she receive the proceeds.

After a hearing, the trial court held that a retroactive application of the statute would be unconstitutional and thus held that DeWitt was entitled to the proceeds. The court of appeals affirmed. That court held that although DeWitt only had an expectancy interest in the proceeds, she could nonetheless challenge the application of the statute as retrospective. DeWitt, 32 P.3d at 553-54. In addition, relying on Whirlpool Corp. v. Ritter, 929 F.2d 1318 (8th Cir.1991), the court of appeals held that retroactive application of the statute would unconstitutionally impose a new duty on decedent DeWitt to act concerning his beneficiary as well as substantially interfere with DeWitt's expectancy interest. DeWitt, 32 P.3d at 554-55.

B. Fasi v. Becker

Decedent Darwin Becker (decedent Becker) and petitioner Donna Fasi (Fasi or named beneficiary) were married in 1983. In 1987, they executed life insurance policies, covering them both, in which decedent Becker named Fasi as beneficiary. The parties divorced in 1994. Section 15-11-804(2) became effective on July 1, 1995. When decedent Becker died in 1997, Fasi was still named as the beneficiary. Respondent Douglas Becker, as personal representative of decedent Becker's estate, claimed that, pursuant to section 15-11-804(2), the estate was entitled to the proceeds of the insurance policy. The trial court agreed, holding that the statute applied retroactively to revoke decedent Becker's designation of Fasi as the beneficiary. The court of appeals affirmed. That court held that application of the statute was not unconstitutionally retrospective because Fasi's interest in receiving the proceeds did not vest until decedent Becker's death, which was after the effective date of the statute. Becker, 32 P.3d at 562. Given the split in the court of appeals' panels, we granted certiorari in both cases.2

II. Retrospectivity

Absent legislative intent to the contrary, a statute is presumed to operate prospectively, meaning it operates on transactions occurring after its effective date. See Coffman v. State Farm Mut. Auto. Ins. Co., 884 P.2d 275, 279 (Colo.1994)

; Ficarra v. Dep't of Regulatory Agencies, 849 P.2d 6, 11 (Colo.1993); Curtis v. McCall, 79 Colo. 122, 123, 244 P. 70, 71 (1926). A statute is retroactive if it operates on transactions that have already occurred or on rights and obligations that existed before its effective date. Ficarra, 849 P.2d at 11.

Retroactive application of statutes is generally disfavored by both common law and statute. Id.; see also § 2-4-202, 1 C.R.S. (2001). Although disfavored, the retroactive application of a statute is not necessarily unconstitutional; it is permitted where the statute effects a change that is...

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