Smith v. Marez , COA11–475.

Decision Date06 December 2011
Docket NumberNo. COA11–475.,COA11–475.
Citation719 S.E.2d 226
PartiesSuzanne Furr SMITH, individually and Suzanne Furr Smith, as Executrix under the will of Leonard George Smith, Plaintiffs, v. Deborah Ann Smith MAREZ, Stefan Smith and Diane Hill, Defendants.
CourtNorth Carolina Court of Appeals

OPINION TEXT STARTS HERE

Appeal by defendants from order entered on or about 20 January 2011 by Judge Kenneth F. Crow in Superior Court, Brunswick County. Heard in the Court of Appeals 10 October 2011.

Trest & Twigg, Calabash, by Roy D. Trest, for plaintiffs-appellees.

Gary S. Lawrence, Southport, and Andrea L. Hinshaw, Raleigh, for defendants-appellants.

STROUD, Judge.

Deborah Ann Smith Marez, Stefan Smith, and Diane Hill (collectively referred herein as defendants) appeal from the trial court's order granting summary judgment in favor of Suzanne Furr Smith (plaintiff). For the following reasons, we affirm the trial court's order.

I. Background

On 2 December 2009, plaintiff, in her individual capacity and as executrix of the will of Leonard George Smith, filed a complaint against defendants alleging that the proceeds from Leonard George Smith's (“decedent”) “Rollover IRA” account were properly distributed to her and the proceeds from decedent's second “Traditional IRA” account should be distributed to her and that there was an actual controversy as to the ownership of these IRAs, as defendants contend that the proceeds from the two IRA accounts are the property of decedent's estate and not plaintiff. Plaintiff requested a declaratory judgment to determine “the rights and obligations of the parties to the above Rollover IRA account and the above Traditional IRA account.” On 29 January 2010, defendants filed their answer, denying plaintiff's claims that plaintiff was entitled to the proceeds from the IRA accounts, and raising counterclaims that the decedent intended for the two IRA accounts to go to defendants in the percentages set forth in his “Last Will and Testament” or in the alternative, if the changes to his beneficiary forms were not effective, the distribution of the IRA accounts should be pursuant to the original designation forms, which gave defendants specific percentages of the IRA accounts. Defendants requested that “the Court declare the rights and obligations of the parties to the” IRA accounts and declare that “the Defendant's [sic] herein are the beneficiaries of the above referenced” IRA accounts. On or about 30 March 2010, plaintiff filed an answer denying defendants' counterclaims that the IRA accounts should be distributed pursuant to decedent's will or the original IRA designation forms. On or about 3 August 2010, plaintiff filed a motion for summary judgment.

The affidavits, depositions, and documents filed with that motion, along with the parties' stipulations and pleadings, tended to show that on 23 March 2006, Leonard George Smith executed a “Traditional IRA Adoption Agreement” and a “Rollover IRA Adoption Agreement[,] with Pershing LLC as the custodian. On both IRAs, decedent made the following beneficiary designations to defendants: Stefan Smith, 37.50%; Deborah Marez, 37.50%; and Diane Hill, 25%. In 2007, decedent was diagnosed with cancer. On 15 November 2007, decedent executed his “Last Will and Testament” which bequeathed $100,000.00 to plaintiff and the residue of his estate to his children, including defendants, in the following percentages: Deboran [sic] Ann Smith Marez, 50%; Stefan Smith, 45%; Diane Hill, 5%; and Denise Smith, 0% 1. It also appointed plaintiff as “Personal Representative of [his] estate[,] and directed that his debts, expenses, and taxes be paid out of his residuary estate. On the same day, decedent executed new designation of beneficiary forms for the Pershing IRA accounts. In the space provided on each form for listing of beneficiaries, defendant wrote, “To be distributed pursuant to my Last Will and Testament [.] In December 2007, decedent was informed that his cancer was terminal. Decedent married plaintiff on 16 December 2007. Decedent died on 29 February 2008. After decedent's death, Pershing distributed the proceeds of the Rollover IRA account to plaintiff.

On 27 January 2011, by written order, the trial court granted plaintiff's motion for summary judgment stating that “the Plaintiff is declared to be the owner of two IRA accounts held by the deceased Leonard George Smith with Pershing LLC as custodian[.] On 9 February 2011, defendant gave notice of appeal from the trial court's 27 January 2011 order. On appeal, defendants contend that the trial court erred in its application of the law to the facts before it and granting summary judgment in favor of plaintiff or, in the alternative, summary judgment was in error as there was a genuine issue of material fact that needed to be resolved at trial.

II. Summary Judgment

We have stated that

[s]ummary judgment may be granted in a declaratory judgment proceeding where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.... On appeal, this Court's standard of review involves a two-step determination of whether (1) the relevant evidence establishes the absence of a genuine issue as to any material fact, and (2) either party is entitled to judgment as a matter of law.

Steiner v. Windrow Estates Home Owners Ass'n, ––– N.C.App. ––––, ––––, 713 S.E.2d 518, 521 (2011) (citation omitted).

Defendants contend that “the trial court erred in applying the law to the facts and granting summary judgment in favor of appellee.” Specifically, defendants argue that the trial court erred in its interpretation of the IRA agreements and that the doctrine of dependent relative revocation is applicable to the facts before us.

A. Choice of Law

We first note that the IRA agreements contain a choice of law provision, stating that [t]he Plan shall be construed, administered, and enforced according to the laws of the State of New York[.] Our Courts have recognized the validity of a choice of law provision in a contract. See Sawyer v. Market America, Inc., 190 N.C.App. 791, 794, 661 S.E.2d 750, 752 (holding that “where parties to a contract have agreed that a given jurisdiction's substantive law shall govern the interpretation of the contract, such a contractual provision will be given effect.” (citation omitted)), disc. review denied, 362 N.C. 682, 670 S.E.2d 235 (2008). Therefore, we will apply New York law to the issues before us.

B. Contract Interpretation

Defendants argue that the “ultimate goal” in resolving a controversy involving a change of beneficiary is “realization and effectuation of the parties' intent[.] Defendants contend that “Decedent's clear intent was to name [defendants] as beneficiaries of the Pershing IRAs” by inserting “the phrase ‘To be distributed pursuant to my Last Will and Testament [,] which gave decedent's residuary estate in percentages to defendants. As further evidence of decedent's intent, defendants argue that decedent had originally designated defendants as the beneficiaries of the IRA accounts and decedent's will was executed on the same day as he changed the beneficiary designations on his IRA accounts. Defendants further contend that decedent's beneficiary designation change substantially complied with the IRA agreements' provisions for changing beneficiaries, as the beneficiary designations form was accepted by Pershing. Plaintiff counters that the decedent's intentions as shown by statements in his will are not relevant, as the law required more than “substantial compliance” with the IRA agreements' requirements as to changing the beneficiary designation. Plaintiff argues that “Pershing [was] entitled to insist upon strict compliance for the terms of its IRA agreement [,] which avoids “frequent and extended” litigation based on conflicting evidence as to the decedent's intentions. Plaintiff argues that based upon the IRA agreements, “no valid beneficiary was found to have been designated at the death of the accountholder” and the IRA proceeds should properly go to plaintiff by default.

New York Estates, Powers & Trusts Law § 13–3.2(e) (2010) states that

(e) A designation of a beneficiary or payee to receive payment upon death of the person making the designation or another must be made in writing and signed by the person making the designation and be:

(1) Agreed to by the employer or made in accordance with the rules prescribed for the pension, retirement, death benefit, stock bonus or profit-sharing plan, system or trust.

(2) Agreed to by the insurance company or the savings bank authorized to conduct the business of life insurance, as the case may be.

Although New York Estates, Powers & Trusts Law § 13–3.2(e) does not expressly refer to IRAs, it has been applied to them, see Storozynski v. Storozynski, 10 A.D.3d 419, 419–20, 781 N.Y.S.2d 141, 142 (N.Y.App.Div.2004). Even though New York Estates, Powers & Trusts Law § 13–3.2(e) addresses [a] designation of a beneficiary[,] New York courts have held that a change of beneficiary requires the same formalities. Androvette v. Treadwell, 73 N.Y.2d 746, 747, 536 N.Y.S.2d 43, 43–44, 532 N.E.2d 1271 (1988). The parties do not dispute that the decedent's change of beneficiary forms were in writing and signed by the decedent but disagree as to whether the designations were [a]greed to” by Pershing and “made in accordance with the rules prescribed for the [IRA policies]....” See New York Estates, Powers & Trusts Law § 13–3.2(e).

The Court of Appeals of New York has stated that [i]t is a rule of the common law, that if the terms of the contract violate no law or public policy, are sustained by sufficient consideration, and have been fairly entered into, a strict and exact compliance with them may be insisted upon[.] Roehner v. Knickerbocker Life Ins. Co., 63 N.Y. 160, 164 (1875) (citation...

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