Smith v. South Carolina Retirement System

• Decision Date: 06 July 1999
• Docket Number: No. 3025.,3025.
• Parties: Marian Kay SMITH, Appellant/Respondent, v. The SOUTH CAROLINA RETIREMENT SYSTEM, Respondent, Elena P. Smith, Respondent/Appellant.
• Court: South Carolina Court of Appeals

336 S.C. 505

520 S.E.2d 339

Marian Kay SMITH, Appellant/Respondent, v. The SOUTH CAROLINA RETIREMENT SYSTEM, Respondent, Elena P. Smith, Respondent/Appellant.

No. 3025.

Court of Appeals of South Carolina.

Submitted June 8, 1999.

Decided July 6, 1999.

Rehearing Denied September 11, 1999.

G. Dana Sinkler and Andrea H. Duenas, both of Warren & Sinkler, of Charleston, for appellant/respondent.

Ray P. McClain and Margaret D. Fabri, both of Charleston, for respondent/appellant.

Stephen R. Van Camp and Nancy E. Shealy, both of South Carolina Retirement System, of Columbia, for respondent.

ANDERSON, Judge:

Marian Smith appeals the trial court's dismissal of her declaratory judgment action against the South Carolina Retirement System. Elena Smith filed a cross-appeal, asserting the trial court erred (1) in refusing to dismiss Marian Smith's claim for constructive trust and (2) in failing to dismiss the declaratory judgment action with prejudice. We affirm the trial court's dismissal of the declaratory judgment action without prejudice and reverse the trial court's refusal to dismiss the constructive trust claim.¹

FACTS/PROCEDURAL BACKGROUND

Marian Kay Smith (former Wife) and William Allen Smith (Husband) were married May 28, 1955, and separated in September 1972. Husband accepted a professorship at the Medical University of South Carolina on July 15, 1973, and thereby enrolled in the South Carolina Retirement System (SCRS). In April 1975, the parties executed a Separation Agreement whereby Husband, in lieu of paying alimony or other periodic spousal support, agreed to maintain former Wife as beneficiary of his pre-retirement death benefits from SCRS. The relevant language, found in Article IV, section D, of the Separation Agreement is:

By letter dated April 24, 1975, Husband notified the South Carolina Retirement Systems [sic] of his intention to retain (post-divorce) Wife as beneficiary under his pre-retirement death benefit program. A copy of said letter is attached as "Exhibit A." Husband agrees that this request shall not be changed until his death or remarriage of the Wife.

This notarized letter states:

This letter is to request that you note in the records of the South Carolina Retirement System my desire to name:

Marian Kay Smith, 357 Wesley Drive, Chapel Hill, North Carolina 27514 as beneficiary of all my benefits under the "Pre-Retirement Death Benefit Program" and the "Refund of Contribution upon Death". This request is made at this time to reaffirm Marian Kay Smith as my beneficiary despite my marital divorce from her.

According to Article IX of the Separation Agreement:

The Wife acknowledges that the provisions herein set out are fair, adequate and reasonable, and satisfactory to her. Accordingly, she accepts the same in lieu of and in full and final settlement and satisfaction of any and all claims and rights that she may now or hereafter have against the Husband for her support and maintenance and for the support, maintenance and education of the Children.

The parties were divorced June 17, 1975, with the divorce decree incorporating the Separation Agreement as part of the judgment. Neither the Separation Agreement nor the order granting the divorce were forwarded to SCRS.

On February 25, 1977, Husband married Elena P. Smith (Widow). Subsequently, in 1985, without former Wife's knowledge or accession, Husband changed the designated beneficiary of his "Refund of Contribution upon Death" from former Wife to his son. He substituted Widow as beneficiary of his "Pre-Retirement Death Benefit Program." On July 15, 1994, Husband wrote a letter to former Wife asking her to relinquish her claim to these benefits, and Included a copy of a release for her signature. Former Wife, however, did not sign the release or respond to Husband's request. Then, in 1996, Husband replaced his son with Widow as beneficiary of the post-mortem contributions refund. Thus, in March, 1997, when Husband died prior to retirement, Widow remained as the sole statutorily-designated beneficiary of all pre-retirement death benefits.

Former Wife notified SCRS of her claim to Husband's benefits on April 14, 1997. On April 25, she filed a complaint against SCRS and Widow in federal district court. After SCRS pled Eleventh Amendment immunity as a defense, however, former Wife took a voluntary dismissal on July 10. The next day, former Wife instituted a declaratory judgment action against SCRS in the Circuit Court of Charleston County seeking an order entitling her to Husband's pre-retirement death benefits.² This complaint was amended on August 15, adding (1) Widow as a necessary party and (2) former Wife's alternative claim for constructive trust. Widow answered and counterclaimed for interest, costs, and attorney's fees. In addition, both defendants moved for dismissal, asserting, among other things, former Wife neglected to follow statutory procedure as outlined by S.C. Annotated §§ 9-18-10 et seq., and thereby failed to exhaust her administrative remedies as required therein.

The trial court held a motions hearing on December 4, 1997, and subsequently entered a form judgment on February 6, 1998:

Having considered the briefs and arguments of counsel, as well as the record herein, the motion of defendant S.C. Retirement System to dismiss for failure to exhaust administrative remedies is hereby granted. The motion to dismiss by defendant Smith as to the constructive trust cause of action is hereby denied; any issue as to the relationship between the decedent and the plaintiff and their alleged agreement are not properly resolved at this stage of the proceedings. Provided, however, the court finds that this claim should be stayed pending exhaustion of any administrative remedies or until further order of this court.

Former Wife appeals from the denial of her motion for reconsideration, arguing the trial court erred in granting SCRS's motion to dismiss the declaratory judgment action for failure to exhaust administrative remedies. In addition, Widow cross-appeals the denial of her motion to dismiss former Wife's constructive trust claim.

LAW/ANALYSIS

I. Application of §§ 9-18-10 et seq. to Prior Divorce Orders

A. Retroactive Application

Former Wife contends the statutory scheme requiring exhaustion of administrative remedies, S.C.Code Ann. §§ 9-18-10 et seq., entitled "Qualified Domestic Relations Orders" (QDRO statute), does not apply to domestic relations orders entered prior to its enactment. We disagree.

South Carolina Code Ann. § 9-18-20 (Supp.1998) provides:

(A) Sections 9-1-1680,9-8-190, 9-9-180, or 9-11-270 apply to the creation, assignment, recognition, or enforcement of a right to any benefit payable under a retirement system with respect to a member or retired member pursuant to a domestic relations order unless the order is determined to be a qualified domestic relations order. A qualified domestic relations order may order that all or any part of any (1) retirement benefit, (2) withdrawal or refund of contributions, (3) disability benefit, or (4) death benefit that becomes payable under the retirement system on account of the member or retired member, instead be paid by the system to the alternate payee. No other benefits provided under the retirement system may be paid to an alternate payee. A domestic relations order constitutes a qualified domestic relations order if it orders the payment of only those types of benefits described in clauses (1) through (4) of this subsection and meets the requirements set forth in subsection (B).³

Former Wife claims the statute does not apply to her 1975 North Carolina domestic relations order, because it was enacted in 1995, some twenty years after her divorce. Essentially, former Wife contends the absence of specific statutory language regarding domestic relations orders entered prior to the creation of qualified domestic relations orders in 1984,⁴ except for those "accepted" by the retirement systems prior to July 1, 1995, pursuant to S.C.Code Ann. § 9-18-100, precludes application of the statute in this instance. In addition, former Wife maintains general rules of statutory construction hold statutes operate prospectively absent specific statutory provisions or clear legislative intent to the contrary.

In the construction of statutes there is a presumption that statutory enactments are to be considered prospective rather than retroactive in their operation unless there is a specific provision or clear legislative intent to the contrary. Hyder v. Jones, 271 S.C. 85, 245 S.E.2d 123 (1978). SCRS's QDRO statute, however, is remedial. See King v. S.C. Retirement Sys., 319 S.C. 373, 461 S.E.2d 822 (1995)

. An exception to the prospectivity presumption therefore applies. Statutes that are remedial or procedural in nature are generally held to operate retrospectively. See Merchants Mut. Ins. Co. v. South Carolina Second Injury Fund, 277 S.C. 604, 291 S.E.2d 667 (1982); Hercules, Inc. v. South Carolina Tax Comm'n, 274 S.C. 137, 262 S.E.2d 45 (1980) (statutes affecting the remedy, not the right, are generally retrospective). Clearly, the QDRO statute's express procedure for qualifying a domestic relations order falls within this exception. Moreover, former Wife's argument ignores the fact that retroactivity is contemplated by the statute itself. Though the statutory language does not expressly state the statute's retroactive nature, at least two statutory provisions undoubtedly presume it.

Section 9-18-30(B) provides a remedy for those orders not determined to be qualified domestic relations orders:

If the order is determined not to be a qualified domestic relations order, the member or retired member or alternate payee named in the order may appeal the administrator's determination in the manner specified in subsection (A) of this section and may petition the court which issued the order to amend the order so that it will be qualified. The court which issued the order or

...