Stillman v. Teachers Ins. & Annuity Ass'n College

• Citation: 343 F.3d 1311
• Decision Date: 11 September 2003
• Docket Number: No. 02-4020.,02-4020.
• Parties: Marilyn STILLMAN, an individual, and Nicolas Bryner Caravaglia, an individual, Plaintiffs-Counterclaim Defendants-Appellees, v. TEACHERS INSURANCE AND ANNUITY ASSOCIATION COLLEGE RETIREMENT EQUITIES FUND, a New York corporation, Defendant-Counterclaimant, v. Yaeko Bryner and Erin Jun Bryner, Counterclaim Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1311

343 F.3d 1311

Marilyn STILLMAN, an individual, and Nicolas Bryner Caravaglia, an individual, Plaintiffs-Counterclaim Defendants-Appellees, v. TEACHERS INSURANCE AND ANNUITY ASSOCIATION COLLEGE RETIREMENT EQUITIES FUND, a New York corporation, Defendant-Counterclaimant, v. Yaeko Bryner and Erin Jun Bryner, Counterclaim Defendants-Appellants.

No. 02-4020.

United States Court of Appeals, Tenth Circuit.

September 11, 2003.

Stephen K. Christiansen, of Van Cott, Bagley, Cornwall & McCarthy (Kenneth W. Yeates, with him on the briefs), Salt Lake City, UT, for Counterclaim Defendants-Appellants.

Alan L. Sullivan, of Snell & Wilmer L.L.P. (Todd Shaughnessy and Amy F. Sorenson, with him on the brief), Salt Lake City, UT, for Plaintiffs-Counterclaim Defendants-Appellees.

Before HARTZ and McKAY, Circuit Judges, and BRORBY, Senior Circuit Judge.

HARTZ, Circuit Judge.

This appeal requires us to consider competing claims to the proceeds of two annuity contracts issued by Teachers Insurance and Annuity Association and College Retirement Equities Fund (TIAA-CREF). The annuitant, Dale Bryner, died in 1999. Dale's ex-wife, Marilyn Stillman, asserted that she was entitled to the annuity benefits because she was the beneficiary designated in the contracts. Marilyn's claim conflicted with the claim of Erin Jun Bryner, Dale's daughter from his subsequent marriage to Yaeko Bryner. Erin based her claim on a 1998 amendment to Utah's Uniform Probate Code, Utah Code Ann. § 75-2-804(2), which revokes upon divorce a pre-divorce designation of a spouse as the beneficiary of an annuity or similar asset.

TIAA-CREF sought interpleader relief under Rule 22 of the Federal Rules of Civil Procedure. The claimants filed cross-motions for summary judgment. Ruling that the 1998 amendment did not apply because the beneficiary designations and divorce occurred before 1998, the district court awarded Marilyn the annuity benefits. Erin and Yaeko appeal. Our jurisdiction arises under 28 U.S.C. § 1291.

We vacate the district court's rulings on the summary judgment motions and remand for further proceedings. We hold that § 75-2-804(2) applies even when the beneficiary designation and divorce predate the statute's effective date. Section 75-2-804(2) is a rule of construction, and Utah Code Ann. § 75-2-1301(2) provides that rules of construction in the 1998 amendments apply to documents executed before July 1, 1997. We also hold that application of § 75-2-804(2) in this case does not violate the Contract Clause of the United States Constitution or the comparable Utah constitutional provision.

I. Background

In 1965 Dale purchased two annuities from TIAA-CREF. At the time of this purchase, Dale was married to Marilyn and the couple had two sons — Nicolas (who now takes the name Nicolas Bryner Caravaglia) and Patrick. Under the annuity contracts issued to Dale, a designated beneficiary would receive death benefits if the annuitant died before annuity payments began. Dale named "Marilyn Stillman Bryner — Wife" as the primary beneficiary and his "Children" as the contingent beneficiaries.

In 1970 Dale and Marilyn divorced. Their divorce decree did not refer to the TIAA-CREF annuities. The next year Dale married Yaeko. They had one child, Erin, born in 1979. In 1988, and again in 1997, Dale purchased new TIAA-CREF annuity contracts, naming Yaeko as the primary beneficiary and Erin as the contingent beneficiary. After learning that he had cancer, Dale made a will in January 1999 in which he left all his property to Yaeko and designated Erin as the contingent beneficiary. The will specifically stated that Dale was not providing for Nicolas and Patrick, the children from his marriage to Marilyn. (Patrick had actually predeceased Dale, but Dale apparently did not have certain knowledge of this event.)

Dale died in February 1999. A year later Marilyn and Nicolas filed suit against TIAA-CREF in federal district court. Their complaint alleged that Marilyn is entitled to the proceeds from the annuities Dale had purchased in 1965, because Dale had designated Marilyn as the beneficiary of the annuities and had never changed this designation using the procedures outlined in the annuity contracts. Among the forms of relief sought by Marilyn and Nicolas was a declaration stating:

(1) that the 1965 Annuities are valid and enforceable, (2) that Ms. Stillman is the properly designated primary beneficiary under the 1965 Annuities, (3) that no one other than the Plaintiffs in this case has any right to or interest in the benefits of the 1965 Annuities, and (4) that TIAA-CREF must immediately disburse the benefits of 1965 Annuities to Ms. Stillman in the manner directed by her for the benefit of herself and Plaintiff Nicolas Bryner Caravaglia....

App. at 16.

TIAA-CREF filed a counterclaim for interpleader under Rule 22 of the Federal Rules of Civil Procedure, noting that Yaeko and Erin had also asserted entitlement to the annuity benefits, and naming as defendants Marilyn, Nicolas, Yaeko, and Erin. The district court entered an order granting TIAA-CREF's request for leave to deposit the proceeds of the 1965 annuities with the court and to be dismissed from the action.

Erin then filed a cross-claim, seeking a declaration that she and Nicolas are the true beneficiaries of the annuity benefits and that she is entitled to one-half the proceeds. The cross-claim further requested that the court declare that Marilyn is entitled to nothing from the annuities.

The two sets of claimants — Marilyn and Nicolas (Appellees) on one side, and Erin and Yaeko (Appellants) on the other — filed cross-motions for summary judgment. The parties agreed that there were no disputed questions of material fact. Following a hearing the court entered an order granting Appellees' motion and denying Appellants' motion. The court ruled that "Marilyn Stillman is solely entitled to all of the proceeds of" the 1965 annuities and that "Yaeko Bryner and Erin Jun Bryner are entitled to take nothing under" the contracts. App. at 262. Appellants filed a Motion to Alter or Amend the Judgment, which the court denied. They then filed this appeal.

Because this is a diversity case, we apply the substantive law of Utah. We follow federal law, however, regarding the standard for granting summary judgment. Eck v. Parke, Davis & Co., 256 F.3d 1013, 1016 (10th Cir.2001). Given that the parties agreed that there are no disputed issues of material fact and moved for summary judgment, "we must examine whether either party is entitled to summary judgment as a matter of law. This requires a de novo review of the legal determinations of the district court." Employee Trs. of Eighth Dist. Elec. Pension Fund v. Employer Trs. of Eighth Dist. Elec. Pension Fund, 959 F.2d 176, 179 (10th Cir. 1992) (internal citations omitted).

II. Discussion

A. Application of § 75-2-804(2)

Until 1998, "[t]he general rule in Utah [was] that divorce alone does not terminate a former spouse's rights as a survivor beneficiary of an insurance policy, IRA, or retirement benefits...." Estate of Anello v. McQueen, 953 P.2d 1143, 1145 (Utah 1998). "[U]nless a property settlement or divorce decree evidence[d] a clear intent" to the contrary, a divorce did not change the former spouse's status as the survivor beneficiary. Id.

In 1998, however, the Utah Legislature enacted a statute which creates essentially the opposite presumption. Utah Code. Ann. § 75-2-804(2) states:

Except as provided by the express terms of a governing instrument, a court order, or a contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage:

(a) revokes any revocable:

(i) disposition or appointment of property made by a divorced individual to his former spouse in a governing instrument....

The Utah Uniform Probate Code generally defines "governing instrument" to encompass a number of documents, including "a deed, will, trust, [and] insurance or annuity policy." § 75-1-201(19). For purposes of § 75-2-804, a "[g]overning instrument" is "a governing instrument executed by the divorced individual before the divorce...." § 75-2-804(1)(d). Under § 75-2-804(4), "[p]rovisions of a governing instrument are given effect as if the former spouse ... disclaimed all provisions revoked by this section...."

The Utah Legislature modeled this statute on § 2-804 of the Uniform Probate Code. See Terry S. Kogan and Michael F. Thomson, Piercing the Facade of Utah's "Improved" Elective Share Statute, 1999 Utah L. Rev. 677, 677 ("In 1998, the Utah Legislature adopted major amendments to the Utah Uniform Probate Code, in an attempt to align the state's code with the latest version of the Uniform Probate Code ..., adopted by the National Conference of Commissioners on Uniform State Laws in 1993.") Such revocation-upon-divorce provisions reflect a recognition that "the property owner is unlikely to wish to benefit her former spouse and, had she thought about it, probably would have revoked the pre-divorce beneficiary designation." E. Gary Spitko, The Expressive Function of Succession Law and the Merits of Non-Marital Inclusion, 41 Ariz. L. Rev. 1063, 1084 (1999).

This appeal turns on whether the revocation-upon-divorce rule set forth in § 75-2-804(2) applies to Marilyn's designation as the beneficiary of the annuities purchased in 1965. Appellees contend that applying § 75-2-804(2) would have an improper retroactive effect, because the provision would govern conduct — Dale's naming of Marilyn as the beneficiary, as well as Dale and Marilyn's divorce — that occurred prior to the statute's enactment in 1998. Appellants counter that under the effective-date provisions of the Probate Code, a rule of construction such as § 75-2-804(2) applies regardless of the date of the beneficiary designation. They further argue that there is no retroactivity issue here...