W. Va. Inv. Mgmt. Bd. v. Variable Annuity Life Ins. Co.

• Citation: 234 W.Va. 469,766 S.E.2d 416
• Decision Date: 14 November 2014
• Docket Number: No. 13–1193.,13–1193.
• Court: West Virginia Supreme Court
• Parties: The WEST VIRGINIA INVESTMENT MANAGEMENT BOARD, a public body corporate, and The West Virginia Consolidated Public Retirement Board, a public agency, Plaintiffs Below, Petitioners, v. The VARIABLE ANNUITY LIFE INSURANCE COMPANY, a Texas corporation, Defendant Below, Respondent.

234 W.Va. 469

766 S.E.2d 416

The WEST VIRGINIA INVESTMENT MANAGEMENT BOARD, a public body corporate, and The West Virginia Consolidated Public Retirement Board, a public agency, Plaintiffs Below, Petitioners

v.The VARIABLE ANNUITY LIFE INSURANCE COMPANY, a Texas corporation, Defendant Below, Respondent.

No. 13–1193.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 30, 2014.

Decided Nov. 14, 2014.

Gerard R. Stowers, Esq., Special Assistant Attorney General, J. Mark Adkins, Esq., Lenna R. Chambers, Esq., Bowles Rice LLP, Anthony J. Majestro, Esq., Powell & Majestro, PLLC, Charleston, WV, for Petitioners.

Jeffrey G. Blaydes, Esq., Carbone & Blaydes P.L.L.C., Charleston, WV, Amicus Curiae–American Federation of Teachers–West Virginia, AFL–CIO.

John Everett Roush, Esq., Charleston, WV, Amicus Curiae–The West Virginia, School Service Personnel Association.

James M. Haviland, Esq., Charleston, WV, Amicus Curiae–West Virginia, Education Association.

Thomas J. Hurney, Jr., Esq., Michael M. Fisher, Esq., Erin R. Stankewicz, Esq., Patricia M. Bello, Esq., Jackson Kelly PLLC, Charleston, WV, Daniel McNeel Lane, Jr., Pro Hac Vice, Akin Gump Strauss Hauer & Feld LLP, San Antonio, TX, Ashley B. Vinson, Pro Hac Vice, Danielle Crockett, Pro Hac Vice, Akin Gump Strauss Hauer & Feld LLP, San Francisco, CA, for Respondent.

Opinion

LOUGHRY, Justice:

The petitioners, the West Virginia Investment Management Board (“IMB”) and the West Virginia Consolidated Public Retirement Board (“Board”), appeal from two orders¹ entered by the Circuit Court of Kanawha County that separately grant summary judgment to the respondent, The Variable Annuity Life Insurance Company (“VALIC”), against the IMB and the Board. The petitioners initiated the underlying action to obtain a declaratory judgment regarding their entitlement to a full surrender of two annuity contracts without delays in payment or surrender charges. Bifurcating the relief awarded based on the signatories to the annuity contracts, the trial court resolved the petitioners' claims on grounds of standing, the absence of a justiciable controversy, or the lack of ambiguity concerning the language of the policy endorsement in dispute. On appeal, the petitioners assert multiple assignments of error including the trial court's reliance on disputed issues of material fact. Upon a thorough review of the submitted record in conjunction with the issues raised, we find that the trial court committed error in its grant of summary judgment to VALIC and, accordingly, we reverse.

I. Factual and Procedural Background

Like the trial court, we find it necessary to briefly review the history of the teachers' retirement plans and the underlying legislation relating to these plans that are at the center of this dispute. The State Teachers Retirement System (“TRS”) was created in 1941 to provide retirement benefits for public school teachers and other school service personnel.² From 1941 to 1970, teachers and other professional and school service personnel were required to participate in TRS. While originally a defined contribution plan, TRS became a defined benefit plan in 1970.³ Due to funding problems affecting the solvency of TRS, the Legislature enacted the “ Teacher's Retirement Reform Act” (“Reform Act”) in 1990, pursuant to which a defined contribution plan (“DCP”) was created. See W.Va.Code §§ 18–7B–1 to –21 (2012 & Supp.2014). Subject to the provisions of the Reform Act, participants were permitted to allocate their retirement funds among various investment options in the DCP.⁴

Pertinent to this matter are two fixed annuity contracts issued by VALIC, the first on October 8, 1991 (the “1991 Contract”),⁵ and the second on November 6, 2008 (the “2008 Contract”).⁶ Both of the annuity contracts issued by VALIC contain an identically-worded endorsement—the terms of which purport to govern the rights of the parties with regard to a participant's decision to surrender his or her investment in the annuity.

Directly impacting the case before us was the Legislature's decision to permit DCP members to voluntarily transfer their retirement funds to TRS effective July 1, 2008. See generally W.Va.Code §§ 18–7D–1 to –12 (2008). This transfer could only take place if sixty-five percent of actively-contributing DCP members elected to make the transfer. See id. at §§ 18–7D–3, –5. According to the trial court's findings, more than seventy-eight percent of the relevant DCP participants elected to make the transfer to TRS.

The record in this case evidences that VALIC or its agent⁷ was fully apprised of the legislation (House Bill 101) that, upon enactment and subsequent approval by the necessary percentage of DCP participants, would permit electing DCP members to join TRS.⁸ VALIC was similarly aware of the resulting need to remove the assets of DCP participants electing to transfer to TRS from its annuity fund. During discussions between the Board and VALIC in advance of the DCP participants' vote, VALIC indicated that there was likely to be a “surrender charge” of $11.5 million “in the event that all assets were cashed out in the same year.”⁹ This potential surrender charge, which had not been anticipated by the Board,¹⁰ spawned additional and ongoing communications between VALIC, the Board, and the IMB concerning the transfer of moneys subject to the 1991 Contract of those DCP participants electing to join TRS.

Striving to meet its statutory duty to effectuate the timely transfer of funds from the DCP to TRS¹¹ and to uphold its fiduciary obligations,¹² the Board, in active consultation with the IMB, agreed to obtain a second annuity contract (the 2008 Contract) from VALIC. As the record makes clear, the 2008 Contract was purposefully designed “as an investment and funding vehicle” to “accomplish the transfer to the TRS Plan of TDC Plan [DCP] assets of electing members currently invested in a Group Annuity Contract [1991 Contract] with ... (“VALIC”).”¹³ Through email communications from VALIC to the Board and the IMB, the parties documented their agreement that the second annuity contract would be “materially similar (i.e., form, endorsements, rates, and terms) to the contract issued to the CPRB [Board] for the TDCP [DCP].”¹⁴

On December 10, 2008, the petitioners submitted a request to VALIC to transfer $248,345,458.77 from the 1991 Contract to the 2008 Contract. VALIC effectuated the transfer pursuant to the petitioners' request. On December 18, 2008, IMB requested withdrawal of all funds held under the 2008 Contract on or before December 21, 2008.¹⁵ Due to VALIC's unalterable position that the funds were subject to withdrawal restrictions which limited the petitioners to removing twenty percent of the surrender amount per year, the IMB was forced to remove funds from the 2008 Contract in accord with this five-year installment method.¹⁶

Based on the respondent's refusal to surrender the entirety of the affected funds in a lump sum, the petitioners instituted a declaratory judgment action against VALIC.¹⁷ In response to the request for judicial resolution of the petitioners' right to full and unrestricted surrender of the annuity funds, VALIC removed the case to federal court.¹⁸ Following the district court's decision to remand this case to circuit court, the petitioners amended their complaint to seek damages arising from VALIC's refusal to timely release the funds at issue.¹⁹ Cross motions for summary judgment were filed after the completion of discovery. On October 21, 2013, the circuit court separately granted the respondent's motion for summary judgment against each of the petitioners. It is from these orders that the petitioners assert error.

II. Standard of Review

Our review in this case is unquestionably plenary as we are examining the grounds upon which the trial court relied in granting summary judgment to the respondent. See Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994) (“A circuit court's entry of summary judgment is reviewed de novo. ”). As we articulated in Painter, “[t]he circuit court's function at the summary judgment stage is not to weigh the evidence and determine the truth of the matter, but is to determine whether there is a genuine issue for trial.” 192 W.Va. at 190, 451 S.E.2d at 756, syl. pt. 3. Also applicable is this Court's recognition in syllabus point two of Riffe v. Home Finders Assocs., Inc., 205 W.Va. 216, 517 S.E.2d 313 (1999), that “[t]he interpretation of an insurance contract, including the question of whether the contract is ambiguous, is a legal determination that, like a lower court's grant of summary judgment, shall be reviewed de novo on appeal.” Bearing these standards in mind, we proceed to determine whether the trial court committed error.

III. Discussion

A. Adverse Rulings Against the Board

1. Justiciable Controversy—1991 Contract

In granting summary judgment to VALIC with regard to the Board's averments, the trial court separately examined the Board's attempt to seek relief under both the 1991 Contract and the 2008 Contract. As to the 1991 Contract, the trial court focused initially on the Board's right to seek declaratory relief under the Uniform Declaratory Judgments Act (the “Act”). See W.Va.Code §§ 55–13–1 to –16 (2008). Looking to this Court's recognition in Hustead v. Ashland Oil, Inc., 197 W.Va. 55, 475 S.E.2d 55 (1996), that “there must be an actual, existing controversy” to grant relief under the Act, the trial court concluded that the predicate justiciable controversy was absent with regard to the 1991 Contract. Id. at 61, 475 S.E.2d at 61.

In deciding there was no active controversy between the Board and VALIC with regard to the 1991 Contract, the trial court relied upon carefully-crafted factual findings.²⁰ Illustrative of this point is the myopic focus by the trial court on the Board's failure to “demand immediate cash surrender of the electing teachers' assets in June 2008 or thereafter.”²¹ Only by applying a hyper-critical lens to this case can...