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Hayes v. Hayes

Supreme Court of Vermont

September 14, 2018

Patricia Hayes
Allison Hayes, Brian Hayes and LPL Financial, LLC

          Supreme Court On Appeal from Superior Court, Addison Unit, Civil Division Helen M. Toor, J.

          Michele B. Patton and James W. Swift of Langrock Sperry & Wool, LLP, Middlebury, for Plaintiff-Appellant.

          Joan W. D. Donahue of Brennan Punderson & Donahue, PLLC, Middlebury, for Defendants-Appellees Allison Hayes and Brian Hayes.

          Reiber, C.J., Skoglund, Robinson and Carroll, JJ., and Davenport, Supr. J. (Ret.), Specially Assigned

          CARROLL, J.

         ¶ 1. This case involves a dispute over a husband's designation of his niece and nephew, defendants Allison Hayes and Brian Hayes, as the beneficiaries of his Individual Retirement Account (IRA) rather than his wife, plaintiff Patricia Hayes. Husband is now deceased. Wife filed a declaratory judgment action, arguing that the beneficiary designation should be declared void under 14 V.S.A. § 321 and that the IRA funds should pass through husband's estate. The trial court granted summary judgment to defendants, concluding for several reasons that wife was not entitled to relief under § 321. We agree with the trial court that § 321 does not apply here because wife took under husband's will rather than electing her statutory share of his estate. We therefore affirm.

         ¶ 2. The following facts are undisputed. Husband and wife married in December 1973 and separated in 2006. In June 2016, husband filed for divorce. Husband died in September 2016. During his lifetime, husband had a deferred compensation retirement plan through his work. Wife was the beneficiary of this account. In June 2015, husband withdrew the money in this account (approximately $119, 000) and rolled it into a traditional IRA managed by defendant LPL Financial, LLC. Husband designated his niece and nephew as co-primary beneficiaries. Husband was close to his niece and nephew, and they visited him regularly.

         ¶ 3. Husband died testate. His will, executed in December 2001, left the rest and residue of his estate to wife. The probate division allowed the will in October 2016, finding that it was properly executed and authenticated and that wife consented to its allowance. Wife inherited husband's personal estate valued at $95, 000 (less a lien against a vehicle), as well as husband's probate estate. Wife also obtained sole possession of husband's primary residence, which the couple owned as tenants by the entirety at the time of husband's death.

         ¶ 4. In June 2017, wife filed this declaratory judgment action, arguing that husband's IRA beneficiary designation was void under 14 V.S.A. § 321. Defendants maintained that the statute did not apply, but even if it did, that the undisputed facts showed that husband did not violate it.

         ¶ 5. Section 321 was part of a much larger bill that both restated and revised existing law. See 2009, No. 55, § 5. Section 321 is entitled "Conveyance to defeat spouse's interest," and it provides:

A voluntary transfer of any property by an individual during a marriage or civil union and not to take effect until after the individual's death, made without adequate consideration and for the primary purpose of defeating a surviving spouse in a claim to a share of the decedent's property so transferred, shall be void and inoperative to bar the claim. The decedent shall be deemed at the time of his or her death to be the owner and seised of an interest in such property sufficient for the purpose of assigning and setting out the surviving spouse's share.

         The court concluded that § 321 was a modern articulation of a longstanding rule that a spouse cannot convey property to others to fraudulently deprive the surviving spouse of property to which he or she has a right, that is, commit "a fraud upon . . . [the surviving spouse's] marital rights." Thayer v. Thayer, 14 Vt. 107, 123 (1842) (emphasis omitted). The court emphasized that "an intent to defraud must be found as a fact" and that a fraudulent intent could not be "presumed from the knowledge that [a diminished estate] would be the effect of the conveyance." Dunnett v. Shields, 97 Vt. 419, 426, 428-29, 123 A. 626, 630-31 (1924) (emphasis omitted) (stating that "the law in no case presumes fraud," and "[o]ne who seeks to set aside a conveyance on the ground that it is fraudulent must establish that fact so clearly and conclusively as to put it beyond a reasonable doubt"), overruled on other grounds by Trepanier v. Getting Organized, Inc., 155 Vt. 259, 583 A.2d 583 (1990).

         ¶ 6. The court reasoned that wife relied solely upon the effect of the beneficiary designation, the exact reasoning rejected in Dunnett. The undisputed facts showed that husband was close to his niece and nephew and that he otherwise provided for wife. These facts, in the court's view, supported an inference that husband did not intend to disinherit wife but instead intended to lawfully provide for his niece and nephew. The court thus held that wife failed to establish an essential element of her case. See Burgess v. Lamoille Hous. P'ship, 2016 VT 31, ¶ 17, 201 Vt. 450, 145 A.3d 217 ("Summary judgment is mandated where, after an adequate time for discovery, a party fails to make a showing sufficient to establish the existence of an element essential to the party's case and on which the party has the burden of proof at trial." (quotation and alterations omitted)).

         ¶ 7. The court further found that the reference to a surviving spouse's "share" in § 321 referred to a spouse's share under 14 V.S.A. § 311 when the decedent dies intestate or to a spouse's elective share under 14 V.S.A. § 319. See 14 V.S.A. § 311 (describing intestate share of surviving spouse); id. § 319 (providing that spouse can "waive the provisions of the decedent's will and in lieu thereof elect to take one-half of the balance of the estate, after the payment of claims and expenses"). In this case, husband died testate and wife chose to take under husband's will. It followed that wife was barred from seeking her elective share under § 319, and thus, § 321 did not apply. See In re O'Rourke's Estate, 106 Vt. 327, 332, 175 A. 24, 26 (1934) ("It is a familiar rule that one cannot take under a will and against it."). The court also concluded that wife ...

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