Title: Cosby v. Cosby

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Cosby v. Cosby, 96 Ohio St.3d 228, 2002-Ohio-4170.] 
 
 
COSBY, APPELLEE, v. COSBY, APPELLANT, ET AL. 
[Cite as Cosby v. Cosby, 96 Ohio St.3d 228, 2002-Ohio-4170.] 
State Teachers Retirement System — Death of contributor — Beneficiaries — 
Court may not impose a constructive trust upon the State Teachers 
Retirement System survivor benefits of a surviving spouse in favor of a 
former spouse who claims entitlement based on an award of retirement 
benefits in a divorce decree. 
(No. 2001-0659 — Submitted April 9, 2002 — Decided August 28, 2002.) 
APPEAL from the Court of Appeals for Butler County, No. CA99-11-192, 2001-
Ohio-4205. 
__________________ 
 
LUNDBERG STRATTON, J. 
{¶1} 
The issue before us is whether a court may impose a constructive 
trust upon the State Teachers Retirement System (“STRS”) survivor benefits of a 
surviving spouse in favor of a former spouse who claims entitlement based on an 
award of retirement benefits in a divorce decree.  We find that a constructive trust 
is an inappropriate remedy that is contrary to the statutory mandate of the STRS 
to pay survivor benefits to a qualified surviving spouse when no retirement 
benefits have vested.  Consequently, we reverse the judgment of the court of 
appeals. 
{¶2} 
In 1989, appellee Faye Cosby and Carel Cosby divorced.  The 
judgment and divorce decree that terminated the marriage also provided for Faye 
to receive a portion of Carel’s retirement fund upon his retirement: 
{¶3} 
“Upon the retirement of the plaintiff, the plaintiff will receive 
Sixty (60%) Percent of his State Teacher’s Retirement Fund;  and the defendant 
will receive Forty (40%) Percent of said retirement fund.  AND IT IS FURTHER 
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ORDERED that the plaintiff will guarantee that the defendant receive at least One 
Thousand ($1,000.00) Dollars per month from said retirement.” 
{¶4} 
Carel Cosby remarried and continued to work and contribute to 
STRS until he died in 1997.  Although he qualified for retirement, he did not 
apply for or receive retirement benefits.  His surviving spouse, appellant Bonnie 
Cosby, qualified as the statutory beneficiary of STRS survivor benefits payable 
under former R.C. 3307.48 (144 Ohio Laws, Part IV, 6235) and 3307.49 (146 
Ohio Laws, Part I, 2026), now R.C. 3307.562 and 3307.66. 
{¶5} 
Appellee Faye Cosby filed this action, claiming that Bonnie Cosby 
had been unjustly enriched by at least 40 percent of the STRS benefits she has 
received and will receive in the future to the detriment of Faye Cosby.  Faye 
Cosby asked the trial court to impose a constructive trust on her behalf and to 
order Bonnie Cosby to turn over 40 percent of the STRS benefits.  She also 
named STRS as a defendant and asked the court to require STRS to pay to her any 
funds remaining in its possession that had not yet been paid to Bonnie Cosby. 
{¶6} 
The trial court dismissed STRS with prejudice, finding that the 
complaint failed to state a claim against it upon which relief could be granted 
because the STRS’s duty was statutory and it had no contractual obligation to 
Faye Cosby.  After a bench trial, the court held that the award in the divorce 
decree was unambiguous and was triggered only by Carel Cosby’s retirement.  
Because he did not retire, there was no basis for Faye Cosby to recover under the 
divorce decree.  The trial court dismissed with prejudice the complaint against 
Bonnie Cosby. 
{¶7} 
The court of appeals reversed and remanded to the trial court to 
enter judgment in favor of plaintiff Faye Cosby.  The appellate court reasoned that 
Faye Cosby’s percentage of the retirement account was part of the division of 
marital property and should be construed in accordance with the law governing 
division of marital property and that the parties’ intent was not dispositive.  The 
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3 
court concluded that Carel Cosby could not give to Bonnie Cosby property that 
the domestic relations court had previously awarded to his former spouse.  
Consequently, the court deemed it unconscionable for Bonnie Cosby to retain the 
entire benefit, and ruled that Bonnie had been unjustly enriched and that equity 
supported the creation of a constructive trust in favor of Faye Cosby. 
{¶8} 
The dissenting judge, referring to the benefits at issue as “death” 
benefits, stated that they are not the equivalent of retirement benefits under STRS.  
He reasoned that a constructive trust was inappropriate because Carel Cosby’s 
pension benefits never vested, citing R.C. 3307.42.  Bonnie Cosby was the 
statutory beneficiary who was entitled to receive the STRS benefits under R.C. 
3307.562, he concluded. 
{¶9} 
This cause is before this court on allowance of a discretionary 
appeal. 
{¶10} We begin by examining the STRS.  The STRS is the statutorily 
created public retirement system for public school teachers in Ohio, and as a 
government retirement system, it is exempt from federal ERISA requirements.  
Section 1003(b)(1), Title 29, U.S.Code; R.C. Chapter 3307.  STRS membership is 
composed of teachers who are employed in a public school system.  The system is 
funded by its members, who must contribute a portion of their salaries to the 
system.  R.C. 3307.26 (formerly 3307.51, 144 Ohio Laws, Part II, 2089).  The 
STRS is administered and implemented according to statute. 
{¶11} STRS pays various statutorily mandated benefits to retired 
members, their surviving spouses, and other qualified dependents.  R.C. 3307.58 
(formerly 3307.38) requires STRS to pay a pension to members who qualify and 
then apply for retirement benefits.  Id.  The benefits do not vest until STRS grants 
the retirement.  R.C. 3307.42 (formerly 3307.711, 126 Ohio Laws 1077);  see, 
also, State ex rel. Horvath v. State Teachers Retirement Bd. (1998), 83 Ohio St.3d 
67, 697 N.E.2d 644. 
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{¶12} If a member dies before retiring, no retirement benefits will vest 
and no contractual right to retirement benefits will arise.  R.C. 3307.42;  see 
Horvath.  However, the right to a survivor benefit arises in the deceased 
member’s designated beneficiary.  R.C. 3307.562 and 3307.66 (formerly 3307.48 
and 3307.49).  If the member has not expressly designated a beneficiary, then the 
surviving spouse at the time of the member’s death is the first person who is 
statutorily entitled to the survivor benefit.  R.C. 3307.562(C)(1).  A member’s 
divorce automatically revokes the designation of a former spouse as a beneficiary.  
R.C. 3307.562(B). 
{¶13} The court below referred to the STRS survivor benefits at issue as 
a death benefit.  This is incorrect.  Payment of a death benefit is made after a 
member dies while receiving STRS retirement benefits.  R.C. 3307.661 (formerly 
3307.40, 144 Ohio Laws, Part II, 2077) and 3307.392.  When that occurs, STRS 
will pay a death benefit consisting of a one-time lump-sum payment to a qualified 
beneficiary.  Id. 
{¶14} Faye Cosby bases her claim upon the divorce decree, which 
awarded her a percentage of her former husband’s STRS retirement fund “[u]pon 
the retirement” of her husband.  There was evidence before the trial court that 
attorneys for the parties in the divorce action did not contemplate Carel Cosby’s 
death prior to retirement.  Therefore, Faye contends that the intent was to provide 
her with a portion of the retirement funds whether Carel retired or died prior to 
retirement.  She acknowledges the statutory distinction between retirement and 
survivor benefits; however, she claims that the distinction is irrelevant for 
purposes of the intent of the parties in the divorce to vest in her a portion of the 
STRS account. 
{¶15} Bonnie Cosby contends that STRS retirement benefits are separate 
and distinct from the STRS survivor benefits that she is receiving.  This position 
was further emphasized by the Attorney General, who filed a brief on behalf of 
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5 
amicus curiae STRS, as well as four other public retirement systems.1  According 
to amici, Ohio’s public retirement systems, including STRS, can pay benefits only 
as expressly authorized by statute.  Erb v. Erb (1996), 75 Ohio St.3d 18, 22, 661 
N.E.2d 175.  Because Carel Cosby died prior to retirement, his retirement benefits 
did not vest.  STRS is statutorily prohibited from paying retirement benefits until 
a member has actually retired.  Id. 
{¶16} However, STRS was obligated to pay survivor benefits to Carel 
Cosby’s surviving spouse under R.C. 3307.562.  Even if Carel Cosby had 
designated Faye Cosby as beneficiary for those benefits, that designation would 
have been automatically revoked as a result of the divorce.  R.C. 3307.562(B).  
Consequently, Bonnie Cosby became entitled to her husband’s survivor benefits 
pursuant to R.C. 3307.562(C)(1) as his surviving spouse.  According to amici, she 
is the only lawful beneficiary to these benefits under Ohio law. 
{¶17} The appellate court’s analysis blurred the statutory distinction 
between retirement and survivor benefits.  Instead of the statutory requirements, 
the court focused on what it believed was the intent of the parties in the divorce 
action to provide for Faye Cosby from her ex-spouse’s STRS fund.  The appellate 
court fashioned an equitable remedy in the form of a constructive trust to reach 
the STRS funds in order to afford Faye relief.  A constructive trust is an equitable 
remedy that may be used “ ‘[w]hen property has been acquired in such 
circumstances that the holder of the legal title may not in good conscience retain 
the beneficial interest.’ ”  Ferguson v. Owens (1984), 9 Ohio St.3d 223, 225, 9 
OBR 565, 459 N.E.2d 1293, quoting Beatty v. Guggenheim Exploration Co. 
(1919), 225 N.Y. 380, 386, 122 N.E. 378. 
                                          
 
1. 
The amici curiae include the Public Employees Retirement System of Ohio, the School 
Employees Retirement System of Ohio, the Ohio State Highway Patrol Retirement System, and 
the Ohio Police and Fire Pension Fund. 
SUPREME COURT OF OHIO 
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{¶18} However, the appellate court failed to examine the statutory nature 
of the STRS benefits.  In the divorce decree, Faye Cosby was awarded a portion 
of her former spouse’s retirement benefits.  Those benefits never vested.  Instead, 
upon the death of Carel Cosby, STRS was required to pay survivor benefits to 
Bonnie Cosby. 
{¶19} STRS benefits are governed exclusively by statute.  Bonnie Cosby, 
as the qualified statutory beneficiary of Carel Cosby’s STRS account, is currently 
receiving or has received survivor benefits under R.C. 3307.562.  The court of 
appeals’ decision imposing a constructive trust over a portion of Bonnie Cosby’s 
benefits for the benefit of Faye Cosby is contrary to the statutory mandates of 
STRS.  While we sympathize with Faye Cosby’s situation, we are bound by the 
statutory mandates of the STRS and cannot ignore their requirements.  Although 
we may not like the result, a different solution lies only with the General 
Assembly.  Consequently, we reverse the judgment of the court of appeals and 
reinstate the judgment of the trial court. 
Judgment reversed. 
 
MOYER, C.J., and F.E. SWEENEY, J., concur. 
 
COOK, J., concurs in judgment. 
 
DOUGLAS, J., dissents. 
 
RESNICK and PFEIFER, JJ., dissent. 
__________________ 
 
ALICE ROBIE RESNICK, J., dissenting. 
{¶20} The majority expresses sympathy for Faye Cosby’s plight but 
nevertheless asserts that it is limited by the statutory mandates of the State 
Teachers Retirement System (“STRS”) and therefore overturns the judgment of 
the court of appeals that a constructive trust be imposed.  This case does not 
present a straightforward exercise in statutory construction but must be considered 
in light of its specific facts.  The constructive-trust doctrine, with its origins in 
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7 
equity, is especially well suited to provide relief in just such a situation as is 
presented in this case.  Finding that the court of appeals was correct in 
determining that a constructive trust is appropriate on these facts, I would affirm 
the judgment of that court. 
{¶21} The relevant provision in the divorce decree terminating the 
marriage of Faye Cosby and Carel Cosby states, “Upon the retirement of the 
plaintiff [Carel Cosby], the plaintiff will receive Sixty (60%) Percent of his State 
Teacher’s Retirement Fund; and the defendant will receive Forty (40%) Percent 
of said retirement fund.  AND IT IS FURTHER ORDERED that the plaintiff will 
guarantee that the defendant receive at least One Thousand ($1,000.00) Dollars 
per month from said retirement.”  (Emphasis added.) 
{¶22} An examination of this provision reveals that the parties in the 
divorce were splitting Carel Cosby’s “retirement fund” or retirement account.  
References to the “retirement fund” show that that term was used in a generic way 
to specify that whatever STRS benefits were to go to Carel Cosby would be split 
60-40 at the time those benefits were received.  It is evident that any STRS 
benefits, no matter how characterized, were within the contemplations of the 
parties in providing for this division. 
{¶23} “Retirement” in the sense in which it was used is not the strict 
technical statutory definition contained in the STRS statutes but is a general term 
meant to encompass any STRS benefits, including the survivor benefits that are at 
issue.  Therefore, it is not dispositive that Carel Cosby’s retirement benefits never 
vested pursuant to R.C. 3307.42.  The majority focuses on the statutory terms 
entirely too much and misses this essential point. 
{¶24} Contrary to appellant Bonnie Cosby’s arguments, a constructive 
trust can be imposed even when there is no indication of wrongdoing by anyone.  
This court has recognized that although a constructive trust is most often imposed 
as a remedy for fraudulent conduct, “a constructive trust may also be imposed 
SUPREME COURT OF OHIO 
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where it is against the principles of equity that the property be retained by a 
certain person even though the property was acquired without fraud.”  Ferguson 
v. Owens (1984), 9 Ohio St.3d 223, 226, 9 OBR 565, 459 N.E.2d 1293. 
{¶25} The brief filed by the Attorney General on behalf of amicus curiae 
STRS and the other state retirement systems reveals that Carel Cosby had not 
designated a beneficiary for his survivor benefits, so that Bonnie Cosby 
automatically became the recipient of those benefits as his surviving spouse 
pursuant to R.C. 3307.562(C)(1).  However, if Carel Cosby had designated a 
beneficiary in accordance with R.C. 3307.562(B) (former R.C. 3307.48, 144 Ohio 
Laws, Part IV, 6235), it appears that he could have specifically provided that Faye 
Cosby would receive 40 percent of his survivor benefits.  Furthermore, if Faye 
Cosby had been designated as a 40-percent beneficiary after Carel Cosby married 
Bonnie Cosby, the automatic revocation provision regarding a former spouse 
contained within R.C. 3307.562(B) would have been overridden.  Of course, 
Carel Cosby did not take this action.  Imposition of a constructive trust in these 
circumstances is necessary to carry out the mutually expressed intention of Carel 
Cosby and Faye Cosby as incorporated in their 1989 divorce decree. 
{¶26} The equities favor the imposition of a constructive trust.  Faye 
Cosby and Carel Cosby were married for 37 years.  As the court of appeals 
recognized, the STRS benefits of Carel Cosby were accumulated as a product of 
the joint efforts of Carel Cosby and Faye Cosby during their marriage.  When the 
marriage concluded, these interests were included within the property settlement.  
Carel Cosby gave up something (and Faye Cosby received something) in the 
divorce, but according to the majority, as it turns out in the end, Faye Cosby 
receives nothing and Bonnie Cosby gets it all, despite the obligations that Carel 
Cosby undertook in the divorce decree. 
{¶27} The court of appeals believed that it is unconscionable for Bonnie 
Cosby to retain all of Carel Cosby’s STRS benefits, and that Bonnie Cosby is 
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9 
unjustly enriched by her retention of the entire amount.  Because I fully agree 
with the essential reasoning of the court of appeals, I dissent. 
 
PFEIFER, J., concurs in the foregoing dissenting opinion. 
__________________ 
 
Fred Miller, for appellee. 
 
John M. Holcomb, for appellant. 
 
Betty D. Montgomery, Attorney General, and Christopher S. Cook, 
Assistant Attorney General, for amici curiae State Teachers Retirement System, 
the Public Employees Retirement System of Ohio, the School Employees 
Retirement System of Ohio, the Ohio State Highway Patrol Retirement System, 
and the Ohio Police and Fire Pension Fund. 
__________________