NO. 94-017

IN THE SUPREME COURT OF THE STATE OF MONTANA

1994

IN THE MATTER OF THE ESTATE OF

GLENDON CECIL BRUCE, Deceased:

ALISON T. BRUCE, JONATHAN S.

BRUCE and ISABEL S. NOBLE,

interested parties,

DONNA BRUCE, surviving spouse, and

NORWEST CAPITAL MANAGEMENT & TRUST

co., MONTANA, personal representative,

Respondents and Respondents.

APPEAL FROM: District Court of the Eleventh Judicial District,

In and for the County of Flathead,

The Honorable Michael H. Keedy, Judge presiding.

COUNSEL OF RECORD:

For Petitioners and Appellants:

Kent P. Saxby, Warden, Christiansen, Johnson

and Berg, Kalispell, Montana

For Respondents and Respondents:

Kirby S. Christian, Christian & Samson, P.C.,

Missoula, Montana (Donna Bruce)

Walter S. Murfitt and Dale E. Reagor, Luxan and

Murfitt, Helena, Montana (Nor-west)

Jeffrey Bruce and Christian Bruce, San Diego,

California (Pro Se)

Filed:

Submitted on Briefs: June 2, 1994

Decided: June 30, 1994
Chief Justice 3. A. Turnage delivered the Opinion of the Court.

This is an appeal from an order certified pursuant to Rule

54(b), M.R.Civ.P. In that order, the District Court for the

Eleventh Judicial District, Flathead County, determined that a

PaineWebber individual retirement account (IRA) is part of the

estate of Glendon Cecil Bruce. We reverse.

The issue is whether the court erred in ruling that the

designated contingent beneficiaries of the PaineWebber IRA, Alison

Bruce and Jonathan Bruce, are not entitled to the proceeds of the

IRA.

In 1986, Glendon Cecil Bruce established a PaineWebber IRA

account. He named his wife, Isabel, as the primary beneficiary of

the account, and their children, appellants Alison Bruce and

Jonathan Bruce, as contingent beneficiaries. The Custodial

Agreement for the IRA account provided, at paragraph 5.5:

The term "Beneficiary" means the person or persons

designated as such . . . on a form acceptable to the

Custodian . . . . The form may name persons or estates

to take upon the contingency of survival. However, if no

such designation on such a form effectively disposes of

the IRA as of the time such distribution is to commence,

the term "Beneficiary" shall mean the designating

person's estate.

In 1988, the marriage of Glendon and Isabel was dissolved.

They entered a property settlement agreement which provided:

Husband has two Individual Retirement Accounts (IRAs)

with Paine Webber [sic] (in the approximate amount of

$360,000.00) and with Fidelity Funds (in the approximate

amount of $15,000.00), which IRA-s shall remain the sole

and separate property of Husband.

The agreement also contained a comprehensive mutual release of

claims, which provided in part as follows:

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[E]ach party hereto releases and forever discharges the

other party, his or her personal representatives and

assigns from any and all rights, claims, demands and

obligations except as herein specifically provided. Each

party is forever barred from having or asserting any such

right, claim, demand or obligation at any time hereafter

for any purpose . .~ . .

Glendon later married respondent Donna Bruce and was married

to her at the time of his death in February 1992. Despite the

dissolution of his marriage to Isabel and his remarriage to Donna,

he had never changed the named beneficiaries of his PaineWebber

IRA.

After Glendon died, Isabel filed with the District Court a

renunciation and disclaimer pursuant to § 72-2-101, MCA (1991),

renouncing her interest in the PaineWebber IRA as the named primary

beneficiary. Both the contingent beneficiaries (Glendon's children

Alison and Jonathan) and the personal representative of Glendon's

estate, Norwest Capital Management & Trust Co., have asserted

claims to the proceeds of the PaineWebber IRA.

The District Court ruled that the 1988 property settlement

agreement constituted an affirmative act evidencing Glendon's

intent that Isabel not receive the IRA. It ruled that Isabel lost

the ability to renounce her interest in the account when she

entered the property settlement agreement, pursuant to § 72-2-101,

MCA (1991). It then concluded that neither Isabel nor the

contingent beneficiaries are entitled to the account.

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Did the court err in ruling that the designated contingent

beneficiaries of the PaineWebber IRA, Alison Bruce and Jonathan

Bruce, are not entitled to the proceeds of the IRA?

Section 72-2-101, MCA (1991), provides:

(1) A person . . . who is [a] . . . beneficiary under a

. . . nontestamentary instrument . . . may renounce, in

whole or in part, the right of succession to any property

or interest therein . . . by filing a written renunciation under this section. . . .

. . . .

(4) Unless the transferor of the interest has otherwise

provided, the property or interest renounced devolves as

though the person renouncing had predeceased the decedent

. . . .

(5) (a) The right to renounce property or an interest

therein is barred by:

(i) an assignment, conveyance, encumbrance, pledge, or

transfer of property or interest . . . .

In the opinion of the District Court, the 1988 property settlement

agreement constituted an assignment under subsection (5) (a)(i)

above, and Isabel was thereafter barred from exercising a right to

renounce. The respondents argue that the contingent beneficiaries

are not entitled to the IRA because Isabel did not predecease them.

They argue that there exists no effective designation of a

beneficiary of the IRA, and therefore, under the terms of the

Custodial Agreement, the estate is the beneficiary.

In Sowell v. Teachers' Retirement System (1984), 214 Mont.

zoo, 693 P.2d 1222, this Court ruled that a marital property

settlement agreement did not operate as a relinquishment of a right

to be designated as the beneficiary of a retirement account. The

Court stated:

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[t]he property settlementagreementdoes not specifically

refer to Carolyn's designation as beneficiary, but

rather, relinquishes Carolyn's rights of "dower, support,

maintenance, succession, homestead, inheritance, or

heirship" and her right to "all property, both real and

personal which the other party now has or may hereafter

acquire." This language does not specifically cover

Carolyn's inchoate right to acquire property upon the

happening of a future event.

Sowell, 693 P.2d at 1224.

The respondents rely upon Soha v. West (1981), 196 Mont. 95,

637 P.2d 1185. In that case, this Court held that a property

settlement agreement created a question of fact as to decedent's

intent concerning a previously-executed designation in a life

insurance policy which named the ex-spouse as the beneficiary.

That holding, however, was specifically overruled in Eschler v.

Eschler (1993), 257 Mont. 360, 849 P.2d 196. In Eschler, we quoted

the following language with approval:

[W]hile a settlementagreementmay require the beneficiary wife to surrender or l'turn over" the policy to the

insured, that fact alone does not destroy her right as

beneficiary where the insured thereafter did not change

her designation as beneficiary.

Whether a property settlement agreement should be

deemed to bar the divorced wife is a question of the

construction of the agreement itself. Where there is no

provision that the effecting of the settlement agreement

should deprive her of her rights as named beneficiary and

she in fact remains named as beneficiary, the settlement

agreement will not be siven a broader scooe than its

express terms specify and she will not be barred from her

right as the named beneficiary.

Eschler, 849 P.2d at 201; quoting Girard v. Pardun (S.D. 1982), 318

N.W.2d 137, 138-39 (emphasis in original).

The respondents argue that neither Sowell nor Eschler applies

here, because, unlike the retirement account and life insurance

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policy involved in those cases, the PaineWebber IRA was specifically awarded to Glendon in the property settlement agreement.

However, the property settlement agreement did not refer to

Isabel's interest as a beneficiary of the PaineWebber IRA, but only

referred to the account in general. Under the language and logic

of Sowell and Eschler, when she entered the property settlement

agreement, Isabel relinquished any immediate ownership interest in

the IRA by virtue of her marital interest therein. She did not,

however, relinquish her right as a named beneficiary of the IRA.

After the dissolution of the marriage of Glendon and Isabel,

and until the time of his death, Glendon retained complete control

over who was named as the beneficiary of the IRA. The personal

representative states that it is difficult to speculate on

Glendon's intent as to who should be the beneficiary of the IRA.

However, it is not necessary to speculate, because Glendon specifically named a beneficiary and two contingent beneficiaries. He, at

any time before his demise, possessed the power to change any

beneficiary named in the IRA; either intentionally or inadvertently, he did not change the beneficiaries.

We hold that the property settlement agreement did not

constitute a relinquishment of Isabel's inchoate interest in the

PaineWebber IRA as a beneficiary. Pursuant to § 72-2-101(4), MCA

(1991) I her renunciation of that right after Glendon's death

operated as if she had predeceased him and brought into effect the

provision of the Custodial Agreementthatthe contingent beneficiaries "take upon the contingency of survival." The right to the

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Painewebber IRA then vested in Alison Bruce and Jonathan Bruce, the

contingent beneficiaries.

Reversed and remanded for further proceedings consistent with

this Opinion.

We concur:

Chief Justice

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June 30, 1994

CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States mail, prepaid, to the

followhlg named:

Kent P. Saxby

WARDEN, CHRISTIANSEN, JOHNSON & BERG

P. 0. Box 3038

Kalispell, MT 59903-3038

Kirby S. Christian

CHRISTIAN & SAMSON, P.C.

P. 0. Box 8479

Missoula, MT 59807

Walter S. Murfitt & Dale E. Reagor

LUKAN & MURFITT

P. 0. Box 1144

Helena, MT 59624

Jeffrey Bruce

7096 Park Mesa Way, #58

San Diego, CA 92111

Christian Bruce

262 Lausanna Drive

San Diego, CA 92114

ED SMITH

CLERK OF THE SUPREME COURT

STATE OF MONTANA