NO. 94-209

IN THE SUPREME COURT OF THE STATE OF MONTANA

1994

IN THE MATTER OF THE ESTATE

OF SYLVESTER L. LAHREN,

Deceased.

APPEAL FROM: District Court of the Sixth Judicial District,

In and for the County of Park,

The Honorable Byron L. Robb, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Joseph B. Gary and Calvin L. Braaksma, Landoe,

Brown. Planalp & Braaksma, Bozeman, Montana

For Respondents:

Dan L. Spoon, R-p, Spoon & Gordon, Missoula,

Montana; Kevin S. Jones, Christian & Samson,

Missoula, Montana

Submitted on Briefs: September 8,

December 13,

1994

1994
Justice James C. Nelson delivered the Opinion of the Court

This is an appeal from a Sixth Judicial District Court, Park

county, order determining that the certificates of deposit at issue

were held in joint tenancy with right of survivorship by Sylvester

L . Lahren's (S.L. Lahren's) granddaughter, Signe Lahren (Signe)

We affirm in part and reverse in part.

ISSUES

There are two issues on appeal:

I . Did the District Court err in determining that the bank

certificates of deposit, which designate one depositor and one

"P.0.D." beneficiary, are joint tenancy instruments?

II. Did the District Court err in determining that the P.O.D.

designations on the bank certificates of deposit act to transfer

the certificates outside of the probate estate at the time of the

depositor's death as a non-testamentary transfer?

FACTUAL AND PROCEDURAL BACKGROUND

S.L. Lahren died testate on June 25, 1992. He bequeathed the

residue of his estate, less items of personal property which he had

specifically devised, to three of his four sons, namely Larry,

Daniel and S.L. Lahren Jr. However, the bulk of S.L. Lahren's

estate consisted of four bank certificates of deposit (CDs) at

American Bank, formerly known as First Security Bank.

The four CDs include: Certificate Number 32989, issued on

January 15, 1985, Certificate Number 33220, issued on June 15,

1989, Certificate Number 33493, issued on March 9, 1990, and

Certificate Number 34197, issued on October 8, 1991. On three of

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the four CDs, the depositor was listed as S.L. Lahren P.O.D. Signe

Lahren. The fourth CD named as depositor, S.L. or Signe Lahren.

Signe is not only S.L. Lahren's granddaughter, but also the

personal representative of S.L. Lahren's estate.

As stated in her memorandum in support of her motion for an

order determining that the CDs were joint tenancy property, Signe

originally retained legal counsel from Livingston as recommended by

one of her uncles. Counsel informed her that he believed that the

CDs were estate property. Signe sought a second opinion on the

status of the CDs and came to believe through independent review

and evaluation that the CDs were actually property held in joint

tenancy with right of survivorship.

On June 21, 1993, with her new counsel, Signe filed her motion

for an order determining whether the CDs were joint tenancy

property. On June 23, 1993, the District Court filed an order

requesting additional briefs on the respective positions of the

parties regarding the status of the CDs at issue. Appropriate

briefs were filed and on February 22, 1994, the District Court

determined that the CDs were joint tenancy property. The order was

certified as final and appealable on the joint tenancy question.

This appeal followed.

ISSUE I - JOINT TENANCY

Appellants argue that the District Court erred in determining

that the three CDs at issue were joint property with right of

survivorship. (The fourth CD which named the depositor as, S.L.

Lahren or Signe Lahren, is not at issue on this appeal.) They

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contend that Signe did not have a present interest in the CDs and

therefore, she had no joint tenancy or joint interest in the CDS.

In a fairly recent opinion, Matter of Estate of Shaw (1993),

259 Mont. 117, 855 P.2d 105, we provided some guiding principles

for determining whether property is held in joint tenancy. In

-IShaw we held that the creation of a joint interest or joint

tenancy in property is by Montana statute. - I Shaw 855 P.2d at 111.

"Sections 70-l-307 and 70-l-314, MCA, mandate that if parties want

to create a joint tenancy (same as joint interest) in property,

they must make an exDress declaration that they intend to create a

joint tenancy or joint interest." - I Shaw 855 P.2d at 111.

(Emphasis added.) Absent an express declaration of intent that the

ownership interest be held in joint tenancy or joint interest, then

a tenancy in common or interest in common is created. - I Shaw 855

P.2d at 111.

Section 70-l-307, MCA, defines joint interest as:

A joint interest is one owned by several persons in

equal shares by a title created by a single will or

transfer, when expressly declared in the will or transfer

to be a joint tenancy or when granted or devised to

executors or trustees as joint tenants.

Section 70-l-314, MCA, explains how an interest in common is

created:

Every interest created in favor of several persons

in their own right, including husband and wife, is an

interest in common unless acquired by them in partnership

for partnership purposes or unless declared in its

creation to be a joint interest, as provided in 70-l-307.

We are left to determine whether S.L. Lahren made an express

declaration that the property was to be held in joint tenancy or

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joint interest, thus creating a joint tenancy or joint interest in

the property. The certificates state on the front in printed form:

‘You' means the depositor(s) named above....If more than

one of you are named above, you will own this certificate

as joint tenants with right of survivor-ship, (and not as

tenants in common.) (You may change this ownership by

written instructions.) We will treat any one of you as

owner for purposes of endorsement payment of principal

and interest, presentation (demanding payment of amounts

due), transfer and any notice to or from you. Each of

you appoints the other as your agent, for the purposes

described above. We will use the address on our records

for mailing notices to you. You cannot transfer or

assign this certificate or any rights under it without

our written consent.

Signe argues that this is the express declaration required

under Shaw to create a joint tenancy or joint interest. However,

also included on the face of the CDs is the written designation

under depositors which states "S.L. Lahren P.O.D. Signe Lahren."

The P.O.D. designation is not the same as a designation that the

property is held in joint tenancy or joint interest. The

dissimilarity in the two designations makes the document ambiguous.

In m, we stated unequivocally that in the absence of an express

and unambiauous declaration, no joint tenancy or joint interest is

created. Therefore, in the instant case, no joint tenancy or joint

interest was created because there was no express and unambiguous

declaration creating a joint interest on the documents.

Moreover, "the essential characteristic of a joint tenancy is

the right of survivorship. The right of survivorship-the

indispensable ingredient and characteristic of the estate, and not

a mere expectancy or possibility, as for example, is the inchoate

right of dower-accrues as a vested right when and as soon as the

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joint tenancy is created...." Casagranda v. Donahue (1978), 178

Mont. 479, 483, 585 P.2d 1286, 1288. (Citation omitted.) A joint

interest or joint tenancy, then, assumes a present interest in the

property.

A P.O.D. designation provides that the beneficiary receives an

interest in the CD only at the death of the depositor. See

Official Comments to §§ 72-6-211 and 213, MCA, Annotations. The

P.O.D. certificate of deposit is akin to an insurance policy - the

proceeds cannot be claimed by the beneficiary until death. At any

time before the depositor's death, the depositor can change the

beneficiary or withdraw the account and use the funds. However,

the P.O.D. beneficiary has no such right. See Official Comments to

§§ 72-6-211 and 213, MCA, Annotations. Therefore, a P.O.D.

designation does not entitle the beneficiary to a present interest

in the CDs and accordingly, the accounts cannot be held in joint

tenancy or as a joint interest.

Finally, the face of the documents contain a pre-printed

statement which provides that the CDs are owned in joint tenancy

but the written designation of "S.L. Lahren P.O.D. Signe Lahren"

indicates a different status of ownership. Sections l-4-105 and

28-3-205, MCA, state that when an instrument contains partly

written words and partly language in pre-printed form, the written

words control the pre-printed form. In the instant case, the

written words which designate a P.O.D. beneficiary would control

over the pre-printed form purporting to create a joint tenancy or

joint interest in the CDs.
We hold that, because there was no express and unambiguous

declaration that the instrument be held in joint tenancy or joint

interest, and because Signe Lahren held no present interest in the

subject CDs while S.L. Lahren was alive, no joint tenancy or joint

interest was created in the CDs. Signe Lahren is not entitled to

the proceeds of the CDs at issue under a theory of joint interest

or joint tenancy. Accordingly, we reverse the District Court on

this issue.

ISSUE II - P.O.D. DESIGNATION

Appellants also argue that the P.O.D. designation on the three

CDs was invalid. They assert that the statutes which authorize

P.O.D. designations, §§ 72-6-201 through 211, MCA, were not

effective until October 1, 1993, long after the CDs were purchased,

S.L. Lahren died and the estate was probated. They further contend

that the statute was not retroactive and therefore, the P.O.D.

designation is an invalid attempt at a non-testamentary transfer.

Signe counters that the non-testamentary transfer of the CDs

by the P.O.D. designation was valid under 5 72-l-110, MCA. She

states that at the time the CDs were issued and S.L. Lahren died,

and the estate was probated, 5 72-l-110, MCA, controlled the

disposition of the CD proceeds because the CDs were "deposit

agreement [sl .I'

We agree with Signe and note that although the Montana Probate

Code was extensively modified and revised in 1993, § 72-l-110, MCA,

remains viable and substantially unchanged in the 1993 revised

code. Section 72-l-110(1) and subsection (1) (a), MCA, provide:
Instruments not invalidated by code. (1) Any of the

following provisions in an insurance policy, contract of

employment, bond, mortgage, promissory note, deposit

agreement, pension plan, trust agreement, conveyance, or

any other written instrument effective as a contract,

gift, conveyance, or trust is deemed to be

nontestamentary, and this code does not invalidate the

instrument or any provision:

(a) that money or other benefits theretofore due to,

controlled or owned by a decedent shall be paid after his

death to a person designated by the decedent in either

the instrument or a separate writing, including a will,

executed at the same time as the instrument or

subsequently....

The statute was revised by the 1993 Legislature and now reads:

Nonprobate transfers on death. (1) A provision for

a nonprobate transfer on death in an insurance policy,

contract of employment, bond, mortgage, promissory note,

certificated or uncertificated security, account

agreement, custodial agreement, deposit agreement,

compensation plan, pension plan, individual retirement

plan, employee benefit plan, trust, conveyance, deed of

gift, marital property agreement, or other written

instrument of a similar nature is nontestamentary. This

subsection includes a written provision that:

(a) money or other benefits due to, controlled by,

or owned by a decedent before death must be paid after

the decedent's death to a person whom the decedent

designates either in the instrument or in a separate

writing, including a will, executed either before or at

the same time as the instrument or later....

Section 72-6-111, MCA, (1993).

Essentially, the statute remains the same, and at all times

applicable, provided the authority to conclude that the P.O.D.

designation on the face of the CDs serves to create a valid nontestamentary transfer. As stated in the Official Comments to 5 72-

6-111, MCA,

This section is a revised version of former Section

6-201 [72-l-110, repealed 19931 of the original Uniform

Probate Code, which authorized a variety of contractual

arrangements that had sometimes been treated as

testamentary in prior law. For example, most courts

treated as testamentary a provision in a promissory note

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that if the payee died before making a payment, the note

should be paid to another named person; or a provision in

a land contract that if the seller died before completing

payment, the balance should be canceled and the property

should belong to the vendee. These provisions often

occurred in family arrangements. The result of holding

such provisions testamentary was usually to invalidate

them because not executed in accordance with the statute

of wills. On the other hand, the same courts for years

upheld beneficiary designations in life insurance

contracts. The drafters of the original Uniform Probate

Code declared in the Comment that they were unable to

identify policy reasons for continuing to treat these

varied arrangements as testamentary. The drafters said

that the benign experience with such familiar will

substitutes as the revocable inter vivos trust, the

multiple-party bank account, andunited States government

bonds payable on death to named beneficiaries all

demonstrated that the evils envisioned if the statute of

wills were not rigidly enforced simply do not

materialize. The Comment also observed that because

these provisions often are part of a business transaction

and are evidenced by a writing, the danger of fraud is

largely eliminated.

Because the modes of transfer authorized by an

instrument under this section are declared to b e

nontestamentary, the instrument does not have to be

executed in compliance with the formalities for wills

prescribed under Section 2-502 [72-2-5221; nor does the

instrument have to be probated, nor does the personal

representative have any power or duty with respect to the

assets.

The sole purpose of this section is to prevent the

transfers authorized here from being treated as

testamentary.

Applying § 72-l-110, MCA, we conclude that the CDs at issue

are "deposit agreementrsl ,I' or "other written instrument[sl

effective as a contract" and are a valid non-testamentary

instrument. See; Malek v. Patten (1984), 208 Mont. 237, 244, 678

P.2d 201, 205. Moreover, "th[el money...controlled or owned by

[the] decedent shall be paid after his death to [the1 person

designated by the decedent in...the instrument...executed at the

same time as the instrument or subsequently." Section 72-l9
110(l) (a), MCA. The three CDs naming Signe Lahren as the P.O.D.

beneficiary, are valid non-testamentary transfers. Accordingly,

the sums at issue belong to Signe Lahren as the P.O.D. beneficiary.

The appellants' argument that §§ 72-6-201 through 211, MCA,

enacted in 1993, first provided the authority for P.O.D.

designations on CDs, and that there was no earlier authority for

P.O.D. designations, is misplaced. First, §§ 72-6-201through 211,

MCA, address multiple person accounts. See Title 72, Chapter 6,

Part 2, MCA. S.L. Lahren's CDs were single person accounts and

therefore, not governed by Title 72, Chapter 6, Part 2, MCA.

Second, 5 72-l-110, MCA, governed S.L. Lahren's single person

account at the time the CDs were purchased, at the time of his

death and at the time his estate was probated. Section 72-l-110,

MCA, provided the authority for S.L. Lahren to designate Signe

Lahren as the P.O.D. beneficiary on the face of the CDs. The

statute remains valid today, although revised and renumbered at s

72-6-111, MCA (1993). Therefore, S.L. Lahren provided for a valid

non-testamentary transfer when he designated Signe Lahren as the

P.O.D. beneficiary. We note that if S.L. Lahren's CDs were

purchased today, § 72-l-110, MCA, revised by the 1993 Legislature

and now renumbered § 72-6-111, MCA, would still apply to CDs such

as those at issue in the instant case.

We hold that the P.O.D. designation on the CDs at issue acted

to transfer the certificates outside of the probate estate at the

time of S.L. Lahren's death as a non-testamentary transfer,

pursuant to § 72-l-110, MCA. The CDs are "deposit agreement[sl" or

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"other written instrument [sl effective as a contract" under the

statute, and as such are valid non-testamentary transfers. The

District Court did not err in concluding that Signe Lahren is the

valid P.O.D. beneficiary of the three CDs at issue and accordingly,

we affirm the District Court on this issue.

REVERSED IN PART AND AFFIRMED IN PART.

-

We Concur:

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