Court Opinion

ID: 4413707
Source: CourtListenerOpinion
Date Created: 2019-07-03 15:04:43.705104+00
Date Added: 2024-06-11T14:51:06.673307
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                    No. 18-1415
                                 Filed July 3, 2019

ANGELA CHAPMAN and KRISTINE FORD,
    Plaintiffs-Appellees,

vs.

BARBARA BRECHLER,
     Defendant-Appellant.
________________________________________________________________

      Appeal from the Iowa District Court for Clay County, Don E. Courtney,

Judge.

      Barbara Brechler appeals from the district court’s summary judgment

rulings overruling her motion and sustaining the motion of Angela Chapman and

Kristine Ford, her deceased husband’s daughters. AFFIRMED.

      Steven R. Postolka and Stephen F. Avery of Cornwall, Avery, Bjornstad &

Scott, Spencer, for appellant.

      Michael R. Bovee and Jill M. Davis of Montgomery, Barry, Bovee, Steffen

& Davis, LLP, Spencer, for appellees.

      Heard by Potterfield, P.J., and Doyle and Mullins, JJ.
                                              2

DOYLE, Judge.

       Carl Brechler owned an Individual Retirement Account (IRA). Pursuant to

a 2003 decree of dissolution from his wife Donna, he designated his daughters

Angela Chapman and Kristine Ford as primary beneficiaries of the IRA.1 Carl

married Barbara in 2004. In 2011, he transferred 54% of the IRA to a new IRA.

He designated his daughters as primary beneficiaries of the new IRA and changed

the primary beneficiary designation of the original IRA from his daughters to his

wife Barbara.

       Carl’s daughters filed a petition for declaratory judgment against Barbara

seeking to invalidate and set aside Carl’s designation of Barbara as the primary

beneficiary of the original IRA.         Following a hearing on dueling motions for

summary judgment, the district court sustained Carl’s daughters’ motion and

overruled Barbara’s motion, finding the 2003 dissolution decree obligated Carl, by

way of his and Donna’s voluntary stipulation, to irrevocably designate his

daughters as equal beneficiaries of the IRA in question. Barbara appeals that

ruling, arguing Carl was permitted to make withdrawals under the stipulation, which

was essentially what he did, and Carl’s daughters were only to inherit the balance

of Carl’s retirement account on the date of his death, which they did. Alternatively,

Barbara argues Carl’s post-dissolution contributions to his retirement account are

her and Carl’s marital property, and Carl’s transfer of funds to a new IRA account

for his daughters honored the provisions of his divorce stipulation. Upon our

review, we affirm the district court’s summary judgment rulings.

1
 For the sake of brevity, we will generally refer to Angela and Kristine collectively as Carl’s
daughters.
                                         3

       I. Standard of Review.

       “A motion for summary judgment is appropriately granted when ‘there is no

genuine issue as to any material fact and . . . the moving party is entitled to a

judgment as a matter of law.’” Behm v. City of Cedar Rapids, 922 N.W.2d 524,

542 (Iowa 2019) (quoting Iowa R. Civ. P. 1.981(3)). Our review of a court’s

summary judgment ruling is for correction of errors at law. See Morris v. Steffes

Group, Inc., 924 N.W.2d 491, 496 (Iowa 2019).

       II. Background Facts and Proceedings.

       The underlying facts are undisputed. In December 2003, the district court

entered a decree dissolving the marriage of Donna and Carl Brechler. The decree

accepted and adopted Donna and Carl’s stipulation and property settlement,

containing the following provision:

               Carl is a participant in a 401(K) Plan sponsored by his
       employer, . . . which plan had a balance of $124,164.59 as of June
       5, 2003 (hereinafter “Carl’s 401(K) Plan”).
               . . . Carl shall cause the Administrator of Carl’s 401(K) Plan
       to assign to an [IRA] established by Donna (hereinafter “Donna’s
       Rollover IRA”), an amount equal to one-half (1/2) of the balance held
       in Carl’s 401(K) Plan . . . .
               Carl and Donna agree that following the assignment of one-
       half (1/2) of the balance of Carl’s 401(K) Plan to Donna’s Rollover
       IRA, that Carl shall receive the remaining balance held in Carl’s
       401(K) Plan.
               Carl agrees that he will irrevocably designate [his and
       Donna’s adult children, Angela Chapman and Kristine Ford,2] as
       equal beneficiaries of Carl’s 401(K) Plan in the event of Carl’s death.

Other provisions of the stipulation adopted by the district court declared that Carl

and Donna knew the stipulation’s terms and conditions, executed the stipulation

2
 Angela was born in 1962 and Kristine in 1967, making them 41 and 36 at the time of
entry of the decree.
                                             4

freely and voluntarily, and would execute any additional documents necessary to

effectuate the terms and conditions of the stipulation.

       Sometime thereafter, Carl rolled the remaining balance of his 401(K) Plan

into an IRA with SEI Private Trust Custody (SEI), account number XXX817. He

named his daughters as the primary beneficiaries.3

       As of February 1, 2011, Carl’s IRA account number XXX817 had a market

value of approximately $110,000. On February 17, 2011, Carl transferred 54% of

the account—approximately $60,000—into a new IRA, account number XXX401.

Account number XXX817 had a remaining amount of about $51,000.                          Carl

designated his daughters the primary beneficiaries of the new XXX401 account.

       On June 13, 2011, Roger Schulke of Williams & Company Financial

Services, LLC drafted a “To Whom It May Concern” letter indicating Carl opened

an IRA with Schulke through SEI on February 16, 2011, and that Carl listed his two

daughters as equal primary beneficiaries. In September 2011, Carl executed an

IRA Beneficiary Designation Form changing the primary beneficiary designation of

account number XXX817 from his daughters to Barbara. Carl’s daughters were

designated as contingent beneficiaries of account number XXX817.

       Carl died in 2016. In 2017, Carl’s daughters filed a petition seeking entry of

a declaratory judgment setting aside and invalidating Barbara as the beneficiary of

the IRA account number XXX817.4 They argued designating Barbara as the

3
  No one suggests the roll-over of the 401(K) to the IRA violated the decree.
4
  The administrator of Carl’s IRA accounts, HK Financial Services, was also named as a
defendant in the suit. The administrator filed a motion for summary judgment, which was
not resisted, and the district court granted the administrator’s motion and dismissed it from
the suit. HK Financial Services is not a party to this appeal.
                                            5

beneficiary was in violation of the terms of the decree, and they requested the court

declare the proceeds of IRA account number XXX817 as their property in equal

shares. Barbara admitted she had been designated the beneficiary but denied it

was a violation of the decree.

         Barbara and Carl’s daughters filed dueling motions for summary judgment,

each party arguing that there was no material fact in dispute and they were entitled

to summary judgment as a matter of law. The daughters argued to the district

court:

                  Again, Plaintiffs do not seek to recoup distributions [Carl]
         lawfully took during his lifetime. However, when he moved money
         from Account No. [XXX]817 to Account No. [XXX]401, he was not
         taking a distribution, nor was he withdrawing funds. That was a
         transfer of funds, which itself was not a per se violation of the
         Stipulation and Property Settlement. It was the act of changing the
         beneficiary designation that triggered the violation. Had [Carl] simply
         designated his daughters as equal beneficiaries of the account, he
         would have been in compliance with the Stipulation and Property
         Settlement.
                  There is no dispute that [Account number XXX]817 originated
         as the 401(k) plan referenced in Section 10 of the Stipulation and
         Property Settlement, and therefore was acquired during the
         marriage. If the account balance grew in value subsequent to the
         divorce, it was either because of contributions made by [Carl], or
         because the account responded positively to the market. If [Carl]
         made contributions to that account after his divorce was finalized
         (even if he used marital funds from his second marriage), it was his
         choice to do so. The account was nonetheless acquired during the
         [first] marriage. The Stipulation is silent as to how contributions to
         the account after the dissolution of the marriage should be handled.
         Because there is no affirmative provision, there is no authority to
         justify setting those contributions aside for [Carl]’s second wife. Just
         as [the daughters] cannot and do not seek to recoup distributions
         [Carl] took from the account [during his lifetime], they likewise cannot
         be made to account to [Barbara] for the increased value of the
         account. And regardless of whether post-divorce contributions were
         made by [Carl], it does not change the requirement [Carl] voluntarily
         imposed upon himself, to irrevocably designate[] [the daughters] as
         the beneficiaries of that account.
                                         6

              The fact remains that [Carl] had no authority to change the
       beneficiary of the account that originated from his 401(k) retirement
       plan sponsored by his former employer . . . . He was simply
       prohibited from doing so by the terms of the Stipulation and Property
       Settlement.

       Following a hearing, the district court entered its ruling sustaining Carl’s

daughters’ summary judgment motion and overruling Barbara’s motion. The court

first noted:

               An IRA does not lend itself to facile labeling. It arguably
       contains elements of a [Pay-on-Death] account, of a multiple-party
       account, of a trust account, and even of a life insurance policy. An
       IRA is a private retirement plan created by Congress in 1974 to allow
       tax-deferred savings, the balance of which becomes payable to the
       depositor at a certain age. The IRA depositor may name a
       beneficiary. The court finds that the scope of the Stipulation
       incorporated into the 2003 dissolution decree was not limited to the
       ownership of the retirement accounts but also governed the legal
       effect upon the designation of beneficiaries to non-probate transfers.

Based upon the language in the dissolution’s stipulation, the district court found

       Carl voluntarily agreed to make the terms and conditions of the
       Stipulation mandatory. The Stipulation obligated Carl to irrevocably
       designate his daughters as equal beneficiaries of his IRA. It is
       undisputed that after his divorce to Donna, Carl rolled the proceeds
       of his 401(k) Plan [into IRA account number XXX817] . . . . The
       language . . . of the Stipulation, that Carl irrevocably designated his
       daughters as equal beneficiaries, is dispositive. Black’s Law
       Dictionary defines irrevocable as “[U]nalterable; committed beyond
       recall.” Black’s Law Dictionary 835 (7th ed. 1999).
               When the owner of an IRA retains the right to change
       beneficiaries, the designated beneficiary’s interest is a revocable
       expectancy vesting only upon the owner’s death. However, when
       the owner of an IRA waives the right to change beneficiaries by an
       appropriate agreement, the designated beneficiary obtains a vested
       contractual right that is not dependent on any community interest,
       and which supersedes another’s community interest. When the
       owner of an IRA ignores a court order or contractual obligation to
       retain an irrevocable beneficiary, that beneficiary is entitled to
       recover the proceeds, even though the newly named beneficiary has
       a community interest in the IRA.

       Barbara now appeals.
                                          7

       III. Discussion.

       The district court sustained the daughters’ motion for summary judgment.

That motion specifically requested the court establish that the changing of the

beneficiary designation on IRA account number XXX817 from Carl’s daughters to

Barbara violated the dissolution decree. They requested the proceeds of the

XXX817 account be declared as their property, in equal shares, as a matter of law,

and any other relief the court deemed appropriate. Consequently, in sustaining

their motion for summary judgment, the court declared the proceeds of the XXX817

account to be the daughters’ property.

       On appeal, Barbara asserts the district court erred in two respects. First,

she argues she was not a proper party to the action and her motion for summary

judgment should have been granted. Second, she maintains Carl’s actions were

permissible under the dissolution decree.

       A. Proper Party.

       “A declaratory judgment is a type of action where the ‘court declares the

rights, duties, status, or other legal relationships of the parties.’” Zimmer v. Vander

Waal, 780 N.W.2d 730, 732 (Iowa 2010) (citation omitted).

              Any person interested in an oral or written contract, or a will,
       or whose rights, status or other legal relations are affected by any
       statute, municipal ordinance, rule, regulation, contract or franchise,
       may have any question of the construction or validity thereof or
       arising thereunder determined, and obtain a declaration of rights,
       status or legal relations thereunder.

Iowa R. Civ. P. 1.1102; see also Sierra Club Iowa Chapter v. Iowa Dep’t of Transp.,

832 N.W.2d 636, 648 (Iowa 2013). Relief based on a declaratory-judgment petition

“may be granted wherever necessary or proper,” and, “[i]f the court deems the
                                            8

petition sufficient, it shall, on such reasonable notice as it prescribes, require any

adverse party whose rights have been adjudicated to show cause why such relief

should not be granted.” Iowa R. Civ. P. 1.1106. However, the court cannot

adjudicate the claim unless there is “a substantial controversy between parties

having adverse legal interests of sufficient immediacy and reality to warrant a

declaratory judgment.” Sierra Club, 832 N.W.2d at 648. Still, “[t]he mere denial of

interest in the case or that a controversy exists will not defeat an action for

declaratory judgment.” State ex rel. Zimmerer v. Clark, 107 N.W.2d 726, 729 (Iowa

1961).     The ordinary rules of procedure apply.         See Dubuque Policemen’s

Protective Ass’n v. City of Dubuque, 553 N.W.2d 603, 607 (Iowa 1996). Thus:

         A party is indispensable if the party’s interest is not severable, and
         the party’s absence will prevent the court from rendering any
         judgment between the parties before it; or if notwithstanding the
         party’s absence the party’s interest would necessarily be inequitably
         affected by a judgment rendered between those before the court.

Iowa R. Civ. P. 1.234(2).

         Here, it is true that Barbara was not a party to the underlying stipulation that

the district court adopted in the dissolution decree. Nevertheless, Barbara was

named as a beneficiary on a retirement account Carl’s daughters sought the court

to declare was in violation of that decree. Clearly Barbara’s right to be Carl’s

named beneficiary of the account was in dispute. We find Barbara was a proper

party to the proceeding. See also generally Zobrist v. Bennison, 486 S.E.2d 815,

816-17 (Ga. 1997) (permitting “a suit against the beneficiary of a [life insurance]

policy which replaced a policy which a divorce decree required the insured to

maintain for the benefit of a child”).
                                           9

       B. Validity of Carl’s Changed Beneficiary Designation.

       Barbara also maintains Carl’s actions were permissible under the decree

and the law. She argues that Carl’s 2011 transfer from his IRA amounts to nothing

more than a lifetime withdrawal, which his divorce stipulation allowed him to do.

Barbara also argues the amount that Carl withdrew from his IRA represented funds

that he earned after his divorce from Donna and to which the children have no

claim of right.

       “A stipulation and settlement in a dissolution proceeding is a contract

between the parties.” In re Marriage of Morris, 810 N.W.2d 880, 886 (Iowa 2012)

(citation omitted).   When a stipulation is adopted by the district court in its

dissolution decree, it is the “decree, not the stipulation, that determines what rights

the parties have.” Id. It is the court’s intent “that is relevant, not the intent of the

parties.” Id.

       “We interpret court decrees like any other written instrument.”             TSB

Holdings, L.L.C. v. Bd. of Adjustment, 913 N.W.2d 1, 16 (Iowa 2018). A dissolution

decree

       should be construed in accordance with its evident intention. Indeed
       the determinative factor is the intention of the court as gathered from
       all parts of the decree. Effect is to be given to that which is clearly
       implied as well as to that which is expressed. Of course, in
       determining this intent, we take the decree by its four corners and try
       to ascertain from it the intent as disclosed by the various provisions
       of the decree.

In re Marriage of Goodman, 690 N.W.2d 279, 283 (Iowa 2004) (citation omitted).

       The stipulation adopted by the court unambiguously required that Carl

“irrevocably designate” his daughters as the equal beneficiaries of his remaining

proceeds of his 401(K) plan. It is undisputed that those funds were rolled over into
                                         10

his IRA account number XXX817. In 2011, he changed the primary beneficiary

designation of that account from his daughters to Barbara. This was in violation of

the stipulation he agreed to and adopted by the court in its dissolution decree,

wherein his daughters would be irrevocably designated as the equal beneficiaries

of the retirement account. Therefore, the proceeds of account number XXX817

belong to the daughters.

       Perhaps the result has the appearance of elevating form over substance,

as no one disputes that Carl could have withdrawn the retirement funds during his

lifetime and used them for whatever purpose he saw fit. Carl could have withdrawn

the funds and given cash to Barbara. Carl could have deposited his continuing

post-decree retirement contributions to some other account. He did not. Under

the terms of the decree to which Carl agreed, his daughters were to be named

beneficiaries of the retirement account and therefore entitled to whatever funds, if

any, remained in the account upon his death. Carl’s changing the account’s

beneficiary designation to Barbara was in violation of the decree. Therefore, the

district court did not error in its summary judgment rulings.

       IV. Conclusion.

       We affirm the district court’s ruling sustaining Carl’s daughters’ motion for

summary judgment and overruling Barbara’s motion for summary judgment.

       AFFIRMED.