Court Opinion

ID: 999247
Source: CourtListenerOpinion
Date Created: 2013-07-04 17:22:39.555762+00
Date Added: 2024-06-11T15:12:05.763051
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CATHY E. MERCHANT,
Plaintiff-Appellant,

and

HENRY'S PHARMACY INCORPORATED,
PROFIT SHARING PLAN,
Plaintiff,

v.                                                             No. 98-2128

VICKIE B. CORDER (formerly
Forrest),
Defendant-Appellee,

and

NATIONSBANK,
Defendant.

Appeal from the United States District Court
for the District of South Carolina, at Anderson.
Henry M. Herlong, Jr., District Judge.
(CA-96-1885-20-8)

Argued: April 7, 1999

Decided: July 12, 1999

Before NIEMEYER, MICHAEL, and MOTZ, Circuit Judges.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________
COUNSEL

ARGUED: Clarence Rauch Wise, C. RAUCH WISE, Greenwood,
South Carolina, for Appellant. Thomas Patrick Murphy, SMITH &
MURPHY, North Augusta, South Carolina, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Cathy Merchant appeals from orders of the district court awarding
Vickie Corder the interest of Corder's deceased ex-husband in a profit
sharing plan (Henry's Pharmacy, Inc. Profit Sharing Plan). We affirm.

I.

South Carolina residents Cally Forrest and Vickie Corder were
married from 1974 until their divorce in 1993. Forrest owned and
operated Henry's Pharmacy, Inc., and he was enrolled in the pharma-
cy's profit sharing plan, which was governed by the Employee Retire-
ment Income Security Act (ERISA), see 29 U.S.C. § 1001 et seq.
(1994). On October 23, 1981, Forrest designated his wife, Corder, as
his plan beneficiary. Some 11 years later, on April 21, 1992, Corder
sued Forrest for divorce, alleging adultery. The next month, on May
22, 1992, a state family court judge issued a pendente lite order giving
Corder custody of the children, setting Forrest's child support pay-
ments, and giving Corder possession of "the parties' former marital
residence." On January 4, 1993, Forrest attempted to change the bene-
ficiary of his profit sharing plan; he filed a new form with the trustee,
designating Cathy Merchant as his beneficiary. Three months later, on
April 19, 1993, the state family court granted Corder a judgment of
divorce.

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The final order in the divorce case provided that Forrest was to pay
Corder $30,000 for her share of Henry's Pharmacy. The order also
provided that Forrest was to receive "[h]is profit sharing plan" (worth
about $38,000), "less the amount [$30,000] to be paid to [Corder] for
her share of Henry's Pharmacy." To satisfy Forrest's obligation, the
plan trustee withdrew $30,000 of Forrest's interest in the plan, paid
$24,000 to Corder, but withheld $6,000 representing taxes due on the
early withdrawal.

Corder then obtained an order in family court that required Forrest
to pay the $6,000 shortfall. In issuing the order, the court held that
Forrest was liable for the withdrawal taxes because Corder "was
receiving money [$30,000] for her interest in the pharmacy and not
for an interest in her husband's profit sharing plan." Corder returned
the $24,000 to the plan trustee. When Forrest thereafter failed to sat-
isfy the obligation, more litigation ensued. Finally, the family court
issued an order on March 31, 1994, (1) requiring Forrest to "use all
due diligence" to have the plan pay $24,000 to him, (2) requiring For-
rest, in turn, to pay this money to Corder immediately, and (3) making
Forrest responsible for any tax obligations for the withdrawal from
the plan. Corder was still to receive a total of $30,000. Forrest subse-
quently paid Corder $6,000, but Forrest died in January 1995 without
paying Corder anything more.

Following Forrest's death, Merchant and the plan sued Corder and
NationsBank (the plan trustee) in federal court seeking a declaration
as to the parties' rights to Forrest's interest in the plan. After a bench
trial the court ruled that Corder was entitled to the plan assets. Mer-
chant appeals.

II.

ERISA normally requires spousal consent before a plan participant
may name a beneficiary other than his or her spouse. See 29 U.S.C.
§ 1055(c)(2)(A)-(B) (1994); see also 29 U.S.C. § 1055(a)(2),
1055(b)(C)(i). In certain circumstances, however, no consent is
required: section 1055(c)(2)(B) dispenses with consent when "the
consent required under subparagraph (A) may not be obtained
because there is no spouse, because the spouse cannot be located, or
because of such other circumstances as the Secretary of the Treasury

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may by regulations proscribe." Treasury regulations, in turn, provide
that consent is not required if "the participant is legally separated or
the participant has been abandoned (within the meaning of local law)
and the participant has a court order to such effect." 26 C.F.R.
§ 1.401(a)-20, A-27 (1988).

In district court Merchant and the plan relied on the family court's
May 22, 1992, pendente lite order to contend that Forrest and Corder
were legally separated when Forrest changed his beneficiary designa-
tion to Merchant. Thus, they argued, no consent from Corder was
required for the change. The district court disagreed. After noting that
it had to look to South Carolina law to determine whether Forrest and
Corder were "legally separated," the court concluded that "there is no
action for legal separation in South Carolina." Because Forrest could
not have been legally separated as required by the Treasury regula-
tion, the district court determined that "Mr. Forrest's attempt to desig-
nate Ms. Merchant as the Plan beneficiary is invalid because it was
made without Ms. Corder's consent and prior to the final divorce."
Thus, the court held that Corder is still the "proper beneficiary" of the
plan and entitled to Forrest's share of the plan's assets.

Merchant and the plan then filed a motion for reconsideration in
district court, raising additional arguments. They argued that Forrest
substantially complied with ERISA's requirements by keeping the
change in beneficiary form (naming Merchant) in the plan records
until his death. This, they say, showed his clear intent for Merchant
to be his beneficiary. The district court again disagreed. The court
noted that the doctrine of substantial compliance triggers equitable
considerations, and it concluded that equity favors Corder. The dis-
trict court recounted that the state family court had ordered Forrest to
take $30,000 from the plan to pay Corder for her interest in Henry's
Pharmacy and that Forrest had reneged on his obligation by failing to
pay the bulk of it, $24,000. Thus, the district court concluded that "an
equitable doctrine should not be applied to deprive Ms. Corder of
money she should have received when the parties divorced in 1993."

Merchant and the plan also argued on reconsideration that Corder
waived any interest she had in the plan as a result of the language in
the various family court orders which, according to Merchant and the
plan, awarded the plan assets to Forrest. Merchant and the plan relied

                     4
on Altobelli v. IBM, 77 F.3d 78, 81 (4th Cir. 1996) (holding that ex-
wife had no interest in ex-husband's ERISA plan because "each party
clearly intended [by the terms of a property settlement] to relinquish
all interests in the pension plans of the other."). The district court dis-
tinguished Altobelli, finding that "the divorcing parties in this case
contemplated that money from the Plan would be used to pay Ms.
Corder for her interest in Henry's Pharmacy." In other words, the
court concluded that Corder expected to receive money from the plan,
and therefore she did not exhibit the necessary"clear intent" to relin-
quish her interest in it. The motion for reconsideration was denied.

III.

After considering the briefs, the joint appendix, and the arguments
of counsel, we affirm on the reasoning of the district court. See
Merchant v. Corder, No. 8:96-1885-20 (D.S.C. Mar. 27, 1998);
Merchant v. Corder, No. 8:96-1885-20 (D.S.C. July 2, 1998) (deny-
ing plaintiffs' motion for reconsideration).*

AFFIRMED
_________________________________________________________________
*On appeal Merchant also argues that Corder's eventual divorce from
Forrest cured any defect in his attempted change of beneficiary. Mer-
chant concedes that no case has gone this far. In light of the general prin-
ciple that plans must be administered in accordance with ERISA law and
plan documents, we reject this argument.

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