Court Opinion

ID: 2827334
Source: CourtListenerOpinion
Date Created: 2015-08-14 13:15:26.784698+00
Date Added: 2024-06-11T09:14:09.520330
License: Public Domain

Aug 14 2015, 6:39 am

ATTORNEY FOR APPELLANT                                    ATTORNEY FOR APPELLEE
E. Kent Moore                                             Christine A. DeSanctis
Laszynski & Moore                                         Lafayette, Indiana
Lafayette, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Wesley McDivitt,                                          August 14, 2015

Appellant,                                                Court of Appeals Case No.
                                                          79A02-1501-DR-29
        v.                                                Appeal from the Tippecanoe Superior
                                                          Court

Sue McDivitt,                                             The Honorable Thomas H. Busch,
                                                          Judge
Appellee
                                                          Cause No. 79D02-1401-DR-19

Baker, Judge.

Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015                          Page 1 of 10
[1]   Wesley McDivitt appeals the judgment of the trial court ordering him to pay

      one-half of his monthly pension benefits to his ex-wife, Sue McDivitt. Finding

      that the trial court based its judgment on an erroneous interpretation of

      Wesley’s employment severance agreement, we reverse.

                                                      Facts     1

[2]   Wesley and Sue were married on September 9, 1999. A week before their

      marriage, the couple entered into a prenuptial agreement. The agreement

      contained the following provision:

              Section 5.1. Ownership of Benefits. Wife agrees that the benefits
              under the Husband’s 401K Plan and IRA Retirement Plan and any
              other retirement benefits from Indianapolis Life Insurance Company
              or Husband’s subsequent employer are the sole and separate property
              of Husband, and the parties intend and agree that such benefits, all
              account balances, and additions thereto shall continue after their
              marriage to constitute the separate property of Husband and be subject
              to his beneficiary designation. Wife knows and understands the rights
              and benefits in such plans to which she would be entitled as Husband’s
              spouse, in the absence of any agreement, and hereby agrees to waive
              such rights and benefits.

      Appellant’s App. p. 34.

[3]   At the time the prenuptial agreement was signed, Wesley was employed by the

      Indianapolis Life Insurance Company. On July 28, 2000, Wesley elected to

      retire and begin receiving his pension. Wesley signed a severance agreement

      1
        We held oral argument in this case in Indianapolis on July 27, 2015. We would like to thank counsel for
      their exceptional oral advocacy.

      Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015                        Page 2 of 10
      providing that he would receive his pension benefits in the form of an annuity.

      The agreement provided a list of several different types of annuities, from which

      Wesley selected a “joint with 100% to survivor” annuity.2 Ex. 1. Wesley began

      receiving the payments on August 1, 2000. These payments came in the form

      of checks made payable to Wesley alone.

[4]   On January 22, 2014, Wesley filed a petition to dissolve the marriage. The trial

      court held a hearing on November 10 and 17, 2014. At the hearing, Wesley

      and Sue agreed on all issues except for the disposition of Wesley’s pension.

      The trial court issued an order dissolving the marriage on November 21, 2014.

      On December 12, 2014, the trial court issued a further order regarding the

      disposition of Wesley’s pension benefits. In that order, the trial court

      concluded as follows:

               1.       Prior to selecting his retirement benefits, the Husband had sole
                        ownership of the policy and the absolute power to select his
                        benefits and to name a Co-Annuitant and Beneficiary or not.
               2.       After electing his retirement benefits, the Husband was bound
                        by the election.
               3.       The Husband elected a joint and survivor policy. The company
                        wrongly listed the Wife as Beneficiary, in other words the
                        person who receives benefits after the Husband’s death, rather
                        than as Co-Annuitant, the person who shares the benefits
                        during the lifetime of the Husband.

      2
        Under federal law, Wesley was required to receive his benefits in the form of a joint and survivor annuity
      unless Sue consented to a different form in writing. 29 U.S.C. § 1055(a), (c); Duran v. Duran, 585 N.E.2d
1373, 1376 (Ind. Ct. App. 1992). Wesley’s severance agreement contained a waiver form for Sue to sign if
      she wished to consent to Wesley choosing a different type of annuity. Ex. 1. Sue did not sign this consent
      form. Id.

      Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015                          Page 3 of 10
              4.       By selecting a joint and survivor policy, the Husband
                       transferred ownership of the proceeds of the policy to the Wife
                       jointly for life, and to the Wife exclusively after the Husband’s
                       death.

      Appellant’s Br. p. 13-14. Consequently, the trial court ordered Wesley to pay

      Sue one-half of all annuity payments he received from that point forward.

      Wesley now appeals.

                                    Discussion and Decision
[5]   The trial court found that Wesley, by entering into a severance agreement in

      which he elected to receive his benefits in the form of a joint and survivor

      annuity, gave Sue an ownership interest in the annuity payments he is presently

      receiving and, thereby, waived his right to sole ownership of those benefits as

      provided for in the couple’s prenuptial agreement. The trial court based this

      conclusion on its interpretation of the terms of Wesley’s severance agreement.

[6]   As the interpretation of a contract is primarily a question of law, our standard

      of review is essentially the same as that applied by the trial court. Magee v.

      Garry-Magee, 833 N.E.2d 1083, 1087 (Ind. Ct. App. 2005). When interpreting a

      contract, our ultimate goal is to determine the intent of the parties when they

      made the agreement. Metro Holdings One, LLC v. Flynn Creek Partner, LLC, 25
N.E.3d 141, 157 (Ind. Ct. App. 2014), trans. denied. In making this

      determination, “we begin with the plain language of the contract, reading it in

      context and, whenever possible, construing it so as to render each word, phrase,

      and term meaningful, unambiguous, and harmonious with the whole.” Id.

      Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015             Page 4 of 10
      (quotations omitted). We attempt to construe the language of a contract so that

      no word, phrase, or term will be rendered meaningless or ineffective. Id.

[7]   However, a contract may be ambiguous if its terms are susceptible to more than

      one interpretation and reasonably intelligent persons would honestly differ as to

      its meaning. Four Seasons Mfg., Inc. v. 1001 Coliseum, LLC, 870 N.E.2d 494, 501

      (Ind. Ct. App. 2007). When a contract is ambiguous, extrinsic evidence may be

      examined to determine the parties’ reasonable expectations. Bicknell Minerals,

      Inc. v. Tilly, 570 N.E.2d 1307, 1310 (Ind. Ct. App. 1991).

[8]   Here, the trial court examined the terms of the severance agreement, beginning

      with the term “co-annuitant.” It concluded that this term meant “the person

      who shares the benefits” during Wesley’s lifetime. Appellant’s Br. p. 14.

      Although “co-annuitant” is not explicitly defined in the agreement, other

      provisions of the agreement tend to support the trial court’s conclusion. For

      instance, the agreement provides:

                 Payees. Annuity payments due during the sole lifetime of the
                 Participant shall be made to the Participant.[3] Annuity payments under
                 a joint and survivor annuity shall be payable to the Participant and the Co-
                 Annuitant while both are living and to the survivor of them after the
                 death of the first of them.

      Ex. 1. (emphasis added). The fact that checks are to be made payable to both

      the participant and the co-annuitant indicates that the co-annuitant shares in the

      3
          The agreement lists Wesley as the participant. Ex. 1.

      Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015                  Page 5 of 10
       ownership of the payments. Thus, we believe that the trial court’s conclusion

       on this point is sound.

[9]    The trial court next concluded that Sue is a co-annuitant. On this point, we

       cannot agree. As for the plain terms of the agreement, the first page provides a

       space where a co-annuitant could be listed, but that space has been left blank.

       Id. Instead, Sue is listed as the beneficiary. Id. The agreement defines

       “beneficiary” as “the person . . . to receive any benefits due after the death of

       the Participant and Co-Annuitant or Contingent Annuitant, if any.” Id. The

       agreement contains no provision indicating that a beneficiary shares ownership

       of payments made to a participant during the participant’s lifetime. The trial

       court acknowledged that Sue was listed as the beneficiary rather than as a co-

       annuitant, but concluded that that was a mistake. Appellant’s Br. p. 14.

[10]   However, even if the trial court were correct to conclude that Sue’s designation

       was ambiguous in light of the agreement’s terms, its conclusion that Sue is the

       co-annuitant becomes untenable when one considers the extrinsic evidence in

       the record. The trial court found that “the checks under the annuity had been

       payable to [Wesley] alone.” Id. at 13. As we have already observed, the

       agreement provides that “[a]nnuity payments under a joint and survivor

       annuity shall be payable to the Participant and the Co-Annuitant while both are

       living . . . .” Ex. 1. (emphasis added). Accordingly, evidence that the checks

       were not made payable also to Sue indicates that she is not a co-annuitant. The

       trial court’s conclusion to the contrary finds no support in the terms of the

       agreement itself or the extrinsic evidence in the record.

       Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015   Page 6 of 10
[11]   We also note that the current administrator of Wesley’s pension agrees with his

       position.4 In 2014, the administrator sent the following letter in response to

       Wesley’s questions regarding Sue’s interest in the benefits:

                  Dear Mr. McDivitt,
                                                          ***
                  You elected payment in the form of a Joint and Survivor Annuity,
                  naming your spouse, Sue E. McDivitt, as your designated beneficiary.
                  In the event of your death, Sue will receive 100% of your monthly
                  benefits for the remainder of her life. If Sue is the first to die, you will
                  continue to receive the monthly benefit until your death. Sue is not
                  the participant or an owner, as she was not the employee covered
                  under the pension plan; she is simply your designated beneficiary set to
                  receive survivor benefits under the plan in the event of your death.

       Husband’s Ex. C. This letter, which was entered into evidence at the hearing

       without objection, further persuades us that the trial court misinterpreted the

       terms of Wesley’s severance agreement.

[12]   Despite the evidence to the contrary, Sue believes that this Court’s decision in

       Perdue v. American Express Travel Related Services Company, Inc. compels us to find

       in her favor. 609 N.E.2d 1141 (Ind. Ct. App. 1993). In that case, Perdue had a

       life insurance policy that designated his wife as the beneficiary. Id. The couple

       had signed a prenuptial agreement that provided that all life insurance proceeds

       were to remain the separate property of either spouse. Id. at 1142. When

       Perdue died, proceeds from the life insurance policy were paid to his wife. Id.

       4
           Wesley’s pension is now administered by the Athene Annuity & Life Assurance Company. Tr. p. 10.

       Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015                     Page 7 of 10
       at 1141. Perdue’s estate brought suit to recover the proceeds, citing the

       prenuptial agreement. Id.

[13]   This Court found that “[t]he antenuptial agreement clearly states that nothing

       barred [Perdue] from giving any part of his own Separate Estate to [his wife].”

       Id. at 1144. It went on to find that Perdue’s insurance policy did not allow him

       to change his beneficiary and, therefore, his wife “acquired a vested right in the

       policy upon issuance and acceptance.” Id. Consequently, this Court held that

       Perdue had given his wife a vested interest in the policy, as allowed for by the

       prenuptial agreement, which she thereafter held as part of her separate estate.

       Id.

[14]   Sue points out that the prenuptial agreement at issue here similarly allows either

       party to make a voluntary transfer of property to the other. Appellant’s App. p.

       29. However, despite that fact, the question remains whether Wesley actually

       made a voluntary transfer. In Perdue, this Court determined that Perdue had

       made such a transfer because the life insurance contract provided that he could

       not change his beneficiary. Perdue, 609 N.E.2d at 1144. We held that:

       “Inasmuch as [Perdue] had no power of disposition reserved in the policy, that

       is, could not change the primary beneficiary from his spouse . . . to someone

       else, [his spouse] acquired a vested right in the policy upon issuance and

       acceptance.” Id.

[15]   However, Sue cannot show that she has acquired such a vested right here.

       Wesley’s severance agreement is silent as to whether the participant and owner

       Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015    Page 8 of 10
       of a joint and survivor annuity can change beneficiaries. 5 Ex. 1. Furthermore,

       even if we construed the agreement to bar Wesley from changing his

       beneficiary, that would only provide Sue with a vested interest in the payments

       made following Wesley’s death. It would not indicate that Sue acquired any

       interest in payments made to Wesley during his life. Consequently, our holding

       in Perdue is inapplicable to the facts of this case.

[16]   While we admit that Wesley’s severance agreement is not a model of precision,

       we are obliged to determine its meaning in accordance with the parties’

       reasonable expectations. Here, neither the plain terms of the agreement nor

       extrinsic evidence in the record counsel in favor of adopting Sue’s

       interpretation. The terms unambiguously list Sue as a beneficiary rather than a

       co-annuitant, and evidence in the record indicates that the checks under the

       agreement have been made payable to Wesley alone. In light of this, we cannot

       conclude that when Wesley entered into the agreement, the parties reasonably

       believed that Sue had acquired an ownership interest in annuity payments made

       to Wesley during his lifetime. As we find that Wesley transferred no such

       ownership interest to Sue, the payments remain his sole property pursuant to

       the terms of the couple’s prenuptial agreement.

       5
         Wesley asserts that he has always understood the agreement to mean that his pension benefits would
       remain “his alone during life, but with [Sue] as a named beneficiary.” Reply Br. p. 4. As Wesley is not now
       seeking to change his beneficiary, we express no opinion as to whether the terms of Wesley’s severance
       agreement would allow him to do so.

       Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015                        Page 9 of 10
[17]   The judgment of the trial court is reversed.

       Najam, J., and Friedlander, J., concur.

       Court of Appeals of Indiana | Opinion 79A02-1501-DR-29 | August 14, 2015   Page 10 of 10