Opinion
D075245
04-22-2020
CAROLINE D'ARCY et al., Plaintiffs and Appellants, v. JOY ANDREWS, Defendant and Respondent.
Law Office of Barbara L. Richards and Barbara L. Richards; Niddrie Addams Fuller Singh and Victoria E. Fuller for Plaintiffs and Appellants. Gersten Law Group and Ehud Gersten; Law Offices of Branson & Branson and Uzzell Branson, for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2014-00084132-CU-MC-CTL) APPEAL from a judgment of the Superior Court of San Diego County, Eddie C. Sturgeon, Judge. Reversed and remanded with directions. Law Office of Barbara L. Richards and Barbara L. Richards; Niddrie Addams Fuller Singh and Victoria E. Fuller for Plaintiffs and Appellants. Gersten Law Group and Ehud Gersten; Law Offices of Branson & Branson and Uzzell Branson, for Defendant and Respondent.
Caroline D'Arcy and daughters, Tara and Sinaoife Andrews, appeal from a judgment entered after the trial court sustained without leave to amend the demurrer to a complaint filed by respondent Joy Andrews. Appellants had sued Joy for retaining insurance benefits disbursed to her after her husband Philip Andrews died. Appellants alleged they were entitled to the funds based on the terms of a Marriage Settlement Agreement (MSA) upon the dissolution of Philip's prior marriage to Caroline.
We refer to some individuals by their first names to avoid confusion.
Appellants contend the court erroneously concluded their claims were preempted by the Employment Retirement Income Security Act (ERISA; 29 U.S.C. § 1001 et seq.). They also contend that the MSA, which the family court approved, was a Qualified Domestic Relations Order (QDRO; 29 U.S.C. § 1056(d)(3)) exempt from ERISA's provisions. Appellants do not challenge the administrator's distribution of the policy benefits to Joy, but rather Joy's right to retain them in light of the MSA's terms. They argue, "ERISA does not preclude a civil lawsuit against a beneficiary who received policy proceeds in undeniable violation of a judgment of dissolution." We reverse and remand with directions.
FACTUAL AND PROCEDURAL BACKGROUND
We take the facts from the plaintiffs' operative second amended complaint, accepting as true material allegations but not contentions, deductions or conclusions of law, and considering matters that are judicially noticeable. (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512; Heckart v. A-1 Self Storage, Inc. (2018) 4 Cal.5th 749, 753-754.)
Caroline and Philip were married in 1989 and separated in 2004. Their 2006 MSA formed part of the judgment of dissolution, and provided as follows: "[F]or as long as [Philip or Husband] is obligated to support TARA and SINAOIFE, [Philip] agrees to maintain in full force and effect [h]is employer[-]provided life insurance policy (i.e. current death benefit is two times annual salary). He agrees to pay all premiums when due and retain the beneficiary provisions as they currently read: that is, Wife [Caroline] will continue to be primary beneficiary and TARA and SINAOIFE will be secondary beneficiaries in equal shares. If either [Caroline] or [Philip] should remarry, they agree to re-negotiate the naming of his beneficiary. If they are unable to agree then, they now agree that the beneficiary designation shall be changed to TARA CHRISTINA ANDREWS and SINAOIFE D'ARCY ANDREWS, in equal shares."
At the time he entered into the MSA, Philip had a life insurance policy through his employer, Solar Turbines, Inc. The 2007 "Personal Benefits Statement" from Philip's employer listed Caroline as the primary beneficiary of the life insurance policy, with Tara and Sinaoife as secondary beneficiaries.
Philip remarried in 2006 and later designated Joy the sole beneficiary of the life insurance policy. In January 2011, Philip died. In February 2011, the life insurance policy proceeds of $245,876.59 were distributed to Joy.
Under Probate Code section 850, appellants filed a creditor's claim in probate court for the value of Philip's life insurance proceeds as well as outstanding child and spousal support. The probate court dismissed the petition, finding that the MSA was not specifically enforceable under that statute.
In January 2014, appellants sued Joy in superior court alleging causes of action for conversion, and money had and received. They sought a temporary restraining order, injunctive relief, an order declaring that Joy was holding the insurance proceeds in a constructive trust for appellants, and damages in the amount of the insurance proceeds plus interest, as well as punitive damages.
In October 2018, appellants voluntarily dismissed with prejudice certain claims that were unrelated to the life insurance proceeds.
Joy demurred to the complaint and moved to strike it, arguing ERISA preempted the claims regarding the life insurance policy. Appellants responded that because the MSA was not "state law," ERISA did not apply. They also argued the family court's dissolution order incorporating the MSA was not preempted because it involved a "welfare benefit" and not a "pension benefit" plan under ERISA.
ERISA's preemption section, 29 U.S.C. § 1144(a), states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA.
The superior court sustained Joy's demurrer: "[T]he exclusive way to order the designation of the employee's children or spouse as beneficiaries of employer[-]provided life insurance is through a [QDRO] . . . The complaint fails to allege Plaintiffs submitted a QDRO, therefore the issues involving the life insurance policy are preempted by ERISA." It granted appellants leave to amend the complaint to allege the existence of a QDRO.
In their second amended complaint, appellants alleged the MSA was a QDRO under 29 U.S.C. §1056(d)(3)(C). Joy again demurred to the amended complaint partly on grounds of ERISA preemption. Joy also argued the lack of a valid QDRO entitled her to the insurance proceeds, the same claims were concurrently the subject of the probate court action, each cause of action was barred by the statute of limitation under Code of Civil Procedure section 338, subdivision (c) because the complaint was filed more than three years after Philip died, appellants had failed to join the administrator of Philip's estate as an indispensable party to this action, a constructive trust is not a cause of action but a remedy, and injunctive relief is not an independent cause of action. Joy also moved to strike certain portions of the complaint, arguing the claims were preempted by ERISA. In support of both motions, Joy sought judicial notice of several documents, including the MSA and court filings in the probate court.
Appellants opposed Joy's motions, arguing inter alia the demurrer was time-barred under Code of Civil Procedure section 430.40, subdivision (a), the family court order constituted a QDRO, and ERISA did not preempt the family court's dissolution order.
The court sustained the demurrer without leave to amend: "As to all four causes of actions in the complaint they are preempted by [ERISA] because there was no [QDRO]." In the ensuing judgment, the court explained, "The Plaintiffs' requested relief in the first, second, third and fourth causes of action is preempted by [ERISA] to the extent it is related to decedent Philip Andrews['s] employer-provided life insurance policy. [¶] . . . In finding preemption, the court explicitly relied on the authorities of Egelhoff v. Egelhoff [(2001)] 532 US 141, and Metropolitan Life Insurance Company v. Marsh (6th Cir 1997) 119 F.3d. . . . [¶] . . . [¶] The Domestic Relations Order presented by the Plaintiffs is not a [QDRO] pursuant to 29 U.S.C. § 1056(d)(3)(C) and § 1144(b) because it lacks adequate specificity when designating alternate beneficiaries."
DISCUSSION
I. Standard of Review
In testing the sufficiency of a complaint against a general demurrer, we apply well settled rules. " ' " 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment . . . . " ' [Citation.] ' "The burden of proving such reasonable possibility is squarely on the plaintiff." ' " (Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010; see also Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924.) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., § 452; Gilkyson v. Disney Enterprises, Inc. (2016) 244 Cal.App.4th 1336, 1340; see Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [complaint must be read in context and given a reasonable interpretation].) Our review is de novo. (Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc., at p. 1010.) We also review de novo any issue of statutory interpretation. (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 527.)
II. Analysis
A. ERISA Does Not Preempt Appellants' Causes of Action
Although Joy seeks to avoid the complaint's allegations by arguing they were preempted by ERISA, that claim is unavailing because appellants do not challenge the administrator's distribution of policy proceeds to her according to the plan documents; nor do they allege a cause of action against the plan administrator. Rather, they seek post-distribution remedies only against Joy.
Section 1056 of title 29 of the United States Code (section 1056) governs the form and payment of benefits from a covered pension or employee retirement benefits plan. Section 1056(d) addresses "Assignment or alienation of plan benefits," and sets forth the general rule of anti-alienation: "Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated." (29 U.S.C. § 1056(d)(1).) Relevant here, that section creates an exception to the anti-alienation rule for QDROs that meet certain requirements: "Paragraph (1) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that paragraph (1) shall not apply if the order is determined to be a qualified domestic relations order. Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any [QDRO]." (29 U.S.C. § 1056(d)(3)(A).) Likewise, QDROs that meet the statutory requirements of section 1056(d)(3) are expressly exempted from ERISA's preemption of state judicial decisions that "relate to any employee benefit plan." (29 U.S.C. § 1144(a), (b)(7); see id., § 1144(c)(1) [defining "State law" to include "decisions"].)
Joy relies on Egelhoff and other federal authorities to argue that the proceeds of an ERISA life insurance policy must be paid to the plan's beneficiary unless they are the subject of a QDRO. In Egelhoff, the United States Supreme Court held that ERISA preempted the application of a state statute that automatically revoked, upon divorce, any designation of a spouse as a beneficiary of an ERISA benefit plan. (Egelhoff v. Egelhoff, supra, 532 U.S. at pp. 144, 147-150.) The Supreme Court based its holding on the fact that the state statute required administrators to "pay benefits to the beneficiaries chosen by state law, rather than to those identified in the plan documents," creating a "direct[ ] conflict[ ] with ERISA's requirements that plans be administered, and benefits be paid, in accordance with plan documents." (Id. at pp. 147, 150.) The Supreme Court has not, however, determined whether ERISA preempts state law claims against named beneficiaries after benefits are distributed. (See Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan (2009) 555 U.S. 285, 299-300, fn. 10 [expressly declining to state view on whether estate of deceased ERISA plan participant could have brought an action in state or federal court to obtain benefits from a former spouse after they had been distributed to her]; see also Hohu v. Hatch (N.D.Cal. 2013) 940 F.Supp.2d 1161, 1174-1175.)
Here, it is undisputed the plan benefits were paid to Joy as the designated beneficiary. Numerous federal and state courts have concluded ERISA does not preempt post-distribution suits against plan beneficiaries, and have allowed individuals and estates to pursue such claims. (See Andochick v. Byrd (4th Cir. 2013) 709 F.3d 296, 299, 301 [concluding decedent's estate could enforce a waiver in a marital settlement agreement against ERISA plan beneficiary and noting "every published appellate opinion" to address the issue had concluded ERISA did not preempt post-distribution suits against ERISA beneficiaries]; Estate of Kensinger v. URL Pharma, Inc. (3d Cir. 2012) 674 F.3d 131, 136-137 ["permitting suits against beneficiaries after benefits have been paid does not implicate any concern of expeditious payment or undermine any core objective of ERISA"]; Hohu v. Hatch, supra, 940 F.Supp.2d at p. 1175; Sweebe v. Sweebe (Mich. 2006) 474 Mich. 151 [712 N.W.2d 708, 712-713].) Joy does not meaningfully distinguish any of the authorities cited by appellants on this issue. She merely points out those cases involved designated beneficiaries who had waived rights to the proceeds; but she does not discuss the fact that the cases also hold that ERISA does not preempt post-distribution suits against plan beneficiaries. We conclude appellants' claim to the insurance proceeds is not preempted by ERISA.
If the general rules of state law preemption no longer apply once the plan funds are fully distributed, then it logically follows there is no need to satisfy the exceptions to those rules with a QDRO that meets ERISA's requirements. On these facts, ERISA does not apply because the money is simply no longer in the "plan's hands" or under its "charge." (NLRB v. HH3 Trucking, Inc. (7th Cir. 2014) 755 F.3d 468, 470.) Because ERISA is inapplicable to the already distributed proceeds of decedent's insurance policy, the propriety of the orders on appeal is purely a matter of state law. B. Appellants' Causes of Action May Proceed
"Conversion is the wrongful exercise of dominion over the property of another." (Oakdale Village Group v. Fong (1996) 43 Cal.App.4th 539, 543.) Proof of conversion requires a showing of ownership or right to possession of the property at the time of the conversion, the defendant's conversion by a wrongful act or disposition of property rights, and resulting damages. (Id. at pp. 543-544; Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.) "Money can be the subject of an action for conversion if a specific sum capable of identification is involved." (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.)
"A cause of action for money had and received is stated if it is alleged [that] the defendant 'is indebted to the plaintiff in a certain sum "for money had and received by the defendant for the use of the plaintiff." ' " (Farmers Ins. Exchange v. Zerin, supra, 53 Cal.App.4th at p. 460, quoting Schultz v. Harney (1994) 27 Cal.App.4th 1611, 1623.) The claim is viable " 'wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter.' " (Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 937, quoting Weiss v. Marcus (1975) 51 Cal.App.3d 590, 599.) "As juries are instructed in CACI No. 370, the plaintiff must prove that the defendant received money 'intended to be used for the benefit of [the plaintiff],' that the money was not used for the plaintiff's benefit, and that the defendant has not given the money to the plaintiff." (Avidor v. Sutter's Place, Inc. (2013) 212 Cal.App.4th 1439, 1454.)
Taking the facts alleged in the complaint as true, as we must, they support a conclusion appellants have raised sufficient facts to make out causes of action for conversion, and money had and received. After Philip died, the plan administrator disbursed to Joy the proceeds of his employer-provided insurance plan; however, Philip was bound by a marriage dissolution order to—in case of a dispute—designate his daughters as beneficiaries of that insurance plan; therefore, Joy was not entitled to retain those proceeds. Liberally construing the complaint with a view to substantial justice between the parties, we conclude appellants may proceed with their causes of action that seek to recoup those proceeds.
DISPOSITION
The judgment is reversed. The matter is remanded with directions that the superior court vacate its order sustaining the demurrer and issue a new order overruling the demurrer. Appellants are entitled to their costs on appeal.
O'ROURKE, J. WE CONCUR: BENKE, Acting P. J. IRION, J.