D'Arcy v. Andrews

CAROLINE D'ARCY et al., Plaintiffs and Appellants, v. JOY ANDREWS, Defendant and Respondent.

D075245

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

April 22, 2020

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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,¹ appeal from a judgment entered after the trial court sustained without leave to amend the demurrer to acomplaint 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.

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 tomaintain 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 aconstructive trust for appellants, and damages in the amount of the insurance proceeds plus interest, as well as punitive damages.²

Joy demurred to the complaint and moved to strike it, arguing ERISA preempted the claims regarding the life insurance policy.³ 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.

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 probatecourt 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...