In re Estate of Easterday

209 A.3d 331

IN RE: ESTATE OF Michael J. EASTERDAY, Deceased

Appeal of: Matthew M. Easterday

In re: Estate of Michael J. Easterday, Deceased

Cross Appeal of: Colleen A. Easterday

No. 15 MAP 2018

No. 16 MAP 2018

Supreme Court of Pennsylvania.

Argued: December 4, 2018

Decided: June 18, 2019

OPINION

JUSTICE DONOHUE

In these cross-appeals, we consider two issues of first impression. The first issue involves the impact of a pending divorce action on a spouse's entitlement to life insurance benefits, and specifically the interplay between provisions of the Divorce Code, 23 Pa.C.S. §§ 3301 - 3904, the Probate, Estates, and Fiduciaries Code, 20 Pa.C.S. § 101 - 8815 ("PEF Code"), and Rule of Civil Procedure 1920.42(b). The second issue asks whether ERISA¹ preempts a state law claim to enforce a contractual waiver to receive pension benefits by the named beneficiary. For the reasons detailed herein, we affirm the decision of the Superior Court with regard to both issues.

Michael J. Easterday ("Decedent") and Colleen A. Easterday ("Easterday") married in 2004. Prior to marriage, Decedent worked for Federal Express and became a participant in a pension plan established by this former employer. He also purchased a $250,000 life insurance policy. Decedent designated Easterday the beneficiary of both during their marriage. The parties separated on July 12, 2013. On August 13, 2013, Easterday filed for a divorce in Lancaster County under section 3301(c) of the Divorce Code, which provides for a divorce by mutual consent of the parties. She and Decedent subsequently settled their economic claims in a property settlement agreement ("PSA") executed on December 5, 2013. Critical to our inquiry here, the PSA included the following provision:

Husband and Wife shall each retain 100% of their respective stocks, pensions, retirement benefits, profit sharing plans, deferred compensation plans, etc. and shall execute whatever documents necessary to effectuate this agreement.

Property Settlement Agreement, 12/5/2013, ¶ 11. The PSA further provided that its terms were to remain in effect unless the parties modified or terminated the agreement in writing.² Id. ¶ 14.

Section 3301(c), permits the entry of a divorce decree where three conditions are met: at least ninety days have elapsed since the filing of the divorce complaint; the parties allege that their marriage is irretrievably broken; and the parties file affidavits consenting to the divorce (hereinafter "affidavits of consent"). See 23 Pa.C.S. § 3301(c). Pursuant to Rule of Civil Procedure 1920.42(b)(2), these affidavits of consent must be filed within thirty days of execution in order to be valid. Pa.R.C.P. 1920.42(b)(2).

Easterday's attorney prepared the affidavits of consent for both parties to sign.³ Decedent signed his affidavit on November 30, 2013 and returned it to Easterday. Easterday held Decedent's affidavit until mid-January, at which time she executed her affidavit and returned them both to her attorney. On January 14, 2014, Easterday's counsel sent the affidavits to the prothonotary. Shortly thereafter, the prothonotary returned Decedent's affidavit of consent to Easterday's counsel, explaining that it was invalid because it was not filed within thirty days of the date of execution. In a letter dated February 6, 2014, Easterday's counsel asked Decedent to execute another affidavit of consent and return it for filing.

Decedent did not return a signed affidavit before he died, intestate, on September 21, 2014. Three days later, Easterday withdrew the divorce action. On October 4, 2014, Easterday applied for the proceeds of Decedent's $250,000 life insurance policy, in which she was named the beneficiary, and in December of the same year, she began to receive Decedent's pension benefits.

In the interim, on November 17, 2014, Decedent's son and executor of his estate, Matthew Easterday, filed a petition in orphans' court to compel Easterday to turn over the life insurance proceeds and all pension benefits. It was the Estate's position that the designation of Easterday as life insurance beneficiary was nullified pursuant to section 6111.2 of the PEF Code, which provides that where a spouse is named as the beneficiary and the policy holder dies during the course of divorce proceedings, the designation of the spouse is ineffective if grounds for divorce have been established. See 20 Pa.C.S. § 6111.2.⁴ With regard to the pension benefits, the Estate argued that Easterday waived her right thereto in the parties' PSA.

In response, Easterday claimed that her waiver in the PSA to the receipt of Decedent's pension benefits was not valid because Decedent never took any steps to remove her as the named beneficiary. She also argued that because Decedent did not file a valid affidavit of consent, section 6111.2 of the PEF Code did not divest her of her rights as a surviving spouse. Easterday argued that Decedent did not take either of these actions because they were in the midst of reconciling at the time of his death.⁵

After a hearing, the orphans' court found that section 6111.2 was not implicated because Easterday withdrew the divorce complaint after Decedent's death, thereby nullifying the only basis for the matter to proceed under the Divorce Code. Orphans' Court Opinion, 3/22/2016, at 5-6. The orphans' court relied on Tosi v. Kizis , 85 A.3d 585 (Pa. Super. 2014). In that case, the Superior Court ruled that section 3323(d.1) of the Divorce Code (which provides that parties' economic rights shall be determined under the Divorce Code where a party to a divorce action dies before the divorce decree is issued but after grounds for divorce have been established) is not mandatory in its application. As such, it concluded that the surviving spouse may still elect to discontinue the action, as provided by Rule of Civil Procedure 229, and proceed under the PEF Code. See Tosi , 85 A.3d at 588-89. It therefore refused to apply section 6111.2. Nonetheless, the orphans' court determined that the parties' PSA controlled the disposition of the pension and insurance proceeds. The trial court reasoned that because Easterday waived her right to Decedent's pension benefits in the PSA, she was not entitled to them. Orphans' Court Opinion, 3/22/2016, at 7-8. It further concluded that because the PSA was silent as to Decedent's insurance policy and Decedent never removed Easterday as the named beneficiary thereto, Easterday was entitled to those proceeds. Id. Both parties appealed.

The Estate challenged the orphans' court's reliance on Tosi and its resultant conclusion that section 6111.2 of the PEF Code did not apply in the present case. The Superior Court agreed, explaining that after Tosi was decided, this Court promulgated Rule of Civil Procedure 1920.17(d) and specifically disapproved of Tosi . Rule 1920.17(d) provides that when a party dies during the pendency of a divorce action and grounds for divorce have been established but no decree has issued, "neither the complaint nor economic claims can be withdrawn except by the consent of the surviving spouse and the personal representative of the decedent. If there is no agreement, the economic claims shall be determined pursuant to the Divorce Code." Pa.R.C.P. No. 1920.17(d). The note to this rule expressly addresses the Tosi decision, providing that "[t]o the extent that Tosi [ ] holds that 23 Pa.C.S. § 3323(d.1) does not prevent the plaintiff in a divorce action from discontinuing the divorce action following the death of the defendant after grounds for divorce have been established, it is superseded." Pa.R.C.P. 1920.17(d), Note.

The Superior Court acknowledged that Rule 1920.17 and the Note thereto conclusively establish this Court's "disapproval of the broad effect of Tosi , which effectively gave any surviving spouse the unilateral power to determine whether the assets ... would be distributed under the Divorce Code or the PEF Code[.]"

In re Estate of Easterday , 171 A.3d 911, 915 (Pa. Super. 2017). Although this Court addressed only section 3323(d.1) of the Divorce Code in the Note to Rule 1920.17(d), the Superior Court concluded that our adoption of this rule signaled a "clear indication that [this] Court would look with similar disfavor" on an interpretation of section 6111.2 of the PEF Code that would allow a surviving spouse to unilaterally determine the manner of asset distribution. Id.

With the orphans' court's reliance on Tosi conclusively rejected, the Superior Court considered whether section 6111.2 invalidates Easterday's designation as beneficiary of the insurance policy. It decided that the answer turned on whether grounds for divorce had been established, as section 6111.2 only applies under such circumstances. Id. at 915-16.

Section 3323(g) of the Divorce Code defines "grounds for divorce." Relevant to the present dispute, it provides that grounds for a divorce under section 3301(c) are established where both parties have filed their affidavits of consent. 23 Pa.C.S. § 3323(g)(2). The Superior Court then recognized that Rule 1920.42(b) provides that for a divorce under section 3301(c), affidavits of consent must be filed (1) at least ninety days after the filing and service of the divorce complaint and (2) within thirty days of execution of their execution. Easterday , 171 A.3d at 916. Because Decedent's affidavit was executed more than thirty days after its execution, Easterday argued that it was invalid pursuant to Rule 1920.42(b)(2). Id. Consequently, she contended, grounds for divorce per section 3323(g) were never established and section 6111.2 of the PEF Code could not apply. Id.

The Estate, conversely, argued that compliance with Rule 1920.42(b) is necessary only for the issuance of a divorce decree by mutual consent. Id. Because neither section 3323(g) nor section 6111.2 of the PEF Code relate to the issuance of a divorce decree, the Estate claimed, the "time limitations" contained in Rule 1920.42(b) do not apply for their purposes ...