Cosby v. Cosby , 141 Ohio App. 3d 320 ( 2001 )

I must respectfully dissent because I disagree with the majority's conclusion that it is "unconscionable" to permit Bonnie Cosby to retain Carel Cosby's STRS death benefit. The majority reaches it conclusion by reasoning that Bonnie Cosby's receipt of the STRS death benefits defeats Faye Cosby's right to the division of Carel Cosby's retirement account that the trial court ordered in the original divorce decree. I believe that a constructive trust in this case is wholly inappropriate because no party has received Carel Cosby's pension benefits since those benefits, never matured, and a death benefit is not equivalent to pension retirement benefits.

Pension benefits mature only when the pension plan provides that distribution and payments are currently due and payable to the employee. Erb v. Erb (1996), 75 Ohio St.3d 18, 20, 661 N.E.2d 175, 177-178. STRS pensions benefits mature only upon formal retirement. R.C. 3307.711; see, also, Patsey v. Patsey (Dec. 16, 1998), Columbiana App. No. 96C052, unreported, 1998 WL 896455; Catron v. Catron (Dec. 19, 1997), Trumbull App. No. No. 96-T-5609, unreported, 1997 WL 799507.

Ohio courts have recognized four alternative methods for equitably dividing unvested and unmatured pension funds within the context of an overall property division. The alternatives include (1) withdrawing the employee spouse's share of the funds from the pension plan and apportioning and distributing them at the time of the divorce; (2) determining the present value of the pension fund, calculating the nonemployee spouse's proportionate share, and offsetting that amount with other marital assets or a lump sum payment; (3) determining the present value of the pension fund, calculating the nonemployee spouse's proportionate share, and offsetting that amount with installment payments from the employee spouse; and (4) determining the appropriate percentage or amount of future benefits in view of the circumstances and ordering that amount to be paid directly from the fund to the nonemployee spouse if and when the pension matures. See, e.g., Ricketts v. Ricketts (1996), 109 Ohio App.3d 746, 752, 673 N.E.2d 156,160; Smith v. Smith (1993), 91 Ohio App.3d 248, 253, 632 N.E.2d 555,558-559; Sprankle v. Sprankle (1993), 87 Ohio App.3d 129, 132,621 N.E.2d 1310, 1311-1312. The first option is not available to divide public pensions such as an STRS pension plan because they are not covered by the Employee Retirement Income Security Act of 1974 and are not currently subject to division pursuant to a qualified domestic relations order.² Sprankle v. Sprankle (1993), 87 Ohio App.3d 129, 131,621 N.E.2d 1310, 1311.

In this case, the trial court chose the fourth option and determined the appropriate percentage of Carel Cosby's future STRS pension benefits that each party would receive if and when the pension matured. This method of dividing an unmatured pension "divides the risk between the parties that the benefits will fail to vest or mature." Hoyt v. Hoyt (1990), 53 Ohio St.3d 177, 182, 559 N.E.2d 1292, 1298.

If the pension fails to mature, neither party will receive the benefits. See id. "Likewise, the nonemployed spouse bears the risk that the employed spouse will die and the expected benefits, before being vested [and] matured, will terminate." Id. Carel Cosby's STRS pension never matured because he never formally retired. Nobody has a vested, matured interest in Carel Cosby's STRS retirement pension. See R.C.3307.42.³

When a member of the STRS dies before retirement, R.C. 3307.562⁴ provides that his accumulated contributions shall be paid to his named beneficiary at the time of his death. R.C. 3307.562 provides for the automatic revocation of a member's former spouse as the designated beneficiary upon divorce, dissolution or legal separation:

"The member's marriage, divorce, marriage dissolution, legal separation, or withdrawal of account, or the birth of the member's child, or the member's adoption of a child, shall constitute an automatic revocation of the member's previous designation."

In the event of an automatic revocation R.C. 3307.562 provides that the following shall qualify as beneficiaries in their order of precedence: (1) the member's current surviving spouse, (2) children, (3) parents and (4) the member's estate. These provisions demonstrate a clear legislative recognition that STRS members would ordinarily revoke a prior designation of a beneficiary upon the occurrence of a divorce, dissolution, annulment, or the birth or adoption of a child. See White v. McGill (1990), 67 Ohio App.3d 1, 5, 585 N.E.2d 945, 947-948.

R.C. 1339.63 also provides that former spouses ordinarily do not have any rights in employer death benefit plans after a divorce, dissolution or annulment.

"Unless the designation of beneficiary or the judgment or decree granting the divorce, dissolution of marriage, or annulment specifically provides otherwise, * * * if a spouse designates the other spouse as a beneficiary * * * and if, after [the] designation, the spouse who made the designation * * * is divorced from the other spouse, obtains a dissolution of marriage, or has the marriage to the other spouse annulled, then the other spouse shall be deemed to have predeceased the spouse who made the designation * * *, and the designation of the other spouse as a beneficiary is revoked as a result of the divorce, dissolution of marriage, or annulment." (Emphasis added.) R.C. 1339.63 (B)(1).

Under R.C. 1339.63 (A)(2), employer death benefit plans include "any funded or unfunded plan or program, or any fund, that is established to provide the beneficiaries of an employee participating in the plan, program, or fund with benefits that may be payable upon the death of that employee."

Therefore, under both R.C. 3307.562 and 1339.63, a former spouse has no rights to the other spouse's STRS death benefit in the absence of an express redesignation of the former spouse as a beneficiary.

Carel Cosby's STRS pension never matured because he died before retirement. Faye Cosby's interest in Carel Cosby's STRS pension terminated with Carel Cosby's death. No one is collecting Carel Cosby's STRS retirement pension. Since Carel Cosby died before his retirement, his designated beneficiary was entitled to receive an STRS death benefit. Carel Cosby could have designated anyone to receive the death benefit, not just Bonnie Cosby. By statute, even in the absence of being a designated beneficiary, Bonnie Cosby has a right in Carel Cosby's death benefit superior to that of Faye Cosby.

It is well established that once marital property is allocated, awards are final and the court does not have continuing jurisdiction to modify an award in the nature of a property settlement. Wolfe v. Wolfe (1976),46 Ohio St.2d 399, 75 O.O.2d 474, 350 N.E.2d 413. Modification of property division awards is expressly prohibited by R.C. 3105.171 (I). Under the guise of a constructive trust, the majority has ignored this established principle and has effectively modified the parties' property settlement to specifically nominate Faye Cosby as the beneficiary of Carel Cosby's STRS death benefit. Further, the majority's approach circumvents R.C. 3307.562 and 1339.63 by converting a death benefit into vested and matured retirement benefits. Contrary to the majority's assertion, permitting Bonnie Cosby to retain the death benefit paid to her by STRS does not defeat Faye's Cosby's rights to share in Carel Cosby's retirement benefits. Rather, the majority's decision defeats Bonnie Cosby's statutory rights to receive Carel Cosby's entire death benefit.

For the foregoing reasons, I cannot join the majority opinion and I respectfully dissent.

THOMAS J. GRADY, J., of the Second Appellate District, sitting by assignment.

JOSEPH D. KERNS, J., retired, of the Second Appellate District, sitting by assignment.

² The General Assembly recently passed Am.Sub.H.B. No. 535, which permits public retirement programs in Ohio, including STRS, to make payments to a participant's former spouse for the purpose of dividing marital property, pursuant to a court order. The amendments are effective January 1, 2002.

³ R.C. 3307.42 is former R.C. 3307.711, amended and recodified.

⁴ R.C. 3307.562 was formerly codified as R.C. 3307.48. R.C. 3307.48 was recently repealed, amended and recodified as R.C. 3307.562.