Estate of Irvine v. Oaas
309 P.3d 986, 372 Mont. 49, 2013 MT 271 (2013)
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Rule of Law:
A court will not reform an unambiguous donative instrument to name an entirely new beneficiary, even if the donor's designation was based on a mistaken understanding of its legal consequences, as this would constitute creating a new contract rather than correcting a mistake in the existing one.
Facts:
- John Winkley Irvine, Jr. married Deana Dodge, who had a son, Michael Dodge, from a prior marriage.
- In 1983, John and Deana executed wills that included Michael Dodge as a beneficiary.
- Between 2003 and 2006, John created beneficiary designations for three investment accounts.
- For two accounts (Hartford and Pacific Life), John named Deana as the primary beneficiary and his 'estate' as the contingent beneficiary.
- For the third account (Northwestern), John named Deana as the primary beneficiary but did not name a contingent beneficiary.
- John's financial planner, Steven Daniel, advised him to name his estate as the contingent beneficiary under the belief that the proceeds would then pass by intestacy to John's mother, Va Va Irvine, because John had told Daniel he did not have a will.
- Deana died in August 2008.
- John died ten months later in June 2009.
Procedural Posture:
- John's mother, Va Va Irvine, filed a complaint in the Second Judicial District Court, Silver Bow County, seeking a declaratory judgment that she was the sole beneficiary of John's three investment accounts.
- Michael Dodge, John's stepson and a beneficiary of his will, opposed the action.
- Both parties filed cross-motions for summary judgment.
- The District Court granted summary judgment in favor of Dodge, finding that the beneficiary designation contracts could not be reformed.
- The Estate of Va Va Irvine appealed the District Court's order to the Supreme Court of Montana.
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Issue:
Does a donor's mistaken belief about the legal consequences of naming their 'estate' as a contingent beneficiary, based on incorrect advice that arose from the donor's own omission, constitute a mistake of fact or law sufficient to reform the donative instrument to name a different, specific individual as beneficiary?
Opinions:
Majority - Chief Justice McGrath
No. A donative instrument may be reformed to conform the text to the donor’s intention if a mistake of fact or law is established by clear and convincing evidence, but reformation is not appropriate to create a new contract by inserting a new beneficiary. The court adopted the standard from the Restatement (Third) of Property § 12.1, which allows reformation for unilateral mistakes in donative instruments. However, the court found no mistake in the beneficiary designation forms themselves; John intentionally designated his 'estate' as the contingent beneficiary, and the forms accurately reflected this decision. His mistake was not in the expression of his intent on the form, but in his understanding of the legal effect of that designation, a misunderstanding which arose because he failed to inform his advisor about his 1983 will. Reformation cannot be used by a third party, like Va Va, to name herself as a beneficiary, as this would be a substantial addition that creates a 'new and different' contract, which is beyond the court's equitable power. The contracts were unambiguous, and therefore the plain language controls, directing the proceeds to John's estate to be distributed according to his will.
Analysis:
This case clarifies the scope and limits of the equitable remedy of contract reformation for donative instruments in Montana. By formally adopting the Restatement (Third) of Property § 12.1, the court aligned itself with modern trends allowing reformation for a donor's unilateral mistake. However, the court's refusal to apply the doctrine here establishes a critical precedent: reformation is for correcting errors in expressing intent (e.g., a scrivener's error), not for retroactively altering a deliberate choice that had unintended consequences due to the donor's own omissions or faulty legal understanding. This decision reinforces the primacy of the plain language of unambiguous contracts and protects written beneficiary designations from posthumous challenges based on extrinsic evidence of what a decedent might have done if better informed.
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