IN THE SUPREME = COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

═════════_= 52;══

No. 04-0729

════════λ= 2;═══

Tommy Joe Holmes,=20 Petitioner,

Alan Brad = Kent,=20 Individually and as Independent Executor

of the Estate of = Linda Ann=20 McWhorter, Deceased,

and Cassie Elizabeth = Kent,=20 Respondents

════════λ= 2;══════════&= #9552;═════════_= 52;══════════= ══════════ = 552;═

On Petition for Review from = the

Court of Appeals for the Sixth = District of=20 Texas

═════════_= 52;══════════= ══════════ = 552;══════════= ;══════════&#= 9552;

PER = CURIAM

Petitioner=20 Tommy Joe Holmes claims that he is entitled to payments from an optional = annuity=20 elected by his deceased ex-wife, Linda Ann McWhorter, as part of her = teacher=20 retirement benefits. Her son Alan Brad Kent, who is the executor of her = estate=20 and only heir, joined by his ex-wife Cassie Elizabeth Kent[1] as respondents, disagree. They = argue,=20 first, that McWhorter=92s designation of them as beneficiaries of her = other=20 retirement benefits covered the optional annuity as well or at least = showed her=20 intent that they receive the annuity, and second, that Holmes and = McWhorter=92s=20 divorce decree divested him of all interest in her retirement benefits. = The=20 trial court granted Holmes summary judgment. The court of appeals = rejected the=20 Kents=92 first argument but agreed with the second, thus concluding that = while=20 Holmes was entitled to receive the annuity payments because his = designation as=20 beneficiary was never changed, after the divorce he had no right to = retain the=20 payments unless McWhorter intended for him to have them.[2] If on remand it were shown that = she had=20 no such intention, a constructive trust should be imposed on the = payments in=20 favor of McWhorter=92s estate.[3] Holmes petitioned this Court = for review.=20 The Teacher Retirement System of Texas has filed an amicus curiae brief = arguing=20 that the court of appeals=92 decision will adversely affect thousands of = TRS=20 retirees and beneficiaries. We reverse and render judgment for = Holmes.

TRS = allows a=20 retiree to elect, instead of a standard service retirement annuity, an = optional=20 annuity that provides reduced payments to the retiree during her life = and, at=20 death, continued payments to and throughout the life of a designated=20 beneficiary.[4] Under this option, if the = beneficiary=20 does not survive the retiree, the retiree=92s payments increase to those = of a=20 standard annuity, but only prospectively.[5] If the beneficiary survives the = retiree,=20 payments cease when the beneficiary dies.[6] Only one beneficiary can be = designated,=20 and changing the designation is restricted,[7] since the value of the optional = annuity,=20 and hence the cost to TRS, depend on the beneficiary=92s longevity. = Statutory=20 amendments in 1997 and 2001 allow a retiree who has designated a spouse = as=20 beneficiary a change or revocation if the spouse files a notarized = consent or if=20 a court in a divorce proceeding approves or orders the change or = revocation.[8] TRS is authorized to prescribe = the form=20 the retiree must use.[9] If the designation is revoked, = the=20 retiree receives the higher payments of a standard annuity going = forward,[10] as if the beneficiary had = predeceased=20 the retiree. If the designation is changed, the new beneficiary receives = payments for the shorter of his life or the original beneficiary=92s = life=20 expectancy at the time the retiree retired.[11] Thus, a change or revocation = should not=20 (statistically) increase and may actually decrease the cost to TRS of = the=20 retiree=92s original election of the optional annuity.

TRS = reads the=20 statutory provisions strictly to require that a retiree submit the = change or=20 revocation to TRS on a prescribed form and that the divorce court=92s = approval or=20 order specifically direct the change or revocation; a divorce decree=92s = general=20 award of retirement benefits to the retiree does not, in TRS=92s view, = satisfy the=20 requirements. According to TRS, these statutory requirements =93protect = the trust=20 fund from the claims of multiple beneficiaries that arise when there is=20 uncertainty regarding the beneficiary of the benefits and the resulting = costs of=20 litigation.=94 They also protect retirees and beneficiaries, TRS argues, = by=20 providing a clear, certain system for assigning retirement benefits.

When=20 McWhorter retired in May 1997 at age 54 after 33 years of teaching, she = elected=20 an =93option 5=94 annuity [12] and designated Holmes as the=20 beneficiary. The TRS form she signed correctly explained that she could = not name=20 joint primary beneficiaries of this optional annuity and that she would=20 receive

[a] reduced annuity payable throughout my life with = the=20 provision that upon my death three-fourths (3/4) of the reduced annuity = shall be=20 continued throughout the life of and paid to the person designated = hereupon as=20 primary beneficiary. If my primary beneficiary designated hereupon = predeceases=20 me, my annuity payment will increase to the standard annuity = amount.[13]

McWhorter was=20 also entitled to a $10,000 lump-sum payment at her death.

A = year later,=20 while going through a divorce, McWhorter signed a TRS form stating:

I hereby designate the following person(s) as my = primary=20 beneficiary(ies) to receive any payments which may be due under the = Teacher=20 Retirement System Law of the State of Texas following my death (joint = beneficiaries=20 to share alike, with right of survivorship only): Alan Brad Kent = . . .=20 [and] Cassie Elizabeth Kent.

The form=20 stated that =93[w]hen received by the Teacher Retirement System, this = form revokes=20 any previous beneficiary designation made by the member on a prescribed = Teacher=20 Retirement form.=94 Nevertheless, McWhorter=92s submission of the form = did not meet=20 the statutory requirements for a change in the optional annuity = beneficiary=20 because it designated two people, not one, and it was not accompanied by = Holmes=92=20 notarized consent or a divorce decree ordering a change.[14] TRS notified McWhorter by = letter that it=20 had accepted the change for the $10,000 death benefits but explained = that to=20 change the beneficiary of the optional annuity, she would be required to = submit=20 the appropriate form, which TRS enclosed, and submit it with either = Holmes=92s=20 notarized consent or a =93[c]ertified copy of a Court Order from the = court with=20 jurisdiction over the marriage ordering the change.=94 The letter added = that by=20 statute

the new beneficiary is entitled to receive monthly = payments=20 for the SHORTER of EITHER the remainder of the life expectancy of the = original=20 beneficiary designated at retirement, OR the remainder of the new = beneficiary=92s=20 life.

Another year=20 passed, and McWhorter and Holmes=92s divorce became final. The decree = awarded=20 McWhorter

[a]ny and all sums, whether matured or unmatured, = accrued or=20 unaccrued, vested or otherwise, together with all increases thereof, the = proceeds therefrom, and any other rights related to [McWhorter=92s] = retirement=20 benefits through the Teacher Retirement System, and any other = profit‑sharing=20 plan, retirement plan, pension plan, employee stock option plan, = employee=20 savings plan, accrued unpaid bonuses, or other benefit program existing = by=20 reason of [McWhorter=92s] past or present employment.

The decree=20 also =93divested [Holmes] of all right, title, interest, and claim in = and to such=20 property=94 and required that he =93execute all instruments necessary to = effect this=20 decree.=94

McWhorter=92s=20 attorney submitted the divorce decree to TRS and requested information=20 concerning =93the current status of [McWhorter=92s] account and all = available=20 options which she might have with respect to payment of her = retirement.=94 TRS=20 responded in a five-page letter, explaining in detail what it had on = file for=20 McWhorter, the requirements for changing or revoking an optional annuity = beneficiary, and the effects of each. The letter advised McWhorter that = TRS=20 would not accept the divorce decree as a basis for changing or revoking = the=20 beneficiary because it did not clearly order the change or revocation. = The=20 letter suggested that it might be possible for McWhorter to have the = decree=20 clarified and set out decretal language it would accept. Alternatively, = the=20 letter explained that McWhorter could submit a notarized consent by her = former=20 spouse. The letter emphasized that McWhorter would also be required to = use=20 prescribed forms, and it enclosed forms for revoking or changing the = beneficiary=20 and for a former spouse=92s notarized consent. McWhorter never complied = with TRS=92s=20 instructions. A little over a year later, she died.

McWhorter=92s=20 will left everything to her son Alan. In accordance with the beneficiary = designations on file, TRS made a $10,000 lump-sum payment to the=20 Kents and began making = optional=20 annuity payments to Holmes of $1,617 per month. The Kents sued Holmes for an order = clarifying and=20 enforcing the divorce decree, compelling him to execute whatever = instruments TRS=20 required to transfer annuity payments to the Kents, imposing=20 a constructive trust on payments he received, and enjoining him from = accepting=20 future payments. The trial court granted summary judgment for Holmes. = The court=20 of appeals held that McWhorter=92s designation of Holmes as beneficiary = of the=20 optional annuity had not been changed because McWhorter did not fulfill = the=20 statutory requirements.[15] TRS was therefore required to = make=20 annuity payments to Holmes.[16] But the court also held that = the divorce=20 decree divested Holmes of any right to the annuity payments, and that if = McWhorter did not intend to give Holmes the payments notwithstanding the = decree,=20 her estate was entitled to have a constructive trust in its favor = imposed on the=20 payments.[17] The court remanded the case to = ascertain=20 McWhorter=92s intentions.[18]

The = Kents do not claim that = McWhorter=20 revoked her designation of Holmes as beneficiary of the optional annuity = so that=20 her estate would be entitled to increased payments to the level of a = standard=20 annuity during her life. We agree with the court of appeals that the = original=20 beneficiary designation was never changed. The statutory provisions are = very=20 clear. Only one person may be designated beneficiary of an optional = annuity. If=20 the person is the retiree=92s spouse or former spouse, the designation = may be=20 changed only as provided by statute: that is, only if the spouse or = former=20 spouse signs a notarized consent, or if the divorce decree orders the = change.=20 The retiree must also use a form prescribed by TRS. McWhorter never = submitted=20 the proper form or Holmes=92 notarized consent, and the divorce decree = did not=20 name a new beneficiary.

We = disagree=20 with the court of appeals that a constructive trust in favor of the = Kents, or=20 either of them, can be imposed on the payments Holmes receives. Absent a = valid=20 designation as the one beneficiary of the optional annuity, Alan=92s = only claim to=20 the payments is under his mother=92s will, and Cassie has no claim at = all. The=20 divorce decree awarded McWhorter all rights in her TRS benefits, = divested Holmes=20 of any rights, and required that he execute all papers necessary to = carry out=20 the decree. The decree thus denied Holmes any part of McWhorter=92s = benefits as=20 his share of the community estate.

In = effect,=20 Alan argues that because the divorce decree deprived Holmes of any right = to=20 McWhorter=92s retirement benefits, the payments under the optional = annuity should=20 belong to her estate and to him as its beneficiary, and a constructive = trust=20 should be imposed to achieve this result. There are three problems with = this=20 argument. First, it circumvents the statutory requirements for changing = a TRS=20 beneficiary.[19] Second, it alters TRS=92s = statutory=20 obligation. Alan claims that he is entitled to the payments TRS is = obligated to=20 make to Holmes for the rest of Holmes=92s life, but if McWhorter had = replaced=20 Holmes with Alan as beneficiary, TRS would owe payments only for the=20 shorter of Holmes=92s life expectancy at the time of = McWhorter=92s=20 retirement, or the life of the new beneficiary, Alan. By measuring the = duration=20 of payments by the shorter of two lives rather than by one, TRS=92s = obligation=20 might be reduced. While that may not have been likely in this case, = since Alan=20 is younger than Holmes, it remains that Alan=92s claim would alter the = statutory=20 provisions. Even if a constructive trust could be used in this case to = limit=20 payments as the statute would, it is unclear how the same result could = be=20 obtained when a retiree has more than one heir or when a will = beneficiary is not=20 a natural person. Third, Alan=92s argument necessarily injects a level = of=20 uncertainty into a program that TRS convincingly argues should be as = definite as=20 possible to free those affected from disputes over benefits. This case = is a=20 poster child for TRS=92s argument: the court of appeals has sent the = parties back=20 to the trial court to try to determine, since McWhorter never took any = of the=20 relatively simple steps TRS explained to change or revoke the = beneficiary=20 designation, whether she had a change of heart after the divorce. The = simple=20 statutory steps for designating, changing, and revoking a beneficiary = are=20 designed to avoid litigation over such things as a decedent=92s = intentions.[20]

We = have said=20 that =93[c]onstructive trusts, being remedial in character, have the = very broad=20 function of redressing wrong or unjust enrichment in keeping with basic=20 principles of equity and justice.=94 [21] To impose a constructive trust = on=20 optional annuity payments to a designated beneficiary in this situation, = we must=20 first attempt to ascertain if that is what the retiree really wanted, = then=20 effectively alter the statutory scheme for benefits provided when a = beneficiary=20 has been changed, and finally open TRS=92s retirement system to similar = claims by=20 others. We see nothing equitable or just in this. Nor do we think a = designated=20 beneficiary wrong or unjustly enriched to receive what the retiree gave = him and=20 never took back.

The = court of=20 appeals cited Sanderlin v. Sanderlin, which holds that general = language=20 in an agreement incorporated in a divorce decree, awarding one spouse = all rights=20 to retirement benefits, effectively removed the other spouse as = designated=20 beneficiary of TRS benefits.[22] No such agreement is involved = here.=20 Also, Sanderlin does not appear to have involved the optional = annuity=20 that is more carefully regulated by statute. Further, as discussed = above, in the=20 1997 legislative session shortly after Sanderlin was decided, the = statutory provisions were amended to allow for a change in the = designation of a=20 spouse as beneficiary of an optional annuity but only if made in = compliance with=20 statutory requirements.[23] Finally, Sanderlin did = not=20 address TRS=92s argument that its interests and those of all retirees = and=20 beneficiaries are better served by strict adherence to the statutory = scheme.

Accordingly,=20 we grant Holmes=92s petition for review and without hearing oral = argument,[24] reverse the judgment of the = court of=20 appeals and render judgment for Holmes.

Opinion=20 delivered: April 20, 2007

^[1] = The Kents, who=20 were still married when McWhorter died, divorced during this=20 litigation.

^[2] = 139 S.W.3d=20 120, 133 (Tex. App.=96Texarkana 2004).

^[3]=20 Id.

^[4] = Tex. Gov=92t Code = =A7 824.204(a)-(c).=20 These provisions, as pertinent to the annuity chosen by McWhorter,=20 state:

=93(a) =20 Instead of the standard service retirement annuity = . . . , a=20 retiring member may elect to receive an optional service retirement = annuity=20 . . . under this section. An election to receive an optional = service=20 retirement annuity must be filed with the board of trustees not later = than the=20 effective date of retirement.

=93(b) An=20 optional service retirement annuity is an annuity payable throughout the = life of=20 the retiree and is actuarially reduced from the annuity otherwise = payable under=20 this subtitle to its actuarial equivalent under the option selected = under=20 Subsection (c).

=93(c) An=20 eligible member may select one of the following options, which provide = that:=20 . . .

=93(5) =20 after the retiree=92s death, three‑fourths of the reduced annuity = is payable to=20 and throughout the life of the person nominated by the retiree=92s = written=20 designation filed prior to retirement.=94

^[5] = Id.=20 =A7 824.204(d) (=93If a person who is nominated by a retiree in the = written=20 designation under Section 824.101 predeceases the retiree, the reduced = annuity=20 of a retiree who has elected an optional service retirement annuity = under=20 Subsection (c)(1), (c)(2), or (c)(5) shall be increased to the standard = service=20 retirement annuity that the retiree would otherwise be entitled to = receive if=20 the retiree had not selected that annuity option.=20 . . .=94).

^[6] = Id.=20 =A7 824.204(c)(5).

^[7] = Id.=20 =A7 824.101. This section provides:

=93(a) =20 Except as provided by Subsection (c), any member or annuitant may, on a = form=20 prescribed by and filed with the retirement system, designate one or = more=20 beneficiaries to receive benefits payable by the retirement system on = the death=20 of the member or annuitant.

=93(b) =20 Except as provided by Subsection (c), a member or annuitant may change = or revoke=20 a designation of beneficiary in the same manner as the original = designation was=20 made.

=93(c) =20 Only one person may be designated as beneficiary of an optional = retirement=20 annuity under Section 824.204(c)(1), (c)(2), or (c)(5), and a = designation of=20 beneficiary under any of those options may not be made, changed, or = revoked,=20 except as provided by Sections 824.1011, 824.1012, and 824.1013, after = the later=20 of the date on which the retirement system makes the first annuity = payment to=20 the retiree or the date the first payment becomes due. For purposes of = this=20 section, the term =91makes payment=92 includes the depositing in the = mail of a=20 payment warrant or the crediting of an account with payment through = electronic=20 funds transfer.

=93(d) =20 Unless a contrary intention is clearly indicated by a written = designation of=20 beneficiary and except as otherwise provided by this section, the most = recent=20 designation of beneficiary by a member or annuitant applies to all = benefits=20 payable on the death of the member or annuitant.

=93(e) The=20 retirement system by rule may provide for the designation of alternate=20 beneficiaries and may adopt other rules to administer this = section.

=93(f) =20 A beneficiary designation, change in beneficiary, or revocation of = beneficiary=20 is not effective unless it is authorized by this subchapter. Except as = provided=20 by Subsection (g), any authorized beneficiary designation, change in=20 beneficiary, or revocation of beneficiary, including any modification = ordered by=20 a court or contemplated in a trust or testamentary document, must be = executed by=20 the member or annuitant in a form prescribed by the retirement system = and must=20 be received by the retirement system before the member=92s or = annuitant=92s death=20 or, for a beneficiary named to receive continued optional service or = disability=20 retirement payments, not later than the deadline established elsewhere = in this=20 subtitle.

=93(g) =20 Receipt by the retirement system of a certified copy of a divorce decree = between=20 a member or annuitant and a designated beneficiary revokes any = designation of=20 the former spouse as beneficiary of any death benefits payable under = Subchapter=20 E or F of this chapter that was effective before the date of divorce, if = the=20 decree is received by the retirement system before the payment of any = part of=20 the death benefit to any beneficiary.=94

^[8] = Act of May 15,=20 1997, 75th Leg., R.S., ch. 401, =A7 1, 1997 Tex. Gen. Laws 1639, 1639-40 = (providing for revocation following divorce), and Act of May 29, 1997, = 75th=20 Leg., R.S., ch. 1416, =A7 14, 1997 Tex. Gen. Laws 5297, 5300 = (providing for=20 change), both amended by Act of May 30, 1999, 76th Leg., R.S., = ch. 1540,=20 =A7=A7 8-9, 1999 Tex. Gen. Laws 5282, 5284; Act of May 27, 2001, = 77th Leg.,=20 R.S., ch. 1229, =A78, 2001 Tex. Gen. Laws 2811, 2813 (providing for = revocation by=20 consent). Current versions of these sections are found at Tex. Gov=92t Code = =A7=A7 824.1012-.1013,=20 which state in pertinent part:

=93=A7 824.1012. Revocation of Beneficiary = Designation=20 for Certain Retirement Benefit Options

=93(a) As=20 an exception to Section 824.101(c), a retiree who selected an optional = service=20 retirement annuity under Section 824.204(c)(1), (c)(2), or (c)(5)=20 . . . may revoke the designation of the beneficiary to receive = the=20 annuity on the death of the retiree, if a court in a divorce proceeding=20 involving the retiree and beneficiary approves or orders the revocation = in the=20 divorce decree or acceptance of a property settlement or if the = beneficiary is=20 the spouse, a former spouse, or an adult child of the retiree and signs = a=20 notarized consent to the revocation. The revocation takes effect when = the=20 retirement system receives it.

=93(b) A=20 revocation described by Subsection (a) cancels the optional annuity = selection=20 made by the retiree, effective with the beginning of payments of the = annuity as=20 recomputed under this subsection. The retiree is entitled to receive = payments of=20 a standard service or disability retirement annuity, as applicable, = reduced for=20 early retirement, if applicable, beginning with the payment for the = month after=20 the month in which the retirement system receives the notice of = revocation and=20 ending on the death of the retiree.

=93(c) The=20 retirement system by rule may establish requirements for forms, = documentation,=20 and procedures necessary for the administration of this = section.

=93=A7 824.1013. Change of Beneficiary = After=20 Retirement

=93(a) A=20 retiree receiving an optional retirement annuity under Section = 824.204(c)(1),=20 (c)(2), or (c)(5) . . . may change the designated beneficiary = as=20 provided by this section for the benefits payable after the retiree=92s = death=20 under those sections.

=93(b) If=20 the beneficiary designated at the time of the retiree=92s retirement is = the spouse=20 or former spouse of the retiree:

=93(1) the=20 spouse or former spouse must give written, notarized consent to the = change;=20 or

=93(2) a=20 court with jurisdiction over the marriage must have ordered the=20 change.

=93(c) A=20 beneficiary designated under this section is entitled on the retiree=92s = death to=20 receive monthly payments of the survivor=92s portion of the retiree=92s = optional=20 retirement annuity for the shorter of:

=93(1) the=20 remainder of the life expectancy of the beneficiary designated as of the = effective date of the retiree=92s retirement; or

=93(2) the=20 remainder of the new beneficiary=92s life.

=93(d) A=20 retiree may not change a beneficiary under this section after retirement = if the=20 retiree has previously changed or designated after retirement a = beneficiary for=20 optional retirement annuity payments under this = subtitle.=94

^[9] = Id.=20 =A7=A7 824.101(f), 824.1012(c).

^[10] = Id.=20 =A7 824.1012(b).

^[11] = Id.=20 =A7 824.1013(c).

^[12] = See=20 id. =A7 824.204(c)(5).

^[13] = See=20 id.

^[14] = Id.=20 =A7=A7 824.101(c), 824.1013(b).

^[15] = 139 S.W.3d at=20 126-27.

^[16] = Id. at=20 133.

^[17] = Id. at=20 124.

^[18]=20 Id.

^[19]=20 Compare Tex. Fam. = Code =A7=20 9.302(a) (providing that a divorce decree renders ineffective prior = designations=20 of the former spouse as a beneficiary in retirement benefits and other = financial=20 plans), and id. =A7 9.302(e) (=93This section does not apply to = the=20 disposition of a beneficial interest in a retirement benefit or other = financial=20 plan of a public retirement system as defined by Section 802.001, = Government=20 Code.=94), with Tex. = Gov=92t=20 Code =A7=A7 824.101(g), .1012 and .1013.

^[20] = Alan argues=20 that Keen v. Weaver, 121 S.W.3d 721 (Tex. 2003), is = =93analogous,=94 but it=20 is quite different. There we held that a spouse could effectively waive = division=20 of ERISA plan benefits in a divorce decree if the waiver was specific, = knowing,=20 and voluntary. Id. at 727-28. But the benefits at issue in = Keen=20 were payments under simple annuities purchased by the employee and were = not at=20 all like the carefully regulated optional annuity provided by TRS = involved in=20 this case. See id. at 722-23. The waiver in Keen = did not=20 conflict with a statutory retirement scheme as a waiver in this case=20 would.

^[21] = Meadows v.=20 Bierschwale, 516 S.W.2d 125, 131 (Tex. 1974); accord = Bocanegra v.=20 Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex. 1980) (=93A = constructive trust=20 is the formula through which the conscience of equity finds = expression.=94=20 (internal quotation marks omitted)).

^[22] = 929 S.W.2d=20 121, 123 (Tex. App.=96San Antonio 1996, writ denied).

^[23] = Supra=20 note 8.

^[24] = Tex. R. App. P.=20 59.1.