TEACHERS' RETIREMENT SYSTEM OF LOUISIANA v. VIAL

BLANCHE, Judge.

This concursus proceeding was instituted by the Attorney General of the State of Louisiana to have judicially determined the disposition of the accumulated funds of Richard J. Vial, Jr., decedent, in the Louisiana Teachers' Retirement System, said funds being claimed individually by Richard Vial's daughter, Patsye Vial Keller, and also by his second wife, Susan Gueydan Vial. In accordance with LSA-C.C.P. Art. 4651 et seq., the funds were deposited by the Attorney General in the Registry of the Court.

This suit was tried on stipulated facts in the trial court. Those facts reveal that on August 1, 1936, when the Louisiana Teachers' Retirement System was established, Richard J. Vial, Jr., became a member. Some time thereafter he named his first wife, Ethel, as his beneficiary to the funds generated under that system. On April 11, 1970, Ethel Vial died, and following her death Richard Vial named his daughter, Patsye Vial Keller, as his beneficiary in the fund. On August 4, 1971, a judgment of possession with respect to Ethel Vial's estate decreed Patsye Vial Keller as the sole heir of her mother and sent her into possession of all the community property left by her mother. Richard Vial was also recognized as the surviving spouse in community. On October 22, 1971, Richard Vial and Susan Gueydan executed a marriage contract renouncing the community of acquets and gains and declaring all property acquired before and after the marriage to be the separate property of each. Subsequently, on October 28, 1971, Richard Vial married Susan Gueydan. On November 4, 1971, Richard Vial then designated his second wife, Susan, as beneficiary in the retirement fund and revoked all previous designations.

When Richard Vial died on January 13, 1973, he left with the teachers' retirement system an accumulated fund of $29,480.79. Patsye Vial Keller, the sole heir in both her mother's and father's successions, claims all of the aforesaid benefits as the forced heir of her father. In order to have the proceeds declared as a part of his estate, she has contested the constitutionality of that section of the Teachers' Retirement Act which establishes the method of disposing of the contributions accumulated to a member's credit in the event of his death prior to retirement.

The trial court rejected Patsye Vial Keller's claim of unconstitutionality of the statute and awarded the proceeds accumulated under the system to Susan Gueydan Vial in accordance with the beneficiary provisions made by Richard Vial prior to his death. From this decision, Patsye Vial Keller has appealed.

LSA-R.S. 17:573,1 a basic provision of the Teacher's Retirement Act, provides that these contributions will be exempt from seizure, sale and taxation and will be unassignable except as otherwise provided. Included within this latter exception of nonassignability is R.S. 17:640,2 which provides that in the event of a member's death prior to retirement the accumulated contributions to his credit shall be payable on demand to his designated beneficiary.

Appellant argues that the Teachers' Retirement Act is unconstitutional in that it violates Article 4, Section 4,3 of the Louisiana Constitution, for the reason that it gives effect to an informal or invalid will. She further cites Article 15704 of the Louisiana Civil Code providing that no disposition mortis causa shall be made otherwise than by last will and testament. Particularly, appellant states that LSA-R. S. 17:573 and 17:640 permit members of the teachers' retirement system to designate a beneficiary to receive accumulated contributions in the event of death by merely completing a pre-printed form entitled "Teachers' Retirement System of Louisiana—Beneficiary Blank."

A similar argument was considered in Succession of Rockvoan, 141 So.2d 438 (La.App. 4th Cir. 1962), in which a retirement system similar to the Louisiana Teachers' Retirement System was under consideration. That case involved a contest over the death benefits provided for by the decedent's employer. There the contest was between the decedent's second wife, who attempted to have the death benefits of the retirement system included in the community, and the son of decedent by his first wife, who claimed entitlement thereto as a named beneficiary by his father. The rules and regulations of the retirement system under consideration in that case provided that death benefits would be paid to the beneficiary designated by the employee in his application for membership. Quoting from the opinion, the Court set out counsel's argument as follows:

For the identical reasons as stated by our brothers on the Fourth Circuit, we reject appellant's argument, and we take the liberty of quoting their language:

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In the Succession of Mendoza, 288 So.2d 673 (La.App. 4th Cir. 1973), the Fourth Circuit again took the same approach in resolving a controversy over the proceeds of a retirement plan. The only asset of that succession was death benefits payable to the estate of the decedent under the Seafarer's Union Welfare Plan. Under the plan the employee had a right to designate a beneficiary prior to his death but did not do so. The death benefits, therefore, were paid to the administrator of his estate. The Court noted the similarity of the case before it to the Rockvoan case in that the decedent had no vested interest whatsoever in the death benefits and could realize no part of it as long as he lived. The surviving spouse of decedent, of course, contended that the proceeds belonged to the community. In resolving the issue, the Court analogized the retirement plan's death benefit provisions to a life insurance contract and applied the relevant law thereto.

The Second Circuit had previously made the same comparison in the case of Scott v. Scott, 179 So.2d 656 (La.App. 2nd Cir. 1965), in referring to the nonassignability provisions of LSA-R.S. 17:573, stating:

Based on such an analogy, the Court concluded that funds in the retirement system belonged to a participating wife or husband's separate estate and their exclusion from the inventory as community property was proper.

Going one step further from such a concept, other cases, including one from this circuit, have held that if the funds contributed to the retirement system were community earnings, the separate estate of the testator would be indebted to the other spouse for one-half of the increase in the fund which occurred during the existence of the community. Moore v. Moore, 187 So.2d 145 (La.App. 2nd Cir. 1966), writ refused, 249 La. 451, 187 So.2d 438; Broyles v. Broyles, 215 So.2d 526 (La.App. 1st Cir. 1968); Blalock v. Blalock, 259 So.2d 367 (La.App. 2nd Cir. 1972).

We note that other jurisdictions have used this same analogy. Under the annotation "Rights in Survival Benefits Under Public Pension or Retirement Plan as Between Designated Beneficiary and Heirs, Legatees, or Personal Representative of Deceased Employee," 5 A.L.R.3d 644, 649, 650, we find:

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Since Sizeler v. Sizeler, 170 La. 128, 127 So. 388 (1930), it is no longer contested that Civil Code authorities relating to donations inter vivos and mortis causa have no application to life insurance policies, and the proceeds from insurance contracts form no part of the estate of an insured. Also, since the accumulated funds of decedent in the teachers' retirement system form no part of the estate of the deceased and inure to the beneficiary directly through decedent's designation of said beneficiary under and by virtue of constitutional and statutory authority,5 it is an irrelevant inquiry as to whether the procedure by which such funds were transferred complied with laws of descent and distribution or is invalid as to form, in violation of the codal articles prescribing the making of donations mortis causa.

Appellant argues that the funds paid into the Louisiana Teachers' Retirement System by decedent consisted almost entirely of community funds and that under the Moore, Broyles and Blalock cases, cited supra, the separate estate of the teacher is then required to reimburse the other spouse's estate for one-half of the value of the contributions to the system made during the existence of the community. Assuming arguendo the validity of this argument, we fail to see how it in any way benefits appellant. Appellant was the sole heir of both her mother and father, and should her father's estate be required to pay such contributions, she, as his sole heir, would be required to make such payments to herself as the sole heir of her mother. As both debtor and creditor of the same amount, the debt would be extinguished by confusion. LSA-C.C. Art. 2217.6

Also without merit are appellant's other arguments concerning the unconstitutionality of the teachers' retirement system as constituting a denial of due process of law in violation of Article 1, Section 2, of the Louisiana Constitution, and exceeding the authority granted by Article 12, Section 23, of the Louisiana Constitution, which article is the constitutional authority for the establishment of the Louisiana Teachers' Retirement Fund. We find no authorities to substantiate these arguments, nor have any been cited by appellant. Clearly, the teachers' retirement system operates equally and fairly to those participants in the system and no one thereunder is denied due process or equal protection of the laws. Additionally, the act creating the retirement system does not exceed its authority by depriving appellant of any independent substantive right as heir of decedent. Appellant's argument on this point is essentially the same as stated above in support of her contention that the act violated Article 4, Section 4, of the Louisiana Constitution. As pointed out more fully hereinabove, appellant never became an heir to any of the retirement proceeds, as they never formed a part of her father's estate.

For the above reasons, the judgment of the trial court is affirmed, and appellant is cast for all costs of this appeal.

Affirmed.