STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EUGENE McREDMOND, )

)

Petitioner, )

)

and MARTIN HORTON, )

)

Intervenor, ) CASE NO. 90-7104

)

vs. )

)

DIVISION OF RETIREMENT, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in this case in Sarasota, Florida on June 27, 1991, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For Petitioner and Edward S. Stafman, Esquire Intervenor 318 North Calhoun Street

Tallahassee, Florida 32301

For Respondent Stanley M. Danek, Esquire

Division of Retirement Cedars Executive Center

2639 North Monroe Street, Bldg. C Tallahassee, Florida 32399

ISSUES

The issue for consideration in this matter is whether Peter McRedmond, the deceased, should have been permitted to change the beneficiary on his state retirement plan to elect an annuity for the benefit of his estate and the Intervenor, Martin Horton.

PRELIMINARY MATTERS

By letter dated October 2, 1990, the Respondent, Division of Retirement, advised the Petitioner, Eugene McRedmond, Peter McRedmond's brother, that his request to have Peter's retirement option changed subsequent to his death had been denied. By subsequent letter dated October 17, 1990, Eugene McRedmond requested a formal hearing on the matter and it was forwarded to the Division of Administrative Hearings for appointment of a Hearing Officer.

By Order dated December 11, 1990, Hearing Officer Charles C. Adams, to whom the case was initially assigned, set the matter for hearing in Tallahassee on February 22, 1991. However, the matter was subsequently assigned to the undersigned who, by Order dated April 12, 1991, granted Respondent's Motion to Continue and reset the case for hearing in Sarasota on June 27, 1991, at which time it was held as scheduled.

At the hearing, Petitioner and Intervenor presented the testimony of Dr. Warren Dale Kuipers, a physician with the Sarasota County Health Department; Judith D. Ligon, a registered nurse and friend of the deceased; Beverly Ann Bradburn, a former student and friend of the deceased; Martin V. Horton, Intervenor and friend of the deceased; and Eugene McRedmond, Petitioner and brother of the deceased. Petitioner also introduced Petitioner's Exhibits 1 and

1. Respondent presented the testimony of Linda Marie Hendin, a notary public; Lydia Faye DeGeorge, benefits specialist for Manatee Community College; and Gail Lee Newcomb, formerly Peter McRedmond's secretary and friend. Respondent also introduced Respondent's Exhibits A though C.

   
   

   No transcript was provided. Both Petitioner and Respondent submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

   
   

   FINDINGS OF FACT

   
   

   1. At all times pertinent to the issues herein, the Respondent, Division of Retirement, was the state agency responsible for the control, operation and monitoring of the State Retirement System. Petitioner, Eugene McRedmond, is the surviving brother of Peter McRedmond, deceased, a former member of the Florida Retirement System. Intervenor, Martin V. Horton, is the former live-in friend and companion to Peter McRedmond and the individual who claims an interest in Peter's retirements benefits.

      
      

   2. For some period prior to 1988, Peter McRedmond was employed at Manatee Community College as a psychology professor and as such was a member of the Florida Retirement System, (FRS). He was so employed until he retired for disability in early 1990. Before that time, however, in August or September, 1988, he was diagnosed as having AIDS by Dr. Warren D. Kuippers, a physician with the Community Migrant Health Center. Tests taken at or around that time indicated he was suffering from toxoplasmosis, a disease of the brain in which significant portions of that organ are eaten by parasites, resulting in intermittent periods of impaired judgement and reasoning ability. He also suffered numerous other medical problems including weight loss, a wasting syndrome, general weakness and fatigue.

      
      

   3. Notwithstanding the seriousness of his illness, because Mr. McRedmond wanted to qualify for retirement under the FRS system, he continued to work for another year to meet the minimum requirements for retirement. On April 27, 1990, he made application for disability retirement to be effective July 1, 1990. As a part of that application, Mr. McRedmond selected Option 1 under the FRS as the method under which he desired his benefits be paid and named the Intervenor, Mr. Horton, as his designated beneficiary to receive any benefits legally due after his death.

      
      

   4. Mr. McRedmond could have elected to receive benefits under either Option 1 or Option 2 of the plan. Option 3 was not available to him because of his marital status. Under Option 1, he would receive payments of $639.33 per month for the remainder of his life, regardless of how long he lived. Under

      Option 2, he would have been paid a slightly lesser monthly sum, $587.51, for the rest of his life, but not less than 10 calendar years, and if he were to die before 10 years were up, the payments would go to his designated beneficiary.

      
      

   5. In May, 1990, consistent with the procedure then in effect within the Division, Mr. McRedmond was sent a second Option selection form to give him as much information as was possib1e and to make sure he understood what he was doing as it related to his option selection. Mr. McRedmond again selected Option 1, had his signature notarized, and returned the executed form to the Division. The individual who performed the notary service did not recall the transaction but indicated her routine practice was not to notarize a document for anyone who did not appear to know what he was doing.

      
      

   6. Peter McRedmond died on August 23, 1990 from the disease with which he was afflicted. Several months before his death, in mid June, 1990, Mr. McRedmond and Mr. Horton discussed finances and what Horton could expect after McRedmond's death. It is clear that Mr. McRedmond wanted to make arrangements for Mr. Horton to finish his education without having to work while doing so. At that time, McRedmond's life insurance policy, in the face amount of

      $60,000.00, had Horton as the beneficiary. Shortly before his death, however, upon the prompting of his brother, Eugene, Petitioner herein, Peter McRedmond directed the policy be changed to make his estate the beneficiary. This was done by Eugene through a power of attorney. There was also some discussion of an additional $500.00 per month which was to go to Mr. Horton, but no one, other than Mr. Horton, recalls this.

      
      

   7. Also shortly before his death, Mr. McRedmond and Mr. Horton travelled to the family home in Connecticut for several weeks. During that time, Mr. McRedmond had at least one major seizure and family members noticed that while he was sometimes forgetful, for the most part his thinking was rational and normal.

      
      

   8. There can be little doubt that Mr. McRedmond had deep feelings for Mr. Horton and wanted the latter to be provided for after his death. Friends of both relate the numerous comments McRedmond made to that effect and are convinced that at the time he made the contested election, Mr. McRedmond was not of sound mind sufficient to knowingly make the choice he made. To be sure, the ravages of his disease had taken its toll and there were numerous occasions on which he was not lucid or competent to determine issues such as here.

      
      

   9. On the other hand, the benefits administrator with whom McRedmond talked at the time he selected his retirement plan option was totally satisfied that at that time, he fully understood the nature and effect of the option he selected and was choosing that which was consistent with his desires at the time. By the same token, the notary, whose testimony was noted previously herein, also was satisfied he knew what he was doing at the time of the second election.

      
      

   10. In its final configuration, Mr. McRedmond's estate includes all his assets, including the proceeds of the insurance policy previously designated to go to Mr. Horton, for a total of approximately $120,000.00. According to the terms of the will, the estate is to be put into a trust from which Mr. Norton is to receive $1,000.00 per month for his lifetime, as well as all his medical expenses. Since Mr. Horton has tested HIV positive, these can be expected to be extensive. Eugene McRedmond is the executor of the estate. Petitioner and Mr. Horton claim that since the trust contains all of Peter's assets existing at his death, the only other source of the additional $500.00 per month would be the

       benefits from the FRS. Both cite this as evidence of Mr. McRedmond's intent that the option selection providing for payment after death was his intention. This does not necessarily follow, however.

       
       

   11. Notwithstanding what Petitioner and Intervenor state were his intentions, Mr. McRedomnd took no action to make the change in option selection which would have effectuated them. Instead, he went out of town to visit family for several weeks, and even after receipt of the first retirement check, received on July 31, 1990, still took no action to make the change.

       
       

   12. During this period, after the return from Connecticut, Mr. McRedmond's condition deteriorated to the point he was often bedridden and was periodically unaware. However, there is ample evidence to indicate that he was often lucid during this period and still took no action to change his retirement option. During this time, Mr. Horton conducted come of Mr. McRedmond's business affairs for him pursuant to specific instructions. These included making bank deposits and as a part of one of these deposits, when Horton was to deposit two checks as requested by McRedmond, he also deposited the first retirement check. Horton and Eugene McRedmond both claim that at no time did Peter McRedmond ask or authorize him to do so.

       
       

   13. In a visit that Petitioner made to his brother in early August, 1990, just weeks prior to Peter's death, according to Petitioner his brother explained he had selected the wrong retirement option and requested that Eugene attempt to change the election. Peter gave Eugene a Power of Attorney with which he was to do this as well as to change the beneficiary on the life insurance policy. Consistent with those instructions, Eugene wrote a letter to the Division explaining the situation and that the check had been deposited by mistake. On August 13, 1990, Eugene telephonically contacted the Division where he spoke with Melanie White. During this conversation, in which he again spelled out the circumstances which he believed constituted the mistaken election, he was told to file a power of attorney. When he did this, the Division would not honor it claiming that since it had been executed in May, 1990, some three months earlier, it was not current.

       
       

   14. Subsequent to the death of Peter McRedmond and the filing of the claim against the Division, Eugene McRedmond and Martin Horton have entered into an agreement whereby any sums recovered from the Division will be split with 25% going to Mr. Horton and 75% going to the Trust. Upon the death of Mr. Horton, any sums remaining in the trust will be split by Eugene McRedmond and another brother.

       
       

       CONCLUSIONS OF LAW

       
       

   15. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding, Section 120.57(1), Florida Statutes.

       
       

   16. The Division has renewed its prior motion to dismiss Eugene McRedmond from this action on the basis he has no interest in these proceedings, either individually or as the personal representative of his brother's estate. The motion is denied. The evidence clearly indicates he is the trustee of his brother's trust for the benefit of the Intervenor and a beneficiary thereof after Mr. Horton's death. As such, he has a legitimate interest in the outcome of this action regardless of the agreement the estate may have with Mr. Horton regarding the division of any funds received from the Division.

   17. The Florida Retirement System is described and provided for in Chapter 121, Florida Statutes, where at subsection 121.091(6), the four options are outlined. Only Options 1 and 2 are pertinent and applicable to Peter McRedmond. Option 1 provides for a lifetime benefit for the member. If the member dies before the total benefits paid equal the amount paid in, the difference is refunded to the beneficiary, Section 121.091(7)(a). Option 2 provides a lifetime benefit to a member at a lower rate, but also guarantees a minimum of

       120 months payments to that member or someone else of his choosing. In this case, had Option 2 been chosen, Mr. Horton would receive 119 payments at the deduced rate since Mr. McRedmond died after only one payment was made. Option selections made pursuant to Section 121.091(6)(a) may be changed at any time prior to negotiation of the first warrant paid after retirement, Rule 22B- 4.002(3), F.A.C.

       
       

   18. It is clear from the evidence that the relationship between Mr. McRedmond and Mr.Horton was a meaningful one and that Mr. McRedmond fully intended for Mr.Horton to be provided for upon his death. Accepting that premise, however, does not necessarily require that it also be accepted that McRedmond intended for Mr. Horton to have his retirement benefits. The evidence clearly shows that Mr. McRedmond initially provided that Mr. Horton receive the proceeds of his $60,000.00 life insurance policy and the income from the trust made up of the remainder of his estate up to $1,000.00 per month.

       
       

   19. It is equally clear that in the months prior to his death, Mr. McRedmond's health steadily deteriorated and that periodically his judgement and reasoning ability were impaired. By the same token, however, there were numerous times, even just before his demise, when Mr. McRedmond was totally lucid and in full command of his mental faculties. Several credible witnesses, including the benefits manager for Manatee Community College, the individual who initially counseled Mr. McRedmond regarding his benefit options, and the notary who notarized his second election form, neither of whom is an employee of the FRS, were satisfied that at the time he made each election, Mr. McRedmond was fully aware of what he was doing and the consequences of his act.

       
       

   20. Aside from the testimony of the Petitioner as to what his brother requested of him just before his death, prior to the negotiation of the first warrant paid under the election, there is no credible evidence that Peter McRedmond made any effort to change his option choice.

       
       

   21. In addition, the warrant was negotiated by Mr. Horton, presumably in good faith, but even after being made aware of that fact, Mr. McRedmond made no effort to rectify the mistake, and the funds represented by the warrant were placed in his account and, presumably, used for his benefit.

       
       

   22. Though Mr. Horton now asserts he did not have the authority to deposit that warrant, he appeared to believe he had that authority when he did so. The deposit was presumably legal and both the bank which received it and the agency which issued it can both rely on the presumption that the deposit was legal. Neither can be charged with the knowledge that the deposit was unauthorized. Central Bank & Trust Co. vs. Shipman, et al., 126 So.2d 706 (Fla. 3DCA 1961). Though Horton's unauthorized deposit might not have bound Peter initially, his use of these funds constitutes a ratification of the deposit even if it was, initially, unauthorized. Commercial Credit Co. v. United Divers Supply Co., 253 F. Sup. 255 (D.C. Fla. 1918.)

   23. Here, the burden is upon the Petitioner and Intervenor to show, by a preponderance of the evidence, that Peter McRedmond's election of Option 1 was a mistake, caused by his inability at the time of election, to intelligently determine the appropriate option for his situation or that the cashing of the initial warrant issued under the option selected was unauthorized and should not bar a subsequent change of election. In light of the fact that the evidence demonstrates clearly that at the time of the initial election and the time of the second election, Mr. McRedmond was in command of his mental faculties and was aware of the nature and consequences of his election; and that he made no effort to stop the crediting of the unauthorized deposit of the warrant to his account and thereafter made use of the funds it represented for his own benefit thereby ratifying the unauthorized act; it is clear that burden has not been met.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED that Petitioner's and Intervenor's claims for retirement benefits under Option 2 of the Florida Retirement System retirement plan, on behalf of Peter McRedmond, be denied.

RECOMMENDED in Tallahassee, Florida this 29th day of July, 1991.

ARNOLD H. POLLOCK

Hearing Officer

Division of Administrative Hearings The DeSoto Buildi5g

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clark of the Division of Administrative Hearings this 29th day of July, 1991

APPENDIX TO RECOMMENDED ORDER IN CASE NUMBER 90-7104

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

FOR THE PETITIONER AND INTERVENOR:

1. Accepted and incorporated herein.

   
   

2. Accepted and incorporated herein.

   
   

3. First two sentences accepted and incorporated herein. Third sentence not proven.

   
   

4. & 5. Accepted and incorporated herein.

1. Accepted and incorporated herein.

   
   

2. Accepted that Peter McRedmond had numerous conversations with friends about providing for Mr. Horton, but it was not established that he mentioned using his retirement benefits for that purpose.

   
   

3. & 9. Accepted and incorporated herein.

1. Accepted and incorporated herein.

   
   

2. Rejected as not necessarily following from the facts.

   
   

3. Rejected as speculation not supported by fact, except that Petitioner claims Peter desired to change the option selection.

   
   

4. First sentence accepted. Second sentence accepted in so far as it asserts Peter told Horton he would receive a monthly sum of $1,000.00. Balance rejected.

   
   

5. Accepted and incorporated herein.

   
   

6. Rejected as speculation and conclusion except for first sentence and first clause of second sentence.

   
   

7. Accepted and incorporated herein.

17.-20. Accepted and incorporated herein.

21. First and second and last sentences accepted.

22.-24. Accepted.

1. Accepted and incorporated herein.

   
   

2. Accepted.

   
   

3. & 28. Accepted.

29. Irrelevant.

FOR THE RESPONDENT:

1-4. Accepted and incorporated herein.

1. Accepted and incorporated herein.

   
   

2. & 7. Accepted and incorporated herein.

8.-10. Accepted.

1. Ultimate finding accepted. On the date he filed his application, Peter McRedmond was capable of understanding what he was doing and the implications thereof.

   
   

2. & 13. Rejected as comments of the evidence and not Findings of Fact.

1. First four sentences accepted. Remainder rejected except that McRedmond wanted Horton to get at least $1,000.00 per month for life, and more if possible.

   
   

2. & 16. Accepted except for last two sentences of 16.

1. Accepted except for last sentence which is a comment on the evidence and not a Finding of Fact.

   
   

2. Accepted.

   
   

3. & 20. Accepted and incorporated herein.

1. Accepted.

   
   

2. & 23. Accepted and incorporated herein.

24. Accepted and incorporated herein.

COPIES FURNISHED:

Edward S. Stafman, Esquire Stafman & Saunders

318 North Calhoun Street Tallahassee, Florida 32301

Stanley M. Danek, Esquire Department of Administration

Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560

A. J. McMullian, III Director

Division of Retirement

Cedars Executive Center, Bldg. C 1639 North Monroe Street Tallahassee, Florida 32399-1560

John A. Pieno Secretary

Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

Linda Stalvey

Acting General Counsel Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency which will issue the Final Order in this case.

Docket for Case No: 90-007104

Orders for Case No: 90-007104