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contractappealtrialpleawill
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Coble v. Sexton, 71 Ark. App. 122, 27 S.W.3d 759

Facts

William E. Sexton owned a 401(k) savings plan and executed a beneficiary designation form naming his daughter Laura Cobble as the primary beneficiary and his niece Rhonda Sexton as the contingent beneficiary. After Mr. Sexton's death, it was discovered that there was no person named 'Laura Cobble,' leading Schneider National Carriers, Inc. to file an interpleader action. Both of Mr. Sexton's biological daughters, Linda Coble and Laura Mersch, claimed to be the primary beneficiary, while Rhonda argued that Mr. Sexton intended for Laura to be the primary beneficiary. The chancellor ultimately ruled in favor of Rhonda, stating that Mr. Sexton failed to name a primary beneficiary.

The facts giving rise to this cause of action are as follows. The 401(k) savings plan was owned by Mr. William E. Sexton, who died on November 18, 1998. Mr. Sexton had two biological daughters, appellant Linda Coble ('Linda') and cross-appellant Laura Mersch ('Laura'). Mr. Sexton had been married to their mother, but they divorced in 1984. Their mother remarried, and Laura was adopted by her stepfather in 1986, when she was fifteen years old. It was unknown if Mr. Sexton was ever aware that this adoption took place. Appellee Rhonda Sexton ('Rhonda') is the niece of the late Mr. Sexton, being the daughter of his brother.

Issue

Did the chancery court err in determining the proper beneficiary of the 401(k) savings plan without considering extrinsic evidence?

The Court of Appeals, Robbins, Chief Judge, held that chancery court was precluded from determining proper beneficiary under 401k savings plan without consideration of profered extrinsic evidence.

Rule

When a written contract is ambiguous, parol evidence is admissible to explain the writing. The initial determination of the existence of an ambiguity rests with the trial court.

When contracting parties express their intention in a written instrument in clear and unambiguous language, it is our duty to construe the written agreement according to the plain meaning of the language employed.

Analysis

The court found that there was a latent ambiguity in the beneficiary designation because the name 'Laura Cobble' did not correspond to any known individual. The chancellor's refusal to consider extrinsic evidence, which could clarify the intent behind the designation, was deemed an error. The appellate court emphasized that the ambiguity should have been resolved by examining the proffered evidence, including Mr. Sexton's holographic will.

However, a latent ambiguity became apparent when evidence was introduced that there was no such person as 'Laura Cobble.' The proffered evidence should have been considered to determine if it shed light on the meaning of the words used in the primary beneficiary designation.

Conclusion

The Court of Appeals reversed the chancery court's decision and remanded the case for further proceedings to consider extrinsic evidence regarding the beneficiary designation.

We reverse and remand this case for the chancellor to consider extrinsic evidence in his attempt to resolve this ambiguity.

Who won?

The prevailing party was Rhonda Sexton, as the court ruled that the chancellor erred in not considering extrinsic evidence that could clarify the ambiguity in the beneficiary designation.

Linda's contentions on appeal are that the chancellor erred (1) in considering the holographic will as extrinsic evidence of the primary beneficiary, (2) in finding that there was a failure to name a primary beneficiary, and (3) in awarding the proceeds of the savings plan to the contingent beneficiary.

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