Saturday, August 9, 2014

What’s Done Is Done . . .Maybe

Spencer v. Spencer, 2014 VT 63

By Elizabeth Kruska

In today’s episode of Property Settlements: What’s Done Is Done is an example of a time when what’s done might not actually be done.

Donald (Husband), who was in the military, and Gerda (Wife) got married in 1981. Husband retired from the military in 199817 years after their marriage. However, he had about 22 total years of military service under his belt at the time he retired, meaning he had 5 or so years of service prior to marriage. They divorced in 2000. When they divorced, they agreed that his military pension would be split such that Wife received 41.8% of the gross pay, and he’d get the rest.

Husband went back into military service in 2009, a fact the parties probably didn’t expect to happen at the time of their divorce. Husband worked as a ROTC instructor for 3 years. This did a couple things. First, it made it such that his pension wasn’t being paid out anymore, since he was working. Second, it increased his pension base, since he was adding more service time upon which a pension could be paid. 

There are no numbers in the opinion, so I’ll make up some that are easy to use. Let’s pretend that in 2000 the pension paid out $2000/month. Wife would get 41.8% of that, or $836. However, for that 3 years that he was back to work, the pension plan didn’t pay out at all.

Husband was finished with his ROTC instructor gig after 3 years. This increased his base. Let’s pretend his base got increased to $2500/month as a result of his additional employment. This would now make his wife’s monthly income from that $1048. Of course, that’d make his monthly pension income higher, too.

Husband thinks to himself, “this isn’t what I signed up for,” and files a motion with the court to correct the 2000 stipulation so that it fit with what the parties knew and expected at the time. That is, that Wife would get a percentage of the pension as it was valued at the time of retirement. Retirement predated the divorce, and probably nobody thought he’d go back to work for the military again.

Wife responds and says, “it’s a property settlement, and as we all know, what’s done is done” (I’m paraphrasing significantly, but that’s pretty much the argument). She says there weren’t any extraordinary circumstances such that the stipulation should be changed.

The court denied Husband’s motion because although Wife was now getting more money than they originally thought would happen, the stipulation was clear in that it said “41.8%.” It didn’t say anything about it being modified in the possible event of Husband going back to work for the military. Husband appealed.

SCOV takes a look and decides to remand for a hearing. Here’s the problem. This wasn’t like a pension where someone was still actively working and contributing to it at the time of the divorce. Husband was retired at the time of the divorce. At that time, the parties knew the value of the pension. The pension was treated like any other piece of marital property with a value at that particular time. You know, like a car or a diamond ring or a toaster or whatever. The parties didn’t expect that Husband would get recalled or go back to work as an instructor, so they had no reason to think the value of the pension would change going forward. SCOV feels the parties entered into their 2000 stipulation believing the value of the pension at the time was what it was and would continue to be.

Although SCOV sends it back, they point out that Husband has the burden to prove that the modification he seeks is necessary to prevent hardship or injustice.

Husband went back to work for the same organization many years after the divorce, which means Wife would get a bit of an unanticipated windfall many years later. If Husband had gone to work for a private company, like a defense contractor, surely Wife would have no claim to any of his earnings 9 years post-divorce. However, Wife makes a good point that the stipulation is clear and is final, so that’s what the court should rely on.

Justice Robinson, joined by Justice Dooley, agrees with Wife, and they dissent. Justice Robinson, writing for the dissenters, feels the majority took a pretty big leap from gleaning the parties’ intentions to what was actually written. She examines a couple other Vermont cases that, while not totally on point, are somewhat similar.

She writes at length about the use of a coverture fraction. Uh ohmath for lawyers. Since sometimes people are employed with retirement benefits accruing prior to getting married, it may not be fair for the other spouse to get the benefit of what was accrued prior to marriage. So, in order to figure out what the non-pension holding spouse could be entitled to receive, you use a coverture fraction. What you do is: (a) find a calculator, (b) find a sharp #2 pencil with an eraser, (c) say, “I didn’t go to law school to have to do math,” (d) grin, bear it, and do the math.

Let’s make a really simple example. Take the total number of months the person worked and accrued the benefit in question. If the person worked 10 years, that’s 120 months. Then, take the total number of months the person was accruing the benefit AND was married. Let’s pretend they were married 6 ½ years. That’s 78 months. The percentage of time the benefit accrued AND the earner was married is 65%. (78 months/120 months = .65) From there, the parties can figure out what percentage of that percentage is which is an equitable distribution of the benefit. Sometimes it’s 50%. In our made-up situation that would be a payout to non-earning spouse of 32.5% of the payout. Sometimes it’s not 50%, because sometimes people agree on some other percentage for whatever reason.

The issue Justice Robinson raises is that the parties came up with 41.8% somewhere, but there isn’t really a rationale for it that she can find in the information before her. It doesn’t appear that it was spelled out in the original stipulation, and wasn’t explained in Husband’s subsequent filing. If it had been more clear, she might’ve been inclined to consider Husband’s motion. But Husband’s pleading didn’t include enough information. She also points out that it would’ve been possible to write the stipulation with a payout to Wife with a fixed amount per month, like “Wife gets $500/month from the pension.” People don’t often do that, but it is certainly a possibility.

She also points out that in circumstances where a divorced spouse keeps working and contributing to a pension, that there is an increase that often works to the benefit of the former spouse.

There’s a concern here that by allowing these folks to go back to the trial court to litigate the issue that it violates the “What’s Done Is Done” spirit of property settlement. SCOV is really in favor of litigation being done, especially in the Family Court setting. Justice Robinson worries that this might open the floodgates to other people whose former spouses are getting more of their retirement accounts than originally believed.

So, in any case, this gets remanded for an evidentiary hearing. Husband now will still have the burden of proving that the modification he seeks is to prevent an unnecessary hardship or injustice. It’ll be up to the trial court to decide if that’s the case or not.

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