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In re Marriage of Tough

Court of Appeals of Oregon

October 30, 2013

In the Matter of the Marriage of BRADLEY J. TOUGH, Petitioner-Appellant, and MARGARET A. TOUGH, Respondent-Respondent.

Submitted on April 12, 2013.

Lincoln County Circuit Court 850363 Charles P. Littlehales, Judge.

B. Kevin Burgess and Watkinson Laird Rubenstein Baldwin & Burgess, P.C., filed the briefs for appellant.

Michael C. Peterson and Heltzel, Williams, Yandell, Roth, Smith, Petersen & Lush, P.C., filed the brief for respondent.

Before Armstrong, Presiding Judge, and Nakamoto, Judge, and Egan, Judge.

EGAN, J.

Husband appeals a supplemental judgment ordering entry of a qualified domestic relations order (QDRO), [1] contending that the trial court erred in its calculation of wife's interest in his pension plan. Specifically, he contends that the QDRO divides his pension benefits in a manner that is inconsistent with the division provided for in the parties' dissolution judgment. We agree and, accordingly, reverse and remand.

Husband and wife were married for just over 10 years, during which time husband was employed by Georgia Pacific. Husband's employment provided him with a defined benefit pension plan. When the parties divorced, their property was divided according to a dissolution judgment, which provides, in relevant part:

"[Wife] shall be entitled to receive one-half of the monthly benefits that [husband] is entitled to receive from his pension, as set forth in Exhibit 'C, ' which is by this reference incorporated herein, if and when he receives those payments pursuant to the terms of his agreement with the union. [Wife] shall not have any right to claim any retirement benefits which accrue to [husband] after March 1, 1985."

Exhibit C provides that husband was "100% vested" in the benefit that he had accrued as of December 31, 1984, which was a monthly pension benefit of $215.25. It further estimated the monthly benefit that husband could potentially earn by continuing to work until he was 65 years old to be $971.25.

Husband continued to work for Georgia Pacific for more than 13 years following the dissolution. During that time, the value of his retirement benefits increased. After he had filed for retirement, but before he began to receive any benefits, wife petitioned the court for a QDRO that would effectuate the dissolution judgment's division of husband's pension benefits.

At a show cause hearing on wife's petition, wife contended that the trial court should enter a QDRO that calculated her interest in husband's pension according to the "time rule." Typically, the time rule is used to calculate a nonemployee spouse's interest in the benefits of a defined benefit plan. Kiser and Kiser, 176 Or.App. 627, 632 n 1, 32 P.3d 244 (2001). The time rule provides that the nonemployee spouse's interest is determined by dividing the marital portion of the retirement benefits, at the time of retirement, in half.[2] "The marital portion is determined by multiplying the benefit to be divided by a fraction, the numerator of which is the years (or months) of service during which the couple were married and the denominator is the total years (or months) of employment." Id. Thus, under the time rule, the nonemployee spouse's interest in the retirement benefits is calculated by multiplying the employee spouse's benefits at the time of retirement by a fraction representing the portion of the number of years worked during which the parties were married and dividing the resulting number in half.

Husband challenged wife's petition, contending that she was seeking to circumvent the division of his pension benefits that the dissolution judgment provided for. Husband contended that the dissolution judgment provided that wife was entitled to one half of the pension benefits that he had accrued at the time of dissolution and that wife was not entitled to any benefits that accrued under husband's pension after that point.

In essence, the parties' dispute focused on whether the dissolution judgment provided that wife's interest in husband's pension was to be determined based on husband's pension benefits at the time of dissolution or by applying the time rule to husband's benefits at the time that he retired. Under husband's construction of the dissolution judgment, wife would have a smaller interest in husband's ultimate pension benefits than she would under her construction.

The trial court agreed with wife's construction of the dissolution judgment. Consequently, it calculated wife's interest in husband's pension benefits by applying the time rule to the benefits at the time of retirement. The court then entered a QDRO that provided for that division of the benefits.

Husband appeals, contending that the court incorrectly construed the dissolution judgment and that it erred in entering a QDRO that divides his pension benefits by applying the time rule to his benefits at the time of retirement. In response, wife contends that the dissolution judgment unambiguously provides that husband's benefits are to be divided among the parties by applying the time rule to husband's pension benefits at the time of his retirement. In the alternative, wife contends that the provision providing for the division of husband's pension benefits is ambiguous and that extrinsic evidence, such as the "overall nature" of the dissolution judgment, demonstrates that the dissolution court intended to use the time rule to divide husband's pension benefits among the parties.

Thus, the parties' dispute reduces to a question of construction of the dissolution judgment. We therefore examine the language of the dissolution judgment to determine whether the provision concerning the division of husband's pension benefits is ambiguous. "A provision in a judgment is ambiguous if it is capable of more than one reasonable interpretation." Neal and Neal, 181 Or.App. 361, 365, 45 P.3d 1011 (2002).

Husband contends that the provision at issue unambiguously provides that wife is entitled to 50 percent of the pension benefits that he had accrued at the time of dissolution. He explains that the language of the provision providing that wife "shall be entitled to receive one-half of the monthly benefits that [husband] is entitled to receive from his pension, as set forth in Exhibit 'C, '" limits the property that the provision divides between the parties to the benefits listed in Exhibit C, which are the benefits that husband had accrued at the time of dissolution. Husband contends that the provision reiterates that limitation by stating that wife "shall not have any right to claim any retirement benefits which accrue to [husband] after March 1, 1985." He contends that the provision, by prohibiting wife from claiming any retirement benefits that accrue to husband after March 1, 1985, clearly indicates that wife's interest in his benefits is limited to those benefits that he had accrued at the time of dissolution.

In response, wife contends that the dissolution judgment unambiguously provides that husband's benefits are to be divided among the parties according to the time rule. She contends that the first sentence of the provision provides that she is entitled to one-half of husband's monthly benefits when he receives them. Wife acknowledges that, under her interpretation of that sentence, she would be entitled to one-half of all of husband's pension benefits when he receives those benefits; she nonetheless contends that the second sentence, which provides that she is not entitled to any benefits that accrue to husband after March 1, 1985, limits the scope of the first sentence by describing the marital portion of the pension benefits, which is the portion of husband's pension benefits at retirement that could be allocated to the years during which the parties were married.

Husband has the better of the arguments. To begin with, we disagree with wife's contention that the provision provides that wife's interest is to be calculated at the time that husband receives his benefits. The first sentence of the provision provides that wife "shall be entitled to receive one-half of the monthly benefits that [husband] is entitled to receive from his pension, as set forth in Exhibit 'C, ' * * * if and when he receives those payments pursuant to the terms of his agreement with the union." That sentence provides the timing for when wife is entitled to receive her interest in the benefits, which is "if and when [husband] receives those payments"; it does not provide the timing for when wife's interest in the benefits is to be calculated. (Emphasis added.)

Instead, the sentence expressly links wife's interest in husband's pension to the benefits that he is entitled to receive "as set forth in" Exhibit C. The benefit that Exhibit C provides that husband is entitled to receive is the monthly pension benefit that he had accrued as of December 31, 1984. [3]

To construe the dissolution judgment to provide that wife's interest in the pension benefits is to be calculated based on the benefits that husband has accrued at the time of retirement would ignore both the provision's express reference to the benefits that husband is entitled to receive "as set forth" in Exhibit C and the express limitation on the benefits that wife is not to receive. We therefore conclude that wife's construction of the provision is not reasonable. Cf. Hoffman Construction Co. v. Fred S. James & Co., 313 Or 464, 473, 836 P.2d 703 (1992) (explaining that a construction that renders language meaningless is unreasonable). Consequently, we conclude that the dissolution judgment unambiguously provides that wife's share of husband's pension benefits is not appropriately calculated under the time rule.

The dissent reasons that the QDRO did not modify or conflict with the dissolution judgment, but rather "implemented the property division in the judgment." ___Or App at___ (Armstrong, P.J., dissenting) (slip op at 5). We do not agree that the judgment is susceptible to that interpretation, because the dissolution judgment unambiguously reflects the intent to give wife a one-half interest in the benefits that husband was entitled to receive at the time of the dissolution "as set forth" in Exhibit C. If the dissolution judgment intended to invoke the time rule, Exhibit C--which, again, was incorporated into that judgment--is entirely superfluous, for wife's portion of the benefits could be calculated as needed without reference to any of the figures contained in that exhibit. Moreover, we note that the QDRO conflicts with what wife requested during the divorce proceedings. In her pretrial statement to the trial court, wife not only identified the then-present value of husband's pension benefit at retirement as "approximately $225.00 per month, " she then stated that "[wife] requests that she be awarded a one-half interest in this pension plan vested to date." (Emphasis added.)

The division of retirement benefits at dissolution is a property division that is not subject to modification unless the property award was based on the enhanced earning capacity of one of the parties. ORS 107.135(1)(e); Tiley and Tiley, 147 Or.App. 262, 266, 936 P.2d 367, rev den, 325 Or 491 (1997). Wife did not petition the trial court to modify the dissolution judgment according to ORS 107.135(1)(e). As a result, wife is not entitled to a division of husband's retirement benefits contrary to the division provided for in the dissolution judgment. Because the dissolution judgment unambiguously provides that wife's share of husband's pension benefits is not to be calculated by using the time rule, the trial court erred in entering a QDRO that calculated wife's interest in husband's pension benefits by using the time rule.

Reversed and remanded.

ARMSTRONG, P. J., dissenting.

In reversing the trial court, the majority ultimately--and erroneously--concludes that the trial court's qualified domestic relations order (QDRO) conflicts with the underlying dissolution judgment that it was designed to implement. It does not.

To reach its conclusion, the majority reasons as follows: The dissolution judgment expressly provides that wife is not entitled to claim any pension benefits that accrued to husband after the dissolution of the parties' marriage. By applying the time rule, the QDRO awards wife pension benefits that accrued to husband after the dissolution of the parties' marriage. Hence, the QDRO impermissibly modified the property division in the dissolution judgment.

The majority's conclusion is based on a misunderstanding of the time rule when applied to pension benefits that accrue under a defined-benefit plan. A division of pension benefits entails three separate determinations by a dissolution court: the court must determine the marital portion of the benefits, it must determine the value of the marital portion, and it must divide the marital portion between the parties. Here, the actual division of husband's retirement benefits is not in dispute--both parties acknowledge that wife is entitled to one half of the marital portion of those benefits. However, the parties do dispute the dollar amount of wife's half interest, which implicates both the apportionment and the value of the marital portion of husband's pension benefits.

As the majority acknowledges, the time rule is typically used to calculate the marital portion of a pension benefit. ___Or App at___ (slip op at 2); see, e.g., Kiser and Kiser, 176 Or.App. 627, 631-32, 632 n 1, 32 P.3d 244 (2001). The rule is not complicated: the marital portion is simply represented by a fraction--the coverature fraction. The numerator of the fraction represents the duration of employment service during which the parties were married; the denominator represents the total duration of employment service. In the context of a defined-benefit plan, the time rule ignores other factors--such as contribution amounts, account balances, increases in salary, or the vesting of benefits over different periods of service--because benefits under a defined-benefit plan are understood to appreciate on a straight-line basis. In other words, the benefits are deemed to accrue in a straight line, that is, in equal increments for each year of participation in the defined-benefit plan. See Kiser, 176 Or.App. at 631-32, 632 n 1; Caudill and Caudill, 139 Or.App. 479, 483-84, 912 P.2d 915 (1996).

After establishing the marital portion of a given pension plan--that is, the portion of the benefits that accrued during the marriage--through application of the time rule, the value of that portion may be determined simply by multiplying the coverature fraction by the total value of the benefits due under the pension plan. The total value of the benefits, in turn, can be either the actuarial present value of the benefits, see, e.g., Richardson and Richardson, 307 Or 370, 378, 796 P.2d 179 (1989); Reich and Reich, 150 Or.App. 311, 313, 946 P.2d 319 (1997), or the value of the benefits as they are distributed, see, e.g., Cave and Cave, 85 Or.App. 336, 338, 736 P.2d 215 (1987). See also Kiser, 176 Or.App. at 632. The court then divides that amount between the parties.

Thus, while the time rule reflects a specific conception of the appreciation of pension benefits--viz., accrual in equal increments for each year of participation in the defined-benefit plan--when properly applied it does not have the effect that the majority attributes to it. That is, it does not result in an award of benefits that accrue after the dissolution of the parties' marriage. We have recognized that proposition since at least 1987. See, e.g., Cave, 85 Or.App. at 338.

In Cave, the dissolution court awarded the wife one-half of the husband's monthly pension payments "to the extent that those benefits ha[d] vested and accrued on the date that [the] decree bec[ame] final, " including "any future cost of living increases." Id. The husband appealed, arguing that the award of future cost-of-living increases improperly expanded the wife's share of his pension benefits beyond the marital portion. We disagreed, reasoning that, by the judgment's terms, "any future cost-of-living increases will be based solely on that portion of the pension vested as of the date of the decree." Id. That conclusion recognizes a distinction between the apportionment and the valuation of pension benefits; thus, when a pension benefit's value is not concretely determined in the dissolution judgment--thereby leaving the value of the marital portion undefined--an increase in the pension benefit's value before that value is concretely determined does not result in an award of benefits that can be understood to have accrued after the dissolution of the parties' marriage.[4]

Turning to the application of the time rule here, the court generated a coverature fraction, the numerator of which was 10.42 (husband's years of service during the marriage) and the denominator of which was 23.58 (husband's total years of service under the plan). That results in a marital portion--viz., the amount of husband's pension benefits that accrued before March 1, 1985--of 44.18 percent.[5] The court then awarded wife one-half of that amount--22.09 percent of husband's pension benefits--through the entry of the QDRO.

Nothing about that process conflicts with or modifies any provision of the dissolution judgment; the QDRO simply awarded wife her share of husband's pension benefits that had accrued before March 1, 1985. In the language of the judgment, wife was awarded "one-half of the monthly benefits that [husband] is entitled to receive from his pension * * * if and when he receives those payments * * * [and she has no] right to claim any retirement benefits which accrue[d] to [husband] after March 1, 1985." Because the QDRO did not modify the dissolution judgment's division of property but, rather, implemented the property division in the judgment, I dissent from the majority's decision to reverse the trial court.


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