Opinions, March 31, 2016: The Ghosts of QDROs Past & Future

The First District Court of Appeals released its published opinion in Howard v. Howard, No. 01-14-00761-CV, in which the Court of Appeals reversed and remanded the trial court’s determination of the meaning of the decree’s division of retirement benefits.

Winnie Howard and Stephen Howard married in November, 1979, and were divorced in November, 1988. Prior to marriage, Stephen worked for the Houston Fire Department. Six months after they were married, Stephen began working for the Houston Police Department and continued to work there after the divorce. The divorce decree provided that Winnie was entitled to:

One half of any and all sums related to any vested profit sharing plan, retirement plan, pension plan, employee stock option plan, employee savings plan or accrued unpaid bonuses, or other benefit programs existing by reason of [Stephen]’s employment during the marriage.

 

This is the language of the decree which determined the outcome of this case.

Stephen participated in the Houston Police Officer’s Pension System (“HPOPS”) from day one of his employment, making contributions of $20,765 during the 8.5 years he was married to Winnie and employed by HPD. If he terminated his employment before becoming vested in HPOPS, these contributions would be refunded to him. At the time of the divorce, HPOPS provided retirement benefits for employees who had served ten years and further benefits for those who had served twenty years.

Also, years after the divorce, the HPD made changes to the pension, adding two benefits: 1) In 1995, HPD offered the Deferred Retirement Option Program (DROP) benefit which provides an officer with 20 years of service with the option to defer retirement and if retirement is deferred, then eligible retirement benefits pay into another account while the officer continues working, which builds into a lump sum available when the officer actually retires. 2) In 1998, HPOPS added a $5,000 lump sum payment for retiring officers who had 20 years of service.

In 2001, HPOPS was amended so Stephen’s HFD service prior to and in the first six months of marriage counted toward HPOPS. Thus, in 1998, Stephen became eligible for DROP. He elected not to retire and participated in DROP, building up retirement benefits while he continued working.

In 2011, Winnie filed a Petition to Enter Post Divorce QDRO and an Amended Petition to Enter Post Divorce DRO, Clarify Prior Order and Division of Undivided Assets in 2012 in the 311th District Court.

After a bench trial in January 2014, the trial court ruled that Winnie was entitled only to one half of the payroll contributions on the date of the divorce (i.e. one half of $20,765.00), not to any benefits that Stephen accrued once he reached ten and twenty years of employment.

On appeal, the only dispute between the parties is the meaning of the language in the decree quoted above. Stephen argued that his payroll contributions of about $21,000 which he would be entitled to if he terminated his employment with the HPD were the only “vested” retirement benefit at the time of the divorce. The Court of Appeals strongly disagreed, finding that this interpretation

disregards the express terms of the parties’ agreed divorce decree because it ignores the provision’s use of the terms “all sums related to” and benefits “existing by reason of” employment during the marriage, which is broader than sums that are “then-existing.”

Particularly, the Court of Appeals found that if the decree was referring solely to the refund of those payroll contributions, it would have said so and the language like “all sums related to” would be surplusage:

By including broad, general language encompassing a variety of possible benefit plans, the decree contemplates the allocation of Winnie’s proportional future right to vested benefits that “exist[] by reason of” the marriage, so long as those benefits can be traced to the contributions made and service credit earned during the marriage.

The Court of Appeals also stressed that the use of the modifier “vested” did not overrule the remainder of the prospective and forward-looking language in the provision. In fact, Stephen had no vested retirement benefit on the date of divorce because he didn’t have the requisite years of service at that time. A refund of payroll contributions, the Court said, is not a retirement benefit, but a return of salary earned.

The Court of Appeals found that the trial court erred in its interpretation of the decree but it did not explicitly state what benefits Winnie was be entitled to. There is a strong implication that not only is she entitled to a pro-rata portion of the HPOPS benefits for ten- and twenty-year employees as provided in the plan at the time of divorce, but also a pro-rata portion of the $5,000 lump sum upon retirement and/or the DROP benefits traceable to the service credits accumulated during the parties’ marriage. But the Court of Appeals remanded for further proceedings. It’ll be interesting to see if it comes back up in the future.

This also raises the practical question of whether a different wording of the decree could have prevented this result for Stephen. It seems possible to me, but on the other hand, it’s hard to imagine an alert attorney agreeing to such limiting language.

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Opinions, March 29, 2016: What Makes a Division Just & Right?

The Fourteenth Court of Appeals released its memorandum opinion in Marin v. Marin, No. 14-13-00749-CV this morning. The key issue is the trial court’s division of a business owned by the parties.

Joel Marin petitioned for divorce, claiming insupportability and adultery on the part of Janell Marin. Janell counter-petitioned, alleging insupportability, cruel treatment, and adultery against Joel. Both filed an Inventory and Appraisement listing stock in Ameriwaste. Together they owned a controlling interest in Ameriwaste; Janell owned 51% and Joel owned 31%. Janell valued the entire 82% stock of Ameriwaste at $940,000 but Joel valued it at $2,096,000.

In her inventory, Janell also listed a loan for $380,000 from Ameriwaste as community debt. The loan was a portion of the total amount necessary to discharge a judgment of $502,000 against Janell personally. Because the judgment against Janell is in favor of IESI TX Corp., the parties and Court refer to it as the IESI judgment. IESI had sued Janell for breach of fiduciary duty, fraud, conversion, and forgery. Joel paid $122,000 towards satisfaction of the judgment while Janell borrowed the $380,000 from Ameriwaste to satisfy the balance. Janell executed two promissory notes to Ameriwaste.

In his inventory, Joel listed the IESI judgment as part of a waste claim against Janell and assigned a value of $502,000. He did not mention the $380,000 loan in his inventory.

The parties agreed to a trial by a special judge (“SJ”). The agreed order of referral did not include any limitation on the SJ’s authority of the divorce trial. After a four day trial, the SJ sent the parties an email detailing his division of the marital estate which included a spreadsheet, and several months later signed a final decree of divorce. On the spreadsheet, the SJ evidently wrote in the $380,000 loan and then crossed it out. He also adjusted the value of the Ameriwaste stock, finding the value was $1,770,000. He awarded all of the stock to Janell and granted Joel a money judgment against Janell.

At the hearing prior to the entry of the final decree, the SJ stated that he couldn’t specifically recall why he had written and then scratched out the $380,000 loan but figured it was because that loan was “subsumed within the values” he gave to Ameriwaste.

Janell filed a motion for new trial, alleging that the division of property “inadvertently omitted” the debt of $380,000 to Ameriwaste. The SJ denied the MNT, issued findings of fact and conclusions of law, and Janell appealed.

In her first issue, Janell challenged whether the SJ had authority to issue a final decree of divorce. This is actually the Marins’ second trip to the Court of Appeals. On the previous trip this issue was resolved.

In her second issue, Janell argued the trial court erred by not granting her motion for new trial because, according to her, the SJ did not timely submit the verdict within sixty days of the adjournment of trial as required by the TCPRC. Section 151.012 of the TCPRC states that if the SJ fails to submit the verdict within that 60 day window:

the trial court may grant a new trial if: (1) a party files a motion requesting the new trial; (2) notice is given to all parties stating the time and place that a hearing will be held on the motion; and (3) the hearing is held.

See Tex. Civ. P. & Rem. Code Ann.  § 151.012 (emphasis added). Janell argued that the statute mandates or requires the trial court to grant a new trial if the three elements of §151.012 are met. The Court of Appeals disagreed, finding the discretionary language permitted the trial court to decline to grant a new trial. “Janell cites no authority for her position that section 151.012 mandates a new trial, and we find none.”

Furthermore, the Court of Appeals noted the record did not establish that she met the three elements anyway.

Janell also argued that the motion for new trial could only have been denied by the presiding judge of the court, not the SJ. The order denying the MNT was signed by Thomas Stansbury as the “presiding judge.” The Court of Appeals found that Janell waived this complaint when she did not present it to the presiding judge. And even if Judge Stansbury lacked authority to sign the order, the MNT was denied by operation of law.

In her third and fourth issues, Janell challenged the property division. Specifically, she argued the trial court abused its discretion by “failing to award and account for” the $380,000 debt and requiring her to pay the $380,000 twice, as debt service to Ameriwaste and in the waste claim to Joel. Janell argues that after the trial concluded, the SJ sent the parties an email with his conclusions and a spreadsheet and after adjustments for waste claims, determined that a “50/50” division was appropriate. Janell argued that this spreadsheet assigning the division of property did not include the $380,000 loan to Janell from Ameriwaste.

Joel did not dispute the characterization or existence of the loan but he did dispute that Ameriwaste had a business purpose in loaning the money to Janell and whether Janell would be required to repay Ameriwaste (as she was the majority shareholder and could forgive the loan). Joel also argued that the SJ did not abuse his discretion by not specifically awarding the $380,000 loan because there was evidence to support the division. He also argued the finding of value of the 82% of the shares of Ameriwaste stock and the assignment to Janell of all of it demonstrated the court’s consideration of the debt.

The decree awarded all of the Ameriwaste stock but awarded Joel a money judgment of $341,297 against Janell as part of the division of community property. The Court of Appeals then excerpted a significant portion of the SJ’s findings, including:  Janell’s adultery and fault in the break up of the marriage; Janell’s fraud on the community and wasting of assets; reimbursement claims owed by Janell to the community, etc. It’s a pretty damning list against Janell.

Janell complained on appeal that the SJ had insufficient evidence on which to make his division but did not complain that the court failed to give due consideration to the Murff factors. Murff v. Murff, 615 S.W.2d 696, 699 (Tex. 1981) (The name Murff appears in the opinion 9 times; I’d like to think Justice Donovan just enjoys saying Murff). The Court of Appeals then listed a veritable laundry list of evidence in the record the SJ heard which supported the disproportionate division. The final decree and findings incorporated this evidence in making its disproportionate division of the parties’ estate.

The Court of Appeals noted that the SJ adjusted the value of the Ameriwaste stock by giving it a value of $1,770,000 (Janell had valued it at $940,000; Joel, at $2,096,000) and awarded it all to Janell, despite the fact Joel requested it be awarded to him. The COA also held that Janell did not complain that the debt was mischaracterized and that the mischaracterization was harmful “which would require us to remand the entire community estate for a just and right division.”

 

Finally, though the SJ expressed uncertainty at the hearing on the motion to enter judgment as to why he wrote in and then crossed out the $380,000 loan on the spreadsheet attached to his email rulings, the Court of Appeals found that “his subsequent actions indicate[d] that he considered the $380,000 debt and decided not to modify his rulings.” Because Janell’s argument  the $380,000 loan was “inadvertently omitted” was considered prior to final judgment, the court did not abuse its discretion by denying the MNT.

In conclusion, the Court of Appeals found there was sufficient evidence to support the findings of fact and division of property and that Janell did not meet her burden of demonstrating the division was so unjust and unfair as to constitute an abuse of discretion. The decree was affirmed.

 

 

 

 

Opinions, March 24, 2016: Clerical Error v. Judicial Error

This is a little awkward. This morning, the Fourteenth District Court of Appeals released its published opinion in In re A.M.C. & T.R.C., No. 14-15-00060-CV, a case in which my firm and I wrote the Appellee’s brief. Because it is a published opinion, I will briefly summarize the case.

The underlying case was an enforcement action which had already been to the Court of Appeals before on mandamus when Stacie Depeau challenged her incarceration after she was found in contempt of the parties’ divorce decree. In re Depeau, No. 14-14-00693-CV, 2014 WL 4952427 (Tex.App.–Houston [14th Dist.] Oct. 2, 2014, no pet.) (orig. proceeding). Some, though not all, of the violations were affirmed.

At issue in the instant matter is a Judgment Nunc Pro Tunc (“JNPT”) signed by the trial court correcting the original commitment order. When the original commitment order was scanned by the court clerk, it accidentally cut off key provisions of the order handwritten at the bottom of the page; specifically, those provisions setting forth the conditions of Depeau’s probation. Appellee moved for JNPT. The trial court held two hearings on the motion. At the first hearing, the trial court indicated that the court clerk would have to find the original order that included the handwritten provisions which had been scanned. At the second hearing, the trial court determined the original order had not been found and was presumed lost. The trial court granted the motion for JNPT and entered a JNPT which included the conditions of probation in the body of the order, typed.

Depeau appealed the Judgment Nunc Pro Tunc, arguing that the trial court improperly entered the JNPT including provisions which she asserts were not in the original order and that the JNPT corrected a judicial error, not a clerical one.

The Court of Appeals affirmed the trial court, finding that: 1) the trial court’s determination that the original order included the omitted handwritten language and that a Judgment Nunc Pro Tunc correcting the error was proper; and 2) the error was a clerical one, not a judicial one (“This is precisely the type of clerical error that is envisioned by Rule 329b”).

Opinions, March 17, 2016: Primer on Separate Property

The First District Court of Appeals released its memorandum opinion in Lopez v. Lopez, No. 01-15-00618-CV this morning, affirming the 308th’s division of the marital estate. The case presents a nice and uncomplicated illustration of how to establish a separate property claim at trial.

Jose and Anita married in 1985 and moved into a house on Twickenham Trail in Houston. The Twickenham house was owned by Anita’s mother. During the marriage, they made payments on the home from community funds to Anita’s mother to retire the debt, but there was no evidence of a written installment contract or contract for deed between Anita’s mother as seller and Anita and Jose as buyers.

At some point, Anita’s father passed away and she received an inheritance from his estate in 2004 which apparently consisted of an interest in real property that he owned. Two of Anita’s siblings purchased her interest, each writing a check to Anita individually for $31,566.67. Anita deposited her brother’s check into a certificate of deposit and did not claim it as separate property when Anita and Jose divorced in 2014. But Anita took the check from her sister and endorsed it to their mother as partial payment for purchase of Twickenham. The mother then deeded Twickenham to Anita individually in 2004. The evidence included the canceled check from Anita’s sister (without objection from Jose) and corroborating testimony from her (without objection from Jose).

The trial court entered findings adopting the uncontested valuation figures from Anita’s I&A and determined the value of Twickenham was $31,566.67 and was Anita’s separate property.

The Court of Appeals applied the inception of title rule and the statutory presumption that assets gained during the marriage are community assets and concluded that Twickenham was presumptively a community asset.

Next, the Court of Appeals examined whether the evidence supported the trial court’s finding that Twickenham was Anita’s separate property. The court reviewed the evidence and noted that undisputed testimony is sufficient to establish the separate character of property. The Court of Appeals affirmed the trial court in finding the evidence sufficient to support Anita’s separate property claim.

Finally, Jose also challenged an award of attorney’s fees the trial court made of $10,000.00 against him. Jose stipulated at trial that $10,000 was a reasonable and necessary amount for fees but on appeal contended that the evidence was insufficient to support the award. The Court of Appeals found that Jose was awarded the business assets in the divorce and that Anita testified she received none of the income from the businesses after the couple separated, though Jose did send her money after she requested a divorce. Also, Anita presented evidence that Jose had diverted some of the income to his family and his girlfriend in the Honduras (I love it when this sort of detail comes out at the end of the opinion). The Court of Appeals affirmed the award.

 

 

 

 

Opinions, March 10, 2016: Disqualifying an Attorney

The First Court of Appeals released its interesting memorandum opinion this morning in a mandamus proceeding, In re Groves, No. 01-15-00537-CV, concerning a motion to disqualify an attorney after an outcry of sexual abuse was allegedly made to the attorney.

In the underlying case, Keith Gross represented James Wesley Groves in his proceeding to modify the terms of the order concerning his children with Avette Mathis. Gross explained that on April 13, 2015, Groves informed him that one of the children had made an outcry of sexual abuse against the child’s step-father to Groves’s wife. Gross met with Groves and his wife to make a reasonable inquiry into the foundation for filing a TRO. Gross informed the trial court that he had forgotten that an amicus had been appointed because he had had little interaction with the amicus and had been on the case for a short time. The child had come with Groves and his wife to the meeting and was present when they told Gross what allegedly occurred. He further asserted that the only thing he said to the child was “Is this true what your parents are saying? Do you know the difference . . . between a lie?” The child stated she knew the difference between the truth and a lie.

The amicus learned on April 18, 2015 that there had been an outcry. Gross told the amicus about the meeting and his conversation with the child. The amicus instructed Gross not to speak with the child and later met with the child.

Temporary orders were set for April 28. The day before, Mathis filed  a motion to disqualify Groves, contending that he was “an essential fact witness in this matter” and Mathis would be prejudiced by his “dual role as an advocate and a witness.”  Gross’s conduct made him “a material witness as to the essential facts as to whether or [not] sexual abuse occurred and any other related facts which form the basis of [Groves’s] claims or defenses” including Groves’s “filing suit to restrict [Mathis’s] possession and access using knowledge gained from Keith A. Gross’[s] actions as a material witness.” Gross and Groves responded that disqualification was inappropriate because Mathis failed to identify any essential facts that were necessary to the case and required Gross’s testimony, and failed to articulate how Gross’s supposed dual roles would prejudice her case. Mathis then supplemented her motion to disqualify with a motion for sanctions for tampering with a witness. (Side note: there must have been some very fast drafting and filing going on here).

The next day, Mathis’s counsel stated he would like to take up the motion to disqualify and alleged that Gross intentionally interfered with the Court’s core function by interviewing the child without the amicus’ consent. No witnesses were sworn and no exhibits were offered or admitted into evidence. The trial court granted the motion to disqualify and ordered Gross to take the ad litem’s CLE that is offered for CPS cases and to pay a fine of $2,500.00 into the registry of the court. The trial court did not state a basis for the ruling, did not sign an order or make any findings of fact.

Gross and Groves filed the mandamus, arguing that the trial court abused its discretion in disqualifying and sanctioning Gross because Mathis did not establish that Gross’s conduct significantly interfered with the court’s legitimate exercise of its core functions and the record does not establish a violation of a trial court order. They also alleged that Mathis failed to establish Gross’s bad faith.

The Court of Appeals noted that, in applying its inherent power to impose sanctions, the trial court must make findings to support its conclusion that the conduct complained of significantly interfered with the court’s legitimate exercise of its core functions. Though the trial court did not sign an order or make findings, the COA said it would review the record to determine whether the trial court abused its discretion.

Because no witnesses were sworn and no evidence offered or admitted, the record contained no evidence to support an imposition of sanctions on Gross. Accordingly, the COA concluded the trial court abused its discretion in sanctioning Gross based on its inherent authority to sanction.

On the issue of disqualification, the COA noted that Mathis initially moved to disqualify Gross based on the lawyer-witness rule of the Texas Rules of Disciplinary Conduct, but that issue was not urged at the hearing and no evidence was offered to support Mathis’ argument. The COA noted that disqualification of an attorney due to his status as a potential witness is appropriate only if the attorney’s testimony is necessary to establish an essential fact. “The fact that an attorney serves, or may serve, as an advocate and witness does not compel disqualification.” The COA agreed with Gross and Groves that Mathis had failed to demonstrate that Gross’s testimony is necessary to establish any particular essential fact.

In conclusion, the COA vacated the sanctions and disqualification order.

 

 

 

 

Opinions, March 8, 2016: Recognizing Foreign Wedding Ceremonies

First, happy birthday to U.S. Supreme Court Justice Oliver Wendell Holmes, Jr.! He would have been 175 today. One of my favorite quotes from the pithy Great Dissenter: “Lawyers spend a great deal of their time shoveling smoke.”

Secondly, man, it’s been over a month since the last post/family law decision from the Houston Courts of Appeal. Maybe they’re saving them up for an Easter basket cornucopia or something.

On to today’s decision: The  Fourteenth Court of Appeals released its published opinion in Adeleye v. Driscal, No. 14-14-00822-CV, in which the key issue is the recognition of a marriage under foreign law and custom.

Margaret Modupe Driscal testified that she met Tokes Tosin Adeleye in 1981 and they dated for two years before being married in a traditional Nigerian ceremony on May 18, 1984. She further testified that she was pregnant and they had been cohabitating before the ceremony. Neither Adeleye nor Driscal was present at the ceremony because the custom in Nigeria was for the man to tell his family whom he wants to marry and then his family writes to the woman’s family to ask for her hand in marriage and dates are arranged for a ceremony at which the husband and wife evidently do not appear. They had three children together and moved to Georgia in 1983 and to the Houston area in 1997. She testified they found a house in Houston together, lived together throughout the marriage (though Adeleye went back and forth between Atlanta and Houston, supposedly for business reasons), and held themselves out to friends and family as being married. The trial court entered a divorce decree dissolving the marriage and dividing the estate. Adeleye challenged the decree on appeal.

At trial, Driscal introduced expert testimony of a Nigerian lawyer licensed in Nigeria and New York whose practice includes immigration and family law matters. Her expert corroborated Driscal’s account of Nigerian marriage customs and further testified that such “customary law by proxy” marriages are recognized by the United States, as evinced by the United States Citizenship and Immigration Service Policy Manual. He said that in such cases, the families of the couple meet and agree on a “bride price” to be paid by the groom and then family members or personal representatives of both sides, along with two witnesses, meet. Once the meeting has occurred, the couple is legally married in Nigeria.

At first, I thought this would save considerable sums on wedding planning, but Adeleye’s brother, Sanya Adeleye, testified that there were 50 to 80 people at the ceremony, so it sounds like you still have to feed scores of semi-known relatives. Adeleye’s own brother further testified that his family recognized Driscal and Adeleye as married, the couple held themselves out as married, they lived together, had three children together, had a house together, and that Sanya is totally getting Tokes back for that time when they were kids and Tokes put Sanya’s hand in warm water while he was asleep.

Long story short*, the trial court did not abuse its discretion in finding the marriage was valid and existing at the time the divorce action was filed.

*There are a number of other interesting and intriguing issues addressed in the opinion (e.g. there is a strong implication Adeleye had a second wife and life in Georgia and Driscal had an unconsummated de jure marriage to another man for green card purposes) but they are either distracting from the main issue or Adeleye failed to preserve the error in trial court or he asserts arguments on appeal that were not asserted in trial court.