Divich v. Divich, 22537.

• Citation: 665 N.W.2d 109,2003 SD 73
• Decision Date: 18 June 2003
• Docket Number: No. 22537.,22537.
• Parties: Patricia M. DIVICH, Plaintiff and Appellant, v. Richard Allen DIVICH, Defendant and Appellee.
• Court: Supreme Court of South Dakota

665 N.W.2d 109

2003 SD 73

Patricia M. DIVICH, Plaintiff and Appellant, v. Richard Allen DIVICH, Defendant and Appellee.

No. 22537.

Supreme Court of South Dakota.

Considered on Briefs April 28, 2003.

Decided June 18, 2003.

Rebecca A. Porter, Rapid City, for plaintiff and appellant.

Elizabeth M. Frederick, Frederick Law Office, Rapid City, for defendant and appellee.

GILBERTSON, Chief Justice.

[¶ 1.] This appeal is brought by Patricia Paul (formerly Patricia Divich) after a remand hearing in which the trial court entered a disputed Qualified Domestic Relation Order (QDRO) and denied attorney's fees to Patricia. We reverse and remand as to the QDRO and the denial of attorney's fees.

FACTS AND PROCEDURE

[¶ 2.] Patricia and Richard Divich divorced in 1988 after twenty-eight years of marriage. Richard, who was a teacher for the Rapid City School System, receives retirement benefits through the retirement fund administered by the South Dakota Retirement System. The parties' decree of divorce incorporated the provisions of their Stipulation and Property Settlement Agreement. As part of the settlement, the following paragraph was included:

A. [Patricia] shall have a vested interest in [Richard's] retirement program under the South Dakota Retirement System. [Patricia's] interest shall be defined as:

1. Fifty percent (50%) of the benefit multiplied by the number of years during the marriage in which contributions to the program were made and divided by the total number of years in which contributions were made to the program.

2. [Patricia] shall be entitled to this division of the benefits whenever [Richard] should draw on his benefits. More specifically, should [Richard] liquidate the account prior to retirement, [Patricia's] share would be determined as above and distributed directly to her at the time of liquidation. If on the other hand [Richard] continues the account until he commences to draw retirement benefits therefrom, [Patricia's] share of the benefits shall be determined as above and be paid to her with the same frequency as the benefit received by [Richard].

3. That [Richard] shall maintain [Patricia's] status as survivor benefit on the existing retirement plan according to the terms thereof which will provide the greatest benefit to her in the event of his death.

[¶ 3.] In Divich v. Divich, 2002 SD 24, ¶ 11, 640 N.W.2d 758, 761 (Divich I), we reversed and remanded the trial court's finding that the retirement provisions of the parties' property settlement agreement was ambiguous. We also reversed and remanded the trial court's denial of Patricia's motion for attorney's fees for a re-determination. Divich I, 2002 SD 24, ¶ 15, 640 N.W.2d at 763.

[¶ 4.] On remand, the trial court denied Patricia's motion for attorney's fees and also rejected her proposed QDRO, which attempted to provide that if Patricia predeceased Richard, her share of the retirement benefits would be payable to her estate. Instead, the trial court entered a QDRO which provided that if Patricia predeceased Richard, her share of the retirement benefits would revert back to him.

[¶ 5.] Moreover, on July 8, 2002, the trial court entered a QDRO that contained the following clause to which Patricia objected:

The Alternate Payee shall receive a separate monthly payment (assignment) from the Plan equal to 34.2% of the benefit that the Participant otherwise would receive from the Plan on a monthly basis. The monies shall be paid simultaneously with the benefit payment from the Plan to the Participant and shall continue until the earlier of the Alternate Payee's death or the Participant's death. After this assignment, the Participant shall have no remaining rights to the portion assigned. If the Alternate Payee does predecease the Participant, then and in that event, all of the monthly benefit payment from the Plan thereafter shall be paid to the Participant.

(emphasis added.)

[¶ 6.] Patricia brings this appeal and raises the following issues:

1. Whether Patricia's share of retirement benefits is a property right that should be paid to Patricia's estate if she predeceases Richard.

2. Whether the trial court abused its discretion when it denied Patricia's application for attorney's fees.

STANDARD OF REVIEW

[¶ 7.] According to Kanta v. Kanta, 479 N.W.2d 505, 507 (S.D.1991), we will not "disturb a division of property unless it clearly appears the trial court abused its discretion." Id. (citing Johnson v. Johnson, 471 N.W.2d 156 (S.D.1991); Fox v. Fox, 467 N.W.2d 762 (S.D.1991); Studt v. Studt, 443 N.W.2d 639 (S.D.1989)). "The term `abuse of discretion' refers to a discretion exercised to an end or purpose not justified by, and clearly against, reason and evidence." Kanta, 479 N.W.2d at 507 (citing Gross v. Gross, 355 N.W.2d 4, 7 (S.D.1984); Rykhus v. Rykhus, 319 N.W.2d 167 (S.D.1982); Herndon v. Herndon, 305 N.W.2d 917 (S.D.1981); Davis v. Kressly, 78 S.D. 637, 107 N.W.2d 5 (1961)). The interpretation of a retirement provision contained within a property settlement is a question of law reviewed by this Court de novo. Divich I, 2002 SD 24, ¶ 9, 640 N.W.2d at 761.

[¶ 8.] According to Zepeda v. Zepeda, we review the denial of attorney fees in a divorce action under the abuse of discretion standard. 2001 SD 101, ¶ 27, 632 N.W.2d 48, 57 (citing Whalen v. Whalen, 490 N.W.2d 276, 284 (S.D.1992) (modified on other grounds) (citations omitted)).

ANALYSIS AND DECISION

[¶ 9.] 1. Whether Patricia's share of retirement benefits is a property right that should be paid to Patricia's estate if she predeceases Richard.

[¶ 10.] Patricia argues that the trial court should have entered her proposed QDRO. Specifically, she argues that there is no language in the parties' Stipulation and Agreement indicating that Patricia agreed to divest her share of Richard's retirement benefits if she predeceases him. Therefore, she contends, when the trial court entered a QDRO that provided if she predeceased Richard her share of the retirement benefits would return to him, it was an impermissible modification of the property settlement.

[¶ 11.] "`In South Dakota a retirement plan has been recognized as a divisible marital asset since it represents consideration in lieu of a higher present salary. Contributions made to the pension plan would have been available to the family as disposable income during the marriage.'" Bell v. Bell, 499 N.W.2d 145, 147 (S.D. 1993) (quoting Stemper v. Stemper, 403 N.W.2d 405, 408 (S.D.1987)). However, despite this well-settled point of law that a retirement plan is a property right, the trial court found that "when [Patricia's] gone, [her share of that retirement fund] goes with her."

[¶ 12.] Whether a share of a retirement plan awarded in a divorce action is a property right which should continue to be paid to the estate of a spouse who predeceases the employee spouse, is a case of first impression for this Court. Richard relies on Ablamis v. Roper, 937 F.2d 1450 (9thCir.1991), for the assertion that benefits provided for under a retirement plan may not be assigned or alienated. Richard, therefore, argues that Patricia's proposed QDRO was correctly rejected by the trial court.

[¶ 13.] In Ablamis, the parties were married in California, a community property state, and remained married until the wife passed away. 937 F.2d at 1452. In Mrs. Ablamis' will, she devised "all property subject to [her] testamentary power including [her] one-half community property ... assets [she] may have." Thereafter, the executrix of her estate asserted that the property should include all community property, including a one-half interest in her husband's pension rights, which were fully vested. Id. at 1455. However, the Ninth Circuit Court of Appeals disagreed and found that ERISA's spendthrift provisions preempted any state community property law. 937 F.2d at 1456-57. In the case at hand, as agreed to by both parties, the South Dakota Retirement System plan is exempt from federal legislation. See 29 U.S.C. § 1003(b)(1). Furthermore, even if it was not exempted, Ablamis acknowledged that ERISA's spendthrift provisions are not applicable to QDROs. Id. at 1456.

[¶ 14.] Next, Richard argues that the purpose of retirement plans is to provide for participants and their dependents or surviving spouses during their lifetime. Nonetheless, an interest in a retirement plan is marital property, subject to an equitable division. See, e.g., Grode v. Grode, 1996 SD 15, ¶ 24, 543 N.W.2d 795, 802

. We note that Wade Hubbard, a witness appearing from the South Dakota Retirement System, referenced a form for a QDRO which treated the retirement benefit as a fixed asset which would go to the spouse's estate upon the spouse's death. Moreover, in examining whether an item is marital property or alimony, "it is not the label that is placed on the award that controls, but rather the nature of the award." Saxvik v. Saxvik, 1996 SD 18, ¶ 16, 544 N.W.2d 177, 180 (citing Hautala v. Hautala, 417 N.W.2d 879, 882 (S.D. 1988)). Patricia argues that if Richard had the resources to buy out Patricia's share of his retirement at full value, that money would be hers to use as she pleased. Further, if she died before using the money, then it would pass to her estate. Therefore, it follows that if she receives a monthly payment, instead of a lump sum award, then that payment should continue to be paid to her estate. We agree with Patricia's argument and hold that her proposed QDRO should have been entered.

[¶ 15.] 2. Whether the trial court abused its discretion when it denied Patricia's application for attorney's fees.

[¶ 16.] In Divich I, we stated that "[i]n view of our reversal on the merits of the trial court's order and judgment, we also reverse the trial court's denial of Patricia's motion for attorney's fees and remand the issue to the...