Ferrill v. Ferrill

• Decision Date: 06 March 2020
• Docket Number: Court of Appeals Case No. 18A-DR-2013
• Citation: 143 N.E.3d 350
• Parties: Michael A. FERRILL, Appellant-Respondent, v. Susan E. FERRILL, Appellee-Petitioner
• Court: Indiana Appellate Court

143 N.E.3d 350

Michael A. FERRILL, Appellant-Respondent,

v.Susan E. FERRILL, Appellee-Petitioner

Court of Appeals Case No. 18A-DR-2013

Court of Appeals of Indiana.

FILED March 6, 2020

Attorney for Appellant: Mark S. Lenyo, South Bend, Indiana

Attorney for Appellee: Lauren M. Longstreet, Longstreet Law, LLC, South Bend, Indiana

May, Judge.

[1] Michael A. Ferrill appeals the trial court's order granting Susan E. Ferrill's petition for a rule to show cause in the parties' dissolution of marriage action. Michael argues the trial court erroneously interpreted language in the parties' court-approved settlement agreement and, therefore, abused its discretion when it found him in contempt for ceasing the monthly payments at issue. We reverse.

Facts and Procedural History¹

[2] Susan and Michael were married in March 1972. Michael was on active duty in the United States Army until 1995, when he elected to leave active duty prior to accumulating the twenty years of service required for military pension. In exchange for leaving active duty before qualifying for pension, Michael was to receive Voluntary Separation Incentive ("VSI") payments in an amount based on his pay grade when separating from the military and for "twice the number of years of service." 10 U.S.C.A. § 1175(a)(2)(A).

[3] In January 2003, Susan and Michael separated and filed a petition to dissolve their marriage. On February 9, 2004, the trial court entered a decree dissolving their marriage and incorporating their property settlement agreement ("the Agreement"), which divided the marital estate. As to personal property, pensions, and retirement accounts, the Agreement provided:

2. The personal property and household furnishings have been amicably divided between the parties, with Wife to keep as her sole and separate property, all of the property presently in her possession, including a 2000 Jeep, Wife's IRA, Wife's Nantucket Cottage Hospital pension, three cemetery plots and the items of personal property as set out on Schedule 1 attached hereto.

Husband will keep as his sole and separate property all of the property presently in his possession, including but not limited to a 1994 Aerostar vehicle, Husband's IRA, Husband's military retirement pension, three cemetery plots and certain items in Wife's possession as set out on Schedule 1 attached hereto.

(App. Vol. 2 at 89 (hereinafter, "the Pension Provision").) As to the VSI payments Michael was receiving, the Agreement provided:

[Michael] currently receives a voluntary separation incentive from the United States Government. [Michael] will pay to [Susan] the sum of $11,000 annually from this VSI account within ten (10) days from the date that he receives same. Should this VSI account be converted to any other form of payment, [Michael] will pay this $11,000 obligation from this source pro-rated as received.

(Id. at 91 (hereinafter, "the VSI Provision").)

[4] After the dissolution decree was entered, Michael made $1,000 monthly payments to Susan pursuant to the VSI Provision. When Michael returned to active duty and received active duty pay in lieu of VSI payments, he continued paying $1,000 per month to Susan. In 2011, Michael learned he was no longer eligible to receive VSI payments because he had accumulated the twenty years of active-duty service required to receive full military pension. Around that same time, Michael also learned he would have to repay all VSI monies he had received, which totaled $386,730.11. Nevertheless, Michael continued to make the $1,000 monthly payments to Susan.

[5] On February 28, 2016, Michael wrote to Susan and informed her that he had received no VSI payments for five years but had continued making monthly payments to her as a courtesy. He told her that those payments would cease after March 2016. On March 14, 2017, Susan filed a petition for rule to show cause asking the court to hold Michael in contempt for stopping his monthly payments. The trial court held an evidentiary hearing on the petition on June 11, 2018. On July 20, 2018, the trial court issued an order granting Susan's petition.

[6] In relevant part, the trial court found as follows:

3. Michael's voluntary separation (while holding an officer's rank) from the Army took place in 1995. Although neither of the parties described the program under which Michael left the [A]rmy as a "reduction in force," it essentially was just that. To encourage service members to leave rather than wait until members were vested in their military pensions, the Army agreed to pay departing members an incentive. Michael's annual incentive payments were $22,000.

4. The tragic events of September 11, 2001 led to military action in Afghanistan. Michael's training and experience made him a candidate for involuntary recall and deployment to Afghanistan.

5. While Michael was back on active duty, the VSI payments stopped. When Michael again separated from the Army, the VSI payments continued.

6. Michael was recalled to active duty involuntarily on four separate occasions. During the course of those deployments (some of which occurred before and some after the parties were divorced), Michael became eligible for the military pension.

7. Michael's final separation from the Army occurred in 2011. At that time Michael learned that he would no longer be eligible to receive the VSI payments but instead would receive pension payments. Michael was not given a choice between the VSI payments and the pension payments.

8. Federal law requires that when a military veteran receiving VSI payments becomes vested in a pension after additional service, the veteran must repay the VSI payments previously received. This is done through a deduction in the pension payments.

9. Upon hearing of this requirement during the evidentiary hearing, the Court was surprised that the military would impose such a requirement. One would think that in the context of an involuntary recall that leads to a service member being eligible for the pension that the member would simply begin to receive pension payments instead of VSI payments, perhaps in some reduced amount to reflect the moneys received earlier. The Court's research, however, has revealed that this repayment (or recoupment) requirement indeed exists and that Michael is subject to this requirement. This requirement includes the repayment of the entire amount of the VSI moneys paid to Michael by the military .... This requirement is mindboggling, but the Court is unable to relieve either of the parties of the requirement.

(Id. at 14-16 (emphasis original).)

[7] The trial court then applied the law to the facts of the case:

For a court to conclude that a party is in contempt for failing to comply with an order of the court, the party seeking the contempt finding must prove three things by clear and convincing evidence. First, that the non-compliant party was aware of the order. Second, that the order clearly required the non-compliant party to act or not act. Third, that the non-compliant party willfully failed to comply with the order.

In this case, there is no question that Michael was aware of the order contained within the settlement agreement that was incorporated into the dissolution decree. Michael complied with the requirement that he pay $11,000 from his VSI for a number of years. Thus, the first requirement for a finding of contempt is satisfied.

Turning to the second requirement, the answer is not reached quickly. From Michael's perspective, he knew he was required to pay the $11,000 each year from his VSI payment. Once the VSI payment stopped, there was no clear requirement that he continue making the $11,000 payments. On the other hand, from Susan's perspective, the settlement agreement's provision regarding conversion of the VSI payments to a different form of payment should not require further clarification.

In this case, the Court finds that the parties intended that Susan would receive $11,000 each year out of Michael's post-Army career pay, whether in the form of the VSI or a future pension benefit that might replace the VSI. The inclusion of the sentence regarding the "conver[sion] to any other form of payment" makes this clear. Michael's interpretation of Paragraph 5 would render that sentence meaningless....

... Even though the parties can offer different interpretations, the Court finds that Michael's interpretation is not a reasonable one given the inclusion of the reference to converting the VSI to another form of payment. Thus, the Court concludes that the settlement agreement was sufficiently clear to inform Michael what was expected of him. The second requirement for a finding of civil contempt is therefore satisfied.

The third requirement is that Susan must prove by clear and convincing evidence that Michael's non-compliance with the settlement agreement was willful. This does not mean that the Court must conclude that Michael was belligerent or refusing to comply. The Court only has to conclude that Michael's actions were intentional as opposed to accidental or that he could not possibly comply. The Court concludes that Susan has carried her burden, and that Michael's cessation of the payments owed to Susan was willful.

Because all three requirements for a finding of civil contempt have been satisfied, the Court can reach only one conclusion: Michael is in contempt for his failure to make the $11,000 yearly payments to Susan.

The next question concerns the remedy. The Court concludes that the only genuine remedy is for Michael to resume making the payments to Susan, effective immediately, as Michael's pension payments are received. In other words, if Michael receives a monthly pension payment, he owes Susan $916.67 each month....

The Court finds that Susan's monthly payment of $916.67 should be reduced by her proportionate share as her contribution to the recoupment. A sample illustration may be helpful. Susan's Exhibit 3 states that as of January of 2017, Michael's recoupment withholding is $2,183. The Court

...