Johnston v. Johnston

• Decision Date: 10 May 2019
• Docket Number: No. 2018-147,2018-147
• Citation: 2019 VT 34
• Court: Vermont Supreme Court
• Parties: Douglas S. Johnston v. Lorrie Johnston

2019 VT 34

Douglas S. Johnston v. Lorrie Johnston

No. 2018-147

Supreme Court of Vermont

December Term, 2018

May 10, 2019

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.

On Appeal from Superior Court, Windsor Unit, Family Division

Elizabeth D. Mann, J.

Melvin Fink, Ludlow, for Plaintiff-Appellant.

Emily S. Davis and Boolie Sluka (On the Brief) of Davis Steadman Ford & Mace, LLC, White River Junction, for Defendant-Appellee.

PRESENT: Reiber, C.J., Skoglund and Robinson, JJ., and Teachout, Supr. J. and Howard, Supr. J. (Ret.), Specially Assigned

¶ 1. SKOGLUND, J. This case asks us to examine that strange procedural device, the Qualified Domestic Relations Order (QDRO), and how it intersects with the statute of limitations for actions on judgments. The parties divorced in November 2004. As part of the divorce, the court ordered wife to transfer funds from her retirement account to husband. In 2006, the court approved a proposed QDRO to effectuate the transfer of said funds. The order was never "qualified," however, because there was no money in the retirement account that wife identified. The court approved another proposed QDRO in February 2007 specifying a different retirement account identified by wife. In August 2017, husband filed a motion to enforce, asserting that the owed funds were never transferred to him and that there were no funds in the second retirement account that wife identified. The court denied husband's motion to enforce, finding it barred by the eight-year statute of limitations for actions on judgments. As set forth below, we do not consider husband's attempt to effectuate a transfer of these retirement funds by QDRO to be an action on a judgment, and we therefore reverse and remand.

¶ 2. We begin with an overview of the relevant law governing the division of retirement accounts. A court must engage in a two-step process to divide retirement accounts governed by the federal Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. It first "enters a substantive order which equitably divides and assigns the parties' property." Breslin v. Synnott, 2012 VT 57, ¶ 6, 192 Vt. 79, 54 A.3d 525. It then enters a Domestic Relations Order (DRO) "directing the [retirement] plan administrator to make certain specified payments to the ex-spouse." Id. (citations omitted). We have described a DRO as a "procedural device that enforces an underlying substantive order." Id. ¶ 7; see also 2 B. Turner, Equitable Distribution of Property § 6:20 (4th ed. 2019) (expressing similar sentiment).

¶ 3. "The [retirement] plan administrator determines whether the order is qualified—whether a Q can be added to the DRO—subject to the right of either spouse to appeal the decision to a state or federal court." 2 Turner, supra, § 6:20. This results in a QDRO.¹ "A qualified order assures that a spouse receives benefits as an alternate payee." Ochoa v. Ochoa, 71 S.W.3d 593, 596 (Mo. 2002) (citing 29 U.S.C. § 1056(d)(3)(A), (J)).

¶ 4. As Turner recognizes, "the requirements for qualification are difficult to meet." 2 Turner, supra, § 6:20; see also Larimore v. Larimore, 362 P.3d 843, 849 (Kan. Ct. App. 2015) (explaining that "valid QDRO must meet the comprehensive requirements of at least three federal acts, as amended: the Internal Revenue Code, [ERISA], and the Retirement Equity Act of 1984"(alteration in original) (quotation omitted). When a plan receives a proposed QDRO, the plan administrator must "promptly notify the participant and each alternate payee of the receipt of such order and the plan's procedures for determining the qualified status of domestic relations orders." 29 U.S.C. § 1056(d)(3)(G)(i)(I). "[W]ithin a reasonable period after receipt of such order," the plan administrator must "determine whether such order is a qualified domestic relations order and notify the participant and each alternate payee of such determination." Id. § 1056(d)(3)(G)(i)(II).

¶ 5. "If the administrator refuses to qualify the DRO, the court may amend it to address the source of the problem." 2 Turner, supra, § 6:20 (explaining that "[e]ssentially all jurisdictions" agree, with respect "to revision of DROs and other attempts to draft qualified orders dividing retirement benefits," that "[t]hose orders are subject to future changes without limitation, so long as the modification only enforces the court's previous substantive order, without modifying that order's substantive terms"). As indicated, "the modern rule is that the court may modify its DRO any number of times." Id. This modifiability is a strength of a DRO's "limited status . . . as [a] procedural device[] rather than [a] substantive order[]." Id. "[T]he weakness is that the DRO cannot reach a result inconsistent with the underlying substantive order." Id.

¶ 6. "In short," Turner explains:

when dividing retirement benefits, the law of equitable distribution is not playing on its home field. Because of ERISA, pension issues are litigated in material part upon the home field of the plan administrator. . . . Because the plan administrator is not required to play by normal state court rules, normal state court procedures must be adapted to the unique setting of DROs under ERISA.

Id.

¶ 7. With this overview in mind, we turn to the facts. The parties here divorced in November 2004 after a twenty-five-year marriage. The court ordered an equal division of the marital assets. Both parties had pensions and various retirement accounts. As relevant here, thecourt ordered wife to transfer $27,655 from one or both of her retirement accounts to husband within forty-five days of the date of the final divorce order.

¶ 8. No funds were transferred to husband within this period by QDRO or otherwise. In mid-2006, husband's attorney filed with the court a proposed QDRO, drafted by wife's attorney and edited by husband's attorney, to effectuate the transfer. The court approved the proposed QDRO in May 2006, identifying a particular retirement account from which a lump-sum payment should be made to husband as the "alternative payee." This order was then presumably sent to the plan administrator to determine if it should be qualified; if it was deemed qualified, the plan administrator would segregate the retirement funds and transfer them to husband's retirement account.

¶ 9. In September 2006, husband moved for enforcement of the divorce order and contempt. He asserted that there were no funds in the retirement account that wife identified in the proposed QDRO and, thus, there were no funds available to transfer to him. Wife's attorney acknowledged that wife had removed the funds from the retirement account she identified. She proposed a modified QDRO that identified a different retirement account.

¶ 10. The parties then engaged in a back-and-forth over the proposed QDRO's terms. Husband objected to the use of a QDRO at all, arguing that he was entitled to an immediate lump sum payment from wife. If a QDRO was warranted, husband argued that he was entitled to interest given wife's delay in transferring the funds to him. In late February 2007, at the parties' request, the court clarified that the final divorce order contemplated a transfer by QDRO from one retirement account to another. The following month, the court approved the second proposed QDRO drafted by wife's attorney; the order stated it was intended as a QDRO requiring wife to transfer the $27,655 from her retirement account to husband. The court denied husband's request to include accrued interest. The proposed QDRO, approved by the court, stated, among other things, that the court "shall retain jurisdiction with respect to this Order to the extent required tomaintain its qualified status and the original intent of the parties as provided herein." There is nothing in the record to show that a plan administrator ever approved this proposed QDRO.

¶ 11. Ten years later, in August 2017, husband filed a motion to enforce the final judgment of divorce. See generally V.R.F.P. 4.2 (describing process for filing post-judgment proceedings in divorce actions, including motions to enforce). He recounted the history of the two proposed QDROs. Husband averred that wife had forwarded the proposed QDRO to her plan administrator and that husband had assumed that the transfer occurred. He stated that he had recently learned that no retirement funds were transferred to him and that there were no funds available for transfer in the second retirement account that wife identified in the 2007 QDRO. Husband asked the court to compel wife to transfer the retirement funds to him with interest. Wife opposed the motion, arguing that husband's request was time-barred.

¶ 12. The court construed husband's motion as seeking enforcement of the November 2004 final divorce order and concluded that it was time-barred. The court determined that the eight-year limit for actions on judgments applied. See 12 V.S.A. § 506 ("Actions on judgments and actions for the renewal or revival of judgments shall be brought by filing a new and independent action on the judgment within eight years after the rendition of the judgment, and not after."). It found that unlike child-support orders, there was no specific statute shielding enforcement actions in divorce cases from the eight-year limit set forth in § 506. See 15 V.S.A. § 606(a), (c) (addressing enforcement of child-support orders).

¶ 13. The court also looked to a Nevada case applying similar statutes. It found compelling the Nevada Supreme Court's holding that a judgment-action limitations period applied to the enforcement of a divorce decree's property...