Kendrick v. Kendrick

• Decision Date: 16 November 1994
• Citation: 902 S.W.2d 918
• Parties: Debbra Jo KENDRICK, Plaintiff/Appellee, v. Mitchell Gene KENDRICK, Defendant/Appellant.
• Court: Tennessee Court of Appeals

Page 918

902 S.W.2d 918

Debbra Jo KENDRICK, Plaintiff/Appellee, v. Mitchell Gene KENDRICK, Defendant/Appellant.

Court of Appeals of Tennessee Middle Section, at Nashville.

Nov. 16, 1994.

Published Pursuant to Tenn.Ct.App.R. 11.

Brad W. Hornsby, Bullock, Fly & McFarlin, Murfreesboro, for appellant.

Trudy McKelvey Edwards, Floyd Don Davis, P.C., Winchester, for appellee.

OPINION

KOCH, Judge.

This appeal involves the right of a divorcee to receive a portion of her former spouse's nonvested military pension. After over ten years of marriage, the wife sued the husband for divorce in the Chancery Court for Franklin County. The trial court granted the wife a divorce and awarded her a portion of the husband's nonvested military pension as part of the division of the marital property. The husband asserts on this appeal that his nonvested military pension should not have been considered marital property. We have determined that the wife is entitled to a portion of the husband's military pension when and if he begins to receive it and that her share should be based on the husband's salary at the time of the divorce.

I.

Mitchell Gene Kendrick enlisted in the United States Air Force in July 1980. He married Debbra Jo Kendrick in August 1981. By 1991 he had attained the rank of technical sergeant and had decided to make the Air Force his career. At that time, Sergeant and Ms. Kendrick were stationed at Arnold Air Force Base in Tullahoma where Sergeant Kendrick served as chief of electrical operations and maintenance.

The Kendricks separated in September 1991, and Ms. Kendrick filed for divorce in the Chancery Court for Franklin County approximately one month later. Following a hearing in April 1992, the trial court granted Ms. Kendrick a divorce and awarded her custody of the parties' two children and modest rehabilitative spousal support. The trial court also divided the marital estate but reserved dividing Sergeant Kendrick's military pension. Following another hearing in May 1992, the trial court determined that the increase in the value of Sergeant Kendrick's pension during the marriage was marital property and awarded Ms. Kendrick fifteen percent (15%) of Sergeant Kendrick's pension "when paid periodically or in a lump sum."

This appeal focuses on the trial court's decision to award Ms. Kendrick a portion of Sergeant Kendrick's nonvested military retirement benefits. Sergeant Kendrick asserts that these benefits were not marital property and, if they were, that Ms. Kendrick should not receive any portion of the retirement benefits earned after the divorce.

II.

Pension rights accrued during marriage play an increasingly prominent role in today's divorce proceedings. Many married couples consider their pensions as substitutes for savings or investments. In re Marriage of Grubb, 745 P.2d 661, 664-65 (Colo.1987); Christmas v. Christmas, 787 P.2d 1267, 1268 (Okla.1990). Accordingly, pension rights frequently comprise a major portion of many marital estates and often represent one of the parties' most valuable assets. Patric v. Patric, App. No. 03-A-01-9111-CH-00389, slip op. at 4, 17 T.A.M. 12-20, 6 T.F.L.L. 6-4, (Tenn.Ct.App. Feb. 25, 1992); Janet A. Johnson, Valuation of Marital Property, 3 Fam.L. & Prac. (MB) § 36.13 (Apr.1993) ("Johnson").

Pension rights are property because they are a form of deferred compensation for work already performed. Batson v. Batson, 769 S.W.2d 849, 857 (Tenn.Ct.App.1988); Hunley v. Hunley, App. No. 88-206-II, slip op. at 7, 13 T.A.M. 52-4, 3 T.F.L.L. 3-20, (Tenn.Ct.App. Nov. 23, 1988); Simmons v. Hitt, 546 S.W.2d 587, 592 (Tenn.Ct.App.1976). Accordingly, an overwhelming majority of state courts now treat pension rights as marital property. Grace G. Blumberg, Intangible Assets: Recognition and Valuation, 2 Valuation & Distribution of Marital Prop. (MB) § 23.02[a] (1988) ("Blumberg"); Charles C. Marvel, Annotation, Pension or Retirement Benefits as Subject to Award or Division by Court in Settlement of Property Rights Between Spouses, 94 A.L.R.3d 176 § 8(a) (1979).

The treatment of pension rights as marital property subject to equitable division is controlled by the law of the state where the divorce proceeding is pending. Thus, this appeal requires us to consider three issues in light of Tennessee's statutory and case law. The first issue is whether nonvested pension rights are marital property. The second issue is whether military pension rights must be treated differently than other private or public pension rights. The third issue concerns the manner in which these pension rights should be valued and distributed if the pension rights involved in this case are marital property. This court has addressed similar issues in the past; however, most of our decisions remain unpublished.

III.

We first consider whether pension interests are marital property under Tennessee law. The question is complicated by the fact that there are many types of pensions and interests in pensions. Without cataloging each possible type of interest, we have concluded that pension interests that accrue during a marriage should be considered as marital property regardless of whether the interest is vested or nonvested, ¹ mature or unmature, ² or contributory or noncontributory. ³ The only requirement should be that the employee spouse acquire the interest during the marriage.

A.

Tennessee courts have had statutory authority to distribute marital property in divorce cases for over thirty years. Prior to 1983, Tenn.Code Ann. § 36-825 (amended 1983) empowered the courts to

[A]djust and adjudicate the respective rights and interests of the parties in all jointly owned property, so as to preserve for each or either party, that portion of such jointly owned property as may be just and reasonable under the facts and circumstances of the case.

Both vested and nonvested pension rights figured into the division of marital property under this statute. Hensley v. Hensley, 631 S.W.2d 131, 134 (Tenn.Ct.App.1981) (nonvested pension rights are "economic circumstances" affecting the division of marital property); Whitehead v. Whitehead, C.A. No. 85, slip op. at 16, 6 T.A.M. 13-10 (Tenn.Ct.App. Feb. 4, 1981) (vested military retirement pay is marital property subject to division), rev'd, 627 S.W.2d 944 (Tenn.1982).

In 1983, the General Assembly amended the statute governing the distribution of marital property in divorce cases. ⁴ According to its House sponsor, the legislation's purposes were to codify existing case law, to define marital property more clearly, and to recognize homemakers' contributions. For the first time, the statute recognized a distinction between "marital" and "separate" property and specifically directed the courts to "equitably divide, distribute or assign the marital property without regard to marital fault in proportions as the court deems just."

For the past decade Tenn.Code Ann. § 36-4-121 has governed the classification of property interests for the purpose of dividing the marital estate in divorce cases. Tenn.Code Ann. § 36-4-121(b)(1) broadly defines "marital property" as follows:

(A) "Marital property" means all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage up to the date of the final divorce hearing and owned by either or both spouses as of the date of filing of a complaint for divorce, except in the case of fraudulent conveyance in anticipation of filing, and including any property to which a right was acquired up to the date of the final divorce hearing, and valued as of a date as near as reasonably possible to the final divorce hearing date.

(B) "Marital property" includes income from, and any increase in value during the marriage, of property determined to be separate property in accordance with subdivision (b)(2) if each party substantially contributed to its preservation and appreciation and the value of vested pension, retirement or other fringe benefit rights accrued during the period of the marriage.

(C) As used in this subsection, "substantial contribution" may include, but not be limited to, the direct or indirect contribution of a spouse as homemaker, wage earner, parent or family financial manager, together with such other factors as the court having jurisdiction thereof may determine.

(D) Property shall be considered marital property as defined by this subsection for the sole purpose of dividing assets upon divorce and for no other purpose. ⁵

At the same time, Tenn.Code Ann. § 36-4-121(b)(2) defines "separate property" as

(A) All real and personal property owned by a spouse before marriage;

(B) Property acquired in exchange for property acquired before the marriage;

(C) Income from and appreciation of property owned by a spouse before marriage except when characterized as marital property under subdivision (b)(1); and

(D) Property acquired by a spouse at any time by gift, bequest, devise or descent.

B.

Tenn.Code Ann. § 36-4-121(b)(1)(B) provides that vested pension rights are marital property. Accordingly, this court has consistently treated vested pension rights, even when they have not matured, as marital property subject to division. Cushenberry v. Cushenberry, App. No. 01-A-01-9006-CH-00199, slip op. at 4, 16 T.A.M. 34-13, 5 T.F.L.L. 11-12, (Tenn.Ct.App. July 26, 1991); Alton v. Alton, supra, slip op. at 2; Rakestraw v. Rakestraw, supra, slip op. at 4; Bartley v. Bartley, supra, slip op. at 8.

The status of nonvested pension rights is less clear. The Tennessee Supreme Court has recognized the trend in other jurisdictions toward treating nonvested pension rights as marital property. Towner v. Towner, 858 S.W.2d 888, 891 (Tenn.1993). In addition, this court has held that a pension's vesting has no bearing on its classification as marital property, Marzo v. Marzo, C.A. No. 917, slip op. at 8, 9 T.A.M. 9-27 (Tenn.Ct.App. Jan. 5, 1984), and has treated nonvested pension rights...