Kraus v. Kraus

• Decision Date: 08 July 2015
• Docket Number: 2013-04824
• Citation: 2015 N.Y. Slip Op. 05915,131 A.D.3d 94,14 N.Y.S.3d 55
• Parties: Carol KRAUS, appellant, v. Richard KRAUS, respondent.
• Court: New York Supreme Court — Appellate Division

131 A.D.3d 94

14 N.Y.S.3d 55

2015 N.Y. Slip Op. 05915

Carol KRAUS, appellant

v.Richard KRAUS, respondent.

2013-04824

Supreme Court, Appellate Division, Second Department, New York.

July 8, 2015.

Magda M. Deconinck, New York, N.Y. (Glass Krakower, LLP[John Hogrogian ], of counsel), for appellant.

Kelli M. O'Brien, Goshen, N.Y., for respondent.

MARK C. DILLON, J.P., L. PRISCILLA HALL, ROBERT J. MILLER, and SYLVIA O. HINDS–RADIX, JJ.

Opinion

DILLON, J.P.

We address for the first time in the Appellate Division, Second Department, the question of whether the submission for judicial approval of a proposed qualified domestic relations order (hereinafter QDRO), instead of a motion made on notice, may be employed by a party to a matrimonial action to obtain pension arrears.We hold that a QDRO may be used for such a purpose.

Relevant Facts

The plaintiffCarol Kraus and the defendantRichard Kraus were married in 1973, and have four adult children.During a portion of the marriage, the plaintiff was employed by the State of New York as a hospital nurse.The defendant was employed by the Fire Department of the City of New York(hereinafter the FDNY) as a firefighter from 1977 to 2008.As a firefighter, the defendant was a member of a pension system for much of the parties' marriage.The plaintiff was also a member of a pension system as a State employee.

In 1993, the plaintiff commenced this matrimonial action against the defendant in the Supreme Court, Orange County, seeking a divorce and ancillary relief.On November 1, 1995, the parties reached a settlement, pursuant to which each spouse was entitled, inter alia, to a marital share of the other spouse's pension in accordance with the formula set forth in Majauskas v. Majauskas,61 N.Y.2d 481, 474 N.Y.S.2d 699, 463 N.E.2d 15.The parties executed a 28–page stipulation of settlement containing all the terms of the settlement including, in Article XV thereof, the division of the parties' pensions pursuant to the Majauskas formula.Article XV(c) of the stipulation recited that the defendant had commenced his employment with the FDNY on August 13, 1977, and provided that the plaintiff's Majauskas share would be based on 50% of the marital portion of his pension that had accumulated over a period of 13 years, 7 months, and 7 days, representing the period of time during the marriage in which the defendant had been employed by the FDNY and accrued his pension.The stipulation also expressly provided that “[a] Qualified Domestic Relations Order shall be prepared in the course of any divorce and forwarded to the Court for signature and filed with the Husband's employer.”A judgment of divorce was signed by the Supreme Court on February 21, 1996, which incorporated, but did not merge, the stipulation.Less than a year after entry of the judgment, the defendant submitted a proposed Qualified Domestic Relations Order (hereinafter QDRO) to the court in order to effectuate payment of his share of the plaintiff's pension.The defendant's proposed QDRO, which calculated his share of the plaintiff's pension pursuant to the Majauskas formula, was signed by the court on January 24, 1997.However, for unknown reasons, no proposed QDRO was initially submitted by the plaintiff in connection with her share of the defendant's pension, which also was to be calculated pursuant to the Majauskas formula.

Several years passed.The defendant remarried and continued to work for the FDNY until his retirement on March 1, 2008.The plaintiff alleged that she was never notified of the defendant's retirement.After the divorce was finalized, but prior to his retirement, the defendant took out a loan against his pension, which had an outstanding balance of $8,503.24 at the time of his retirement.To repay the loan, the defendant's overall retirement pension was therefore reduced by the plan administrator of the New York Fire Department Pension Fund(hereinafter the FDNY pension plan) by the sum of $848.58 per year.The maximum possible pension was further reduced by the defendant's election of a survivorship benefit in favor of his second wife.The loan repayment and survivorship deductions reduced the annual pension benefits received by the defendant from a maximum amount of $65,926.56 to $58,887.03.The reduction concomitantly reduced the plaintiff's share of the defendant's overall pension, which was calculated, according to the terms of the parties' stipulation, as 22.3% of the total.

On August 29, 2012, approximately 6 ½ years after the Supreme Court signed the judgment of divorce and 4 ½ years after the defendant's retirement, the plaintiff learned of the defendant's retirement, and submitted a proposed QDRO to the Supreme Court for settlement and signature.During the time between the defendant's retirement and the plaintiff's submission of the proposed QDRO, the defendant had been receiving his pension without any deduction for the plaintiff's share under the Majauskas formula, as contemplated by the stipulation and final judgment of divorce.The plaintiff's proposed QDRO called for two mathematical calculations, to which the defendant objected.First, it proposed that the plaintiff's 22.3% share of the defendant's pension be calculated against its maximum potential annual allowance of $65,925.56, rather than against the actual annual allowance of $58,887.03.The plaintiff employed the higher pension amount on the ground that the defendant's loan and survivorship deductions were unilaterally incurred by the defendant, and not contemplated by the parties in the stipulation.Second, the proposed QDRO called for the defendant to pay the pension arrears accumulated from March 1, 2008, to September 1, 2012, which totaled $66,157.02, by means of monthly payments in the same amount as were to be paid during the period of arrearage.

The defendant opposed the plaintiff's proposed QDRO and submitted his own proposed QDRO, with cross notice of settlement.The defendant's proposed QDRO directed payment to the plaintiff of her Majauskas share of the actual, reduced retirement benefit, necessarily reflecting the deductions for the pension loan repayments and election of the survivorship option.The defendant's proposed QDRO included no provision for the payment of arrears accumulated between March 1, 2008, and September 1, 2012.In submitting his proposed QDRO to the Supreme Court for settlement and signature, the defendant argued that QDROs perform the limited function of enforcing pension-related provisions of divorce judgments and, therefore, cannot be employed to resolve collateral matters such as arrears.The defendant also argued that, as to the pension loan and survivorship reductions, the parties never expressly agreed that such reductions were prohibited, and that the plaintiff's proposed QDRO could not therefore be employed to impose new obligations not previously agreed upon.

On March 26, 2013, the Supreme Court signed the defendant's proposed QDRO, and that QDRO was entered on April 19, 2013.Accordingly, the plaintiff began receiving her Majauskas share of the defendant's pension, as reduced by the loan repayment and by the defendant's election to take his pension benefits subject to his second wife's right of survivorship.However, the Supreme Court did not direct the defendant to pay any arrears to the plaintiff.

The plaintiff appeals from the QDRO.She argues that the Supreme Court erred in failing to award her arrears, as QDROs may provide for retroactive relief, and an award of arrears was required to fulfill the parties' stipulated intention of equitably dividing the defendant's pension upon his retirement.The plaintiff also argues that the defendant may not be permitted to reduce the value of her share of his pension by deducting therefrom the value of loans and survivorship adjustments that were not authorized by the terms of the parties' settlement.The defendant maintains, inter alia, that arrears can only be properly sought via a separate motion made on notice or the commencement of a plenary action to enforce the stipulation and final judgment of divorce, and that the terms of the parties' settlement did not prohibit the defendant from taking a loan against anticipated pension proceeds, or from choosing a right of survivorship in favor of his second wife.

For reasons set forth below, we modify the QDRO to the extent of awarding the plaintiff pension arrears accumulated between the defendant's retirement on March 1, 2008, and March 26, 2013, the date that the QDRO appealed from was signed.We also direct that the plaintiff's share of the defendant's pension benefits be calculated as if there were no reduction in monthly benefits arising from the loan made to the defendant.

Legal Analysis

Pensions represent a form of deferred compensation paid after retirement in lieu of the receipt of greater compensation during the period of employment (seeMajauskas v. Majauskas,61 N.Y.2d at 491–492, 474 N.Y.S.2d 699, 463 N.E.2d 15;Pagliaro v. Pagliaro,31 A.D.3d 728, 729, 821 N.Y.S.2d 602 ).“Under controlling law, pension benefits, ‘except to the extent that they are earned or acquired before marriage or after commencement of a matrimonial action, constitute marital property’ ”(Nugent–Schubert v. Schubert,88 A.D.3d 967, 968, 931 N.Y.S.2d 642, quotingDolan v. Dolan,78 N.Y.2d 463, 466, 577 N.Y.S.2d 195, 583 N.E.2d 908 ).They are assets of the marriage that both spouses expect to enjoy at a future date (seeDolan v. Dolan,78 N.Y.2d at 466, 577 N.Y.S.2d 195, 583 N.E.2d 908 ).Indeed, the concept of pension benefits as marital property is “consistent with the concept of equitable distribution which rests largely on the view that marriage is, among other things, an economic partnership to which each party has made a contribution”(Dolan v. Dolan,78 N.Y.2d at 466, 577 N.Y.S.2d 195, 583 N.E.2d 908;seeMcDermott v. McDermott,119 A.D.2d 370, 379, 507 N.Y.S.2d 390 ).So, too, enhanced or supplemental retirement...