Macy v. Macy

• Decision Date: 11 February 2014
• Docket Number: No. M2012-02370-COA-R3-CV,M2012-02370-COA-R3-CV
• Parties: ROBERT L. MACY v. OUIDA J. MACY
• Court: Tennessee Court of Appeals

ROBERT L. MACY v. OUIDA J. MACY

No. M2012-02370-COA-R3-CV

COURT OF APPEALS OF TENNESSEE AT NASHVILLE

November 19, 2013 Session

Filed February 11, 2014

Direct Appeal from the Chancery Court for DeKalb County

No. 2011-CV-1

Ronald Thurman, Chancellor

This appeal challenges the effectiveness of a QDRO which requires Wife to pay taxes on a $115,000.00 divorce settlement. The trial court held that the amount should not be reduced by taxes. We conclude that the trial court erred in holding that Wife's $115,000.00 divorce settlement was not subject to reduction for taxes, and we reverse its holding in that regard. The case is remanded for further proceedings consistent with this opinion.

Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Reversed

and Remanded

ALAN E. HIGHERS, P.J., W.S., delivered the opinion of the Court, in which DAVID R. FARMER, J., and J. STEVEN STAFFORD, J., joined.

Stephen W. Pate, Murfreesboro, Tennessee, for the appellant, Robert L. Macy

Bratten H. Cook, II, Smithville, Tennessee, for the appellee, Ouida J. Macy

OPINION

I. FACTS & PROCEDURAL HISTORY

Robert L. Macy ("Husband") and Ouida J. Macy ("Wife")¹ married in 1987. Husband filed a Complaint for Absolute Divorce in the Dekalb County Chancery Court on January 4, 2011 alleging irreconcilable differences and inappropriate marital conduct. Wife filed an Answer and Counter-Complaint conceding irreconcilable differences and alleging inappropriate marital conduct by Husband.

The divorce case was settled by mediation in June 2011. A Marital Dissolution Agreement ("MDA") was entered on August 29, 2011; Wife executed the MDA on July 11, 2011 and Husband executed the MDA on August 24, 2011. Pursuant to the MDA, Husband was awarded the parties' marital residence, 9.93 acres of land adjoining the marital residence property, and "two tracts of real property of approximately twenty three acres of land located in Dekalb County, Tennessee[.]" Wife was required to execute quitclaim deeds conveying her interest in the above-properties to Husband.

The MDA further provided:

2.5 As a division of marital property, the husband will pay to the wife the sum of $115,000.00, which shall be paid from his retirement account pursuant to paragraph 4.0 below, for any and all interest she has in the marital property which will become the property of the husband, included but not limited to, all of the realty ow[n]ed by the parties, and the husband's retirement account.²

. . . .

4.0 PENSION/RETIREMENT ACCOUNTS: Husband maintains a 401(k) account through his employment with Johnson Controls, with the present balance being approximately $200,000.00, after deducting the loans outstanding on said account in the amount of approximately $16,000.00. The parties agree that wife shall receive the total sum of one hundred fifteenthousand dollars ($ 115,000.00) from said 401 (k) account, pursuant to the terms of a qualified domestic relations order (QDRO). Wife shall be responsible for the preparation of the QDRO or any other documents required to convey said funds, and husband shall cooperate in providing all information and/or executing any documents necessary to convey wife's portion in said account. The parties shall be equally responsible for any administrative fees assessed by the plan administrator to process the transfer pursuant to the terms of the QDRO.

The MDA was incorporated into a Final Judgment, filed on September 6, 2011, which dissolved the parties' marriage on the ground of irreconcilable differences. Also on September 6, 2011, a Qualified Domestic Relations Order ("QDRO") was signed by the parties and their counsel and filed in the chancery court. The QDRO provided in relevant part:

11. Taxation

For purposes of Section 402 and 72 of the Code, any alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distributions or payments made to the alternate payee under the terms of the order and, as such, will be required to pay the appropriate federal, state, and local income taxes on such distributions.

On February 22, 2012, Wife filed a Motion in the chancery court, pursuant to Tennessee Rule of Civil Procedure 70,³ moving the court to "enforce the requirement set forth in the Order heretofore entered in this cause on September 6, 2011 which required [Husband] to pay to [Wife] the sum of $115,000.00 from []his retirement account." According to the Motion, Wife had been "informed that the administrator for the employer has set aside the $115,000.00 due the wife, but . . . that she will be responsible for the payment of penalties and taxes on such amount, which would reduce the $115,000.00 to approximately $90,000.00, which was not the agreement of the parties."

In response, Husband filed a Motion on April 17, 2012, pursuant to Tennessee Rule of Civil Procedure 60.02, moving the court to order Wife to execute three quitclaim deedsconveying her interest in the above-referenced properties to Husband consistent with the Final Judgment and the MDA. According to Husband, Wife had refused to relinquish her interest in the properties until she received the $115,000.00 sum unreduced by taxes. Husband argued that Wife was responsible for paying taxes on the amount, and in any event, that the requirement that she execute the quitclaim deeds was not contingent upon her receipt of funds.

A hearing was held on the parties' motions on May 4, 2012. At the hearing, the chancellor sua sponte raised the issue of whether additional consideration was given to Wife for her execution of the QDRO, which it found contained terms different from those set out in the MDA. The court allowed Husband's counsel ten days in which to file a statement of any consideration received by Husband subsequent to her execution of the MDA on July 11, 2011 and her execution of the QDRO filed on September 6, 2011. Husband responded on May 14, 2012 by filing a Notice in which he "concede[d] that he [was] unaware of any new or additional consideration directly benefitting wife between the date of her execution of the MDA and the date of the filing of the QDRO[;]" Husband, however, argued that Wife received consideration when she executed the MDA and that additional consideration was unnecessary.

On July 20, 2012, the chancery court entered an Order in which it found and ordered as follows:

1. That there was no new or additional consideration benefitting defendant/wife between the dates of the execution of the Marital Dissolution Agreement and the Qualified Domestic Relations Order. The plaintiff/husband was given the opportunity to present such evidence, and counsel for plaintiff/husband candidly admitted no such evidence existed.

2. That based upon the language of the Marital Dissolution Agreement, where it recites that "as a division of marital property, the husband will pay to the wife the sum of $115,000.00, which shall be paid from his retirement account . . .", the Court is of the opinion that said payment is in the nature of a division of marital property, and the plaintiff/husband was merely afforded an opportunity to pay same out of his retirement account, of which he received 100%.

3. The defendant/wife should receive the payment of $115,000.00 unreduced by any taxes, etc.

4. That in the event the plaintiff/husband does not agree to the paymentto the defendant/wife of $115,000.00 unreduced by taxes, etc., then the Court hereby sets aside the Marital Dissolution Agreement in its entirety and the Court will decide all issues related thereto absent a subsequent agreement by the parties.⁴

On August 3, 2012, Husband filed a Motion for Interlocutory Appeal regarding the taxation issue. In an October 16, 2013 Order, the chancery court denied Husband's motion and instead it ordered that its July 20, 2012 Order⁵ be deemed a final order subject to appeal.⁶ Husband filed a Notice of Appeal to this Court on October 19, 2013.⁷

II. ISSUE PRESENTED

Husband presents the following issue for review:

1. Whether the trial court erred in ordering Wife to receive the total sum of $115,000.00 net and unreduced by taxes, from Husband's 401(k) account.

For the following reasons, we reverse the decision of the chancery court and we remand for further proceedings.

III. DISCUSSION⁸

The sole issue on appeal is whether Wife's $115,000.00 divorce settlement is subject to reduction through taxation. As stated above, the trial court held that Wife should receive the entire $115,000.00 sum, unreduced by taxes. Ostensibly, the trial court reached this conclusion on two grounds: Wife did not receive additional consideration for her execution of the QDRO and, according to the trial court, the MDA provided for Wife's receipt of $115,000.00 and Husband "was merely afforded an opportunity to pay same out of his retirement account[.]"

On appeal, Husband argues that the plain language of the MDA and the QDRO clearly requires Wife to pay taxes on distributions from Husband's retirement account and that both documents should be enforced under general contract principles. He contends that both the MDA and the QDRO were entered into "with full disclosure, adequate provisions for each party, consideration by each party, without fraud or misrepresentation, with neither party being under undue influence or duress, and with each party having the right to seek independent advi[c]e."⁹ Husband maintains that the MDA and the QDRO do not contain conflicting terms and he rejects the idea that additional consideration was necessary for execution of the QDRO because the QDRO was necessary to "effectuate[] the transfer of assets pursuant to the terms of the MDA."

In response, Wife does not argue that the MDA and/or the QDRO should be set aside for failure of consideration or because there was no meeting of the minds-theories considered sua sponte by the trial court. Instead, she argues solely that the MDA and the QDRO contain conflicting language and, therefore, that the MDA-which, according to Wife provides for...