Marriage of Preston, In re

• Decision Date: 29 January 1999
• Docket Number: No. 85A04-9801-CV-19,85A04-9801-CV-19
• Citation: 704 N.E.2d 1093
• Parties: In re the MARRIAGE OF William D. PRESTON, Appellant-Respondent, and Cathy Jo Preston, Appellee-Petitioner.
• Court: Indiana Appellate Court

Page 1093

704 N.E.2d 1093

In re the MARRIAGE OF William D. PRESTON, Appellant-Respondent and Cathy Jo Preston, Appellee-Petitioner.

No. 85A04-9801-CV-19.

Court of Appeals of Indiana.

Jan. 29, 1999.

David W. Stone IV, Stone Law Office, Anderson, Mark C. Guenin, Johnson, Lehman and Guenin, Wabash, for Appellant-Respondent.

Jane L. Kauffman, Lemon, Armey, Hearn & Leininger, Warsaw, for Appellee-Petitioner.

OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

William D. Preston appeals from the trial court's division of his retirement plan in the decree that dissolved his second marriage to Cathy Jo Preston. William raises various issues which we consolidate and restate as:

1. Whether the trial court erred when it concluded that William's retirement plan is marital property subject to division.

2. Whether the trial court misapplied the law when it divided William's retirement plan benefits using a "coverture fraction" formula which included the combined length of the couple's two marriages.

3. Whether the method the trial court used to distribute Cathy's share of William's retirement plan constitutes an abuse of discretion.

We affirm in part, reverse in part and remand.

FACTS AND PROCEDURAL HISTORY

William and Cathy married for the first time in July of 1967. They had two children, and Cathy was a homemaker for most of the marriage. William was a teacher for ten years before he became an independent agent for Farm Bureau Insurance Company ("Farm Bureau") in January of 1975. The parties entered into a property settlement agreement that was incorporated and merged into a dissolution decree dated March 30, 1993. Under the decree, William was awarded "[a]ny pension benefits, or retirement benefits through his past, present, or future ... employment with Farm Bureau Insurance."

The parties continued their relationship after the divorce, and they re-married on December 15, 1993. Less than three years later, on June 3, 1996, Cathy filed a petition for dissolution of marriage. On September 25, 1997, the trial court entered its decree, with requested findings and conclusions, and dissolved the couple's second marriage. The marital assets in the second dissolution were essentially the same as those in the first dissolution. The court ordered an equal division of the marital property.

The trial court found that William's retirement plan was a divisible asset and included the entire plan in the marital estate. The court also determined that under the 1993 property settlement agreement and decree the parties had "erroneously concluded that the pension was not divisible." Thus, the court considered the retirement plan "anew" and awarded each party a one-half interest in the plan. William appeals from that award.

DISCUSSION AND DECISION

Standard of Review

In this case, the trial court entered findings and conclusions pursuant to Indiana Trial Rule 52(A). We will not set aside the findings or judgment unless clearly erroneous. Id. Findings are clearly erroneous when the record contains no facts to support them either directly or by inference. Quillen v. Quillen, 671 N.E.2d 98, 102 (Ind.1996). The judgment is clearly erroneous if (i) the findings do not support the conclusions of law or (ii) the conclusions of law do not support the judgment. Id.

When reviewing a claim that the trial court improperly divided marital property, we consider only the evidence most favorable to the trial court's disposition of the property, and we decide whether the trial court's decision constitutes an abuse of discretion. Hodowal v. Hodowal, 627 N.E.2d 869, 871 (Ind.Ct.App.1994), trans. denied. An abuse of discretion occurs if the trial court's decision is clearly against the logic and effect of the facts and circumstances before the court, or the reasonable, probable, and actual deductions to be drawn therefrom. Id. An abuse of discretion also occurs when the trial court misinterprets the law or disregards evidence of factors listed in the controlling statute. Id.

Issue One: Retirement Plan as Marital Property

William first contends that the trial court erred when it included his retirement plan in the marital estate. Specifically, William challenges the following finding:

Testimony and exhibits regarding the Farm Bureau pension indicated that if [William] would now retire, he would be entitled to early retirement benefits under the agreement with Farm Bureau. Although the amount to be paid by the retirement plan could vary significantly, [William's] benefits could not now be forfeited upon termination of his employment [footnote omitted]. The pension plan is therefore a divisible asset.

The dissolution court is required to divide all the property of the parties "whether owned by either spouse prior to the marriage, acquired by either spouse in his or her own right after the marriage and prior to final separation of the parties, or acquired by their joint efforts, in a just and reasonable manner." IND.CODE § 31-1-11.5-11(b). ¹ Our court has recently reiterated the well-established rule that, in order for a pension or retirement plan to be included in the marital estate, it must be vested. Dowden v. Allman, 696 N.E.2d 456, 458 (Ind.Ct.App.1998). The word "vest" generally means either vesting in possession or vesting in interest. Brown v. American Fletcher Nat'l Bank, 519 N.E.2d 166, 168 (Ind.Ct.App.1988), trans. denied. Vesting in possession connotes an immediate existing right of present enjoyment, while vesting in interest implies a presently fixed right to future enjoyment. Id. Vested pension rights have been described as "intangible assets of a spouse which have been earned during the marriage, either through the contributions of the spouse which otherwise would have been available as assets during the marriage, or through contributions of the employer which constitute deferred compensation." HOMER H. CLARK, JR., 2 THE LAW OF DOMESTIC RELATIONS IN THE UNITED STATES § 16.6, at 208 (2d ed.1987).

The dissolution statutes have codified these concepts, specifically defining "property" as all the assets of either party or both parties, including:

(1) a present right to withdraw pension or retirement benefits;

(2) the right to receive pension or retirement benefits that are not forfeited upon termination of employment, or that are vested, as that term is defined in Section 411 of the Internal Revenue Code [26 U.S.C. § 411], but that are payable after the dissolution of marriage; and

(3) the right to receive disposable retired or retainer pay, as defined in 10 U.S.C. 1408(a), acquired during the marriage, that is or may be payable after the dissolution of marriage.

IND.CODE § 31-1-11.5-2(d) (emphasis added).

Here, William was enrolled under the "Farm Bureau Retirement Program for Contracted Agents." ² An agent's retirement benefits under the program consist of a monthly annuity for life, the amount of which depends upon length of credited service, average compensation, including commissions and bonuses, and age at retirement. The program is financed entirely by Farm Bureau, and benefits are considered a form of "deferred bonus commissions." Normal retirement age under the program is sixty-five; however, an agent who attains the age of fifty-five and has ten years of credited service may select an early retirement option. An agent with ten years of credited service qualifies for "deferred vested" retirement, that is, an agent's benefits are vested but "deferred" until the agent is eligible for retirement, and the agent actually retires.

William's retirement benefits had vested before the second marriage. At the time of dissolution, he was fifty-six years old and had been a Farm Bureau agent for twenty-two years. Because William had reached early retirement age, he was eligible to receive benefits immediately upon retirement. ³ Further, William had completed the required ten years of credited service; thus, his right to receive benefits was "not forfeitable upon termination" of his contract pursuant to Indiana Code § 31-1-11.5-2(d)(2). In a similar case, this court held that an early retirement benefit which, at the time of dissolution, the husband had a right to receive and which would not be forfeited upon termination of his employment was marital property. Hughes v. Hughes, 601 N.E.2d 381 (Ind.Ct.App.1992), trans. denied. As in Hughes, William's retirement plan is marital property as defined by the Dissolution of Marriage Act.

Still, William complains that his actual future benefits are contingent upon his retirement date and his "average monthly compensation" ⁴ and contends essentially that his interest is too speculative to be deemed a marital asset. These contingencies, however, do not alter the status of the retirement plan as divisible marital property. The fact that the actual amount of future benefits has not yet been determined does not, in itself, prevent the interest from constituting property under subsection 2(d)(2). See Tirmenstein v. Tirmenstein, 539 N.E.2d 990, 991 (Ind.Ct.App.1989) (police pension was marital property where amount of future benefits depended upon number of years before earning spouse retired and future base salary of first class patrolman). ⁵

In a separate argument, William emphasizes that the trial court adopted the property settlement agreement and awarded him his retirement plan in the first dissolution decree. Thus, he claims that the portion of the plan that accrued before his second marriage should be excluded from the marital estate. We rejected a similar argument in Huber v. Huber, 586 N.E.2d 887 (Ind.Ct.App.1992), trans. denied, where the parties divorced after a twenty-year marriage, remarried six months later, and separated after another ten years together. The husband argued that the second marital estate should consist of only those assets which he desired to commingle upon remarriage and those acquired during the second marriage. Id. at 889. We observed that our definition of...