Shanks v. Treadway

• Decision Date: 26 June 2003
• Docket Number: No. 00-1325.,00-1325.
• Citation: 110 S.W.3d 444
• Parties: George Payton SHANKS, Petitioner, v. Kenda Carolyn (Shanks) TREADWAY, Respondent.
• Court: Texas Supreme Court

Page 444

110 S.W.3d 444

George Payton SHANKS, Petitioner, v. Kenda Carolyn (Shanks) TREADWAY, Respondent.

No. 00-1325.

Supreme Court of Texas.

Argued April 24, 2002.

Decided June 26, 2003.

Tonya P. Johannsen, Susan Lea Hays, Waters & Kraus, L.L.P., Dallas, for petitioner.

James Warren Hryekewicz, James Hunter Birch, Hughes & Luce, Dallas, for respondent.

Justice O'NEILL delivered the opinion of the Court.

The issue in this case is the proper interpretation of a 1981 divorce decree that divided, among other assets, retirement benefits stemming from one spouse's employment both during and after the marriage. The trial court held that the divorce decree awarded the non-employee spouse a specific percentage of the retirement benefits valued at the date of divorce. The court of appeals reversed, concluding that the decree unambiguously awarded the non-employee spouse a percentage of the total amount of the benefits on the date of retirement. 110 S.W.3d 1, 6. We hold that the court of appeals correctly interpreted the decree. Accordingly, we affirm the court of appeals' judgment.

I. Background

Kenda Carolyn Treadway and George Payton Shanks married in 1962. George started working for American Airlines in 1966 and began participating in American's retirement program the following year. The program included both a defined benefit plan and a defined contribution plan.¹ George continued to work for American until his retirement in 1998.

George and Kenda divorced in 1981. In the divorce decree, the district court awarded Kenda a twenty-five percent interest in George's retirement benefits, and neither party appealed the judgment. The relevant portions of the decree provide:

The Court finds that [George] has earned certain employee benefits under a pension plan arising out of past employment as an employee of American Airlines.

[Kenda] is awarded a "pro-rata interest" (as hereinafter defined) of any and all sums received or paid to [George] from such pension plan and such sum or sums shall be payable to [Kenda] if, as and when paid by American Airlines or the trustee of such plan to [George] as pension or retirement employee benefits existing because of [George's] employment.

IT IS DECREED that [Kenda's] "pro-rata interest" shall be defined as that sum of money equal to 25% of the total sum or sums paid or to be paid to [George] from such pension or retirement plan.

. . . .

IT IS FURTHER DECREED that all remaining right, title and interest in and to such American Airlines pension and/or retirement plan shall be and is hereby set aside to [George].

On March 9, 1998, approximately two months before his scheduled retirement date, George filed a Motion to Sign Qualified Domestic Relations Order ("QDRO"). See TEX. FAM.CODE § 9.102. In his motion, George proposed that the court calculate the value of both the defined benefit and defined contribution plans as of the date of divorce in awarding Kenda her twenty-five percent interest. In response, Kenda asserted that res judicata barred the attempted collateral attack. She requested that the district court sign her proposed QDRO, awarding her twenty-five percent of the total amount of the benefits to be paid to George.

The district court signed two QDROs — George's QDRO dividing the defined benefit plan valued at the date of divorce and Kenda's QDRO dividing both plans valued as of the date that George actually received payment. In light of the inconsistent orders, George moved for reconsideration. The court granted George's motion, vacated Kenda's QDRO, and entered another QDRO valuing the defined contribution plan at the date of divorce. Kenda appealed.

The court of appeals reversed the judgment, concluding that the trial court's QDROs impermissibly altered the substantive division of property made in the original divorce decree. 110 S.W.3d at 3. The court held that the divorce decree unambiguously awarded Kenda "a twenty-five percent interest of the `total sum or sums paid or to be paid' from [George's] pension plans and [did] not limit her award to a percentage of the benefits accrued in the plans prior to the divorce." Id. at 6. The court therefore remanded the case to the district court to enter a revised QDRO awarding Kenda a twenty-five percent interest in the entire amount to be paid to George as retirement benefits. We agree with the appellate court's interpretation of the decree and therefore affirm the court of appeals' judgment.

II. Dividing Retirement Benefits

We begin with an overview of the law that was in effect in this area at the time the decree was entered to demonstrate the complexities involved in dividing retirement benefits upon divorce. Our decisions focused first on the recognition of pension interests as community property rights and then on the separate issues of apportionment and valuation of benefits. In Cearley v. Cearley, we considered whether future pension benefits constitute community property rights subject to equitable division upon divorce. 544 S.W.2d 661, 663-64 (Tex.1976). We approved of the proposition that even "nonvested² pension rights are ... a contingent interest in property," and "to the extent that such rights derive from employment during coverture, they comprise a community asset subject to division in a dissolution proceeding." Id. (quoting Brown v. Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561, 562 (1976)). We also discussed the difficulty of computing the present value of such a contingent interest and approved the method of making the award of the non-employee spouse's community interest "effective if, as, and when the benefits are received by the [employee] spouse." Id. at 666.

The 1983 case Berry v. Berry, 647 S.W.2d 945 (Tex.1983), currently governs the division of retirement benefits. However, when the decree in question was entered in 1981, Cearley and Taggart v. Taggart, 552 S.W.2d 422 (Tex.1977), provided trial courts the formula to use in determining the community interest in retirement benefits and the non-employee spouse's share of that interest. The Court used a fraction to apportion the community interest: the number of months married under the plan divided by the total number of months employed under the plan at the time of retirement. Taggart, 552 S.W.2d at 424. That fraction was multiplied by the non-employee spouse's "just and right" share in the community interest as determined by the trial court (often fifty percent) and then multiplied by the value of the benefits received by the employee spouse at retirement. Id.³ When the trial court entered George and Kenda's divorce decree, it should have employed the Taggart formula to divide the retirement benefits, though of course the court would not have been able to insert numbers for the denominator of the community interest fraction or the value of the benefits, which could not be determined until retirement.

III. Interpreting the Divorce Decree

Notwithstanding the state of the law at the time the divorce decree was entered, this case does not involve a direct appeal, and we must interpret the decree to determine not what the trial court should have done but, if possible, what the court actually did. When interpreting a divorce decree, courts apply the general rules regarding construction of judgments. Wilde v. Murchie, 949 S.W.2d 331, 332 (Tex.1997) (per curiam) (citing Constance v. Constance, 544 S.W.2d 659, 660 (Tex. 1976)). Judgments should be construed as a whole to harmonize and give effect to the entire decree. Constance, 544 S.W.2d at 660. "[I]f the decree, when read as a whole, is unambiguous as to the property's disposition, the court must effectuate the order in light of the literal language used." Wilde, 949 S.W.2d at 332; see also Baxter v. Ruddle, 794 S.W.2d 761, 763 (Tex.1990). If the decree is ambiguous, the court should review the record along with the decree to aid in interpreting the judgment. Wilde, 949 S.W.2d at 332. In addition, if a judgment is ambiguous — that is, subject to more than one reasonable interpretation — courts should adopt the construction that correctly applies the law. MacGregor v. Rich, 941 S.W.2d 74, 75 (Tex.1997) (per curiam). As with other written instruments, whether a divorce decree is ambiguous is a question of law. Coker v. Coker, 650 S.W.2d 391, 394 (Tex.1983).

The decree in question identifies George's pension plan as "arising out of past employment," but then states that Kenda is entitled to "a `pro rata interest' ... of any and all sums received or paid to [George] from such pension plan...." The decree also defines "pro rata interest" as "25% of the total sum or sums paid or to be paid to [George] from such pension or retirement plan." The decree does not set out a specific Taggart-like formula to be used in calculating Kenda's interest.

The court of appeals concluded, and we agree, that the decree is unambiguous, and Kenda should receive twenty-five percent of George's total retirement benefits. The phrase "arising out of past employment as an employee of American Airlines" (emphasis added) does not render the decree ambiguous, as George argues; rather, it merely serves to identify more specifically the property that is being divided (i.e., George's retirement plan).⁴ As noted by the court of appeals, the trial court awarded Kenda an interest of all sums received under such plan, not an interest of presently accrued benefits under such plan. 110 S.W.3d at 6. And the plan that was in existence at the time of the divorce and referred to in the decree is the same plan in effect now that George has retired. The fact that the plan's value may have increased since the divorce does not affect the decree's plain language, which simply cannot reasonably be construed to award Kenda an interest only in the plan benefits that had accrued on the date of divorce. Whether intentional or not, the court that entered the decree failed to limit the community interest pursuant to the Taggart...