Sulzer v. Diedrich

• Decision Date: 03 July 2003
• Docket Number: No. 02-0036.,02-0036.
• Citation: 263 Wis.2d 496,2003 WI 90,664 N.W.2d 641
• Parties: Mary K. SULZER, Plaintiff-Respondent-Cross-Appellant-Petitioner, v. Mary Susan DIEDRICH, Defendant-Appellant-Cross-Respondent.
• Court: Wisconsin Supreme Court

263 Wis.2d 496

2003 WI 90

664 N.W.2d 641

Mary K. SULZER, Plaintiff-Respondent-Cross-Appellant-Petitioner, v. Mary Susan DIEDRICH, Defendant-Appellant-Cross-Respondent.

No. 02-0036.

Supreme Court of Wisconsin.

Oral argument May 27, 2003.

Decided July 3, 2003.

For the plaintiff-respondent-cross-appellant-petitioner there were briefs by C. Michael Hausman, Steven W. Jelenchick, and C. Michael Hausman & Associates, Ltd., Delafield, and oral argument by Steven W. Jelenchick and C. Michael Hausman.

For the defendant-appellant-cross-respondent there was a brief by John K. Brendel and Brendel Law Offices, Brookfield, and oral argument by John K. Brendel.

¶ 1. ANN WALSH BRADLEY, J.

The petitioner, Mary Sulzer (Sulzer), seeks review of a published court of appeals decision that reversed an order of the circuit court.¹ The circuit court order vacated its initial order imposing a constructive trust. Instead, it awarded Sulzer a money judgment in connection with the division of the retirement accounts of her former husband, Fred Diedrich (Fred), which were to be divided equally at the time of their divorce in 1989. Upon Fred's death, the accounts were subsequently converted to survivorship benefits with his second wife, the respondent Mary Diedrich (Diedrich), named as the beneficiary. The court of appeals concluded that the circuit court erred when it vacated its initial order imposing a constructive trust on Sulzer's portion of these funds, and instead awarded a money judgment.

¶ 2. In analyzing the amount that should be subject to the constructive trust, the court of appeals determined that it should include the investment experience of Sulzer's portion of the accounts between the 1989 divorce and the date of Fred's death in 1995, but should not include the investment experience after Fred's death.²Sulzer v. Diedrich, 2002 WI App 278, ¶ 2, 258 Wis. 2d 684, 654 N.W.2d 67. Sulzer agrees that a constructive trust should be imposed, but seeks review of the court of appeals' determination that the constructive trust should not include the investment experience of her portion of the retirement accounts after Fred's death.

¶ 3. While we agree that the imposition of a constructive trust is warranted in this case, we conclude that the constructive trust should include the investment experience on Sulzer's portion of the retirement accounts through the date of payment to Sulzer. We therefore modify the decision of the court of appeals, affirm the decision as modified, and remand to the circuit court for further proceedings consistent with this opinion.

¶ 4. The retirement accounts at issue in this case are Fred's Wisconsin Retirement System (WRS) account and his deferred compensation account administered by the Copeland Companies (Copeland) at the time of the divorce.³ During Sulzer and Fred's divorce proceedings, the parties entered into an oral stipulation. The following exchange took place regarding the pension benefits:

ATTORNEY D'ANGELO: . . . In addition, the parties have agreed to divide equally all of the respondent's interests through the Wisconsin Retirement System with the value established as of today's date, and all of the respondent's interest in his deferred compensation program through the State of Wisconsin.

THE COURT: So, those two retirement plans or investment plans are going to be divided equally by a qualified domestic relation order.

ATTORNEY D'ANGELO: On the deferred compensation but the State of Wisconsin uses a slightly different program for division, but that is the intent of it.

....

THE COURT:... We are going to use a qualified domestic relation order for the deferred compensation plan, and we are going to use another approach, which is going to end up with her owning half of his present value as of today in his retirement plan. Okay. Not exactly a domestic relation order, it's another kind of procedure used by the State whereby she ends up receiving half of it....

¶ 5. In conformity with the oral stipulation, the judgment of divorce, entered on December 12, 1989, contained a "Property Division" section that provided:

The parties will divide equally all of respondent's interest in the retirement, pension, profit sharing, or deferred compensation benefits through the Wisconsin Retirement System or the State of Wisconsin. The deferred compensation plan of the respondent is presently administered by the Copeland Companies and his retirement benefits are with the State of Wisconsin Retirement System. It is the parties' intent to have these benefits divided as to their balance on the date of the divorce trial on September 6, 1989, by a Qualified Domestic Relations Order, or an order of the Court having a similar effect.

¶ 6. After the divorce, Sulzer obtained various circuit court orders in her efforts to cause the division of the retirement accounts as provided in the 1989 divorce judgment. In August 1990, she obtained an Order for Division of Benefits directing the Wisconsin Department of Employee Trust Funds to issue Fred's benefit checks to the Clerk of Courts of Waukesha County for division of payments pursuant to the divorce judgment. The Copeland plan administrators rejected this order.

¶ 7. A Domestic Relations Order was then entered in February 1993 as to the Copeland account, ordering Fred to, among other things, designate Sulzer as the beneficiary under the account as to the amount provided in the divorce judgment. Fred failed to name Sulzer as the beneficiary as required by the order.

¶ 8. In March 1995, an Order to Divide Wisconsin Retirement System Benefits was entered as to the WRS account. The order, which was intended to be a Qualified Domestic Relations Order (QDRO), awarded Sulzer 50% of the value of the WRS account. However, WRS considered the QDRO to be unenforceable because, at that time, the QDRO exception to the WRS restrictions did not apply to marriages terminated prior to April 28, 1990.

¶ 9. Fred married Diedrich on May 9, 1992. Shortly thereafter, on May 22, 1992, he designated Diedrich as the beneficiary of the WRS and Copeland accounts.

¶ 10. Fred died in February 1995. Soon after his death, Sulzer requested her portion of the retirement accounts from WRS and Copeland, as provided in the divorce judgment. Both requests were denied because Sulzer was not designated as the beneficiary on the accounts.

¶ 11. In May 1998, the law was changed to permit the division of WRS retirement accounts in accordance with QDRO agreements reached pursuant to divorce judgments granted on and prior to April 27, 1990. In response to the change in the law, Sulzer requested that WRS implement the QDRO. WRS responded in February 1999, setting forth its reasons for refusing to honor the QDRO. WRS stated that it would not honor the QDRO in this case because Fred died prior to the change in the law and his benefits had already been paid to Diedrich as the designated beneficiary.

¶ 12. Sulzer commenced this action in December 1996, seeking a constructive trust against Diedrich, and any other appropriate just and equitable relief. After numerous delays, postponements, and adjournments, the circuit court imposed a constructive trust on the retirement accounts in September 2000. At a hearing to determine Sulzer's monetary interest in the retirement accounts, the circuit court, for reasons not fully explained on the record, vacated the constructive trust and awarded Sulzer a monetary judgment in the amount of $169,482. This is the amount that was in Sulzer's portion of the retirement accounts as of the date of divorce together with the investment experience on that portion up to the date of the hearing, as calculated by Sulzer's expert.

¶ 13. Diedrich appealed the circuit court's judgment and Sulzer cross-appealed. The court of appeals concluded that the circuit court erred in vacating the constructive trust and awarding a money judgment. Sulzer v. Diedrich, 2002 WI App 278, ¶ 2, 258 Wis. 2d 684, 654 N.W.2d 67. It determined that the circumstances warranted the imposition of a constructive trust. Id.

¶ 14. The court also concluded that Sulzer was not entitled to appreciation after Fred's death because the funds had been converted from retirement benefits to survivorship benefits. Id., ¶ 17. Further, noting that the action sounded in equity, it concluded that Sulzer was not entitled to interest because of her numerous requests for postponements and because Diedrich did not wrongfully retain the use of Sulzer's money. Id., ¶ 18. The court of appeals remanded the matter to the circuit court for imposition of the constructive trust. Id., ¶ 19.

II

¶ 15. In this case, we must determine whether the use of a constructive trust is warranted to give effect to terms contained in a divorce judgment. If it is, we must then address the extent to which the investment experience of Sulzer's portion of the retirement accounts should be included in the constructive trust.

[1-3]

¶ 16. The question of whether to impose a constructive trust sounds in equity. Singer v. Jones, 173 Wis. 2d 191, 194, 496 N.W.2d 156 (Ct. App. 1992). We apply a two-tiered standard of review in this type of case. Id. As to the legal issues, such as the construction of the divorce judgment, we apply a de novo standard. Id. As to the ultimate decision whether to grant the equitable relief of a constructive trust, we apply a discretionary standard. Id.

¶ 17. Our application of the discretionary standard of review to the ultimate decision of whether to impose a constructive trust is complicated by the procedural history of this case. Sulzer's complaint requested that the circuit court impose a constructive trust and the circuit court initially did so. However, it later vacated the constructive trust and ordered a money judgment. The court of appeals noted that the circuit court did not set forth on the record its reasoning for ordering the money judgment. Sulzer, 258 Wis. 2d 684, ¶ 8. It assumed that the circuit court did...