Opinion issued December 21, 2006
In The
Court of Appeals
For The
First District of Texas
NO. 01-04-00427-CV
BRENDA JOYCE GAINOUS, Appellant
V.
THOMAS EARL GAINOUS, Appellee
On Appeal from the 246th District Court
Harris County, Texas
Trial Court Cause No. 1994-18001
CONCURRING OPINION ON REHEARING
I withdraw my dissenting opinion issued August 24, 2006 and substitute this concurring opinion in its stead. I join the opinion of the panel on rehearing. I write separately to express my reasons for concluding that the divorce decree awarded Brenda a vested interest in one-half of the total amount of Thomas's future contingent interest in the Houston Firemen's Relief and Retirement Fund ("the Fund").
Clarification of the 1995 Divorce Decree
The Gainouses' divorce decree, entered in 1995, provided that, as part of "a just and right division of the parties' marital estate":
[BRENDA] is awarded the following as [her] sole and separate property, and [THOMAS] is hereby divested of all right, title, interest, and claim in and to such property:
. . . .
- One-half (1/2) of the Houston Firemen's Relief and Retirement Fund standing in the name of THOMAS E. GAINOUS.
The trial court orally rendered judgment construing the divorce decree as awarding Brenda one-half of Thomas's interest in the Fund "as of the date of divorce."
Brenda contends that the plain language of the 1995 divorce decree awarded to her at the time of the divorce, as her separate property, a present one-half interest in the future contingent retirement benefits standing in Thomas's name in the Fund, to become effective at the time of Thomas's retirement, apportioned to the years of marriage during which those future benefits were accruing, including her portion of (1) Thomas's Deferred Retirement Option Plan ("DROP") funds, (2) Cost-of-Living-Adjustment ("COLA") benefits earned during the marriage, (3) a one-time $5,000 lump-sum payment made at Thomas's retirement, (4) a $150 supplemental payment, and (5) an annual supplemental payment benefit called the "13th-benefit payment." (1)
Thomas contends that the disputed benefits were properly denied by the 1996 Qualified Domestic Relations Order ("QDRO") because the decree awarded Brenda only one-half of the retirement benefits present in the Fund as of the date of the divorce. He argues that his DROP account, COLAs, 13th-benefit payments, supplemental payment, and lump-sum payment all constitute future contingent benefits that were not part of the community estate divisible on the date of the divorce because not even a contingent, unvested entitlement to those specific benefits existed until after the divorce; thus, he argues, they constitute his separate property under the terms of the decree and are not divisible. (2)
The task for this Court, therefore, is to determine, as a matter of law, (1) whether Brenda's half of Thomas's interest in the retirement plan, awarded to her at the time of divorce, was a present one-half interest in future contingent retirement benefits to be valued when those benefits actually accrued and were received in Thomas's name in the Fund or (2) whether the half of Thomas's retirement benefits distributable to Brenda when the assets matured and were received in the Fund was limited by the terms of the 1995 divorce decree to one-half of Thomas's share of the benefits available to firefighters eligible to retire in 1995, valued as of 1995.
Terms of the Gainouses' 1995 Divorce Decree
"When interpreting a divorce decree, courts apply the general rules regarding construction of judgments." Shanks v. Treadway, 110 S.W.3d 444, 447 (Tex. 2003). "Judgments should be construed as a whole to harmonize and [to] give effect to the entire decree." Id. "[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." Id. (quoting Wilde v. Murchie, 949 S.W.2d 331, 332 (Tex. 1997)). "If the decree is ambiguous, the court should review the record along with the decree to aid in interpreting the judgment." Id. If the decree is "subject to more than one reasonable interpretation," the court "should adopt the construction that correctly applies the law." Id. "[W]hether a divorce decree is ambiguous is a question of law." Id.
The literal language of the divorce decree in this case awards Brenda as her separate property, as of the date of divorce, a present vested interest in "[o]ne-half (1/2) of the Houston Firemen's Relief and Retirement Fund standing in the name of THOMAS E. GAINOUS." As of the date of divorce, there were no accrued and matured retirement benefits standing in Thomas's name in the Fund. Nor does anything in the language of the divorce decree limit Brenda's award of Thomas's future contingent retirement benefits to one-half of the type of retirement benefits available to firefighters who retired in 1995 or to the value of those particular assets as of 1995. Therefore, Brenda was necessarily awarded a future contingent interest in the total amount of Thomas's retirement benefits when they vested and became available for distribution as his portion of the Fund, i.e., at his retirement. This conclusion is supported by well-established Texas law.
Treatment of Future Contingent Retirement Benefits Under Texas Law
Neither Texas statutory law nor common law either expressly or implicitly prohibits trial courts from awarding in a divorce decree future contingent benefits earned during the marriage. To the contrary, under established Texas law, unaccrued and unmatured retirement benefits earned wholly or partially during marriage "constitute a contingent interest in property and a community asset subject to consideration along with other property in the division of the estate of the parties under [the predecessor to section 7.001] of the Family Code." Cearley v. Cearley, 544 S.W.2d 661, 666 (Tex. 1976); see also Taggart v. Taggart, 552 S.W.2d 422, 423 (Tex. 1977). Such "retirement benefits are subject to division as vested contingent community property rights even though the present right has not fully matured." Taggart, 552 S.W.2d at 423; see also Trahan v. Trahan, 894 S.W.2d 113, 119 (Tex. App.--Austin 1995, writ denied) ("[M]ilitary retired pay is subject to division upon divorce as a vested community property right even if the present right to the pay had not fully matured.").
In Cearley, the divorce decree awarded the former wife a fractional interest in the former husband's future military retirement benefits if and when he received them. Cearley, 544 S.W.2d at 661. In determining that the division of those future contingent benefits should be made effective as of the date of retirement, the supreme court stated, "The administration of justice will best be served if contingent interests in retirement benefits are settled at the time of divorce, even though it may be necessary in many instances for the judgment to make the apportionment to the nonretiring spouse effective if, as, and when the benefits are received by the retiring spouse." Id. at 666. The court explained that this method "will forego the difficulty of computing a present value and will fairly divide the risk that the pension may fail to mature." Id.
The supreme court has never overruled Cearly or determined that future contingent benefits cannot be awarded at the time of divorce. To the contrary: Cearley is still good law. Subsequently, however, in Taggart, the supreme court was faced with the problem of a divorce decree that divided community property, but failed to divide future contingent retirement benefits that had accrued during the life of the community. Taggart, 552 S.W.2d at 423. The court, therefore, developed a formula for courts to use in determining the community's interest in the employed spouse's future contingent retirement benefits and the non-employee spouse's share of that interest when the decree fails to apportion those benefits. See id. at 423-24. Because the Taggarts' marriage coincided with 246 of the 360 months that George Taggart had to serve in the Navy to receive retirement benefits, the court awarded Ann Taggart "one-half of 246/360th's of the retirement pay" actually received by George. Id. at 424.
In Berry v. Berry, 647 S.W.2d 945, 947 (Tex. 1983), the supreme court retrenched on the Taggart formula. In Berry, as in Taggart, the divorce decree was silent as to the division of the husband's future contingent retirement benefits. Id. at 945. The former wife later brought suit to collect her community share of those benefits, and the trial court awarded her "one-half of such benefits as would have existed at the time of divorce" had her former husband then been eligible for retirement. Id. The supreme court affirmed the judgment of the trial court. Id. It held that, in a case in which the divorce decree is silent as to the division of future contingent retirement benefits, the non-employee spouse should be awarded one-half of such future benefits "as would have existed at the time of divorce," apportioned to the years of the marriage, as in Taggart, but, unlike Taggart, also valued at the time of the divorce. Id. at 945, 947. It reasoned that a court could not properly divide a future contingent interest in the employed spouse's separate property, i.e., in the benefits that accrued by that spouse's labor after the divorce or that became available to plan retirees after the divorce. Id. at 947. However, the court expressly stated that its opinion was "not to be understood as overruling Taggart v. Taggart . . . or disapproving of its progeny . . . insofar as those opinions approve an apportionment formula for determining the extent of the community interest in retirement benefits," i.e., as proportional to the years of marriage vis a vis the years counted towards the retirement benefits. Id. (emphasis in original) (citations omitted).
Since developing the Taggart/Berry formula for judicially apportioning future contingent retirement benefits not divided in a divorce decree, the supreme court has twice considered whether to apply the Taggart/Berry formula in interpreting a divorce decree that is not silent as to the division of future contingent retirement benefits, but expressly apportions those benefits in terms inconsistent with the Taggart/Berry formula. See Shanks, 110 S.W.3d at 447-48; Reiss v. Reiss, 118 S.W.3d 439, 440-43 (Tex. 2003).
In both Shanks and Reiss, rather than impute to the divorce decree the Taggart/Berry formula for apportioning future contingent retirement benefits, the supreme court interpreted the decree according to its literal terms--even though, in both cases, the divorce decree awarded to the non-employee spouse an unqualified interest in future contingent retirement benefits and, thereby, necessarily awarded that spouse a portion of the employee spouse's post-divorce benefit increases that were properly construed as separate property. See Reiss, 118 S.W.3d at 441-42 (holding that decree that awarded wife 50% "of such retirement or pension benefit to which [husband] . . . is entitled to receive" if and when he retired or was otherwise entitled to benefits "unequivocally awards [former wife] half of [former husband's] total retirement benefits under the plan, regardless of when they accrued," despite other language in decree referring to division of community property); Shanks, 110 S.W.3d at 447-48 (holding that unappealed divorce decree that provided that non-employee former wife was to receive "a 'pro rata' interest . . . of any and all sums received or paid to [employee former husband] from such pension [or retirement] plan" unambiguously awarded former wife pro rata portion of former husband's total retirement benefits, rather than pro rata portion of community-property portion of those benefits). (3) The court emphasized in Shanks that "the trial court awarded [the former wife] an interest in all sums received under such plan, not an interest of presently accrued benefits under such plan." Shanks, 110 S.W.3d at 448 (emphasis in original and added).
The court opined in Shanks:
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 [the non-employee spouse] 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 apportionment fraction and instead clearly gave [the non-employee spouse] a twenty-five percent interest in the total amount (whatever that might be) to be paid to [the employee spouse] under the plan.
Id. Similarly, in Reiss, the supreme court acknowledged that by awarding the wife half of her husband's total retirement benefits "if and when" he retired, the trial court had mistakenly classified all of the former retirement benefits as community property, rather than as part separate property and part community property, and had thus mistakenly awarded the former wife a portion of her former husband's separate property. 118 S.W.3d at 442. Nevertheless, in both cases, the court concluded that, although the trial court's mistake in awarding to the former wife a portion of her former husband's separate property made the decree voidable if timely appealed, the decree was not void "because a court has jurisdiction to characterize community property--even if it does so incorrectly"; thus, absent a timely appeal, the judgment became final and could not be collaterally attacked. Id. at 443; see Shanks, 110 S.W.3d at 449.
Here, as in Reiss and Shanks, the divorce decree expressly divided the total amount of Thomas's share of the Fund, awarding Brenda at the time of divorce a vested interest in "[o]ne-half (1/2) of the Houston Firemen's Relief and Retirement Fund standing in the name of THOMAS E. GAINOUS," when a portion of the Fund was actually allocated to Thomas, rather than apportioning her interest according to the years of the marriage as under the Taggart/Berry formula. The decree did not limit the portion of Thomas's retirement benefits distributable to Brenda at his retirement to the type of benefits available to retirees at the time of the divorce in 1995 or to the value of such benefits in 1995, even though, had the parties intended to apportion Brenda's interest in Thomas's share of the Fund to the years of the marriage or to limit her interest in Thomas's share of the Fund to the value of his interest had he been eligible to retire in 1995, they could have done so. See Hurley v. Hurley, 960 S.W.2d 287, 288-89 (Tex. App.--Houston [1st Dist.] 1997, no pet.) (holding that language that wife was to receive "'one-half (1/2) of [appellant's] retirement benefits in the Mars Retirement Plan if, as and when received by [him]'
. . . is unambiguous, and it is fatal to appellant's claim that the benefits were to be valued at the time of divorce").
Conclusion
Accordingly, I join in the panel's opinion and conclusion that, under its literal language, the divorce decree awarded Brenda at the time of the divorce a future contingent interest in "[o]ne-half (1/2) of the [total amount of the] Houston Firemen's Relief and Retirement Fund standing in the name of THOMAS E. GAINOUS" at the time of his retirement, including a one-half interest in the DROP funds; the COLAs; the one-time, lump-sum payment of $5,000; the $150 monthly supplemental payment; and the 13th-benefit payment.
Evelyn V. Keyes
Justice
Panel consists of Justices Taft, Keyes, and Hanks.
Justice Keyes, concurring.
Justice Hanks, concurring in the judgment.
1. 2. Thomas pointed out that section 804.003(g)(7) of the Government Code
expressly provides that a public retirement system may reject a QDRO that
purports to award "future benefit increases that are provided or required by the
Legislature." Tex. Gov't Code Ann. § 804.003(g)(7) (Vernon 2004). As our
opinion explains, however, section 804.003(g)(7) applies to QDROs--not to
divorce decrees. See id. There is no such limitation on divorce decrees.
3. The Shanks decree awarded the wife "a 'pro-rata interest' . . . of any and all sums
received or paid to" the husband from his pension plan. Shanks v. Treadway, 110
S.W.3d 444, 445 (Tex. 2003). It defined "pro-rata interest" as "25% of the total sum
or sums paid or to be paid to [husband] from such pension or retirement plan." Id.