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Eads v. Eads

Court of Appeals of Indiana

November 16, 2018

Kimberly L. Eads, Appellant-Petitioner,
Robert J. Eads, Jr., Appellee-Respondent

          Appeal from the Johnson Superior Court The Honorable Peter D. Nugent, Judge Trial Court Cause No. 41D02-1110-DR-779

          ATTORNEY FOR APPELLANT Jonathan R. Deenik Deenik Law, LLC Greenwood, Indiana

          ATTORNEY FOR APPELLEE Janice Mandla Mattingly Janice Mandla Mattingly, P.C. Carmel, Indiana

          Vaidik, Chief Judge.

         Case Summary

         [¶1] In October 2011, Kimberly L. Eads ("Wife") filed a petition to dissolve her marriage to Robert J. Eads ("Husband"). Nearly six years later, in July 2017, the trial court issued a decree dissolving the parties' marriage. In the decree, the court used a coverture fraction to determine that 77.2% of Husband's firefighters' pension was earned during the marriage. The court then ordered Husband, once he retires, to forward half of 77.2%, or 38.6%, of his monthly pension payment to Wife each month and then issue her a Form 1099-R (an IRS form for distributions from pensions and retirement plans) so that Wife pays the taxes on her share of his pension. In addition, the court found that Wife, who receives social-security disability payments for injuries she sustained in a car accident, is entitled to rehabilitative maintenance and ordered Husband to pay her $1000/month for twenty-four months. Finally, the court ordered each party to pay their own attorney's fees.

         [¶2] Both Husband and Wife now appeal. We conclude that the trial court erred in calculating the coverture fraction because it included pension rights that Husband earned after Wife filed for divorce. We therefore remand this case with instructions for the court to apply one of two methods-the date-of-retirement approach or the date-of-divorce approach-to determine the portion of Husband's pension that was earned during the marriage. We also conclude that the trial court erred in ordering Husband to issue Wife a Form 1099-R each year and therefore order the court to consider different options of making Wife responsible for the taxes on her share of Husband's pension. Although we find no abuse of the trial court's discretion in ordering each party to pay their own attorney's fees, we find that the record does not support an award of rehabilitative maintenance. On remand, the court must determine whether Wife is entitled to incapacity maintenance instead of rehabilitative maintenance. We therefore affirm in part and reverse and remand in part.

         Facts and Procedural History

         [¶3] Although the dissolution decree covers many topics, this appeal concerns only a few of them. Accordingly, we set forth the facts that are relevant to the issues the parties raise on appeal.

         [¶4] Husband began working as a firefighter on February 7, 1994. As a firefighter, Husband is a member of the 1977 Police Officers' and Firefighters' Pension and Disability Fund ("1977 Fund"), which is administered by the Indiana Public Retirement System (INPRS). Appellant's App. Vol. II p. 23 (Finding 37); see also Thatcher v. City of Kokomo, 962 N.E.2d 1224, 1225 n.1 (Ind. 2012) ("The '1977 Fund' is a disability and pension fund for police officers and firefighters established by Indiana Code section 36-8-8-4 that is managed by [INPRS]."). Members of the 1977 Fund become vested with twenty years of service and are eligible for an unreduced retirement benefit when they have twenty years of service, are at least fifty-two years old, and have separated from service. Appellant's App. Vol. II p. 23 (Finding 37); see also Ex. 1. Unlike other pensions, the 1977 Fund pension is not subject to a Qualified Domestic Relations Order (QDRO).[1]

         [¶5] About three-and-a-half years after Husband began working as a firefighter, on November 15, 1997, Husband and Wife married. In 2000, Wife was involved in a car accident and sustained back injuries. See Tr. Vol. II p. 9 (Wife testifying that her back injuries prevent her from sitting, standing for long periods of time, and concentrating and that her medications make her sleepy). Wife, who worked as a finance manager before the accident, has not worked since the accident. Id. Wife was eventually awarded social-security disability payments dating back to 2000. In 2002 and 2003, Husband was "medically retired" due to an injury. Appellant's App. Vol. II p. 23 (Finding 39); Tr. Vol. III p. 177. Husband then returned to work.

         [¶6] On October 25, 2011-which was before Husband, then age forty-five, became vested in his 1977 Fund pension-Wife filed for divorce.[2] In the petition, Wife requested spousal maintenance. Tr. Vol. II pp. 95-97. After Wife filed for divorce, Husband and Wife did not live together or commingle assets. The divorce was pending for nearly six years. During this time, Husband reached twenty years of service and thus became vested in his pension.

         [¶7] The final hearing was held over the course of three days between December 2016 and February 2017. Husband was still working and thus continuing to accrue pension benefits. At the hearing, substantial time was devoted to Husband's 1977 Fund pension, as it was one of the parties' two major assets (the other being the marital residence). Wife presented evidence from Dan Andrews, a Franklin College business and accounting professor and a CPA. Specifically, Andrews testified that Husband's monthly benefit amount (calculated by INPRS as though Husband had separated from service on October 4, 2016-the date of valuation-and would apply for an unreduced retirement benefit when he turned fifty-two in July 2018) would be $3254.86 and that the present value of Husband's 1977 Fund pension was $1, 278, 133.26. See Tr. Vol. II pp. 200, 223; Ex. 2A. Andrews, at Wife's request, then applied the coverture fraction formula (discussed below), concluding that Husband earned 61.52% of his pension during the marriage. Tr. Vol. II pp. 201-02; Ex. 2A (although Andrews testified that the coverture is 61.54%, his report provides that the coverture is 61.52%).[3] Both Husband and Wife asked the trial court to order the other party to pay their attorney's fees. Tr. Vol. II p. 111; Tr. Vol. III p. 49.

         [¶8] On July 5, 2017, the trial court issued a decree of dissolution of marriage, which it amended in December following the parties' motions to correct error. The amended decree addresses Husband's 1977 Fund pension as follows:

46. The Court finds that the period of time from the date of [Husband's] employment (February 7, 1994) until the Date of the Decree (July 5, 2017) to be a total period of 281 months. However, the parties were not married for the first 40 months of [Husband's] employment, and there was [a] 24-month period of time in 2002-3 in which [Husband] was not working and contributing to his pension. Therefore, the pension vesting period was 217 months. (281 months - 64 months). Thus, the percentage of the pension earned during the marriage is 77.2% (217 divided by 281). [Wife] is entitled to half of that amount, or 38.6%.
* * * * *
48. [Wife] presented evidence in the form of a valuation report prepared by Dan Andrew[s] for [Husband's] 1977 Police and Firefighter pension. (Exhibit 2A). The Court accepts . . . Andrew[s'] valuation and places a value of $1, 278, 133.26 on said pension. However, only 77.2% of that amount was earned during the marriage, or $986, 718.83.

Appellant's App. Vol. II p. 24. The court then divided the $986, 718.83 equally, awarding Husband and Wife each $493, 359.42. Id. at 27 (Finding 59). As to how Wife would receive her share of Husband's pension, the court explained:

62. Because the parties do not have sufficient assets to divide the value of [Husband's] pension, the Court elects to divide the monthly benefit instead.
63. [Husband's] pension benefit at age 52 is calculated to be $3, 254.86 per month . . . . [Husband] could apply for a reduced pension benefit January 1, 2017 in the amount of $2, 894.22. (Exhibits 1, 2A, 2B, 2C).
64. Upon his retirement, [Husband] shall forward 38.6% . . . of his monthly pension each month to [Wife], as a [QDRO] is not possible with the Firefighter Pension. Because [Husband] . . . cannot determine his income tax liability before his earnings are calculated, [Husband] shall forward the pension amount directly to [Wife] and, each year, issue her a Form 1099 for her share of the pension.
65.The Court chooses this method of distributing [Husband's] pension due to the parties lacking sufficient resources to otherwise allocate sufficient assets and the inability of the pension to be divided by [QDRO].

Id. at 28.[4]

         [¶9] As for Wife's request for spousal maintenance, the court found:

74. The Court finds that [Wife] is disabled and in need of maintenance. [Wife] has been determined to be disabled by the Social Security Administration and receives Social Security Disability payments. [Wife] has been unable to work for several years.
* * * * *
82. The Court GRANTS [Wife's] request for spousal maintenance. The Court has reviewed I.C. 31-15-7-2 and the trial exhibits and agrees that [Wife] is in need of spousal maintenance. While [Wife] does currently receive disability income, it is not sufficient to sustain her needs. Pursuant to I.C. 31-15-7-2(3), the Court finds that [Husband] shall pay to [Wife] the sum of $1, 000.00 or 16.2% ...

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