Douglas S. Johnston v. Lorrie Johnston
Douglas S. Johnston v. Lorrie Johnston
Opinion
*628 ¶ 1. This case asks us to examine that strange procedural device, the Qualified Domestic Relations Order (QDRO), and how it intersects with the statute of limitations for actions on judgments. The parties divorced in November 2004. As part of the divorce, the court ordered wife to transfer funds from her retirement account to husband. In 2006, the court approved a proposed QDRO to effectuate the transfer of said funds. The order was never "qualified," however, because there was no money in the retirement account that wife identified. The court approved another proposed QDRO in February 2007 specifying a different retirement account identified by wife. In August 2017, husband filed a motion to enforce, asserting that the owed funds were never transferred to him and that there were no funds in the second retirement account that wife identified. The court denied husband's motion to enforce, finding it barred by the eight-year statute of limitations for actions on judgments. As set forth below, we do not consider husband's attempt to effectuate a transfer of these retirement funds by QDRO to be an action on a judgment, and we therefore reverse and remand.
¶ 2. We begin with an overview of the relevant law governing the division of retirement accounts. A court must engage in a two-step process to divide retirement accounts governed by the federal Employee Retirement Income Security Act of 1974 (ERISA),
¶ 3. "The [retirement] plan administrator determines whether the order is qualified-whether a Q can be added to the DRO-subject to the right of either spouse to appeal the decision to a state or federal court." 2 Turner,
supra
, § 6:20. This results in a QDRO.
1
"A qualified order assures that a spouse receives benefits as an alternate payee."
Ochoa v. Ochoa
,
¶ 4. As Turner recognizes, "the requirements for qualification are difficult to meet." 2 Turner,
supra
, § 6:20; see also
Larimore v. Larimore
,
¶ 5. "If the administrator refuses to qualify the DRO, the court may amend it to address the source of the problem." 2 Turner, supra , § 6:20 (explaining that "[e]ssentially all jurisdictions" agree, with respect "to revision of DROs and other attempts to draft qualified orders dividing retirement benefits," that "[t]hose orders are subject to future changes without limitation, so long as the modification only enforces the court's previous substantive order, without modifying that order's substantive terms"). As indicated, "the modern rule is that the court may modify its DRO any number of times." Id . This modifiability is a strength of a DRO's "limited status ... as [a] procedural device[ ] rather than [a] substantive order[ ]." Id . "The weakness is that the DRO cannot reach a result inconsistent with the underlying substantive order." Id .
¶ 6. "In short," Turner explains:
when dividing retirement benefits, the law of equitable distribution is not playing on its home field. Because of ERISA, pension issues are litigated in material part upon the home field of the plan administrator.... Because the plan administrator is not required to play by normal state court rules, normal state court procedures must be adapted to the unique setting of DROs under ERISA.
¶ 7. With this overview in mind, we turn to the facts. The parties here divorced in November 2004 after a twenty-five-year marriage. The court ordered an equal division of the marital assets. Both parties had pensions and various retirement accounts. As relevant here, the court ordered wife to transfer $ 27,655 from one or both of her retirement accounts to husband within forty-five days of the date of the final divorce order.
¶ 8. No funds were transferred to husband within this period by QDRO or otherwise. In mid-2006, husband's attorney filed with the court a proposed QDRO, drafted by wife's attorney and edited by husband's attorney, to effectuate the transfer. The court approved the proposed QDRO in May 2006, identifying a particular retirement account from which a lump-sum payment should be made to husband as the "alternative payee." This order was then presumably sent to the plan administrator to determine if it should be qualified; if it was deemed qualified, the plan administrator would segregate the retirement funds and transfer them to husband's retirement account.
¶ 9. In September 2006, husband moved for enforcement of the divorce order and contempt. He asserted that there were no funds in the retirement account that wife identified in the proposed QDRO and, thus, there were no funds available to transfer to him. Wife's attorney acknowledged that wife had removed the funds from the retirement account she identified. She proposed a modified QDRO that identified a different retirement account.
¶ 10. The parties then engaged in a back-and-forth over the proposed QDRO's *630 terms. Husband objected to the use of a QDRO at all, arguing that he was entitled to an immediate lump sum payment from wife. If a QDRO was warranted, husband argued that he was entitled to interest given wife's delay in transferring the funds to him. In late February 2007, at the parties' request, the court clarified that the final divorce order contemplated a transfer by QDRO from one retirement account to another. The following month, the court approved the second proposed QDRO drafted by wife's attorney; the order stated it was intended as a QDRO requiring wife to transfer the $ 27,655 from her retirement account to husband. The court denied husband's request to include accrued interest. The proposed QDRO, approved by the court, stated, among other things, that the court "shall retain jurisdiction with respect to this Order to the extent required to maintain its qualified status and the original intent of the parties as provided herein." There is nothing in the record to show that a plan administrator ever approved this proposed QDRO.
¶ 11. Ten years later, in August 2017, husband filed a motion to enforce the final judgment of divorce. See generally V.R.F.P. 4.2 (describing process for filing post-judgment proceedings in divorce actions, including motions to enforce). He recounted the history of the two proposed QDROs. Husband averred that wife had forwarded the proposed QDRO to her plan administrator and that husband had assumed that the transfer occurred. He stated that he had recently learned that no retirement funds were transferred to him and that there were no funds available for transfer in the second retirement account that wife identified in the 2007 QDRO. Husband asked the court to compel wife to transfer the retirement funds to him with interest. Wife opposed the motion, arguing that husband's request was time-barred.
¶ 12. The court construed husband's motion as seeking enforcement of the November 2004 final divorce order and concluded that it was time-barred. The court determined that the eight-year limit for actions on judgments applied. See 12 V.S.A. § 506 ("Actions on judgments and actions for the renewal or revival of judgments shall be brought by filing a new and independent action on the judgment within eight years after the rendition of the judgment, and not after."). It found that unlike child-support orders, there was no specific statute shielding enforcement actions in divorce cases from the eight-year limit set forth in § 506. See 15 V.S.A. § 606(a), (c) (addressing enforcement of child-support orders).
¶ 13. The court also looked to a Nevada case applying similar statutes. It found compelling the Nevada Supreme Court's holding that a judgment-action limitations period applied to the enforcement of a divorce decree's property distribution, regardless of whether enforcement was brought "through motion practice or through an independent action."
Davidson v. Davidson
,
¶ 14. The
Davidson
court considered the timeliness of a wife's action to enforce a
*631
provision in a divorce decree requiring her ex-husband to pay her one-half of the equity in the marital home. The court concluded that, "other than child support orders," Nevada law did not exclude family division orders from the state's six-year limitation for actions on judgments.
Davidson
,
¶ 15. Finally, the court in this case cited
Iannarone v. Limoggio
, where we held that the doctrine of claim preclusion barred the wife from filing successive motions to enforce her ex-husband's obligation to pay her a certain sum under a final divorce order.
¶ 16. Husband challenges the trial court's decision on multiple grounds. He first argues that the court erred in relying on claim preclusion to deny his request. He argues that claim preclusion is inapplicable here because he lacked a prior opportunity to litigate his claim. Husband further argues that § 506 should not apply because he filed a motion to enforce, not an "action on a judgment." He asserts that applying § 506 ignores the proposition, referred to favorably in our cases, that a trial court retains indefinite jurisdiction to enforce its own orders. Husband also contends that the Legislature and this Court have never expressly stated that § 506 governs motions to enforce a court's own order. Finally, husband cites various equitable principles and argues that wife should not be allowed to benefit from repeatedly disobeying a court order.
¶ 17. First, we find it unnecessary to address claim preclusion because it is inapplicable
*632
here and because the trial court did not rely on claim preclusion (other than by analogy) to deny husband's claim. We agree with husband, however, that this case is not like
Iannarone
, where one spouse could have, and should have, raised her current theory of recovery in a prior proceeding and failed to do so. Cf.
¶ 18. We note, moreover, that the statute of limitations for actions on judgments was not at issue in
Iannarone
, nor did we discuss QDROs and their unique role in transferring retirement funds. Instead, we considered if the trial court's denial of the wife's first motion to enforce payment of a certain sum reflecting her share of the value of the marital home constituted "a previous final judgment on the merits," one of the elements of claim preclusion.
¶ 19. We thus turn to husband's remaining arguments. We review de novo whether the statute of limitations set forth in § 506 bars husband's motion. See
In re D.C.
,
¶ 20. Other courts have reached similar conclusions under similar facts. See
Jordan v. Jordan
,
¶ 21. In
Jordan
, a wife was awarded a certain percentage of her husband's employment benefits in a final divorce order and the court directed the parties to prepare and submit a QDRO. More than ten years later, the wife did so. Her former husband objected, arguing that entry of a QDRO was barred by the ten-year statute of limitations applicable to actions on judgments. The trial court ultimately agreed with the husband. It reasoned that the wife "could have tried to force an immediate transfer," and it found no statute that would "delay the finality" of final divorce decrees with respect to the division of assets.
Jordan
,
¶ 22. The appeals court reversed. It noted the dearth of case law on the "core question" before it of "whether an attempt to secure the approval of and entry of a QDRO is 'an action on a judgment' within the contemplation of" the ten-year statute of limitations for actions on judgments.
¶ 23. The court recognized the difficulties inherent in drafting a DRO that would be qualified and noted the absence of a statute of limitations for entry of a QDRO under ERISA.
¶ 24. Because the plan administrator had not yet approved the proposed QDRO, "the trial court's decree [could not] be enforced against the 'holder of the purse strings,' " and "[a]ny attempt to 'enforce' the trial court's validly-entered division of [h]usband's pension plan would be futile."
*634
¶ 25. The Michigan Court of Appeals reached a similar conclusion in
Joughin
,
¶ 26. The appeals court considered a QDRO "as
part of
the divorce judgment," and thus, it could not "be viewed as
enforcing
that same judgment."
¶ 27. As in
Jordan
, the court emphasized that entry of a proposed QDRO "did not compel the payment of any money to plaintiff," which further demonstrated that it was "not equivalent to the enforcement of a noncontractual money obligation."
¶ 28. We reach a similar conclusion here. As discussed at the outset of this opinion, the trial court's division of the parties' assets and its approval of a DRO is only the first step in obtaining the transfer of retirement funds under ERISA; a spouse has no right to payment from a particular retirement account until a plan administrator determines that a QDRO has been created, that is, the court's DRO is qualified. Thus, although husband was awarded the right to a particular amount of retirement funds in the 2004 divorce order, he had no effective ability to enforce that portion of the order through an "action on the judgment." See
Koerber v. Middlesex Coll.
,
¶ 29. We agree with the courts above that " 'the approval of [a] proposed QDRO is adjunct to the entry of the judgment of divorce and not an attempt to "enforce" the judgment.' "
Joughin
,
¶ 30. We acknowledge that other courts have reached conclusions different from those set forth above, albeit in a slightly different context. See
Larimore
,
*636 to hold that a motion for entry of a DRO is governed by the state's normal statute of limitations on enforcing judgments"). 7 We simply disagree with the conclusion that entry of a DRO is an attempt to enforce the underlying final divorce order or that the filing of a DRO constitutes an execution upon the judgment. As previously discussed, the right to obtain the retirement funds awarded in a final divorce order depends upon the approval of a third-party, the plan administrator. There is no "judgment" to execute or enforce until that step has been taken.
¶ 31. Thus, for the reasons stated above, we reverse the trial court's decision and remand for entry of a revised DRO. We do not decide at this juncture if the revised DRO should include interest. We note, however, that "[s]ome courts are starting to award interest on QDROs and similar orders transferring retirement benefits." 2 Turner, supra , § 6:20 (citing cases). We leave it to the trial court to decide this question in the first instance on remand.
Reversed and remanded for additional proceedings consistent with this opinion .
For convenience and to avoid confusion, we refer to a DRO in some portions of this opinion as a "proposed QDRO," mindful that an order is not actually a QDRO until it is approved by a plan administrator.
Wife moves to strike portions of husband's brief and printed case, including, apparently, husband's motion to enforce and the affidavit that accompanied his motion. These materials are plainly part of the trial court record and they are properly included in husband's printed case. See V.R.A.P. 10(a)(i) (explaining that record on appeal includes, among other things, "the original documents ... and exhibits filed ... in the superior court"); V.R.A.P. 30(a)(1) (describing contents of printed case to include "relevant parts of the pleadings," and "other parts of the record to which the parties wish to direct the Court's attention"). Wife also asks this Court to strike portions of husband's arguments that she contends rely on "allegations outside the evidentiary record." The Court has not relied on any evidence outside the record in reaching its decision. We therefore deny wife's motion as moot.
We note that we did not address this question in
Breslin
,
Some states have enacted laws explicitly providing courts with continuing jurisdiction to establish, maintain, or revise DROs to ensure that they are qualified, or stating that divisions of retirement benefits are not final until a DRO is qualified by the plan administrator. See 2 B. Turner, supra , § 6:20 (citing statutes and cases applying such statutes).
We note the availability of contempt proceedings under 15 V.S.A. § 603(b). Under § 603(b), "[i]f a person disobeys a lawful order of the Family Division made under the provisions of this chapter and the order creates a financial obligation, including payment of child support, spousal maintenance, or a lump sum property settlement, the person may be subject to proceedings for civil contempt as provided by 12 V.S.A. § 122 and the provisions set forth herein." See also V.R.F.P. 16 (addressing civil contempt proceedings in family division cases). The availability of contempt proceedings, however, does not show that husband had the ability to take an "action on the judgment" under § 506, which requires the "filing of a new and independent action on the judgment."
We note that the
Larimore
court construed a dormancy statute, the application of which was not limited to money judgments, rather than a statute of limitations for actions on judgments. See
We note that
Davidson
, cited by the trial court, does not involve entry or modification of a QDRO and the cases cited by the
Davidson
court similarly do not involve QDROs. See
Davidson
,
Reference
- Full Case Name
- Douglas S. JOHNSTON v. Lorrie JOHNSTON
- Cited By
- 1 case
- Status
- Published