Opinion ID: 1057654
Heading Depth: 2
Heading Rank: 1

Heading: Interpretation of Section 36-4-121(b)(1)(B)

Text: The disposition of this issue depends upon our interpretation of the governing statute, particularly the last eight words. The pertinent portion of the statute provides as follows: Marital property includes income from, and any increase in value during the marriage of, property determined to be separate property ... if each party substantially contributed to its preservation and appreciation, and the value of vested and unvested pension, vested and unvested stock option rights, retirement or other fringe benefit rights relating to employment that accrued during the period of the marriage. Tenn.Code Ann. § 36-4-121(b)(1)(B) (2005) (emphasis added). As stated by the majority, this statute addresses two forms of marital property: (1) that so classified by substantial contribution and (2) pension, stock option rights, and retirement or other fringe benefit rights that accrued during the period of the marriage. The majority interprets retirement or other fringe benefit rights relating to employment that accrued during the period of the marriage to include as marital property any increase in value of an employment-related retirement benefit right that occurs during a marriage, even when the retirement benefit rights were acquired before the marriage. See Black's Law Dictionary 22 (8th ed. 2004) ( accrue ... 2. To accumulate periodically .). While that definition might tend to support the majority's interpretation, I believe that section 36-4-121(b)(1)(B) directs that accrual, in context, occurs on the date (or dates) the retirement benefit right is earned or acquired, not the dates of its appreciation or the increases in its value. See Black's Law Dictionary at 22 ( accrue ... 1. To come into existence as an enforceable claim or right; to arise ....); id. at 301 ( accrued compensation. Remuneration that has been earned but not yet paid.); id. at 778 ( accrued income. Money earned but not yet received.); id. at 1347 ( accrued right. A matured right; a right that is ripe for enforcement. ...). That is, the retirement benefit right accrued prior to, not during the period of the marriage. Tenn.Code Ann. § 36-4-121(b)(1)(B). Indeed, the language in the statute is ambiguous. Initially, the two definitions of accrue cited above may be read together to permit not only the interpretation to which I subscribe, but also that of the majority. Moreover, it is unclear whether accrued during the period of the marriage, the concluding phrase in the paragraph, modifies the term value or the term rights. Because the statute is ambiguous, however, the history of the legislation and our prior interpretations of the specific language should guide our thinking, and, I believe, would lead us to a conclusion the majority has failed to embrace. See Parks v. Tenn. Mun. League Risk Mgmt. Pool, 974 S.W.2d 677, 679 (Tenn.1998) (holding that, where statutory language is ambiguous, an examination of the context may be helpful).
Language similar to the provision at issue was first added in 1983, when the General Assembly enacted a substantial overhaul of the law governing the division of property and the award of support and maintenance in divorce cases. Act of May 12, 1983, 1983 Tenn. Pub. Acts 798, 800 (the 1983 Act). Notably, the 1983 Act addressed retirement rights as part of the larger category of property acquired by a spouse during a marriage: Marital property means all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage and presently owned by either or both spouses; including ... the value of vested pension, retirement or other fringe benefit rights accrued during the period of the marriage. Id. at ch. 414, § 4(b)(1) (emphasis added). Although the current version of section 36-4-121(b)(1) has broken its definition of marital property into multiple subsections and no longer explicitly refers to the value of retirement rights as property ... acquired... during the course of the marriage, I have found nothing to suggest that the General Assembly has elected to define marital property on a basis other than the time the right is acquired. In my assessment, the original language of the statute supports the conclusion that retirement benefit rights should be initially classified as either marital or separate based upon the timing of the acquisition.
In Cohen v. Cohen, 937 S.W.2d 823 (Tenn.1996), we used language suggesting that the date of acquisition controlled on the question of whether property qualified as marital or separate property. The Cohens were married in 1982, and the husband's employer began contributing to his retirement plan in 1987, so there were no premarital contributions. We granted permission to appeal in order to determine whether an interest in an unvested retirement plan is marital property pursuant to section 36-4-121(b)(1). Id. at 825. While determining that the benefits were marital property, this Court, in multiple instances, used language stressing that the statutory reference to the time of accrual referred to the accrual of the benefit right  as opposed to accrual of additional value through appreciation: (1) Though not necessary to our conclusion, we note that courts of other states and our own Court of Appeals are in accord with our conclusion that unvested retirement benefits accruing during the marriage constitute marital property; (2) A spouse who is primarily a homemaker would be seriously disadvantaged by the inability to claim a portion of the retirement benefits that accrued during the course of the marriage; (3) Only the portion of retirement benefits accrued during the marriage [is] marital property subject to equitable division; (4) We, therefore, conclude that marital property includes retirement benefits, both vested and unvested[,] which accrue during the marriage ; (5) An interest in a retirement benefit, vested or unvested, accruing during the marriage, is marital property subject to division under Tennessee Code Annotated Section 36-4-121(a)(1). Id. at 829-30 (emphasis added). Each reference serves as an indication that accrued during the period of the marriage meant acquired during that time. Furthermore, the Cohen opinion expressed concurrence with the Rhode Island Supreme Court's rationale for treating retirement benefits accrued during a marriage as marital property: To the extent earned during the marriage, the benefits represent compensation for marital effort and are substitutes for current earnings which would have increased the marital standard of living or would have been converted into other assets divisible at dissolution. Subjecting the benefits to division is just, because in most cases the retirement benefits constitute the most valuable asset the couple has acquired and they both have relied upon their pension payments for security in their older years. Id. at 828-29 (quoting Moran v. Moran, 612 A.2d 26, 33 (R.I.1992)) (emphasis added). In other words, the benefits are part of the consideration earned by an employee, and . . . a form of deferred compensation provided by the employer for work already performed. Id. at 829 (citation omitted). By defining marital property as those retirement benefits earned during the marriage, the Cohen court by negative implication excluded those earned prior to the marriage. In Langschmidt v. Langschmidt, 81 S.W.3d 741 (Tenn.2002), this Court considered section 36-4-121(b)(1)(B) in the context of individual retirement accounts (IRAs) funded with premarital earnings, concluding that the accounts were not marital property. While the majority purports not to specifically overrule Langschmidt, it has ruled that the analysis lacked clarity and failed to articulate clearly the correct analytical approach. I must disagree. In Langschmidt, this Court concluded that the time of the husband's acquisition of the assets that funded the account controlled as to the classification of the property as marital: Unlike the accrual of vested or unvested pension during the marriage, Husband's IRAs in this case do not represent deferred compensation during the marriage, but were funded with premarital assets. . . . [A]ssets owned by a spouse before marriage are not marital property. See Tenn.Code Ann. § 36-4-121(b)(2)(a). Since Husband's IRAs do not represent deferred marital compensation, but were funded with premarital earnings (except for the value of the 401(k) rollover), we conclude that Husband's premarital IRAs are not retirement benefits under Tenn.Code Ann. § 36-4-121(b)(1)(B). 81 S.W.3d at 749-50. By adopting that reasoning, this Court explicitly considered and rejected a line of cases that treated the question of whether accounts are retirement benefits by definition as determinative. Id. at 749 (citing McKee v. McKee, No. M1997-00204-COA-R3-CV, 2000 WL 666363, at  (Tenn.Ct.App. May 23, 2000); Mahler v. Mahler, No. 01A01-9507-CH-00303, 1997 WL 187130, at  (Tenn.Ct.App. April 18, 1997); Mayfield v. Mayfield, No. 10A01-9611-CV-00501, 1997 WL 210826, at -5 (Tenn.Ct.App. April 30, 1997)). The majority has chosen instead to revive the reasoning of this line of cases. Because I see no reason to either overrule or clarify Langschmidt, I must disagree. The principle espoused by Langschmidt and Cohen is that contributions to a retirement account qualify as marital property if made as a form of deferred compensation during the marriage, but they do not qualify as marital property if made prior to the time of marriage. Because the premarital contributionsas benefits accruing before the marriageshould be separate property, any increase in value attributable to those contributions should also be treated as separate property.
The Langschmidt rule is consistent with the policy underlying the statutory scheme, which classifies property based upon the time property is acquired, earned, or increased in value through a spouse's labor. Section 36-4-121(b)(1)(A), for example, includes property  acquired by either or both spouses during the course of the marriage up to the date of the final divorce hearing. (Emphasis added.) Further, section 3 6-4-121(b)(1)(B) includes any increase in value during the marriage of . . . separate property . . . if each party substantially contributed to its preservation and appreciation.  (Emphasis added.) Finally, section 36-4-121(b)(1)(C) includes recovery in personal injury, workers' compensation, social security disability actions, and other similar actions for . . . wages lost during the marriage.  (Emphasis added.) The common thread within these provisions is that the asset, to qualify as marital property, must be earned, acquired, or improved by spousal labor during the time of marriage. In this context, the Langschmidt rule, which identifies the determinative factor as whether or not the accounts were funded with deferred marital compensation, is preferable to the ruling of the majority, which focuses only on the date of appreciation and, in effect, ignores the date of the initial contributions. I would conclude, therefore, that the premarital contributions as well as any appreciation of those contributionsshould have been initially classified as separate property for the purposes of section 36-4-121. [1]