Court Opinion

ID: 4513571
Source: CourtListenerOpinion
Date Created: 2020-03-06 17:04:02.178057+00
Date Added: 2024-06-11T09:44:01.358520
License: Public Domain

FILED
                                                                                 Mar 06 2020, 8:43 am

                                                                                     CLERK
                                                                                 Indiana Supreme Court
                                                                                    Court of Appeals
                                                                                      and Tax Court

      ATTORNEY FOR APPELLANT                                    ATTORNEY FOR APPELLEE
      Mark S. Lenyo                                             Lauren M. Longstreet
      South Bend, Indiana                                       Longstreet Law, LLC
                                                                South Bend, Indiana

                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Michael A. Ferrill,                                       March 6, 2020
      Appellant-Respondent,                                     Court of Appeals Case No.
                                                                18A-DR-2013
              v.                                                Appeal from the St. Joseph Circuit
                                                                Court
      Susan E. Ferrill,                                         The Honorable John Broden,
      Appellee-Petitioner                                       Judge
                                                                The Honorable William L. Wilson,
                                                                Magistrate
                                                                Trial Court Cause No.
                                                                71C01-0301-DR-12

      May, Judge.

[1]   Michael A. Ferrill appeals the trial court’s order granting Susan E. Ferrill’s

      petition for a rule to show cause in the parties’ dissolution of marriage action.

      Michael argues the trial court erroneously interpreted language in the parties’

      court-approved settlement agreement and, therefore, abused its discretion when

      Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020                            Page 1 of 14
      it found him in contempt for ceasing the monthly payments at issue. We

      reverse.

                            Facts and Procedural History                               1

[2]   Susan and Michael were married in March 1972. Michael was on active duty

      in the United States Army until 1995, when he elected to leave active duty prior

      to accumulating the twenty years of service required for military pension. In

      exchange for leaving active duty before qualifying for pension, Michael was to

      receive Voluntary Separation Incentive (“VSI”) payments in an amount based

      on his pay grade when separating from the military and for “twice the number

      of years of service.” 10 U.S.C.A. § 1175(a)(2)(A).

[3]   In January 2003, Susan and Michael separated and filed a petition to dissolve

      their marriage. On February 9, 2004, the trial court entered a decree dissolving

      their marriage and incorporating their property settlement agreement (“the

      Agreement”), which divided the marital estate. As to personal property,

      pensions, and retirement accounts, the Agreement provided:

                     2. The personal property and household furnishings have
              been amicably divided between the parties, with Wife to keep as
              her sole and separate property, all of the property presently in her
              possession, including a 2000 Jeep, Wife’s IRA, Wife’s Nantucket

      1
        We held oral argument on this matter on April 2, 2019, at the Indiana Court of Appeals Courtroom. We
      thank counsel for their able presentations.

      Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020                            Page 2 of 14
              Cottage Hospital pension, three cemetery plots and the items of
              personal property as set out on Schedule 1 attached hereto.

                     Husband will keep as his sole and separate property all of
              the property presently in his possession, including but not limited
              to a 1994 Aerostar vehicle, Husband’s IRA, Husband’s military
              retirement pension, three cemetery plots and certain items in
              Wife’s possession as set out on Schedule 1 attached hereto.

      (App. Vol. 2 at 89 (hereinafter, “the Pension Provision”).) As to the VSI

      payments Michael was receiving, the Agreement provided:

              [Michael] currently receives a voluntary separation incentive
              from the United States Government. [Michael] will pay to
              [Susan] the sum of $11,000 annually from this VSI account
              within ten (10) days from the date that he receives same. Should
              this VSI account be converted to any other form of payment,
              [Michael] will pay this $11,000 obligation from this source pro-
              rated as received.

      (Id. at 91 (hereinafter, “the VSI Provision”).)

[4]   After the dissolution decree was entered, Michael made $1,000 monthly

      payments to Susan pursuant to the VSI Provision. When Michael returned to

      active duty and received active duty pay in lieu of VSI payments, he continued

      paying $1,000 per month to Susan. In 2011, Michael learned he was no longer

      eligible to receive VSI payments because he had accumulated the twenty years

      of active-duty service required to receive full military pension. Around that

      same time, Michael also learned he would have to repay all VSI monies he had

      Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020         Page 3 of 14
      received, which totaled $386,730.11. Nevertheless, Michael continued to make

      the $1,000 monthly payments to Susan.

[5]   On February 28, 2016, Michael wrote to Susan and informed her that he had

      received no VSI payments for five years but had continued making monthly

      payments to her as a courtesy. He told her that those payments would cease

      after March 2016. On March 14, 2017, Susan filed a petition for rule to show

      cause asking the court to hold Michael in contempt for stopping his monthly

      payments. The trial court held an evidentiary hearing on the petition on June

      11, 2018. On July 20, 2018, the trial court issued an order granting Susan’s

      petition.

[6]   In relevant part, the trial court found as follows:

              3.       Michael’s voluntary separation (while holding an officer’s
                       rank) from the Army took place in 1995. Although neither
                       of the parties described the program under which Michael
                       left the [A]rmy as a “reduction in force,” it essentially was
                       just that. To encourage service members to leave rather
                       than wait until members were vested in their military
                       pensions, the Army agreed to pay departing members an
                       incentive. Michael’s annual incentive payments were
                       $22,000.

              4.       The tragic events of September 11, 2001 led to military
                       action in Afghanistan. Michael’s training and experience
                       made him a candidate for involuntary recall and
                       deployment to Afghanistan.

      Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020            Page 4 of 14
        5.       While Michael was back on active duty, the VSI payments
                 stopped. When Michael again separated from the Army,
                 the VSI payments continued.

        6.       Michael was recalled to active duty involuntarily on four
                 separate occasions. During the course of those
                 deployments (some of which occurred before and some
                 after the parties were divorced), Michael became eligible
                 for the military pension.

        7.       Michael’s final separation from the Army occurred in
                 2011. At that time Michael learned that he would no
                 longer be eligible to receive the VSI payments but instead
                 would receive pension payments. Michael was not given a
                 choice between the VSI payments and the pension
                 payments.

        8.       Federal law requires that when a military veteran receiving
                 VSI payments becomes vested in a pension after additional
                 service, the veteran must repay the VSI payments
                 previously received. This is done through a deduction in
                 the pension payments.

        9.       Upon hearing of this requirement during the evidentiary
                 hearing, the Court was surprised that the military would
                 impose such a requirement. One would think that in the
                 context of an involuntary recall that leads to a service
                 member being eligible for the pension that the member
                 would simply begin to receive pension payments instead of
                 VSI payments, perhaps in some reduced amount to reflect
                 the moneys received earlier. The Court’s research,
                 however, has revealed that this repayment (or recoupment)
                 requirement indeed exists and that Michael is subject to
                 this requirement. This requirement includes the
                 repayment of the entire amount of the VSI moneys paid to

Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020            Page 5 of 14
                       Michael by the military . . . . This requirement is
                       mindboggling, but the Court is unable to relieve either of
                       the parties of the requirement.

      (Id. at 14-16 (emphasis original).)

[7]   The trial court then applied the law to the facts of the case:

              For a court to conclude that a party is in contempt for failing to
              comply with an order of the court, the party seeking the contempt
              finding must prove three things by clear and convincing
              evidence. First, that the non-compliant party was aware of the
              order. Second, that the order clearly required the non-compliant
              party to act or not act. Third, that the non-compliant party
              willfully failed to comply with the order.

              In this case, there is no question that Michael was aware of the
              order contained within the settlement agreement that was
              incorporated into the dissolution decree. Michael complied with
              the requirement that he pay $11,000 from his VSI for a number of
              years. Thus, the first requirement for a finding of contempt is
              satisfied.

              Turning to the second requirement, the answer is not reached
              quickly. From Michael’s perspective, he knew he was required
              to pay the $11,000 each year from his VSI payment. Once the
              VSI payment stopped, there was no clear requirement that he
              continue making the $11,000 payments. On the other hand,
              from Susan’s perspective, the settlement agreement’s provision
              regarding conversion of the VSI payments to a different form of
              payment should not require further clarification.

              In this case, the Court finds that the parties intended that Susan
              would receive $11,000 each year out of Michael’s post-Army
              career pay, whether in the form of the VSI or a future pension
      Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020             Page 6 of 14
        benefit that might replace the VSI. The inclusion of the sentence
        regarding the “conver[sion] to any other form of payment”
        makes this clear. Michael’s interpretation of Paragraph 5 would
        render that sentence meaningless. . . .

        . . . Even though the parties can offer different interpretations, the
        Court finds that Michael’s interpretation is not a reasonable one
        given the inclusion of the reference to converting the VSI to
        another form of payment. Thus, the Court concludes that the
        settlement agreement was sufficiently clear to inform Michael
        what was expected of him. The second requirement for a finding
        of civil contempt is therefore satisfied.

        The third requirement is that Susan must prove by clear and
        convincing evidence that Michael’s non-compliance with the
        settlement agreement was willful. This does not mean that the
        Court must conclude that Michael was belligerent or refusing to
        comply. The Court only has to conclude that Michael’s actions
        were intentional as opposed to accidental or that he could not
        possibly comply. The Court concludes that Susan has carried her
        burden, and that Michael’s cessation of the payments owed to
        Susan was willful.

        Because all three requirements for a finding of civil contempt
        have been satisfied, the Court can reach only one conclusion:
        Michael is in contempt for his failure to make the $11,000 yearly
        payments to Susan.

        The next question concerns the remedy. The Court concludes
        that the only genuine remedy is for Michael to resume making
        the payments to Susan, effective immediately, as Michael’s
        pension payments are received. In other words, if Michael
        receives a monthly pension payment, he owes Susan $916.67
        each month. . . .

Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020           Page 7 of 14
              The Court finds that Susan’s monthly payment of $916.67 should
              be reduced by her proportionate share as her contribution to the
              recoupment. A sample illustration may be helpful. Susan’s
              Exhibit 3 states that as of January of 2017, Michael’s recoupment
              withholding is $2,183. The Court assumes that is a monthly
              amount. If Michael receives $6,549 per month from his pension,
              then the $2,183 figure represents one-third of his monthly
              pension benefit. Susan’s payment of $916.67 would therefore be
              reduced by one third, or $305.56. To the extent Michael has not
              made any monthly payment to Susan in recent years, the Court
              considers those missed payments as Susan’s “pre-contribution”
              to the recoupment amounts, and it is possible that these missed
              payments might affect Susan’s proportionate share going
              forward. The Court will ask the parties to conduct the necessary
              calculations to establish the payments going forward that
              Michael will pay to Susan and submit an agreed order
              accordingly.

      (Id. at 16-19 (internal citation omitted).)

                                 Discussion and Decision
[8]   Appellate review of family law matters is conducted with a preference for

      granting latitude and deference to trial courts. Kicken v. Kicken, 798 N.E.2d 529,

      532 (Ind. Ct. App. 2003). We will reverse only if the trial court’s decision is

      clearly against the logic and effect of the facts and circumstances before it.

      Keown v. Keown, 883 N.E.2d 865, 868 (Ind. Ct. App. 2008). We apply a similar

      standard of review to a trial court’s order finding a party in contempt and, in

      conducting our review, will consider only the evidence and reasonable

      inferences supporting the trial court’s judgment. Bandini v. Bandini, 935 N.E.2d

      Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020          Page 8 of 14
       253, 264 (Ind. Ct. App. 2010). The court’s decision finding Michael in

       contempt was based on the court’s interpretation of the parties’ Agreement.

[9]    A divorce settlement agreement is a contract that we interpret like any other,

       meaning we will apply a de novo standard of review to the trial court’s

       interpretation. Pohl v. Pohl, 15 N.E.3d 1006, 1009 (Ind. 2014). Unless the terms

       of the agreement are ambiguous, they will be given their plain and ordinary

       meaning, but if there is an ambiguity, we may consider extrinsic evidence to

       resolve it, with the aim of carrying out the parties’ likely intent. Id. A contract

       should be interpreted to “harmonize its provisions, rather than place them in

       conflict[,]” and we should “make all attempts to construe the language of a

       contract so as to not render any words, phrases, or terms ineffective or

       meaningless.” Jernas v. Gumz, 53 N.E.3d 434, 444 (Ind. Ct. App. 2016), trans.

       denied.

[10]   At issue in this case is an alleged conflict between two provisions of the

       Agreement – the Pension Provision, and the VSI Provision. The Pension

       Provision gives Michael his “military retirement pension” as “his sole and

       separate property[.]” (App. Vol. 2 at 89.) The VSI Provision requires Michael

       to pay Susan $11,000 per year from his VSI payments and states: “Should this

       VSI account be converted to any other form of payment, [Michael] will pay this

       $11,000 obligation from this source pro-rated as received.” (Id. at 91.) Susan

       alleged, and the trial court agreed, that Michael’s VSI payments “converted to”

       military retirement pension, such that Susan was entitled to $11,000 a year from

       Michael’s military retirement pension, which essentially invalidated the

       Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020          Page 9 of 14
       Pension Provision’s pronouncement that Michael’s pension was his “sole and

       separate property.” (Id. at 89.)

[11]   We begin by noting that courts in other jurisdictions have held – when a

       divorce settlement agreement or a divorce decree has given a percentage of

       Spouse B’s military retirement to Spouse A – that if Spouse B thereafter

       unilaterally forfeits military retirement by accepting VSI payments, Spouse A is

       entitled to receive the expected monies from Spouse B’s VSI payments in lieu of

       receiving those monies from retirement benefits that no longer exist. 2 See, e.g.,

       Kelson v. Kelson, 675 So. 2d 1370, 1372 (Fla. 1996), reh’g denied; Fisher v. Fisher,

       319 S.C. 500, 505-506 (S.C. Ct. App. 1995), reh’g denied; Marriage of Babuta, 78
Cal. Rptr. 2d 281, 283 (Cal. Ct. App. 1998); Marriage of Menard, 42 P.3d 359,

       364 (Or. Ct. App. 2002). Susan, in essence, wants us to hold that the inverse is

       also true – that her entitlement to a portion of Michael’s VSI payments under

       the Agreement converted into an entitlement to a portion of Michael’s military

       pension when Michael became eligible for the pension instead of VSI.

       However, unlike those cases from other jurisdictions, the Agreement between

       2
         Courts have ruled similarly when the military spouse opted to leave the military for Special Separation
       Benefit (“SSB”), which is a one-time lump-sum payment “offered as an incentive for military member’s [sic]
       in certain career fields to leave active duty.” “What is SSB?”,
       https://www.dfas.mil/retiredmilitary/plan/separation-payments/special-separation-benefit.html
       [https://perma.cc/NP7Y-AG8C]. See, e.g., Heupel v. Heupel, 936 P.2d 561, 572-73 (Colo. 1997) (when
       military spouse takes SSB after other spouse given share of retirement, military spouse must pay portion of
       SSB to replace retirement); Marsh v. Wallace, 924 S.W.2d 423, 427 (Tex. Ct. App. 1996) (same); Kulscar v.
       Kulscar, 896 P.2d 1206, 1209 (Okla. Civ. App. 1995) (same); In re Marriage Crawford, 884 P.2d 210, 213 (Ariz.
       Ct. App. 1994) (same), rev. denied.

       Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020                               Page 10 of 14
       Michael and Susan contained distinct provisions that disposed separately of VSI

       payments and military pension, and we thus decline to follow those cases.

[12]   The trial court noted that our mission when interpreting the Agreement is “to

       make all attempts to construe the language of a contract so as to not render any

       words, phrases, or terms ineffective or meaningless.” (App. Vol. 2 at 17.)

       Nevertheless, the court then determined that the “reasonable” reading of the

       parties’ Agreement was a reading that rendered the Pension Provision

       meaningless. (Id. (“the Court finds that Michael’s interpretation is not a

       reasonable one”).) The court interpreted the VSI Provision’s reference to VSI

       payments “be[ing] converted to any other form of payment,” (id. at 91), to

       include pension payments, even though the Pension Provision gave Michael his

       pension as “his sole and separate property.” (Id. at 89.) We disagree with the

       trial court’s interpretation.

[13]   First, it seems logical to us that the “converted to any other form of payment”

       language in the VSI Provision, (id. at 91), refers to the times when Michael’s

       monthly paychecks would have come from active duty compensation, rather

       than VSI. As the trial court found: “While Michael was back on active duty,

       the VSI payments stopped. When Michael again separated from the Army, the

       VSI payments continued.” (Id. at 15.) Furthermore, in light of the fact that

       Michael had been deployed at least once between his voluntary separation from

       the military in 1995 and the parties’ petition for divorce in 2003, (see id.), Susan

       would have known to ask for the payments from Michael to continue during

       such times as he might be deployed and receive active duty pay. Finally, it is

       Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020         Page 11 of 14
       illogical to have written the Agreement to give Michael his pension as his

       separate property if a conversion could occur that would entitle Susan to part of

       his pension. If Susan had intended to claim part of Michael’s pension if it came

       into existence, then the Agreement should not have given Michael the pension

       as his “sole and separate property[.]” (Id. at 89.) By reading the parties’

       Agreement in this manner, we can harmonize and give effect to both the

       Pension Provision and the VSI Provision. See Jernas, 53 N.E.3d at 444 (court’s

       goal is to harmonize provisions and not render any portions ineffective or

       meaningless).

[14]   We acknowledge there are cases in which equity supports holding a pension

       converted to VSI when a veteran unilaterally elected to take VSI, thereby

       vitiating pension after a divorce settlement agreement provided the spouse with

       a guaranteed percentage of that pension. See infra ¶ 11 & fn.1. Here, however,

       Michael placed himself in harm’s way to serve his country – whether

       voluntarily or involuntarily matters not to us 3 – and as a result he became

       entitled to full military retirement. Because the parties’ Agreement stated

       Michael’s military retirement pension is “his sole and separate property,” the

       3
         Susan asserts Michael should have “liability” for causing the VSI payments to stop because, contrary to his
       testimony, he was not involuntarily recalled to active duty. (Appellee’s Br. at 9.) In support of her allegation
       “that Michael . . . must have voluntarily returned to service,” (id.), Susan notes that “[p]ursuant to 10 U.S.
       Code § 1175a(j)(2)” soldiers who are involuntarily recalled to active duty are not subject to the repayment
       requirements of “10 U.S. Code § 1175a(j)(1).” (Id.) Susan has correctly represented Section 1175a of the
       U.S. Code; however, Michael’s VSI eligibility arose under Section 1175, not Section 1175a, and Section 1175
       contains no such provision distinguishing those who were recalled involuntarily from those who volunteered
       for recall. Nor would we feel comfortable assigning additional “liability” to a person who had voluntarily
       chosen to risk his life to serve our country.

       Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020                                 Page 12 of 14
       trial court erred in ordering Michael to pay any of those pension monies to

       Susan. 4

[15]   As a final matter, we must address the trial court’s determination that Michael

       was in contempt for discontinuing the payments to Susan.

               “[T]o be held in contempt for failing to comply with a court
               order, a party must have willfully disobeyed the order.” “The
               order must have been so clear and certain that there could be no
               question as to what the party must do, or not do, and so there
               could be no question regarding whether the order is violated.”
               “A party may not be held in contempt for failing to comply with
               an ambiguous or indefinite order . . . otherwise, a party could be
               held in contempt for obeying an ambiguous order in good faith.”

       Bandini, 935 N.E.2d at 264-65 (internal citations omitted). Contrary to the trial

       court’s determination, the lack of clarity in the provisions of the parties’

       Agreement about what Michael should do or not do in this particular

       circumstance created an ambiguity that prohibited the court from holding

       Michael in contempt for discontinuing the payments to Susan. See, e.g., Kulscar

       v. Kulscar, 896 P.2d 1206, 1209 (Ok. Civ. App. 1995) (“Given the dearth of law

       interpreting these relatively new statutory provisions, it was not unreasonable

       for Appellant to conclude the decree did not cover the SSB payment.

       Accordingly, any order finding Appellant in indirect contempt cannot stand.”).

       4
        As Susan is not entitled to Michael’s retirement pension, but was entitled to the VSI payments, we hold
       Susan has no obligation to contribute toward the recoupment of the VSI payments that accrued when
       Michael became eligible for military pension.

       Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020                              Page 13 of 14
       As the trial court abused its discretion by finding Michael in contempt, we

       reverse its determination.

                                                Conclusion
[16]   The trial court erred by interpreting the Agreement’s Pension Provision and VSI

       Provision to conflict. Rather, like other contracts, the Agreement should be

       read to give effect and meaning to all portions of the Agreement, such that

       pursuant to the Pension Provision, Michael’s military retirement pay is his sole

       and separate property, and the trial court abused its discretion by holding

       Michael in contempt for failing to continue the payments to Susan.

       Accordingly, we reverse.

[17]   Reversed.

       Baker, J. and Tavitas, J., concur.

       Court of Appeals of Indiana | Opinion 18A-DR-2013 | March 6, 2020       Page 14 of 14