Court Opinion

ID: 4685269
Source: CourtListenerOpinion
Date Created: 2021-05-10 07:17:31.79119+00
Date Added: 2024-06-11T08:04:27.109488
License: Public Domain

In the
                 Court of Appeals
         Second Appellate District of Texas
                  at Fort Worth
              ___________________________
                   No. 02-20-00203-CV
              ___________________________

              JOSEPH GULLIKSEN, Appellant

                             V.

BEVERLY JO GULLIKSEN A/K/A BEVERLY JO ROSING, Appellee

           On Appeal from the 367th District Court
                   Denton County, Texas
               Trial Court No. 14-00440-367

            Before Kerr, Birdwell, and Walker, JJ.
           Memorandum Opinion by Justice Walker
                              MEMORANDUM OPINION

      This is an appeal from an order enforcing a provision of a mediated settlement

agreement incorporated into a decree of divorce. The trial court ordered Joseph

Gulliksen (“Husband”) to pay Beverly Jo Rosing (“Wife”) $18,069 as reimbursement

for 70% of her federal income tax liability incurred as a result of the liquidation of

funds in Husband’s pension plan. Husband contends that the court erred (1) by

enforcing the decree’s reimbursement provision when Wife failed to comply with

conditions precedent, (2) by materially altering the terms of the divorce decree, and

(3) in the alternative, by miscalculating the amount owed to Wife. We reverse and

render.

                                 I. BACKGROUND

      The facts pertinent to this appeal are undisputed. Husband and Wife entered

into a mediated settlement agreement which was incorporated into their October 1,

2015 divorce decree. The decree awarded Wife 100% of the total vested balance of

Husband’s pension plan (“Plan”) and required her to withdraw those funds (with a

request to the Plan administrator to withhold up to 25% for estimated federal income

taxes) and to deliver the amount received into her attorney’s trust fund account.

Wife’s attorney was required to use those funds to pay certain specified debts owed by

Husband and Wife, and then to distribute the remainder, 30% to Wife and 70% to

Husband. The decree also allocated the federal income tax liability resulting from

liquidating the Plan funds:

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      As part of the division of the marital estate, [Husband] is ORDERED to
      reimburse [Wife] for 70% of the income taxes incurred by [Wife] as a
      result of the liquidation of the funds in the Plan. The amount of such
      income tax liability will be determined as follows:

             For the year in which such liquidation occurs, [Wife] will have two
             (2) separate draft income tax returns prepared by a licensed
             income tax preparer: one draft which includes the taxable amount
             of funds liquidated from the Plan as income and one draft which
             does not include such liquidated funds as income. [Wife] shall
             provide copies of both draft income tax returns to [Husband] . . .
             on or before June 1 of the year following the year in which such
             liquidation occurs. . . . [Husband] is ORDERED to reimburse
             [Wife] in an amount which equals 70% of the difference in
             income tax liability between these two draft income tax returns.

      According to the briefing in this case, the Plan was liquidated in 2016 and so

Wife’s deadline to provide the two draft tax returns was June 1, 2017.

      Wife, who remarried in 2016, engaged H&R Block to prepare the two draft tax

returns. The first draft tax return, which Wife filed with the Internal Revenue Service,

was a return filed jointly with her new husband, Keven Rosing. That return included

Rosing’s wage income, Wife’s wage income, Wife’s social security disability income,

and $101,421, which represented the liquidated Plan funds. The second draft tax

return also purported to be a joint return but included only Wife’s wage income. It

therefore differed from the first draft tax return not only by omitting the liquidated

Plan funds, but also by omitting Rosing’s income and Wife’s social security disability

income.

      Wife sent these two draft tax returns to Husband before the June 1, 2017

deadline. Husband acknowledged their receipt but informed Wife that he needed a

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draft tax return including only her income (not Rosing’s) and the liquidated Plan

funds.     Husband and Wife exchanged a series of text messages concerning the

required draft tax returns, and Wife returned to H&R Block several times to have new

draft tax returns prepared, but “each time they got it wrong.”

         Wife acknowledged at the trial court hearing that she understood, at least by

that time, that the two draft tax returns required by the divorce decree were to be

exactly the same except that one would include the liquidated Plan funds and one

would not. She also acknowledged that she did not send correct versions of the two

required draft tax returns on or before June 1, 2017 and, even at the time of the

hearing in February 2020, she had not provided two such drafts. Instead, she retained

a forensic accountant to determine how much Husband owed her under the

reimbursement provision of the divorce decree.

         Larry Settles, Wife’s accounting expert, testified that the draft tax returns

prepared by H&R Block were incorrect. But he was not hired to prepare correct draft

returns. Rather, he was asked simply to calculate the difference between Wife’s

income tax liability including the liquidated Plan funds and her liability excluding

those funds. He accomplished that task in September 2019, which he testified was

the first time the correct calculations were made. Settles concluded that the difference

in Wife’s income tax liability was $25,813.85 and that 70% of that sum was

$18,069.70.

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      Husband testified that he received Settles’s expert report in September 2019—

over two years after the June 1, 2017 deadline—but that he had never received two

draft tax returns fulfilling the divorce decree requirement. He acknowledged that he

had not reimbursed Wife for any portion of the tax liability resulting from the

liquidated Plan funds and testified that he believed she had waived her right to that

reimbursement by failing to provide the required draft returns.

      The trial court found that Wife “is entitled to reimbursement from [Husband]

in the amount of $18,069.00, which represents 70% of the federal income taxes

incurred by [Wife] in connection with the liquidation of the funds in the Plan as set

forth in the Final Decree of Divorce.” It accordingly granted Wife judgment for that

amount.

                                     II. ISSUES

      Husband raises three issues on appeal: (1) the trial court erred by enforcing the

reimbursement provision when Wife did not comply with conditions precedent

necessary to trigger Husband’s obligation to pay; (2) the trial court materially altered

the terms of the divorce decree by refusing to credit tax withholdings against

Husband’s tax liability; and (3) in the alternative, the trial court miscalculated the

amount owed to Wife by considering income in excess of that authorized by the

divorce decree to calculate Husband’s tax liability. For the reasons discussed below,

we need only address issue one.

                                           5
                          III. STANDARD OF REVIEW

      We review a trial court’s ruling on a motion to enforce a divorce decree for an

abuse of discretion. In re C.F., 576 S.W.3d 761, 774 (Tex. App.—Fort Worth 2019,

no pet.); Murray v. Murray, 276 S.W.3d 138, 143 (Tex. App.—Fort Worth 2008, pet.

dism’d). But we construe an unambiguous divorce decree as a matter of law. Chafin v.

Isbell, No. 02-10-00007-CV, 2011 WL 946653, at *4 (Tex. App.—Fort Worth Mar. 17,

2011, no pet.) (mem. op. on reh’g) (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex.

1983)).

              IV. THE DRAFT TAX RETURN REQUIREMENT

                  A. PRINCIPLES OF CONTRACT CONSTRUCTION

      “An agreed property division incorporated into a final divorce decree is treated

as a contract and is controlled by the rules of construction applicable to ordinary

contracts.” Howard v. Howard, 490 S.W.3d 179, 184 (Tex. App.—Houston [1st Dist.]

2016, pet. denied) (citing Allen v. Allen, 717 S.W.2d 311, 313 (Tex. 1986)). The court’s

task is to give effect to the parties’ intention as expressed in the agreement. Waldrop v.

Waldrop, 552 S.W.3d 396, 407 (Tex. App.—Fort Worth 2018, no pet.) (citing El Paso

Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 805 (Tex. 2012)). To

accomplish that task, we give effect to the entire agreement so that none of its

provisions are rendered meaningless. Id.; Howard, 490 S.W.3d at 184. In addition,

“[w]e will not construe contracts to produce an absurd result when a reasonable

alternative construction exists.” Markel Ins. Co. v. Muzyka, 293 S.W.3d 380, 387 (Tex.

                                            6
App.—Fort Worth 2009, no pet.); accord S. Cty. Mut. Ins. v. Sur. Bank, N.A.,

270 S.W.3d 684, 689 (Tex. App.—Fort Worth 2008, no pet.).

      Contract construction begins with the express language of the agreement. See

Perry v. Perry, 512 S.W.3d 523, 527–28 (Tex. App.—Houston [1st Dist.] 2016, no pet.)

(citing Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333

(Tex. 2011)). “If the written instrument is so worded that it can be given a certain or

definite legal meaning or interpretation, then it is not ambiguous and the court will

construe the contract as a matter of law.” Coker, 650 S.W.2d at 393. An agreement is

not ambiguous merely because the parties offer different interpretations of its

language. Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997);

Waldrop, 552 S.W.3d at 408. It is ambiguous only if its language is “susceptible to two

or more reasonable interpretations.”      Kelley–Coppedge, Inc. v. Highlands Ins. Co.,

980 S.W.2d 462, 465 (Tex. 1998) (emphasis added); see Waldrop, 552 S.W.3d at 408.

                     B. CONSTRUING THE DIVORCE DECREE

                              1. The Parties’ Positions

      Husband contends that the reimbursement provision required Wife to use a

licensed tax preparer to prepare two draft federal income tax returns that included

only her income (not Rosing’s) and that differed only in that one would include the

taxable amount of the liquidated Plan funds and the other would not. In addition,

Wife was required to furnish those draft tax returns to Husband on or before June 1,

2017. He urges that Wife did not comply with any of these requirements.

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      Wife, on the other hand, contends that she was not required to use a “licensed

income tax preparer” because that term was not defined in the decree and has no

commonly understood meaning. She also contends that the decree required only that

she furnish one draft tax return that includes the liquidated Plan funds and one that

does not, not that those drafts must otherwise be the same or that they could not

include Rosing’s income. Based on this construction of the decree, Wife urges that

she complied with the reimbursement provision by sending Husband two admittedly

incorrect and dissimilar draft tax returns, one of which was a joint return that included

Rosing’s income, before the June 1, 2017 deadline.

                        2. Mirror Image Draft Tax Returns

      We first consider whether Wife was required to provide draft returns differing

only in the inclusion or exclusion of the liquidated Plan funds—what the parties and

the trial court referred to as “mirror image” draft tax returns. In keeping with the

principles stated above, we begin with the express language of the decree. See Italian

Cowboy Partners, 341 S.W.3d at 333; Perry, 512 S.W.3d at 527–28.

      The reimbursement provision identified Husband’s obligation—“to reimburse

[Wife] for 70% of the income taxes incurred by [Wife] as a result of the liquidation of

the funds in the Plan.” It then provided that “[t]he amount of such income tax

liability will be determined” by Wife having “two (2) separate draft income tax returns

prepared . . . one draft which includes the taxable amount of funds liquidated from

the Plan as income and one draft which does not include such liquidated funds as

                                           8
income.” The amount that Husband was obligated to pay Wife was then defined as

“an amount which equals 70% of the difference in income tax liability between these

two draft income tax returns.”

      Wife’s construction of the reimbursement provision focuses solely on the

language that required her to provide one draft tax return that included funds from

the Plan liquidation as income and one draft that did not include those funds as

income.   She contends that because the decree did not say anything about the

remaining content of the draft tax returns, there was no requirement that they

otherwise be similar or “mirror images.” This argument contravenes two bedrock

principles of construction—that the decree be construed as a whole so that no

provision is rendered meaningless and that the decree be construed to avoid an

absurd result. See Waldrop, 552 S.W.3d at 407; Muzyka, 293 S.W.3d at 387.

      It is clear from the reimbursement provision, and the decree as a whole, that

Wife’s obligation to provide Husband with the two draft tax returns was no idle

exercise. On the contrary, those draft tax returns were specifically identified as the

means by which the parties were to quantify Husband’s obligation. The purpose of

the draft tax return requirement was expressed in its introductory sentence: “The

amount of [Husband’s] income tax liability will be determined as follows: . . . .” And

that purpose was reiterated in the concluding sentence: “[Husband] is ORDERED to

reimburse [Wife] in an amount which equals 70% of the difference in income tax

liability between these two draft income tax returns.”

                                           9
       Again, Husband’s obligation was to reimburse Wife “for 70% of the income

taxes incurred by [Wife] as a result of the liquidation of the funds in the Plan.” [Emphasis

added.] The plain, unambiguous language of the decree established that the purpose

of providing the two draft tax returns was to furnish the method to determine the

amount Husband owed Wife, which necessarily included determining the amount of

income taxes Wife incurred as a result of liquidating the Plan funds. And, the amount

of income taxes so incurred could only be determined by comparing two draft tax

returns that differ only in the inclusion or exclusion of the liquidated Plan funds as

income. Any other deviation between the two would yield a difference in tax liability

that was not necessarily attributable to the liquidated Plan funds.

       It is apparent, then, that Wife’s interpretation of the reimbursement

provision—which would permit her to furnish draft tax returns that incorporated

different elements of income in addition to the liquidated Plan funds—would render

the provision meaningless because the draft tax returns would be of no use in

determining the amount Husband was required to pay. In fact, Wife tacitly admits in

her brief that the draft tax returns she gave Husband did not fulfill the purpose for

which they were required: “Because the two tax returns prepared by or on behalf of

Wife were not comparable, the trial court needed additional evidence to determine

this amount.”

       In addition to rendering portions of the divorce decree meaningless, Wife’s

construction would lead to an unreasonable, if not absurd, result.             Under that

                                            10
construction, Wife could trigger Husband’s duty to pay by giving him two draft tax

returns from which he could not determine the amount he owed.

      The unreasonableness of Wife’s construction is also illustrated by the two draft

returns that she contends satisfied her duty under the reimbursement provision. One

draft included only her wage income; the other included her wage income, social

security disability income, Rosing’s wage income, and the liquidated Plan funds. It is

readily apparent that the difference in tax liability between the two included

differences attributable to Wife’s social security disability income and Rosing’s wage

income.   But if those drafts were sufficient to comply with the reimbursement

provision, then that same provision would have required Husband to pay “70% of the

difference in income tax liability between these two draft income tax returns,”

including the amounts not attributable to the liquidated Plan funds. Most certainly

this is not what the parties intended, but it would be the necessary result of Wife’s

construction of the decree.

      While the parties offer differing interpretations of the reimbursement

provision, that provision is not ambiguous because Wife’s interpretation is not

reasonable. See Kelley–Coppedge, 980 S.W.2d at 465; Waldrop, 552 S.W.3d at 408. We

conclude, as a matter of law, that requiring Wife to furnish “one draft [tax return]

which includes the taxable amount of funds liquidated from the Plan as income and

one draft which does not include such liquidated funds as income” means that the

drafts were to differ only in that stated respect. Only by isolating this one variable

                                         11
could the drafts serve their purpose of identifying “the income taxes incurred by

[Wife] as a result of the liquidation of the funds in the Plan” and, thus, the amount Husband

was required to pay. [Emphasis added.]

                            3. Including Rosing’s Income

       We next consider whether providing a draft tax return that included Rosing’s

income complied with the reimbursement provision. Wife urges that it did because

the decree was silent on whether her returns could or could not include her new

spouse’s income. We disagree.

       Wife’s accounting expert testified that she had two options for filing her

2016 income tax return—jointly with Rosing or married filing separately. Those

options do not, however, apply to her duty under the reimbursement provision. That

duty was to provide Husband with two draft tax returns from which the parties could

calculate Wife’s tax liability resulting from liquidating the Plan funds. The use of the

word “draft” demonstrates that these documents were distinct from whatever tax

return Wife ultimately filed with the IRS. See Hernandez v. State, 614 S.W.3d 760, 765

(Tex. Crim. App. 2019) (Slaughter, J., dissenting) (distinguishing between a

governmental record and a draft governmental record). And the fact that they were

to be used to determine Wife’s tax liability resulting from the liquidated Plan funds

precluded the use of a draft that also encompassed anyone else’s tax liability.

       As a result, while Wife was free to file a joint return with the IRS, providing

Husband a joint tax return did not comply with her obligation under the

                                             12
reimbursement provision. On the contrary, the unambiguous language of the decree

required that she provide one draft tax return including only her own income plus the

liquidated Plan funds and one draft tax return including only her own income.

                C. APPLYING THE CONSTRUCTION TO THE FACTS

      It is undisputed that Wife did not send Husband two draft tax returns, each

including only her own income and differing only in their inclusion or exclusion of

the liquidated Plan funds, on or before June 1, 2017. Wife therefore did not fulfill her

obligation under the reimbursement provision.        The divorce decree clearly and

unambiguously declared the consequence of that noncompliance:

      IT IS ORDERED that [Husband’s] obligation to reimburse [Wife] for
      federal income taxes, as set forth above in this section, shall be waived in
      the event [Wife] does not present the two draft income tax returns to
      [Husband] on or before June 1 of the year following the year in which
      such liquidation of the funds in the Plan occurs, as required above.

      Wife’s failure to comply with her obligation to present the required draft tax

returns relieved Husband of his obligation to reimburse her. The trial court therefore

abused its discretion by finding that Wife was entitled to reimbursement and by

granting her judgment against Husband in the amount of $18,069.

      Issue one is sustained. As a result, we need not address Husband’s additional

issues on appeal.

                                V. CONCLUSION

      The order of the trial court is reversed and we render judgment that Wife take

nothing on her petition to enforce the reimbursement provision of the divorce decree.

                                          13
                              /s/ Brian Walker

                              Brian Walker
                              Justice

Delivered: May 6, 2021

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