|
|
|
Loss of Value of Defined Contribution Plan After Divorce Decree
© 2003 National Legal Research Group, Inc.
INDIANA: Case v. Case, 794 N.E.2d 514 (Ind. Ct. App. 2003).
A divorce decree awarded the wife $50,000 and the husband $40,389 from the husband's 401(k) plan. The plan then dropped in value, so that it was literally impossible to award each spouse the amount stated in the decree. In postdivorce proceedings, the court converted the award into percentages, based upon the value at the time of divorce, and awarded each spouse the stated percentage as of the date of actual distribution.
Upon divorce, the trial court, after considering the differences in the educational level of each of the parties and acknowledging that the wife would be starting out after the divorce at a disadvantage, divided the proceeds of a 401(k) plan with a balance of $90,398, which was a marital asset. The wife was awarded $50,000. The trial court specifically found this unequal division to be equitable, noting that "it's not anywhere approaching 60%." An appropriate order was prepared by wife's counsel whereby she was awarded the sum of $50,000 from the husband's Tyco Corporation 401(k) account, with the husband to receive the balance of $40,389.
Some 43 days after the issuance of the order, the husband filed a petition to modify the decree, arguing that the decree could not be executed because the value of the account had diminished from the date of its original valuation to $67,266. The husband argued that the decline in value should be borne by the parties as their respective interests in the plan had been allocated to them by the dissolution decree. The trial court agreed, finding that it would be inequitable and unfair under the peculiar circumstances of this case for the husband alone to bear the downside risk of the securities market which brought about the decrease in the value of the 401(k) plan. The court, therefore, awarded the wife 55.3% of the 401(k) plan whenever the appropriate QDRO was tendered, approved by the court, and accepted by the plan. The wife appealed. The court of appeals affirmed.
The wife first argued that as the husband filed a petition to modify the judgment, he was barred from doing so here because he could not allege, as he was required to do under the governing statute, Ind. Code 31-15-7-9.1, that any fraud had been committed. Nor could the petition be treated as a motion to correct error based upon newly discovered evidence since it was not filed within the 30-day period under Trial Rule 59(A). The appellate court agreed that a petition to modify was not the appropriate motion. However, it held that, despite the erroneous title of the husband's petition, it was, in substance, a Rule 60(B)(8) motion for relief, which may be filed within a reasonable time for any reason justifying relief. The filing of this motion 43 days after the issuance of the divorce order was deemed reasonable.
As for the substantive ground for granting the motion, the appellate court responded to the wife's second contention that it was erroneous for the trial court to have altered the distribution award of the 401(k) plan by stressing that the determination below was reviewed on an abuse of discretion standard. The wife argued that, even under this standard, there was error in that the order of dissolution awarded her a sum certain, $50,000, and that she was entitled to this amount as the order did not express in any clear terms the issue of growth or losses in the value of the plan. The court of appeals disagreed. Relying upon prior authority in which a settlement agreement was construed, Niccum v. Niccum, 734 N.E.2d 637 (Ind. Ct. App. 2000), the court adopted the rule that as investment plans inherently include both the rewards of growth and the risk of losses, absent express language stating otherwise, it is implicitly contemplated that both parties should share all of the awards and risks associated with an investment plan. Here, the dissolution order indicated that, based on the approximate $90,000 value of the plan, the wife was entitled to $50,000, with the balance of $40,000 to the husband. However, as that allocation became impossible when the value of the husband's plan declined, the order must be read as contemplating that both parties share the risks and rewards associated with the 401(k) plan.
The wife also asserted that she was awarded $50,000 from the plan to accomplish the trial court's intended division of the marital property, presumably taking into account her earnings and earning capacity. But the court of appeals pointed out that the intended dissolution order was, nevertheless, based upon the plan being worth $90,000 and did not take into account the subsequent decrease in value. Under the equitable distribution statute, Ind. Code 31-15-7-4(b), the court is obligated to divide marital assets in a just and reasonable manner. The wife's interpretation of the dissolution order would result in an unjust and unreasonable allocation in the wife's favor, whereby she would receive 78% of the husband's 401(k) plan. Such a result was far from the trial court's intended division, which was to award the wife less than 60% of the plan.
Go to: Pensions Category
Go to: Cases of Interest by Category
Go to: Previous Page
| Featured Services | |
|
| The Research Center: ( Cases of Interest by Category ) | Research Home | ||||
Find Case Law, Case Analysis, and Divorce Related Information...
| |||||
 How to Hire The Right Divorce Lawyer - You must have the right lawyer to have a successful divorce! provides a road map for finding an effective lawyer and then helps you to monitor his or her performance and fees. |
Comments & Suggestions? or Recommend This Page to a Friend!