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Postdivorce Loss of Value in Retirement Account
© 2003 National Legal Research Group, Inc.
SOUTH DAKOTA: Duran v. Duran, 657 N.W.2d 692 (S.D. 2003).
The parties stipulated that the husband would pay the wife $206,000 for her marital interest in his stock plan and an additional $38,000 from the plan as his share of the marital debt. Unfortunately, the plan held stock in Enron. Because the $206,000 represented the wife's interest in the plan, that amount lost value along with the plan itself when the Enron stock declined in value. Because the $38,000 was payment of the marital debt and not an ownership in the plan, the wife's right to that amount remained constant despite the plan's loss of value.
The parties divorced on March 14, 2001. On March 2, 2001, they had entered into a Stipulation and Agreement by which they divided the marital property and the marital debt. Most of the marital estate subject to division was invested in Enron Corporation stock which was held in the husband's employee stock and savings plans. Under the stipulated settlement, the wife was to receive approximately $206,000 from the husband's employment-related stock plans. As payment of the husband's share of the marital debt, the wife was also to receive an additional $38,000 from the same plans, for a total of $244,000. This was done because if the husband removed the $38,000 from the plans to pay the marital debt, he would have incurred a significant tax penalty. The parties agreed to the issuance of a QDRO as the plans were governed by ERISA. The QDRO, dated March 26, 2001, lumped together the wife's property award and the husband's debt. The court then segregated the husband's share of the plans from that awarded to the wife and established separate accounts. The wife was not permitted to withdraw the sums from the accounts awarded to her until May 24 or 25, 2001. In the two-month period between the issuance of the QDRO and this latter date, the stock in Enron Corporation suffered a precipitous decline in value. The wife received only $187,987. Because of this $57,292 decline in value, the wife refused to pay the husband's $38,000 in marital debt.
The husband filed a motion to enforce the term of the stipulation, arguing that because the assets had been segregated in the wife's name she should pay his full share of the $38,000 in marital debt that she had agreed to pay. The wife also filed a motion to set aside portions of the judgment decree and stipulation, arguing that she should not have to bear the risk of loss from the decline in value of her property award and the assets available for the husband's debt obligation. The trial court denied both motions, holding that a construction of the stipulation required each party to bear the risk of loss for the decline in value. The wife was required to bear the loss from the decline in value of her property award and the husband was required to bear the loss from the decline in value of the assets allocated to satisfy his portion of the marital debt. The husband appealed.
The husband first argued that the trial court erred in interpreting the stipulation as requiring that he bear the risk of loss in the $38,000 in the Enron stock that had been allocated for his share of the marital debt. The court on appeal disagreed. A court is required in construing a stipulation to give effect to the intention of the parties. Here, the wife was to receive two amounts, one for her share of the marital assets and one for the husband's share of the marital debt, both of which were to come out of the husband's retirement plan accounts. This latter amount, $38,000, was to come from the retirement account as a means of facilitating payment by the husband so that he could avoid the tax consequence if he simply removed the funds himself and paid the wife directly. There was no language which suggested that the husband's obligation would be relieved or reduced if the portion of the retirement account declined in value before the funds were actually transferred to the wife. The husband, therefore, remained responsible for ensuring that his obligation for the marital debt was satisfied. This conclusion was warranted because the values of the marital property and the marital debt were not absolutely fixed to a certain point in time. In divorce proceedings, the date of valuation of the marital estate is generally the date of the granting of the divorce. While a different date may be used if special circumstances are present, no such circumstances were present in Duran. The husband chose to satisfy his marital debt obligation by use of retirement plan assets and a QDRO. When the value of the Enron stock in the plans declined, neither the husband nor the wife received the full amount of money they originally contemplated at the time of the granting of the divorce. The trial court acted within its discretion in adjusting the calculations so that the wife would not incur sole responsibility for the risk of loss from a decline in value of the assets the husband desired to use to satisfy his marital debt.
The husband also argued that the QDRO demanded that the wife bear the risk of loss from the decline in value allocated to the marital debt. He further argued that it mandated that as soon as the Enron stock contained in the retirement plans was segregated, each separate account was subject to its own earnings and losses. On appeal, the court found no support for these contentions in the QDRO. The QDRO simply failed to contain any language allocating any loss or decrease in the value of the stock. Even if the language could be construed as such, however, courts have the power to "interpret" or "construe" the terms of the QDRO or pension plan in accordance with the parties' stipulations. The trial court may construe the final division of property in a divorce judgment and allocate pension appreciation or loss that accrues between the divorce and distribution when the divorce decree is silent. The court was clear to note the distinction between "interpretation" and "construction," on the one hand, and "modification" on the other. The division of property pursuant to a divorce decree is not subject to modification. Absent fraud or some other reason which would apply to any other judgment which incorporates a property settlement agreement, a divorce decree which incorporates a property settlement is a final and conclusive adjudication and is not subject to modification.
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