Sunday, November 25, 2007

Error in Disposition of Military Retirement Benefits Requires Reversal of Property Division and Child Support

Waco Court of Appeals reverses disposition of military retirment benefits in divorce; also reverses child support because it was affected by the error in division of property. Chief Justice would have affirmed.

Anderson v. Anderson, No. 10-06-00361-CV (Tex.App.- Waco, Nov. 14, 2007)(Opinion by Justice Reyna ) Dissenting Opinion by Chief Justice Gray
(military retirement benefits, estoppel, child support, intentional underemployment)
(Before Chief Justice Gray, Justices Vance and Reyna)
Full style: In the Matter of the Marriage of Sylvester Anderson and Diona Marie Anderson and in the Interest of S.E.A. and B.T.W.A., Children
Appeal from 378th District Court of Ellis County
Disposition: Reversed and Remanded


Sylvester Anderson appeals from a divorce decree, claiming in two issues that: (1) the court improperly construed the parties’ postnuptial agreement to be ambiguous and thus erroneously awarded each party a one-half interest in the other’s military retirement benefits; and (2) the court abused its discretion by awarding child support in excess of the statutory guidelines because of a finding of intentional underemployment. Appellee Diona Marie Patera presents two cross-issues in which she contends: (1) Sylvester is precluded from attacking the divorce decree because he has remarried; and (2) the parties’ postnuptial agreement is unenforceable under California law. We will reverse and remand.

Acquiescence in Decree

Diona contends in her first cross-issue that Sylvester is estopped to challenge the divorce decree because he acquiesced in the decree by remarrying. She cites Bragdon v. Bragdon, 594 S.W.2d 561 (Tex. Civ. App.—Amarillo 1980, writ ref’d n.r.e.), in support of this proposition. This contention appears to be based on “the well-settled ‘acceptance of benefits’ rule, under which a party who accepts the benefit of a judgment is estopped from challenging the judgment by appeal.” Williams v. LifeCare Hosps. of N. Tex., L.P., 207 S.W.3d 828, 830 (Tex. App.—Fort Worth 2006, no pet.). We reject Diona’s contention for two reasons.

First, Bragdon involved a collateral attack on a prior divorce decree. See Bragdon, 594 S.W.2d at 562-63. The former wife sought to enforce an Alabama divorce decree in Texas, but the former husband argued in a counterclaim that the Alabama decree was void because the Alabama court did not have jurisdiction of the parties. Id. at 562. Sylvester, on the other hand, is challenging the property division aspects of the divorce decree in this case by direct appeal.

Second, under the “acceptance of benefits” rule, an exception applies “when the reversal of the judgment on the grounds appealed cannot possibly affect an appellant’s right to the benefits accepted under the judgment.” Williams, 207 S.W.3d at 830; accord Waite v. Waite, 150 S.W.3d 797, 804 (Tex. App.—Houston [14th Dist.] 2004, pet. denied). Here, a reversal of the divorce decree because of the manner in which the trial court divided the parties’ community estate or awarded child support “cannot possibly affect” the dissolution of the parties’ marriage. See id.

Therefore, we hold that Sylvester is not estopped to challenge the divorce decree on the grounds he has asserted. Diona’s first cross-issue is overruled.

Military Retirement

Sylvester contends in his first issue that the court improperly construed the parties’ postnuptial agreement to be ambiguous and thus erroneously awarded each party a one-half interest in the other’s military retirement benefits.

“Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.” Enter. Leasing Co. of Houston v. Barrios, 156 S.W.3d 547, 549 (Tex. 2004) (per curiam) (quoting Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996)); Roman v. Roman, 193 S.W.3d 40, 50 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) (same). An ambiguity does not exist merely because the parties assert conflicting interpretations. In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex. 2006) (orig. proceeding). Rather, an ambiguity exists only if the contract is susceptible to two or more reasonable interpretations. Id.; Roman, 193 S.W.3d at 50.
Here, the parties’ postnuptial agreement contains the following provision regarding their military retirement benefits:
Husband is a Sergeant and the Wife is a Corporal in the U.S. Marine Corps and their active service for purposes of retirement began on December 28, 1977 for the Husband and February 4, 1982 for the Wife. The parties have agreed that they do expressly waive all rights they may have in and to said retirements.

This provision (the “retirement clause”) is labeled as paragraph d of section II of the agreement, which section is entitled “Division of Community Property.”
Because both Sylvester and Diona began active service in the Marines before their marriage, only a percentage of their respective military retirement benefits can be considered community property. See Limbaugh v. Limbaugh, 71 S.W.3d 1, 16-17 & n.12 (Tex. App.—Waco 2002, no pet.). Thus, at the time they executed their postnuptial agreement, they each owned community property interests in their own military retirement benefits, community property interests in each other’s benefits, and separate property interests in their own benefits.
Because the retirement clause is located in a section of the agreement entitled “Division of Community Property,” Sylvester and Diona waived one or more of the community property interests they held in these benefits under the language of this clause. See Enter. Leasing, 156 S.W.3d at 549 (ambiguity “must be decided by examining the contract as a whole”); Roman, 193 S.W.3d at 50 (same). Thus, they waived: (1) the community property interests they held in their own benefits; (2) the community property interests they held in each other’s benefits; and/or (3) all community property interests they held in their combined military retirement benefits.
We hold as a matter of law that the only reasonable interpretation of the retirement clause is that Sylvester and Diona each waived the community property interest they held in the other’s military retirement benefits. See D. Wilson Constr., 196 S.W.3d at 781; Roman, 193 S.W.3d at 50. Stated another way, it is unreasonable to believe (under optional interpretation (1) above) that Sylvester and Diona intended to designate the community property interests they held in their own military retirement benefits as each other’s separate property. Cf Tex. Fam. Code Ann. § 4.102 (Vernon 2006) (spouses may partition or exchange community property by agreement). It is likewise unreasonable to believe (under optional interpretation (3) above) that they each agreed to forfeit all community property interests they held in their combined military retirement benefits.
Accordingly, we sustain Sylvester’s first issue.

Enforceability of Postnuptial Agreement

Diona contends in her second cross-issue that the postnuptial agreement is unenforceable because the parties did not comply with section 1615 of the California Family Code when they executed the agreement.
Sylvester and Diona executed this agreement when they were stationed in California. By its own terms, the agreement is governed by California law. Under section 1615, “[a] premarital agreement is not enforceable” against a party who “did not execute the agreement voluntarily.” Cal. Fam. Code § 1615(a)(1) (West 2004). Subsection (c) of this statute then provides that such an agreement “shall be deemed” to have not been executed voluntarily if a party was not “represented by independent legal counsel” at the time of execution, unless expressly waived, or if the party was not given at least seven days to consult with counsel between the time the agreement was first presented to the party and the time it was signed. Id. § 1615(c) (West 2004).
However, section 1615 applies only to premarital agreements. Id. § 1615(a); In re Marriage of Friedman, 100 Cal. App. 4th 65, 122 Cal. Rptr. 2d 412, 417 (Cal. Ct. App. 2002). Sylvester and Diona executed the postnuptial agreement at issue nearly eighteen months after they were married. Accordingly, any failure to satisfy the requirements of section 1615 does not render their agreement unenforceable. See Friedman, 122 Cal. Rptr. 2d at 417. Thus, we overrule Diona’s second cross-issue.

Intentional Underemployment

Sylvester contends in his second issue that the court abused its discretion by awarding child support in excess of the statutory guidelines because of a finding of intentional underemployment.[1]

We review child support orders under an abuse-of-discretion standard. Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990) (per curiam); In re J.C.K., 143 S.W.3d 131, 134 (Tex. App.—Waco 2004, no pet.). We do not conduct an independent review of findings of fact in a child support case under traditional legal and factual sufficiency standards. J.C.K., 143 S.W.3d at 135; London v. London, 94 S.W.3d 139, 143-44 (Tex. App.—Houston [14th Dist.] 2002, no pet.). Rather, legal and factual sufficiency are factors which can be considered in determining whether an abuse of discretion has occurred. J.C.K., 143 S.W.3d at 135; London, 94 S.W.3d at 143-44.
In re J.D.M., 221 S.W.3d 740, 742 (Tex. App.—Waco 2007, no pet.).

Under the Family Code, a child support award is generally based on the net monthly resources of the obligor. Tex. Fam. Code Ann. §§ 154.125-154.126 (Vernon 2002). Section 154.066 permits a trial court to apply the child support guidelines to the “earning potential of the obligor” if the court determines that the obligor is intentionally unemployed or underemployed. Id. § 154.066 (Vernon 2002).

To support a finding of intentional underemployment or unemployment, there must be evidence the obligor reduced his or her income with the intention of decreasing the child support payment. Garner v. Garner, 200 S.W.3d 303, 306-07 (Tex. App.—Dallas 2006, no pet.); In re E.A.S., 123 S.W.3d 565, 570 (Tex. App.—El Paso 2003, pet. denied). This intent may be inferred from such circumstances as the parent’s education, economic adversities, business reversals, business background, and earning potential. Id.

Here, it is undisputed that, after taking into account the trial court’s award of fifty percent of Sylvester’s retirement to Diona, Sylvester received a monthly net retirement benefit of $505 and a monthly net disability benefit of $875.[2] See Tex. Fam. Code Ann. § 154.062(b)(5) (Vernon 2002) (obligor’s net resources include “retirement” and “disability” benefits). Sylvester testified that he was employed for a period of time after retirement by Greyhound but had to quit because of physical problems associated with his disability.[3] According to Diona, he earned about $25,000 per year working for Greyhound.

Most of the dispute regarding Sylvester’s income or potential income relates to the cars he owns. Diona testified that Sylvester repairs and resells old cars. She estimated that he sold between thirty and forty cars in 2005 and made about $4,500 net per month doing so. She testified to one occasion in April 2005 when Sylvester showed her a briefcase containing $50,000 in cash which he had acquired from selling cars. According to her, he has cars in three states (Mississippi, Texas, and California) available to sell.

Sylvester disputed much of Diona’s testimony. He denies that he has ever been in the car selling business. He explained that he was keeping an unspecified number of cars which he has listed in his will and hopes to leave for their children. He testified that he has several friends who leave their cars on his property because he has plenty of space. He stated that he had never sold even fifteen cars in a single year. Sylvester estimated that if he did sell cars, he “probably could make $5,000 a year.” He testified that he had sold a few cars in the months preceding the final hearing[4] just to cover his monthly expenses.

In this final hearing, Diona testified that Sylvester has “earning potential” from work and the “car business” but “[h]e’s just choosing not to use it.” She also refers us to a portion of Sylvester’s testimony from which it could be inferred that he decided to stop selling cars after learning that his child support obligation would be based on the income he earned from sales. This testimony was provided when Diona’s counsel was cross-examining Sylvester about when he sold a 1970 Dodge Charger. “When it was [sic] in the process of being sold? 2005. When the court date -- we -- we first -- the decree. And then once I was told that I was going to have to pay $600 for child support and was based on the cars --.“

The trial court ordered Sylvester to pay $450 per month in child support for his two children.[5] We conclude that no abuse of discretion is shown for several reasons.

If the trial court took Sylvester at his word, he could make about $5,000 per year selling cars. This income, when combined with his retirement and disability income would support a monthly child support award of $449.[6] Sylvester also testified that he has several cars which he could sell but is not because he would like to give them to his children when he dies. See Tex. Fam. Code Ann. § 154.067(a) (Vernon 2002) (court may assign reasonable amount of deemed income to obligor’s assets which could be liquidated). Finally, if the court fully accepted Diona’s testimony regarding income Sylvester could realize from selling cars ($4,500 net per month), the testimony would support a monthly child support award of $1,470.[7]

Based on the parties’ circumstances and the testimony regarding whether Sylvester was not selling cars because he wanted to lower his child support obligation, we hold that the court did not abuse its discretion by finding that Sylvester is intentionally underemployed. See Garner, 200 S.W.3d at 307-08; E.A.S., 123 S.W.3d at 570-72. Accordingly, we overrule Sylvester’s second issue.


We have found error in the manner in which the trial court divided Sylvester’s military retirement benefits. These benefits were a primary factor in the court’s calculation of his child support obligation. Therefore, we reverse the judgment and remand this cause for further proceedings consistent with this opinion. See Wilson v. Wilson, 132 S.W.3d 533, 538-39 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (remanding child support determination and property division because child support determination can be “materially influenced” by property division).


Before Chief Justice Gray,
Justice Vance, and
Justice Reyna
(Chief Justice Gray dissenting)
Reversed and remanded
Opinion delivered and filed November 14, 2007

[1] Finding of Fact No. 7 states, “Child support should be set at $450.00 per month beginning November 1, 2005 based on the earnings that Sylvester Anderson has the potential of earning if he were not intentionally underemployed and applying the Supreme Court guidelines.”
[2] The parties offered little documentary evidence to substantiate their testimony regarding their own and each other’s income. In a letter to the trial court, Sylvester’s counsel asked the court to base Sylvester’s child support obligation on these figures, which are consistent with Sylvester’s testimony regarding his monthly benefits. Therefore, we are treating these figures as net income.

[3] Sylvester testified that his disability came from unspecified “neck and pain injuries” which he sustained while lifting weights. He explained that he had been on a Marine Corps weightlifting team and was a five-time world champion.
[4] The court actually conducted four hearings in this matter: (1) an October 31, 2005 “Final Divorce Hearing”; (2) a February 8, 2006 hearing for entry of judgment; (3) a May 9, 2006 hearing on Sylvester’s motion for new trial; and (4) a June 6, 2006 “Final Hearing” in which the parties provided additional testimony regarding child support and visitation. Sylvester provided this particular testimony during the June 6 hearing.
[5] There were actually two divorce decrees in this case. In the first decree, the court ordered Sylvester to pay $600 per month in child support. However, the court granted Sylvester’s motion for new trial in part based on Sylvester’s contention that the child support award had been calculated based on 100% of Sylvester’s military retirement, even though the court had awarded 50% of his retirement to Diona.

[6] $5,000 per year is approximately $417 per month. $875 + $505 + $417 = $1,797. In this scenario, 25% of Sylvester’s actual and potential net monthly income of $1,797 would be $449. See Tex. Fam. Code Ann. § 154.125(b) (Vernon 2002) (child support for two children is 25% of monthly net resources).

[7] $875 + $505 + $4,500 = $5,880 x 0.25 = $1,470

No comments: