David K. Miller v. Joy A. (Miller) Brown , 83 N.E.3d 1252 ( 2017 )

FILED
Sep 29 2017, 6:49 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Sean G. Thomasson R. Patrick Magrath
Thomasson, Thomasson, Long & Alcorn Sage Schwartz & Magrath,
Guthrie, P.C. LLP
Columbus, IN Madison, IN
IN THE
COURT OF APPEALS OF INDIANA
David K. Miller, September 29, 2017
Appellant-Respondent, Court of Appeals Case No.
03A01-1703-DR-512
v. Appeal from the Bartholomew
Superior Court 2
Joy A. (Miller) Brown, The Honorable Jon W. Webster,
Appellee-Petitioner Special Judge
Trial Court Cause No.
03D02-1006-DR-092
Vaidik, Chief Judge.
Case Summary
[1] While David Miller (“Father”) and Joy Brown (“Mother”) were married,
Father opened two college savings accounts in his name, designating the
couple’s two sons as the beneficiaries. After the couple divorced, Father
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continued making contributions to those two accounts, and Mother opened two
additional accounts in her own name with the boys as the beneficiaries. The
older son enrolled in college but eventually withdrew. At issue in this case is
the trial court’s order requiring Father and Mother to, among other things,
combine all the savings accounts into a single, jointly owned account for the
benefit of the younger son. Father appeals. He says he has no objection to
paying his share of his son’s college expenses but argues that the funds in the
accounts he opened are his property and that the trial court lacked authority to
make Mother a co-owner. We agree with Father, reverse the order in its
entirety, and remand for further proceedings.
Facts and Procedural History
[2] Father and Mother married in 1986 and had two sons: Z.M., born in May 1995,
and N.M., born in December 1997. During the marriage, Father opened two
“529 accounts”—the tax-advantaged college savings accounts authorized by 26
U.S.C. § 529. Father designated Z.M. as the beneficiary of one of the accounts
and N.M. as the beneficiary of the other.
[3] Father and Mother divorced in 2010. They entered a settlement agreement
regarding property division, as well as custody and child support, but the
agreement did not specifically address the 529 accounts, which at the time had
balances of “roughly $5,000” each. Tr. p. 22. After the divorce, Father
continued contributing to the accounts, and Mother opened two new 529
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accounts in her own name, also with Z.M. and N.M. as the designated
beneficiaries.
[4] In June 2014, Mother filed a petition in which she indicated that Z.M. had
started college and asked the trial court to order Father to pay a share of the
expenses. Father objected, noting that Z.M. was nineteen years old “and thus
emancipated” when Mother filed her petition and arguing that the petition was
therefore “late, moot, and untimely and should be dismissed.” Appellant’s
App. Vol. II p. 34. In January 2015, while Mother’s petition relating to Z.M.
was still pending, she filed a similar petition as to N.M., explaining that he had
“plans to attend college once he graduates high school.” Id. at 36.
[5] The trial court held a hearing on both of Mother’s petitions in April 2015.
Mother claimed that she had paid between $20,000 and $25,000 for Z.M.’s
“attempt at college”—an attempt that had “failed.” Id. at 41; Tr. pp. 11-12.
Nonetheless, the trial court granted Father’s motion to dismiss Mother’s
petition relating to Z.M., relying on our decision in Neal v. Austin, 20 N.E.3d
573 (Ind. Ct. App. 2014), to hold that Mother had waited too long (i.e., until
after Z.M. had turned nineteen) to file the petition.1 As such, the court denied
Mother’s request for reimbursement from Father’s 529 account for Z.M., which
by that point had a balance over $20,000. Regarding N.M., the court deferred
1
Mother did not appeal that ruling and does not attempt to challenge it here.
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consideration of Mother’s petition, noting that N.M. was still in high school
and had not even applied to any colleges.
[6] N.M. attended Ivy Tech in the fall of 2016, and Mother notified the trial court
that her petition relating to N.M. was ripe. The trial court held another
hearing, at which Mother testified that N.M.’s tuition for the fall was $1600 and
that Father had not paid any of it. She also testified that N.M. had withdrawn
from Ivy Tech and enrolled at Indiana State, at a cost of approximately $20,000
per year. By the time of the hearing, Mother had consolidated her two 529
accounts for Z.M. and N.M. into a single account for N.M., with a balance of
approximately $11,400. Father was still maintaining the two original 529
accounts, with balances of approximately $21,000 for Z.M. and $25,000 for
N.M. Based on the parties’ testimony and the exhibits they submitted, the trial
court ordered that: (1) the parties consolidate all the 529 funds into a single
account, with Mother and Father as “equal co-owners”; (2) 100% of N.M.’s
college expenses be paid from the consolidated account (including reimbursing
Mother for the Ivy Tech expenses); and (3) in the event that the consolidated
account is exhausted, additional expenses will be paid 55% by Mother and 45%
by Father (except for textbooks and fees, which will be paid by N.M.).
Appellant’s App. Vol. II p. 12.
[7] Father now appeals.
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Discussion and Decision
[8] Husband does not challenge the part of the order requiring him to contribute to
N.M.’s college expenses, the part calling for the 529 funds to be exhausted
upfront (even though about 80% of those funds, roughly $46,000, would come
from him and only about 20%, just over $11,000, would come from Mother), or
the part requiring him to pay 45% after the 529 funds are exhausted. His only
argument is that the trial court erred by ordering the creation of a single, jointly
owned 529 account. He expresses concern that if N.M. stops going to school,
Mother will have the same access to the remaining funds as he does, even
though he has contributed a much larger amount. Father asserts that the funds
in the 529 accounts that are in his name are his property and that by directing
him to place those funds into a 529 account jointly owned by Mother, the trial
court has ordered a post-dissolution distribution of property, something that the
trial court “does not have authority to do.” Appellant’s Br. p. 9. Whether a
trial court has authority to take a given action is a question of law that we
review de novo. Howard v. Am. Family Mut. Ins. Co., 928 N.E.2d 281, 283 (Ind.
Ct. App. 2010); Christenson v. Struss, 855 N.E.2d 1029, 1032 (Ind. Ct. App.
2006).
[9] As a threshold matter, Mother attacks the premise underlying Father’s
argument—that the funds in the 529 accounts are his property. She maintains
that the funds are “the individual property of [Z.M.] and [N.M.]” and are
merely being “held in trust” by Father. Appellee’s Br. pp. 4, 16-17. She is
incorrect. While there is no dispute that the accounts were opened with the
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intent of benefitting Z.M. and N.M., the fact remains that Z.M. and N.M. are
merely the designated beneficiaries of the accounts. Father is the owner, as the
account documents make clear. See Pet. Ex. C; Resp. Ex. 5. Mother cites no
evidence or authority for the proposition that a 529 account is a “trust” or that
the beneficiary of a 529 account is the true “owner” of the funds. To the
contrary, the 529 statute specifically contemplates changes in beneficiaries. 26
U.S.C. § 529(c)(3)(C). The funds in Father’s 529 accounts are not owned by
Z.M. and N.M.2
[10] Alternatively, Mother argues that even if the funds are Father’s property, the
trial court was authorized by Indiana law to make her a co-owner. Again, we
disagree. Mother cites Davidson v. Davidson, where we addressed a trial-court
order for a father’s name to be placed on accounts previously “held in joint
names” by his wife and daughter, and for the funds to be used for the daughter’s
college education. 540 N.E.2d 641, 646 (Ind. Ct. App. 1989), reh’g denied. We
affirmed the order, holding that “the trial court was certainly within its
2
Mother argues that the following provision in the parties’ dissolution decree supports her argument that
Z.M. and N.M. are the owners of the funds in the 529 accounts:
All personal property, securities, bank accounts, beneficial interests in trusts and other
assets belonging to the children of the marriage (whether held directly in their name or by
one or both parents as custodian or under the Uniform Transfers to [M]inors Act or by a
third party in trust) shall be and remain the separate property of the children and, if
applicable, shall be delivered to the children by the parents not later tha[n] the date the
child attains the age of twenty-four (24) years or, if earlier, upon graduation from college.
Appellant’s App. Vol. II pp. 17-18. But this passage does not make N.M. and Z.M. the owners of any
particular property; it simply provides that the property of the children will remain the property of the
children. As we just concluded, the funds in the 529 accounts are not the property of Z.M. and N.M., either
in trust or otherwise.
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authority to set apart this property and designate that it be used for [the
daughter’s] college education.” Id. However, the order at issue in Davidson was
entered at the time of dissolution, when the trial court enjoyed broad discretion
in determining the appropriate division of the parties’ property. See Ind. Code §
31-15-7-4 (requiring courts to divide marital property “in a just and reasonable
manner”); see also Del Priore v. Del Priore, 65 N.E.3d 1065, 1072 (Ind. Ct. App.
2016) (explaining that division of marital property “is a matter committed to the
sound discretion of the trial court”), trans. denied. The order here, on the other
hand, was entered post-dissolution, long after the trial court had approved the
parties’ property-division agreement. Nothing in Davidson supports such an
order.
[11] Mother’s reliance on Indiana Code section 31-16-6-3 and decisions interpreting
it is similarly misplaced. Section 31-16-6-3 provides: “As part of the child
support order the court may set apart the part of the property of either parent or
both parents that appears necessary and proper for the support of the child.”
We agree with Mother that this statute gives trial courts broad discretion to
earmark part of parents’ property for the future support of their child(ren). This
is true even post-dissolution, as one of the decisions cited by Mother illustrates.
See Thompson v. Thompson, 550 N.E.2d 1332, 1337 (Ind. Ct. App. 1990)
(holding that predecessor to Section 31-16-6-3 authorized trial court to order
father to pay mortgage that he and mother acquired after they divorced because
requiring father to satisfy debt “amounts to no more than a subsequent order of
child support”). But the trial court did not merely order part of Father’s
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property “set apart” for the future support of Z.M. and N.M. Rather, it
purported to make Mother a co-owner of Father’s property. The text of Section
31-16-6-3 does not authorize such a post-dissolution division of property. Nor
do the other decisions Mother cites. In Schueneman v. Schueneman, 591 N.E.2d
603 (Ind. Ct. App. 1992), Quillen v. Quillen, 659 N.E.2d 566 (Ind. Ct. App.
1996), adopted in relevant part, 671 N.E.2d 98 (Ind. 1996), and Hartley v. Hartley,
862 N.E.2d 274 (Ind. Ct. App. 2007), we simply affirmed dissolution decrees
that “set apart” marital property to cover future college expenses. None of the
cases involved a post-dissolution order making one parent a co-owner of
property owned by the other. The trial court here erred in entering such an
order.3
[12] We understand Mother’s concern. She and Father contributed thousands of
dollars to two 529 accounts while they were married, but the accounts were in
Father’s name, so they stayed with him when the parties divorced, and now
Father has apparently failed to pay a share of certain expenses. Much of her
frustration could have been avoided, of course, if she had specifically addressed
the 529 accounts at the time of dissolution, either by trying to reach an
agreement with Father or by raising the issue with the trial court. She did
neither, and now it is too late for her to seek partial ownership of the funds. See
3
Even if Indiana law allowed the trial court to make Mother a co-owner of Father’s property, that is not an
option with the parties’ 529 accounts, which can have only one owner. See CollegeChoice Advisor 529
Savings Plan Disclosure Statement, October 2013, http://cdn.unite529.com/jcdn/files/INA/
pdfs/programdescription.pdf (last visited September 25, 2017).
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Rohrer v. Rohrer, 734 N.E.2d 1077, 1082 (Ind. Ct. App. 2000) (“[I]n dissolution
proceedings, a trial court must finally dispose of all marital assets in one final
judgment.”).
[13] But this is not the end of the line for Mother. While we are constrained to
vacate the order requiring the parties to create a single, jointly owned 529
account, we must also remand this matter for a new ruling on Mother’s petition
for payment of N.M.’s college expenses. In doing so, we remind the trial court
of its authority to “set apart” part of Father’s property, including his 529
accounts, for purposes of securing his contribution to N.M.’s college expenses.
Notably, Father evidently would not object to such an order; his only concern is
with making Mother a co-owner of his property. See Appellant’s Br. pp. 8-9.
We leave it to the trial court to determine in the first instance the most
appropriate alternative to that approach.4
[14] Reversed and remanded.
Mathias, J., and Crone, J., concur.
4
Father says in his opening brief that N.M. stopped attending school after the trial court issued its order. In
a separate order issued today, we grant Mother’s motion to strike that allegation, since it involves matters
outside the record. If true, however, this allegation would be relevant to the trial court on remand.
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