Shari L. Morey v. W. Michael Morey

Jan 20 2016, 10:09 am
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Judy M. Tyrrell Heather George Myers
Indianapolis, Indiana Greenwood, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Shari L. Morey, January 20, 2016
Appellant-Defendant/Cross-Appellee, Court of Appeals Case No.
49A02-1502-DR-64
v. Appeal from the Marion Superior
Court
W. Michael Morey, The Honorable James B. Osborn,
Appellee-Plaintiff/Cross-Appellant. Judge
Trial Court Cause No.
49D14-1402-DR-3275
Mathias, Judge.
[1] The marriage of Shari (“Wife”) and W. Michael (“Husband”) Morey was
dissolved in Marion Superior Court. Wife appeals the decree of dissolution and
raises three issues, which we restate as:
I. Whether the trial court erred in in its application of the coverture
fraction formula to Husband’s Reynolds & Reynolds pension;
II. Whether the trial court abused its discretion in failing to credit Wife’s
payment of Husband’s post-dissolution expenses and;
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III. Whether the trial court abused its discretion in its valuation of the
marital residence.
[2] Husband cross-appeals and argues that the trial court abused its discretion when
it found that Husband failed to rebut the presumption that an equal division of
marital property was just and reasonable. He also asserts that the trial court
erred when it failed to apply the coverture fraction formula to his annuity and
401(k).
[3] We affirm.
Facts and Procedural History
[4] Husband and Wife were married on April 13, 1991. Husband had worked in
Reynolds & Reynolds’s (“Reynolds”) IT Department since 1983. Husband’s
position was eliminated, and he was laid off on February 15, 2006. In total,
Husband worked at Reynolds for twenty-two years, eight of those years before
he married Wife. As an employee, Husband earned retirement savings, which
included a Reynolds pension, an annuity, and a 401(k).
[5] After Husband was laid off, he worked as a temporary contractor at Hewlett-
Packard for two years but was not hired on full time after the contract ended.
Although Husband has continued to search for employment, he has been
unsuccessful in obtaining a job due to advancements in the technology field that
have surpassed his training. After losing his job at Reynolds, Husband was
diagnosed with depression, which has made finding employment even more
difficult. For two and one-half years prior to the hearing, Wife has worked for
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Dow AgroSciences. Like Husband, Wife has earned retirement benefits from
her employer which include an IRA, a Roth IRA, and a 401(k).
[6] Wife filed a petition for dissolution of marriage on February 6, 2014. The trial
court held a hearing on December 4, 2014. Wife presented testimony from a
pension valuation expert that Husband’s Reynolds defined benefit pension was
worth $100,498.07 on the date of separation. Husband requested that the trial
court exclude 36% of the pension from the marital pot based on the coverture
fraction formula because he was not married to Wife while working at
Reynolds for the first eight years.
[7] During the hearing, Wife testified that she kept the couple’s 2013 federal tax
return in the amount of $3,955 to pay the additional $1,200 in credit card
charges that Husband incurred after Wife filed the petition for dissolution. She
also stated that she never received her half of the $338 from the 2013 state tax
return paid to Husband.
[8] Further, Wife presented testimony from a realtor who had performed a
comparative market analysis on the marital residence. The realtor testified that
the residence would sell for between $282,000 and $287,000, with the average
price of comparable houses selling for $299,300. Husband testified that the
house was valued at $300,000.
[9] The trial court issued its finding of facts, conclusions of law, and decree of
dissolution of marriage on January 5, 2015. It determined that Husband was
unable to rebut the presumption that an equal division of the marital property
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was just and reasonable but applied a 14/22 coverture fraction to his Reynolds
defined benefit pension, allocating $63,953.28 to the marital estate. Half of the
pension, based on the coverture fraction formula, was awarded to Wife, and
half was awarded to Husband. However, the court declined to extend the
coverture fraction formula to Husband’s annuity and 401(k) because Husband
failed to present evidence to establish what portions of the benefits were accrued
before marriage.
[10] In its equal division of the marital property, the court awarded Wife her:
• IRA valued at $91,372;
• Roth IRA valued at $45,391; and
• 401(k) valued at $103,262.
[11] The court awarded Husband his:
• annuity valued at $190,842;
• 401(k) valued at $192,319 and;
• the additional 36% of the Reynolds pension accrued prior to marriage
amounting to $36,544.79.
[12] The court also awarded the federal tax return to Wife and the state tax return to
Husband with no indication of a credit to Wife for the $1,200 she paid for
Husband’s credit card charges incurred after the dissolution petition was filed.
The court also valued the marital residence at $299,300, which includes a
$192,292 mortgage.
[13] On February 4, 2015, Husband filed a motion to correct error alleging among
other issues that the trial court erred by failing to apply the coverture fraction
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formula to his annuity and 401(k). On February 12, 2015, the trial court denied
Husband’s motion but issued an amended decree of dissolution to include the
vehicle identification number (“VIN”) of Husband’s van. Wife and Husband
both appeal the decree of dissolution.
Standard of Review
[14] Both Wife and Husband requested findings of fact and conclusions of law under
Indiana Trial Rule 52(A), which prohibits this court from setting aside the trial
court’s judgment “unless clearly erroneous.” In re Marriage of Nickels, 834
N.E.2d 1091, 1095 (Ind. Ct. App. 2005) (citing Dunson v. Dunson, 769 N.E.2d
1120, 1123 (Ind. 2002)). When a trial court has made special findings of fact, its
judgment is “clearly erroneous only if (i) its findings of fact do not support its
conclusions of law or (ii) its conclusions of law do not support its judgment.”
Id.[15] The trial court’s valuation of marital assets will only be disturbed for an abuse
of discretion. Id. As long as evidence is sufficient and reasonable inferences
support the valuation, an abuse of discretion does not occur. We will not weigh
the evidence and will consider the evidence in the light most favorable to the
judgment. Id. “Although the facts and reasonable inferences might allow for a
different conclusion, we will not substitute our judgment for that of the trial
court.” Id. (quoting Bizik v. Bizik, 753 N.E.2d 762, 766 (Ind. Ct. App. 2001)).
Court of Appeals of Indiana | Opinion 49A02-1502-DR-64 | January 20, 2016 Page 5 of 18
I. Presumption of an Equal Division of Marital Property
[16] Husband asserts that the trial court abused its discretion in finding that he did
not rebut the presumption of an equal division of marital property. Specifically,
Husband argues that the trial court’s findings do not support its conclusions of
law because the court found that several statutory factors supporting an unequal
division of marital property weighed in Husband’s favor.
[17] Under Indiana Code section 31-15-7-4(a):
In an action for dissolution of marriage, the court shall divide the
property of the parties, whether:
(1) owned by either spouse before the marriage;
(2) acquired by either spouse in his or her own right:
(A) after the marriage; and
(B) before final separation of the parties or
(3) acquired by their joint efforts.
[18] “The ‘one-pot’ theory of [Indiana Code section 31-15-7-4] specifically prohibits
the exclusion of any asset from the scope of the trial court’s power to divide and
award.” Thompson v. Thompson, 811 N.E.2d 888, 914 (Ind. Ct. App. 2004).
While the trial court may ultimately decide to award an asset solely to one
spouse, it must first include the asset in its consideration of the marital estate to
be divided. Id. (citing Lulay v. Lulay, 591 N.E.2d 154, 155 (Ind. Ct. App. 1992)).
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[19] A trial court should presume that an equal division is just and reasonable, but a
party may present evidence to rebut this presumption using the following
statutory factors:
(1) The contribution of each spouse to the acquisition of the
property, regardless of whether the contribution was income
producing.
(2) The extent to which the property was acquired by each
spouse:
(A) before the marriage; or
(B) through inheritance or gift.
(3) The economic circumstances of each spouse at the time the
disposition of the property is to become effective, including the
desirability of awarding the family residence or the right to dwell
in the family residence for such periods as the court considers just
to the spouse having custody of any children.
(4) The conduct of the parties during the marriage as related to
the disposition or dissipation of their property.
(5) The earnings or earning ability of the parties as related to:
(A) a final division of property; and
(B) a final determination of the property rights of the parties.
Ind. Code § 31-15-7-5 (1997).
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[20] Here, the trial court weighed all of the factors outlined in Indiana Code section
31-15-7-5 and entered the following findings of fact before concluding that the
presumption had not been rebutted:
1. During the marriage, Wife contributed far more to the
acquisition of the property. Husband has been
unemployed for approximately seven years. Wife, on the
other hand, has a full-time job, has been paying all of the
household bills so that Husband has only recently had to
use his retirement funds for living expenses. Wife has, in
the meantime, been paying down the mortgage and
building up retirement funds which are included in the
marital estate. Factor 1 weighs in favor of Wife.
2. A portion of Husband’s two retirement accounts and his
pension were earned prior to the marriage. Factor 2
weighs in favor of Husband.
3. Wife is employed and Husband is voluntarily
unemployed. Factor 3 weighs slightly in favor of Husband.
4. No evidence was presented that either party dissipated
property or unnecessarily disposed of assets. Factor 4
weighs in favor of neither party.
5. Wife’s earnings are higher than Husband’s. Husband may
have been less than energetic in his efforts to obtain
employment, but he has been limited in his abilities to
obtain work in his chosen field because technology
advances over the last eight years have surpassed his
training and experience. No evidence was presented that
Husband cannot work. Factor 5 weighs slightly in favor of
Husband.
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Appellant’s App. pp. 56-57.
[21] These findings are supported by the evidence and after weighing the five
factors, the trial court concluded that an equal division was just and reasonable.
Husband’s argument is simply a request to reweigh the evidence, which we will
not do. The trial court’s conclusion that an equal division is just and reasonable
is supported by the evidence. See In re Marriage of Nickels, 834 N.E.2d at 1095.
A. Coverture Fraction Formula
[22] Wife contends that although the trial court correctly concluded that the marital
estate should be divided equally, it erred when it applied the coverture fraction
formula to Husband’s Reynolds pension. Conversely, Husband argues that the
trial court correctly applied the coverture fraction formula to his Reynolds
pension but erred when it did not apply the same formula to his annuity and
401(k). Husband asserts that the coverture fraction formula should be applied
because he started accruing these benefits eight years before he married Wife.
The “coverture fraction” formula is one method a trial court may
use to distribute pension or retirement plan benefits to the
earning and non-earning spouses. Under this methodology, the
value of the retirement plan is multiplied by a fraction, the
numerator of which is the period of time during which the
marriage existed (while pension rights were accruing) and the
denominator is the total period of time during which pension
rights accrued.
In re Marriage of Fisher, 24 N.E.3d 429, 433 (Ind. Ct. App. 2014) (quoting Hardin
v. Hardin, 964 N.E.2d 247, 250 (Ind. Ct. App. 2012)).
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[23] The doctrine of coverture dates back early in English common law, where
husband and wife were legally viewed as one person. Claudia Zaher, When a
Woman’s Marital Status Determined Her Legal Status: A Research Guide on
the Common Law Doctrine of Coverture, 94 Law Libr. J. 459, 460 (2002).
Essentially, while married, the wife was “covered” or protected under her
husband’s wing, and this condition was called her “coverture.” Id. The doctrine
eroded during the Industrial Revolution as society began to recognize women
as separate legal persons. Id. at 461.
[24] In modern times, courts have retained remnants of the doctrine of coverture,
expressed in the coverture fraction formula. However, the purpose of the
formula has been broadened to account for the accumulation of pre-marital
assets by the parties to a marriage and the equitable distribution of those assets
in the event of divorce. The coverture fraction formula is a separate tool that the
court may use to determine how much of an asset should be included in the
marital pot. See Brett R. Turner, 2 Equitable Distribution of Property 3d § 6:25
(demonstrating use of coverture fraction formula to determine which portion of
defined-benefit pension plan constitutes marital property and which portion
constitutes separate property).
[25] In Indiana, trial courts have historically exercised their discretion to apply the
coverture fraction formula when allocating and distributing pension and
retirement benefits in dissolution of marriage proceedings, but that discretion
has been inconsistently applied. Confusion arises in cases, such as the case
before us, where a trial court determines that an equal division was just and
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reasonable but then applies the coverture fraction formula, resulting in an
unequal division of marital property. We recognize that the division of marital
property in dissolution of marriage proceedings is highly fact sensitive, but
retirement plans are often the largest and most valuable marital asset, so
understanding when and how to apply this formula is essential.
[26] Division of marital assets and the application of the coverture fraction formula
in a dissolution of marriage proceeding is a multi-step process. We believe that
the clearest way to apply it is as follows.
[27] First, the trial court should identify what assets should be segregated from the
marital pot by operation of law. The coverture fraction formula at issue here is
just one method that allows the spouse who acquired the asset to segregate
what might otherwise be considered marital property from the marital pot. If
the trial court determines in its discretion that a given asset should be segregated
from the marital pot for application of the coverture fraction formula, the
percentage derived from the formula should be applied to the entire benefit to
determine the marital portion of that benefit. Importantly, the pre-marital
portion of the benefit is then set aside for the spouse who acquired it, for
distribution outside of the division of the assets in the marital pot.
[28] Although the coverture fraction formula is at issue here, over the years, Indiana
courts have determined that other types of property can also be excluded from
the marital pot, including: 1) inheritance; 2) future income; and, 3) unvested
retirement benefits. See Ind. Code § 31-15-7-4(b)(4); see also Castaneda v.
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Castaneda, 615 N.E.2d 467, 470 (Ind. Ct. App. 1993) (the trial court’s setting
aside to wife funds inherited from her father as it divided marital property was
not an abuse of discretion, where wife introduced evidence that inheritance was
kept in wife’s name and that husband did nothing to contribute to accumulation
of funds, that inheritance funds were never commingled with other assets
brought into marriage, and that wife did not treat them as marital property);
Sadler v. Sadler, 428 N.E.2d 1305, 1307 (Ind. Ct. App. 1981) (holding that a trial
court could not award an interest in a spouse’s future income, whether the
source of that income constitutes salary, pension, or retirement benefits); Harris
v. Harris, 31 N.E.3d 991, 997 (Ind. Ct. App. 2015) (holding that although it is
well established that for a pension to be included in the martial pot, it must be
vested). Once identified by the trial court, such assets may also be segregated
and awarded to the spouse who acquired the assets prior to marriage, outside of
the division of the assets in the marital pot.
[29] Next, the trial court must gather all the non-excluded marital assets and place
them into one pot subject to division under Indiana Code section 31-15-7-4.
Then, the court must determine whether the presumption that an equal division
is just and reasonable has been rebutted. If a trial court determines that an equal
division is just and reasonable, the marital pot is divided equally between
Husband and Wife. See Barton v. Barton, WL 7983011, at *8 (Ind. Ct. App. Dec.
7, 2015, trans. pending). If the trial court determines that a party has rebutted the
presumption of an equal division of the marital pot and decides to deviate from
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an equal division, then it must state its reasoning in its findings and judgment.
Hartley v. Hartley, 862 N.E.2d 274, 285 (Ind. Ct. App. 2007).
1. Reynolds Pension
[30] Wife argues that the trial court erred in applying the coverture fraction formula
because it caused an unequal division of marital property.1 However, that
assertion conflates the concept behind the correct application of the coverture
fraction formula with presumptive equal division under the statute. Presumptive
equal division applies only to assets determined to be properly includable in the
marital pot. As set forth above, the coverture fraction formula operates to
segregate a percentage of a given asset from the marital pot while including the
balance of the asset in the marital pot. Although the trial court here reversed the
better order of the application of the coverture fraction formula, it reached the
correct result when it applied the coverture fraction formula to the pension,
allocating 14/222 or $63,953.28, to the divisible marital estate; determined that
an equal division of marital property was just and reasonable; and then equally
divided half of the marital portion of the pension, allocating $31,976.64 of the
net asset to each party.
1
Wife argues that Husband admitted on cross-examination that he was not vested during part of the eight
years before the marriage that he worked at Reynolds. Tr. p. 118. Husband testified that he did not know
when he was first vested. Tr. pp. 116, 118. In In re Marriage of Fisher, this court determined that even if
Husband’s pension did not vest until ten years of employment, the years he was employed prior to vesting
were integral to earning his pension. 24 N.E.3d at 433. We concluded that the coverture fraction formula was
applicable to years of employment prior to the time when the pension vested. Id.
2
Husband and Wife were married for 14 of the 22 years Husband was employed at Reynolds.
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2. Husband’s Annuity and 401(k)
[31] Husband asserts that the trial court erred when it failed to apply the coverture
fraction formula to his annuity and 401(k). At the hearing, Husband testified
that his Reynolds pension, annuity, and 401(k) started accruing when his
employment began in 1983. He also testified that he did not know the value of
either the Reynolds pension or 401(k) on the date of marriage and that he was
not completely vested in the Reynolds pension or the 401(k) during part the
eight years he worked at Reynolds prior to marriage.
[32] It is always the burden of the spouse seeking segregation of an asset from the
marital estate to prove the grounds for that segregation and the amount to be
segregated. The trial court concluded that Husband did not present evidence for
the court to determine what portions of his annuity and 401(k) accrued prior to
marriage. We agree with the trial court that Husband did not carry his burden
on this issue, and we conclude that it was within the trial court’s discretion to
decline to apply the coverture fraction formula to Husband’s annuity and
401(k). See In re Marriage of Fisher, 24 N.E.3d at 433.
II. Federal Tax Refund
[33] Next, Wife contends that the trial court erred by not awarding her credit for
$1,200 in credit charges incurred by Husband that Wife paid after she filed the
petition for dissolution. Wife asserts that she used the parties’ 2013 federal tax
return to pay these charges. In dissolution actions, the marital pot generally
closes on the date the dissolution petition is filed. Alexander v. Alexander, 927
N.E.2d 926, 940 (Ind. Ct. App. 2010). Therefore, debts incurred by one party
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after the dissolution petition has been filed are not to be included in the marital
pot. Id.[34] At the hearing, the only evidence to support Wife’s claim that she paid
Husband’s post-dissolution credit card charges and she reimbursed herself with
the federal tax return was her testimony.3 Husband testified that he had no
knowledge of this arrangement because it was never discussed. The trial court
has discretion to weigh the credibility of each witness, and we may not
substitute our judgment here. For these reasons, the trial court did not err in
failing to credit Wife’s $1,200 payment for Husband’s post-dissolution
expenses.
III. Valuation of the Marital Residence
[35] Finally, Wife asserts that the trial court abused its discretion when it valued the
marital residence at $299,300, which she claims is not supported by the
evidence. Wife’s realtor testified at the hearing that the marital residence would
sell for between $282,000 and $287,000 with the average price of comparable
houses selling for $299,300. Tr. pp. 39-40. Husband also testified that he
believed the house was worth $300,000. Both the realtor’s testimony and
Husband’s testimony provide sufficient evidence to support the trial court’s
3
Wife provided in her Appendix what is referred to as Exhibit 16. Appellant’s App. p. 91. Exhibit 16 is the
parties’ joint Discover Card statement dated February 18, 2014, which details Husband’s moving expenses
amounting to about $1,200 incurred on February 11 and 12, 2014. These charges were made after Wife filed
the petition for dissolution on February 6, 2014. However, Exhibit 16 was not admitted into evidence at the
hearing and may not be submitted for the first time on appeal. See Saler v. Irick, 800 N.E.2d 960, 970 (Ind. Ct.
App. 2003).
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valuation. See In re Marriage of Nickels, 834 N.E.2d at 1095. Again, we respect
the trial court’s discretion in making this determination, and we conclude that it
did not abuse its discretion in its valuation of the marital residence.
Conclusion
[36] The trial court did not err when it applied the coverture fraction formula to
Husband’s defined benefit pension thereby segregating a portion of Husband’s
Reynolds pension from the marital estate, even though it determined that
Husband failed to rebut the presumption that an equal division of the marital
estate was just and reasonable. However, Husband failed to carry his burden of
proof as to the grounds and amount for similar segregation of a portion of his
annuity and 401(k), and the trial court did not abuse its discretion when it did
not apply the coverture fraction formula to Husband’s annuity and 401(k).
Finally, the trial court did not abuse its discretion when it failed to credit Wife’s
payment of Husband’s post-dissolution expenses, or in its valuation of the
marital residence.
[37] Affirmed.
Bailey, J., concurs.
Baker, J., concurs in result with opinion.
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IN THE
COURT OF APPEALS OF INDIANA
Shari L. Morey, Court of Appeals Case No.
49A02-1502-DR-64
Appellant-Defendant/Cross-Appellee,
v.
W. Michael Morey,
Appellee-Plaintiff/Cross-Appellant.
Baker, Judge, concurring in result.
[1] I fully concur with the majority opinion with the exception of its analysis
related to the coverture fraction. As the majority observes, the doctrine of
coverture has its origin in an outdated and misogynist view of the respective
roles and rights of men and women. Slip op. p. 10. In my view, it is long since
time that the State of Indiana should discard this archaic doctrine, especially
since it is no longer needed.
[2] Coverture is a creation of common law. Slip op. p. 10. But in 1973, the Indiana
General Assembly passed the Dissolution of Marriage Act, which has since
been amended and recodified multiple times. See Anderson v. Anderson, 399
N.E.2d 391, 397 n.9 (Ind. Ct. App. 1979) (noting that the Act became effective
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on September 1, 1973). At present, division of property in a dissolution of
marriage action is governed primarily by Indiana Code sections 31-15-7-4 and -
5. Section 4 codifies the “one pot” theory, specifying that all property of the
parties must be divided by the trial court. After placing all of the property into
the pot, the trial court may then set aside certain assets to one party, taking into
consideration multiple factors, including the extent to which the property was
acquired by a party before the marriage. I.C. §§ 31-15-7-4, -5. The trial court
may then divide the remainder, and although there is a presumption of an equal
division of the “pot,” that presumption is readily overcome by evidence relating
to the relevant factors. I.C. § 31-15-7-5. In other words, by applying the statutes
passed by our legislature, we can arrive at the same place as if the coverture
fraction had been applied.
[3] In my opinion, the coverture fraction has been superseded by statute for
decades. Given that it has been superseded, and given its roots in an aspect of
our history that we have gladly put behind us, I believe that the outmoded
theory should no longer be applied in this State, and I part ways with the
majority in its application of this doctrine. That said, if the relevant statutes
were applied to this case as opposed to the coverture doctrine, I believe that the
same result would be reached. Consequently, I concur in the result reached by
the majority on this issue. In all other ways, I fully concur with the majority
opinion.
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