Citation Numbers: 439 Mass. 97, 786 N.E.2d 318, 2003 Mass. LEXIS 263
Judges: Marshall
Filed Date: 4/2/2003
Status: Precedential
Modified Date: 10/18/2024
Albert H. Krapf (defendant) appealed from a declaratory judgment ordering him to pay to his former spouse, Constance E. Krapf (plaintiff), an amount equal to the military pension income she would have received pursuant to the parties’ separation agreement (agreement) had the defendant, after the divorce, not voluntarily and without the plaintiff’s consent waived his military retirement benefits in order to receive Veterans Administration (VA) disability payments. The defendant also appealed from the judge’s order that he pay the plaintiff’s appellate attorney’s fees pendente lite. The Appeals Court affirmed the declaratory judgment with modifications. Krapf v. Krapf, 55 Mass. App. Ct. 485, 492 (2002). We granted the defendant’s application for further appellate review. We conclude that the judge acted properly in construing and specifically enforcing the agreement and in awarding the plaintiff appellate counsel fees, pendente lite. Accordingly, we affirm the declaratory judgment, as modified by the Appeals Court, see id.., and the award of attorney’s fees.
1. Facts. The core facts are undisputed. In 1984, after twenty-seven years of marriage and three children, the defendant filed for divorce from the plaintiff. At the time, the plaintiff was approximately fifty-one years old; the record does not disclose either her health status or her employment status. The defendant was approximately forty-nine years old. He was on inactive or reserve duty in the United States Army. According to his counsel at oral argument, the defendant was “able bodied,” in good health, and suffered from no known or suspected disability.
On December 5, 1985, the parties entered into the separation agreement, three provisions of which are germane to this case. First, the parties agreed that the plaintiff would receive $200 a month in alimony for seven months, and that “[thereafter, neither [party] will make any claim against the other for alimony, support or'maintenance.” Second, the parties agreed that the defendant would “cause to be entered by the Middlesex Probate Court an order allocating half his pension rights with the U.S. Army to the [plaintiff].” Third, the parties provided
On June 2, 1986, a judge in the Probate and Family Court entered a qualified court order, see 10 U.S.C. § 1408(a)(2) (2000),
In early 1997, without the plaintiff’s knowledge, the defendant applied for VA disability benefits on the ground that he suffered from posttraumatic stress disorder stemming from his army service. See 38 U.S.C. § 1110 (2000) (wartime disability). In April, 1997, the VA classified the defendant as ten per cent disabled. In April, 1998, it reclassified him as fifty per cent disabled; and in June, 2000, it reclassified him as one hundred per cent disabled. With each determination of increased disability, the defendant received a commensurate increase in VA disability income. However, because Federal law prohibits a military retiree from “double dipping” into Federal retirement accounts, see Mansell v. Mansell, 490 U.S. 581, 583 (1989), the defendant executed a waiver that reduced his military retirement payments one dollar for every dollar of VA disability payments he received. See 38 U.S.C. § 5305 (2000).
April, 1997, reduced from $1,009.04 to $969.09 a month;
May, 1998, reduced from $969.09 to $797.38 a month;
June, 2000, reduced from $787.38 to $145 a month.
As of April 4, 2001, the defendant’s total VA disability payment was $2,166, an amount that included a stipend for his current wife. He received an additional $145 each month in military retirement pay. The plaintiff received only $145 each month in military retirement pay. In other words, after he obtained a one hundred per cent disability rating, the defendant’s service-related income more than doubled, while his former wife’s service-related income fell by approximately eighty-six per cent.
On July 19, 2000, the plaintiff filed a contempt complaint against the defendant in the Probate and Family Court, alleging
On April 4, 2001, the judge issued a memorandum of deci
The defendant filed a motion for reconsideration pursuant to Mass. R. Civ. R 52 (b), as amended, 423 Mass. 1402 (1996), on the ground that the judgment constituted a division of his military disability pay in violation of 38 U.S.C. § 5301 (2000) (exempting VA disability payments from certain creditors’ claims and enforcement mechanisms). The judge denied the motion, and the defendant appealed from both the April 4, 2001, declaratory judgment and the denial of his reconsideration motion. In May, 2001, the plaintiff filed a motion to restrain the defendant from diminishing his assets and a motion for attorney’s fees pendente lite to defend against the appeal. Another Probate and Family Court allowed both motions, and the defendant filed a motion for reconsideration of both orders. When the motion was denied, he timely filed a second notice of appeal.
2. Separation agreement. A policy of long standing in our Commonwealth encourages divorcing couples to resolve their marital disputes by mutual agreement rather than resort to litigation. See G. L. c. 208, § 1A; Knox v. Remick, 371 Mass. 433, 436 (1976); Buckley v. Buckley, 42 Mass. App. Ct. 716, 720 n.3 (1997). To that end, our laws permit divorcing parties to enter into written separation agreements, which they may elect to survive the divorce judgment as independent contracts. See Moore v. Moore, 389 Mass. 21, 24 (1983) (noting Commonwealth’s “strong policy . . . favor[ing] survival of separation agreements, even when such an intent of the parties is merely implied”). Such surviving separation agreements may secure with finality the parties’ respective rights and obligations concerning the division of marital assets, among other things, according to established contract principles. See, e.g., Larson v. Larson, 37 Mass. App. Ct. 106 (1994); DeCristofaro v. DeCristofaro, 24 Mass. App. Ct. 231, 236-237 (1987).
However, spouses who enter into agreements with each other are held to standards higher than those we tolerate in the arm’s-length transactions of the marketplace. Parties to a separation agreement stand as fiduciaries to each other, and will be held to the highest standards of good faith and fair dealing in the performance of their contractual obligations. See Eaton v. Eaton, supra at 370. See also Larson v. Larson, supra at 109.
The Legislature has recognized that pensions often constitute valuable marital assets. General Laws c. 208, § 34, specifically directs the court to consider the equitable division of “retirement benefits,” including “military retirement benefits if qualified under and to the extent provided by federal law,” when apportioning the marital estate.
Applying these basic contract principles, we have no difficulty in concluding that the parties intended the term “pension rights with the U.S. Army” to mean exactly what it says: the totality of benefits due to the defendant on his retirement from the army. We draw our conclusions from the entire agreement itself and from the context of its execution. See id.; DeCristofaro v. DeCristofaro, supra at 237, and cases cited. Although the parties have not furnished us with their financial statements as of the date of the judgment nisi, we infer from the agreement that the defendant’s military pension was among their most substantial marital assets. It was, at any rate, valuable enough to the plaintiff in this long-term marriage to induce her to waive any entitlement to alimony, support, or maintenance for an agreement that gave her an enforceable, vested interest in one-half of the defendant’s military retirement benefits. It is highly unlikely that she negotiated such an agreement intending to give the defendant carte blanche to reduce the value of her pension to a pittance in order to benefit himself. Nothing in the agreement suggests such authorization. We think it far more likely that the agreement gave her a “reasonable expectation” that she would receive pension income in her later years. See Schaer v. Brandeis Univ., 432 Mass. 474, 478 (2000). We also credit the representation of the defendant’s counsel that, as of the date of the agreement, the defendant was able bodied and no longer on active duty, and that neither party had reason to anticipate a disability claim stemming from his active service. That the defendant waived the joint military retirement rights unilaterally further confirms our conclusion that, at the time they entered into the agreement, each party expected and intended that the plaintiff would receive one-half of the
The defendant challenges this construction of the contract by claiming now that the plaintiff continues to reap the benefits of her bargain and that he had no control over the evaporation of her pension income. But the defendant’s military retirement benefit did not become essentially worthless because of changes in the law or changes in the market. It became worthless because of the defendant’s unilateral and voluntary action. We respect the defendant’s long years of service and sacrifice in the armed forces, but cannot escape the conclusion that by converting his and the plaintiff’s military retirement benefits to VA disability benefits for his own benefit, see note 5, supra, he denied the plaintiff the fruits of her bargain in breach of his continuing duty to exercise the utmost good faith and fair dealing in performing his obligations under the agreement. See Nile v. Nile, 432 Mass. 390, 398-399 (2000) (breach of implied covenant of good faith and fair dealing does not require showing of bad faith; lack of good faith may be inferred by considering totality of circumstances).
This case bears strong similarities to Nile v. Nile, supra. There, a party to a postdivorce settlement agreement agreed to bequeath the majority of his estate to the children of his former wife. Subsequently, he poured most of his assets into a revocable inter vivas trust in favor of his new wife, with the result that, when he died, the children of his former wife were left with nothing in the probate estate and very little from the trust. Relying on one hundred years of contract law, we held that, by destroying or injuring the rights of the children of his first marriage to receive the benefit of his agreement with his former wife, the decedent breached his continuing duty of good faith and fair dealing. See id. at 398-400, and cases cited. We rejected the trustees’ argument that the agreement merely required the decedent to leave the bulk of his “probate” estate to his heirs, while leaving the decedent free to empty the probate estate of all value. Id. at 399. A court of equity, we said, will not countenance such “questionable logic,” nor permit “an individual to have an estate to live on but not an estate from which his debts could be paid.” Id. at 400.
We also reject the defendant’s argument that the judge improperly transgressed the declaratory judgment statute by effectively converting a declaratory judgment action under G. L. c. 231A into a modification proceeding under G. L. c. 208, § 37, and then reapportioning the division of marital property contrary to established law. See Bush v. Bush, 402 Mass. 406, 409 (1988) (“The parties to a divorce may not relitigate the division of property that already has been the subject of a proceeding under G. L. c. 208, § 34”). See also Taverna v. Pizzi, 430 Mass. 882, 886 (2000); Drapek v. Drapek, 399 Mass. 240, 244 (1987). First, the Legislature has directed courts to construe and administer the declaratory judgment remedy broadly in order “to remove, and to afford relief from, uncertainty and insecurity with respect to rights, duties, status and other legal relations.” G. L. c. 231 A, § 9. Second, contrary to the defendant’s assertions, a judge may order monetary relief in a declaratory judgment action. See Trustees of Dartmouth College v. Quincy, 331 Mass. 219, 227-228 (1954). Finally, as the trial judge noted, it was the defendant himself, and not the judge, who unilaterally and impermissibly accomplished a de facto modification of the agreement. The judge merely exercised her well-established equitable authority to construe the agreement to effectuate the parties’ intent in circumstances where the contracted-for method of paying the plaintiff her equitable share of the marital estate was no longer available because of the defendant’s actions.
While not dispositive on this matter of first impression in Massachusetts, we note that many other State appellate courts have ordered similar relief against military retirees who waive
Mansell v. Mansell, 490 U.S. 581 (1989), does not compel a different result, but holds that the Uniformed Services Former Spouses’ Protection Act, 10 U.S.C. § 1408 (2000), which provides for the divisibility of military retirement pensions, does not permit State courts “to treat as property divisible upon divorce military retirement pay that has been waived to receive veterans’ disability benefits.” Id. at 595.
3. Other Issues.
(a) Attorney’s fees. The defendant claims that the judge lacked authority in a declaratory judgment action to award the plaintiff appellate counsel fees pendente lite “pursuant to” G. L. c. 208, § 38. He does not claim that the amount of fees awarded was unreasonable. We agree with the Appeals Court that this issue is most properly addressed by resort to the plain language of the contract. The agreement provides that a party in breach of its provisions shall be “responsible for all reasonable costs incurred by the non-breaching party to enforce” the agreement. Although we recognize that the judge denied the plaintiff’s request for attomey’s fees to prosecute the declaratory judgment action on the ground that the case presented an issue of first impression,
(b) Res judicata. The defendant claims that the plaintiff was barred from bringing her subsequent action for declaratory judgment because the dismissal with prejudice of her contempt complaint was res judicata on the issue of his liability under the agreement. The Appeals Court rejected this argument on the ground that the record was not sufficiently developed to enable the court to determine the judge’s reasons for dismissing the complaint for contempt with prejudice. Krapf v. Krapf, 55 Mass. App. Ct. 485, 492 (2002). We agree. It is plausible, as the defendant argues, that the judge intended the dismissal of the
(c) Due process. In his supplemental brief to this court, the defendant claims for the first time that the judge denied him due process by failing to afford the defendant the opportunity to be heard on all relevant issues.
4. Conclusion. We affirm the declaratory judgment as modified by the Appeals Court and the order awarding the plaintiff attorney’s fees pendente lite. We affirm the denial of the defendant’s motions for reconsideration.
So ordered.
-The agreement also contained general representations that the parties had made full financial disclosure to each other; that they had entered into the agreement freely, voluntarily, and fully apprised of their rights; and that they believed that the agreement was “fair, adequate and reasonable” in light of the factors set out in G. L. c. 208, § 34. The parties agreed to submit “any dispute or disagreement concerning the performance, interpretation, meaning or application of” the agreement to the Probate and Family Court.
In 1989, the parties modified the agreement to reduce the sum the plaintiff was due from the sale of certain real estate and to modify certain child-related provisions. The modification, which survived, also restated the alimony waiver. The terms of the modification agreement are not relevant to this appeal.
“The term ‘court order’ means a final decree of divorce, dissolution, annulment, or legal separation issued by a court, or a court ordered, ratified, or approved property settlement incident to such a decree (including a final decree modifying the terms of a previously issued decree of divorce, dissolution, annulment, or legal separation, or a court ordered, ratified, or approved property settlement incident to such previously issued decree) . . . which . . . provides for . . . division of property . . . .” 10 U.S.C. § 1408(a)(2)(B)(iii) (2000).
See 10 U.S.C. § 1408(a)(4) (2000) (defining “disposable retired pay”). State courts are authorized to treat disposable retired pay as sole property or as marital property in accordance with the law of the court’s jurisdiction pursuant to 10 U.S.C. § 1408(c). “[Disposable retired pay” excludes military retirement pay waived to receive Veterans Administration (VA) disability benefits. See 10 U.S.C. § 1408(a)(4)(B). Presently, every State appears to consider military retirement pay to be divisible marital property. See Note, State-by-State Analysis of the Divisibility of Military Retired Pay, Army Law. 42 (Aug 2002).
Unlike military retirement pay, VA disability pay is exempt from taxation. See 38 U.S.C. § 5301(a) (2000). “Not surprisingly, waivers of retirement pay [to receive VA disability benefits] are common.” Mansell v. Mansell, 490 U.S. 581, 584 (1989).
The dismissal was issued without explanation by way of a notation on the complaint, and the record fails to disclose the reasons for the judge’s determination. In a subsequent pleading in the declaratory judgment action, the plaintiff claimed that the defendant argued at the contempt hearing that, because the defendant’s actions were not so culpable as to give rise to a contempt judgment, the plaintiff should have filed either a modification complaint or a declaratory judgment action and the contempt action should be dismissed. We do not have the benefit of a transcript of that hearing.
They also submitted financial statements showing that the plaintiff’s adjusted net weekly income from all sources was $389.13 and that the defendant’s adjusted net weekly income from all sources was $1,423. The plaintiff claimed assets valued at approximately $103,000 and liabilities of approximately $9,000. The defendant claimed assets valued at approximately $508,000 and liabilities of approximately $16,000.
The second notice appealed from the April 4, 2001, judgment, the denial of the motions to reconsider the judgment, the order to restrain dissipation of assets, and the order to pay attorney’s fees. On appeal, the defendant does not
Military retirement pay may also be considered a “stream of income” for purposes of alimony. Andrews v. Andrews, 27 Mass. App. Ct. 759, 759 (1989).
Other courts have afforded divorced military spouses similar relief based, at least in part, on indemnity provisions in the separation agreement. See, e.g., Abernethy v. Fishkin, 699 So. 2d 235, 240 (Fla. 1997); McHugh v. McHugh, 124 Idaho 543, 545 (1993); Scheidel v. Scheidel, 129 N.M. 223, 226 (Ct. App. 2000); Hisgen v. Hisgen, 554 N.W.2d 494, 498 (S.D. 1996); Owen v. Owen, 14 Va. App. 623, 629 (1992); In re Marriage of Choat, Nos. 43291-5-I, 43791-7-I (Wash. Ct. App. July 3, 2000).
The Federal act does permit courts to order alimony payments from VA disability benefits. See 10 U.S.C. § 1408(a)(2)(B)(ii).
Similarly, the defendant’s argument that the declaratory judgment amounted to a garnishment or assignment forbidden by Federal law, see respectively 42 U.S.C. § 659 (2000) and 38 U.S.C. § 5301 (2000), is unavailing. The judgment did not “turn [the Federal government or any agency of the Federal government] into a collection agency” or require the Federal government to participate in any proceeding or pay money directly to the plaintiff. Rose v. Rose, 481 U.S. 619, 630, 635 (1987).
The plaintiff has not appealed from that denial.
To the extent that the defendant’s due process argument also maintains that he was denied due process because the judge sua sponte converted the declaratory judgment action into a de facto modification action, this argument has been previously addressed.
In any event, we would be hard pressed to find that the lack of a hearing in this case deprived the defendant of due process where he voluntarily waived such a hearing and agreed to submit the case on the pleadings, and where the judgment considered only the issues of contract interpretation and enforcement raised by the parties.
Our holding today disposes of the need to consider the merits of the defendant’s reconsideration motions.