In the Roth and Myers decisions earlier this month, Virginia Court of Appeals Judge James W. Haley, Jr., parses property settlement agreements dividing retirements.

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            The Roth agreement gave the wife forty percent of her husband’s retirement benefits “through his employment with the Fairfax County Board of Education” (VSRS). Further on, the parties specifically waived all other claims to each other’s pensions.

 

             After the parties signed the agreement and divorced, Virginia set up a new, separate entity called “Virginia Retirement System” (VRS) covering the same employment of the husband and the same years of work. Thus, the husband now had two pensions from his career as a Fairfax County schoolteacher, where before he only had one.

            The Court of Appeals denied the wife any share of the new retirement on the ground that it did not exist when the agreement was signed, and the parties expressly waived any interest in other property.

            Two elements of the Roth ruling are perplexing: 

                        (1)            The court states that contradictory testimony of the wife undermines her entitlement; but it is unclear why parol evidence would be considered at all – after the contract was deemed unambiguous. 

                        (2)            In closing, the court construes the agreement against the wife because her counsel drafted it. In doing so, the court seems to be applying a rule of construction for resolving ambiguity – again, despite this being a case where no ambiguity is found. 

            Wife’s counsel, David L. Duff, is a highly regarded family law practitioner. He could hardly have anticipated that Virginia would create a second pension covering the identical job and time period as a pension that the opposing party already had. In fact, settlement agreements commonly tie up loose ends by granting each party ownership of property not specifically mentioned.   

            The lesson in Roth may be to include a sentence in property settlement agreements awarding a share of any future property interest that the other spouse accrues as a direct result of employment during the marriage.  Such a clause could capture even more than the improbable, supplemental retirement that materialized here. It could snare the employee stock option plan (ESOP) and bonus that a wily employer holds in abeyance pending their employee’s divorce. 

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            As in Roth, the Myers’ agreement has a paragraph dividing husband’s retirement. But the appellate outcome is radically different, since the Myers wife gets a share of the plan that is mentioned and a share of the plan that is not.  How does she fare so much better than the wife in Roth?  She is pursuing an interest in a plan that exists when the agreement is signed! 

            The heading of the Myers’ agreement paragraph about retirement says “Retirement Plans” (emphasis added). The body of that paragraph talks about the “retirement plan at Merck.” Here, as in the precedent set by Hale v. Hale, 42 Va. App 27, 590 S.E.2nd 66 (2003), the Court of Appeals finds that the intent of the parties encompasses all existing plans with the named employer – whether specifically identified or not. 

            Addressing attorney fees, J. Haley denies the wife’s claim on the ground that she did not initiate the proceeding alleging breach of the agreement; the husband launched the proceeding to determine his own obligation. 

            The Myers’ agreement provided that if judicial “proceedings are instituted for … nonperformance … the defaulting party shall be responsible for” attorney fees.  It seems obvious to me from this sentence that the right of recovery belongs to the prevailing party. Surely, this husband and wife couldn’t care less about which of them filed the first pleading about interpreting their contract. What they cared about is the whole purpose of fee-shifting clauses – that the loser cover the other party’s costs. 

             Applying the court’s strained interpretation of the Myers’ attorney fee provision can generate an untoward result: You could have a husband in brazen defiance of all material elements of a property settlement agreement who goes to court first to “determine his obligations,” thereby avoiding liability for the attorney fees of his wife who did nothing wrong. That is so clearly not what these parties intended.


[1] Roth v. Roth, Record No. 1332-10-4, March 1, 2011; and Myers v. Myers, Record No. 1509-10-3, March 8, 2011. Both decisions are unpublished.