Family Law Case Review: Shepard v. (Shepard) Tackett

Case: Gary R. Shepherd v. Linda S. (Shepherd) Tackett

Case Summary – by Mike Kohlhaas 

HELD:  The Indiana Court of Appeals held that a dissolution court may exercise continuing jurisdiction to reexamine a property settlement where the nature of which is to seek clarification of a prior order.  The Court further held that clarifying a settlement agreement, consistent with the parties’ intent, is not the same as modifying the agreement.

FACTS AND PROCEDURAL HISTORY:  In August, 2009, Wife filed for dissolution of marriage.  A contested final hearing was held in December, 2009.  In February, 2010, the trial court issued a Decree, which incorporated a division of property and awarded marital real estate to Wife.  The marital real estate was encumbered by a second mortgage with a balance of $43,304.00.  The trial court’s property division divided that indebtedness equally between Husband and Wife, stating, “Each party shall be responsible for one-half (1/2) of the second mortgage indebtedness and [Husband] shall pay to [Wife] $252.47 each and every month . . . A qualified domestic relations order shall be entered for the payment of this amount.”

Around one week after the Decree was issued; Husband filed a Chapter 13 bankruptcy petition.  The bankruptcy action stayed all action in the trial court, including that concerning Husband’s second mortgage obligation.    Wife petitioned the bankruptcy court for limited relief from the automatic stay.  Husband objected.  The bankruptcy court overruled Husband’s objection and determined that the trial court’s order was not sufficiently clear regarding the second mortgage.  The bankruptcy court specifically found the following issues to be unclear: 1) whether Husband had the option of paying the unpaid balance in full at some point; 2) what would happen if the Plan Administrator rejected an assignment of QDRO; and 3) whether Wife had a security interest in the Husband’s pension plan or retirement fund until Husband paid what he owes.  The bankruptcy court ordered Wife to petition the trial court for clarification.

In July, 2010, Wife filed a Verified Petition to Clarify Divorce Decree with the trial court.  The trial court held a hearing in October, 2010, where it heard arguments from counsel, but no new evidence was presented.  Wife’s counsel explained that, in contrast to a Chapter 7 bankruptcy that provides that things such as child support and money obligations from one spouse to another are not dischargeable, Husband filed a Chapter 13 bankruptcy, which allows that secured debts are paid in full but unsecured debts are paid only in a specified portion determined by the bankruptcy code according to the debtor’s disposable income after living expenses.  Wife’s counsel asked the trial court to clarify, among other things, what kind of debt Husband owed Wife, so that the bankruptcy court could determine how much Husband had to pay Wife out of his Chapter 13 bankruptcy.

The trial court noted that neither of the attorneys in attendance at the hearing on Wife’s Petition to Clarify had been at the final dissolution hearing, where the possibility of Husband filing for bankruptcy was clearly anticipated.  In fact, Wife’s attorney at the final dissolution hearing had remarked that “we need a [QDRO] to prevent him from discharging in bankruptcy.”  The trial court explained that in issuing the Decree, which made Husband responsible for one-half of the second mortgage, “the intent was [for] the debt to be secured against the pension assets of [Husband] or secured by the pension assets of [Husband].”  The trial court then issued an order stating that Wife was to have a judgment against Husband for $21,652.00, half the balance of the second mortgage, with that judgment accruing interest at the same rate as the mortgage.  The trial court’s order further stated that nothing in the Decree was intended to limit Wife’s option to pay the mortgage early, or to limit Husband’s option to pay off the judgment early.  Instead, the Decree was intended to set a minimum amount that Husband had to pay Wife if he chose to pay the judgment month to month.

On review before the Indiana Court of Appeals, Husband argued that the trial court’s order did not clarify the Decree, but rather modified it, contrary to statutory requirements which provide that orders concerning property division may not be revoked or modified, except in the case of fraud.  However, the Court held that a dissolution court may exercise continuing jurisdiction to reexamine a property settlement where the nature of which is to seek clarification of a prior order.  The Court further held that clarifying a settlement agreement, consistent with the parties’ intent, is not the same as modifying the agreement.  The Court found that the trial court did not modify the property division, but rather provided an alternate means of securing Husband’s existing obligation after learning that the original QDRO would not be enforced.  The Court noted that the Order did not make sweeping or substantial changes to the Decree, did not change the division of property, and did not schedule a new obligation or indebtedness.  Rather the Court determined that the Order was a clarification of an existing obligation, namely the debt for half the second mortgage, which Husband owed under the original Decree.

OUTCOME:  Affirmed

To view the text of this opinion in its entirety, click here: Gary R. Shepherd v. Linda S. (Shepherd) Tackett

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