John Luttrell v. Melinda Luttrell , 994 N.E.2d 298 ( 2013 )

Sep 12 2013, 5:59 am
FOR PUBLICATION
ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEE:
HEATHER GEORGE MYERS JEANNE M. HAMILTON
DONNA JAMESON Doninger Tuohy & Bailey LLP
Greenwood, Indiana Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
JOHN LUTTRELL, )
)
Appellant-Petitioner, )
)
vs. ) No. 49A02-1301-DR-85
)
MELINDA LUTTRELL, )
)
Appellee-Respondent. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable David Dreyer, Judge
The Honorable Patrick Murphy, Commissioner
Cause No. 49D01-0911-DR-52404
September 12, 2013
OPINION - FOR PUBLICATION
ROBB, Chief Judge
Case Summary and Issues
John Luttrell appeals the trial court’s awards and division of property following his
divorce from Melinda Luttrell. John presents three restated issues on appeal: 1) whether the
trial court properly divided the marital estate; 2) whether the trial court abused its discretion
in awarding spousal maintenance to Melinda; and 3) whether the trial court abused its
discretion in its award of attorney’s fees. Concluding that the trial court abused its discretion
only in regards to consideration of the Luttrell’s children’s student loans, we affirm in part
and remand in part.
Facts and Procedural History
John and Melinda were married in April 1987. They have three children, who were all
adults at the time of the final hearing in this case. John was employed with the United States
Postal Service throughout the marriage, while Melinda worked less than full-time for much
of the marriage and was the primary caretaker for the children.
In August 2008, Melinda filed for social security disability insurance (“SSDI”). In
November 2009, Melinda filed a petition for legal separation from John. Soon thereafter,
John filed a counter-petition for dissolution of marriage, and the court converted the
separation proceedings to divorce proceedings. In April 2010, an Administrative Law Judge
(“ALJ”) found Melinda to have been disabled under the Social Security Act since January 15,
2008. The ALJ found that Melinda had the following severe impairments: cervical
spondylosis, chronic pyelonephritis, anemia, spasmodic dysphonia, osteoporosis, and
disorder of the back. Melinda was awarded a lump sum payment of $14,430.75 in social
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security disability benefits, representing lost income from January 15, 2008 to April 23, 2010,
and she began receiving monthly SSDI payments in the amount of $915.
In September 2012, the trial court held a final hearing on the divorce proceedings.
John and Melinda’s incomes for the years immediately preceding the final hearing were as
follows:
John Melinda
2007 Gross income of $71,685 Gross income of $33,125
2008 Gross income of $51,899 Gross income of $14,960
2009 Gross income of $53,333 Gross income of $4,080
Unemployment benefits of $16,308
(Total = $20,388)
2010 Gross income of $53,998 Gross income of $1,728
Disability payments of $6,174
SSDI lump sum payment of $14,430
(Total = $22,333)
2011 Gross income of $52,829 Gross income of $6,743
Disability payments of $10,584
(Total = $17,327)
In December 2012, the court entered a decree of dissolution, including findings of fact and
conclusions of law. The court’s relevant conclusions included that the lump sum SSDI
payment to Melinda was not an asset of the marriage subject to division; that two student
loans, taken out in the names of their children, and for which John and Melinda co-signed,
were not debts of the marriage subject to division;1 that the presumption of equal division of
property had been rebutted and the marital estate would be split 60/40 in favor of Melinda;
1
Their son Shane has a student loan in the amount of $14,137 which was in deferral at the time of the
final hearing, and for which both John and Melinda co-signed to guarantee payment in the case of a default.
Their daughter Danisha has a student loan in the amount of $31,837 which was in forbearance at the time of
the final hearing and for which John alone co-signed to guarantee payment in the case of a default.
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that maintenance was proper because Melinda’s ability to support herself had been materially
affected, and John was therefore ordered to pay her $230 each month, and additionally pay a
monthly premium of $542 to maintain Melinda on health insurance benefits through the
United States Postal Service; and that, due to disparity of income, John was to pay $15,000 of
Melinda’s attorney’s fees.2 This appeal followed. Additional facts will be supplied as
necessary.
Discussion and Decision
I. Division of Marital Estate
A. Standard of Review
Indiana Code sections 31-15-7-4 and 31-15-7-5 govern disposition of marital assets in
a dissolution proceeding. There is a presumption of an equal division of property, but that
presumption may be rebutted. Ind. Code § 31-15-7-5. We apply a strict standard of review
to a dissolution court’s distribution of property. Wilson v. Wilson, 732 N.E.2d 841, 844 (Ind.
Ct. App. 2000), trans. denied. The party challenging the property division must overcome a
strong presumption that the court complied with the statute and considered the evidence on
each of the statutory factors. Id. We will reverse a property distribution only if there is no
rational basis for the award—that is, if the result reached is clearly against the logic and
effect of the facts and circumstances before the court, including the reasonable inferences to
be drawn therefrom. Id. We do not reweigh the evidence, and we consider only the evidence
2
John had incurred a total of $8,837 in attorney’s fees, and Melinda had accumulated $32,198 in
attorney’s fees.
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favorable to the dissolution court’s decision. Id. We will also reverse where the trial court
has misinterpreted the law or has disregarded evidence of statutory factors. Id.B. Exclusion of Melinda’s Lump Sum SSDI Payment
John first argues that the trial court improperly excluded Melinda’s lump sum SSDI
payment from the marital pot. The trial court relied on Severs v. Severs, 837 N.E.2d 498(Ind. 2005), in its determination that the lump sum payment was not a divisible marital asset.
John is correct that the lump sum payment covered a period of time during the Luttrells’
marriage, and that Severs specifically addressed SSDI payments as a future income stream
rather than examining a retroactive lump sum payment as is at issue here. John does not
argue that he is entitled to any of Melinda’s future SSDI payments. Rather, John urges us to
consider the lump sum payment here as more closely resembling worker’s compensation
benefits, which our supreme court determined to be divisible marital assets to the extent that
a payment was intended to replace earnings during the marriage. Leisure v. Leisure, 605
N.E.2d 755, 759 (Ind. 1993). Were state law the only relevant basis for a determination of
the issue at hand, we might be inclined to agree with John. However, Severs points to
applicable federal law regarding social security benefits that supports the conclusion of the
trial court.
The Social Security Act specifies that:
The right of any person to any future payment under this subchapter shall not
be transferable or assignable, at law or in equity, and none of the moneys paid
or payable or rights existing under this subchapter shall be subject to
execution, levy, attachment, garnishment, or other legal process, or to the
operation of any bankruptcy or insolvency law.
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42 U.S.C. § 407(a). Based on the plain wording of the statute, with references to “moneys
paid” and “[any] other legal process,” it appears that it applies to the money that was paid to
Melinda, and prevents that payment from being subject to division in the divorce
proceedings. A limited number of Indiana cases reference section 407, and none address the
precise issue at hand, although Severs comes closest. However, an evaluation of other case
law, as well as the Social Security Act itself, further illuminates the applicability of section
407 to Melinda’s lump sum payment. The Act itself includes an exception to the broad
prohibition contained in section 407. Section 659 provides that
Notwithstanding any other provision of law (including section 407 of this title
and section 5301 of Title 38) . . . moneys . . . due from, or payable by, the
United States . . . to any individual . . . shall be subject . . . to withholding in
accordance with State law . . . and to any other legal process brought, by a
State agency administering a program under a State plan approved under this
part or by an individual obligee, to enforce the legal obligation of the
individual to provide child support or alimony.
42 U.S.C. § 659(a). That same section also defines “alimony,” and specifically excludes
from the definition “any payment or transfer of property or its value by an individual to the
spouse or a former spouse of the individual in compliance with any community property
settlement, equitable distribution of property, or other division of property between spouses
or former spouses.” 42 U.S.C. § 659(i)(3)(B) (emphasis added).
It is clear then that Congress knows how to provide an exception to the broad limits
imposed by section 407, and moreover that Congress was mindful of the potential for
division of benefits to come up in divorce proceedings and yet chose not to extend the
exception to allow for divisibility of either past or future benefits except in the case of child
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support or alimony. See, e.g., Gomez-Perez v. Potter, 553 U.S. 474, 497 (2008) (“We
reasoned that ‘Congress accordingly demonstrated that it knew how to provide a statutory
right to a jury trial when it wished to do so elsewhere in the very ‘legislation cited.’ . . . But
in [§ 633a(c)] it failed explicitly to do so.’”) (citation omitted); McNary v. Haitian Refugee
Ctr., Inc., 498 U.S. 479, 496 (1991) (“It is presumable that Congress legislates with
knowledge of our basic rules of statutory construction . . . .”). Our reading of the Act is
further supported by the United States Supreme Court’s decision in Philpott v. Essex County
Welfare Board, in which the Court held that section 407 barred a New Jersey welfare agency
from recovering disability benefits retroactively paid to the recipient in a lump sum, even
though state benefits would have been reduced had the recipient received SSDI in monthly
payments rather than a lump sum, and even though the recipient had executed an agreement
to reimburse the state for welfare received. 409 U.S. 413 (1973).3
Consequently, it appears that the restrictions found in section 407 apply to the lump
sum payment that Melinda received. We therefore agree with Melinda that the broad
statement by our supreme court that “any assignment or division of social security benefits to
satisfy a marital property settlement under Indiana law is barred by 42 U.S.C. § 407,” is not
limited to a future income stream as at issue in that case, but also applies to the lump sum
3
Congress later overrode Philpott by enacting legislation that authorized localities to recover
interim assistance provided to SSI applicants once the applicant received retroactive benefits. See
Rodriguez v. Perales, 86 N.Y.2d 361, 365 (1995). That amendment, however, applies only to local
governments recovering interim assistance, not to divisibility of payments in the context of divorce
proceedings.
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payment that Melinda received.4 Severs, 837 N.E.2d at 501. The trial court thus properly
excluded the payment from the pot of divisible property. This is so even though the payment
was retroactive, even though a large portion of it covered a period of time during the
marriage, and even though the money would have been available for both John and
Melinda’s use had it been received as payments beginning in 2008—when her disability
began and when they were living as a married couple—rather than as a lump sum payment
following their separation.
C. Exclusion of the Children’s Student Loans
The trial court concluded that the children’s student loans were not debts of the
marriage subject to division. John argues that the loans, on which John and/or Melinda co-
signed, should have been considered by the trial court. We agree. While there is little
relevant Indiana case law regarding disposition of contingent liability in divorce proceedings,
we believe the loans should have been considered by the trial court.
We have previously noted that
in a dissolution proceeding, the trial court is mandated, by statute and case law,
to divide the assets and liabilities of the parties to the proceeding in which they
have a vested present interest. Of course, the trial court may not divide assets
which do not exist just as it may not divide liabilities which do not exist.
In re Marriage of Lay, 512 N.E.2d 1120, 1123-24 (Ind. Ct. App. 1987). However, we do not
believe that it is fair to say that the Luttrells’ liability for the student loans that they co-signed
“does not exist.” While the children have not defaulted on either loan and so neither John
4
Some courts have held that, while SSDI payments may not be divided in divorce proceedings, they
may be considered as part of the total picture as a court decides how to equitably divide up those items that are
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nor Melinda has been called to pay on the loans, the question is only who will pay the loan,
not whether John and Melinda might be liable. In essence, we believe that the Luttrells’
liability for the loans has “vested” for our purposes here, and thus the loans need to be
considered by the trial court. See Leever v. Leever, 919 N.E.2d 118, 124 (Ind. Ct. App.
2009) (stating that “the term ‘vest’ generally means either vesting in possession or vesting in
interest. Vesting in possession connotes an immediate existing right of present enjoyment,
while vesting in interest implies a presently fixed right to future enjoyment,” and holding that
an interest had vested in real estate under a constructive trust where the parties would receive
a right to enjoy the property as they see fit once the trust no longer had a reason to exist—i.e.
when one party’s parents no longer needed use of the residence in question) (citation
omitted). While it is possible that neither John nor Melinda will be called upon to make good
on their promise to repay the loans, at the same time, their names cannot be removed from the
loans. If one of the children defaults, the co-signers will be liable on the debt. We remand to
the trial court for consideration of the Luttrells’ liability under the children’s student loans.
D. Division of the Estate
John also argues that the trial court improperly divided the marital estate by failing to
properly account for the value of a vehicle and by assigning the full value of the Luttrells’
2008 and 2009 tax liability and any debt to an apartment complex solely to John. We
disagree. John is correct that the trial court references an “Exhibit A” which is not included
with the order. John suspects that the court meant to include as Exhibit A one of Melinda’s
divisible. See, e.g., Stanley v. Stanley, 956 A.2d 1, 4 (Del. 2008). We do not reach that question here.
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exhibits, which listed the value and amount owed on the car that Melinda was driving at the
time. While it would have been preferable for the court to include any referenced exhibits,
we consider the court’s disposition of marital property as a whole, not item by item.
Krasowski v. Krasowski, 691 N.E.2d 469, 473 (Ind. Ct. App. 1998). The court referenced all
major items in the marital pot within its order—noting, among other things, that John would
keep his vested retirement plan; John would pay certain loans; Melinda was entitled to a set-
off for a savings plan; Melinda would keep the car she was driving and John would pay the
loan for the car; and the parties would keep the personal property currently in their own
possession. The court also clearly referenced statutory factors in its order, and justified its
unequal division of property. This also applies to the court’s decision to put the
responsibility for any tax liability on John, as well as any debt owed by the apartment
complex (although no such debt was owed or claimed by the complex at the time of the
hearing). On the whole, there is a rational basis for the court’s distribution of property, and
John has not overcome the presumption that the court complied with the statute and
considered the evidence on the statutory factors.
II. Spousal Maintenance
A. Standard of Review
The trial court may award spousal maintenance upon the finding that a spouse is
incapacitated and her ability to support herself is materially affected. Ind. Code § 31-15-7-2.
The trial court’s power to award maintenance is wholly within its discretion, and we will
reverse only when the decision is clearly against the logic and effect of the facts and
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circumstances of the case. Bizik v. Bizik, 753 N.E.2d 762, 768-69 (Ind. Ct. App. 2001),
trans. denied. In determining whether a trial court has abused its discretion in a spousal
maintenance determination, we will presume that the trial court properly considered the
applicable statutory factors in reaching its decision. Id. at 769. The presumption that the trial
court correctly applied the law in making an award of spousal maintenance is one of the
strongest presumptions applicable to the consideration of a case on appeal. Id.B. Maintenance Awarded to Melinda
Here, the trial court found that Melinda was incapacitated and that her ability to
support herself is materially affected. The trial court awarded her spousal maintenance in the
amount of $230 per month, in addition to John paying the monthly premium for her to stay on
the postal service insurance. John argues that the statutory criteria were not met, apparently
because Melinda works part time and because she did not have a medical expert testify as to
her prognosis or limitations.5 Melinda testified as to her medical issues, her difficulty
working, and her difficulty maintaining employment due to her many medical appointments
and treatments. The Social Security Administration has found Melinda to be disabled. We
do not agree that the trial court abused its discretion in awarding maintenance to Melinda. As
for the part of the order requiring John to pay Melinda’s insurance premium through the
postal service, he argues that she is eligible for Medicare parts A through D but only
5
John also points to the fact that Melinda’s income for 2011 was “almost twice the poverty threshold”
of $11,702 to support his claim that her ability to support herself is not materially affected. Appellant’s Brief
at 14. To the contrary, we think this speaks more to how absurdly low the “poverty” threshold is set than it
does to Melinda’s ability to support herself. Despite her income being nearly double the poverty threshold,
Melinda testified that she qualifies for and receives food stamps and that qualifying for food stamps has
allowed her to gain several pounds, as she had been living on $50 per week for food—which equates to less
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participates in part A, and that she could participate in parts B through D for a nominal fee.
The trial court noted in its order that there was testimony suggesting that Melinda could
participate in Medicare for a nominal fee, but that there was no evidence submitted by either
party as to the actual cost. Further, Melinda testified that she had extensively researched her
coverage options, and that Medicare would not cover many of her necessary appointments
and treatments. The court found that Melinda needed health insurance to help cover the costs
of treatments that are necessary for her disabilities and medical issues. The trial court’s
award is not clearly against the logic and effect of the facts and circumstances of the case.
III. Attorney’s Fees
A. Standard of Review
In dissolution proceedings, the trial court may order a party to pay a reasonable
amount for the other’s attorney’s fees. Ind. Code § 31-15-10-1. The trial court has broad
discretion in awarding attorney’s fees, and we will reverse an award only where the decision
is clearly against the logic and effect of the facts and circumstances. In re Marriage of
Bartley, 712 N.E.2d 537, 546 (Ind. Ct. App. 1999). In assessing attorney’s fees, the court
may consider such factors as the resources of the parties, the relative earning ability of the
parties, and other factors which bear on the reasonableness of the award. Id. An award of
attorney’s fees is proper when one party is in a superior position to pay fees over the other
party. Id.than $2.50 per meal.
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B. Attorney’s Fees Awarded to Melinda
John argues that the court abused its discretion in awarding attorney fees to Melinda
because she received the lump sum payment of SSDI benefits, and “had [she] been more
financially responsible with her expenditures, she would have been able to contribute more”
to her attorney’s fees. Appellant’s Br. at 18. John also argues that because Melinda received
money in marital assets, she had the resources to pay her own attorney’s fees. The trial court
seems to have especially considered the disparity in income between John and Melinda in
awarding attorney’s fees, and Melinda notes that the award works out to John paying
approximately 60% of the total attorney bills, in line with the court’s 60/40 division of
marital property. We disagree that the award was unreasonable or that the trial court abused
its discretion in awarding the fees.
Conclusion
Concluding that the trial court properly excluded Melinda’s lump sum SSDI payment,
improperly excluded from consideration the Luttrells’ liability on their children’s student
loans, otherwise properly divided the estate, and properly awarded maintenance and
attorney’s fees, we affirm in part and remand for proceedings consistent with this opinion.
Affirmed in part and remanded.
RILEY, J., and KIRSCH, J., concur.
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