McMullin v. McMullin, Ky COA, QDRO, Ambiguous Agreement

McMullin v. McMullin, NO. 2010-CA-000843-MR

Published:  Opinion Affirming

County:     Mercer

      Husband appeals from a post-dissolution QDRO dividing his pension benefits with his ex-wife, arguing that the trial court erroneously interpreted the parties settlement agreement and relied upon inapplicable legal doctrines.

 

        The parties had been married nearly thirty years when they were divorced in 2000.  In their settlement agreement which was handwritten by the wife,  they divided husband’s two retirement accounts: an employer-funded pension fund plan and a 401(k) tax-deferred savings plan.  Husband took the handwritten document to his attorney who drafted a formal agreement based on the handwritten agreement.  Both parties signed the new settlement agreement and it was incorporated into the decree of dissolution.  The agreement provided that the wife would receive one-half the pension at the 20 years of service rate, payable when the pension became payable, and one-half the 401(k) calculated as of the date of dissolution.

 

        In 2009, due to health problems, the husband retired ten years earlier than expected.  He submitted two QDROs, one for the 401(k) and one for the pension.  The division of the 401(k) was acceptable to the wife, but she objected to the QDRO dividing the pension because it used the decree date to calculate her share rather than the date of husband’s retirement, resulting in zero benefit to her.

 

        The Mercer Family Court found that husband had intentionally introduced an ambiguity into the agreement and the doctrine of contra proferentem allowed an inference to be drawn against him.  The trial court held that the implied covenant of good faith and fair dealing required that inferences be drawn against husband with respect to the ambiguity, and further held that husband invoked attorney-client privilege to prevent his lawyer from testifying, providing additional grounds to construe the ambiguity in favor of the wife.  Thus, wife was entitled to one-half the twenty-year rate, calculated at retirement.  The husband appealed on several grounds.

 

        The Court of Appeals reviewed the agreement de novo, giving no deference to the trial court.  It found the agreement was ambiguous and attempted to glean the intention of the parties from the contract and surrounding circumstances.  It was clear that the wife had an intent formed about her entitlement to a portion of the pension even though she did not have a detailed awareness of the plan’s payout chart.

 

        The husband argued that Kentucky law requires division as of the date of divorce, but the court pointed out that the law requires that a pension be valued as of the decree date.  Husband ignored the fact that parties may contract for any division of property they choose, so long as the terms are not unconscionable.

 

        Husband also argued that application of the doctrine of contra proferentem and the implied covenant of good faith and fair dealing were inapplicable and the trial’s reliance was error.

 

        The Court disagreed, finding that husband’s intentional introduction of an ambiguity into the contract would be unconscionable and counter to public policy, noting that the law does not allow an individual to benefit from his own fraud in drafting or procuring a contract and that the clean hands maxim bars relief to those guilty of improper conduct.

 

Digested by Sandra G. Ragland, Diana L. Skaggs + Associates.