Petitioner's Brief on the Merits - Supreme Court of Texas

No. 00-1325
IN THE
SUPREME COURT OF TEXAS
George Payton Shanks,
Petitioner,
v.
Kenda Carolyn (Shanks) Treadway,
Respondent.
On Petition for Review from the
Court of Appeals for the Fifth Judicial District, Dallas, Texas
PETITIONER’S BRIEF ON THE MERITS
TONYA P. JOHANNSEN
State Bar No. 10670200
SUSAN HAYS
State Bar No. 24002249
AKIN, GUMP STRAUSS, HAUER
& FELD, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201-4618
(214) 969-2800 (telephone)
(214) 969-4343 (facsimile)
ATTORNEYS FOR PETITIONER

No. 00-1325
IN THE
SUPREME COURT OF TEXAS
George Payton Shanks,
Petitioner,
v.
Kenda Carolyn (Shanks) Treadway,
Respondent.
On Petition for Review from the
Court of Appeals for the Fifth Judicial District, Dallas, Texas
PETITIONER’S BRIEF ON THE MERITS
TO THE HONORABLE SUPREME COURT OF TEXAS:
Petitioner, George Payton Shanks (“Shanks”) submits his <strong>Brief</strong> on the Merits
seeking reversal of the Dallas Court of Appeals’ decision in favor of Kenda Carolyn
Treadway (“Treadway”), and would show this court as follows:
i

AMENDED IDENTITY OF PARTIES AND COUNSEL
Name
George Payton Shanks
(Petitioner/Appellee/Plaintiff)
Court of Appeals:
Court of Appeals and Trial Court:
Kenda Carolyn (Shanks) Treadway
(Respondent/Appellant/Defendant)
Counsel
TONYA P. JOHANNSEN
State Bar No. 10670200
SUSAN HAYS
State Bar No. 24002249
AKIN, GUMP, STRAUSS, HAUER
& FELD, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas, 75201
Fred Misko, Jr., P.C.
Barbara Rosenberg
3811 Turtle Creek Blvd., 19 th Floor
Dallas, Texas 75219
James R. Hilliard
7515 Greenville Ave.
Suite 1010, LB 540
Dallas, Texas 75231
W. Dane Clay (pro hac vice)
THE ROSE LAW FIRM
120 East 4 th Street
Little Rock, Arkansas 72201
James Hunter Birch
James W. Hryekewicz
HUGHES & LUCE, L.L.P.
1717 Main Street, Ste. 2800
Dallas, Texas 75201
ii

TABLE OF CONTENTS
AMENDED IDENTITY OF PARTIES AND COUNSEL ...........................................................ii
INDEX OF AUTHORITIES ...........................................................................................................v
STATEMENT OF THE CASE...................................................................................................... xi
STATEMENT OF JURISDICTION ............................................................................................xii
ISSUES PRESENTED................................................................................................................xiii
STATEMENT OF FACTS.............................................................................................................. 1
SUMMARY OF THE ARGUMENT............................................................................................. 4
ARGUMENT 5
I. Given the proliferation of post-divorce proceedings, parties
and courts should understand that retirement benefits fall into
two general categories with vastly different traits......................................................... 5
A. The advent of QDROs increases post-divorce
proceedings............................................................................................................ 5
B. Defined contribution and defined benefit plans are
fundamentally different......................................................................................... 6
1. Defined contribution plans ....................................................................... 6
2. Defined benefit plans ................................................................................ 8
3. The “plan” in this case ............................................................................10
C. To accurately segregate community interests courts
should note which factual situation the divorce presents
as each requires a different analysis to preserve marital
property rights.....................................................................................................11
II. Given constitutional and statutory restrictions, divorce decrees
should be interpreted differently than other judgments.................................................... 14
A. Divorce decrees must be interpreted within the context
of Texas’ community property laws have always banned
division of separate property upon divorce.......................................................14
B. The perceived tension between Berry and Baxter can be
reconciled. ...........................................................................................................17
C. Divorce decrees, unlike other final judgments, are
subject to a variety of review mechanisms........................................................20
D. Application of the divorce decree by entering more
detailed QDROs is not a “substantive division” under
section 9.007(a)..................................................................................................22
E. The decree in this case awarded Treadway 25% of the
community property in the retirement plans, or 25% of
the plans valued at divorce..................................................................................25
1. Divorce decree judgments must be interpreted
with an eye toward constitutional marital
property rights.........................................................................................25
iii

III.
2. The court of appeals relied on cases construing
contracts in interpreting the divorce decree.........................................26
3. The decree here is ambiguous and must be read in
the context of constitutional property rights........................................27
4. The court of appeals erred in construing “if, as,
and when paid” as a term of art meaning valuation
at payment rather than a term recognizing the
contingent nature of retirement benefits...............................................30
5. The courts of appeals, caught in the tension
between finalizing divorces and accurately
dividing retirement plans, commit several errors.................................32
This Court should grant this petition and untangle the
complicated interaction between marital property rights and
benefit plan requirements...............................................................................................33
A. Apportionment and valuation errors in the lower courts
and the ongoing confusion in applying Berry must be
remedied...............................................................................................................34
B. Community property share of defined contribution plans
can be valued to an accurate dollar amount at divorce.....................................34
C. When retirement precedes divorce, division of both
defined contribution and defined benefits plans is
relatively simple..................................................................................................36
D. When divorce precedes retirement, divorce decrees
must necessarily be applied to future facts via a QDRO
or other Chapter 9 post-divorce proceeding.....................................................37
1. Valuation must respect separate property rights..................................37
2. Post-divorce increases............................................................................40
3. The problem of Taggert as an estimate.................................................41
CONCLUSION............................................................................................................................43
PRAYER.......................................................................................................................................44
iv

INDEX OF AUTHORITIES
STATE CASES
Acosta v. Acosta, 836 S.W.2d 652 (Tex. App. – El Paso 1992, writ
denied)....................................................................................................................................27
Adams v. Adams, 214 S.W.2d 856 (Tex. Civ. App. – Waco 1948, writ
ref’d n.r.e.) .............................................................................................................................27
Albrecht v. Albrecht, 974 S.W.2d 262 (Tex. App. – San Antonio 1998,
no pet.)..............................................................................................................................17, 37
Anderson v. Anderson, 707 S.W.2d 166 (Tex. App. – Corpus Christi
1986, writ ref’d n.r.e.) ....................................................................................................13, 39
Bankers Home Building & Loan Ass’n v. Wyatt, 162 S.W.2d 694
(Tex. 1942) ............................................................................................................................27
Baw v. Baw, 949 S.W.2d 764 (Tex. App. – Dallas 1997, no pet.) ..................................7, 8, 34
Baxter v. Ruddle, 794 S.W.2d 761 (Tex. 1990) ..................................................18, 19, 20, 32
Berry v. Berry, 647 S.W.2d 945 (Tex. 1983) ...................................xii, 14, 16-20, 38, 40, 42
Bina v. Bina, 908 S.W.2d 595 (Tex. App. – Fort Worth 1995, no writ)................................24
Burchfield v. Finch, 968 S.W.2d 422 (Tex. App. – Texarkana 1998,
pet. denied).......................................................................................................................17, 40
Busby v. Busby, 457 S.W.2d 551 (Tex. 1970) ..................................................................15, 21
Byrnes v. Byrnes, 19 S.W.3d 556 (Tex. App. – Fort Worth 2000, no.
pet)..........................................................................................................................................17
Cameron v. Cameron, 641 S.W.2d 210 (Tex. 1982) .............................................................17
Cearley v. Cearley, 544 S.W.2d 661 (Tex. 1976) ...........................................................15, 31
Coker v. Coker, 650 S.W.2d 391 (Tex. 1983).........................................................................26
Constance v. Constance, 544 S.W.2d 659 (Tex. 1977) .........................................................21
Contreras v. Contreras, 974 S.W.2d 155 (Tex. App. – San Antonio
1998, no pet.)...................................................................................................................17, 24
v

County of Maverick v. Texas Ass’n of Counties’ Worker’s Comp.
Self-Ins. Fund, 852 S.W.2d 700 (Tex. App. – San Antonio 1993,
no writ).............................................................................................................................26-27
Dechon v. Dechon, 909 S.W.3d 950 (Tex. App. – El Paso 1995, no
writ) .................................................................................................................................18, 21
Disbrow v. Thibodeaux, 596 S.W.2d 174 (Tex. App. – Houston [14th
Dist.] 1980, writ ref’d n.r.e.) ...............................................................................................30
Dunn v. Dunn, 703 S.W.2d 317 (Tex. App. – San Antonio 1985, writ
ref’d n.r.e.) .............................................................................................................................17
Echols v. Echols , 900 S.W.2d 160 (Tex. App. – Beaumont 1995, writ
denied)................................................................................................................................9, 24
Eggemeyer v. Eggemeyer, 554 S.W.2d 137 (Tex. 1977) ...................................17, 26, 28, 33
Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (Tex. 1994).................................................27
Grier v. Grier, 731 S.W.2d 931 (Tex. 1987)...........................................................................16
Harrell v. Harrell, 700 S.W.2d 645 (Tex. App. – Corpus Christi
1985, no writ)..................................................................................................................26, 40
Harvey v. Harvey, 905 S.W.2d 760 (Tex. App. – Austin 1995, no
writ) .......................................................................................................................................18
Hatteberg v. Hatteberg, 933 S.W.2d 524 (Tex. App. – Houston [1st
Dist.] 1994, no writ)................................................................................................. 7, 8, 9, 34
Haworth v. Haworth, 795 S.W.2d 296 (Tex. App. – Houston [14th
Dist.] 1990, no writ)..............................................................................................................24
Herring v. Blakeley, 385 S.W.2d 843 (Tex. 1965)....................................................14, 15, 20
Hurley v. Hurley, 960 S.W.2d 287 (Tex. App. – Houston [1st Dist.]
1997, no pet.) ..................................................................................................................30, 31
Iglinsky v. Iglinsky, 735 S.W.2d 536 (Tex. App. – Tyler 1987, no
writ) .......................................................................................................................................34
In re Joiner, 755 S.W.2d 496 (Tex. App. – Amarillo 1988, no writ) ...................................12
Lawrence v. Lawrence, 911 S.W.2d 450 (Tex. App. – Texarkana 1995,
writ denied) ...........................................................................................................................19
vi

Layfield v. Layfield, No. 09-93-102-CC, 1994 WL 29104 (Tex. App.
– Beaumont 1994, no writ)...................................................................................................34
Lee v. Lee, 112 Tex. 392, 247 S.W. 828 (1923) .....................................................................14
Lipsey v. Lipsey, 983 S.W.2d 345, 350 (Tex. App. – Fort Worth 1998,
no pet.)....................................................................................................................................35
Lohse v. Cheatham, 705 S.W.2d 721 (Tex. App. – San Antonio 1986,
writ dism’d)............................................................................................................................27
Lone Star Cement Corp. v. Fair, 467 S.W.2d 402 (Tex. 1971)............................................26
Ex Parte Lucher, 728 S.W.2d 823 (Tex. App. – Houston [1st Dist.]
1987, no writ)........................................................................................................................32
In re Marriage of Alford, 40 S.W.3d 187 (Tex. App. – Texarkana
2001, no pet.).........................................................................................................................21
In re Marriage of Rister, 512 S.W.2d 72 (Tex. Civ. App. – Amarillo
1975, no writ)..................................................................................................................14, 31
May v. May, 716 S.W.2d 705 (Tex. App. – Corpus Christi 1986, no
writ) ....................................................................................................................11, 16, 34, 40
McGehee v. Epley, 661 S.W.2d 924 (Tex. 1983)....................................................................24
McPherren v. McPherren, 967 S.W.2d 485 (Tex. App. – El Paso
1998, no pet.)...................................................................................................................21, 24
Parliament v. Parliament, 860 S.W.2d 144 (Tex. App. – San Antonio
1993, writ denied) .................................................................................................................42
Pate v. Pate, 874 S.W.2d 186 (Tex. App. – Houston [14th Dist.] 1994,
writ denied) ............................................................................................................................23
Pelzig v. Berkebile, 931 S.W.2d 398 (Tex. App. – Corpus Christi
1996, no writ)....................................................................................................................7, 34
Pierce v. Pierce, 850 S.W.2d 675 (Tex. App. – El Paso 1993, writ
denied)....................................................................................................................................24
R&P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517 (Tex.
1980)......................................................................................................................................26
Republic Nat’l Life Ins. Co. v. Spillars, 368 S.W.2d 92 (Tex. 1963)...................................26
vii

Reiss v. Reiss, No. 01-0251, 40 S.W.3d 605 (Tex. App. – Houston
[1st Dist.] 2001, pet. filed)...........................................xii, 8, 11, 25, 26, 30, 31, 33, 34, 40
Sears, Roebuck & Co. v. Commercial Union Ins. Corp., 982 S.W.2d
151 (Tex. App. – Houston [1st Dist.] 1998, no pet.)..........................................................26
Smith v. Smith, 22 S.W.3d 140 (Tex. App. – Houston [14th Dist.]
2000, no pet.).....................................................................................................................8, 12
State Farm Lloyds, Inc. v. Williams, 791 S.W.2d 542 (Tex. App. –
Dallas 1990, writ denied) .....................................................................................................26
Stephens v. Marlowe, 20 S.W.3d 250 (Tex. App. – Texarkana 2000,
no pet.)....................................................................................................................................22
Taggert v. Taggert, 552 S.W.2d 422 (Tex. 1977) ............................15-16, 21, 34-37, 41-42
Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154 (Tex. 1951) ...............................26
Wilde v. Murchie, 949 S.W.2d 331 (Tex. 1997) ...........................................12, 25-27, 28, 32
Wilson v. Uzzel, 953 S.W.2d 384 (Tex. App. – El Paso 1997, no pet.)....................11, 24, 40
Wright v. Eckhardt, 32 S.W.3d 891 (Tex. App. – Corpus Christi 2000,
no pet.)..............................................................................................................................21, 33
Zoella v. Zoella, 15 S.W.3d 239 (Tex. App. – Houston [14th Dist.]
2000, pet. denied) ................................................................................................................33
DOCKETED CASES
Shanks v. Shanks, No. 06-98-0078-CV (Tex. App. – Texarkana, Sept.
24, 1998, no pet.) ................................................................................................................... 3
STATE STATUTES AND SESSION LAWS
TEX. CONST. art. I, § 17 .............................................................................................................17
TEX. CONST. art. XVI, §§ 15, 17 .....................................................................xii, 14, 17, 19, 26
TEX. CONST. of 1845, art. VII, § 19...........................................................................................19
Act of July 20, 1987, 70 th Leg., 2d C.S., ch. 50, 1987 Tex. Gen. Laws
159..........................................................................................................................................22
viii

Act of May 27, 1995, 74 th Leg., R.S., ch. 1026, 1995 Tex. Gen. Laws
5106.......................................................................................................................................... 6
Act of May 26, 1999, 76 th Leg., R. S. ch. 692, § 3 1991 Tex. Gen.
Laws 3292..............................................................................................................................17
TEX. FAM. CODE § 4.201-.206...................................................................................................17
TEX. FAM. CODE § 7.001 ...............................................................................................26, 28, 33
TEX. FAM. CODE § 9.001-.002...................................................................................................21
TEX. FAM. CODE § 9.006 ...............................................................................................xii, 21, 23
TEX. FAM. CODE § 9.007 ....................................................................xii, xiii, 19, 21, 22, 23, 43
TEX. FAM. CODE § 9.008 ............................................................................................................21
TEX. FAM. CODE § 9.011-.012.............................................................................................21-22
TEX. FAM. CODE § 9.101-.105.......................................................................2, 6, 19, 22, 23, 25
TEX. GOV’T CODE § 22.001.......................................................................................................xii
FEDERAL STATUTES AND REGULATIONS
U.S. CONST. amend. V, cl. 4, 5 .................................................................................................... 5
26 U.S.C.A. § 401(a)(13)............................................................................................................. 5
26 U.S.C.A. § 414(i)..................................................................................................................... 7
26 U.S.C.A. § 414(p) .................................................................................................................... 6
29 U.S.C.A. § 1056(d)(3).........................................................................................................5, 6
Pub. L. 98-397 (1984).................................................................................................................. 5
Treas. Reg. § 1.401(a)-13(g)........................................................................................................ 5
SECONDARY SOURCES
Steven R. Brown, An Interdisciplinary Analysis of the Division of
Pension Benefits in Divorce and Post-Judgment Partition
Actions: Cures for the Inequities in Berry v. Berry, 39 BAYLOR L.
REV. 1131 (1987)..........................................................................................................6, 8, 32
ix

VICTOR B. MEYEN & MARK W. DUNDEE, QUALIFIED DOMESTIC
RELATIONS ORDER ANSWER BOOK (1998) (Tab B and Tab I to Pet.
for Review) ......................................................................................................................7, 8, 9
SAMPSON & TINDALL’S TEXAS FAMILY CODE ANNOTATED (2000 ed.) ................................22
GARY A. SHULMAN & DAVID I. KELLEY, DIVIDING PENSIONS IN
DIVORCE (1999) (Tab H to Pet. for Review) ................................................................7, 8, 9
x

STATEMENT OF THE CASE
Nature of the Case: Qualified Domestic Relations Order (“QDRO”) ∗ proceeding
enforcing a 1981 divorce decree.
Trial Court and its
disposition:
Parties in the Court of
Appeals:
Hon. Dan Gibbs, sitting for the 303 rd District Court,
Dallas County, signed two QDROs in which Treadway
received 25% of the community property interest in
Shanks’ defined contribution and defined benefit plans
for the time that the marriage and Shanks’ participation
in the plans overlapped (Sept. 26, 1967 – Aug. 3, 1981).
George P. Shanks
(Plaintiff /Appellee/Petitioner)
Kenda Carolyn (Shanks) Treadway
(Defendant/Appellant/Respondent)
Court of Appeals:
Judgment of the Court of
Appeals
Fifth Court of Appeals, Opinion (unpublished) by Farris,
J., sitting by designation, joined by James, J., and
FitzGerald, J., issued on November 17, 2000.
The court of appeals reversed the trial court and
remanded, finding that the unambiguous language in the
1981 divorce decree required that Treadway receive 25%
of Shanks’ defined contribution and defined benefit plans
valued when paid, an interpretation will result in
Treadway receiving a portion of his separate property as
well as the community property of a subsequent spouse,
both of which accrued after the 1981 divorce.
∗ See Glossary of Terms at Tab A. Given the technical language used in QDROs under the federal tax laws, Shanks
has provided the Court with a list of terms with definitions as they are used in the brief.
xi

STATEMENT OF JURISDICTION
This Court has jurisdiction under §§ 22.001(a)(6) and 22.001(a)(2):
• because the court of appeals has committed an error of law of such importance to
the state’s jurisprudence that this Court should correct it as the lower court’s opinion
effectively divests Shanks of separate property in violation of the Texas Constitution,
article XVI, § 15.
• because in divesting Shanks of separate property the court of appeals’ decision
directly conflicts with Reiss v. Reiss, No. 01-0251 and Berry v. Berry, 647 S.W.2d 945
(Tex. 1983), by valuing the benefits at retirement rather than at divorce.
This Court potentially has jurisdiction under § 22.001(a)(3) of the Government
Code because interpretation of “substantive division” in sections 9.006 and 9.007 of the
Texas Family Code may be necessary to determine the outcome of this case.
xii

ISSUES PRESENTED
1. Whether a court can interpret a divorce decree in a manner that
unconstitutionally divests separate property when the decree can reasonably be applied in a
manner that preserves those marital property rights.
2. Whether the phrase “if, as, and when paid” is a term of art requiring that
retirement benefits be valued at payment, rather than at the date of divorce, or merely a
statement recognizing the contingent nature of retirement benefits.
3. Whether QDRO proceedings under Subchapter B of Family Code, Chapter 9
are subject to the prohibition on changing or altering the “substantive division of property”
in a divorce decree when that prohibition appears in Subchapter A and not Subchapter B.
4. If QDRO proceedings are so restricted, whether issuing a QDRO that is more
specific than a divorce decree amounts to an improper alteration of the “substantive
division of property” in the decree under Texas Family Code § 9.007.
xiii

STATEMENT OF FACTS
A. The Divorce.
Shanks and Treadway divorced on August 30, 1981 after nineteen years of marriage.
CR 14; ARR 5. Shanks, an American Airlines (“American”) employee during the entire
marriage, had participated in American’s retirement program since September 26, 1967.
The program included both a defined benefit and a defined contribution plan. 1 ARR 5, 6-7,
15.
When Shanks and Treadway divorced on August 31, 1981, Judge Dan Gibbs, divided
the couple’s community property and designated certain separate property. CR 10-14. The
court found that Shanks had “certain employee benefits under a pension plan arising out of
past employment as an employee of American Airlines.” CR 12. The court awarded
Treadway 25% of the “pension plan.” 2 The court also awarded her $55,000 of the $89,900
in cash the parties then owned. 3
CR 11-12. The decree divided the rest of the parties’
estate as follows:
1 Given the technical nature of retirement plan terms, Shanks provides this Court with a Glossary of Defined Terms.
This brief consistently uses these defined terms even if the cases being discussed use different language.
2 During this appeal, the parties have disputed the value of the plans at the time of divorce. See Shanks’ Pet. at 1
(estimating $40,000 divorce value); Treadway’s Resp. at 3 (estimating $103,000 divorce value); Shank’s Reply Pet. at
1-2 & 1 n.1 (discussing dispute and concluding that both parties are wrong). ARR Pet. Ex. 3, 5. The exact dollar value
of the plans in 1981 is not necessary to determine the methodology to divide the two plans in a way that preserves
marital property rights and is faithful to the divorce decree.
3 The couple’s liquid assets during the divorce mainly consisted of $89,900 in cash from a $15,000 certificate of
deposit and $74,400 held in escrow, proceeds from the sale of the couple’s house. CR 11-12. While Treadway was
awarded only 25% of the community property in the retirement benefits, she received a disproportionate share of the
couple’s liquid assets.
1

• To Treadway: all household goods subject to her control; her Individual
Retirement Account; all U.S. Savings Bonds; a 1980 Buick; all life insurance
insuring her life; all her personal effects.
• To Shanks: all household goods subject to his control; all shares of American
Airlines stock; all cash in certain bank accounts in his name; all ham radio
equipment; three cemetery lots; all life insurance policies insuring his life; a
1981 Datsun; a 1976 Mercury; and all his personal effects.
CR 11. The original trial court also found that certain property in Alabama was Shanks’
separate property. CR 12-13.
B. The Retirement Plans and Their Changing Values.
Shanks worked for American seventeen more years after the divorce. By the late
1980s, he was a captain, a position accompanied by commensurate salary increases. ARR
13. Shanks’ performance during the post-divorce seventeen years of service had a
substantial effect on the amount of his retirement because his benefits under American’s
defined benefit plan are calculated pursuant to a formula based on his final average pay (an
amount which is determined by averaging his compensation over the final five years of his
service), multiplied by his total years of service, and his benefits under the defined
contribution plan were increased by seventeen years of contributions and growth. ARR 13;
Pet. Ex. 2. When Shanks retired on May 16, 1998, the benefits in the two plans were worth
more than $2 million. ARR 6, 13.
C. The QDRO Proceedings.
In 1998, as his retirement approached, Shanks filed a motion for approval of a
qualified domestic relations order (“QDRO”) in the court of continuing jurisdiction, the
303 rd District Court. CR 15. See TEX. FAM. CODE § 9.101-.105. Shanks’ draft QDROs,
2

one for the defined benefit plan and one for the defined contribution plan, both calculated
the 25% of the “pension plan” based on the value at divorce. SCR 3, 12, 19. In response,
Treadway submitted a draft QDRO that awarded her 25% of all sums actually paid to Shanks
— 25% of more than $2 million. CR 32, 37.
Judge Gibbs, now a visiting judge, was coincidentally assigned to hear the QDRO
proceedings. After hearing and introduction of evidence on the structure and value of the
plans at the time of divorce, Judge Gibbs drafted a letter ruling, finding that the divorce
decree awarded Treadway 25% of benefits “arising out of past employment” as of the
divorce. CR 6 (emphasis in original); ARR 6-13, Pet. Ex. 1-6.
The judge regularly sitting in the 303 rd District Court later signed two QDROs —
Shanks’ QDRO that divided the defined benefit plan valued at the date of divorce, CR 51,
and Treadway’s QDRO which divided both plans as of the date sums were actually paid to
Shanks. CR 58. Shanks moved to reconsider the obviously conflicting orders. 4 CR 64.
Treadway responded, and Judge Gibbs presided over a second hearing during which
Treadway introduced handwritten notes 5
allegedly demonstrating that Judge Gibbs had
intended to award her 25% of the total sum of retirement, if, as, and when paid. JRR, Ex. 1-
4. Judge Gibbs sustained Shanks’ motion to reconsider and entered the QDRO dividing
Shanks’ defined contribution benefit valued at the date of divorce. CR 7, 131.
4 Treadway appealed the QDRO dividing the defined benefit plan. Given the trial court’s ruling on the motion for
consideration, the appeal was dismissed. Shanks v. Shanks, No. 06-98-0078-CV (Tex. App. – Texarkana, Sept. 24,
1998, no pet.) (transferred by order of the Supreme Court of Texas).
5 At the hearing, Shanks strenuously objected to the use of the notes. JRR 8, 9, 12-13, 14-16 (voir dire), 16, 24.
Shanks also objected to the evidentiary nature of the hearing as it was merely a hearing prompted by Judge
Johnson’s signing conflicting orders. JRR 5, 8.
3

The court of appeals reversed, finding the language of the divorce decree unambiguous,
6 and that the trial court’s QDROs substantively altered the divorce decree’s division
of property. Slip op. at 5-6. The court refused to read the decree in the context of
constitutional marital property rights, instead interpreting the decree language literally.
Refusing to acknowledge the constitutional bounds of divorce decrees, the court opined
that post-divorce, separate property benefits could be freely awarded to the alternate payee.
Slip op. at 7-8.
SUMMARY OF THE ARGUMENT
The decree in this case awarded Treadway 25% of the community property interest
in the employee benefit plans if, as and when paid. Where, as here, divorce precedes
retirement and the decree contemplates division of a defined benefit plan as part of the
community estate, the appellate court’s failure to understand the marital property rights in
the plan results in an inaccurate division of community property and an unconstitutional
divestiture of Shanks’ separate property rights (and of the community property rights of any
subsequent spouse). Treadway, on the other hand, receives a windfall of post-divorce
accrued value. This Court should provide lower courts with a better understanding of the
marital property rights at issue where post-divorce division of a retirement plan is involved.
In addition, this Court should define the framework within which lower courts are to
construe divorce decrees so as to preserve constitutional marital property rights and their
underlying policies.
6 Although the court of appeals stated that Shanks agreed the decree was unambiguous, slip op. at 6, Shanks
actually argued both that is was ambiguous and unambiguous in his brief. Appellee’s Br. at 15-16.
4

ARGUMENT
I. Given the proliferation of post-divorce proceedings, parties and courts should
understand that retirement benefits fall into two general categories with
vastly different traits.
In the last thirty years, divorce decrees have become subject to a wide variety of
post-divorce scrutiny, particularly over the division of retirement benefits in cases where
the divorce preceded retirement. To accurately identify and divide community property
interest in retirement plans, courts and litigants must understand the basic traits of
retirement plans and what issues they raise in the valuation and apportionment of each type
of plan.
A. The advent of QDROs increases post-divorce proceedings.
Recognizing that divorce decrees often inadequately describe the division of retirement
benefits, Congress enacted statutes to permit alienation of these benefits upon
divorce by a Qualified Domestic Relations Order. 7 Pub. L. 98-397 (1984) (codified at 26
U.S.C.A. § 414(p); 29 U.S.C.A. § 1056(d)(3)). QDROs must specify certain information
including the amount or percentage of benefits to be paid the alternate payee and the manner
of determining that percentage and must not attempt to provide benefits not
7 QDROs are a statutory exception to the otherwise applicable prohibition against assigning or alienating benefits in
a tax-qualified retirement plan. 26 U.S.C.A. § 401(a)(13); Treas. Reg. § 1.401(a)-13(g).
5

otherwise provided by the plan. 26 U.S.C.A. § 414(p)(1)(A); 29 U.S.C.A. § 1056(d)(3).
Plan administrators do not undertake a substantive review of the QDROs and are, in fact,
required to approve QDROs that meet these simple requirements and do not violate the
parameters of the pension plan itself. 29 U.S.C.A. § 1056(d)(3). The Texas Legislature has
in turn amended the Family Code to provide for QDRO proceedings after divorce. Act of
May 27, 1995, 74 th Leg., R.S., ch. 1026, 1995 Tex. Gen. Laws 5106 (codified at TEX. FAM.
CODE §§ 9.101-.105). Thus, it is increasingly important that the courts develop an accurate
understanding of these pension benefits and how to divide them appropriately within the
confines of constitutionally guaranteed marital property rights.
B. Defined contribution and defined benefit plans are fundamentally
different.
Employee retirement plans fall into two main categories: defined contribution and
defined benefit plans. 8
As this case illustrates, courts and practitioners frequently fail to
appreciate the differences between the two plans when approving, drafting, and interpreting
divorce decrees and QDROs. The differences are critical because the method of proper
apportionment and valuation of a given plan differs depending on the type of plan and facts
of the case.
1. Defined contribution plans
Defined contribution plans, sometimes known as “individual account” plans, are
composed of contributions from the employer or employee and have no pre-set formula for
determining benefits. Instead, benefits are determined by the amount of contributions plus
6

earnings less applicable plan expenses, if any. 9
Defined contribution plans are relatively
simple to divide. In most cases, the value of, or the “accrued benefit” in the plan is the total
account balance on a given date. 10
Defined contribution plans thus may be apportioned by a
simple formula, using a divorce-date accrued benefit, and subtracting the marriage-date
accrued benefit, if any. 11
However, if an individual participated in the plan prior to the date
of the marriage or if the benefits are not divided until after divorce, care must be taken to
prorate the total benefit accordingly by segregating out any increases or decreases of
separate property in the plan. See part III.B, infra.
Pension administrators and litigants naturally prefer division upon divorce to avoid
the problems inherent in future contingencies and disputes, and the plans generally allow
doing so. 12
When partition cannot take place before retirement, any divorce decree or
8 Steven R. Brown, An Interdisciplinary Analysis of the Division of Pension Benefits in Divorce and Post-Judgment
Partition Actions: Cures for the Inequites in Berry v. Berry, 39 BAYLOR L. REV. 1131, 1137 (1987).
9 Brown, at 1137-39; see also 26 U.S.C.A. § 414(i).
10 GARY A. SHULMAN & DAVID I. KELLEY, DIVIDING PENSIONS IN DIVORCE § 1.3 (1999) (hereinafter DIVIDING
PENSIONS); VICTOR B. MEYEN & MARK W. DUNDEE, QUALIFIED DOMESTIC RELATIONS ORDER ANSWER BOOK
Q1:39 (1998) (hereinafter QDRO ANSWER BOOK) (excerpts from both treatises attached at Tabs H & I of the Pet. for
Review).
11 See Baw v. Baw, 949 S.W.2d 764, 766, 767-68 (Tex. App. – Dallas 1997, no writ) (approving of apportionment of a
defined contribution plan by subtracting the value of the plan at marriage from the value at divorce); Hatteberg v.
Hatteberg, 933 S.W.2d 524, 531 (Tex. App. – Houston [1st Dist.] 1994, no writ) (refusing to apply the Berry formula to
a defined contribution plan as such plans may be valued accurately at any time); Pelzig v. Berkebile, 931 S.W.2d 398,
402 (Tex. App. – Corpus Christi 1996, no writ) (finding the Berry apportionment and valuation analysis inapplicable to
a defined contribution plan and employing the same formula as in Baw).
12 DIVIDING PENSIONS § 1.3.
7

esulting QDRO must take into account any future growth on the ‘divided’ community
interest so the alternate payee does not lose any future separate property. 13
2. Defined benefit plans
Defined benefit plans are much more complicated, both from the standpoint of
drafting a QDRO and valuing the plan at the time of divorce. 14
A defined benefit plan
contractually guarantees the participant a benefit, defined by a formula, usually based on
years of service, age, and highest salary paid. 15
Consequently, there is no separate account
or cash balance subject to easy valuation if the divorce precedes retirement. 16
Rather,
because the benefit under a defined benefit plan is based on a formula, what one might think
of as the “present value” is actually the accrued benefit. The accrued benefit in a defined
benefit plan is expressed in terms of the benefit the plan participant would receive upon
attainment of normal retirement age, given the current salary and years of service at the
time of calculation. A typical formula might be:
1.25%
[multiplier]
final
(years of service –
average
any service prior to
X X = benefit
pay
date of plan eligibility)
[salary]
[credited service]
13 Id.
14 DIVIDING PENSIONS § 1.4; QDRO ANSWER BOOK Q2:1.
15 Brown, at 1137; Reiss v. Reiss, 40 S.W.3d 605, 608 n.2 (Tex. App. – Houston [1st Dist.] 2001, pet. filed); Smith v.
Smith, 22 S.W.3d 140, 148 (Tex. App. – Houston [14th Dist.] 2000, no pet.); Baw, 949 S.W.2d 768 n.3; Hatteburg, 933
S.W.2d at 531.
16 DIVIDING PENSIONS § 1.4; QDRO ANSWER BOOK Q1:37.
8

Thus, unlike defined contributions plans, there are no “earnings” for benefits under a
defined benefit plan that need to be accounted for after divorce. Rather, the accrued benefit
that appears on a plan participant’s statement already expresses the future amount of the
plan benefit, i.e., the benefit payable at normal retirement age. To determine the benefit
payable at any time prior to normal retirement age should the plan participant take early
retirement, 17
the accrued benefit is discounted for present value, using actuarial
assumptions specified in the plan.
The formula behind a defined benefit plan often causes the plan to dramatically
increase in value the last few years of employment. 18
QDROs for defined benefit plans are
much more difficult to prepare and review because far more complex issues are involved, in
particular the accurate apportionment of separate property interests and value of community
property interests. 19
These plans seem to prompt more litigation because of the dramatic
changes in the plan value, depending on the plan’s specific formula and the underlying facts
of the case. 20
17 Echols v. Echols , 900 S.W.2d 160, 163 (Tex. App. – Beaumont 1995, writ denied) (requiring payment of share of
lump sum from early retirement, which the decree did not contemplate, does not impermissibly modify the decree).
18 DIVIDING PENSIONS § 1.5.
19 QDRO ANSWER BOOK Q1:42, see also Q10:5-7. See Hatteberg, 933 S.W.2d at 531 (noting that defined benefit
plans are subject to apportionment by formula as the value of future benefits is less readily ascertainable at the time
of divorce).
20 See QDRO ANSWER BOOK Q2:29 (offering examples of how changes in the plan formula or underlying facts of the
plan participant’s employment can dramatically change the accrued benefits at retirement).
9

3. The “plan” in this case
The divorce decree here awarded Treadway 25% of Shanks’ “pension or retirement
plan.” CR 12. Actually, Shanks had two plans: a defined benefit plan and a defined
contribution plan. Specifically, he had what American calls a “variable income” plan which
is a defined contribution plan, specifically a money purchase plan. As with other defined
contribution plans, participants such as Shanks have individual accounts subject to ready
valuation. A participant’s interest in the plan is measured in units, similar to shares in a
mutual fund. The exact number of shares at divorce depends in part on when in a calendar
year the shares are funded and whether and how they are pro-rated to the exact divorce date.
The amount of units Shanks owned at his retirement was based, in part, on his age at
retirement as well as additional contributions to the plan after divorce. See ARR 13.
American calls its second type of plan the “fixed income” plan (which is also
referred to as a “fixed benefit” or “retirement benefit” plan). This plan is a defined benefit
plan. The benefit in this plan increases over time based on a formula typical for defined
benefit plans in that the length of time a participant works for the employer and increases in
the participant’s salary over the last five years of employment have a dramatic impact on the
benefit’s value. ARR 13. Shanks’ benefits under the plan increased dramatically after the
divorce due to his post-divorce promotion to captain with the commensurate pay raises, and
his additional seventeen years of service.
10

C. To accurately segregate community interests courts should note which
factual situation the divorce presents as each requires a different
analysis to preserve marital property rights.
Division of retirement benefits in divorce can occur in four different factual
sequences resulting in different implications for marital property rights. If the sequence
results in a combination of separate property and community property interests in the
retirement benefits, the benefits must be apportioned between community and separate
property, properly attributing any post-divorce, pre-retirement increases to each one. If the
divorce occurs before retirement or cessation of accrual of benefits, the effect of postdivorce
contingencies on the amount of the retirement benefit must be considered, as they
present valuation issues, particularly in the case of defined benefit plans. These
contingencies include the length of continued employment, any promotions or raises in
salary, early retirement incentives, cost of living increases, changes in the terms of the plan,
gains and losses in investments (in the case of defined contribution plans), and subsequent
marriage by the plan participant, which would of course create a community property
interest of the new spouse in the retirement benefit. 21
To be fair to both spouses, valuation cannot be as simple as valuing the benefit “at
the time of divorce” or “at the time paid,” which was the simplistic analysis the court of
appeals used in this case. Valuation includes two analyses: the value of the community
21 See e.g., Reiss, 40 S.W.3d at 611 n.5 (describing post-divorce contingencies and noting which are strictly separate
property and which can increase community property); Wilson v. Uzzel, 953 S.W.2d 384 (Tex. App. – El Paso 1997, no
pet.) (allowing a non-employee spouse interest in a retirement plan even though the employee spouse retired under a
plan that did not exist at divorce per an early retirement incentive); cf. May v. May, 716 S.W.2d 705, 711 (Tex. App. –
Corpus Christi 1986, no writ) (refusing to award cost of living increases, finding them the employee’s separate
property).
11

property interest at divorce (when the community estate ends) and the value of any
increases or decreases on the community property share, such as investment gains or
losses, cost of living increases, or, in the case of defined benefit plans, the timing of the
commencement of the benefit, 22 attributable to that community property share rather than to
the future separate property of the employee or the future community property interest of a
subsequent spouse. 23
The following chart sets out the four sequences, the property rights implicated, and
whether apportionment, valuation of the community property interest, or valuation of the
increases in each share must occur at the time of divorce for both defined contribution and
defined benefit plans to preserve those rights. The table states when valuation is something
other than what benefit plan statements indicate at divorce.
22 Since defined benefit plans are expressed in terms of the accrued benefits payable at normal retirement age, if a
plan participant or alternate payee takes the benefit before the normal retirement age, the benefit will be discounted to
present day value.
23 The valuation of earnings applies to pre-marriage separate property as well. For example, In re Joiner collapsed
the valuation of earnings and community property share. 755 S.W.2d 496 (Tex. App. – Amarillo 1988, no writ). In that
case the parties married after the plan participant began participation in a profit sharing stock plan, with 1/5 of the
time in the plan before marriage, and 4/5 during the marriage. The court found that exactly 80% of the plan was
community property. 755 S.W.2d at 498. However, given the extra time for growth on the original 20%, the separate
property in the plan would be more than 20%, as the increase in the value of the separate property is separate
property. See Smith, 22 S.W.3d 140.
12

Sequence Marital Property Defined Contribution Defined Benefit
M-E-R-D All CP Neither Neither
E-M-R-D SP – CP Apportionment; Valuation Apportionment
of increases 24
E-M-D-R SP – CP – SP Apportionment; Valuation
of increases
Apportionment and
Valuation
M-E-D-R CP – SP Apportionment; Valuation
of increases
Apportionment and
Valuation
M = marriage
CP = community property
E = employment and beginning plan participation
SP = separate property
R = retirement (termination of employment with cessation of benefit accrual)
D = divorce
Valuation of ‘increases’ in defined benefit plans will be necessary whenever benefits are
taken at a time other than normal retirement age, regardless of the factual sequence.
This framework applies accurately in most cases, but courts and parties should be
aware that atypical facts can change the nature of marital property. See e.g., Anderson v.
Anderson, 707 S.W.2d 166, 1689-69 (Tex. App. – Corpus Christi 1986, writ ref’d n.r.e.)
(even though divorce preceded retirement, the plan participant’s benefits were fully accrued
at divorce, so there were no separate property interests created after divorce and benefits
could be accurately valued at retirement).
Because both Reiss and this case present the last sequence, any QDRO effectuating
the intent of the divorce decree must apportion the defined contribution plan and apportion
and value the non-participant spouse’s community property share in the defined benefit
plan. Further, any increases in Treadway’s share of the defined contribution benefit must be
valued. The court of appeals failed to comprehend the significant differences between the
24 The chart uses “increases” as short-hand for both increases and decreases due to any gains, losses, expenses, etc.
13

two plans, interpreting the divorce decree as though the trial court had ignored the
inevitable separate property in the plans and intended to simply divide the balance at
retirement whatever that balance might turn out to be.
II.
Given constitutional and statutory restrictions, divorce decrees should be
interpreted differently than other judgments.
A. Divorce decrees must be interpreted within the context of Texas’
community property laws which have always banned division of
separate property upon divorce.
Since 1923, Texas courts have recognized that retirement benefits earned during the
marriage are community property. 25
The court of appeals held that the retirement benefits
should not be valued at the time of divorce, despite the constitutional marital property
implications. This rationale was predicated on the premise that the law in 1981 did not
require valuation of the community interest at divorce. Slip op. at 8. 26
However, the most
basic parameter of marital property rights — that which is earned during the marriage is
community property and that earned outside the marriage is separate property — has been
constitutionally ordained since at least 1845, a fact that the trial court understood when it
entered the divorce decree in 1981 and the QDROs in 1998. See TEX. CONST. art. XVI, §
15, Historical Notes.
This Court recognized in Cearley v. Cearley that even unvested, contingent interests
in retirement benefits are property and part of the community estate, even if they could only
25 Lee v. Lee, 112 Tex. 392, 247 S.W. 828, 832-33 (1923).
26 As recognized in Berry v. Berry, the principle that retirement benefits accruing after divorce are not part of the
community estate was articulated as early as 1965. 647 S.W.2d 945, 946 (Tex. 1983) (citing Herring v. Blakeley, 385
S.W.2d 843 (Tex. 1965) and In re Marriage of Rister, 512 S.W.2d 72 (Tex. Civ. App. – Amarillo 1974, no writ)).
14

e paid to the alternate payee “if, as, and when” paid to the plan participant. 27
Usually with
defined benefit plans, such as the military pension at issue in Cearley, benefits can only be
paid to the alternate payee “if, as, and when” paid to the plan participant.
This Court has also addressed the problem of apportioning the alternate payee’s
interest in benefits. In 1977, the Court developed what has come to be known as the
Taggert formula which, in the case of marriage after employment, proportionately awards
benefits to the alternate payee based on the years of marriage during the employment
divided by the years of service in the plan: 28
½
[share of
community
property]
X
Years in marriage
Years of employment
[apportionment of
community property]
X
Retirement
benefits
[value to
be divided]
In Taggert v. Taggert, the plan participant’s employment preceded the marriage, but the
participant worked additional years after the divorce. The Court rejected the court of
appeals’ computation of years of employment based on the standard twenty years required
for military retirement. 552 S.W.2d 422, 424 (Tex. 1977). Instead the Court used the
entire, actual period of employment. Id.
The Court revisited this formula in 1983, expressly limiting the holding of Taggert.
In Berry v. Berry, this Court specified that retirement benefits should be valued at divorce,
27 Cearley v. Cearley, 544 S.W.2d 661, 666 (Tex. 1976); see also Busby v. Busby, 457 S.W.2d 551 (Tex. 1970); Herring,
385 S.W.2d 843.
28 Taggert, 552 S.W.2d at 424.
15

given that pension benefits accruing after divorce are not part of the community estate. 647
S.W.2d 945, 946 (Tex. 1983). 29
Berry admonished courts of appeals for reading the
holding of Taggert too broadly, noting that Taggert only held that the alternate payee had a
right to contingent, unmatured retirement benefits and did not make any holding on when
those interests should be valued. 647 S.W.2d at 946. Thus, Berry refined the formula to:
½
[share of
community
property]
X
Years in marriage
Years of employment
[apportionment of
community property]
X
Value of
Benefits at
Divorce
[valuation]
In cases where divorce precedes retirement, the denominator in the apportionment fraction
must be calculated as of the date of divorce as well. 30
Otherwise the plan participant is
divested of property rights. Some courts of appeals described the distinction between these
two seminal cases as Taggert addressing the apportionment (or “extent”) of community
property interests while Berry addresses the valuation of community property interest. 31
The holding of Berry was and is necessary to enforce the constitutional protection
afforded separate property, and spouses cannot be easily divested of such a property right. 32
29 Accord Grier v. Grier, 731 S.W.2d 931, 932 (Tex. 1987) (valuing community property portion of military retirement
benefits based on rank of employee-spouse at time of divorce as doing otherwise “would impermissibly invade [his]
separate property”).
30 May, 716 S.W.2d at 716.
31 Albrecht v. Albrecht, 974 S.W.2d 262, 263-64 (Tex. App. – San Antonio 1998, no pet.); Contreras v. Contreras, 974
S.W.2d 155, 157 (Tex. App. – San Antonio 1998, no pet.); Burchfield v. Finch, 968 S.W.2d 422, 424 (Tex. App. –
Texarkana 1998, pet. denied); Dunn v. Dunn, 703 S.W.2d 317, 321 (Tex. App. – San Antonio 1985, writ ref’d n.r.e.).
32 TEX. CONST . art. XVI, § 15; Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 140 (Tex. 1977) (finding that the nature of
property is fixed by TEX. CONST . art. XVI, § 15); see also Cameron v. Cameron, 641 S.W.2d 210, 213-19 (Tex. 1982)
(discussing the long history of marital property rights in Texas). Notably, in 1999 the Texas Legislature proposed a
constitutional amendment which was approved by the voters that would allow parties to re-characterize separate
16

Moreover, such cursory divestiture of separate property also implicates due process and
takings violations. 33
This Court has recognized the inviolate nature of separate property in
other decisions. 34
B. The perceived tension between Berry and Baxter can be reconciled.
Courts of appeals decisions tend to follow either Berry or Baxter, although the
cases address different issues.
Berry held that the community interest in retirement
proceedings should be valued at divorce, rather than retirement, to avoid invading separate
property. 647 S.W.2d at 946-47. Relying upon the doctrine of res judicata, Baxter v.
Ruddle refused to re-write unambiguous language in an unappealed divorce decree where
the parties agreed to the apportionment of retirement benefits. 794 S.W.2d 761, 763 (Tex.
1990). In doing so, the Baxter court relied on the fact that the decree was agreed, stating
“[t]he parties were entitled to make the agreement they did, even if the trial court had been
unable to order the same property division . . . .” Id. That is, parties can agree to improper
property as community property by written, signed agreement that identifies the property being converted and states
that it is being converted to community property. Act of May 26, 1999, 76 th Leg., R. S. ch. 692, § 3 1991 Tex. Gen.
Laws 3292 (codified at TEX. FAM. CODE §§ 4.201-4.206). If spouses could not convert their separate property to
community property until the Texas Constitution art. XVI, § 15 was amended, it is difficult to see how the trial judge
in 1981 would have done so in so casual a fashion. Cf. Byrnes v. Byrnes, 19 S.W.3d 556, 559 (Tex. App. – Fort Worth
2000, no pet.) (refusing to enforce a partition of community property interest in military retirement benefits where the
parties did not strictly follow the statutory requirement for a partition).
33 See Eggemeyer, 554 S.W.2d at 140 (noting a constitutional problem under art. I, § 19); see also TEX. CONST . art. I, §
17; U.S. CONST . amend. V, cl. 4, 5.
34 See Eggemeyer, 554 S.W.2d at 140 (constitutional problems arise if the decree awards one spouse the other
spouse’s separate property); Cameron, 641 S.W.2d at 213-20 (discussing the longstanding and strong restrictions
against divestiture of separate property); see also Reiss, 40 S.W.3d at 609 (to interpret a divorce decree, the court
presumes that a trial judge would not violate statutory and constitutional protections of separate property).
17

property divisions, 35 but courts cannot order them. Unlike Baxter, the decree in question
here was contested rather than agreed to by the parties. 36
In the case at bar, the court of appeals improperly utilized Baxter’s res judicata
analysis to avoid applying the facts regarding the retirement benefits’ apportionment and
valuation to the vague, ambiguous divorce decree at issue. Instead, the lower court
zealously argued that Shanks’ requested QDROs were barred by res judicata because they
made improper substantive changes in the decree. 37
In so holding, the court trapped Shanks
in a res judicata catch-22, that is, Shanks is required to appeal a divorce decree that does not
on its face divest him of separate property, but prevents him from challenging the
subsequent interpretation of the decree in a QDRO that directly implicates his separate
property. 38
The lower court’s analysis is flawed for another reason. Unlike the statutes
governing clarification and enforcement proceedings, the statutes governing QDRO
proceedings do not contain any restriction against altering or modifying the substantive
property division. See TEX. FAM. CODE §§ 9.101-.105. Indeed the lower court’s analysis
35 This statement is over-broad, as parties could only agree to convert separate property to community property
beginning in 1999. See fn. 32, infra.
36 The court of appeals below rejected Shanks’ argument distinguishing Baxter as an agreed property settlement.
Slip op. at 7, n.5.
37 See slip op. at 9; but see Dechon v. Dechon, 909 S.W.3d 950, 958 (Tex. App. – El Paso 1995, no writ) (finding proper
a clarification that defined “benefits” to mean “gross benefits”); Harvey v. Harvey, 905 S.W.2d 760, 762-64 (Tex. App.
– Austin 1995, no writ) (allowing a trial court to award employee benefits that the decree did not explicitly mention in
order to effectuate the intent of the decree).
38 See slip op. at 8-9; cf. Lawrence v. Lawrence, 911 S.W.2d 450, 452 n.1 (Tex. App. – Texarkana 1995, writ denied)
(refusing to allow collateral attack on a decree that explicitly awarded a spouse a life estate in the other spouse’s
separate property upon a finding of fault in the divorce).
18

of section 9.007 as the basis for its res judicata ruling is wholly inapplicable to a QDRO
proceeding.
The court of appeals also held that the trial court acted improperly by implicitly
accepting this Court’s ruling in Berry v. Berry as that case was issued after the divorce
decree. Slip op. at 8 (“But this case was decided in 1981, and Berry cannot be applied
retroactively to modify a final decree. See Baxter, 794 S.W.2d at 763.”). However, the
holding in Berry which the trial court here respected — that separate property, particularly
future separate property cannot be divided — was nothing new to Texas jurisprudence,
having been in Texas state constitutions since 1845. 39 See TEX. CONST. of 1845, art. VII, §
19; see also TEX. CONST. art. XVI, § 15, Historical Notes. In fact, Berry itself recognized
that its holding was merely a restatement of this Court’s 1965 holding in Herring v.
Blakeley. 647 S.W.2d. at 946 (“In truth, this Court has already resolved the issue presented
in this case.”).
Moreover, Baxter did not slam the door on Berry’s holding. Baxter’s discussion of
the issue was in full:
Contrary to Ruddle’s argument, Berry . . . does not affect the application of
res judicata to the divorce decree in this case. Berry does not apply
retroactively to modify a final decree. . . . When the parties agree to a
method of apportionment, that agreement will be enforced, and the
subsequent judgment has a binding effect on the parties.
39 Ironically, Treadway and the court of appeals rely at length on a 1990 case, Baxter for its res judicata argument.
Resp. Pet. at 6-8, slip op. at 8 (both citing Baxter). Apparently, they believes that Baxter can be applied retroactively,
but the decision based on constitutional property rights, Berry, cannot.
19

794 S.W.2d at 763 (citations omitted). Baxter was fixated on the fact that the decree in
question was agreed, unlike the decree in this case. In addition, Shanks has not asked for a
“modification” of the divorce decree. Instead he has argued that the ¼ fraction in the
decree is the trial court’s award to Treadway of a portion of the community interest in the
retirement benefits, not an apportionment of the community interest itself.
This Court should grant this case to clarify the proper interaction between divorce
decrees and the more detailed QDROs.
C. Divorce decrees, unlike other final judgments, are subject to a variety
of review mechanisms.
Texas law provides several mechanisms for reviewing final divorce decrees,
sometimes even years after they become final. At common law under marital property
rules, community property not divided at divorce is transformed into a tenancy in common,
subject to a partition action. 40
Courts also have an inherent power to enforce their
judgments. 41
In the last twenty years, the Legislature has added several provisions to the Family
Code to either codify existing common law mechanisms of reviewing and enforcing
property division upon divorce or to create new methods. 42
In 1983, the Legislature gave
Texas courts continuing, exclusive jurisdiction over enforcement actions. TEX. FAM. CODE
40 E.g., Constance v. Constance, 544 S.W.2d 659 (Tex. 1977); Busby, 457 S.W.2d 551; see also Taggert, 552 S.W.2d at
423 (discussing the spate of post-divorce partition actions and admonishing the family bar to consider retirement
benefits upon divorce).
41 E.g., Dechon, 909 S.W.3d 950.
42 In re Marriage of Alford, 40 S.W.3d 187, 188-90 (Tex. App. – Texarkana 2001, no pet.) (describing the statutory
scheme for post-divorce review).
20

§§ 9.001-.002. Courts were also given the power to issue clarifying and enforcement
orders, so long as those orders do not affect the “substantive division” of the community
property. TEX. FAM. CODE §§ 9.006-.007. 43
Courts may also issue clarification orders in
contempt actions, to give an errant party with an honest disagreement on the meaning of a
divorce decree a chance to conform to a more precise court order. TEX. FAM. CODE §
9.008. In the 1983 act, the Legislature also specified that courts may award rights to future
property in divorce and that these multiple methods of enforcement are also applicable to
divisions of future property rights. TEX. FAM. CODE
§§ 9.011-.012. See also SAMPSON & TINDALL’S TEXAS FAMILY CODE ANNOTATED 116
(2000 ed.) (noting that section 9.011 was designed primarily for the division of pension
benefits).
In 1987, the same legislation that added a provision requiring courts to determine
rights in pensions and other retirement plans upon divorce codified the practice of postdivorce
decree partition suits. Act of July 20, 1987, 70 th Leg., 2d C.S., ch. 50, 1987 Tex.
Gen. Laws 159 (codified at TEX. FAM. CODE §§ 7.003, 9.201). Finally, in 1995, the
Legislature codified the practice of seeking QDROs and granted the court that issued the
divorce decree continuing, exclusive jurisdiction over issuing and reforming QDROs. See
TEX. FAM. CODE §§ 9.101-.105.
43 The courts of appeals differ on whether a finding that the decree is ambiguous enough to be enforced by contempt
is a prerequisite to clarification. See McPherren v. McPherren, 967 S.W.2d 485, 491 (Tex. App. – El Paso 1998, no
pet.) (such a finding is required); but see Wright v. Eckhardt, 32 S.W.3d 891 (Tex. App. – Corpus Christi 2000, no
pet.) (such a finding not required under section 9.006)
21

These post-divorce review mechanisms are practical and necessary. Parties may
overlook assets, particularly contingent ones, new assets of the community may arise out of
unforeseen facts, 44 or new facts, such as changes in retirement plan terms, may modify
assets, requiring a literal modification of QDRO terms.
D. Application of the divorce decree by entering more detailed QDROs is
not a “substantive division” under section 9.007(a).
The court of appeals ruled and Treadway argues that this is a simple case of res
judicata barring a change in the substantive division of property made in the decree. Slip op.
at 8; Resp. Pet. at 4-5 (citing TEX. FAM. CODE § 9.007). The Texas Family Code allows
clarification or enforcement of divorce decrees so long as the court does not alter or
change the “substantive division” of marital property.
TEX. FAM. CODE §§ 9.006(b),
9.007(a), (b).
First, the subchapter governing QDRO proceedings does not contain such a
restriction. See TEX. FAM. CODE §§ 9.101-.105. Thus, the restriction of section 9.007 is
inapplicable to this case. Section 9.007(b) specifies that “[a]n order under this section that
amends, modifies, alters, or changes the actual, substantive division of property . . . is
unenforceable.” TEX. FAM. CODE §§ 9.007(b) (emphasis added). Since clarification and
interpretation of the divorce decree arises through a QDRO proceeding under Subchapter B,
rather than under Subchapter A’s mechanisms, a QDRO is not unenforceable if it affects a
substantive division of retirement benefits divided on divorce. If the Texas Legislature had
44 E.g., Stephens v. Marlow, 20 S.W.3d 250 (Tex. App. – Texarkana 2000, no pet.) (awarding settlement proceeds from
a class action suit over the participant’s pension plan to the participant, as the decree awarded her “any and all”
retirement plan benefits).
22

intended to apply this restriction to QDRO proceedings, the restriction could have been
incorporated into the specific sections governing QDRO proceedings.
Second, Treadway’s argument forecloses application of the numerous post-divorce
proceedings. Treadway argues that the divorce decree is res judicata because to grant what
Shanks requests would “change” the decree in violation of Texas law. But the problem
facing parties seeking a QDRO based on an old divorce decree is that the decree is often
not specific enough to adequately and accurately describe and divide the retirement plan. 45
If this faulty theory stands, a spouse can always claim res judicata as a QDRO will always
“change” the amount to be paid as the dollar amount of benefits will always be different
under than under the less precise calculation of a divorce decree.
To “change or alter” the “substantive division” of property requires more than
altering the dollar amount. Adding an obligation to pay or hand over certain property where
there was none before is certainly an impermissible change under the statute. 46
In addition
changing the terms of a crystal clear apportionment and valuation formula or of a detailed
allocation of various retirement benefits is also an impermissible change. 47
Enforcing a
45 See Layfield v. Layfield, No. 09-93-102-CV, 1994 WL 29104, *3 (Tex. App. – Beaumont 1994, no writ) (declining to
hold that Texas courts are powerless to divide retirement benefits to effectuate a partition judgment particularly when
the judgment preceded the 1984 QDRO amendments to ERISA).
46 McGehee v. Epley, 661 S.W.2d 924 (Tex. 1983); see Pierce v. Pierce, 850 S.W.2d 675, 678-80 (Tex. App. – El Paso
1993, writ denied) (refusing to impose obligation that did not exist before even though a spouse had “rigged the
settlement” to deprive the other spouse of her interest but discussing cases where subsequent changes were allowed
as they only enforced a decree or interpreted and applied a vague and ambiguous formula).
47 Contreras, 974 S.W.2d at 157-58 (finding impermissible change where decree specified formula for computing
apportionment and valuation); McPherren, 967 S.W.2d 485 (refusing to change ownership of certain retirement
benefits when decree specified ownership in several retirement plans); Wilson, 953 S.W.2d 384 (denying motion for
enforcement where the decree specified the formula for apportioning and valuing plan benefits); Pate v. Pate, 874
S.W.2d 186 (Tex. App. – Houston [14th Dist.] 1994, writ denied) (refusing to change formula for apportionment and
23

division of retirement benefits by requiring payment from a form of benefit that did not
technically exist at divorce is a permissible change as it still furthers the divorce court’s
intention. 48
Here, the Shanks sought a QDRO that specified the valuation of the retirement
benefits where the decree only offered a division of the community interest and failed to
specify any formula for apportionment and valuation.
A QDRO does not change the substantive division of property just because it
changes the amount the parties anticipated receiving. To hold a plan beneficiary like Shanks
accountable for failing to appeal Treadway’s twenty-year hence interpretation of the decree
requires family law litigants to be clairvoyant. Courts that read decrees narrowly and slam
the door on post-divorce clarifications under the guise of res judicata defeat the intent of
the Legislature to allow liberal post-divorce application of decrees. See TEX. FAM. CODE §
9.105 (provisions for QDRO proceedings should be liberally construed to effect divorce
decree division of retirement benefits).
E. The decree in this case awarded Treadway 25% of the community
property in the retirement plans, or 25% of the plans valued at divorce.
1. Divorce decree judgments must be interpreted with an eye toward
constitutional marital property rights.
When a divorce decree’s interpretation is a legal question, it is reviewed de novo.
Reiss v. Reiss, 40 S.W.3d 605, 607 (Tex. App. – Houston [1st Dist.] 2001, pet. filed).
valuation where it was specified in the divorce decree); Haworth v. Haworth, 795 S.W.2d 296 (Tex. App. – Houston
[14th Dist.] 1990, no writ) (reversing enforcement order where the decree specified a formula).
48 Echols, 900 S.W.2d 160 (order requiring payment of share of lump sum from early retirement, which the decree did
not contemplate, did not impermissibly modify the decree but furthered the parties’ intention); Bina v. Bina, 908
S.W.2d 595 (Tex. App. – Fort Worth 1995, no writ) (allowing clarification where decree incorrectly named the stock to
be divided).
24

Whether the decree is unambiguous is a question of law. Stephens v. Marlowe, 20 S.W.3d
250, 253 (Tex. App. – Texarkana 2000, no pet.).
Where a decree addresses the division of certain property, general rules of
construction of judgments apply. Wilde v. Murchie, 949 S.W.2d 331, 332 (Tex. 1997) (per
curiam). If the decree, read as a whole, is unambiguous as to the property’s disposition, the
court should effectuate the decree in light of the literal language used.
Id. But, if the
decree is ambiguous read as a whole, the court must interpret it by reviewing the decree as a
whole and the record. Id. at 332-33. In reading the decree, the court should construe it as a
whole toward the end of harmonizing and giving effect to all that is written. Id. at 333.
Courts should not give conclusive effect to the judgment’s use or omission of commonly
employed decretal words, but should interpret the decree from a fair reading of all the
judgment’s provisions.
Id. In contrast, agreed property settlements are interpreted as
though they were a contract. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)
(interpreting an agreed property settlement as though it were a contract).
In addition, the court should assume that the divorce court acted as applicable law
required. Reiss, 40 S.W.3d at 607; Harrell v. Harrell, 700 S.W.2d 645, 647 (Tex. App. –
Corpus Christi 1985, no writ) (presuming the trial court followed the law during the
“McCarty gap” period). This includes respecting separate property rights. Id. at 609
(citing Eggemeyer v. Eggemeyer, 554 S.W.2d. 137, 139-40 (Tex. 1977); TEX. CONST. art.
XVI, § 15; TEX. FAM. CODE § 7.001). As explained more fully below, Wilde’s language that
unambiguous decrees should be interpreted literally is read too narrowly by some courts
and based on inapplicable authority.
25

2. The court of appeals relied on cases construing contracts in
interpreting the divorce decree.
Relying on a series of insurance and other contract cases, the court of appeals here
narrowly interpreted the divorce decree as though it were a contract. Slip op. at 5-6. 49
While the court did rely on divorce cases for the proposition that if the decree taken as a
whole is unambiguous, the trial court should interpret it in light of the literal meaning of the
language used, those cases cited in turn rely on contract cases. Slip op. at 5 (citing Wilde v.
Murchie, 949 S.W.2d 331, 332-33 (Tex. 1997) (per curiam); Acosta v. Acosta, 836 S.W.2d
652, 654 (Tex. App. – El Paso 1992, writ denied)). Wilde cites Acosta and Lohse v.
Cheatham, 705 S.W.2d 721 (Tex. App. – San Antonio 1986, writ dism’d) for the
proposition. 949 S.W.2d at 332.
Acosta cites Lohse. 836 S.W.2d at 654. Lohse cites a
trespass to try title case and a divorce case based on an agreed property settlement. 705
S.W.2d 726 (citing Bankers Home Building & Loan Ass’n v. Wyatt, 162 S.W.2d 694 (Tex.
1942) and Adams v. Adams, 214 S.W.2d 856 (Tex. Civ. App. – Waco 1948, writ ref’d
n.r.e.)). Adams is not only based on an agreed settlement but also relies on non-divorce
case law for the proposition. 214 S.W.2d at 857. So, ultimately the proposition arises
49 Citing Lone Star Cement Corp. v. Fair, 467 S.W.2d 402 (Tex. 1971) (default judgment on a contract); State Farm
Lloyds, Inc. v. Williams, 791 S.W.2d 542 (Tex. App. – Dallas 1990, writ denied) (insurance); R&P Enters. v. LaGuarta,
Gavrel & Kirk, Inc., 596 S.W.2d 517 (Tex. 1980) (suit on a note); Sears, Roebuck & Co. v. Commercial Union Ins.
Corp., 982 S.W.2d 151 (Tex. App. – Houston [1st Dist.] 1998, no pet.) (landlord-tenant contract); Universal C.I.T.
Credit Corp. v. Daniel, 243 S.W.2d 154 (Tex. 1951) (contract for automobile dealer); Republic Nat’l Life Ins. Co. v.
Spillars, 368 S.W.2d 92 (Tex. 1963) (insurance); County of Maverick v. Texas Ass’n of Counties’ Worker’s Comp.
Self-Ins. Fund, 852 S.W.2d 700 (Tex. App. – San Antonio 1993, no writ) (insurance); Forbau v. Aetna Life Ins. Co.,
876 S.W.2d 132 (Tex. 1994) (insurance).
26

entirely from non-divorce judgments, whether in contract, insurance, or other cases, that
did not have to contend with specific, strict constitutional restrictions. 50
3. The decree here is ambiguous and must be read in the context of
constitutional property rights.
Although the divorce decree is inartfully worded, the trial court awarded Treadway
25% of the community property interest in the two plans, or 25% of the benefits under the
plans, valued at the date of divorce, plus any increases attributable to that community
interest share. If the trial court had awarded, as Treadway urges, 25% of retirement benefits
valued “if, as, and when” paid, the court would have been awarding 25% of an unknown
amount — including Shanks’ future separate property interests 51 — to Treadway. Such an
arbitrary and unconstitutional ruling should not be so readily attributed to the trial court.
The provision addressing Shanks’ retirement “plan” appears in a portion of the
decree dividing the “estate of the parties” or community property. 52
The provision can be
reasonably read two different ways, depending on what words the reader gives emphasis.
The provision reads:
The Court finds that [Shanks] has earned certain employee benefits
under a pension plan arising out of past employment as an employee of
American Airlines.
50 In addition, the court of appeals here seems to have interpreted the decree literally, rather than reading its language
in “light of its literal language.” See Wilde, 949 S.W.2d at 332.
51 Of course, if the plan participant re-marries after the divorce but before retirement, such an order would award the
subsequent spouse’s community property rights in the retirement benefits to the former spouse.
52 Eggemeyer, 554 S.W.2d at 139 (“The only ‘estate of the parties’ is community property.”) (discussing § 3.63, the
predecessor statute to § 7.001). The decree goes on to identify some real estate as Shanks’ separate property. CR
12-13. No where does the decree indicate that it identify or divides any separate property in the retirement plans,
much less future separate property.
27

[Treadway] is awarded a “pro-rata interest” (as hereinafter defined) of
any and all sums received or paid to [Shanks] from such pension plan and
such sum or sums shall be payable to [Treadway] if, as and when paid by
American Airlines or the trustee of such plan to [Shanks] as pension or
retirement employee benefits existing because of [Shanks’] employment.
IT IS DECREED that [Treadway’s] “pro-rata interest” shall be defined
as that sum of money equal to 25% of the total sum or sums paid or to be
paid to [Shanks] from such pension or retirement plan.
[Shanks] is hereby declared to be trustee of any benefits or payments
received by [Shanks] that under the terms of this decree are to be owned by
28

[Treadway]. It is further ORDERED that [Shanks] pay to [Treadway] any
benefits or payments received by [Shanks] on or before ten (10) days from
the date such benefit or payments are received by [Shanks].
IT IS FURTHER DECREED that all remaining right, title and interest
in and to such American Airlines pension and/or retirement plan shall be and
is hereby set aside to [Shanks].
CR 12 (bold emphasis to indicate words Shanks focuses on; italics, words Treadway
focuses on; underscore, to show words the QDRO trial court particularly emphasized in its
ruling). The trial court, emphasizing the words “arising out of past employment” and “prorata
interest . . . from such pension plan” found that the word “such” referred back to the
plan from “past” employment and thus the decree intended to value the plans at divorce. CR
6.
The decree only contains one fraction, ¼. Any post-Taggert decree that intended to
apportion community property interest would naturally contain two fractions or formulas:
one to allot a share of the community property interest to the alternate payee and one —
likely by formula — to apportion that community property interest. The decree here,
however, only contains the first one.
Both at the time of divorce and when entering the QDROs, the trial court here
recognized the restrictions that the community property laws bring to the division of
retirement benefits. In response to Treadway’s argument that the divorce decree awarded
her 25% of Shanks’ total retirement plan, as paid in the future, the trial court interjected,
“what you’re telling me, I can award 25 percent of his future earnings . . . which would be
his separate property. That conflicts with every Texas law we have.” JRR 23. The trial
court understood the bounds of the Texas Constitution and stayed within them in approving
29

the decree in 1981 and the QDROs in 1998. In contrast, the court of appeals interpreted
the decree to divest Shanks’ separate property in violation of the Texas Constitution, when
it could have reasonably interpreted the decree to avoid that constitutional violation. 53
Thus, the divorce decree, read as a whole, divides up the couple’s community
property, then notes the ownership of certain separate property. CR 10-13. Nowhere does
it purport to award Shanks’ separate property to Treadway, much less divide Shanks’ future
separate property.
4. The court of appeals erred in construing “if, as, and when paid” as
a term of art meaning valuation at payment rather than a term
recognizing the contingent nature of retirement benefits.
Treadway and the court of appeals insist that the phrase “if, as and when paid” in a
divorce decree is a “term of art” requiring valuation of the retirement plan at divorce. 54
In
doing so, the court erred by endowing the term with an absolute meaning, rather than
understanding its meaning in context. 55
“If, as and when” is a phrase widely used in divorce
decrees over the last few decades. See e.g., Cearley, 544 S.W.2d at 666 (praising decree
ordering payment of benefits “if, as and when paid” as the benefits are contingent interest);
In re Marriage of Rister, 512 S.W.2d 72, 74 (Tex. Civ. App. – Amarillo 1975, no writ)
53 See Reiss, 40 S.W.3d at 607 (presuming the judge acted as the law required at the time), 609 (declining to find that
the trial judge unconstitutionally awarded separate property).
54 Resp. Pet. at 9; slip op. at 7 (citing Hurley v. Hurley, 960 S.W.2d 287, 289 (Tex. App. – Houston [1st Dist.] 1997, no
pet.)).
55 See Reiss, 40 S.W.3d at 609-11 (finding that “if, as, and when” merely recognizes the contingent nature of the right
and distinguishing Hurley as being concerned with the dollar value of an interest, where the formula in question
concerned the community property interest); Disbrow v. Thibodeaux, 596 S.W.2d 174, 175 (Tex. App. – Houston
[14th Dist.] 1980, writ ref’d n.r.e.) (finding that an award of 50% of retirement benefits “if, as and when” payable after
divorce does not accurately award alternate payee’s interest in the benefits and employing the Taggert formula to do
so).
30

(court recognizing that accrued benefits may become vested due to services performed
after the marriage with decree awarding retirement benefits “if, as, and when paid”). Use
of the term “if, as, and when paid” was and is necessary due to the contingent nature of
retirement benefits, particularly defined benefit plans which must often by necessity be paid
“if, as and when paid” to the plan beneficiary. 56
Not until the last few years have any courts declared the phrase a “term of art”
requiring valuation at the time of receipt of the benefits. See e.g., Hurley v. Hurley, 960
S.W.3d 287, 289 (Tex. App. – Houston [1st Dist.] 1997, no pet.). The court of appeals
below took this theory a step further and required valuation at retirement and apportionment
by a flat percentage rather than by an apportionment formula. Slip op. at 7 & 7 n.5. Cf.
Reiss, 40 S.W.3d at 610 (discussing Hurley and recognizing that it concerned valuation of
the plan at retirement, not apportionment of the community property interest). If this Court
does not grant this case and reverse this trend of redefining “if, as and when paid,” decadesold
divorce decrees will have entirely new, unanticipated, and costly meanings upon the
entry of QDROs upon retirement.
5. The courts of appeals, caught in the tension between finalizing
divorces and accurately dividing retirement plans, commit several
errors.
(a)
The courts of appeals read decree language too literally.
The courts read language in divorce decrees too literally as though they were
contracts executed by sophisticated businessmen, negotiating at arms’ length. The court of
56 For example, benefits under a defined benefit plan are often payable only in the form of an annuity, and not in a
lump sum. Thus, the benefit in such a plan awarded to an alternate payee is often expressed as a percentage of each
payment, payable “if, as, and when” the payments are made to the plan participant.
31

appeals here split hairs over language in the divorce decree, despite finding the language
“unambiguous.” 57
This approach endows individual words with far more meaning than the
trial court could have imagined and inevitably leads to inequitable results.
Treadway also harps on language differences in the divorce decrees in this case and
Reiss. Pet. Resp. at 5-6. First, Texas jurisprudence should not leave the fate of divorced
parties to hinge on the subtleties of wording differences in decades-old divorce decrees,
particularly given the difficulties inherent in the terminology of pension plans. 58
Second, language differences are often immaterial. For example, in Reiss the
divorce decree recites that it is dividing “community property.” Reiss, 40 S.W.3d at 607;
Reiss Pet. at Tab C. The decree in this case recites that it is dividing the “estate of the
parties” which means the same thing. CR 10. See Reiss, 40 S.W.3d at 609 (noting that
courts interpret “estate of the parties” to mean “community estate”) (citing TEX. FAM.
CODE § 7.001); Eggemeyer, 554 S.W.2d at 139 (“The only ‘estate of the parties’ is
community property.”) (discussing § 3.63, the predecessor statute to § 7.001).
(b)
The courts of appeals refuse to recognize the latent
ambiguity caused by applying an otherwise clear decree to a
complicated retirement plan.
57 E.g., slip op. at 7 & 7 n.4 (awarding Treadway 25% of the plan valued at the time of retirement because the decree
contained the words “such pension plan” rather than “such benefits” and “that existed” rather than “as it existed.”);
cf. Wilde, 949 S.W.2d at 333 (reading a divorce decree as a whole toward the end of harmonizing and giving effect to
the whole instrument and considering the entire record to clarify the decree’s provisions); Baxter, 794 S.W.2d at 763
(valuing plan at retirement where decree specified “gross amount . . . received each month” and noting that Ex Parte
Lucher contained a similar decree).
58 For example, in Baxter, the Court emphasized the presence of the word “gross” in the decree and discussed at
length the use of the same word in the decree in Ex Parte Lucher, 728 S.W.2d 823 (Tex. App. – Houston [1st Dist.]
1987, no writ). 794 S.W.2d at 762, 763. This word does not appear in the decree in this case. See also Brown, at 1151-
55 (cataloguing the misapplication of pension terminology in Texas jurisprudence).
32

Decrees that appear unambiguous when read literally, may and often do become
ambiguous when applied to a complicated pension plan. The court of appeals here found the
decree unambiguous. However, the decree’s language is rendered ambiguous when applied
to the facts. 59
In this circumstance, courts may modify the application of the decree to
resolve the latent ambiguity and give effect to the judgment without improperly changing
the decree. 60
III.
This Court should grant this petition and untangle the complicated
interaction between marital property rights and benefit plan requirements.
The confusion in the lower courts can be rectified if this Court grants this case and
uses it to reconcile the competing lines of case law, doing so around basic marital property
tenets combined with the more complicated principles of employee benefits law.
A. Apportionment and valuation errors in the lower courts and the
ongoing confusion in applying Berry must be remedied.
Courts confuse holdings 61
when apportioning and valuing community property
interests and confuse the relevance of contributions to a defined contribution plan with
59 Of course, one can also read the decree to be unambiguous, interpreting the ¼ allocation to be the allocation to
Treadway of the community property interest and leaving the valuation and apportionment of that interest to marital
property laws.
60 See Zoella v. Zoella, 15 S.W.3d 239, 242 (Tex. App. – Houston [14th Dist.] 2000, pet. denied) (finding clarification
of the decree proper where the employee took early retirement, rendering the decree ambiguous as applied); Wright,
32 S.W.3d at 895-96 (finding clarification of the decree proper where plan participant entered reserves, thus not
appearing on the “official Navy retirement list” as the decree specified as the subsequent fact created a latent
ambiguity in the decree).
61 Compare Reiss, 40 S.W.3d at 608 n.2 (noting that the Taggert formula only applies to defined benefit plans, but not
to defined contribution plans), to, May, 726 S.W.2d at 707 (stating that Taggert applies to apportionment and Berry
applies to valuation).
33

enefits payable under a defined benefit plan. 62
However, in a defined benefits plan, the
contributions have no relation to the ultimate benefits received.
The timing of valuation of plan benefits depends on the formula that will be applied
and the nature of the property interests at stake.
See table page 13. For example, if a
decree invokes the Taggert formula, which apportions separate and community property, it
usually should be applied to the value of the benefit when the benefit (1) contains both
separate and community property and (2) the separate property preceded the community
property.
B. Community property share of defined contribution plans can be valued
to an accurate dollar amount at divorce.
Courts of appeals typically divide defined contribution plans by subtracting the value
of the benefits at marriage from the value at divorce. 63 The value, or accrued benefit, in a
defined contribution plan can be determined at any given time and will be the plan
participant’s account balance. The following formula results:
Community
Property
Interest
=
Accrued
benefit
at divorce
Accrued
benefit
at marriage
62 E.g., Iglinsky v. Iglinsky, 735 S.W.2d 536, 538 (Tex. App. – Tyler 1987, no writ) (holding that the trial court
improperly applied the fractional share to the accumulated funds at divorce rather than the accrued benefits).
63 See Baw, 949 S.W.2d at 767-68 (approving of apportionment of a defined contribution plan by subtracting the
value of the plan at marriage from the value at divorce); Hatteberg, 933 S.W.2d at 531 (refusing to apply the Berry
formula to a defined contribution plan as such plans may be valued accurately at any time); Pelzig, 931 S.W.2d at 402
(finding the Berry apportionment and valuation analysis inapplicable to a defined contribution plan and employing
the same formula as in Baw).
34

This formula preserves marital property rights if the marriage preceded the employment
because at divorce the entire accrued benefit will be community property. See table at page
13. However, if employment preceded marriage, the accrued benefit at marriage will be
entirely separate property and at divorce will include separate property. Thus, the growth of
the plan during marriage will include: (1) additional contributions to the plan, which are
community property, (2) growth on those contributions, which is also community property,
and (3) growth on the account balance at marriage, which is separate property. 64
Thus, any
QDRO which divides a retirement benefit under a defined contribution plan with respect to
a participant whose employment (and plan participation) commenced prior to the marriage
must include in the calculation a formula for deducting growth on the benefit’s value at
marriage. 65
C. When retirement precedes divorce, division of both defined
contribution and defined benefits plans is relatively simple.
The key fact courts must be aware of when entering QDROs or enforcing or
clarifying divorce decrees, particularly those concerning defined benefit plans, is whether
the divorce precedes “retirement” or the cessation of accrual of benefits. When divorce
precedes retirement, valuation of the benefit cannot be reduced to an accurate dollar
amount until the plan participant actually retires and begins receiving benefits. However,
64 Lipsey v. Lipsey, 983 S.W.2d 345, 350 (Tex. App. – Fort Worth 1998, no pet.) (increase in the value of separate
property is separate property, so the undistributed income in a retirement trust created with separate property is
separate property).
65 Some practitioners may use the Taggert formula to approximate this growth. Doing so erroneously assumes that
the growth occurs evenly from year to year. However, the simplicity and ease of application of the formula as an
estimate may counteract a more precise calculation given the transactional cost of calculating the separate property
to the penny.
35

when retirement precedes divorce, courts and litigants have a much easier analysis before
them.
The Marriage, Employment, Retirement, Divorce sequence of events is the simplet
scenario, as the entire value of the retirement benefit is earned entirely during the marriage
and is thus all community property at divorce. Dividing benefits, as paid, by the percentage
of community property awarded the alternate payee as part of the just and right division
(often 50%) accurately divides the community interests for either a defined contribution or
a defined benefit plan. 66
The Taggert formula when properly applied provides a reasonable estimate of the
community interest in retirement benefits. The Employment, Marriage, Retirement,
Divorce sequence of events creates a period of separate property benefits, followed by the
community property interest. For defined benefit plans in this fact situation, there are no
problems with being unable to accurately value the retirement benefits at divorce. The only
calculation necessary is to apportion the benefits to segregate out the community property
share by applying the Taggert formula. 67
The amount an alternate payee would receive,
assuming the trial court orders that ½ is a just and right division of the community share, is:
½
[share of
community
property]
X
Years in marriage
Years of employment
Prior to divorce
[apportionment of
community property]
66 Often, benefits do not commence for some period of time after retirement. In the case of a defined contribution
plan, however, the participant’s account will often be segregated upon divorce, and subsequent earnings and losses
are allocated separately. This is particularly the case when a defined contribution plan permits participants (and
alternate payees) to designate their own investment options.
67 See Albrecht, 974 S.W.2d at 263 (the Taggert formula is used when the value of the plan is not at issue).
X
Accrued
benefit at
divorce
[community
property]
36

D. When divorce precedes retirement, divorce decrees must necessarily be
applied to future facts via a QDRO or other Chapter 9 post-divorce
proceeding.
As in this case, when a divorce decree is entered before retirement the decree will
inevitably have to be interpreted and applied to final facts whether by a QDRO proceeding,
or by a clarification, enforcement or contempt proceeding under Chapter 9 of the Family
Code.
To comply with the Texas Constitution’s marital property law, retirement plan
benefits must be valued at divorce for the purpose of an apportionment formula in a QDRO
or a divorce decree.
1. Valuation must respect separate property rights.
Defined benefit plans cannot be valued at divorce in the same sense that defined
contribution plans can. Rather, the ‘value’ at divorce is a matter of determining the accrued
benefit, that is the amount the employee will receive under the plan’s formula at normal
retirement age, given the years worked and salary at the time of divorce. As illustrated by
the examples at Tab B, valuing the community property interest in a defined benefit plan at
retirement will give the alternate payee value attributable to post-divorce years of service
and promotions — which are not part of the divisible community estate. Specifically,
Example 1 notes that if the plan participant (the husband in the example) terminated
employment shortly after divorce, the difference in the amount payable, even if valued at
retirement, would be negligible. Likewise, Example 2 shows that if the plan participant’s
compensation level stays the same, the alternate payee’s benefit would about the same
37

amount, whether valued at divorce or retirement. 68
Depending on the sequence of events in
question, different formulas should be used to segregate the community interest in the plan.
The Employment, Marriage, Divorce, Retirement sequence of events is the most
complicated as benefits are initially separate property, increases during the marriage are
community property, with a return to separate property interests subsequent to divorce.
Defined benefit plans must be valued at the proper time and apportioned, and the
contingencies of post-divorce events must be taken into account.
The Taggert formula adequately apportions community property from the separate
property acquired before marriage. By taking the total months of the marriage as the
numerator, and the total months of employment at divorce as the denominator, a ratio of
community property to total property is calculated. The ratio should be applied to the
accrued benefit (or value) at divorce to determine the entire community share. 69
That
amount should be divided in the manner the trial court deems “just and right” under the
Family Code. The resulting formula, assuming ½ is the just and right division, is:
½
[share of
community
property]
X
Years in marriage
Years of employment
Prior to divorce
[apportionment of
community property]
X
Accrued
benefit at
divorce
[community
property]
68 Sticking to Berry’s holding that plan benefits should be valued at divorce rather than retirement will not always
leave the alternate payee with less. Example 3 at Tab B demonstrates that whether a certain party gets less if the plan
is valued at divorce depends on the formula in the plan. In that example, the alternate payee would get less if the plan
were valued at retirement since the community property share would be less.
69 Anderson, 707 S.W.2d at 168 (although divorce preceded retirement, total benefits had already accrued on divorce).
38

In the Marriage, Employment, Divorce, Retirement sequence a Taggert
apportionment is not needed. This sequence results in a period of community property,
followed by a period of separate property, and is the sequence in this case and in Reiss.
Since all accruals of the retirement benefit occur after marriage, the community interest is
simply valued at divorce. This amount constitutes the entire community property in the
retirement plan since the years of employment at divorce overlap entirely with the
marriage. The accrued benefit at divorce should simply be subjected to a just and right
division. Thus, the formula for calculating the alternate payee’s share in this case, given
that the trial judge found ¼ as the just and right division is:
¼
[share of
community
property]
X
Accrued
benefit at
divorce
[community
property]
2. Post-divorce increases.
Courts of appeals decisions are split on whether post-divorce increases should be
credited to the community estate. Post-divorce increases may include normal concepts of
“earnings” such as cost of living increases, inflation, interest, etc., but may also include
additional accruals based on earnings (or losses) on or additional contributions to a defined
contribution plan, or based on additional years of service or salary increases under a defined
benefit plan. 70 Some cases have awarded the increases to the community estate. 71 Others
70 One must distinguish additional accruals (actual increases in the amount of the benefit) from additional vesting
(increases in the percentage of total benefit in which the participant has a non-forfeitable interest). Both may result
from additional post-divorce years of service. However, an increase in vesting is simply satisfaction of a
contingency to receipt of the benefit, while increases in the accrued benefit due to additional years of service
calculated in the benefit formula are actual increases in the accrued benefit and are thus separate property.
39

have refused to do so to avoid invading separate property. 72
Berry refused to apply
‘inflation’ to the alternate payee’s share. 647 S.W.2d at 947. However, in Berry the court
was considering a benefit under a defined benefit plan, which by definition is not credited
with earnings or inflation in the sense that a defined contribution plan is.
In truth, whether increases should be credited to the community estate depends on
what type of increase is at issue. Earnings on the community property share of a defined
contribution plan should be credited to that community property share. In defined benefit
plans, a change to the terms of the plan to increase the multiplier utilized in many plan
formulas might be considered a true inflationary increase from which alternate payee
should benefit.
3. The problem of Taggert as an estimate.
The Taggert apportionment formula is properly applied to cases were employment
begins before the marriage and a period of separate property precedes inception and growth
of the community share. But the fraction is not appropriate where marriage precedes
employment and divorce precedes retirement. Benefits under defined benefit plans do not
grow linearly. Rather, the benefit’s value may grow modestly then rapidly accelerate as the
71 Reiss, 40 S.W.3d 611 n.5 (noting that cost of living adjustments and interest accruing are subject to community
property division); Burchfield v. Finch, 968 S.W.2d 422, 424 (Tex. App. – Texarkana 1998, pet. denied) (post divorce
increases in benefits are not attributable to raises, promotions, services rendered or contributions are subject to
community property division); Harrell, 700 S.W.2d at 647-48 (granting alternate payee post-divorce increases
because the plan participant’s post-divorce labors did not contribute to those increases); cf. Wilson, 953 S.W.2d 384
(allowing a non-employee spouse interest in a retirement plan even though the employee spouse retired under a plan
that did not exist at divorce per an early retirement incentive).
72 Reiss, 40 S.W.3d 611 n.5 (noting that changes attributable to continued employment are separate property, such as
raises, services rendered, and contribution); May, 716 S.W.2d at 711 (refusing to award cost of living increases,
finding them the employee’s separate property); Dunn, 703 S.W.2d at 320-21 (reversing the trial court’s award of cost
of living increase).
40

plan participant approaches retirement, and age, salary, and years of service all increase.
Such growth, if charted would result in a flat line in the early years which turns sharply
‘uphill’ as the plan participant reaches normal retirement age:
V
a
l
u
e
Taggert
estimate of
growth
Actual
growth in
accrued
benefits
Time
Apportionment by the Taggert formula, however, assumes linear growth. The result is that
amounts under the flat line of the Taggert formula and above the curved line of the plan’s
rate of accrual results in the improper characterization of separate property as part of the
community estate. Some courts and commentators have criticized the application of
Taggert for this reason. 73
Others have accepted Taggert’s estimate with the policy
argument that the benefit would not reach its high-growth years without the preceding years
which overlapped the marriage. 74
Thus, the critics reason, the alternate payee is entitled to a
proportionate share based on the years in the marriage.
73 E.g., Berry, 647 S.W.2d at 947.
74 E.g., Parliament v. Parliament, 860 S.W.2d 144, 146 (Tex. App. – San Antonio 1993, writ denied) (application of
Taggert formula avoids a “battle of the experts” and is fair as the later increase in value would not have taken place
without the foundation years of employment).
41

This argument ignores the bounds of marital property laws which are not subject to
negotiation. It also ignores that the property rights of a subsequent spouse who is married
to the plan participant in the high-growth years will be eviscerated by a Taggert application
to post-divorce accrued benefits. This Court should re-iterate the holding in Berry that
post-divorce benefit accruals are not subject to division of the marital estate and clarify that
Taggert only applies to apportion the accrued benefit (and not to value it) for cases in
which employment precedes marriage.
CONCLUSION
This Court has an opportunity to instruct the lower courts on the methodology of
dividing retirement benefits in a divorce decree in a manner that minimizes future QDRO
litigation. The Court should clarify that “if, as, and when paid” is not a term of art requiring
valuation at payment rather than upon divorce. The Court should also establish that a QDRO
proceeding is not subject to section 9.007’s modification of substantive property division
restriction. Or, in the alternative, that a detailed QDRO is does not improperly alter a vague
divorce decree.
In general, this case would allow this Court to provide guidance to the lower courts
in interpreting decrees the wording of which is not sophisticated enough to clearly describe
the alternate payee’s share in a pension payable twenty or thirty years later — namely to
preserve the constitutional distinctions between community and separate property.
42

PRAYER
This Court should grant Shanks’ petition, hear oral argument, reverse the court of
appeals, and remand for the entry of a QDRO in accordance with the Court’s guidance.
Respectfully submitted,
TONYA P. JOHANNSEN
State Bar No. 10670200
SUSAN HAYS
State Bar No. 24002249
AKIN, GUMP STRAUSS, HAUER
& FELD, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201-4618
(214) 969-2800 (telephone)
(215) 969-4343 (facsimile)
ATTORNEYS FOR PETITIONER
43

CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing <strong>Brief</strong> on the
Merits was served upon all counsel of record, as listed below, via certified mail, return
receipt requested, on this 6th day of July, 2001, pursuant to Texas Rule of Appellate
Procedure 9.5:
W. Dane Clay
THE ROSE LAW FIRM
120 East 4 th Street
Little Rock, Arkansas 72201
(501) 375-9131 (telephone)
(501) 375-1309 (facsimile)
James Hunter Birch
James W. Hryekewicz
HUGHES & LUCE, L.L.P.
1717 Main Street, Ste. 2800
Dallas, Texas 75201
(214) 939-5500 (telephone)
(214) 939-5849 (facsimile)
Susan Hays
44

No. 00-1325
IN THE
SUPREME COURT OF TEXAS
George Payton Shanks,
Petitioner,
v.
Kenda Carolyn (Shanks) Treadway,
Respondent.
APPENDIX TO BRIEF ON THE MERITS
1. Glossary of Defined Terms .......................................................................................Tab A
2. VICTOR B. MEYEN & MARK W. DUNDEE, QUALIFIED
DOMESTIC RELATIONS ORDER ANSWER BOOK (1998) Q 2:29.............................Tab B
45