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Sean Patrick Abeyta
Fort Worth, Texas - Divorce lawyer represented Appellant with appealing from an order enforcing a provision of a mediated settlement.
This is an appeal from an order enforcing a provision of a mediated settlement
agreement incorporated into a decree of divorce. The trial court ordered Joseph
Gulliksen (“Husband”) to pay Beverly Jo Rosing (“Wife”) $18,069 as reimbursement
for 70% of her federal income tax liability incurred as a result of the liquidation of
funds in Husband’s pension plan. Husband contends that the court erred (1) by
enforcing the decree’s reimbursement provision when Wife failed to comply with
conditions precedent, (2) by materially altering the terms of the divorce decree, and
(3) in the alternative, by miscalculating the amount owed to Wife. We reverse and
The facts pertinent to this appeal are undisputed. Husband and Wife entered
into a mediated settlement agreement which was incorporated into their October 1,
2015 divorce decree. The decree awarded Wife 100% of the total vested balance of
Husband’s pension plan (“Plan”) and required her to withdraw those funds (with a
request to the Plan administrator to withhold up to 25% for estimated federal income
taxes) and to deliver the amount received into her attorney’s trust fund account.
Wife’s attorney was required to use those funds to pay certain specified debts owed by
Husband and Wife, and then to distribute the remainder, 30% to Wife and 70% to
Husband. The decree also allocated the federal income tax liability resulting from
liquidating the Plan funds:
As part of the division of the marital estate, [Husband] is ORDERED to
reimburse [Wife] for 70% of the income taxes incurred by [Wife] as a
result of the liquidation of the funds in the Plan. The amount of such
income tax liability will be determined as follows:
For the year in which such liquidation occurs, [Wife] will have two
(2) separate draft income tax returns prepared by a licensed
income tax preparer: one draft which includes the taxable amount
of funds liquidated from the Plan as income and one draft which
does not include such liquidated funds as income. [Wife] shall
provide copies of both draft income tax returns to [Husband] . . .
on or before June 1 of the year following the year in which such
liquidation occurs. . . . [Husband] is ORDERED to reimburse
[Wife] in an amount which equals 70% of the difference in
income tax liability between these two draft income tax returns.
According to the briefing in this case, the Plan was liquidated in 2016 and so
Wife’s deadline to provide the two draft tax returns was June 1, 2017.
Wife, who remarried in 2016, engaged H&R Block to prepare the two draft tax
returns. The first draft tax return, which Wife filed with the Internal Revenue Service,
was a return filed jointly with her new husband, Keven Rosing. That return included
Rosing’s wage income, Wife’s wage income, Wife’s social security disability income,
and $101,421, which represented the liquidated Plan funds. The second draft tax
return also purported to be a joint return but included only Wife’s wage income. It
therefore differed from the first draft tax return not only by omitting the liquidated
Plan funds, but also by omitting Rosing’s income and Wife’s social security disability
Wife sent these two draft tax returns to Husband before the June 1, 2017
deadline. Husband acknowledged their receipt but informed Wife that he needed a
draft tax return including only her income (not Rosing’s) and the liquidated Plan
funds. Husband and Wife exchanged a series of text messages concerning the
required draft tax returns, and Wife returned to H&R Block several times to have new
draft tax returns prepared, but “each time they got it wrong.”
Wife acknowledged at the trial court hearing that she understood, at least by
that time, that the two draft tax returns required by the divorce decree were to be
exactly the same except that one would include the liquidated Plan funds and one
would not. She also acknowledged that she did not send correct versions of the two
required draft tax returns on or before June 1, 2017 and, even at the time of the
hearing in February 2020, she had not provided two such drafts. Instead, she retained
a forensic accountant to determine how much Husband owed her under the
reimbursement provision of the divorce decree.
Larry Settles, Wife’s accounting expert, testified that the draft tax returns
prepared by H&R Block were incorrect. But he was not hired to prepare correct draft
returns. Rather, he was asked simply to calculate the difference between Wife’s
income tax liability including the liquidated Plan funds and her liability excluding
those funds. He accomplished that task in September 2019, which he testified was
the first time the correct calculations were made. Settles concluded that the difference
in Wife’s income tax liability was $25,813.85 and that 70% of that sum was
Husband testified that he received Settles’s expert report in September 2019—
over two years after the June 1, 2017 deadline—but that he had never received two
draft tax returns fulfilling the divorce decree requirement. He acknowledged that he
had not reimbursed Wife for any portion of the tax liability resulting from the
liquidated Plan funds and testified that he believed she had waived her right to that
reimbursement by failing to provide the required draft returns.
The trial court found that Wife “is entitled to reimbursement from [Husband]
in the amount of $18,069.00, which represents 70% of the federal income taxes
incurred by [Wife] in connection with the liquidation of the funds in the Plan as set
forth in the Final Decree of Divorce.” It accordingly granted Wife judgment for that
Husband raises three issues on appeal: (1) the trial court erred by enforcing the
reimbursement provision when Wife did not comply with conditions precedent
necessary to trigger Husband’s obligation to pay; (2) the trial court materially altered
the terms of the divorce decree by refusing to credit tax withholdings against
Husband’s tax liability; and (3) in the alternative, the trial court miscalculated the
amount owed to Wife by considering income in excess of that authorized by the
divorce decree to calculate Husband’s tax liability. For the reasons discussed below,
we need only address issue one.
III. STANDARD OF REVIEW
We review a trial court’s ruling on a motion to enforce a divorce decree for an
abuse of discretion. In re C.F., 576 S.W.3d 761, 774 (Tex. App.—Fort Worth 2019,
no pet.); Murray v. Murray, 276 S.W.3d 138, 143 (Tex. App.—Fort Worth 2008, pet.
dism’d). But we construe an unambiguous divorce decree as a matter of law. Chafin v.
Isbell, No. 02-10-00007-CV, 2011 WL 946653, at *4 (Tex. App.—Fort Worth Mar. 17,
2011, no pet.) (mem. op. on reh’g) (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex.
IV. THE DRAFT TAX RETURN REQUIREMENT
A. PRINCIPLES OF CONTRACT CONSTRUCTION
“An agreed property division incorporated into a final divorce decree is treated
as a contract and is controlled by the rules of construction applicable to ordinary
contracts.” Howard v. Howard, 490 S.W.3d 179, 184 (Tex. App.—Houston [1st Dist.]
2016, pet. denied) (citing Allen v. Allen, 717 S.W.2d 311, 313 (Tex. 1986)). The court’s
task is to give effect to the parties’ intention as expressed in the agreement. Waldrop v.
Waldrop, 552 S.W.3d 396, 407 (Tex. App.—Fort Worth 2018, no pet.) (citing El Paso
Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 805 (Tex. 2012)). To
accomplish that task, we give effect to the entire agreement so that none of its
provisions are rendered meaningless. Id.; Howard, 490 S.W.3d at 184. In addition,
“[w]e will not construe contracts to produce an absurd result when a reasonable
alternative construction exists.” Markel Ins. Co. v. Muzyka, 293 S.W.3d 380, 387 (Tex.
App.—Fort Worth 2009, no pet.); accord S. Cty. Mut. Ins. v. Sur. Bank, N.A.,
270 S.W.3d 684, 689 (Tex. App.—Fort Worth 2008, no pet.).
Contract construction begins with the express language of the agreement. See
Perry v. Perry, 512 S.W.3d 523, 527–28 (Tex. App.—Houston [1st Dist.] 2016, no pet.)
(citing Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333
(Tex. 2011)). “If the written instrument is so worded that it can be given a certain or
definite legal meaning or interpretation, then it is not ambiguous and the court will
construe the contract as a matter of law.” Coker, 650 S.W.2d at 393. An agreement is
not ambiguous merely because the parties offer different interpretations of its
language. Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997);
Waldrop, 552 S.W.3d at 408. It is ambiguous only if its language is “susceptible to two
or more reasonable interpretations.” Kelley–Coppedge, Inc. v. Highlands Ins. Co.,
980 S.W.2d 462, 465 (Tex. 1998) (emphasis added); see Waldrop, 552 S.W.3d at 408.
B. CONSTRUING THE DIVORCE DECREE
1. The Parties’ Positions
Husband contends that the reimbursement provision required Wife to use a
licensed tax preparer to prepare two draft federal income tax returns that included
only her income (not Rosing’s) and that differed only in that one would include the
taxable amount of the liquidated Plan funds and the other would not. In addition,
Wife was required to furnish those draft tax returns to Husband on or before June 1,
2017. He urges that Wife did not comply with any of these requirements.
Wife, on the other hand, contends that she was not required to use a “licensed
income tax preparer” because that term was not defined in the decree and has no
commonly understood meaning. She also contends that the decree required only that
she furnish one draft tax return that includes the liquidated Plan funds and one that
does not, not that those drafts must otherwise be the same or that they could not
include Rosing’s income. Based on this construction of the decree, Wife urges that
she complied with the reimbursement provision by sending Husband two admittedly
incorrect and dissimilar draft tax returns, one of which was a joint return that included
Rosing’s income, before the June 1, 2017 deadline.
2. Mirror Image Draft Tax Returns
We first consider whether Wife was required to provide draft returns differing
only in the inclusion or exclusion of the liquidated Plan funds—what the parties and
the trial court referred to as “mirror image” draft tax returns. In keeping with the
principles stated above, we begin with the express language of the decree. See Italian
Cowboy Partners, 341 S.W.3d at 333; Perry, 512 S.W.3d at 527–28.
The reimbursement provision identified Husband’s obligation—“to reimburse
[Wife] for 70% of the income taxes incurred by [Wife] as a result of the liquidation of
the funds in the Plan.” It then provided that “[t]he amount of such income tax
liability will be determined” by Wife having “two (2) separate draft income tax returns
prepared . . . one draft which includes the taxable amount of funds liquidated from
the Plan as income and one draft which does not include such liquidated funds as
income.” The amount that Husband was obligated to pay Wife was then defined as
“an amount which equals 70% of the difference in income tax liability between these
two draft income tax returns.”
Wife’s construction of the reimbursement provision focuses solely on the
language that required her to provide one draft tax return that included funds from
the Plan liquidation as income and one draft that did not include those funds as
income. She contends that because the decree did not say anything about the
remaining content of the draft tax returns, there was no requirement that they
otherwise be similar or “mirror images.” This argument contravenes two bedrock
principles of construction—that the decree be construed as a whole so that no
provision is rendered meaningless and that the decree be construed to avoid an
absurd result. See Waldrop, 552 S.W.3d at 407; Muzyka, 293 S.W.3d at 387.
It is clear from the reimbursement provision, and the decree as a whole, that
Wife’s obligation to provide Husband with the two draft tax returns was no idle
exercise. On the contrary, those draft tax returns were specifically identified as the
means by which the parties were to quantify Husband’s obligation. The purpose of
the draft tax return requirement was expressed in its introductory sentence: “The
amount of [Husband’s] income tax liability will be determined as follows: . . . .” And
that purpose was reiterated in the concluding sentence: “[Husband] is ORDERED to
reimburse [Wife] in an amount which equals 70% of the difference in income tax
liability between these two draft income tax returns.”
Again, Husband’s obligation was to reimburse Wife “for 70% of the income
taxes incurred by [Wife] as a result of the liquidation of the funds in the Plan.” [Emphasis
added.] The plain, unambiguous language of the decree established that the purpose
of providing the two draft tax returns was to furnish the method to determine the
amount Husband owed Wife, which necessarily included determining the amount of
income taxes Wife incurred as a result of liquidating the Plan funds. And, the amount
of income taxes so incurred could only be determined by comparing two draft tax
returns that differ only in the inclusion or exclusion of the liquidated Plan funds as
income. Any other deviation between the two would yield a difference in tax liability
that was not necessarily attributable to the liquidated Plan funds.
It is apparent, then, that Wife’s interpretation of the reimbursement
provision—which would permit her to furnish draft tax returns that incorporated
different elements of income in addition to the liquidated Plan funds—would render
the provision meaningless because the draft tax returns would be of no use in
determining the amount Husband was required to pay. In fact, Wife tacitly admits in
her brief that the draft tax returns she gave Husband did not fulfill the purpose for
which they were required: “Because the two tax returns prepared by or on behalf of
Wife were not comparable, the trial court needed additional evidence to determine
In addition to rendering portions of the divorce decree meaningless, Wife’s
construction would lead to an unreasonable, if not absurd, result. Under that
construction, Wife could trigger Husband’s duty to pay by giving him two draft tax
returns from which he could not determine the amount he owed.
The unreasonableness of Wife’s construction is also illustrated by the two draft
returns that she contends satisfied her duty under the reimbursement provision. One
draft included only her wage income; the other included her wage income, social
security disability income, Rosing’s wage income, and the liquidated Plan funds. It is
readily apparent that the difference in tax liability between the two included
differences attributable to Wife’s social security disability income and Rosing’s wage
income. But if those drafts were sufficient to comply with the reimbursement
provision, then that same provision would have required Husband to pay “70% of the
difference in income tax liability between these two draft income tax returns,”
including the amounts not attributable to the liquidated Plan funds. Most certainly
this is not what the parties intended, but it would be the necessary result of Wife’s
construction of the decree.
While the parties offer differing interpretations of the reimbursement
provision, that provision is not ambiguous because Wife’s interpretation is not
reasonable. See Kelley–Coppedge, 980 S.W.2d at 465; Waldrop, 552 S.W.3d at 408. We
conclude, as a matter of law, that requiring Wife to furnish “one draft [tax return]
which includes the taxable amount of funds liquidated from the Plan as income and
one draft which does not include such liquidated funds as income” means that the
drafts were to differ only in that stated respect. Only by isolating this one variable
could the drafts serve their purpose of identifying “the income taxes incurred by
[Wife] as a result of the liquidation of the funds in the Plan” and, thus, the amount Husband
was required to pay. [Emphasis added.]
3. Including Rosing’s Income
We next consider whether providing a draft tax return that included Rosing’s
income complied with the reimbursement provision. Wife urges that it did because
the decree was silent on whether her returns could or could not include her new
spouse’s income. We disagree.
Wife’s accounting expert testified that she had two options for filing her
2016 income tax return—jointly with Rosing or married filing separately. Those
options do not, however, apply to her duty under the reimbursement provision. That
duty was to provide Husband with two draft tax returns from which the parties could
calculate Wife’s tax liability resulting from liquidating the Plan funds. The use of the
word “draft” demonstrates that these documents were distinct from whatever tax
return Wife ultimately filed with the IRS. See Hernandez v. State, 614 S.W.3d 760, 765
(Tex. Crim. App. 2019) (Slaughter, J., dissenting) (distinguishing between a
governmental record and a draft governmental record). And the fact that they were
to be used to determine Wife’s tax liability resulting from the liquidated Plan funds
precluded the use of a draft that also encompassed anyone else’s tax liability.
As a result, while Wife was free to file a joint return with the IRS, providing
Husband a joint tax return did not comply with her obligation under the
reimbursement provision. On the contrary, the unambiguous language of the decree
required that she provide one draft tax return including only her own income plus the
liquidated Plan funds and one draft tax return including only her own income.
C. APPLYING THE CONSTRUCTION TO THE FACTS
It is undisputed that Wife did not send Husband two draft tax returns, each
including only her own income and differing only in their inclusion or exclusion of
the liquidated Plan funds, on or before June 1, 2017. Wife therefore did not fulfill her
obligation under the reimbursement provision. The divorce decree clearly and
unambiguously declared the consequence of that noncompliance:
IT IS ORDERED that [Husband’s] obligation to reimburse [Wife] for
federal income taxes, as set forth above in this section, shall be waived in
the event [Wife] does not present the two draft income tax returns to
[Husband] on or before June 1 of the year following the year in which
such liquidation of the funds in the Plan occurs, as required above.
Wife’s failure to comply with her obligation to present the required draft tax
returns relieved Husband of his obligation to reimburse her. The trial court therefore
abused its discretion by finding that Wife was entitled to reimbursement and by
granting her judgment against Husband in the amount of $18,069.
Issue one is sustained. As a result, we need not address Husband’s additional
issues on appeal.
Outcome: The order of the trial court is reversed and we render judgment that Wife take
nothing on her petition to enforce the reimbursement provision of the divorce decree.