COA reverses contempt finding against vet for nonpayment in divorce dispute

The goal of harmonizing provisions between conflicting provisions in a divorce settlement led the Indiana Court of Appeals to find a military veteran should not have been held in contempt for discontinuing monetary support to his former wife.

Michael and Susan Ferrill divorced in 2004 after more than 30 years of marriage. As part of their divorce agreement, Michael split with Susan his monthly Voluntary Separation Incentive payment. He was receiving this benefit because he agreed to forego his military pension and leave active duty prior to accumulating 20 years of service.

However, following the 9/11 terrorist attacks, Michael was recalled to active duty and, eventually, the time he served reactivated qualified him for a military pension in 2011. He continued to pay Susan $11,000 after he stopped receiving VSI payments while also having his monthly pension payment reduced because the military was requiring him to repay all the money he had previously received as part of the VSI.

When Michael stopped making the payments in 2016, Susan filed a petition for rule to show cause, asking the St. Joseph Circuit Court to hold Michael in contempt.

The trial court agreed Michael was in contempt for stopping payments. Looking at the settlement agreement’s provision that stated, “Should this VSI account be converted to any other form of payment, [Michael] will pay this $11,000 obligation from this source prorated as received,” the court determined he was still obligated to pay because the VSI had been converted to a pension.

In Michael A. Ferrill v. Susan E. Ferrill, 18A-DR-2013, the Court of Appeals reversed.

The unanimous appellate panel found the divorce settlement agreement contained a VSI provision and a pension provision. Susan argued, and the trial court agreed, that Michael’s VSI payments “converted to” military retirement pension, so she was still entitled to the annual $11,000.

But citing Jernas v. Gumz, 53 N.E. 3d 434, 444 (Ind. Ct. App. 2016), trans. denied, the Court of Appeals noted the goal is to harmonize provisions and not render any portion ineffective. Consequently, the appellate court found the trial court’s ruling invalidated the pension provision that expressly gave Michael his military retirement pension as his sole and separate property.

“First, it seems logical to us that the ‘converted to any other form of payment’ language in the VSI provision refers to the time when Michael’s monthly paychecks would have come from active duty compensation, rather than VSI,” Judge Melissa May wrote for the COA.

“… Furthermore, in light of the fact that Michael had been deployed at least once between his voluntary separation from the military in 1995 and the parties’ petition for divorce in 2003, Susan would have known to ask for payments from Michael to continue during such time as he might be deployed and receive active duty pay,” May continued. “Finally, it is illogical to have written the Agreement to give Michael his pension as his separate property if a conversion could occur that would entitle Susan to part of his pension.”

The Court of Appeals thus ruled the trial court had abused its discretion for finding Michael in contempt for discontinuing his payments to Susan.