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J.K. v. A.K.

Court of Appeals of Texas, Second District, Fort Worth

November 7, 2019

J.K., Appellant
v.
A.K., Appellee

          On Appeal from the 16th District Court Denton County, Texas Trial Court No. 16-04048-16

          Before Kerr, Bassel, and Wallach, JJ.

          MEMORANDUM OPINION

          Dabney Bassel, Justice.

         I. Introduction

         This is an appeal from the October 12, 2018 "Final Judgment On Petition For Enforcement Of The Agreed Final Decree Of Divorce." After ex-husband Appellant J.K. (Jeff) and ex-wife Appellee A.K. (Angie) filed competing motions to enter judgment, the trial court rendered judgment on Jeff's proposed order (the enforcement judgment). The enforcement judgment included a section stating that it "clarified" the final divorce decree's provision that divided Jeff's bonuses by replacing the term "tax bracket" with the phrase "effective tax rate" for the purpose of calculating the amount of the payments to Angie. Jeff now appeals, arguing that because the substituted terms were inconsistent, the enforcement judgment was not simply a clarification but rather was a modification and that, consequently, the trial court lacked jurisdiction to make the substitution because its plenary power over the final decree of divorce had expired. The primary question that we decide is whether substituting the phrase "effective tax rate" for "tax bracket" constitutes a clarification or a modification. Because we conclude that the substitution was a clarification, we hold that the expiration of the trial court's plenary power did not affect its continuing jurisdiction to clarify and enforce its prior judgment. We therefore affirm.

         II. Background

         The trial court rendered the agreed final decree of divorce on February 1, 2017. The sole provision from the final decree that is at issue in this appeal is as follows:

         Provision for Division of Husband's LTI and CEO Bonuses

         IT IS ORDERED AND DECREED that the following provisions for division of [Jeff's] LTI and CEO bonus payments are divided and shall be paid to [Angie] within seven (7) days of [Jeff's] receipt of those awards as follows:

1. The total sum of Seventy-Five Thousand Dollars and no/100 ($75, 000.00) anticipated to be paid on March 14, 2017;
2. The total sum of Twelve Thousand and Five Hundred Dollars and no/100 ([$]12, 500.00) anticipated to be paid on March 14, 2017;[1]
3. The total sum of Sixty Thousand Dollars and no/100 ($60, 000.00) anticipated to be paid on March 14, 2018; and
4. The total sum of Sixty Thousand Dollars and no/100 ($60, 000.00) anticipated to be paid on or before March 14, 2019.

         IT IS ORDERED that [Jeff] shall provide [Angie] a 1099 tax statement for each payment listed above made by [Jeff] to [Angie] on or before the U.S. National Tax Statement Submission, if allowed by [Jeff's] employer. IT IS ORDERED that [Jeff] is to inquire if this is possible from his employer and notify [Angie] of the response from his employer. In the event [Jeff] is unable to provide [Angie] [a] 1099 tax statement for payments made, then the payments made to [Angie] shall be the amounts above net of taxes paid in [Jeff's] tax bracket. [Emphasis added.]

         In May 2018, Angie filed a petition for enforcement of the final decree, and she filed an amended petition the following month. In her amended petition, she argued that Jeff had failed to transfer the 2017 LTI and CEO bonus payments to her as required by the final decree.[2] Specifically, she argued that "[r]ather than dividing the bonuses 'net of taxes paid in [Jeff's] tax bracket,' [Jeff] . . . [had] divided them based upon what he [had] received after taxes were withheld by his employer at a much higher rate than his effective tax rate." Angie sought a money judgment for Jeff's alleged failure to pay her the specified amounts of his 2017 LTI and CEO bonus payments net of his effective tax rate. Angie's amended petition for enforcement also requested that the trial court enter a clarifying order if it found that any part of the final decree was not specific enough to be enforced by contempt. Jeff filed an answer to Angie's petition for enforcement of the final decree and denied the allegations.

         During the hearing on Angie's petition for enforcement, Jeff admitted that he had "netted out some money from [the March 14, 2017 LTI and CEO bonus] payments." Jeff testified that he had withheld 39.6 percent from the amount of his 2017 LTI and CEO bonus payments that he had paid to Angie and that he had paid taxes on those bonuses at only 32.5 percent. Jeff further testified that his adjusted gross income for 2017 was over $600, 000 and that his effective tax rate was 32.5 percent. The record demonstrates that a portion of Jeff's income was taxed in every tax bracket.[3] After the enforcement hearing, the parties filed competing motions for the trial court to render a final judgment.

         The trial court signed the proposed final judgment submitted by Jeff, [4] granting Angie a judgment against Jeff for $6, 212.50[5] and $3, 000 for Angie's attorney's fees. The enforcement judgment[6] also ordered that the "Provision for Division of Husband's LTI and CEO Bonuses" in the final decree of divorce was "clarified by this Final Judgment as follows: . . . . In the event [Jeff] is unable to provide [Angie] [a] 1099 tax statement for payments made, then the payments made to [Angie] shall be the amounts above net of taxes paid in [Jeff's] effective tax rate." [Emphasis added.] The trial court also entered findings of fact and conclusions of law:

2. The Final Decree provided for the division of Husband's LTI (long-term incentive) and CEO Bonuses, including a requirement that Husband pay Wife the sum of $87, 500 within seven (7) days following Husband's receipt of bonuses anticipated on March 14, 2017.
3. The Final Decree also ordered Husband to inquire whether he could provide Wife an IRS Form 1099 tax statement for these payments from his employer. In the event that Husband could not obtain such a tax statement, Husband was required to make the payments to Wife "net of taxes paid in [Husband's] tax bracket."
4. Husband could not obtain an IRS Form 1099 tax statement from his employer for Wife.
5. The highest tax bracket in which Husband paid taxes on any of his income for tax year 2017 was 39.6%.
6. The progressive federal income tax system requires payment of taxes in various brackets based upon how much income a taxpayer receives, and Husband paid taxes on some portion of his income in every tax bracket. The very top marginal tax bracket under the tax code for tax year 2017 was 39.6%.
7. Husband's effective tax rate for tax year 2017 was 32.5%, meaning, Husband paid tax to the Internal Revenue Service that equaled 32.5% of his income.
8. Husband distributed the 2017 bonuses to Wife in the amount of $52, 850. This amount was calculated by taking the total amount of bonuses of $87, 500, and reducing it by 39.6%, the highest tax rate applied to any portion of Husband's income in 2017.
9. Husband did not pay a tax rate of 39.6% on his entire income for tax year 2017.
10. The payment of $52, 850 was $6, 212.50 less than the bonus amount due to Wife "net of taxes paid" by Husband.
11. The total payment due from Husband to Wife for the 2017 bonuses, calculated by applying his effective tax rate of 32.5% to the amount of $87, 500, is $59, 062.50.
12. Satisfaction of the terms of the Final Decree requires that Husband make an additional payment to Wife of $6, 212.50 in connection ...

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