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  • September 13, 2012

    Court Sides With Ex-Wife in Pension Fight, Applies New Judgment Interest Rule 

    Court Sides With Ex-Wife in Pension Fight, Applies New Judgment Interest Rule 

    By Joe Forward, Legal Writer, State Bar of Wisconsin

    Court Sides With Ex-Wife in Pension Fight,   Applies New Judgment Interest Rule Sept. 13, 2012 – A former Milwaukee firefighter must pay $165,290 to his ex-wife, who was entitled to 40 percent of his retirement pension starting in 2001. Post-divorce, the ex-husband elected to receive lifetime “duty disability payments” in lieu of the pension.

    The District I Wisconsin Court of Appeals in Dickau v. Dickau, 2011AP1516 (Sept. 5, 2012), also applied the state’s new judgment interest rule (prime rate plus one percent) to future payments, but not without questioning the wisdom of the new law.

    “Although a fixed percentage interest rate on delinquent payments has much to recommend it in the context of certainty to litigants and economical use of judicial time, the legislature has set a different policy,” wrote Judge Joan Kessler for the three-judge appeals court panel.

    Ex-Husband Must Pay Portion of Disability Payments 

    Glen and Georgianne Dickau divorced in 1993 after 24 years of marriage. They entered into a Marital Settlement Agreement (MSA) that entitled Georgianne to 40 percent of Glen’s retirement pension through the City of Milwaukee, when he started receiving it. At the time of divorce, the parties anticipated that Glenn would start receiving the pension at age 57.

    In 2001, Glen joined litigation commenced by four other Milwaukee firefighters regarding “duty disability benefits,” which he had been receiving since 1985. The result meant that Glen could receive nontaxable lifetime duty disability benefits in lieu of retirement pension payments.

    Glen chose the duty disability benefit pension option when he turned age 57 in October 2001, and did not inform his ex-wife that he would never receive pension retirement payments. In fact, the circuit court found that Glen actively concealed this information believing that receipt of duty disability benefits instead of pension payments would entitle Georgianne to nothing.

    In 2009, when Georgianne learned of Glen’s belief from a family friend, she commenced an action to recover 40 percent of the duty disability payments, beginning in 2001.

    The circuit court ruled in favor of Georgianne, ordering that Glen pay a past due amount, at three percent interest, calculated at $165,290. The court also imposed 12 percent interest on any past due sum not paid within a month and two weeks of judgment, and ordered that future delinquent payments bear interest at three percent per annum, compounded annually.

    Appeals Court 

    The appeals court upheld the circuit court’s order in part, agreeing the Glen owed a past due amount, plus three percent interest (from 2001 to 2011), based on the couple’s MSA.

    “[T]he disability benefit payments are in fact and in law a substitute for age-related retirement benefits to which the employee had earlier been entitled,” wrote Judge Kessler, relying on Topolski v. Topolski, 2011 WI 59, 335 Wis. 2d 327, 802 N.W.2d 482. “We conclude that the decision in Topolski is entirely supportive of and consistent with the circuit court’s conclusions here.”

    The appeals court also upheld the circuit court’s application of 12 percent interest on any past due sum not paid within the grace period of a month and two weeks from the judgment.

    However, it ruled that Wis. Stat. section 815.05(8), effective Dec. 2, 2011, applied to determine the interest rate on future delinquent monthly payments owed to Georgianne by Glen. The circuit court had set a three percent fixed rate interest on future delinquent payments.

    Section 815.05(8) changed interest on civil money judgments from an annual fixed rate of 12 percent to an annual rate of 1 percent plus the prime rate in effect on Jan. 1 and June 30 in a given year, as reported by the Federal Reserve board in statistical release H. 15.

    “The statute does not appear to prospectively set a fixed rate interest on future delinquencies other than as directed by the statute,” Judge Kessler explained.

    Related article 

    Lessons from Topolski: When a Pension is Not a PensionWisBar InsideTrack, June 20, 2012.

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