Virginia Divorces: The Need for Specificity in Settlement Agreements

Quinn v. Irons, Record No. 0851-14-4 (Va. Ct. Appeals 2014) is a case that never should have existed but for a perfect storm of misunderstanding.  In that case, the parties entered into a marital settlement agreement, while represented by legal counsel, at the end of an arbitration.  The marital settlement agreement included a section entitled “College Savings Accounts,” which provided:

         “Husband shall retain the college education accounts that are associated with [the two oldest children] . . . , and these accounts are already held by Husband.  Wife shall retain the college education accounts that are associated with [the two youngest children] . . . , and since these accounts are currently held by Husband, the parties shall execute all reasonable documents that are necessary to forthwith transfer these two accounts from Husband’s name to Wife’s name.  Each party shall be identified as having the right of survivorship of the accounts held by the other party.”

After the two 529 college savings accounts were transferred into Wife’s name, she withdrew $60,000 from one of the accounts for her own use.  After the agreement was incorporated into a final order of divorce, Husband argued that Wife was in contempt of the final order of divorce because of this withdrawal.  The trial court held that the agreement was unambiguous, refused to allow Wife to present parol evidence on what the parties intended with the division of these college savings accounts, and held Wife in contempt.  Wife appealed, and the Virginia Court of Appeals upheld the trial court’s decision.

The Virginia Court of Appeals held that the meaning of the word retain in this context was not ambiguous.  It basically means to keep possession of or to continue to have.  It further held that this definition makes sense given the very nature of these accounts, which is to save for the children’s college expenses, not to withdraw from subject to large penalties and fees.  So the mother in this case was obligated to keep the funds on deposit in this account rather than use them as she pleased.

So what’s so interesting about this?

First of all, it’s the sheer fact that this was even an issue.  In most cases, these settlement agreements spell out what is being retained, which usually includes all right, title, and interest in the account and all funds on deposit therein.  And, in most cases involving children’s savings accounts, these settlement agreements usually mandate that these accounts be held in trust for the benefit of the children.  It’s the very lack of these details that led to this case being litigated all the way to the Virginia Court of Appeals.

Secondly, it’s the breeziness of  the court’s decision.  Isn’t it at least possible that the parties intended “retain” to mean mere retention of ownership of these accounts?  Why didn’t the court mention whether the parties used the word “retain” when it came to their regular bank accounts?  If they used the word retain when dividing their checking accounts, for example, then surely they didn’t intend for that word to limit their use of the funds on the deposit because everyone makes regular withdrawals from their checking accounts for their own needs.  If they didn’t use the word retain when dividing their checking accounts, then it’s probable that they meant to treat the children’s savings accounts differently because they would have used a special word for those accounts:  “retain.”  And given the nature of these accounts, this is entirely what we would expect and blends perfectly with the court’s ultimate decision that the wife could not make withdrawals from the college savings accounts.  Yet, the court never wrestles with this one way or the other, even though it’s an obvious thing to consider when reading a contract, statute, opinion, or other legal document.