Fulgium v. Fulgium

Panel: Meredith, Graeff, Irma. S. Raker (Senior Judge, Specially Assigned), JJ. Graeff, J. ^{35 272} This case arises from a divorce action between Amy Fulgium, appellant, and Christopher Fulgium, appellee. On July 31, 2017, the Circuit Court for Prince George's County issued a Judgment of Absolute Divorce and a Constituted Pension Order relating to Mr. Fulgium's military retirement benefits.

On appeal, Ms. Fulgium challenges only the award of military retirement benefits. In that regard, she presents five questions for this Court's review, 1 which we have consolidated and rephrased, as follows: 1. Did the circuit court err in incorrectly calculating Ms. Fulgium's marital share of Mr. Fulgium's military pension? 2. Did the circuit court err by not entering a constituted pension order that awarded cost-of-living adjustments to Ms. Fulgium's share of Mr. Fulgium's military pension?

For the reasons set forth below, we answer the first question in the affirmative, and therefore, we shall vacate the judgment of the circuit court and remand for further proceedings. ²⁷³ FACTUAL AND PROCEDURAL BACKGROUND The Fulgiums were married on July 8, 2005. No children were born during the marriage. Mr. Fulgium has been an active duty member of the United States Marine Corps since July 12, 1999. On May 30, 2017, Mr. and Ms. Fulgium entered into a Partial Marital Settlement Agreement (the "Agreement").

The Agreement settled all issues regarding the divorce, with the exception of alimony, Mr. Fulgium's military pension, and attorney's fees. The parties planned to address these issues at a trial on the merits. Trial began that same day, May 30, 2017. Ms. Fulgium requested "three years of alimony," a portion of Mr. Fulgium's military pension, and attorney's fees.

With respect to the pension, counsel stated that the Federal Government had changed the way pensions were dealt with by the military: [I]t used to be like we do with all other pensions, you have the Bangs formula, where the number of years that ... the parties were married ... over all the overall time that employee was working for the, for the company. That's no longer the case. ³⁶ What they now decided on a Federal basis is that the bottom number is frozen as of the time that the parties get divorced, so even though the pension will continue to grow for Mr. Fulgium, my client's not entitled to share in that anymore and that's nothing that this Court decides, it's just what the Federal law now is. Mr. Fulgium asked that the court deny Ms. Fulgium's claims for alimony and attorney's fees. He asked that the court award him the "full amount of his military retired pay." At trial, Mr. Fulgium testified that his marriage to Ms. Fulgium first started to deteriorate in 2011, when he became aware that she had been involved in "intimate action with neighbors" while he was deployed.

He testified that, although Ms. Fulgium had been "extremely responsible" when they ²⁷⁴ first got married, she began spending a lot of money over the course of the marriage, and money he had saved was depleted. Mr. Fulgium, who was 36 years old at the time of trial, testified that his rank in the Marines was a "Chief Warrant Officer 2." According to his W-2 forms for the years 2014, 2015, and 2016, he made $ 52,950.60, $ 56,264.45, and $ 60,195.60, respectively. Mr. Fulgium had a high school education, and he used his GI bill, in the amount of approximately $ 27,000, to help Ms. Fulgium earn her master's degree. Ms. Fulgium, who was 31 at the time of trial, was living in California.

She testified that she received her master's degree in 2014. It took her three years to complete the degree, and she received 12 months' credit from the GI bill. Ms. Fulgium testified regarding her health during the marriage. She had several medical conditions that required surgery, and Mr. Fulgium helped her after the surgeries.

As of the date of trial, however, Ms. Fulgium was healthy, with no health complications. Ms. Fulgium testified that, in 2016, her annual earnings were $ 55,582.17. Her monthly expenses were less than her earnings. After the evidence was presented, counsel for Mr. Fulgium asked that he receive his full share of his retired pay.

Counsel for Ms. Fulgium requested that she be awarded a share of the pension "from the date they got married until the date they got divorced." On June 27, 2017, the circuit court held a disposition hearing. The court denied each party's request for attorney's fees, and Ms. Fulgium's request for alimony. With respect to Mr. Fulgium's military pension, the court discussed the "National Defense Authorization Act of fiscal year 2017, known as [N]DAA 17," which revised "how pension orders are written and will operate." The court stated: In accordance with [N]DAA 17, the hypothetical retired pay attributable to the rank and years of service of a military member at the time of the applicable order will be divided rather than a percentage of the total retirement ²⁷⁵ following the service member's retirement. So the [c]ourt has used this with regard to the pension.

The pension benefit to be divided is frozen as of the date of the entry of this order, which will be if one of you does the order. The only adjustment will be the cost of living adjustment made under 10 U.S.C. Section 1401 (a)(b) between the time of the court order [and] the time of retirement. In practice, this number is gathered by the highest 3 years of continuous pay. That's often the most 3 recent years.

This element must be multiplied with the retired pay multiplier, which is 2.5 ³⁷ times of credi[table] service at the time of the order. Here, Mr. Fulgium submitted his W-2 statements for 2014, 2015, and 2016, tax forms reflecting annual compensation of $ 52,950.60, $ 56,463.95, and $ 60,195.60 respectively. Therefore, on average, Mr. Fulgium earned $ 56,536.72 over the past 3 years. He has been enlisted in the Marine Corps for 215 months, which equals 17.9 years, resulting in a retired pay multiplier of 0.448.

The 17.9 years credited times 2.5 percent when this amount is multiplied by the highest three, the resulting gross pay amount is $ 25,300.18. Thus using the formula under [N]DAA 17, which was passed December of 2016[,] [Ms.] Fulgium shall be awarded 15 percent of disposable military retired pay Mr. Fulgium would have received, had the member retired with retired base high of $ 56,536.72, as of today, June 27, 2017. So as of today-well, this number has to be adjusted because the order is not ready today. I need to redo this, recalculate this, but as of today's date, Mr. Fulgium's retired base pay is $ 56,536.72 following 17 years, 19 [sic] months of credible service.

That, to date, Mr. Fulgium's annual payout in accordance with that 215 months of service is at an annual rate of $ 25,300.18. [Ms.] Fulgium should be awarded marital portion of pension as had accrued on the date of this order using that formula. ²⁷⁶ In response to the circuit court's oral ruling, counsel for Ms. Fulgium asked the court to clarify whether it awarded Ms. Fulgium 50% of Mr. Fulgium's disposable military pay or 15%. The following colloquy between the court and counsel for Ms. Fulgium ensued: THE COURT: Fifteen. I did that because of the number. When you take the number, when I multiplied, it came out to be $ 16,000; and 50 percent of that 16, which is the 12 years they were married, the 50 percent of the 16 is $ 8,000.

That $ 8,000 is 15 percent of the $ 25,000. That makes sense. [COUNSEL]: It didn't, to me. THE COURT: When you figure it out using the formula, it is different. But when I figured out the formula, by using the formula I did, I came up with a number that was $ 16,000-and-some-odd dollars. [COUNSEL]: Which was what?

THE COURT: Which was based on his years of service while they were married. And 50 percent of that $ 16,000, which would be her pension, 50 percent of that would be $ 8,000. The $ 8,000 then from the $ 25,300.18 - - I'm sorry. The 15 percent of that is $ 8,000.

So that's why I said 15 percent of that $ 25,000 number. That might have been a convoluted way to say it. [COUNSEL]: Off the top of my head, wouldn't $ 8,000 - if you use 25, wouldn't that be roughly a third? THE COURT: No. It's 50 percent of the 16. The 25,000 is 15 percent. [COUNSEL]: Right.

THE COURT: Oh, you're saying a third. 32 percent? I think you're right. I think I did that wrong. [COUNSEL]: It would seem to me that - THE COURT: I think you're right. That number is incorrect.

The goal is [Ms.] Fulgium will be awarded 15 percent of disposable military retired pay, [that] Mr. Fulgium would ²⁷⁷ have received, had he retired with a retired base high of $ 56,536.72 with his 17 years and 9 months of creditable service as of today's date. The circuit court explained that the 15% was 50% of the 11.11 years they were ³⁸ married, which was $ 16,000, and 50% of that "is 8." The court stated that it would order "that [Ms.] Fulgium shall be granted the marital portion of Mr. Fulgium's military pension in accordance with the National Defense Authorization Act of 2017," and it requested that counsel "draft the appropriate military divorce order in accordance with the National Defense Authorization Act of 2017, for the division of Mr. Fulgium's military pension." With respect to Ms. Fulgium's entitlement to cost-of-living adjustments ("COLAs") for her share of Mr. Fulgium's military pension, the court stated that it believed that Ms. Fulgium was entitled to COLA, but "[i]t's whatever the law says." After the circuit court's oral ruling, the parties could not agree on the terms for the order dividing military retirement pay. The circuit court requested that each party submit a proposed order for the court's review. On July 31, 2017, the court issued the Constituted Pension Order, 2 which stated, in pertinent part, as follows: 4.

This Order is intended to qualify under the Uniformed Services Former Spouses Protection Act (USFSPA), 10 U.S.C. Sec. 1408 et seq. , as amended by the National Defense Authorization Act of 2017 (NDAA), with all provisions to be interpreted in light of USFSPA, as amended. * * * 6. (a) The Former Spouse is awarded 15% of the disposable military retired pay of the Member; (b) As of the date of the Judgment of Absolute Divorce on July 27, 2017, the Member's military retired base ²⁷⁸ pay (High-3) was $ 4,826.28, and the member had 17 years and 11 months of creditable service. (c) Former Spouse is entitled to direct payment from the military pay center, known as the Defense Finance and Accounting Service (DFAS), to the extent permitted by law, at the same times as Member receives his retired pay. In accord with the applicable law and regulations, payments of the retired pay to Former Spouse shall terminate upon the death of Member or the death of Former Spouse, whichever shall occur first.

On August 21, 2017, Ms. Fulgium filed a Motion to Alter or Amend Judgment of Absolute Divorce and Constituted Pension Order. On October 31, 3017, the circuit court entered an order denying the motion. This appeal followed. DISCUSSION Ms. Fulgium contends that the circuit court misinterpreted federal statutes addressing military retirement benefits and incorrectly divided Mr. Fulgium's military pension.

She asserts several contentions in this regard, which will be discussed, infra. Mr. Fulgium contends that the circuit court correctly applied the federal statutes addressing military retired pay, and these statutes preempt conflicting state law. He asserts that, after applying the federal statutes, the court properly exercised its discretion in awarding Ms. Fulgium less than half of the marital portion of his military retired pay based on its findings that his contributions "far exceeded" the contributions made by Ms. Fulgium. He argues that the court "had discretion to award less than an equal marital share, ³⁹ and it was not required to follow any set formula." Before addressing Ms. Fulgium's specific arguments, we will give some background on the law regarding military retirement benefits.

"Military retired pay is a federal entitlement that, much like a pension, provides a monthly annuity for ²⁷⁹ life upon retirement from the armed forces." Dziamko v. Chuhaj , 193 Md. App. 98 , 116, 996 A.2d 893 , cert denied , 416 Md. 273 , 6 A.3d 905 (2010). As Judge Nazarian explained for this Court in Hurt v. Jones-Hurt , 233 Md. App. 610 , 619, 168 A.3d 992 (2017) : Marriage, divorce, and the division of marital property are quintessentially matters of state law, and pension or retirement benefits normally are considered marital property at the time of divorce. But military benefits are creatures of federal law, and the treatment of military benefits in state divorce proceedings has been a source of federal and state tension for decades. Prior to June 26, 1981, military pensions were considered to be divisible marital property in Maryland.

Collins v. Collins , 144 Md. App. 395 , 421-22, 798 A.2d 1155 (2002). In 1981, in McCarty v. McCarty , 453 U.S. 210 , 232-33, 101 S.Ct. 2728 , 69 L.Ed.2d 589 (1981), the United States Supreme Court held that the federal law "governing military benefits preempted state family law and precluded those benefits from being treated as community property in state divorce proceedings." Hurt , 233 Md. App. at 619 -20 , 168 A.3d 992 . The Court of Appeals subsequently held that the rationale in McCarty applied in Maryland, an equitable distribution state, precluding a court from dividing military retirement pay as marital property. Hill v. Hill , 291 Md. 615 , 620-21, 436 A.2d 67 (1981).

In 1982, in response to McCarty , "Congress enacted the Uniform Services Former Spouses Protection Act" ("USFSPA," or "the Act"), codified at 10 U.S.C. § 1408 . Howell v. Howell , --- U.S. ----, 137 S.Ct. 1400 , 1403, 197 L.Ed.2d 781 (2017). Accord Andresen v. Andresen , 317 Md. 380 , 383, 564 A.2d 399 (1989). The purpose of the Act was to place courts in the same position they were in prior to the McCarty decision with respect to non-disability military retired pay.

Andresen , at 383, 564 A.2d 399 . The Senate report stated that the Act was intended to remove the federal preemption found to exist by the United States Supreme Court and permit State and ²⁸⁰ other courts of competent jurisdiction to apply pertinent state or other laws in determining whether military retired or retainer pay should be divisible. Nothing in this [Act] requires any division; it leaves that issue up to the courts applying community property, equitable distribution or other principles of marital property determination and distribution. Id. at 383-84 , 564 A.2d 399 (quoting Senate Report No. 97-502, July 22, 1982, reprinted in 1982 U.S. Code Cong. & Admin.

News , 1555, 1596, 1611). 3 The USFSPA provides: "Subject to the limitations of this section, a court may treat disposable retired pay payable to a member for pay periods beginning after ⁴⁰ June 25, 1981, either as property solely of the member or as property of the member and his spouse in accordance with the law of the jurisdiction of such court." 10 U.S.C. § 1408 (c)(1). Thus, "[s]ubject to the limitations" of § 1408, a state court may divide a military pension as marital property pursuant to Maryland law. One of the limitations on a court's ability to divide a military pension is that only "disposable retired pay" may be considered marital property. Id.

The statute defines "disposable retired pay" as "the total monthly retired pay to which a member is entitled," less certain amounts, such as military retirement pay waived to receive disability payments. 10 U.S.C. § 1408 (a)(4)(A). 4 By excluding from its "grant of authority ²⁸¹ the disability-related waived portion of military retired pay," the USFSPA provides a limited grant of power to divide military retired pay. Howell , 137 S.Ct. at 1404 . State courts still are preempted from treating as divisible marital property military retirement pay waived by the retiree to receive disability payments. Howell , 137 S.Ct. at 1406 ; Mansell v. Mansell , 490 U.S. 581 , 589, 109 S.Ct. 2023 , 104 L.Ed.2d 675 (1989) ; Hurt , 233 Md. App. at 626 , 168 A.3d 992 .

Thus, only a portion of retired pay may be treated as marital property that can be divided in divorce proceedings. Another significant limitation was included in the National Defense Authorization Act for Fiscal Year 2017 ("NDAA17"), signed on December 23, 2016. See Pub.L. 114-328, 130 Stat. 2164 , 2418 (Dec. 23, 2016). This amendment to § 1408 was intended to modify "the division of military retired pay in a divorce decree to the amount the member would be entitled based upon the member's pay grade and years of service at the time of the divorce rather than at the time of retirement." S. Rept. 114-255, National Defense Authorization Act for Fiscal Year 2017, at 168 (114th Congress, 2016); Kristy N. Kamarck, Cong.

Research Serv., RL31663, Military Benefits for Former Spouses: Legislation and Policy Issues , at 15 (2018) (hereinafter "CRS Report"). Rather than dividing actual retired pay at the time of retirement, the benefit would be frozen at the time of divorce. The rationale for using a "date of ²⁸² divorce" method for pension valuation was that a former spouse would not receive a windfall benefit from promotions and other pay increases that accrued from the date of divorce to the date of retirement, to which the former spouse made no contribution. See CRS Report, 15.

The new provision stated, in relevant part, that "the total monthly pay to which a member is entitled," i.e., "disposable retired pay," "shall be the amount of basic ⁴¹ pay payable to the member for the member's pay grade and years of service at the time of the court order," plus cost of living adjustments. 10 U.S.C. § 1408 (a)(4)(B). In the National Defense Authorization Act for Fiscal Year 2018, Congress made technical corrections to this provision to clear up language problems in the NDAA17. See Pub. L. 115-91, 131 Stat. 1283 , 1429 (Dec. 12, 2017); Brentley Tanner & Amelia Kays, Winds of Change: New Rules for Dividing the Military Pension at Divorce , 30 J. Am.

Acad. Matrimonial Law 491, 497 (2017-2018). The current version of the statute provides that, in the situation where there is a final decree of divorce prior to the date of the member's retirement, disposable retirement pay is based on "the amount of retired pay to which the member would have been entitled using the member's retired pay base and years of service on the date of the decree of divorce, dissolution, annulment, or legal separation, as computed under section 1406 or 1407 of this title, whichever is applicable, increased by the sum of specified cost of living adjustments[.]" 5 10 U.S.C. § 1408 (a)(4)(B). The USFSPA provides that, under certain circumstances, the nonmilitary spouse may obtain his or her share of disposable retired pay directly from the federal government, i.e., the Defense Finance and Accounting Service ("DFAS"). 10 U.S.C. § 1408 (d)(1).

To be eligible for direct payment, there must be a court order, incident to a final decree of divorce or legal ²⁸³ separation, providing for the payment of an amount of the disposable retired pay. § 1408(a)(2) & (d)(1) ; accord CRS Report, 2. After service on the Secretary of such an order, "the Secretary shall make payments (subject to the limitations of [ § 1408 ] ) from the disposable retired pay ... to the spouse or former spouse." Id. One of the limitations on direct payment is that it is available only when the service member performed ten or more years of creditable military service while married to his or her spouse. 10 U.S.C. § 1408 (d)(2). See Mansell , 490 U.S. at 585 , 109 S.Ct. 2023 .

Accord Dziamko , 193 Md. App. at 119 , 996 A.2d 893 (direct payment of military pension not possible where parties married only seven years). Another limitation is that "the Federal Government will not make community property payments that exceed 50 percent of retired disposable retired or retainer pay." Mansell , 490 U.S. at 585 , 109 S.Ct. 2023 . See § 1408(e)(1) ("The total amount of disposable retired pay of a member payable under all court orders pursuant to subsection (c) may not exceed 50 percent of such disposable retired pay."). 6 ^{42 284} In sum, the USFSPA limits what is considered disposable military retirement pay that may be divided as marital property. It permits distribution only of disposable retired pay, but it does not require distribution.

A state court has discretion whether to divide the disposable retired pay, and if so, how, in accordance with state law. See CRS Report, 2-3. With this background in mind, we address Ms. Fulgium's specific arguments. I. Ms. Fulgium initially contends that the circuit court should have calculated the division of the military pension using the "if, as, and when" basis set forth in Bangs v. Bangs , 59 Md. App. 350 , 367-68, 475 A.2d 1214 (1984).

She summarizes the Bangs formula as: "the employee's total pension benefit at the time of his retirement multiplied by a fraction, the numerator of which is the employee's total years of service during marriage and the denominator of which is the employee's total years of service at retirement (which is the so-called 'marital share'), which is then multiplied by fifty percent (50%), to arrive at the non-employee's share of the employee's pension benefit." Ms. Fulgium asserts that this formula cannot be frozen prior to retirement, and therefore, the proper calculation of her marital share of the military pension is "145 months married/total number of months of service x 50% x retired pay at benefit commencement." Mr. Fulgium contends that the court correctly calculated Ms. Fulgium's marital share of Mr. Fulgium's military pension. He asserts that the federal statute preempts state law with respect to a marital property award requiring the division of military retired pay, and the court "correctly applied federal law to the division of [his] "retired military pay." 7 ²⁸⁵ As indicated, 10 U.S.C. § 1408 permits courts to apply state law in determining whether military retired pay should be divisible. Andresen , 317 Md. at 383 -84 , 564 A.2d 399 . In Maryland "[a]n interest in a military pension is marital property to the extent it was earned during the marriage." Woodson v. Saldana , 165 Md. App. 480 , 488, 885 A.2d 907 (2005).

Pursuant to FL § 8-205, the court may transfer ownership of a pension or retirement plan from one party to either or both parties after considering various factors. 8 Thus, "[s]ubject ⁴³ to the limitations" of 10 U.S.C. § 1408 (c)(1), a military pension may be distributed under FL § 8-205. In Dziamko , this Court explained the possible methods of valuing pension benefits in a divorce proceeding: ²⁸⁶ First, a trial court could calculate the value of the member's contributions to the pension during the marriage, plus interest. Second, the court could attempt to compute the present value of the pension when it vests. Third, the court could " 'determine a fixed percentage for [the non-member] of any future payments [the member] receives under the plan, payable to [the non-member] as, if, and when paid to [the member].' " Dziamko , 193 Md. App. at 111 , 996 A.2d 893 (quoting Deering v.