Ohm v. Ohm

Thompson, J., delivered the opinion of the Court. This is an appeal from a decree of divorce. The principal issues are whether the court below, in dissolving the parties’ marriage and dividing their property, was correct in its determination that the husband’s vested, matured right to receive benefits under a private, non-contributory pension plan was "marital property” within the meaning of Maryland’s Property Disposition in Divorce and Annulment statute (the statute), Md. Cts. and Jud. Proc.

Code Ann. § 3-6A-01, et seq. (1980 Repl. Vol., 1980 Cum. Supp.), and thus subject to equitable distribution upon divorce, and if so, whether the court properly valued and divided those bene ³⁹⁴ fits. 1 We hold that the retirement benefits were properly included among the parties’ marital property but that the chancellor failed to consider various factors relevant in the valuation and division of the benefits.

June L. Ohm, the appellee, was awarded a divorce a vinculo matrimonii from Norman K. Ohm, the appellant, in the Circuit Court for Prince George’s County on August 11, 1980. The parties had been married for 39 years and had two sons, both now adults. At the time of the divorce, the husband was 57 years old and had been employed by the C. & P. Telephone Company for 39 years. He was earning a gross salary of $2,399.26 per month.

As a result of his employment, he had acquired certain vested rights in a noncontributory pension plan maintained by his employer and was eligible to retire at any time, although his benefits would be increased if he chose not to retire until he was older. Under the plan, Mr. Ohm could elect to receive a pension of $1,019.36 per month, which would terminate upon his death, or he could elect a so-called survivor’s benefit, under which he would receive $980.43 per month but which, after his death, would continue to pay $545.22 per month to his survivor until the survivor’s death. At the time of the divorce, Mrs. Ohm had been employed by the University of Maryland for some 10 years and had a gross salary of $1,020.56 per month. She also had acquired pension rights as a result of her employment, although no details concerning such rights are contained in the record.

In accordance with § 3-6A-05 (a) of the Courts Article, the chancellor determined the following to be marital property: the marital home, located in Maryland and owned by the parties as tenants by the entireties; a vacation home and four unimproved lots, located in Florida and also held as tenants by the entireties; a C. & P. Telephone contributory ³⁹⁵ savings plan, in the husband’s name, having a balance of $13,000; shares of A. T. & T. stock, individually or jointly titled; two $10,000 certificates of deposit, one in the name of the wife only, and the other in the names of the wife and the parties’ two sons; a savings account in the name of the wife, having a balance of $3,600; six small insurance policies, two of which insured the lives of the sons; the household furniture located in the marital home; and, the benefits payable under the husband’s retirement plan. The marital property, exclusive of the retirement plan, was determined to have a total value of $180,000. The chancellor ordered that the real property listed above be sold and that the proceeds remaining after indebtedness on the properties was discharged be equally divided between the husband and the wife; he ordered that the items of personal property be equally divided as well. With respect to the retirement plan, which he determined to have a present value of $134,224, the chancellor granted the wife a monetary award in the amount of $67,112, or one-half the value of the pension, and entered judgment against the husband in that amount.

In addition, the chancellor directed that the parties’ two automobiles be titled one in the name of each and awarded the wife alimony, in the amount of $150 per month, and attorney’s fees. No determination or award was made with respect to the benefits payable under the wife’s pension plan. I Marital Property Section 3-6A-01 (e) of the Courts Article states: "'Marital property’ is all property, however titled, acquired by either or both spouses during their marriage. It does not include property acquired prior to the marriage, property acquired by inheritance or gift from a third party, or property excluded by valid agreement or property directly traceable to any of these sources.” The question of whether the right to receive benefits under a private pension plan is marital property, which under ³⁹⁶ § 3-6A-05 (b) may be the subject of a monetary award "as an adjustment of the equities and rights of the parties” is not directly answered by the statute and has not heretofore been decided either by this Court or by the Court of Appeals.

The issue has been addressed by the courts of numerous other states which, upon dissolution of a marriage, divide, either equally or equitably, 2 the property acquired by the parties during their marriage. The overwhelming majority of the courts have determined, either expressly or by implication, that vested rights under a private or public pension plan, to the extent such rights were acquired during the marriage, are property subject to division upon dissolution. Rogers and Rogers, 609 P.2d 877, 880 (Or. App. 1980); see, Van Loan v. Van Loan, 569 P.2d 214 (Ariz. 1977); In Re Marriage of Brown, 126 Cal.

Rptr. at 634-35; In Re Marriage of Mitchell, 579 P.2d 613 (Colo. 1978); In Re Marriage of Evans, 406 N.E.2d 916, 918 (Ill. App. 1980); Foster v. Foster, 589 S.W.2d 223 (Ky. App. 1979); Sims v. Sims, 358 So. 2d 919 (La. 1978); Hutchins v. Hutchins, 248 N.W.2d 272 (Mich. App. 1976); Elliott v. Elliott, 274 N.W.2d 75 (Minn. 1978); In Re Marriage of Powers, 527 S.W.2d 949 (Mo.

App. 1975); In Re Marriage of Miller, 609 P.2d 1185 (Mont. 1980); Kruger v. Kruger, 375 A.2d 659, 662 (N.J. 1977); Copeland v. Copeland, 575 P.2d 99 (N.M. 1978); Hansen v. Hansen, 273 N.W.2d 749 (S.D. 1979); Cearley v. Cearley, 544 S.W.2d 661 (Tex. 1976); Englert v. Englert, 576 P.2d 1274 (Utah 1978); DeRevere v. DeRevere, 491 P.2d 249 (Wash. App. 1971); cf., Stigall v. Stigall, 277 N.E.2d 802, 811 (Ind. App. 1972) (pension is evidence to be considered by court in determining amount of award of property settlement); Rogers and Rogers, 609 P.2d at 881 (retirement benefits, while not marital property to be divided, are marital assets to be considered in ³⁹⁷ formulating decree); Leighton v. Leighton, 261 N.W.2d 457, 463-64 (Wis. 1978) (under Wisconsin statute, vested and nonvested pension benefits are to be considered in dividing property). But see, Savage v. Savage, 374 N.E.2d 536, 538-40 (Ind.

App. 1978); Witcig v. Witcig, 292 N.W.2d 788, 793 (Neb. 1980); Baker v. Baker, 546 P.2d 1325, 1326 (Ok. 1975). See generally, Legislation, Property Disposition Upon Divorce in Maryland: An Analysis of the New Statute, 8 U. Balt. L. Rev. 377, 400-403 (1979); Annot. Pension or Retirement Benefits as Subject to Award or Division by Court in Settlement of Property Rights Between Spouses, 94 A.L.R.3d 176 (1979).

The rationale of these decisions is that retirement benefits are a form of deferred compensation or wage substitute and the right to receive such benefits, being contractual in nature, a chose in action and thus, property. See, e.g., Van Loan v. Van Loan, 569 P.2d at 215-16 ; In Re Marriage of Hunt, 397 N.E.2d at 516-17. In Rogers and Rogers , the Court of Appeals of Oregon stated: "[Vjested retirement rights are a valuable asset earned through contributions which would otherwise have been available to the parties during the marriage. Even where contributions have been made entirely by the employer, the courts have concluded that retirement benefits are a mode of employee compensation and as such are an earned property right of the marriage.

As noted by the California Supreme Court in Brown, 544 P.2d at 566, 126 Cal. Rptr. at 638: '*** Over the past decades, pension benefits have become an increasingly significant part of the consideration earned by the employee for his services. As the date of vesting and retirement approaches, the value of the pension right grows until it often represents the most important asset of the marital community. *** A division of *** property which awards one spouse the entire value of this asset, without any offsetting award to the other spouse, does not represent [an] ³⁹⁸ equal division of *** property ***.’ ” (Footnote omitted.) 609 P.2d at 880. The courts have also noted the similarities between pension benefits and other sources of deferred income which are undisputably property, the New Jersey Supreme Court observing: "The right to receive monies in the future is unquestionably ... an economic resource.

In most situations its present dollar value can be computed. *** No one would quarrel with the proposition that the recipient of a life estate created by a testamentary or inter vivos trust owned a valuable asset which would be subject to equitable distribution. So, too, if one purchased or acquired an insurance annuity which paid a weekly sum certain to the beneficiary for life, the right to collect those funds would also be considered property subject to distribution. There are many different types of employee benefits, which employees or former employees receive, which everyone would readily admit are assets that have been acquired during employment. Deferred compensation, stock options, profitsharing and pensions are typical examples.” Kruger v. Kruger, 375 A.2d at 662 .

See also, Hutchins v. Hutchins, 248 N.W.2d at 277 ("these deductions [from the husband’s salary, paid into a contributory public employees pension account] would have been available to the parties during their marriage to be invested in stock, bonds, savings account, annuity and/or other investments.”); In Re Marriage of Brown, 126 Cal. Rptr. at 638 ("in other situations, when community funds or efforts are expended to acquire a conditional right to future income, the courts do not hesitate to treat that right as a community asset.”). A significant number of jurisdictions have extended the reasoning set forth above so as to encompass nonvested pension rights as well. See, e.g., Van Loan v. Van Loan, 569 P.2d at 215 ; In Re Marriage of Brown, 126 Cal.

Rptr. at ³⁹⁹ 634-35; In Re Marriage of Hunt, 397 N.E.2d at 518; Cearley v. Cearley, 544 S.W.2d at 666 ; Leighton v. Leighton, 261 N.W.2d at 464 . Generally, they have reasoned that while the nonvested nature of the pension may make its valuation difficult, it makes the right to receive the benefits no less property; thus they have rejected the characterization of such benefits as "expectancies” and have instead held them to be a "contingent interest in property.” In Re Marriage of Hunt, 397 N.E.2d at 517. We are persuaded that the correct rule is that the right to receive retirement benefits under a private or public employees pension plan, whether or not vested, matured, or contributory, is property and that, if acquired during the marriage, it constitutes marital property within the meaning of § 3-6A-01 (e). Accordingly, we hold that the chancellor did not err in determining that the appellant’s pension was marital property which could be the subject of a monetary award.

In reaching this conclusion, we are cognizant of our recent decision in Hill v. Hill, 47 Md. App. 460, 469 , 424 A.2d 779 , cert. granted, 290 Md. (1981), in which we held "as a matter of state law that military retirement pay is income and not 'marital property’ subject to division upon divorce”; however, Hill is not dispositive of the issue in the instant case. Justice Harry A. Blackmun, writing for the majority in McCarty v. McCarty, U.S. , 101 S. Ct. 2728 , 69 L. Ed. 2d 589 , 49 U.S.L.W. 4850, 4853 , observed: "[Military retired pay differs in some significant respects from a typical pension or retirement plan. The retired officer remains a member of the Army, ... and continues to be subject to the Uniform Code of Military Justice. ... In addition, he may forfeit all or part of his retired pay if he engages in certain activities.

Finally, the retired officer remains subject to recall to active duty by the Secretary of the Army 'at any time.’ ... These factors have led several courts, including this one, to conclude that military retired pay is reduced compensation for ⁴⁰⁰ reduced current services.” (Citations and footnotes omitted.) In our opinion in Hill , we relied most heavily upon two cases: In Re Marriage of Ellis, 538 P.2d 1347 (Colo. App. 1975), aff'd., Ellis v. Ellis, 552 P.2d 506 (Colo. 1976), which held that military retirement pay was not marital property subject to division upon divorce, and United States v. Williams, 279 Md. 673 , 370 A.2d 1134 (1977), which held that military retirement pay "constitutes wages for purposes of attachment under” Md. Comm. Law Code Ann. § 15-602. 47 Md. App. at 468-69 .

The Courts in those two cases each attached substantial weight to the unique characteristics of military retirement pay listed by Justice Blackmun in McCarty . As those factors which we found to be of significance in Hill are not involved in the pension in the instant case, or in any other non-military pension, we believe that different treatment of civilian and military retirement benefits is appropriate and that our decision in the instant case is not in conflict with our decision in Hill. Cf., Paulsen v. Paulsen, 601 S.W.2d 873, 875 (Ark. 1980) ("Military retirement pay is not a fixed and tangible asset such as a vested pension....”); In Re Marriage of Mitchell, 579 P.2d at 617 (distinguishing between a public employee retirement and the military pension held not to constitute property in Ellis v. Ellis, supra); compare, Russell v. Russell, 605 S.W.2d 33, 35 (Ky. App. 1980) (holding military retirement pay not property subject to division, on federal pre-emption grounds), and Foster v. Foster, 589 S.W.2d at 224 (Ky.

App. 1979) (holding vested private pension is property subject to division). The appellant’s pension is subject to the protections and requirements of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. Section 206 (d) (1) of ERISA, 29 U.S.C. § 1056 (d) (1), provides that "each pension plan [subject to ERISA] shall provide that benefits provided under the plan may not be assigned or alienated.” Relying upon the decision of the Supreme Court in Hisquierdo v. Hisquierdo, 439 U.S. 572 , 99 S. Ct. 802 , 59 L. Ed. 2d 1 (1979), the appellant contends that the ERISA ⁴⁰¹ anti-assignment provision bars treatment of his pension as marital property. We do not agree.

In Hisquierdo , the Supreme Court held that the noncontractual retirement benefits payable to a railroad employee under The Railroad Retirement Act of 1974, 45 U.S.C. § 231 , et seq., are not subject to allocation and division upon dissolution of the employee’s marriage. In so doing, the Court reversed a judgment of a California court, which had held such benefits to be community property and awarded the spouse of a railroad employee an interest in the employee’s expectation of receiving benefits under the Act. The Supreme Court did so on the basis of a conflict between the California award and the provisions and objectives of the Act; it found that Congress, by expressly providing a separate benefit for an employee’s spouse, which was terminated by divorce, see 45 U.S.C. § 231d, and by providing that benefits were not to be "anticipated,” "assigned,” or "subject to any tax or to garnishment, attachment, or other legal process,” see, 45 U.S.C. § 231m, had indicated its intent that the full amount of the benefits were for the employee alone, in order to insure that the employee’s pension was sufficient to support him in his old age and to encourage retirement. The Court reasoned that diminution of that benefit, either directly, by means of an order directing payment of a portion of the benefits to the spouse, or indirectly, by awarding the spouse other property to offset the amount of the pension, would frustrate the Congress’ purpose and that state law was therefore pre-empted under the Supremacy Clause of the United States Constitution.

Subsequent to the submission of arguments in this case, the Supreme Court, in McCarty v. McCarty, supra, employing reasoning similar to that in Hisquierdo , held that military retirement pay was not subject to division as community property upon dissolution of a serviceman’s marriage. The Court found a conflict between the terms of the military retirement statutes and the community property right asserted and found that division of the retirement pay would frustrate the Congressional objective of providing for the retired serviceman and encouraging enlistment, orderly ⁴⁰² promotion, and the maintenance of a youthful military; consequently, it held that state law was pre-empted and reversed the California judgment awarding a retired serviceman’s former spouse a portion of the serviceman’s retirement pay. These decisions, and the statutes they construe, are clearly distinguishable from