Pleasant v. Pleasant

⁷¹⁷ WENNER, Judge. Appellant, Alfred J. Pleasant, has appealed from a judgment of the Circuit Court for Prince George’s County granting appellee, Diana Marie Eugene, formerly Diana E. Pleasant, an absolute divorce, giving her a monetary award, and sanctioning appellant. Unhappy with the monetary award and sanctions, appellant noted this appeal. As the questions he has presented us with do not precisely reflect his contentions, we have rephrased them as follows: I. The trial court erred by failing to consider appellee’s contribution to Social Security as marital property.

II

The trial court erred by transferring title of the marital personal property, rather than ordering a sale and distribution of the proceeds of sale.

III

The trial court erred in its valuation of appellant’s real estate business.

IV

The trial court erred by requiring appellant to provide a former spouse survivor benefit in relation to its award of an interest in appellant’s pension to appellee. V. The trial court abused its discretion in presenting appellant -with what he has termed “ultimatums” regarding the method by which appellee would receive the awarded share of appellant’s pension.

VI

The trial court erred in imposing sanctions for appellant’s failure during discovery to produce tax and pension documentation in a timely manner. For the reasons we shall hereafter elucidate, we shall vacate that portion of the judgment granting appellee a monetary award and dividing the pension benefits, affirm the remainder of the judgment, and remand the case to the circuit court for further proceedings consistent with this opinion. Facts The parties were married in New Orleans, Louisiana, on June 2, 1979. Until they separated in April of 1986, they lived in Prince George’s County, Maryland, in a home purchased by appellant before they were married.

At the time of the ⁷¹⁸ divorce, the primary marital assets were partial interests in the home, appellant’s government pension, automobiles, bank accounts, a real estate brokerage firm begun by appellant during the marriage, and a relatively small amount of household furnishings. Inasmuch as they were unable to reach a settlement, the parties asked the circuit court to divide this property. The trial judge determined the following to be marital property: Pensions Value Alfred Pleasant $167,907 Diana Pleasant 12,023 $179,930 Property Value Titling/Possession 1 House $ 77,298 Husband Jaguar 13,675 Husband Excalibur 6.000 Husband Bolling AFB CU 431 Husband Crestar 505 Husband DC Teachers FCU 10,717 Husband DC Teachers IRA 3,130 Husband Citizens Bank 210 Husband Citizens Bank 217 Wife Cressida 4,425 Wife Alfred Pleasant & Assoc. 8.000 Husband Business checking account 250 Husband Sleep sofa 75 Husband Freezer 50 Husband Night stand 20 Husband Dining room set 3.000 Husband Television 200 Husband Sewing machine 200 Wife Mixer 150 Husband Crystal 100 Husband Silverware 200 Husband Wedgewood serving set 200 Husband Microwave 200 Husband $129,226 2 ⁷¹⁹ The trial judge then determined that an equal division was equitable. Based upon expert testimony, appellee was awarded 16.9% of appellant’s pension if, as, and when received by him, and appellant was ordered to provide appellee with a survivor’s benefit annuity to guarantee appellee’s receipt of pension payments after appellant’s death.

The trial judge also ordered that the personal property remain with the person currently in possession of it, and granted appellee a monetary award of $64,613, one half of the total value of the marital property. Analysis Social Security Appellant first asserts that appellee’s contribution to social security should have been included in the marital pension assets. Although this appears to be an issue of first impression in Maryland, the treatment of social security benefits in the division of marital property has been considered by a number of other states. After reviewing these decisions, it is clear to us that the Supremacy Clause of the United States Constitution precludes states from intervening in the allocation of social security benefits.

Consequently, social security benefits may not be considered marital property or be subject to distribution in any manner in a divorce proceeding. See, Taylor v. Director of OWCP, 967 F.2d 961, 963-64 (4th Cir.1992) (characterizing social security as government benefit rather than property right); Olson v. Olson, 445 N.W.2d 1, 5-11 (N.D.1989) (summarizing preemption analysis as applied by various state courts); Deering v. Deering, 292 Md. 115 , 125 n. 8, 437 A.2d 883 (1981) (recognizing potential preemption of state divorce law by federal pension law). The trial judge did ⁷²⁰ not err in declining to include appellee’s contributions to social security in valuing the marital pension assets. 3 Transfer of Title to Property In Maryland, in a domestic case, the trial judge has no authority to transfer ownership of property from one of the parties to the other, other than to transfer an interest in a pension, retirement, profit sharing, or deferred compensation plan. Md.Fam.Law Code Ann. §§ 8-202(a)(3), 8-205(a).

Rather, the trial judge may either grant a monetary award to adjust the equities of the parties, id. § 8-205(a), or, in the case of property owned by both of them, order that the property be sold and the proceeds divided equally. Id. § 8-202(b)(2). With respect to the titling of personal property, the Court of Appeals has recognized a distinction between “the broad category of personal property generally and the narrower one of household goods and furnishings purchased for the use of the family unit.” Bender v. Bender, 282 Md. 525, 533-34 , 386 A.2d 772 (1978). Unless rebutted by evidence of individual ownership, the presumption that the purchasing spouse makes a gift of one’s goods in the latter category to the marital unit results in joint ownership of such goods.

Id. at 534-37 , 386 A.2d 772 . Thus, household furnishings may be disposed of by a partition, or by a sale of the property and a division of the proceeds. Permitting each party to keep the items of jointly owned property then in his or her possession at the time of the divorce is “tantamount to transferring ownership of that property from both parties to one of them ... [which] the court is not authorized to do.” Rogers v. Rogers, 80 Md.App. 575, 586 ,. 565 A.2d 361 (1989). Unfortunately, for the parties, it is clear from the record before us that the trial judge did exactly that which is prohibited by Rogers .

Although recognizing that sale is ap ⁷²¹ propriate in a situation such as this one, the trial judge, perhaps misled by the incorrect heading on the S-74 form, has confused the issues of possession and titling. In making his determination, the trial judge said: In most cases whenever the property is either titled in joint names and then we have to order sale and do things of that nature in order to get to the ultimate disposition of the property. In this case it is a little bit different. Everybody seems to own everything themselves and I am not yet dealing with the property that is in the house and how it is titled.

I am now going to go back to the second page. The way I read this, everything is in the husband’s name — here I have the husband’s sleep sofa, husband’s washer, night stand. This could be possession, too — sewing machine. I am going to consider those as part of the marital property and I will consider them titled as the S-74 says they are.

I now come to a total of $129,226. I am now going to divide that by two ... it says whose pension [sic] it is in — it stays within that person’s possession — this is the value of the total for marital property purposes. If it is in his possession, ... that stays within his possession. The sewing machine is in her possession and the S-74 says that.

I take the $129,226 figure, divide it by 50 percent, equals $64,613. In the absence of evidence to the contrary, appellant and appellee are presumed to hold the household goods and furnishings as tenants by the entirety. Upon divorce, they then hold such property as tenants in common. Consequently, the trial judge had no authority to permit either of them to retain possession of the property then in his or her possession, but should have ordered the property sold and the proceeds divided between them.

Under these circumstances, we shall set aside the monetary award and remand the case to the ⁷²² circuit court. 4 Valuation of Appellant’s Business The trial judge gave appellant’s real estate brokerage a value of $8000. Appellant contends that the trial judge erred because his business had no value. As the Court of Appeals recently pointed out: [Rule 8-131 (c) and its precursors Rules 886 and 1086] have been consistently interpreted in our cases to require that appellate courts accept and be bound by findings of fact of the lower court unless they are clearly erroneous. And as we said in Ryan v. Thurston [ 276 Md. 390, 392 , 347 A.2d 834 (1975) ], “[t]he appellate court must consider evidence produced at the trial in a light most favorable to the prevailing party and if substantial evidence was presented to support the trial court’s determination, it is not clearly erroneous and cannot be disturbed.” Moreover, as we reiterated in Housing Comm’n v. Lacey, [ 322 Md. 56, 59-60 , 585 A.2d 219 (1991) ], the trial court is not only the judge of a witness’s credibility but also of the weight to be attached to the evidence.

It is thus plain that the appellate court should not substitute its judgment for that of the trial court on its findings of fact but -will only determine whether those findings are clearly erroneous in light of the total evidence. ⁷²³ U.S. Money v. Kinnamon, 326 Md. 141, 149 , 604 A.2d 64 (1992). The trial judge valued appellant’s real estate brokerage by considering appellant’s 1989 tax returns which showed a gross income of $6240, appellant’s 1990 tax returns which showed a gross income of $7343, and appellant’s testimony that the brokerage had no value whatever. After considering this evidence and discounting appellant’s opinion of its value, the trial judge assigned a value of $8000 to the brokerage. 5 There was no error. Pensions Appellant next contends that the trial judge erred in awarding appellee a survivor benefit annuity in conjunction with the “if, as and when” payment of appellee’s interest in the marital portion of appellant’s civil service pension.

While we do not find the award of a survivor benefit annuity to be erroneous, we conclude, after reviewing the trial judge’s overall treatment of the pension assets, that he erred in distributing the pension. From the testimony of an economist who qualified as an expert in valuing pensions, the trial judge determined that the marital portion of appellant’s pension had a present value of $167,907, and that the marital portion of appellee’s pension from the Maryland State Retirement System had a present value of $12,023. The trial judge then granted half of the pension, or $89,965 to each party. After adjusting for the value of appellee’s pension, which was to remain in her name, appellee was awarded $77,942.

The economist calculated that this would amount to an “if, as and when” payment of 16.9% of the pension payments received by appellant. We think it clear from the record that the formula used by the economist was not that prescribed by Bangs v. Bangs, 59 Md.App. 350 , 475 A.2d 1214 (1984). In Bangs , we held that it was not an ⁷²⁴ abuse of discretion to award future payment of the divorced spouse’s share of retirement benefits according to the following formula: former spouse share x Years and months of marriage Years and months of employment credited toward retirement Id. at 356 , 475 A.2d 1214 ; see also Rohrbeck v. Rohrbeck, 318 Md. 28 , 39 n. 5, 566 A.2d 767 (1989). In Hoffman v. Hoffman, 93 Md.App. 704 , 614 A.2d 988 (1992), we held that, because the marital portion is determined in relation to the total years of employment, and therefore “cannot be determined until the appellant retires from civil service and the number of years of total employment is known,” the Bangs formula is the formula to be used in awarding an “if, as and when” payment.

Id. at 719, 614 A.2d 988 . Thus, awarding appellee 16.9% of the pension payments received by appellant was erroneous. In addition to the 16.9% “if, as and when” payment, the trial judge ordered appellant to provide appellee with a former spouse survivor annuity to ensure appellee that she would receive her portion of appellant’s pension in the event of appellant’s death. Because this issue will no doubt recur upon remand, we shall address it here.

Appellant first asserts that the award of a survivor annuity is improper on the basis that a “survivor benefit is not property acquired during the marriage, and therefore cannot constitute marital [property].” We disagree. Unless jointly waived by the employee and his/her spouse at the time of retirement, the annuity to be received by the employee is automatically reduced by 2½ of the first $3,600 plus 10% of the amount over $3,600 in order to provide a survivor annuity for the spouse. 5 U.S.C. §§ 8339 (j)(1), (4). If elected by the employee, or ordered by a court in relation to a divorce or annulment, a former spouse may also be entitled to a survivor annuity. 5 U.S.C. § 8341 (h)(1). The reduction of the employ ⁷²⁵ ee’s annuity to pay for a former spouse survivor annuity is at the same rate as for the spousal survivor annuity. 5 U.S.C. §§ 8339 (j)(2), (4).

We thus find that the right to a survivor annuity is incident to the marital relationship, and that such a right, analogous to the right to the pension benefits themselves, falls within the definition of marital property contained in Deering v. Deering, supra, 292 Md. at 125 , 437 A.2d 883 . Consequently, it is within the discretion of the trial judge to order that a former spouse survivor annuity be provided so as to continue the protection of the spouse’s interest in the marital portion of the pension previously provided by the spousal survivor annuity. Appellant also asserts that “the Court made no effort to determine the cost of a survivor’s benefit nor recognize that the appellant would be spending future funds (non-marital) to provide such a benefit” and that, contrary to Heyda v. Heyda, 94 Md.App. 91 , 615 A.2d 1218 (1992), the trial judge gave no consideration to federal regulations concerning orders from state courts affecting a former spouse’s survivor annuity. We shall address these concerns together.

Heyda involved a court order that, in satisfaction of a stipulation between the parties that Mrs. Heyda be awarded a 50% interest in Mr. Heyda’s pension from the federal government with “survivorship benefits,” required Mr. Heyda to provide a former spouse survivor annuity, to be replaced with an insurable interest annuity should Mrs. Heyda remarry before age 55. 6 On appeal, we determined that there were significant differences between the two types of annuities and that, in order to comply with the circuit court’s order, Mr. Heyda would be required to take action contrary to federal regulations governing such annuities. On remand, the circuit court was instructed to “carefully consider the limitations imposed by the federal government on a state court’s power to pass an order affecting a Former Spouse Survivor Annuity ⁷²⁶ and/or and Insurable Interest Annuity.” Id. at 106 , 615 A.2d 1218 . In the instant case, we refer the circuit court to 5 C.F.R. Part 838, entitled “Court Orders Affecting Retirement Benefits,” which “regulates the Office of Personnel Management’s handling of court orders affecting the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS).” Id. § 838.101. 7 As in Heyda , we believe it important to review the pertinent provisions of the regulations contained in 5 C.F.R. Part 838 before explaining our ruling. 8 There are three types of retirement benefits that may be affected by court orders in connection with divorce, annulment, or legal separation: (1) the employee’s retirement payment or “employee annuity,” (2) the refund of employee contributions in the event of pre-retirement separation from government employment, and (3) the spousal survivor annuity, which provides for continued payment to the spouse after the employee’s death. See 57 Fed.Reg. at 33571.

The regulations establish requirements, explain terminology, and recommend language to be used in the preparation and processing of court orders affecting each type of benefit. 5 C.F.R. § 838.102 (a). Of significance to the case sub judice, the regulations permit a court to award a former spouse a “pro-rata share” of ⁷²⁷ an employee’s retirement annuity. 5 C.F.R. § 838.621 . A pro-rata share is