Smith v. Smith

JAMES P. SALMON, J. (Retired, Specially Assigned). Frederick Troy Smith (“Frederick”) and Sandra Smith (“Sandra”) were married on September 15, 1966. Forty-one years later, on October 15, 2007, Sandra filed a complaint for ³¹ divorce against Frederick in the Circuit Court for Prince George’s County.

Frederick responded by filing a cross-complaint for divorce against his spouse. At trial, the major issues about which the parties could not agree were financial. On July 17, 2008, the trial judge ruled from the bench and, insofar as here pertinent, divided the marital property evenly between the litigants. Before the order granting a judgment of absolute divorce was signed, Sandra filed a motion to open the record to receive new evidence concerning post-retirement monies ($33,-088.61) that had recently been received by Frederick from his former employer.

Frederick, who had retired from his job with the Montgomery County Public School system on June 24, 2008, received the money to pay him for unused accrued leave. Sandra claimed that these monies were marital property and that she was entitled to receive a monetary award equal to one-half of the net proceeds. The trial judge granted the motion to open the record, but ultimately declined to treat as marital property the monies recently received by Frederick. A final judgment of absolute divorce was entered on February 6, 2009.

Frederick filed a motion to amend judgment on February 12, 2009. The motion concerned a 5.35 acre parcel of land located in St. Mary’s County that was titled in the name of Frederick and Sandra, as tenants by the entirety. Frederick contended in his post-trial motion that the trial court erred when it failed to grant him a monetary award equal to the full value of the St. Mary’s County land because, despite the way the land was titled, the transferor of the property (Frederick’s mother) intended the transfer to be a gift to Frederick alone. In the alternative, Frederick asked the court to transfer the St. Mary’s County property to him.

That motion was denied. Frederick noted an appeal and Sandra filed a timely cross-appeal. As phrased by Frederick, the issue to be resolved is: [WJhether the trial court considered the contribution of either party to marital property which resulted in an error ³² by equally dividing the interest in the St. Mary’s Property between Mr. and Mrs. Smith when such property had been given to Mr. Smith by his mother and Mr. Smith merely titled the property as tenants by the entirety. In her cross-appeal, Sandra asks: “Whether the trial court erred in ruling that money due the Husband from his employer upon retirement for accrued leave was not marital property.” I. Facts Relevant to Issue Raised by Frederick Frederick’s mother, Alice Smith (“Alice”), owned a 5.35 acre parcel of property in St. Mary’s County.

Alice deeded a fifty percent interest in that property to Sandra and Frederick, as tenants by the entireties, on February 5, 1996. The deed was duly recorded in the St. Mary’s County land records on February 6, 1996. Less than one year later, on January 28, 1997, Alice signed a second deed conveying the remaining fifty percent interest in the property to Frederick and Sandra as tenants by the entireties. That deed was also duly recorded.

Alice died on February 11,1999. 1 In regard to the St. Mary’s County property, Sandra testified on direct examination that she and Frederick own the property. She then testified, ambiguously, that although she ³³ “wasn’t there at the meeting” she knew that Frederick’s mother intended to “g[i]ve [Frederick] that property.” Frederick testified that he, his mother (Alice), and Alice’s attorney, David Gwynn, Esquire, met at Mr. Gwynn’s Upper Marlboro, Maryland office to discuss the transfer of the St. Mary’s County property. These discussions occurred before his mother signed both the 1996 and 1997 deeds. According to Frederick, Alice wanted to transfer the property to him alone but he suggested, and his mother acquiesced in the suggestion, that Sandra’s name be put on the deed so that if he (Frederick) died first, Sandra could avoid probate. 2 II.

Analysis of the Issue Raised by Frederick Frederick recognizes that, pursuant to Md. Ann. (2006 Repl. Vol.), § 8-201(e) of the Family Law Article (“FL”), the St. Mary’s County property was correctly found by the trial judge to be marital property. FL section 8-201(e) reads: § 8-201. Definitions.

(e) Marital property. — (1) “Marital property” means the property, however titled, acquired by 1 or both parties during the marriage. ³⁴ (2) “Marital property” includes any interest in real property held by the parties as tenants by the entirety unless the real property is excluded by valid agreement. (3) Except as provided in paragraph (2) of this subsection, “marital property” does not include property: (i) acquired before the marriage; (ii) acquired by inheritance or gift from a third party; (iii) excluded by valid agreement; or (iv) directly traceable to any of these sources. (Emphasis added.) The main “error” that Frederick claims that the trial judge committed was that the judge, when he concluded that the St. Mary’s County property should be divided equally, failed to “address” factor nine, which is one of the eleven factors set forth in FL section 8-205(b) 3 that must be considered when deciding whether to make a monetary award. Section 8-205(b) reads, in pertinent part: ³⁵ (b) Factors in determining amount and method of payment or terms of transfer. — The court shall determine the amount and the method of payment of a monetary award, or the terms of the transfer of the interest in property described in subsection (a)(2) of this section, or both, after considering each of the following factors: (9) the contribution by either party of property described in § 8-201(e)(3) of this subtitle to the acquisition of real property held by the parties as tenants by the entirety; (Emphasis added.) It should first be noted that the St. Mary’s County property did meet the definition of “property described in section 8-201(e)(3)” because it was property “acquired by ... gift from a third party.” Frederick argues: The Marital Property Act as amended makes it clear that the source of funds does not apply to an interest in real property by the parties as tenants by the entirety.

I[n] effect, the Act creates a legal fiction wherein regardless of the source, property titled as tenants by the entirety is considered marital property. However, to the extent the property is classified as marital, then the Court, in the interest of equity, must consider as a factor in the equitable distribution of marital property a party’s contribution of non-marital funds to real property titled as tenants by the entirety. Flanagan v. Flanagan, 181 Md.App. 492 [ 956 A.2d 829 ] (2008). See also John F. Fader II and Richard J. Gilbert, MARYLAND FAMILY LAW Section 15-9(a), at 15-39 to 44 (4th edition 2006, 2007 Supp.) and Gordon v. Gordon, 74 [174] Md.App. 583, 923 A.2d 149 (2007) also citing Fader.

(Emphasis in original.) We have no quarrel with the legal principles relied upon by Frederick. But, under the circumstances, those principles do not advance Frederick’s position. As far as is shown in the ³⁶ record, neither Frederick nor Sandra contributed one penny of non-marital funds to the acquisition of the St. Mary’s County property. The trial judge appropriately considered factor nine, because he found (correctly) that Alice, by deeding the property to the parties as tenants by the entirety, made a gift of that land to both Frederick and his spouse.

Because the gift was to both parties the ninth factor, insofar as the St. Mary’s County property is concerned, was neutral. Frederick makes a second argument that is closely related to his first, viz: The court in rendering its judgment stated that the St. Mary’s tract of land was a gift from the mother to both Mr. and Mrs. Smith. As such it was marital property and he ordered that it be sold and divided equally. However, the testimony is undisputed that the St. Mary’s tract of land was a gift from the mother to appellant.

As set forth in the statement of facts, even the appellee admitted that she knew that the St. Mary’s property was a gift from her mother to her son. She confirmed this both on cross examination and re-cross examination. Moreover, no testimony was adduced at trial to show what contribution the appellee made to St. Mary’s property other than having title by virtue of the appellant’s desire to protect her in the event of his death. The reason for this lack of evidence is simple, she made no contribution whatsoever.

The evidence, contrary to Frederick’s argument, did not show that Alice made a gift of the land only to Frederick. Although Alice initially intended to make a gift of the land to Frederick, she changed her mind. She did so at Frederick’s suggestion and for no consideration. After changing her mind, Alice made a gift of the land to Frederick and Sandra by transferring it to them as tenants by the entirety.

Titling property in that fashion, of course, had legal consequences more far reaching than simply allowing the surviving tenant to avoid probate. ³⁷ It is true, as Frederick stresses, that the evidence is clear that Sandra made no contribution whatsoever to the acquisition of the land. But, contrary to the implication contained in that argument, that fact was neutral because Frederick likewise made no contribution of funds to the acquisition of the land either. He, like Sandra, simply received a gift.

III

Issue Raised by Sandra on her Cross-Appeal Frederick worked for the Montgomery County Public Schools system as an energy management technician from 1981 until he retired on June 24, 2008. His retirement date was approximately three weeks prior to the date when the trial in this matter commenced. After Sandra’s post-trial motion to “open the record” was granted, she proved that on July 31, 2008, after the trial had concluded, Frederick was paid $83,088.61 by his former employer to reimburse him for accrued annual leave and sick leave. After taxes, he received $19,406.46.

Sandra argues that because Frederick retired before their divorce was granted, the payment represented the repayment of a debt owed to Frederick by his employer for services rendered during the marriage and thus met the definition of marital property. According to Sandra, the trial court erred when it ruled that the $33,088.61 was non-marital property. She asserts that the trial court should have given her a monetary award equal to fifty-percent (50%) of $19,406.46 or $9,703.23. Frederick, relying on Thomasian v. Thomasian, 79 Md. App. 188 , 556 A.2d 675 (1989), maintains that the trial judge correctly ruled that the value of accrued annual and sick leave should be categorized as non-marital property, even though, prior to the divorce, he received monies from his employer paying him for the value of that accrued leave.

In Thomasian , the husband was, at the time a judgment of divorce was granted, a senior health officer at Providence Hospital in Washington, D.C. Id. at 191 , 556 A.2d 675 . At the time of the divorce hearing, he had accrued more than 180 ³⁸ hours of vacation time and more than 180 hours of unused holiday time. Id. at 196 , 556 A.2d 675 . The accrued leave had a total value of more than $12,000.

Id. Ms. Thomasian unsuccessfully attempted to convince the trial judge that the value of the accrued leave met the definition of marital property and therefore should be categorized as such when determining whether to make a monetary award. Id. at 196-97 , 556 A.2d 675 . In Thomasian, Judge Robert Bell said for this Court: This precise issue was presented to the Supreme Court of Alaska in Schober v. Schober, 692 P.2d 267 (Alaska 1984).

There, Mr. Schober, an Alaska state trooper had over 400 hours of accrued, but unused personal leave. Under the terms of his contract "with the State, he could use the leave as paid vacation or convert it to cash. Mrs. Schober unsuccessfully sought to have the trial judge consider the unused leave as a marital asset. In denying that request, the trial court was of the opinion that the leave was contingent and, therefore, not a present asset.

The appellate court reversed. It pointed out that Mr. Schober’s interest in his unused leave was, rather than an expectancy, a chose in action, a form of property, because his right to paid vacation constituted deferred wages for services rendered and, consequently, vested as the labor was rendered. As a result, the court determined that Mr. Schober’s interest was like a pension or retirement benefit, a form of deferred compensation. The court concluded, therefore, that the unused leave was a marital asset and should have been considered by the trial court in determining how to divide the Schobers’ property.

Even though it is closely akin to that used by the Court of Appeals and this Court in Deering [v. Deering, 292 Md. 115 , 437 A.2d 883 (1981) ], Ohm [v. Ohm, 49 Md.App. 392 , 431 A.2d 1371 (1981) ], and Green [v. Green, 64 Md.App. 122 , 494 A.2d 721 (1985) ], we are not persuaded by the rationale of the Alaska Court. Nor are we satisfied that simply because the definition of property in our Act is expansive enough to encompass accrued holiday and vacation entitlement, it nec ³⁹ essarily does. We just are not persuaded that accrued holiday and vacation entitlement is the same as a pension or retirement benefits, a form of deferred compensation; since it replaces wages on days when the worker does not work, it is really only an alternative form of wages. MEA/AFSCME Local 519 v. City of Sioux Falls, 423 N.W.2d 164, 166-67 (S.D.1988).

It need not be liquidated by the payment of cash; it may be, and often is, dissipated when the person entitled to do so, takes vacation or holiday time. Thus, it is far from as tangible as, and much more difficult to value, not to mention more personal than, a pension or retirement benefits. Accordingly, we hold that accrued holiday and vacation entitlement is not marital property. It follows that the court did not err in refusing to consider it in determining whether to grant a monetary award.

Id. at 199-200 , 556 A.2d 675 (emphasis added). Sandra argues: Thomasian is not on point. Unlike Dr. Thomasian, Husband retired prior to trial. And unlike the