Hawkins, D. v. Hawkins, J. ( 2014 )


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  • J-A25018-14
    NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
    DONNA IEZZI HAWKINS                                IN THE SUPERIOR COURT OF
    PENNSYLVANIA
    Appellant
    v.
    JOSEPH HAWKINS
    Appellee                    No. 494 EDA 2014
    Appeal from the Order of January 21, 2014
    In the Court of Common Pleas of Delaware County
    Civil Division at No.: 07-3259
    BEFORE: DONOHUE, J., WECHT, J., and PLATT, J.*
    MEMORANDUM BY WECHT, J.:                           FILED NOVEMBER 03, 2014
    Donna Iezzi Hawkins (“Wife”) appeals the January 21, 2014 order that
    disposed of the parties’ economic claims arising from their divorce.       After
    review, we are constrained to vacate the order of the learned trial court, and
    we remand for further proceedings.
    Wife and Joseph Hawkins (“Husband”) married on October 20, 1979.
    On March 27, 2007, Wife filed a complaint in divorce. The date of separation
    was December 31, 2003.            On March 26, 2010, Wife filed a petition for
    bifurcation that the trial court ultimately granted. On December 15, 2010,
    the divorce decree entered.         A master was assigned to hear the equitable
    distribution matter, but retired before reaching a determination. Trial Court
    ____________________________________________
    *
    Retired Senior Judge assigned to the Superior Court.
    J-A25018-14
    Opinion (“T.C.O.”), 3/26/2014, at 2. On November 27, 2013, the trial court
    held a hearing on the parties’ economic claims.
    The trial court made the following findings of fact and conclusions of
    law:
    [Wife] is currently 56 years of age and currently resides [in
    Wilmington, Delaware]. [Husband] is currently 64 years of age
    and currently resides [in Drexel Hill, Pennsylvania].
    The parties . . . have one emancipated child, Alicia . . . . Wife
    also has a son from her previous marriage[, Brian,] who was
    adopted by Husband and is also emancipated.
    Wife is employed as an Office Manager at the University of
    Pennsylvania and has held that position since 1992.         Wife
    receives “good benefits” from the University of Pennsylvania and
    her present gross salary is $54,000. In addition, Wife holds a
    Bachelors of Arts degree from the University of Pennsylvania
    which she received during the parties’ marriage.
    Since the December 14, 2010 divorce, Wife has remarried and
    purchased a home with her new husband who has a background
    as an accountant. Wife testified that her current household
    income is approximately $150,000.          This Court also heard
    credible testimony that Wife is in excellent health.
    Husband was employed with Sunoco during the parties’ marriage
    and continued post[-]separation until retiring at age 55.
    Husband testified that he was effectively forced into retirement
    in December of 2005 after Sunoco lowered his grade level by
    two grades.      Husband received an incentive package for
    retirement from Sunoco and has been unable to secure suitable
    employment since. . . . Husband is not in good health as he
    suffers from arthritis. Husband has little prospect of meaningful
    employment in the future.
    *    *    *
    Husband has helped the parties’ daughter, Alicia, pay for her
    college tuition and loans. After separation Husband took over
    four (4) Sallie Mae loans on behalf of Alicia. This Court notes
    that Alicia attends college at the University of Pennsylvania and
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    since her mother (Wife) is an employee there, 75% of daughter’s
    tuition is paid by the University. This Court heard testimony that
    Husband has paid $55,000 of daughter’s college loans/tuition to
    date and that the present amount owed on those loans is
    $57,223.02.      In addition Husband pays $1,400 per month
    toward the college loans/tuition for the daughter.
    The marital residence was sold after Wife filed her Complaint in
    Divorce and the proceeds were placed in an escrow account.
    During the Equitable Distribution Trial, [W]ife called Kenneth
    Biddick to testify with respect to the present day valuations of
    the marital estate, including the parties’ retirement accounts and
    plans, stocks, bank accounts, and life insurance cash values. Mr.
    Biddick was qualified by this Court as an expert in forensic
    accounting.     Mr. Biddick testified to the appreciated and
    accumulated values, dividends, distributions, loans, and referred
    generally to stocks sometime dividing and advised the Court that
    he relied on Wife’s new husband (who is also an accountant) to
    provide him with the documents and information upon which he
    reached his conclusions and testified to in open Court.
    This Court heard extensive testimony that both Husband and
    Wife had and still have numerous retirement accounts and
    pensions. Husband and Wife disagree about the date the Court
    should use to value the various retirement accounts and
    pensions. Husband submitted to the Court that the particular
    facts and circumstances, supported by the prevailing case law
    requires a date of separation value, and Wife argues that the
    prevailing case law requires a date of distribution value.
    There is no disagreement between the parties regarding the date
    of separation, December 31, 2003, and the value of the various
    retirement and pension plans as of that date. There is also no
    disagreement that the various retirement accounts/pensions had
    had significant withdrawals by both parties since December 31,
    2003. Since the December 31, 2003 date of separation, both
    parties have relied upon and withdrawn, on multiple occasions,
    substantial amounts from the retirement funds, with each party
    assuming their own tax consequences for the early withdrawal.
    Wife testified that she withdrew $97,000 from her retirement
    funds for living expenses for herself and her new husband as
    well as legal expenses. Husband was permitted, by a Court
    Order signed by Judge Cartisano on November 15, 2010, to
    withdraw up to $60,000 annually from his Sunoco Vanguard
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    retirement account. Husband testified to withdrawing a total of
    $135,000 from his retirement accounts to assist with his living
    and medical insurance expenses since he was laid off from
    Sunoco in December of 2005.
    The Court was provided with some testimony, based upon Mr.
    Biddick’s extrapolation as to the value of this account and the
    monthly amount that Wife should receive upon her retirement.
    This Court again has concerns, with the methods and
    documentation, or lack thereof, used by Wife’s expert to reach
    the total and monthly amount that will be provided to Wife upon
    her retirement from the University of Pennsylvania.
    Based upon the Divorce Code and the current case law, this
    Court determined that Wife’s Retirement Allowance Plan from
    the University of Pennsylvania is considered marital property by
    this Court.
    This Court was also asked to equitably divide the Sunoco wage
    continuation severance pay,[1] which was provided to Husband
    upon his retirement from Sunoco in December of 2005. This
    retirement/severance package . . . consisted of Husband’s wage
    continuation and his unused vacation days and it was provided
    to [H]usband upon his retirement in December of 2005. Based
    upon the Divorce Code and the current case law this Court
    further determined that Husband’s wage continuation and
    severance pay, that included unused vacation days, will not be
    . . . considered marital property by this Court and is not
    considered a marital asset as it is post[-]separation income for
    Husband.
    T.C.O. at 4-8 (citations to record omitted).
    On January 21, 2014, the trial court filed its equitable distribution
    order.    In that order, the trial court reasserted its misgivings regarding
    Wife’s expert’s testimony given the lack of testimony about methodology,
    ____________________________________________
    1
    Wife characterizes this payment as severance pay. Husband calls it a
    wage continuation. For ease of reference, we use “severance pay.”
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    lack of supporting documentation, and the expert’s reliance upon the work
    product of Wife’s husband. Order, 1/21/2014, at 6, 8. The court found that
    there was no marital debt. Id. at 16. The court also determined that the
    date of separation value for the retirement/pension funds should be used
    because both parties had made withdrawals from the funds post-separation
    and the expert testimony about current value was too speculative to support
    date of distribution values.   Id. at 17-18.    The court ordered a 50/50
    distribution scheme of assets as of the date of separation. Id. at 23-27.
    On February 4, 2014, Wife timely filed a notice of appeal. On February
    7, 2014, the trial court ordered Wife to file a concise statement of errors
    complained of on appeal pursuant to Pa.R.A.P. 1925(b).           Wife timely
    complied.   On March 26, 2014, the trial court filed its Pa.R.A.P. 1925(a)
    opinion.
    Wife raises four issues for our review:
    1. The Trial Court abused its discretion and misapplied the
    existing law in the Commonwealth of Pennsylvania in
    choosing the valuation date for marital property as the date
    of separation (December 1, 2003) as opposed to the
    preferred valuation date being the date of distribution. Said
    determination awarded to [Husband] all appreciation in the
    marital property and accounts over the intervening time
    period of the separation which acts as a windfall for
    [Husband].
    2. The Trial Court erred in choosing the separation date versus
    the date of distribution for valuing assets as the law applied
    by the Trial Court related to closely held businesses/
    corporations controlled by one party as opposed to marital
    assets such as savings, retirements, pension, real estate, etc.
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    3. The Trial Court erred and committed an abuse of discretion in
    determining the value of [Husband’s] lump sum pension
    payment from Sunoco and therefore, failed to apply a
    coverture fraction which would have established the marital
    portion of [Husband’s] Sunoco retirement.
    4. The Trial Court erred and committed an abuse of discretion
    when it determined that [Husband’s] severance pay package,
    which was based upon years of service while the parties were
    married and residing together, was not a marital asset
    subject to being apportioned for marital property purposes by
    applying a coverture fraction to the sum received less unused
    vacation days which [Husband] had accumulated after the
    parties separated.
    Wife’s Brief at 3.
    Our standard of review in assessing the propriety of a marital
    property distribution is whether the trial court abused its
    discretion by a misapplication of the law or failure to follow
    proper legal procedure. An abuse of discretion is not found
    lightly, but only upon a showing of clear and convincing
    evidence.
    When reviewing an award of equitable distribution, we measure
    the circumstances of the case against the objective of
    effectuating economic justice between the parties and achieving
    a just determination of their property rights.
    Smith v. Smith, 
    904 A.2d 15
    , 18 (Pa. Super. 2006) (citations and quotation
    marks omitted).
    Wife’s first two issues challenge the trial court’s use of the date of
    separation for valuing assets.   Wife contends that the trial court erred in
    using the date of separation value for the marital assets because it provides
    a windfall to Husband in the appreciation of the assets.    Wife also argues
    that the case law that the trial court relied upon in deciding to use the date
    of separation value was inapposite. Wife’s Brief at 9-13.
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    Husband responds that the case law supports the proposition that the
    trial court has broad discretion to use either date of separation or
    distribution   based   upon    what   economic   justice   in   the   particular
    circumstances requires. Husband contends that the trial court considered all
    of the appropriate factors in deciding to use the date of separation values
    and the 50/50 distribution. Husband’s Brief at 6-14.
    The trial court explained that, while the date of distribution ordinarily
    is preferred, a date of separation valuation worked better economic justice
    for these parties. T.C.O. at 10. The trial court stated that case law supports
    its application of the date of separation values to the parties’ retirement and
    bank accounts.    Id. at 11.     Because Husband and Wife each withdrew
    substantial amounts from their respective retirement accounts between
    separation and distribution, and because the accounts were subject to
    market forces, the trial court found that date of distribution valuations were
    too speculative to be reliable. Further, the court determined that using date
    of distribution values would result in a windfall to Wife and would be unjust
    for Husband. Id. at 12.
    We have confronted the date of valuation issue on prior occasions. In
    Sergi, we identified the various problems that can arise in choosing
    valuation dates. Sergi v. Sergi, 
    506 A.2d 928
    , 931 (Pa. Super. 1986). We
    stated that using date of separation valuations could result in a distribution
    using stale data or could neglect to consider appreciation or depreciation of
    assets.   However, we also noted that using date of distribution valuations
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    would fail to account for assets that were consumed during the pendency of
    the divorce and would allow a party to avoid including a marital asset in
    distribution. Ultimately, we concluded that:
    [W]e do not attempt at this time to establish a valuation to be
    used in every situation. To recognize a specific valuation date as
    a matter of law would deprive the trial court of the necessary
    discretion required to effectuate economic justice.
    Sergi, 506 A.2d at 932.
    Since Sergi, we have upheld trial court decisions that have used date
    of distribution valuations, as well as decisions that have used date of
    separation valuations; these affirmances relied upon the fact that the trial
    court provided a sufficient rationale for its decision. See, e.g., Diamond v.
    Diamond, 
    519 A.2d 1012
    , 1017 (Pa. Super. 1987) (using date of separation
    for land that was improved by the husband’s post-separation efforts); Bold
    v. Bold, 
    516 A.2d 741
    , 745 (Pa. Super. 1986) (using date of distribution
    when new appraisal was more credible and there was no evidence of waste
    or dissipation).   Recognizing that the Divorce Code provided no express
    valuation date, our Supreme Court has held that, in the usual case, a
    valuation date close to distribution should be used. Sutliff v. Sutliff, 
    543 A.2d 534
    , 536 (Pa. 1988).     Acknowledging that preference, we also have
    noted that there were factual situations, such as when one spouse consumes
    or dissipates an asset or when one party during separation has control of the
    fate of an asset, such as a closely held business, where date of separation
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    values may be more appropriate. Smith v. Smith, 
    653 A.2d 1259
    , 1270-71
    (Pa. Super. 1995).
    Based upon this case law, we reject Wife’s contention that the trial
    court applied inapposite decisional law.          Here, the trial court aptly
    recognized that it must determine the date of valuation within the context of
    the overarching goal of working economic justice between the parties. The
    trial court found that the date of distribution values provided were based
    upon conjecture and that their use would result in a windfall to Wife. The
    trial court appropriately considered that Husband is older, in worse health,
    and has less of an opportunity to acquire assets than Wife, among the other
    factors, in equitably dividing the marital estate. We cannot say that the trial
    court abused its discretion in doing so.
    Wife next challenges the trial court’s valuation of Husband’s lump sum
    pension payment. Wife argues that, upon his retirement, Husband received
    his pension as a lump-sum pay-out.         Wife asserts that, because the lump
    sum was Husband’s pension, which was based upon his years of service, a
    coverture fraction should have been applied to the lump sum to determine
    what portion of it was marital property. Wife’s Brief at 14-17.
    The trial court stated that a coverture fraction is only applied when it is
    necessary to determine what portion of a pension or retirement plan is
    marital property.    T.C.O. at 13.    The trial court found application of a
    coverture fraction to be unnecessary because the pension started after the
    date of marriage and the trial court used the date of separation as the
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    valuation date. Therefore, the trial court concluded that the entire amount
    was marital. T.C.O. at 14.
    Wife’s expert Kenneth Biddick testified that Husband received a lump
    sum payment for his retirement. According to Mr. Biddick, that included a
    lump sum from Sun Ship and a lump sum from Sunoco. Notes of Testimony
    (“N.T.”), 11/27/2013, at 97-100. Husband disputed this characterization of
    his retirement.   Husband admitted that he received a lump sum in 2005
    when he retired and that he put that money into a Merrill Lynch account.
    Id. at 312. However, Husband asserted that Wife’s expert double-counted a
    Sun Ship pension that had merged into the amount from Sunoco when he
    transferred jobs and that there were not two separate lump sums.        Id. at
    309. Husband also provided documentation showing the lump sum that he
    would have received as of the date of separation. Id. at 310 (citing Exh. D-
    3).
    There are two issues here.     The first is whether the pension, or a
    portion of the pension, is a marital asset and the second is how it should be
    distributed. Wife concentrates her argument on the first issue. Courts have
    struggled to define what portion of a pension is marital, and specifically, how
    to treat post-separation enhancements to that pension.         See Smith v.
    Smith, 
    938 A.2d 246
    , 253-57 (Pa. 2007) (detailing the history of
    Pennsylvania Supreme Court cases and split decisions addressing the issue).
    In Meyer, our Supreme Court held that increased pension benefits that were
    based solely upon years of service were to be included in the marital estate
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    and were subject to a coverture fraction. Meyer v. Meyer, 
    749 A.2d 917
    ,
    919 (Pa. 2000). The Smith Court noted that post-separation enhancements
    to a pension were generally marital property, but that the General Assembly
    had specifically carved out those enhancements “arising from postseparation
    monetary contributions made by the employee spouse.” Smith, 938 A.2d at
    259.      However,      enhancements    resulting   “merely   from      continued
    employment,      such   as   supplemental   retirement   income,    [and]   bonus
    inducements,” were marital property. Id. Following Smith, we addressed
    whether cost of living adjustments to a pension were marital property. See
    MacDougall v. MacDougall, 
    49 A.3d 890
    , 894 (Pa. Super. 2012). Finding
    that the adjustments were automatic, based upon the husband’s years of
    service and accrued without the husband’s effort or contribution, we
    determined that they were marital property. Id. at 894, 896.
    Wife’s arguments are correct. However, they are unavailing. The trial
    court found that the entire pension was marital property. Order, 1/21/2014,
    at 10. Because the entire pension was marital, there was no need to apply a
    coverture fraction.     Wife’s actual argument is not that the court excluded
    part of the pension as non-marital, but that the court distributed more of the
    pension to Husband. Wife received half of the pension’s value as of the date
    of separation.    Id. at 24. It is undisputed that the pension’s value grew
    after that date. However, the trial court found that the equities of the case
    required it to award that growth to Husband.        Id. at 17.     The trial court
    considered the age and employment opportunities of the parties, their
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    health, their respective household incomes, and the other factors as required
    by 23 Pa.C.S.A. § 3502(a).           Id. at 3-5, 17.     The record supports those
    findings, and the trial court did not abuse its discretion in making such an
    award.
    Wife’s final issue raises a similar challenge.         Wife argues that the
    severance pay that Husband received should have been deemed a marital
    asset because it was based upon Husband’s years of service. Wife concedes
    that part of this severance was based upon Husband’s unused vacation days
    and that that portion is not marital.              Wife’s Brief at 18-20.   Husband
    contends that the severance pay was earned after separation and should not
    be included in the marital estate. Husband’s Brief at 20.
    We confronted a similar issue in Gordon v. Gordon, 
    647 A.2d 530
    (Pa. Super. 1994) (“Gordon I”).2 In Gordon I, the husband was offered an
    incentive to retire early. 
    Id. at 538
    . Because this offer was unexpected and
    not a planned benefit available during the husband’s employment, and
    because it was not a result of the husband’s continued employment, we
    determined that the incentive plan was not marital property. 
    Id. at 539
    . A
    divided Supreme Court affirmed based upon the rationale that the date of
    ____________________________________________
    2
    Our Supreme Court reversed Gordon I on the other issue raised
    before the Court, i.e., what date should be used for valuing the marital
    potion of the defined benefit plan. Gordon v. Gordon, 
    681 A.2d 732
     (Pa.
    1996). However, an equally divided court affirmed on the issue of whether
    the retirement incentive benefits were marital. Id. at 739 (Castille, J.
    concurring & dissenting, joined by Zappala & Nigro, JJ.).
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    accrual of the benefits should determine whether the property was marital.
    Gordon v. Gordon, 
    681 A.2d 732
    , 739 (Pa. 1996) (Castille, J. concurring &
    dissenting) (“Gordon II”).
    After Gordon I, we focused upon whether the benefits had been
    expected by the parties.
    This court has been forced to ascertain what types of increases
    may or may not qualify as marital property. For example, post-
    separation incentives and bonuses, although based on years of
    service, are not marital property. Gordon I, 
    647 A.2d at
    538–
    39. See also LaBuda v. LaBuda, 
    503 A.2d 971
     (Pa. Super.
    1986), alloc. denied, 
    524 A.2d 494
     (Pa. 1987) (participant
    spouse accepted a post-separation early retirement incentive;
    because the right to receive the bonus did not accrue prior to the
    parties’ separation, the bonus could not be considered part of
    the marital estate). Unlike basic pension benefits, which are
    planned and contemplated throughout service, incentive plans
    are not anticipated and not occasioned by continued
    employment. Gordon I, 
    647 A.2d at 539
    .
    The pension enhancement in this case, as opposed to the
    retirement plan in Gordon I, was part of the benefits package
    in place throughout the marriage. It was not an unanticipated
    incentive or a bonus offered post-separation.    Rather, the
    enhancement amounted to deferred compensation. As such, we
    conclude that it is marital property subject to equitable
    distribution
    Brown v. Brown, 
    669 A.2d 969
    , 974-75 (Pa. Super. 1995) (citations
    modified).
    However, the Smith Court noted that, in 2004, the General Assembly
    modified the Divorce Code to address distribution of defined benefit plans,
    by adding subsection (c) to 23 Pa.C.S.A. § 3501. Smith, 938 A.2d at 257.
    The comment to the rule states that it was intended to “codify the result
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    reached   by   Justices   Flaherty,   Cappy     and    Newman    regarding     the
    postseparation retirement enhancements in Gordon [II].”               23 Pa.C.S.A.
    § 3501, cmt. “The justices listed above opined that since no present efforts
    or contributions of the employee spouse were required to receive the
    supplemental   retirement   income     and     bonus   inducements,    they   were
    includable in the marital estate.” Id. While not addressing early retirement
    incentives, the Smith Court concluded that the only post-separation
    enhancements to be excluded are those that represent the employee
    spouse’s monetary contribution. Smith, 938 A.2d at 259. In MacDougall,
    we adopted the methodology of Smith, holding that the determinative factor
    was whether the increases were automatic or due to the spouse’s
    contributions. MacDougall, 49 A.3d at 894.
    Instantly, the trial court relied upon Gordon I and Labuda for the
    proposition that the time of the accrual of the benefit was the controlling
    factor. T.C.O. at 15. While neither case has been explicitly overruled, “we
    must defer to the legislature as the policy making body.” Smith, 938 A.2d
    at 258. The General Assembly clearly rejected the methodology of Gordon
    I. See 23 Pa.C.S.A. § 3501, cmt.
    Husband testified that he was offered “wage continuation” to retire.
    N.T. at 300.   Husband received the equivalent of four weeks’ pay each
    month for fourteen and one–half months.          Id. at 339.   Husband testified
    that the amount was based upon his years of service.            Id. at 340-41.
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    However, Husband could not remember the amount that he received. Id. at
    347-48.
    Here, based upon the limited testimony, the severance pay was not
    due to any efforts or contributions from Husband.     Instead, it was based
    upon his years of service. Therefore, pursuant to Smith and section 3501,
    the severance pay was marital and is subject to a coverture fraction because
    it was based upon Husband’s entire time in service, including some years
    after separation. The trial court erred in concluding that this pay was not
    marital property.
    Because the record is sparse regarding the severance pay, the trial
    court may need to take additional evidence to determine the value of that
    severance pay and to divide it equitably.     Because the inclusion of this
    additional asset may disturb the trial court’s distribution scheme, we vacate
    the January 21, 2014 order to allow the court to divide the marital estate in
    the manner it deems required to achieve economic justice.
    Order vacated. Case remanded for further proceedings.      Jurisdiction
    relinquished.
    Judgment Entered.
    Joseph D. Seletyn, Esq.
    Prothonotary
    Date: 11/3/2014
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Document Info

Docket Number: 494 EDA 2014

Filed Date: 11/3/2014

Precedential Status: Precedential

Modified Date: 4/17/2021