Conner, C. v. Holtzinger Conner, K. ( 2019 )

J-A16020-19
2019 PA Super 251CHRISTOPHER CONNER : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
KATHERENE E. HOLTZINGER : No. 856 MDA 2018
CONNER
Appeal from the Order Entered April 24, 2018
In the Court of Common Pleas of Cumberland County Civil Division at
No(s): 15-01899
CHRISTOPHER CONNER : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
KATHERENE E. HOLTZINGER :
CONNER :
: No. 907 MDA 2018
Appellant
Appeal from the Order Entered April 24, 2018
In the Court of Common Pleas of Cumberland County Civil Division at
No(s): 15-01899
BEFORE: LAZARUS, J., MURRAY, J., and STEVENS*, P.J.E.
OPINION BY MURRAY, J.: FILED: AUGUST 20, 2019
Christopher Conner (Husband) appeals, and Katherene E. Holtzinger
Conner (Wife) cross-appeals, from the order purporting to resolve the
economic claims attendant to the parties’ divorce action. Upon review, we
reverse in part, affirm in part, and remand for further proceedings.
____________________________________
* Former Justice specially assigned to the Superior Court.
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Factual and Procedural Background
Husband and Wife were married on July 29, 1984, and have four adult
children. They were married for more than 30 years before separating in
2014. They are currently in their early 60s. Both parties have law degrees,
although their careers and earnings have diverged.
Husband worked as an attorney in private practice for the first 20 years
of his career. The retirement funds from Husband’s time in private practice,
plus $5,909 in premarital retirement funds, are reflected in Husband’s Schwab
IRA account.
On July 26, 2002, Husband was appointed United States District Judge
for the Middle District of Pennsylvania. On September 1, 2013, Husband was
appointed, and currently serves as, Chief Judge of the Middle District of
Pennsylvania. In his capacity as a federal judge, Husband, upon satisfying
the Rule of 80,1 is entitled to receive “an annuity equal to the salary he was
receiving at the time he retired.” 28 U.S.C.A. § 371 (Judicial Income).
Moreover, Husband can elect to participate in a judicial survivors’ annuity
system (JSAS), “a voluntary survivor benefit plan that provides annuities to
the survivors of certain Article III judges.” Trial Court Opinion, 4/24/18, at 2;
____________________________________________
1The Rule of 80 refers to the age and service requirements for retirement
under Section 371. Specifically, a justice or judge is eligible for a salary
annuity once the sum of their age and years of service equals 80.
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see also 28 U.S.C.A. § 376. Husband contributes 2.2% of his gross income
to the JSAS.
Wife began her career working at the Dauphin County District Attorney’s
Office. Following the birth of the parties’ first child, Wife began working part-
time in a private law practice. Eventually, Wife transitioned to a faculty
position at Penn State Dickinson Law School, where she remained a part of
the faculty until her contract expired in 2017. While at Dickinson Law School,
Wife held various positions, including Director of Public Interest Programs and
Faculty Supervisor for Externship Placement. At the time of the equitable
distribution hearing, Wife was unemployed but receiving a pension through
her Pennsylvania State Employee Retirement System (SERS).
On April 2, 2015, Husband filed a complaint in divorce. On November
10, 2016, Husband filed a petition for bifurcation, seeking to separate the
divorce action from ancillary economic claims. Wife filed an answer to
Husband’s petition and a separate petition raising economic claims on
November 23, 2016. On January 4, 2017, Wife filed a petition for alimony
pendente lite (APL). On February 1, 2017, the trial court entered an order
granting Husband’s petition for bifurcation and issuing a divorce decree, and
awarding Wife $3,900 per month in APL.
The record reveals that on September 25, 2017, after reviewing the
parties’ briefs — but without conducting an evidentiary hearing — the trial
court entered an order finding Husband’s Judicial Income and JSAS to be
marital property subject to equitable distribution. See Order, 9/25/17.
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Husband filed a motion for reconsideration, which the trial court denied on
November 16, 2017.
On November 28, 2017, the trial court convened a hearing to address
equitable distribution and alimony. On December 22, 2017, the trial court
entered an order and opinion, dividing the parties’ assets, and awarding Wife
$2,500 per month in alimony until Husband “reaches pay status for his Judicial
[Income],” at which time “Wife shall immediately begin receiving her share of
Husband’s retirement. . .” Trial Court Opinion, 12/22/17, at ¶ 3-4. Husband
and Wife both filed for reconsideration of the trial court’s equitable distribution
and alimony order. The trial court granted reconsideration on January 17,
2018. On March 9, 2018, the parties consented to post-trial stipulations, in
which they addressed Husband’s Schwab IRA, Judicial Income, JSAS, and
alimony. On April 24, 2018, the trial court issued a final order and opinion
disposing of the parties’ equitable distribution and alimony claims.
Husband filed a timely appeal, challenging: (1) the September 25, 2017
order finding Husband’s Judicial Income and JSAS to be marital property
subject to equitable distribution; (2) the November 16, 2017 order denying
reconsideration of the September 25, 2017 order; (3) the December 22, 2017
equitable distribution order; and (4) the April 24, 2018 final equitable
distribution order.2 Husband’s Brief at 11.
____________________________________________
2 We remind Husband that an appeal does not lie from an order denying
reconsideration; instead, an appeal must be timely filed from the underlying
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Wife cross-appealed, challenging the trial court’s April 24, 2018 final
order of equitable distribution. The trial court, Husband and Wife have all
complied with Pennsylvania Rule of Appellate Procedure 1925.
Issues
On appeal, Husband raises five issues:
1. Did the trial court abuse its discretion and commit reversible
error when it found that marital property included the salary
guarantee afforded to [Husband], a United States Federal
Judge, pursuant to 28 U.S.C.A. § 371 et seq., upon a transition
to senior status or to full retirement?
2. Did the trial court abuse its discretion and commit reversible
error when, after having determined that Former Husband’s
[Judicial Income] benefits should be subject to deferred
distribution, abruptly reversed course on reconsideration
(without notice to the parties) and engaged in an independent
actuarial calculation to determine a present value of said
[Judicial Income] in the amount of $3,536,000?
3. Did the trial court abuse its discretion and commit reversible
error by attributing an earning capacity to Former Wife far
below the uncontested expert response [sic] submitted into
evidence?
4. Did the trial court abuse its discretion and commit reversible
error when, on reconsideration, it doubled the award of alimony
to Former Wife from $2500 per month to $5000 per month
after merely listing the relevant factors but not considering all
relevant factors as required under 23 Pa.C.S.A. § 3701(b) and
applying a reasonable needs analysis?
____________________________________________
order. Commonwealth v. Moir, 766 A.2d 1253 (Pa. Super. 2000);
Valentine v. Wroten, 580 A.2d 757 (Pa. 1990). To the extent Husband
seeks to challenge the order denying reconsideration, such challenge is
improper and beyond our purview.
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5. Did the trial court abuse its discretion and commit reversible
error in assessing the value of the marital estate and applying
the equitable distribution scheme?
Husband’s Brief at 4-5 (suggested answers omitted).
In her cross-appeal, Wife raises three issues:
1. Although properly determining that Husband’s [Judicial
Income] constituted a marital asset, did the Trial Court abuse
its discretion in its equitable distribution of Husband’s Judicial
[Income] by failing to provide for a deferred distribution of
Wife’s marital share?
2. Whether the Trial Court abused its discretion in adopting
Husband’s valuation of Wife’s SERS pension as Husband’s
valuation included post-separation contributions, which are
unequivocally precluded from inclusion in the valuation of the
asset in equitable distribution, and by attributing to Wife a
purported withdrawal from her SERS pension?
3. Whether the Trial Court committed an abuse of discretion in
valuing Husband’s Schwab IRA as of the date of separation,
rather the [sic] date distribution, despite Husband’s Schwab
IRA growing dramatically in value post separation due to
market increases on the marital portion of the asset?
Wife’s Brief at 7-8 (suggested answers omitted).
Wife’s Cross-Appeal
As a preliminary matter, we address our jurisdiction over Wife’s cross-
appeal. Pennsylvania Rule of Appellate Procedure 903 governs the filing of
cross-appeals, and states in pertinent part:
. . . [I]f a timely notice of appeal is filed by a party, any other
party may file a notice of appeal within 14 days of the date on
which the first notice of appeal was served, or within the time
otherwise prescribed by this rule, whichever period last expires.
Pa.R.A.P. 903(b) (emphasis added). The appeal period is strictly construed,
and we have no jurisdiction to expand the period or excuse the failure to file
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a timely notice of appeal. Instantly, Husband filed his timely notice of appeal
on May 21, 2018. Wife filed a notice of cross-appeal, which was docketed on
June 5, 2018, 15 days after Husband filed his notice of appeal. Thus,
ostensibly, Wife’s cross-appeal is untimely as it was filed beyond the 14 days
prescribed in Pa.R.A.P. 903(b).
However, Husband did not serve Wife with his notice of appeal until May
23, 2018. Accordingly, Wife had 14 days from the date she was served with
the notice of appeal to file a cross-appeal. See Pa.R.A.P. 903(b). As Wife
filed her cross-appeal on June 5, 2018, 13 days from the date she was served
with Husband’s notice of appeal, it is timely. See id.The Parties’ Economic Claims
Turning to the issues before us, both Husband and Wife assert that the
trial court erred in formulating its equitable distribution award. At the outset,
we underscore the economic complexity of the parties’ issues. We further
observe:
We review a challenge to the trial court’s equitable distribution
scheme for an abuse of discretion. Brubaker v. Brubaker, 201
A.3d 180, 184 (Pa. Super. 2018) (citation omitted). “We do not
lightly find an abuse of discretion, which requires a showing of
clear and convincing evidence.” Id. We will not find an abuse of
discretion “unless the law has been overridden or misapplied or
the judgment exercised was manifestly unreasonable, or the
result of partiality, prejudice, bias, or ill will, as shown by the
evidence in the certified record.” Carney v. Carney, 167 A.3d
127, 131 (Pa. Super 2017). 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.”
Hayward v. Hayward, 868 A.2d 554, 558 (Pa. Super. 2005).
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When determining the propriety of an equitable distribution
award, this Court must consider the distribution scheme as a
whole. Mundy v. Mundy, 151 A.3d 230, 236 (Pa. Super. 2016).
“We do not evaluate the propriety of the distribution order upon
our agreement with the court’s actions nor do we find a basis for
reversal in the court’s application of a single factor. Rather, we
look at the distribution as a whole in light of the court’s overall
application of the 23 Pa.C.S.A. § 3502(a) factors for consideration
in awarding equitable distribution. If we fail to find an abuse of
discretion, the order must stand.” Harvey v. Harvey, 167 A.3d
6, 17 (Pa. Super. 2017) (citation and internal brackets omitted).
Finally, “it is within the province of the trial court to weigh the
evidence and decide credibility and this Court will not reverse
those determinations so long as they are supported by the
evidence.” Brubaker, 201 A.3d at 184 (citation omitted).
Hess v. Hess, -- A.3d --, 2019 WL 2334113, at *2 (Pa. Super. 2019).
Husband’s Claims
Husband’s first and second issues concern his Judicial Income, which
implicate the interplay of federal and state law. In his first issue, Husband
asserts that the trial court erred in concluding that the annuity he receives
upon satisfying the Rule of 80 is a retirement benefit subject to equitable
distribution.
Section 371 of the United States Code reads, in relevant part:
§ 371. Retirement on salary; retirement in senior status
(a) Any justice or judge of the United States appointed to hold
office during good behavior may retire from the office after
attaining the age and meeting the service requirements,
whether continuous or otherwise, of subsection (c) and
shall, during the remainder of his lifetime, receive an
annuity equal to the salary he was receiving at the time he
retired.
(b) (1) Any justice or judge of the United States appointed to
hold office during good behavior may retain the office but
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retire from regular active service after attaining the age and
meeting the service requirements, whether continuous or
otherwise, of subsection (c) of this section and shall, during
the remainder of his or her lifetime, continue to receive the
salary of the office if he or she meets the requirements of
subsection (e)
(2) In a case in which a justice or judge who retires under
paragraph (1) does not meet the requirements of subsection
(e), the justice or judge shall continue to receive the salary
that he or she was receiving when he or she was last in
active service or, if a certification under subsection (e) was
made for such justice or judge, when such a certification
was last in effect. The salary of such justice or judge shall
be adjusted under section 461 of this title.
28 U.S.C.A. § 371. Husband urges this Court to characterize his Judicial
Income as a “salary guarantee,” rather than a retirement benefit subject to
equitable distribution, based on Adams v. Comm’r of Internal Revenue,
841 F.2d 62 (3d Cir. 1988). Husband’s Brief at 24-26; see also U.S. v.
Hatter, 532 U.S. 557 (2001).
The Adams decision is “an appeal by the Commissioner of Internal
Revenue from a decision of the Tax Court allowing certain deductions for
contributions to individual retirement accounts (IRA),” pursuant to Section
219 of the United States Code. Adams, 841 F.2d at 63; see also 26 U.S.C.A.
§ 219 (effective to Dec. 31, 1996) (current version at 26 U.S.C. § 219(effective March 23, 2018)). Although Adams is not on point, Husband cites
its discussion of Section 371 as authority for finding that Husband’s Judicial
Income is not a retirement plan. The Adams court stated: “Thus, we cannot
regard 28 U.S.C. §§ 371(a), 371(b) and 372(a) as establishing a retirement
plan for judges. Further, we cannot possibly regard the provisions of the
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Constitution itself providing for lifetime appointments to be a retirement plan.”
Id. at 65. According to Husband, Adams explicitly concludes that Section
371 does not confer a retirement benefit upon federal judges; rather, Section
371 is a salary guarantee not subject to equitable distribution.
Husband further contends that Section 371 income constitutes a salary
— and not retirement — by highlighting the “stark differences” between a
traditional pension and Husband’s Judicial Income. Husband argues:
In direct contrast with a defined benefit plan, [Husband’s Judicial
Income] does not have a [s]ummary [p]lan [d]escription;
[Husband] is not considered a participant in a plan; does not
provide for alternate payee status; provides no options upon
retirement such as a single life annuity; and, has no vesting
schedule. [Husband’s Judicial Income] payment to federal judges
is the same as their salary; whereas the monthly benefit under a
defined benefit plan is calculated based on the participant’s most
recent average salary but is less than the salary (and could be
reduced further is a survivor benefit option is selected).
Husband’s Brief at 29-30.
Wife counters Husband’s reliance on Adams by citing Porter v.
Comm’r of Internal Revenue, 856 F.2d 1205 (8th Cir. 1988), which was
decided six months after Adams. Like Adams, Porter examined whether
Section 371 is a retirement plan for purposes of Section 219. This time,
however, the court held:
Section[ ] 371 . . . thus specifically provide[s] retirement income
for the remainder of a judge’s life after regular, active service has
come to an end. . . . We believe the availability to a judge of
these statutory options for the judge’s years beyond regular,
active service constitutes a retirement plan within the context of
section 219.
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Porter, 856 F.2d at 1210-11.
Wife also cites Major v. Major, 518 A.2d 1267 (Pa. Super. 1986), and
Braderman v. Braderman, 488 A.2d 613 (Pa. Super. 1985), to support her
position that Husband’s Judicial Income is a retirement benefit subject to
equitable distribution. In Major, this Court held that the clear language of
the Pennsylvania Divorce Code includes a military retirement pension as
marital property when acquired during the marriage. We opined:
. . . In light of the sacrifices of those families in the armed services,
including long periods of separation while on duty or on
assignment overseas, the contributions of both spouses to the
household enable the enlisted spouse to continue serving until the
pension vests after 20 years of service. Thus we reject appellant’s
argument that military pension benefits are not marital property.
Major, 518 A.2d at 1270.
Similarly, in Braderman, this Court concluded that state retirement
benefits were marital property subject to equitable distribution. We
emphasized:
Each spouse has a reasonable expectation of enjoying the monies
received from an employee retirement fund. In order to
“effectuate economic justice between the parties”, equity
demands that both parties share in this asset acquired during the
marriage.
Braderman, 488 A.2d at 617.
Wife asserts that this Court has soundly rejected efforts to exclude
retirement benefits from equitable distribution. Wife’s Brief at 25; see also
Major, supra; Braderman, supra. Thus, Wife contends that Husband’s
Judicial Income is a marital asset subject to equitable distribution.
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Major and Braderman, however, are also distinguishable. In both
cases, the annuity was already determined to be a retirement benefit –
specifically, a pension. This Court’s review was limited to deciding whether
these retirement benefits were marital property for purposes of equitable
distribution.
Here, our exhaustive research has failed to uncover persuasive legal
authority from either the federal courts or this Commonwealth from which we
may determine definitively that Husband’s Judicial Income is salary or
retirement. We further acknowledge the restricted relationship a state court
has in applying a federal statute when that statute has been the subject of
interpretation and application by a federal governmental body. See U.S.
CONST. art. VI, cl.2; see also Council 13, Am. Fed’n of State, County &
Mun. Employees, AFL-CIO v. Rendell, 986 A.2d 63, 77 (Pa. 2009) (“it is
fundamental that by virtue of the Supremacy Clause, the State courts are
bound by the decisions of the Supreme Court with respect to . . . federal law,
and must adhere to extant Supreme Court jurisprudence.”). The federal
statute must be given the meaning and effect attributed to it by our federal
government.
To date, the United States Supreme Court has not issued an opinion
interpreting Section 371 in such a way that would allow us to determine
whether Husband’s Judicial Income is a marital asset subject to equitable
distribution. We recognize that several ancillary resources exist that would
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help us address this issue. For example, it is well known that pensions in this
Commonwealth are not subject to the Pennsylvania Income Tax. See 61 Pa.
Code § 101.6(c)(8)(i); see also AMP Products Corp. v. Com., 593 A.2d 1,
3 n.6 (Pa. Commw. Ct. 1991). We take judicial notice of the fact that
numerous federal judges have retired from office in our Commonwealth, and
receive income pursuant to Section 371. Evidence of how the Pennsylvania
Department of Revenue taxes (or does not tax) their Section 371 income
would be highly probative of whether the income is salary or retirement.
Notably, our review of the record indicates that Husband intended to
present the testimony of “[a] representative of the Administrative Office of
the United States Courts” to explain his Judicial Income. Husband’s Pre-Trial
Statement, 1/9/17, at 2. It is unclear from the record, however, why this
witness was not called to testify at the hearing.
Likewise, Wife sought to introduce the testimony of Beth A. Mascetta,
CPA, CVA, as an expert witness, who authored a report on Husband’s Judicial
Income. N.T., 11/28/17, at 146. The trial court, however, denied Wife’s
request to present Ms. Mascetta’s testimony because “I don’t see how
testimony from this witness would change the math I have to do. I have to
come up with a date or some formula to do it. But how, [Counsel for Wife],
are you saying your witness would change what I need to do?” Id. at 147.
Although we cannot speculate as to Ms. Mascetta’s testimony, we question the
trial court’s decision to preclude potentially valuable testimony concerning
Husband’s Judicial Income.
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Consistent with the foregoing, we are constrained to remand this issue
for further proceedings. As this Court has held, “where there is insufficient
evidence to support the trial court’s order, the judgment is manifestly
unreasonable.” Strawn v. Strawn, 664 A.2d 129, 131 (Pa. Super. 1995).
Here, the evidence of record is devoid of evidence to support a determination
as to Husband’s Judicial Income. Given the deficiency, the proper course is
remand to the trial court so the parties may avail themselves of evidentiary
proceedings in which to create a record regarding Section 371, and
specifically, Husband’s Judicial Income.
In his second issue, Husband contends that even if his Judicial Income
is marital property subject to equitable distribution, the trial court erred by
engaging in its own actuarial calculation to determine a present value.
Husband’s Brief at 31-35. Husband notes that the parties agreed,
notwithstanding Husband’s objection to the characterization of his Judicial
Income as retirement rather than salary, to utilize a deferred distribution
method at equitable distribution. See Post-trial Stipulations, 3/9/18, at 3
(unpaginated). Thus, Husband asserts that the trial court erred by applying
the immediate offset method and calculating a present value utilizing evidence
not in the record.
Pennsylvania law provides two methods for distributing a pension when
dividing marital assets. Miller v. Miller, 577 A.2d 205 (Pa. Super. 1990).
The first method, “immediate offset,” awards a percentage of the marital
portion of the value of the pension to the party earning it, and offsets the
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marital value of this pension with other marital assets at equitable distribution.
Id. at 208-09. This method is preferred where the estate has sufficient assets
to offset the pension, because it does not require the court to retain
jurisdiction indefinitely. Id. at 209. The second method, “deferred
distribution,” generally requires the court to retain jurisdiction until the
pension is collected, at which point the pension is divided according to the
court’s order. Id. This method is more practical where the parties lack
sufficient assets to offset the marital value of the pension. Id.
We have recognized that neither distribution scheme will be
appropriate to all cases. Rather, the trial court must balance the
advantages and disadvantages of each method according to the
facts of the case before it in order to determine which method
would best effectuate economic justice between the parties.
Lyons v. Lyons, 585 A.2d 42, 47 (Pa. Super. 1991).
In this case, the parties stipulated that if the court determined that
Husband’s Judicial Income was retirement income subject to equitable
distribution, then a deferred distribution method would be the appropriate
method to effectuate equitable distribution. Post-trial Stipulations, 3/9/18, at
3 (unpaginated). Both parties expressly recognized that the marital estate
lacks sufficient assets to offset the marital value of Husband’s Judicial Income.
Regardless of the parties’ stipulations, the trial court proceeded to place
a present value on the Judicial Income. The trial court arbitrarily imputed to
Husband a life expectancy of 82, and a retirement age of 65, from which to
calculate the present value of the Judicial Income. In so doing, the court
multiplied Husband’s current salary of $208,000 per year by 17 (the potential
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number of years of retirement based on a retirement age of 65 and a life
expectancy of 82 years) to arrive at a present value of $3,536,000.
Upon careful review, we find the valuation method employed by the trial
court to be in error. Critically, the parties agreed to the deferred distribution
method and Wife concedes that “the [t]rial [c]ourt should have utilized the
deferred distribution method. Accordingly, Wife requests that this Court direct
the [t]rial [c]ourt to apply the deferred distribution method to Husband’s
Judicial [Income].” Wife’s Brief at 37.
Mindful of the trial court’s wide discretion to value assets and our highly
deferential standard of review, we nonetheless conclude that the court erred
in calculating the present value of Husband’s Judicial Income. When valuing
assets, a trial court must base its decision on evidence of record. See Smith
v. Smith, 904 A.2d 15, 21-22 (Pa. Super. 2006) (When valuing assets, “the
trial court must exercise discretion and rely on estimates, inventories, records
of purchase prices, and appraisals submitted by both parties.”). The value
that the trial court assigned to Husband’s Judicial Income — $3,536,000 —
lacks support in the record, and neither Husband nor Wife presented this
figure, nor evidence in support of this figure, to support the valuation.
The trial court’s imputed average life expectancy of 82 years in its
calculation of the present value is in error. This value is troubling because the
value considers evidence not of record and the trial court fails to cite any
source from which it gleaned this information. “A trial court may not consider
evidence outside of the record in making its determination. Nor may this
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[C]ourt uphold a trial court’s order on the basis of off-the-record facts.”
Johnson v. Johnson, 153 A.3d 318, 322 (Pa. Super. 2016) (citations
omitted).3
Likewise, the soundness of the trial court’s valuation is speculative at
best due to the lack of evidence supporting the court’s arbitrary determination
that Husband would retire at age 65.
There is ample empirical and statistical evidence to justify the
conclusion that all workers do not retire at the same age. A
variety of factors impact on an individuals [sic] selection of a
retirement age. In the great majority of qualified defined benefit
plans the participant is given an option to retire within a range of
dates. The breadth of this range is from the date an individual
becomes vested and decides to opt for a vested deferred
retirement benefit . . . to the date an individual is required to
terminate employment as a result of demonstrable physical or
mental incapacity to perform . . . . Because of the actual range
of retirement options available to the employed spouse,
evaluators who assume that all workers retire at the same age or
point are to be viewed with skepticism.
DeMarco v. DeMarco, 787 A.2d 1072, 1078-79 (Pa. Super. 2001) (citing
Rounick, Pennsylvania Matrimonial Practice, Vol. 1B, § 46C:1 at 14). Notably,
Husband testified that he intends to work past age 65. See generally, N.T.,
11/28/17, at 36-42, 90 (“I have every hope to be serving well after age sixty-
five, for all the reasons that I said before.”).
____________________________________________
3 We further recognize the comment to Rule 2.4 of the Code of Judicial
Conduct, which states: “Confidence in the judiciary is eroded if judicial
decision making is perceived to be subject to inappropriate outside
influences.”
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Based on the foregoing, the trial court abused its discretion by adopting
a present value for Husband’s Judicial Income. Moreover, the trial court’s
error is fatal to the overall equitable distribution award. While the court did
not quantify its overall distribution scheme,4 it appears that the trial court’s
decision to award Wife the entire value of her SERS pension and permanent
alimony in the amount of $5,000 per month was based on the court’s belief
that Husband would receive a more valuable asset – 100% of his Judicial
Income. See Trial Court Opinion, 4/24/18, at 14. Thus, because the issue of
Husband’s Judicial Income must be revisited on remand, the overall
distribution is implicated. We therefore remand for the trial court to apply the
deferred distribution method in dividing Husband’s Judicial Income in
equitable distribution.5
In his third issue, Husband argues that the trial court erred by assigning
Wife an earning capacity of $50,000 per year. Husband avers that the
assigned earning capacity belies the evidence presented at trial and is in direct
contravention of the Pennsylvania Rules of Civil Procedure. In Husband’s
view, Wife “substantially limited the scope of her search efforts” to a field that
pays less and has less opportunities. Husband’s Brief at 43. Husband
suggests that Wife’s earning capacity is substantially higher than the value
assigned by the trial court. We disagree.
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4 See discussion infra.
5We recognize that no recalculation will be necessary if it is determined that
Husband’s Judicial Income is salary, as opposed to retirement income.
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“A person’s earning capacity is defined not as an amount which the
person could theoretically earn, but as that amount which the person could
realistically earn under the circumstances, considering his or her age, health,
mental and physical condition and training.” Gephart v. Gephart, 764 A.2d
613, 615 (Pa. Super 2000). Past earnings alone are not sufficient to support
a determination of earning capacity without corroborating evidence that the
party still has the capacity to earn that amount. See D.H. v. R.H., 900 A.2d
922 (Pa. Super. 2006) (holding trial court erred in determining earning
capacity based solely upon party’s most recent tax return). Moreover,
Pennsylvania Rule of Civil Procedure 1910.16-2(d)(4), addressing earning
capacity, provides:
If the trier of fact determines that a party to a support action has
willfully failed to obtain or maintain appropriate employment, the
trier of fact may impute to that party an income equal to the
party’s earning capacity. Age, education, training, health,
work experience, earnings history and child care
responsibilities are factors which shall be considered in
determining earning capacity. In order for an earning capacity
to be assessed, the trier of fact must state the reasons for the
assessment in writing or on the record. Generally, the trier of fact
should not impute an earning capacity that is greater than the
amount the party would earn from one full-time position.
Determination of what constitutes a reasonable work regimen
depends upon all relevant circumstances including the choice of
jobs available within a particular occupation, working hours,
working conditions and whether a party has exerted substantial
good faith efforts to find employment.
Pa.R.C.P. 1910.16-2(d)(4) (emphasis added).
In giving its reasons for assigning Wife an earning capacity of $50,000
per year, the trial court stated:
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Based on the evidence presented as to her prior salaries, this
Court finds her earning capacity to be $50,000.00 annually. While
Husband argues that he submitted evidence establishing Wife’s
annual earning capacity to be $80,000.00, Wife testified very
credibly that she has applied for a significant number of jobs, for
which she is qualified, without any success. Thus, the Court finds
a reasonable earning capacity for Wife, given her age and lack of
recent employment in the legal field, to be more accurately
established at $50,000.00 per year.
Trial Court Opinion, 4/24/18, at 9.
The record is devoid of evidence that Wife “willfully failed to obtain or
maintain appropriate employment[.]” Pa.R.C.P. 1910.16-2(d)(4). Rather, the
trial court found Wife’s testimony concerning her employment search to be
“very credible.” Trial Court Opinion, 4/24/18, at 9. The record further reveals
that Wife is now in her early sixties and, at the time of the equitable
distribution hearing, had been seeking employment unsuccessfully for over 18
months. See Wife’s Exhibit 4. With Husband’s support, Wife left private
practice over 20 years ago, and Wife testified that her expertise and
experience is limited to public interest and academia. N.T., 11/28/17, at 128-
30. While Husband suggests that Wife “has an annual earning capacity of (1)
anywhere from $65,000 to $75,000 in the academic community; and (2)
anywhere from $95,000 to $121,680 in the private sector,” Husband’s Brief
at 42, the trial court, as finder of fact, was “free to believe all, part, or none
of the evidence,” and this Court will not disturb the trial court’s credibility
determinations. Lee v. Lee, 978 A.2d 380, 382 (Pa. Super. 2009). Thus, we
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conclude that imputing an earning capacity of $50,000 per year to Wife was
reasonable and the trial court did not abuse its discretion.
In his fourth issue, Husband contends that the trial court erred in
awarding Wife $5,000 per month in permanent alimony without first engaging
in a reasonable needs analysis as required by 23 Pa.C.S.A. § 3701(b).
Our standard of review regarding questions pertaining to the
award of alimony is whether the trial court abused its discretion.
We previously have explained that the purpose of alimony is not
to reward one party and to punish the other, but rather to ensure
that the reasonable needs of the person who is unable to support
himself or herself through appropriate employment, are met.
Alimony is based upon reasonable needs in accordance with the
lifestyle and standard of living established by the parties during
the marriage, as well as the payor’s ability to pay. Moreover,
alimony following a divorce is a secondary remedy and is available
only where economic justice and the reasonable needs of the
parties cannot be achieved by way of an equitable distribution
award and development of an appropriate employable skill.
Teodorski v. Teodorski, 857 A.2d 194, 200 (Pa. Super. 2004).
Section 3701(b) of the Divorce Code states:
In determining whether alimony is necessary and in determining
the nature, amount, duration and manner of payment of alimony,
the court shall consider all relevant factors, including:
(1) The relative earnings and earning capacities of the
parties.
(2) The ages and the physical, mental and emotional
conditions of the parties.
(3) The sources of income of both parties, including, but not
limited to, medical, retirement, insurance or other
benefits.
(4) The expectancies and inheritances of the parties.
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(5) The duration of the marriage.
(6) The contribution by one party to the education, training
or increased earning power of the other party.
(7) The extent to which the earning power, expenses or
financial obligations of a party will be affected by reason
of serving as the custodian of a minor child.
(8) The standard of living of the parties established during
the marriage.
(9) The relative education of the parties and the time
necessary to acquire sufficient education or training to
enable the party seeking alimony to find appropriate
employment.
(10) The relative assets and liabilities of the parties.
(11) The property brought to the marriage by either party.
(12) The contribution of a spouse as homemaker.
(13) The relative needs of the parties.
(14) The marital misconduct of either of the parties during the
marriage. The marital misconduct of either of the parties
from the date of final separation shall not be considered
by the court in its determinations relative to alimony,
except that the court shall consider the abuse of one
party by the other party. As used in this paragraph,
“abuse” shall have the meaning given to it under section
6102 (relating to definitions).
(15) The Federal, State and local tax ramifications of the
alimony award.
(16) Whether the party seeking alimony lacks sufficient
property, including, but not limited to, property
distributed under Chapter 35 (relating to property
rights), to provide for the party’s reasonable needs.
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(17) Whether the party seeking alimony is incapable of self-
support through appropriate employment.
23 Pa.C.S.A. § 3701(b). “To determine whether alimony is necessary and to
establish the appropriate nature, amount, and duration of any alimony
payments, the court is required to consider all relevant factors, including the
17 factors that are expressly mandated by statute.” Lawson v. Lawson, 940
A.2d 444, 447 (Pa. Super. 2007) (emphasis in original). We note the factors
in Section 3701(b) do not create an exhaustive list. Ressler v. Ressler, 644
A.2d 753 (Pa. Super. 1994).
Additionally, this Court has repeatedly held that an asset awarded in
equitable distribution may not be included in an individual’s income for
purposes of calculating support payments. See Miller v. Miller, 783 A.2d
832, 835-36 (Pa. Super. 2001) (holding that money received from the sale of
an asset awarded in equitable distribution may not be included in an
individual’s income for purposes of calculating support payments); Rohrer v.
Rohrer, 715 A.2d 463, 466 (Pa. Super. 1998) (stating that this Court does
not condone “double dipping,” i.e., using the same revenue as a source for
support and equitable distribution); Berry v. Berry, 898 A.2d 1100, 1105
(Pa. Super. 2006) (holding that a partnership accrual account was marital
property and, thus, could not be considered income).
Here, regarding the Section 3701 factors, the trial court noted that
Husband and Wife are in their early 60s. Trial Court Opinion, 4/24/18, at 9.
The parties were married for over 30 years, and both are lawyers. Id.Husband currently sits as Chief Judge in the Middle District of Pennsylvania,
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while Wife is currently seeking employment after her legal education position
was eliminated. Id. Wife has not practiced law in decades and “played a
larger role as homemaker during the parties’ marriage.” Id. at 10. The trial
court considered that Wife brought $10,000 in student loan debt to the
marriage and Husband contributed premarital assets to his Schwab retirement
account, but there was no other evidence that either party had substantial
assets or liabilities prior to the marriage. Id. at 10. The trial court further
recognized testimony regarding Husband’s marital misconduct, but
determined that the evidence did not “justify an inclusion of this factor.” Id.
After reciting the Section 3701(b) factors, the trial court ordered
Husband to pay $5000 per month in permanent alimony, “or until such events
would take place to justify its modification or termination under 23 Pa.C.S.A.
§ 3701(e).” Trial Court Opinion, 4/24/18, at 14. The court reasoned that
“60.49%[6] of Husband’s current $208,000 annual salary equals $125,819.
Divided equally, this would result in approximately $63,000/year. With the
current alimony award of $5,000, Wife will be receiving $60,000/year.” Id.
at 14 n.20.
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6 60.49% represents the coverture fraction for the deferred distribution
method stipulated to by the parties when dividing Husband’s Judicial Income.
See Post-trial Stipulations, 3/9/18, at 3 (unpaginated).
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Essentially, the trial court calculated Wife’s alimony award by applying
a coverture fraction7 to Husband’s Judicial Income to determine the marital
portion of the income. The court then divided the “marital portion” of
Husband’s Judicial Income equally,8 and attributed to Husband an income of
$63,000 per year for purposes of calculating alimony. In order to presumably
keep the relative earnings of the parties equal, the trial court awarded Wife
$5,000 per month – $60,000 per year – in permanent alimony.
We have long held that marital property subject to equitable distribution
may not be included in an individual’s income for purposes of calculating
support payments, and have characterized this practice as “double dipping.”
See Miller, 783 A.2d at 835-36; Rohrer, 715 A.2d at 466; Berry, 898 A.2d
at 1105. The trial court’s equitable distribution order factors Husband’s
Judicial Income – an asset already distributed in equitable distribution – in the
calculation of Husband’s income and Wife’s alimony. This calculation
constitutes a “double-dip.” Accordingly, we reverse the trial court’s order as
____________________________________________
7 A coverture fraction is used to calculate the marital portion of a pension plan:
the denominator of the coverture fraction is the number of months the
employee spouse worked to earn the pension benefit and the numerator is the
number of such months accrued during the marriage prior to final separation.
See 23 Pa.C.S.A. § 3501(c).
8 This division presumably represents the trial court’s intent to effectuate a
50-50 distribution of the marital estate. However, again, the trial court did
not articulate an overall numerical/percentage distribution. See discussion
infra.
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to alimony, and remand for the recalculation of Wife’s alimony, with due
consideration to the Section 3701(b) factors.9
In his fifth and final claim, Husband argues that the trial court erred in
dividing the marital assets and creating the final equitable distribution
scheme. Husband specifically alleges two instances of error: 1) the trial court
erred when it stated that the parties had agreed to divide certain marital
assets; and 2) the trial court erred when it failed to designate and apply a
percentage to the equitable distribution scheme. Husband’s Brief at 45, 47.
We agree. The trial court erred when it stated that “many of [the assets]
have already been divided by consent of the parties.” Trial Court Opinion,
4/24/18, at 13. This statement was made in reference to the proceeds from
the sale of the marital residence, which were split by the parties 80%-20% in
favor of Wife. According to the trial court, this division was made by consent
of the parties and did not need to be addressed by the trial court or included
in the final equitable distribution award.
Simply put, both Husband and Wife testified that Wife received a larger
percentage of the proceeds from the sale of the marital residence as an
advance against her share of the marital estate. See N.T., 11/28/17, at 22-
24, 172. Thus, it was error by the trial court to disregard the funds the parties
received from the sale of the marital home when the court formulated the
equitable distribution award. As stated above, remand is warranted in light
____________________________________________
9 Wife concedes that “the alimony award was a de facto deferred distribution
of Wife’s share of Husband’s Judicial [Income].” Wife’s Brief at 44.
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of our decision concerning Husband’s income and Wife’s alimony; we likewise
remand for the trial court to consider the funds the parties received from the
proceeds of the marital residence in recalculating equitable distribution.
Additionally, the trial court erred when it failed to state the distribution
scheme it intended to effectuate in terms of what percentage of the marital
estate each party would receive. While we acknowledge that the trial court
may divide the marital estate as it deems appropriate, it must make the
distribution scheme clear. See Mundy v. Mundy, 151 A.3d 230, 236 (Pa.
Super. 2016) (recognizing that this Court reviews the distribution scheme as
a whole on appeal). Accordingly, upon remand, we direct the trial court to
quantify the distribution scheme in equitable distribution.
Wife’s Claims
We now turn to the issues Wife raises in her cross-appeal. She first
argues that the trial court erred in calculating the present value of Husband’s
Judicial Income. Underlying this issue are essentially the same arguments
Husband made in his second issue. Thus, having already considered this issue
and disposed of this issue, we turn to Wife’s next claim.
In her second issue, Wife challenges the trial court’s assessment of her
SERS pension. Wife asserts two allegations of error: (1) the trial court erred
by including post-separation contributions in valuing her SERS pension; and
(2) the trial court “double-dipped” in assigning assets during equitable
distribution by attributing both the present value of the pension and the lump
sum distribution to Wife.
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We first address Wife’s claim that the trial court erred by including post-
separation contributions when valuing her pension. Wife contends:
[T]he trial court adopted the value of [Wife’s SERS account] as of
December 31, 2015. As stated by the Director [of SERS], the
State makes contributions to Wife’s SERS pension of 4% every
year on the remaining balance of the account Accordingly, the
value of the SERS pension as of December 31, 2015 would include
post-separation contributions by the State.
Wife’s Brief at 73.
The Divorce Code provides that “[p]roperty acquired after final
separation until the date of divorce” is not marital property. 23 Pa.C.S.A. §
3501(a)(4). Likewise, in Schneeman v. Schneeman, 615 A.2d 1369 (Pa.
Super. 1992), this Court explained that because an annuity is:
deferred compensation, the portion of the retirement reserve
attributable to the duration of the marriage is marital property.
While increases due to interest or returns on investment in the
value of the amount contributed during the marriage are marital
property, contributions by the employee or employer after the
date of separation are not marital property.
Id. at 1376.
At trial, Wife presented the testimony of David Tarsi, the director of the
bureau of member services for SERS. N.T., 11/28/17, at 103. Mr. Tarsi
testified with regard to the present value of Wife’s SERS pension, the lump
sum withdrawal Wife made from her SERS pension, and the contributions that
comprise a participant’s SERS account. See id. at 103-07. In explaining the
components of Wife’s SERS account, Mr. Tarsi testified:
A member makes contributions as a state employee, it is
mandatory. 6.25% goes into the retirement system. We pay
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statutory 4% interest every year on what we call the lump
sum with the contributions and interest that a member
contributes over their career.
Id. at 104 (emphasis added). Wife suggests that the 4% statutory interest is
a non-marital employer contribution exempt from equitable distribution.
Wife’s Brief at 73. We disagree.
Under the State Employees’ Retirement Code and accompanying
regulations, the definition of “statutory interest” in Wife’s SERS account is
“[i]nterest at 4% per annum, compounded annually.” 71 Pa.C.S.A. § 5102.
The comment to the definition of “statutory interest” further reflects that “the
rate of interest payable is statutorily defined.” 71 Pa.C.S.A. § 5102, comment.
The plain meaning of statutory interest is that employees receive 4%
interest, compounded annually, on their SERS investment.
The Code’s definition and comment relating to statutory interest make
no mention of employer contributions. Without more, we cannot interpret
“statutory interest” to mean employer contributions. The provisions of the
State Employees’ Retirement Code is unambiguous on its face and must be
given effect in accordance with its plain and common meaning. “Absent
ambiguity, the plain meaning of the statute controls.” See Sternlicht v.
Sternlicht, 876 A.2d 904, 910 (Pa. 2005). Accordingly, the trial court did not
err in finding that the entire value of the pension was marital property.
Second, Wife argues that the trial court “double-dipped” in calculating
the value of Wife’s SERS pension for purposes of equitable distribution. The
trial court attributed to Wife $580,252, which was commensurate with the
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present value of Wife’s SERS pension with NO withdrawal of contributions and
interest as of December 31, 2016. See Husband’s Exhibit 11 (emphasis in
original). The trial court also imputed to Wife a “SERS withdrawal” of
$105,704, the value of the lump sum withdrawal Wife rolled into an IRA
account. Again, the trial court’s distribution scheme constituted an
impermissible “double-dip,” as it factors the lump sum withdrawal Wife made
against her SERS pension. Accordingly, we remand for the trial court to
reconsider this aspect of its equitable distribution award.
In her third and final claim, Wife argues the trial court abused its
discretion in its valuation of Husband’s Schwab IRA. Wife contends the marital
portion should have been valued as of the date of distribution, not separation.
In support, Wife cites to Smith v. Smith, 653 A.2d 1259 (Pa. Super. 1995),
in which this Court stated:
The increase in the value of Husband’s deferred compensation
plan, employee savings plan and IRA, from the date of separation
until the date of distribution, was not a result of Husband’s post-
separation contributions. Husband admitted that he made no
contributions to these retirement funds post-separation.
Therefore, the most appropriate date for valuing Husband’s
various pension plans is the date of distribution.
Smith, 653 A.2d at 1271. The basis for this Court’s reasoning in Smith was
that, because there had been a considerable passage of time between the
parties’ separation and the distribution of their marital assets, substantial
fluctuations in the values of those assets may have occurred, which, from an
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equitable standpoint, should be reflected in the distribution order. Id. at
1270-71.
Here, the parties separated in November 2014, a complaint in divorce
was filed in April 2015, and distribution of marital assets was ordered by the
trial court in November 2017. Like Smith, Husband acknowledged that he
made no post-separation contributions to the IRA fund. See N.T., 11/28/17,
at 85-86. To distribute Husband’s Schwab IRA without regard to the
significant value fluctuations that occurred would undermine the legislative
intent of “effectuating economic justice between the parties and achieving a
just determination of their property rights.” Hayward, 868 A.2d at 558.
Thus, we conclude that the trial court erred in valuing Husband’s Schwab IRA
as of the date of separation, and remand for valuation at distribution.
Conclusion
Order reversed in part and affirmed in part. Case remanded with
instructions. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/20/2019
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