Court Opinion

ID: 2747761
Source: CourtListenerOpinion
Date Created: 2014-11-04 00:04:50.204223+00
Date Added: 2024-06-11T09:32:34.445766
License: Public Domain

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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.
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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
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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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