Forrester v. Forrester, No. 32, 2007.

• Court: United States State Supreme Court of Delaware
• Writing for the Court: Jacobs
• Citation: 953 A.2d 175
• Docket Number: No. 32, 2007.
• Decision Date: 10 July 2008
• Parties: Richard J. FORRESTER,<SMALL><SUP>1</SUP></SMALL> Respondent Below, Appellant, v. Margaret R. FORRESTER, Petitioner Below, Appellee.

953 A.2d 175 Richard J. FORRESTER,¹ Respondent Below, Appellant,
v.
Margaret R. FORRESTER, Petitioner Below, Appellee. No. 32, 2007. Supreme Court of Delaware. Submitted: May 7, 2008. Decided: July 10, 2008.

[953 A.2d 177]

Court Below: Family Court of the State of Delaware in and for New Castle County, File No. CN06-01118.

Upon Appeal from the Family Court. AFFIRMED.

Shawn Dougherty, Esquire, of Weik, Nitsche, Dougherty & Componovo, Wilmington, Delaware; for Appellant.

H. Alfred Tarrant, Jr. (argued) and Thomas Shellenberger, Esquires, of Cooch and Taylor, Wilmington, Delaware; for Appellee.

Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS, and RIDGELY, Justices, constituting the Court en Banc.

JACOBS, Justice.

Richard J. Forrester ("Husband") appeals from an order of the Family Court requiring him to divide his City of Wilmington Police pension and his accumulated compensatory time with his former wife, Margaret R. Forrester ("Wife"). Husband argues that neither his pension nor his compensatory time were marital assets subject to property division and that, therefore, the Family Court erred as a matter of law and abused its discretion in ordering their division. We hold that Husband's City of Wilmington Police pension, even though a "substitute" for Social Security benefits, is a marital asset subject to equitable division by the Family Court in divorce proceedings. We also hold that the Family Court did not err in awarding Wife a portion of Husband's accumulated compensatory time. Therefore, we affirm.

FACTS

Husband and Wife were married on September 22, 1989 and were divorced on February 10, 2006. Two children were born of the marriage. During their marriage, Wife was primarily responsible for the care of the children, while Husband was employed as a police officer by the City of Wilmington Police Department ("WPD").

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Husband began his employment as a police officer in 1984, and is still employed by the WPD. At all relevant times, Husband made contributions to the City of Wilmington Police Pension Plan, but he could not, and therefore did not, make any contributions to Social Security in his capacity as a WPD employee.²

During the first year and a half of the marriage, Wife was employed full-time. In 1991, Wife stopped working for three months to take care of their first child; afterwards, she resumed employment on a part-time basis. In 1998, Wife began working again full-time. Wife has a Roth IRA, two 403(b) Plans with the State of Delaware and Christiana Care, and a State of Delaware Defined Benefit Pension Plan. She is also eligible to receive Social Security benefits.

By the date of the parties' separation, Husband had accrued 457 hours of accumulated compensatory time. Husband could either "cash in" those hours and receive his current hourly wage, or use them as vacation or early retirement time. The cash value of the 457 hours of compensatory time is approximately $14,000. Shortly after the parties separated, Husband cashed in approximately 160 hours for $5,000.

Husband's WPD pension and his compensatory time were disputed assets in the divorce proceedings. Husband argued that the WPD pension was exempt from the marital estate and equitable division because it was received "in lieu of Social Security benefits, which under federal law are not subject to property division. Wife responded that pensions "in lieu of Social Security benefits are fundamentally different from actual Social Security benefits, and that therefore such pensions, like other retirement benefits earned during a marriage, are marital property subject to equitable division.

The Family Court recognized that there were conflicting Family Court decisions concerning whether pensions that operate "in lieu of Social Security can be divided.³ After discussing those conflicting cases, the trial court concluded that "no federal or state restriction prohibit[ed] Husband's police pension from being considered part of the marital estate and equitably divided, even though the WPD pension is received in lieu of non-divisible social security benefits."⁴ The Family Court noted, however, that it was required to "consider the inequities involved and avoid any imbalance that may result given that Husband is not entitled to a portion of Wife's accrued social security benefits."⁵ After comparing the respective economic positions of the

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parties, their employment history, annual income, and assets, the trial judge divided Husband's WPD pension, giving Wife a 50% share in that portion of the pension that Husband earned during the marriage.⁶

As for the disputed accumulated compensatory time, Wife sought to be awarded a portion of the monetary value of that time on an "if, as, and when basis." The Family Court held that Husband's compensatory time accumulated during the marriage was marital property subject to division, similar to other types of deferred compensation. Additionally, the trial judge noted that "Wife's request that she receive her portion of the money on an if, as, and when basis is unnecessary given that there are no conditions precedent to Husband receiving a payout," i.e., because Husband could "cash in" the compensatory time whenever he chose. The trial court concluded that Wife was entitled to "half of the 457 hours accumulated during the marriage for a total of 228.5 hours at Husband's hourly rate of $32.00" and addressed Husband to "either: (1) request an immediate payout of these hours and turn that amount over to Wife; or (2) submit proof of an accurate accounting of those hours to Wife and deduct that amount from his portion of the marital estate."⁷

This appeal followed.

ANALYSIS Standard of Review

On appeal from a Family Court decision dividing marital property, we review the facts and the law, as well as the inferences and deductions made by the trial judge.⁸ Conclusions of law are reviewed de novo.⁹ If the law was correctly applied, we review for an abuse of discretion.¹⁰ We will not disturb findings of fact unless they are clearly wrong and the doing of justice requires their overturn.¹¹

I. Husband's City of Wilmington Police Department Pension

Husband first claims that his WPD pension is not a marital asset and, thus, is not subject to equitable division. Specifically, Husband argues that, because his WPD pension is "in lieu of Social Security, it should receive the same treatment as Social Security benefits, and, thus, is exempt from equitable division.

Social Security Benefits Are Not Subject to Division

Under 42 U.S.C. § 407, Social Security benefits are not "transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under [the Social Security Act] shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."¹² Although 42 U.S.C. § 659 permits garnishment for enforcement of alimony

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and child support obligations, it categorically excludes "any payment or transfer of property or its value by an individual to his spouse or former spouse in compliance with any community property settlement, equitable distribution of property, or other division of property between spouses or former spouses."¹³ As the United States Supreme Court held in Flemming v. Nestor,¹⁴ "[t]o engraft upon the Social Security system a concept of `accrued property rights' would deprive it of the flexibility and boldness in adjustment to everchanging conditions which it demands."¹⁵ Therefore, under federal law, Social Security benefits are not marital assets and cannot be divided upon the dissolution of the Social Security beneficiary's marriage.

Based on Section 407 and Flemming v. Nestor, the relevant state decisions hold almost uniformly that federal law prevents division of these benefits.¹⁶ In Delaware, several Family Court decisions have held that Social Security benefits are not subject to division.¹⁷ We agree.

Pensions Received as a "Substitute" For Social Security Are Subject to Division

Husband argues that because Social Security benefits are not subject to equitable division, his WPD pension—which he receives "in lieu of" Social Security benefits—is exempt from the marital estate and from equitable division. Wife agrees that Husband's pension is received "in lieu of Social Security benefits, but contends that pensions "in lieu of Social Security are fundamentally different from actual Social Security benefits and, like other retirement benefits earned during the marriage, are marital property that is subject to equitable division.

Despite the absence of any legal authority, the parties agreed, as did the Family

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Court, that Husband's WPD pension is "in lieu of or "the functional equivalent of Social Security benefits.¹⁸ That characterization is based on the fact that, as a WPD police officer, Husband could not, and therefore did not, make any contributions to the Social Security system.¹⁹ It is only in that sense that we refer to Husband's WPD pension plan as a "substitute" for Social Security benefits in this Opinion.

Husband's contention raises an issue of first impression in this Court. Other state courts that have decided that issue are divided. Nine jurisdictions have determined that retirement plans that substitute for federal Social Security are subject to division as a marital asset.²⁰ Four jurisdictions do not treat such plans as marital assets.²¹ We conclude that pensions, owned by a party to a marriage, that

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operate as a "substitute" for Social Security, such as the one at issue here, are marital property and as such are subject to equitable division upon dissolution of the beneficiary's marriage. The legislation creating the WPD pensions, and our case law interpreting that legislation, support that conclusion.

Presently, all WPD pensions fall under one of three statutes: the 1978 City of Wilmington Police...