Hill v. Hill, 1636

• Citation: 47 Md.App. 460,424 A.2d 779
• Decision Date: 07 January 1981
• Docket Number: No. 1636,1636
• Parties: Mae H. HILL v. Theodore R. HILL, Jr.
• Court: Court of Special Appeals of Maryland

Page 460

47 Md.App. 460

424 A.2d 779

Mae H. HILL v. Theodore R. HILL, Jr.

No. 1636.

Court of Special Appeals of Maryland.

Jan. 7, 1981.

Joel Marc Abramson, Columbia, with whom were Talkin & Abramson, Columbia, on the brief, for appellant.

Stephen N. Goldberg, Baltimore, with whom was Jerome F. Cohn, Baltimore, on the brief, for appellee.

Argued before MORTON and MASON, JJ., and CHILDS, E. MACKALL, Specially Assigned Judge.

MASON, Judge.

In this case the principal issue we are asked to decide is whether military retirement pay is "marital property" subject to equitable distribution under subtitle 6A of title 3 of the Courts and Judicial Proceedings Article of the Annotated Code of Maryland (Cum.Supp. 1980). ¹

Mae H. Hill, appellant and cross-appellee, was granted an absolute divorce from Theodore R. Hill, Jr., appellee and cross-appellant, in the Circuit Court for Anne Arundel County. In addition she was awarded alimony, counsel fees, and a monetary award pursuant to subtitle 3-6A-05(b). The husband who served twenty-seven years in the United States Army until he retired in 1972 receives military retirement pay and veteran's disability pension. During seventeen years of his service in the military he was married to appellant and cross-appellee.

At the trial below the chancellor refused to permit an economist called by the wife as an expert witness to testify regarding the present value of the husband's military benefits on the basis "that the pension is not subject to the provisions of the Marital Act7" A proffer, however of the witness' testimony indicated that based on the husband's life expectancy of 19.2 years the present value of his yearly United States Army pension of $8,643.64 was not less than $130,221.00, nor more than $142,803.00. Both parties appeal from the judgment of the lower court.

The wife's sole argument on appeal is that "the chancellor erred by excluding appellee's military retirement benefits and the value thereof in his determination of what property qualified as marital property." Stated another way, the wife contends that the husband's military retirement benefits were an asset of the marriage and should have been included in the computation of the monetary award made in her favor.

Although the question of whether military retirement pay is "marital property" subject to equitable distribution between the parties upon divorce is one of first impression in this State, other jurisdictions have wrestled with this issue and have reached conflicting results. It appears to be the general rule in community property states that military retirement pay is community property subject to division upon divorce. See Luna v. Luna, 608 P.2d 57 (Ariz.App. 1980); Czarnecki v. Czarnecki, 123 Ariz. 466, 600 P.2d 1098 (1979); Gorman v. Gorman, 90 Cal.App.3d 454, 153 Cal.Rptr. 479 (1979); In re Marriage of Fithian, 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449 (1974), cert. den. 419 U.S. 825, 95 S.Ct. 41, 42 L.Ed.2d 48, reh. den., 419 U.S. 1060, 95 S.Ct. 644, 42 L.Ed.2d 657 (1975); Ramsey v. Ramsey, 96 Idaho 672, 535 P.2d 53 (1973); Stephens v. Stephens, 93 N.M. 1, 595 P.2d 1196 (N.M. 1979); Coote v. Coote, 592 S.W.2d 52 (Tex.Civ.App. Fort Worth, 1979); Payne v. Payne, 82 Wash.2d 573, 512 P.2d 736 (1973). The most comprehensive and widely cited case in support of this rule is In re Marriage of Fithian, 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449 (1974), cert. den. 419 U.S. 825, 95 S.Ct. 41, 42 L.Ed.2d 48, reh. den. 419 U.S. 1060, 95 S.Ct. 644, 42 L.Ed.2d 657 (1975). In that case the Supreme Court of California in holding that federal military retirement pay was properly the subject of California community property law stated:

The law is settled in California that retirement benefits which flow from the employment relationship, to the extent they have vested, are community property subject to equal division between the spouses in the event the marriage is dissolved. Underlying the community treatment of retirement benefits is the concept that they do not derive from the beneficence of the employer, but are properly part of the consideration earned by the employee. Thus whether an employee is required to make contributions to the retirement fund is irrelevant to the ultimate characterization of the benefits as community property. Furthermore, the principle that retirement benefits are community property has been held to apply whether the source of the retirement fund lies in a state, federal, military, or private employment relationship. (Citations omitted).

The conclusion follows that husband's federal military retirement pay must be considered community property in accordance with established principles of California law. Although the retirement fund was noncontributory, husband's rights to the benefits vested during marriage and constituted an integral part of his compensation for service in the military.

Id., 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d at 451. ²

Apart from the foregoing judicial declarations on tangential issues, military retirement pay must be realistically viewed as compensation for past, not present, services. Congress' purpose in creating the retirement pay system was to enhance the morale of the serviceman and to encourage him to remain in the military, and not to compensate him for his limited responsibility to the government after his retirement. Indeed, the amount of retirement pay a serviceman receives bears no relation to any continuing duties after retirement, but is calculated solely on the basis of the number of years served on active duty and the rank attained prior to retirement. (10 U.S.C. § 6323(e).) Moreover, should the serviceman actually be recalled to active duty, he is not only additionally compensated according to the active duty pay scale, but his rate of retirement pay is also increased thereafter. (10 U.S.C. § 1402). The conclusion is inescapable that retirement pay is awarded in return for services previously rendered and therefore is divisible as community property to the extent the serviceman was married while on active duty.

Id., 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d at 456-457.

For cases from noncommunity property states which rely on Fithian in holding that military retirement pay and disability benefits are assets of the marriage, divisable upon divorce, see In re Marriage of Musser, 70 Ill.App.2d 706, 27 Ill.Dec. 240, 388 N.E.2d 1289 (1979); In re Marriage of Schissel, 292 N.W.2d 421 (Iowa, 1980); Chisnell v. Chisnell, 82 Mich.App. 699, 267 N.W.2d 155 (1978); In re Marriage of Miller, 609 P.2d 1185 (Mont. 1980), petition for cert. filed, 49 U.S.L.W. 3273 (U.S. Oct. 14, 1980) (No. 80-291); Kruger v. Kruger, 139 N.J.Super. 413, 354 A.2d 340 (1976); aff'd. 73 N.J. 464, 375 A.2d 659 (1977).

Contrary to Fithian and its progeny, several other jurisdictions have held that military retirement pay is equivalent to wages and is not property or an asset of the marriage subject to distribution upon divorce. The leading case espousing this theory is In re Marriage of Ellis, 538 P.2d 1347 (Colo.App. 1975). In that case, the wife in reliance on Fithian and other authorities from community property states appealed from a determination of the lower court that retirement pay was not a vested property right subject to division upon divorce, but income of the husband. The Colorado Court of appeals, in affirming the lower court, held:

We hold that the husband's army retirement pension and the future retired pay to be received thereunder do not constitute "property" and are, therefore, not subject to division as such under § 14-10-113, C.R.S. 1973. It is a resource of the husband in the nature of income to be received in the future, to be considered in fixing the amount of maintenance and child support which the husband is able to pay as related to the needs of the wife and children, §§ 14-10-114 and 115, C.R.S. 1973, and is to be considered also as any other "economic circumstance" of the husband in determining a just division of the marital property.

Id. at 1350.

The rationale undergirding the Court's holding was as follows:

Army retirement pay is something the soldier has earned, Berkey v. United States, 176 Ct.Cl. 1, 361 F.2d 983, and, because he is still subject to recall to active duty, Lemly v. United States, 109 Ct.Cl. 760, 75 F.Supp. 248, is still earning as a continuation of active duty pay on a reduced basis, Hostinsky v. United States, 154 Ct.Cl. 443, 292 F.2d 508. He has to serve at least 20 years to be eligible to retire, and can elect to retire at any time thereafter. 10 U.S.C. § 3911. This right to retirement pay can be said to have "vested" after 20 years, but he cannot start to draw it until he does retire and is still alive and, therefore, the right is subject to divestment on prior death or discharge. The amount of retired pay is wholly within the control of Congress, is presently based on rank and length of service at time of retirement, and the retired soldier can expect increases or reductions which may be legislated from time to time. See 10 U.S.C. § 1401a, § 3961, and § 3991; 6 C.J.S. Army and Navy § 20a(7).

The full amount of the retired pay is taxable income under § 61(a)(11) of the 1954 Internal Revenue Code. The soldier makes no contributions to any retirement fund, nor is there any such fund under current law. See 10 U.S.C. §§ 3911 and 3991.

Army retired pay is not a fixed or tangible asset. At no time has it any cash surrender, loan, redemption, or lump sum value. It is payable monthly, but terminates on death... The right to the pension and the retired pay not yet due and payable cannot be assigned, sold, transferred, conveyed, or pledged.

Id. at 1349.

The Supreme Court of Colorado, in affirming the ruling of the Colorado Court of Appeals, said:

We hold, as did the court of appeals, that military retirement pay is not "property" under the dissolution of marriage act. Our reason is that it does not...