J-A18016-14
2014 PA Super 169
THOMAS A. DEAN IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
JOAN A. DEAN
Appellee No. 2110 MDA 2013
Appeal from the Order of October 24, 2013
In the Court of Common Pleas of Berks County
Civil Division at No.: 10-4283
BEFORE: LAZARUS, J., WECHT, J., and MUSMANNO, J.
OPINION BY WECHT, J.: FILED AUGUST 13, 2014
the trial court erred in denying one of
vacate the order in part, affirm in part, and remand with instructions.
separated in February 2010. This was the third marriage for each party.
There were no children of the marriage, although both parties have children
from their prior marriages. On March 2, 2010, Husband filed a complaint in
divorce.
On May 2, 2012, the court appointed a master to conduct a hearing
and issue a report to resolve the partie
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because Godfrey was living in the marital residence and asserted that she
ht to
over the economic issues. On October 3, 2012, upon the consent of the
parties, the trial court permitted Godfrey to intervene.
On March 14, 2013, the master conducted an equitable distribution
hearing. On April 15, 2013, the master issued his report and
recommendation and proposed order. In that report, the master concluded
that the parties had two main assets, a cabin that had been sold with the
proceeds being split equally, and the marital residence. As for the marital
residence, the master applied a seven percent cost of sale and determined
that the value available for distribution was $168,330. The master gave
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marital and that she used in the purchase of marital residence. The master
also found that Wife had arranged the loans for the marital residence and
used money from a long-term savings plan with her employer. The master
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subject to a coverture fracture as a portion was marital. However, that buy-
was used to pay off the marital
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residence.1 The master applied the coverture fraction to the remaining
equity in the marital residence to determine that $69,466 was the marital
portion of the residence. The master determined that a 75/25 split favoring
Wife was equitable. Wife was awarded the marital residence and was
ordered to pay Husband $17,366.65. Recognizing that Wife had limited
liquid assets and an outstanding home equity line of credit, the master
recommended that Wife be given options to pay Husband. Specifically, Wife
could execute a note for the total amount plus interest to act as a lien on the
property to be paid when Wife sold the property or upon her death; Wife
could pay the lump sum within ninety days; or Wife could make an initial
payment of $5,000 within ninety days and make installment payments on
the remainder plus interest over a period of three years.
On April 30, 2013, Husband filed exceptions to the report. Also on
April 30, 2013, Husband filed a motion for sanctions in which he argued that
Godfrey made representations in her petition to intervene that were
contradicted by her later deposition testimony and that Wife and Godfrey
should be ordered to pay his counsel fees for responding to the petition.
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1
The master found that, around the same time Wife paid off the loans
on the marital residence, Wife indicated that she wanted her children to
that provided for the sale of the house upon her death from which her
children would receive the first $80,000 of the proceeds and Husband would
receive the remainder.
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Following oral argument, on October 24, 2013, the trial court denied
Husband filed a notice of appeal. The trial court ordered, and Husband
timely filed, a concise statement of errors complained of on appeal pursuant
to Pa.R.A.P. 1925(b). Thereafter, the trial court filed its opinion.
Husband presents three issues for our review:
1. Whether the lower court abused its discretion and/or
committed an error of law in its calculation/determination of
the value of the marital residence for the purposes of the
2. Whether the lower court abused its discretion and/or
committed an error of law by allowing [Wife] to pay
death.
3. Whether the lower court abused its discretion and/or
Sanctions.
-2.
We review an equitable distribution order according to the following
standard:
The equitable distribution of marital property is within the sound
discretion of the trial court and its decision will not be disturbed
on appeal absent an abuse of discretion. Under the abuse of
the finder of fact. An abuse of discretion is not found lightly, but
only upon a showing of clear and convincing evidence. . . .
However, an abuse of discretion will be found by this Court if the
trial court failed to follow proper procedure or misapplied the
law.
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Hunsinger v. Hunsinger, 554 A.2d 89, 92 (Pa. Super. 1989) (citations
omitted).
Husband first argues that the trial court erred by affirming the
marital component of the marital resid -out. Husband
asserts that the master lacked authority to do so. Husband also argues that,
-marital, Wife
comingled the funds with a marital asset, rendering them marital assets.
Husband contends that the entire value of the marital residence should have
been considered marital property. In the alternative, Husband argues that,
if a coverture fraction could have been applied, it should have only applied
to the buy-out and not to the entire value of the marital residence.
-8.
Wife owned a home prior to marriage. Approximately nine years into
the marriage, Wife sold that property and applied the proceeds to the
marital residence. The master found that Wife was responsible for the
mortgage and swing loan that were used to finance the marital residence
and that Wife paid off those loans using the buy-out she received when her
employment ended and the retirement funds Wife withdrew. The master
determined that Wife consumed the entirety of the buy-out by paying off the
loans and by having work completed on the marital residence. The master
concluded that the entirety of the funds to purchase and pay for the marital
residence derived from Wife.
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However, the mas
retirement funds and her buy-out were attributable to her years of
employment during the marriage, and thus, constituted marital property. To
determine the marital portion, the master divided the number of years that
Wife worked during the marriage by the total number of years that Wife
worked for her employer to determine a coverture fraction of 43.58 percent.
The master then applied that percentage to the amount Wife received from
her retirement and buy-out.
The master also decided to apply the coverture fraction to the value of
the marital residence, because the funds Wife received were applied to the
residence. In so doing, the master found it to be equitable to credit Wife for
this non-marital property that had been co-mingled with a marital asset.
Applying the coverture fraction and the 75/25 distribution scheme to the
marital residence, the result was a higher amount to Husband than applying
-out. The master
found it equitable to award Husband the larger sum based, in part, upon the
was appropriate under these circumstances. The trial court recognized that,
even though Husband deeded the marital residence to Wife, it remained
marital property. However, the trial court found that Wife did not gift non-
marital property to Husband when she paid off the marital residence, but
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to her children, Wife was engaging in financial planning. When Wife applied
those funds to the house, she did so with the expectation that Husband
would not have an interest in the residence beyond the residuary clause of
her will. Therefore, the trial court found it to be equitable that the funds
used for the marital residence were considered according to their original
marital or non-marital designation before they were applied to the residence.
-9.
By statute, a coverture fraction2 shall be applied to a defined benefit
retirement plan when the court equitably divides such a plan. See 23
Pa.C.S.A. § 3501(c). Generally, a coverture fraction is not applied to other
types of marital assets. Husband is correct that when a party co-mingles
non-marital assets with marital assets, those assets generally are
transformed into marital assets. See Verholek v. Verholek, 741 A.2d 792,
797 (Pa. Super. 1999). However, in certain circumstances, we have
considered the value of pre-marital assets that were contributed to a marital
asset to determine distribution.
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2
coverture fraction shall be the number of months the employee spouse
worked to earn the total benefit [or the total accrued benefit as determined
as close as possible to the time of trial] and the numerator shall be the
number of such months during which the parties were married and not
distribution of the plan is chosen. 23 Pa.C.S.A. § 3501(c).
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For example, in Lee v. Lee, 978 A.2d 380 (Pa. Super. 2009), the wife
purchased the marital residence and had paid part of the mortgage prior to
the marriage. The wife re-financed the residence and the husband was
included on the deed at that time, transforming the asset from pre-marital
to marital property. At the time of re-finance, the wife paid the costs and
part of the mortgage with funds from the sale of additional pre-marital
property she owned. After re-financing, the wife paid off the balance of the
mortgage with the remaining proceeds from her pre-marital property. The
husband admitted that he contributed nothing to the marital residence. The
court distributed the marital residence with 65 percent going to the wife.
Id. at 384. Finding that the record did not support the distribution, we
remanded with instructions for the trial court to determine the percentage of
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-marital assets, and from the
joint assets, and to distribute the residence accordingly. Id. at 385.
This case is similar to Lee. While Wife did not own the marital
residence prior to marriage, Wife paid for the mortgage from funds that
were partly non-marital. Husband, by his own testimony, did not pay the
mortgage and knew that Wife was using her retirement funds to pay for the
-40. Wife testified
that she made every mortgage payment and paid all property taxes.
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Deposition of Wife, 11/7/2012, at 8.3 As in Lee, the master attempted to
determine which percentage of the value of the marital residence was
-marital assets and to give Wife credit for that
percentage. While application of a coverture fraction may have been
unorthodox, it accomplished that goal. Had the master deemed the entire
residence to be marital property and merely given Wife a larger percentage
of the marital residence, resulting in the exact same monetary distribution in
recognition of her greater contribution to the asset, that too would have
been an appropriate use of discretion. The use of a coverture fraction does
not invalidate that use of discretion.
The master made, and trial court affirmed, conclusions regarding
ances, including their
separate assets, contribution to the marital estate, health and age, and
likelihood that each would acquire additional assets. Those conclusions are
distribution of assets.
Husband next argues that the trial court abused its discretion in
allowing Wife the option not to pay Husband his share of the marital
residence until her death. Husband contends that he contributed to the
expenses for the household yet may not see his share of the equity in the
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3
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house if he does not outlive Wife. Husband also asserts that, because there
-9.
The master and the trial court relied upon the determination that it
would be unfair to require Wife to sell the marital residence as justification
for the delay in providing Husband with his share of the marital estate.
Because Wife had invested the majority of the funds in the residence, the
master and trial court believed that it would be equitable for her to remain in
the house until her death or until she chose to sell it. T.C.O. at 14-15. The
trial court also cited the note that Wife would execute in favor of Husband as
evidence of the equity of the award. Id. at 15.
One of the overarching purposes of the Divorce Code is to work
economic justice between the parties. 23 Pa.C.S.A. § 3102 (a)(6). While
the master and the trial court asserted that economic justice is achieved by
Wife remaining in the marital residence, neither discussed how economic
justice would be served through the indefinite delay of payment of
executing a note, the court permitted Wife to dictate when, if ever, Husband
receives his share of the estate. Wife could choose that option and decide
not to sell the marital residence with the knowledge that Husband has a
heart condition that is deteriorating. See N.T. at 12-13 (describing
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We often have dealt with the issue of delayed receipt of equitable
distribution in the context of pension benefits. We have compared
immediate receipt versus delayed distribution:
The immediate offset method has the advantage of avoiding
further entanglement between the parties. Problems with
continuing court supervision and enforcement are also avoided.
final and immediate settlement of the distribution of the
retirement benefits. In contrast, the deferred distribution
method equally divides the risk of forfeiture before maturity
among the parties, but also prolongs the strife and hostility
between the parties by extending the time for a final resolution
. . . this method is impractical where the parties do not possess
enough assets to offset the pension award. When the value of
the employee- eeds the value of the
other marital property, the deferred distribution method must be
used.
* * *
[T]he trial courts . . . must balance the advantages and
disadvantages of each alternative method as applied to the facts
of each particular case to determine which method best
effectuates a fair and equitable distribution
Hunsinger, 554 A.2d at 93 (quoting Braderman v. Braderman, 488 A.2d
613, 619-20 (Pa. Super. 1985)).
obvious. Husband and Wife would avoid further entanglement and the court
would avoid continued involvement and enforcement. While a payment plan
might be necessary, enforcement of such a method would be more clear-cut
than the untangling of possible competing claims fo
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with none of its advantages. This arrangement would prolong the financial
involvement between Husband and Wife and allow neither to separate
completely from the other. Nor does this deferral divide any risk. All it does
is allow Wife complete control over when, or if, Husband receives his share.
One benefit of deferred distribution is that it provides an option when
the estate does not have sufficient liquid assets. However, while no one
disputes that Wife does not have the total amount at her disposal, the
record does not support a finding that Wife does not have the resources to
pay Husband at all. Wife testified that she could take another $15,000 from
her home equity line of credit. N.T. at 67. Godfrey paid Wife $400 per
month, but stopped doing so. Id.
Wife at the time of the hearing and was not contributing to the household
expenses. Id. at 84. Wife works part-time and receives social security
benefits. Id. at 83. Wife could use her line of credit or ask her mother or
son to contribute to enable her to pay the majority of what she owes
Husband. Wife could seek to increase her work hours. The record does not
support the conclusion that Wife has no option but to delay distribution to
Husband until her death.
making. Wife complains that Husband has $6,000 in savings, while Wife has
been left with no retirement fund and a line of credit debt. However,
N.T. at 31. While Husband saved these proceeds, Wife used her share to
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buy a camper for her children. Id. at 67. At the time of her deposition in
Wife, Exh. 3 at 2. At trial, approximately a year later, it was about $45,000.
N.T. at 55. Wife testified that part of the increase was due to counsel fees;
however, approximately $20,000 of that debt was used to purchase a car for
her son. Id. at 60- -separation financial decisions should not
be used to justify delaying or denying Husband his share of the marital
estate.
Because there was no justification to delay, and perhaps deny,
discretion in allowing Wife to do so. However, the trial court did not abuse
its discretion in allowing Wife the option of a payment plan over a period of
time or of a lump sum payment to Husband. Those options provide Husband
financial situation. Therefore, we vacate the part of the order that allows
Wife to execute a note in lieu of actual payment to Husband.
We note that the trial court recognized that the master made a
calculation error and that, applying the coverture fraction correctly, Husband
should have received $17,398.55. T.C.O. at 6-7, n.1 & 2. However, the
trial court did not correct the order to reflect this error when Husband filed
exceptions. Because we are remanding this case, the trial court also is
directed to enter an order reflecting the true amount and directing Wife to
pay Husband either in a lump sum or according to the payment plan.
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In his final issue, Husband asserts that the trial court erred in denying
his Motion for Sanctions. Husband pursued sanctions pursuant to Pa.R.C.P.
1023.1(d). That rule provides that the trial court has discretion in granting
or denying such a motion. Id.
decision for an abuse of that discretion.
Rule 1023.1 provides that, by signing a pleading, motion, or other
paper, the party or attorney is certifying that it is not being filed for an
improper purpose; that the claims are warranted by existing law, an
extension of existing law, or establishment of new law; that there is
evidence or evidence is likely to be found through discovery for any factual
allegations; and that denials are based upon evidence or a reasonable lack
of information or belief. Pa.R.C.P. 1023.1(c). The rule also provides that
the court may impose sanctions when the rule is violated. Pa.R.C.P.
1023.1(d).
Husband argues that Godfrey included allegations in her petition to
intervene that were contradicted by her deposition testimony. Husband
inconsistencies and requesting that the petition be withdrawn or corrected.
petition, acted willfully in making false allegations. Husband also contends
that the petition increased his counsel fees because he had to defend the
peti -14.
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The trial court determined that it was reasonable for Godfrey to
believe that she could be required to leave the marital residence when
Husband asserted a claim to it. T.C.O. at 20. The trial court also found
Id. at 21. However, the court also determined
that the allegations were not unreasonable given the information Godfrey
had. The
sanctions were not warranted. Id. at 22. Based upon our review of the
record, we cannot conclude that the trial court abused its discretion in
reaching its conclusions. Therefore, we affirm the denial of sanctions.
Order affirmed in part and vacated in part. Case remanded with
instructions. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/13/2014
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Dean, T. v. Dean, J.
Combined Opinion