Daniel v. Daniel (Slip Opinion)

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as

Daniel v. Daniel, Slip Opinion No. 2014-Ohio-1161.]

NOTICE

This slip opinion is subject to formal revision before it is published in

an advance sheet of the Ohio Official Reports. Readers are requested

to promptly notify the Reporter of Decisions, Supreme Court of Ohio,

65 South Front Street, Columbus, Ohio 43215, of any typographical or

other formal errors in the opinion, in order that corrections may be

made before the opinion is published.

SLIP OPINION NO. 2014-OHIO-1161

DANIEL, APPELLANT, v. DANIEL, APPELLEE.

[Until this opinion appears in the Ohio Official Reports advance sheets,

it may be cited as Daniel v. Daniel, Slip Opinion No. 2014-Ohio-1161.]

Domestic relations—Divorce—Marital property—R.C. 3105.171(A)(3)(a)—

Military retirement benefits—Unvested military retirement benefits earned

during marriage are marital property subject to division—Present value

need not be determined—Court may fashion order deferring distribution

until benefits become payable.

(No. 2012-2113—Submitted October 22, 2013—Decided March 26, 2014.)

APPEAL from the Court of Appeals for Mercer County, No. 10-11-09,

2012-Ohio-5129.

____________________

SYLLABUS OF THE COURT

Unvested military retirement benefits earned during marriage fall within the

definition of marital property in R.C. 3105.171(A)(3)(a) and must be

considered for division under R.C. 3105.171(C).

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SUPREME COURT OF OHIO

O’NEILL, J.

{¶ 1} In this case, we consider whether unvested military retirement

benefits are assets to be considered in a divorce property division. While there is

always a degree of uncertainty regarding the precise value of such benefits, it is

beyond dispute that they do have value, even if that value will become fixed only

in the future. Accordingly, a trial court must take such benefits into account when

determining a division of property.

FACTS AND PROCEDURAL HISTORY

{¶ 2} Plaintiff Christen Daniel and defendant Sean Daniel were married

in 1995. The marriage produced three children, who were aged 13, 11, and 7 at

the time of the divorce hearing. During the marriage, the parties separated on two

occasions: from fall 2004 until December 2005 and from January 2008 through

the date of the divorce decree in 2011.

{¶ 3} The defendant enlisted in the National Guard just prior to the

marriage, and at the time of the divorce hearing had been in the Guard for 16

years. Prior to the hearing, he reenlisted for an additional six years, and he will be

eligible to receive retirement benefits once he accumulates 20 years of credit. The

parties entered into an agreement regarding custody of the three children, so their

divorce trial related only to division of property and debt.

{¶ 4} The matter was heard by a magistrate, who concluded that “Ohio

law does not permit the court to divide a non-vested pension benefit.” The

plaintiff-wife objected to this finding, arguing that “since the Defendant is already

contractually committed to remain in the military through vesting ‘age’, the court

should have divided one-half of his retirement benefits during the years of

marriage.” The plaintiff contended that the court erred in concluding that

unvested military benefits cannot be divided and that the court should have

divided those benefits by computing the ratio of the number of years of the

defendant’s military service during the marriage to the total years of his military

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service. The trial court overruled the plaintiff’s objection and adopted the

magistrate’s decision. In its final order, the trial court found that the defendant’s

military retirement benefits were a “mere expectancy” and concluded that there

were “no retirement benefits for the court to divide.”

{¶ 5} The court of appeals affirmed this decision, even though it implied

that the trial court’s analysis may have been incorrect. The majority concluded

that there was no need to decide whether unvested pension benefits are a marital

asset, because insufficient evidence regarding Sean’s retirement benefits was

presented at trial in this case to require division of the asset. But a separate

opinion dissenting on this point observed that in this case, “the potential military

pension is the only marital asset that the parties may have,” and for that reason,

“an exact valuation or further details concerning the plan was not necessary in

order for the court to provide for the future division of this asset.” (Emphasis sic.)

2012-Ohio-5129, ¶ 61 (Willamowski, J., concurring in part and dissenting in

part). “[T]he trial court had before it all of the information that was needed in

order to award Christen one half of the amount of any future military pension that

was attributable to the points that were earned during the marriage.” Id. at ¶ 64.

The plaintiff appealed, and this court accepted jurisdiction to determine whether

unvested military retirement benefits are marital assets subject to division in

divorce proceedings.

{¶ 6} We agree with the dissent. While the exact amount to be divided is

not ascertainable unless and until the service member completes the required 20

years of service, the percentage of ownership of the benefits on the date of

divorce can readily be discerned. It is simple math: the number of years in service

compared to the number of years of marriage provides the formula for division.

ANALYSIS

{¶ 7} In any divorce action, the starting point for a trial court’s analysis

is an equal division of marital property. R.C. 3105.171(C)(1); Neville v. Neville,

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99 Ohio St.3d 275, 2003-Ohio-3624, 791 N.E.2d 434, ¶ 5. Although the trial

court was not specific on this point, it concluded, in essence, that because the

defendant’s military retirement benefits had not vested, they were not marital

property and were therefore not subject to division. We disagree.

{¶ 8} As defined in R.C. 3105.171(3)(a), “marital property” includes

“[a]ll real and personal property that currently is owned by either or both of the

spouses” and “[a]ll interest that either or both of the spouses currently has in any

real or personal property, including, but not limited to, the retirement benefits of

the spouses, and that was acquired by either or both of the spouses during the

marriage.” (Emphasis added.) R.C. 3105.171(A)(3)(a)(i) and (ii).

{¶ 9} The statute does not distinguish between vested or unvested

retirement benefits. The portion of the statute that sets forth what is not to be

considered marital property does not mention retirement benefits at all. R.C.

3105.171(A)(3)(b). We have held that vested pension benefits are marital

property. Hoyt v. Hoyt, 53 Ohio St.3d 177, 178-179, 559 N.E.2d 1292 (1990).

But we have never addressed unvested benefits in this context.

{¶ 10} Admittedly, it may be difficult to ascertain the value of benefits

that have not yet vested and may never vest. But it does not follow that those

future benefits have no value. Most states hold that unvested retirement benefits

accrued during the marriage constitute marital property subject to division. See

Cohen v. Cohen, 937 S.W.2d 823, 829 (Tenn.1996) (listing cases from 37 states).

{¶ 11} In addressing the division of pension benefits, courts have

fashioned two approaches: the “present cash value” method, which requires the

court to place a value on the benefit as of the date of the final decree and divide

that value between the parties, and the “deferred distribution” method, in which

the court devises a formula for dividing the monthly benefit at the time of the

decree, but defers distribution until the benefits become payable. Cohen at 831;

see also Hoyt at 181.

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{¶ 12} Our holding in Wilson v. Wilson, 116 Ohio St.3d 268, 2007-Ohio-

6056, 878 N.E.2d 16, provides a useful example of the “deferred distribution”

method of accomplishing an equitable division of an unvested retirement benefit.

The trial court in that case included in the divorce decree the following language:

“The defendant shall receive one-half of the coverture value of the plaintiff’s

unvested Teamsters pension if and when it becomes vested. This division shall be

through a qualified domestic relations order (QDRO) prepared and signed at the

time of the vesting.”1 Wilson at ¶ 3.

{¶ 13} Similarly, in Hoyt this court approved the division of a vested but

unmatured pension benefit by the use of a Qualified Domestic Relations Order,

but rejected the claim that the trial court must always use the present vested value

of a plan in reaching its division of property. Id. at 183-184. We identified the

two goals that trial courts must balance when dividing pension assets. “[W]hen

circumstances permit, [trial courts] should strive to resolve the issues between the

parties so as to disassociate the parties from one another or at least minimize their

economic partnership.” Id. at 182. But “the trial court must obtain a result which

will preserve the asset so that each party can procure the most benefit.” Id. at

181. And we recognized that in some situations, achieving the latter goal may

mean that the former must yield:

When a trial court decides that a pension or retirement asset

shall be paid by deferred distribution, it has created a situation

where the parties’ affairs are not concluded. * * * Although this

alternative divides the risk between the parties that the benefits will

fail to vest or mature, as an example, there is nothing to prevent an

1

We recognize that a Qualified Domestic Relations Order is a device specifically designed for

assigning benefits to a nonparticipant spouse under the federal Employment Retirement Income

Security Act, 29 U.S.C. 1001 et seq., and that such an order is not applicable to a nonprivate

pension. But it may provide a useful model.

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employed spouse, for whatever reason, from quitting his or her

employment and becoming employed elsewhere. Likewise, the

nonemployed spouse bears the risk that the employed spouse will

die and the expected benefits, before being vested or matured, will

terminate.

Id. at 182. Hoyt recognizes that while it is desirable to bring finality to the

parties’ marriage by dividing assets once and for all, doing so is not possible in all

cases, because it sometimes leads to an inequitable result. And while the dollar

amount in all likelihood will change as retirement approaches, the percentage

interest of the parties in the pension will not.

{¶ 14} The appellate court seems to have understood that the defendant’s

unvested retirement benefit was marital property under the statute, but then

concluded that since the precise value of the benefit could not be ascertained

based on the record presented, it could not be divided. But fixing a precise

present value and the date of vesting is not mandatory. See Hoyt, 53 Ohio St.3d at

182, 559 N.E.2d 1292; Wilson, 116 Ohio St.3d 268, 2007-Ohio-6056, 878 N.E.2d

16, at ¶ 19-20; Neville, 99 Ohio St.3d 275, 2003-Ohio-3624, 791 N.E.2d 434, at

¶ 10-11. And in the case of such an important asset, a court can and should seek

other reasonable methods of achieving equity. As we noted in Hoyt, “[w]hen the

only marital asset of the parties is an employed spouse’s pension or retirement

benefits, it is difficult for the trial court to structure an equitable property division

without dividing the pension or retirement asset.” Hoyt at 183.

{¶ 15} As the plaintiff notes, one possible way to divide such assets is by

computing “the ratio of the number of years of [the] employed spouse’s

employment during the marriage to the total number of years of his or her

employment,” id., a ratio that has come to be known as the “coverture fraction.”

See, e.g., Thompson v. Thompson, 196 Ohio App.3d 764, 2011-Ohio-6286, 965

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N.E.2d 377, ¶ 33. In this case, the trial court was provided all of the information

needed to calculate the coverture fraction: the dates of the marriage, the dates of

defendant’s military service, and the dates the two overlapped. This is all that

was necessary to award the plaintiff a percentage share of the defendant’s military

retirement benefit. The fact that its precise value will not become fixed, if it ever

does, until some future date is irrelevant. The trial court had enough information

in this case to make an equitable division of the benefits, whether by the

plaintiff’s suggested coverture fraction or some other appropriate method.

{¶ 16} The trial court and the court of appeals were mistaken in

concluding that the defendant’s unvested military pension was not a divisible

asset. This record, although sparse, is sufficient to demonstrate that the plaintiff

was entitled to share in the sole remaining asset that was earned during the

marriage. The trial court erred as a matter of law, and as a result its division of

property was inequitable and an abuse of discretion.

CONCLUSION

{¶ 17} Unvested military retirement benefits earned during the marriage

fall within the definition of marital property in R.C. 3105.171(A)(3)(a) and must

be considered for division under R.C. 3105.171(C). We reverse the judgment of

the court of appeals and remand this case to the trial court for further proceedings.

Judgment reversed

and cause remanded.

PFEIFER, KENNEDY, and FRENCH, JJ., concur.

O’CONNOR, C.J., and O’DONNELL and LANZINGER, JJ., dissent.

____________________

O’DONNELL, J., dissenting.

{¶ 18} I respectfully dissent.

{¶ 19} This case presents a question of statutory interpretation regarding

whether an unvested, contingent future interest in military retirement benefits is

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marital property subject to equitable division in a divorce proceeding. This

question is substantially different from the division of assets held in a pension or

IRA account—which are customarily divided using a QDRO—because in this

instance, the benefits are not currently owned by either party to the divorce, can

only be acquired, if ever, after termination of the marriage, and may never vest.

The General Assembly has specifically defined marital property to include only

assets currently owned by a party to a proceeding and therefore has not provided

that unvested interests or future interests in property are marital assets.

Accordingly, because these military retirement benefits are not marital property,

the appellate court correctly resolved this issue, and its judgment should be

affirmed.

{¶ 20} The role of the judiciary in the exercise of the judicial power

granted by the Constitution is to interpret the law that the General Assembly

enacts, and the primary goal in construing a statute is to ascertain and give effect

to the intent of the legislature. State v. Robinson, 124 Ohio St.3d 76, 2009-Ohio-

5937, 919 N.E.2d 190, ¶ 18. Here, the General Assembly has clearly expressed

its intent by enacting R.C. 3105.171(A)(3)(a), which specifically defines “marital

property” to include:

(i) All real and personal property that currently is owned by

either or both of the spouses, including, but not limited to, the

retirement benefits of the spouses, and that was acquired by either

or both of the spouses during the marriage;

(ii) All interest that either or both of the spouses currently

has in any real or personal property, including, but not limited to,

the retirement benefits of the spouses, and that was acquired by

either or both of the spouses during the marriage.

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(Emphasis added.) Notably, marital property includes retirement benefits of the

spouse acquired during the marriage and all interests that either spouse currently

has in the retirement benefits at the time of the equitable division of property.

The General Assembly could have also included unvested interests in retirement

benefits or future interest in property that a spouse may receive or acquire at a

future time, but it chose not to include such an inchoate interest in the definition

of marital property. Thus, future interests in property that might possibly vest, if

at all, after the termination of a marriage have not been acquired during the

marriage, are not currently owned by either or both spouses, and a spouse

currently has no interest in such benefits. Therefore, they are not marital property

subject to equitable division by a trial court.

{¶ 21} In this case, at the time of the divorce, Sean Daniel did not

currently own any right to military retirement benefits from the National Guard,

because he had not accumulated 20 years of service credit. Nor did he currently

have an interest in those benefits, because that interest had not vested and could

only vest into an enforceable right to payment in the future—only after

termination of the marriage. Notably, he had no ownership right or possessory

interest in those benefits that would permit him to bring a cause of action for a pro

rata share of those benefits based on his years of service in the National Guard at

the time of the divorce. And because he had not acquired any right to receive

retirement benefits from the National Guard during the marriage, the trial court

had nothing to divide.

{¶ 22} Thus, contrary to the view of the majority, which ignores the

General Assembly’s use of the word “currently” in defining marital property, I

would decide this case in accord with the expressed intent of the legislature as set

forth in the plain language of the statute. The General Assembly has defined the

term “marital property” to include property that is currently owned by either

spouse, including retirement benefits, and all interest that either spouse currently

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has in retirement benefits. Since neither spouse here currently has a vested

interest in these benefits, they are not marital property, and the domestics relations

court may not divide them nor consider them in its distribution of marital assets.

{¶ 23} If the General Assembly believes that a change in its policy is

warranted, it may choose to include unvested interests in retirement benefits as

marital property at some future time. But at present, it has not done so, and this

court has taken upon itself the role of legislating from the bench in its conclusion

that it will order these benefits to be considered as marital property. I cannot join

in this action, because I believe in judicial restraint and the role of the court as

being limited to interpreting the law as written by the General Assembly.

{¶ 24} The court of appeals correctly adjudicated this issue, and I would

affirm its judgment.

____________________

LANZINGER, J., dissenting.

{¶ 25} I respectfully dissent and would hold that this case was

improvidently accepted. The majority has redefined marital property under R.C.

3105.171(A)(3)(a) simply to reverse the outcome in a single case. This case raises

an issue that deserves a full adversarial presentation to avoid a judgment whose

far-reaching consequences are unintended. Unvested pensions are not marital

property, for until the pension is vested, neither spouse has a current interest as

required by R.C. 3105.171(A)(3)(a)(i), and vesting is a contingent event. What

other mere contingencies and expectations will trial courts be required to consider

marital assets subject to division in R.C. 3105.171(C)?

{¶ 26} We have established that a trial court has broad discretion to divide

property in domestic relations cases, and its decision will not be disturbed on

appeal absent unreasonable, arbitrary, or unconscionable conduct. Middendorf v.

Middendorf, 82 Ohio St.3d 397, 401, 696 N.E.2d 575 (1998), citing Holcomb v.

Holcomb, 44 Ohio St.3d 128, 541 N.E.2d 597 (1989); Martin v. Martin, 18 Ohio

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St.3d 292, 294-295, 480 N.E.2d 1112 (1985); Blakemore v. Blakemore, 5 Ohio

St.3d 217, 219, 450 N.E.2d 1140 (1983); Berish v. Berish, 69 Ohio St.2d 318,

319, 432 N.E.2d 183 (1982). “If there is some competent, credible evidence to

support the trial court’s decision, there is no abuse of discretion.” Middendorf at

401.

{¶ 27} The court of appeals concluded in a two-to-one decision that it

could not find an abuse of discretion in the trial court’s decision not to award a

portion of the unvested military pension based upon the scant record in this case.

But with only one party, the appellant, filing a single brief in this court and

presenting oral argument without opposition, the majority now determines that

unvested military benefits must be considered as marital property subject to

division. Even the dissenting judge in the court of appeals acknowledged that we

have not yet ruled on this specific issue, although commenting that current law

“allows” consideration of an unvested military pension in the division of assets.

2012-Ohio-5129 at ¶ 58 (Willamowski, J., concurring in part and dissenting in

part).

{¶ 28} The previous holdings of this court dealing with the division of

pension benefits have rightly noted the importance of vesting. Teeter v. Teeter, 18

Ohio St.3d 76, 78, 479 N.E.2d 890 (1985) (military pension benefits that were

earned during the marriage and that had vested and were being paid at the time of

the divorce are marital assets and a factor to be considered in the division of

property); Hoyt v. Hoyt, 53 Ohio St.3d 177, 182, 559 N.E.2d 1292 (1990)

(distinguishing between potential division methods for vested matured and vested

unmatured pension benefits).

{¶ 29} We have stated that “[p]ension or retirement benefits accumulated

during the course of a marriage are marital assets subject to property division in a

divorce action.” (Emphasis added.) Erb v. Erb, 75 Ohio St.3d 18, 20, 661 N.E.2d

175 (1996). But retirement benefits that have not vested have not actually

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accumulated. They do not exist as actual benefits until they vest. The statute

defining marital assets emphasizes this point:

“Marital property” means * * *

(i) All real and personal property that currently is owned by

either or both of the spouses, including, but not limited to, the

retirement benefits of the spouses, and that was acquired by either

or both of the spouses during the marriage;

(ii) All interest that either or both of the spouses currently

has in any real or personal property, including, but not limited to,

the retirement benefits of the spouses, and that was acquired by

either or both of the spouses during the marriage;

***

(b) “Marital property” does not include any separate

property.

(Emphasis added.) R.C. 3105.171(A)(3)(a).

{¶ 30} The statute does not have the expansive meaning the majority

gives it. It may well be that that this court should adopt a rule that unvested

military retirement benefits accrued during the marriage constitute marital

property subject to division even while those benefits remain unvested. However,

such a change in precedent should not occur without robust adversarial

presentation. This issue is too important in its ramifications to be decided with

half of the argument unpresented and unheard.

{¶ 31} This is an example of a one-sided case potentially making bad law.

Because I believe that we should not have accepted this case for review under

these circumstances, I dissent.

O’CONNOR, C.J., concurs in the foregoing opinion.

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January Term, 2014

____________________

James A. Tesno, for appellant.

_________________________

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