# Berrington v. Berrington

> Supreme Court of Pennsylvania · November 12, 1993 · 534 Pa. 393

URL: https://www.frixlaw.com/law-library/cases/9731459

## Case

- **Full name:** Charles L. BERRINGTON, Appellee, v. Claire L. BERRINGTON, Appellant
- **Court:** Supreme Court of Pennsylvania
- **Decided:** November 12, 1993
- **Citations:** 534 Pa. 393; 633 A.2d 589; 17 Employee Benefits Cas. (BNA) 2394; 1993 Pa. LEXIS 233
- **Precedential status:** Published
- **Opinion:** Dissent by Cappy
- **Judges:** Nix, Larsen, Flaherty, Zappala, Papadakos, Cappy, Montemuro
- **Cited by:** 46 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9731459

## How later opinions describe it (automated extraction)

- holding that “in a deferred distribution of a defined benefit pension, the spouse not participating may not be awarded any portion of the participant-spouse’s retirement benefits which are based on post-separation salary increases, incentive awards or years of service”
- finding spouse’s share should be calculated based upon the salary at the time of separation

## Opinion text

CAPPY, Justice,
dissenting.
For the reasons that follow, I am constrained to respectfully dissent.
The majority herein holds that,
in a deferred distribution of a defined benefit pension, the spouse not participating may not be awarded any portion of the participant-spouse’s retirement benefits which are based on post-separation salary increases, incentive awards or years of service. Any retirement benefits awarded to the non-participant spouse must be based only on the participant spouse’s salary at the date of separation.
(Maj. op. at 402-403) (emphasis added).
Thereafter, in an apparent effort to reduce the harshness of the announced rule, the majority goes on to conclude that any
increases in retirement benefits payable to the employee spouse, between the date of marital separation and the date the non-participant spouse begins receiving benefits which are not attributable to the efforts or contributions of the participant-spouse, ... may be shared by the non-partici *404 pant spouse based upon his or her proportionate share of the marital estate.
(Maj. op. at 403).
The majority correctly states that under the Divorce Code the marital portion of the pension is the benefit which the marital partnership acquired as of the date of separation. 1 The majority then concludes that the marital partnership has acquired as of the date of separation a benefit calculated by using the participant spouse’s salary as of the date of separation and, furthermore, that a benefit calculated by using the participant’s salary as of a later date (which the majority apparently assumes will be higher than at separation), will result in the non-participant spouse receiving more than what the marital partnership acquired prior to separation.
The majority’s ruling would be correct if as of the date of separation the participant spouse had already acquired a final retirement benefit for the years worked during the marriage based on that spouse’s date-of-separation salary and if all increased retirement benefits are deferred compensation for work performed after separation. However, neither is the case. The majority’s ruling is based on three assumptions that I believe to be demonstrably incorrect. First, the majority assumes that, as of the date of separation, the participant spouse has acquired the right to receive, at the very minimum, a pension benefit calculated by using the participant’s salary as of the date of separation; second, the majority assumes that an asset cannot be marital if it depends on any efforts or contributions made after separation; and third, the majority assumes that its result is fair because the non-participant spouse would otherwise receive benefits based upon earnings attributable to increased efforts and enhancement of job skills occurring after separation and therefore not attributable to the marriage.
*405 The majority is incorrect in assuming that a participant spouse has acquired the right to receive, at the very minimum, a pension benefit based on his salary as of the date of separation. To the contrary, the benefit that he will receive upon retirement will be calculated by using his salary during the final years of his employment. If his average salary during these years is less than his date-of-separation salary, his benefit will be less than a benefit based on his date-of-separation salary.
As of the date of separation, this was a vested pension. But the parties had acquired only a right to receive retirement benefits for the years that Mr. Berrington worked during the marriage that would be calculated primarily by looking to his salary shortly before he retired. As of the date of separation, the parties had not acquired any right to receive a specific amount of money for the years worked prior to separation. What they had acquired as of the date of separation was only a “promise” from the employer, an inchoate right if you will, to pay them benefits for the years worked during the marriage based upon a particular formula set forth in the pension plan contract 2 upon the occurrence of certain post-separation con *406 tingencies. 3 The final benefit for the years worked during the parties’ marriage will be calculated by considering Mr. Berrington’s subsequent earnings and incentive awards during his continued years of service. It is this promise acquired during the marriage to pay benefits for the years worked during the marriage that the majority fails to recognize as being earned during the marriage, and thus, improperly labels as “after-acquired property.” Under the employer’s promise, the participant spouse’s salary at the date of separation is not determinative of the amount that he or she will receive upon retirement. Thus, in valuing the pension benefit, the participant spouse acquires during the marriage, a promise to make deferred compensation for the marriage years based upon a formula that could produce pension benefits higher or lower than the amount that would be arrived at based upon earnings at the date of separation.
Under these circumstances, it is clear that the inequity resulting from the majority’s approach can cut both ways. The general assumption may be that the participant spouse’s salary will increase after the date of separation, resulting in his becoming entitled to a correspondingly larger pension upon retirement. However, in a downward economy, as some might say we have endured over the past few years, it is wholly within the realm of reasonable possibility that economic cut-backs will force employees to take income cuts, resulting in substantially lower salaries at retirement. In those instanc *407 es, it is the participating spouse who suffers under the legal fiction created by the majority. 4
The majority’s second assumption — that an asset cannot be considered marital if its value depends upon any efforts or contributions made after the date of separation — is inconsistent with the prevailing view that non-vested pension benefits are marital property regardless of the fact that they are subject to contingencies. It is clear from even a cursory reading of the majority opinion that the majority recognizes that both vested and non-vested pension plans are marital property subject to equitable distribution. 5 In Braderman v. Braderman, 339 Pa.Super. 185 , 488 A.2d 613 (1985), the rationale was succinctly set forth: “These benefits constitute deferred compensation for services defendant-husband per *408 formed during the marriage and therefore, he acquired his interest in these benefits while married to plaintiff-wife ... He worked for and earned the right to these payments.” Id. at 196 , 488 A.2d at 618 . The Superior Court concluded that pension benefits are marital property even though the marriage terminated at a time when benefits were non-vested, despite its recognition of the fact that non-vested benefits are subject to a number of contingencies: “These benefits have accrued, but are still subject to the condition that the employee continue his employment. They will be forfeited by discharge, voluntary termination, or death.” Id. at 192 , 488 A.2d at 616 .
In concluding that non-vested pension benefits are nothing more than deferred compensation and thus, marital property (i.e., marital property is the promise to pay for the time that you have already worked provided that certain things occur), the Superior Court has created a foundation on which to build a fair and equitable resolution in the case sub judice. Once this promise is defined as marital property, there can be no reasonable explanation for ignoring future events that define the benefits which flow from the promise. The persuasive and well-reasoned rationale utilized by the Superior Court for finding non-vested pension benefits to be marital property is equally applicable to the issue presented here.
Third, the majority errs when it concludes that its result is fair because the non-participant spouse would otherwise receive benefits based on increased efforts and enhancement of job skills occurring after separation and therefore not attributable to the marriage. The majority implicitly assumes that the post-marital salary increases of the participant spouse result from the participant spouse bringing new energy and skills to the job. However, the typical case in which the court awards a non-participant spouse a share of a defined benefit pension does not involve persons in their twenties or thirties who have been married only for a short time. Rather, experience teaches that, in the typical situation, the time and energy that participant spouse devoted to the job during the marriage and the work skills developed during that period (frequently *409 made possible because of the contributions of the non-participant as homemakers and primary caretakers of the children), rather than increased efforts or work skills developed after marriage, are the most significant factors explaining increased post-marital earnings in cases involving the use of a deferred distribution of a defined benefit pension.
Since the Divorce Code has given the Courts the responsibility for achieving equitable results, 23 Pa.C.S. § 3102(a)(6) (formerly 23 P.S. § 102(a)(6)) and 23 Pa.C.S. § 3502 (formerly 23 P.S. § 401), the law that we develop must be governed by the import of our rulings. In most cases involving the use of a deferred distribution of a deferred pension benefit, the nonparticipant spouse will be the primary homemaker and caretaker of the parties’ children. This spouse will also in most cases be the wife. In accordance with 23 Pa.C.S. § 3502(a)(7) (formerly 42 P.S. § 401), the most important thread that consistently runs through the rulings of this Court and the Superior Court involving the Pennsylvania Divorce Code is the full recognition given to homemaking and earetaking. Since pension benefits are frequently the most significant marital asset in instances in which a deferred pension distribution approach is used, the majority ruling here unravels the standing case law which has achieved very consistent and, in my view, very correct results.
To summarize, the paramount difficulty I have with the majority’s position is understanding how, in a deferred compensation situation, the majority can characterize the participant spouse’s post-separation salary as after-acquired property rather than as an unknown factor that will be used in calculating the value of deferred compensation earned during the marriage. A promise to pay an amount based upon a formula that may be influenced by efforts after separation is “property” acquired at the time of the promise under a normal definition of the term.
Constructive criticism, well intended as it may be, is often useless unless accompanied by a reasonable alternative. Although I agree with the majority that marital property includes only property acquired during the marriage, it is my *410 position that, where the property in question is deferred compensation, the property acquired during the marriage includes those benefits that the participant and non-participant spouse will actually receive for the years during which the parties were married. In my view, at the time of the parties’ separation, a participant spouse has acquired a promise from the employer to make deferred compensation payments (for the years of the marriage) based upon a formula that can produce higher or lower pension benefits than those calculated based upon the employee’s earnings at the date of separation. Thus, the marital property acquired during the marriage includes this promise to make future payments for the years worked during the marriage. Therefore, I propose that we follow the deferred distribution approach utilized in cases involving non-vested pension benefits.
As recognized by the majority, there are two approaches to distributing a pension, the immediate offset method and the deferred distribution method. The immediate offset method provides the. advantage of finality in distribution, and avoids prolonging hostility between the parties. However, deferred distribution is often necessary because other marital assets may be insufficient to offset a pension award. 6 Moreover, the Superior Court has stated in numerous opinions that deferred distribution is the preferred method of dividing non-vested speculative pension benefits, which may never actually be received by the employee spouse due to contingencies such as *411 early termination or death. Elhajj v. Elhajj, 413 Pa.Super. 578, 581 , 605 A.2d 1268, 1270 (1992); Lyons v. Lyons, 401 Pa.Super. 271, 280, 585 A.2d 42, 47 (1991); Lowry v. Lowry, 375 Pa.Super. 382, 401 , 544 A.2d 972, 982 (1988); DeMasi v. DeMasi, 366 Pa.Super. 19, 50 , 530 A.2d 871, 886 (1987); Flynn v. Flynn, 341 Pa.Super. 76, 83 , 491 A.2d 156, 160 (1985). Valuation difficulties and the potential unfairness of immediate distribution of pension benefits that may never come to fruition, or decline due to salary reductions in the later years as a result of today’s economy, also weigh in favor of using the deferred distribution approach. 7
In my view, once deferred distribution is chosen, there is a glaring inconsistency in caselaw which favors a “wait and see approach” where it is not clear whether employees will, in fact, receive any benefits at all and, at the same time abandons that approach in a deferred distribution scenario where the “wait and see approach” would remove all doubt as to the exact entitlement of the respective parties. Why should we not adopt exactly the same posture in a situation where the pension is vested but the benefits are, as yet, unmatured and undetermined, where the parties are in a deferred distribution posture?
In Lyons v. Lyons, 401 Pa.Super. 271, 585 A.2d 42 (1991), the Superior Court has emphasized that the method to be selected for evaluating pension benefits is that which will “best effectuate economic justice between the parties.” Id. at 281 , 585 A.2d at 47 . I agree with that court and the learned trial court below, that the real issue is one of economic justice, especially in light of the fact that the law is sensible and settled that pension benefits are marital property even though there are future requirements imposed on employees before benefits are ever received. It is incomprehensible to me as to why we should reach different results depending upon whether the question with which we are dealing involves deferred compensation (i.e., marital property defined as a promise to *412 pay for the time that you have already worked, provided that certain things occur which would cause the pension to vest) or deferred compensation (i.e., marital property defined as a promise to pay for the time that you have already worked, provided that the amount to be paid to you will be determined when all the final numbers are in).
In an ill-advised effort to resolve all future interest immediately, my brethren in the majority have been thrust into the uncomfortable position of immediate resolution with full knowledge that the consequences will more often than not be unfair to one or the other party. 8 In addition, the majority has done so without attempting to explain the pressing need for the immediate valuation of the non-participant spouse’s pension interest in a case involving the deferred distribution of a defined pension benefit. 9
In the case sub judice, in accordance with the pension plan, Mr. Berrington made a small mandatory cash contribution after the date of separation. While his pension will ultimately be of higher value due to his decision to contribute and Westinghouse’s incentive in return for his contributions, such contributions were specifically defined, and their minimal na *413 ture (approximately $13,700 from the date of separation on July 15, 1984 through the year 1990) will have little effect in the generation of the final value of his pension benefit. (R.R. pp. 99a, 268a). 10 Instead, it is his continued employment and the potential salary increases and incentive awards that will determine the final value of his pension. A posture that, in my strong opinion, Mr. Berrington achieved with the substantial aid and sacrifice of Mrs. Berrington during their 29 years of marriage. 11 In my view, most of the pension benefit is not *414 based upon an employee cash contribution made after separation.
Therefore, and for the reasons stated above, I would reverse and remand to the trial court with instructions to separate out any benefits attributable to the husband’s actual post-separation cash contributions. The balance would be available for distribution to the wife under the proper equitable distribution formula at the appropriate time, the date of retirement.
The approach I have suggested in the case sub judice not only recognizes that there is no need for immediate valuation but also best effectuates economic justice between the parties. Additionally, it would obviate the need to create legal fictions in order to resolve immediately that which need not be resolved immediately and, better yet, totally eliminate the need to create an internally inconsistent fabrication which offers the non-participating spouse concomitant benefit increases in all áreas which are not directly tied to salary increases.
For these reasons, I respectfully dissent.
. Most pension plans calculate benefits by using an average salary earned over several years. The majority does not indicate whether the participant spouse’s salary at the date of separation means an average salary based on earnings over several years prior to separation or whether the participant's salary at the date of separation means the actual salary as of the date of separation.
. Without resorting to expansive description of the Westinghouse pension plan involved in this case, the text of which comprises approximately 107 pages, generally the plan contract provides for the payment of benefits in three portions — Basic, Supplemental, and Executive. (1) Under the Basic Portion, an employee is entitled to benefits calculated under one of two methods, whichever is higher. Under the "career accumulation method” (earn a certain amount of pension each year), if one elects to contribute, he is entitled to a monthly pension benefit equal to hi of 1.3% of total compensation for that year up to $14,700 plus 2.4% of the remaining compensation for that year. If one does not contribute, the monthly career accumulation amount for each year of credited service is set forth in the contract, (e.g. $15 for each year of credited service after 1/1/83). Under the "final average compensation method,” if one elects to contribute, he is entitled to a monthly pension benefit based upon the average pay during the 3 highest paid consecutive years in the 10 years before retirement, which yields a monthly pension benefit for each year of credited service pursuant to a table set forth in the plan. (2) Under the Supplemental Portion, contributions are made based upon the amount of the employee’s salary (by my estimate approximately 1.25% of his base salary). Under this portion an employee accumulates an amount of pension each year, and an employee is entitled to benefits based upon his years of credited service multiplied by his earning class multiplied by $1.05 for years prior to *406 1970, and a dollar value set forth in plan schedules for years after 1969. (e.g. One in earnings class 10 — earning between $975 and $1025 a month would have made a monthly contribution of $12.50 in the years after 1969). (3) Under the Executive Portion, an employee makes no contributions, and he earns a final pension benefit based upon his average total compensation multiplied by his years of service multiplied by 1.47%. "Average total compensation” is comprised of his "average monthly salary” and "average monthly incentives” computed based upon the best 5 months in the last ten years before retirement.
. See David v. Veitscher Magnesitwerke Actien Gesellschaft, 348 Pa. 335 , 35 A.2d 346 (1944), wherein this Court recognized that such a "promise” by the employer conveys upon the employee an "inchoate right.” It is this right, and its associated detriment, that I believe is in essence, a joint enterprise undertaken by husband and wife that accrued during the marriage. See also Moore v. Moore, 114 N.J. 147 , 553 A.2d 20 (1989).
. Let us suppose that for each year of employment the pension plan provides that the employer pays 2 percent of the average of the last ten years, as determined by the best last five months of each year. At the date of separation, the participating spouse is 55 years of age and is earning $60,000. That spouse works ten more years until age 65 in a declining economy where the economic performance of the company suffers a substantial decline. Let us finally suppose that because of the company’s poor performance and poor financial situation, the salary of the participating spouse on average has fallen to $40,000 at retirement. Assuming 20 years of marriage at the date of separation and 30 years of employment at the date of retirement, the majority herein would assign marital benefits to the non-participating spouse in the amount of h (coverture fraction) of 30 (the years of participation in the pension plan), times $60,000 (the salary at separation), even though the actual deferred pension payment for the participating spouse turns out to be based upon $40,000 (the actual average salary over the last 10 years of employment). Can the majority reasonably conclude that the participating spouse had earned the right to a pension based upon $60,000 for the first 20 years of marriage? In fact, he or she had actually earned a 30-year pension based upon a salary of $40,000. The simple fact is that the participating spouse did not earn a pension based upon a salary of $60,000 and no legal fiction to the contrary can absolve the inequity.
. Verdile v. Verdile, 370 Pa.Super. 475 , 536 A.2d 1364 (1988); Vaughn v. Vaughn, 370 Pa.Super. 333 , 536 A.2d 431 (1988); Major v. Major, 359 Pa.Super. 344 , 518 A.2d 1267 (1986); Braderman v. Braderman, 339 Pa.Super. 185 , 488 A.2d 613 (1985); Barnhart v. Barnhart, 343 Pa.Super. 234 , 494 A.2d 443 (1985); Flynn v. Flynn, 341 Pa.Super. 76 , 491 A.2d 156 (1985); and King v. King, 332 Pa.Super. 526 , 481 A.2d 913 (1984). See also; Whitfield v. Whitfield, 222 N.J.Super. 36, 535 A.2d 986 (1987) (recognizing the long term movement of the vast majority of other jurisdictions away from invoking vesting as a requirement to the distribution of pension benefits).
. Obviously, the demand for final resolution and valuation is paramount where the trial judge is required to set-off the value of pension benefits as against other marital assets in determining a final order of equitable distribution. However, that is not the case here. Set-off is not an issue in this appeal and the question of how to place an immediate value on future benefits can be left to another day. I, for one, see many approaches, including, but not limited to, valuing at the date of normal expected retirement absent evidence that some other date would be more appropriate. In that situation, I would agree that because the parties are demanding an immediate set off, the compromise of utilizing the final salary as of the date of separation may be the only available alternative. However, no such demand is made in the case sub judice and, therefore, there is no need to resort to a legal fiction in order to resolve the issues. Nor is the issue raised in the companion case of Katzenberger v. Katzenberger, 534 Pa. 419 , 633 A.2d 602 (1993), also decided this day by this Court.
. See In re Marriage of Fairchild, 110 Ill.App.3d 470, 475 , 66 Ill.Dec. 131, 134 , 442 N.E.2d 557, 560 (1982) (quoted in Flynn, supra.); see generally Moore v. Moore, 114 N.J. 147 , 553 A.2d 20 (1989).
. Elhajj v. Elhajj, 413 Pa.Super. 578 , 605 A.2d 1268 (1992); Holland v. Holland, 403 Pa.Super. 116 , 588 A.2d 58 (1991), allocatur denied, 528 Pa. 611 , 596 A.2d 158 (1991); LaBuda v. LaBuda, 349 Pa.Super. 524 , 503 A.2d 971 (1986), allocatur denied, 514 Pa. 648 , 524 A.2d 494 (1987); Flynn v. Flynn, 341 Pa.Super. 76 , 491 A.2d 156 (1985); King v. King, 332 Pa.Super. 526 , 481 A.2d 913 (1984); Morschhauser v. Morschhauser, 357 Pa.Super. 339 , 516 A.2d 10 (1986); Moore v. Moore, 114 N.J. 147 , 553 A.2d 20 (1989) (Right to receive benefits accruing to a spouse subsequent to a divorce are subject to equitable distribution if they are related to the joint efforts of the parties); Whitfield v. Whitfield, 222 N.J.Super. 36 , 535 A.2d 986 (1987); Majauskas v. Majauskas, 61 N.Y.2d 481 , 463 N.E.2d 15 (1984) (Conclusion thus reached accords with that of most óut-of-state courts); Jerry L.C. v. Lucille H.C., 448 A.2d 223 (Del., 1982); Lynch v. Lynch, 665 S.W.2d 20 (Mo.Ct.App., 1984); In re Marriage of Judd, 68 Cal.App.3d 515 , 137 Cal.Rptr. 318 (1977).
. This situation is analogous to one in which the employer agrees to contribute 2 percent of husband’s salary into the company stock for each year the husband works, with the husband to receive the current value of the stock when he reaches age 65. In such a case, the increase in value after the date of separation for stock purchased before separation would clearly be marital property.
. While I acknowledge that Mr. Berrington has undoubtedly continued to make contributions after 1990, further evidence of the limited effect of such contributions on the final value of the pension is provided by the fact that during the period between his commencement of employment in 1955 through the year 1987, Mr. Berrington's contributions amounted to only $25,694.71. As of July 13, 1988, these contributions had only earned interest in the amount of $12,693.14. (R.R. p. 99a). Moreover, Mr. Berrington has made no contributions whatsoever to the separate “non-qualified” Executive Portion of the Westinghouse Pension Plan.
The majority appears to have used this "small cash contribution” as the foundation on which to hold that pension benefits must be based upon the husband's salary at separation, even where no contributions were made to the separate “non-qualified” Executive Portion of the Westinghouse Pension Plan. The Court reached the result without explanation and simply by stating that marital property acquired during the marriage does not include pension benefits purchased with contributions made after separation. The Superior Court then cites to Berrington in order to justify its holding in Katzenberger v. Katzenberger, 409 Pa.Super. 10 , 597 A.2d 636 (1991), the companion case also decided this day by this Court, 534 Pa. 419 , 633 A.2d 602 (1993). However, in Katzenberger the final pension benefits are not based upon any contributions that husband made after separation, whereas here, much of the majority opinion appears to be based on husband's cash contributions made after separation, although in part of the opinion the majority refers to the “efforts” of the husband/participant spouse.
In my view, the majority approach is illogical in that it has placed the proverbial cart before the horse. We should have started with Katzenberger in which the pension benefits are not based upon any contributions made by husband after separation. Then the sole issue would have been what salary figure is appropriate for final computation of wife's equitable share. Furthermore, the wife’s benefits should be based on the husband's salary as utilized by the employer in the final computation under the specific pension plan being used. For the reasons stated, I do not agree that the husband’s salary at separation is determinative of wife’s equitable share.
. In 1955, at age 20, Claire L. Berrington resigned from college in order to marry and support Charles L. Berrington in his new career *414 with the Westinghouse Electric Corporation. During the course of the next 29 years, Mrs. Berrington provided Mr. Berrington with two sons, and faithfully and energetically devoted herself to her family and her husband’s career, including household relocation on eleven occasions, six of which were of an interstate nature. In July 1984, Mr. Berrington, by my estimate approximately 52 years of age, left Mrs. Berrington to reside with a woman 12 years his junior. Mr. Berrington filed for divorce less than six months later, and remarried in October 1987.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9731459. Public record. Not legal advice.