E-Alert Case Updates

Constructive Trust and Posthumous QDRO Proper Where Divorcing Parties Failed to Communicate Terms of Divorce Agreement to Retirement Plan

Robinette v. Hunsecker
No. 90 (Maryland Court of Appeals, July 18, 2014)
by Colleen K. O’Brien, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdcourts.gov/opinions/coa/2014/90a13.pdf

Robinette v. Hunsecker (No. 90, Court of Appeals of Maryland, July 18, 2014), involved the intersection of a divorce and pension/retirement benefits under a retirement plan sponsored by the Husband’s employer. In terms of the underlying facts, Husband was employed by a public school system, and participated in the pension plan available to its employees. Husband and Wife divorced, and the property settlement agreement (“Agreement”) provided for Ex-Wife to receive a portion of Husband’s pension benefits, including any death benefit, that accrued during the marriage. The Agreement stated that the judgment of divorce would be a qualified domestic relations order (“QDRO”) as defined by ERISA, however ERISA did not apply to the pension plan, and a judgment of divorce does not serve as a QDRO. Under the Agreement, Ex-Wife was to receive 50 percent of any pension and death benefits. The parties waived any claims under applicable Maryland family law statutes governing the allocation of marital property in divorce. Neither party obtained a QDRO for submission to Husband’s employer. Two years later, Husband remarried, and named his Wife as the beneficiary of record for his pension with his employer. When Husband died, Wife received an initial payment from the pension plan. Thereafter, Ex-Wife applied to the pension plan for a portion of the benefits under the Agreement. Because the plan never received any QDRO indicating Ex-Wife was a beneficiary of Husband’s death benefits, it rejected Ex-Wife’s request for a portion of the benefits.

Ex-Wife filed a complaint against Wife alleging Wife was unjustly enriched in receiving the entire pension and death benefits. Wife also contended that Husband had undertaken a contractual obligation to transfer a portion of his pension and death benefits to Ex-Wife and requested imposition of a constructive trust on a portion of the pension and death benefits that had been received by Wife. The parties filed cross-motions for summary judgment.

The trial court entered summary judgment in favor of Ex-Wife, finding that it would be inequitable for Wife to retain the proceeds of the pension plan, because she was receiving a windfall of Ex-Wife’s portion of the pension plan. Ex-Wife had a sufficiently higher equitable call to the pension proceeds. The court ordered that Wife account for the pension and death benefits that she had already received and granted Ex-Wife a constructive trust in a portion of those benefits. The Circuit Court also approved a posthumous QDRO to be filed with the retirement plan with respect to future benefits. Maryland’s intermediate appellate court affirmed this decision, and so did Maryland’s highest court.

The Court of Appeals determined that the trial court had authority to issue a posthumous order directing the retirement plan to allocate a portion of the Husband’s death benefit to Ex-Wife and to impose a constructive trust on a portion of those benefits already received by Wife. The trial court did not abuse its discretion in taking these actions.