No. 416 Harrisburg 1982, No. 417 Harrisburg 1982, Appeal from the Decree of the Court of Common Pleas, Civil Division, of Dauphin County, at No. 944 S. 1981.
Thomas B. Rutter, Philadelphia, for appellant (at No. 416) and appellee (at No. 417).
Charles E. Friedman, Harrisburg, for appellant (at No. 417) and appellee (at No. 416).
Wickersham, Del Sole and Montemuro, JJ. Wickersham, J., filed a concurring and dissenting opinion.
[ 337 Pa. Super. Page 153]
This is an action in divorce pursuant to the Pennsylvania Divorce Code, 23 P.S. §§ 101 et seq.
The parties were divorced by a decree entered October 9, 1981. Economic issues were reserved for future determination. Claims for alimony, equitable distribution, counsel fees and expenses were subsequently heard by a Special Master. Both parties filed Exceptions to the Master's findings. On November 24, 1982, the Court of Common Pleas entered a final decree which included an award of alimony of $100 per week until September 26, 1994, when the parties' youngest child will reach majority. Both parties have appealed from that final decree.
[ 337 Pa. Super. Page 154]
The issue on appeal is what compensation, if any, is Mrs. Hodge entitled to under the Pennsylvania Divorce Code (the Code) for her contributions to her husband's medical education and license.
The factual situation of the case is as follows. Arthur Hodge was born on February 28, 1945, and Patricia Hodge was born on May 22, 1940. The parties met while Arthur was a medical technology student and Patricia was a clinical instructor at St. Lukes Hospital in Bethlehem, Pennsylvania. They were married on July 15, 1967. That same year, Arthur applied for a Commission in the United States Army Medical Service Corps. From 1967 through 1970, the parties lived at Fort Hood, Texas. The couple lived on Arthur's salary as a laboratory officer, while saving Patricia's earnings from her job as a laboratory technologist. Their first child, Laura, was born on September 28, 1968.
After his discharge from the Army, Arthur worked for approximately nine months as a serologist with Ortho-Pharmaceuticals of Raritan, New Jersey, earning $6,938.00.
Being unable to gain admission to an American medical school, in January of 1971, Arthur entered the Medical School of the University of Guadalajara, Mexico. During 1971, his family remained in Pennsylvania so that Patricia would be able to continue contributing earnings and savings to the expenses of Arthur's medical education.
From 1972 through 1974, Patricia and the child joined Arthur in Mexico. Their living conditions were far below those to which they were accustomed in the United States.
In 1975, the family returned to Pennsylvania and Arthur began a final year of student training at Harrisburg Polyclinic Hospital. A second child, Arthur, was born on June 30 of that year. In 1976, Arthur took an internship at Harrisburg Polyclinic Hospital. The parties' third child, Melanie, was born September 26 of that year.
Upon their return to the United States in 1975, the parties rented a small house in Schuylkill County for Patricia and Laura. Arthur lived in the physicians' residence at the
[ 337 Pa. Super. Page 155]
hospital. Patricia and the children are still living in that rented home.
In January of 1977, Arthur began a two year residency in Internal Medicine and received his license to practice medicine the following month. On August 27, 1977, Arthur announced that he no longer wished to continue in the marriage and moved in with a registered nurse named Julie Paland. Arthur completed his residence in December of 1978 and began the private practice of medicine.
Arthur is employed by another physician in a practice grossing $300,000 per year. He is paid $52,000 per year plus fringe benefits and bonus, plus $7,200 per year rental on his office, which is in the home he shares with Ms. Paland. Ms. Paland, as his office manager, is paid $15,900 per year, plus medical benefits.
Patricia is not employed. She has custody of the parties' three children. At the time of the hearing, her only income was $275 per week support from Arthur.
In her appeal, Patricia Hodge argues that the court should have equitably divided the value of Arthur Hodge's medical education, since the joint efforts and investment of the parties substantially increased Arthur's earning capacity and the marriage terminated before Patricia could enjoy the fruits of her investment.
A clear majority of courts that have considered the question of whether the advanced degree itself, or the increased earning capacity it represents, are divisible marital assets, have concluded that they are not. Mahoney v. Mahoney, 91 N.J. 488, 453 A.2d 527 (1982); Frausto v. Frausto, 611 S.W.2d 656 (Tex.Civ.App. 1981); DeWitt v. DeWitt, 98 Wis.2d 44, 296 N.W.2d 761 (Ct.App. 1980); In re: Marriage of Graham, 194 Colo. 429, 574 P.2d 75 (1978); Wilcox v. Wilcox, 173 Ind.App. 661, 365 N.E.2d 792 (1977). We agree with the majority view.
23 P.S. § 401 provides the framework for our analysis of the distribution of "marital property". Section 401(f) provides that "all property whether real or personal acquired
[ 337 Pa. Super. Page 156]
by either party during the marriage is presumed to be marital property . . ." (emphasis supplied).
The question then becomes: Is potential increased earning capacity marital property if developed during the time of the marriage?
First, it is important to note that such a potential to earn more in the future is not limited to situations involving formal education. Rather, this potential can be a result of on-the-job training, in-job experience, apprenticeships or a host of other factors which make the labor of an individual more valuable in our society. Thus, the decision reached today is not limited to formal educational situations.
Clearly, increased earning capacity is neither real or personal property in any classic sense of the word. In the case of an advanced degree, the Colorado Supreme Court noted:
An educational degree, such as an M.B.A., is simply not encompassed even by the broad views of the concept of "property". It does not have an exchange value or any objective transferable value on an open market. It is personal to the holder. It terminates on death of the holder and is not inheritable. It cannot be assigned, sold, transferred, conveyed, or pledged. An advanced degree is a cumulative product of many years of previous education, combined with diligence and hard work. It may not be acquired by the mere expenditure of money. It is simply an intellectual achievement that may potentially assist in the future acquisition of property. In our view, it has none of the attributes of property in the usual sense of that term.
In re: Marriage of Graham, supra, 574 P.2d at 77.
Our analysis of the Divorce Code also supports the conclusion that the legislature did not intend increased earning capacity to be a divisible asset. Section 401(d)(4) provides that one of the factors to be considered in distributing marital property is "the contribution by one party to the education, training, or increased earning power of the
[ 337 Pa. Super. Page 157]
other party" . . . It is logical to conclude from that statement that increased earning power itself is not marital property. Also, § 501(b)(1) and (6) provide that in determining the amount, nature and duration of alimony the court should consider the earning capacity of the parties and the contribution made by one spouse to the other's increased earning power. The inclusion of the latter section makes it obvious that the legislature was concerned with and did consider situations such as that presented here, involving marriages where the divorce occurs before the parties acquired substantial marital property, but one spouse has developed the potential for vastly increased earnings. Had the parties in this case acquired substantial real or personal property prior to the divorce, and had Mrs. Hodge received a substantial portion of that property pursuant to § 401(d)(4), it is doubtful anyone would argue she would be entitled to a share of her husband's future earnings as a divisible asset. Since the parties did not accumulate such property, the trial court properly considered Mrs. Hodge's contributions to her husband's professional education and earning capacity in awarding alimony.
We turn now to Arthur Hodge's cross-appeal, in which he argues the court violated § 501(c) of the Code by ordering alimony for a period of almost fourteen years. Section 501(c) provides as follows:
(c) Unless the ability of the party seeking the alimony to provide for his or her reasonable needs through employment is substantially diminished by reason of age, physical, mental or emotional condition, custody of minor children, or other compelling inpediment to gainful employment, the court in ordering alimony shall limit the duration of the order to a period of time which is reasonable for the purpose of allowing the party seeking alimony to meet his or her reasonable needs by:
(1) obtaining appropriate employment; or
(2) developing an appropriate employable skill.
According to Dr. Hodge, Patricia could develop an appropriate employment skill with two more years of education.
[ 337 Pa. Super. Page 158]
Therefore, the alimony award should be for a two year period only. This argument is without merit.
The record indicates that Patricia Hodge is forty-four years old, has not worked for ten years, has custody of three minor children, and has some physical impairment. She has a two year associate degree in medical technology. However, potential employers where she resides now require a four year degree. These impediments to employment would exempt Mrs. Hodge from the limitations provided in § 501(c)(1) and (2).
Even more important, Dr. Hodge had ignored § 501(b) which provides:
(b) In determining whether alimony is necessary, and in determining the nature, amount, duration and manner of payment of alimony; the court shall consider all relevant factors including:
(1) The relative earnings and earning capacities of the parties.
(2) The ages, and the physical, mental and emotional ...