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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 2761 September Term, 2006

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PETER CORMICK HEARN

v.

PAMELA HEARN

Krauser, Meredith, Wenn er, Willia m W., (Retired, Specially Assigned) JJ.

Opinion by Meredith, J.

Filed: November 30, 2007

This case arises from a post-divorce dispute between the parties, Peter C. Hearn, appellant, and Pamela H earn, appellee, relative to terms upon which M r. Hearn's federal pension benefits will be divided. Shortly after the divorce was finalized, the parties

negotiated a qualified d omestic relations orde r to distribute a portion of Mr. Hearn's federal pension to Mrs. Hearn when Mr. Hearn retires. Because Mr. Hearn's pension is from the federal government, the order directing the distribution is a Civil Service Retirement and Survivor Annuity Benefits Order ("CSRS order"). O n Februa ry 10, 2001, in a ccordanc e with the joint request of the parties, the Circuit Court for Frederick County entered a CSRS order that directed a p ortion of M r. Hearn's re tirement ben efits be paid to Mrs. Hearn, using a calculation called a pro rata formu la. By letter dated May 3, 2001, the Office of Personnel Management ("OPM ") acknowledg ed receipt of the CS RS order, and advised the parties that the formula f or calculating Mrs. He arn's portion of the pen sion bene fit would b e applied to the gross amo unt of the b enefit that Mr. Hearn would be entitled to receive, if, as and when he was to receive it. On August 22, 2006, Mr. Hearn filed a motion requesting the circuit court to order that the pro rata f ormula in the CSRS order be applied to Mr. Hearn's net annuity, rather than the gross amount o f the retireme nt benefit. M rs. Hearn o pposed th is motion . On November 28, 2006, the circuit court held a hearing and denied Mr. Hearn's motion without taking any evidence or testimony. M r. Hearn n oted a timely ap peal.

Mr. Hearn has raised the following questions: (1) Did the circuit court err in ruling that the pro rata formula used in the CSRS order applies to the gross payment and not the net payment received? (2) Did the circuit court err in denying Mr. Hearn's request without permitting h im to present any evidence in support of his motion? We conclude that the circuit court correctly ruled that the CSRS order, as entered, provides for Mrs. Hearn to receive a portion of the gross benefits. The applicable federal regulations conclusively resolve any possible ambiguity in that regard. If Mr. Hearn had alleged that the CSRS order, when interpreted pursuant to the federal regulations, was not in accordance with his unilateral understanding to the contrary, the parol evidence rule wou ld preclude further consideration of his request for reformation. But Mr. Hearn alleged that he and Mrs. Hearn both intended the formula for division to apply to his net benefit, and, therefore, if the CSRS order is not interpreted to apply to his net benefit, then he and Mrs. Hearn were mutually mistaken as to the legal effect of the agreed language. Because the parol evidence rule does n ot preclude evidence of a mutual mistake , Mr. Hearn's claim for reformation should ha ve been a ddressed b y the circuit court. B ut the circuit court failed to make any factual findings or otherwise address Mr. Hearn's contention that the language used in the conse nt order w as based u pon a mu tual mistake as to its legal eff ect. Acc ordingly, we shall vacate the judgment of the circuit court and remand the case for further proceedings.

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Facts and Procedural History Mr. and M rs. Hea rn wer e divor ced in 1 999. A detailed sep aration agre ement, signed by the parties on September 15, 1999, was incorporated, but not merged, into the final divorce judgment entered on September 15, 1999. The separation agreement described how the pro rata formula for division of Mr. Hearn's pension benefits would be calculated, stating: Husband's interest in the pension shall be divided between the parties and Wife shall be designated as the Alternate Payee of Husband 's benefits and shall receive her share if, as and when Husband receives his benefits. The amounts of Wife's portion shall be determined by multiplying the amount of each payment times Fifty percent (50%) of a fraction. The fraction shall be determined or designated as follows: the numerator shall be the number of years and months of the marriage during which contributions were made to the Plan throu gh July 3, 1998 and the denominator shall be the total number of years and months of employment during which contributions were made to the Plan. The parties agree that this shall be deemed to be twenty-two years (22) and six (6) months is the numerator and the total number of years and months of employment cred ited toward retirement is the denominator. The parties agree that Husband's initial date of service with the United States Govern ment for p urposes o f determin ing his retirem ent benef its is June 16, 1968. Thereafter, the parties ne gotiated a p roposed c onsent ord er to require OPM to divide Mr. Hearn's pension benefits in accordance with their separation agreement. The proposed CSRS order expressly indicated in the preamble that it was intended to carry out the parties' agreement regarding the pension as the parties had previously set forth in their separation agreem ent.

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On February 10, 2001, the circuit court entered the jointly requested CSRS order that divided Mr. Hearn's federal pension benefits between the parties "pursuant to the provisions of 5 CFR Section 838.10 1, et seq. . . ." The CSRS order used the pro rata formula agreed upon by the parties in the separation agreement, quoted above, to calculate the amount of payment that Mrs. Hearn will receive when Mr. Hearn begins receiving retirement benefits. The CSRS order also stated: [N]otwithstanding any language in any other Order of this or any other Court to the contrary, and notwithstanding any contrary or inconsistent terms contained in the above mentioned [Separation] Agreement or in the Judgment of Absolute Divorce, the language contained in this Order shall govern the determ ination o f the m atters ad dressed herein . . . . After being entered by the circuit court, the CSRS order was submitted to OPM. Accord ing to counsel for Mr. Hearn, OPM notified him (1) that OPM had accepted the Hearns' CSRS order for processing, and (2) that OPM would apply the pro rata formu la to the gross payment due to be paid to Mr. Hea rn at retirement rather than the n et an nuity. Counsel for Mrs. Hearn represented to the circuit court that the notice from OPM was dated May 3, 2001, but no copy of the notice appears in the record. On August 22, 2006, Mr. Hearn filed a motion in the Circuit Court for Frederick County requesting that the court instruct OPM to enforce the CSRS order by applying the agreed fraction to M r. Hearn's n et annuity, rather th an the gros s amoun t of the retirement annuity. In the memorandum submitted in support of Mr. Hearn's motion, he asserted that the court's CSRS order

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was the result of a negotiation between the parties over division of all [marital] property. The parties discussed and agreed that Ms. Hearn's share of the retirement benefit would b e calculated from the n et annuity payment received by Mr. Hearn. The parties believed that this intention was expressed in the CSRS Order by using the p hrase "retirem ent annuity be nefit payment that the Employee may hereafter become entitled to receive from the CSRS..." . . . Howeve r, OPM has indicated that unless corrective language is received it will apply the prorata formula to the gross retirement annuity benefit. If OPM applies the formu la in this fashio n, it will not be carrying out the CSRS Order as the parties intended and will be an injustice to the parties. Although the above allegations were not supported by any documentary evidence, the motion was sup ported by an a ffidavit of M r. Hearn tha t stated, in pertine nt part: 2. When the Civil Service Retirement and Survivor A nnuity Bene fits Order was drafted, it was discussed how the formula used to determine Ms. Hearn's payment was to be applied, and we agreed that it would be applied to the net payment that I received from CSRS. 3. I was informed and therefore believed that the language used in the order that was filed with the Court was sufficient to carry out this intention. 4. I have been informed by OPM that it intends to a pply the form ula to the gross retirement annuity benefit, and req uires further order from this C ourt to apply the formula as the parties intended. 5. If OPM were to apply the formula to the gross retirement annuity benefit, then OPM would not be executing the order in the way that I and Ms. Hearn intended and agreed. In opposition to Mr. Hearn's motion, Mrs. Hearn denied that any action b y the circuit court was requ ired to carry out the intentions of the parties, and further asserted that all of her former husband's claims for relief with respect to the terms of CSRS order were barred by laches. The opposition was supported by an affidavit of Mrs. Hearn stating under oath that the CS RS orde r was in ac cordance with her inte nt: 5

2. The Order clearly establishes the Agreement between the parties. I have no recollection of "net" benefits even being discussed. 3. I always intended and expected to receive my marital share of the Defendant's gross pension. The circuit court held a hearing on the motion on November 28, 2006. Counsel for Mr. Hearn recounted that the CSRS ord er was intended to comply with the separation agreeme nt. Couns el related that: The language of both the separation ag reement and the [C SRS order] do esn't use the word gross. However, because of OPM's particular wording that they need in orders, because it didn't use the word net or a few other particular phrases, the default that OPM uses is . . . gross[.] [S]o because the w ord payment was used and not another phrase, OPM is defaulting to gross even though the parties didn't pu t gross in the order. *** The language used in both the separation agreement and the [CSRS order] uses the words payment . . . payment received by the employee . . . . The parties did not use the word gross, a nd to allo w OP M to a pply it that w ay . . . is not correct. It's not applying it as the parties intended it to apply, as they negotia ted it bac k in 200 1. At the conclusion of her opening argument on the motion, counsel for Mr. Hearn stated: "I would intend to call M r. Hear n as a w itness. . . ." Arguing in opposition to the motion, Mrs. Hearn's attorney asserted that the court was obligated to apply the provisions of the Code of Federal Regulations, which provide tha t if a CSRS order does not specify that it is to apply to the net benefit, OPM will apply the order to gross ben efits. Noting that it appeared that counsel for M r. Hearn intended to ca ll Mr. Hearn as a witness, and that he "inten ds to state what he believe d and what M s. Hearn 6

believe d," Mrs. Hearn's counse l pointed out that Mrs. H earn's affidavit disputed her former husband's recollection. Counsel for Mrs. Hearn protested, "it's inappropriate for [Mr. Hearn ] to state in the aff idavit or testify as to what s he belie ved." Without hearing any testimony from Mr. Hearn, the court denied Mr. Hearn's motion. The court noted that the orde r is not amb iguous be cause the regulations by which OPM administers CSRS o rders make clear that the agreement was to apply to gross benefits. The court did not address Mr. Hearn's contention that the CSRS o rder did not conform to the mutual intention of the parties. As a consequence of the court's denial of the motion, it was not necessary for the court to consider Mrs. Hearn's claim of laches. On Novem ber 29, 200 6, the day after hearing on the motion, Mr. Hearn filed a "proffer in support of his motion." The proffer attached two letters exchanged between counsel prior to entry of the CSRS order, and stated: Defendant proffers that had he been a llowed to o ffer evide nce in support of his mo tion, he wo uld have offered the attached letters in support of his motion. A ttachmen t A [letter dated January 26, 2001, from wife's counsel to husband's counsel] and B [letter dated December 14, 2000, from husband 's counsel to wife's counsel]. These letters evidence that the parties specif ically eliminated the term "gross" from the calculation of the form ula for Plaintiff's share of the pension benefit. These letters show that the interpretation of the Office of Personnel Management and the ruling of the Court are not consistent with the parties' drafting of the o rder. The proffered letter from M r. Hearn's counsel commented that the separation agreement specified that the pro rata formula was to be applied to "the amount of each paymen t," whereas the initial draft of the CSRS order stated th at the form ula was to apply

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to "the gross a nnuity amou nt of each monthly retirement annuity payment. . . ." The letter concluded: Thus, while the [separation] ag reement provides that your client's sha re will be taken from the amount of the payment itself, the proposal has the share coming off of the gross. If this can be rectified, I believe w e will be ab le to agree to the proposal as submitted. The proffered letter of response from counsel for Mrs. Hearn stated: "Enclosed please find the Civil Service Retirement and Survivor Annuity Benefits Order with your only requested chang e, stated i n your lette r attache d." In response to M r. Hearn's post-hearing pro ffer, counsel for M rs. Hearn m oved to strike the proffered ma terial, arguing that the letters would have been inadmissible because they predated the CSRS order and would have been irrelevant to interpretation of that docume nt. The circuit court entered its written order den ying Mr. Hearn's m otion on January 11, 2007, and Mr. Hearn noted his timely appeal on February 1, 2007. On February 16, 2007, the circuit court entered an orde r granting the motion to strike M r. Hearn's proffer. Standard of Review "Consent judgments are `agreements entered into by the parties which must be endorsed by the court.'" Dennis v. Fire and Police Employees' Ret. Sys. , 390 Md. 639, 655 (2006) (quoting Chernick v. Chernick, 327 Md. 470, 478 (1992)). They reflect the agreement of the parti es "pur suant to which they hav e relinqu ished th e right to litigate th e contro versy." Dennis , supra , 390 M d. at 655 -56 (inte rnal qu otations and cita tions om itted). Acc ordingly, we look to the parties' agreement as embodied in the judgment to interp ret the or der. Id. at 8

656. In interpreting the parties' agreement as embodied in a consent judgment, we have applied the ord inary prin ciples o f contra ct cons truction . Id. Under M aryland law, the

interpretation o f a contrac t, including the question o f whethe r the langua ge of a co ntract is ambiguous, is a question of law subject to de novo review . Towson v. Conte , 384 Md. 68, 78 (2004). Discussion Parties to a contract are presumed to contract mindful of the existing law , and all applicable or relevant laws must be read into the agreement of the parties just as if e xpressly provided by them, except where a contrary intention is evident. A s Judge H ammon d wrote for the Court of Appeals in Griffith v. Scheungrab, 219 Md. 27, 33 (1959): It is familiar principle often applied in the cases that "* * * the laws which subsist at the time and place of making a contract enter into and form a part of it, as if they w ere expressly referred to o r incorpora ted in its terms; a nd this rule embraces alike those which affect its validity, construction, discharge, and enforc emen t." Brown v. Smart, 69 Md. 320, 330; Globe Slicing M achine Co., Inc. v. M urphy , 161 Md. 667, 671. The Court of Appeals has on numerous occasions applied the principle of contract law that reads into agreements all existing and applicable laws and regulations. See, e.g., Lema v. Bank of Am erica, N .A., 375 Md. 625, 645 (2003) ("parties are presumed to know the law when entering into contracts. . ."); Auctio n & Esta te Repr esenta tives, Inc . v. Ashto n, 354 Md. 333, 344 (1999) ("Ma ryland adheres to the general rule that pa rties to a contract are presumed to contract mindful of the existing law and that all applicable or relevant laws must be read into the agreement of the parties just as if expressly provided by them, except where 9

a contrary intention is ev ident"); Wright v. Commercial and Sav. Bank, 297 M d. 148, 153 (1983) (same); Dennis v. The Mayor and City Council of Rockville, 286 Md. 184, 189 (1979) ("the laws subsisting at the time of the making of a contract enter into and form a part thereof as if expressly referred to or incorporated in its terms, and the principle embraces alike those provisions which affect the validity, construction, discharge and enforcement of the contract"). In this case, the applicable federal regulations resolve any ambiguity with respect to whether the CSRS order should be constru ed to apply to M r. Hearn's g ross annu ity benefit. 5 C.F.R.

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