author: Liss, J.,

text:
    THE ANNE ARUNDEL GENERAL HOSPITAL, INC. et al. v. DAVID S. O’BRIEN et al.
    [No. 1641,
    September Term, 1980.]

      Decided July 13, 1981.

      The cause was argued before Thompson, Moylan and Liss, JJ.

      Robert V. Barton, Jr., with whom were Paul R. DeMuro and Ober, Grimes & Shriver on the brief, for appellants.

      Glenn A. Mitchell, with whom were Catherine R. Baumer, James A. McGuire and Stein, Mitchell & Mezines on the brief, for appellees Frazier, Cerny, Smith and Brown. Abel J. Merrill, with whom were Thomas M. Downs and Blumenthal, May, Downs & Merrill, P.A. on the brief, for appellee Friedman. Richard Bloch, with whom were Shiling & Bloch, P.A. on the brief, for appellee O’Brien. William A. Franch, L. Dale Burgmeier andGoldsborough, Franch & Collett, P.A. on the brief for appellee Brown.
   Liss, J.,

delivered the opinion of the Court.

On June 30, 1980, four radiologists, Robert W. Frazier, M.D., Matthew J. Cerny, Jr., M.D., Joseph F. Smith, M.D., and Stephen R. Brown, M.D.,* and their professional association, including each of the named doctors (hereinafter the "Frazier P.A.”), filed a bill of complaint in equity in the Circuit Court for Anne Arundel County against the Anne Arundel General Hospital, Inc. (hereinafter the "Hospital”), the Hospital’s administrator, Carl A. Brunetto (hereinafter "Brunetto”), Barry H. Friedman, M.D., (hereinafter "Friedman”) and Barry H. Friedman, M.D., P.A. (hereinafter the "Friedman P.A.”).

David A. O’Brien (hereinafter "O’Brien”) and his professional association (hereinafter the "O’Brien P.A.”) filed a similar declaration in law against the same defendants. The bill of complaint and declaration alleged breach of contract, equitable estoppel, interference with business relationship, violation of federal and state antitrust laws, fraud, and violation of due process. The plaintiffs sought ex parte interlocutory and permanent injunctive relief, damages, and prayed a jury trial. On June 30,1980, the court issued orders denying the requests for ex parte injunctive relief. On July 25, 1980, the action filed in equity was transferred to law and the two cases were consolidated.

On August 18, 1980 a seven-day evidentiary hearing was held on the radiologists’ request for an interlocutory injunction. At this hearing the plaintiffs requested the court to require the Hospital to reinstate their privileges at the Hospital pending the final disposition of the case and further sought to have the court require the Hospital to grant the radiologists a hearing on their entitlement to privileges at the Hospital. By memorandum and order the trial court directed the Hospital to grant the radiologists a hearing on the question of their right to privileges at the Hospital; but denied their requests for temporary reinstatement and denied interlocutory injunctive relief as to Brunetto, Friedman and the Friedman P.A.

The trial court based its decision on the following four reasons:

1. The Hospital’s bylaws guarantee a due process hearing whenever privileges are terminated.

2. The Fourteenth Amendment right to due process protects the radiologists against termination without a hearing.

3. Substantive due process required the Hospital to demonstrate that the termination of the radiologists’ privileges was not arbitrary and capricious.

4. A hearing granted O’Brien in a prior privilege dispute set a precedent for granting a hearing to the radiologists.

From these judgments, appeals and cross-appeals were noted.

In the interest of clarity we shall indicate the status of the parties in these appeals. The Hospital and Brunetto are appellants and cross-appellees. Friedman and the Friedman P.A. are cross-appellees only. Frazier, Cerny, Smith, Brown and O’Brien and their several professional associations are appellees and cross-appellants.

Although the appellants raise four issues in their’ briefs, we conclude that a decision on one of the issues is dispositive of the others as well. That issue is:

Whether the radiologists were entitled to a hearing on their asserted right to continue to have medical staff privileges at the Hospital?

The statement of facts presented by the appellants is as follows:

Frazier, Cerny, Smith, Brown and O’Brien provided radiology coverage to the Hospital pursuant to a contract which expired on June 30, 1980 and pursuant to medical staff privileges granted by the Hospital which expired on the same date. Four of the physicians were shareholders in the Frazier P.A. O’Brien provided radiology coverage under an agreement with the Frazier P.A. The radiologists were not admitting physicians but were "hospital based physicians,” i.e., they did not admit patients to the Hospital; they were not responsible for the overall care and treatment of the patient; they performed certain diagnostic tests and procedures only upon the request of the admitting physician and reported their findings to the admitting physician for his information. Both the Frazier P.A. and the O’Brien P.A. maintain offices outside the Hospital where they perform tests and diagnostic procedures upon request of physicians for non-hospitalized patients.

The Hospital is an acute, non-profit, tax-exempt community hospital, licensed by the State of Maryland and accredited by the Joint Commission on Accreditation of Hospitals. It is a provider of care under contract with the Medicare and Medicaid programs. It is a private hospital controlled by a governing board (the Board of Managers, hereinafter the "Board”) elected by members of the corporation. It received certain financial assistance from Anne Arundel County, and the Federal government under the Hill-Burton program. The defendant Brunetto is its administrator.

Friedman is a physician who (by the Friedman P.A.) contracted to provide hospital coverage as of July 1,1980 for all "diagnostic imaging” services which includes radiology, nuclear medicine, ultrasound and computerized tomography scanning.

On January 24, 1980 the Hosptial and the radiologists entered into an agreement extending the terms of their existing contract to June 30,1980. The extension agreement stated, in pertinent part:

1. The terms of the Agreement are extended until June 30, 1980 at which time it shall automatically terminate without any notice or action on the part of either the Hospital or the Radiologists.
2. It is expressly acknowledged and agreed that after June 30, 1980 there shall be no agreement in effect between the Hospital and Radiologists or between the Hospital and any physician officer, shareholder, employee or contractor of said Radiologists, unless said agreement is in writing and duly executed by the parties thereto after February 1, 1980.

No subsequent agreement was entered into and the contract expired June 30, 1980.

On the same day that the contract was extended, the Hospital Board also granted staff privileges to Frazier, Cerny, O’Brien and Smith for the same time period — through June 30,1980. This was a departure from the usual Hospital reappointment practice of granting privileges for a full medical staff year. Accordingly Brunetto sent each a special notice in addition to the standard appointment letter. Each radiologist signed an acceptance of the appointment and none objected to or appealed from the appointment of limited duration. On June 30, 1980 the contract and medical staff privileges expired.

On January 24, 1980 the Hospital Board appointed Friedman chief of the imaging department, after a formal selection process. The imaging department was a newly created consolidation of the former radiology and nuclear medicine departments. The terms of the Hospital’s contract with the Friedman P.A. became effective July 1, 1980. The Friedman P.A. negotiated with the radiologists but never reached agreement and the Friedman P.A. contracted with other physicians.

The radiologists sent Brunetto requests for applications and subsequently requests for medical staff, privileges in radiology. He returned the applications to them citing the Hospital exclusive contract policy and the Hospital contract in effect with Friedman. The physicians requested and were permitted to appear before the Hospital’s Medical Board (composed of staff physicians), to state their concerns about the status of the radiology department. The Medical Board passed a resolution communicating to the Hospital Board, among other things, concern for continuity of care of patients with respect to radiology services. The Hospital Board President had the matter investigated by a subcommittee of its Joint Conference Committee, and the Board received assurance that adequate coverage would be provided by Friedman.

In addition to the facts above stated, the appellees have included in their brief from the record the additional factual material: Frazier, at the time the controversy arose, had been performing radiological and related services and had had hospital privileges at the Hospital for nineteen years. Cerny had had privileges for thirteen years and Smith for three years. The Frazier P.A. contract between it and the Hospital was originally entered into on July 1, 1979 and continued until July 1,1980. The hospital privileges enjoyed by the individual radiologists were also renewed from year to year. There has been no suggestion that the services rendered by the radiologists were less than competent. Appellees contend that during the period from June to September, 1979 (when the Hospital was considering the consolidation of the radiology and nuclear departments) they were assured by the Hospital that consolidation would not jeopardize the continuation of their privileges at the Hospital.

The appellants contend that the record shows that the radiologists lost the Hospital contract as a result of the two following Hospital policy decisions: (1) to consolidate radiology and nuclear medicine into one department; (2) to appoint Friedman as chief of the new department and as contractor to provide coverage. They suggest both policy decisions were made in accord with Hospital decision-making procedures after the radiologists and other medical staff members had opportunity to present their views.

They state that since 1976, the Hospital had been concerned about problems arising from separate diagnostic imaging services (radiology and nuclear medicine). Furthermore, the Hospital desired a chief without separate outside office commitments who was agreeable to "combined billing” under Maryland Health Services Cost Review Commission rates.

The Hospital Board voted on September 27, 1979 to consolidate the two departments and on October 25, 1979 approved a plan of action. These decisions followed a recommendation of the Hospital Planning Committee as provided for by the Hospital corporate bylaws, and its special subcommittee after review and study which included: notice to all radiologists and opportunity to comment; review of letters from Cerny, Smith and Friedman; comments to the committee from all radiologists; a report by the Hospital administration; reports to the Hospital medical staff about the inception, progress and outcome of the study. The committee and the subcommittee contained physician members, one serving as chairman. The medical staff was advised of the plan of action to establish the imaging department. A motion to express staff concern and request further study was defeated at a medical stall' meeting.

After the new department was established, the Hospital Board selected Friedman as its chief. A selection committee of the Hospital Board President, the administrator and the President of the Medical Staff solicited expressions of interest and formal applications, reviewed applications, interviewed the applicants (Friedman and Smith, twice), and unanimously recommended Friedman. All radiologists but Frazier applied. None of the applicants complained about the fairness of the selection process.

All of the parties to this appeal agree that the Hospital has the right to establish and implement a policy of providing hospital based diagnostic services by means of an agreement with a contracting physician to the exclusion of noncontracting physicians.

In Radiology Professional Corporation v. Trinidad Area Health Association, Inc., 195 Colo. 253, 577 P.2d 748 (1978), the Colorado court, in upholding an exclusive contract between a hospital and an association to provide radiological services, stated:

Contracts which limit the use of a hospital’s facilities to certain specialists or which provide that all services of a particular type required by hospital patients be performed by the contracting specialists have been upheld by courts which have considered their validity. [Citations omitted.] 577 P.2d at 751.

In Blank v. Palo Alto-Stanford Hospital Center, 234 Cal. App. 2d 377, 44 Cal. Rptr. 572 (1965), the court stated:

[a]n examination of the nature of the speciality of radiology, of the hospital’s responsibility for providing radiological diagnostic facilities, and the manner in which the Hospital Center’s Board resolved the question of how to furnish such facilities, sustains the trial court’s findings that "the exclusive contract method of operating the Palo Alto Diagnostic X-ray Department was, and is, a reasonable and proper method of operating the department. * * *” 44 Cal. Rptr. at 578.

See also Letsch v. Northern San Diego County Hospital District, 246 Cal. App. 2d 673, 55 Cal. Rptr. 118 (1966).

Appellees do not challenge the Hospital’s right to enter into exclusive radiology contracts especially since their own professional association was granted these exclusive rights in their original contract with the Hospital. Rather, the appellees challenge the termination of their hospital privileges which they contend exist separate and apart from the exclusive contract entered into between Friedman P.A. and the Hospital. Appellees urge that these privileges cannot be extinguished except in conformity with the procedural and substantive due process requirements prescribed by the Hospital’s corporate and Medical Staff bylaws, which are binding on the Hospital. They cite in support of this contention Article V, Section 6 of the corporate bylaws of the Hospital which provide in pertinent part as follows:

[The Board of Managers] ... shall have power to terminate or suspend privileges granted to physicians and to terminate employment of all hospital personnel after the giving of notice and an opportunity for a hearing in compliance with due process requirements.

It is well settled that hospital bylaws have the force and effect of an enforceable contract. Berberian v. Lancaster Osteopathic Hospital Association, Inc., 395 Pa. 257, 149 A.2d 456 (1959); St. John’s Hospital Medical Staff v. St. John Regional Medical Center, Inc., 245 N.W.2d 472 (S.D. 1976).

Our independent review of the Hospital’s bylaws convinces us that the elaborate procedure for hearing and review set out in Article IX of the bylaws does not apply to this proceeding. The article which is titled "Fair Hearing Plan and Appellate Review Procedure” contemplates the initiation of an adverse recommendation as to a practitioner which would result in an unfavorable decision on his status as a member of the staff or his right to exercise clinical privileges at the Hospital. The provisions for hearing and appeal which are set out in Article IX of the bylaws are intended to guarantee due process review by the Board of Managers, the Medical Staff, and the Medical Board of any adverse recommendation.

It seems clear to us that this procedure presupposes notification to the practitioner that he has failed in his duties to the Hospital, his patients, or in the competent practice of medicine. Obviously a doctor faced with charges of this kind must be given a due process opportunity to defend himself. The case here at bar, however, does not fit into that category. Here Frazier and the other radiologists had an exclusive contract with the Hospital which protected them from competition from other competent radiologists. The contract had a date certain as to when it began and when it was to terminate. By agreement between the parties the exclusive contract was renewed until July 1, 1980 and it is not disputed that the Frazier P.A. was to retain exclusive contractual rights until that date. At the same time, another agreement was executed between the parties which clearly stated that the appellees’ privileges were to be extended only for the same six-month period as their exclusive contract. Appellees made no objections to these agreements at the time they were executed. It was not until after Friedman and the Friedman P.A. were selected to head the newly formed Department of Imagery that the appellees contended that the exclusive contract and staff privileges were separate and distinct from each other. We do not agree with this contention. Appellees concede that the Hospital had a legal right to enter into an exclusive contract with Friedman and his professional association to provide the services required to implement the newly formed Department of Imaging. It necessarily follows that under these circumstances the Hospital had no obligation to grant privileges to radiologists who might compete with the Friedman Association.

We find no merit in appellees’ complaint that Friedman’s negotiations with Frazier and the other radiologists amounted to less than good faith bargaining. The trial judge, in his memorandum opinion, recognized the problems facing the newly established Department of Imaging when he denied the interlocutory injunction sought by Frazier and the other appellees. He stated the following reasons for denying the injunction:

It would be imprudent to force five radiologists on a Department of Imaging that has been functioning as a unit for a mere two months. By the time a suitable schedule is worked out between the parties, the Plaintiffs will be back in court for a determination on the merits. The Court believes that until such a determination, the Department of Imaging will operate more efficiently without the addition of the Plaintiffs.
The consequence of any hardship to the Hospital is passed on to the public. Common sense dictates that when two groups with demonstrated animosities are forced to work together pending resolution of their dispute in a judicial forum, the public interest will be jeopardized.

Appellees cite a number of cases in support of their contention that when a physician’s hospital privileges are affected, physicians are entitled to a due process hearing upon the failure of the hospital to renew their privileges.

They rely heavily on Christhilf v. Annapolis Emergency Hospital Association, Inc., 496 F.2d 174 (4th Cir. 1974), vacated and remanded on other grounds, 552 F.2d 1070 (4th Cir. 1977). An examination of this .case, however, clearly establishes that Christhilf was denied a continuation of medical staff privileges on the basis of thirty-two alleged improper procedures in his exercise of his privileges at the hospital. No hearing was held, nor was there an adjudication of these allegations. The United States Court of Appeals 4th Circuit held that there was a lack of due process and stated in support of its conclusion:

The fundamental requisite of due process of law is the opportunity to be heard. Grannis v. Ordean, 234 U.S. 385, 394, 34 S. Ct. 779, 783, 58 L. Ed. 1363 (1914). And the right to a hearing embraces an "adequate opportunity ... to defend... .” Louisville and Nashville R. R. Co. v. Schmidt, 177 U.S. 230, 236, 20 S. Ct. 620, 44 L. Ed. 747 (1900).

Factually, Christhilf and the case at bar are substantially different. No suggestion is made that the radiologists were in any way incompetent or failed to conduct themselves properly while their contract with the Hospital was in effect. There is nothing to defend. The facts are that an exclusive contract with Frazier P.A. has expired and a new exclusive contract has been negotiated with Friedman’s P.A. The requirement that the Hospital hold a hearing on what is essentially a management decision vested in the several governing boards of the private hospital was not contemplated by the charter and bylaws of the Hospital.

Appellees contend that Ascherman v. San Francisco Medical Society, 39 Cal. App. 3d 623, 114 Cal. Rptr. 681 (1974) is controlling in this case. We disagree. In Ascherman, the court held that a hearing should be granted in all cases where a doctor is being considered for appointment or reappointment to the hospital staff. However, it must be noted that no exclusive contract was involved in Ascherman. The significance of this fact is clear when we note that the same California court has held differently in cases where an exclusive contract existed. See Centeno v. Roseville Community Hospital, 107 Cal. App. 3d 62, 167 Cal. Rptr. 183 (1979), where the California Court of Appeals, in refusing to invalidate an exclusive radiology contract, stated: "Indeed, in every case brought to our attention in which a hospital’s operation of a facility on a 'closed-staff basis was challenged, the decision of the governing authority of the hospital has been upheld.” [citations omitted.] [167 Cal. Rptr. at 186-87.] See also Lewin v. St. Joseph Hospital of Orange, 82 Cal. App. 3d 368, 146 Cal. Rptr. 892 (1978), where the same court held:

A managerial decision concerning operation of the hospital made rationally and in good faith by the board to which operation of the hospital is committed by law should not be countermanded by the courts unless it clearly appears it is unlawful or will seriously injure a significant public interest.
Judges are untrained and courts ill-equipped for hospital administration, and it is neither possible nor desirable for the courts to act as supervening boards of directors for every nonprofit hospital corporation in the state. [82 Cal. App. 3d at 385.]

In the light of the Hospital’s decision to (1) operate its radiology and nuclear medicine facilities in a joint facility to be known as the Department of Imaging; (2) its further decision to enter into an exclusive contract with the Friedman P.A.; and (3) the expiration of its previously existing exclusive contract with the Frazier P.A. and the medical staff privileges granted to the several radiologists, we find no basis for the trial court’s decision requiring a hearing to be held.

Nor do we agree with the lower court’s holding that the radiologists had a "clearly implied promise of continued employment,” which prohibited termination absent a due process hearing. The trial judge relied on Mondell v. Mayor and City Council of Baltimore, 356 F. Supp. 76 (D. Md. 1973). In Mondell, the Court relied on Board of Regents v. Roth, 408 U.S. 564, 92 S. Ct. 2709 (1972); however, a scrutiny of the facts in Mondell convinces us that case is not apposite to the case at bar. In Mondell, the plaintiff was a civil service employee subject to the civil service provisions of the Baltimore City Charter. There was no termination date for her employment in her contract. When the facts in Roth, supra, are examined it is clear that the lack of a termination date was an important factor in the court’s ultimate decision. The Supreme Court in Roth pointed out that the only question before it was whether Roth had a constitutional right to a statement of reasons and a hearing on the University of Wisconsin’s decision not to rehire him at the expiration of his contract for a year. In discussing the significance of the expiration of Roth’s contract, the Court stated:

Just as the welfare recipients’ "property” interest in welfare payments was created and defined by statutory terms, so the respondent’s "property” interest in employment at Wisconsin State University-Oskosh was created and defined by the terms of his appointment. Those terms secured his interest in employment up to June 30,1969. But the important fact in this case is that they specifically provided that the respondent’s employment was to terminate on June 30. They did not provide for contract renewal absent "sufficient cause.” Indeed, they made no provision for renewal whatsoever. [408 U.S. at 578.]
The State, in declining to rehire the respondent, did not make any charge against him that might seriously damage his standing and associations in his community. It did not base the nonrenewal of his contract on a charge, for example, that he had been guilty of dishonesty, or immorality. Had it done so, this would be a different case. * * * In such a case, due process would accord an opportunity to refute the charge before University officials. In the present case, however, there is no suggestion whatever that the respondent’s "good name, reputation, honor, or integrity” is at stake. [Id. at 573.]
In these circumstances, the respondent surely had an abstract concern in being rehired, but he did not have a property interest sufficient to require the University authorities to give him a hearing when they declined to renew his contract of employment. [Emphasis in original.] [Id. at 578.]

See also Sament v. Hahnemann Medical College and Hospital of Philadelphia, 413 F. Supp. 434 (E.D. Pa. 1976), aff'd, 547 F.2d 1164 (3d Cir. 1977).

The record discloses that even the radiologists admit that there was never any direct promise of employment at the expiration of their contract. They knew that their future privileges, if any, were dependent on their ability to negotiate an agreement with Dr. Friedman. Dr. O’Brien testified as follows:

Q. [Mr. Barton] * * * was it your understanding in January of 1980 that in order for you to get privileges in the imaging department you would have to negotiate with Dr. Friedman?

A. [Dr. O’Brien] Well, I tried every way I could to negotiate a contract with Dr. Friedman, yes.

Q. Well, that was your understanding then, in January of 1980?

A. That’s correct.

Q. And that if you didn’t negotiate an agreement with Dr. Friedman, then you wouldn’t get privileges?

A. I would assume so if that was a requirement in the contract with him, that’s right.

Our own review of the record convinces us that the appellees did not have a clearly implied promise of continued employment.

The corporate bylaws of the appellant Hospital Article V, Section 6, gives the Board of Managers full power and authority to manage the business and property of the Corporation without limitation or restriction. The Board has the sole power to select and grant privileges to physicians to practice in the hospital and the terms and conditions of the privileges. Appellees urge that the following language guarantees them a hearing in compliance with due process requirements when privileges are terminated or suspended. The pertinent sentence provides as follows:

It shall have power to terminate or suspend privileges granted to physicians and to terminate employment of all Hospital personnel after the giving of notice and opportunity for a hearing in compliance with due process requirements.

The Court of Appeals has recognized that "due process does not necessarily mean judicial process.” Burke v. Fidelity Trust Co., 202 Md. 178, 96 A.2d 254 (1953). In Chevy Chase Village v. Montgomery County Board of Appeals, 249 Md. 334, 239 A.2d 740 (1967), the Court stated the established Maryland law that where the determinations to be made are quasi-legislative or administrative, there is no constitutional need for a hearing. We find that the appellees have in fact had the hearing to which they were entitled under the corporate bylaws. They were granted an opportunity to be heard on the substantive decision by the Hospital to create the consolidated department and each of them was given an opportunity to apply for the position as chief of the department. The Frazier P.A. and the Friedman P.A. were both considered before the exclusive contract was awarded to the Friedman P.A. They knew from the contracts which they had previously executed that their privileges and their exclusive contract expired as of July 1, 1980. All of the substantive decisions had been made by the duly authorized Board of Managers and the Medical Board of the Hospital. By the time the appellees made their application for staff privileges there was nothing left to be decided. The Hospital had decided to go with the newly consolidated department, and to grant Friedman’s P.A. exclusive operation of that department. To suggest that a hearing was required on the question of granting competing privileges in the face of the exclusive agreement is in our opinion to suggest an exercise in futility.

Appellee/cross-appellant O’Brien suggests that he stands in a different position than the other appellees because O’Brien’s privileges did not expire with the expiration of the co-plaintiffs’ contract with the Hospital. O’Brien was not a party to the contract and his privileges were not conditioned on the continuation of that agreement. We do not agree. The record shows that O’Brien was entitled to exercise his privileges during the exclusive contract with Frazier P.A. only on the basis of an agreement required by the Hospital that he accept a proportionate share of the fees paid to Frazier P.A. He admitted that when the Frazier P.A.’s exclusive contract terminated and the Friedman P.A. was selected as the exclusive agency to provide the services to be rendered by the Imaging Department, he would not be granted privileges if he didn’t negotiate an agreement with Dr. Friedman. We do not find that the previous record of O’Brien’s dispute with the Hospital concerning the granting of privileges required that O’Brien be treated any differently than the other appellees in this case.

We conclude that the Hospital acted within the provisions of its charter and bylaws when it decided to consolidate its radiology and nuclear medicine departments in a new Department of Imaging. We hold that the Hospital had a right to adopt the policy which provides its diagnostic imaging services by means of an exclusive contract which excluded qualified physicians, including those who previously held the contract. We hold further that the appellees’ rights under their contract and their privileges at the Hospital expired by agreement on the date certain agreed upon by the parties. The appellees were given due process during the administrative procedures in which the Hospital made its decision as to the consolidation of the Department of Imaging; and the selection of the physician to head the department; and the exclusive contract negotiated with the Friedman P.A. The appellees were not deprived of any property right, nor has any breach of duty to the public been suggested. Each of the appellees has radiological practices independent of the Hospital, and there was no showing of irreparable harm which justified the trial judge’s granting of the interlocutory relief of a hearing. We conclude that it was error on the part of the trial judge to issue an interlocutory injunction granting the appellees a hearing within 30 days from the date of his order. We affirm the remaining portions of the order for the reasons we have stated.

Interlocutory order affirmed in part, reversed in part, costs to be paid by appellees.

      . We were advised at oral argument that the Hospital and Stephen R. Brown, M.D. and his professional association have settled their dispute and an appropriate order has been filed.

      . Brown’s privileges were somewhat different. He was appointed to the medical staff for the first time in June of 1979 after being specifically notified of the then anticipated contract termination. His initial appointment was "provisional” under the medical staff bylaws and therefore subject to certain requirements for reappointment. His initial provisional appointment extended through June 26,1980 and although he did not meet the stated requirements for reappointment, his privileges were extended for four days to June 30, 1980 at which time they expired.

      . Article IX, Section 2.1.a. of the Medical Staff bylaws provides that any practitioner who receives notice from the AAGH Administrator that his appointment or status as a member of the staff or the exercise of his clinical privileges will be adversely affected shall be entitled to a hearing before an ad-hoc committee of the Medical Staff ...


source: Caselaw Access Project

author:
Thompson, J.,
      Melvin, J.,

license: Public Domain

text:
    WILLIAM E. DIXON v. TRINITY JOINT VENTURE et al.
    [No. 1621,
    September Term, 1980.]

      Decided July 14, 1981.

    The cause was argued before Thompson, Melvin and Couch, JJ.

      Robert L. Fila and Charles C. W. Atwater, with whom were Atwater & Stone on the brief, for appellant.

      Lawrence S. Greenwald, with whom were Gordon, Feinblatt, Rothman, Hoffberger & Hollander on the brief, for appellees.
   Thompson, J.,

delivered the opinion of the Court. Melvin, J., dissents and files a dissenting opinion at page 389 infra.

In this case we are concerned with the duty of a general partner to give notice to limited partners concerning a business opportunity.

I The Law

Justice Benjamin N. Cardozo, while the Chief Judge of the Court of Appeals of New York set out the standard in his usually eloquent manner when he said in Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928):

"Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the 'disintegrating erosion’ of particular exceptions. Wendt v. Fischer, 243 N.Y. 439, 444, 154 N.E. 303. Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court.”

The Supreme Court of Alaska drew a parallel between the relationship of partners to their partnership and the fiduciary relationship of corporate officers and directors to their corporation in Mathis v. Meyeres, 574 P.2d 447, 448 (Alas. 1978):

"The parties are not in disagreement concerning the law governing business opportunities among partners. They correctly acknowledge that what we said in Alvest, Inc. v. Superior Oil Corporation, 398 P.2d 213, 215 (Alaska 1965) regarding the fiduciary relationship of corporate officers and directors to their corporation applies to the parallel relationship between partners and their partnership:
'A corporate officer or director stands in a fiduciary relationship to his corporation. Out of this relationship arises the duty of reasonably protecting the interests of the corporation. It is inconsistent with and a breach of such duty for an officer or director to take advantage of a business opportunity for his own personal profit when, applying ethical standards of what is fair and equitable in a particular situation, the opportunity should belong to the corporation. Where a business opportunity is one in which the corporation has a legitimate interest, the officer or director may not take the opportunity for himself. If he does, he will hold all resulting benefit and profit in his fiduciary capacity for the use and benefit of the corporation.’ ”

At this point it may be well to look at the Maryland Code with reference to the duty of a general partner in an ordinary partnership, set out in Md. Corp. & Ass’ns. Code Ann. § 9-404 (a) as follows:

"Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.”

The particular duty with reference to limited partnerships is contained in § 10-108:

"A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners,____”

Maryland cases, although they do not address the precise question before the Court, approve the principles we have quoted. See, Herring v. Offutt, 266 Md. 593, 295 A.2d 876 (1972), and Allen v. Steinberg, 244 Md. 119, 223 A.2d 240 (1966), in which it was said that managing partners of a limited partnership owe a special duty:

"A partner is a trustee to the extent that his duties bind him, a cestui que trust as far as the duties that rest on his copartners. 1 Rowley, Modern Law of Partnership, §§ 341-42; Restatement, Restitution §§ 166 comment d, 190 comment a; 68 C.J.S. Partnership § 76; 40 Am. Jur. Partnership § 128; Hagan v. Dundore, 187 Md. 430. These authorities which consider the matter also hold that generally the principle of utmost good faith covers not only dealings and transactions occurring during the partnership but also those taking place during the negotiations leading to the formation of the partnership. See also Knapp v. First National Bank and Trust Co. (10th Cir.), 154 F.2d 395, 398; Stephens v. Stephens (Ky.), 183 S.W.2d 822, 824. Managing partners particularly owe a ñduciary duty to inactive partners. Corr v. Hoffman (N.Y.), 176 N.E. 383; Einsweiler v. Einsweiler (Ill.), 61 N.E.2d 377.” (Emphasis added). Id. at 128.

The principles were reiterated in Impala Platinum v. Impala Sales, 283 Md. 296, 324, 389 A.2d 887 (1978):

"A fiduciary relationship 'carries with it the requirement of utmost good faith and loyalty and the obligations of [the fiduciary] to make full disclosure of all known information that is significant and material to the affairs ... of [the fiduciary relationship] ... "the principle of utmost good faith covers not only dealings and transactions occurring during the [fiduciary relationship] but also those taking place during the negotiations leading to the formation of the [fiduciary relationship].” Allen v. Steinberg, supra at 128’; Herring at 597.”

See also, Levin v. Levin, 43 Md. App. 380, 390, 405 A.2d 770 (1979). In Faraclas v. City Vending Co., 232 Md. 457, 463-64, 194 A.2d 298 (1963) the Court said:

"This Court has long recognized as a corollary to the law of a corporate officer’s and director’s fiduciary duty, that, when presented with a business opportunity to fulfill a corporate purpose, he should take advantage of it, not for himself, but for the corporation. See Acker, Merrall & C. Co. v. McGaw, 106 Md. 536....”
"Of course, a corporation, as such, has no interest in its outstanding stock or in dealings therein by its officers, directors or shareholders. If there is a struggle for control the corporation would normally occupy a neutral position. But in the case at bar the Company had a direct interest in acquiring the assets of a solvent partnership in order to pay its creditors. The condition, to which everyone agreed, was that the Wilbur stock be redeemed so that the partners might not be required to share future profits with shareholders outside the family. When John purchased the Wilbur stock for his own account, he frustrated a valid corporate purpose that had been invalidly consummated. We agree with the Chancellor that this was a breach of his fiduciary duty under the circumstances.”

II The Facts

We adopt as our own the finding of facts made by the chancellor, all of which are supported by the evidence:

"The Plaintiffs, Trinity Joint Venture, et al, (Trinity), [appellees], filed a Bill of Complaint alleging that the Defendant, William E. Dixon, (Dixon), [appellant], breached his fiduciary duties by failing to inform Trinity that a certain ten (10) acre tract of land was for sale and by buying the said land for his own profit through entities which he owned and controlled. As a means of redress, the Plaintiffs seek an accounting for all profits made by the Defendant, Dixon, together with damages. The Defendant, in his Answer to the Bill of Complaint, denies any breach of his fiduciary duties and prays that the Bill be dismissed.

"The events leading up to this cause of action are as follows: At all pertinent times, the Plaintiff, Trinity, existed as a limited partnership of which the Defendant, Dixon, was a general and managing partner. Trinity had been formed 'to hold, operate and lease the real property acquired by the partnership.’

"Pursuant to the purposes of the partnership, Trinity developed a shopping center known as East Park Center on a certain tract of land located near Crain Highway and Maryland Route 3 in Anne Arundel County. Adjacent to and north of East Park Center was a ten (10) acre tract of undeveloped land owned by the Holy Trinity Roman Catholic Congregation. In order to obtain the approval of the County Planning and Zoning Board for development of the shopping center, Trinity agreed with County authorities to construct a road known as East Park Drive through East Park Center. The County’s primary reason for requiring the road was to provide access to the said ten (10) acre tract which otherwise would be landlocked by East Park Center and the Glen Burnie Park Improvement Association. A secondary purpose for the required road was to provide service to the 7.221 acre tract abutting the west of East Park Drive.

"On or about September 19, 1973, John A. Cade entered into an agreement with the Holy Trinity Roman Catholic Congregation to purchase the ten (10) acre tract abutting East Park Center for $100,000. Shortly thereafter, Mr. Cade informed the Defendant, Dixon, that he now controlled the ten (10) acre tract. Mr. Cade previously had been associated with Mr. Dixon as an employee (officer) of Monumental Title Company which was owned and controlled by Dixon and his immediate family and also had served as a consultant to Trinity. However, due to 'bad feelings’ between Mr. Cade and Mr. Larkin, a limited partner of Trinity (also a Plaintiff in this action), Mr. Cade’s services were dispensed with by the partnership.

"Testimony at the hearing by both Mr. Cade and the Defendant, Dixon, revealed that Dixon suggested that the ten (10) acre tract be offered to Trinity but Mr. Cade refused to follow through on the suggestion since he did not want to have any business dealings with Trinity.

"Subsequently, on or about September 26, 1973, Mr. Cade assigned his right to purchase the ten (10) acre tract to Landco Limited Partnership (Landco Ltd.).

"Testimony at the hearing showed that Landco Ltd. was a partnership formed for the purpose of providing retirement benefits for the employees of Monumental Title Company which held a 70% limited partnership interest in Landco Ltd. The remaining 30% interest was held by Landco Inc. as a general and limited partner. Testimony further adduced that Monumental Title Company is an entity in which Dixon along with his then wife jointly owned a two-thirds interest and his son owned the remaining one-third interest. With regard to Landco Inc. it was shown that the Board of Directors consisted of Dixon, Arlene T. Corbin (Dixon’s personal secretary) and Mr. Cade. Dixon testified that he frequently appointed Ms. Corbin, his secretary, as an officer or director of his 'corporations’ and that she never voted against his wishes. In effect then Dixon controlled two of the three board positions of Landco Inc. Additionally, Dixon stated at the hearing that all capital for Landco Ltd. was advanced by Monumental Title Company.

"Once Landco Ltd. obtained the right to purchase the ten (10) acre tract, it continued to hold it from September 26, 1973 to February 22, 1974 when Landco Ltd. then assigned its right to purchase to Dick Rice, Inc. for $200,000. Dixon testified at the hearing that the profit made by Landco Ltd. on the assignment was between $60,000 and $65,000. Dixon by way of his Post-Trial Memorandum states that the profit obtained was $59,000. Dick Rice, Inc. subsequently obtained title to the ten (10) acre tract on March 15, 1974 and obtained a purchase money mortgage guaranteed by the Defendant, Dixon.

"It is clear from the facts that Dixon became aware of the availability of the ten (10) acre tract in July 1973 when Mr. Cade informed him that he (Cade) had the right to purchase the tract. From July 1973 to September 1973, the ten (10) acre tract remained in the control of Mr. Cade. With the exception of the testimony of Mr. Baldwin, a general partner in Trinity, the facts and evidence indicate that Dixon did not inform Trinity of the availability of this property during this time. Then, in September 1973, Landco Ltd. obtained the right to purchase the ten (10) acre tract from Mr. Cade and held it until February 1974 when Landco Ltd. transferred its right to purchase to Dick Rice, Inc. for $200,000. Again, during these months Dixon did not inform Trinity of the availability of the ten (10) acre tract.

"The Plaintiffs allege that the ten (10) acre tract in question was of critical importance to the interest of Trinity. They assert that if Trinity were able to obtain ownership over the ten (10) acre tract it potentially could have avoided building the road known as East Park Drive in connection with the development of East Park Center. In support of this contention, the Plaintiffs offered the testimony of Florence Kurdle, a director within the Anne Arundel County Planning and Zoning Office. Mrs. Kurdle testified that East Park Drive was required by the County primarily to provide access to the ten acre tract in order to prevent it from becoming land-locked upon development of East Park Center. Mrs. Kurdle further stated that given the situation where the ten (10) acre lot was deeded to the Glen Burnie Park Improvement Association it would no longer be land-locked since access would have been through other land owned by the Association and that in this instance the County may not have required construction of East Park Drive. The Plaintiffs allege that an inference can be drawn from Mrs. Kurdle’s testimony which strongly suggests that had access to the ten (10) acre tract been made available through other means then the County would not have required construction of East Park Drive. In any event, the Plaintiffs contend that had Trinity had the opportunity to acquire the ten (10) acre tract, it may have been able to avoid construction of the road by either retaining the tract or deeding it to the Glen Burnie Park Improvement Association, and could have utilized the land upon which the road is situated for other purposes.”

The chancellor found that there was a fiduciary duty owed by the appellant, William E. Dixon, to the plaintiffs, Trinity, and awarded damages in the amount of profits that Landco Ltd. made on the sale of the real estate. We agree with the chancellor, Judge Eugene M. Lerner, sitting in the Circuit Court for Anne Arundel County.

Ill Appellant’s Contentions

Appellant makes a number of arguments on appeal, the general thrust of which is that limited partners are entitled to no more rights than are specifically set out in § 10-109.* In making the argument he ignores that portion of the statute which we have set out above which imposes upon a partner the same duties as those imposed on other fiduciaries. He further argues that to have given the partners proper notice would have been allowing them to participate in determining whether to purchase the real estate or not and that having given notice to the other general partner, Thomas I. Baldwin, his duty was complete, particularly when the two general partners decided that in view of the partnership’s financial condition at the time, they would not have agreed to the purchase. We think Judge Cardozo gave the answer to this argument in Meinhard v. Salmon, supra, when he said at 547:

"The trouble about his conduct is that he excluded his coadventurer from any chance to compete, from any chance to enjoy the opportunity for benefit that had come to him alone by virtue of his agency. This chance, if nothing more, he was under a duty to concede. The price of its denial is an extension of the trust at the option and for the benefit of the one whom he excluded.
"No answer is it to say that the chance would have been of little value even if seasonably offered. Such a calculus of probabilities is beyond the science of the chancery. Salmon, the real estate operator, might have been preferred to Meinhard, the woolen merchant. On the other hand, Meinhard might have offered better terms, or reinforced his offer by alliance with the wealth of others. Perhaps he might even have persuaded the lessor to renew the Bristol lease alone, postponing for a time, in return for higher rentals, the improvement of adjoining lots.”

We do not hold that the general partner in the partnership here involved was obligated to disclose to his partners all other real estate developments in which he became engaged during the life of the partnership. We agree that simply because the property herein involved adjoined partnership property as in Mathis v. Meyeres, supra, notice to the other partners would not have been required. The property in the instant case, however, was more than adjoining property. Restrictions for its benefit had been imposed on the partnership property at the time of its purchase. In addition, there was evidence, which was apparently accepted by the chancellor, that had the partnership been able to acquire the property purchased by Dixon, it would have been able to avoid the expense of building a road which the county required as a condition of development of the partnership property. These facts in our view make the opportunity to purchase the adjoining property a "partnership opportunity.” The appellant’s attempt to assign to the limited partners only the very strict express rights set out in the statute and to ignore that portion of the statute which says in effect that the managing partner has fiduciary duties, cannot prevail.

We, like the chancellor, are not impressed with the appellant’s suggestion that the whereas clauses of the partnership agreement limited the general purposes of the partnership as set out in the body of the agreement.

Finally, the appellant argues that the chancellor erred in holding that Baldwin, a general partner, was not a necessary party to the suit. The argument is without substantial merit because Baldwin was a party to the suit under Md. Cts. & Jud. Proc. Code Ann. § 6-406 (a) and (b) which provide as follows:

"(a) An unincorporated association, joint stock company, or other group which has a recognized group name may sue or be sued in the group name on any cause of action affecting the common property, rights, and liabilities of the group.”
"(b) An action under this section:
(1) Has the same force and effect with respect to the common property, rights, and liabilities of the group as if all members of the group were joined. . . .”

Decree affirmed.

Appellant to pay the costs.

Melvin, J.,

dissenting:

Because I disagree with the result reached by the majority in this case, I respectfully dissent.

The graveman of the plaintiffs’ complaint against the defendant Dixon is that he breached his fiduciary duty to the limited partnership by "failing to inform Trinity [the limited partnership] that the ten acre tract was for sale and [by not] taking steps to purchase it for Trinity”, and that by purchasing the ten acre tract for his own account he wrongfully deprived Trinity of "a partnership opportunity.”

In my view, the plaintiffs failed to prove these allegations for the following reasons:

1. The purchase of the ten acre tract was beyond the scope of the purpose for which the partnership was formed. The written partnership agreement entitled "Trinity Joint Venture Limited Partnership Agreement,” clearly sets forth that the purpose of the partnership was to "hold, operate, improve and lease” only the specific 33.93 acres of real estate mentioned in the agreement. That it may have been advantageous to Trinity to own the extra ten acre tract does not enlarge that purpose. Thus, the availability of the ten acre tract was not a "partnership opportunity” within the meaning of that doctrine. It should be noted that Dixon did, acting in the best interests of the partnership, achieve the release of restrictions against the 33.93 acres of partnership property that had been imposed in favor of the ten acre tract.

2. Assuming that the availability of the ten acre tract presented a "partnership opportunity”, that availability was made known by Dixon to the only other general partner, Thomas I. Baldwin. Baldwin, who is not a named party to this action, testified in unequivocal terms that it would have been "ridiculous” for Trinity to have purchased the ten acres under the circumstances, citing the fact that the partnership was already in arrears on a $400,000 mortgage indebtedness, that the ten acre tract was not zoned for commercial development, and that to have acquired the ten acres and eliminated the road through the 33.93 acres would have required a substantial delay in the shopping center project. Dixon was of the same opinion. The partnership agreement provided that as general partners, Dixon and Baldwin, were to be "the managing partners of the Limited Partnership for the purposes of handling all transactions, directions and instructions in connection with the development of the property” (emphasis added), and that, "no Limited Partner shall participate in the management of the Partnership business.” There are no allegations of fraud or collusion on the part of either of the general partners. Thus, we have a situation where both managing partners, although fully aware that the ten acre tract was for sale, exercised their business judgment not to avail themselves of the opportunity to attempt to buy the property for Trinity. That the limited partners may disagree with that judgment is, in the absence of fraud or bad faith, totally irrelevant to the issues in this case.

Under these circumstances, I do not agree that Dixon’s failure to notify the limited partners that the ten acres were for sale, or that the acquisition of the ten acres by another entity in which Dixon had a controlling interest, constituted a breach of his fiduciary duty to the Trinity limited partnership or the individual limited partners thereof.

The majority’s reliance upon Meinhard v. Salmon, 164 N.E. 545 (N. Y. 1928) is misplaced. That case involved a dispute between general partners and not, as in this case, a dispute between limited partners and a general partner. I find nothing in Meinhard to support a holding that a general partner is guilty of breach of his fiduciary duty when he takes advantage of a partnership opportunity for his own account after the managing partners with knowledge of the opportunity decline for business reasons to take it for the partnership. See W. Fletcher, Cyclopedia of the Law of Private Corporations § 862.1 (rev. perm. ed. 1975).

      . "§ 10-109. Rights of a limited partner.

      (a) A limited partner shall have the same rights as a general partner to:
      (1) Have the partnership books kept at the principal place of business of the partnership, and at all times to inspect and copy any of them;
      (2) Have on demand true and full information of all things affecting the partnership, and a formal account of partnership affairs whenever circumstances render it just and reasonable; and
      (3) Have dissolution and winding up by decree of court.
      (b) A limited partner shall have the right to receive a share of the profits or other compensation by way of income, and to the return of his contribution as provided in §§ 10-114 and 10-115 of this title.”
      It should be noted that Chapter 801, Laws of Maryland, 1981 amended the statute on limited partnerships.

      . It is apparent that all of the parties here involved were also involved in other development schemes outside of this particular partnership.

      . The appellant, recognizing this, voluntarily arranged for the release of those conditions while the property was held by his nominee.


author: Thompson, J.,

text:
    NORMAN K. OHM v. JUNE L. OHM
    [No. 1250,
    September Term, 1980.]

      Decided July 15, 1981.

      The cause was argued before Morton, Thompson and Weant, JJ.

      Saul E. Kerpelman for appellant.

      Nelson M. Oneglia, with whom were Horowitz, Oneglia, Goldstein, Foran & Parker, P.A. on the brief, for appellee.
   Thompson, J.,

delivered the opinion of the Court.

This is an appeal from a decree of divorce. The principal issues are whether the court below, in dissolving the parties’ marriage and dividing their property, was correct in its determination that the husband’s vested, matured right to receive benefits under a private, non-contributory pension plan was "marital property” within the meaning of Maryland’s Property Disposition in Divorce and Annulment statute (the statute), Md. Cts. and Jud. Proc. Code Ann. § 3-6A-01, et seq. (1980 Repl. Vol., 1980 Cum. Supp.), and thus subject to equitable distribution upon divorce, and if so, whether the court properly valued and divided those benefits. We hold that the retirement benefits were properly included among the parties’ marital property but that the chancellor failed to consider various factors relevant in the valuation and division of the benefits.

June L. Ohm, the appellee, was awarded a divorce a vinculo matrimonii from Norman K. Ohm, the appellant, in the Circuit Court for Prince George’s County on August 11, 1980. The parties had been married for 39 years and had two sons, both now adults. At the time of the divorce, the husband was 57 years old and had been employed by the C. & P. Telephone Company for 39 years. He was earning a gross salary of $2,399.26 per month. As a result of his employment, he had acquired certain vested rights in a noncontributory pension plan maintained by his employer and was eligible to retire at any time, although his benefits would be increased if he chose not to retire until he was older. Under the plan, Mr. Ohm could elect to receive a pension of $1,019.36 per month, which would terminate upon his death, or he could elect a so-called survivor’s benefit, under which he would receive $980.43 per month but which, after his death, would continue to pay $545.22 per month to his survivor until the survivor’s death.

At the time of the divorce, Mrs. Ohm had been employed by the University of Maryland for some 10 years and had a gross salary of $1,020.56 per month. She also had acquired pension rights as a result of her employment, although no details concerning such rights are contained in the record.

In accordance with § 3-6A-05 (a) of the Courts Article, the chancellor determined the following to be marital property: the marital home, located in Maryland and owned by the parties as tenants by the entireties; a vacation home and four unimproved lots, located in Florida and also held as tenants by the entireties; a C. & P. Telephone contributory savings plan, in the husband’s name, having a balance of $13,000; shares of A. T. & T. stock, individually or jointly titled; two $10,000 certificates of deposit, one in the name of the wife only, and the other in the names of the wife and the parties’ two sons; a savings account in the name of the wife, having a balance of $3,600; six small insurance policies, two of which insured the lives of the sons; the household furniture located in the marital home; and, the benefits payable under the husband’s retirement plan. The marital property, exclusive of the retirement plan, was determined to have a total value of $180,000. The chancellor ordered that the real property listed above be sold and that the proceeds remaining after indebtedness on the properties was discharged be equally divided between the husband and the wife; he ordered that the items of personal property be equally divided as well. With respect to the retirement plan, which he determined to have a present value of $134,224, the chancellor granted the wife a monetary award in the amount of $67,112, or one-half the value of the pension, and entered judgment against the husband in that amount. In addition, the chancellor directed that the parties’ two automobiles be titled one in the name of each and awarded the wife alimony, in the amount of $150 per month, and attorney’s fees. No determination or award was made with respect to the benefits payable under the wife’s pension plan.

I Marital Property

Section 3-6A-01 (e) of the Courts Article states:

"'Marital property’ is all property, however titled, acquired by either or both spouses during their marriage. It does not include property acquired prior to the marriage, property acquired by inheritance or gift from a third party, or property excluded by valid agreement or property directly traceable to any of these sources.”

The question of whether the right to receive benefits under a private pension plan is marital property, which under § 3-6A-05 (b) may be the subject of a monetary award "as an adjustment of the equities and rights of the parties” is not directly answered by the statute and has not heretofore been decided either by this Court or by the Court of Appeals. The issue has been addressed by the courts of numerous other states which, upon dissolution of a marriage, divide, either equally or equitably, the property acquired by the parties during their marriage. The overwhelming majority of the courts have determined, either expressly or by implication, that vested rights under a private or public pension plan, to the extent such rights were acquired during the marriage, are property subject to division upon dissolution. Rogers and Rogers, 609 P.2d 877, 880 (Or. App. 1980); see, Van Loan v. Van Loan, 569 P.2d 214 (Ariz. 1977); In Re Marriage of Brown, 126 Cal. Rptr. at 634-35; In Re Marriage of Mitchell, 579 P.2d 613 (Colo. 1978); In Re Marriage of Evans, 406 N.E.2d 916, 918 (Ill. App. 1980); Foster v. Foster, 589 S.W.2d 223 (Ky. App. 1979); Sims v. Sims, 358 So. 2d 919 (La. 1978); Hutchins v. Hutchins, 248 N.W.2d 272 (Mich. App. 1976); Elliott v. Elliott, 274 N.W.2d 75 (Minn. 1978); In Re Marriage of Powers, 527 S.W.2d 949 (Mo. App. 1975); In Re Marriage of Miller, 609 P.2d 1185 (Mont. 1980); Kruger v. Kruger, 375 A.2d 659, 662 (N.J. 1977); Copeland v. Copeland, 575 P.2d 99 (N.M. 1978); Hansen v. Hansen, 273 N.W.2d 749 (S.D. 1979); Cearley v. Cearley, 544 S.W.2d 661 (Tex. 1976); Englert v. Englert, 576 P.2d 1274 (Utah 1978); DeRevere v. DeRevere, 491 P.2d 249 (Wash. App. 1971); cf., Stigall v. Stigall, 277 N.E.2d 802, 811 (Ind. App. 1972) (pension is evidence to be considered by court in determining amount of award of property settlement); Rogers and Rogers, 609 P.2d at 881 (retirement benefits, while not marital property to be divided, are marital assets to be considered in formulating decree); Leighton v. Leighton, 261 N.W.2d 457, 463-64 (Wis. 1978) (under Wisconsin statute, vested and nonvested pension benefits are to be considered in dividing property). But see, Savage v. Savage, 374 N.E.2d 536, 538-40 (Ind. App. 1978); Witcig v. Witcig, 292 N.W.2d 788, 793 (Neb. 1980); Baker v. Baker, 546 P.2d 1325, 1326 (Ok. 1975). See generally, Legislation, Property Disposition Upon Divorce in Maryland: An Analysis of the New Statute, 8 U. Balt. L. Rev. 377, 400-403 (1979); Annot. Pension or Retirement Benefits as Subject to Award or Division by Court in Settlement of Property Rights Between Spouses, 94 A.L.R.3d 176 (1979).

The rationale of these decisions is that retirement benefits are a form of deferred compensation or wage substitute and the right to receive such benefits, being contractual in nature, a chose in action and thus, property. See, e.g., Van Loan v. Van Loan, 569 P.2d at 215-16; In Re Marriage of Hunt, 397 N.E.2d at 516-17. In Rogers and Rogers, the Court of Appeals of Oregon stated:

"[Vjested retirement rights are a valuable asset earned through contributions which would otherwise have been available to the parties during the marriage. Even where contributions have been made entirely by the employer, the courts have concluded that retirement benefits are a mode of employee compensation and as such are an earned property right of the marriage. As noted by the California Supreme Court in Brown, 544 P.2d at 566, 126 Cal. Rptr. at 638: '*** Over the past decades, pension benefits have become an increasingly significant part of the consideration earned by the employee for his services. As the date of vesting and retirement approaches, the value of the pension right grows until it often represents the most important asset of the marital community. *** A division of *** property which awards one spouse the entire value of this asset, without any offsetting award to the other spouse, does not represent [an] equal division of *** property ***.’ ” (Footnote omitted.) 609 P.2d at 880.

The courts have also noted the similarities between pension benefits and other sources of deferred income which are undisputably property, the New Jersey Supreme Court observing:

"The right to receive monies in the future is unquestionably ... an economic resource. In most situations its present dollar value can be computed. *** No one would quarrel with the proposition that the recipient of a life estate created by a testamentary or inter vivos trust owned a valuable asset which would be subject to equitable distribution. So, too, if one purchased or acquired an insurance annuity which paid a weekly sum certain to the beneficiary for life, the right to collect those funds would also be considered property subject to distribution. There are many different types of employee benefits, which employees or former employees receive, which everyone would readily admit are assets that have been acquired during employment. Deferred compensation, stock options, profitsharing and pensions are typical examples.” Kruger v. Kruger, 375 A.2d at 662.

See also, Hutchins v. Hutchins, 248 N.W.2d at 277 ("these deductions [from the husband’s salary, paid into a contributory public employees pension account] would have been available to the parties during their marriage to be invested in stock, bonds, savings account, annuity and/or other investments.”); In Re Marriage of Brown, 126 Cal. Rptr. at 638 ("in other situations, when community funds or efforts are expended to acquire a conditional right to future income, the courts do not hesitate to treat that right as a community asset.”).

A significant number of jurisdictions have extended the reasoning set forth above so as to encompass nonvested pension rights as well. See, e.g., Van Loan v. Van Loan, 569 P.2d at 215; In Re Marriage of Brown, 126 Cal. Rptr. at 634-35; In Re Marriage of Hunt, 397 N.E.2d at 518; Cearley v. Cearley, 544 S.W.2d at 666; Leighton v. Leighton, 261 N.W.2d at 464. Generally, they have reasoned that while the nonvested nature of the pension may make its valuation difficult, it makes the right to receive the benefits no less property; thus they have rejected the characterization of such benefits as "expectancies” and have instead held them to be a "contingent interest in property.” In Re Marriage of Hunt, 397 N.E.2d at 517.

We are persuaded that the correct rule is that the right to receive retirement benefits under a private or public employees pension plan, whether or not vested, matured, or contributory, is property and that, if acquired during the marriage, it constitutes marital property within the meaning of § 3-6A-01 (e). Accordingly, we hold that the chancellor did not err in determining that the appellant’s pension was marital property which could be the subject of a monetary award.

In reaching this conclusion, we are cognizant of our recent decision in Hill v. Hill, 47 Md. App. 460, 469, 424 A.2d 779, cert. granted, 290 Md. (1981), in which we held "as a matter of state law that military retirement pay is income and not 'marital property’ subject to division upon divorce”; however, Hill is not dispositive of the issue in the instant case.

Justice Harry A. Blackmun, writing for the majority in McCarty v. McCarty, U.S. , 101 S. Ct. 2728, 69 L. Ed. 2d 589, 49 U.S.L.W. 4850, 4853, observed:

"[Military retired pay differs in some significant respects from a typical pension or retirement plan. The retired officer remains a member of the Army, ... and continues to be subject to the Uniform Code of Military Justice. ... In addition, he may forfeit all or part of his retired pay if he engages in certain activities. Finally, the retired officer remains subject to recall to active duty by the Secretary of the Army 'at any time.’ ... These factors have led several courts, including this one, to conclude that military retired pay is reduced compensation for reduced current services.” (Citations and footnotes omitted.)

In our opinion in Hill, we relied most heavily upon two cases: In Re Marriage of Ellis, 538 P.2d 1347 (Colo. App. 1975), aff'd., Ellis v. Ellis, 552 P.2d 506 (Colo. 1976), which held that military retirement pay was not marital property subject to division upon divorce, and United States v. Williams, 279 Md. 673, 370 A.2d 1134 (1977), which held that military retirement pay "constitutes wages for purposes of attachment under” Md. Comm. Law Code Ann. § 15-602. 47 Md. App. at 468-69. The Courts in those two cases each attached substantial weight to the unique characteristics of military retirement pay listed by Justice Blackmun in McCarty. As those factors which we found to be of significance in Hill are not involved in the pension in the instant case, or in any other non-military pension, we believe that different treatment of civilian and military retirement benefits is appropriate and that our decision in the instant case is not in conflict with our decision in Hill. Cf., Paulsen v. Paulsen, 601 S.W.2d 873, 875 (Ark. 1980) ("Military retirement pay is not a fixed and tangible asset such as a vested pension....”); In Re Marriage of Mitchell, 579 P.2d at 617 (distinguishing between a public employee retirement and the military pension held not to constitute property in Ellis v. Ellis, supra); compare, Russell v. Russell, 605 S.W.2d 33, 35 (Ky. App. 1980) (holding military retirement pay not property subject to division, on federal pre-emption grounds), and Foster v. Foster, 589 S.W.2d at 224 (Ky. App. 1979) (holding vested private pension is property subject to division).

The appellant’s pension is subject to the protections and requirements of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. Section 206 (d) (1) of ERISA, 29 U.S.C. § 1056 (d) (1), provides that "each pension plan [subject to ERISA] shall provide that benefits provided under the plan may not be assigned or alienated.” Relying upon the decision of the Supreme Court in Hisquierdo v. Hisquierdo, 439 U.S. 572, 99 S. Ct. 802, 59 L. Ed. 2d 1 (1979), the appellant contends that the ERISA anti-assignment provision bars treatment of his pension as marital property. We do not agree.

In Hisquierdo, the Supreme Court held that the noncontractual retirement benefits payable to a railroad employee under The Railroad Retirement Act of 1974, 45 U.S.C. § 231, et seq., are not subject to allocation and division upon dissolution of the employee’s marriage. In so doing, the Court reversed a judgment of a California court, which had held such benefits to be community property and awarded the spouse of a railroad employee an interest in the employee’s expectation of receiving benefits under the Act. The Supreme Court did so on the basis of a conflict between the California award and the provisions and objectives of the Act; it found that Congress, by expressly providing a separate benefit for an employee’s spouse, which was terminated by divorce, see 45 U.S.C. § 231d, and by providing that benefits were not to be "anticipated,” "assigned,” or "subject to any tax or to garnishment, attachment, or other legal process,” see, 45 U.S.C. § 231m, had indicated its intent that the full amount of the benefits were for the employee alone, in order to insure that the employee’s pension was sufficient to support him in his old age and to encourage retirement. The Court reasoned that diminution of that benefit, either directly, by means of an order directing payment of a portion of the benefits to the spouse, or indirectly, by awarding the spouse other property to offset the amount of the pension, would frustrate the Congress’ purpose and that state law was therefore pre-empted under the Supremacy Clause of the United States Constitution.

Subsequent to the submission of arguments in this case, the Supreme Court, in McCarty v. McCarty, supra, employing reasoning similar to that in Hisquierdo, held that military retirement pay was not subject to division as community property upon dissolution of a serviceman’s marriage. The Court found a conflict between the terms of the military retirement statutes and the community property right asserted and found that division of the retirement pay would frustrate the Congressional objective of providing for the retired serviceman and encouraging enlistment, orderly promotion, and the maintenance of a youthful military; consequently, it held that state law was pre-empted and reversed the California judgment awarding a retired serviceman’s former spouse a portion of the serviceman’s retirement pay.

These decisions, and the statutes they construe, are clearly distinguishable from the instant case and ERISA. The Supreme Court so indicated in Hisquierdo, where it said:

"In this case, Congress has granted a separate spouse’s benefit, and has terminated that benefit upon absolute divorce. Different considerations might well apply where Congress has remained silent on the subject of benefits for spouses, particularly when the pension program is a private one which federal law merely regulates. See Employee Retirement Income Security Act of 1974 [ERISA], 88 Stat. 829, 29 U.S.C. § 1001 et seq. Our holding intimates no view concerning the application of community property principles to benefits payable under programs that possess these distinctive characteristics.” 99 S. Ct. at 813 n. 24.

In addition, the Supreme Court has twice dismissed appeals from California decisions which had held that ERISA did not bar the treatment of a private pension as community property and the award of an interest in such pension to the employee’s spouse. See, In Re Marriage of Campa, 89 Cal. App. 3d 113, 152 Cal. Rptr. 362 (1979), appeal dismissed, 444 U.S. 1028, 100 S. Ct. 696, 62 L. Ed. 2d 664 (1980); Johns v. Retirement Fund Trust, 85 Cal. App. 3d 511, 149 Cal. Rptr. 551 (1978), appeal dismissed and cert. denied, 444 U.S. 1028, 100 S. Ct. 696, 62 L. Ed. 2d 664 (1980). Such dismissals are viewed as decisions on the merits, holding that no substantial federal question is presented. See, Hicks v. Miranda, 422 U.S. 332, 344-45, 95 S. Ct. 2281, 2289, 45 L. Ed. 2d 223 (1975). Finally, our research indicates that arguments similar to that advanced by the appellant have been considered by a number of courts; they have been uniformly rejected. See, e.g., In Re Marriage of Hunt, 397 N.E.2d at 520-21 (Ill. App. 1979). As indicated in Hisquierdo and McCarty, for pre-emption to occur, state law must do damage to substantial federal interests; we see no such damage in the instant case and therefore find no pre-emption under ERISA.

II Valuation of Pensions

Valuation of marital property is governed by § 3-6A-05 of the statute, which provides as follows:

"(a) In granting an absolute divorce or annulment, or at any time within 90 days thereafter, if in its decree granting the divorce or annulment the court has expressly reserved the power to do so, the court shall determine which property is marital property if the division of property is an issue. Family use personal property or the family home shall not be considered marital property so long as it is the subject of a use and possession order.
"(b) The court shall determine the value of all marital property. After making the determination, the court may grant a monetary award as an adjustment of the equities and rights of the parties concerning marital property, whether or not alimony is awarded. The amount of the award and the method of its payment shall be determined after considering each of the following factors:
"(1) The contributions, monetary and nonmonetary, of each party to the well-being of the family;
"(2) The value of all property interests of each spouse;
"(3) The economic circumstances of each spouse at the time the award is to be made;
"(4) The circumstances and facts which contributed to the estrangement of the parties;
"(5) The duration of the marriage,;
"(6) The age and the physical and mental condition of the parties;
"(7) How and when specific marital property was acquired, including the effort expended by each party in accumulating the marital property;
"(8) Any award or other provision which the court has made under this Subtitle 6A with respect to family use personal property or the family home, and any award of alimony; and
"(9) Such other factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award.
"(c) A monetary award made under this section may be reduced to a judgment to the extent that any part of the award is due and owing.”

Although § 3-6A-05 (b) (9) states that a monetary award is to be "fair and equitable,” the chancellor evidently felt constrained to make an equal division of the parties’ property. We observe that he divided equally each and every item determined to be marital property and we note particularly the following colloquy concerning division of the appellant’s pension:

"The Court: That seems like a hardship, but it is marital property. It bothers me as much as it must bother you.

Mr. Oneglia [counsel for wife]: It doesn’t bother me.

The Court: He can’t walk away with it. He could die tomorrow without getting a quarter and yet she’s got a $70,000 judgment. That bothers me, but I’ve got to abide by the law.

Mr. Blitz: A $170,000 obligation in effect that Mr. Ohm is required to transfer either in money or monies worth $160,000 value?

The Court: He may not be able to recover any of the $134,000, God forbid, but tomorrow the judgment would be against him and yet he may not ever be able to draw the pension.

It’s hard, but that’s apparently the law, at least that’s how I’m looking at it. Otherwise, I wouldn’t deal with it this way. If I could deal with it any other way, I would have.”

We believe that the chancellor improperly limited the discretion which he is to exercise in dividing marital property. The statute does not require that the value of each individual item of marital property be equally divided; indeed, it does not require that the total value of the property and money awarded to the respective spouses be equal. Equal division is a requirement of community property states, not equitable distribution jurisdictions. What is required is that the chancellor reach a fair and equitable award after consideration of each of the factors set forth in § 3-6A-05 (b). See, Ward v. Ward, 48 Md. App. 307, 426 A.2d 443 (1981). It is apparent here that the chancellor failed to consider that the appellee, as well as the appellant, has individual pension benefits available. It appears that the chancellor failed to consider the possibility of awarding the entire value of the pension to the husband and making an offsetting award of other property to the wife, in lieu of awarding the wife one-half the value of the pension and entering a judgment against the husband. Finally, it is clear that the chancellor failed to consider the impact of the alimony award made to the wife, as he is required to do under § 3-6A-05 (b) (8), cf., Md. Ann. Code Art. 16, § 1 (b) (1) (ii) and (iv) (requiring that any monetary award made under § 3-6A-05, and rights to receive retirement benefits, be considered in awarding alimony); if his objective was an equal division of property, that objective was not achieved by awarding the wife one-half the husband’s pension, while at the same time requiring the husband to pay alimony out of the remainder.

We also believe the chancellor erred in valuing the pension. The problem of valuing and distributing pension benefits to be paid in the future is a difficult one and has not proved susceptible to the imposition of rigid rules. Rather, the courts have generally held that a flexible approach is necessary, so as to accommodate the circumstances presented by each individual case. The decisions do set forth considerations for the trial courts to take into account in valuing and dividing pension benefits. For the guidance of the chancellor on remand, we shall briefly review some of the decisions and the principles which they enunciate.

In its excellent opinion, the Court in In Re Marriage of Hunt, 397 N.E.2d at 519, dealt at some length with the problem of valuation:

"It is true that placing a present value on a pension or on a profit sharing interest may be difficult, particularly if, as in this case, they have not matured. However, difficulties in valuation are not an insurmountable barrier to including a pension or profit sharing interest, whether matured, vested or nonvested, as marital property.
"The trial court can in some cases determine, by actuarial evidence, the present value of such an interest at the time of divorce. *** The amount of the pension or profit sharing interest included as marital property would then be the present value of the interest multiplied by a fraction whose numerator is the number of years (or months) of marriage during which benefits were being accumulated, and whose denominator is the total number of years (or months) during which benefits were accumulated prior to divorce. Once the trial court has determined the present value of that part of the pension or profit sharing interest which is marital property, the trial court may award the interest to the employee spouse and give the non-employee spouse other marital property to offset her marital share in the interest. ***
"In those instances where it is difficult to place a present value on the pension or profit sharing interest due to uncertainties regarding vesting or maturation, or when the present value can be ascertained but the type, or lack, of other marital property makes it impractical or impossible to award sufficient offsetting marital property to the non-employee spouse, then the trial court in its discretion may award each spouse an appropriate percentage of the pension to be paid 'if, as and when’ the pension becomes payable. *** The marital interest in each payment will be a fraction of that payment, the numerator of the fraction being the number of years (or months) of marriage during which benefits were being accumulated, the denominator being the total number of years (or months) during which benefits were accumulated prior to when paid. The trial court, when using this method of allocation, will retain jurisdiction and award the non-employee spouse some percentage of the marital interest in each payment. *** Placing a present value on a nonvested pension or profit sharing interest requires a court to take into account the possibility that death or termination of employment may destroy the interest. *** Thus, this second method of allocating the interest seems particularly appropriate if the interest has not vested, because it 'divides *** the risk that the pension will fail to vest.’ ” (Citations omitted.)

See also, In Re Marriage of Brown, supra.

In Wilder v. Wilder, 534 P.2d 1355, 1358 (Wash. 1975), the Court, in considering the valuation of benefits, stated:

"We think the proper rule is that the court must consider all the circumstances and evaluate the probability that the party who has a contingent right to a pension will eventually enjoy that pension. The length of time remaining before eligibility matures is a factor for the court to consider; also, the other options open to the person and the likelihood that he may, in the exercise of a reasonable judgment, decide to pursue some other career and abandon his pension rights. Also, the court must take account of the community’s investment in the pension system and determine whether, in the event the party entitled to the pension decides to abandon his rights, the community’s contribution should nevertheless be considered an asset under his control and be balanced against other assets awarded to the other party. There can ' be no set rule for determining every case and as in all other cases of property distribution, the trial court must exercise a wise and sound discretion.”

In Rogers and Rogers, 609 P.2d at 882-83, the Court, after examining a number of the cases, suggested the following guidelines for distribution:

"(1) The distribution should generally be based on the contributions made during the marriage. (2) The courts should continue to strive to disentangle the parties as much as possible by determining, where equitable, a sum certain to be paid rather than a percentage based upon expected future contingencies. (3) In determining whether a lump sum award is appropriate, courts should consider the burden it would place on the paying spouse in view of required child support, spousal support, and other property distribution. (4) Where courts determine that the parties will share in the benefits on a proportional basis, the parties should also share the risks of future contingencies, e.g., death of the employe spouse or delayed retirement of the employe spouse, and payment should be to the receiving spouse as the employe spouse receives the retirement pay. (5) Courts should consider, where appropriate, an award of a portion of retirement benefits where other property awarded is not adequate to make an equitable distribution.”

Also instructive is Copeland v. Copeland, 575 P.2d at 103-04:

"Some courts have felt that it is better to leave the risk apportioned between the two parties and to award either a specified amount or a certain percentage of the benefit to the nonretiring spouse if, when and as the benefits are paid. The administration of this type of award would be more complex but the court in In re Marriage of Brown, supra, held that an administrative burden was not sufficient justification for refusing to divide the benefits in this manner, because it takes into account all of the contingencies. The administration of an ongoing payment type of award should not be an onerous burden though, because alimony and child support payments have been adequately handled in this manner. Such an 'if, when and as received’ payment award has been approved in the cases in various jurisdictions. See, In re Marriage of Brown, supra; Cearley v. Cearley, supra; Miser v. Miser, 475 S.W.2d 597 (Tex. Civ. App. 1971); DeRevere v. DeRevere, supra; Pinkowski v. Pinkowski, 67 Wis. 2d 176, 226 N.W.2d 518 (1975).
"It would appear that a flexible approach to this problem is needed. The trial court should make a determination of the present value of the unmatured pension benefits with a division of assets which includes this amount, or divide the pension on a 'pay as it comes in’ system. This way, if the community has sufficient assets to cover the value of the pension, an immediate division would make a final disposition; but, if the pension is the only valuable asset of the community and the employee spouse could not afford to deliver either goods or property worth the other spouse’s interest, then the trial court may award the non-employee spouse his/her portion as the benefits are paid.”

On remand, the chancellor, in valuing the appellant’s pension, and in making a monetary award, should give some consideration to the guidelines set forth above. In some cases, actuarial evidence, if based on all the appropriate factors, will be sufficient to permit valuation; however the courts must be alert to unique circumstances in a particular case which may render an individual pension more or less valuable than the norm. As we have indicated above, under the alimony and marital property statutes, an award of alimony and a monetary award concerning marital property must be made in conjunction with one another. Accordingly, we shall vacate both awards in the instant case and remand for reconsideration in light of this opinion.

Ill Other Contentions

(1) The chancellor refused to permit the appellant to cross-examine the appellee as to her adultery. Although it is within the discretion of the chancellor to require such testimony be brought out by calling the appellee as an adverse witness, it is clear that under the statute the wife’s adultery is a factor to be considered not only in making an award of alimony but also in making a monetary award.

(2) If the court did err in declaring two $1,000 life insurance policies to be marital property when in fact they belonged to the sons of the parties, that error can be corrected on remand.

(3) Appellant also alleges that he has been denied the equal protection of the laws and due process. Inasmuch as the constitutional questions were not argued below, we will not consider them here. Md. Rule 1085.

Decree affirmed in part and reversed in part.

Case remanded for further proceedings consistent with this opinion.

Costs to be equally divided.

      . A "vested” pension is one "which is not subject to a condition of forfeiture if the employment relationship terminates before retirement”; a "matured” pension is one under which there is an "unconditional right to immediate payment.” In Re Marriage of Brown, 15 Cal. 3d 838, 126 Cal. Rptr. 633, 635 (1976). A "non-contributory” pension "is one which is funded solely by the employer,” i.e., without deductions from the employee’s wages. In Re Marriage of Hunt, 397 N.E.2d 511, 515 (Ill. App. 1979).

      . The states of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington are community property states and upon dissolution divide equally between the parties the property deemed community property; Maryland, along with another thirty-odd states, is a common law state which applies principles of equitable distribution. Technically, the Maryland statute does not provide for a division of property, only an equitable monetary award which is designed to accomplish an equitable division in an indirect manner. This does not make the out of state cases any less persuasive because the concepts in all the jurisdictions are similar.