Bloomer v. Bloomer

• Decision Date: 30 June 1978
• Docket Number: No. 75-760,75-760
• Citation: 267 N.W.2d 235,84 Wis.2d 124
• Parties: Janet Lee BLOOMER, Plaintiff-Appellant, v. Herbert Dale BLOOMER, Defendant-Respondent.
• Court: Wisconsin Supreme Court

Page 235

267 N.W.2d 235

84 Wis.2d 124

Janet Lee BLOOMER, Plaintiff-Appellant, v. Herbert Dale BLOOMER, Defendant-Respondent.

No. 75-760.

Supreme Court of Wisconsin.

Argued Feb. 7, 1978.

Decided June 30, 1978.

Sperry & Sperry, Jefferson, on brief, and Richard D. Sperry, Jefferson, argued, for plaintiff-appellant.

Bruce W. Freeberg, Jefferson, for defendant-respondent.

HEFFERNAN, Justice.

This case arises out of the divorce of the parties and relates to the proper valuation, for the purpose of the division of the marital estate, of Herbert Bloomer's interest in his Wisconsin employee's pension plan.

Herbert and Janet Bloomer were married on April 4, 1953, and at the time of the trial were ages forty-two and thirty-nine, respectively. Trial was held to the court on September 22, 1975. The trial court found that Herbert's retirement fund account with the Wisconsin Department of Employee Trust Funds was an asset of the marital estate subject to consideration in dividing the marital property.

Herbert is a municipal employee, and he has participated in the Wisconsin Retirement Fund continuously from December 1, 1954, through the date of trial. During a part of that time, he made direct employee contributions to the Fund. At the end of the calendar quarter nearest to the commencement of this action, his total contribution to the fund, plus interest, was $8,047.61, exclusive of any employer contributions. This sum would be available immediately to Herbert upon termination of employment but is not available to him as long as he continues his employment. ¹

In the event Herbert terminates his employment before age fifty-five, he could elect the immediate receipt of the balance of employee contributions plus interest. Alternatively, upon termination of employment before age fifty-five, he could elect to leave this amount invested in the Fund and receive a retirement annuity commencing, at the earliest, at age fifty-five.

If, on the other hand, Herbert continues as an employee and retires at age fifty-five or older, the Fund provides for the payment of a retirement annuity.

The trial court found the present value of Herbert's account to be $2,600, despite the current balance of $8,047.61. The trial court expressed some doubt as to the correctness of the method of computation, but it concluded that this result was required under this court's decision in Parsons v. Parsons, 68 Wis.2d 744, 229 N.W.2d 629 (1975). Judgment was entered on November 10, 1975, and it is from the part of the judgment valuing Herbert's interest in the pension fund that Janet appeals.

Janet also petitioned the trial court for an allowance of attorneys' fees and costs on appeal. The trial court denied this petition in an order entered on May 7, 1976. Janet also appeals from this order denying her petition for attorneys' fees and costs. ²

It is Janet's contention on this appeal that the method of valuation used in Parsons, and in the trial court decision in this case, is improper in that it, in effect, results in "double discounting" of the value of the interest in the fund. We agree and therefore reverse.

In many divorce situations, the pension rights of one or both employee spouses are the most significant marital assets owned by the couple. Dickinson, Role of Retirement Plans, 10 Real Prop., Prob.&Tr.J. 644 (1975). The climate for recognition of the rights of the non-employee spouse in the pension plan of the employee spouse seems to be more salubrious in the community-property states. I. Baxter, Marital Property, sec. 11.2 (Cum.Supp.1977). Wisconsin, however, is in the forefront of common-law-property states recognizing the rights of the non-employee spouse. Schafer v. Schafer, 3 Wis.2d 166, 87 N.W.2d 803 (1958), determined that pension rights earned during marriage are properly included as a marital asset in dividing the property of the spouses.

Although it is settled that pension rights must be considered, trial courts are presented with a complex task in properly valuing the rights in those plans. Herbert's rights in the pension plan can properly be described as vested, but non-matured. His interest is vested, in the sense that were he to retire immediately, he would not lose all rights under the plan. ³ His interest is non-matured, in that his right to receive payments in the form of a pension based in part on employee contributions will not accrue, at the earliest, until he reaches age fifty-five. See generally, In re Marriage of Bruegl, 47 Cal.App.3d 201, 120 Cal.Rptr. 597 (1975), overruled on other grounds, In re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561 (1976).

The problem of valuing prospective benefits under a pension plan is frequently exacerbated by the fact that unmatured rights may be terminated by death, discharge, or other contingencies. See generally, I. Baxter, supra, sec. 11. 2 (Cum.Supp.1977); Hughes, Community-Property Aspects of Profit-Sharing and Pension Plans in Texas Recent Developments and Proposed Guidelines for the Future, 44 Tex.L.Rev. 860, 879 (1966). Valuation is further complicated by the dual nature of most pension plans. If the employee continues to work until retirement, the payments to the employee, to the extent derived from employer's contributions, are in the nature of deferred compensation. If, however, the employee terminates work before retirement age, the usual plan provides at least for the return of employee contributions. Leighton v. Leighton, 81 Wis.2d 620, 261 N.W.2d 457 (1978).

None of the Wisconsin cases have explicitly faced the question presented on this appeal. A variety of methods of valuation have been approved in the individual cases, without any analysis of the proper theory for valuing the asset. In Schafer v. Schafer, supra, this court noted that the employee contributions (apparently exclusive of interest) amounted to $4,065.08. The husband was eligible to retire then and would have received $2,880 per year as a pension. We said that this pension, for the husband's life expectancy, discounted at 5 percent, would have a present value of $29,000. It was said that this figure might be too high, since the husband had no intention of retiring at that time. We said, however, that the intrinsic value of the pension rights was probably as great as the value of the homestead (which was valued at $17,800). After remand, this same case was again appealed to this court in Schafer v. Schafer, 9 Wis.2d 502, 101 N.W.2d 780 (1960) (Schafer II ). In Schafer II, we stated that the husband's contributions plus interest amounted to $6,234.04. He could have retired at the time of trial and received a pension of $237 per month. If he retired at age sixty, he would receive $281 per month. If he were to die immediately, his estate would collect $6,263.04. The evidence was that a private, single-premium annuity equivalent to the husband's rights would cost $49,000. The trial court valued the pension at $6,263.04, and we affirmed. This sum equalled the death benefit currently and also closely approximated the total of employee contributions plus interest.

In Schneider v. Schneider, 15 Wis.2d 245, 112 N.W.2d 584 (1961), the husband had $5,000 in the fund, which he would receive if he were to quit, retire, or be fired. Because the husband apparently had no intent to retire at the time, the money would not be immediately available. This court indicated that the proper value should probably be a little less than $5,000, since the funds were not currently available.

In Kronforst v. Kronforst, 21 Wis.2d 54, 123 N.W.2d 528 (1963), the husband had $9,749 in the fund, which he was entitled to receive as a lump sum or in annuity form on retirement. The valuation at $9,749 was upheld, and this court analogized the interest in the fund to the interest in a savings account. However, the husband was disabled, and it appeared that he would not return to work, so that for practical purposes the husband was immediately entitled to receive this sum. ⁴

Parsons v. Parsons, supra, was the case relied on by the trial court in reducing the value of the account to the "present value." In Parsons, the husband was seventeen years from retirement, and he had $39,495 in his retirement account. The husband argued that this sum had to be discounted to present value, since it was not available until retirement. We have reexamined the briefs in Parsons, and they disclose that the wife's argument in that case was simply that full face value should be used, rather than "so called present values." With the arguments presented in this posture, we held that present values must be used in dividing the marital assets, and we now reaffirm that much of the holding in Parsons. Since the wife in Parsons did not really dispute the husband's methodology for calculating present value, we did not question the basic methodology utilized in discounting the value of the account for seventeen years at 5 percent, yielding a value of $17,246.72. In this case, Janet has clearly defined the issue which was not posed in the Parsons case not whether present values should be used but how present value should be calculated.

Janet argues that were the interest in the fund to be determined with reference to the current balance in the account, that balance should not be discounted, because it already equals (or at least approximates) the present value. This case involves a marital asset consisting of $8,047.61 at the time of trial, which will not be available until retirement, since Herbert is not to be forced to retire early, under the Pinkowski rule. Assume, for the sake of illustration, that Herbert retires at age sixty-five, twenty-three years after the trial in this case. If the value of Herbert's interest in the fund would be $8,047.61 when distributed in twenty-three years, then the trial court would undoubtedly be right in discounting the $8,047.61 for twenty-three years at 5 percent. The error in this method...