Carpenter v. Carpenter, 1

• Decision Date: 14 February 1985
• Docket Number: No. 1,CA-CIV,1
• Citation: 150 Ariz. 130,722 P.2d 298
• Parties: Opal N. CARPENTER, Plaintiff-Appellee, v. Sandra CARPENTER, Defendant-Appellant. 7590.
• Court: Arizona Court of Appeals

Page 298

722 P.2d 298

150 Ariz. 130

Opal N. CARPENTER, Plaintiff-Appellee, v. Sandra CARPENTER, Defendant-Appellant.

No. 1 CA-CIV 7590.

Court of Appeals of Arizona Division 1, Department D.

Feb. 14, 1985.

[150 Ariz. 131] Patten, Montague & Arnett by W. Dea Montague, Tempe, for plaintiff-appellee.

Allen, McClennen & Fels, P.C. by Robert H. Allen, Burton E. Dezendorf, Jr., Phoenix, for defendant-appellant.

OPINION

CORCORAN, Judge.

In this appeal by decedent John Carpenter's widow, Sandra Carpenter, we must decide whether the trial court correctly awarded to Opal Carpenter, John Carpenter's former wife, a percentage of an Arizona State Retirement System death benefit and the proceeds of a group term policy on John's life. We affirm in part and reverse in part.

The facts material to this appeal are undisputed. John and appellee Opal Carpenter were married on October 9, 1937. On September 27, 1974 their marriage was dissolved by a decree entered in the superior court. From June, 1951 until his death on May 20, 1981, John was employed by the City of Mesa. As a city employee, John participated in the Retirement System. As of the date of the decree, John's accrued benefits in the System were valued at $16,197.11. On the date of the decree John was also the insured under a group term life insurance policy carried by the City of Mesa and issued by an insurance company. The death benefit under the policy was $20,000.00.

The decree incorporated by reference a property settlement agreement entered into between John and Opal on June 21, 1974. The agreement provided that John would pay Opal $640 per month for spousal maintenance. It further made a specific division of certain of the community assets and liabilities. Concerning the group policy on John's life, the agreement provided as follows:

The Respondent [Opal] remain as Beneficiary on a life insurance Policy carried by the City of Mesa on Petitioner's life in the amount of $20,000, and if for any reason this life insurance should be terminated, Petitioner [John] agrees to have a policy in the same amount made out with Respondent [Opal] as Beneficiary.

Contemporaneously with the entry of the decree, John designated Opal as beneficiary under the group life policy issued by the insurance company.

Neither the property settlement agreement nor the divorce decree mention John's accumulated state retirement fund benefit, and contained no provision that purported to dispose of community assets not specifically described. After his marriage to Opal was dissolved but before he married Sandra, John designated Sandra as beneficiary of his retirement fund death benefit.

Before John's death, the City of Mesa changed insurance carriers, replacing one insurance company with another insurance company, but the coverage remained the same. On February 13, 1981, John married Sandra, and on March 6, 1981 named her beneficiary on the new group life policy. John's marriage to Sandra continued until his death on May 20, 1981.

On June 4, 1981 Opal commenced this action against the Retirement System, the new insurance company, the City of Mesa, and Sandra. The complaint was later dismissed against all defendants other than Sandra. By agreement between the parties, the $20,000 proceeds of John's group life insurance were paid into a trust account subject to the joint control of Opal's and Sandra's counsel. Also by agreement of the parties, $21,921.08 of John's state retirement fund death benefit was paid to Sandra, and the balance of $26,792.43 was deposited in the trust account.

On cross-motions for summary judgment, the trial court entered judgment awarding Opal one half the value of John's state retirement account as of the date of the decree of dissolution, September 27, 1974, and the entire proceeds of the group policy on John's life. The trial court also awarded Opal $6,000 attorney's fees under A.R.S. § 12-341.01. After the trial court denied Sandra's motion for new trial and to alter and amend judgment, Sandra commenced this appeal.

1. The Retirement Fund Death Benefit

Sandra first contends Opal was not entitled to any share of John's state retirement fund, because at the time his marriage to Opal was dissolved, his account in the fund was not community property. Sandra asserts that retirement and pension benefits were first classified as divisible community property in Everson v. Everson, 24 Ariz.App. 239, 537 P.2d 625 (1975). She reasons that because Reed v. Reed, 124 Ariz. 384, 604 P.2d 648 (App.1979) and Guffey v. LaChance, 127 Ariz. 140, 618 P.2d 634 (App.1980), held Everson was not to be applied retroactively, the Everson rule cannot be applied in this case to disturb the finality of a divorce decree that was final before Everson was decided. Accordingly, Sandra argues, Opal had no community interest in John's retirement fund, and the trial court erred in holding that she did.

Opal rejects Sandra's analysis, relying on Yeazell v. Copins, 98 Ariz. 109, 402 P.2d 541 (1965) and Warren v. Warren, 2 Ariz.App. 206, 407 P.2d 395 (1965), for the proposition that Everson established nothing new in Arizona law. We cannot agree with Opal's view of the Arizona cases. Although Yeazell recognized in the context of a contract claim that municipal pension benefits are in the nature of deferred compensation, and Warren noted that a husband's stock purchase plan was community property because it was funded by deductions from his salary, Everson was the first Arizona decision that ordered a division of the value of a pension and profit sharing plan as part of a marital dissolution. We stated in Everson :

Pension and profit sharing plans are a mode of employee compensation for services performed, see LeClert v. LeClert, 80 N.M. 235, 236, 453 P.2d 755, 756 (1969), so that the portion of the plan earned during coverture is property of the community. Therefore, Rosanne is entitled to one-half of the value of these plans which was earned during the marriage. Herring v. Blakeley, 385 S.W.2d 843 (Tex.1965); Miser v. Miser, 475 S.W.2d 597 (Tex.Civ.App.1972). Since the record is unclear as to whether the vested interest of $16,699.62 was entirely earned during marriage, upon remand the trial court is ordered to determine what portion of vested interest was accumulated during marriage and award one-half of that sum to Rosanne.

24 Ariz.App. at 244, 537 P.2d at 629.

Opal also argues that Reed and Guffey do not preclude the retrospective application of Everson in this case. In Reed the trial court awarded the wife one half the military retirement benefits which the husband was receiving at the time of the divorce. Division Two of this court reversed on appeal, stating:

Although Everson v. Everson, 24 Ariz.App. 239, 537 P.2d 624 (1975) held that any portion of a pension plan earned during marriage is community property, it was not until Van Loan v. Van Loan, 116 Ariz. 272, 569 P.2d 214 (1977) that the court squarely held nonvested military benefits attributable to community effort are community property. The final decree in this case was entered prior to Everson and Van Loan.

....

There is a compelling policy interest favoring the finality of property settlements. Peste v. Peste, 1 Wash.App. 19, 459 P.2d 70 (1969). This policy interest would be greatly undermined if the court were to create the potential for reexamination of every military divorce prior to Everson and Van Loan. See Martin v. Martin, 20 Wash.App. 686, 581 P.2d 1085 (1978). We therefore hold that Everson and Van Loan should not be given a retrospective effect.

124 Ariz. at 385, 604 P.2d at 649 (footnotes omitted). We followed Reed in Guffey v. LaChance, holding that a divorce decree filed in 1969 which was silent concerning the division of the husband's non-vested military retirement benefits could not be reopened.

In support of her argument that Everson may be applied retrospectively in this case despite Reed and Guffey, Opal argues in effect that the Reed court's citation to Everson and Van Loan was a shorthand way of referring to the principles of those cases only as they apply to non-vested military retirement benefits. Opal argues:

The Reed case does not say that, as applied to the facts of the Carpenter dissolution, Everson will not be applied. Rather, the Reed case holds that non-vested military benefits attributable to community effort will not be given retrospective effect inasmuch as the federal military benefits were not recognized as community property until the case of Van Loan, supra.

(Emphasis in original). This is wrong. Like Everson, Reed dealt with retirement benefits that were fully vested. ¹ The fact that the retirement benefits in Reed were derived from military employment was not a necessary element of the Reed court's reasoning. The rule that Reed refused to apply retrospectively was thus not that of the Van Loan decision alone, but rather the broader rule for which Everson and Van Loan stand together. We therefore agree with Sandra that Reed held both Van Loan and Everson to be non-retroactive. Accordingly, because the decree of dissolution in the instant case predated the Everson decision, the trial court erred in awarding to Opal a share of John's state retirement fund account. ²

2. The Group Term Life Insurance Proceeds

Sandra also contends the trial court erred in holding that Opal was entitled to recover directly from Sandra the proceeds of John's group life insurance policy. She argues that under our decision in Lock v. Lock, 8 Ariz.App. 138, 444 P.2d 163 (1968), Opal had no right to reach any of the insurance proceeds at all, and was therefore limited to pursuing a contract claim against John's estate.

There is extensive authority for the proposition that where a property settlement agreement incorporated into a divorce decree requires the husband to maintain in effect a specifically identified insurance policy on his life that names his wife or children as beneficiaries, and the...