Farver v. Department of Retirement Systems

• Decision Date: 27 April 1981
• Docket Number: No. 4836-II,4836-II
• Citation: 29 Wn.App. 138,629 P.2d 903
• Parties: Jill A. FARVER, Appellant, v. DEPARTMENT OF RETIREMENT SYSTEMS of the State of Washington, and John A. Berling and Betty A. Berling, his wife, Respondents.
• Court: Washington Court of Appeals

Page 138

29 Wn.App. 138

629 P.2d 903

Jill A. FARVER, Appellant, v. DEPARTMENT OF RETIREMENT SYSTEMS of the State of Washington and John A. Berling and Betty A. Berling, his wife, Respondents.

No. 4836-II.

Court of Appeals of Washington, Division 2.

April 27, 1981.

Franklin K. Fogg, Tacoma, for appellant.

Matthew J. Coyle and Timothy Malone, Asst. Attys. Gen., Olympia, Charles M. Granoski, Tacoma, for respondents.

REED, Chief Judge.

Plaintiff Jill Berling Farver appeals from an order granting summary judgment in favor of defendants John and Betty Berling. The principal issue presented on appeal is whether a wife's interest in her husband's state pension ¹ is inheritable. We hold it is and, accordingly, reverse the trial court's order.

Phyllis and John Berling were married in 1944. In 1974 John petitioned for dissolution of the marriage. At that time John had worked for the Washington State Patrol for 22 years, and his pension rights in the State Patrol Retirement System constituted the most valuable marital asset. In the course of dividing the marital property, the court awarded three-fourths of the contingent pension payments to John and one-fourth to Phyllis, with an unchallenged proviso that any additional benefits accruing in the event John decided to work past his earliest permissible retirement date in 1977 would be shared equally. Under the terms of the decree, payments to Phyllis were to begin only after John retired and were to continue only so long as he continued to receive benefits. John married his present wife, Betty, in 1975 and continued to work for the State Patrol until 1979.

In 1978 Phyllis died intestate, survived by two children from her marriage to John. Jill Berling Farver, their married daughter, was appointed administratrix of her mother's estate. Her inventory of the estate included her mother's interest in the State Patrol pension. Probate proceedings were completed in May 1979. As part of the distribution of estate assets, Phyllis's interest in the pension was assigned in equal shares to Farver and her brother, Jim. When John Berling retired in June 1979, however, the Department of Retirement Systems, relying on RCW 43.43.310, began paying the full amount of the pension benefits to him. Berling refused to pay any portion of his pension benefits to his daughter after he received them.

Farver then commenced this action against the Department and the Berlings, seeking a judgment declaring her rights in the pension and ordering the Department to pay her share directly to her. Both Farver and the Berlings moved for summary judgment. The trial court entered an order denying Farver's motion and granting the Berling's motion, thereby necessarily rejecting any claim against the Department, although no judgment was ever entered in favor of the Department.

No Washington appellate decision has addressed the precise issue presented in this case. Washington courts have recognized, however, that a pension constitutes a property right in the nature of deferred compensation, even though benefits are not presently available. Wilder v. Wilder, 85 Wash.2d 364, 534 P.2d 1355 (1975); In re Marriage of Pea, 17 Wash.App. 728, 566 P.2d 212 (1977); DeRevere v. DeRevere, 5 Wash.App. 741, 491 P.2d 249 (1971). As such, it is community property to the extent that benefits are earned during marriage and is subject to equitable distribution in a dissolution proceeding, whether characterized as separate or community property. Wilder v. Wilder, supra; Payne v. Payne, 82 Wash.2d 573, 512 P.2d 736 (1973); RCW 26.09.080; RCW 26.16.010-.030. Thus, Farver argues that general rules governing inheritability of property should apply to a pension that is either community property, thereby owned in part by a wife at her death, or separate property of a former wife, having been distributed to her as part of a property settlement in a dissolution. See RCW 11.04.015. In particular, Farver contends the analogy between life insurance proceeds and pension benefits is so close, see DeRevere, 5 Wash.App. at 745-46, 491 P.2d 249, that the same rules of inheritability should govern both. ²

In response, the Berlings contend that a state pension is a unique form of property that should not be subject to general rules of inheritability. Relying principally on Waite v. Waite, 6 Cal.3d 461, 492 P.2d 13, 99 Cal.Rptr. 325 (1972), they argue that permitting inheritance of a wife's interest in her husband's pension would be inconsistent with the legislature's intent in establishing state retirement systems and that the wife's interest therefore must terminate at her death. We are unpersuaded, however, by the reasoning underlying the Waite decision.

In Waite, the husband had participated during marriage in the state judges' retirement plan. As part of a comprehensive dissolution property settlement, the trial court awarded to the wife or her devisees or heirs the entire community interest in her husband's retirement benefits. On appeal, the California Supreme Court held that although the pension benefits were community property, the trial court erred in awarding the benefits alternatively to the wife's devisees or heirs. The court based its conclusion on what it perceived as the legislative intent behind the California pension statute to provide benefits for employees and defendants, but not to others. After outlining the objectives of public pension programs and explaining the benefits provided under the judges' retirement plan, the court stated:

The state's concern, then, lies in provision for the subsistence of the employee and his spouse, not in the extension of benefits to such persons or organizations the spouse may select as the objects of her bounty. Once the spouse dies, of course, her need for subsistence ends, and the state's interest in her sustenance reaches a coincident completion. When this termination occurs, the state's concern narrows to the sustenance of the retired employee; its pension payments must necessarily be directed to that sole objective.

...

We conclude that the statutory design for judges' pensions negates the spouse's contention that her legatees should inherit pension payments payable for the balance of the judge's life. Whatever community interest the wife may claim, it cannot transcend the legislation upon which the pension itself rests. The legislation grants to the wife, not an inheritable legacy, but a continuing economic protection for her lifetime, a state-secured provision for subsistence.

Waite, 6 Cal.3d at 473-74, 492 P.2d 13, 99 Cal.Rptr. 325. ³ To apply the Waite rule to this case and thus hold that Phyllis Berling's interest in her former husband's pension terminated at her death would require us to conclude that the statutes governing the State Patrol Retirement System, RCW 43.43.120-.320, somehow have restricted the operation of RCW 11.04.015 (governing descent and distribution of property). ⁴ See Reppy, Community and Separate Interests in Pensions and Social Security Benefits After Marriage of Brown and ERISA, 25 UCLA L.Rev. 417, 470-74 (1978). Neither the language of the statutes nor the legislative history, however, contains a clear expression of an intent to partially amend or repeal RCW 11.04.015. Nevertheless, the Berlings argue that, read in concert, these statutes reveal that the legislature in establishing the retirement plan had no intention to permit retirement benefits to become part of the estate of a nonmember spouse and thus potentially transferable to a person who is not a dependent of the retirement system member. This argument essentially calls upon us to declare that the retirement system statutes have partially repealed or amended the intestate succession statute by implication. We cannot find such a partial repeal or amendment by implication here, however, because both statutory schemes, together with Washington case law making state pensions divisible as property in a dissolution proceeding, can be reconciled and given effect by holding the interest in the pension to be subject to testamentary disposition. See e. g., Stephens v. Stephens, 85 Wash.2d 290, 295, 534 P.2d 571 (1975); Misterek v. Washington Mineral Prods. Inc., 85 Wash.2d 166, 168, 531 P.2d 805 (1975); Reppy, supra at 472-74.

Furthermore, as a matter of property law and simple logic, we can see no significant difference between pension benefits and the salary paid to a married state employee. No one would seriously dispute a wife's power to bequeath half of any accrued but unpaid salary when she predeceases her employee husband. Similarly, a wife clearly would have testamentary power over half of a private annuity purchased by her husband with his community earnings and payable over his life. See Reppy, supra at 471. Absent a clear expression of legislative intent to the contrary, the same rule should apply to a state pension.

As a final argument, the Berlings suggest that RCW 41.04.320, ⁵ enacted in 1979, supplies the requisite expression of legislative intent that Phyllis Berling's interest should terminate at her death. They contend that this statute merely articulates the previously implied legislative policy to make retirement benefits available only to former state employees and their dependents. Even if we were to interpret RCW 41.04.320 to terminate the wife's interest at her death, however, RCW 41.04.330 ⁶ clearly provides that the 1979 amendatory act containing RCW 41.04.320 shall apply only to dissolution decrees entered after May 25, 1979. The decree in the instant case was entered in 1974, well before the effective date of the act.

Moreover, we are unconvinced that RCW 41.04.320 was intended to address the nature of the interest owned by a nonmember spouse. Although the legislative history is not entirely clear, the 1979 amendatory act, introduced as Senate Bill 2378, apparently contained only 10 sections originally and was designed to permit courts to order the ...