Farver v. Department of Retirement Systems of State of Wash.

• Decision Date: 13 May 1982
• Docket Number: No. 47842-2,47842-2
• Citation: 97 Wn.2d 344,644 P.2d 1149
• Court: Washington Supreme Court
• Parties: Jill A. FARVER, Respondent v. DEPARTMENT OF RETIREMENT SYSTEMS OF the STATE OF WASHINGTON, and John A. Berling and Betty A. Berling, husband & wife, Petitioners.

Page 344

97 Wn.2d 344

644 P.2d 1149

Jill A. FARVER, Respondent v. DEPARTMENT OF RETIREMENT SYSTEMS OF the STATE OF WASHINGTON and John A. Berling and Betty A. Berling, husband & wife, Petitioners.

No. 47842-2.

Supreme Court of Washington, En Banc.

May 13, 1982.

Betzendorfer, Deutscher & Granoski, Charles M. Granoski, Jr., Tacoma, for petitioners.

Franklin K. Fogg, Tacoma, for respondent.

STAFFORD, Justice.

Phyllis and John Berling (petitioner) were married in 1944. In 1974 John petitioned for dissolution. At the time of trial, John had worked for the Washington State Patrol for 22 years and his contingent pension rights in the Washington State Patrol's retirement system constituted the most valuable marital asset.

The trial court, in the process of allocating the marital property, divided the retirement rights, giving three-fourths of the income from the contingent pension to John and one-fourth to Phyllis, with the 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 as long as he continued to receive benefits. John continued to work for the State Patrol and married his present wife Betty (petitioner) in 1975.

On May 19, 1978, Phyllis Berling died, leaving no will. She was survived by their two children. Their daughter, respondent Jill Berling Farver, was appointed administratrix. Farver's inventory of the estate included her mother's interest in the retirement benefits. Probate of the estate was completed in May 1979. As part of the distribution, the decedent's interest in the retirement benefits were assigned in equal shares to Farver and her brother.

John Berling retired from the State Patrol in June of 1979, with retirement benefits of $1,340.59 per month. Beginning in July 1979, the Department began paying the full amount of the pension to John. Mrs. Farver commenced this action against the Department and John and Betty Berling praying for a judgment declaring her rights in the pension fund and requiring the Department to pay her share directly to her. Both Farver and the Berlings moved for summary judgment. The trial court denied Farver's motion and entered judgment for the Berlings, thereby necessarily rejecting any claim against the Department. No judgment was entered in the Department's favor, however.

Division Two of the Court of Appeals reversed the summary judgment, holding Phyllis Berling's interest in her former husband's pension was inheritable. The court also held, however, that the dissolution decree did not require the Department to pay the decedent's heirs directly. Farver v. Department of Retirement Sys., 29 Wash.App. 138, 629 P.2d 903 (1981).

We affirm the decision of the Court of Appeals, although under a different rationale.

I

Pension and other retirement plans are unique property rights. They are in the nature of deferred compensation. As such they are not mere expectancies but are vested rights possessed by employees. Wilder v. Wilder, 85 Wash.2d 364, 534 P.2d 1355 (1975); Payne v. Payne, 82 Wash.2d 573, 512 P.2d 736 (1973) ¹; DeRevere v. DeRevere, 5 Wash.App. 741, 491 P.2d 249 (1971); W. de Funiak & M. Vaughn, Principles of Community Property § 68, at 149 (2d ed. 1971).

It is a fundamental principle of community property law that since both spouses participate in the community, both are entitled to share in its reward. See Cross, The Community Property Law in Washington, 49 Wash.L.Rev. 733, 764 (1974); see Reppy, Community and Separate Interests in Pensions and Social Security Benefits After Marriage of Brown and ERISA," 25 U.C.L.A. L.Rev. 417 (1978). The non-employee (non-member) spouse, then, has a property interest in the employee or participant spouse's retirement plan. See H. Cross, supra; Wilder, supra; Payne, supra; DeRevere, supra.

Consistent with this principle the trial judge, in the dissolution action between Phyllis and John Berling, awarded a specified percentage of the income from John's retirement benefits to Phyllis for as long as he received such benefits. The dissolution decree stated:

(P)etitioner (John Berling) alone shall have the right to determine, within the limits of the plan, when and in what form payments should be made from the plan-and, petitioner alone shall have the right to decide when he shall retire, and consequently start retirement benefit payments; ...

... the payments to respondent (Phyllis Berling), whether periodic, lump sum or otherwise, under the retirement plan benefits need not be paid and are not due until petitioner retires. If petitioner does not retire during March, 1977, at which time his retirement vests, and continues in the employment of the Washington State Patrol and consequently acquires additional retirement benefits, those additional retirement benefits shall be divided equally between the parties; it is further

ORDERED, ADJUDGED AND DECREED, that petitioner's obligation to make payment from his retirement income shall continue only so long as he receive such benefits; ...

(Italics ours.)

The decree was never challenged. By its terms Mr. Berling was required to pay a specified percentage of his retirement income to Phyllis. The payments from that source of income were to continue only as long as income from the pension benefits were received by Mr. Berling. It is clear that Phyllis Berling's rights were only against Mr. Berling, not against the Department. The property to which she was entitled is the stated interest in whatever income Mr. Berling actually received from retirement benefits. This is no more than the usual property division routinely made in dissolution decrees. See RCW 26.09. Thus, pursuant to the decree, the distributed property became Phyllis Berling's separate property. See Barkley v. American Sav. Bank & Trust Co., 61 Wash. 415, 112 P. 495 (1911); Washington State Bar Ass'n, Community Property Desk Book § 37.29 (1977). Her property right to the judicially specified percentage of John's income from retirement benefits was subject to the State's statutes governing the descent and distribution of property. RCW 11.04.015. ²

Petitioners, John and Betty Berling, contend such a ruling would be contrary to the State Patrol Retirement System Statute (RCW 43.43.120-.320). They assert the absence of a specific statement of statutory intent to permit retirement benefits to be given to the estate of a deceased non-employee spouse indicates a legislative intent to restrict the operation of RCW 11.04.015. In support, petitioners cite a recent decision of the California Supreme Court. It held that a trial court may not award benefits (pursuant to a comprehensive dissolution property settlement) from a State judge's retirement plan to the former wife's devisees or heirs. Waite v. Waite, 6 Cal.3d 461, 492 P.2d 13, 99 Cal.Rptr. 325 (1972). See also In re Marriage of Brown, 15 Cal.3d 838, 544 P.2d 561, 126 Cal.Rptr. 633 (1976); Benson v. Los Angeles, 60 Cal.2d 355, 384 P.2d 649, 33 Cal.Rptr. 257 (1963). In Waite, the California court found a legislative intent that the non-employee former spouse's interest in the pension would terminate upon the death of either spouse. Under this "terminable interest rule" ³, then, a non-employee's community interest in the employee's retirement plan would end upon the non-employee's death thereby cutting off the non-employee's testamentary power.

Petitioners' argument is without merit. First, unlike Waite, we are not faced with a challenge to a dissolution settlement awarding benefits from a husband's retirement plan to the former wife and ultimately to her devisees or heirs. Rather, the issue is whether Phyllis Berling's separate property interest in the income from John Berling's pension may devolve to Jill Farver and her brother under the laws of intestate succession. Consequently, Waite is inapposite.

Moreover, the Waite court looked to the statutory design underlying the California pension legislation for support:

(T)he 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 474, 492 P.2d 13, 99 Cal.Rptr. 325.

One commentator has noted the absurdity of this argument:

It is senseless to say, as did the Waite court, that in fashioning a pension scheme the legislature had no intention of conferring benefits on the heirs or legatees of a participant's spouse. Undoubtedly there is the same absence of intent when it comes to the salary paid to a married state employee, yet if some savings from that salary are on hand when (wife) predeceases (husband) no one would dispute her...