Green v. Green (In re Green)

• Decision Date: 24 June 2013
• Docket Number: No. S203561.,S203561.
• Citation: 158 Cal.Rptr.3d 247,302 P.3d 562,56 Cal.4th 1130
• Court: California Supreme Court
• Parties: In re the MARRIAGE OF Julie R. GREEN and Timothy P. Green. Julie R. Green, Appellant, v. Timothy P. Green, Respondent.

56 Cal.4th 1130

302 P.3d 562

158 Cal.Rptr.3d 247

In re the MARRIAGE OF Julie R. GREEN and Timothy P. Green.Julie R. Green, Appellant,

v.Timothy P. Green, Respondent.

No. S203561.

Supreme Court of California

June 24, 2013.

See 11 Witkin, Summary of Cal. Law (10th ed. 2005) Community Property, § 58 et seq.

Aimee Feinberg and April Rose Sommer, for Appellant.

Tarkington, O'Neill, Barrack & Chong and Robert A. Roth, San Francisco, for Respondent.

Barbara A. DiFranza; Whiting, Fallon, Ross & Abel and Ann Fallon, Walnut Creek, for the Northern California Chapter of the American Academy of Matrimonial Lawyers as Amicus Curiae on behalf of Respondent.

Barbara A. DiFranza as Amicus Curiae on behalf of Respondent.

R. Ann Fallon, Walnut Creek, and James Crawford, Jr., as Amici Curiae.

CHIN, J.

Retirement benefits attributable to service rendered during a marriage are community property. In this case, the husband, a firefighter, has retirement benefits that are part community property and part his own separate property. During the time of the marriage, he exercised his right to purchase four years' worth of additional retirement credit for his premarital military service. He had to pay to obtain this additional credit, which he elected to do in installments, some of which came from community property. The value of the additional credit substantially exceeds the cost of obtaining it. We must decide how much, if any, of the value of the four additional years of credit is community property.

What matters in determining whether retirement benefits are community or separateproperty is the person's marital status when the services on which the benefits are based were rendered. Here the husband rendered the military service before the marriage. Accordingly, we conclude that, except for the community's contribution to the cost of obtaining the credit, the four years of additional credit are the husband's separate property.

The trial court ordered the husband to pay the wife one-half of the amount the community expended to obtain the credit plus interest. We conclude that the trial court acted within its discretion in using this method to compensate her for her share of the community's interest in the property. We reverse the judgment of the Court of Appeal, which reached a different conclusion.

I. Facts and Procedural History

We draw these facts largely from the Court of Appeal opinion.

Timothy P. Green (husband) served in the United States Air Force for four years, from July 23, 1982, to May 1, 1986. On June 16, 1989, he began working as a firefighter for the Dougherty Regional Fire Authority in Dublin, which participated in the California Public Employees' Retirement System (CalPERS). At that time, husband had the right to buy up to four years of service credit towards his retirement benefits for his military service. Husband married Julie R. Green (wife) in May 1992.

In July 1997, the Dougherty Regional Fire Authority merged with the Alameda County Fire Department, which also participates in CalPERS. Husband continued to work for the Alameda County Fire Department.

On August 1, 2002, husband exercised his right to buy four years of service credit for his military service. He elected to pay for the purchase under an installment plan, paying $92.44 twice each month through payroll deductions for 15 years, scheduled to end in July 2017. Before the parties separated on October 1, 2007, $11,462.56 of community funds had been used toward the purchase of the military service credit.

Wife filed a petition for dissolution of the marriage in March 2008. The parties disputed whether to characterize husband's military service credit as separate or community property. After a trial, the trial court ordered that the military service credit portion of husband's CalPERS pension be awarded to him as his separate property. The court also ordered husband to pay wife $6,699.54, representing half of the installment payments made with community funds toward the military service credit, plus interest at the rate of 6 percent.

Wife appealed, challenging the characterization of the military service credit as husband's separate property. The Court of Appeal reversed the judgment. It concluded that, “because the military service credit was purchased with community funds during the parties' marriage, it was community property” and remanded the case to the trial court to determine the proper allocation of that property.

We granted husband's petition for review.

II. Discussion

We recently summarized the applicable legal principles. In general, all property that a spouse acquires during marriage before separation is community property. (Fam.Code, §§ 760, 770.) Community property may include the right to retirement benefits that the employee spouse accrues as deferred compensation for services rendered. The right to retirement benefits is a property interest. To the extent that such a right derives from service during marriage before separation, it is a community asset. We review de novo the trial court's characterization of service credit as community or separate property. (In re Marriage of Sonne (2010) 48 Cal.4th 118, 124, 105 Cal.Rptr.3d 414, 225 P.3d 546( Sonne ).)

Husband is a member of CalPERS. “Members of CalPERS, once vested, participate in a defined benefit retirement plan, which supplies a monthly retirement allowance under a formula comprising factors such as final compensation, service credit (i.e., the credited years of employment), and a per-service-year multiplier. The retirement allowance consists of an annuity (which is funded by member contributions deducted from the member's paycheck and interest thereon) and a pension (which is funded by employer contributions and which must be sufficient, when added to the annuity, to satisfy the amount specified in the benefit formula).” ( Sonne, supra, 48 Cal.4th at p. 121, 105 Cal.Rptr.3d 414, 225 P.3d 546.)

Government Code section 21024 permits those who work for an agency that elects to be subject to the section to obtain up to four years of additional credit towards their retirement allowance for “public service,” which includes service in the United States military. (See id., subds. (a), (c), (e), (f).) This public service is to be credited “as it would be credited if the member had been in state service during his or her public service.” (Gov.Code, § 21034.) Government Code section 21024 was enacted in 1995 as part of the Public Employees' Retirement Law. (Stats.1995, ch. 379, § 2, pp. 2133–2134; see Gov.Code, § 20000.) But it is derived from an earlier statute containing similar provisions. (Gov.Code, former § 20930.3, added by Stats.1974, ch. 1437, § 1, p. 3142.)

Government Code section 21024, subdivision (b), requires those who elect to receive the additional credit for public service to contribute money in order to receive it. During the marriage, husband elected to obtain the four years of military service credit for which he was eligible and arranged to make the required contribution in installment payments, some of which came from community property. We must decide whether the credit for the military service is community property or husband's separate property.

Two recent cases from this court guide us. In In re Marriage of Lehman (1998) 18 Cal.4th 169, 74 Cal.Rptr.2d 825, 955 P.2d 451( Lehman ), the husband and wife had been married during part, although not all, of the time the husband worked and accumulated retirement benefits. At the time the husband retired, after dissolution of the marriage, his employer offered an “enhanced retirement program” to encourage early retirement. The program included “the crediting of three putative years of service.” ( Lehman, supra, at p. 175, 74 Cal.Rptr.2d 825, 955 P.2d 451.) We described these putative years as “ fictive—they have no independent existence, but are merely a means by which the employer effects the enhancement.” ( Id. at p. 188, 74 Cal.Rptr.2d 825, 955 P.2d 451.) Although the employer offered the enhanced program only after the marriage had dissolved, we found the three years' additional credit to be, in part, community property.

We explained that, “if the right to retirement benefits accrues, in some part, during marriage before separation, it is a community asset and is therefore owned by the community in which the nonemployee spouse as well as the employee spouse owns an interest.” ( Lehman, supra, 18 Cal.4th at p. 179, 74 Cal.Rptr.2d 825, 955 P.2d 451.) “It follows that a nonemployee spouse who owns a community property interest in an employee spouse's retirement benefits owns a community property interest in the latter's retirement benefits as enhanced. That is because, practically by definition, the right to retirement benefits that accrues, at least in part, during marriage before separation underlies any right to an enhancement.” ( Id. at pp. 179–180, 74 Cal.Rptr.2d 825, 955 P.2d 451.) “[W]hat is determinative is the single concrete fact of time. To the extent—and only to the extent—that an employee spouse accrues a right to property during marriage before separation, the property in question is a community asset.” ( Id. at p. 183, 74 Cal.Rptr.2d 825, 955 P.2d 451.)

We cited with approval a New York case that had explained that a pension right owned as community property is, by its nature, subject to modification by future actions of either the employee or the employer. ( Lehman, supra, 18 Cal.4th at pp. 183–184, 74 Cal.Rptr.2d 825, 955 P.2d 451, citing Olivo v. Olivo (1993) 82 N.Y.2d 202, 604 N.Y.S.2d 23, 624 N.E.2d 151. 155.) Accordingly, “ ‘both parties' rights are generally subject to changes in the terms of a retirement plan, as well as to circumstances largely beyond their control, such as the salary level finally achieved by the employee and used to calculate the pension benefit. What the nonemployee spouse possesses, in short, is the right to share in the pension as it is ultimately determined .... [Any]...