Johnson v. Johnson

• Decision Date: 17 December 1980
• Docket Number: No. 2,CA-CIV,2
• Parties: Julia Barrett JOHNSON, Petitioner/Appellant, v. Emery Peter JOHNSON, Respondent/Appellee. 3613.
• Court: Arizona Court of Appeals

Page 714

638 P.2d 714

131 Ariz. 47

Julia Barrett JOHNSON, Petitioner/Appellant, v. Emery Peter JOHNSON, Respondent/Appellee.

No. 2 CA-CIV 3613.

Court of Appeals of Arizona, Division 2.

Dec. 17, 1980.

Rehearing Denied Jan. 28, 1981.

Review Granted March 3, 1981.

Slutes, Browning, Zlaket & Sakrison, P. C. by James M. Sakrison, Tucson, for petitioner/appellant.

J. Emery Barker, Tucson, for respondent/appellee.

OPINION

HOWARD, Judge.

This appeal seeks review of the trial court's judgment in a dissolution proceeding. The appellant, Julia Barrett Johnson, contends that the court erred in four instances: (1) In determining the present value of the pension and profit-sharing funds; (2) in determining that certain loans from or secured by appellee's separate property were community debts; (3) in excluding appellee's bonuses as part of his salary for the purpose of establishing a spousal maintenance award and (4) in improperly valuing the community residence.

The facts are as follows. Appellee, Emery Peter Johnson, married appellant, Julia Johnson, in 1964. They were married fourteen years and had three children. During their marriage, the couple acquired a substantial amount of community assets, including both real and personal property. They also incurred many debts in connection with the acquisition of and improvements to their residence as well as payments on their interest in a real property trust and a limited partnership.

Through appellee's employment with a large firm in Tucson, he has acquired a vested right to funds from both a profit-sharing plan and a pension plan. There was at the time of trial $17,047.14 in the profit-sharing fund and $55,380.77 in the pension trust for a total of $72,427.91. Both plans expressly state that distribution of the fund lies within the discretion of an administrative committee. The committee has complete control to determine distribution and thus, while the right to the fund is fully vested, it has not matured into an unconditional right to immediate payment.

Appellant attacks the method employed by the trial court to determine the "actuarial current value" of the fund as required by this court in Tester v. Tester, 123 Ariz. 41, 597 P.2d 194 (App.1979). The court used the following method to determine present value: It multiplied the present amount on deposit in each fund by .2775, a figure obtained from a present value table in the American Jurisprudence Desk Book, based on discounting the funds at 6% interest for 22 years. It then awarded the entire amount of interest on the funds, at this discounted value, to appellee. Appellant contends the court improperly valued the sum resulting in a "double discount" because it failed to take into account the interest which will accrue on the present funds on deposit in determining the total value of the sum to be discounted. We agree.

The issue of which method should be used to determine present value of a community property fund, such as we have here, which will continue to earn interest after the dissolution of the marriage, has never been addressed by our courts. In Bloomer v. Bloomer, 84 Wis.2d 124, 267 N.W.2d 235 (1978), the Wisconsin Supreme Court included the interest to be earned on the employee pension plan until the time of distribution in its determination of the value of the future sum to be discounted to present value. The facts in Bloomer are analogous to those here. ¹ At the time of trial, the husband's contribution totaled $8,047.61. The trial court discounted their value to $2,600 assuming that he would retire in 23 years. In reversing the trial court, the Wisconsin court reasoned as follows:

"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 is that the $8,047.61 will continue to accrue interest over the next twenty-three years. Assuming a 5 percent rate of growth, the value of the fund will approximately triple over that period. If we were to take the approximately tripled figure, twenty-three years in the future, and then discount that figure at 5 percent, we would end up where we started, with a present value of approximately $8,047.61. To take, however, the uninflated current balance and discount that sum as if it were a future sum, as was done in Parsons (v. Parsons, 68 Wis.2d 744, 229 N.W.2d 629) and in the trial court here, is to 'double discount' the sum to a figure well below present value. The problem presented by this type of marital asset is that it cannot be reached until some time in the future. Therefore, before it is discounted from its future value to present value, a court must first calculate what it will be worth at a designated time in the future. Were we to adopt Herbert's theory of proper valuation, the effect would be that all future growth of this marital asset would be credited to him, and none to Janet." (Emphasis in original) 267 N.W.2d at 240.

We agree with the Bloomer rationale. In determining the "actuarial current value" of a fund which presently exists but which is not immediately payable, the first step is to determine the amount of the fund on the date of distribution. That was not done here. Appellant had a vested right to one-half of the fund, $36,213.95. She cannot have this amount until 22 years from now. In the meantime, her share is drawing interest at the rate of 6% and in 22 years will be worth more than $36,213.95. Since the one-half is hers, she is entitled to one-half of the interest. Since 6% was used to decrease the fund, 6% should be used to increase the fund to reflect its future value, and the result is a "wash." The current value of the fund at the time of trial was $72,427.91 and not the $20,099.00 found by the trial court.

Appellant's second claim concerns the court's determination that seven obligations were loans to the community which resulted in a reduction of her community property award. She contends that the obligations were separate property loans against appellee's separate property which constituted a gift to the community. We disagree.

The facts reveal that appellee borrowed money for community property on seven different occasions....