Koelsch v. Koelsch

• Decision Date: 28 January 1986
• Docket Number: Nos. 17483-P,17868-PR,s. 17483-P
• Citation: 713 P.2d 1234,148 Ariz. 176
• Parties: , 54 USLW 2467 In re the Marriage of E. David KOELSCH, Petitioner-Appellee, v. Elizabeth R. KOELSCH, Respondent-Appellant. Ann Angela HAYNES, Petitioner, Appellee, Cross-Appellant, v. David Lee HAYNES, Respondent, Appellant, Cross-Appellee. Ann Angela HAYNES, Petitioner, Appellee, Cross-Appellant, v. PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM and the Fund Manager; Phoenix Police Pension Board, Appellants, Cross-Appellee.
• Court: Arizona Supreme Court

Page 1234

713 P.2d 1234

148 Ariz. 176, 54 USLW 2467

In re the Marriage of E. David KOELSCH, Petitioner-Appellee, v. Elizabeth R. KOELSCH, Respondent-Appellant.

Ann Angela HAYNES, Petitioner, Appellee, Cross-Appellant, v. David Lee HAYNES, Respondent, Appellant, Cross-Appellee.

Ann Angela HAYNES, Petitioner, Appellee, Cross-Appellant, v. PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM and the Fund Manager; Phoenix Police Pension Board, Appellants, Cross-Appellee.

Nos. 17483-PR, 17868-PR.

Supreme Court of Arizona, In Banc.

Jan. 28, 1986.

Stevens & Leibow by Charles T. Stevens, Phoenix, for petitioner-appellee David Koelsch.

George M. Sterling, Jr., Phoenix, for respondent-appellant Elizabeth Koelsch.

Galasky & Meador by Andrew G. Galasky, Phoenix, for petitioner, appellee, cross-appellant, Ann Haynes.

Lewis and Roca by Jeremy E. Butler, Paul G. Ulrich, Dale A. Danneman, David Lee Titterington, Phoenix, for respondent, appellant, cross-appellee, David Haynes.

Napier & Jones by Robert E. Jones, Jr., Phoenix, for Phoenix Police Pension Bd.

Snell & Wilmer by Thomas J. Kennedy, Bruce K. Pingree, Michael P. Anthony, William R. Hayden, Tibor Nagy, Jr., Phoenix for amicus curiae, and Public Safety Retirement/Fund Manager.

HOLOHAN, Chief Justice.

We have consolidated these cases for decision since they present the same issues concerning the divisibility of Public Safety Personnel Retirement System benefits upon dissolution. In both cases the Arizona Court of Appeals reversed the trial court's resolution and remanded for further proceedings. We granted review in both cases to clarify this specific area of community property law. We have jurisdiction pursuant to A.R.S. § 12-120.24 and Rule 23, Ariz.R.Civ.App.Proc., 17A A.R.S.

The facts in both cases are essentially undisputed. ¹ In Koelsch v. Koelsch, No. 17483-PR, the husband, David, and the wife, Elizabeth, were divorced in 1981 after twenty-five years of marriage. At the time of the dissolution, David was six months from being eligible to receive a pension for his work with the Department of Public Safety. Pursuant to the provisions of the Public Safety Personnel Retirement System, A.R.S. § 38-841 through -855, he was eligible to retire and receive a monthly pension benefit after twenty years of service. A.R.S. §§ 38-844(A), 38-842(19). David was forty-four years old at the time and had recently been promoted to a job he enjoyed and wished to keep. He chose to continue working, thus delaying receipt of the benefits. The statute provides that benefits will increase if the employee continues working after the normal retirement date of twenty years of service. A.R.S. § 38-845(A)(2). If David had retired after twenty years of service, he would have received a monthly benefit of $867.01. The statute restricts death benefits to current spouses and children. A.R.S. § 38-846.

The trial court applied the so-called Van Loan formula to determine Elizabeth's community property share of the pension benefit. The dissolution decree provided in part:

With respect to the Public Safety Retirement Fund said property is the community property of the parties and there is hereby set aside to the respondent as her sole and separate property, a sum equal to one-half of the amount which is determined after calculating the fraction by which 234 [the number of months David and Elizabeth were married while David was a member of the System] is the numerator and the total months of enrollment is the denominator. Said sum shall be paid to the respondent at the same time and in the same manner as it is paid to [p]etitioner.

Elizabeth argued before the court of appeals that when community property retirement benefits are vested and matured, ² it is inequitable to place in the employee spouse the sole discretion when the benefits will be paid. She argued that her share of the property would be diminished if David were to work for another ten years and possibly defeated if he were to die before he retired. She sought an order requiring David to pay her a monthly amount equal to the amount she would receive if he would have retired after twenty years. David argued that requiring him to pay Elizabeth $422.67 per month would force him to retire and find another job.

The court of appeals, in an effort to serve the interests of both parties, suggested the following compromise [W]e believe that the resolution of the competing interests involved requires that the percentage of the spouse whose interest is not covered by the plan be fixed as of the date that the benefits would mature, but that enjoyment of those benefits be postponed until retirement of the spouse who is covered by the plan actually occurs. In such a case, in consideration of the one spouse foregoing the present enjoyment of the benefits, he or she will share in any increase in benefits that continued employment will produce, including increase in pension benefits and salary. The covered spouse who now has complete control of the time when benefits will be received may continue to work and reap the rewards thereof, but does so with the knowledge that the ex-spouse's interest in retirement benefits is fixed and that he or she will share in what the continued employment will produce. [footnotes deleted]

Koelsch, 148 Ariz. at 191, 713 P2d at 1249.

In his petition for review, David argues that the new formula proposed by the court of appeals does not fairly treat separate earning contributions to the plan and that the formula used by the trial court should be reinstated. In her cross-petition, Elizabeth renews her argument that the unilateral control of the pension benefits by the employee is unfair. We granted both the petition and the cross petition for review.

The factual setting in Haynes v. Haynes, No. 17868-PR, is very similar. The employee husband, David, and his wife, Ann, were divorced after twenty-five years of marriage. David had worked for the Phoenix police force for over twenty years and was eligible to retire before the date of dissolution. As of January 1, 1981, the retirement benefit, if taken, would have been $1,327.00 per month for the rest of David's life. David, however, chose to continue working rather than retire. Ann sought affirmative relief in the trial court against the Public Safety Personnel Retirement System and its Fund Manager and the Police Pension Board (retirement agencies) in connection with any retirement benefits payable. They were thus made parties to the action. The trial court held that the pension benefits were divisible community property and applied the Van Loan formula to determine Ann's share. It also ruled that at such time as benefits were payable under the plan, the Retirement System was to pay Ann's interest directly to her.

On appeal, the retirement agencies and David Haynes argued that retirement benefits are not divisible community property. The agencies contended that if the benefits were community property, the trial court erred in not offsetting Ann's share with other community property. The court of appeals ruled that retirement benefits are community property, that the System should pay non-employee spouses their shares directly, and that in this case there was no community property of sufficient value to offset the pension benefit.

David and Ann also challenged the valuation and timing of payment of Ann's share of the benefits, raising essentially the same arguments raised in Koelsch. The court of appeals reversed and remanded the case to the trial court on the authority of its prior holding in Koelsch.

The retirement agencies, David, and Ann all sought review in this court. The agencies argue that benefits payable under the Public Personnel Retirement System are indivisible, and that even if such benefits are divisible, they may only be divided after receipt by the employee spouse. David argues that the retirement benefits are not community property and that the Koelsch formula impermissibly grants an ex-spouse increases in benefits earned after dissolution. Ann argues that it is inequitable to force her to wait until David decides to retire to collect her share of the retirement benefits. We granted all three petitions so that there will be a definitive ruling on these important issues of statewide concern by the highest court of the state. ³

I. DIVISIBILITY OF PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM BENEFITS AS COMMUNITY PROPERTY

Both the retirement agencies and David Haynes argue that retirement benefits payable under the Public Safety Personnel Retirement System are not community property subject to division by the court at dissolution. They assert that the statutory provisions of A.R.S. §§ 38-841 through -855 preclude division of retirement benefits as community property. We granted review on this issue explicitly to affirm the reasoning and holding of the court of appeals in Haynes v. Haynes, 148 Ariz. 191, 195, 713 P.2d 1249, 1253 (1984). First, we agree that "the retirement benefits provided under the system are deferred compensation for services previously rendered and are therefore property acquired during marriage." Id. at 196, 713 P.2d at 1254. ⁴ Second, we agree that while the reasoning of the United States Supreme Court in Hisquierdo v. Hisquierdo, 439 U.S. 572, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979), and McCarty v. McCarty, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589 (1981), "may have some validity when that court is interpreting legislation which is national in scope and affects both community property states and common law states, that reasoning loses its persuasiveness when ascertaining the intent of a legislature in a community property state." Haynes, 148 Ariz. at 196, 713 P.2d at 1254. We also agree that "the inquiry should be ... whether the legislature in clear and unequivocal language intended to deprive the ex-spouse of a community interest in property acquired during marriage," Id. at 196, 713 P.2d at 1254, and find in the statutory scheme...