Linson v. Linson, 6875

CourtCourt of Appeals of Hawai'i
Citation618 P.2d 748,1 Haw.App. 272
Docket NumberNo. 6875,6875
PartiesColleen Ann LINSON, Plaintiff-Appellee, v. Gerald John LINSON, Defendant-Appellant.
Decision Date21 October 1980

Syllabus by the Court

1. Equity regards substance rather than form.

2. The phrase "estate of the parties" as it is used in HRS § 580-47 means anything of present or prospective value.

3. A spouse's nonvested military retirement benefit constitutes part of the estate of the parties under HRS § 580-47.

4. Federal law does not preclude division of military retirement pay by Hawaii family courts.

Blake T. Okimoto, Honolulu (Max Nakata Garcia, Honolulu, on brief), for defendant-appellant.

Dorothy N. W. Lamott, Honolulu, for plaintiff-appellee.

Before HAYASHI, C. J., and PADGETT and BURNS, JJ.

BURNS, Judge.

This is an appeal from a Decree Granting Absolute Divorce and Awarding Child Custody entered in favor of the plaintiff-wife on September 20, 1977.

There is one issue: Whether the trial court erred in ruling that a nonvested federal military retirement benefit which was eighteen-twentieths ( 18/20) earned but which was worthless until it was twenty-twentieths ( 20/20) earned was divisible in a divorce action.

The parties married on February 14, 1959. Husband began his air force career on April 20, 1959. The parties separated on April 4, 1977 and wife filed a complaint for divorce on May 5, 1977. At the time of separation and divorce, husband was a technical sergeant, pay grade 36. Upon 20 years service he is entitled (but not required) to retire and to receive a monthly cash payment (based on his pay grade and length of service) and other benefits for the remainder of his life.

Husband's position with respect to wife's entitlement to his potential retirement benefits is best stated in his following testimony:

HUSBAND: I have not as yet earned the military retirement, and I really disagree that she is entitled to it. If I were to get out of the service with 18 years, I wouldn't have any retirements coming to me. And I just don't see where she has an interest to it.

COURT: Well, as I understand it Sergeant, if you get out at 18 and you get nothing, she gets nothing.

HUSBAND: Yes sir, but her name is not on my enlistment contracts. I was the one who enlisted into the service, not her.

The Decree Granting Absolute Divorce and Awarding Child Custody made the following award:

(f) Contingent Military Retirement Rights. Defendant's contingent military retirement rights are a marital asset under Hawaii law. Should Defendant remain in military service for two more years so that his retirement rights mature, Plaintiff's contingent interest in Defendant's military retirement shall likewise mature. Plaintiff's entitlement to such pension rights is 18/20 of 50% or 45% of a technical sergeant's pension, together with cost-of-living increases thereon, based upon the amount such a technical sergeant would draw at the time Defendant retires. Upon his retirement, Defendant shall notify his military disbursement officer that a separate allotment check shall be issued to Plaintiff each month in an amount equal to the foregoing pension. These payments shall continue so long as both Plaintiff and Defendant shall live and shall not be eliminated upon Plaintiff's remarriage.

This case squarely presents the issue of whether the nonvested retirement benefits of one spouse constitute part of the "estate of the parties" under Hawaii Revised Statutes (HRS) § 580-47 and are therefore subject to division and distribution by order of the family court upon granting a divorce. 1 Although our supreme court refers to this issue in Tavares v. Tavares, 58 Haw. 541, 544, 574 P.2d 125, 127 (1978), the case at bar is essentially one of first impression in this jurisdiction. For clarity, primarily in analyzing decisions in other jurisdictions, the terms "vested" and "matured", as they relate to retirement benefits in divorce cases, require definition. We adopt those definitions set forth by the Supreme Court of California in In re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561 (1976).

" * * * Some decisions that discuss pension rights, but do not involve division of marital property, describe a pension right as 'vested' if the employer cannot unilaterally repudiate that right without terminating the employment relationship. * * * In divorce and dissolution cases * * * however, the term 'vested' has acquired a special meaning; it refers to a pension right which is not subject to a condition of forfeiture if the employment relationship terminates before retirement. * * * (T)he term 'vested' in this latter sense (defines) a pension right which survives the discharge or voluntary termination of the employee.

"As so defined, a vested pension right must be distinguished from a 'matured' or unconditional right to immediate payment. Depending upon the provisions of the retirement program, an employee's right may vest after a term of service even though it does not mature until he reaches retirement age and elects to retire. Such vested but immature rights are frequently subject to the condition, among others, that the employee survive until retirement." (Citations omitted.) (Footnotes omitted.)

126 Cal.Rptr. at 635, 544 P.2d at 563.

These definitions create three periods in a retirement benefit plan. Benefits may be nonvested, vested but not mature, or mature. In the Matter of the Marriage of Lucille Rogers and Ronald A. Rogers, 45 Or.App. 885, 609 P.2d 877, 880 (1980).

Whether nonvested retirement benefits constitute property subject to division upon divorce is a question which has divided courts in other jurisdictions.

In 1941, the California Supreme Court issued a decision which was to become the leading case for a generation thereafter. In French v. French, 17 Cal.2d. 775, 112 P.2d 235, the court held that nonvested pension rights are not property, but a mere expectancy, and therefore not a community asset subject to division upon dissolution of a marriage. See also White v. White, 136 N.J.Super. 552, 347 A.2d 360 (1975), Lumpkins v. Lumpkins (Tex.Civ.App.) 519 S.W.2d 491 (1975).

This characterization of nonvested pension rights meant that so long as the dissolution action preceded vesting, the non-employee spouse could not be awarded a share in a most valuable potential asset, an asset acquired through effort expended during the marriage. It meant that the employee spouse could prevent the non-employee spouse from sharing this benefit by timing the dissolution action to occur before vesting. See, e. g., Note, Retirement Pay: A Divorce in Time Saved Mine, 24 Hastings L.Rev. 347 (1973).

In 1969, the New Mexico Supreme Court held that vested, nonmature navy retirement pay to which a husband would become entitled on retirement after the divorce was a community property interest subject to division in the divorce proceeding. LeClert v. LeClert, 80 N.M. 235, 453 P.2d 755. See also Copeland v. Copeland, 91 N.M. 409, 575 P.2d 99 (1978) (affirming the LeClert rule).

In 1971, the Washington Intermediate Court of Appeals, in DeRevere v. DeRevere, 5 Wash.App. 741, 491 P.2d 249, held that nonvested retirement benefits constitute community property under the laws of that state. See also Wilder v. Wilder, 85 Wash.2d 364, 534 P.2d 1355 (1975).

In 1976, the Supreme Court of California, in Brown, supra, specifically overruled French v. French and held that nonvested retirement benefits were property subject to division in dissolution proceedings. The Brown court reasoned that retirement benefits are not gratuities flowing from the employer's beneficence, but rather part of the consideration earned by the employee, a form of deferred compensation for services rendered. Therefore, "the employee's right to such benefits is a contractual right, derived from the terms of the employment contract". 126 Cal.Rptr. at 637, 544 P.2d at 565. Relying on California cases dealing with pensions, the court stated that "a contractual right is not an expectancy but a chose in action, a form of property". Id. The fact that an employee's contractual right to a pension is contingent upon future events "does not degrade that right to an expectancy. The law has long recognized that a contingent future interest is property ..." 126 Cal.Rptr. at 638, 544 P.2d at 566.

Having judicially redefined the employee spouse's relationship to a nonvested pension, the Brown court noted that pension benefits have become in recent times an increasingly significant part of the consideration earned by the employee; that as the date of vesting and retirement approaches, the value of the pension right often becomes the most important asset of the marital community, and that a property division which excludes this asset from consideration is inequitable.

Arizona, Texas, Wisconsin, Illinois and Idaho have followed suit. Van Loan v. Van Loan, 116 Ariz. 272, 569 P.2d 214 (1977), Cearley v. Cearley, Tex., 544 S.W.2d 661 (1976), Leighton v. Leighton, 81 Wis.2d 620, 261 N.W.2d 457 (1978), In Re Marriage of Hunt, 78 Ill.App.3d 653, 34 Ill.Dec. 55, 397 N.E.2d 511 (1979), Shill v. Shill, 100 Idaho 433, 599 P.2d 1004 (1979). Recent decisions to the contrary have come from Arkansas, Colorado and Indiana. See Fenney v. Fenney, 259 Ark. 858, 537 S.W.2d 367 (1976), Ellis v. Ellis, 191 Colo. 317, 552 P.2d 506 (1976), Hiscox v. Hiscox, Ind.App., 385 N.E.2d 1166 (1979). Of these, Ellis is typical in approach. In Ellis, the husband had already retired (after 29 years of military service, during the last 20 of which the parties had been married) and was receiving retirement pay on a monthly basis. The Ellis court held that military retirement pay is not "property" under the applicable Colorado statute (§ 14-10-113, C.R.S. 1973) because "it does not have any of the following elements: cash surrender value; loan value; redemption value;...

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