Marriage of Judd, In re

• Decision Date: 29 March 1977
• Citation: 137 Cal.Rptr. 318,68 Cal.App.3d 515
• Court: California Court of Appeals Court of Appeals
• Parties: In re the MARRIAGE OF Stanley H. and Renee L. JUDD. Stanley H. JUDD, Appellant, v. Renee L. JUDD, Appellant. Civ. 37892.

Page 318

137 Cal.Rptr. 318

68 Cal.App.3d 515

In re the MARRIAGE OF Stanley H. and Renee L. JUDD Stanley H. JUDD, Appellant, v. Renee L. JUDD, Appellant.

Civ. 37892.

Court of Appeal, First District, Division 4, California.

March 29, 1977.

Hearing Denied May 26, 1977.

Jerome Marks, San Francisco, for Stanley H. Judd.

Belzer & Jackl by V. James Jackl, Oakland, for Renee L. Judd.

EMERSON, ^* Associate Justice (Assigned).

In this action for dissolution of marriage, both Stanley Judd and his wife Renee appeal from certain portions of the interlocutory judgment. Stanley also appeals from orders, contained in the judgment, fixing the amount of his arrearages in spousal support under a prior order of the court, and denying his motion to modify a previous order for support. We consider first Stanley's appeal from that part of the judgment which divides and awards the community property of the parties.

STANLEY'S APPEAL

1. The Annuity Plan

One of the assets of the marriage was a retirement annuity plan, provided by Stanley's employer, Standard Oil Company (hereafter Standard). After 15 years of service, payments under the plan become 50% 'vested.' The vesting factor increases 5% For every additional year of employment, until the payments become 100% Vested upon completion of 25 years of service. At the time of the separation of the parties, this annuity had vested to the extent of 55%.

The basic monthly annuity payment is calculated by a formula which takes into account the age at retirement, the final five-year earnings of the employee, the number of years of credited service, and the form in which the annuity is paid.

If the employee dies before retirement, his beneficiary is entitled to a refund of contributions made, plus interest. If the employment is terminated before retirement, the employee is entitled to either a refund of contributions plus interest, or if he has completed at least 15 years of service, annuity payments subject to the 'vesting factor' described above.

The trial court found the plan to be a community asset and made the following declaration: '(a) The annuity plan with (Stanley's) employer, Standard Oil of California, is vested and each party is entitled to one-half of 60% Of the annuity plan upon (Stanley's) retirement, with payments to be made as received by (Stanley). No evidence of actuarial value was presented at hearing.' In determining the community interest to be 60% Of the entire annuity plan, the trial court apparently looked only at the percentage of the plan which was 'vested' at the time of trial. ¹ The court thus followed a theory which, for purposes of this opinion, we shall call the 'vesting rule.'

Stanley contends that because the plan was vested but not Matured and because there are too many uncertainties in the plan itself, the court erred in awarding Renee a continuing percentage interest in the annuities. Rather, Stanley, urges, the case should be remanded with directions that the court award the entire plan to Stanley, and that Renee be given a cash award of one-half of the community interest in the plan, calculated upon the basis of either its actuarial value or the total amount of contributions plus interest, at the time of separation. Renee urges this court to modify the order and decree that the community interest in the plan is the ratio of the number of months of community service in proportion to the total number of months served. We shall refer to this theory of division of the plan as the 'time rule.'

We dispose first of Stanley's contention that it would have been 'clearly preferable' for the court to have awarded Renee a cash amount in lieu of a continuing interest in the annuities. This assertion is based on the claim that Stanley's right to receive the annuities has not yet 'matured' and is subject to contingencies that may destroy these rights before they mature. But the fact that the employee's contractual right to receive benefits may be contingent upon future events does not alter its status as a property right. (In re Marriage of Brown (1976) 15 Cal.3d 838, 844, 126 Cal.Rptr. 633, 544 P.2d 561.) In Brown, the court recognized that a trial court must take into account the possibility that future events may destroy pension rights before they mature. (Id., at p. 848, 126 Cal.Rptr. 633, 544 P.2d 561.) However, it also noted that such uncertainties may be taken care of by awarding each spouse 'an appropriate portion of each pension payment as it is paid.' (Id., at p. 848, 126 Cal.Rptr. at p. 639, 544 P.2d at p. 567.) This is exactly what the trial court below did. Thus the immature character of Stanley's pension rights did not deprive the court of its power to divide the community interest in the plan by allowing Renee a continuing participation in it. We note further that in Brown, the Supreme Court also stated '(o)ur suggestion in Phillipson v. Board of Administration, supra, 3 Cal.3d 32, 46, 89 Cal.Rptr. 61, 473 P.2d 765, that when feasible the trial court should award the employee all pension rights and compensate his spouse with other property of equal value, was not intended to tie the hands of the trial court. That court retains the discretion to divide the community assets in any fashion which complies with the provisions of Civil Code section 4800.' (In re Marriage of Brown, supra, 15 Cal.3d at p. 848, fn. 10, 126 Cal.Rptr. at p. 639, 544 P.2d at p. 567.) Therefore the issue is not whether an alternative division was preferable, but whether the court below abused its discretion by dividing the pension in the manner it did.

We are of the opinion that the 'vesting rule' is no longer the proper standard to be applied in the division of the community interest in retirement benefits. The trial court may well have considered the case of In re Marriage of Fithian (1974), 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449, cert. den., 419 U.S. 825, 95 S.Ct. 41, 42 L.Ed.2d 48, which it cited in its memorandum. That case held that '(t)he law is settled in California that retirement benefits which flow from the employment relationship, To the extent they have vested, are community property subject to equal division between the spouses . . ..' (Id., at p. 596, 111 Cal.Rptr. at p. 371, 517 P.2d at p. 451, fn. omitted, emphasis added.) From this statement, a trial court could quite logically conclude that the percentage of community interest in the retirement benefits equalled the percentage vested during marriage.

However, subsequent to the trial court's decision, the law on this subject changed with the ruling in In re Marriage of Brown, supra, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561. ² In Brown, the court overruled its decision in French v. French (1941) 17 Cal.2d 775, 112 P.2d 235, that pension rights, to the extent they are nonvested, cannot constitute community property. (Id., at p. 851, 112 P.2d 235.) The conclusion was reached 'that the husband's pension rights, a contingent interest, whether vested or not vested, comprise a property interest of the community and that the wife may properly share in it.' (15 Cal.3d 838, 852, 126 Cal.Rptr. 633, 642, 544 P.2d 561, 570.)

Brown has therefore established that the extent to which the husband's benefits are 'vested' is no longer the touchstone for determining the community interest in it. Instead, the court has held, 'the joint effort that composes the community and the respective contributions of the spouses that make up its assets, are the meaningful criteria.' (In re Marriage of Brown, supra, at p. 851, 126 Cal.Rptr. at p. 641, 544 P.2d at p. 569.)

Although the extent to which benefits have vested during the marriage may at first glance appear to constitute a valid measure of the community's contribution toward the sum total of retirement assets, further reflection reveals that such is not the case.

For example, suppose Stanley were to retire on the date of separation. It is obvious that 100% Of the retirement assets have been the result of community effort, yet only 55% Of the basic annuity payment has 'vested.' Or suppose Stanley were to retire two years beyond the date of separation. Stanley would then have 18 years of completed service and only 65% Of the plan would be 'vested,' yet 88.8% Of Stanley's services (16 of the 18 years) would have been the result of community effort.

The Brown decision has mandated that the community's share of retirement benefits are to reflect the extent of community effort in earning the contractual right to receive those benefits. (Id., at pp. 851--852, 126 Cal.Rptr. 633, 544 P.2d 561.) From the foregoing it is clear that the percentage of the plan which happened to have vested during the marriage is not necessarily reflective of the community's contribution toward the earning of Stanley's retirement benefits.

It follows, therefore, that the 'vesting rule' adopted by the trial court, is unreasonable as applied to the facts of this case. While the court will be at liberty to apply any other standard which complies with Civil Code section 4800 (In re Marriage of Brown, supra, at p. 848, fn. 10, 126 Cal.Rptr. 633, 544 P.2d 561), we suggest that, on remand, it adjudge that Renee's continuing interest in the annuity payments is equivalent to one-half of that portion of Stanley's services attributable to community effort.

The most effective method of accomplishing the above result would be to determine the community interest to be that fraction of retirement assets, the numerator of which represents the length of service during the marriage but before the separation, and the denominator of which represents the total length of service by the employee-spouse. Such disposition would comport with what we have termed the 'time rule.' (See In re Marriage of Adams (1976) 64 Cal.App.3d 181, 186, 134 Cal.Rptr. 298.)

This method of ascertaining the community interest in a spouse's retirement benefits has been approved not only by Pre-Brown decisions dealing with...