Marriage of Milhan, In re

• Decision Date: 12 December 1974
• Court: California Supreme Court
• Parties: , 528 P.2d 1145 In re the MARRIAGE OF Mary Lee and Harry Lloyd MILHAN. Mary Lee MILHAN, Appellant, v. Harry Lloyd MILHAN, Respondent. L.A. 30298. In Bank

Page 809

117 Cal.Rptr. 809

13 Cal.3d 129, 528 P.2d 1145

In re the MARRIAGE OF Mary Lee and Harry Lloyd MILHAN.

Mary Lee MILHAN, Appellant, v. Harry Lloyd MILHAN, Respondent.

L.A. 30298.

Supreme Court of California,

In Bank.

Dec. 12, 1974.

Jack A. Otero, Santa Barbara, for appellant.

Price, Postel & Parma, Gary R. Ricks and C. Michael Cooney, Santa Barbara, for respondent.

BURKE ^*, Justice.

In this case we determine the extent to which the trial court in a marriage dissolution proceeding may exercise jurisdiction over a National Service Life Insurance policy issued to one of the parties but paid for with community property funds. We conclude that, in view of federal law protecting an insured's interest in and control over such military policies, the trial court is without authority to divest the insured of such interest or control. Specifically, the court may not award the policy to the other spouse, may not deprive the insured of his right to change the beneficiary of the policy, and may not require the insured to surrender the policy in order to obtain, and thereupon divide and distribute, its cash value. We hold, however, that if sufficient community assets exist aside from the policy, the trial court may award the other spouse an amount therefrom equivalent to his or her community interest in the policy.

The parties ('Husband' and 'Wife') were married in 1944, following Husband's graduation from the United States Naval Academy. Husband became an ensign in the United States Navy and, during the course of his career, he obtained the two policies at issue, a National Service Life Insurance Policy with a cash value, at time of trial, of $2,190 and a Navy Mutual Aid Association Policy, with a cash value of $2,293. It appears undisputed that Husband paid the premiums on these policies from community income. Husband retired in 1965 and began receiving military retirement pay in the approximate amount of $600 monthly. The parties separated in 1968.

On May 2, 1972, the trial court entered judgment in the dissolution proceedings, dividing the community property between the parties and finding that the subject life insurance policies and military retirement pay were Husband's separate property. Wife appeals, contending that she should have been awarded her community share of these assets.

Initially, it is now clear that military retirement pay attributable to employment during marriage may, if vested in interest, be treated as community property and subject to equal division between the spouses upon dissolution of their marriage. (In re Marriage of Fithian, 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449.) Husband, now aware of our recent Fithian opinion, reluctantly agrees that the judgment below must be reversed and remanded on the issue of retirement pay. He continues to contend, however, that the two life policies were and are his separate property over which the trial court had no jurisdiction.

Husband relies upon the principles set forth by the United States Supreme Court in Wissner v. Wissner, 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424, also involving an asserted community interest in a National Service Life Insurance policy. ¹ We discussed Wissner in our Fithian opinion, as follows: 'In Wissner, the trial court ordered the beneficiary of life insurance proceeds under the National Life Insurance Act (38 U.S.C. § 701 et seq.) to pay half the proceeds, as community property, to the deceased soldier's widow. The United States Supreme Court held the order invalid under the supremacy clause on the ground that the specific language of the act, (fn. omitted) construed in the light of congressional intent, gave the serviceman the absolute right to choose the beneficiary of the policy and hence was invulnerable to the application of state community property law.

'Wissner does not require community property states to classify the proceeds of National Service Life Insurance policies as separate property, but only to refrain from administering those incidents of community property law which would frustrate the congressional plan. In Estate of Allie (1958), 50 Cal.2d 794, 329 P.2d 903, we held that insurance proceeds payable to the serviceman's estate may be considered community property since such a classification does not hinder the insured's free choice of beneficiaries. It is clear, therefore, Wissner did not establish a general rule that federal employment benefits cannot be treated as community property, but merely construed a specific statute in view of the congressional intent it embodies. (Fn. omitted.) Wissner has no controlling impact on the case at bar except to mandate us to examine the legislative goals behind the federal military retirement pay system.' (10 Cal.3d at pp. 597--598, 111 Cal.Rptr. at p. 372, 517 P.2d at p. 452.)

We believe that the foregoing analysis of Wissner is equally pertinent to the case before us. Wissner does not forbid the states from applying their community property laws to achieve an equitable division of marital property, so long as the operation of those laws does not frustrate congressional intent. Clearly, given the express congressional intent to assure the serviceman the...