Marriage of Powers, In re, B040937

• Decision Date: 06 March 1990
• Docket Number: No. B040937,B040937
• Citation: 218 Cal.App.3d 626,267 Cal.Rptr. 350
• Court: California Court of Appeals Court of Appeals
• Parties: In re MARRIAGE OF Ruth J. and Stephen R. POWERS, Jr. Stephen R. POWERS III, as executor etc., Respondent, v. Stephen R. POWERS, Jr., Appellant. Department of Water and Power Employees Retirement Disability Death Benefit Insurance Plan, Claimant and Appellant.

Page 350

267 Cal.Rptr. 350

218 Cal.App.3d 626

In re MARRIAGE OF Ruth J. and Stephen R. POWERS, Jr. Stephen R. POWERS III, as executor etc., Respondent, v. Stephen R. POWERS, Jr., Appellant Department of Water and Power Employees Retirement Disability Death Benefit Insurance Plan, Claimant and Appellant.

No. B040937.

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

March 6, 1990.

Review Denied May 31, 1990.

Bodkin, McCarthy, Sargent & Smith, Henry G. Bodkin, Jr., and William G. Lieb, Los Angeles, for defendant and appellant.

James K. Hahn, City Atty., Edward C. Farrell, Chief Asst. City Atty., and David J. Oliphant, Asst. City Atty., for claimant and appellant.

Thomas Trent Lewis, Woodland Hills, for plaintiff and respondent.

Adrian Kuyper, County Counsel, and Donald H. Rubin, Deputy County Counsel, as amicus on behalf of defendant and appellant and claimant and appellant.

ARLEIGH M. WOODS, Presiding Justice.

This is an appeal from a post-judgment order in a marital dissolution action. The appellants are Stephen Powers, Jr., (husband) and the Water and Power Employees Retirement Disability Death Benefit Insurance Plan of the Department of Water and Power of the City of Los Angeles (the Department). Respondent is the estate of Ruth Powers (wife). The order appealed from grants to wife's estate her community property interest in husband's retirement benefits by virtue of the trial court's retroactive application of Civil Code section 4800.8 pursuant to In re Marriage of Taylor (1987) 189 Cal.App.3d 435, 234 Cal.Rptr. 486. At issue here is the propriety of the trial court's action.

Husband and wife were married on April 23, 1949. Husband was employed by the Department beginning on August 2, 1957, and acquired certain rights in the Department's retirement plan beginning March 1, 1958. ¹

The parties separated on June 10, 1979, and a petition of dissolution was filed by wife on January 22, 1982. An interlocutory judgment of dissolution was filed on August 1, 1983. In it the court expressly reserved jurisdiction over both husband's and wife's retirement plans. ²

With respect to husband's retirement plan, paragraph 9 of the judgment stated: "The Court expressly reserves jurisdiction over all retirement and other deferred compensation benefits of [husband] under the Water and Power Employees Retirement Plan (including but not limited to the value, if any, of the health insurance premium feature thereof) to determine the nature, extent and value thereof and the division between the parties of the community property interest therein.

"[Wife] and [husband] married on April 23, 1949 and separated on June 10, 1979.

"The Board of Administration of the Water and Power Employees Retirement Plan (hereafter called 'Board') has been joined as a claimant in this proceeding pursuant to Civil Code Section 4363.1 and is responsible for administering the retirement benefits provided for by said Plan, pursuant to Section 220.1 of the Charter of the City of Los Angeles.

"[Husband] is currently employed by the Department of Water and Power of the City of Los Angeles and is an active member of the Water and Power Employees Retirement Plan, commencing membership in the Plan on July 1, 1955.

"[Wife] is ordered to keep the claimant Board advised as to her current address at all times.

"In accordance with Civil Code Section 4800, the Court expressly reserves jurisdiction over any and all retirement benefits which are due, or may be due, to the parties under [husband's] membership in the Water and Power Employees Retirement Plan.

"The Board shall disburse no funds under the Plan without further order of this Court."

On December 16, 1983, wife died.

In 1985, husband's son, who was executor of wife's estate, informed husband that the estate might claim an interest in husband's pension. Husband consulted Department lawyers who advised him that such an action by the estate would not be successful. The advice given husband was correct under a judicially-developed rule, called the terminable interest rule. Under this rule a wife's community property interest in her husband's pension terminated at her death.

In reliance upon this advice, husband filed an irrevocable intention to retire. His retirement became effective on April 1, 1987. In 1985, husband married Judith Powers and was married to her at the time of his retirement. She had previously taken an early retirement from the Department at a reduced level of benefits. Both retirements were premised on an expectation that husband would have an unlimited interest in his pension with which to support them.

Effective January 1, 1987, the Legislature adopted Civil Code section 4800.8 abrogating the terminable interest rule. In February 1987, Division Four of the First Appellate District filed In re Marriage of Taylor, supra, 189 Cal.App.3d 435, 234 Cal.Rptr. 486, giving the section retroactive application.

Based on those developments, in October 1987, wife's estate sought trial on the reserved issue of wife's community property interest in husband's pension. ³ The motion was unsuccessfully opposed by husband and the Department. Both husband and the Department then moved for summary judgment challenging, inter alia, retroactive application of the statute. Their motions were denied, the court deciding that it was compelled to follow Taylor.

Trial was held on December 8, 1988. Husband and the Department again raised the issue of retroactivity as they had on the summary judgment motion. The trial court, too, applied the statute retroactively. ⁴ Subsequently, by written order, the court ordered the Department to pay to wife's estate $38,191.01 as benefits due wife from husband's pension from April 1, 1987, the date of his retirement, to December 31, 1988. The court also ordered the Department to pay the estate .37839 percent of husband's pension commencing on January 1, 1989, and to continue until his death.

Husband and the Department both appeal this order. We affirm.

I

The principal issue before us is the propriety of retroactive application of Civil Code section 4800.8 in this case. ⁵ Before discussing the specific contentions, it is necessary to examine both the change in the law effected by section 4800.8 and the applicable principles of retroactivity.

Prior to enactment of section 4800.8, the terminable interest rule governed disposition of community property interests in retirement benefits upon the death of either of the spouses in dissolution proceedings. The rule derived from two cases, Benson v. City of Los Angeles (1963) 60 Cal.2d 355, 33 Cal.Rptr. 257, 384 P.2d 649, and Waite v. Waite (1972) 6 Cal.3d 461, 99 Cal.Rptr. 325, 492 P.2d 13. "Briefly stated, this judicially created rule recognize[d] that an interest in a retirement plan traceable to contributions of community funds or to community labor constitutes community property; however, the interest of the nonparticipant spouse does not extend to benefits payable after the death of either spouse." (Chirmside v. Board of Administration (1983) 143 Cal.App.3d 205, 208, 191 Cal.Rptr. 605, fn. omitted.) There were two distinct aspects to the rule. " '[T]he first aspect ... postulates that the community interest in accrued benefits does not extend to pension benefits payable following the death of the employee spouse. Thus, the nonemployee spouse may not claim pension benefits earned or accrued during marriage if the employee spouse designates a third party to receive them after his death.... [p] A second aspect of the Terminable Interest Doctrine postulates that the nonemployee spouse's interest in pension benefits terminates upon the death of the nonemployee spouse, so that the nonemployee spouse may not bequeath these benefits by will....' [Citation.]" (Bowman v. Bowman (1985) 171 Cal.App.3d 148, 152, 217 Cal.Rptr. 174, quoting Culhane, Terminable Interest Doctrine (1984) 14 Sw.U.L.Rev. 613, 615-616, fns. omitted.) With respect to this second aspect of the rule, it should be noted that community property interests are ordinarily inheritable. (See Prob.Code, § 100; see, e.g., Sousa v. Freitas (1970) 10 Cal.App.3d 660, 665, 89 Cal.Rptr. 485.)

The terminable interest rule was subject to considerable appellate and academic criticism. (In re Marriage of Taylor, supra, 189 Cal.App.3d at p. 440, 234 Cal.Rptr. 486.) Addressing what was perceived to be the major inequity of the rule, then-Justice Kaus wrote in In re Marriage of Peterson (1974) 41 Cal.App.3d 642, 115 Cal.Rptr. 184: "We do not believe the rule which we must follow is fair. [Husband's] pension rights constitute a bundle to which [wife], as a partner in the community during the years of marriage contributed her equal share. Why should she be deprived of her right to any single stick in the bundle? [Citation.]" (Id., at p. 656, 115 Cal.Rptr. 184, fn. omitted.)

In 1987, the Legislature enacted section 4800.8 which empowered a court to make "whatever orders are necessary or appropriate to assure that each party receives his or her full community property share in any retirement plan, whether public or private, including all survivor and death benefits...." (§ 4800.8.) ⁶ The statute then set forth, illustratively, two kinds of possible orders to effect this purpose. Subdivision (a) permitted the court to "[o]rder the division of any retirement benefits payable upon or after the death of either party in a manner consistent with Section 4800." Subdivision (b) permitted the court to "[o]rder a party to elect a survivor benefit annuity or other similar election for the benefit of the other party, as specified by the court, in any case in which a retirement plan provides for such an election." In an uncodified section, the Legislature expressed its intent "to abolish the terminable interest rule set forth in Waite v. Waite, 6 Cal.3d 461 [99 Cal.Rptr. 325, 492 P.2d 13], and Benson v. City of Los Angeles, 60 Cal.2d 355 [33 Cal.Rptr. 257, 384 P.2d 649],...