Marriage of Samuels, In re

• Decision Date: 23 August 1979
• Citation: 158 Cal.Rptr. 38,96 Cal.App.3d 122
• Parties: In re the MARRIAGE OF Leora May and John Piercy SAMUELS. Leora May SAMUELS, Appellant, v. John Piercy SAMUELS, Appellant. Civ. 42819.
• Court: California Court of Appeals Court of Appeals

Page 38

158 Cal.Rptr. 38

96 Cal.App.3d 122

In re the MARRIAGE OF Leora May and John Piercy SAMUELS Leora May SAMUELS, Appellant, v. John Piercy SAMUELS, Appellant.

Civ. 42819.

Court of Appeal, First District, Division 1, California.

Aug. 23, 1979.

Hearing Denied Oct. 18, 1979.

Steven W. Forsberg, Santa Rosa, for appellant John Piercy samuels.

Barry D. Parkinson, Petaluma, for appellant Leora May Samuels.

RACANELLI, Presiding Justice.

On appeal by both parties from a judgment of dissolution of marriage, we examine the nature of certain federal civil service disability and survivorship benefits. For the reasons we explain, we conclude that only the benefits payable to the disabled employee spouse upon becoming eligible for deferred retirement benefits constitute community property. We reverse and remand.

Facts

The facts are undisputed: At the time of marriage in June 1942, John had been employed as a federal civil service employee for a period of 16 months, such employment continuing without interruption until February 1971, when at age 50 years he terminated his employment due to an injury and began receiving monthly disability benefits reduced in amount by reason of his election providing death benefits to his surviving wife. Under the then existing provisions of the federal civil service retirement system (5 U.S.C. § 8337), ¹ John became eligible for a "disability annuity" upon completing a minimum of five years of service prior to disability and would be eligible for a "deferred retirement annuity" upon attaining 62 years of age. ² The parties separated in January 1973, Leora being awarded temporary support later increased to $190 per month. John's disability annuity is his sole source of income and only substantial asset. Under the terms of the judgment, 94 percent of the disability annuity was determined to be community property and Leora awarded a one-half interest therein payable monthly retroactive to June 1977; the judgment further provided that Leora possessed a property interest in any future death benefits and enjoined John from exercising any right to modify or terminate such survivorship benefits as might accrue to Leora thereunder. John appeals from that portion of the judgment determining community property interests and restraining him from changing the survivorship annuity; Leora cross-appeals from the portion denying payment of her one-half community property interest from date of separation.

I. Federal Supremacy

Preliminarily, we consider John's initial claim that since the intent of the federal law is to provide disability retirement benefits to a disabled federal federal civil service employee as a "wage-substitute," the doctrine of federal supremacy renders invalid any conflicting state law regulating community interests in such benefits. (See Wissner v. Wissner (1950) 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424.) The claim is groundless.

It is well established that California courts may apply community property principles to federally created benefits so long as the result does not frustrate the objectives of the federal legislation. (See Hisquierdo v. Hisquierdo (1979) --- U.S. ----, 99 S.Ct. 802, 59 L.Ed.2d 1 (railroad retirement benefits expressly excluded from state legal process by statute (45 U.S.C. § 231m)); ³ In re Marriage of Jones (1975) 13 Cal.3d 457, 461, 119 Cal.Rptr. 108, 531 P.2d 420 (overruled on other grounds, In re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561); In re Marriage of Fithian (1974) 10 Cal.3d 592, 597-604, 111 Cal.Rptr. 369, 517 P.2d 449 (cert. den. 419 U.S. 825, 95 S.Ct. 41, 42 L.Ed.2d 48, rehg. den., 419 U.S. 1060, 95 S.Ct. 644, 42 L.Ed.2d 657; overruled on other grounds, In re Marriage of Brown, supra); see Phillipson v. Board of Administration (1970) 3 Cal.3d 32, 49-50, 89 Cal.Rptr. 61, 473 P.2d 765 (overruled on other grounds, In re Marriage of Brown, supra); In re Marriage of Camp (1979) 89 Cal.App.3d 113, 152 Cal.Rptr. 362; In re Marriage of Peterson (1974) 41 Cal.App.3d 642, 653, 115 Cal.Rptr. 184 (disapproved on other grounds; In re Marriage of Brown, supra; but see in rE marriage OF nizenkoff (1976) 65 caL.app.3d 136, 134 caL.rptr. 189.) Since we discern no irreconcilable conflict between the purpose of the subject federal legislation and California community property laws, no issue of federal supremacy is here involved.

II. Nature of Disability Benefits

The principal thrust of John's argument centers upon the nature of the disability payments for which he is solely eligible until age 62 years. Relying upon a body of authority holding that disability benefits received prior to maturity of retirement benefits based upon service longevity constitute the separate property of the injured employee spouse (In re Marriage of Loehr (1975) 13 Cal.3d 465, 119 Cal.Rptr. 113, 531 P.2d 425 (disapproved in In re Marriage of Stenquist (1978) 21 Cal.3d 779, 789, 148 Cal.Rptr. 9, 582 P.2d 96); In re Marriage of Jones, supra, 13 Cal.3d 457, 119 Cal.Rptr. 108, 531 P.2d 420; In re Marriage of Mueller (1977) 70 Cal.App.3d 66, 137 Cal.Rptr. 129; In re Marriage of Olhausen (1975) 48 Cal.App.3d 190, 121 Cal.Rptr. 444) John contends that his election to receive the immediate disability benefits in lieu of deferred retirement benefits results in an "excess" attributable solely to compensation for disability as separate property. (See In re Marriage of Cavnar (1976) 62 Cal.App.3d 660, 133 Cal.Rptr. 267.) While the rationale underlying his argument is tenuous, our analysis leads to the same result urged by John.

While under certain circumstances disability benefits in general received after separation as compensation for pain and suffering or diminished earning capacity have been held to be the separate property of the incapacitated spouse (In re Marriage of Jones, supra, 13 Cal.3d 457, 119 Cal.Rptr. 108, 531 P.2d 420; In re Marriage of Loehr, supra, 13 Cal.3d 465, 119 Cal.Rptr. 113, 531 P.2d 425 (military disability benefits); In re Marriage of Olhausen, supra, 48 Cal.App.3d 190, 121 Cal.Rptr. 444 (state industrial disability benefits); In re Marriage of Robinson (1976) 54 Cal.App.3d 682, 686, 126 Cal.Rptr. 779; In re Marriage of McDonald (1975) 52 Cal.App.3d 509, 125 Cal.Rptr. 160 (workers' compensation benefits)), those decisions pivoted around a determination that the disabled spouse had not yet acquired a vested right to retirement benefits based upon service longevity (e. g., In re Marriage of Jones, supra, 13 Cal.3d at p. 461, 119 Cal.Rptr. 108, 531 P.2d 420; In re Marriage of Olhausen, supra, 48 Cal.App.3d at p. 192, 121 Cal.Rptr. 444), a theory since discredited in the benchmark decision of In re Marriage of Brown, supra, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561, which obliterated any substantive distinction between vested and nonvested pension rights derived as a result of employment during marriage.

Moreover, the continuing vitality of Loehr-Jones and their progeny was further undermined by In re Marriage of Stenquist (1978) 21 Cal.3d 779, 148 Cal.Rptr. 9, 582 P.2d 96, holding that where the employee spouse Elects to receive disability benefits In lieu of benefits based upon longevity of service rendered during coverture, only the excess received constitutes separate property as compensation for personal anguish and loss of earning capacity; the amount received in lieu of retirement benefits, whether matured or nonvested, constitutes community property subject to division. (In re Marriage of Stenquist, supra, 21 Cal.3d 779, 788-789, fn. 9, at p. 788, 148 Cal.Rptr. 9, 582 P.2d 96; see also In re Marriage of Mueller, supra, 70 Cal.App.3d 66, 71, 137 Cal.Rptr. 129; cf. In re Marriage of Cavnar, supra, 62 Cal.App.3d 660, 664-665, 133 Cal.Rptr. 267.) However, unlike the husband in Stenquist, John made no meaningful election in accepting immediate disability benefits equal in amount to, and in lieu of, the deferred benefits for which he would become eligible at age 62 years. Further, in contrast to Stenquist, no excess payment inured to John by way of retirement support "attributable to employment during marriage" (Id. 21 Cal.3d at p. 791, 148 Cal.Rptr. 9, 582 P.2d 96).

Nonetheless, while conceding that John derives no excess compensation as a result of the disability benefits, Leora argues that since such presently enjoyed benefits equal in amount to deferred retirement benefits derive in part from community contributions, the disability payments constitute divisible community assets. The argument is unconvincing.

First, the disabled employee spouse is free to choose among available alternative retirement programs so long as that choice does not defeat the community property interest of the nonemployee spouse. (In re Marriage of Stenquist, supra, 21 Cal.3d 779, 786, 148 Cal.Rptr. 9, 582 P.2d 96; In re Marriage of Brown, supra, 15 Cal.3d 838, 849, 126 Cal.Rptr. 633, 544 P.2d 561.) In choosing to accept immediate disability benefits instead of a return of contributions ( § 8342) or deferred benefits ( § 8338), no impermissible transmutation or other impairment of community interests results.(Cf. In re Marriage of Mueller, supra, 70 Cal.App.3d 66, 137 Cal.Rptr. 129.) Payment of such disability benefits now serves the principal purpose of compensating John for his injury, including loss of earnings and diminished earning capacity, and constitutes his separate property. (In re Marriage of Jones, supra, 13 Cal.3d 457, 459, 119 Cal.Rptr. 108, 531 P.2d 425.) But after John reaches the minimum age (62 years) credited with past service longevity (5 years), the predominant purpose of such payments shifts to retirement support rather than disability compensation resulting from premature retirement (In re Marriage of Webb (1979) 94 Cal.App.3d 335, 342, 156 Cal.Rptr. 334); at that point the true character of the disability benefits commensurate in value to the fully matured retirement benefits based upon completion of five years of...