Marriage of Taylor, In re

Decision Date13 February 1987
Citation234 Cal.Rptr. 486,189 Cal.App.3d 435
PartiesIn re the MARRIAGE OF Warren K. and Alice R. TAYLOR. Warren K. TAYLOR, Respondent, v. Alice R. TAYLOR, Appellant. A030984.
CourtCalifornia Court of Appeals Court of Appeals

D. Thomas Woodruff, Carson, Woodruff, O'Hair & Munsill, Inc., Sacramento, Richard Sherman, De Goff and Sherman, Berkeley, for appellant.

Gerald J. Adler, Sacramento, for respondent.

CHANNELL, Associate Justice.

Wife appeals from a post-judgment order determining her interest in Husband's judicial retirement benefits and denying her requests for modification of spousal support and for attorneys' fees.

In her appeal, Wife has challenged the validity of the "terminable interest rule," as it has been applied under the Judges' Retirement Act. We are satisfied that the trial court's order, when entered, was correct and in accord with then-existing law. After this case was fully briefed, however, the Legislature added section 4800.8 to the Civil Code, 1 effective January 1, 1987, with the express intent "to abolish the terminable interest rule." (See Stats.1986, ch. 686, § 2.) We requested the parties to submit letter briefs regarding the impact of the new legislation on this case. Having concluded that the new law may be applied to this case, we are remanding the matter to the trial court for further consideration in light of section 4800.8.

I. FACTS

Husband and Wife were married on July 1, 1948 and separated on June 1, 1976. Husband began service as a superior court judge on May 1, 1963, a position he held until he elected to retire on July 31, 1984.

During the initial dissolution proceedings in 1978, the trial court concluded that Wife had a community property interest in a certain portion of Husband's judicial retirement benefits, but reserved jurisdiction over valuating Wife's share until such time as Husband was eligible to retire. 2 Spousal support was ordered in the amounts of $750 per month for six months, $500 per month for six months, and $1 per year until further order of the court, death, or remarriage of Wife. No attorneys' fees or costs were awarded.

Husband first became eligible to retire as a superior court judge on May 1, 1983. In October 1983, Wife filed a motion seeking her proportionate share of Husband's retirement benefits that he would have received had he retired on May 1, 1983. 3 Thereafter, Wife also moved for modification of her spousal support, requesting $2,500 per month. Attorneys' fees were also requested. Before hearing, Husband notified the Judges' Retirement System of his intent to retire effective July 31, 1984, making him eligible to receive judicial retirement benefits commencing September 1, 1984.

At the hearing, the issues were submitted primarily on declarations, deposition testimony, and offers of proof. On November 8, 1984, the court issued its order. Wife's motions to increase spousal support and for attorneys' fees were denied. Concerning the retirement benefits, Wife was to receive direct monthly payments equalling 32.71 percent of the gross amount, including cost of living and other adjustments. On Wife's death, the rights and interests of Wife and her estate to receive the benefits would terminate "and [Husband] shall be entitled to receive the entire payment. [Wife] shall be entitled to reserve 32.71 per cent of each monthly payment during the joint lives of [Wife] and [Husband]." (Emphasis added.) Significantly, the court reserved jurisdiction "to make all necessary and appropriate orders regarding [Husband's] retirement benefits."

II. DISCUSSION **

A. Judicial Retirement Benefits

1. The Trial Court's Order Was Correct When Entered

In its order, the trial court indicated Wife was to receive 32.71 percent of Husband's monthly retirement payments "during the joint lives" of Husband and Wife. On appeal, Wife contends that the trial court erred in that the effect of its order was to deprive her of a substantial portion of her one-half share of the community interest in the retirement benefits. To support her contention, Wife challenged the validity of the so-called "terminable interest rule," as it has been applied under the Judges' Retirement Law. 4

It has been said that there are two aspects to the terminable interest rule, each of which Wife claims serves to deprive her of her full share of community property in a different manner. First, the accrued benefits do not extend to pension benefits payable following the death of the employee spouse. (Benson v. City of Los Angeles (1963) 60 Cal.2d 355, 33 Cal.Rptr. 257, 384 P.2d 649; Bowman v. Bowman (1985) 171 Cal.App.3d 148, 152, 217 Cal.Rptr. 174.) Thus, if Husband died before Wife, the remainder of the benefits would go entirely to Husband's second wife, even though they were earned in large part during Husband's marriage to his first wife.

For example, in this case, Husband's election to retire was made under the provisions of Government Code section 75033.5. That section has provided for an annuity benefit to "the surviving spouse of any judge who has so elected to retire" thereunder. (Emphasis added.) The Judges' Retirement Law itself has made no provision for survivors' benefits to a former spouse of the judge. "The Judges' Retirement Law designates the surviving spouse, not the ex-spouse, as recipient; it is designed for the support of the former, not the latter." (In re Marriage of Andreen (1978) 76 Cal.App.3d 667, 674, 143 Cal.Rptr. 94, following Benson v. City of Los Angeles, supra, 60 Cal.2d 355, 33 Cal.Rptr. 257, 384 P.2d 649.) As a matter of law, payments to Wife would cease on Husband's death.

The second aspect of the terminable interest rule postulates that the nonemployee spouse's interest in the pension benefits terminates upon that person's death, so that the nonemployee spouse may not bequeath the benefits by will. (Waite v. Waite (1972) 6 Cal.3d 461, 99 Cal.Rptr. 325, 492 P.2d 13; Bowman v. Bowman, supra, 171 Cal.App.3d at p. 152, 217 Cal.Rptr. 174.) Thus, if Wife died first, her share of the benefits, which would be payable to her if she continued to live, would revert to Husband. All of the benefits, including Wife's community property share, would become payable to Husband for the rest of his life.

The Judges' Retirement Law itself has made no provision for the payment of benefits to the heirs or devisees of the former spouse of the judge. "The state's concern ... lies in provision for the subsistence of the employee and his spouse, not in the extension of benefits to such persons or organizations the spouse may select as the objects of her bounty." (Waite v. Waite, supra, 6 Cal.3d 461, 473, 99 Cal.Rptr. 325, 492 P.2d 13.) In Waite, our Supreme Court concluded that the statutory design for a judge's pension negated the spouse's contention that her legatees should inherit pension payments payable for the balance of the judge's life. "Whatever community interest the wife may claim, it cannot transcend the legislation upon which the pension itself rests." (Id., at p. 474, 99 Cal.Rptr. 325, 492 P.2d 13.) 5

At the time it was entered, the trial court's order that Wife was entitled "to receive 32.71 percent of each monthly payment during the joint lives" of Husband and Wife was consistent with these principles of law.

2. Applicability of New Section 4800.8

The terminable interest rule generated its share of appellate and academic criticism. (Bowman v. Bowman, supra, 171 Cal.App.3d at pp. 151-156, 217 Cal.Rptr. 174 [declined to apply rule to private pension plan]; Chirmside v. Board of Administration (1983) 143 Cal.App.3d 205, 210-211, 191 Cal.Rptr. 605 [declined to extend to community contributions in a fully vested public retirement plan]; In re Marriage of Peterson (1974) 41 Cal.App.3d 642, 656, 115 Cal.Rptr. 184 [dicta stating rule not believed fair]; see also Culhane, Toward Pension Equality: A Reexamination of California's Terminable Interest Doctrine (1984) 14 Sw.U.L.Rev. 613, 616-617; Reppy, Community and Separate Interests in Pensions and Social Security Benefits after Marriage of Brown and ERISA (1978) 25 UCLA L.Rev. 417, 444-445, 480-482.) Whatever courts may have felt about the fairness of the terminable interest rule, however, they were confronted with the fact that these features were an integral part of legislatively enacted public pension plans which, by their terms, have been restrictive in their choice of beneficiaries. (See Judicial Retirement Law (Gov.Code, § 75000 et seq.); for listing of other legislative enactments having these features, see Reppy, supra, 25 UCLA L.Rev. at pp. 444-445, fn. 98; compare Bowman v. Bowman, supra, 171 Cal.App.3d at p. 156, 217 Cal.Rptr. 174.)

While this case was pending before this court, the Legislature amended the Family Law Act to require courts, when dividing community property interests in any retirement plan, to make whatever orders are necessary or appropriate to assure that each party receives a full community property share of any retirement plan. (Stats.1986, ch. 686, § 1.) 6 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], in order that retirement benefits shall be divided in accordance with Section 4800." (Stats.1986, ch. 686, § 2.)

In response to our request for letter briefs regarding the extent to which this statute could constitutionally be applied to this case, Husband argues that at least since May 1, 1983, when he first became eligible to retire as a judge, both he and his second wife have had a vested contractual and statutory right to require the Judicial Retirement System to pay to her, if she survives him, one-half of the retirement allowance that would be payable to Husband were he living...

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