May v. May

• Decision Date: 29 August 1986
• Docket Number: No. 13-86-087-CV,13-86-087-CV
• Citation: 716 S.W.2d 705
• Parties: Douglas MAY, Appellant, v. Patricia MAY, Appellee.
• Court: Texas Court of Appeals

Page 705

716 S.W.2d 705

Douglas MAY, Appellant, v. Patricia MAY, Appellee.

No. 13-86-087-CV.

Court of Appeals of Texas,

Corpus Christi.

Aug. 29, 1986.

Christine Tharp, San Antonio, for appellant.

Stevan R. Stough, San Antonio, for appellee.

Before NYE, C.J., and UTTER and KENNEDY, JJ.

OPINION

NYE, Chief Justice.

This is an appeal from a division of retirement benefits in a divorce action. In anticipation of their divorce, the parties entered into an agreement which disposed of many of the matters in controversy. The matters that were submitted to the trial court concerned the characterization and division of appellant's three retirement plans. This appeal concerns only the trial court's disposition of two of the plans.

Appellant's first two points of error and appellee's cross-point complain of the division of appellant's San Antonio Fire Department pension benefits. The third point of error concerns appellant's Air National Guard benefits.

The trial court divided appellant's accrued, non-vested, and unmatured civilian retirement benefits earned from the San Antonio Fire Department. ¹ The trial court made the following findings of fact:

1. Parties were married on April 8, 1967.

* * *

* * *

12. Respondent began his employment with the City of San Antonio in June, 1969, and accumulated retirement credit continuously from that date through the date of trial.

13. Respondent [had] worked 15 years out of the 20 years which are required for the retirement to vest.

14. The number of months Respondent was married while accumulating credit towards City of San Antonio retirement, through trial, [equaled] 184 months.

15. That a certified actuary determining the present value of Respondent's Fireman Retirement was stipulated to and admitted into evidence without objection. If Respondent retired [at] the date of divorce his present monthly Accrued Pension Benefit would be $667.79.

16. The present value of Petitioner's community interest in Respondent's City of San Antonio Retirement plan is $25,000. Said amount reflects the value of Petitioner's interest in Respondent's Fire Department Retirement plan projected upon contingencies and anticipated future value based upon historical inflation trends.

The trial court awarded appellee (the non-employee spouse) the following portion of appellant's benefits:

months married in amount of monthly 100% k total

1 plan (184) benefit employee percentage of

-- X ----------------- X would be receiving X cost of living

2 months in plan at on date of divorce increases

retirement whether eligible or granted by employer

not ($667.79) from 12-31-84 to

retirement An employee spouse's accrued benefits in a retirement plan which have been earned during marriage, but which have not vested and matured at the time of divorce, constitute a contingent interest in property and a community asset subject to division upon divorce. Cearley v. Cearley, 544 S.W.2d 661, 666 (Tex.1976); Miser v. Miser, 475 S.W.2d 597, 600 (Tex.Civ.App.--Dallas 1971, writ dism'd). Although this is a well-settled point in Texas law, uncertainty still exists as to the proper method of dividing future interests in retirement benefits.

Upon divorce, the non-employee spouse is entitled to a certain percentage (in this case, the trial court awarded one-half) of the community interest in the pension benefits. Unless the marriage spans the entire term of employment under the plan through to retirement, so that all benefits were earned during the marriage and are community property, an apportionment must be made between those benefits earned during marriage and those earned while not married, which are separate property. Once the community's fractional interest has been determined, the value of the benefits is multiplied by that fraction which yields the specific amount of the non-employee spouse's interest in the benefits. This method of division is reflected in the following formula:

1 no. months married under plan amount of non-

- X ------------------------------ X value = employee spouse's

2 no. months employed under plan share

(Community (Community Interest) (Value) (Amount of Share)

Share)

See Division of Pension Benefits, 37 Baylor L.Rev. at 136.

This relatively straight-forward equation is still the source of much confusion. The uncertainty has arisen in part because the denominator of the community interest fraction and the valuation element have not been consistently defined in case law. The "number of months employed under the plan" has been calculated at both the time of divorce and the time of retirement. The valuation variable has also been calculated for both the date of divorce and the date of retirement. The dates at which these two variables should be calculated is the central question to be determined in this case.

The leading cases in this area are Taggart v. Taggart, 552 S.W.2d 422 (Tex.1977), which spoke to the apportionment element of the equation, and Berry v. Berry, 647 S.W.2d 945 (Tex.1983), which primarily considered the valuation element. Each of these elements has been considered by the Supreme Court in relative isolation from one another. However, these two elements operate jointly in any division of retirement benefits. The interplay between these two variables is reflected in the instant case where the trial court apparently used a mixed formula for division by calculating the apportionment denominator from the date of retirement (Taggart ) and the valuation element from the date of divorce (Berry ).

Both parties agree that the trial court erred in this regard. Appellant argues in his first point of error that the trial court abused its discretion, as a matter of law, by calculating the denominator in the apportionment fraction as of the date of retirement instead of the date of divorce, thereby divesting appellant of some of his separate property. By cross-point, appellee agrees that the trial court abused its discretion in calculating the apportionment fraction from the date of retirement instead of divorce. However, appellee contends that this miscalculation divests her of separate property by multiplying a continually reducing apportionment fraction by a value which already has been discounted back to the value of the benefits at the time of divorce. The trial court improperly calculated these two variables of the formula, and we find that this formula used by the trial court was incorrect. It worked to the detriment of the non-employee spouse.

Taggart v. Taggart involved the partition of military retirement benefits. The employee spouse began employment under the plan in 1943, married in 1947, completed twenty years of service and was eligible for retirement in 1964, divorced in 1968, and actually retired in 1974. The trial court had awarded the non-employee spouse "four-ninths of all retirement pay," which the employee spouse had and would receive after retirement. (Emphasis added). Four-ninths represents one-half of the fractional amount of time the parties had been married and accumulating benefits over the employee spouse's years of service as of 1964, the date he was eligible to retire (three and one-half years before divorce). The trial court then applied this fraction to the value of the benefits as of the date of retirement.

The Supreme Court ruled the trial court had incorrectly computed the apportionment formula. 552 S.W.2d at 424. The Court reasoned that it was the employee spouse's thirty years of service (360 months) which entitled him to the benefits he received at retirement. The Court held that the correct calculation was "one-half of 246/360th's of the retirement pay." Although the Court makes no specific mention of the value of the benefits, we can infer that it used the trial court's valuation date, retirement. See Heisterberg v. Standridge, 656 S.W.2d 138, 147 n. 4 (Tex.App.--Austin 1983, no writ). The Taggart formula can be expressed as:

value of

1 no. months married under plan benefits as non-employee

- X ------------------------------ X of date of = spouse's

2 no. months employed under plan retirement share

as of the date of retirement

Apportionment (d/r) Value (d/r)

Ten years after Taggart, the Supreme Court decided Berry v. Berry. That case involved the partition of civilian retirement benefits. The parties were married in 1939, before Mr. Berry became employed under the plan in 1940. The couple was divorced in 1966, while the benefits were still unmatured. Mr. Berry retired in 1978, after thirty-eight years of service, and began receiving retirement benefits.

The trial court awarded Mrs. Berry one-half of the benefits "as would have existed at the time of divorce." There was evidence that Mr. Berry actually received $946.34 per month in retirement benefits, but that had he been eligible to retire at the time of his divorce his monthly benefits would have amounted to $221.21. To reach the result it did, the trial court must have calculated the apportionment fraction as of the date of divorce. Thus, the equation would be:

1 no. years married under plan value as of Mrs.B- X

----------------------------- X date of

2 no. years employed under plan divorce

as of date of divorce

1 26

------ X ----- X $221.21 = $110.60/mo.

2 26

The Court of Appeals reversed and applied the Taggart division forumula. It ruled that, since Mr. Berry had been employed thirty-eight years under the plan, the community's interest was 26/38 or 34.21% "of all benefits received by Mr. Berry." The Court obviously valued the benefits as of date of retirement. Under the Court of Appeals' Taggart formula, Mrs. Berry would have been entitled to:

1 26

---- X ---- X $946.34 = $323.74/mo.

2 38

In its opinion, the Supreme Court, for the first time, recognized that other factors affect the division of retirement benefits. The Court noted that, under this retirement plan, the "total length of service under the plan is used as a multiplier in order to reach the amount...