McDermott v. McDermott

Decision Date14 October 1986
Citation119 A.D.2d 370,507 N.Y.S.2d 390
Parties, 55 USLW 2299 Isabel A. McDERMOTT, Respondent, v. Fergus J. McDERMOTT, Defendant-Appellant, and Fire Department Article 1-B Pension Fund of the City of New York, Proposed Intervenor-Appellant.
CourtNew York Supreme Court — Appellate Division

Joel R. Brandes, Garden City, for defendant-appellant.

Frederick A.O. Schwarz, Jr., Corp. Counsel, New York City (Larry A. Sonnenshein and Edward F.X. Hart, of counsel), for proposed intervenor appellant.

E. Patricia Somerset, P.C., New York City, for respondent.

Before LAZER, J.P., and THOMPSON, WEINSTEIN, NIEHOFF and RUBIN, JJ.

LAZER, Justice Presiding.

In her seemingly classic though recent study of the economic and social consequences of modern divorce laws, Professor Weitzman observes concerning pensions:

"A divorced person who has been awarded a share of his or her spouse's pension may still face problems in collecting the benefit. One problem occurs if the worker elects to forego survivor's coverage. Under most pension plans, a worker can opt for a reduced pension to provide a survivor's benefit for his widow, or can opt for full monthly checks during his lifetime. Many workers elect to 'opt out' or waive survivor's coverage, and the choice has typically been theirs alone" (Lenore J. Weitzman, The Divorce Resolution, The Free Press, p. 119).

At principal issue here is the power of the judicial system to limit the selection of payment options by a public employee whose pension rights are protected by particular constitutional and statutory provisions. The dispute also furnishes a further opportunity to examine how fundamentally the traditional nature of property rights have been altered for the marital relationship by the Legislature's creation of the "marital property" concept.

I

When their divorce action began, Fergus and Isabel McDermott had been married for 33 years, during almost all of which he held a position with the New York City Fire Department and she was a housewife. At the time of trial, he was 62 years old and Deputy Chief of the Fire Department with a salary of over $55,000 per year; she was 58, and apart from interest on a very small inheritance, her income was what he provided. Her rather severe health problems and lack of work experience made it highly unlikely that she could develop any meaningful earning potential in the future. His retirement was mandated at age 65.

In its divorce judgment, Special Term granted the wife a divorce on the ground of abandonment (see, Domestic Relations Law § 170[2] ); awarded her maintenance of $225 per week to continue until the death of either party, her remarriage or the husband's retirement; directed the husband to maintain his existing medical coverage, or its equivalent, for her benefit; and awarded her counsel fees. Distribution of the marital property was sharply complicated, however, by the disproportion between the $317,269 value attributed to the husband's pension rights and the $136,191 value of the rest of the assets. The nonpension assets consisted of two jointly owned homes on Staten Island worth $59,000 and $27,500, three joint bank accounts containing approximately $5,565, three automobiles with a total worth of $2,600, and a stock portfolio and annuity worth $33,565 and $9,461, respectively, both in the husband's name. What was vigorously debated at Special Term and currently, of course, was the court's power to limit the husband's right to untrammeled selection of available pension payment options.

Under the fire department pension plan, pensioners may select from among a number of payment options. Under the "maximum allowance" option the husband was entitled to receive $35,193 per annum for life with $4,000 to be paid to his designated beneficiary at his death. Other options decreased the amounts payable per year but increased benefits to the designated survivors. "Option I" would provide $26,668 annually until death, with the designated beneficiary to receive a lump sum payment of whatever was left in the reserve fund at the time of the pensioner's death. "Option II" would pay $23,484 annually until death, with the designated beneficiary to receive the same amount until his or her death. Designation of the Option II beneficiary would become irrevocable upon the pensioner's retirement and prior death of the beneficiary would extinguish the residuary benefits. "Option III" would provide a slightly higher annual allowance than Option II--$25,888--but would reduce the beneficiary's annual allowance to one-half of what the husband would receive, $12,944. "Option IV" would allow the husband to convert a portion of the maximum allowance into life insurance, at a cost of $64.84 per $1,000 of insurance; the balance of the maximum allowance left after payment of these premiums would be paid to him.

Special Term awarded the wife the more valuable house plus a one-half interest in the joint bank accounts and the annuity; the husband got the other house, the stock portfolio, the three automobiles and retained the other half of the bank accounts and the annuity. In distributi the pension rights, the court awarded the wife a one-half interest worth $158,634, and, to insure her ability to receive that interest, the husband's choice among the payment options was limited to Option II, Option III, or, under certain conditions, Option IV. Barred from selection by the husband were the maximum allowance option because of its minimal survivorship benefits and "Option I" because pension payments would cease if he outlived his life expectancy and no survivorship benefits would be available. He was also directed to designate the wife irrevocably as the beneficiary to the extent of her interest under whatever option he did choose. The judgment required that a copy of it be served on the pension plan administrators and enjoined them from accepting any election of a payment option or designation of a beneficiary which did not comply with the judgment.

After Special Term's decision but before the entry of judgment, the Fire Department Article 1-B Pension Fund of the City of New York (the fund) sought leave to intervene as a matter of right (CPLR 1012[a][2] ), or, in the alternative, in the exercise of discretion (CPLR 1013), for the purpose of rearguing the pension distribution determination on constitutional and statutory grounds. The husband had not attacked the determinations on those grounds and even on appeal merely argues that the court abused its discretion and that Domestic Relations Law § 236(B) does not authorize judicial limitation of pension options. In an order signed on the same day as the divorce judgment Special Term denied the fund's applications and it has appealed from that order, arguing not only for intervention, but on the merits of the judgment as well.

Special Term was correct in denying the fund leave to intervene as of right, since the standards of CPLR 1012(a)(2) were not met. Nevertheless, it was error to refuse permission to intervene under CPLR 1013. The fund had a "real and substantial interest" in these proceedings (see, Plantech Housing v. Conlan, 74 A.D.2d 920, 921, 426 N.Y.S.2d 81, appeal dismissed 51 N.Y.2d 862, 433 N.Y.S.2d 1018, 414 N.E.2d 398; Matter of Petroleum Research Fund, 3 A.D.2d 1, 157 N.Y.S.2d 693) and all it sought was reargument of the portion of the judgment applicable to it--a matter of law. The error is curable without a remittitur, however, since, by exercising our discretion to permit intervention on this appeal (see, Auerbach v. Bennett, 47 N.Y.2d 619, 419 N.Y.S.2d 920, 393 N.E.2d 994), we now entertain the same argument that would have been made at Special Term.

Before reaching the merits of that argument, we pause to dispose of a number of lesser issues raised by the defendant. The plaintiff's testimony was sufficient to establish the unjustified and nonconsensual departure which constitutes abandonment (see, Domestic Relations Law § 170[2]; Schine v. Schine, 31 N.Y.2d 113, 335 N.Y.S.2d 58, 286 N.E.2d 449). Further, in a marriage of the duration of the instant one, it was not improper to divide the pension fund equally (see, Antis v. Antis, 108 A.D.2d 889, 485 N.Y.S.2d 770). The maintenance award was not excessive and the argument that it should not have been permitted to continue indefinitely is meritless because the payments were to terminate upon the defendant's retirement, a matter of three years. Since the court is empowered to require that one party provide medical insurance for the other (Domestic Relations Law § 236[B][8] ), it was not an abuse of discretion for the trial court to require the defendant to maintain the existing coverage or its equivalent for the plaintiff's benefit, and, under the circumstances, we see no reason to insert a termination date for that obligation. Finally, the award of attorney's fees reflected no abuse of discretion (see, Silver v. Silver, 63 A.D.2d 1017, 406 N.Y.S.2d 352) but it did fail to credit the defendant with a payment of $500 made to the plaintiff's counsel pursuant to a pendente lite order, so the judgment must be modified in that respect. What requires extended discussion in this case is the propriety of the court's determination relative to pension options.

II

Pensions represent a form of deferred compensation paid after retirement in lieu of the receipt of greater compensation during the period of employment (Majauskas v. Majauskas, 61 N.Y.2d 481, 491-492, 474 N.Y.S.2d 699, 463 N.E.2d 15; see also, D'Amato v. D'Amato, 96 A.D.2d 849, 466 N.Y.S.2d 23). Deferral of that compensation obviously affects the spouse of the pension plan member, not only in the sense that it diminishes current income, but also because it slows the buildup of marital assets. An interest in the contractual right to a pension plan is marital property to the extent that the interest was acquired during the marriage and prior to commencement of a matrimonial...

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