Selchert v. Selchert
| Decision Date | 07 March 1979 |
| Docket Number | No. 77-784,77-784 |
| Citation | 90 Wis.2d 1,280 N.W.2d 293 |
| Parties | Janet L. SELCHERT, Plaintiff-Respondent, v. Glen E. SELCHERT, Defendant-Appellant. |
| Court | Wisconsin Court of Appeals |
Frederick A. Moegenburg, Milwaukee, on brief, for plaintiff-respondent.
Before DECKER, C. J., CANNON, J., and ROBERT W. HANSEN, Reserve Judge.
This is an appeal by the defendant in a contested divorce action. Mrs. Selchert was granted a divorce on February 16, 1978, on the basis of cruel and inhuman treatment by Mr. Selchert, and the property of the parties was divided pursuant to that divorce judgment. The issues on appeal involve the division of property between the parties, and the awarding of attorney's fees. The custody of the 11-year-old daughter of the parties, which was contested during the divorce proceedings and awarded to Mrs. Selchert, is not at issue on appeal.
At the time of the divorce, Mr. Selchert was 51 years old, and worked at A. O. Smith Corporation as a tool and die maker. His take-home pay was approximately $1,050 per month. Mrs. Selchert was 45 years old, and had apparently been a housewife during most of the marriage of 26 years. The parties had six children, only one of whom was a minor at the time of the divorce judgment.
In the divorce judgment, the trial court expressed a desire to divide the marital property "to approximate as close as possible a 50 per cent division to each of the parties." Mrs. Selchert was awarded property valued at $91,795, which consisted of most of the non-pension related assets of the parties' estate; Mr. Selchert received $96,000, consisting predominantly of his retirement fund. 1 In addition, Mr. Selchert was ordered to pay $4,000 in contribution towards his wife's attorney fees.
Mr. Selchert raises a number of issues on appeal. We reverse on two of the issues; sustain the trial court's rulings on the remaining issues; remand to the trial court for a reevaluation of the worth of Mr. Selchert's pension fund and for findings regarding
the award of attorney's fees to Mrs. Selchert.
The paramount issue on appeal involves the proper evaluation of Mr. Selchert's pension fund. Mr. Selchert's pension retirement fund, in which he had a 100 percent vested interest, was created by his employer, A. O. Smith Corporation. The fund had no cash surrender value. Mr. Selchert did not pay any money into the fund; the plan was supported entirely by contributions from A. O. Smith Corporation. The plan would pay $625 per month upon Mr. Selchert's retirement 2 until he became 62 years old. At that point, payments would be reduced to $372.97 per month for life, supplemented by Social Security. The fund would cease performance upon Mr. Selchert's death, with no payments made to heirs or spouse. No payments would be made until he retired.
An expert witness, Carl Vredenbregt, was called by Mrs. Selchert to testify regarding the value of the fund. 3 Vredenbregt stated that it would cost $75,198 to privately purchase a plan comparable to the pension fund Mr. Selchert possessed at A. O. Smith, I. e., one that would pay $625 per month from age 51 to 62, and $372.97 per month for life thereafter. Vredenbregt stated, however, that the amounts paid out under the privately purchased annuity plan would not be taxed until the total of the payments surpassed the amount paid for the annuity, I. e., $75,198. However, Mr. Selchert, as a noncontributing beneficiary of the A. O. Smith plan, would pay income taxes on all payments he received under the plan.
Mr. Selchert's witness, Alan Bachman, was the assistant administrator of the employee benefits department at A. O. Smith. He testified that the plan "isn't worth anything today," since it paid nothing until Mr. Selchert retired. Throughout most of the proceedings, Mr. Selchert maintained the position that the plan was worth nothing, and therefore, should not be considered in dividing up the marital estate. The trial court valued the retirement fund at $75,190 and awarded it to Mr. Selchert.
The division of property in a divorce action
(i)s within the sound discretion of the trial court and . . . the division will not be disturbed unless an abuse of discretion is shown. An abuse of discretion arises when the trial court has failed to consider proper factors, has made a mistake or error with respect to the facts upon which the division was made, or when the division itself was, under the circumstances, either excessive or inadequate. Wilberscheid v. Wilberscheid, 77 Wis.2d 40, 44, 252 N.W.2d 76, 79 (1977).
On appeal, the parties agree that it would be an abuse of discretion for the trial court to not consider Mr. Selchert's interest in the pension plan in dividing the property. See Schafer v. Schafer, 3 Wis.2d 166, 170, 87 N.W.2d 803 (1958); 4 Leighton v. Leighton, 81 Wis.2d 620, 633, 261 N.W.2d 457 (1978). The only disagreement concerns the actual monetary value placed on the fund by the trial court.
We hold that the value placed upon the pension fund by the trial court is excessive. We base our holding on two important factors:
First, the trial court found the value of the pension fund to be equivalent to the purchase price of the annuity about which Mrs. Selchert's expert, Mr. Vredenbregt, testified. The value of the annuity was based upon a 51-year old man receiving $625 per month from age 51 to 62, and receiving $372.97 per month from age 62 until his death. However, the A. O. Smith pension plan provided that Mr. Selchert would receive no payments until he actually retired. Mr. Selchert testified that he had no intention of retiring until age 65. 5 Therefore, unless Mr. Selchert retired at age 51, the value of the pension plan would be worth considerably less than an annuity which would begin payments immediately at age 51. Only if Mr. Selchert retired at age 51 could he realize the full value placed upon his pension by the court. As stated in Bloomer v. Bloomer, 84 Wis.2d 124, 131 n. 4, 267 N.W.2d 235, 239 n. 4 (1978):
Unlike the situation in the Kronforst (Kronforst v. Kronforst, 21 Wis.2d 54, 123 N.W.2d 528 (1963)) case, there is no indication in the present record that Herbert has any intention of retiring early. In Pinkowski v. Pinkowski, 67 Wis.2d 176, 226 N.W.2d 518 (1975), we stated that the husband should not be forced to retire early in order to realize the lump-sum retirement benefit.
In Schafer, supra 3 Wis.2d at 171, 87 N.W.2d 803, the court, in attempting to place a value on a retirement fund, determined that if the husband retired immediately, the fund would be worth $29,000. However, the court noted: "This value of $29,000 may be too high because apparently Mr. Schafer has no present intention of retiring."
Secondly, if a private annuity plan was purchased by an individual for $75,198, the recipient would pay taxes on the monthly payments only when the total amount received surpassed the cost of $75,198. Anything less than this amount would be considered, for income tax purposes, merely as a non-taxable return of principal. However, Mr. Selchert's plan was non-contributory; therefore, under current tax law, he would be required to pay taxes on every payment received from the company. All payments would be 100% Taxable. If each payment would be taxed when received at approximately 10-20%, which is reasonable speculation, the present value of the pension would be considerably less than the $75,198 amount placed upon it by the trial court when compared to the approximately $75,000 worth of tax free property awarded to Mrs. Selchert to offset the award of the pension to her husband. This consideration would appear to affect the trial court's desire to divide the property on a 50/50 basis. 6
Therefore, we find it necessary to remand this case to the trial court for a reevaluation of Mr. Selchert's pension plan. After the reevaluation, it probably will be necessary for the trial court to make a new overall division of the marital assets of the parties. Any new distribution is, of course, in the discretion of the trial court.
Although it is relatively simple to conclude that the value placed on Mr. Selchert's pension plan was too high, it is much more difficult to construct proper guidelines for valuing a pension plan. Retirement and pension plans are rarely similar; there are differences in whether the plan is contributory or non-contributory, whether it is vested or unvested, whether it is affected by early retirement or discharge, whether it pays to beneficiaries upon the primary insured's death, whether its value is affected by tax considerations, etc.
The most thorough discussion of the problem by the Wisconsin courts is contained in the recent case of Bloomer v. Bloomer. In Bloomer, supra 84 Wis.2d at 135-36, 267 N.W.2d 235, the supreme court suggested three methods determining a value for a pension plan. By the first method the trial court could consider the amount of the husband's contributions to the fund, and divide this amount accordingly. In this case the husband made no contribution to the fund; it was entirely supported by his company. Therefore, this method would not appear appropriate for this situation.
Secondly, "the trial court could attempt to calculate the present value of (Mr. Selchert's) retirement benefits when they vest under the plan." Although Mr. Selchert's interest in his plan is vested, the extent of his interest cannot be exactly determined until he actually retires. Since Mr. Selchert could retire any time during the next fourteen years, and according to new federal law would probably not be required to retire even at age 65, any value placed upon the pension would be suspect.
Finally, the trial court could use a method widely employed in other states, whereby the trial court determines what percentage of...
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