Shill v. Shill

• Decision Date: 11 September 1979
• Docket Number: No. 12948,12948
• Citation: 599 P.2d 1004,100 Idaho 433
• Parties: Jeanette T. SHILL, Plaintiff-Appellant, v. Douglas K. SHILL, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 1004

599 P.2d 1004

100 Idaho 433

Jeanette T. SHILL, Plaintiff-Appellant, v. Douglas K. SHILL, Defendant-Respondent.

No. 12948.

Supreme Court of Idaho.

Sept. 11, 1979.

Stephen A. Bywater, Burley, for plaintiff-appellant.

William A. Parsons of Parsons, Smith & Stone, Burley, for defendant-respondent.

BAKES, Justice.

Appellant Jeanette T. Shill and respondent Douglas K. Shill were married September 29, 1957. In April, 1958, Douglas Shill was hired by the City of Burley, Idaho, fire department and commenced making contributions from his wages to the State of Idaho Firemen's Retirement Fund, established pursuant to Title 72, chapter 14, of the Idaho Code. On October 24, 1977, appellant and respondent were divorced. At the time of the divorce Douglas Shill had completed nineteen and one half years of employment with the City of Burley fire department and had been promoted to the position of fire chief.

The decree of divorce was entered on October 24, 1977. The final resolution of child custody, child support and property division questions was reserved for later decision. On January 25, 1978, the trial court judge entered a memorandum decision which stated in part:

"Defendant's position as Fire Chief of the City of Burley is an appointive position subject to the will of the Mayor and council of that city. His right to retirement is contingent on his continued appointment and has no legislative or other guarantee of maturity. As of the date of trial the only vested right possessed by defendant was to the $8,089.24 cash surrender value of his pension contributions. This was all contributed during the marriage and was community property. It should be divided evenly."

On March 1, 1978, the trial court made findings of fact and conclusions of law which stated:

"5. The vested interest of the defendant in the Firemen's Pension Plan as of October 24, 1977, was Eight Thousand Eighty-Nine Dollars and Twenty-Four Cents ($8,089.24). The position of Fire Chief of the City of Burley, is subject to the will of the Mayor and Council of the City, and the defendant has no guarantee of continued employment."

Judgment was entered on March 1, 1978, in accordance with the findings of fact and conclusions of law. In the property division appellant Jeanette Shill was awarded one-half of the $8,089.24 cash surrender value of the Firemen's Retirement Fund.

The principal question raised in this appeal is whether the trial court erred in finding that the value of the couple's community property interest in the Firemen's Retirement Fund as of October 24, 1977, the date of divorce, was its cash contribution of $8,089.24. This appeal raises for the first time in Idaho the issue of whether in a divorce proceeding a marital community has a dividable property right or interest in payments which may subsequently be received from a non-vested pension plan.

At the date of the divorce, Douglas Shill had worked for the City of Burley fire department for 191/2 years. If his employment as a paid firefighter were to be terminated, either voluntarily or involuntarily, prior to the twentieth year, he would have been entitled to receive only the contributions to the fund made from his salary or wages at the time of termination, and he would not have been eligible for further benefits from the plan. ¹ The trial court reasoned that the contingencies to Douglas Shill's right to draw a pension compelled a valuation of the pension at its cash surrender value as of the date of divorce. The essence of the court's ruling was that the couple's contingent interest in benefits from the fund had no present value.

Courts in most of the community property states have been faced with the question of how to value and divide non-vested pension rights upon dissolution of a marriage. The traditional rule was that non-vested pension rights were not property, but were a mere expectancy and thus not a community asset subject to division upon dissolution of a marriage. The leading case stating this principle was French v. French, 17 Cal.2d 775, 112 P.2d 235 (1941). The rule in French has been perceived by commentators as being inequitable because, under it, a division of pension rights was dependent solely upon whether those pension rights were vested before or after the date of divorce, a date often within control of the employee spouse. ²

In 1969 the New Mexico Supreme Court became the first court in the community property jurisdictions to disapprove the rule embodied in French. It held, in LeClert v. LeClert, 80 N.M. 235, 453 P.2d 755 (1969), that a husband's Navy retirement pay to which the husband would become entitled on retirement after the divorce was a community property interest subject to division in the divorce proceeding. The New Mexico Supreme Court affirmed the trial court order dividing equally between the ex-spouses the 73% Of the future retirement pay which had been earned during coverture, the wife's share to be paid when received by the husband.

Since 1975 the courts in Arizona, California, New Mexico, Texas and Washington have each abandoned the rule exemplified by French and have held that a marital community has a property right or interest subject to division at divorce in retirement benefits prior to the time the employed spouse's right to receive the pension becomes vested. ³ Van Loan v. Van Loan, 116 Ariz. 272, 569 P.2d 214 (1977); Brown v. Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561 (1976) (expressly overruling French v. French, 17 Cal.2d 775, 112 P.2d 235 (1941)); Copeland v. Copeland, 91 N.M. 409, 575 P.2d 99 (1978) (affirming the rule adopted in LeClert v. LeClert, 80 N.M. 235, 453 P.2d 755 (1969); Cearley v. Cearley, 544 S.W.2d 661 (Tex.1976); and Wilder v. Wilder, 85 Wash.2d 364, 534 P.2d 1355 (1975). The reasoning in each of these cases is similar. The New Mexico Supreme Court noted that abandonment of the rule in French

"was compelled by the inequitable division of property when a marriage of substantial length breaks up and the major asset is a pension plan which has been acquired during the marriage but has not yet matured, i. e., is not subject to immediate disbursement." Copeland v. Copeland, 91 N.M. 409, 575 P.2d 99, 101 (1978).

At the time of his divorce Douglas Shill was 43 years old and had no intention of quitting his employment with the City of Burley fire department. His position there as fire chief was found by the trial court to be a non-contractual appointive position subject to the will of the mayor and city council of Burley, although Mr. Shill testified that he could not be involuntarily terminated by the city without a legitimate reason. ⁴

The State of Idaho Firemen's Retirement Fund establishes a pension plan funded by contributions from each paid fireman deducted from the fireman's wages or salary. Other revenues are also added to the fund. ⁵ Douglas Shill's contributions to the fund were made from his wages, and any property interest attributable to those contributions is a community asset. Kohny v. Dunbar, 21 Idaho 258, 121 P. 544 (1912); I.C. §§ 32-903 and -906. A firefighter's interest in the pension fund attributable to fund income from sources other than employee contributions is not a gratuity but a form of deferred compensation accrued by reason of the individual's service and is also a community property asset to the extent acquired during coverture. See Guy v. Guy, 98 Idaho 205, 560 P.2d 876 (1977) (employee disability benefits paid by employer are compensation for past employment and are community property if earned during marriage); Travelers Ins. Co. v. Johnson, 97 Idaho 336, 544 P.2d 294 (1975) (a group life insurance policy provided by an employer as an incident of employment is a community property asset if acquired during marriage); Ramsey v. Ramsey, 96 Idaho 672, 535 P.2d 53 (1975) (retirement pay based upon military service is not a gratuity but is an earned property right accrued by reason of the person's military service and is community property to the extent earned during marriage); See also LeClert v. LeClert, 80 N.M. 235, 453 P.2d 755 (1969).

The trial court's ruling that the sole community property interest possessed by the couple at the time of divorce and subject to division in the marital dissolution proceedings was the cash surrender value of the Shill's pension contributions does not recognize the potential value which those pension rights will have upon vesting. Although Douglas Shill could not draw a pension from the fund until he had completed twenty years of service as a fireman, the pension is not earned on the last day of the twentieth year of employment. The value of the pension at the end of twenty years of service is a form of deferred compensation which is attributable to the entire period in which it was accumulated. The portion of the pension rights earned during the marriage were contingent earnings which may or may not have matured into a vested right to draw pension benefits, but constitutes a contingent community property interest subject to consideration and division upon divorce. The more difficult problem in this case is not deciding whether the Shill marital community has a property interest in the pension subject to division upon divorce, but in valuing and dividing that contingent interest. ⁶ A retired firefighter's right to a pension from the fund is not represented by an individual account statement which might provide ready reference to the employee's accumulated interest in the plan. All that is known when a divorce occurs prior to the time that an employed spouse's interest in a pension fund vests is that if the employee stays alive and on the job until retirement at a time when the pension right has vested, he or she will be entitled to a contractual or statutorily determined monthly payment until the employee's death. Factors which will affect the value of the couple's contingent community property interest in the pension fund...