Sims v. Sims

• Decision Date: 10 April 1978
• Docket Number: No. 60719,60719
• Citation: 358 So.2d 919
• Parties: Winston H. SIMS, Plaintiff-Appellee-Respondent, v. Marcella McGinnis SIMS, Defendant-Appellant-Relator.
• Court: Louisiana Supreme Court

Page 919

358 So.2d 919

Winston H. SIMS, Plaintiff-Appellee-Respondent, v. Marcella McGinnis SIMS, Defendant-Appellant-Relator.

No. 60719.

Supreme Court of Louisiana.

April 10, 1978.

On Rehearing May 19, 1978.

Michael Cavanaugh, Cavanaugh & Ducote, Baton Rouge, for defendant-appellant-relator.

Charles W. Wilson, III, Watson, Blanche, Wilson & Posner, Baton Rouge, for plaintiff-appellee-respondent.

TATE, Justice.

The issue before us concerns the determination of a divorced wife's interest in her former husband's pension rights, insofar as they are attributable to his employment during the existence of the community.

The issue arises in the context of a suit to partition the community's assets following its dissolution as the result of a divorce. The trial court held that the wife's interest in the husband's pension rights was limited to one-half its cash withdrawal value at the date of dissolution of the community ($14,446.95), and the court of appeal affirmed. 349 So.2d 974 (La.App. 1st Cir. 1977).

We granted certiorari, 351 So.2d 175 (La.1977), because we believed the wife's contention to be meritorious that, instead, she was entitled to have recognized her interest in the pension funds or rights, when they become actually payable to or for the husband, in the proportion that they are attributable to the husband's employment during the community.

Facts

Mr. and Mrs. Sims were married on May 30, 1946. They were divorced on November 19, 1975, nearly thirty years later. The husband has been employed by the federal government since June 18, 1956 as an air traffic controller.

During the existence of the community, he had acquired certain federal pension rights as a result of his employment. 5 U.S.C. 8331 et seq. The parties agree that the retirement plan, or at least the funds contributed by the husband to it, are a community asset. They differ, as noted above, as to what interest the wife acquired in this community asset.

The federal retirement plan is contributory the employee and the government each deposit 7% of the employee's basic pay into the United States Treasury. 5 U.S.C. § 8334(a)(1), (2). The annuity, however, is not tied to the amount of those contributions, but is made according to a schedule provided by statute. 5 U.S.C. § 8339.

The plan includes several alternative rights acquired by contributions to the plan. At least two annuity rights are here pertinent:

An annuity based upon a percentage of average pay during federal employment: (1) is payable to an employee with at least five years' creditable service, which will become payable when the employee reaches 62 years of age, 5 U.S.C. § 8333, 8338; or (2) is payable to an air controller who is voluntarily or involuntarily separated from the service after the employee becomes 50 years of age and has completed 20 years of service in that capacity, 5 U.S.C. 8336(e) (1972).

An employee, upon separation from the federal service, may also obtain the refund of contributions made by him (not including the matching employer contributions) in lieu of any annuity right. 5 U.S.C. § 8342(a).

At the time the community was dissolved by divorce in 1975, the husband had 19 years and 5 months of creditable service. He did not become 50 years of age until September 23, 1976, about ten months later. He thus did not become eligible to retire and receive immediate retirement benefits until that latter date.

On the date the community was dissolved, if the husband had then separated from the federal service, his retirement annuity would not commence until he was 62 years of age; or, upon such separation he could have received the return of the $14,446.95 contributions made by him from community funds. (For later reference, illustrative computations of annuities payable are included in Appendix A of this opinion.)

The community's interest in the pension plan or in payments made to or for the husband or as a result of his employment or contributions to such plan during the community

The trial and intermediate courts held that the wife's interest in the pension plan was limited to the return of one-half of the community funds contributed to it, as if the husband had resigned his job and had elected this option on the date the community was dissolved.

This reasoning and result is erroneous on several accounts: (1) in fact, the husband did not elect this option but, instead, continued his employment; and (2) if this method of fictitious valuation had been appropriate, it overlooks that the contributions which established the pension rights, under the actual circumstance of continued employment, included not only the employee's contributions but also the matching contributions by employer, which we have previously held represent an asset acquired by community earning and efforts, T. L. James & Co., Inc. v. Montgomery, 332 So.2d 834 (La.1976).

More essentially, however, this reasoning and result underlook the fundamental nature of the community asset acquired in a retirement plan through employment of either spouse during the existence of the community. The community interest stems not only from contributions made by community funds, but also by reason of any right to receive proceeds attributable to such employment during the community (i. e., as an asset "acquire(d) during the marriage," Civil Code Article 2402), whether based on the community's contributions or not. T. L. James & Co., Inc. v. Montgomery, cited above.

As stated in T. L. James & Co., 332 So.2d 851: "When acquired during the existence of a marriage, the right-to-share (in a retirement plan) is a community asset which, at the dissolution of the community, must be so classified even though at the time acquired or at the time of dissolution of a community, the right has no marketable or redeemable cash value, and even though the contractual right to receive money or other benefits is due in the future and is contingent upon the happening of an event at an uncertain time." See also Messersmith v. Messersmith, 229 La. 495, 86 So.2d 169 (1966).

A spouse's right to receive an annuity, lump-sum benefit, or other benefits payable by a retirement plan is, to the extent attributable to his employment during the community, therefore an asset of the community. Further, the community interest is not limited to the refund of community funds paid, usually (as here) greatly less in monetary value than the pension rights acquired as a result of the employment of one spouse of the community.

Accordingly, except in an isolated decision to be noted below, our courts have uniformly held that, at the dissolution of the community, the non-employed spouse is entitled to judgment recognizing that spouse's interest in proceeds from a retirement annuity, or profit-sharing plan or contract, if and when they become payable, with the spouse's interest to be recognized as one-half of any payments to be made, insofar as they are attributable to the other spouse's contributions or employment during the existence of the community.

See: T. L. James & Co., Inc. v. Montgomery, 332 So.2d 834 (La.1976); Messersmith v. Messersmith, 229 La. 495, 86 So.2d 169 (1956); Moon v. Moon, 345 So.2d 168 (La.App.3d Cir. 1977), certiorari denied 347 So.2d 250 (La.1977); Swope v. Mitchell, 324 So.2d 461 (La.App.3d Cir. 1975); Lynch v. Lawrence, 293 So.2d 598 (La.App.4th Cir. 1974), certiorari denied 295 So.2d 809 (La.1974) ¹; Laffitte v. Laffitte, 253 So.2d 120 (La.App.2d Cir. 1971). Cf. Berry v. Equitable Life Assurance Society of U. S., 316 So.2d 399 (La.App.1st Cir. 1975). See also: LeVan, Allocating Deferred Compensation in Louisiana, 38 La.L.Rev. 35 (1977); Hughes, Community-Property Aspects of Profit-Sharing and Pension Plans in Texas, 44 Tex.L.Rev. 860 (1966).

Not in accord with the above decisions is Langlinais v. David, 289 So.2d 343 (La.App.3d Cir. 1974), followed by the intermediate court in the present case. ² There, the intermediate court rejected the wife's claim to a share of the retirement benefits, since the husband had not retired at the date of the community's dissolution; it awarded her only one-half the value of the husband's account in the retirement fund. The result and reasoning are inconsistent with T. L. James & Co. and the other decisions cited, and the decision is overruled insofar as inconsistent with them and with the present opinion.

As in T. L. James & Co., Messersmith, and the other decisions cited, our decree will recognize the wife's proportionate interest in the retirement annuities, if and when they become payable, without attempting to fix a present monetary value for this interest, since it has none. (Unless the employment actually terminated following dissolution of the present community, for instance, the cash withdrawal value of the contributions is a fictitious value not proportionate to the actual retirement rights retained by the still-employed husband. See footnote 4 below.)

Due to the nature of the interest acquired by the community, as these decisions likewise recognize, it is not merchantable or susceptible to partition by licitation. ³ The recognition of the respective interests of the spouses in this non-merchantable asset acquired during the community is analogous to a partition or division in kind. Of course, the parties between themselves can agree upon a valuation for purposes of conventional partition. See Due v. Due, 342 So.2d 161, 166 (La.1977).

The wife's proportionate interest in any retirement plan proceeds, if and when payable to or for the husband's account.

At the time of the dissolution of the community, as well as of the present date (at which, we are informed by the briefs, the husband is still employed as an air traffic controller), the community interest in the retirement plan has no immediate redeemable cash value. Until the employee is separated from the service, dies, retires, or becomes disabled, no value can be fixed upon his right to receive an annuity or upon...