Smith v. Lewis

• Decision Date: 17 April 1973
• Court: California Court of Appeals Court of Appeals
• Parties: Rosemary E. SMITH, Plaintiff and Respondent, v. Jerome R. LEWIS, Defendant and Appellant. Civ. 1761.

Page 95

107 Cal.Rptr. 95

31 Cal.App.3d 677

Rosemary E. SMITH, Plaintiff and Respondent, v. Jerome R. LEWIS, Defendant and Appellant.

Civ. 1761.

Court of Appeal, Fifth District, California.

April 17, 1973.

For Opinion on Hearing, see, 118 Cal.Rptr. 621, 530 P.2d 589.

Bullen, McKone & McKinley, George W. Bullen, Sacramento, for defendant and appellant.

Edward Freidberg, Sacramento, for plaintiff and respondent.

OPINION

GEO. A. BROWN, Presiding Justice.

Jerome R. Lewis, an attorney, appeals from a judgment entered upon a jury verdict for $100,00 against him in this malpractice action. He had represented the respondent, Rosemary E. Smith, in a prior divorce action. The gravamen of her charges arises out of appellant's failure to have taken into consideration in settling her community property rights in the divorce action her former husband's retirement benefits payable by the State of California under the California National Guard retirement program and from the federal government as a retiree from attendance at reserve drills with the California National Guard.

Respondent, Rosemary E. Smith, married General Clarence D. Smith on February 6, 1943. She filed the underlying suit for divorce through appellant, Jerome R. Lewis, on February 20, 1967-after 24 years of marriage. The interlocutory decree was obtained on March 20, 1967, and entered on March 21, 1967. The final was entered on February 27, 1968. The minimal tangible community assets owned by the parties were amicably divided and the court ordered General Smith to pay respondent $300 per month alimony and $100 per month child support for their 18-year-old son. There was no reference to retirement benefits in the complaint or in the interlocutory decree.

In the summer and early fall of 1968 appellant filed separate motions on behalf of respondent to amend the divorce decree and to set aside that decree on the basis of extrinsic fraud, alleging that General Smith's retirement pay was community property and should have been in the divorce proceedings. Both motions were denied.

Thereafter, and on December 23, 1968, the respondent filed this action for legal malpractice.

The evidence shows that General Smith was employed by the California National Guard as a state civilian employee between the latter part of 1945 and his retirement on December 31, 1966, at the age of 43--a period of over 20 years. All of the retirement benefits herein referred to were earned during the marriage and prior to the divorce in March 1967.

Between 1945 and 1961 he belonged to the State Employees' Retirement System, ¹ which was and is a contributory system. ² Between 1961 and the date of his retirement he belonged to the California National Guard retirement program, a noncontributory system. Concurrently, he was working toward separate retirement benefits from the federal government by attending national guard reserve drills. This was also a noncontributory system. Both programs pay lifetime monthly benefits to eligible retirees. Neither has any widows' benefits, and both cease upon the death of the retiree.

The State of California commenced paying General Smith $796.26 gross per month on January 1, 1967, under the California National Guard retirement program. He had nothing further to do to become entitled to the federal benefits at the time of his retirement, but payments were deferred until he reaches age 60, a period of some 17 years after his retirement.

Appellant makes interrelated contentions that at the time off his legal services to respondent the law was uncertain and unclear as to whether the retirement benefits under General Smith's two programs were community property; that as a matter of law an attorney is not liable for an error when reasonable doubt is entertained by well-informed lawyers on a question of law; that as a consequence the trial court committed error in refusing to grant appellant's motions for nonsuit and judgment notwithstanding the verdict, in instructing the jury that the retirement benefits under both programs were and will be community property, ³ and in submitting the issue of appellant's negligence to the jury under appropriate instructions. ⁴

The resolution of these questions is dependent upon determining the state of the law at the time the legal services were rendered--between February 17, 1967, and February 1968--and at the present time with respect to whether the retirement benefits were community property and in reference to the legal duty owed by an attorney at law to his client.

Retirement benefits, state or federal, if sufficiently matured and certain to be received so as to be classified other than as a mere expectancy, are community property subject to division in a divorce or dissolution proceeding. (Waite v. Waite (1972), 6 Cal.3d 461, 99 Cal.Rptr. 325, 492 P.2d 13; Phillipson v. Board of Administration (1970), 3 Cal.3d 32, 89 Cal.Rptr. 61, 473 P.2d 765; Brown v. Brown (1972), 27 Cal.App.3d 188, 191, 103 Cal.Rptr. 510; Bensing v., Bensing (1972), 25 Cal.App.3d 889, 892-893, 102 Cal.Rptr. 225; In re Marriage of Karlin (1972), 24 Cal.App.3d 25, 29-32, 101 Cal.Rptr. 240.) The same authorities establish that the retirement benefits serve as remuneration for services rendered by the employee, and if those services are performed during the marriage the remuneration must be a community asset. Under these cases, benefits are community property though the plan be denominated contributory or noncontributory, is labeled as a gratuity from the government, contains no widow's benefits, or may be increased, diminished or abolished at the will of the governmental authority. ⁵

Appellant argues that since General Smith's federal payments will not start until he arrives at age 60 the benefits are conditional upon survival to that date, rendering them so tenuous and unmature as to justify their being characterized as an expectancy only. We do not agree. Upon retirement General Smith's right to receive the federal benefits when he arrives at the age of 60 became absolute, although his right to receive each payment remains contingent upon surviving to that age. Although the period of waiting--some 17 years--renders the contingency of his right to receive each payment more remote, conceptually it is no different than the contingency present in waiting for each monthly payment, the right to receive which depends upon survival to the first of each month. We note further that in calculating the actuarial present value of the future payments the long delay in the commencement of payments is mathematically considered with the result that their value is substantially less than if the delay was not present.

In Williamson v. Williamson (1962), 203 Cal.App.2d 8, 11, 21 Cal.Rptr. 164, 167, the court used language which would seem to compel a different result. That court said:

'The principle established by these cases is that pensions become community property, subject to division in a divorce, when and to the extent that the party is certain to receive some payment or recovery of funds. To the extent that payment is, at the time of the divorce, subject to conditions which may or may not occur, the pension is an expectancy, not subject to division as community property. [Citations.]'

However, in Bensing v. Bensing, supra, 25 Cal.App.3d 889, 102 Cal.Rptr. 255, and Brown v. Brown, supra, 27 Cal.App.3d 188, 103 Cal.Rptr. 510, the court in each instance held that the potential retirement payments were sufficiently matured to be subject to division as community property in dissolution proceedings because at the time of the dissolution the serviceman was eligible for retirement though he had not actually retired. In each case, the time of actual retirement would be at some indefinite time in the future, depending upon the serviceman's choice. Thus the language in Williamson, supra, is necessarily subject to the exception, implied by the facts of those and other cases, that survival to the date of receipt of payment alone is not a circumstance rendering the interest so unmatured as to require its classification as an expectancy.

We conclude that the trial court did not err in instructing the jury that both the state and federal retirement benefits were and will be the community property of respondent and General Smith (see fn. 3). A fortiori, had appellant litigated the issue in the divorce proceedings, the result would have been a determination by the court that these rights were subject to disposition as community property in those proceedings.

Relying on Lucas v. Hamm (1961), 56 Cal.2d 583, 15 Cal.Rptr. 821, 364 P.2d 685, appellant contends that at the time the legal services were furnished the law on the subject of whether retirement benefits were community property was so unclear and debatable that as a matter of law he cannot be held liable for his failure to have presented the issue in the divorce proceedings. In Lucas v. Hamm, supra, the Supreme Court held that an attorney cannot be held liable for drafting a will provision which violates the rule against perpetuities. In that case, the attorney's only possible negligent act was his mistake in failing to realize that a muddled and complicated doctrine might invalidate the will provision which he prepared. The court described the rule against perpetuite 'as a 'technicality-ridden legal nightmare" (at p. 592, 15 Cal.Rptr. 821, 826, 364 P.2d 685, 690) and stated 'that few, if any, areas of the law have been fraught with more confusion or concealed more traps for unwary draftsman. . . .' (At p. 592, 15 Cal.Rptr. at p. 826, 364 P.2d at p. 690.) The facts and the holding in that case are inapposite to the case at bench.

At the time legal services were rendered the status of retirement benefits was not so obscure as appellant suggests--certainly not analogous to the abstruse permutations of the rule against perpetuities.

There was no case holding such benefits were not community property. On the...