Valdez v. Ramirez

• Decision Date: 02 November 1977
• Docket Number: No. 15790,15790
• Citation: 558 S.W.2d 88
• Parties: Lillie VALDEZ, Appellant, v. Olga RAMIREZ and Tomas Valdez, Appellees.
• Court: Texas Court of Appeals

Page 88

558 S.W.2d 88

Lillie VALDEZ, Appellant,

v. Olga RAMIREZ and Tomas Valdez, Appellees.

No. 15790.

Court of Civil Appeals of Texas, San Antonio.

Nov. 2, 1977.

Rehearing Denied Nov. 30, 1977.

James M. Heidelberg, San Antonio, for appellant.

Kirk Patterson, Mitchell, Stewart & Hemmi, San Antonio, for appellees.

KLINGEMAN, Justice.

This suit involves a division of retirement benefits under the U.S. Civil Service Retirement Act, 5 U.S.C.A. § 8331, et seq. (1967). Lillie Valdez appeals from a judgment in the District Court of Bexar County, Texas awarding appellees, Olga Ramirez and Tomas Valdez, Jr., the heirs-at-law of Tomas M. Valdez, Sr., deceased, approximately a one-half interest in civil service retirement benefits payable to Lillie Valdez after her retirement from civil service employment.

Lillie Valdez began working for civil service shortly prior to her marriage to Tomas M. Valdez, Sr., and at the time of her retirement had worked 352 months. For 340 of these months she was married to Tomas M. Valdez. Tomas M. Valdez, Sr. died intestate. Lillie Valdez was not the natural mother of appellees and appellees were children of Valdez, Sr. by a prior marriage. The District Court entered judgment October 14, 1976 ordering appellant (1) to pay appellees one-half of 340/352 of the retirement benefits received up to that date; (2) to pay appellees one-half of 340/352 of the retirement benefits to be received after October 14, 1976. The trial court Appellant asserted in the trial court and here maintains that: (1) the retirement pay is a defeasible interest, contingent upon the lives of Lillie Valdez and Tomas M. Valdez, Sr., and the death of Valdez, Sr. terminated any interest that he or his children had with respect to retirement pay; (2) appellees are not entitled to any of the retirement pay because federal statutes provide these retirement benefits are not assignable or subject to legal process; (3) at the time of her retirement Lillie elected to provide survivorship benefits to her husband, which constituted a partition of any community interests that her husband might have had with regard to retirement benefits. Lillie was required to take a reduced annuity in consideration for providing her husband with retirement benefits and, consequently, such election constituted a partition of the community interest in the retirement benefits.

made extensive findings of fact and conclusions of law. ¹

On this appeal appellant asserts three points of error:

1. The interest, if any, of Valdez Sr. in the U.S. Civil Service Retirement benefits did not constitute a property or interest subject to alienation by will or by the State intestate succession laws.

2. The trial court award to the adult children of the deceased spouse by a former marriage contravened the purpose and intent of the federal law establishing civil service retirement benefits.

3. Such retirement benefits are not subject to assignments or legal process by express provision of federal law and, therefore This appears to be a case of first impression in this State in the type of fact situation here involved. There are numerous cases involving a division of retirement benefits in divorce actions, but the case before us involves a division of retirement benefits under our probate or intestate succession laws.

any state law regarding distribution of annuity is preempted.

§ 45, Tex.Prob. Code Ann. (1956), provides in effect that upon dissolution of the marriage relation by death, all property of the husband and wife shall go to the survivor, if there be no child or children of the deceased or their descendants; but if there be a child or children of the deceased, or descendants then the survivor shall be entitled to one-half of the property and the other one-half shall pass to said child or children of the deceased.

We shall discuss appellant's contentions separately.

I

Appellant first contends that the interest of Tomas M. Valdez, Sr. in the U.S. Civil Service Retirement benefits did not constitute a property or interest subject to alienation by will or by the State and intestate succession laws. At the outset, appellant and appellees disagree both as to the nature of such retirement benefits and as to which portion of the U.S. Civil Service Retirement Act is applicable. Appellant refers to the payments as an annuity and in particular relies strongly on the provision of § 8341, which sets forth those individuals who may be designated as survivor annuity beneficiaries in the event of the death of the federal employee annuitant. (Appellant maintains the only interest Valdez, Sr. may have had with regard to Lillie's retirement annuity, was extinguished by his death.)

It is to be remembered that Lillie Valdez was living at the time of the death of Valdez, Sr., and is still living.

It is appellees' contention that the benefits here involved are retirement benefits payable under §§ 8332-8336 of the U.S. Civil Service Retirement Act. It is clear from the trial court's findings of fact and conclusions of law that the trial court regarded the benefits as retirement benefits, and as an earned property right.

§ 5.01, Tex. Family Code Ann. (1975), provides that community property consists of property, other than separate property, acquired by either spouse during their marriage.

The basic question here is whether or not the retirement benefits here involved are community property. There are a number of Texas decisions passing on and discussing the question as to whether retirement benefits are community property in this State. These decisions basically arise out of divorce actions. In the recent case of Cearley v. Cearley, 544 S.W.2d 661 (Tex.1976), the trial court granted the wife a fractional interest in future military retirement benefits, if, as, and when received by the husband. The court of civil appeals reversed because the husband had not quite reached the 20 years required for the benefits to become vested. The Supreme Court reversed the court of civil appeals and held that rights in retirement programs, prior to accrual and maturity, constituted a contingent interest in property and a community asset subject to consideration along with other property in the division of the estate. In such case, the Supreme Court stated:

Section 5.01 of the Family Code provides that community property consists of the property, other than separate property, acquired by either spouse during marriage. . . . Despite an earlier view that retirement and pension plans were gifts bestowed by benevolent employers on retiring employees, they are now regarded as a mode of employee compensation earned during a given period of employment. . . .

It is now well established that matured private retirement, annuity, and pension benefits earned by either spouse during the marital relationship are part of the community estate and thus subject to division upon dissolution of the marriage. . . .

The same characterization of community property was first given to military retirement benefits by this court in Busby v. Busby, 457 S.W.2d 551 (Tex.1970) . . . .

The latest expression by the Supreme Court is Taggart v. Taggart, 552 S.W.2d 422 (Tex.1977), which involved a partition of military retirement benefits that were not divided when the parties were divorced. The Supreme Court held that Cearley, supra, controlled such case also, and that the wife owned as her part of the community estate a share in the contingent right to military benefits even though the right had not matured at the time of the divorce. ²

Appellant also argues that the U.S. Civil Service Retirement benefits are in the nature of a gratuity granted by the federal government in appreciation for faithful services by a federal employee, and cites in support thereof Berkey v. United States, 176 Ct.Cl. 1, 361 F.2d 983 (1966). We do not regard this argument as persuasive. Our Supreme Court, in Cearley, supra, rejected this gift theory, citing with approval the following language from Lee v. Lee, 112 Tex. 392, 247 S.W. 828 at 833 (1923):

"It was in no sense a donation to the employe (sic) for individual merit, but was manifestly additional compensation for faithful and continuous service. It was as much a fruit of his labors as his regular wages or salary. It was in the strictest sense a 'gain' added to the common acquests of the marital partnership, as the direct result and fruit of his labor and services."

Appellant also relies on McJunkin v. Estate of McJunkin, 492 S.W.2d 278 (Tex.Civ.App. Dallas 1973, writ ref'd n.r.e.); Allen v. Allen, 363 S.W.2d 312 (Tex.Civ.App. Houston 1962, no writ); Buehler v. Buehler, 323 S.W.2d 67 (Tex.Civ.App. Texarkana 1959, writ ref'd n.r.e.). In our opinion, these cases are distinguishable and are not here controlling.

Herring v. Blakeley, 385 S.W.2d 843 (Tex.1965), is more in point. This case involved an annuity contract under which James Herring, an employee of Marathon, was entitled to a retirement annuity and certain death benefits. James had the unrestricted right to designate beneficiaries to receive the death benefits. James and Ellen were married during the course of James' employment at Marathon, but in 1960 they were divorced. At such time, James changed the death benefit from Ellen to Blakeley. James died ten months after the divorce and the question presented was who was entitled to the death benefits. The case did not involve retirement benefits. The Supreme Court held that James' interest in the plan was community property, and that at the date of the divorce Ellen was entitled to one-half of the value of the plan; pointing out that the plan came into existence during the marriage and contributions were made during the marriage.

II

Appellant next contends that the award to appellees of an interest in appellant's federal retirement benefits contravened the purpose and intent of the federal law establishing the U.S. Civil Service Retirement program. She argues that ...