Lead Opinion
Opinion
Retiring after 26 years of military service, husband
received a “disability” pension of 75 percent of his basic pay in lieu of a “retirement” pension at 65 percent of basic pay.
We agree with the reasoning of the trial court; to permit the husband, by unilateral election of a “disability” pension, to “transmute community property into his own separate property” (In re Marriage of Fithian, supra,
Turning to wife’s cross-appeal, we explain that the trial court’s order limiting its jurisdiction over spousal support to 24 months conflicts with the policy established in our recent decision of In re Marriage of Morrison (1978)
1. The trial court correctly apportioned husband’s pension into community and separate assets.
In the instant case the husband joined the Army in 1944 and married in 1950. In 1953 he suffered a service-related injury leading to amputation of his left forearm, for which the Army assigned him an 80 percent disability rating. If the husband had retired immediately, his maximum “disability” pay would have been 75 percent of basic pay, compared to a maximum “retirement” pay of 22 Vi percent of basic pay. He nevertheless continued his military service until he retired in 1970. At that time he faced the choice of taking regular “retirement” pay at the rate of 65 percent of his basic pay, or taking “disability” pay, a stipend equal to 75 percent of basic pay.
The husband commenced proceedings for dissolution of the marriage in 1974. The trial court first determined that all pension rights attributable to the husband’s military service before marriage, plus the portion of those rights earned during marriage attributable to the husband’s disability, constituted his separate property. It then ruled that that portion of the pension rights earned after the marriage equivalent to an ordinary retirement pension, computed on the basis of longevity of service and rank at retirement, constituted a community asset.
We begin our discussion of this issue by reviewing the procedure by which a disabled serviceman may compute the amount of “retired pay” to which he is entitled. He may elect, first, to compute his “retired pay” on the basis of his rank and disability by multiplying his monthly basic pay by his percentage of disability. Alternatively, he can compute his “retired pay” on the basis of rank and longevity of service by multiplying his monthly basic pay by 2Vi percent times his years of service. (10 U.S.C. § 1401.) Under either formula, he cannot receive more than 75 percent of his last monthly basic pay. The amount of retired pay the serviceman receives under either option therefore depends largely on his monthly pay at retirement, a function of longevity of service and rank; rank itself is closely related to length of service.
In In re Marriage of Jones, supra,
In Jones, we held that when a spouse is entitled to receive a pension only because he is disabled, and has no right to a pension because of longevity of service, the disability benefit payments are his separate property upon dissolution of the marriage. At the time Jones was decided, however, we deemed the community, interest in a nonvested retirement pension a mere expectancy, and not a property interest. (See French v. French (1941)
One year following our decision in Jones we overturned past precedent and held in In re Marriage of Brown, supra,
We cannot permit the serviceman’s election of a “disability” pension to defeat the community interest in his right to a pension based on longevity. In the first place, such a result would violate the settled principle that one spouse cannot, by invoking a condition wholly within his control, defeat the community interest of the other spouse. (See Waite v. Waite (1972)
In the second place, “only a portion of husband’s pension benefit payments, though termed ‘disability payments,’ is properly allocable to disability. It would be unjust to deprive wife of a valuable property right simply because a misleading label has been affixed to husband’s pension
The purpose of disability benefits, as we explained in Jones, is primarily to compensate the disabled veteran for “the loss of earnings resulting from his compelled premature military retirement and from diminished ability to compete in the civilian job market” (
The present case illustrates the point. The husband here did not retire prematurely from military service to face the prospect of competing on the civilian labor market handicapped by his disability; he served for 26 years, retiring only after he had acquired a vested right to a “retirement” pension. He did not begin to receive his disability pension until 17 years after the injury. The value of his present “disability” pension depends largely on the high military rank he had achieved at the time of retirement and his extensive military service; it does not relate to his rank or longevity at the time of injury. Under these circumstances, the pension’s function of compensating the husband for loss of earning capacity or providing recompense for personal suffering is secondary to the primary objective of providing retirement support.
The Court of Appeal in In re Marriage of Mueller, supra,
The trial court in the present case correctly followed this formula. It first classified as separate property that portion of the husband’s pension attributable to employment before marriage. Turning to the balance of the pension, it assigned as separate property only the excess of the husband’s pension over the “retirement” pension that he would have received if not disabled; the remainder of the pension it divided as community property.
2. The trial court abused its discretion by limiting its jurisdiction to modify spousal support to a period of 24 months.
The trial court ordered husband to pay to wife “as and for her spousal support, the sum of $1.00 per month, payable for a period of twenty-four (24) months, commencing March 1, 1974, subject to the continuing jurisdiction of the Court to alter, modify, or terminate the same upon good cause first being shown.” Wife does not challenge the amount of $1 per month, but contends that the 24-month limitation is an abuse of discretion.
Since the court’s continuing jurisdiction is not expressly limited to the 24-month period, the order is not entirely clear on its face. The award of $1 per month alimony, however, serves to clarify the meaning of the order. That award plainly is not intended as genuine support for the wife, but to serve as a legal fiction demonstrating the continuing jurisdiction of the court over spousal support. By limiting the $1 per month payments to a period of 24 months, the court impliedly indicated that it did not intend to extend its jurisdiction to modify the award of spousal support beyond the 24-month period.
So interpreted, the trial court’s award is inconsistent with our recent decision in In re Marriage of Morrison, supra,
In the present case, the parties had been married for 25 years. Following retirement from the military, husband has not been employed. Wife attempted to start work as a part-time real estate salesperson, but as of trial she earned only about $100 a month. As is so often the case, the
If the husband’s military pension is divided as ordered by the trial court, husband and wife will have approximately equal monthly incomes; thus the award of only $ 1 per month in spousal support is not an abuse of discretion. Any attempt to predict conditions of two, five, or ten years hence, however, is a matter of total speculation. Husband may remain unemployed and totally dependent on his military pension; on the other hand his demonstrated talents may yield a well paying job. Wife may or may not succeed as a real estate salesperson.
Both In re Marriage of Morrison and the Court of Appeal cases cited with approval in Morrison stress that decisions to terminate continuing jurisdiction cannot be based on speculation concerning future earnings and employment. Such decisions should instead be deferred until the realized facts demonstrate whether further support is warranted. As the Court of Appeal explained in In re Marriage of Smith (1978)
We conclude that the trial court abused its discretion in divesting itself of jurisdiction to award spousal support 24 months after the date of the decree. Four years having passed since the trial court rendered its judgment, that court should now reconsider the issue of spousal support in light of the current income and earning potential of the parties, and frame its award in conformity with the principles outlined in this opinion and elucidated fully in In re Marriage of Morrison, supra,
We conclude that military retired pay based on disability contains two components: (a) compensation to the serviceman for loss of earning power and personal suffering, and (b) retirement support. The latter component, to the extent that it is attributable to employment during marriage, is community property.
The portion of the judgment limiting the court’s jurisdiction to award spousal support is reversed and the cause remanded for further proceedings consistent with the views expressed herein. In all other respects the judgment is affirmed. Marilyn Stenquist shall recover her costs on this appeal.
Bird, C. J., Mosk, J., Richardson, J., Manuel, J., and Jefferson, J.,
Notes
We used the labels “disability pay” and “retirement pay” in In re Marriage of Jones (1975)
We note that if the husband had retired four years later, in 1974, both his maximum “disability” and his maximum “retirement” pay would have been 75 percent of his basic pay.
The trial court held that “[t]he ratio of that portion of the marriage from the commencement thereof up until the time of the petitioner’s [husband’s] retirement from military service, as compared with the entire total service of twenty-five years, eight months and ten days with which petitioner was credited, is seventy-seven percent (77%). The Court therefore finds that had the petitioner retired on longevity retirement pay, the respondent [wife] would be entitled to 38.5% of such pay, as a division of community property, such percentage representing fifty percent (50%) of the amount of such retirement accumulated during coverture . . . . [H] The Court further finds that ... the difference in pay between what the Petitioner would have received had he retired on straight retirement for years, and the disability pay which he is actually receiving, is the sole and separate property of the husband, while said lesser sum is community property, as accumulated during coverture. . . . [H] Pursuant thereto, the Court finds that 65/75ths (86.66%) of the disability retirement pay being received by the Petitioner would be community property to the extent the same was accrued during coverture, and that 77% thereof was so accrued during coverture, hence, 66.73% of said disability retirement pay is community property and one-half thereof (33.36%, rounded off to 33!ó% for convenience, by stipulation) is respondent’s share. (86.66% X 77% +2 =33!6%).’’
The wife on her part acknowledges that the trial court arrived at an equitable apportionment of the pension between separate and community interests. She argues, however, that the duty of making such apportionment imposes so great a burden on the courts that we should instead adopt a clear and simple rule that all “disability” payments, the right to which was earned during coverture, are community property. Rejecting this rigid rule and the contention that any other disposition of the issue causes complications, we point out that the method of apportionment adopted by the trial court, which we endorse, does not involve any delicate balancing of equities, but a simple mathematical computation based on the relationship of the “disability” pension to an alternative “retirement” pension. It does not impose a burden so heavy that for reasons of expediency we must settle for the less equitable, all-or-nothing rule wife proposes.
While in In re Marriage of Brown, supra,
Recognition of the nonemployee spouse’s interest in the “disability” pension would not limit the employee’s freedom “to elect between alternative retirement programs." (In re Marriage of Brown, supra,
We note that the courts of Texas have held that if a serviceman surrenders a vested right to retirement benefits in order to obtain “disability” benefits, the “disability” benefits are community property. (See Busby v. Busby (Tex. 1970)
As we have affirmed many times, adjustments in the amount of alimony awarded will not mitigate the hardship caused the wife by the denial of her community interest in the pension payments. Alimony lies within the discretion of the trial court and may be modified with changing circumstances: “the spouse ‘should not be dependent on the discretion of the court... to provide her with the equivalent of what should be hers as a matter of absolute right.’ ” (In re Marriage of Brown, supra,
Although the quoted language from In re Marriage of Mueller speaks of “matured” retirement benefits, the court earlier in its opinion made clear that matured benefits could not be distinguished from immature but vested benefits. Indeed in light of In re Marriage of Brown, supra,
Contrary to the view advanced in the dissenting opinion, allocation of the “disability” pension between separate and community interests does not discriminate against the disabled. In attempting to demonstrate such discrimination, the dissent first describes a healthy worker who takes some action, such as terminating his employment before his pension vests or working beyond his retirement date, which has the effect of forfeiting all or part of his pension rights. In such a case, of course, the worker’s spouse has no claim to any of the forfeited rights; a community share of nothing equals nothing. (See Reppy, Community and Separate Interests in Pension and Social Security Benefits After Marriage of Brown and ERISA (1978) 25 UCLA L.Rev. 417, 426, fn. 31.) The dissent then compares such a healthy worker to a disabled worker who retires and receives a “disability” pension, part of which under the present decision will be classified as community property. Because the spouse of the disabled worker can claim a share in his pension, the dissent concludes that the decision discriminates against the disabled.
The conclusion of the dissent, however, derives from the dissent’s inappropriate comparison. If instead of comparing a healthy worker who has forfeited pension rights with a disabled worker receiving a pension, we compare healthy and disabled workers who are both receiving pensions, we discover that under the allocation formula set forth in this opinion the disabled worker usually will retain a higher percentage of the benefits. In the present case, for example, the husband’s pension by virtue of his disability is higher than the “retirement” pension of a healthy serviceman of equivalent rank and longevity. Because we allocate to husband the whole of the excess of his “disability” pensions over a “retirement” pension, he receives greater pension benefits than does the undisabled veteran.
Language in In re Marriage of Jones, supra,
The record on appeal does not include a reporter’s transcript of the brief testimony heard by the trial court. The arguments of the parties suggest that none of this testimony bore on the question of the wife’s ability to attain economic self-sufficiency within a period of two years following the decree.
Upon such reconsideration, the trial court may wish to reserve jurisdiction to award spousal support to the husband as well as to the wife if the economic prospects of the parties so warrant.
Following the policy of In re Marriage of Brown, supra,
Assigned by the Chairperson of the Judicial Council.
Dissenting Opinion
I dissent.
Retirement pensions earned during marriage constitute community property, and disability pensions—no matter when the disability occurs—constitute separate property. Under federal law, a veteran who has qualified for both may receive only one. Either the separate property interest or the community property interest must be sacrificed, and the question before us is whether upon dissolution a portion of the disability pension—equal to the amount of retirement pension earned during marriage—shall be held to be community property. On the basis of well-settled principles, authorities and reason set forth in In re Marriage of Jones (1975)
To reach the result that part of the disability pension is community, the majority disapprove our recent unanimous decision in Jones (by the author of today’s opinion), now implying that Jones was based on the overruled doctrine of French v. French (1941)
Facts
Husband entered the Army in 1944 and married in 1950. In 1953 he was injured by shell fragments, suffering amputation of his left forearm. Rather than exercising his right to disability compensation, he chose to remain on active duty.
When husband retired in 1970 at the age of 43, he possessed the options of regular retirement pay based on longevity of service equal to 65 percent of his basic pay, or disability compensation equal to 75 percent of his basic pay. Disability compensation is not subject to federal or state taxes. The Army assumed husband desired the higher amount and began making disability payments to him.
Husband commenced dissolution of the marriage in 1974. The trial court held the difference between future disability compensation and regular retirement benefits constitutes husband’s separate property. A portion of the pension was attributed to husband’s employment prior to marriage and was also held to be his separate property. The balance was attributed to employment during marriage and was held to be community property. The court awarded the wife half of all community assets, determined $38,000 was her separate property, granted child support and one dollar per month spousal support for two years.
Recognizing that retirement benefits are not gratuities but represent deferred compensation for past service, this court has held that anticipated future retirement payments attributable to employment during marriage constitute a community asset divisible upon dissolution. (In re Marriage of Brown (1976)
Limitations on the applicability of community property principles to retirement pensions have also been established. Judicial recognition of the nonemployee spouse’s interest in pension rights does not limit the employee’s freedom to change or terminate his employment, to modify employment terms, including retirement benefits, or “to elect between alternative retirement programs.
These limitations on the applicability of community property doctrine reflect that pension programs not only compensate for past services but are also designed to induce persons to continue in the service of their employer by providing subsistence for employees and their dependents. (Waite v. Waite, supra,
Disability Compensation
Unlike retirement pensions, veteran’s disability benefits do not constitute deferred compensation for past services. While longevity of service may be a factor in determining the underlying right to disability compensation and its amount, benefits depend primarily upon physical or mental disability, compensating for loss of earning capacity in the open labor market. Earnings following dissolution are of course separate property. The secondary purpose of disability benefits is to compensate for pain, suffering, disfigurement and resulting misfortune—all personal rather than community concerns. (In re Marriage of Jones, supra,
Because the main bases for disability compensation are loss of earning capacity and personal damage rather than past services performed, disability compensation is analogous to a personal injury award rather than to a retirement benefit. In Washington v. Washington (1956)
For the foregoing reasons, we concluded in In re Marriage of Jones, supra,
Waiver of Retirement Pension
The veteran in Jones did not possess a vested right to a retirement pension and we expressly left open the question whether a disability pension, granted after the serviceman obtains a vested right, constitutes separate property. Nevertheless, the reasoning of Jones requires our conclusion that disability payments are separate property whether or not the veteran’s right to a retirement pension has vested.
Jones was decided when the rule existed that nonvested pension rights do not constitute community property divisible on divorce. (French v. French, supra,
Because our decision in Brown determined that vested and nonvested retirement pensions shall be treated "alike, no reason exists to distinguish our holding in Jones that disability compensation following dissolution is separate property when a disabled employee possesses nonvested retirement rights. Disability compensation is obviously a legitimate separate property interest, whether the retirement pension is vested or not. And when, as here, direct conflict exists between that interest and the community interest in the retirement pension, one must bow. Resolution
Such holding does not result in a deprivation of the spouse’s justifiable reliance on a retirement pension. Any such reliance must take into account our holding in In re Marriage of Jones, supra,
The Majority Opinion
A. The Excuse to Reconsider In re Marriage of Jones, supra,
The majority indicate that Jones was somehow based on the doctrine of French v. French, supra,
The majority’s indication that Jones was based on the expectancy doctrine is false. As shown above, the basis of Jones was that disability pensions are primarily compensation for loss of earning capacity and for pain, suffering, disfigurement, and resulting misfortune—all separate rather than community concerns after dissolution. Jones does not cite French or mention the expectancy doctrine. And there was a very good reason why it was not mentioned—the justices were fully aware of the likelihood that French and the expectancy doctrine would be repudiated. Less than a year earlier, this court in In re Marriage of Wilson (1974)
All of the justices who participated in Jones had participated in Wilson, and all participated less than a year after Jones when in Brown, French was disapproved. The right hand knew what the left hand was doing. In the circumstances, while expectancy doctrine could have furnished a basis to reach the result in Jones, any reliance upon expectancy doctrine of French in Jones would have been improper. Jones not even mentioning French or the expectancy doctrine, it is unreasonable to suggest that Jones was somehow based on French or the doctrine.
The excuse furnished by the majority for repudiating our recent unanimous decision in Jones displays a remarkable lack of candor.
B. Results of Repudiation of Jones.
However contrived the excuse given for reconsidering a recent unanimous decision, however weak the reasons given for repudiating the decision, in the last analysis the results following from the new rule adopted must be weighed on their own merits. When we weigh the majority’s determination to repudiate Jones, we find that they have established an invidious discrimination between disabled employees and healthy employees who terminate employment when there is a dissolution.
Disapproving Jones, the majority purport to rely upon In re Marriage of Brown, supra,
In short under Brown when the healthy employee having only nonvested retirement rights terminates his employment—perhaps for more lucrative employment—the nonvested pension rights are lost with the employee owing no obligation to compensate a former spouse for the loss of the nonvested pension rights. Under Jones, a comparable result was reached—the disabled employee having nonvested retirement rights who terminated employment and received a disability pension was not required to compensate the former spouse for loss of the nonvested pension rights.
By disapproving Jones, the majority single out the handicapped and compel them to compensate former spouses for loss of nonvested pension rights due to termination of employment. The disabled are placed in a worse position than the healthy who terminate employment. Former spouses of the disabled are given benefits when former spouses of the healthy are denied similar benefits.
The disabled are also placed in a worse position than the healthy employee who continues his employment. There is no liability to former spouses because there are no retirement benefits. The employee may continue to work until he dies in which event there may never be retirement pension payments. On the other hand, the employee who retires for disability under today’s majority decision immediately must pay part of the disability pension to the former spouse. The former spouse of the disabled employee is entitled to benefits upon payment of the disability pension, when had the employee remained healthy the former spouse might not have been entitled to any benefits and at most could only receive delayed benefits.
Both federal and state law prohibit discrimination against the handicapped in employment. (See, e.g., 29 U.S.C. § 793; Lab. Code, §§ 1430, 1735.) Today, the majority not only permit but require discrimination against the disabled who are compensated for their inability to compete in
Primarily, there are three situations where there is a clear difference in the practical effects of the majority’s determination to give the former spouse an interest in the disability pension and my approach to hold that the pension is separate property with spousal support available to meet the needs of the former spouse. The three situations involve justification to deny or severely limit spousal support. The disability pension and other economic resources available to the disabled employee may be insufficient to meet his needs, warranting denial of spousal support. The former spouse may have sufficient economic resources so that little or no support is required. The former spouse may remariy terminating spousal support. (Civ. Code, § 4801.)
C. The Majority’s Settled Principle.
Relying upon Waite v. Waite, supra,
However, the cases cited do not stand for the so-called “settled principle,” but hold only that the possibility the employee may elect to forego an otherwise vested pension does not unvest that pension. (Waite and Peterson were decided prior to this court’s decision in Brown holding that nonvested pensions are community property subject to division upon dissolution.)
Moreover, the so-called “settled principle” is contrary to Brown because, as we have seen, the employee is free to change or terminate employment, modify retirement terms, or elect between alternative retirement programs. (In re Marriage of Brown, supra,
I would reverse the judgment.
“In Phillipson v. Board of Administration, supra,
The majority’s formula implicitly accepts the conclusion that disability benefits are separate property. Under the formula, had there been no retirement benefits, the former spouse of the disabled employee would not be entitled to any of the disability pension.
Such an approach was followed by the trial court in Waite v. Waite, supra,
The majority in footnote 10 suggest that the proper comparison is between healthy employees who receive pension payments and the disabled. The comparison is not in point because no payments are made under nonvested pensions. The pension must be vested before there are payments.
Death of the obligor ordinarily terminates spousal support (Civ. Code, § 4801), but employee pension payments ordinarily terminate on death of the employee. As pointed out earlier, surviving spouse benefits are paid only to surviving spouses, not former spouses who may have been married to the employee during the period of employment.
In re Marriage of Cavnar (1976)
By way of contrast, in the instant case the husband commenced receiving disability pay at the age of 43, he did not receive retirement pay, and it is clear that his disability pay is compensation for the diminished ability of a one-armed man to compete in the labor market.
I would disapprove In re Marriage of Mueller (1977)