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Full Opinion
In re the Marriage of RICHARD WILLIAM and MARILYN BETTY STENQUIST.
RICHARD WILLIAM STENQUIST, Appellant,
v.
MARILYN BETTY STENQUIST, Appellant.
Supreme Court of California.
*782 COUNSEL
Hervey, Mitchell, Ashworth & Keeney and Thomas Ashworth III for Appellant Husband.
Rand & Day and Roland B. Day for Appellant Wife.
Gertrude D. Chern as Amicus Curiae on behalf of Appellant Wife.
OPINION
TOBRINER, J.
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.[1] Although a military "retirement" pension is a community asset (In re Marriage of Fithian (1974) 10 Cal.3d 592, 604 [111 Cal. Rptr. 369, 517 P.2d 449]), husband claims that his entire "disability" pension is his separate property under our decision in In re Marriage of Jones, supra, 13 Cal.3d 457. Looking beneath the label of a "disability" pension, however, the trial court found that only the excess of the "disability" pension rights over the alternative "retirement" pension represented additional compensation attributable to husband's disability; the balance of the pension rights acquired during the marriage, it ruled, served to replace ordinary "retirement" pay and thus must be classed as a community asset.
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, 10 Cal.3d 592, 602), is to negate the protective philosophy of the community property law as set out in previous decisions of this court. We therefore affirm the judgment of the trial court apportioning husband's *783 pension rights between separate and community assets and dividing the community interest equally between the spouses.
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) 20 Cal.3d 437 [143 Cal. Rptr. 139, 573 P.2d 41]. Because any assertion that wife will attain economic self-sufficiency within 24 months of the judgment below rests on speculation, not evidence, the trial court's order divesting itself of the power to order spousal support beyond that brief period constitutes an abuse of discretion. We therefore reverse that portion of the trial court's order, remanding the matter for further proceedings in light of this opinion.
(1a) 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 1/2 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.[2] Assuming the husband desired the higher amount, the Army began making "disability" payments to him.
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.
*784 The court finally divided this asset equally between the spouses.[3] The husband appeals from the portion of the judgment awarding his wife part of his pension as community property. The wife also appeals from the judgment below; challenging the court's apportionment, she claims that only that portion of the pension attributable to husband's employment before marriage is separate property.
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 2 1/2 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, 13 Cal.3d 457, and In re Marriage of Loehr (1975) 13 Cal.3d 465 [119 Cal. Rptr. 113, 531 P.2d 425], its companion memorandum decision, we held that a serviceman's right to "disability" pay, acquired before he had earned a "vested" right to ordinary retirement pay, was separate property. Subsequently in In re Marriage of Brown (1976) 15 Cal.3d 838 [126 Cal. Rptr. 633, 544 P.2d 561], we held that "vested" and "nonvested" pension rights should be treated alike. Relying on those decisions, the husband contends that all military *785 pensions based on disability are now separate property.[4] Closer examination, however, reveals that the reasoning of Jones and Brown supports the division of the husband's pension which the present trial court ordered.
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) 17 Cal.2d 775 [112 P.2d 235, 134 A.L.R. 366].) Since Jones retired before his right to a "retirement" pension vested, his acceptance of "disability" pay did not affect any present community asset, but merely prevented an expectancy from coming into fruition. Recognizing, however, that the principles in Jones might not govern a case in which the serviceman had acquired a vested right to retired pay wholly apart from his disability, we expressly limited our decision to cases involving nonvested pensions.
One year following our decision in Jones we overturned past precedent and held in In re Marriage of Brown, supra, 15 Cal.3d 838, that pension rights, whether or not vested, constituted a property interest; that to the extent that such rights derive from employment during coverture, they now comprise community assets. This holding undermines the fundamental premise of Jones: that the award of a serviceman's "disability" pension to the serviceman as his separate property would not impair any community interest of his spouse. Under current law in contrast to the law prevailing when Jones was decided both the nonvested retirement pension in Jones and the husband's vested right to a "retirement" pension in the present case constitute valuable community assets deserving of judicial protection.
*786 Our reasoning in Brown is particularly appropriate to the present case. (2) As we stated there, "[o]ver the past decades, pension benefits have become an increasingly significant part of the consideration earned by the employee for his services. As the date of vesting and retirement approaches, the value of the pension right grows until it often represents the most important asset of the marital community.... A division of community property which awards one spouse the entire value of this asset, without any offsetting award to the other spouse, does not represent that equal division of community property contemplated by [the Family Law Act]." (In re Marriage of Brown, supra, 15 Cal.3d 838, 847.)
(1b) 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) 6 Cal.3d 461, 472 [99 Cal. Rptr. 325, 492 P.2d 13]; In re Marriage of Peterson (1974) 41 Cal. App.3d 642, 650-651 [115 Cal. Rptr. 184].)[5] As the court explained in In re Marriage of Mueller (1977) 70 Cal. App.3d 66 [137 Cal. Rptr. 129], a case indistinguishable from the present appeal, the employee spouse retains the right to determine the nature of the benefits to be received.[6] It would be inconsistent with community property principles "to permit that spouse to transmute what would otherwise be community property into his or her separate property." (70 Cal. App.3d at pp. 71-72.)[7]
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 *787 fund benefits." (3) (See fn. 8.) (In re Marriage of Cavnar (1976) 62 Cal. App.3d 660, 665 [133 Cal. Rptr. 267]; see Pattiz, In a Divorce or Dissolution Who Gets the Pension Rights: Domestic Relations Law and Retirement Plans (1978) 5 Pepperdine L.Rev. 191, 198 and cases there cited.)[8]
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" (13 Cal.3d at p. 459) and secondarily to compensate him for the personal suffering caused by the disability. Military retired pay based on disability, however, does not serve those purposes exclusively. Because it replaces a "retirement" pension, and is computed in part on the basis of longevity of service and rank at retirement, it also serves the objective of providing support for the serviceman and his spouse after he leaves the service. Moreover, as the veteran approaches normal retirement age, this latter purpose may become the predominate function served by the "disability" pension.
(1c) 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, 70 Cal. App.3d 66, explained the method of allocating a disability pension between the separate interest of the disabled spouse and the community *788 interest in the retirement benefits. It stated that "where the employee spouse elects to receive disability benefits in lieu of a matured right to retirement benefits, only the net amount thus received over and above what would have been received as retirement benefits constitutes compensation for personal anguish and loss of earning capacity and is, thus, the employee spouse's separate property. The amount received in lieu of matured retirement benefits remains community property subject to division on dissolution." (70 Cal. App.3d at p. 71.)[9]
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.[10] Finding this portion of the trial court's decision in accord with the principles stated in In re Marriage of Mueller, supra, 70 *789 Cal.3d 68, and adopted in this opinion, we affirm its division of the marital property.[11]
(4a) 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, 20 Cal.3d 437. (5) We stated in Morrison that "A trial court should not terminate jurisdiction to extend a future support order after a lengthy marriage, unless the record clearly indicates that the supported spouse will be able to adequately meet his or her financial needs at the time selected for termination of jurisdiction. In making its decision concerning the retention of jurisdiction, the court must rely only on the evidence in the record and the reasonable inferences to be drawn therefrom. It must not engage in speculation. If the record does not contain evidence of the supported spouse's ability to meet his or her future needs, the court should not `burn its bridges' and fail to retain jurisdiction." (20 Cal.3d at p. 453.)
(4b) 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 *790 combined income of the parties is insufficient to meet the anticipated expenses of separate living.[12]
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) 79 Cal. App.3d 725, 738-739 [145 Cal. Rptr. 205]: "[B]y making an order terminating all spousal support ... without reserving jurisdiction to extend the period, the court put it out of its power to provide any support whatever for wife after that time even if, after maximum effort on her part, she is unable to support herself in a reasonable fashion. There is no justification for the court so `burning its bridges.'" (See also In re Marriage of Andreen (1978) 76 Cal. App.3d 667, 673 [143 Cal. Rptr. 94].)
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, 20 Cal.3d 437.[13]
*791 3. Summary
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.[14] The trial court correctly followed this analysis in apportioning the husband's pension rights in the instant case. That court erred, however, in limiting its jurisdiction to award spousal support to the brief period of two years; it should have retained jurisdiction in order to be able to evaluate the parties' needs and capacities in light of future events.
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.,[*] concurred.
CLARK, J.
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) 13 Cal.3d 457 [119 Cal. Rptr. 108, 531 P.2d 420], it must be concluded the disabled person upon dissolution is entitled to the future *792 disability pension payments as separate property, with spousal support available to meet the needs of the nondisabled former spouse in appropriate cases.
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) 17 Cal.2d 775 [112 P.2d 235, 134 A.L.R. 366], which held that nonvested retirement pensions are mere expectancies. (Ante, p. 785.) The implication is false; Jones did not rely upon the doctrine of French. Moreover, by repudiating Jones, the majority establish an invidious discrimination between disabled employees and healthy ones who terminate employment, a discrimination betraying a shocking lack of compassion for the handicapped.
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.
*793 RETIREMENT PENSIONS
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) 15 Cal.3d 838, 841 et seq. [126 Cal. Rptr. 633, 544 P.2d 561]; In re Marriage of Jones, supra, 13 Cal.3d 457, 461; Waite v. Waite (1972) 6 Cal.3d 461, 471 [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].) On this basis, future military retirement benefits have been held divisible as community property. (In re Marriage of Fithian (1974) 10 Cal.3d 592, 604 [111 Cal. Rptr. 369, 517 P.2d 449].) The retirement pension is divisible whether vested or nonvested. (In re Marriage of Brown, supra, 15 Cal.3d 838, 843-850.) While nonvested pension rights may in theory be divided by determining the present value of the rights, their evaluation must take into account the possibility that death or termination of employment may destroy them before maturity. The uncertainties warrant refusal to divide present value and instead awarding a portion of each pension payment as it comes due. (Id., at p. 848.)
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.[12] ... The employee retains the right to decide, and by his decision define, the nature of the retirement benefits owned by the community." (In re Marriage of Brown, supra, 15 Cal.3d 838, 849-850.) Unlike other community property interests, the nonemployee spouse's interests may not be devised or inherited. (Waite v. Waite, supra, 6 Cal.3d 461, 472-474.) And a provision in the employee benefit plan granting benefits to an employee's "widow" will be enforced to exclude benefits to a spouse married during the employment period where the marriage was dissolved and the employee remarried. (Id., at p. 472, fn. 6; Phillipson v. Board of Administration, supra, 3 Cal.3d 32, *794 42-43; Benson v. City of Los Angeles (1963) 60 Cal.2d 355, 360-362 [33 Cal. Rptr. 257, 384 P.2d 649]; In re Marriage of Peterson (1974) 41 Cal. App.3d 642, 650 [115 Cal. Rptr. 184].)
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, 6 Cal.3d 461, 472-473.) When the various goals conflict, community interests will be sacrificed when necessary to protect the private interests of employers and employees.
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, 13 Cal.3d 457, 462; 7 Witkin, Summary of Cal. Law (8th ed. 1974) Community Property, § 1, p. 5094.)
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) 47 Cal.2d 249 [302 P.2d 569], we held that while personal injury awards recovered during marriage might be classified as community property, a cause of action for such injury becomes the injured spouse's separate property when the cause has not been reduced to judgment prior to the date of divorce. Justice Traynor reasoned that in "such a case not only may the personal elements of damages such as past pain and suffering be reasonably treated as belonging to the injured party, but the damages for future pain and suffering, future expenses, and future loss of earnings are clearly attributable to him as a single person following the divorce. Moreover, as in any other case involving future earnings or other after acquired property, the wife's right, if any, to future support may be protected by an award of alimony." (47 Cal.2d 249, 253-254.)
*795 The Legislature subsequently extended the Washington principle to all personal injury damages and settlement payments received after interlocutory decree of dissolution. (Civ. Code, § 5126.)
For the foregoing reasons, we concluded in In re Marriage of Jones, supra, 13 Cal.3d 457, 464, that "military disability payments received after dissolution of a marriage should ... be classified as the separate property of the disabled veteran." (See In re Marriage of Olhausen (1975) 48 Cal. App.3d 190, 192 et seq. [121 Cal. Rptr. 444] (police officer disability).)[1]
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, 17 Cal.2d 775, 778.) We later overruled French and held that nonvested pension rights are divisible upon dissolution. (In re Marriage of Brown, supra, 15 Cal.3d 838, 851.) Rejecting the argument that division of nonvested retirement pensions would infringe upon the employee's freedom to contract, we pointed out that recognition of the nonemployee spouse's interest in vested pension rights does not limit the employee's right to change or terminate employment, to modify employment terms including retirement benefits, or to elect between alternative retirement programs. (Id., at p. 849.)
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 *796 of the conflict is provided by Washington v. Washington, supra, 47 Cal.2d 249, 253-254, holding disability compensation separate property but fashioning spousal support to meet the needs of the nondisabled spouse.[2]
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, 13 Cal.3d 457, 464 that military disability payments received after dissolution of a marriage are separate property of the disabled veteran if retirement due to disability occurs prior to vesting of a retirement pension. Thus, the spouse is on notice during the entire period when the retirement pension is assertedly earned that should the employee obtain dissolution and retire for disability, the disability payments will be separate.