Marr. of Green , 56 Cal. 4th 1130 ( 2013 )

Filed 6/24/13
IN THE SUPREME COURT OF CALIFORNIA
In re the Marriage of JULIE R. GREEN)
and TIMOTHY P. GREEN. )
)
JULIE R. GREEN, )
)
Appellant, )
) S203561
v. )
) Ct.App. 1/4 A129436
TIMOTHY P. GREEN, )
) Contra Costa County
Respondent. ) Super. Ct. No. D0801292
____________________________________)
Retirement benefits attributable to service rendered during a marriage are
community property. In this case, the husband, a firefighter, has retirement
benefits that are part community property and part his own separate property.
During the time of the marriage, he exercised his right to purchase four years‟
worth of additional retirement credit for his premarital military service. He had to
pay to obtain this additional credit, which he elected to do in installments, some of
which came from community property. The value of the additional credit
substantially exceeds the cost of obtaining it. We must decide how much, if any,
of the value of the four additional years of credit is community property.
What matters in determining whether retirement benefits are community or
separate property is the person‟s marital status when the services on which the
benefits are based were rendered. Here the husband rendered the military
1
service before the marriage. Accordingly, we conclude that, except for the
community‟s contribution to the cost of obtaining the credit, the four years of
additional credit are the husband‟s separate property.
The trial court ordered the husband to pay the wife one-half of the amount
the community expended to obtain the credit plus interest. We conclude that the
trial court acted within its discretion in using this method to compensate her for
her share of the community‟s interest in the property. We reverse the judgment of
the Court of Appeal, which reached a different conclusion.
I. FACTS AND PROCEDURAL HISTORY
We draw these facts largely from the Court of Appeal opinion.
Timothy P. Green (husband) served in the United States Air Force for four
years, from July 23, 1982, to May 1, 1986. On June 16, 1989, he began working
as a firefighter for the Dougherty Regional Fire Authority in Dublin, which
participated in the California Public Employees‟ Retirement System (CalPERS).
At that time, husband had the right to buy up to four years of service credit
towards his retirement benefits for his military service. Husband married Julie R.
Green (wife) in May 1992.
In July 1997, the Dougherty Regional Fire Authority merged with the
Alameda County Fire Department, which also participates in CalPERS. Husband
continued to work for the Alameda County Fire Department.
On August 1, 2002, husband exercised his right to buy four years of service
credit for his military service. He elected to pay for the purchase under an
installment plan, paying $92.44 twice each month through payroll deductions for
15 years, scheduled to end in July 2017. Before the parties separated on October
1, 2007, $11,462.56 of community funds had been used toward the purchase of the
military service credit.
2
Wife filed a petition for dissolution of the marriage in March 2008. The
parties disputed whether to characterize husband‟s military service credit as
separate or community property. After a trial, the trial court ordered that the
military service credit portion of husband‟s CalPERS pension be awarded to him
as his separate property. The court also ordered husband to pay wife $6,699.54,
representing half of the installment payments made with community funds toward
the military service credit, plus interest at the rate of 6 percent.
Wife appealed, challenging the characterization of the military service
credit as husband‟s separate property. The Court of Appeal reversed the
judgment. It concluded that, “because the military service credit was purchased
with community funds during the parties‟ marriage, it was community property”
and remanded the case to the trial court to determine the proper allocation of that
property.
We granted husband‟s petition for review.
II. DISCUSSION
We recently summarized the applicable legal principles. In general, all
property that a spouse acquires during marriage before separation is community
property. (Fam. Code, §§ 760, 770.) Community property may include the right
to retirement benefits that the employee spouse accrues as deferred compensation
for services rendered. The right to retirement benefits is a property interest. To
the extent that such a right derives from service during marriage before separation,
it is a community asset. We review de novo the trial court‟s characterization of
service credit as community or separate property. (In re Marriage of Sonne (2010)
48 Cal.4th 118, 124 (Sonne).)
Husband is a member of CalPERS. “Members of CalPERS, once vested,
participate in a defined benefit retirement plan, which supplies a monthly
retirement allowance under a formula comprising factors such as final
3
compensation, service credit (i.e., the credited years of employment), and a per-
service-year multiplier. The retirement allowance consists of an annuity (which is
funded by member contributions deducted from the member‟s paycheck and
interest thereon) and a pension (which is funded by employer contributions and
which must be sufficient, when added to the annuity, to satisfy the amount
specified in the benefit formula).” (Sonne, supra, 48 Cal.4th at p. 121.)
Government Code section 21024 permits those who work for an agency
that elects to be subject to the section to obtain up to four years of additional credit
towards their retirement allowance for “public service,” which includes service in
the United States military. (See id., subds. (a), (c), (e), (f).) This public service is
to be credited “as it would be credited if the member had been in state service
during his or her public service.” (Gov. Code, § 21034.) Government Code
section 21024 was enacted in 1995 as part of the Public Employees‟ Retirement
Law. (Stats. 1995, ch. 379, § 2, pp. 2133-2134; see Gov. Code, § 20000.) But it is
derived from an earlier statute containing similar provisions. (Gov. Code, former
§ 20930.3, added by Stats. 1974, ch. 1437, § 1, p. 3142.)
Government Code section 21024, subdivision (b), requires those who elect
to receive the additional credit for public service to contribute money in order to
receive it. During the marriage, husband elected to obtain the four years of
military service credit for which he was eligible and arranged to make the required
contribution in installment payments, some of which came from community
property. We must decide whether the credit for the military service is community
property or husband‟s separate property.
Two recent cases from this court guide us. In In re Marriage of Lehman
(1998) 18 Cal.4th 169 (Lehman), the husband and wife had been married during
part, although not all, of the time the husband worked and accumulated retirement
benefits. At the time the husband retired, after dissolution of the marriage, his
4
employer offered an “enhanced retirement program” to encourage early
retirement. The program included “the crediting of three putative years of
service.” (Lehman, supra, at p. 175.) We described these putative years as
“fictive — they have no independent existence, but are merely a means by which
the employer effects the enhancement.” (Id. at p. 188.) Although the employer
offered the enhanced program only after the marriage had dissolved, we found the
three years‟ additional credit to be, in part, community property.
We explained that, “if the right to retirement benefits accrues, in some part,
during marriage before separation, it is a community asset and is therefore owned
by the community in which the nonemployee spouse as well as the employee
spouse owns an interest.” (Lehman, supra, 18 Cal.4th at p. 179.) “It follows that a
nonemployee spouse who owns a community property interest in an employee
spouse‟s retirement benefits owns a community property interest in the latter‟s
retirement benefits as enhanced. That is because, practically by definition, the
right to retirement benefits that accrues, at least in part, during marriage before
separation underlies any right to an enhancement.” (Id. at pp. 179-180.) “[W]hat
is determinative is the single concrete fact of time. To the extent — and only to
the extent — that an employee spouse accrues a right to property during marriage
before separation, the property in question is a community asset.” (Id. at p. 183.)
We cited with approval a New York case that had explained that a pension
right owned as community property is, by its nature, subject to modification by
future actions of either the employee or the employer. (Lehman, supra, 18 Cal.4th
at pp. 183-184, citing Olivo v. Olivo (N.Y. 1993) 624 N.E.2d 151. 155.)
Accordingly, “ „both parties‟ rights are generally subject to changes in the terms of
a retirement plan, as well as to circumstances largely beyond their control, such as
the salary level finally achieved by the employee and used to calculate the pension
benefit. What the nonemployee spouse possesses, in short, is the right to share in
5
the pension as it is ultimately determined. . . . [Any] enhancement‟ in the amount
is a „modification of an asset not the creation of a new one.‟ ” (Lehman, supra, at
p. 184, quoting Olivo v. Olivo, supra, at p. 155, italics added in Lehman.)
In Sonne, supra, 48 Cal.4th 118, the husband transferred to a former wife
several years of service credit that had accrued during the former marriage. The
former wife exercised her right to collect a refund of the accumulated
contributions in the retirement account, which permanently waived her rights to
any further claim on the husband‟s retirement benefits. Later, the husband, then
remarried, exercised his right to redeposit the same contributions into the account,
thereby regaining the years of service credit he had previously transferred to the
former wife. Some of the money used to redeposit the contributions was
community property from the second marriage. When the second marriage was
dissolved, “the question arose: What was the community‟s share of the service
credit from the [former] marriage?” (Id. at p. 121.) The trial court had found that,
to the extent community funds from the second marriage were used for the
redeposit, the service credit was the second marriage‟s community property. We
took a different view.
We agreed with the argument of an amicus curiae “that since community
funds contributed only to the annuity component of the retirement allowance, the
community was entitled only to a pro tanto share of the annuity — and not to a
share of the much larger pension component, which was funded by employer
contributions.” (Sonne, supra, 48 Cal.4th at p. 121.) We explained that “a
redeposit of member contributions for a prior period of service does not constitute
consideration for the service credit for that period; it is merely a condition
precedent to a credit for that previously rendered service. (See Gov. Code,
§ 20756.) The service credit (and the pension component of the retirement
allowance) are more correctly described as „ “a form of deferred compensation for
6
services rendered.” ‟ (In re Marriage of Skaden (1977) 19 Cal.3d 679, 686.) The
trial court‟s analysis gave no weight whatsoever to the service Husband rendered
as a deputy sheriff during those years, all of which preceded the [second]
marriage.” (Id. at p. 125.)
We found instructive In re Marriage of Lucero (1981) 118 Cal.App.3d 836(Lucero), which, we said, “involved almost the mirror image of the present case.”
(Sonne, supra, 48 Cal.4th at p. 125.) As we explained, in Lucero, “the husband
redeposited his federal employee retirement contributions after he and his wife had
separated, using his own separate funds. Part of the redeposited contributions
related to service years during the marriage. (Lucero, supra, 118 Cal.App.3d at p.
839.) In rejecting the husband‟s claim that the increase in his retirement benefit
due to the redeposit was entirely his separate property, the Court of Appeal
recognized that the substantial increase in the husband‟s retirement benefit „was
possible only as consideration for the husband‟s service‟ during the marriage (id.
at p. 841) and that „ “the community owns all pension rights attributable to
employment during the marriage.” ‟ (Id. at p. 842.) Accordingly, the court
concluded that the wife had a right „to share in the increased retirement benefits
upon payment of her pro rata share of the redeposit.‟ (Ibid.)” (Sonne, supra, at p.
125.)
The service credit at issue in Sonne, “by contrast, was not attributable to
employment during the [second] marriage. Rather, it was earned during [the
husband‟s former] marriage and was originally an asset of that community.”
(Sonne, supra, 48 Cal.4th at p. 126.) Because the husband had received that
property as his own separate property, it had remained his separate property at the
time of the second marriage. (Ibid., citing In re Marriage of Stenquist (1978) 21
Cal.3d 779, 788 [“that portion of the husband‟s pension attributable to
employment before marriage” is separate property].)
7
We further explained that the husband had “retained, as his separate
property, a right to recoup that service credit in the event [the former wife] were to
withdraw the assets in her nonmember account. (See In re Marriage of Brown
(1976) 15 Cal.3d 838, 846, fn. 8 [„The law has long recognized that a contingent
future interest is property [citation] no matter how improbable the
contingency . . .‟]; In re Marriage of Joaquin (1987) 193 Cal.App.3d 1529, 1533
[„ “ „property to which one spouse has acquired an equitable right before marriage
is separate property, though such right is not perfected until after
marriage . . .‟ ” ‟].) [The former wife] did just that (see Gov. Code, § 21292), and
Husband elected to exercise his right to redeposit his member contributions plus
interest. (See id., §§ 20750, 20751.) Had he made that redeposit with separate
property funds, the recouped service credit would unquestionably have been his
separate property.” (Sonne, supra, 48 Cal.4th at p. 126.) Accordingly, “the right
to recover the prior service credit was Husband‟s separate property.” (Ibid.)
We concluded in Sonne that “the community had a claim only on the
annuity component relating to the time period of the [former] marriage, and was
entitled only to a pro tanto share of that portion of Husband‟s retirement
allowance.” (Sonne, supra, 48 Cal.4th at pp. 127-128.) “The remainder of the
retirement allowance is supplied by the pension, which derives from the
contributions of the employer and which, the record shows, is several orders of
magnitude larger than the accumulated member contributions. The [second
marriage‟s] community did not contribute to that larger component of the
retirement allowance, and it was therefore an abuse of discretion to award any
share of it to the community.” (Id. at p. 128.)
A treatise has aptly distilled the rule derived from these cases: “Pension
and retirement benefits are a form of employment compensation and thus
tantamount to „earnings.‟ As such, regardless of when the benefits ‘vest’ or are
8
received, they are characterized in accordance with the employee‟s marital status
at the time the services were rendered; i.e., the benefits are community property to
the extent attributable to employment during marriage.” (2 Hogoboom & King,
Cal. Practice Guide: Family Law (The Rutter Group 2012) § 8:141, p. 8-43.)
Here, husband rendered his military service before the marriage, making the
military service credit his separate property.
Wife argues the military service credit was an enhanced retirement benefit
like the one in Lehman, supra, 18 Cal.4th 169, that we determined was partly
community property. But this case is not similar to Lehman. In Lehman, the
enhanced credits were based on “fictive” years (id. at p. 188, italics omitted), not
real ones, and, accordingly, were attributable in part to years of work during the
marriage. Here, husband served in the military rather than as a firefighter during
the time in question. Government Code section 21034 treats that military service
as if it had been service as a firefighter. In that limited sense, the military credit is
fictive. But in the sense we used the term in Lehman, the years of credited service
are not fictive. Those years are attributable to specific, actual years of military
service that husband rendered before the marriage.
To designate a portion of those four years of credit as community
property — as did the Court of Appeal — solely due to the community‟s
contribution towards the required payment gives no weight to husband‟s
premarital service to his country. (See Sonne, supra, 48 Cal.4th at p. 125.) But
Government Code section 21034 specifically mandates that this military service is
to be credited “as it would be credited if the member had been in state service
during” that service. This demonstrates a legislative intent to fully credit persons
for their military service. The four years of military service should be treated the
same the way the years at issue in Sonne and Lehman were treated — basing the
characterization of the credit on the marital status at the time of the service.
9
In Sonne, we were able to discern from the record that the payment from
community funds went towards the annuity portion of the retirement benefits and
not towards the far greater pension portion, which the employer paid. (Sonne,
supra, 48 Cal.4th at pp. 127-128.) The situation is less clear in this case. On this
record, it is difficult to determine exactly how the required contribution was
calculated and what it paid for. The Court of Appeal believed that, unlike the
situation in Sonne, husband had to pay both the employee‟s and the employer‟s
contribution. But it explained that obtaining the credit was nonetheless beneficial
because “whatever method was used to set [husband‟s] contribution to purchase
military service credit, he was able to purchase it based on his salary at the time of
hire, but he will receive payment for the service credit based on his salary upon
retirement.”
Wife stated in the trial court that the credit‟s value was about $140,000, far
more than the cost of the contributions, and husband seemed to accept that figure,
although it is not clear how either arrived at it. An amicus curiae brief from the
Northern California Chapter of the American Academy of Matrimonial Lawyers
filed in the Court of Appeal argues that the value of the credit was far greater than
the cost of obtaining it, resulting in a “significant subsidy” that someone other than
husband would have to pay, “and that someone must, by default, be the employer
or CalPERS.” An amicus curiae brief from Certified Family Law Specialist
Barbara A. DiFranza filed in this court argues that the same annuity/pension
dichotomy described in Sonne, supra, 48 Cal.4th at pages 127-128, governs this
case.
Ultimately, it does not matter exactly how the contribution was calculated
or what it paid for. It is clear the value of the four years of credit far exceeds the
cost of obtaining it. Indeed, the difference in value is precisely what the parties
are fighting over. The trial court awarded wife her share of the community‟s
10
contribution plus interest, but she seeks instead a share of the four years‟ worth of
credit itself. As the Lucero court said regarding the redeposit of that case,
purchasing the four years of military service “was obviously a great bargain.”
(Lucero, supra, 118 Cal.App.3d at p. 841.) And this bargain “was possible only as
consideration for husband‟s service” in the United States military — service that
predated the marriage. (Ibid.) The difference in value was not due to what the
community contributed — part of the installment payments — but to what
husband brought to the community — his military service. For these reasons, the
difference in value between the four years‟ worth of credit and the cost of
obtaining it is husband‟s separate property, subject to reimbursement for the
community‟s contribution to the cost of obtaining the credit.
In reaching a contrary conclusion, the Court of Appeal found (and wife
argues) that even after husband “started working for a CalPERS participant, and
thus became eligible to purchase military service credit based on his premarital
service in the military, his right to such credit amounted to no more than an
„expectancy,‟ which is not a property right divisible upon dissolution of marriage.”
(Citing In re Marriage of Brown, supra, 15 Cal.3d at pp. 844-845 (Brown).) To
place this argument in perspective, we must take a step back in time.
Before the landmark decision of Brown, supra, 15 Cal.3d 838, which put
California law regarding the property status of retirement benefits on the road it
has followed ever since, the rule had been “that nonvested pension rights are not
property, but a mere expectancy, and thus not a community asset subject to
division upon dissolution of a marriage.” (Id. at p. 841, italics added, citing
French v. French (1941) 17 Cal.2d 775, 778 (French).) We noted in Brown that a
Court of Appeal decision had explained that under this “French rule,” “ „[t]o 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
11
community property.‟ ” (Brown, supra, at p. 844, quoting Williamson v.
Williamson (1962) 203 Cal.App.2d 8, 11.) Brown held that “the French rule
cannot stand because nonvested pension rights are not an expectancy but a
contingent interest in property . . . . Pension rights, whether or not vested,
represent a property interest; to the extent that such rights derive from employment
during coverture, they comprise a community asset subject to division in a
dissolution proceeding.” (Brown, supra, at pp. 841-842.) Accordingly, we
overruled French and disapproved Court of Appeal cases that followed it,
including Williamson v. Williamson, supra, 203 Cal.App.2d 8. (Brown, supra, at
pp. 841, 851, fn. 14.)
We later summarized Brown‟s new rule: “Under California law, retirement
benefits earned by a spouse during a marriage are community property, subject to
equal division upon the dissolution of the marriage. (In re Marriage of Brown
(1976) 15 Cal.3d 838, 842 . . . .) This is true whether the benefits are vested or
nonvested, matured or immature. (Brown, supra, at p. 842.)” (In re Marriage of
Gillmore (1981) 29 Cal.3d 418, 422, fn. omitted.)
In explaining why previous courts had erred in finding nonvested pension
rights to be a mere expectancy rather than a property interest, we said in Brown
that the “term expectancy describes the interest of a person who merely foresees
that he might receive a future beneficence, such as the interest of an heir apparent
[citations], or of a beneficiary designated by a living insured who has a right to
change the beneficiary [citations]. As these examples demonstrate, the defining
characteristic of an expectancy is that its holder has no enforceable right to his
beneficence.” (Brown, supra, 15 Cal.3d at pp. 844-845, fn. omitted.) We
contrasted such nonenforceable expectancies with retirement benefits, which are
property rights. We explained “that an employee acquires a property right to
pension benefits when he enters upon the performance of his employment
12
contract.” (Id. at p. 845.) Nonvested retirement benefits are certainly contingent
on various events occurring — such as continued employment — but this does not
prevent them from being a property right for these purposes. “The fact that a
contractual right is contingent upon future events does not degrade that right to an
expectancy. The law has long recognized that a contingent future interest is
property [citation] no matter how improbable the contingency (see Civ. Code,
§ 697); an expectancy, on the other hand, „is not to be deemed an interest of any
kind.‟ (Civ. Code, § 700.)” (Id. at p. 846, fn. 8.)
To call the right to obtain the credit for military service a mere expectancy
rather than a property interest divisible on dissolution of the marriage is to regress
to the pre-Brown days of French, supra, 17 Cal.2d 775, and Williamson v.
Williamson, supra, 203 Cal.App.2d 8. The Court of Appeal based its conclusion
that the right was a mere expectancy on the fact that, until exercised, the right was
subject to certain contingencies. It argued that before husband exercised his right
to obtain the credit, all that existed was “a possible expectancy that if Timothy
continued to work for a CalPERS participant, and if [Government Code] section
21024 remained in effect, and if Timothy‟s employer continued to offer the option
to buy military service credit pursuant to the statute, and if Timothy paid the
requisite amount, he would be entitled to the benefit of the credit he purchased.”
But much the same can be said of the right to redeposit contributions in
Sonne, supra, 48 Cal.4th 118, and Lucero, supra, 118 Cal.App.3d 836. In Sonne,
for example, the husband‟s right to redeposit his member contributions was
contingent on the former wife‟s withdrawing the assets in her nonmember account.
(Sonne, supra, 48 Cal.4th at p. 126.)
The interest at issue in Lehman, supra, 18 Cal.4th 169, faced far greater
contingencies than those the Court of Appeal cited here. Unlike husband‟s right to
obtain credit for military service, the enhanced retirement program in Lehman did
13
not even exist until after the marriage had been dissolved. During the marriage
itself, any property right in the enhanced program was subject to the rather
significant contingency that it later be created. But nevertheless, we found the
enhanced benefits to be a property interest that was partly community property
because the service on which it was based was partly rendered during the
marriage. We explained that retirement benefits are, by their nature, subject to
later changes, and that the nonemployee spouse possesses the right to share in the
benefits as they are ultimately determined. (Id. at pp. 183-184.)
The contingencies the Court of Appeal cited do not degrade a property right
to a mere expectancy. (Brown, supra, 15 Cal.3d at p. 846, fn, 8.) Unlike the
hopeful heir apparent we cited in Brown as having a mere expectancy, husband
here could enforce his right to receive the military credit any time he chose. This
right was a property interest. Because husband rendered the service on which the
credit was based before the marriage, it was his separate property, except to the
extent the community contributed to the payments necessary to obtain it.
As the trial court recognized, wife does have an interest in the contributions
the community made towards obtaining the military service credit. In a
dissolution proceeding, the court must apportion an employee spouse‟s retirement
benefits between the spouses‟ community property interest and any separate
property interest the employee spouse may have. The court has discretion to
choose the method of apportionment as long as the result is reasonable and fairly
represents the relative contributions of the community and separate estates.
(Sonne, supra, 48 Cal.4th at p. 124; Lehman, supra, 18 Cal.4th at p. 187.) To
compensate wife for her interest, the court ordered husband to pay her an amount
of money representing half of the payments made with community funds plus
interest. Doing so came within the court‟s discretion. The court‟s order was
reasonable and fairly represented the relative contributions of the community
14
estate (making some of the installment payments) and the separate estate
(rendering the four years of military service on which the credit was based).
Wife argues that she is entitled to more than simply reimbursement of the
community contribution towards the purchase price. She cites cases in which one
spouse had purchased a house before marriage, paying part of the purchase price
and taking a loan for the balance, and the community helped pay off the loan. In
that situation, the spouse who had not originally purchased the house is entitled to
more than mere reimbursement of the community payments. “Where community
funds are used to make payments on property purchased by one of the spouses
before marriage „the rule developed through decisions in California gives to the
community a pro tanto community property interest in such property in the ratio
that the payments on the purchase price with community funds bear to the
payments made with separate funds.‟ ” (In re Marriage of Moore (1980) 28
Cal.3d 366, 371-372, quoting Forbes v. Forbes (1953) 118 Cal.App.2d 324, 325.)
These cases do not apply here. When one spouse purchases a house before
marriage but also takes out a loan for part of the purchase price, that spouse, in
effect, brings to the marriage only part of a house — the value of the house minus
the size of the loan. In effect, the community itself purchases some of the house
by paying off the loan. In that situation, when the community contributes much
towards the equity in the house, the party bringing part of a house to the
community should not be awarded all of the equity. The situation here is
different. Husband brought to the marriage all of his four years of military
service — not just part of it with a loan due on the rest. The trial court acted
within its discretion in apportioning the separate and community interests as it did.
15
III. CONCLUSION
We reverse the judgment of the Court of Appeal and remand the matter to
that court for further proceedings consistent with this opinion.
CHIN, J.
WE CONCUR:
KENNARD, J.
BAXTER, J.
CORRIGAN, J.
16
CONCURRING OPINION BY WERDEGAR, J.
The central question in this marital dissolution proceeding is how to
characterize four years of service credit in the California Public Employees‟
Retirement System (CalPERS) that Timothy P. Green (husband) earned during his
premarital military service and elected to purchase with community funds during
his marriage to Julie R. Green. The court concludes that, “except for the
community‟s contribution to the cost of obtaining the credit, the four years of
additional credit are the husband‟s separate property” because the “husband
rendered the military service before the marriage.” (Maj. opn., ante, at pp. 1-2.)
“What matters in determining whether retirement benefits are community or
separate property,” the court holds, “is the person‟s marital status when the
services on which the benefits are based were rendered.” (Id. at p. 1.)
I concur in the court‟s judgment and agree with its conclusion in this case,
where the employee spouse had the same marital status during the time he
performed the work on which his public service credits were based and at the time
he began employment with a CalPERS participating agency. In this case, husband
was single during the four years he served in the United States Air Force (1982-
1986) and when he was hired by a CalPERS participating firefighting agency
(1989). Only in 1992, after both these events, did the parties marry. On these
facts, the military service credits are aptly characterized as husband‟s separate
property.
1
A more difficult question would arise if the parties had married before
husband began working as a local firefighter.
Family Code section 760 provides generally that property “acquired by a
married person during the marriage while domiciled in this state is community
property,” while under Family Code section 770, subdivision (a)(1), “property
owned by [a] person before marriage” is that person‟s separate property. Time of
acquisition is thus the “single concrete fact” most determinative of
characterization: “To the extent—and only to the extent—that an employee
spouse accrues a right to property during marriage before separation, the property
in question is a community asset.” (In re Marriage of Lehman (1998) 18 Cal.4th
169, 183; see In re Marriage of Bouquet (1976) 16 Cal.3d 583, 591 [“The status of
property as community or separate is normally determined at the time of its
acquisition.”].)
When did husband acquire a property right in his military service credits?
As we explained in In re Marriage of Brown (1976) 15 Cal.3d 838, 845, for
purposes of community property law, and regardless of vesting rules, “an
employee acquires a property right to pension benefits when he enters upon the
performance of his employment contract.” The court is therefore correct to reject
the view of the Court of Appeal below that even after husband started working for
a CalPERS participating agency, his right to purchase credits for his military
service was a mere expectancy, becoming a divisible property right only when the
credits were actually purchased. (Maj. opn., ante, at pp. 11-14.) But until
husband started working for a participating employer, his prior military service
entitled him to no CalPERS benefits. Before CalPERS employment, husband‟s
interest in purchasing CalPERS service credits for his four years of military
service could hardly be described as an expectancy, much less a contractual or
property right. It appears, therefore, that husband‟s property interest in those
2
service credits was acquired when he began work as a firefighter for a
participating agency.
Had the parties married between 1986 and 1989, after husband‟s military
service and before he was hired by a CalPERS participating agency, we would be
faced with a hard question: should the credits‟ characterization be governed by
the employee‟s marital status when he earned them through his military service, or
by his marital status when he acquired a property right to obtain them by virtue of
employment with a participating employer? The fundamental rule of Family Code
sections 760 and 770—that a property‟s character is governed by marital status at
the time the property is acquired—weighs heavily on the side of the latter answer.
Arguments for the former position can certainly be imagined. One might
observe that our decision in In re Marriage of Sonne (2010) 48 Cal.4th 118, 125-
126, emphasized that the service credit at issue was attributable to CalPERS
service preceding the parties‟ marriage—though of course that decision, like In re
Marriage of Lehman, supra, 18 Cal.4th 169, involved credits for service with a
participating employer. The employee in each of these cases thus acquired a
property right to the credits at the same time he earned them by his service, and
neither case presented the question posed above: If marital status at the time
service credit rights are acquired differs from that at the time of the service itself,
which governs? One might also point to Government Code section 21034‟s
command that public service be credited as current or prior service “as it would be
credited if the member had been in state service during his or her public
service”—though that provision, by its terms, relates to how public service is
credited within the CalPERS system, not to how it is characterized under
community property law.
Further, it might be argued that making marital status at the time of the
non-CalPERS public service strictly determinative leads to fairer and less arbitrary
3
divisions of property, since the parties‟ interests can be prorated to account for any
period of marriage during the service, whereas a line drawn at the time CalPERS
employment begins will determine the characterization of the entire service credit
regardless of how soon before or after the commencement of CalPERS
employment the parties married. However, such a result may be less arbitrary
than it initially appears because employment decisions made during marriage are
often joint decisions. If one spouse helps the other secure CalPERS employment
or encourages him or her to accept CalPERS employment when offered, it hardly
seems arbitrary to characterize retirement benefits derived from the resulting
CalPERS employment as community property. Moreover, any potential
arbitrariness might be alleviated through an equitable apportionment of the credits
whatever their characterization (see, e.g., In re Marriage of Sonne, supra, 48
Cal.4th at pp. 127-129 [although right to repurchase service credit was husband‟s
separate property, use of community funds for the repurchase entitled community
to a share of the retirement benefit‟s annuity portion]), and in any event whether
such policy considerations permit us to set aside the principle of Family Code
section 760 is doubtful at best.
The present case does not call on us to consider these arguments and
counterarguments. The court is not faced here with the problem of conflicting
rules looking, on the one hand, to marital status at the time the employee
performed the public service and, on the other, to marital status at the time he or
she acquired a property right to obtain credits for that service. This is an easier
case, as here the parties‟ marriage followed both these potentially critical events.
WERDEGAR, J.
WE CONCUR:
CANTIL-SAKAUYE, C. J.
LIU, J.
4
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion In re Marriage of Green
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 205 Cal.App.4th 1475Rehearing Granted
__________________________________________________________________________________
Opinion No. S203561
Date Filed: June 24, 2013
__________________________________________________________________________________
Court: Superior
County: Contra Costa
Judge: Charles B. Burch
__________________________________________________________________________________
Counsel:
Aimee Feinberg and April Rose Sommer for Appellant.
Tarkington, O‟Neill, Barrack & Chong and Robert A. Roth for Respondent.
Barbara A. DiFranza; Whiting, Fallon, Ross & Abel and Ann Fallon for the Northern California Chapter of
the American Academy of Matrimonial Lawyers as Amicus Curiae on behalf of Respondent.
Barbara A. DiFranza as Amicus Curiae on behalf of Respondent.
R. Ann Fallon and James Crawford, Jr., as Amici Curiae.
Counsel who argued in Supreme Court (not intended for publication with opinion):
April Rose Sommer
P.O. Box 6937
Moraga, CA 94570
(510) 423-0676
Robert A. Roth
Tarkington, O‟Neill, Barrack & Chong
2711 Alcatraz Avenue, Suite 3
Berkeley, CA 94705-2726
(510) 704-0921