Miller v. Miller , 83 Mich. App. 672 ( 1978 )

Bronson, J.

This is an appeal from a judgment in a divorce action in which the property of the parties was divided by the trial court. The sole issue on appeal is one of first impression in Michigan—whether a party’s interest in a pension plan which is funded entirely by his employer is distributable pursuant to a divorce and property settlement.

The leading Michigan case on the distribution of a party’s interest in a pension pursuant to a divorce is Hutchins v Hutchins, 71 Mich App 361; 248 NW2d 272 (1976). In Hutchins, the Court held that a husband’s accumulated contributions to a pension plan funded by deductions from his salary was to be considered an asset by a trial court dividing property in a divorce action. The Court’s rationale was that the accumulated contributions constituted marital property because they were deducted from the husband’s salary and were not forfeitable: MSA 25.81 et seq. Therefore, it must be included as an asset in the distribution of property.” Hutchins, supra, at 370-371.

"Returning to the Michigan public safety department pension, accident and disability fund leads us, as do other jurisdictions with similar statutes, to the conclusion that it also treats the accumulated deductions in the husband’s account in a manner which makes them marital property. Here, the plaintiff-husband’s interest was created in most part from his salary, and we agree with the defendant-wife that these deductions would have been available to the parties during their marriage to be invested, in stocks, bonds, savings account, annuity and/or other investments. The plaintiff-husband’s right in the fund is fully vested and cannot be subjected to divestment or forfeiture, except as herein noted for breach of the public trust. We also hold that it is property that came to the plaintiff by reason of the marriage and therefore should be included in the total assets of the parties. As in New Jersey, our divorce laws make no reference to vesting.¹ See MCLA 552.1 et seq.;

Accord, In re Marriage of Pope, 544 P2d 639 (Colo App, 1975), Pellegrino v Pellegrino, 134 NJ Super 512; 342 A2d 226 (1975), Tucker v Tucker, 121 NJ Super 539; 298 A2d 91 (1972), Schafer v Schafer, 3 Wis 2d 166; 87 NW2d 803 (1958).

We believe the same result should obtain where the pension is funded directly by the employer. I.e., an employee’s interest in a pension funded by his employer is distributable pursuant to a divorce only to the extent that the interest is marital property² with a reasonably ascertainable present value. If the employee’s interest is contingent or a mere expectancy it may not be distributed pursuant to a divorce judgment. See, generally, Polate v Polate, 331 Mich 652; 50 NW2d 190 (1951). Cases from other jurisdictions are in accord with this rule.

In Tucker v Tucker, supra, the New Jersey court held that a husband’s interest in a pension and profit-sharing plan was not distributable pursuant to a divorce judgment because the plan was funded entirely by the employer, the employee had no right of withdrawal and the right to payment in the future was not certain. The court quoted Williamson v Williamson, 203 Cal App 2d 8, 11; 21 Cal Rptr 164 (1962), with approval: party is certain to receive some payment or recovery of funds. To the extent that payment is, at the time of the divorce, subject to conditions which may or may not occur, the pension is an expectancy, not subject to division as community property.’ ” 121 NJ Super at 549.

" 'Pensions become community property, subject to division in a divorce, when and to the extent that the

The same reasoning was applied in White v White, 136 NJ Super 552; 347 A2d 360 (1975), in which the court held that an employee’s interest in a pension plan funded entirely by the employer, with no right of withdrawal and which required full compliance with eligibility requirements as a precondition to payment, was not "property” subject to equitable distribution before the conditions had been met. See, also, In re Marriage of Ellis, 36 Colo App 234; 538 P2d 1347 (1975).

In the case at bar, the trial court’s distribution of the pensions of both the husband and wife was based on total contributions to the pension funds. This was improper. Pension interests are distributable only to the extent of their reasonably ascertainable present value. See Hutchins v Hutchins, supra, at 372.³

In evaluating the interests at issue in the case at bar, a recent New Jersey case stated the problem as follows:

"On one side is property which, although not without value, constitutes an expectation of receipt of benefits or is subject to a contingency. Tucker v. Tucker, supra; Williamson v. Williamson, 203 Cal.App.2d 8, 21 Cal.Rptr. 161 (D.Ct.App. 1962); White v. White, supra. On the other side of that line is property which, although not cash in hand, is not subject to a contingency, has a reasonably discernible value, and awaits but the decision of the owner to take actual possession. Pellegrino v. Pellegrino, supra; See v. See, 64 Cal.2d 778, 51 Cal Rptr. 888, 415 P.2d 776 (Sup.Ct. 1966); Angott v. Angott, 462 S.W.2d 73 (Tex.Civ.App. 1970).”

The court held that only the second type of property was distributable. Blitt v Blitt, 139 NJ Super 213, 216-217; 353 A2d 144, 146 (1976).⁴

We therefore must remand this case to the trial court. The court should: (1) find whether the pension interests have a reasonably ascertainable value or whether the interests are expectancies or subject to contingencies, (2) determine that value, if any, and (3) applying equitable principles, allocate the distributable marital property between the parties. To aid the trial court on remand, we reiterate that pension interests are distributable only if they are marital property with a reasonably ascertainable value. Interests which are contingent upon the happening of an event which may or may not occur are not distributable. The party seeking to include the interest in the marital estate bears the burden of proving a reasonably ascertainable value; if the burden is not met, the interest should, not be considered an asset subject to distribution.

Remanded for proceedings consistent with this opinion. Costs to appellant.

M. F. Cavanagh, P. J., concurred.

1 The Court’s reference to "vesting” is puzzling in light of its finding that the husband’s interest in the fund was "fully vested”. To the extent this language could be read as indicating that it is irrelevant to a determination of distributability that an interest in a pension fund is "vested” or not, we disapprove. In determining whether an interest is distributable, the court should consider whether the pension is vested or not, not the source of the funding.

2 See MCL 552.19; MSA 25.99. The trial court found that the pension interests were marital property. We do not disagree with that finding.

3 The actual distribution of the property is left to the trial court’s discretion. See MCL 552.19; MSA 25.99.

4 The court held that the defendant’s interest in a 50% vested employer-funded profit-sharing plan had a distributable value of $24,500 (one-half of the fund), as distribution of that amount could occur on retirement, disability, death, or termination of employment.