Marriage of Pauly CA4/3 ( 2022 )

Filed 11/29/22 Marriage of Pauly CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
In re Marriage of JAMES D. and
DEBORAH L. PAULY.
JAMES D. PAULY,
G059786
Appellant,
(Super. Ct. No. 15D007308)
v.
OPI NION
DEBORAH L. PAULY,
Respondent.
Appeal from a postjudgment order of the Superior Court of Orange County,
Julie A. Palafox, Judge. Reversed and remanded with instructions.
Law Offices of John S. Cowhig and John S. Cowhig for Appellant.
Law Offices of Lisa R. McCall, Lisa R. McCall and Erica M. Baca for
Respondent.
INTRODUCTION
Family court is a court of equity. (See In re Marriage of Oliverez (2019)
33 Cal.App.5th 298, 310.) When husband and wife dissolve their marriage, the family
court is bound to divide the community estate equally unless the parties agree otherwise.
Each side is entitled to their share of said estate, and no more.
In this case, husband retired from active military service while he and wife
were still married. When the couple divorced, they agreed to split the community share
of husband’s military pension equally, with the understanding that wife would eventually
get paid her portion of the monthly benefit directly by the pension fund. She began
receiving direct payments from the pension fund in 2019. But she sought an award of
back payments of pension benefits she was owed, going back to the date of the couple’s
separation in 2015. Husband opposed this request, arguing wife had received increased
temporary spousal support instead of a monthly pension benefit and should be equitably
estopped from asserting her claim to any more retrospective benefits.
The trial court rejected husband’s contention and awarded wife years’
worth of back-owed pension benefits. We agree that wife was entitled to back payments
of pension. But we find the trial court should have, but did not, credit husband for the
increased support he paid to wife. For this reason, we must reverse and remand so the
trial court can calculate the amount of the credit, if any, and deduct it from wife’s
recovery.
FACTS
James Pauly and Deborah Pauly were married for more than 30 years
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before they separated on January 5, 2015. James filed for dissolution of their marriage
on August 20, 2015. Deborah requested spousal support, and on June 1, 2016, the parties
entered into a stipulation whereby James agreed to pay Deborah $11,000 per month in
1
The couple has two adult children.
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temporary support. James had been in the active military and retired during the parties’
marriage. At the time of the stipulation as to temporary support, James had disclosed he
was receiving $3,637 per month in military pension benefits. He had been receiving
these pension benefits during the marriage as well. The parties had included no specific
calculation supporting the $11,000 temporary support figure, but they had negotiated
regarding the impact of the pension on temporary support and future property division.
The court entered judgment terminating the parties’ marital status in
November 2016, but trial was reserved on several issues, including division of
community assets. When trial was set to begin on the reserved issues in September 2017,
the parties advised the court they had entered into a settlement on certain issues regarding
property division, and a stipulation and order for partial judgment was entered on
September 13, 2017. In the stipulated judgment, the parties agreed Deborah was entitled
to a portion of the pension benefit, and the parties would split the community portion of
the benefit equally pursuant to a Military Division Order (MDO) still to issue. The
judgment also contained a constructive receipt provision – if the pension plan paid James
any benefits that were to be assigned to Deborah, James would immediately reimburse
her within 10 days. The parties further agreed the court would “retain jurisdiction to
make any orders to affect an equal division of the community interest” in the pension or
to ensure benefits were rightly assigned.
Trial went forward on the remaining issues and judgment on them was
entered on May 21, 2018. James was ordered to pay $9,200 per month in spousal support
with a yearly step-down in amount. Property division remained the same. Deborah was
still entitled to 50 percent of the community interest in the pension. The final judgment
also contained the same provisions allowing the court to retain jurisdiction to effectuate
an equal division and declaring James in constructive receipt of any benefits belonging to
Deborah.
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On October 16, 2018, the court entered a stipulated order for division of the
pension, which awarded Deborah 30.15 percent of the full monthly benefit. James would
hold any sums payable to Deborah in constructive trust until she was actually paid, and
the constructive trust would be applicable until Deborah began receiving direct payments.
It would also be applicable for any month for which Deborah did not receive a direct
payment. On May 31, 2019, Deborah began receiving $1,153 per month as her share of
the pension.
Deborah filed a request for order (RFO) seven months later, on December
26, 2019, seeking, among other things, $60,533 in pension benefits received by James
which should have been paid to her, plus interest. This amount was calculated based on
her share of $1,153.01 per month, which she claimed James was paid between their date
of separation (January 5, 2015) until May 31, 2019 – a total of 52 and one-half months.
James opposed the RFO in this respect, arguing the pension had been incorporated into
Deborah’s temporary spousal support order, allowing her increased payments. He also
said Deborah had failed to raise this issue at the time of trial.
The court, in an admirable attempt to understand precisely what was owed
Deborah and what had been paid, entertained lengthy argument and both invited and
reviewed voluminous filings by the parties. After taking the matter under submission, the
court issued its decision on November 9, 2020. It found Deborah was entitled to $59,956
of the pension benefits distributed to James beginning at the date of separation through to
May 2019, plus interest. It denied James’ request to invoke equitable theories to either
bar or offset Deborah’s recovery on the benefits owed, noting he had stipulated to
$11,000 in temporary monthly support without requiring any credit or offset against the
eventual division of the pension benefit. The court concluded James had shown no
prejudice from Deborah’s raising the retroactive pension issue two years after trial.
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DISCUSSION
On appeal, James makes three arguments. First, he contends Deborah
forfeited her retroactive right to monthly benefits because she did not request any part of
those benefits in the trial itself. Second, he claims he should have gotten some sort of
equitable credit, full or partial, against pension benefits awarded to Deborah because he
owed her higher temporary support – ostensibly in exchange. Third, he contends the
court’s award to Deborah improperly effectuated an unequal division of the community
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estate in violation of Family Code section 2550. While we disagree with James on his
first argument, we agree the trial court’s ruling resulted in an unequal division of assets.
I. Forfeiture of Right to Benefits Between Date of Separation and Trial
“The general rule under [In re Marriage of] Brown [(1976) 15 Cal.3d 838],
. . . is that ‘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.’ (In re Marriage of
Brown, supra, [at p.] 842.) A retiree’s pension income is therefore subject to division,
most commonly based on a fraction involving the years worked by the employee spouse
during the marriage compared to the total years worked.” (In re Marriage of Ellis (2002)
101 Cal.App.4th 400, 406-407.) James did not dispute Deborah was entitled to her share
of the pension from the date of separation, and even before that date. Instead, James
believes Deborah was obligated to seek her share of the pension benefits when the case
went to trial.
A review of both the stipulated 2017 judgment and the final 2018 judgment
convinces us to reject this argument. Both judgments awarded Deborah 50 percent of the
community portion of the pension benefits. It was recognized by all parties that the
MDO would ultimately determine how much of the pension benefit Deborah should get.
2
All further statutory references are to the Family Code.
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Deborah had forfeited nothing; the right to pension benefits was memorialized in the
judgment, and they only needed to wait for the MDO to know the exact amount. James
seems to agree because, as he notes, the trial court determined pension payments were not
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omitted assets.
“Generally, once a marital dissolution judgment has become final, the court
loses jurisdiction to modify or alter it. (In re Marriage of McDonough (1986) 183
Cal.App.3d 45, 53; Mueller v. Walker (1985) 167 Cal.App.3d 600, 605.) Under the
doctrine of res judicata, ‘“[i]f a property settlement is incorporated in the divorce decree,
the settlement is merged with the decree and becomes the final judicial determination of
the property rights of the parties.”’ (Giovannoni v. Giovannoni (1981) 122 Cal.App.3d
666, 669.) In short, marital property rights and obligations adjudicated by a final
judgment cannot be upset by subsequent efforts to ‘modify’ the judgment.” (In re
Marriage of Thorne & Raccina (2012) 203 Cal.App.4th 492, 499.)
James argues that because the pension was not an omitted asset, Deborah’s
RFO was an attempt to modify the judgment and the trial court’s ruling resulted in a
reallocation of the pension. The first problem with this argument is James conceded
Deborah was entitled to her share as of the date of separation. But even leaving that
aside, James’ logic is circular. If the pension was not omitted, then Deborah’s share is
necessarily in the judgment; we look to the judgment. The judgment entitled Deborah to
50 percent of the community share. And the court had continuing jurisdiction to enforce
Deborah’s right to her share. Did Deborah really need to spell out for James and the
court the exact time period for which she was entitled to benefits? We don’t think so.
3
The omitted asset doctrine stems from section 2556, which states: “In a proceeding for dissolution
of marriage, for nullity of marriage, or for legal separation of the parties, the court has continuing jurisdiction to
award community estate assets or community estate liabilities to the parties that have not been previously
adjudicated by a judgment in the proceeding. A party may file a postjudgment motion or order to show cause in the
proceeding in order to obtain adjudication of any community estate asset or liability omitted or not adjudicated by
the judgment. In these cases, the court shall equally divide the omitted or unadjudicated community estate asset or
liability, unless the court finds upon good cause shown that the interests of justice require a n unequal division of the
asset or liability.”
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Another tortious argument by James came at the hearing in the trial court.
James’ counsel argued the September 2017 judgment was only effective as of September
2017 going forward. Thus, he claimed, the stipulated judgment did not entitle Deborah to
the benefits James had received between January 2015 and September 2017. This
argument is completely lacking in merit. To start, Deborah’s interest in her community
share of the pension arose during the marriage itself. (See § 751 [“The respective
interests of each spouse in community property during continuance of the marriage
relation are present, existing, and equal interests.”].) Additionally, as Deborah correctly
points out, the parties stipulated they would divide the community portion of the pension
equally, with August 2, 1984, as the date of marriage and January 5, 2015, as the date of
separation for purposes of the MDO. This language indicates the parties understood the
community share was to be divided as of the date of separation.
II. Equal Division of Assets/Equitable Offset
James’ second and third arguments dovetail. As section 2550 states:
“Except upon the written agreement of the parties, or on oral stipulation of the parties in
open court, or as otherwise provided in this division, in a proceeding for dissolution of
marriage or for legal separation of the parties, the court shall, either in its judgment of
dissolution of the marriage, in its judgment of legal separation of the parties, or at a later
time if it expressly reserves jurisdiction to make such a property division, divide the
community estate of the parties equally.” Equal division is the default rule.
If “the parties agree upon the property division, no law requires them to
divide the property equally, and the court does not scrutinize the [marital settlement
agreement] to ensure that it sets out an equal division.” (Mejia v. Reed (2003) 31 Cal.4th
657, 666.) But in stipulating to the division of certain assets in September 2017, the
parties here took their cues from section 2550 – they explicitly agreed to an equal division
of the pension. Thus, a proper enforcement of the settlement means the community
portion of the pension must be equally split between Deborah and James.
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It is undisputed James’ military pension benefit was factored into
temporary support in 2016. And the monthly support amount was higher as a result.
According to guideline support calculations submitted to the court by James’ counsel in
2020, had Deborah begun receiving her share of the pension benefit earlier, support
would only have been $10,631 per month rather than $11,000. This means that, between
at least February 2016 when the stipulated support order was entered and at least May
2018 when the judgment was entered setting permanent support at $9,200 per month
(with step-down), James was overpaying by about $300 per month. The trial court
acknowledged this possibility after reviewing the calculations.
Thus, even if Deborah’s RFO had merit as to back-payment of pension
benefits, any such recovery necessarily had to take into account these overpayments.
There had to be an offset. To hold otherwise would not only risk an unequal division of
the pension (which was not in keeping with the parties’ agreement), but also a windfall to
Deborah. She is entitled to be paid her share, not to be paid twice. For this reason, we
reverse and remand so the trial court can conduct hearings and fact-finding to determine
how much the offset should be.
There was much discussion in the trial court about Henn v. Henn (1980) 26
Cal.3d 323 (Henn). In Henn, husband’s military pension was actually an omitted asset in
the judgment. (Id. at p. 327.) Our Supreme Court held wife was entitled to seek her
community share of it. (Id. at pp. 330-331.) In doing so, the court acknowledged it
might be inequitable to allow wife to claim retrospective pension benefits if she received
higher support payments in lieu. (Id. at p. 332.) Thus, the court suggested husband “seek
to limit” such retrospective enforcement of wife’s claim to the pension “on an equitable
estoppel theory by demonstrating that she in fact received additional support payments in
lieu of a share in the pension.” (Ibid., fn. omitted.)
Henn is not really on point here, because James’ military pension was
adjudicated in the judgment. As a result, there is no need to bring in an equitable
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estoppel theory to effectuate an equal division of the pension benefits. Instead, the trial
court could just follow the judgment itself and effectuate an equal division. This includes
calculating how much additional support Deborah received in lieu of receiving her
monthly share of the benefits and deducting it from her pension award.
Both Deborah and the trial court argued James could have insisted on an
offset or credit in the stipulated judgment. Because he did not, they conclude he
essentially forfeited the right to an offset. We disagree. James could have insisted on
including an offset in the stipulated judgment, no doubt, but his failure to do so does not
change the fundamental agreement. The community share of the pension was to be
divided equally and Deborah is entitled to 30.15 percent of the monthly benefit. Nothing
more, nothing less.
DISPOSITION
The order is reversed and remanded for further proceedings to calculate the
amount of offset to which James is entitled and to modify accordingly the award of back
payments of pension to Deborah. James to recover his costs on appeal.
BEDSWORTH, ACTING P. J.
WE CONCUR:
GOETHALS, J.
MARKS, J.*
*Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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