Shill v. Shill , 115 Idaho 115 ( 1988 )

SHEPARD, Chief Justice.

This is a continuation of the proceedings in Shill v. Shill, 100 Idaho 433, 599 P.2d 1004 (1979), which involved a divorce and the determination of the community property interest in pension benefits. The remit-titur of this Court issued October 2, 1979, and it was not until October 10, 1985, that respondent Jeanette Shill filed an amended complaint seeking a redetermination of the community property interest in the pension benefits. Thereafter the district court granted summary judgment on November 7, 1986, adjudicating the community property interest in the retirement pension benefits. We reverse and remand.

The parties hereto were married September 1957, and in early 1958 Douglas Shill was employed by the fire department of Burley, Idaho, and began contributions from his wages to the Idaho Firemen’s Retirement Fund. The parties were divorced by decree entered October 1977, at which time Douglas Shill had completed 19 ¥2 years of employment with the Burley Fire Department. Under the provisions of the statutes, Shill was entitled to pension rights from the Idaho Firemen’s Retirement Fund, Title 72, Ch. 14,1.C., but only if he had completed 20 years of such employment. If he terminated prior to completing 20 years he would have received only the contributions he had made.

Although the divorce decree was entered in October 1977, that portion of the judgment dealing with the division of the community property was not entered until March 1, 1978. In that decision the court held that since Shill possessed only the right to receive the cash surrender value of the contributions ($8,089.24), all of which had been contributed during the marriage, such was characterized as community property and ordered divided equally between the parties. Hence, Jeanette Shill was awarded one-half of the cash surrender value of Shill’s rights in the Firemen’s Retirement Fund.

Upon appeal to this Court the decision of the district court was reversed, Shill v. Shill, supra, and for the first time contingent non-vested pension benefits were recognized as divisible community property in Idaho. This Court there indicated that a lump sum award as of the date of divorce was the preferred method of distribution, but the Court realized that such a cash-out method might not always be feasible. It was held that where the community owns few assets, or when present value calculations were inaccurate or difficult, an apportionment to the non-retiring spouse might be made effective if as and when the actual pension benefits were received by the retiring spouse. Therefore, the decision of the trial court was reversed, and the cause was remanded,

... [i]n order to effect an equitable disposition of the retirement benefits possessed by this marital community, it will be necessary to remand this matter to the trial court to allow the parties an opportunity to present such evidence as it deems proper on the issue of the disposition of the parties' community property interest in the Firemen’s Retirement Fund. See Ramsey v. Ramsey, 96 Idaho 672, 535 P.2d 53 (1975).

Inexplicably it was not until six years later, on October 10, 1985, that respondent Jeanette Shill filed an amended complaint seeking a recalculation and distribution of the retirement benefits. Following the entry of the decree of divorce in October 1977, Douglas Shill had chosen to continue his work with the Burley Fire Department, and continued to make contributions to the Firemen’s Retirement Fund. After 24 years of service, Douglas Shill retired on April 14, 1982. By delaying his retirement and continuing to work past the 20-year retirement, the pension benefits increased from 40 to 60 percent of the average fireman’s salary.

Upon motion therefore, the trial court on November 7, 1986, granted summary judgment in favor of Jeanette Shill.

The principal issue on this appeal is whether the community interest in Mr. Shill’s retirement benefits should be determined, valued, and divided as of the date of the divorce, or at the time the benefits are actually received. We hold that the trial court incorrectly determined the community interest and the value thereof as of the time pension benefits were actually received.

At the outset, we note that had the trial court in the original divorce proceedings determined the then present value of the community property in the pension fund, the non-employee' spouse could have been awarded assets of equal value. That present value of the community in the pension fund was before the trial court, but was then rejected by the trial court by reason of its erroneous view of the law. That decision of the trial court was reversed.

Further, if upon remand the matter had been diligently pursued, the then trial court may have been able to make such an equitable division without being required to enter the morass of an attempted division of the pension rights. However, by the time the matter did reach the trial court for the second time, its options were limited because of the disposition of community assets awarded under the original decree. Thus, the preferred cash-out method of pension division has been thwarted in the instant action. Such an immediate settlement would have disentangled the parties, and would have fully and finally divided the marital property without any contingency.

It is asserted that by waiting six years following the remand, respondent procrastinated in the assertion of her rights, and the cause should have been dismissed for want of prosecution. A trial court has inherent power to dismiss for want of prosecution if the plaintiff fails to prosecute with reasonable diligence. McAllister v. Erickson, 45 Idaho 211, 261 P. 242 (1927). Such question is addressed to the sound discretion of the trial court, and its ruling will not be disturbed on review in the absence of an abuse of that discretion. Ellis v. Twin Falls Canal Co., 109 Idaho 910, 712 P.2d 611 (1985). We hold that the trial court did not abuse its discretion in failing to dismiss for want of prosecution, nor do we find that the action is barred by any statute of limitation or the doctrine of laches.

The question presented in the instant case is whether the value of the pension benefits should be calculated as of the date of the divorce, or as of the date of actual receipt of the pension benefits. In the instant ease the importance of that issue is reflected by the base value of the monthly pension benefits at the various times. Within six months of the time of divorce the pension benefits would have been calculated on a basis of forty percent of the average wage of an Idaho fireman. I.C. § 72-1430(l)(a), (e) (authorizes firemen who voluntarily retire and who are entitled to benefits after twenty years of service, forty percent of the average paid fireman’s salary or wage, and after twenty-four years, sixty percent of the same.) As of 1982 when Mr. Shill retired, the pension benefits had risen to sixty percent of the average fireman’s wage. The award of the trial court included the increase in the pension benefits which had accrued following the date of divorce.

The question thus presented is one of first impression in Idaho. In a divorce action in Idaho the trial court has broad discretion to equitably divide the community property. However, that discretion is strictly circumscribed by our statutes which delineate separate and community property interests. All property owned by a spouse before marriage is separate property. I.C. § 32-903. Property acquired during marriage is presumed to be community property. Stanger v. Stanger, 98 Idaho 725, 571 P.2d 1126 (1977); Speer v. Quinlan, 96 Idaho 119, 525 P.2d 314 (1974); Stahl v. Stahl, 91 Idaho 794, 430 P.2d 685 (1967). Our statute, I.C. § 32-906, defines community property as all the property acquired after marriage by either husband or wife.

I.C. §§ 32-601 and 32-602 provide that marriage is dissolved by death of one of the parties, or by the judgment of a court of competent jurisdiction, and the effect of such a divorce decree is to restore the parties to the state of unmarried persons.

In the instant case the trial court awarded the respondent one-half of the pension benefits, valued at the time of actual retirement in 1982. That award included increases in pension benefits accruing after the date of divorce, and hence not acquired during marriage, but during the time the appellant was an unmarried person. As such, those increases constituted the separate property of the appellant, and to the extent that an interest in those post-divorce increases was awarded to respondent, it constituted an impermissible invasion of appellant’s separate property.

Although as stated, the question is of first impression in Idaho, it has been ruled upon by courts of other jurisdictions.

The Supreme Court of Arizona, in the case of Koelsch v. Koelsch, 148 Ariz. 176, 713 P.2d 1234 (1986), had before it a factual pattern which in part was substantially similar to the case at bar in that it presented the question of a non-employee spouse having the right to share in increased retirement benefits accrued following divorce. The Court pf Appeals in Arizona had so ruled for the non-employee spouse, and the Supreme Court of Arizona reversed. The court stated:

We base our analysis on clearly established community property principles. First, pension plans are a form of deferred compensation to employees for services rendered, and any portion of the plan earned during marriage is community property subject to equitable division and dissolution. (Citations omitted.) We recognize that retirement benefits are often one of a community’s most valuable assets. Second, during marriage a husband and wife have an equal, immediate, present, and vested interest in the community assets. (Citation omitted.) When the community property is divided at dissolution pursuant to the mandate of ARS § 25-318, each spouse receives an immediate, present, and vested separate property interest in the property awarded to him or her by the trial court. It is clear that a former spouse loses any interest in and control over that separate property. Finally, it is established law that while the fruits of labor expended during marriage are community property (citation) earnings after dissolution are separate property.

In its exhaustive opinion the court held that to permit a non-employee spouse from sharing in future increases in the pension benefits is improper.

The Court of Appeals attempted to ameliorate the risk of loss faced by the non-employee spouse by devising a formula which would permit that spouse to share in the future increases in the pension benefits. This compromise is improper for several reasons. First, it improperly allows the non-employee spouse to share in the post-dissolution separate property earnings of the employee spouse.

The court continued:

The second problem with the disposition of the retirement assets by the trial court and the court of appeals is that both formulas award a share of the employee spouse’s earnings after dissolution to the non-employee spouse_ If the amount of the monthly benefit at retirement is greater than the monthly benefit would have been had the employee spouse retired at the normal retirement date, any increases will be due to the separate labors of the employee spouse_ The court of appeals’ formula seems to adopt the proposition that two wrongs make a right. In both denying the non-employee spouse immediate right to separate property benefits and instead awarding that spouse a share of the employee spouse’s separate property, the court of appeals has violated two fundamental principles of community property law. We disapprove.

The Supreme Court of Texas in Berry v. Berry, 647 S.W.2d 945 (1983), was presented with a similar factual pattern and issue.

The sole question presented for consideration is the value of Elna Berry’s interest in the retirement benefits of her ex-husband Giles Berry. The judgment of the trial court awarded Mrs. Berry one-half of such benefits as would have existed at the time of divorce. The court of appeals reversed and held that she was entitled to receive 34.21 percent of the retirement benefits actually received. (citation). We reverse the judgment of the court of appeals and affirm the trial court's judgment.

The court, quoting In re Marriage of Rister, 512 S.W.2d 72 (Tex.App.1974), stated:

However, to the extent that the benefits do increase as a result of future increased earnings, the formula used by the trial court has the effect of awarding benefits accruing to appellant after the divorce from appellee.

We hold that pension benefits accruing as compensation for services rendered after a divorce are not a part of the estate of the parties subject to division on divorce.

The court in Berry then stated:

It is clear from the record in this case that twelve additional years of work following divorce, which included some twelve to fourteen pay raises, plus union contract negotiations for an improved benefits plan, brought about the increase in retirement benefits paid to Mr. Berry. These post-divorce increases cannot be awarded to Mrs. Berry, for to do so. would invade Mr. Berry’s separate property, which cannot be done.

A similar decision was reached in Madrid v. Madrid, 101 N.M. 504, 684 P.2d 1169 (N.M.App.1984). The court held that the community interest in pension benefits must be determined, valued and distributed as of the time of the divorce, and that increases in the pension benefits, “... coming after the date of the divorce, are the husband’s separate property ... At the time of the divorce the increases were not even in existence. The increases coming after the divorce, were not ‘acquired’ until after the divorce, and were the separate property of the husband.” See also Rogers v. Rogers, 45 Or.App. 885, 609 P.2d 877 (1980), modified, Rogers v. Rogers, 50 Or. App. 511, 623 P.2d 1108 (1981); Graham v. Graham, 78 Or.App. 665, 717 P.2d 655 (1986).

We are aware, as argued by respondent, that the courts of California have taken a different approach and arrived at different results. In re Marriage of Freiberg, 57 Cal.App.3d 304, 127 Cal.Rptr. 792 (1976).¹ However, it is our view that the decisions cited, particularly that of the Arizona Supreme Court in Koelsch, constitute the better reasoned authority, and we decline to follow the California approach.

In the instant case the decree of divorce was entered October 1977. The employee-spouse’s first eligible retirement date was April 14, 1978. His actual retirement date was April 18, 1982. As noted herein, we have held that the determination of, and the valuation of, the pension benefits should occur at the date of the decree of divorce. Since such valuation and an award of a lump sum was not made, and now appears to be not possible, an award is necessary based upon the monthly sum which would have been received if the employee spouse had taken retirement at his first eligibility, i.e., April 14, 1978. Berry v. Berry, supra; In re Marriage of Rister, supra; Rogers v. Rogers, supra; Graham v. Graham, supra; In re Marriage of Gillmore, 29 Cal.3d 418, 174 Cal.Rptr. 493, 629 P.2d 1 (1981). In the instant case that date is only six months after the decree of divorce, and hence the difference in value is not deemed significant. There may, of course, arise cases in the future in which the lapse of time between divorce and first eligibility for retirement is of substantial length, and in which therefore the problems will be exacerbated. It is suffice to say that we do not explore those problems today, but leave them to a case-by-case resolution in the future.

Many of the above-cited cases deal with the “risks” which will be encountered by each of the spouses under various theories of distribution of pension benefits upon divorce. It is clear that there can be no amelioration of all risks which might be presented by the enumerable possible scenarios. If, as previously stated, a lump sum cash-out method were utilized, as seems possible in the instant case, the risks to the non-employee spouse would have been eliminated. However, the risk to the employee spouse of death preventing him from receiving any benefits, would remain. Nevertheless, such solution would have the merit of disentangling the parties and their affairs at a finite point in time.

It is also argued that requiring the non-employee spouse to receive a share of the pension benefits if and when the employee-spouse chooses to retire, leaves the option solely with- the employee-spouse. We need not address that assertion, since in the instant case the employee-spouse has retired, and the pension benefits have matured and are payable.

Pursuant to our discussion herein, the judgment of the district court is reversed insofar as it purports to award plaintiff Jeanette Shill a share of the pension benefits valued at a time post-April 14, 1978. Because of the lack of clarity in the record, and the adjustments which may be required by the trial court, we are unable to delineate a specific sum to be awarded by the trial court. The trial court is directed to award plaintiff, Jeanette Shill, her appropriate share of the pension benefits, calculated as of April 14, 1978.

We further remand for the consideration of the trial court a possible offset to the judgment in the sum of $4,044.62. Again, the record is not clear, however it suggests that there was disbursed to the respondent on June 21,1979, the sum of $27,898.55. It is asserted that included in that sum was $4,044.62, representing one-half of the cash surrender value of the Fireman’s Retirement Fund pension. If such assertion is correct, and since the award of the cash surrender value of the pension fund has been reversed, respondent Jeanette Shill may be overcompensated in the sum of $4,044.62. The trial court on remand is directed to ascertain the facts and make appropriate adjustments, if any.

Lastly, it is asserted by respondent cross-appellant Jeanette Shill that accrued interest on her share of the pension fund should be allowed. We disagree. The trial court held, and we agree, that to so assess interest would be to penalize the appellant for the respondent’s lack of diligence in timely pursuing the cause. While she has not waived a right to receive her share of the pension benefits, by her delay she has waived her right to claim any interest thereon. Although not argued by either party, the record demonstrates that an order of the trial court was issued ordering defendant (Douglas Shill) to pay to the plaintiff (Jeanette Shill) the sum of $12,-000.00, and that on the payment of such amount, execution upon the judgment would be stayed pending the appeal. That matter is not discussed by the parties, and hence we assume said sum has been paid, since the appeal has gone forward.

The cause is reversed and remanded for further proceedings in accordance herewith. No costs allowed.

BAKES, J., and McQUADE, J. Pro Tern., concur.

1 . To the extent that it conflicts with In re Marriage of Gillmore, 29 Cal.3d 418, 174 Cal.Rptr. 493, 629 P.2d 1 (1981), In re Marriage of Frei-berg, which suggests, in dictum, that the employee spouse can control the time at which the retirement payments to the non-employee will commence, is disapproved.