Van Loan v. Van Loan , 116 Ariz. 272 ( 1977 )

HAYS, Justice.

The primary question we are asked to decide in this case is whether the community of Jack and Verna Van Loan had a “property” right or interest, subject to division upon divorce, in military retirement benefits, prior to the time the right to payment under the pension became certain.

Jack and Verna Van Loan were married in March of 1957. At that time Jack was a member of the United States Air Force, having joined the Force in September of 1954.

In February of 1974 a petition for dissolution of the marriage was filed, and on February 27 of that year the marriage was dissolved by a decree of dissolution. A property settlement agreement was entered into by the parties and incorporated by reference into the divorce decree.

On August 1, 1975 Verna petitioned the trial court for modification of the decree, seeking to be awarded a portion of her former husband’s military retirement benefits which he would be eligible to receive upon his retirement. At the time of the dissolution, Jack had served nineteen years and five months in the Air Force. In requesting the modification of the decree, Verna contended that the community had a property interest in the retirement benefits at the time of their divorce to the extent that community labor had contributed towards acquiring the pension. The pension not having been considered in the settlement agreement, Verna maintained that the court should award her a share of the retirement benefits pursuant to the subsequently discovered property provisions of the settlement agreement.

Following a hearing, the trial court modified the decree awarding Verna an interest in the retirement pay in an amount equal to one-half of the fraction 17 over the number of years served by Jack in the Air Force if and when received by him. The court further ordered that spousal payments continue through September, 1975 at which time they be terminated.

An appeal was thereupon taken by Jack to the Court of Appeals, Division Two, concerning the trial court’s award of the pension benefits. The Court of Appeals, in a well-reasoned opinion, affirmed the lower court’s resolution of this controversy. Van Loan v. Van Loan (2 CA-CIV 2174, filed January 20, 1977). A motion for rehearing was denied, and Jack petitioned this court for review. Because this case presents an issue of first impression in this jurisdiction, we felt it appropriate for this court to address itself to the matters presented, and we therefore granted the petition. The Court of Appeals decision is vacated.

Jack argues that because he had not completed twenty years of service at the time of the divorce, neither he nor the community had acquired a “vested right” in the retirement benefits. He maintains that until he did serve twenty years he had nothing but a mere “expectancy” which is less than a property right and, hence, is not divisible upon divorce. We do not agree.

The touchstone of the solution to this matter revolves not around whether the employee’s interest was “vested” at the time of the divorce but whether his rights in the pension constitute a property interest or right purchased with community funds or labor. We start with the proposition that pension plans are a form of deferred compensation to employees for services rendered. Yeazell v. Copins, 98 Ariz. 109, 402 P.2d 541 (1965); Everson v. Everson, 24 Ariz.App. 239, 537 P.2d 624 (1975). As compensation, any portion of the plan earned during marriage is property of the community. Everson v. Everson, supra. And because pension benefits do constitute a valuable part of the consideration for the entrance into and continuation of services, an employee’s right to such benefits has been held to be a contractual right derived from the terms of the employment contract that cannot be unilaterally modified. Yeazell v. Copins, supra; In re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561 (1976). That there is yet a condition to be fulfilled prior to the maturation of the right to payment of pension benefits does not in any way vitiate the firm and binding nature of the pension terms of the contract. Yeazell v. Copins, supra. Considering whether that contractual right is a form of property, we reject the proposition that an employee has no more than a mere “expectancy” prior to the maturation of his pension rights. As stated by the California Supreme Court in In re Marriage of Brown, supra :

“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 omitted], or of a beneficiary designated by a living insured who has a right to change the beneficiary [citations omitted]. As these examples demonstrate, the defining characteristic of an expectancy is that its holder has no enforceable right to his beneficence.” 126 Cal.Rptr. at 637, 544 P.2d at 565.

(See also DeRevere v. DeRevere, 5 Wash. App. 741, 491 P.2d 249 (1971), where a Washington appellate court similarly rejected the contention that an employee’s unvested right to a pension is a mere expectancy while holding that the community’s interest in such a pension does, in fact, constitute property divisible by the court.)

Clearly, a contractual right is an enforceable right. Since a contractual right is not an expectancy but is a chose in action, In re Marriage of Brown, supra, it is a form of property. City of Phoenix v. Dickson, 40 Ariz. 403, 12 P.2d 618 (1932). As such, we hold that an employee, and thereby the community, does indeed acquire a property right in unvested pension benefits upon performance under the contract. Thus, to the extent that such a property right is earned through community effort, it is properly divisible by the court upon dissolution of the marriage..

As earlier mentioned, the order of the trial court further required that Jack continue to pay spousal maintenance through September, 1975, at which time it should cease permanently. This order was premised on the provisions of the property settlement agreement which provided that Jack pay support to Verna until the latter’s take-home pay, exclusive of taxes, exceeded $450 per month. On appeal, this ruling is challenged on the grounds that it was unsupported by the evidence. Since there is no reporter’s transcript, however, it must be presumed that there was adequate evidence to support the decision of the trial court, Haining Lumber Co. v. Octavious Leon, Inc., 70 Ariz. 31, 215 P.2d 909 (1950), and we therefore will not disturb the ruling of the court below.

Finally, Jack has argued in his petition for review to this court that the formula employed by the trial court in computing the portion of the pension rights allocable to his wife was erroneous. The propriety of using the formula was never objected to at the trial level nor was it argued by counsel in the briefs submitted to the Court of Appeals. The issue was first raised at oral argument before the Court of Appeals. The failure to raise an issue either at the trial level or in briefs on appeal constitutes a waiver of the issue. Goldwater’s v. Medar, 82 Ariz. 344, 313 P.2d 410 (1957). Counsel for the petitioner argues that his substitution of counsel prior to oral argument before the Court of Appeals should have justified the appellate court’s and this court’s consideration of the issue. However, in view of substitute counsel’s failure to file a supplemental brief with the court during the two-month period between substitution of counsel and oral argument, we think that counsel had ample time within which to file a supplemental brief and therein raise the issue. Counsel not having done so, we think the matter has been waived and we therefore need not address the issue here. Parenthetically, however, we do note that in declining to consider the question, we neither condone nor condemn the correctness of the formula used by the trial court.

Pursuant to the foregoing, the judgment of the trial court is affirmed.

CAMERON, C. J., STRUCKMEYER, V. C. J., and GORDON, J., concurring.