In Re the Marriage of Hunt ( 1995 )

Justice LOHR

concurring in part and dissenting in part:

These cases present an issue concerning the division of military pension benefits in a dissolution of marriage proceeding. The formula adopted by the majority for the determination of the portion of such benefits to be classified as marital property and for division of that marital property between the spouses under the deferred distribution method employed by the trial court in each case is as follows:

Years of Service During Marriage x Monthly Benefit x ⅜

Years of Total (After Taxes) Service

Maj. op. at 532. By applying this formula, known as the “time rule” formula, a trial court effects both the determination of the portion of the pension benefit that is marital property (the product of the first two components of the formula) and the division of that marital property equally between the spouses (by multiplying the marital property portion of the pension benefit times the third formula component, i.e., the 1/2 multiplier). I concur with the majority’s adoption of the first two components of the formula to identify the marital property. I also agree with the conclusion, reflected in those components, that post-dissolution pension benefit enhancements are to be treated as marital property. However, because the division of marital property between the spouses is within the discretion of the trial court, I conclude that the trial court must be allowed discretion to adjust the 1/2 multiplier, the component of the formula that divides the marital portion of the pension between the spouses, if an evaluation of the factors mandated for consideration under section 14-10-113(1)(a)-(d), 6B C.R.S. (1987), requires such an adjustment. I would hold that the trial courts in both In re Marriage of Hunt, 868 P.2d 1140 (Colo.App.1993), and In re Marriage of Raimer, No. 92CA0759 (Colo App. Aug. 5, 1993), properly identified the marital property and acted within their discretion in dividing the property between the spouses. Accordingly, I agree with the majority that the judgment of the Colorado Court of Appeals upholding the trial court’s division of military pension benefits in Hunt should be affirmed, but dissent from the majority’s reversal of the court of appeals’ affirmance of the trial court’s division of such benefits in Raimer.

I.

Under the Uniform Dissolution of Marriage Act (UDMA), §§ 14-10-101 to -133, 6B C.R.S.(1987 & 1995 Supp.), the trial court is charged with the task of dividing property between the spouses following the dissolution of a marriage. The distribution process is conducted in two steps. First, the trial court must classify the property as separate or marital. Second, the court must divide the marital property equitably between the spouses pursuant to the factors set forth in the UDMA. I agree in general with Justice Erickson that these two steps are undertaken pursuant to different legal standards. Erickson, J, dissenting op. at 549. The classification of an asset as marital property is typically a legal determination to be made without discretion by the trial court pursuant to applicable law. But see infra at 528 n. 1. The division of the marital property is committed to the discretion of the trial court to be exercised in accordance with the criteria listed in section 14-10-113(1)(a)(d). The “time rule” formula adopted by the majority combines the classification and division steps into a single process that impermissibly eliminates all discretion of the trial court with respect to the division of the marital share of the military pension benefits.

A.

Under the “time rule” formula, the share of the military pension benefits that is eligible to be divided by the trial court as marital property is computed by multiplying the first two components of the formula. Use of the “time rule” formula results in the inclusion of post-dissolution pension benefit enhancements within the marital estate, for the “monthly benefit” component of the formula is the actual monthly benefit received upon retirement. See maj. op. at 532. I agree with the majority that such a result is proper for precedential and policy reasons. Accordingly, I concur in the majority’s adoption of the “time rule” formula for determining the marital share of military pension benefits when dividing such benefits under the deferred distribution method.

B.

I do not agree, however, with the majority’s adoption and application of the third component of the “time rule” formula. Following the calculation of the share of the military pension benefits that is marital property, the formula requires multiplication of this marital share by 1/2. This mandatory multiplication by 1/2 necessarily results in the equal division between the spouses of the marital share of the pension benefits. The majority holds that a trial court that elects to use the “time rule” formula has no discretion to alter this equal division of the marital portion of the pension benefits. Maj. op. at 543. I consider the majority’s requirement of equal division to be an impermissible limitation on the discretion of the trial court to fashion an equitable distribution of marital property.

Following dissolution of a marriage, the trial court effects division of property between the spouses pursuant to the UDMA. Specifically, section 14-10-113(1), 6B C.R.S.(1987), requires the trial court to:

divide the marital property, without regard to marital misconduct, in such proportions as the court deems just after considering all relevant factors including:

(a) The contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker;

(b) The value of the property set apart to each spouse;

(c) The economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children; and

(d) Any increases or decreases in the value of the separate property of the spouse during the marriage or the depletion of the separate property for marital purposes.

Under this statutory scheme, a trial court must consider the criteria specifically identified in section 14-10-113(1)(a)-(d), including the contribution of each spouse to the acquisition of marital property. Implicit in the consideration of positive contributions to the marital estate is the equal relevance of negative contributions. Brett R. Turner, Equitable Distribution of Property § 8.05, at 575-76 & n. 105 (2d ed.1994). In its evaluation of the statutory factors, however, the trial court has broad discretion to fashion an equitable disposition of the property. In re Marriage of Gallo, 752 P.2d 47, 54 (Colo.1988); In re Marriage of Price, 727 P.2d 1073, 1077 (Colo.1986). Equitable distribution is not necessarily coterminous with an equal division of assets, In re Marriage of Simon, 856 P.2d 47, 50 (Colo.App.1993); In re Marriage of Gercken, 706 P.2d 809, 810 (Colo.App.1985), and the key consideration is fairness, not mathematical precision. Gallo, 752 P.2d at 55.

By holding that a trial court may not alter the third component of the “time rule” formula, the majority eliminates the trial court’s traditional discretion to consider the circumstances of the case in dividing the marital assets. The impermissible effect of the majority’s holding is to prevent the trial court from considering the factors statutorily mandated by section 14-10-113(1). Furthermore, such a rigid, formulaic division of benefits is in direct conflict with the long-recognized principle, discussed above, that the trial court must be granted broad discretion to achieve an equitable, rather than mathematically precise, division of property. Accordingly, I do not agree that a trial court that applies the “time rule” formula to pension benefits is required to apply the 1/2 multiplier without considering the factors set forth in section 14—10—113(1)(a)—(d).

The majority contends that the trial court implicitly takes into consideration the factors set forth in section 14-10-113(1) in evaluating its selection of a distribution method, i.e., either immediate distribution of the net present value or future distribution through application of the deferred distribution or reserve jurisdiction method. See maj. op. at 540.¹ Therefore, the majority concludes that use of the “time rule” formula following selection of a distribution method is not inconsistent with the trial court’s duty to consider those statutory criteria. However, the majority’s conclusion is not supported by a review of the factors underlying a trial court’s selection of a distribution method. As the majority recognizes, the selection of a distribution method turns largely on the value of the pension benefits relative to the entire marital estate, the ability of the court to approximate net present value, and the availability of sufficient assets in the marital estate to offset an immediate award. See maj. op. at 539-540. These factors focus on the ability of the marital estate to support an immediate payout to the nonemployee spouse. When selecting a distribution method, the court is not concerned with allocative factors such as the contribution of each spouse to the marital property or the other factors required for consideration before the actual division of benefits between the spouses. Evaluation of these factors must be undertaken by the trial court after the selection of a distribution method. Consequently, I do not agree that a trial court’s decision to apply the “time rule” formula reflects an application of the statutory factors set forth in section 14 — 10—113(1)(a)—(d).

II.

The trial court in Hunt divided the military pension fund benefits equally under the deferred distribution method. I conclude that this was a proper exercise of the trial court’s discretion.

I disagree, however, with the majority’s conclusion that the trial court in Raimer improperly included marital fault considerations in its analysis. Maj. op. at 542. There is an important distinction between marital misconduct, a “moral”, consideration that a court is specifically prohibited from considering when dividing marital property under section 14-10-113(1), and the contribution of a spouse to the acquisition of marital property, an “economic” factor that must be considered pursuant to section 14-10-113(l)(a). See Michaelson v. Michaelson, 884 P.2d 695, 699-700 & n. 5 (Colo.1994) (describing the historical concept of marital fault as conduct that provided a ground for divorce under Colorado law existing prior to adoption of the UMDA). One commentator explained the distinction as follows:

Where fault is not a factor, the court is not permitted to consider the moral or social impact of a party’s conduct during the marriage in dividing the marital estate. The court can, of course, consider economic fault — conduct which has a negative effect upon the parties’ financial condition. Economic fault includes not only misconduct aimed directly at the parties’ finances, but also the economic consequences of social or moral fault.

Turner, Equitable Distribution of Property § 8.09, at 600 (footnotes omitted). Our cases preceding adoption of the UDMA also reflect recognition of the distinction between these two factors. In Liggett v. Liggett, we stated:

[T]he issue on the property division was not one of marital fault. It was whether the wife was entitled to a division of property by reason of having contributed to the accumulation or the preservation of the assets to be divided, and on this issue it was proper for the court to determine whether her conduct was such as to justify her sharing in a division of such property.

152 Colo. 110, 113, 380 P.2d 673, 675 (1963); see also Kraus v. Kraus, 159 Colo. 331, 333, 411 P.2d 240, 241-42 (1966). In accord with these authorities, I would conclude that conduct of a spouse that has a negative impact on the financial value of the marital property is properly characterized as an aspect of that party’s contribution (or lack thereof) to the marital assets, and is appropriate for consideration by the trial court in dividing marital property under section 14-10-113.

The majority, however, rejects consideration of the economic effect of a party’s conduct in fashioning an equitable division of the marital share of military pension benefits under the deferred distribution method. It does so for three reasons. First, it concludes that economic fault is difficult to separate from marital misconduct, that it “is a limited concept which comes into play only in extreme cases,” and that Raimer does not present such an extreme case. Maj. op. at 542-543. Second, the majority holds that alteration of the time rule formula in a way that fails to divide the marital share of military pension benefits equally “undermines the integrity of the formula and detracts from its very purpose,” for “the formula cannot be altered.” Maj. op. at 543. Finally, it rejects “discounting of the share of the non-employee spouse” because the discount “is wholly arbitrary and subjective.” Maj. op. at 543. I find these reasons individually and collectively unconvincing and contrary to the standard of section 14-10-113(1)(a).

First, “economic fault” is simply a way of expressing an element of the statutorily mandated marital-property-division factor of “[t]he contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker.” § 14-10-113(1)(a). For this reason, a court must consider economic fault in order to be faithful to the requirements of the statute. Although isolation of the effect of “economic fault” on the accumulation of marital property may be difficult and the result may be imprecise, it is a task statutorily required and of the type traditionally committed to the discretion of trial courts.

Second, the majority’s inflexible rule that “[i]f the ‘time rule’ formula is used, the formula cannot be altered,” maj. op. at 543, is based upon practical considerations of allocation of risks concerning future events and simplification of the trial court’s task rather than upon statutory criteria. See maj. op. at 536-537, 543. The “time rule” formula does not take into account the contribution of each spouse towards the acquisition of the marital share of the military pension benefit. See supra pp. 528-529. A trial court must consider that factor to comply with the statutory requirements of § 14-10-113(1)(a).

Finally, the majority rejects departure from equal division of the marital share of military pension benefits because it is “wholly arbitrary and subjective.” Maj. op. at 543. This criticism can be leveled at the division of any form of marital property. The selection of equal division as a principle by which to apportion marital property between the spouses is itself arbitrary. We have recognized, however, that application of the statutory criteria for marital property division is not a task that admits of exactitude, and “[t]he key to an equitable distribution is fairness, not mathematical precision.” Gallo, 752 P.2d at 55. The difficult task of expressing the relative contributions of the parties in mathematical terms is the essence of a trial court’s discretionary function in dividing marital property.

In Raimer, the trial court’s ruling, allocating forty percent of the marital share of the military pension benefit to the wife and sixty percent to the husband, reflects that the court considered the wife’s lack of support for her husband’s military career as evidence of her lack of contribution to the military pension fund asset. The trial court did not east the wife’s lack of support as marital misconduct, and limited her share of the pension based not only on her lack of contribution but also on her receipt of a higher portion of the non-pension marital property. Such a determination is within the trial court’s broad discretion to divide the marital property in an equitable manner.² Accordingly, I would uphold the trial court’s decision in Raimer to limit the wife’s percentage of the marital share of her husband’s pension to forty percent.

III.

For the foregoing reasons, I concur in the majority’s adoption of the first two components of the “time rule” formula for determining the marital share of military pension benefits under the deferred distribution method of dividing marital property. I dissent, however, to the majority’s adoption of the third component, which effects an equal division of the marital property portion without consideration of the factors set forth in section 14-10-113(1). I would affirm the judgment of the Colorado Court of Appeals upholding the trial court’s identification and division of marital property in both Hunt and Raimer.

1 . As the majority notes, the net present value method of identifying marital property does not include increments of military pension benefits based on promotions of the employee spouse subsequent to dissolution. Maj. op. at 539. Thus, to permit the trial court to elect between the net present value method of distribution on the one hand and the deferred distribution or reserve jurisdiction methods on the other does inject an element of discretion into the classification of military pension benefits as marital or separate property, contrary to the precept that classification of property as marital or nonmari-tal is a legal determination not involving the exercise of discretion. See Erickson, J., dissenting op. at 550. The division of military pension benefits on any basis other than reserve jurisdiction, however, necessarily involves assumptions and risks that will be tested and resolved on the basis of uncertain future events. I would accept this departure from conceptual purity as necessary to a sensible and workable scheme for division of military pension benefits.

2 . In particular, I cannot agree with the majority's statement and characterization that the "ten percent discount imposed by the trial court has no basis in the evidence and was selected apparently as some form of rough justice to penalize the nonemployee spouse for what the trial court viewed as her lackluster interest in one phase of her husband's military career.” See maj. op. at 543.