In Re Marriage of Julie and Timothy Green

Family law appeal regarding CalPERS

Marriage of Green (2012, San Francisco)

This year, in the case of In re Marriage of Julie and Timothy Green, the California Court of Appeal grappled with the issue of characterization of California Public Employees’ Retirement System (CalPERS). What makes this case important is the fact that, according to the appellate court, this is a case of first impression – meaning the court of appeal was presented with a legal issue which it had never decided before. Here are the facts.

Timothy and Julie were married from 1992 to 2007. Before getting married, Timothy served in the Air Force for four years. Before getting married to Julie, Timothy began working as a firefighter. The fire authority participated in CalPERS. In 2002, Timothy purchased service credit for his military service. The purchase was allowed per Section 21024. Section 21024 allows a CalPERS member to get up to four years of service credit for service in the armed forces. Timothy exercised his option and started paying $92.44 twice a month for 15 years.

The parties separated in 2007 and Julie filed a petition for dissolution in 2008. The parties did not come to an agreement regarding the characterization of the CalPERS benefits. A trial was held on the issue. The trial court ordered that the credit of CalPERS was to be awarded to Timothy as his separate property. The court, however, ordered Timothy to pay Julie half of the installment payments made with the community funds, plus six percent interest. Julie appealed.

The court of appeal started its analysis with the basic analysis of property characterization. More specifically, the court referred to section 2550 which provides community property is divided equally between the parties when marriage ends and per sections 2600-2640 separate property is not subject to a similar division and just belongs to owner spouse. Section 751 provides that “The characterization of property as community or separate determines its division upon dissolution of marriage. Each spouse owns a one-half interest in all community property.”

The court of appeal went through a very long and thorough analysis of precedents and other controlling cases dealing with similar issues. The court of appeal held that in order to determine whether community has an interest in Timothy’s pension rights, the court must first look at when a party obtained the property interest in the benefits, and if the right was a “mere expectancy.”

The court of appeal found that even though when Timothy was in the Air Force he was eligible for CalPERS, but he had no property interest in such a retirement plan. The court of appeal also observed that even when Timothy started working for the fire authority, which was a CalPERS participant, he still did not have a property interest in the benefits; what he had was an “expectancy.”

The court of appeal further noted that Timothy did not hold any “unconditional, contractual right to payment of of benefits” or “a nonvested rights” until Timothy actually bought credit for his military services. Until he purchased the credit, Timothy had an expectancy and not an enforceable right to pension benefits. The court of appeal ruled that the trial court had mischaracterized Timothy’s ability to purchase military credit with a property interest.

Once Timothy purchased the credit, that’s when he obtained a property interest in the pension benefits. With respect to the characterization of that property interest, the court of appeal held “what is determinative is the single concrete fact of time. To the extent – and only to the extent – that an employee spouse accrues a right to property during marriage before separation, the property is a community asset.”

The court of appeal noted the undisputed facts that military service credit was purchased during marriage and with community funds. This formed the basis of the court of appeal’s conclusion that the pension benefits were community property and not separate.

The court of appeal did not attribute the entire pension benefits to community as Timothy still had an obligation to contribute to his pension, after separation. So, with respect to the allocation of the community interests in the pension plan, the court of appeal did not make a finding and instead sent the case back to the trial court for this determination. The court of appeal suggested that the trial court consider additional evidence regarding the value of the military service credit and to hear further arguments as to the best way of dividing the property.

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