In Re Marriage of Horn

California Court of Appeal
226 Cal. Rptr. 666, 181 Cal. App. 3d 540 (1986)

ELI5:

Rule of Law:

Severance pay that is an absolute contractual right, earned and accrued over a period of employment during a marriage, is considered a form of deferred compensation for past services and is thus community property subject to division upon dissolution.

Facts:

Robert Horn and Cyndee L. Horn married on June 8, 1974, and separated on January 25, 1983.
From 1976 through 1983, while married, Robert was a professional football player in the National Football League (NFL).
In 1982, the NFL and its players' union added a 'severance pay' provision to their collective bargaining agreement (CBA).
The provision entitled any player with two or more seasons in the NFL to a lump-sum severance payment, with the amount based on the number of seasons played.
To receive the payment, a player must declare their intent to permanently retire from professional football.
If a player returns to professional football within 12 months of receiving the pay, they must repay it, but they retain the right to receive it again upon subsequent permanent retirement.
The CBA provides that if a player dies, their severance pay is to be paid to their designated beneficiary or estate.
Based on his eight seasons in the NFL, all during the marriage, Robert was eligible for a $100,000 severance payment.

Procedural Posture:

Cyndee L. Horn and Robert Horn initiated dissolution of marriage proceedings in a California superior court (trial court).
The trial court entered a judgment finding Robert's NFL severance pay to be community property and awarded a share to Cyndee.
Robert Horn (appellant) appealed the judgment to the California Court of Appeal, challenging the trial court's characterization of the severance pay. Cyndee L. Horn is the appellee.

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Issue:

Is severance pay earned by a spouse during marriage, which is based on years of service and represents an absolute contractual right, a form of deferred compensation that constitutes community property?

Opinions:

Majority - Work, J.

Yes, severance pay earned during marriage is community property when it represents a form of deferred compensation. The court found that the NFL severance pay was not compensation for a future loss of earnings but rather an absolute, contractual right that accrued based on Robert Horn's past services rendered during the marriage. The court distinguished this case from those where termination pay was deemed separate property because those payments were contingent on an involuntary loss of work (like a layoff or disability) and were intended to replace future lost income. Here, Robert's right to the pay was absolute and vested through his years of service; he would receive it upon his permanent retirement, whether voluntary or involuntary. The fact that the payment would go to his estate upon his death further solidified its character as an earned property right, akin to a pension, rather than a benefit contingent on future circumstances. The court concluded that the objective characteristics of the pay, particularly its nature as an earned and non-contingent right, defined it as deferred compensation and therefore community property.

Analysis:

This decision solidifies the distinction in California community property law between deferred compensation (community property) and benefits intended to replace future lost earnings (separate property). The court emphasized that the characterization of a benefit depends not on its label (e.g., 'severance pay'), but on its underlying characteristics. By focusing on whether the right to payment is absolute and earned through past service, as opposed to being contingent on a future event like job loss, the ruling provides a clearer analytical framework for classifying various employment benefits in dissolution proceedings. This precedent makes it more likely that benefits earned contractually through labor during marriage will be classified as community assets, regardless of their stated purpose.

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