In Re Marriage of Stenquist
148 Cal. Rptr. 9, 21 Cal. 3d 779, 582 P.2d 96 (1978)
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Rule of Law:
When a spouse is entitled to receive a pension based on disability but has also earned a right to a retirement pension based on longevity, the pension is apportioned. The amount of the disability pension that exceeds the alternative retirement pension is the spouse's separate property; the remainder is characterized as community property to the extent it was earned during the marriage.
Facts:
- Husband joined the Army in 1944.
- Husband and Wife married in 1950.
- In 1953, Husband suffered a service-related injury resulting in the amputation of his left forearm.
- Husband continued to serve in the military until 1970, retiring after 26 years of service.
- At retirement, Husband had the option to receive a longevity-based retirement pension at 65% of his basic pay or a disability pension at 75% of his basic pay.
- Husband elected to receive the higher disability pension.
Procedural Posture:
- Husband commenced proceedings for dissolution of marriage in the state trial court.
- The trial court ruled that the portion of the husband's disability pension equivalent to what he would have received as a longevity retirement pension was community property, while the excess amount was his separate property.
- The trial court divided the community portion of the pension and also issued an order regarding spousal support.
- Husband (as appellant) appealed the trial court's judgment, challenging the characterization of any part of his disability pension as community property.
- Wife (as cross-appellant) also appealed, challenging the apportionment formula and the trial court's decision to limit its jurisdiction over spousal support to 24 months.
- The case is now before the California Supreme Court for review.
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Issue:
Does a spouse's unilateral election to receive a military disability pension instead of a longevity retirement pension transmute the entire pension into the receiving spouse's separate property, thereby defeating the community's interest in the retirement benefits earned during the marriage?
Opinions:
Majority - Tobriner, J.
No. A spouse's unilateral election to receive a disability pension instead of a longevity retirement pension does not transmute the entire pension into separate property. Military disability pensions serve a dual purpose of compensating for disability and providing retirement support, and the component that replaces retirement benefits earned during marriage remains community property. The court reasoned that one spouse cannot, by invoking a condition wholly within their control, defeat the community interest of the other spouse. Citing its decision in In re Marriage of Brown, which established that even nonvested pension rights are community assets, the court held that the community's interest in the underlying retirement pension must be protected. The court adopted the formula from In re Marriage of Mueller, holding that only the net amount received over and above what would have been received as retirement benefits constitutes separate property compensation for the disability. The underlying amount that serves as a retirement pension is classified as community property to the extent it was earned during the marriage.
Dissenting - Clark, J.
Yes. The entire disability pension should be classified as the husband's separate property. The dissent argued that disability benefits are not deferred compensation for past services but are intended to compensate for future loss of earning capacity and personal suffering, which are inherently separate property concerns after a marriage ends. The dissent contended that the majority's decision misinterprets In re Marriage of Jones and creates an invidious discrimination against disabled individuals. A healthy employee can forfeit a nonvested pension by changing jobs without owing their spouse anything, whereas a disabled employee is now forced to share their disability compensation. The proper remedy for the non-disabled spouse's financial needs, according to the dissent, is through spousal support, not by reclassifying the disabled spouse's separate property.
Analysis:
This case establishes the controlling principle in California for apportioning disability benefits that are taken in lieu of longevity retirement benefits. It prevents a spouse from using a 'disability' label to unilaterally divest the community of its interest in a pension earned during the marriage. The court's 'look-through' approach, which examines the function of the benefits rather than their name, became a foundational concept in community property law. This decision solidifies the protections established in In re Marriage of Brown for pension assets and creates a clear, though sometimes complex, formula for dividing such hybrid benefits upon dissolution.
