In Re Marriage of Wright
140 Cal. App. 3d 342, 1983 Cal. App. LEXIS 1437, 189 Cal. Rptr. 336 (1983)
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Rule of Law:
Severance pay received by a spouse after the date of separation is the separate property of that spouse if the payment is intended to compensate for future lost earnings, rather than serving as a form of deferred compensation for services rendered during the marriage.
Facts:
- A husband and wife were married for 12 years before separating on June 23, 1976.
- During the marriage, the Husband was employed as an assistant administrator at San Joaquin Community Hospital Corporation, where the Wife's father worked as the chaplain.
- Twenty days after the separation, on July 13, 1976, the Husband's employment at the hospital was terminated.
- Upon his termination, the Husband received a voluntary, lump-sum payment of $24,208.64 from his employer.
- The hospital administrator testified that the payment was not a bonus for past services but was given in recognition that the Husband would face future difficulty securing new employment, partly due to anticipated harassment from the Wife and her father.
Procedural Posture:
- During their dissolution, the parties entered into a property settlement agreement that did not dispose of the Husband's severance pay.
- Wife initiated a proceeding in the trial court to obtain one-half of the severance payment.
- The trial court found in favor of the Wife and awarded her one-half of the net payment.
- Husband (Appellant) appealed the judgment of the trial court.
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Issue:
Is a lump-sum severance payment, received by a spouse after separation from their marriage, community property when the payment is intended to compensate for future loss of earnings?
Opinions:
Majority - Andreen, J.
No. A lump-sum severance payment received after separation is the recipient spouse's separate property when it is intended to compensate for future loss of earnings rather than past services. The court reasoned that the character of the payment depends on its purpose. Here, the payment was not a contractual right or deferred compensation earned during the marriage, as in In re Marriage of Skaden. Instead, it was analogous to post-separation disability benefits or workers' compensation awards, which are treated as separate property because they replace future earnings that would have been the recipient's separate property. The evidence, particularly the employer's testimony, established that the payment was made to compensate the Husband for his prospective loss of earnings due to the termination of his employment. Since the payment replaced earnings that would have been acquired after separation, the payment itself is classified as separate property under Civil Code section 5118.
Analysis:
This decision solidifies the 'replacement analysis' for characterizing post-separation employment-related payments in California community property law. It distinguishes severance pay intended to compensate for future wage loss from deferred compensation like pensions, which are earned through labor during the marriage. By focusing on the purpose of the payment rather than when the right to it accrued, the court provides a clearer framework for classifying assets that arise around the time of separation. This precedent guides lower courts to look beyond the form of the payment and analyze whether it compensates for past community efforts or replaces future separate earnings.
