Supreme Court of Louisiana
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SUPREME COURT OF LOUISIANA No. 97-C-2305 CHARLENE ARCEMENT BLANCHARD VERSUS WAYNE P. BLANCHARD ************************************************************** ON WRIT OF CERTIORARI TO THE COURT OF APPEAL FIFTH CIRCUIT, PARISH OF JEFFERSON ************************************************************** Calogero, C.J.* We determine in this case the manner in which a marital community should be partitioned, where the community consists only of two major marital assets, a pension, not yet fully mature, and the family home. The defendant, Wayne Blanchard, argued in the court of appeal and in this Court that the district court judge did not abuse his discretion in awarding him the family home and Ms. Blanchard the pension. Ms. Blanchard, on the other hand, argues that such an allocation is inequitable under LSA-9:2801 because of the different “natures” of the assets, her pension being in large part a future hope and the family home being a presently marketable, tangible piece of immovable property. She argues that each asset should be equally divided between the parties if equity is to prevail. Resolution of this issue necessarily turns on whether it is proper in this case to divide the pension using the “present cash value” method, recognized by this Court in Hare v. Hodgins, 586 So.2d 118 (La. 1991), or to defer defendant’s benefit distribution until Ms. Blanchard retires under the “fixed percentage” method * Traylor, J. not on panel. See Rule IV, Part 2, § 3. recognized in Sims v. Sims, 358 So. 2d 919 (La. 1978). For the following reasons, we affirm the court of appeal decision, and hold that division of the two assets, one to each party, was improper under the circumstances of this case. FACTS Charlene Arcement Blanchard and Wayne P. Blanchard were divorced on March 3, 1993. A hearing was held on July 3, 1996 to partition their community property. At that hearing, allocation of the two major assets, the family home and Ms. Blanchard’s pension account with the Teacher’s Retirement System was the major issue in dispute.1 Plaintiff requested that each of these two assets be divided equally between the parties, with a Qualified Domestic Relations Order 2 transferring one-half of the pension account to the defendant and one-half of the house to each spouse, to be followed by either a buy-out or a partition by licitation of the home. Defendant requested that the assets be divided by allocating full ownership of the pension to Ms. Blanchard and ownership of the home to him. The parties stipulated to the values of these two community assets. The home was valued at $44,000. It had been the childhood home of the defendant but was purchased by the community during the marriage by act of sale from Mr. Blanchard’s mother. The community assumed the mortgage payments. The mortgage was paid off during the marriage, and the home is currently unencumbered. 1 The other community assets allocated at the hearing were furniture, with a stipulated value of $3,500 (equally divided between the parties), a 1987 Dodge truck, with a stipulated value of $3,287.00 (allocated to Mr. Blanchard), and an automobile, with a stipulated value of $100 (allocated to Ms. Blanchard). The trial court’s allocation of these items is not in dispute. 2 A Qualified Domestic Relations Order is an order “made pursuant to a state domestic relations law (including a community property law) which creates or recognizes the existence of an alternate payee’s right to, or assigns an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan and relates to the provision of alimony payments, or marital property rights to a spouse or former spouse.” Elizabeth Alford Beskin, Retirement Equity Inaction: Division of Pension Benefits Upon Divorce In Louisiana, 48 La. L. Rev. 677, 683-84 (1988). 2 The plaintiff’s pension with the Teacher’s Retirement System is a defined benefit plan which is vested, but not yet fully mature.3 The community portion of the pension was assessed by defendant’s expert at 87%, the present value of that community interest being $87,585.04.4 That figure was based on plaintiff’s initial eligibility for retirement, eight months prior, on November 6, 1995. On that date, she had been employed twenty years with the Jefferson Parish School System and could therefore have retired at that time if she so chose. However, if plaintiff accumulates thirty years in the school system, her monthly retirement benefits will be substantially higher.5 Plaintiff indicated that she could not afford to live on the benefits she would receive if she retired after only twenty years of service, and she therefore elected not to retire at that time, opting instead to continue employment in an effort to earn the maximum benefit amount available under the plan. Consequently, the community’s interest in the pension was given an alternate value based on a potential retirement date of November 7, 2004, the date on which she would have thirty years of service. On that future date, with all facts and assumptions remaining the same, defendant’s expert concluded that the 3 Plaintiff’s pension is likely at a point on a continuum between non-maturity and maturity. She can retire at present, and therefore all conditions precedent to payment have taken place or are within her control. See Koelsch v. Koelsch, 713 P.2d 1234, 1236 n.2 (Ariz. 1986); In re Gillmore, 629 P.2d 1, 2 n.2 (Cal. 1981) (where only factor preventing immediate payment of monthly benefits is employee’s refusal to retire, pension is mature). However the date upon which benefits are to commence is yet undeterminable as Ms. Blanchard has opted to defer retirement until she has accrued at least thirty years of service, which will allow her to maximize her benefit amount under the retirement plan. See Beskin, supra, at 680 (benefit maturity represents the date upon which benefit payments are to commence). 4 The net present value of Ms. Blanchard’s interest in the Teacher’s Retirement System on November 6, 1995, in the opinion of Mr. Blanchard’s expert, was $100,672.47. Assuming Ms. Blanchard does not retire until the 2004 date, the net present value of her interest in the pension was calculated to be $83,779.86. 5 The difference in benefit amount arises from the difference in the benefit equation. Upon reaching thirty years of service, plaintiff’s benefit is calculated by multiplying her total years of service by 2½ %, versus 2%, times the highest average compensation, defined as the “annual average of the three highest years’ salary....” Louisiana Teacher Retirement Handbook p. 5 (Revised ed. August 1995). The difference in monthly benefit amount would be $1,225.33 per month versus $692.06 per month. 3 community portion of the pension would be 60%, with a net present value of $50,267.6 This latter figure is approximately $37,000 less than the value of the community portion of the pension had Ms. Blanchard retired when she was first eligible. We note, however, that the parties have not contested the valuation of the pension plan in this regard and have stipulated to its value.7 The record does not provide us with sufficient information to determine whether the agreed upon value is in fact correct considering the myriad factors properly to be used in such a calculation. The parties’ stipulation to the pension’s present value obviates the need for us to address this issue. The trial court appointed a special master to review the case and to submit a recommendation. See LSA-RS 9:2801(3) (West Supp. 1999) (allowing the court to appoint an expert to assist in the allocation of assets to the parties). Because the present cash value of the community interest in the pension with a November 2004 commencement date, $50, 267, was approximately the same value as the family home, $44,000, the special master concluded that it would not be inequitable to use the present cash value methodology recognized by this Court in Hare v. Hodgins, 586 So.2d 118 (La. 1991) and allocate to Ms. Blanchard the entire pension and to Mr. Blanchard the home and an equalizing cash payment. The trial court adopted 6 The community fraction of this less than 100% funded pension grows smaller with each additional year worked by the plaintiff after termination of the community under the Sims formula, which is used to calculate the community’s interest in a pension. See Sims v. Sims, 358 So.2d 919 (La. 1978). The Sims formula consists of a fraction in which the numerator is the amount of time the employee spouse has worked towards the pension during the community, and the denominator is the total amount of time worked towards the pension. Id. at 924. Consequently, with each year plaintiff works after the community has terminated, the community percentage of the pension grows smaller. Whether there will be a concomitant increase in the amount of the pension because of any potential salary increase may or may not have been accounted for by the defendant’s expert, whose opinion is reflected only in the form of a letter and not live testimony. When arriving at the 2004 figure, the expert did so based on an increased monthly benefit amount, with all other facts and assumptions remaining the same. 7 Plaintiff’s brief states, “the parties [have] stipulated to the values of the house and the retirement of Charlene Arcement Blanchard.” Plaintiff’s brief at p. 1.