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Court of Appeal, Fourth District, Division 1, California.

IN RE: MARRIAGE OF HILLERMAN. Alan E. HILLERMAN, Respondent, v. Tyna Kay HILLERMAN, Appellant.

Civ. 16669.

Decided: January 16, 1979

Feist, Vetter, Knauf & Loy by Charles L. Currier, Oceanside, for appellant. Jones, Hatfield, Penfield & Garrett by James R. Penfield, Escondido, for respondent.

The parties to this action were married February 1, 1959 and separated on July 20, 1976. On October 13, 1976, Alan filed a petition for dissolution of the marriage. At the interlocutory hearing arguments were presented as to whether the court should retain jurisdiction for the purpose of dividing the community property interest in Alan's social security benefits. At the hearing the parties stipulated that during the period of their marriage Alan did contribute, or have deducted from his pay, sums deposited to social security.

The decision of the court contained in the interlocutory judgment of dissolution of marriage is:

‘IT IS FURTHER ORDERED, ADJUDGED AND DECREED that based upon the authority of In re the Marriage of Kelley 64 Cal.App.3d 82, [134 Cal.Rptr. 529], the court finds petitioners social security benefits are not community property and that no community property interest exists in said benefits, and accordingly no reservation of jurisdiction is made herein for purposes of dividing said benefits.’

Tyna appeals from the foregoing portion of the interlocutory judgment contending:

1. Old age, survivors and disability insurance benefits under the Social Security Act are community property to the extent they relate to the employment of the worker-spouse during marriage; and

2. The characterization of social security benefits as community property and the treatment or division thereof by the court upon dissolution of the marriage does not violate the supremacy clause of the United States Constitution.

In 1960, the United States Supreme Court defined the nature of federal social security benefits, holding that benefits under the act are statutory, rather than contractual, and rejecting the argument that such benefits are an accrued property right. (Flemming v. Nestor, 363 U.S. 603, 610–611, 80 S.Ct. 1367, 4 L.Ed.2d 1435.)

In discussing the non-contractual nature of the benefit, the court found:

‘The Social Security system may be accurately deseribed as a form of social insurance, enacted pursuant to Congress' power to ‘spend money in aid of the ‘general welfare”, Helvering v. Davis, [301 U.S. 619, 57 S.Ct. 904, 81 L.Ed. 1307] supra, 301 U.S. at page 640, 57 S.Ct. at page 908, whereby persons gainfully employed, and those who employ them, are taxed to permit the payment of benefits to the retired and disabled, and their dependents. Plainly the expectation is that many members of the present productive work force will in turn become beneficiaries rather than supporters of the program. But each worker's benefits, though flowing from the contributions he made to the national economy while actively employed, are not dependent on the degree to which he was called upon to support the system by taxation. It is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.’ (Id. at pp. 609–610, 80 S.Ct. at p. 1372.)

In rejecting the accrued property right argument, the court found:

‘To engraft upon the Social Security system a concept of ‘accrued property rights' would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands. See Wollenberg, Vested Rights in Social-Security Benefits, 37 Ore.L.Rev. 299, 359. It was doubtless out of an awareness of the need for such flexibility that Congress included in the original Act, and has since retained, a clause expressly reserving to it ‘[t]he right to alter, amend, or repeal any provision’ of the Act. § 1104, 49 Stat. 648, 42 U.S.C. § 1304, 42 U.S.C.A. § 1304.' (Id. at pp. 610–611, 80 S.Ct. at p. 1372.)

More recently in Weinberger v. Wiesenfeld, 420 U.S. 636, 95 S.Ct. 1225, 43 L.Ed.2d 514, the United States Supreme Court reaffirmed the non-contractual nature of social security benefits. However, the court also stated:

‘But the fact remains that the statutory rights to benefits is directly related to years worked, amounts earned by a covered employee, and not to the need of the beneficiaries directly.’ (Id. at p. 647, 95 S.Ct. at p. 1233.)

The two California cases speaking to social security benefits have rejected the argument that such benefits are a divisible community asset. In In re Marriage of Kelley, 64 Cal.App.3d 82, 134 Cal.Rptr. 259, the court held that future social security benefits that husband might receive while based at least in part on his labors during marriage, were not community property.

‘If the ‘contribution’ is legally analogous to that of an employee to a contributory pension plan or the benefits to be received are a form of deferred compensation legally similar to rights granted by a private retirement plan or government pension earned by the performance of services during marriage, there is a community interest in the ‘contribution’ and in the benefits to be received.' (Id. at p. 96, 134 Cal.Rptr. at p. 267.)

‘Whatever may be the similarities of the OASDI system to private retirement or government pension plans, there are differences both in manner of contribution and computation of benefits which outweigh them.’ (Id. at p. 97, 134 Cal.Rptr. at p. 267.)

‘In essence, the statutory scheme of OASDI is thus one of social insurance designed to provide financial security to covered workers and their families rather than one of deferred compensation for past labor.’ (Id. at p. 98, 134 Cal.Rptr. at p. 268.)

‘When the statutory scheme of OASDI is recognized as primarily one of federal social insurance, it is apparent that exercise of state court jurisdiction awarding community property by evaluating employee ‘contributions' or right to future benefits conflicts with the federal law. The federal law specifically provides benefits for wives . . ., divorced wives . . ., widows . . . and surviving divorced wives . . . If all or any part of OASDI contributions or benefits are included in the mix of community property divisible on dissolution of marriage, what is a uniform federal scheme of benefits becomes one that varies depending upon the community property law of various states.’ (Citations omitted; In re Marriage of Kelley, supra, 64 Cal.App.3d at p. 98, 134 Cal.Rptr. at p. 268.)

In In re Marriage of Nizenkoff, 65 Cal.App.3d 136, 138, 135 Cal.Rptr. 189, 190, the court went further, finding:

‘It is now well settled in this state that in order to qualify as a divisible community asset, an interest must be a contractual right or property interest.’

The court in Nizenkoff, at page 139, 135 Cal.Rptr. 189, cited Flemming v. Nestor, supra, 363 U.S. 603, 611, 80 S.Ct. 1367, 4 L.Ed.2d 1435 as rejecting the argument that the Social Security Act created either contract or property rights.

Preemption was an alternative basis of the holding in Nizenkoff. Noting the Social Security Act provisions for payments under certain circumstances to a divorced wife or surviving divorced wife, the court stated:

‘These provisions demonstrate that in the statutory scheme of the Social Security Act, Congress has considered the termination of marital relationships by divorce and expressly set forth a method for protecting the interests of the divorced wife. ‘The sweep of the Social Security Act is not to be interpreted by the variations and idiosyncracies of local law. As Congress expressly provided for the interests of a divorced wife in the social security system, it did not intend that they rely on state family law concepts of support, alimony and community property.

‘A ruling that social security benefits are divisible community assets would seriously interfere with the express statutory scheme of the Social Security Act and is forbidden by the supremacy clause of the United States Constitution. . . . Thus, we do not think the rationale of In re Marriage of Milhan [13 Cal.3d 129, 117 Cal.Rptr. 809, 528 P.2d 1145] . . . applies to the instant case.’ (Citations omitted; In re Marriage of Nizenkoff, supra, 65 Cal.App.3d at pp. 140–141, 135 Cal.Rptr. at pp. 191–192.)

In re Marriage of Milhan, supra, 13 Cal.3d 129, 117 Cal.Rptr. 809, 528 P.2d 1145, involved a National Service Life Insurance policy. The court held that the property was community property to be valued as such at divorce in making the equal division of community property. The court in Milhan found that California is not forbidden from applying its community property laws to achieve an equitable division of marital property so long as the operation of those laws does not frustrate congressional intent.

Tyna asserts that consistent with a line of decisions in In re Marriage of Fithian, 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449; Smith v. Lewis, 13 Cal.3d 349, 118 Cal.Rptr. 621, 530 P.2d 589; In re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561; and In re Marriage of Hisquierdo, 19 Cal.3d 613, 139 Cal.Rptr. 590, 566 P.2d 224, OASDI benefits under the Social Security Act should be treated in the manner of other retirement benefits and be held to be the community property of the spouses to the extent such benefits relate to the period of the worker's covered employment during marriage.

The Supreme Court in the Hisquierdo case (decided subsequent to Kelley and Nizenkoff) was called upon to decide whether benefits afforded by the Railroad Retirement Act were community property. Among the husband's contentions in the Hisquierdo case was benefits under the Federal Railroad Retirement Act could not be community property because they were governed by the same principles applicable to OASDI benefits under the Social Security Act. Thus, he contended, Flemming v. Nestor, supra, applied to make the benefits non-contractual and hence incapable of being community property. The court was not persuaded by the husband's analogy to benefits payable under the Social Security Act, and stated:

‘The foregoing proposition is unsupported by authority. Although there are some similarities between social security benefits and railroad retirement pensions, the same may be said regarding military retirement pensions which we held in Fithian and its progeny to constitute community property. Thus, we are not convinced by husband's argument.’ (In re Marriage of Hisquierdo, supra, 19 Cal.3d at p. 619, 139 Cal.Rptr. at p. 593, 566 P.2d at p. 227.)

The court in Hisquierdo also pointed out several recent decisions have held that pension rights created under federal law constitute community property to the extent that they are attributable to employment during marriage.

‘The principle that has emerged from these decisions is that whenever there is a conflict between a federal statute affording annuity or insurance benefits and state community property laws the federal statute must prevail. However, if the intent in Congress in creating the federal right is not violated by application of California's community property laws, then the status of such rights is governed by California law. [Citations.] Our task, then, is to determine whether Congress intended that railroad retirement benefits remain the separate property of the employee.’ (Id. at p. 616, 139 Cal.Rptr. at p. 591, 566 P.2d at p. 225.)

The court found that Congress did not intend that railroad retirement benefits remain the separate property of the employee. Tyna submits that the holding in Hisquierdo that Congress did not intend railroad retirement benefits afforded by the Railroad Retirement Act remain the separate property of the employee, the similarity between the Railroad Retirement Act and the Social Security Act, and the nature of benefits provided pursuant to the Social Security Act mandate a characterization of such benefits as community property or rights akin to community property.

Support for Tyna's contention is found in Reppy, Community and Separate Interests in Pensions and Social Security Benefits after Marriage of Brown and ERISA (1978) 25 UCLA Law Review, 417–546.1

‘As Hisquierdo implies, there seems to be no logical basis for distinguishing the military pension cases and their progeny from Kelley-Nizenkoff. 792 In mt view, those cases recognizing a community interest in future federal benefits are correct as a matter of community property law and the social security cases in error.’ (25 UCLA L.Rev., p. 439.)

There are some similarities between the Federal Railroad Retirement Act (45 U.S.C.A. § 231 et seq.) and the Social Security Act. Each of such plans is compulsory and each of such plans presents difficulties of evaluation at the time of dissolution. Both the Social Security Act and the Railroad Retirement Act contain specific provisions concerning ‘direct or primary’ employee benefits and ‘indirect or family’ benefits. The Railroad Retirement Act pension fund is funded in a manner similar to that of the Social Security Act. A railroad retirement ‘tax’ is imposed on employees and there is an annual appropriation from general funds of the United States into the railroad retirement pension account of the precise amount so raised by the tax (45 U.S.C.A. § 231n). In fact, the court in Kalina v. Railroad Retirement Board, 541 F.2d 1204 (6 Cir. 1976), aff'd 431 U.S. 909, 97 S.Ct. 2164, 53 L.Ed.2d 220 (1977), stated that the old Railroad Retirement Act of August 29, 1935, was ‘patterned on’ the social security model and entitled railroad workers and their dependents to the same benefits as payable under OASDI. However, there are some differences between the Social Security Act and the new Railroad Retirement Act. The formula for computing the amount of benefits differ (cf. 45 U.S.C.A. § 231c with 42 U.S.C.A. § 415(b)), the new Railroad Retirement Act provides no benefits for the divorced wife of a participant (45 U.S.C.A. § 231a(d)(4)), and there is no specific reservation of the power to amend or repeal in the Railroad Retirement Act. Evidencing a relationship between the two is 45 U.S.C.A. section 231b(m), reducing Railroad Retirement Act benefits by the amount of any OASDI benefits paid to the beneficiary. Each act contains numerous cross-references to the other.

Under the Social Security Act a divorced spouse is entitled to direct benefits only if she was married to the worker for a minimum period of 10 years prior to the divorce and is 65 years of age (42 U.S.C.A. § 402(b)(1)(C), and (e)(1)). Once this minimum duration is attained, length of marriage does not affect the direct benefits available to the divorced spouse; she is entitled to receive a benefit equal to onehalf of the primary insurance amount payable to the covered worker. The provision in social security legislation for payments to wives, widows and divorced wives would not seem to preclude community interest.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal regulation of private pension and retirement plans. The issue before the court in In re Marriage of Johnston, 85 Cal.App.3d 900, 149 Cal.Rptr. 798, was whether Congress, by the following language, intended to interfere with the distribution by a state court in a marital dissolution action of pension benefits subject to federal regulation:

‘In order to avoid ‘the possibility of endless litigation over the validity of state action that might impinge on federal regulation . . . and potentially conflicting state laws hastily contrived to deal with some particular aspect of private welfare or pension benefit plans not clearly connected to the Federal regulatory scheme,’ (120 Cong.Rec. 29942 (1974) Remarks of Senator Javits) Congress enacted the following preemption statute: ‘. . . this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described [herein] . . ..’ (Italics added.) (29 U.S.C. § 1144.)' (85 Cal.App.3d, at p. 907, 149 Cal.Rptr. 805.)

The court's decision, discussing Brown, Fithian and Hisquierdo, among others, was:

‘We conclude that the preemption clause of ERISA does not affect the operation of California community property laws; that ERISA does not interfere with the power of California courts to divide pension benefits between a husband and wife and to order direct payment of those benefits to a nonemployee spouse; that California community property law does not relate to and is thus not included in federal regulation of any pension benefit plan.’ (In re Marriage of Johnston, supra, at page 912, 149 Cal.Rptr. at page 806.)

The court in In re Marriage of Johnston, supra, also concluded that the laws relating to marital dissolution are uniquely local in nature. ‘The whole subject of the domestic relations of husband and wife . . . belongs to the laws of the states and not to the laws of the United States.’ (In re Burrus, (1890) 136 U.S. 586, 593–594, 10 S.Ct. 850, 853, 34 L.Ed. 500.) ‘Domestic relations is a field peculiarly suited to state regulation and control, and peculiarly unsuited to control by federal courts.’ (Buechold v. Ortiz, (9th Cir. 1968) 401 F.2d 371, 373.)

In In re Marriage of Pardee, (C.D.Cal. 1976) 408 F.Supp. 666, a dissolution action was brought in California. The wife sought to join a pension plan as a party and the plan filed a petition to remove the case to federal court. It was the position of the petitioner that ERISA superseded all state laws relating to employee benefit plans and that the state court thus had no jurisdiction to order payment. At footnote 4, page 669, the court notes:

‘The legislative history suggests that the congressional interest in uniformity was confined to matters involving the minimum standards of pension plans and the safeguards necessary to secure equitable administration. . . . An intent to regulate pension plans does not necessarily include an intent to control the state's distribution of family assets in divorce and separation proceedings.’

In Stone v. Stone (N.D.Cal.1978) 450 F.Supp. 919, 924, the court considered whether a state divorce decree requiring the pension plans to pay directly to wife a portion of the pension benefits due husband was invalid because preempted by ERISA. The court observed ‘Congress does not infringe sub silentio ‘the power to make rules to establish, protect, and strengthen family life [which] is committed by the Constitution of the United States . . . to the legislature of [each state.]’ [Citation.]'

This court in Johns v. Retirement Fund Trust, 85 Cal.App.3d 511, 149 Cal.Rptr. 551 had, previous to In re Marriage of Johnston, supra, ruled that ERISA did not preempt California law as applied there in a matrimonial matter.

It can be argued that there is no community interest in OASDI benefits until

(1) the California Legislature declares that whether a pension plan is created by federal law, or private contract, a participant's spouse has a community interest in all benefits unless they are traceable to separate labor or separate contributions in money, and

(2) Congress, with respect to retirement programs operated under the taxation and spending powers, such as OASDI, by statute makes clear that it has no desire to prevent the states from valuing at divorce, in order to determine the total community wealth at issue, either the ‘taxes' paid or the lump sum total of future benefits payable to all distributees.

We do not agree. Community property is defined in California as property acquired by a husband and wife, or either, during marriage which is not separate property (Civ.Code, § 687), and includes ‘all personal property’ acquired by a married person during the marriage (Civ.Code, § 5110). ‘The general theory of the community property system is that the husband and wife form a sort of partnership, and that property acquired during the marriage by the labor or skill of either belongs to both.’ (See Witkin, Summary of Cal.Law (8th ed. 1974) Community Property, § 1, p. 5094.) These principles result in the earnings and proceeds of earnings, including pension and retirement benefits, of either spouse during marriage to be characterized as a community asset subject to equal division upon dissolution of the marriage. (See Cal.Civ.Code § 4800.) We hold that neither state nor federal law bars recognition of community interest in OASDI benefits and when contributions of community funds or community labors have qualified a married person for benefits, a community interest in those benefits exists at the time of the dissolution of the marriage under California community property law. We are fully cognizant of the difficult problem in tracing OASDI benefits to a spouse's labor during marriage or to FICA taxes paid with community funds as well as the difficulty of placing a value on future OASDI benefits which are subject to numerous contingencies and unknown factors. We are convinced, however, that Congress, in enacting the Social Security Act, did not intend to interfere with a state court's jurisdiction over distribution of marital property at dissolution of marriage.

The court below should have reserved jurisdiction for the purpose of dividing Alan's social security benefits.

The interlocutory judgment as to Alan's social security benefits only is reversed.



1.  Not discussed in the briefs herein as published subsequent to filing of briefs.

2.  Footnote 79 in UCLA Law Review at page 439 states: ‘Professors Charles and Florence Luther predict the prompt disapproval of Nizenkoff and Kelley by the California Supreme Court on the basis of Hisquierdo, because ‘the pertinent provisions of the Railroad Retirement Act and the Social Security Act, pretty much parallel one another.’ Casenote, In re Marriage of Hisquierdo, in State Court Decisions, 4 Community Prop.J. 172, 173 (1977).'

HARELSON,*** Associate Justice. FN*** Judge of the Superior Court of San Diego County sitting under assignment by the chairperson of the Judicial Council.

COLOGNE, Acting P. J., and WIENER, J., concur.