IN RE: the MARRIAGE OF Gary B. and Heidrun H. SKADEN. (1976)

In this dissolution proceeding, appellant wife claims the trial court erred in declaring certain ‘employment termination’ rights of husband to be a nondivisible property right.

For approximately nine years prior to separation, respondent husband (petitioner in the dissolution proceeding) was employed as an insurance agent by State Farm Insurance Company (State Farm). At the time of initial employment, State Farm and respondent husband executed a contract entitled State Farm Agent's Agreement. That agreement provided for a termination payment derived from renewal premiums earned in the year following termination. The agreement provides in part:

‘SECTION III

‘1. This Agreement will terminate upon your death. You or State Farm have the right to terminate this Agreement by written notice delivered to the other or mailed to the other's last known address. The date of termination shall be the date specified in the notice, but in the event no date is specified, the date of termination shall be the date of delivery if the notice is delivered, or the date of the postmark, if the notice is mailed. Either party can accelerate the date of termination specified by the other by giving written notice of termination in accordance with this paragraph.

‘2. In the event we terminate this Agreement, you are entitled upon request to a review in accordance with the termination review procedures approved by the Boards of Directors of the Companies, as amended from time to time.

‘3. After termination of this Agreement you agree not to act or represent yourself in any way as an agent or representative of the Companies.

‘4. Within ten days after the termination of this Agreement, all property belonging to the Companies shall be returned or made available for return to the Companies or their authorized representative.

‘5. For a period of one year following termination of this Agreement, you will not either personally or through any other person, agency, or organization (a) induce or advise any State Farm policyholder credited to your account at the date of termination to lapse, surrender, or cancel any State Farm insurance coverage or (b) solicit any such policyholder to purchase any insurance coverage competitive with the insurance coverages sold by the Companies. In the event the ‘period of one year’ conflicts with any statutory provision, such period shall be the period permitted by statute.

‘SECTION IV

‘1. In the event this Agreement is terminated two years or more after its effective date the respective Companies will, subject to the conditions set forth in paragraphs 2 and 3 below, pay you or your legal representative, less any deductions for commission charge backs, as follows:

‘A. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY will pay, under the terms of the applicable Schedule of Payments attached hereto, on the policies designated below which are credited to your account by the Company as of the date of termination, a termination payment in an amount equal to:

‘(1) Ten percent of the net premium collections received and recorded each month by the Company during the first twelve months following the date of termination on all such ‘primary’ automobile, recreational vehicle and personal liability policies which remain in the same state or province, and

‘(2) Seven percent of the second and subsequent policy years net premium collections received and recorded each month by the Company during the first twelve months following the date of termination, on all such health insurance policies which remain in the same state or province, except those policies which became available in the same state for assignment to an agent as a result of the termination of an agreement between the Company and an agent on which one year has not elapsed since the date of that termination.’

Appellant wife's sole contention on appeal is that the contractual termination payment is in the nature of a retirement or pension benefit subject to division as a community asset.

Appellant wife cites in support of her contention the basic decisional authority established by the Supreme and Appellate Courts of California dealing with pension or retirement benefits. (In re Marriage of Brown (1976) 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561; In re Marriage of Jones (1975) 13 Cal.3d 457, 119 Cal.Rptr. 108, 531 P.2d 420; In re Marriage of Fithian (1974) 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449; Waite v. Waite (1972) 6 Cal.3d 461, 99 Cal.Rptr. 325, 492 P.2d 13; Waters v. Waters (1946) 75 Cal.App.2d 265, 170 P.2d 494.) Appellant wife's reliance upon the cited cases is unavailing. Each decision is factually distinguishable from the circumstances here presented inasmuch as each dealt with a true pension or retirement plan, or involved a property right predicated upon services performed or funds earned during coverture.

Appellant wife categorizes without factual support the termination payment as a ‘pension benefit.’ Our analysis of the facts presented compels a contrary conclusion. The State Farm Agent's Agreement provides that upon termination of that agency, in consideration of the agent's performance of certain acts of forebearance, he will become entitled to a payment derived from income, or premiums paid on insurance contracts credited to the agent's account on the date of termination.

After separation, respondent husband continued as an agent with State Farm. At that time, the termination benefit under the terms of the agreement was no more than an income expectancy to be paid upon performance of contract requirements. Each of the required acts necessary for payment will, of necessity, be performed following coverture, not during.

However, the Supreme Court in In re Marriage of Brown, supra, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561, in discussing pension rights, emphasized that the divisible property right must be acquired during coverture. The same principle is here applicable.

Civil Code section 5118 as amended in 1971 provides that the earnings and accumulations of both spouses while they live apart constitute separate property. Respondent husband's income is derived from premiums paid by his clientele for insurance policies, either new or renewed. In each instance, his efforts as an agent, in procuring new policies, as well as servicing the insurance needs and existing policies of his clients, are rewarded by payment of income based upon the amount of premiums paid. The income received constitutes earnings acquired after separation and are his separate property. Whether the policy was originally sold during coverture does not affect the separate nature of income derived from renewal premiums paid after separation. The renewal premiums may not be considered a gratuitous payment nor may it be said that following the initial sale, additional efforts by the agent (respondent husband) will not be required to induce the client to continue the policy in force. The insurance needs of each client likewise will require the attention and expertise of the agent. For these efforts, he is entitled to earnings derived from premiums paid; such earnings are clearly the separate property of husband.

The payments to which respondent husband will become entitled upon termination of employment have as their source earnings from premiums paid after termination on policies credited to respondent husband's account on the date of termination. They are the separate property of respondent husband. The right to a termination benefit did not create a property right during coverture, subject to division at the time of dissolution.

The judgment is affirmed.

I dissent. The majority opinion erroneously declares that the insurance agents' termination benefits are no more than an expectancy. It ignores ‘the defining characteristic of an expectancy [which] is that its holder has no enforceable right to his beneficence.’ (In re Marriage of Brown, 15 Cal.3d 838, 845, 126 Cal.Rptr. 633, 637, 544 P.2d 561, 565.) Here the husband has an enforceable right to share in premium collections received after termination. This right is not an expectancy but a chose in action, a form of property representing deferred compensation for services rendered during marriage. (Id. at p. 845, 126 Cal.Rptr. 633, 544 P.2d 561.) Such a right is community property and the wife is entitled to share in it.

The fact that future payment may be defeated by the husband's breach of contract does not defeat this conclusion. That performance is wholly or partially dependent upon certain contingencies does not prevent a contract from arising; the employer may not deny or impair the contingent liability any more than it can refuse to make payments of compensation which are immediately due. (Kern v. City of Long Beach, 29 Cal.2d 848, 855, 179 P.2d 799, quoted in In re Marriage of Brown, supra, 15 Cal.3d at p. 846, 126 Cal.Rptr. 633, 544 P.2d 561.) The practical problem of valuation may be overcome, if necessary, by a decree requiring the husband to report the income and to pay his wife her share at the time he receives it.

EVANS, Associate Justice.

PUGLIA, P. J., concurs.