RAUDEBAUGH v. YOUNG (1978)

Mary Ann Raudebaugh (appellant wife) sued Guy Martin Young and Christen Henrichsen (respondent attorneys) for legal malpractice, arising from their representation of her in a divorce action from Thomas Raudebaugh (husband). The action against the attorneys was based on respondents' failure to list as community property a federal military pension of her husband. The wife appeals from a judgment in favor of the attorneys.

In 1966, appellant retained respondents to act as attorneys in obtaining a divorce from her husband of 23 years, Col. Raudebaugh. She obtained her interlocutory decree on August 13, 1969. The parties' property consisted of a family residence, two automobiles, a small savings account, household furniture and a gun collection. Appellant has an 11th-grade education and until shortly before the separation, was never employed during the marriage. Husband, who was in good health, was employed as an aerospace engineer; he was receiving air force retirement and disability benefits totaling $1,308.00 per month.

Appellant informed Young of her husband's job and that he was retired from the air force and was receiving $460.00 per month as a pension. When appellant and her husband consulted respondents together, the subject of the air force retirement pay was brought up. The husband said, “[N]obody [was] going to touch his retirement pay, no matter what—he would go to Mexico and live first.” Young never discussed whether the pension was community or separate property, but at that time, appellant believed it was her husband's separate property.

The pension was not listed as an asset in the pleadings because Young did not believe the military pension was “reachable.” Respondent advised Mrs. Raudebaugh that the pension was a potential source of funds for spousal support. Mrs. Raudebaugh was working as a dispensing optician for $350.00 a month at the time of the proceedings.

The benefits to appellant under the interlocutory decree are:

1. The right to reside in the family residence as long as she wanted.

2. Alimony for $450.00 per month to continue indefinitely.

3. Five life insurance policies on her husband's life to be maintained by husband for her.

4. Approximately equal division of all remaining cash and personal property.

The decree did not mention the pension. As of January 1977, the cash value of the pension according to the wife's analysis was $275,324.00.

Appellant's expert testified that most lawyers considered the federal military pension to be community property beginning with the case of French v. French (1941) 17 Cal.2d 775, 112 P.2d 235,¹ and that most standard legal authorities listed these pensions as community property from 1966 to 1969. However, the expert commented that a 1975 Supreme Court case, Smith v. Lewis (1975) 13 Cal.3d 349, 118 Cal.Rptr. 621, 530 P.2d 589, suggests that a reasonable argument could have been made in 1966-1969 that federal military pensions were not community property. Another lawyer testified that most lawyers in the county did not regard these pensions as a community asset between the years 1966-1969.

I

Appellant argued that the court erred in refusing to instruct the jury that the retirement pay was the community property of the parties. The offered and rejected instruction:

“The retirement benefits that Thomas Corwin Raudebaugh commenced receiving in 1963 and has been receiving on a monthly basis from that time to the present time and will receive in the future from the United States Air Force, were, are and will be the community property of the plaintiff and Thomas Corwin Raudebaugh.”

The above instruction correctly states the present law but that instruction had little to do with the issues before the court and jury below. The question before the jury below was whether the defendants committed malpractice in the years they performed their services for appellant, therefore, we are concerned with instructing on the law of community property at a time these services were performed and not with the present law.

At the times the defendants performed their services for appellant, the community property nature of a military pension was uncertain. In the 1941 case of French v. French, supra, 17 Cal.2d 775, 112 P.2d 235, there was dicta to the effect that retirement pay is community property. However, the French court also stated that because the pay was nonvested, it was not subject to division as community property upon dissolution. It was not until many years later, that the Supreme Court limited the parameters of the French case by holding that federal military retirement pay is vested and must be characterized as community property even though it has not matured. (In re Marriage of Fithian (1974) 10 Cal.3d 592, 596, 111 Cal.Rptr. 369, 517 P.2d 449; Smith v. Lewis (1975) 13 Cal.3d 349, 118 Cal.Rptr. 621, 530 P.2d 589.) And, recently in In re Marriage of Brown (1976) 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561,² the Supreme Court extended its line of reasoning even further and held that even nonvested pension rights earned during marriage are community property, overruling French v. French, Smith v. Lewis, In re Marriage of Fithian, and many other cases³ insofar as those cases expressed the view that nonvested pension rights are not divisible as community property because they are mere expectancies.

However, since the above quoted Supreme Court cases which held that military pensions are community property subject to division on dissolution were decided after the Raudebaugh divorce action, the holdings of those Supreme Court cases are not necessarily relevant on the issue of whether the respondent attorneys committed legal malpractice while handling appellant's divorce action. And, although appellant cites some cases decided prior to In re Fithian to the effect that military pensions were community property, the law on the subject was not clear during the years respondents performed services for appellant. Since the law on the subject was uncertain at the time that respondents performed their services, it was not error to fail to give the above instructions.

Some language in In re Marriage of Brown (1976) 15 Cal.3d 838, 850, 126 Cal.Rptr. 633, 641, 544 P.2d 561, 569, is pertinent. The court said: “Undoubtedly in the 35 years since the rendition of French v. French, counsel, relying on that decision, have often failed to list nonvested pension rights as among the community assets of the marriage.” By analogy, we believe it also follows that prior to 1974 and the handing down of the decision in In re Marriage of Fithian (1974) 10 Cal.3d 592, 596, 111 Cal.Rptr. 369, 517 P.2d 449, counsel would often fail to list federal military retirement benefits as community property, even though vested. Therefore, the proffered instruction had had nothing to do with whether the respondent lawyers committed malpractice in 1966-1969. An instruction is erroneous if, though abstractly correct as a statement of law, it is not within the issues developed by the evidence or a reasonable inference therefrom. (See Gregg v. McDonald (1925) 73 Cal.App. 748, 757, 239 P. 373.)

II

Appellant argues that the court erred in instructing the jury that the character of the federal military retirement benefits as community property or separate property was an arguable issue. The following instruction was offered and given over appellant's objection: “Whether federal military retirement benefits were community or separate property during the years 1966 through 1969 was clearly an arguable issue upon which reasonable lawyers could differ.”

There is no error in the above instruction. The California Supreme Court in Smith v. Lewis (1975) 13 Cal.3d 349, 357, 118 Cal.Rptr. 621, 530 P.2d 589 stated that there was “substantial uncertainty” with regard to the community character of the federal military retirement pension, pointing out that Judge B. Goldberg had written a scholarly article⁴ contending that federal retirement benefits were separate property. The language of the above instruction was correctly based on the reasoning in Smith v. Lewis, supra. Correct statements of law from opinions of reviewing courts are the principal source of instructions. (Witkin, Cal.Procedure, Volume 4, Trial, § 202, p. 3020.)

III

Appellant argues that the court erred in instructing the jury that appellant's rights in her husband's federal military pension can still be litigated in an independent action against him.

The following instruction was given over appellant's objection:

“Plaintiff's rights in her husband's pension can still be litigated in an independent action brought by plaintiff against her husband.”

This instruction was based on specific language in a footnote in In re Marriage of Cobb (1977) 68 Cal.App.3d 855, 137 Cal.Rptr. 670 and directly reflects the reasoning in that case.⁵ And even before the Cobb decision, in In re Marriage of Elkins (1972) 28 Cal.App.3d 899, 903, 105 Cal.Rptr. 59, 61, the court said, “it has long been the rule that property which is not mentioned in the pleadings as community property is left unadjudicated by decree of divorce, and is subject to future litigation, the parties being tenants in common meanwhile.”

Appellant nevertheless argues that the giving of the Cobb instruction was error because she is precluded from going against her husband in an independent action by the doctrine of res judicata. Appellant argues that she is barred from such an action by the reasoning in Kelley v. Kelley (1977) 73 Cal.App.3d 672, 677, 141 Cal.Rptr. 33.

In Kelley the appellate court distinguished Cobb and held that the wife was not entitled to recover military retirement benefits through a separate action brought after the dissolution decree had become final. The court held that the wife was aware of the existence of the pension, and that her election to proceed without counsel contributed to any mistake as to the character of the property.

It is not necessary to consider whether the Kelley reasoning is applicable here because it appears that appellant here is barred from an independent action against the former husband by an extension of reasoning set forth in In re Marriage of Brown (1976) 15 Cal.3d 838, 850-851, 126 Cal.Rptr. 633, 641, 544 P.2d 561, 569. That reasoning was set forth as follows:

“On the other hand, if we accord complete retroactivity to our decision today we might reopen controversies long settled by final judgment. Undoubtedly in the last 35 years since the rendition of French v. French, counsel, relying on that decision, have often failed to list nonvested pension rights as among the community assets of the marriage. In some cases the inability of the nonemployee spouse to assert an interest in nonvested pension rights may have induced the court to award additional alimony. Yet under settled principles of California community property law, ‘property which is not mentioned in the pleadings as community property is left unadjudicated by decree of divorce, and is subject to future litigation, the parties being tenants in common meanwhile.’ (In re Marriage of Elkins (1972) 28 Cal.App.3d 899, 903, 105 Cal.Rptr. 59, 61.) Consequently full retroactivity poses the danger that a nonemployee spouse might upset a settled property distribution by a belated assertion of an interest as a tenant in common in the employee's nonvested pension rights.”

Although the language quoted here applies to nonvested pensions, and military pensions are vested, In re Marriage of Fithian (1974) 10 Cal.3d 592, 596, 111 Cal.Rptr. 369, 517 P.2d 449, the reasoning quoted from Brown applies equally to the case at bar. A belated assertion by Mrs. Raudebaugh as a tenant in common in the employees' military pension rights would upset a settled property distribution, and should not be permitted for the same reason that the rule of In re Marriage of Brown was not fully retroactive.

Under those circumstances, we cannot say that the instruction was not prejudicial. Under the rule established in Smith v. Lewis (1975) 13 Cal.3d 349, 358, 118 Cal.Rptr. 621, 530 P.2d 589, the question of attorney negligence is one to be decided by the laymen on a jury. The effect of the instruction was to tell the jury that, even if the wife's attorney had been negligent, she had suffered no loss because she could still claim a share in the pension.

The judgment is reversed.

I concur in the result, but I disagree with the reasoning set forth in the majority opinion.

I

Invalidity of the Instruction Stating that the Community or Separate Property Nature of Federal Military Retirement Benefits Was an Arguable Issue

Over plaintiff's objection, the trial court gave the following instruction: “Whether federal military retirement benefits were community or separate property during the years 1966 through 1969 was clearly an arguable issue upon which reasonable lawyers could differ.” The majority finds no error in this instruction. I do. It is my view that it was error for the trial court to give this instruction and that it should not be given on the retrial of this action.

The majority relies for its view on certain statements found in the California Supreme Court case of Smith v. Lewis (1975) 13 Cal.3d 349, 118 Cal.Rptr. 621, 530 P.2d 589. The Smith court stated that there was “substantial uncertainty” for a period of time regarding the matter of a federal pension—whether it was community property or separate property. But this statement cannot justify the giving of the instruction at issue.

The Smith court sets forth the standard for determining an attorney's liability for malpractice by using the following language: “In determining whether defendant exhibited the requisite degree of competence in his handling of plaintiff's divorce action, the crucial inquiry is whether his advice was so legally deficient when it was given that he may be found to have failed to use ‘such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake.’ [Citation.]” (Smith, supra, 13 Cal.3d 349, 356, 118 Cal.Rptr. 621, 625, 530 P.2d 589, 593.)

The Smith court added that since “his [the husband's] federal benefits at least arguably belonged to the community” (Smith, supra, 13 Cal.3d 349, 360, 118 Cal.Rptr. 621, 628, 530 P.2d 589, 596), the trial court correctly denied the attorney-defendant's motion for nonsuit and judgment notwithstanding the verdict and properly submitted the question of defendant-attorney's negligence to the jury under instructions setting forth the defense of an attorney's malpractice as stated by the Smith court.

The instruction at issue with which the majority finds no fault is more analogous to a proposed instruction in Smith which was held to have been correctly refused at the Smith trial. Thus, the Smith court observed that “the trial court correctly refused to instruct the jury at defendant's request that ‘he is not liable for being in error as to a question of law on which reasonable doubt may be entertained by well informed lawyers.”’ (Smith, supra, 13 Cal.3d 349, 360, 118 Cal.Rptr. 621, 628, 530 P.2d 589, 596.) (Emphasis added.) “But even with respect to an unsettled area of the law, we believe an attorney assumes an obligation to his client to undertake reasonable research in an effort to ascertain relevant legal principles and to make an informed decision as to a course of conduct based upon an intelligent assessment of the problem.” (Smith, supra, 13 Cal.3d 349, 359, 118 Cal.Rptr. 621, 627, 530 P.2d 589, 595.)

My interpretation of the Smith case is that since a federal military retirement pension was “arguably” community property, a jury would be justified in finding that there was negligence upon the defendant's part in the case before us in not seeking to have the trial court determine that such pension benefits constituted community property.

The error in the instruction which was given—stating that it was an arguable issue upon which reasonable lawyers could differ regarding the status of federal military retirement benefits as being community property or separate property—lies in its misleading character. The jury could well interpret from this instruction that, since reasonably competent lawyers may well have differed on whether the military benefits were community or separate property, it was not negligent for the defendant, as plaintiff's attorney, to fail to seek to have the trial court in the divorce action determine that it was community property. The value of the pension benefits at issue in the case before us was such that “it is difficult to conceive of tactical advantage which could have been served by neglecting to advance a claim so clearly in plaintiff's best interest, …” (Smith, supra, 13 Cal.3d 349, 359, 118 Cal.Rptr. 621, 627, 530 P.2d 589, 595.)

II

The Question of Whether Plaintiff's Rights in Her Husband's Pension Could Still Be Litigated in an Independent Action

The majority finds error in the following instruction which the trial court gave over plaintiff's objection: “Plaintiff's rights in her husband's pension can still be litigated in an independent action brought by plaintiff against her husband.” The majority concludes that this instruction was error based upon the reasoning set forth in In re Marriage of Brown (1976) 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561. The basic premise of the quotation from Marriage of Brown is that a good reason existed for precluding subsequent adjudication of property not mentioned in a divorce judgment. The Marriage of Brown court had in mind that the trial court at the divorce action may have granted additional alimony because of the inability of the nonemployee spouse to assert an interest in nonvested pension rights. This argument has no application in the case at bench.

The majority opinion rejects plaintiff's reliance upon Kelley v. Kelley (1977) 73 Cal.App.3d 672, 141 Cal.Rptr. 33, as holding that plaintiff would be barred from such an independent action against her husband under the doctrine of res judicata. The majority states that Kelley distinguished the Cobb case (In re Marriage of Cobb (1977) 68 Cal.App.3d 855, 137 Cal.Rptr. 670), which held that a wife was not entitled to recover military retirement benefits through a separate action. In my reading of the Kelley opinion, I find no such distinction being made by the Kelley court. On the contrary, the Kelley court explained: “The applicable rule is property which is not mentioned in the pleadings as community property and which is left unadjudicated by a decree of divorce or dissolution is subject to future litigation, the parties being tenants in common meanwhile (In re Marriage of Cobb, 68 Cal.App.3d 855, 860, fn. 1, 137 Cal.Rptr. 670, citing In re Marriage of Brown, 15 Cal.3d 838, 850-851, 126 Cal.Rptr. 633, 544 P.2d 561; In re Marriage of Elkins, 28 Cal.App.3d 899, 903, 105 Cal.Rptr. 59; Estate of Williams, 36 Cal.2d 289, 292-293, 223 P.2d 248, 22 A.L.R.2d 716).” (Kelley, supra, 73 Cal.App.3d 672, 676, 141 Cal.Rptr. 33, 35.)

The Kelley court enunciated the view that, where the court in the divorce action did not adjudicate between the parties the military retirement pension rights of the husband, such retirement pension rights would properly be the subject of a separate lawsuit between the parties. The Kelley court then proceeded to state, however, that there still could be defenses to such an action. In the Kelley case itself, the defense, which was adjudged to be a good defense, was the fact that the plaintiff wife in Kelley had been negligent in not having an attorney represent her in the divorce action and that such negligence resulted in the failure to have the community property character of her husband's retirement pay duly adjudicated. It was this negligence on the plaintiff's part in Kelley that made the Kelley court conclude that the initial divorce action was res judicata to preclude a subsequent action by the wife to reach the husband's pension benefits.

The majority does not mention that the recent case of Lewis v. Superior Court (1978) 77 Cal.App.3d 844, 144 Cal.Rptr. 1, disagreed with the Kelley decision and held that the Marriage of Brown doctrine applied to permit a subsequent separate adjudication and division of federal pension rights without the subsequent adjudication being barred by any doctrine of res judicata due to the failure of the divorce action to deal with this element of property, either in the pleadings, trial, or by the decree of divorce.

It is my view that the Lewis case properly interprets Marriage of Brown. Therefore, I agree with the holdings of Cobb and Lewis. “The purposes of res judicata should not be exalted over the policy of allowing a party a full and fair hearing on the merits of a controversy. To hold otherwise would defeat the express declaration of the Civil Code that a wife's interest is present, existing and equal to that of the husband in the community property.” (Lewis, supra, 77 Cal.App.3d 844, 852, 144 Cal.Rptr. 1, 5; fn. omitted.)

I disagree with the Kelley case view in barring a wife from a subsequent action to divide the community property not divided by the former action on the ground that she was negligent in not employing an attorney to represent her in the former action. Such failure—even assuming it to be negligence—should not be considered as constituting the defense of res judicata to the second action.

Although I conclude that the instruction regarding plaintiff's right to litigate her interest in her husband's pension in a subsequent independent action is a correct statement of the law, it was, nevertheless, error for the trial court to have given the instruction in the instant case. The fact that plaintiff had a right to sue her husband in an independent action in an effort to obtain her interest in his pension does not constitute a defense to her cause of action against her attorneys for malpractice. It is no defense to defendants in the case at bench that plaintiff elected to recover her loss through a malpractice action against defendants rather than through an independent action against her husband. Similarly, had plaintiff elected to sue her husband in an independent action in an effort to reach her interest in his pension, it would not be a defense for him to assert that she should have sued her attorneys for their neglect in representing her in the divorce action.

For the reasons set forth above, I conclude that it was error for the trial court to give the two instructions discussed in the majority opinion. There is no need for further elucidation of the fact that the errors in giving these two instructions were prejudicial and mandate a reversal of the judgment.

FOOTNOTES

1.  The French case is overruled in so far as French found such a pension a “mere expectancy.” (In re Marriage of Brown (1976) 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561.) (The Brown case did not deal with a federal military pension.)

2.  See In re Marriage of Brown (1976) 15 Cal.3d at page 844, 126 Cal.Rptr. 633, 544 P.2d 561 for a list of those cases circumscribing French.

3.  See footnote 14 in In re Marriage of Brown (1976) 15 Cal.3d 838, 851, 126 Cal.Rptr. 633, 544 P.2d 561.

4.  “Is Armed Service Retired Pay Really Community Property?” 58 State Bar Journal 13 (1973)

5.  The Cobb footnote reads (at p. 860, 137 Cal.Rptr. at pp. 673-674): “Since neither the pleadings nor the judgment in the dissolution action mention Loren's pension as a community asset, the court was without jurisdiction to consider the matter at a modification hearing. Property which is not mentioned in the pleadings as community property and which is left unadjudicated by a decree of divorce or dissolution is subject to future litigation, the parties being tenants in common meanwhile (In re Marriage of Brown, 15 Cal.3d 838, 850-851, 126 Cal.Rptr. 633, 544 P.2d 561; in re Marriage of Elkins, 28 Cal.App.3d 899, 903, 105 Cal.Rptr. 59; Estate of Williams, 36 Cal.2d 289, 292-293, 233 P.2d 248, 22 A.L.R.2d 716). The property rights of tenants in common cannot be adjudicated in a motion or order to show cause, and can only be settled in an independent action. The trial court properly dismissed the part of the order to show cause requesting a division of Loren's pension, but its comment about res judicata should be disregarded, since the court lacked jurisdiction to modify its judgment with respect to property rights.”

KINGSLEY, Associate Justice.

FILES, P. J., concurs. JEFFERSON, Associate Justice, concurring in the result.