JONES v. STEVENSON (1983)

Joann Jones filed this action August 15, 1980, seeking damages for legal malpractice from her former attorneys, Frank Stevenson, Richard Songer and Roger Stebleton (collectively, the defendants), asserting they negligently represented her a number of years earlier in her action for dissolution of marriage against Arthur Francis Jones.   She charges they failed to allege her husband's federal military retirement pension was a community property asset when they obtained her dissolution of marriage.   The defendants' motion for summary judgment was granted and Joann appeals.

Joann was separated from Arthur on February 29, 1972, and on March 3, 1972, filed her petition for dissolution of marriage at the time represented by Stebleton.   On October 26, 1973, a stipulated property settlement agreement was executed by the parties and approved by Stebleton, Arthur agreeing to it without the aid of counsel although he had had an attorney in the earlier stages of the dissolution proceedings.   An interlocutory decree was entered on November 19, 1973, incorporating the terms of the agreement.   A final judgment was entered November 27, 1973.   The military pension was not mentioned in any of the documents nor included in the judgment.

At the time of the dissolution, Arthur was employed by Campbell Machine, Inc. as a welder but was also a member of the U.S. Navy Reserve.   The declarations on file indicate that by letter dated August 26, 1975, Arthur received word from the Bureau of Navy Personnel that Arthur should be advised he had completed the required number of years of service and would be eligible for retirement when he reached 60 years of age.   The amount of such payment was not then determined and, since he had not reached the retirement age, payment would not begin until May 13, 1976, his 60th birthday.   The record is not explicit as to when he obtained the entitlement, as opposed to just being informed he had at some time completed the required service.   Joann contends he had completed the necessary service requirements during their marriage and only had to await the retirement age.   Defendants assert the benefits did not accrue until just before the letter from the Navy was written, which was after the dissolution.   The record leaves unresolved whether Arthur had fully earned his entitlement to the pension before or after the dissolution, i.e., whether the pension was then “vested” or “nonvested.”

Arthur's application for transfer to the retired list was approved June 16, 1976, and payments began effective May 13, 1976.

Joann states she was aware Arthur was engaged in military service and knew he would be receiving a pension in the mid-70's, but was not told the pension was community property and that she might be entitled to a portion of it.   She learned this for the first time in August 1980, when she consulted a new attorney on another matter.

The defendants assert, among other contentions, Joann's action is barred by Code of Civil Procedure section 340.6,¹ which establishes a statute of limitations for legal malpractice.   That section provides the action must be commenced “within one year after plaintiff discovered, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.”   The statute also provides the period will be tolled while the attorney continues to represent the plaintiff.   The effective date of this section was January 1, 1978.

In granting the motion for summary judgment, the trial judge made the following statement:

“I reverse the tentative and grant the motion for summary judgment, for all the reasons stated in the moving papers.

“I am persuaded that this case is long outlawed by the Statute of Limitations.   She [Joann] had knowledge very early in the game with respect to the pension—she simply didn't protect her rights—so the motion for summary judgment is granted.”  (Italics added.)

In their moving papers, the defendants asserted three bases for the motion, namely, (1) the interest in the pension plan was nonvested and Joann had no claim to it as a community property asset, (2) Joann had suffered no damage, and (3) the statute of limitations barred any action.   We address only the first of these assertions.

If the pension is nonvested at the time of the dissolution, the law clearly applicable before the decree in question became final in 1974 was to the effect the nonservice spouse had no community property interest (French v. French, 17 Cal.2d 775, 778, 112 P.2d 235).   Even as late as 1974, the California courts consistently held the federal military pension carried the community property character only if it was a vested interest (see In re Marriage of Fithian, 10 Cal.3d 592, 596, 111 Cal.Rptr. 369, 517 P.2d 449).   It was not until 1976 that the Supreme Court altered the state law making a nonvested as well as a vested pension subject to a community property claim (In re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561).   Brown expressly overruled the decision in French to provide this new rule.

Brown, however, specifically made its ruling not retroactive.

“We conclude that our decision today should not apply retroactively to permit a nonemployee spouse to assert an interest in nonvested pension rights when the property rights of the marriage have already been adjudicated by a decree of dissolution or separation which has become final as to such adjudication, [fn. omitted] unless the decree expressly reserved jurisdiction to divide such pension rights at a later date (see Civ.Code, § 4800).   Our decision will apply retroactively, however, to any case in which the property rights arising from the marriage have not yet been adjudicated, to such rights if such adjudication is still subject to appellate review, or if in such adjudication the trial court has expressly reserved jurisdiction to divide pension rights.”  (In re Marriage of Brown, supra, 15 Cal.3d 838, 851, 126 Cal.Rptr. 633, 544 P.2d 561.)

Thus, Brown made it clear that as of 1973 and the finality of the decree of dissolution here, the nonvested pension would not be treated as a community asset.

Liability for professional malpractice was discussed at length in Smith v. Lewis, 13 Cal.3d 349, at page 356, 118 Cal.Rptr. 621, 530 P.2d 589:

“We cannot, however, evaluate the quality of defendant's professional services on the basis of the law as it appears today.   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.]  We must, therefore, examine the indicia of the law which were readily available to defendant at the time he performed the legal services in question.”

Since the attorney correctly interpreted the decisional law as it then appeared and was ultimately settled with respect to nonvested pension rights, it would be folly to inquire whether the attorney used such diligence as lawyers of ordinary skill and capacity commonly exercise in reaching the same result.

If, on the other hand, the right to the pension vested during the marriage, the law was not settled and a different result might have come about with some diligence researching the law (Smith v. Lewis, supra, 13 Cal.3d 349, 357, 118 Cal.Rptr. 621, 530 P.2d 589).   Where, however, the state of the finally settled law was in accord with the attorney's advice, we cannot bring ourselves to find him negligent.

In Sharpe v. Superior Court, 143 Cal.App.3d 469, 192 Cal.Rptr. 16, the court held in spite of the fact the law was unsettled concerning vested military retirement pensions as of the time of the property settlement, if the final determination of the law in the area (McCarty v. McCarty, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589) supports the attorney's position, there should be no liability.  Sharpe tells us:

“McCarty is declaratory of the meaning of federal statutes which were in effect at the time of Sharpe's [nonmilitary spouse's attorney] alleged negligence.   By that law [the nonmilitary spouse] never had a property right in her ex-spouse's military pension capable of being forfeited.   She had no vested right in erroneous California case law, which might have been applied to her claim had it been timely raised․

“[Smith v. Lewis, supra, 13 Cal.3d 349, at p. 356, 118 Cal.Rptr. 621, 530 P.2d 589] assumes trial counsel misperceived the correct law and addresses the issue whether that misperception was the result of professional negligence.   We now know the correct law, applicable in 1968, was as interpreted by McCarty.   Hence the best that [the nonmilitary spouse] can say is that Sharpe inadvertently applied the correct law.   That Sharpe, measured by Fithian, failed to research the community property status of federal military retirement benefits is irrelevant.   It is not malpractice for Sharpe to have failed to discover and apply erroneous case law.   There is no such cause of action.

“․

“Sharpe's duty was to take reasonable measures to determine the law in 1968.   As we have said, McCarty fixed the meaning of that law.   Whatever his professional defects in research or vision, if any, McCarty resolved the substantive issue of [the nonmilitary spouse's] legal entitlement and thereby precluded Sharpe's liability.   Sharpe had no duty in 1968 [fn. omitted] to foresee that a 1982 federal legislative enactment might be interpreted to retroactively [fn. omitted] affect the statutes applicable in 1968.   That would raise prescience to Delphic heights.   There is no such standard of professional accountability.”  (Sharpe v. Superior Court, supra, 143 Cal.App.3d 469, 473–474, 475, 192 Cal.Rptr. 16.)

Even if diligent research had revealed the unsettled nature of the law and provided counsel with a quandary as to the route to follow, what would zealous advocacy require?   It might have established its community character as in In re Marriage of Fithian, supra, 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449, or on equally strong grounds it might conversely have precipitated an earlier McCarty ruling (see Sharpe v. Superior Court, supra, 143 Cal.App.3d 469, 473, fn. 1, 192 Cal.Rptr. 16).   If, as has been suggested, counsel should have reserved a ruling on the issue until the law was established, i.e., until McCarty was decided, he would have had the same result as he obtained here.   At that time the service person would have had a right to a final adjudication the military pension right was not community property.   As in Sharpe, we cannot hold that the attorney should be expected to foresee the legislative response to the final U.S. Supreme Court's interpretation of the law.

Accordingly, whether the pension was vested or nonvested at the time of the dissolution, the attorneys would not be guilty of malpractice because their position was ultimately affirmed to be the correct law by the U.S. Supreme Court in McCarty.

It is for this reason we do not need to reach the very interesting and knotty problem of the effect section 340.6 (statute of limitations for an attorney's negligence) may have upon a cause of action based on a negligent omission allegedly made up to five years before the enactment (see Krusesky v. Baugh, 138 Cal.App.3d 562, 566, 188 Cal.Rptr. 57).   The summary judgment having been granted because no cause of action exists, any discussion of the timeliness of the filing of the action would be an unnecessary exercise.

Judgment affirmed.

In affirming the summary judgment, the majority relies solely on Sharpe v. Superior Court (1983) 143 Cal.App.3d 469, 192 Cal.Rptr. 16.   Since I believe Sharpe is factually and legally distinguishable, I respectfully dissent.

A cause of action for negligence requires a showing of a legal duty to use care;  a breach of that legal duty;  and the breach as the proximate cause of the resulting harm.  (4 Witkin, Summary of Cal.Law (8th ed. 1974) § 488, p. 2749.)   In the case of a lawyer, the legal duty is “․ to have that degree of learning and skill ordinarily possessed by reputable [lawyers], practicing in the same or similar locality and under similar circumstances.  [¶] It is his further duty to use the care and skill ordinarily used in like cases by reputable members of his profession practicing in the same or a similar locality under similar circumstances, and to use reasonable diligence and his best judgment in the exercise of his professional skill and in the application of his learning, in an effort to accomplish the purpose for which he was employed.   A failure to perform any such duty is negligence.”  (BAJI No. 6.37;  see Smith v. Lewis (1975) 13 Cal.3d 349, 356–360, 118 Cal.Rptr. 621, 530 P.2d 589.)

Here, it is possible for Jones to establish the existence of a duty and its breach and yet fail to establish liability if the breach is not shown to have caused her harm.   She must show the result in the earlier action would have been different had the breach, i.e., malpractice, not occurred.  (See Smith v. Lewis, supra, 13 Cal.3d at pp. 360–361, fn. 9, 118 Cal.Rptr. 621, 530 P.2d 589;  BAJI No. 6.37.5.)

Whether a lawyer is negligent turns on whether he acted reasonably in performing adequate research and complying with the standards in the community at the time the advice or act was done.  (Smith v. Lewis, supra, 13 Cal.3d at p. 356, 118 Cal.Rptr. 621, 530 P.2d 589.)   I wish to note that unlike Sharpe, which deals with acts occurring in 1968, the relevant time period here is March 1972 through November 1973.   Our inquiry must be directed to whether at that time Stebleton failed to comply with the proper standard by omitting the military pension and, if so, was that negligence the proximate cause of Jones' damages, if any.

As the majority opinion points out, the record does not reveal whether Arthur's pension vested during marriage and thus a triable issue of fact exists on that matter.   If we assume the pension was vested before dissolution, a triable issue also exists on whether Stebleton breached the duty of care he owed Jones.   Stebleton filed no declarations nor were any filed on his behalf indicating what he did in examining the applicable law or what the prevailing practice was in the community when comparable issues were presented to the court in dissolution proceedings.

During the period of the Jones dissolution, March 1972 to November 1973, the law on the community nature of vested military pensions had achieved a remarkable clarity.   Summarizing the law during that period, our Supreme Court in In re Marriage of Fithian (1974) 10 Cal.3d 592, 596, 111 Cal.Rptr. 369, 517 P.2d 449, said:

“The law is settled in California that retirement benefits which flow from the employment relationship, to the extent they have vested, are community property subject to equal division between the spouses in the event the marriage is dissolved.  (Waite v. Waite (1972) 6 Cal.3d 461 [99 Cal.Rptr. 325, 492 P.2d 13];  Phillipson v. Board of Administration (1970) 3 Cal.3d 32 [89 Cal.Rptr. 61, 473 P.2d 765];  Benson v. City of Los Angeles (1963) 60 Cal.2d 355 [33 Cal.Rptr. 257, 384 P.2d 649];  French v. French (1941) 17 Cal.2d 775 [112 P.2d 235, 134 A.L.R. 366];  Crossan v. Crossan (1939) 35 Cal.App.2d 39 [94 P.2d 609].)   Underlying the community treatment of retirement benefits is the concept that they do not derive from the beneficence of the employer, but are properly part of the consideration earned by the employee.   Thus whether an employee is required to make contributions to the retirement fund is irrelevant to the ultimate characterization of the benefits as community property.  (Phillipson v. Board of Administration (1970) supra;  Sweesy v. L.A. etc. Retirement Bd. (1941) 17 Cal.2d 356 [110 P.2d 37].)   Furthermore, the principle that retirement benefits are community property has been held to apply whether the source of the retirement fund lies in a state, federal, military, or private employment relationship.  (Waite v. Waite (1972) supra;  Phillipson v. Board of Administration (1970) supra;  Estate of Perryman (1955) 133 Cal.App.2d 1 [283 P.2d 298];  French v. French (1941) supra.)”  (Italics supplied, fn. omitted.)

More than one year before the Jones dissolution was final, three different courts of appeal specifically approved community treatment of vested federal military retirement pay in dissolution proceedings.  (In re Marriage of Brown (1972) 27 Cal.App.3d 188, 191, 103 Cal.Rptr. 510;  Bensing v. Bensing (1972) 25 Cal.App.3d 889, 893, 102 Cal.Rptr. 255;  In re Marriage of Karlin (1972) 24 Cal.App.3d 25, 32, 101 Cal.Rptr. 240.)

The only uncertainty that existed during this period related to the issue of whether the states were precluded by the Supremacy Clause of the United States Constitution from treating federal military retirement as community property.   The Supremacy Clause issue, a topic of academic interest to commentators (see Goldberg, Is Armed Services Retired Pay Really Community Property? (1973) 48 State Bar J. 12), was not put to rest in California until Fithian was decided on January 3, 1974.  (10 Cal.3d at p. 604, 111 Cal.Rptr. 369, 517 P.2d 449.)   However, as noted earlier, the law during the period Stebleton represented Jones positively stated vested military retirement pay was divisible.   Because there is no suggestion in any of the moving papers that lawyers in San Diego were governed by a different standard than that established in Brown, Bensing or Karlin, Jones stated a cause of action against her lawyer for negligence.

The question still remains whether factually her lawyer's negligence proximately caused Jones' damages.   That inquiry raises two separate problems.   First, what is the effect of McCarty v. McCarty (1981) 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589 and second, what is the effect of Arthur's continuing liability for one-half the retirement payments?

As we now know, the power of California courts to divide vested federal military pensions, which became more firmly established with each successive case, came to a screeching halt on June 26, 1981 when the United States Supreme Court decided McCarty.   There, the court held that because of federal considerations, federal military pension benefits were not divisible by state courts.   The saga, of course, continued when state courts decided that McCarty was not to be applied retroactively.  (See In re Marriage of Sheldon (1981) 124 Cal.App.3d 371, 177 Cal.Rptr. 380.)   Next, the Uniformed Services Former Spouses' Protection Act (10 U.S.C.A. § 1408 et seq.) was enacted, effective February 1, 1983.   Then, cases such as In re Marriage of Lockstrom (1983), 148 Cal.App.3d 675, 196 Cal.Rptr. 185;  In re Marriage of Sarles (1983) 143 Cal.App.3d 24, 191 Cal.Rptr. 514;  In re Marriage of Camp (1983) 142 Cal.App.3d 217, 191 Cal.Rptr. 45;  In re Marriage of Hopkins (1983) 142 Cal.App.3d 350, 191 Cal.Rptr. 70;  In re Marriage of Ankenman (1983) 142 Cal.App.3d 833, 191 Cal.Rptr. 292;  In re Marriage of Frederick (1983) 141 Cal.App.3d 876, 190 Cal.Rptr. 588 and In re Marriage of Buikema (1983) 139 Cal.App.3d 689, 188 Cal.Rptr. 856 eliminated the impact of McCarty.

I emphasize the foregoing to highlight the different treatment accorded Jones compared with other spouses identically situated.   While those other spouses during the same period were asserting and presumably receiving their proportionate share of vested military retirement pay, Jones received nothing.   If all the lawyers representing persons identically situated to Jones are divided into two subsets, one subset would be those lawyers asserting community property claims for vested military pensions;  the other consists of those who failed to do so.   The former clearly are not negligent;  according to the majority the latter also are not negligent.   Consequently, if the majority is correct, an entire a class of lawyers, some of whom rendered diametrically opposing professional advice with dramatically different results for their clients, is immune to suit for legal malpractice.   I am unable to determine on the facts presented here why this blanket immunity in favor of that class of lawyers should be established.

The cost benefit analysis used to decide lawyer negligence must turn on events that occurred when the lawyer represented the client measured by the applicable legal standard for that same period.   The analytical focus must be restricted to the period during which the give and take of the negotiation/adversary process occurred in order to determine whether that negligence proximately caused any damages.   There can be no doubt but that Stebleton had a bargaining chip based upon Brown, Bensing and Karlin he should have used to assert Arthur's military retirement was community property and therefore divisible.   When that chip was not used in the dialogue leading to the settlement of the case, Jones lost something in the bargaining process.   What that something represents is a triable issue of fact.

Admittedly, my analysis is at odds with Sharpe which applies McCarty retroactively.   Although I do not agree with that analysis, I nonetheless agree with Sharpe's conclusion.   Implicit in that opinion is the concept that an aggrieved client should not have greater rights against her lawyer than she has against her former husband.   During the window period in which McCarty was final, the petitioner in Sharpe decided to stipulate her husband was not liable.  (143 Cal.App.3d at p. 471, 192 Cal.Rptr. 16.)   This stipulation in effect acknowledged that her husband's vested military retirement pay was not divisible under the applicable law.   Because of this concession, the Sharpe court properly held her lawyer's liability should not exceed that of her husband's.   On those unique facts, McCarty was decisive.   That is a substantially different case than the one before us.   Here, Arthur still has potential liability for division of his military retirement pay which he is now receiving.

A pervasive principle in both tort and contract law requires a party to mitigate damages.   Here, Arthur is now receiving military pension benefits.   Under Henn v. Henn (1980) 26 Cal.3d 323, 330–331, 161 Cal.Rptr. 502, 605 P.2d 10 his former wife is entitled to her community share in each of those payments.   Accordingly, if Jones were to now name Arthur as a party in an action to divide what was omitted in the dissolution proceedings, she might still reach her community interest in those payments.   To this extent, Stebleton's negligence would not have caused her any harm.   It is for this reason I conclude Jones must bring an action against Arthur to mitigate her damages.  (Parker v. Morton (1981) 117 Cal.App.3d 751, 763, 173 Cal.Rptr. 197.)

This will not necessarily eliminate Stebleton's liability.   Arthur may be able to raise equitable defenses to relieve him from making payment for benefits he has already received.  (See Hill v. Hattrem (1981) 117 Cal.App.3d 569, 574, 172 Cal.Rptr. 806.)   He may have made elections under the terms of his pension that adversely affect Jones' interest.  (See Lewis v. Superior Court (1978) 77 Cal.App.3d 844, 852, 144 Cal.Rptr. 1.)   He may even be out of the jurisdiction, preventing Jones from reaching the pension.   (Ibid.)  All of these factors must be considered in determining Stebleton's liability.   Any judgment against him must be in the form of lump sum money damages.  (Smith v. Lewis, supra, 13 Cal.3d at p. 362, 118 Cal.Rptr. 621, 530 P.2d 589.)   That sum can properly be allocated into two components:  one representing the loss of payments through trial, the latter representing the loss of future payments.   As to that latter sum, Stebleton should only be liable if Jones does not have a collectible interest in the future payments, e.g., if Arthur is not subject to service of process or otherwise is able to avoid payment of Jones' share of the pension.  (See Lewis v. Superior Court, supra, 77 Cal.App.3d at p. 853, 144 Cal.Rptr. 1.)

Finally, I believe the statute of limitations is governed by Krusesky v. Baugh (1982) 138 Cal.App.3d 562, 188 Cal.Rptr. 57.   Therefore, the applicable statute, Code of Civil Procedure section 340.6, does not bar this action.

I would reverse the summary judgment.

FOOTNOTES

1.   All statutory references are to the Code of Civil Procedure unless otherwise specified.

COLOGNE, Acting Presiding Justice.

STANIFORTH, J., concurs.