Marriage of Walls and Peasley

Filed 1/30/07 Marriage of Walls and Peasley CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

Statement of the Case

Appellant David Peasley (husband) appeals from a qualified domestic relations order (QDRO), in which the court awarded respondent Pheobe Walls (wife) a percentage of the total amount of retirement benefits husband receives from the General Retirement Plan (GRP) of the Ford Motor Company (Ford Motor). (See Code of Civ. Proc., 904.1, subd. (a)(2).) Husband also appeals from the related order awarding wife arrearage from the time husband started to receive retirement benefits. (See Code of Civ. Proc., 904.1, subd. (a)(2).) On appeal, husband claims the court erred in finding that wife had a community property interest in the total amount of retirement benefits he was entitled to receive upon retirement from Ford Motor.

We agree and reverse the order.

Husbands Employment and Pension History

Husband and wife were married on August 22, 1964. In 1966, husband started to work for Ford Aerospace & Communications Corporation (Ford Aerospace) and became a member of the Ford Aerospace Retirement Plan. On March 22, 1982, husband and wife separated, and on March 28, 1983, the court filed an interlocutory judgment of dissolution. The judgment listed husbands Ford Aerospace pension as an item of community property but did not value or apportion it. The court reserved jurisdiction to do so later. On June 21, 1983, the court filed a final judgment of dissolution.

On June 1, 1988, husband quit Ford Aerospace, started working for Ford Motor, and enrolled in the Ford Motor GRP., which recognized his years of service at Ford Aerospace.[1]

Two years later, on June 1, 1990, while Loral Corporation (Loral) was in the process of acquiring Ford Aerospace, husband quit Ford Motor and returned to Ford Aerospace.[2] Husband testified that he returned to Ford Aerospace in reliance upon Ford Motors promise to rehire him if he were later terminated. Husband worked for Ford Aerospace for four months, and on October 16, 1990, he was laid off. He remained unemployed for the next five years.

In September 1993, while unemployed, husband sued Ford Motor and Loral, alleging age discrimination, wrongful termination, and personal injury. In October 1995, the parties settled the lawsuit. Under a release and settlement agreement (the Agreement), Ford Motor paid husband a lump sum monetary settlement of $240,000. Ford Motor reinstated husband for three years until 1998 and gave him retirement credit under the Ford Motor GRP for his years of service at Ford Aerospace and Loral. Doing so substantially enhanced husbands future retirement benefits under the Ford Motor GRP because instead of basing benefits on his five years at Ford Motor, he would receive benefits based on 27.7 years at his highest salary. Under the Agreement, Ford Motor GRP also assumed the liability for, and obligation to pay, the retirement benefits that husband was entitled to receive under the Ford Aerospace/Loral pension plan.[3] In turn, Ford Aerospace/Loral transferred to Ford Motor GRP all retirement assets from Ford Aerospace/Loral related to husbands years of service, and husband released Loral from any retirement obligation to him. Wife testified that at the time, she was unaware of the Agreement and the terms related to the Ford Aerospace/Lorals retirement benefits.

Husband continued to work for Ford Motor for three years as provided in the Agreement. In October 1998, he applied for pension benefits, and on November 1, 1998, at age 58, he retired. Thereafter, he began receiving retirement benefits in accordance with the Agreement and the Ford Motor GRP.

The Motion for a QDRO, the Hearing, and the Courts Ruling

In November 1998, wife filed a motion for a QDRO.[4] She sought her share of the community interest in the total amount of retirement benefits that husband was receiving from Ford Motor. During the prolonged proceedings on the motion, wife sought an arrearage from the date husband started receiving his benefits. She claimed that her interest in the Ford Aerospace retirement benefits entitled her to a share of all that husband was entitled to receive from Ford Motor GRP.[5] Trial commenced in October 2003.

At trial, Patricia Watt testified as a retirement-benefit expert for wife. She noted that Ford Motor GRP based husbands benefits on 27.7 years of employment, which included his service, during his marriage, at Ford Aerospace. She also noted that Ford Motor had assumed Lorals retirement liability to husband. Under the circumstances, she opined that wife was entitled to a share of the total amount of benefits husband was receiving. She further testified that the total amount of benefits should be apportioned under the time rule.[6] Thus, since husband worked for 16.167 years at Ford Aerospace during marriage before separation and because Ford Motor GRP credited him with 27.7 years of service, Watt calculated the community interest at 16.167/27.7i.e., 58.36 percentof the total benefits, of which wife was entitled to half. Based on that determination, Watts also calculated arrearages to which wife was also entitled.[7] Watts acknowledged that the total benefit from the Ford Aerospace pension plan was $1,928.28 per month, as stipulated by the parties.

Husbands expert John Miller testified that Ford Aerospace and Ford Motor were separate corporations with separate retirement plans, each of which had different provisions, formulas, and benefits. He noted that when husband left Ford Aerospace, he joined a new and separate retirement plan. Miller explained that under ordinary circumstances, husband, upon his retirement from Ford Motor, would have received benefit checks from both Ford Aerospace and Ford Motor. In that scenario, husband would have received more benefits from the Ford Aerospace/Loral plan because he worked there longer than he did at Ford Motor. Miller testified that the Agreement changed things, and under it, husband received about 40 percent more than he would have received from separate benefit checks. He explained that the enhanced benefit has three identifiable sources: the benefits earned under the Ford Aerospace retirement plan; the benefits earned under the Ford Motor GRP for the two years he worked there after leaving Ford Aerospace; and the enhancement of benefits created under the Agreement.

Miller opined that the court should determine wifes share of retirement benefits based on only the Ford Aerospace component of the total benefits from Ford Motori.e., $1,928.28 per monthbecause those were the only benefits that husband accrued a right to during marriage before separation. The remainder of the benefits accrued after separation under a different retirement plan and were the result of the post-separation settlement agreement. Thus, since husband worked a total of 268 months at Ford Aerospace, of which 194 were during the marriage, Miller calculated the community interest to be 194/268i.e., 72.38 percentof husbands benefits from Ford Aerospace, and wifes share was half of that amount, with some adjustments for husbands contributions to the plan after separation, his early retirement, and his election to continue the benefit for his second wife. Miller also calculated the arrearage to which wife was entitled.[8]

In its statement of decision, the court acknowledged that it had reserved jurisdiction over only the Ford Aerospace pension. However, it concluded that of necessity this includes [husbands] pension at Ford Motor Company.

Relying on Lehman, supra, 18 Cal.4th 169 and In re Marriage of Gowan (1997) 54 Cal.App.4th 80 (Gowan), the court concluded that wife had a community property interest in husbands total retirement benefits and adopted wifes time-rule methodology in apportioning it.

In its statement of decision, the court dismissed the fact that Ford Aerospace and Ford Motor were separate entities as not a significant factor and, in effect, treated husbands total amount of benefits as an enhanced Ford Aerospace retirement benefit. In disregarding the separate corporate identities of Ford Aerospace and Ford Motor, the court found that the two companies did not deal with each other at arms length but were significantly intertwined and had a unique arrangement. In this regard, the court noted husbands simultaneous termination and hiring in 1988, his reference to it as a transfer, his subsequent simultaneous switch in 1990, and Fords promise to rehire him if he were terminated. The court also found it important that (1) in 1988, husband transferred to Ford Motor with continuity of seniority; (2) the person who brokered the acquisition of Ford Aerospace by Loral had promised husband a job if he were terminated from Ford Motor while performing duties at Ford Aerospace; (3) the 1988 transfer was approved by superiors at both Ford Aerospace and Ford Motor; (4) Ford Aerospace transferred money and credits in its pension trust as part of husbands settlement; (5) Ford Motor added husbands Ford Aerospace time credit to form the ultimate benefit; (6) it was standard procedure to link pensions from Ford Aerospace and Ford Motor; and (7) Ford Motor used husbands salary during the final years at Ford Motor to determine his pension benefit, which would include time at Ford Aerospace.

In concluding that wife was entitled to a share of the total amount of benefits husband was entitled to receive, the court found that husband would not have achieved his ultimate global settlement without the leverage of his Ford Aerospace pension and its Community Property component. The court further opined that it would be unfair to allow only husband to benefit from the settlement agreement because he did not consult with wife when he negotiated the settlement, he did not offer to transfer only his pension rights from Ford Aerospace to Ford Motor, and he did not offer to buy out wifes share of the community interest in the Ford Aerospace pension benefit. Instead, he transferred her share of the community interest to Ford Motor GRP, and doing so resulted in an enhanced pension to the entire community property pension from Ford Aerospace.

Discussion

Husband reiterates the position expressed by Miller at trial: Wife was entitled only to her share of the community interest in the Ford Aerospace retirement benefits, the rights to which accrued during marriage before separation. She was not entitled to a share of additional benefits provided by Ford Motor because the right to those additional benefits accrued after separation.

Family Code section 760 provides, Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property. [P]roperty, as used in the statute, includes earnings and the right to retirement benefits. Therefore, to the extent the right to benefits derives from employment during marriage before separation, it comprises a community asset, of which the nonemployee spouse is entitled to a share. (In re Marriage of Brown (1976) 15 Cal.3d 838, 842, 844.) On the other hand, where the right to retirement benefits is first acquired after separation, it is the separate property of the employee spouse. (See Fam. Code, 771, subd. (a), 772; e.g., In re Marriage of Frahm (1996) 45 Cal.App.4th 536, 544-545 (Frahm) [no community interest in severance payment, the right to which accrued after marriage].)

In this case, it is undisputed and indisputable that wife is entitled to a share of the benefits that husband earned at Ford Aerospace because the right to them accrued, in part, during marriage and before separation. The issue here is whether the additional benefits that husband receives should be characterized as community or separate property.

The trial court characterized them as community property, finding, in effect, that they were an enhancement of a community asset: the Ford Aerospace benefits. As noted, the court relied on Lehman, supra, 18 Cal.4th 169. We agree that Lehman guides a proper analysis in this case. Therefore, we summarize Lehman in some detail.

In Lehman, husband started to work for Pacific Gas and Electric Company (PG&E) in 1959. In 1960, he married wife, and in 1962, he joined PG&Es retirement plan and began to accrue the right to retirement benefits. In 1977, the couple separated; and in 1978, they obtained a final judgment of dissolution. However, the court reserved jurisdiction to divide the community property interest in the PG&E retirement benefit when husband retired. (Lehman, supra, 18 Cal.4th at pp. 174-175.)

In 1993, PG&E offered the husband voluntary participation in an early retirement incentive program, which would improve his retirement benefit formula by offering him credit for three putative years of service and waiving the normal actuarial reduction for early retirement. (Lehman, supra, 18 Cal.4th at p. 175.) He elected to retire early at 54 1/3 year of age, with an enhanced benefit over and above what he would have received had he retired early at 55.[9] (Ibid.) Thereafter, the wife sought a determination by the court characterizing the enhanced retirement benefit as a community asset and apportioning it. (Id. at pp. 175-176.) The husband conceded that the wife had an interest in his retirement benefits but not in his benefits as enhanced. The trial court agreed with wife. It determined the community interest under the time rule, using the period of employment during marriage before separation and the period of actual employmenti.e., not including the putative three years. It then awarded the wife half of the community interest. (Id. at p. 176.)

The primary issue in the case involved the characterization of husbands enhanced benefit as either community or separate property, and specifically whether wife obtained an interest in the enhanced benefit by virtue of her interest in the original retirement benefit. (Lehman, supra, 18 Cal.4th at p. 177.)

The California Supreme Court generally explained that the right to retirement benefits is a right to draw from an income stream that is defined and begins to flow at retirement. (Lehman, supra, 18 Cal.4th at p. 178.) The court noted that [t]he streams volume at retirement may depend on various events or conditions after separation and even dissolution. [Citations.] Such events and conditions include both changes in the retirement-benefit formula [citations], and also changes in the basis on which the retirement-benefit formula operates [citations]. Changes in the retirement-benefit formula may be frequent. [Citation.] Changes in the basis on which the retirement-benefit formula operates are virtually constant. [Citation.] [] Thus, the streams volume at retirement may turn out to be even less than feared, as when the right to retirement benefits fails to vest or mature [citation], or when the employment itself ceases because the employer ceases to do business. By contrast, it may turn out to be even more than hoped for, as when the employer increases the per-service-year multiplier of the retirement-benefit formula [citations]. [] That the nonemployee spouse might happen to enjoy an increase, or suffer a decrease, in retirement benefits because of postseparation or even postdissolution events or conditions is justified by the nature of the right to retirement benefits as a right to draw from a stream of income that begins to flow, and is defined, on retirement [citations], with the nonemployee spouse, at one and the same time, holding the chance of more [citations], and bearing the risk of less [citation] equally with the employee spouse. Because the nonemployee spouse is compelled to share the bad with the employee spouse [citation], he or she must be allowed to share the good as well. (Id. at pp. 178-179.) Accordingly, the court reasoned that if the right to retirement benefits accrues, in some part, during marriage before separation, it is a community asset and is therefore owned by the community in which the nonemployee spouse as well as the employee spouse owns an interest. (Id. at p. 179.)

The court acknowledged that an employee spouse is free to change or terminate employment; agree to a modification of the terms of employment, including retirement benefits; or elect between alternative retirement programs. (Lehman, supra, 18 Cal.4th at p. 179.) In effect, the employee spouse is free to  define . . . the nature of the retirement benefits owned by the community. [Citation.]. [] But regardless how the employee spouse might choose to exercise such freedom, the nonemployee spouse owns an interest in what he or she chooses by owning an interest in the community. [Citation] [] It follows that a nonemployee spouse who owns a community property interest in an employee spouses retirement benefits owns a community interest in the latters retirement benefits as enhanced. That is because, practically by definition, the right to retirement benefits that accrues, at least in part, during marriage before separation underlies any right to an enhancement. [Citation.] (Id. at pp. 179-180, fn. omitted.)

The court stated that because the characterization of property presents a mixed question of law and fact that is predominantly one of law, a reviewing court must exercise independent review over the issue. (Lehman, supra, 18 Cal.4th at p. 184.) Concerning how to determine the character of a retirement benefit, the court cited Frahm, supra, 45 Cal.App.4th 536 as an example of sound reasoning. (Lehman, supra, 18 Cal.4th at p. 183.)

In Frahm, an employee spouse accrued the right to retirement benefits during marriage before separation, and therefore the nonemployee spouse owned a community property interest in those benefits. (Frahm, supra, 45 Cal.App.4th at pp. 537-538, 541-542, 545) Long after dissolution, the employer offered the employee spouse an early retirement incentive plan, which included both a severance payment, which was based on years of service, and an enhanced retirement benefit. (Id. at pp. 541-542.) The employee spouse accepted the program and received both a lump sum severance payment and enhanced benefits. (Id. at pp. 537-538, 542, 544.) He conceded that the enhanced benefit was a community asset. Thus, the only issue was how to characterize the severance payment. The trial concluded that it was separate property. (Id at pp. 537-538.)

On appeal, the court agreed, relying on the simple, fundamental, and determinative principle that [a]n employment benefit . . . is community property to the extent the right to it accrues during marriage . . . . (Frahm, supra, 45 Cal.App.4th at p. 544.) Guided by this principle, the court held that the nonemployee spouse did not have an interest in the severance payment because the employee spouse did not accrue the right to that payment during marriage before separation. (Id. at pp. 544-545.) The court recognized that the amount of the severance payment was based in part on the employee spouses years of service, some of which occurred during marriage. However, it considered that fact irrelevant because the right to receive the severance payment was not based on that fact. (Id. at p. 545 & fn. 2.) The court explained, The time rule determines the amount of the community share. It does not determine the character of the benefit. Stated another way, a court first looks to see if the right to the payment accrued during marriage. If so, the time rule determines the extent of the community interest in the payment. But if the right to the payment did not derive from the employment, it is separate property. (Id. at p. 545, fn. 2; see In re Marriage of Steinberger (2001) 91 Cal.App.4th 1449 [severance pay and stock options derived from new deal after separation and not from employment during marriage before separation]; compare with In re Marriage of Lucero (1981) 118 Cal.App.3d 836 [where community initially obtains an interest in benefits, but the employees contributions are withdrawn during marriage, the community nevertheless regains an interest in pension that is enhanced by redeposit of employee contributions].)

Returning to the facts before it, the Lehman court agreed with the lower courts characterization of the enhanced retirement benefit as community property. As explained, a nonemployee spouse who owns a community property interest in the latters retirement benefits owns a community property interest in the latters retirement benefits as enhanced. Husbands right to retirement benefits, which accrued, in part, during marriage before separation, underlies the right to the enhancement, which is derivative thereof. It bears emphasis that the enhancement is not a separate retirement benefit, still less a benefit separate from the retirement benefits themselves. It is the mere description that we apply to the result that we reach when we subtract the amount of retirement benefits that Husband would have received if he had waited to retire early at 55 years of age from the amount that he did in fact receive by electing to retire early at about 54 1/3 years of age under the [incentive] program. It is no different from an enhancement effected through additional years of service, increase in earnings, or increase in agewhich is uncontestedly a community asset. [Citation.] (Lehman, supra, 18 Cal.4th at p. 185.)

The court rejected husbands claim that the enhanced benefits resulted from an implied postseparation contract between him and PG&E, under which he agreed to be rehired, and therefore the enhancements were entirely independent of the right to benefits that had previously accrued, in part, during marriage. (Lehman, supra, 18 Cal.4th at p.185.) The court found that husbands retirement benefits were not enhanced by a contract of this sort. Any such contract was derivative of the right to retirement benefits that accrued, in some part, during marriage before separation. (Id. at pp. 185-186.) In other words, the enhancement is a modification of an asset not the creation of a new one. [Citation.] (Id. at p. 186.)

We find a significant and determinative distinction between the circumstances in this case and those in Lehman. There, husband worked for one employer; he accrued benefits under one retirement plan from that employer; he accrued the right to those benefits during marriage before separation; and after separation, the employer enhanced the retirement benefit. Thus, the enhanced benefit derived from the marital employment. Here, husband worked for two separate employers; he obtained the right to benefits under two different separate plans; and he accrued the right to those benefits at different times: the right to benefits under the Ford Aerospace plan accrued during marriage before separation; the right to benefits from Ford Motor GRP accrued long after dissolution.

We acknowledge in both Lehman and this case, the employer enhanced a retirement benefit after dissolution. In Lehman, the employer enhanced the original retirement benefit, the right to which had accrued during marriage before separation. Thus, as the court explained, the enhancement modified an existing asset; it did not create a new one. Here, too, the trial court concluded, in effect, that enhanced benefits that husband obtained as a result of the Agreement modified an existing community asset: the Ford Aerospace retirement benefits. However, upon independent review, we conclude that the courts analysis and resulting characterization of husbands benefits are erroneous.[10]

Unlike the circumstances that led to the enhanced benefit in Lehman, the Agreement here did not derive from husbands employment during marriage before separation. Nor did the Agreement purport to enhance or otherwise change, alter, or modify the right to (or amount of) benefits under the Ford Aerospace retirement plan that husband had earned, in part, during marriage before separation. Rather, the Agreement enhanced the husbands benefits under Ford Motor GRP, which were new benefits, the right to which accrued after marriage. (See In re Marriage of Roesch (1978) 83 Cal.App.3d 96 [community has no interest in pension plan, where employee spouse does not commence employment during marriage before separation].)

We recognize that the enhancement that husband received under the Agreement was based, in part, on husbands years of service for Ford Aerospace/Loral, some of which were during marriage before separation. However, as Frahm, supra, 45 Cal.App.4th 536 teaches, the use of years of service during marriage to establish the amount of a retirement benefit is irrelevant in determining the character of that benefit. That determination hinges solely on whether the right to the benefit accrued or derived from employment during marriage before separation.

In this case, the trial court did not make that simple determination. Instead, it adopted what appears to be a quasi-equitable approach toward characterizing husbands enhanced benefits from Ford Motor. Given the circumstances surrounding husbands move to Ford Motor, the court disregarded the fact that Ford Aerospace and Ford Motor were legally separate and distinct companies and then conflated two separate retirement plans as if husband had worked for a single employer under a single plan. The court did so ostensibly because it considered it unfair to deny wife a portion of the husbands enhanced benefits from Ford Motor GRP. It was unfair because husband used his prior years of service at Ford Aerospace to obtain the Agreement, transferred retirement assets from Ford Aerospace/Loral to Ford Motor GRP, and released Ford Aerospace/Loral from its obligation to pay benefits that were a community asset.

However, the circumstances surrounding husbands move and the fact that husband referred to it as a transfer do not destroy the integrity of each corporation as a separate entity or the integrity of their separate retirement plans. Nor are we aware of any authority indicating that those circumstances and the terms of the Agreement would justify the court in treating the two companies as one and conflating their retirement plans for purposes of characterizing husbands retirement benefits.

In this regard, we disagree with the courts suggestion, and wifes claim, that the settlement agreement impaired, waived, transmuted, or terminated wifes share of the community interest in the Ford Aerospace pension benefits. (See In re Marriage of Gillmore (1981) 29 Cal.3d 418, 425-426 [where community has interest in benefits, employee spouse may not exercise right to change or modify benefits in a way that impairs the nonemployee spouses interest in the benefits]; e.g., In re Marriage of Stenquist (1978) 21 Cal.3d 779, 786 [employee spouses election of a disability pension in lieu of a pension based on length of service does not defeat the community interest in the pension based on length of service].)

Under the Agreement, Ford Motor assumed Ford Aerospace/Lorals liability for and obligation to pay those benefits, and husband released Ford Aerospace/Loral from that obligation. Thus, the Agreement did not impair, lessen, or extinguish retirement benefits; it simply changed the payor. Moreover, husband has never claimed that wife is not entitled to her share of the community interest in the Ford Aerospace benefits. Thus, the record does not support an inference that husband somehow deprived wife of her interest in a community asset or, as wife claims on appeal, that he breached his fiduciary duty to her by releasing Ford Aerospace/Loral from its pension liability. Under the circumstances, we do not agree that it was unfair for husband to negotiate the Agreement without consulting with wife or that it is unfair to characterize the benefits of that agreement in excess of the benefits he was entitled to from Ford Aerospace/Loral as his separate property.

Finally, we do not find that Gowan, supra, 54 Cal.App.4th 80 supports the trial courts decision.

In Gowan, husband and wife were married in 1957. In 1960, husband started working for Beckman Instruments, Inc. (Beckman) and worked there until 1974. (Gowan, supra, 54 Cal.App.4th at p. 84.) Thereafter, the parties separated, and in 1978, an interlocutory judgment of dissolution was entered. The parties entered a settlement agreement that provided for an equal division of any and all retirement benefits to which [husband] may be entitled from [Beckman] under the Beckman Pension Plan and further stated that the court shall retain jurisdiction over the subject matter . . . . (Id. at p. 86, italics added.) In 1989, Beckman rehired husband, and he worked there until 1994. (Id. at p. 84.) The Beckman Pension Plan calculated husbands retirement benefits by adding his two periods of employment together for a total service credit of more than 18 years. Thereafter, wife invoked the courts retained jurisdiction and sought an order dividing husbands total pension under the time rule, using his years of service during marriage and his total years of service. (Id. at pp. 84-85.) The court adopted wifes approach. (Id. at p. 85.)

On appeal, husband claimed that the interlocutory judgment limited the courts jurisdiction to the amount of benefits that existed in 1978. (Gowan, supra, 54 Cal.App.4th at p. 85.) In rejecting his claim, this court observed that the Beckman pension as it existed in 1978 can no longer be identified except as part of Jamess current total Beckman pension based upon more than 18 years of service (combined pension). To distribute the pension referenced in the 1978 judgment, the court must now separate it from the remainder of the combined pension. (Id. at p. 86.) Moreover, the parties generally agreed that the court shall retain jurisdiction over the subject matter, and we found that language to be broad enough to authorize the trial court to divide the combined pension into a community property portion attributable to pre-1978 years (which was addressed by the 1978 judgment) and a separate property portion (which was not addressed by the judgment). (Ibid.)

Husband claimed that the court could not consider the entire pension benefit in determining wifes share of the community interest because the parties did not intend their settlement agreement to cover some future period of employment. (Gowan, supra, 54 Cal.App.4th at p. 85.) We agreed that the parties initially intended to consider only the retirement benefits from the first period of employment. This conclusion, however, does not address the fundamental problem: separating the retirement benefits from the first employment period (about which the parties contracted) from the other benefits commingled in the current combined pension. (Id. at p. 87.) We reasoned that although the parties had not contemplated the issue, their general agreement that the court shall retain jurisdiction over the subject matter implicitly contemplated that the court would and could address unanticipated issues in the future. (Ibid.) We further concluded that the agreement did not  freeze the value of the community property pension at the level of the 1974 estimate because it did not include any fixed monetary amounts. (Ibid.) Rather, the parties agreed to an in-kind division of the pension . . . . (Ibid.)

Next, husband claimed that the trial court erred in applying the time rule to the total amount of benefits he received. (Gowan, supra, 54 Cal.App.4th at p. 87.) First, he argued that his ultimate benefits were not related to the years of service during marriage. However, we found substantial evidence to support the trial courts finding that husbands benefits were not based totally on post-separation negotiations without regard to his first period of employment. (Id. at pp. 88-89.) Second, husband argued that the time rule may not be applied to benefits based on the sum of independent, noncontinuous periods of employment. However, we rejected that argument, noting that in In re Marriage of Bergman (1985) 168 Cal.App.3d 742, the court held that the time rule would properly divide a pension, even if the pension reflected two different periods of noncontinuous employment. (Gowan, supra, 54 Cal.App.4th at p.90.)

Like Lehman, Gowan is distinguishable from this case. In Gowan, the employee spouse worked for one employer for two noncontinuous periods of time. He accrued the right to retirement benefits under the employers plan during marriage before separation. He earned credit toward retirement benefits under that one plan during two, noncontinuous periods of time. And his retirement benefits under the plan were based on his total years of service to the same employer.

Here, in contrast, husband worked for two different employers. Each employer had its own retirement plan. And husband accrued the right to benefits under each plan at different times, both during marriage before separation and long after dissolution. We also note that in Gowan, the parties agreed that the trial court would retain broad jurisdiction over the subject matter of the Beckman pension. Here, the court retained jurisdiction only to value and divide the Ford Aerospace retirement benefits. (Cf. In re Marriage of Melton (1994) 28 Cal.App.4th 931 [reservation of jurisdiction to implement settlement agreement precluded court from interpreting agreement and exercising equitable powers to make an order beyond the terms of the agreement].) Finally, Gowan does not reasonably suggest that in characterizing husbands total retirement benefits, the court had the discretion or equitable power to disregard that Ford Aerospace/Loral and Ford Motor were separate companies with separate retirement plans and that husband accrued the right to benefits under the Ford Motor GRP after marriage and then deem those benefits to be an enhancement of the community interest in the Ford Aerospace benefits.[11]

In sum, we find that the trial court erred in concluding that the total amount of husbands retirement benefits from Ford Motor was a community asset subject to apportionment under the time rule. As our discussion reveals, the community owned an interest in only the retirement benefits that husband earned and was entitled to receive from Ford Aerospace. Consequently, we reverse the QDRO. Moreover, because the courts arrearage order is based on the QDRO, that order must also be reversed.

Disposition

The QDRO and arrearage orders are reversed. The matter is remanded to the trial court for further proceedings, including an apportionment of the community interest in the Ford Aerospace/Loral benefits that were being paid by Ford Motor under the Agreement plus arrearages, interest, and credits, if any.[12]

Husband is entitled to his costs on appeal.

______________________________________

RUSHING, P.J.

WE CONCUR:

____________________________________

ELIA, J.

____________________________________

DUFFY, J.

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[1] Although Ford Aerospace was a wholly owned subsidiary of Ford Motor, both companies were legally separate corporations, having different corporate structures, officers, directors, headquarters, payroll departments, and pension plans.

When husband left Ford Aerospace for Ford Motor, husband was required to formally quit Ford Aerospace, and Ford Motor formally hired him in writing. At that time, husband colloquially referred to the move as a transfer. He testified that one of the directors at Ford Motor spoke to his boss at Ford Aerospace and requested that husband interview for a position, which would mean a promotion and more money. Husband accepted the offer, which included a continuation of his seniorityi.e., credit for his years at Ford Aerospaceand he was formally terminated and hired with the approval of both companies.

[2] Again, husband was formally terminated by Ford Motor and hired by Ford Aerospace.

Loral finally acquired Ford Aerospace on October 18, 1990. In doing so, Loral acquired all of Ford Aerospaces pension assets and liabilities, except for those of a small group of former Ford Aerospace employees who had previously started working, and were currently working, for Ford Motor. Those assets and liabilities were transferred to Ford Motor. At the time of Lorals acquisition, husband was not part of this group.

[3] At trial, the parties stipulated that husbands Ford Aerospace service total pension benefit equals $1,928.28 per month.

[4] Under the Employee Retirement Income Security Act (ERISA) (29 U.S.C.  1001 et seq.), spouses in dissolution actions may not transfer rights to retirement benefits unless the court so orders in a QDRO. (29 U.S.C. 1056, subd. (d)(1); In re Marriage of Rich (1999) 73 Cal.App.4th 419, 423.) A QDRO is a judgment or order that creates a right in a former spouse to receive all or a portion of the benefits payable to the participant in the pension plan. (29 U.S.C. 1056, subd. (d)(3)(B)(i)(I).)

[5] Ford Motor GRP appeared and later became a party.

[6] Generally, under the time rule, the community is allocated a fraction of the benefits, the numerator representing length of service during marriage but before separation, and the denominator representing the total length of service by the employee spouse. That ratio is then multiplied by the total benefit received to determine the community interest. (In re Marriage of Steinberger (2001) 91 Cal.App.4th 1449, 1460; see In re Lehman (1998) 18 Cal.4th 169, 176 (Lehman).

[7] In November 2003, the parties stipulated to an interim payment of $500.00 per month from husband to wife to be applied toward arrearages.

[8] Miller also calculated wifes share of the community interest under the tracing method, which determines the amount of the pension earned during marriage using information in benefit contribution records. He opined that this was a better method to determine the community interest in the Ford Aerospace benefit because that plan did not have uniform accruals from one period to the next. Rather, benefits could vary depending on whether the employee elected to make voluntary contributions, which increase the benefit, which husband did in this case after separation.

[9] The husband received a benefit of $3,059.30 per month based on his final monthly compensation and 35.67 years of service, which included the three putative years. (Lehman, supra, 18 Cal.4th at p. 175.) Without the three-year putative service credit, he would have received a retirement benefit of $2,802 per month; without the waiver of the normal actuarial reduction for early retirement, he would have received a benefit of $2,508.63 per month. Had he waited to retire early at 55 years of age, without the service credit or actuarial waiver, he would have received a benefit of $2,350.39 per month. Had he waited to retire at 65, he would have received a benefit of $3,724 per month. Thus, by electing to retire early under the incentive plan instead of waiting to retire early at 55, husband received enhanced benefits of $708.91 per month. (Ibid.)

[10] We reject wifes suggestion that de novo review is not warranted, and we should simply review the courts determination for abuse of discretion. As noted, a determination concerning the character of property is subject to independent review on appeal. (Lehman, supra, 18 Cal.4th at p. 184.)

[11]Gowan does, however, indicate that in determining the community interest in the benefits under the Ford Aerospace/Loral retirement plan, the court may consider husbands two noncontinuous periods of employment with Ford Aerospace.

[12] We need not address husbands claim that the trial court erred in ignoring evidence concerning the use of the direct tracing method of valuing the parties respective community property interests in husbands retirement benefits, and we decline husbands request that we direct the trial court on remand to employ the direct tracing method of valuation.

It is the function of the superior court to apportion an employee spouses retirement benefits between the community property interest of the employee spouse and the nonemployee spouse and any separate property interest of the employee spouse alone. (Lehman, supra, 18 Cal.4th at p. 187.) To that end, the court has discretion in the choice of methods. (Ibid; In re Marriage of Gillmore, supra, 29 Cal.3d at p. 423.) Whatever the method that it may use, however, the superior court must arrive at a result that is reasonable and fairly representative of the relative contributions of the community and separate estates. [Citation.] (Lehman, supra, 18 Cal.4th at p. 187.)