Ruchti v. Goldfein

113 Cal. App. 3d 928, 170 Cal. Rptr. 375, 1980 Cal. App. LEXIS 2601

• Court: California Court of Appeal
• Decided: December 23, 1980
• Docket: Civ. 22301
• Status: Published

Opinions

Opinion

COLOGNE, Acting P. J.

Sharolyn Ann Ruchti brought this action in April 1979, against Ronald Clarence Ruchti, her former husband, for determination of her community property interest in, and partition of, the military retirement benefits deriving from Ronald’s Navy career, and in the second and third causes of action against Jerome D. Goldfein and Thomas D. Kelly, her attorneys in the divorce action for negligence in failing to have the interest determined earlier. Goldfein demurred to the second and third causes of action on the ground the action is barred by the statute of limitations. The demurrer was sustained without leave to amend.

Accepting as true all of the allegations of the complaint, we make the following recitation of the facts: Sharolyn and Ronald were married on July 7, 1962, and separated on January 15, 1973. Sharolyn hired Goldfein and later hired Kelly to represent her in her action for dissolution of marriage. The action was filed and the court issued an interlocutory decree of dissolution on August 2, 1974. The final decree of dissolution was entered August 12, 1974. Neither the interlocutory nor the final judgment of dissolution contained any reference to military retirement benefits.¹ In Sharolyn’s April 5, 1979, action she alleges her entitlement to an award of at least a one-fourth interest in Ronald’s pension accruing during the 11 1/2-year marriage.

The developing law relative to the community property character of military pensions has been a matter of considerable concern to the courts as well as the profession (see In re Marriage of Smethurst (1980) 102 Cal.App.3d 494, 496 [162 Cal.Rptr. 300]). In 1941, the right to receive a nonvested² military pension was held to be a mere “expectancy which is not subject to division as community property” (French v. French (1941) 17 Cal.2d 775, 778 [112 P.2d 235, 134 A.L.R. 366]).

In January 1974, about eight months before the entry of judgment in Ruchti, the California Supreme Court restated the law in this area most succinctly, stating: “The law is settled in California that retirement benefits which flow from the employment relationship, to the extent they have vested, [fn. omitted] are community property subject to equal division between the spouses in the event the marriage is dissolved. [Citations.] .... 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. [Citations.]” (In re Marriage of Fithian (1974) 10 Cal.3d 592, at p. 596 [111 Cal.Rptr. 369, 517 P.2d 449]; italics added.) The court’s understanding of the distinction between vested and nonvested pensions was underscored by footnote 2 which states: “The right to retirement benefits ‘vests’ when an employee acquires an irrevocable interest in a fund created by his own contributions and/or the contributions of his employer. The ‘vesting’ of retirement benefits must be distinguished from the ‘maturing’ of those benefits, which occurs only after the conditions precedent to the payment of benefits have taken place or are within the control of the employee. [Citations.] [If] Husband does not contend his rights to the retirement fund had not vested during the marriage.” (Ibid.)

There is no doubt the courts intended to assign community property character only to the case of a vested pension. The pleadings indicate here, and the parties do not dispute, Ruchti’s pension rights were not vested at the time of the dissolution judgment since he had not completed the necessary time in the Navy. Had his duty been terminated or had he left the Navy voluntarily, he would have received nothing. The law was clear in 1974 that Sharolyn had no right in the pension; nor did the attorney have any reason to appeal the judgment. Since Sharolyn then had no legal right to a division of the pension, she had no legal right to sue her attorney for not dividing it.

In January 1976, In re Marriage of Brown, supra, 15 Cal.3d 838, the California Supreme Court presented us a case dealing with nonvested rights and it altered the state of the law making both vested and nonvested pensions subject to community property claim. Brown overruled not only French v. French, supra, 17 Cal.2d 775, but also expressly disapproved statements to the effect nonvested pension rights are not community property that were contained in such cases as In re Marriage of Fithian, supra, 10 Cal.3d 592 (Jan. 1974), Smith v. Lewis, 13 Cal.3d 349 [118 Cal.Rptr. 621, 530 P.2d 589, 78 A.L.R.3d 231] (Jan. 1975), and In re Marriage of Jones, 13 Cal.3d 457 [119 Cal.Rptr. 108, 531 P.2d 420] (Feb. 1975) (15 Cal.3d 838, 851, fn. 14). Brown made it clear, however, there would be only limited retroactive application of its holding. “[T]he resolution of this issue of prospective application turns primarily on two factors: ‘the extent of the public reliance upon the former rule,... [and] the ability of litigants to foresee the coming change in the law.’ In the present case both factors militate against a purely prospective overruling of French v. French. It is unlikely that a layman would rely upon the French rule, or even know of that doctrine; attorneys familiar with the decision in French v. French would also realize from our opinion in Marriage of Wilson, supra, 10 Cal.3d 851 that the French rule was ripe for reconsideration. The unjust distribution of property engendered by the French rule should not be perpetuated by denial of any retrospective effect to our decision.

“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,[³] 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 jurisdictidn to divide pension rights.” (In re Marriage of Brown, supra, 15 Cal.3d 838, 850, 851.)

Thus, even after Brown, Sharolyn had no right in the military pension since, as she concedes, it was nonvested at the date of the judgment of dissolution (Aug. 1974) from which no appeal was taken (see Shaver v. Shaver (1980) 107 Cal.App.3d 788, 793-794 [165 Cal.Rptr. 672]). It follows under the limited retroactivity rule of Brown that since the Ruchtis’ property was presently divided and there was no appeal or reservation of jurisdiction to divide property later, the decree became a final and conclusive adjudication of the parties’ property rights (see fn. 3, below). We note, too, Sharolyn admits in her supplemental brief Shaver, supra, effectively ends any cause of action against her former husband.

She asserts, however, this does not end the cause of action against her attorneys in the dissolution proceeding and, relying on Smith v. Lewis, supra, 13 Cal.3d 349, asserts the attorney should have been aware of the direction the court was moving and was negligent in not so advising her. “[W]e 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. In the instant case, ample evidence was introduced to support a jury finding that defendant failed to perform such adequate research into the question of the community character of retirement benefits and thus was unable to exercise the informed judgment to which his client was entitled.” (Smith v. Lewis, supra, 13 Cal.3d 349, 359.)

We do not believe any attorney should be held to have foreseen the 180° shift in the law in this area.⁴ However, even if we were to concede for the purpose of argument that (1) had the trial attorney appealed this case, the Supreme Court would have made “In re Marriage of Ruchti” the precedent rather than In re Marriage of Brown, supra, 15 Cal.3d 838, and Sharolyn would have received the benefits Gloria Brown obtained; (2) the attorney had a duty to anticipate the direction of the developing law; and (3) the attorney breached the dúty by failing to adequately research and advise his client of the “uncertain” nature of this law, Sharolyn’s cause of action arose when the attorney’s negligence terminated her rights in the pension benefits, i.e., when the judgment was entered, or at least when the attorney allowed the judgment to become final. At that point, any possibility of acquiring an interest in the pension was terminated. That is real damage. This damage occurred more than four years before the filing of this action and the action is, therefore, barred by the statute of limitations.

Section 340.6 of the Code of Civil Procedure reads: “(a) An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, 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. In no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist:

“(1) The plaintiff has not sustained actual injury....” (Italics added.)

It is not necessary that the pension rights be matured, i.e., there be an unconditional right to immediate payment, before there is damage due to the rights being lost (see In re Marriage of Brown, supra, 15 Cal.3d 838, 848). The rights could be lost by such occurrences as transfer, waiver, adjudication or, as Sharolyn asserts here, the failure to timely claim them (see Lewis v. Superior Court (1978) 77 Cal.App.3d 844, 852-853 [144 Cal.Rptr. 1]). Here these nonvested rights were effectively lost when the judgment became final. Sharolyn alleges, and we agree, her rights against Ruchti in the pension were terminated by the judgment rendered under the law then applicable to nonvested pension rights. Her right to that expectancy as to him, if any there could be, was concluded by that judgment insofar as there was concerned a non-vested pension right which was outside the retroactive scope of In re Marriage of Brown, supra, 15 Cal.3d 838. If the attorney erred, he did so by the act or omission of allowing that judgment to be entered or failing to appeal the judgment and Sharolyn should have brought her action within four years of the date that judgment became final.

Had the pension been vested, so that Sharolyn had a community property interest under the then applicable law, she would have retained her interest as a tenant in common, the interest would not have been lost and she would have suffered no damage as of the date of the dissolution judgment (see Henn v. Henn, supra, 26 Cal.3d 323, 330 [161 Cal.Rptr. 502, 605 P.2d 10]; and see Lewis v. Superior Court, supra, 77 Cal.App.3d 844, 852). The tolling provision of Code of Civil Procedure section 340.6, subdivision (a)(1), could then apply (see Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 194 [98 Cal.Rptr. 837, 491 P.2d 421]; Budd v. Nixen (1971) 6 Cal.3d 195, 200 [98 Cal.Rptr. 849, 491 P.2d 433]). Here, however, Sharolyn had no tenancy in common interest because the pension right was nonvested and that fact was determined in August 1974. If she had a claim against the attorney for losing that right, she was required to bring her action, at the latest, within four years from the date of his act or omission in permitting the entry and finality of the August 12, 1974, judgment. She did not do so and is barred by the statute of limitations.⁵

Judgment affirmed.

1 It appears Ronald entered the United States Navy in August 1961, before their marriage, and thus had not served the 20 years necessary for vesting of the military retirement pension as of the time the dissolution became final. By the time this action was filed, April 5, 1979, Ronald’s right in the pension had vested, according to Sharolyn. As of September 25, 1980, Ronald was still in the service. This information was not found in the pleadings at issue but is presented in an undisputed manner by the parties and is a proper item of concern in this opinion.

2 “Vested” refers to a “pension right which survives the discharge or voluntary termination of the employee” (In re Marriage of Brown (1976) 15 Cal.3d 838, 842 [126 Cal.Rptr. 633, 544 P.2d 561, 94 A.L.R.3d 164]).

3 Concerning its reference to “adjudication” here, the court instructs in a footnote as follows: “An interlocutory decree which does not expressly reserve jurisdiction to divide property at a later date (see Civ. Code, § 4800), but instead renders a present division of property, if not challenged by appeal becomes a final and conclusive adjudication of the property rights of the parties. [Citation.]” (15 Cal.3d 838, 851, fn. 13.)

4 In In re Marriage of Brown, supra, 15 Cal.3d 838, at page 850, the court notes this issue was mentioned in In re Marriage of Wilson, (Mar. 1974) 10 Cal.3d 851 [112 Cal.Rptr. 405, 519 P.2d 165], and the issue was “ripe for reconsideration.” We are not prepared to say “ripe for reconsideration” is the equivalent of “substantial uncertainty” referred to in Smith v. Lewis, supra, 13 Cal.3d 349, at page 357 which, incidentally, dealt with a state benefit that was fully matured and a federal benefit that was vested. The uncertainty in Smith v. Lewis had to do with whether the federal military pension could be divided as community property without violating the supremacy clause of the United States Constitution, an arguable question upon which reasonable lawyers could differ (Smith v. Lewis, supra, at p. 357; see Henn v. Henn (1980) 26 Cal.3d 323, 328 [161 Cal.Rptr. 502, 605 P.2d 10]). Here the law had been announced in French and Brown provided a reversal of the stated rules. We refuse to hold such clairvoyance by the attorney is required.

5 The failure to discover facts may toll the running of the statute but the belated discovery of legal theories does not toll the statute (McGee v. Weinberg (1979) 97 Cal.App.3d 798, 803 [159 Cal.Rptr. 86]).