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In Sebestyen, we held that because the employee spouse's disability pension was calculated based solely on his years of service, the employer intended the pension to serve as deferred compensation such that the community had an interest.
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No. 1 CA-CV 20-0072 FC
03-09-2021
In re the Matter of: Donna L. SEBESTYEN, Petitioner/Appellee, v. Thomas Z. SEBESTYEN, Respondent/Appellant.
Popp Law Firm PLC, Tempe By James S. Osborn Popp Counsel for Respondent/Appellant Berkshire Law Office PLLC, Tempe By Keith Berkshire, Alexandra Sandlin Counsel for Petitioner/Appellee
Popp Law Firm PLC, Tempe By James S. Osborn Popp Counsel for Respondent/Appellant
Berkshire Law Office PLLC, Tempe By Keith Berkshire, Alexandra Sandlin Counsel for Petitioner/Appellee
Presiding Judge Randall M. Howe delivered the decision of the Court, in which Judge Kent E. Cattani and Judge Cynthia J. Bailey joined.
HOWE, Judge:
¶1 Thomas Z. Sebestyen ("Husband") appeals the trial court's decree dissolving his marriage with Donna L. Sebestyen ("Wife"). Husband argues that the court erred when it determined that his United Parcel Service pension plan benefits were a form of deferred compensation and therefore contained a community property interest. He argues, rather, that the benefits arose from his disability and loss of wages and are therefore his sole and separate property upon dissolution.
¶2 The issue on appeal is whether Husband acquired the benefit by "onerous title"—which is acquired "by labor or industry of the spouses" or in "exchange for community property" and therefore community property—or by "lucrative title"—which is acquired by any way that is not through "onerous title," including compensation for his personal well-being or lost wages and therefore Husband's sole and separate property on dissolution of marriage. Ariz. Rev. Stat. Ann. § 25–213(b) ; Jurek v. Jurek , 124 Ariz. 596, 598, 606 P.2d 812, 814 (1980). For the reasons stated below, we hold that even when eligibility for a pension is based on a disability, when the pension plan calculates that benefit based solely on accrued years of service, the benefit is earned entirely through "onerous title" as a form of deferred compensation, making the portion of the benefit earned during marriage community property subject to distribution on dissolution of marriage. FACTS AND PROCEDURAL HISTORY
¶3 Husband began to work for UPS in April 1987, and married Wife in October 1990. In 2006, Husband suffered on-the-job injuries and was declared 100% disabled effective February 1, 2007. At the time, he was just short of his 42nd birthday and had accrued 18 years and six months of service with UPS.
¶4 Husband is a member of UPS's Multi-Employer Retirement Plan. The Plan is a non-contributory plan funded solely by UPS; employees vest in the Plan after five years of service. Employees become eligible to receive a pension upon (1) reaching the age of 55 with at least five years of service, (2) reaching 25 years of service regardless of age, or (3) becoming totally disabled while employed at the company with at least 10 years of service. Regardless how the employee qualifies, his monthly benefit is calculated the same: $144 times total years of service, or $12 for each month of accrued service. To be eligible under the third option, an employee's disability must preclude him from satisfactorily performing job duties before the age of 55. If the retired employee ceases to be 100% disabled, the pension benefit will terminate unless the employee then qualifies under one of the other two eligibility criteria.
¶5 Wife petitioned for dissolution in June 2016. At a hearing on the disposition of the Plan, the parties disputed whether the Plan's payments to Husband were separate or community property, and each presented expert testimony. Husband's expert testified that because Husband's injuries qualified him for the benefit, the benefit did not arise out of Husband's employment because he would have received "zero dollars but for the disability[.]" The expert opined that the benefit was compensation for Husband's injuries and therefore arose from lucrative title, meaning that the payments were Husband's sole and separate property on dissolution. The expert also testified that the character of the benefit would not change when Husband turned 55 and would be eligible for a pension under either of the other two criteria.
¶6 Wife's expert opined that even though Husband's disability made him eligible to receive the pension, the pension did not constitute a disability benefit. Like Husband's expert, Wife's expert explained that a benefit acquired by "onerous title" was any benefit that was earned through community labor, and that any benefit not acquired by "onerous title" was "lucrative title." The expert testified that unlike worker's compensation benefits, which vary in amount depending on the extent of the injury and lost earnings, the Plan based its payment amount solely on the length of time the employee had worked at the company, indicating that the right to the benefit was acquired through onerous title as deferred compensation. Wife's expert also distinguished the Plan from federal and military plans, which use different payment calculations depending on disability rating or current pay at time of disability, and privately purchased disability insurance programs or employer-provided disability insurance, which have their own unique contribution requirements. The expert concluded that Husband's disability rendered him eligible to receive deferred compensation that he had already earned through his years of service. The expert testified that because the nature and extent of Husband's disability was not part of the formula used to calculate the amount of benefit, the benefit arose completely from "onerous title" and therefore Wife had a community interest in all the benefit earned during marriage.
¶7 The trial court found that the Plan's payments were based solely on years of service. It therefore concluded that the benefit was "created through onerous title" and that Wife held a community interest in the benefit earned during the marriage. The trial court entered a QDRO giving the Wife a portion of Husband's benefit calculated in the following manner:
[(a)/(b) x 50%] x Monthly Benefit
Where (a) is the numerator of the fraction representing the total number of months of service accrued between October 13, 1990 [date of marriage] and June 6, 2016 [date of dissolution], and (b) is the denominator of the fraction which represents the total number of months of service credit accrued as of the date that [Husband] began to receive benefits.
¶8 The court incorporated both the pension ruling and the QDRO into its final dissolution decree, in which the court denied Wife spousal maintenance based on her income, assets, and receipt of a share of Husband's pension. Husband moved to reconsider, and the court denied the motion. Husband timely appealed and we have jurisdiction pursuant to A.R.S. § 12–2101.
DISCUSSION
¶9 Husband argues that the trial court erred in concluding that the pension benefit was deferred compensation and therefore community property. Whether a benefit is community property or the separate property of one party is a mixed question of law and fact reviewable de novo . Davies v. Beres , 224 Ariz. 560, 562 ¶ 6, 233 P.3d 1139, 1141 (App. 2010) ; Danielson v. Evans , 201 Ariz. 401, 406 ¶ 13, 36 P.3d 749, 754 (App. 2001). This Court will, however, defer to the trial court's factual findings and uphold its ruling if any reasonable evidence supports it. Mitchell v. Mitchell , 152 Ariz. 317, 323, 732 P.2d 208, 214 (1987) ; Gutierrez v. Gutierrez , 193 Ariz. 343, 346 ¶ 5, 972 P.2d 676, 679 (App. 1998).
¶10 When property is earned through a spouse's labor, it is acquired by "onerous title" and considered the product of the community's efforts. See Jurek , 124 Ariz. at 597, 606 P.2d at 813 ; see also Koelsch v. Koelsch , 148 Ariz. 176, 181, 713 P.2d 1234, 1239 (1986) (holding that pension benefits, as a form of deferred compensation to employees for services rendered, are community property when earned through employment during marriage.). Conversely, when the right to receive the property did not derive from the community's efforts, it is acquired by "lucrative title" and considered the separate property of the spouse receiving it. Luna v. Luna , 125 Ariz. 120, 125, 608 P.2d 57, 62 (App. 1979). Compensation for personal injuries is acquired through lucrative title because it arises through the violation of a person's right of personal security. Jurek , 124 Ariz. at 598-99, 606 P.2d at 814-15. While compensation for loss of wages and earning capacity is an injury to the community during the course of marriage, it becomes the sole and separate property of the injured spouse upon dissolution. See id . ; see also Hatcher v. Hatcher , 188 Ariz. 154, 158, 933 P.2d 1222, 1226 (App. 1996). Whether a pension that is conditioned on a disability is prospective compensation for loss of wages caused by the disability or compensation for personal injury or deferred compensation for labor already performed depends on the employer's intent. See Brebaugh v. Deane , 211 Ariz. 95, 101 ¶ 25, 118 P.3d 43, 49 (App. 2005) (holding that whether stock options are deferred compensation that would be community property or an incentive for performance that would be separate property depends on the employer's intent). In the absence of other evidence, the employer's intent is determined by how the employer calculates the employee's benefit. See Villasenor v. Villasenor , 134 Ariz. 476, 479, 657 P.2d 889, 892 (App. 1982) ; Luna , 125 Ariz. at 124, 608 P.2d at 61.
¶11 Reasonable evidence supports the trial court's finding that Husband acquired the benefit through onerous title as deferred compensation for work already completed and the benefits earned during the marriage therefore are community property. Under the Plan, regardless which eligibility criterion an employee satisfies, his benefit is calculated based solely on accrued years of service. In other words, while the disability that Husband suffered after at least 10 years on the job rendered him eligible for a pension, his disability did not affect the amount of the benefit for which he was eligible. Because the Plan based its payment structure solely on Husband's accrued years of service, he acquired the benefit by his previous "labor and industry" and not his disability, meaning the entitlement arose from "onerous title" and the pension is therefore community property to the extent it was earned during marriage. See Jurek , 124 Ariz. at 597, 606 P.2d at 813.
¶12 Husband argues, however, that because his disability made him eligible for his pension, the pension was designed to compensate him for his lost wages, which made the pension his sole and separate property. He claims that the absence of a scaled disability rating or an unearned service credit does not change the reality that absent the disability, he would not be entitled to the pension, making his years of service inconsequential to the court's analysis. His disability, however, is only part of the prerequisite for retirement under the plan; to be eligible, Husband also had to have worked an additional 5 years from when he vested in the Plan. And while a disability may trigger entitlement to pension benefits, it does not necessarily make the entitlement lucrative in nature. See Villasenor , 134 Ariz. at 478, 657 P.2d at 891. The manner in which an employee's benefits are calculated, rather, determines whether the entitlement will be treated as deferred compensation or as replacement for lost wages or earning capacity due to the disability or other compensation for the employee's injuries. See id .
¶13 Here, Husband's payment amount was based solely on his time with his employer. In this regard, the Plan is distinguishable from the military and federal plans that use statutorily mixed formulas in calculating disability and retirement pay, which may include unearned service credits, see Villasenor , 134 Ariz. at 479, 657 P.2d at 892 (the disability calculation included unearned service years), or allow a retiree to elect between different forms of calculation based either on years of service or disability rating, see Luna , 125 Ariz. at 124, 608 P.2d at 61. In Villasenor and Luna , the employees’ benefits included components both of deferred compensation based on accrued service and compensation for disability. See Villasenor , 134 Ariz. at 479, 657 P.2d at 892 ; Luna , 125 Ariz. at 124, 608 P.2d at 61. Unlike the benefits in those cases, the benefit to which Husband was entitled once he was eligible for retirement was fixed without regard to his disability. His disability merely triggered his entitlement to the standard deferred compensation benefit of $12 per month of accrued service each month. See Villasenor , 134 Ariz. at 478–79, 657 P.2d at 891-92 (stating a disability that triggers receipt of deferred compensation is not compensation for lost wages or compensation for Husband's personal injury while on the job and is therefore onerous in nature.).
¶14 Nor is Husband's benefit analogous to the disability insurance benefits at issue in Hatcher v. Hatcher , 188 Ariz. 154, 156, 933 P.2d 1222, 1224 (App. 1996). There, the employer provided a "Voluntary Personal Accident Plan" that an employee voluntarily paid into and that expressly compensated the employee in the event of the accidental death, dismemberment, or disability of the employee. See also Helland v. Helland , 236 Ariz. 197, 197, 337 P.3d 562, 562 (App. 2014) (dealing with a privately purchased disability insurance policy.). Unlike the husband in Hatcher , Husband did not voluntarily pay into the Plan, nor did the Plan explicitly claim to provide disability benefits; rather, the Plan paid benefits according to years of service regardless of the eligibility requirements.
¶15 Husband further argues that because he would be eligible for retirement at 55 if he is no longer disabled, the pension represents "lost wages" rather than a deferred benefit. But the fact that Husband had a choice to take the early retirement or wait for his regular retirement to accrue does not change the character of the payment from deferred compensation to disability compensation. If he ceased to be disabled, he would no longer be eligible to receive the pension under one of the three eligibility requirements but may still yet be eligible to receive the pension under one of the other two requirements. The availability of alternative eligibility requirements does not change that the source of Husband's benefit was his accrued years of service.
¶16 Husband argues last that this Court should not consider how the Plan calculates the payments to determine whether his benefit was born out of onerous or lucrative title. He argues that his disability is the only factor to be analyzed. His argument, however, disregards the employer's intent in creating the plan. See Brebaugh , 211 Ariz. at 101 ¶ 25, 118 P.3d at 49. Regardless whether an employee claims benefits based on a disability or based on retirement in the ordinary course, the Plan fixed the employee's payments based solely on the employee's years of service. In setting up the pension this way, Husband's employer intended to reward Husband's past labor, not to provide him with prospective compensation. Husband therefore acquired the benefits by "onerous title." See Jurek , 124 Ariz. at 597, 606 P.2d at 813 ; see also Koelsch , 148 Ariz. at 181, 713 P.2d at 1239 (1986) ; see also Brebaugh , 211 Ariz. at 98 ¶ 8, 118 P.3d at 46 (distinguishing an entitlement intended as compensation for a spouse's efforts during marriage as community property from an entitlement perspective in nature as a spouse's separate property on dissolution). The trial court, therefore, correctly determined that the portion of Husband's benefits under the Plan earned during the marriage were community property and subject to division upon dissolution of his marriage.
CONCLUSION
¶17 For the reasons stated, we affirm. Wife requests attorney's fees on appeal under A.R.S. § 25-324. Having considered the financial situations of the parties and the reasonableness of the appeal, in an exercise of our discretion, we decline to award Wife her attorney's fees. As the prevailing party, however, Wife is entitled to her costs on appeal upon compliance with ARCAP 21.