## Facts

- Roeline Hudson (wife) and Murray Hudson (husband) married on November 18, 1975, and divorced in 1987.
- Murray worked for Exxon for decades, including many years before the marriage, and retired on September 1, 1986.
- Exxon provided Murray two retirement annuities at issue in the divorce property division.
- The first annuity was a service-based retirement benefit that increased with each additional year of Murray’s employment.
- At the time of marriage, the first annuity paid $1,702 per month; by retirement it paid $9,448 per month.
- The trial court treated the first annuity as partly separate (based on premarital service) and partly community (based on marital service) and calculated the community share using a months-of-service fraction (months during marriage ÷ total months of service) applied to the annuity’s value at retirement, without giving the community a separate share of the plan’s “increase” from marriage to retirement.
- Roeline appealed, arguing the community should receive a share of the annuity’s proportionate increase in value during marriage rather than a service-time allocation.
- The second annuity was available only to Exxon executives; Murray became an executive during the marriage, but the record did not clearly establish when Murray’s right to this annuity arose or what employment period it compensated.
- The trial court treated the executive annuity as entirely community property and divided it equally; Murray appealed that characterization and division.

## Issues

1. Whether the community interest in a defined-benefit, service-based retirement annuity should be measured by a service-time fraction of the benefit payable at retirement, or instead by awarding the community a share of the annuity’s proportionate increase in value during marriage.
2. Whether the trial court properly treated an executive-only annuity as entirely community property and divided it 50/50 when the evidence did not clearly show when the right to that benefit was acquired or what service period it rewarded.

## Decision

- The court rejected the wife’s argument that she was entitled to a share of the annuity’s proportionate increase in value during marriage, reasoning that approach would attribute to the community value produced by Murray’s premarital service.
- The court approved using a service-time (time-rule) fraction to limit the community’s share of the first annuity to the portion earned during the marriage.
- The court held the record did not support treating the executive annuity as wholly community property based solely on Murray’s executive status during marriage where the accrual basis and acquisition timing were not established.
- The court reversed the property division as necessary and remanded for further proceedings to determine the character and proper division of the executive annuity and to enter a division consistent with those findings.

## Legal Principles

- Retirement benefits are characterized as separate or community according to when the employee spouse’s right to the benefit is earned; benefits earned before marriage are separate property to that extent.
- For a defined-benefit retirement plan that accrues with length of service, a time-rule fraction (service during marriage ÷ total service) is a proper method to apportion the benefit between separate and community estates.
- A nonemployee spouse may not obtain a share of retirement value attributable to the employee spouse’s premarital service merely because the benefit amount increased during the marriage.
- Community-property characterization turns on evidence of when and how a benefit was earned; when the record is insufficient to determine whether a special retirement benefit is separate, community, or mixed, the division may require remand for factfinding and a corrected property division.

## Conclusion

Hudson held that the community share of a service-based retirement annuity is properly determined by a service-time fraction rather than by awarding the community a share of the annuity’s overall increase that would partly reflect premarital service, and it remanded for proper characterization and division of an executive annuity where the evidence did not clearly establish when and on what basis the benefit was earned.


Hudson v. Hudson, 763 S.W.2d 603 (1989)