## Facts

- Margaret J. DeShurley and John R. DeShurley married in 1950 and separated in October 1984.
- John worked as a Continental Airlines pilot from 1951 until he joined a strike in 1983; Continental later entered bankruptcy.
- In October 1985, the bankruptcy court issued an order resolving disputes between Continental and the pilots’ union, terminating the strike and providing eligible striking pilots an election between reinstatement and severance pay.
- The severance option required pilots to waive recall rights and waive strike-related claims against Continental.
- Severance amounts were calculated using a formula tied to years of active service as of September 24, 1983; John’s severance was set at $126,800, payable partly upfront and then in installments with specified interest terms.
- In the dissolution, the parties divided all community property except the severance pay; the trial court characterized the severance as John’s separate property and awarded it to him.

## Issues

1. Whether the severance pay created by a post-separation bankruptcy-court order was community property because it was calculated using years of marital service, or separate property because it compensated for post-separation loss of employment and waiver of future rights.

## Decision

- The Court of Appeal affirmed the judgment.
- The severance pay received and to be received under the bankruptcy-court-ordered plan was John’s separate property.
- The formula referencing prior years of service measured the payment amount but did not convert the benefit into deferred compensation for marital labor.
- The benefit was treated as consideration for post-separation choices and waivers (recall rights and strike-related claims), and as a substitute for future employment, not compensation earned during marriage.

## Legal Principles

- Characterization of employment-related payments turns on what the payment is intended to compensate, not merely on a calculation method tied to years of service.
- Payments functioning as deferred compensation for services performed during marriage are generally community property to the extent attributable to community labor.
- Payments intended to compensate for post-separation loss of employment opportunities, loss of future earnings, or relinquishment of post-separation rights are generally separate property.
- A right created after separation by court order or settlement, and conditioned on a post-separation election and waiver of future rights, supports separate-property characterization even if measured by prior service.

## Conclusion

The court held that severance pay created after separation by a bankruptcy-court order, exchanged for waiving recall and litigation rights and serving as a substitute for future employment, belonged to the employee spouse as separate property despite a service-based calculation formula.


In re Marriage of DeShurley, 207 Cal. App. 3d 992, 255 Cal. Rptr. 150 (Ct. App. 1989)