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Case of the Month (from CFLR Monthly)

July 2017
[Archive]

Sandra’s interest in the retirement pay was contingent on John’s not exercising a waiver . . .

 

In reversal, United States Supreme Court holds that per Mansell , state courts may not order a veteran to indemnify a divorced spouse for the loss in that spouse’s portion of the veteran’s retirement pay caused by his or her waiver of retirement pay to receive service-related disability benefits

 

Howell v. Howell

(May 15, 2017)

United States Supreme Court No. 15-1031, 137 S.Ct. 1400, 2017 FA 1790, per Breyer, J (Roberts, CJ, Kennedy, Ginsburg, Alito, Sotomayor, and Kagen, JJ, concurring; Thomas, J, concurring in part and concurring in the judgment; Gorsuch, J, did not take part). Supreme Court of Arizona, reversed. CFLP §L.88.11.20.

 

When John and Sandra Howell were divorced in Arizona in 1991, John was in the Air Force, but was close to retirement. In anticipation of that event, their Arizona disso judgment awarded Sandra 50% of John’s military retirement pay “ ‘when it begins.’ ” The judgment also ordered John to pay child and spousal support “until the time of [his] retirement.”

 

John retired in 1992 and for the next 13 years, Sandra received half of his retirement pay. Around 2005, the Department of Veteran’s Affairs determined that John was 20% disabled by a service-related shoulder injury. John then elected to receive disability benefits and waived part of his retirement pay in order to receive those non-taxable benefits. That amounted to $250 of the $1,500 a month he received in retirement pay and reduced Sandra’s share by $125 a month.

 

Sandra then petitioned the Arizona family court to enforce the disso judgment by “restoring the value of her share of John’s total retirement pay.” The trial court found that the disso judgment had given Sandra a vested interest in 50% of John’s retirement pay and ordered John to reimburse her for the amount lost by his election and waiver for disability benefits. When John appealed, the Arizona Supreme Court affirmed, holding that the family court order did not divide the military pay that John waived or order him to pay Sandra anything from his disability pay, but “simply ordered [him] to ‘reimburse’ Sandra for ‘reducing . . . her share’ of military retirement pay.” The Arizona high court found it significant that John made his election for disability benefits after his military retirement benefits had been divided; and determined that Mansell v. Mansell (Mansell II) (1989) 490 U.S. 581, 109 S.Ct. 2023, 1989 CFLR 4053, 1989 FA 379 [federal law preempts state courts from treating waived military retirement pay as divisible community property] did not apply.

 

The United States Supreme Court granted cert, reversed the Arizona Supreme Court, and remanded.

 

The road to Mansell . . .
The justices traced the cases and legislative history that led up to the passage of the Uniformed Services Former Spouse’s Protection Act [UFSPA; 10 USC 1408] in 1982, which permits state courts to treat veterans’ disposable retired pay as divisible property, except for amounts received as a result of a waiver required when the veteran elects to receive disability pay. In 1989, the justices said, they “interpreted the new federal language in Mansell ” in holding that federal law precluded California courts from treating the waived portion of a veteran’s retirement pay as community property divisible on divorce. Here, the justices found, the Arizona court had done just that, despite federal preemption of its authority to do so.

 

Timing and labels make no difference . . .
The high court was not persuaded by the Arizona court’s finding that Mansell did not apply because John’s waiver was post-disso. That “temporal difference,” the Supremes said, only highlights the fact that John’s military retirement pay was subject to a later reduction if he chose to exercise a waiver and receive disability benefits. That contingency, they continued, meant that the value of Sandra’s share of the retirement pay might turn out to be less than the parties and the trial court believed it would be when they finalized the division of the parties’ community property. However, that did not mean that John was required to make up the difference to Sandra after he made his disability pay election. The vesting to which the Arizona court referred, the justices explained, could not take place as to the part of the retirement pay that became disability pay; the state court could not grant her what it lacked the authority to give. Moreover, the lower court could not get around Mansell by labeling the payments that John had to make as reimbursement or indemnification. The justices described themselves as cognizant of “the hardship that congressional pre-emption can sometimes work on divorcing spouses.” They suggested that the family court ameliorate that hardship by taking the disability election contingency into account when valuing military retirement pay and when calculating or recalculating its spousal support orders. Meanwhile, they reversed the Arizona Supreme Court’s judgment and remanded for further proceedings in line with this opinion.

 

In other words . . .
In a separate partial concurrence and concurrence in the judgment, Justice Thomas joins in the opinion except for its brief discussion of “ ‘purposes and objectives preemption.’ ” As he did in another case, this justice expressed his belief that the framework of the purposes and objectives of the statute is not a proper basis for finding preemption of state law.

 

 

Comment

  

Readers may find the facts here familiar; they closely mirror those in In re Marriage of Cassinelli (2016) 4 Cal.App.5 th 1285, 210 Cal.Rptr.3d 311, 2017 CFLR 13589, 2016 FA 1764. In that case, the Fourth District held that the trial court erred by ordering the husband to pay monthly spousal support to compensate the wife for monthly payments of his military retirement benefits that she stopped receiving when he made a post-disso election to receive disability retirement benefits. The justices found that spousal support was not appropriate as a reimbursement remedy, and ordered the lower court to award the wife the monthly payments as damages because the husband’s election “caused the loss or destruction of a property right belonging to [the wife] . . . .” Howell makes that reasoning erroneous because the high court finds that Sandra had no vested right to all of her share of John’s retirement pay, but only a contingent right, subject to his ability to waive it for disability payments. And, they specifically state that labeling the payments the trial court awarded as reimbursement or indemnity won’t make them permissible. Howell will also affect the viability of In re Marriage of Krempin (199) 70 Cal.App.4 th 1008, 83 Cal.Rptr.2d 134, 1999 CFLR 8181, 1999 FA 894, in which the court found that the non-military spouse had a vested interest in her husband’s military retired pay that he could not unilaterally diminish and that requiring indemnity from that spouse’s other assets did not contravene the prohibition against dividing disability benefits. It will also affect In re Marriage of Chapman (2016) 3 Cal.App.5 th 719, 207 Cal.Rptr.3d 798, 2016 CFLR 13497, 2016 FA 1759, where the court held that a husband’s post-judgment election to take combat-related special compensation benefits in lieu of the military retirement benefits specified in the disso judgment, could not defeat his ex-wife’s right to receive her community property share of the voluntarily relinquished benefits. The justices there found that it was error to impose a constructive trust on the husband’s CRSC benefits, since he had not acquired them wrongfully, but concluded that the wife was entitled to receive her benefits from the husband’s other assets. As it is, Howell will be a CPA’s dream, as family law attorneys seek to calculate the value of military retirement pay with the contingency factor set forth here.

 

 

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