He may be judgment proof, but she still has the right to a judgment . . .
In reversal, Fourth District holds that trial court erred by ordering husband to pay monthly spousal support to compensate wife for monthly payments of his military retirement benefits that ceased when he made post-disso election to receive disability retirement benefits
In re Marriage of Cassinelli
(November 2, 2016)
California Court of Appeal 4 Civil E063769 (Div 2) 4 Cal.App.5 th 1285, 210 Cal.Rptr.3d 311, 2016 FA 1764, per Ramirez, PJ (McKinster and Codrington, JJ, concurring). Riverside County: Harmon, J, reversed and remanded with directions. For appellant: Ellen Dove, (916) 331-0111. For respondent: Julie Clark, (951) 658-0025. CFLP §L.88.11.25.
When Janice and Robert Cassinelli were married in 1964, he was on active duty with the U.S. Air Force. After serving for 20 years with the Air Force, Robert retired. In 1985, the couple separated and Janice filed for divorce. In August 1986, the trial court issued their stipulated disso judgment which, among other things, provided that Janice had a 43.1% interest in Robert’s Air Force pension and that she was to receive payments of $230 a month or 43.1% of the pension, whichever was greater. Robert was ordered to pay her pension payments from May 1, 1986 until the Air Force began paying her directly. The disso judgment also reserved jurisdiction over spousal support.
After the disso, Robert worked mostly as a teacher. He later developed a heart condition that required quadruple bypass surgery. In 2012, he took a medical retirement from teaching. That same year, the Department of Veterans Affairs determined that Robert had a service-connected disability, based on the assumption that his heart condition was caused by his exposure to Agent Orange in Viet Nam. The VA also determined that Robert was eligible for combat-related special compensation or CRSC benefits, since his disability was combat related. In 2013, Robert elected to receive both disability benefits and CRSC benefits. The result of that election was that Janice ceased to receive her monthly retirement payments, then $541 a month, and Robert began to receive $1,743 a month in veteran’s disability benefits and $1,389 a month in CRSC payments, all tax free.
In January 2014, Janice filed a motion to modify the disso judgment, seeking an order requiring Robert to pay her share of his former retirement pay as “ ‘non-modifiable spousal support.’ ” She stated that her monthly income consisted of $1,673 in wages, and $1,568 in social security. In opposition, Robert argued that the disso judgment was final, federal law prohibited Janice from sharing in his disability pay, and his income was protected from attachment. He also contended that a spousal support award was precluded by a lack of sufficient Fam C §4320 factors. In August 2014, Janice filed a motion for attorney’s fees. After a trial in January 2015, the trial court invited both parties to submit supplemental declarations, which they did.
In April 2015, the trial court issued a written ruling, noting that it could not treat Robert’s retirement disability pay as community property, but it could take “ ‘equitable action’ ” to compensate Janice for the benefits she lost through his election. The lower court determined that the election and resulting termination of payments to Janice was a material change of circumstances and that allowing Janice to go uncompensated would be a “ ‘miscarriage of justice.’ ” The court then considered each of the Fam C §4320 factors and determined that Janice was entitled to receive $541 a month for non-modifiable spousal support. It also ordered Robert to pay $7,180 for Janice’s attorney’s fees.
After moving unsuccessfully for reconsideration, Robert appealed, and in a partially published opinion, the Fourth District reversed and remanded.
Waive goodbye to benefits . . .
Robert contended that federal law precluded the trial court from awarding Janice any part of his veteran’s disability benefits, either directly or indirectly. After reviewing the general principles applicable to federal retirement and disability benefits, the justices determined that the Federal Uniformed Services Former Spouses Protection Act (FUSFSPA) [10 USC 1 408(c)(1)] permits the trial court to treat disposable military retirement pay as community property, but not the amounts waived for disability pay. However, the justices continued, trial courts are not prohibited from fashioning a remedy for divorced spouses whose benefits are terminated by the military spouse’s election to waive retirement pay in order to receive disability pay. The panel noted that in In re Marriage of Krempin (1999) 70 Cal.App.4 th 1008, 83 Cal.Rptr.2d 134, 1999 CFLR 8181, 1999 FA 894, the appellate court had relied on out-of-state cases to determine whether it could find a way to protect the pension interest of a wife who had been awarded a 25% interest in her husband’s military retired pay, but who lost that interest when he elected to waive retirement pay and receive only disability pay. When the Krempin court reviewed those cases, they found that the majority approved the trial court’s taking equitable action to compensate the non-military spouse for the benefits that he or she lost by the other spouse’s election. Those courts reasoned that the non-military spouse had a vested interest in the retired pay that the other spouse could not unilaterally diminish and that requiring indemnity from that spouse’s other assets did not contravene the probation against dividing disability benefits.
Krempin her style . . .
Applying the reasoning in Krempin to the facts here, the justices agreed that a military spouse could be required to reimburse the non-military spouse for the benefits lost through his or her election of disability benefits. The panel reasoned that it should make no difference, as Robert averred, that the military spouse in Krempin was on active duty when the disso court awarded his wife a percentage of his retired pay, while Robert was no longer on active duty when his election occurred. Moreover, contrary to his contention, the justices believed, per Krempin , that the disso judgment need not contain an indemnity clause before the trial court can order some kind of equitable reimbursement to the non-military spouse. In fact, they stated, there should be a presumption against that interpretation of the judgment. Here, the panel found, there was nothing in the disso judgment that indicated that the parties intended that Robert should be able to defeat Janice’s right to a share of his retired pay by electing to receive disability pay. The document didn’t even mention disability pay, identified the specific amount that Janice was to receive, and there was no reservation of jurisdiction over Robert’s retirement pay. All of that led the panel to conclude that the parties intended Janice’s right to receive a share of the retired pay to be “indefeasible.”
No can do . . .
The justices then turned to the question of whether the trial court’s chosen reimbursement remedy, a spousal support award, was appropriate. Looking back at the out-of-state cases they had reviewed, the panel noted that only a minority of those courts had chosen a spousal support award as the appropriate remedy. The majority, they explained, chose to order the military spouse to make monthly payments to the other spouse in the amount lost, but as indemnity, not spousal support. The remedy of monthly payments in the amount lost, the justices found, is not permitted in California. Therefore, the trial court had erred by ordering it here. The panel believed that the lower court should have found that Robert’s election “caused the loss or destruction of a property right belonging to [Janice] and should therefore be required to pay [her] money damages.” They directed the trial court to award Janice $541 per month, as damages, not spousal support.
Odds and ends . . .
The justices gave short shrift to Robert’s contention that the trial court’s order violated the finality of judgments. The lower court did not do so, they said, because that court had reserved jurisdiction over spousal support. The panel was similarly unpersuaded by his argument that Krempin and the other cases were distinguishable because they did not involve CRSC benefits. The justices noted that the trial court had not awarded Janice any interest in those benefits; thus, any discussion of CRSC would be irrelevant here. As for his contention that his income was judgment proof, the panel reasoned that, if true, that fact did not affect Janice’s right to a judgment, however uncollectible it might be. Besides, the justices said, Robert owned a house and car on which Janice might be able to levy, he could “win the lottery,” or the parties could reach a settlement for a lesser amount.
Non-pub . . .
In the unpublished parts of the opinion, the panel declined to consider the testimony of Janice’s expert on the treatment of military retirement and disability payments and concluded that Robert failed to show an abuse of discretion in the trial court’s award of attorney’s fees to Janice.
In a footnote, the justices mention that another recent case, In re Marriage of Chapman (2016) 3 Cal.App.5 th 719, 207 Cal.Rptr.3d 798, 2016 CFLR 13497, 2016 FA 1759 dealt with the same issue as this case and came to the same conclusion as the justices did here. However, they do not rely on that case because it was still subject to California Supreme Court review when they issued this opinion. In Chapman , the Third District held that a husband’s post-judgment unilateral election to take combat-related special compensation benefits in lieu of 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 in that case found that the lower court had erred by imposing a constructive trust to ensure that the ex-wife received her payments, since the husband had not acquired his CRSC benefits wrongfully, but concluded that she was entitled to receive her benefits from the husband’s other assets.
The panel also notes that an award of spousal support “had several advantages for her.” In addition to avoiding problems with the finality of judgments (due to the reservation of jurisdiction over spousal support), a support order would be enforceable against Robert’s disability benefits (up to the amount waived), his CRSC benefits, his social security benefits, and his STRS disability benefits. On his side, Robert would have been able to deduct his spousal support payments, if they met the criteria for deductible alimony under the IRS Code.