Boncoskey v. Boncoskey

• Decision Date: 25 September 2007
• Docket Number: No. 1 CA-CV 06-0289.,1 CA-CV 06-0289.
• Citation: 167 P.3d 705,216 Ariz. 448
• Parties: In re the Marriage of Timothy L. BONCOSKEY, Petitioner-Appellant, v. Laura S. BONCOSKEY aka Laura S. Scott, Respondent-Appellee.
• Court: Arizona Court of Appeals

167 P.3d 705

216 Ariz. 448

In re the Marriage of Timothy L. BONCOSKEY, Petitioner-Appellant, v. Laura S. BONCOSKEY aka Laura S. Scott, Respondent-Appellee.

No. 1 CA-CV 06-0289.

Court of Appeals of Arizona, Division 1, Department D.

September 25, 2007.

Bill Stephens PC, by Bill Stephens, Phoenix, Attorney for Appellant.

Cates Hanson Sargeant & Rakestraw PLC, by William P. Sargeant, III, Leslie L. Rakestraw, Phoenix, Attorneys for Appellee.

OPINION

WEISBERG, Judge.

¶ 1 Timothy L. Boncoskey ("Husband") appeals the superior court's order directing the manner in which his retirement account benefits shall be distributed between him and Laura S. Boncoskey aka Laura S. Scott ("Wife"). For the following reasons, we reverse the court's order and remand this matter for further proceedings.

BACKGROUND

¶ 2 Husband and Wife were divorced in 2003, after more than fourteen years of marriage. The superior court entered a consent decree of dissolution that incorporated the parties' settlement agreement. The settlement agreement resolved the division of the marital property, spousal maintenance, child custody and visitation, child support, and attorneys' fees.

¶ 3 At the time of the dissolution, Husband was forty years old and had worked for the State of Arizona for approximately twelve and one-half years. While employed by the State, he participated in the Arizona State Retirement System ("ASRS") and was eligible to receive a monthly pension benefit upon his retirement.¹ The pension is administered by the ASRS and is a defined benefit plan that pays retired employees a monthly pension based upon a formula, usually related to the employee's years of service and average salary. Ariz. Rev. Stat. ("A. R. S.") §§ 38-757 to -758 (2001); Johnson, 131 Ariz. at 42, 638 P.2d at 709.

¶ 4 When an employee participating in the ASRS meets the requirements for normal retirement, he is entitled to receive a monthly life annuity, the amount of which is calculated based upon the employee's average monthly compensation and length of employment. A.R.S. § 38-757. If the employee elects early retirement, however, the normal retirement benefits to which the employee would otherwise be entitled are reduced. A.R.S. § 38-758.

¶ 5 In addition, the ASRS allows an employee to elect as an optional form of retirement benefit a joint and survivor annuity. A.R.S. § 38-760 (Supp.2006). If the employee makes such an election, he receives a reduced monthly payment throughout his lifetime, but after his death, all or a portion of the monthly payment continues during the life of the person designated as the contingent annuitant. A.R.S. § 38-760(B)(1).

¶ 6 The parties' settlement agreement provided that Husband and Wife would each be entitled to one-half of the community's interest in the pension and that such division would be effectuated by a Qualified Domestic Relations Order ("QDRO").² But, the parties were unable to resolve how the pension should be divided and ultimately agreed to the appointment of a Special Master to make a recommendation to the court. In its ruling appointing the Special Master, the trial court mentioned two prior Arizona Supreme Court cases, Van Loan v. Van Loan, 116 Ariz. 272, 569 P.2d 214 (1977), and Johnson,³ but stated that Koelsch v. Koelsch, 148 Ariz. 176, 713 P.2d 1234 (1986), controlled the valuation and payment parameters for this case.

¶ 7 The Special Master's order proposed to the court stated that he was confused because he understood Koelsch to hold that the community cannot share retirement benefits that accrue after the date the community ends and that this holding was inconsistent with application of a Van Loan fraction⁴ to a final retirement benefit. Nevertheless, because the court had specified that Koelsch controlled, the Special Master determined that Husband could retire at age 50, valued the pension as of that date, and recommended that Husband begin making monthly payments to Wife in the amount of $530 per month as her share of the community's interest in the pension. The Special Master also recommended that whenever Husband actually did retire, his payments to Wife should cease and any subsequent payments to Wife should come from ASRS pursuant to a domestic relations order. The latter order also could address Wife's interest in the death benefits that Husband had accumulated as of the date of dissolution. The Special Master suggested that Husband's direct payments to Wife be characterized as non-modifiable spousal maintenance in order to be tax-deductible to him and that the payments end upon the death of either party or once Wife began receiving her share of the pension from ASRS. Finally, he recommended that Wife might elect to receive a 50% survivor benefit from ASRS and if so that she be charged with the full cost of that benefit.

¶ 8 Husband objected, arguing that a premise of the settlement agreement was that there would be no lump sum buy-out of Wife's interest in the pension and that she waived any right to spousal maintenance; thus, she should not begin receiving spousal maintenance when Husband turned age fifty. He also objected that because the parties had agreed to a QDRO, Wife was entitled only to payments from ASRS rather than from him to begin only when the plan began making pension payments upon his retirement and not before.

¶ 9 Nevertheless, the court adopted the Special Master's report and ordered him to prepare a Domestic Relations Order ("DRO") consistent with the report. The court signed the DRO, which acknowledged that a separate order would require Husband to pay Wife $530 beginning at age 50, and directed that ASRS pay Wife $530 per month out of Husband's retirement benefit. It also required Husband to elect a joint and 50% survivor annuity benefit and that Wife's payment be reduced by the amount necessary to give Husband what he would have received under a single life annuity.

¶ 10 Husband timely appealed from the DRO. We have jurisdiction pursuant to A.R.S § 12-2101(C) (2003).

DISCUSSION

¶ 11 Husband argues that by adopting the DRO, the superior court misapplied the law and inequitably apportioned the pension. He specifically contends that the court abused its discretion in ordering him to make monthly payments to Wife when he turns 50 and in ordering that Wife receive a 50% survivor benefit based upon the value of the entire pension rather than the portion that had accrued during marriage.

This Court's Jurisdiction

¶ 12 We first address Wife's contention that we lack jurisdiction of the appeal because Husband did not appeal from the trial court's July 5, 2005 order adopting the Special Master's report and because the March 27, 2006 DRO from which Husband did appeal was not a final appealable order. Our review of the record persuades us that the superior court did not intend the July 2005 order to be final but contemplated the later preparation and entry of the DRO.⁵ Thus, once the court issued the DRO, the DRO became a final appealable order incorporating the earlier July 2005 order. A.R.S. § 12-2101(C); In re Marriage of Dorman, 198 Ariz. 298, 300-01, 9 P.3d 329, 331-32 (App.2000) (holding order modifying portion of decree was special order after judgment because it raised issues different than those that would be raised in appeal from decree and affected decree and its enforcement). Husband timely appealed from the DRO, and thus we have jurisdiction. See Hill v. City of Phoenix, 193 Ariz. 570, 572, ¶ 10, 975 P.2d 700, 702 (1999) (if opposing party has received adequate notice, mere technical error should not bar appellate court from reaching merits). We now turn to Husband's contentions.

Division of Husband's Pension

¶ 13 In apportioning community property between the parties at dissolution, the superior court has broad discretion to achieve an equitable division, and we will not disturb its allocation absent an abuse of discretion. Miller v. Miller, 140 Ariz. 520, 522-23, 683 P.2d 319, 321-22 (App.1984); Lee v. Lee, 133 Ariz. 118, 649 P.2d 997 (App.1982). But the court may abuse its discretion if it "commits an error of law in the process of exercising its discretion." Kohler v. Kohler, 211 Ariz. 106, 107, ¶ 2, 118 P.3d 621, 622 (App.2005). In reviewing the trial court's apportionment of community property, we consider the evidence in the light most favorable to upholding the superior court's ruling and will sustain the ruling if it is reasonably supported by the evidence. Id.

¶ 14 It is well-established in Arizona that pension rights "are generally viewed as a form of deferred compensation for services rendered by employees" and that pension rights earned by the community effort of a spouse during marriage are community property subject to equitable division. Johnson, 131 Ariz. at 41, 638 P.2d at 708 (citing In re Marriage of Brown, 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561 (1976)); see also Koelsch, 148 Ariz. at 181, 713 P.2d at 1239; Van Loan, 116 Ariz. at 273-74, 569 P.2d at 215-16. Thus, even if the employee spouse is not yet entitled to a pension, he "and thereby the community, does indeed acquire a property right in . . . pension benefits," even if the rights have not vested, that is subject to division upon dissolution. Van Loan, 116 Ariz. at 274, 569 P.2d at 216.

¶ 15 It is important, however, to distinguish between mature pension rights, which can be more easily valued, and rights that have not yet matured and will not do so for many years. In this case, Husband did not possess an unconditional and immediate right to payment of pension benefits that he simply wished to postpone receiving, as in Koelsch. And although the parties stipulated to appointment of a Special Master when they could not agree on how to value Wife's interest in Husband's pension, the parties did not stipulate that Koelsch should control that calculation.

¶ 16 In contrast with the situation in Koelsch but like the situation in Johnson, Husband's benefits were not "matur...