Cook v. Cook

Decision Date19 March 1997
Docket NumberNo. 95-1963,95-1963
Citation208 Wis.2d 166,560 N.W.2d 246
PartiesIn re the Marriage of Pam Anita COOK, Petitioner-Respondent, v. Roger Paul COOK, Respondent-Appellant-Petitioner.
CourtWisconsin Supreme Court

For the respondent-appellant-petitioner there were briefs by Norma Briggs and Briggs Law Office, Madison, and oral argument by Michael J. Briggs.

For the petitioner-respondent there was a brief by Richard J. Auerbach and Auerbach & Porter, Madison, and oral argument by Richard J. Auerbach.

¶1 SHIRLEY S. ABRAHAMSON, Chief Justice

This is a review of a published decision of the court of appeals 1 affirming an order of the Circuit Court for Green County, David G. Deininger, Judge, determining property division and child support in the parties' divorce action. Roger Paul Cook, the husband, objects to that part of the circuit court's order which awarded a portion of the military retired pay to his former wife, Pam Anita Cook, in the equitable division of the property and included his portion of the military retired pay as income for purposes of calculating his obligation for child support. The court of appeals affirmed the order of the circuit court, rejecting the husband's contention that including his portion of the military retired pay as income for purposes of calculating his child support obligation constitutes impermissible "double-counting."

¶2 We affirm the decision of the court of appeals. We conclude that military retired pay must be considered as property for purposes of property division unless otherwise excluded by law and may be considered as income to the recipient for purposes of calculating child support.

¶3 The facts are not in dispute. The parties were married for 12 years; the divorce action was commenced in 1993 and judgment entered in 1995, when the parties' children were three and five years old. At the time of the judgment the wife, the custodial parent, had a gross income of $1,836 per month and required more than $800 per month for the children's day care. The husband had a gross income of $1,212 per month from the military retired pay and expected to earn, soon after the divorce, an additional $2,334 to $2,500 per month from his work as an over-the-road truck driver.

¶4 The circuit court ruled that each party was to receive one half of 11/23 of the husband's military retired pay as it was paid monthly. 2 The remaining 12/23 of the military retired pay was awarded entirely to the husband. The remainder of the parties' property was divided equally, consistent with their agreement.

¶5 Applying the child support percentage guidelines to each party's share of the military retired pay, the circuit court determined that the husband, as the non-custodial parent, was obliged to pay the wife 25% of his gross income from all sources for the support of their children. Monthly payments to the husband of military retired pay were determined to be part of his gross income. The circuit court denied the wife's request for a child support award greater than the guidelines percentage to assist in the sizable day care expense necessitated by her full-time employment. The circuit court reasoned that the percentage standard applied to the husband's gross income (including military retired pay) would produce sufficient funds for child support once the husband began receiving additional income from his new employment.

¶6 This case presents us with two related questions. First, is military retired pay property for purposes of property division upon divorce? The husband contends that his military retired pay should be considered as income only and not as property subject to division.

¶7 Second, if military retired pay is divided in the property distribution, may the non-custodial spouse's share of the military retired pay be considered part of that spouse's gross income for the purpose of calculating his or her child support obligation? The husband argues that if the military retired pay is subject to property division then any portion awarded to him should not be considered as income for purposes of calculating the amount of child support he is to pay.

¶8 A third question raised by the court of appeals and briefed at this court's request is whether the court of appeals may overrule, modify or withdraw language from one of its published decisions. For the reasons set forth we conclude that the court of appeals does not have this power.

I.

¶9 The division of marital property and the calculation of child support are matters generally left to the sound discretion of the circuit court. Jasper v. Jasper 107 Wis.2d 59, 63, 318 N.W.2d 792 (1982); Edwards v. Edwards, 97 Wis.2d 111, 116, 293 N.W.2d 160 (1980). That discretion, however, must be exercised by applying correct legal standards. Hartung v. Hartung, 102 Wis.2d 58, 66, 306 N.W.2d 16 (1981). An exercise of discretion based on a mistaken view of the law is an erroneous exercise of discretion. Schmid v. Olsen, 111 Wis.2d 228, 237, 330 N.W.2d 547 (1983). Because the husband does not contend that the circuit court erroneously exercised its discretion except in regard to the legal standards it applied to the husband's military retired pay, we treat this case as presenting solely issues of law. We determine the legal issues independently of the circuit court and the court of appeals, benefiting from the analyses of those courts.

II.

¶10 The husband first contends that the circuit court erred as a matter of law by considering the military retired pay as property subject to property division under Wis.Stat. § 767.255 (1991-92). 3 We begin with an evaluation of relevant federal and Wisconsin statutes.

¶11 Persons who serve in the armed forces for a specified period, generally 20 years, are entitled to receive military retired pay upon leaving the service. 10 U.S.C. § 3911 et seq. Military retired pay is not available as a lump sum; it is taxable as income and terminates on the death of the retiree. A retiree is entitled to military retired pay even if he or she takes a post-retirement job, except that military retired pay temporarily ceases if the retiree returns to active duty.

¶12 In McCarty v. McCarty, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589 (1981), the United States Supreme Court held that the federal statutory scheme and the Supremacy Clause preclude states from dividing military retired pay as an asset of a marriage. Congress responded to the McCarty decision by enacting the Uniformed Services Former Spouses Protection Act, 10 U.S.C. § 1408, which reversed the effect of McCarty and allowed a state court to divide military retired pay as part of a property division in a divorce. The Act provides that "a court may treat disposable retired pay payable to a member ... either as property solely of the member or as property of the member and his spouse in accordance with the law of the jurisdiction of such court." 10 U.S.C. § 1408(c)(1). Federal law thus no longer precludes Wisconsin from treating military retired pay as property subject to property division on divorce. 4

¶13 We now examine Wisconsin law governing property division on divorce. Under Wisconsin law, upon every judgment of divorce a circuit court shall divide the property of the parties and divest and transfer the title of such property. Wis. Stat. § 767.255. Certain specified property is not subject to property division except in the case of hardship. Id. In regard to all other property, a circuit court is to presume that the property is to be divided equally between the parties but may alter this distribution after considering various factors. Id.

¶14 With these statutory directives in mind we begin our inquiry into whether military retired pay is income or is property subject to division on divorce.

¶15 Military retired pay has characteristics of both income and property. A military retiree has a right to a future stream of income attributable to past employment; the amount of the retiree's benefit is tied to the compensation the retiree received while in service. 10 U.S.C. § 3991. ¶16 Military retired pay is similar to private sector retirement plans. Although, as the husband stresses, the military retiree is not entitled to exchange retired pay for a lump sum, the same is true in many private sector retirement plans. Similarly, it is of no moment that military retired pay terminates at the retiree's death or if the retiree returns to active service. These characteristics do not divest the military retired pay of its status as a retirement plan, comparable to private sector plans.

¶17 It is settled law in this state that private sector retirement plans earned through a spouse's employment during a marriage must be considered in the property division at divorce. The court has noted that in "many divorce situations, the pension rights of one or both employee spouses are the most significant marital assets owned by the couple," and that Wisconsin "is in the forefront of the common-law-property states recognizing the rights of the non-employee spouse [in the pension]." Bloomer v. Bloomer, 84 Wis.2d 124, 129, 267 N.W.2d 235 (1978).

¶18 In Steinke v. Steinke, 126 Wis.2d 372, 378-79, 376 N.W.2d 839 (1985), 127 Wis.2d 444, 379 N.W.2d 853 (1986) (on reconsideration), the court addressed "the proper characterization of Mr. Steinke's pension plan either as property (and, therefore, part of the marital estate subject to division) or as income." The pension in Steinke, like the military retired pay in the present case, was being paid to the husband at the time of divorce. The court held that, "as a matter of law, the value of a spouse's interest in a pension fund must be included by the trial court in the division of the property." Steinke, 126 Wis.2d at 380, 376 N.W.2d 839. In Thorpe v. Thorpe, 123 Wis.2d 424, 367 N.W.2d 233 (Ct.App.1985), the court of appeals affirmed a circuit court's property division of military retired pay.

¶19...

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