Hetherington v. Hetherington

• Decision Date: 19 June 2008
• Docket Number: No. 1 CA-CV 07-0518.,1 CA-CV 07-0518.
• Citation: 202 P.3d 481,220 Ariz. 16
• Parties: In re the Marriage of Therasa Leigh HETHERINGTON, Petitioner/Appellant, v. Thomas HETHERINGTON, Respondent/Appellee.
• Court: Arizona Court of Appeals

202 P.3d 481

220 Ariz. 16

In re the Marriage of Therasa Leigh HETHERINGTON, Petitioner/Appellant, v. Thomas HETHERINGTON, Respondent/Appellee.

No. 1 CA-CV 07-0518.

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

June 19, 2008.

Review Denied February 10, 2009.

S. Alan Cook, Phoenix, Attorney for Petitioner-Appellant.

Udall Shumway & Lyons, PLC By Darrell J. Hadder, Mesa, Attorneys for Defendant-Appellee.

OPINION

EHRLICH, Judge.

¶ 1 This action follows the dissolution of the marriage of Therasa Leigh Hetherington (Wife) and Thomas Hetherington (Husband). Wife appeals the method that the family court used to divide Husband's retirement plan, the division of the proceeds from the sale of the marital residence, the calculation of Husband's income and the court's order that Wife reimburse Husband for her share of the custody evaluator's fee. We affirm the orders regarding the retirement plan and sales proceeds. We remand for the court's reconsideration of a calculation of Husband's income and thus reverse the child-support order. We also remand with instructions that the court include in the decree the same language that it set forth in a previous minute entry order regarding Wife's obligation to reimburse Husband for the evaluator's fees.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 The marriage was entered in 1988 and ended in 2005. The parties have three minor children. During the marriage, Husband was employed as a teacher and contributed to a retirement plan through the Arizona State Retirement System (ASRS). His employment benefits included insurance and employer contributions to his ASRS retirement plan. Wife was self-employed as a nurse on a contract basis; she did not have similar employment benefits.

¶ 3 During the dissolution proceedings, the parties listed the marital residence for sale for $850,000. They received an offer for $20,000 less than that amount based on the fact that the garage had not been built in conformity with the governing code. Husband wanted to accept the offer; Wife wanted to wait for a full-price offer. When Husband proposed reducing his share of the sales proceeds by $20,000 to close the deal, Wife agreed, and the house was sold for $830,000.

¶ 4 The family court appointed David McPhee, Ph.D., to perform a child-custody evaluation. Husband's mother paid the evaluator's fees, which totaled $15,600. Husband later testified that he had repaid his mother for a portion of these fees and that he intended to repay the full amount. Wife paid nothing.

¶ 5 The family court concluded that the community portion of Husband's ASRS plan was "best equitably divided by a Domestic Relations Order [DRO] with the applicable dates being the parties' marriage and the date of service of the Petition of Dissolution upon [Husband]." It also ordered Wife to reimburse Husband $10,000 for her share of the reduction in the sales price of the marital residence, finding that the parties' agreement that Husband assume the entire amount of the reduction was inequitable. The court then entered a child-support order based on Husband's wages without including any employment benefits as income to him. Finally, the court ordered Wife to reimburse Husband for her share of the evaluator's fees. Upon Wife's objection, however, the court agreed that Wife's obligation to reimburse Husband for her share of the evaluator's fees should be contingent upon an affidavit from Husband that he had paid the fees directly or by reimbursing his mother.

¶ 16 Wife filed a motion for new trial, which the trial court denied. She then timely appealed.

DISCUSSION

A. Division of Husband's Retirement Plan

¶ 7 Wife argues that the family court abused its discretion by failing to award her the present cash value of her share in the community interest in Husband's retirement plan in a lump sum. Husband counters that it was within the court's discretion to divide the plan by a DRO. He also contends that Wife failed to provide competent evidence of the present cash value of his retirement plan as of the date of the service of the petition of dissolution and that the court therefore could not calculate the present value of the community's interest in the plan.

¶ 8 As this court stated in Boncoskey v. Boncoskey, 216 Ariz. 448, 451 ¶ 13, 167 P.3d 705, 708 (App.2007):

In apportioning community property between the parties at dissolution, the [family] court has broad discretion to achieve an equitable division, and we will not disturb its allocation absent an abuse of discretion. But the court may abuse its discretion if it commits an error of law in the process of exercising its discretion. In reviewing the [family] court's apportionment of community property, we consider the evidence in the light most favorable to upholding the [family] court's ruling and will sustain the ruling if it is reasonably supported by the evidence.

(Citations omitted.)

¶ 9 It is undisputed that a portion of this asset is community property subject to an equitable division between the parties. See Johnson v. Johnson, 131 Ariz. 38, 41, 638 P.2d 705, 708 (1981) (holding that pension rights, whether vested or non-vested, are community property insofar as they were earned during the marriage). The Arizona Supreme Court has recognized two methods for awarding the non-employee spouse her community interest in the employee spouse's retirement benefits: the present-cash-value method and the reserved-jurisdiction method. Id.

¶ 10 "The community share of the pension is determined by dividing the length of time worked during the marriage by the total length of time worked toward earning the pension." Id. at 41 n. 4, 638 P.2d at 708 n. 4 (citation omitted). Under the present-cash-value method, "the court determines the community interest in the pension, figures the present cash value of that interest, and awards half of that amount to the non-employee spouse in a lump sum[.]" Id. at 41, 638 P.2d at 708. Under the reserved-jurisdiction method, the court determines the community share of the pension, but it "retain[s] jurisdiction to award the appropriate percentage of each pension payment if, as, and when, it is paid out." Id.; see also Boncoskey, 216 Ariz. at 452 ¶ 18, 167 P.3d at 709.

¶ 11 The present-cash-value method relieves the former spouses from "further entanglement" with the possibility of court involvement and enforcement issues, an advantage that is most notable "when the anticipated date of retirement is far in the future." Johnson, 131 Ariz. at 41-42, 638 P.2d at 708-09. Indeed, the Arizona Supreme Court has expressed its preference for the present-cash-value method in cases in which "the pension rights can be valued accurately and if the marital estate includes sufficient equivalent property to satisfy the claim of the non-employee spouse without undue hardship to the employee spouse." Id. at 42, 638 P.2d at 709; see also Boncoskey, 216 Ariz. at 452 ¶ 17, 167 P.3d at 709 (citing Johnson). The court in Johnson approved the use of the present-cash-value method when the employee spouse's rights in his defined-contribution retirement plan were vested,¹ the employee spouse would not retire for another fifteen years and there was sufficient other property available to satisfy the non-employee spouse's interest in the pension. 131 Ariz. at 42-43, 638 P.2d at 709-10. This court in Boncoskey approved the use of the reserved-jurisdiction method when there were no community assets available to satisfy the non-employee spouse's community interest and the pension rights had not yet matured. 216 Ariz. at 451-52 ¶¶ 16-17, 167 P.3d at 708-09.

¶ 12 Husband's plan is a defined-benefit plan, but the ASRS kept track of the contributions made on his behalf. These contributions were characterized as the "refund balance," the amount that Husband would receive if he ended his employment and opted to withdraw from the ASRS.²

¶ 13 The evidence showed the refund balance as of June 30, 2006 and November 14, 2006, but Wife failed to establish the refund balance as of the date of the service of the petition for dissolution. She now contends that there is no requirement that she prove the value of the retirement plan as of the date of service. However, because Husband had been working for his employer since before the marriage, the community's interest in the retirement plan began as of the date of the marriage, October 29, 1988, and ended on the date of service, December 21, 2005.³ The date Wife used, November 14, 2006, included the contributions made on Husband's behalf after the date of service, which are clearly Husband's separate property. See Koelsch v. Koelsch, 148 Ariz. 176, 181, 713 P.2d 1234, 1239 (1986) (holding that a spouse's earnings after dissolution are separate property and that it is error to permit a former spouse to share the post-dissolution separate property earnings of the employee spouse).

¶ 14 In Miller v. Miller, 140 Ariz. 520, 683 P.2d 319 (App.1984), neither party presented evidence of the present cash value of the employee spouse's retirement plan at the time of the dissolution of their marriage; the only evidence was the refund balance on an earlier date. This court found no abuse of the superior court's discretion in applying the reserved-jurisdiction method to divide the husband's retirement plan given that neither party had offered any evidence of the present cash value of the plan on the date of dissolution. Id. at 523, 683 P.2d at 322.

¶ 15 The analysis in Miller is persuasive. Based on the evidence presented to the family court, it was not an abuse of its discretion to order that Husband's retirement plan be divided by a DRO rather than the lump sum based on Wife's calculation which would have awarded her a portion of Husband's post-service separate property earnings.

B. Reduction in Sales Price of Marital Home

¶ 16 The parties listed the marital residence for sale for $850,000 based on an appraisal conducted near the time of the listing...