Hoobler v. Hoobler
| Docket Number | 1 CA-CV 21-0331 FC |
| Decision Date | 06 October 2022 |
| Citation | 80 Arizona Cases Digest 46,519 P.3d 715 |
| Parties | In re the Marriage of: Dale HOOBLER, Petitioner/Appellant, v. Michelle HOOBLER, Respondent/Appellee. |
| Court | Arizona Court of Appeals |
Berkshire Law Office PLLC, Tempe, By Keith Berkshire, Kristi A. Reardon, Alexandra Sandlin, Counsel for Petitioner/Appellant
Law Office of Zalena M. Kersting PLLC, Gilbert, By Zalena M. Kersting, Counsel for Respondent/Appellee
¶1 Dale Hoobler ("Husband") appeals the family court's decree of dissolution of marriage. He contends, among other arguments, that the court erred (1) in using a hybrid method to distribute his pension, which involved ordering him to obtain a life insurance policy to ensure that Michelle Hoobler ("Wife") receives her community portion in the event of Husband's premature death; and (2) in attributing overtime income in calculating child support.
¶2 We reject Husband's first argument because a life insurance policy is a proper vehicle to facilitate the division of assets when the community cannot withstand a lump-sum distribution of its present value. We also reject Husband's second argument because the court considered the evidence before it—including Husband's overtime work history and testimony about his past and future overtime work—and evaluated his credibility. Because we reject these arguments and the other arguments discussed below, we affirm the decree as modified.
¶3 Husband and Wife were married in 1995 and have three children, one of whom is a minor. Husband is a police sergeant with the Tempe Police Department and intends to retire in April 2024 after 25 years of service. Through his employment, Husband accrued $7,240 in his Nationwide 457(b)-retirement account and $284,496 in his 401(k)-retirement account. He has a Public Safety Personnel Retirement System ("PSPRS") pension of approximately $7,800 per month, A.R.S. § 38–845(A), calculated on his highest three consecutive years of income. He also has a Deferred Retirement Option Plan ("DROP") account anticipated to be worth $600,000 when he retires. The DROP program is a contract wherein Husband agrees to retire after a maximum of five years but can retire before then. A.R.S. §§ 38–844.02, –844.08. Until he retires, his deferred retirement benefits are added to his DROP account and accrue with interest. The DROP account value is Husband's "retirement benefits that he [has] earned up through the date that he elects to go into the DROP."
¶4 Husband elected to enter DROP in March 2019, and the pension amount began accruing in his DROP account the following month. Wife is the primary beneficiary. She has been a stay-at-home mother since 2002. Although she worked in sales through the beginning of the marriage, she desires to obtain a two-year photography certificate.
¶5 In early 2020, Husband petitioned for dissolution of marriage. Around September 2020, Husband stopped depositing his paychecks in the parties’ joint account and terminated Wife's access to their credit card. Husband had also been paying for the expenses associated with the parties’ two homes. Wife later petitioned for temporary orders. Husband responded, asking the court not to award spousal maintenance but instead to order him to continue paying community debts and obligations. The court ordered Husband to pay monthly child support of $1,274, and in lieu of monthly spousal maintenance of $6,000, to pay "all of the community expenses and debt."
¶6 At trial over a year later, Husband testified that he paid for the expenses on the parties’ two homes for 15 months after he petitioned for dissolution. He also testified that he regularly works from 5 a.m. to 3 p.m., Tuesdays through Fridays, but that he works overtime and off-duty shifts on weekends and overnight. These additional hours are voluntary and unscheduled, and based on "luck" through either a lottery system or through a job becoming available. His off-duty shifts are non-pensionable work. Husband testified that he worked some overtime for at least the last 10 years. He clarified that he worked a lot of overtime during the divorce proceedings and as a result did not exercise parenting time set forth in the temporary orders. But he said that he "would like not to" work overtime and later that he "would try not to" work overtime after the divorce to spend time with his daughter. He testified that if the court attributed overtime in calculating child support and spousal maintenance, he would not have enough to support himself and would always need to work overtime. Husband testified that upon his retirement, Wife would receive half of the DROP value, $300,000, and half of the $7,800 monthly pension. He added that the DROP amount and pension are both payable before he retires. But if he retired earlier, the DROP account amount would be around $230,000 rather than the maximum $600,000.
¶7 Husband's Affidavit of Information ("AFI") showed that as of early 2021, he earned a base salary of $10,448.44 per month and worked overtime. His pay stub showed that he currently earns $66.21 per hour, approximately $127,000 per year. In 2017, he earned about $115,900 in addition to $37,000 in off-duty income. In 2018, he earned about $123,000 in addition to $38,000 in off-duty income. In 2019, he earned about $160,000, which included about $23,000 in overtime, $2,100 bonus, $6,600 call-back pay, and $20,000 in "other" pay. In 2020, he earned $205,000, which included about $40,000 in overtime, $2,100 bonus, $8,300 call-back pay, $9,500 in lieu of vacation, and $7,700 in "other" pay.
¶8 Wife's pension expert testified about the actuarial value of Husband's pension and retirement accounts. He testified that the $600,000 DROP value consists of community monies that would be paid in a lump sum in April 2024. A.R.S. § 38–844.08(B) ( lump-sum distribution). He added that along with the lump-sum payment, Husband would also receive an accrued monthly pension benefit of $7,800 upon retirement for the rest of his life, and this amount would increase based on Cost of Living Adjustments ("COLA"). If Husband died before completion of the DROP in April 2024, then his death beneficiary form would govern who receives the DROP payment. Husband could name Wife as his DROP beneficiary after the divorce decree is entered. In the event of Husband's death post-decree, however, Wife would not be an eligible spouse and would stop receiving half of the monthly pension. He explained that to determine the pension value as of the community termination date, he used an actuarial value, based on the monthly benefit, the mortality table, and the interest rate as of the community termination date, to calculate a present value of $2,699,336 for Husband's pension as of February 4, 2020. The DROP amount at that time would be $81,050.18 for a combined total of $2,780,386.18. Wife's interest would thus be roughly $1.4 million. To protect Wife's share of the $7,800 monthly PSPRS pension payments in the event of Husband's premature death, the expert suggested that he obtain a life insurance policy for a term of years.
¶9 Wife later testified that as of the trial date, Husband had not exercised his parenting time entered in the temporary orders. She also acknowledged that the child support calculation in her pretrial statement included Husband's base pay in addition to overtime as reflected in his most recent paystub for the year 2020.
¶10 The court issued a dissolution decree that ordered Husband to name and maintain Wife as the death beneficiary of the DROP account. The court noted that although the pension is mature, payments will not begin until April 2024 when the parties would each receive one-half of the monthly $7,800 and one-half of the $600,000 DROP amount. The court recognized that death benefits cease when spouses divorce. To mitigate the risk to Wife, the court considered the present cash-value method—where the present value of the pension is calculated actuarially and generally awarded as a lump sum—and the reserved jurisdiction method—where the court determines a division formula but withholds dividing the payments until the employee-spouse retires. Koelsch v. Koelsch , 148 Ariz. 176, 183, 713 P.2d 1234, 1241 (1986). The court concluded that the latter method was inequitable "because the pension is actually mature, and the division can be determined right now." The court reasoned that awarding a lump sum under the former method, or assets with a lump-sum value, would also be inequitable, however, because Wife would receive half of the present value and Husband would have nothing with which to move forward financially. As a result, the court fashioned a "hybrid" approach in which Wife would receive 44.6% of the PSPRS pension and DROP, the remaining 5.4% of her half would come from the entire Nationwide 457(b) and 401(k) accounts, and Husband would obtain a ten-year $1,000,000 life insurance policy naming Wife as owner and beneficiary. They would share the cost of the premium for the first five years, and then Wife would be responsible for it. If Husband removed Wife as beneficiary of the DROP, he would need to obtain an additional term of $250,000.
¶11 The court ordered the sale of the parties’ two homes and the proceeds divided in half. Wife's half would be reduced by about $23,700, or one-half of Husband's payments on these properties for 15 months. The court ordered Husband to pay $3,000 a month in spousal maintenance for 34 months. The court also ordered him to pay $649 in monthly child support, attributing $12,916 as his gross monthly income and $9,916.67 as his adjusted gross monthly income. The court also found that Husband credibly testified that Wife charged approximately $29,000 of her own expenses to...
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