In re Marriage of Smith

Decision Date23 March 2007
Docket NumberNo. H029176.,H029176.
Citation56 Cal.Rptr.3d 341,148 Cal.App.4th 1115
CourtCalifornia Court of Appeals Court of Appeals
PartiesIn re MARRIAGE OF Keith and Kum SMITH. Keith A. Smith, Appellant, v. Kum C. Smith, Respondent.

PREMO, J.

In this family law matter Keith A. Smith (Keith) appeals from a postjudgment order dividing his military retirement benefits. He argues that the trial court erred by requiring him to pay his former wife Kum C. Smith (K.C.)1 a percentage of any veterans' Disability payments he may receive during his retirement and by requiring that he participate in the military's Survivor's Benefit Plan (10 U.S.C. §§ 1447-1455) (SBP) and name K.C. as his sole beneficiary. Finding no error, we shall affirm.

I. FACTS

Keith and K.C. were married in 1987. The marital status was dissolved on June 23, 2004. Marital property was divided by agreement contained in a judgment filed October 8, 2004. At the time, Keith was a colonel in the United States Army. His service in the Army had begun eight years prior to his marriage to K.C. and he was still on active duty when he and K.C. separated. Keith expected to retire around September 2005. If Keith retired as planned, roughly 60 percent of the military retirement would have been community property, giving K.C. about a 30 percent interest in the retirement asset. The precise percentage would depend upon the date Keith actually retired and his rank at the time of retirement.

The stipulated judgment dividing the marital property contains the following paragraph: "The U.S. Army Retirement shall be divided. Petitioner will be given credit for his separate interest for the period of time that he was in the armed services prior to marriage and the period of time subsequent to marriage. The community interest shall be equally divided.

The parties agree to use Edwin Shilling to prepare necessary documents. The parties to share the costs equally." No appeal was taken from the judgment.

The parties had expected Edwin Shilling, an expert in military retirement benefits, to prepare the "necessary documents" to insure that the military pay center would have what it needed to give effect to the portion of the judgment pertaining to Keith's retirement pay. After judgment was entered K.C. learned that Shilling did not accept joint representations. K.C. retained Shilling herself and Shilling prepared a proposed order for her. Keith opposed the proposed order on the grounds that it was inconsistent with the judgment and with federal law.

A hearing was held at which Shilling testified as an expert to assist the court in understanding the requirements of the pertinent federal law. No other evidence was taken. Keith had wanted to testify about his understanding of the meaning of the stipulated judgment but the trial court refused to accept the evidence, holding that the stipulated judgment "speaks for itself." The trial court adopted the proposed order. Keith appeals from that order.

II. DISCUSSION
A. The Disability Pay Issue
1. Introduction

Veterans who became disabled as a result of military service are eligible for disability benefits. (38 U.S.C. §§ 1110, 1131.) With exceptions not pertinent here, a military retiree may receive disability benefits only to the extent that he or she waives a corresponding amount of retired pay. (38 U.S.C. § 5305; 10 U.S.C. § 1414.) There are several advantages to taking (Usability rather than retirement pay so that retirement pay waivers are quite common. (Mansell v. Mansell (1989) 490 U.S. 581, 583-584, 109 S.Ct. 2023, 104 L.Ed.2d 675 (Mansell).) Although federal law permits courts in community property states to treat military disposable retired pay as community property, retirement pay that has been waived in favor of disability may not be treated as community. (Id. at pp. 594-595,109 S.Ct. 2023.)

There is no evidence that Keith was receiving or was eligible for disability pay at the time the court entered the order he challenges here. Nevertheless, the court's postjudgment order requires that, if Keith later elects to receive disability in lieu of retirement, he must pay K.C. the amount of the retirement pay she would lose as a result of his waiver.2 Keith contends that this provision was not contemplated by the judgment and that it is impermissible under federal law.

Keith's argument requires interpretation of the parties' stipulated judgment. The interpretation of a written instrument is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865, 44 Cal.Rptr. 767, 402 P.2d 839.) Unless interpretation turns upon the credibility of extrinsic evidence, an appellate court is not bound by the trial court's construction but makes an independent determination of the meaning of the writing. (Ibid.; and see Lucas v. Elliott (1992) 3 Cal.App.4th 888, 892, 4 Cal.Rptr.2d 746.)

2. Legal Framework

Members of the Armed Forces who serve for a specified period of time may retire and receive "retired pay." (See e.g. 10 U.S.C. §§ 3911, 3929.) In 1981, the United States Supreme Court held that federal law prohibited state courts from treating military retired pay as community property. (McCarty v. McCarty (1981) 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589.) In response, Congress passed the Uniformed Services Former Spouses' Protection Act (USFSPA), which authorizes courts in community property states to treat "disposable retired pay" as community property. (10 U.S.C. § 1408(c)(1).) The USFSPA defines disposable retired pay as: "the total monthly retired pay to which a member is entitled" less, among other things, amounts deducted as a result of the waiver required to receive disability benefits. (10 U.S.C. § 1408(a)(4).) In Mansell, supra, the United States Supreme Court held that since the USFSPA expressly excluded disability benefits from the definition of disposable retired pay, retired pay that has been waived to receive disability benefits may not be treated as community property. (Mansell, supra, 490 U.S. at pp. 594-595, 109 S.Ct. 2023.) Thus, where a military spouse had been receiving both disability benefits and retired pay at the time of dissolution, the state court could divide the retired pay but could not divide the disability payments. (Ibid.)

The Mansell holding led many state courts to look for creative solutions to prevent a former spouse from losing his or her interest in the military retirement as the result of unilateral action on the part of the military spouse. In re Marriage of Krempin (1999) 70 Cal.App.4th 1008, 83 Cal.Rptr.2d 134 (Krempin) held that a postjudgment waiver of retired pay could not, in proper circumstances, reduce the former spouse's monthly benefit. In Krempin, the judgment gave wife a 25 percent interest in husband's Air Force retirement with monthly payments to commence when husband retired. The marital settlement agreement incorporated into the judgment added: "`The Court in the parties' dissolution action will reserve jurisdiction to make such orders relating to these retirement benefits as are necessary to carry out this agreement.'" (Id. at p. 1011, 83 Cal.Rptr.2d 134.) After judgment was entered, husband retired and the parties filed another stipulation, which stated that "the defense accounting and finance center would begin direct payment to [wife] of her $327 monthly share of the pension in July 1994, and that [husband] would pay that sum to [wife] until those direct payments started." Husband was soon determined to be completely disabled and he waived all his retirement benefits in order to receive disability. Retirement pay ceased and wife's payments were reduced to nothing. (Ibid.)

Krempin distinguished Mansell, noting that the challenged judgment in Mansell had given the nonmilitary spouse a community property interest in retirement pay that the military spouse had already waived to obtain disability benefits and, therefore, the award directly conflicted with the USFSPA. (Krempin, supra, 70 Cal.App.4th at p. 1015, 83 Cal.Rptr.2d 134.) "There is no such `direct' conflict when the waiver of retirement pay occurs after the judgment and new payments are ordered to enforce what had been a proper division of marital property, even if the payments account for the military spouse's receipt of new benefits or pay which could not have been divided in the first instance." (Ibid.) Krempin reviewed the cases from out of state that had confronted similar issues and found that a majority of state courts take equitable action, on one theory or another, to compensate a former spouse when his or her share of retirement pay is reduced by the other's postjudgment waiver. (Ibid.) Krempin concluded that the issue hinged on "the scope of the judgment's reservation of jurisdiction and the agreements in the judgment and the postjudgment stipulation with respect to appellant's payments. If the reservation of jurisdiction and the payment provisions can be interpreted to apply in the event of a waiver of retirement pay, the court has the power to grant the relief appellant seeks." (Id. at p. 1018, 83 Cal. Rptr.2d 134.)

In Krempin, the provisions of the judgment and the parties' stipulation were reasonably susceptible to the construction urged by both parties. Language referring to payment by "the `Defense Accounting and Finance Center'" could be read to mean that wife would take only retired pay because disability benefits are paid by the Veterans Administration, not the defense accounting and finance center. (Krempin, supra, 70 Cal.App.4th at p. 1019, 83 Cal.Rptr.2d 134.) On the other hand, the stipulation identified the wife's interest as a specific dollar amount and provided that husband would pay that amount until direct payments...

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