In re Marriage of Davies, 1 CA-CV 08-0697 (Ariz. App. 6/8/2010)

Decision Date08 June 2010
Docket Number1 CA-CV 08-0697.
PartiesIn re the Marriage of: LORI A. DAVIES, Petitioner/Appellee, v. MARK W. BERES, Respondent/Appellant.
CourtArizona Court of Appeals

Appeal from the Superior Court in Maricopa County, Cause No. FC 2007-091006, The Honorable Bruce R. Cohen, Judge,

VACATED IN PART AND REMANDED.

Mark W. Beres, Tucson, In Propria Persona.

Platt & Westby, PC, Phoenix, By Bryan L. Eastin, Attorneys for Petitioner Appellee.

Gust Rosenfeld, PLC, Phoenix, By James H. Marburger, Attorneys for Amicus Curiae ULSG, LLC.

OPINION

OROZCO, Judge.

¶1 Mark W. Beres (Husband) appeals the decision of the family court which concluded that post-dissolution military Temporary Disability Retired List (TDRL) benefits were partially community property, subject to apportionment. For the reasons that follow, we conclude TDRL benefits are the separate property of the disabled spouse. Accordingly, we vacate the order of the family court in part and remand for additional proceedings.

FACTS AND PROCEDURAL BACKGROUND1

¶2 Husband and his former spouse, Lori A. Davies (Wife) were married from October 1992 to January 2003, when the marriage was dissolved pursuant to a Florida dissolution decree (Decree). During the marriage, Husband served in the United States Air Force, accumulating 121 months of service. With respect to Husband's military retirement, the Decree provides:

The Wife is awarded an interest in the United States Air Force Military Retirement arising out of Husband's service with the United States Air Force, as of November 19, 2002, according to the following formula: The number of months of marriage during which the Husband served in the armed services during the marriage (121 months), divided by the total number of months for which the husband spent in the Armed Forces. The resulting percentage shall then be multiplied by 50% (.50) to determine the Wife's percentage share of any disposable retirement or retainer pay of the Husband. The Wife's portion shall not be decreased by any voluntary or involuntary act of the Husband including disability or otherwise.

¶3 On August 31, 2006, Husband was relieved from active duty and placed on the TDRL with a thirty percent disability rating. At that time, Husband had accumulated a total of fifteen years and three months (183 months) of active duty service. Husband began receiving TDRL pay computed in accordance with 10 U.S.C. § 1401 (2006).2 Husband has paid a portion of his TDRL pay to Wife since he began receiving payments. It is not clear from the record when Husband discontinued making such payments or the total amount he paid to Wife. Husband later applied for and received a Veterans Administration disability rating of forty percent.3

¶4 Both parties subsequently raised issues concerning Wife's interest, if any, in the TDRL benefits. Husband maintained Wife had no interest in his TDRL benefits because he was ineligible for retirement for longevity, he was not retired and his status on TDRL was temporary. Wife believed she was entitled to a percentage of the TDRL benefits based on the fixed formula in the Decree. The family court appointed a special master who issued a report. In the report, the special master explained that whether Wife had any interest in Husband's TDRL benefits depended on the court's interpretation of Arizona case law and the Decree. Based on his analysis, the special master recommended the court find Husband's TDRL benefits partially apportionable. He calculated Wife's interest to be $721 per month.4

¶5 Husband objected to the special master's report. The family court overruled Husband's objections and adopted the findings and conclusions in the special master's report. In August 2008, the court ordered Husband to pay Wife $721 per month from his TDRL pay, and made the award retroactive to April 1, 2008, leaving $3605 in arrears. Husband timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) sections 12-120.21.A.1 and -2101.B (2003).

DISCUSSION

¶6 Husband challenges numerous aspects of the special master's report. His challenges center on one issue: whether any part of Husband's TDRL benefits are community property and thus apportionable to Wife. We review the family court's characterization of property de novo and the apportionment of community property for an abuse of discretion. In re Marriage of Pownall, 197 Ariz. 577, 581, ¶ 15, 5 P.3d 911, 915 (App. 2000); Hrudka v. Hrudka, 186 Ariz. 84, 93, 919 P.2d 179, 188 (App. 1995). Here, the issue of whether TDRL benefits are apportionable is a mixed question of law and fact which we review de novo. Danielson v. Evans, 201 Ariz. 401, 406, ¶ 13, 36 P.3d 749, 754 (App. 2001); Huskie v. Ames Bros. Motor & Supply Co., 139 Ariz. 396, 401, 678 P.2d 977, 982 (App. 1984).

¶7 To fully explain the issue presented, it is necessary to discuss the history of the law regarding military retirement benefits. In 1977, the Arizona Supreme Court ruled that military retirement benefits could be treated as community property to the extent attributable to community efforts. Van Loan v. Van Loan, 116 Ariz. 272, 273-74, 569 P.2d 214, 215-16 (1977). In 1981, the United States Supreme Court held, in McCarty v. McCarty, 453 U.S. 210, 223, 235 (1981), that characterizing military retirement benefits as community property was contrary to federal law, and that federal law preempted state law on community property division. McCarty thus overruled Van Loan. De Gryse v. De Gryse, 135 Ariz. 335, 336, 661 P.2d 185, 186 (1983).

¶8 In response to McCarty, Congress enacted the Uniformed Services Former Spouses' Protection Act, 10 U.S.C. § 1408 (2006) (USFSPA), which became effective February 1, 1983. Beltran v. Razo, 163 Ariz. 505, 506, 788 P.2d 1256, 1257 (App. 1990). Under the USFSPA, state courts were given authority to treat "disposable retired pay" or "retainer pay" as community property and therefore they could apportion such benefits in dissolution cases. 10 U.S.C. § 1408(c)(1); Mansell, 490 U.S. at 589; In re Marriage of Gaddis, 191 Ariz. 467, 468, 957 P.2d 1010, 1011 (App. 1997); see also De Gryse, 135 Ariz. at 336-37, 661 P.2d at 186-87 (explaining Van Loan was revived by the USFSPA and thereafter governed questions concerning military retirement benefits). Disposable retired pay is defined, in pertinent part as:

[T]he total monthly retired pay to which a member is entitled less amounts which

. . . .

in the case of a member entitled to retired pay under chapter 61 of this title, are equal to the amount of retired pay of the member under that chapter computed using the percentage of the member's disability on the date when the member was retired (or the date on which the member's name was placed on the temporary disability retired list).

10 U.S.C. § 1408(a)(4)(C). Chapter 61 of Title 10 addresses retirement or separation from the military for a physical disability. Id. at §§ 1201 to —1222 (2006 & Supp. 2008).

¶9 If a member's disability is indeterminable as to its permanent and stable nature, the member of the armed forces may be placed on the TDRL for a maximum of five years. Id. at §§ 1202, 1210(b), (h). After five years, the member either returns to active duty, permanently retires for longevity if he has reached twenty years of service, or is placed on the permanent disability retired list (PDRL). Id. at § 1210(b); see also 10 U.S.C. § 8911 (2006) (a member of the Air Force generally receives retired pay after twenty years of service).

¶10 While on the TDRL, a member receives TDRL pay5 pursuant to one of two alternative formulas listed as "Formula No. 2" in 10 U.S.C. § 1401(a). Id. at § 1202. Under the first formula, the member receives 2.5% "of his monthly basic pay for each year of service." Luna v. Luna, 125 Ariz. 120, 124, 608 P.2d 57, 61 (App. 1979); see also 10 U.S.C. §§ 1401(a), 1406(b) (2006). Under the second formula, TDRL pay is computed by multiplying a member's monthly basic pay by the percentage of his disability. 10 U.S.C. §§ 1401(a), 1406(b). The result is increased by the amount necessary for the member to receive at least fifty percent of his basic pay. Id. at § 1401(a). A member is entitled to use the formula most favorable to him. Id. at § 1401(b).

¶11 In this case, Husband was receiving $2862 per month in TDRL pay. This was calculated using the second formula consisting of fifty percent of Husband's 2006 basic pay plus a cost of living adjustment (COLA). TDRL pay resulting from application of the second formula is expressly excluded from the definition of disposable retired pay because such pay is computed using the percentage of a member's disability. Id. at § 1408(a)(4)(C). Additionally, the Decree expressly limits Wife's interest in Husband's military retirement benefits to disposable retirement pay or retainer pay. Because these TDRL benefits are not disposable retired pay, the benefits are not community property and are therefore not apportionable. See Thomas v. Piorkowski, 286 S.W.3d 662, 666 (Tex. App. 2009) (concluding TDRL benefits are not divisible as marital property because the benefits are not disposable retired pay).

¶12 This conclusion, however, does not end our inquiry. TDRL benefits may also be calculated under the first formula.

¶13 As previously stated, in Arizona, military retirement benefits are generally treated as community property to the extent attributed to community efforts. Edsall v. Superior Court, 143 Ariz. 240, 241, 693 P.2d 895, 896 (1984); Van Loan, 116 Ariz. at 273-74, 569 P.2d at 215-16. However, disability benefits are the disabled spouse's separate property. Danielson, 201 Ariz. at 407, ¶ 19, 36 P.3d at 755; In re Marriage of Kosko, 125 Ariz. 517, 519, 611 P.2d 104, 106 (App. 1980). A retired service person is precluded from reducing his or her former spouse's interest in military retirement pay by electing to forego a portion of that pay in exchange for disability benefits. See Daniels...

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