Luna v. Luna

• Decision Date: 27 December 1979
• Docket Number: CA-CIV,No. 2,2
• Citation: 608 P.2d 57,125 Ariz. 120
• Parties: Michael A. LUNA, Petitioner/Appellant, v. Donna Lou LUNA, Respondent/Appellee. 3326.
• Court: Arizona Court of Appeals

Page 57

608 P.2d 57

125 Ariz. 120

Michael A. LUNA, Petitioner/Appellant, v. Donna Lou LUNA, Respondent/Appellee.

No. 2 CA-CIV 3326.

Court of Appeals of Arizona, Division 2.

Dec. 27, 1979.

Rehearing Denied Feb. 6, 1980.

Review Denied March 4, 1980.

Aboud & Aboud by John Eli Aboud, Tucson, for petitioner/appellant.

Sorenson, Moore & Benham by J. William Moore, Phoenix, for respondent/appellee.

OPINION

HATHAWAY, Judge.

This appeal questions the trial court's division of community property, allocation of community debts, awarding of attorney's fees and the wording of the decree of dissolution.

The parties were married in Arizona in 1953 while the petitioner was in the Air Force. In 1968, he was placed on the temporary disability retired list (TDRL) because of a diagnosis of multiple sclerosis. At the time he had served slightly over 15 years. In 1970, he was removed from the TDRL and permanently retired with a disability rating of 100%. The parties were separated in 1976 and petitioner filed for dissolution of the marriage in 1977. The parties stipulated that there would be no spousal maintenance, and the only issues presented to the trial court were the division of the community property and the question of respondent's attorney's fees. At the time of the hearing, petitioner was receiving monthly $1,253.00 in disability retired pay and $380.00 in Social Security disability benefits.

Petitioner first challenges the trial court's determination that the entire $1,633.00 he receives each month was community property. He claims the entire amount is his separate property. We find that neither position is correct, as part of the amount received is his separate property and part is community property.

The Social Security disability benefits received by petitioner are paid under 42 U.S.C. Sec. 423. Under the same subchapter of Title 42 is Sec. 407 which states:

"407. Assignment

The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."

The United States Supreme Court in Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973), stated that Sec. 407 ". . . imposes a broad bar against the use of any legal process to reach all social security benefits." 409 U.S. at 417, 93 S.Ct. at 592.

This protection from attachment through legal process was reaffirmed by the court in Hisquierdo v. Hisquierdo, 439 U.S. 572, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979), where, when discussing 45 U.S.C. Sec. 231m dealing with railroad retirement benefits, the court stated:

"Section 231m plays a most important role in the statutory scheme. Like anti-attachment provisions generally, see Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973); Wissner v. Wissner, (338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424 (1950).) supra, it ensures that the benefits actually reach the beneficiary. It preempts all state law that stands in its way." 99 S.Ct. at 809.

Appellee maintains that the wording of Sec. 231m differs materially from Sec. 407 because the former contains the words "(n)otwithstanding any other law of the United States, or of any State . . ." while the latter does not. The significance of the quoted words is explained by the court in a footnote which sets forth the Congressional intention of using that language to protect the benefits from federal and state taxation. 439 U.S. 572, 582 n.17, 99 S.Ct. 802, 809 n.17, 59 L.Ed.2d 1.

While not addressed by the parties, we believe it necessary to discuss the issue of awarding appellee an offsetting award from community property to compensate her for her interest in petitioner's expected benefits from Social Security. We adopt the reasoning of Hisquierdo, supra, 439 U.S. at 586, 588, 99 S.Ct. at 811, 812, where the court held that an offsetting award would defeat the purpose of barring the anticipation of payments. There the court stated that the Railroad Retirement Act resembled a trust and that an offsetting award would improperly anticipate payment by allowing the respondent to receive her interest before the date Congress has set for any interest to accrue. That reasoning is even more applicable here as the Social Security disability payments are paid from the "Federal Disability Insurance Trust Fund." 42 U.S.C. Sec. 401(b).

We therefore hold that the Social Security disability benefits received by petitioner are his separate property and no offsetting award can be made to respondent/appellee.

The issue of the military disability retired pay received by petitioner is more difficult to resolve.

Petitioner maintains that these payments are from the Veterans Administration and are covered by provisions similar to Sec. 407 discussed above. We reject this contention. When petitioner was transferred from the TDRL to permanent disability retirement, his retirement orders stated that the transfer and retirement was in accordance with 10 U.S.C. Sec. 1201 and Sec. 1210. While the Armed Forces use the Veterans Administration schedule of rating disabilities, there is a distinction between military disability retired pay received under Title 10 and Veterans Administration disability compensation received under Title 38. Here petitioner is receiving military disability retired pay computed under 10 U.S.C. Secs. 1401, 1401a, and the provisions of Title 38 U.S.C. are not applicable, except for those sections of Title 38 U.S.C. which provide for the payment of certain benefits to veterans and the dependents of veterans who are permanently disabled. These additional benefits received from the Veterans Administration are not in lieu of Title 10 retired pay, and entitlement to receipt of these benefits is not dependent upon the veteran receiving disability compensation from the Veterans Administration. Under 38 U.S.C. 3105, a retired member of the armed forces who is in receipt of retired pay under any provision of Title 10 U.S.C., can waive a portion of his military retired pay and receive instead a pension under the laws administered by the Veterans Administration. The record fails to disclose any election under 38 U.S.C. 3105 and therefore the entire amount received as disability retired pay by petitioner is military disability retired pay. Having determined that the payment is a form of military retired pay, we must now decide what portion of that monthly amount is community property.

Section 1201 of Title 10 provides that the secretary of the military department concerned may retire a permanently disabled member of the armed forces with "retired pay" if, inter alia, his disability rating is 30% or higher and he has served at least eight years. ¹ Section 1401, which applies both to those retired for disability reasons and to the service member retiring for other reasons, permits the veteran to elect between two alternative means of computing his "retired pay." ² He can compute his pay on the basis of longevity, receiving 21/2% of his monthly basic pay for each year of service. We shall refer to retired pay, computed in this manner, as "retirement benefits" as that term is used in Van Loan v. Van Loan, 116 Ariz. 272, 569 P.2d 214 (1977). Alternatively, the veteran can compute his pay on the basis of his disability, by multiplying his monthly basic pay by the percentage of his disability. We shall refer to retired pay computed in this manner as "disability pay." Under either alternative, retired pay is limited to 75% of the veteran's final monthly base pay, 10 U.S.C. Sec. 1401.

In the present case, the first alternative would result in petitioner receiving "retirement benefits" equal to 371/2% of his monthly base pay (15 years X 21/2% per year), while the second would result in him receiving "disability pay" equal to 75% of his base pay. (100% disability limited to 75% under Sec. 1401.)

In order to determine whether a part or all of the disability pension is community property, we must determine whether the right to receive such payments was created by the labor of the member of the community, i. e., through onerous title, or whether it was created from some other source, i. e., through lucrative title. Property acquired by onerous title is community property and property acquired by lucrative title is separate property. de Funiak & Vaughn, Principles of Community Property, Sec. 62 at 127 (2nd ed.1971). See Jacobson, J., specially concurring opinion in Flowers v. Flowers, 118 Ariz. 577, 578 P.2d 1006 (App.1978).

As stated in Van Loan, supra, the "retirement benefits" received by petitioner are a form of deferred compensation for past services and not gratuities. Because these benefits represent compensation earned during marriage, they are community property. However, in this case, petitioner was in the armed forces at the time of the marriage and it must be determined what portion of these benefits was earned during coverture. Petitioner served in the Air Force for 15 years and three months and was married for 14 years and nine months of that time. Therefore, 96.7% of the "retirement benefits" is community property and respondent/appellee is therefore entitled to 24.2% ³ of the amount received by petitioner from the Air Force each month.

The portion of petitioner's pension benefit payment allocable solely to his disability equals 371/2% ("disability pay" less "retirement benefits"). This "disability pay" does not serve as a form of deferred compensation for past services. The amount of the disability payments depends primarily on the existence and extent of the disability. These payments serve to compensate the disabled veteran for the loss of his military pay caused by his early retirement and for his reduced ability to compete for civilian...