Marriage of Gallo, In re

Decision Date08 February 1988
Docket NumberNo. 86SC128,86SC128
Citation752 P.2d 47
PartiesIn re MARRIAGE OF Jane H. GALLO, Petitioner, and Frank G. Gallo, Respondent.
CourtColorado Supreme Court

Nancy L. Cohen, Frank Plaut, Plaut, Lipstein, Beckman, P.C., Lakewood, for petitioner.

Frederick Epstein, Epstein, Epstein & Lozow, P.C., Denver, Peter L. Franklin, Polidori, Rasmussen, Gerome & Jacobson, Lakewood, Irvin M. Kent, Aurora, for respondent.

ROVIRA, Justice.

In this case, we return to an issue last addressed by this court in Ellis v. Ellis, 191 Colo. 317, 552 P.2d 506 (1976): Whether military retirement pay is property subject to division in a dissolution of marriage proceeding. In an unpublished opinion, the court of appeals, citing our decision in Ellis, affirmed a ruling of the district court which held that military retirement pay is not marital property, and therefore, not subject to division. Because we hold today that military retirement pay constitutes marital property, we reverse the judgment and remand the case for further proceedings.


The petitioner, Jane H. Gallo (wife), and the respondent, Frank G. Gallo (husband), were married in 1953. At the time wife filed her petition for divorce in 1981, their four children were emancipated, she was 51 years old, and her husband was 50 years of age.

During almost all of their marriage, husband was a member of the United States Air Force. After approximately 29 years of military service, he retired as a colonel. Since retirement, he has been receiving military retirement pay. The principal point of contention in the parties' dissolution proceedings, and the issue before this court, is whether that pay should be considered marital property, and therefore subject to equitable division.

In early 1983, a decree of dissolution was entered and later, after a hearing on permanent orders, the trial court issued its findings, conclusions, and order. The court approved a stipulation which resolved such issues as the division of real and personal property, non-pension financial assets, and waiver of maintenance by both parties because of husband's re-marriage and wife's pending re-marriage. The court also ruled that "under the case of Ellis v. Ellis (citation omitted), [h]usband's military retirement benefits are not marital property, and therefore not subject to division." Although denying wife's request to include husband's retired pay as marital property, the court accepted, pursuant to an offer of proof, testimony regarding the present value of husband's retirement pay and wife's contribution to husband's military career.

Husband stated in an affidavit concerning his financial affairs that his monthly military retirement pay amounted to $2,682.69. Wife introduced the testimony of a certified public accountant who testified that the present value of husband's military pay amounted to $257,000. He arrived at this figure by first calculating the life expectancy of a 51-year-old man, which is 25.2 years, or the equivalent of 301 months. He then multiplied 301 times husband's current monthly retirement pay, which equals $807,490. Using a 12 percent discount rate, he discounted the gross figure to reflect the present value of $257,000.

Objecting to the district court's determination concerning husband's military retirement pay, the wife appealed. In an unpublished opinion, the court of appeals affirmed, considering itself bound by Ellis, 191 Colo. 317, 552 P.2d 506.

We granted wife's petition for certiorari to consider whether husband's military retirement pay is marital property subject to division in a dissolution of marriage proceeding.


An Air Force officer who has 20 years of service, at least 10 of which have been active service as a commissioned officer, may request the Secretary of the Air Force to retire him. 10 U.S.C. § 8911 (1982). 1 An officer who requests retirement is entitled to "retired pay." The amount of retired pay is wholly within the control of Congress; benefit levels are a function of rank achieved at the time of retirement and length of service. 10 U.S.C. §§ 8929, 8961, 8991 (1982). Retired pay can be adjusted to reflect such changes as increases in the consumer price index. 10 U.S.C. § 1401a (1982). In the event that retired officers are recalled to active duty, retired pay may be re-computed after the officer's release from active duty. 10 U.S.C. § 1402 (1982). Retired pay is considered taxable income under section 61(a)(2) of the Internal Revenue Code.

The military retirement system is noncontributory in that neither the service member nor the federal government makes periodic contributions to any fund during the period of active service; instead, retired pay is funded by annual appropriations. McCarty v. McCarty, 453 U.S. 210, 214, 101 S.Ct. 2728, 2732, 69 L.Ed.2d 589 (1981). Retired pay terminates upon the retired officer's death, and does not pass to the member's heirs. The member may, however, designate a beneficiary to receive any arrearages that remain unpaid at death. 10 U.S.C. § 2771 (1982). In addition, there are statutory schemes which allow a service member to set aside a portion of the member's retired pay for his or her survivors. See, e.g., Retired Serviceman's Family Protection Plan (RSFPP) (codified at 10 U.S.C. §§ 1431-46 (1982)).

Under the Uniform Dissolution of Marriage Act, §§ 14-10-101 to -133, 6B C.R.S. (1987), the district court in a dissolution proceeding is required to "divide the marital property, without regard to marital misconduct, in such proportions as the court deems just after considering all relevant factors...." § 14-10-113(1), 6B C.R.S. (1987).

Although the Uniform Act does not define the term property, section 14-10-113(2), 6B C.R.S. (1987), provides that marital property includes all property acquired by either spouse subsequent to the marriage, with certain exceptions not applicable in this case.

In Ellis, the husband was receiving military retirement pay at the time of the dissolution of the marriage. This court, in determining that such pay is not property under the dissolution of marriage act, said: "Our reason is that it does not have any of the following elements: cash surrender value; loan value; redemption value; lump sum value; and value realizable after death." 191 Colo. at 319, 552 P.2d at 507.

Subsequently, in In re Marriage of Mitchell, 195 Colo. 399, 579 P.2d 613 (1978), we upheld the trial court's ruling that a husband's contributions on deposit with the Colorado Public Employee's Retirement Association (PERA) were marital property. We noted in Mitchell that "[t]here is nothing speculative or uncertain about the husband's right to the money; it belongs to him now and he could, if he wished, quit work and withdraw the money he has accumulated." 195 Colo. at 403, 579 P.2d at 616.

We then went on to distinguish the husband's contributions to his PERA fund from the military retirement pay considered in Ellis:

PERA funds have many of the attributes which we found lacking in military retirement pay. Our distinction between the two retirement plans is based on a belief that it would be unwise to consider as property those items which have no present value and which may never acquire value. A military retirement plan of the type discussed in Ellis may never be of any value if the employee dies before he retires. Because its future value is only speculative, and it has no present "exchangeable" value, it cannot be considered marital property.

195 Colo. at 403, 579 P.2d at 617.

Since this court decided Ellis, changes in the law at both the national and state level lead us to conclude that the holding of Ellis is no longer appropriate.

In McCarty v. McCarty, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589 (1981), the United States Supreme Court, finding a conflict between the property right asserted by the nonmilitary member-spouse in military pension benefits and the clear and substantial federal interests embodied in the federal military retirement system, held that in the absence of a change in law by Congress, the federal law precluded the application of state community property law principles to existing interests in military non-disability retirement pensions upon dissolution of marriage and subsequent property division. 2 See Note, Divisibility of Military Non-disability Retirement Benefits Upon Marriage Dissolution 22 J.Fam.L. 333 (1983-84). In the words of the court:

We recognize that the plight of an ex-spouse of a retired service member is often a serious one.... Nonetheless, Congress may well decide, as it has in the civil service and foreign service context, that more protection should be afforded a former spouse of a retired service member. This decision, however, is for Congress alone.

453 U.S. at 235-36, 101 S.Ct. at 2742-43. Consequently, the nonmilitary spouse would be effectively barred from claiming any community property interests in the member's military pension upon dissolution of the marriage.

In 1982, Congress enacted the Uniformed Services Former Spouses' Protection Act (Protection Act) (codified at 10 U.S.C. § 1408 (1982)). The legislative history of the Protection Act makes it clear that the principal purpose of the legislation was to legislatively overrule the McCarty decision, so that once again state courts would be free to consider and divide military retirement pay as marital property. 3

Under the terms of the Protection Act, a state court may, subject to certain limitations:

treat disposable retired or retainer pay payable to a member for pay periods beginning after June 25, 1981, either as property solely of the member or as property of the member and his spouse in accordance with the law of the jurisdiction of such court.

10 U.S.C. § 1408(c)(1) (1982). The Protection Act requires the respective service secretary to comply, within certain limits, with a valid state court property division decree concerning the redirection of military retirement...

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