Marriage of Kraft, In re, 10336-6-III

• Decision Date: 25 April 1991
• Docket Number: No. 10336-6-III,10336-6-III
• Citation: 61 Wn.App. 45,808 P.2d 1176
• Court: Washington Court of Appeals
• Parties: In re the MARRIAGE OF Donna L. KRAFT, Respondent, and Bryce A. Kraft, Appellant.

Page 45

61 Wn.App. 45

808 P.2d 1176

In re the MARRIAGE OF Donna L. KRAFT, Respondent,

and

Bryce A. Kraft, Appellant.

No. 10336-6-III.

Court of Appeals of Washington,

Division 3, Panel Three.

April 25, 1991.

Allen M. Gauper, Salina, Sanger & Gauper, Spokane, for appellant.

Chris A. Montgomery, Montgomery Law Firm, Colville, for respondent.

SHIELDS, Acting Chief Judge.

Bryce Kraft appeals the property distribution and postmajority support provided by the dissolution decree ending his marriage to Donna Kraft. He alleges the court (1) erred as a matter of law by treating the disability portion of his military retirement pay as a divisible asset, (2) abused its discretion in dividing the parties' property, and (3) erred by imposing postmajority support for their college bound son on Mr. Kraft only. We reverse and remand.

Bryce and Donna Kraft were married September 23, 1967. They had two children, Troy, 18, and Karen, 15; both remained with Mrs. Kraft at the parties' residence after the parties separated on March 19, 1988. Troy had been accepted at Eastern Washington University for entrance in the fall of 1989. Mr. Kraft moved into a hunting cabin without water, electricity or telephone.

At the time of trial, Mrs. Kraft was employed as a counselor; Mr. Kraft was retired from the military and supplemented his retirement income by caring for an elderly man. He had accumulated credit for 21 years of service, during 14 of which the parties were married. Mr. Kraft suffers from several physical disabilities, has a disability rating of 50 percent, and waives 50 percent of his retirement pay to receive disability benefits.

The court found ¹ Mrs. Kraft's net monthly earned income is approximately $1,700. She also receives monthly rent on the parties' Alabama residence which was awarded to her. The net income averages $200 after deducting mortgage payments, management fees, and expenses from the rent of $435. The court found Mr. Kraft received military benefits in the gross amount of $1,317, one-half of which represented retirement benefits and one-half disability benefits, and average net income of $500 from his caretaking job. The court then deducted $200, representing Mrs. Kraft's community one-half interest in two-thirds of the military retirement benefits and added that sum to her income. Thus, Mrs. Kraft's monthly income was determined to be $2,100 and Mr. Kraft's, $1,600. The court used these figures to determine support for the minor daughter.

The court found Mr. Kraft had received disability pension overpayments totaling approximately $21,000. When Mr. Kraft left the military in 1972, he began receiving disability pay. He went back on active duty in 1976, but continued receiving the disability pay, resulting in the overpayment. As best we can determine from the record, when the overpayment was discovered in 1987, Mr. Kraft agreed to repay the debt to the Veteran's Administration (VA) at the rate of $70 per month. When he elected to waive retirement pay to receive disability benefits, then computed at 40 percent, the government began deducting the entire amount of the disability portion of his monthly checks to repay the VA. At trial, it was revealed Mr. Kraft's disability rating had been increased to 50 percent; presumably, that would increase the amount of the monthly deduction.

The court also found the Krafts were indebted to: Rainier Bank in the amount of $1,800; their son in the amount of $3,500; their daughter in the amount of $1,200; and Mrs. Kraft's father in the amount of $1,000. The court then allocated the property as follows:

To Mrs. Kraft:

Colville house and acreage $126,000 subject to $60,000 mtg.

Alabama house and acreage 55,000 subject to 16,000 mtg.

Furniture & appliances 7,000

Her IRA 8,000

Her own pension 3,000

1979 Volvo 2,500

Woodworking tools 1,500

Various items not valued --------

Gross total $203,000 Net total $127,000

To Mr. Kraft:

His IRA $ 9,000

Ford tractor 800

1976 Mercedes 2,500

His tools 1,000

His guns 1,000

Various items not valued --------

Gross total $ 14,300 Net total $ 14,300

Based on the testimony of Mrs. Kraft's expert, the court determined the present value of Mr. Kraft's entire military pension to be $247,553; one-half was disability benefits and two-thirds of the remaining half was community property. The court allocated the military benefits as follows: to Mrs. Kraft, one-third of the retirement benefits, rounded to $41,300; and to Mr. Kraft, two-thirds of the retirement benefits, rounded to $82,600, and his disability benefits, rounded to $123,800.

Finally, the court allocated the other debts as follows: Mrs. Kraft would pay the mortgages on the real property; $1,800 to Rainier Bank; $1,750 to her son; $600 to her daughter; and $1,000 to her father. Mr. Kraft would repay the VA $21,000; $1,750 to his son; and $600 to his daughter. The court tallied the net distribution: "he'd roughly receive $200,000.00; she, roughly $162,000.00, by my calculations." Actual calculations result in: Mr. Kraft, $197,350, and Mrs. Kraft, $163,150.

Mr. Kraft first contends the court erred by considering the disability portion of Mr. Kraft's military retirement pay as a divisible asset. State courts may not treat military retirement pay, waived by the retiree in order to receive veterans' disability benefits, as property divisible upon dissolution. Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 2031, 104 L.Ed.2d 675 (1989). The court erred in establishing a value for Mr. Kraft's military benefits and then awarding to him "His disability pension, $123,800.00." In effect it was distributed as an asset.

Even before Mansell, under Washington law Mr. Kraft's disability benefits were in the nature of compensation for loss of future wages and should be considered to be Mr. Kraft's individual ² property. See In re Marriage of Anglin, 52 Wash.App. 317, 320-25, 759 P.2d 1224 (1988). Such compensation for loss of future wages is not an asset which can be used to offset other assets, but should only be considered as affecting Mr. Kraft's ability to pay spousal maintenance or child support. It is clear from In re Marriage of Huteson, 27 Wash.App. 539, 541-43, 619 P.2d 991 (1980) that loss of future income is not a community asset to be divided on a present value or any other basis.

Mr. Kraft next contends the court abused its discretion in dividing the parties' assets and liabilities. In making a just and equitable distribution, although there are numerous factors to consider, "it is the economic condition in which the decree will leave the parties that engenders the paramount concern in providing for child support and alimony and in making a property division." DeRuwe v. DeRuwe, 72 Wash.2d 404, 408, 433 P.2d 209 (1967).

The trial court has considerable discretion in making a property division, and will not be reversed on appeal absent a showing of manifest abuse. In re Marriage of Tower, 55 Wash.App. 697, 700, 780 P.2d 863 (1989), review denied, 114 Wash.2d 1002, 788 P.2d 1077 (1990). However, discretion exercised on untenable grounds constitutes manifest abuse. Tower, at 700, 780 P.2d 863.

Eliminating the disability benefits from the equation results in a disproportionate net of $163,150 for Mrs. Kraft and $73,550 for Mr. Kraft. The court offset the "award" of preempted disability benefits to Mr. Kraft by awarding Mrs. Kraft the greater part of the parties' assets. The distribution was thus based upon untenable legal grounds.

The distribution is further distorted in this case because the parties purported to establish a present value for Mr. Kraft's military retirement benefits. Because the pension was in pay status, that was unnecessary. The pension itself can be divided. State courts have specific authority under the Uniformed Services Former Spouses' Protection Act (USFSPA), 10 U.S.C. § 1408(c)(1), to treat disposable military retirement pay as community property, with various limitations. See In re Marriage of Bocanegra, 58 Wash.App. 271, 277, 792 P.2d 1263 (1990), review denied, 116 Wash.2d 1008, 805 P.2d 813 (1991); In re Marriage of Haugh, 58 Wash.App. 1, 8, 790 P.2d 1266 (1990). "Disposable" retirement pay is defined by the statute as the total monthly pay to which a retiree is entitled, minus amounts owed to the United States, deducted for federal employment taxes, withheld for income taxes, and deducted for other purposes such as government life insurance premiums. See 10 U.S.C. § 1408(a)(4)(A)-(F).

In the present case, the $21,000 overpayment of disability benefits received during marriage is being deducted directly from Mr. Kraft's monthly checks. His income should have been adjusted to reflect the disability income deduction, and the deductions listed in the statute, from his military...