Perkins v. Perkins

• Citation: 107 Wash. App. 313,26 P.3d 989
• Decision Date: 13 July 2001
• Docket Number: No. 25689-4-II.,25689-4-II.
• Court: Court of Appeals of Washington
• Parties: Deanna K. PERKINS, Respondent, v. Jeffrey D. PERKINS, Appellant.

26 P.3d 989

107 Wash. App. 313

Deanna K. PERKINS, Respondent, v. Jeffrey D. PERKINS, Appellant.

No. 25689-4-II.

Court of Appeals of Washington, Division 2.

July 13, 2001.

Daniel W. Smith, Boyd Scott Wiley, Campbell, Dille and Barnett, Puyallup, for Respondent.

Larry Jerome Couture, Tuell & Couture PS, Tacoma, for Appellant.

OPINION PUBLISHED IN PART

MORGAN, J.

The question in this appeal is whether the trial court violated federal law by awarding the wife "permanent compensatory spousal maintenance" in the amount of 45% of the husband's veterans disability pension. The answer is yes. Accordingly, we reverse in part and remand for further proceedings.

Jeffrey and Deanna Perkins married on February 11, 1978, and separated on February 19, 1999. Jeffrey joined the Air Force shortly before marriage and retired shortly before separation. He served 22 years, 20 of them while married.

When Jeffrey retired from the Air Force, he was eligible to receive a taxable military service pension in the gross amount of $1,446 per month. He also was eligible to receive a nontaxable veterans disability pension equal to 40% of his service pension, but only if he waived 40% of his service pension.¹ He opted to waive, and his service pension was reduced accordingly. Thereafter, he received a service pension equal to 60% of what it would have been absent disability, and a disability pension equal to 40% of what his service pension would have been absent disability.

In March 1999, Deanna petitioned for dissolution. In October 1999, a bench trial was held, and in February 2000, the court entered findings of fact and a decree of dissolution. The court found as fact:

The main asset of the parties is the husband's military retirement, most of which accumulated during the parties['] marriage. 90% of the military retirement is community property. 10% of the retirement is the husband's separate property. The wife's community interest in the military retirement is 45% of the entire retirement. The husband and wife suffered an automobile accident in 1997 while the husband was in the United States Air Force. The accident was work related. Both the husband and wife suffered substantial injuries from the accident. Due to the accident, the husband has qualified for a 40% VA disability which results in a 40% reduction in the military retirement, a dollar for dollar offset.... Prior to qualifying for the disability, the husband's monthly military retirement was as follows:

$1,446.00 gross pay - $ 94.23 survivor benefit plan $1,351.77 taxable income

After the husband's 40% disability, the military retirement pay is as follows:

$1,446.00 gross pay - $ 94.23 survivor benefit plan - $ 482.00 disability reduction $ 869.77 taxable income

The wife should receive 45% of the disability portion (45% times $482 equals $216.90). Husband should pay to wife compensatory spousal maintenance in an amount which represents 45% of husband's total monthly compensation for disability. This is in addition to the 45% of the reduced military retirement that she is awarded. The maintenance payments shall survive petitioner's remarriage. If the husband is not able to deduct this compensatory spousal maintenance payment as income on his Federal Income Tax Return, then husband may reduce his compensatory spousal maintenance payment to the wife by 20% to compensate him for the Federal Income Tax he is required to pay. The wife is losing $216 per month in military retirement due to the change to 40% of the retirement to disability. The wife should receive this difference as compensatory spousal maintenance pursuant to the analysis in the Supreme Court case, In re the Marriage of Jennings, 138 Wash.2d 612 (1999).²

The court ruled in its decree that the wife

is hereby entitled to 45% of the ... husband's... military retirement.... If the husband's military retirement [pension]... is ... changed in form to a disability payment, the wife shall be entitled to her 45% share.³

The court ordered in its decree that the husband

pay to ... wife ... permanent compensatory spousal maintenance in an amount which represents 45% of [husband's] total monthly compensation for disability and retirement; provided that [wife's] maintenance amount shall be reduced by military retirement actually received by [the wife][.]⁴

Jeffrey now appeals. He claims that the trial court violated federal law by dividing and distributing his veterans disability pension. We agree.

We begin with three state-law propositions. (1) When disability benefits replace future compensation (e.g., post-dissolution wages), they are not distributable at a dissolution trial. Future compensation is not distributable because it is not on hand at trial, so when disability benefits replace such compensation, they are treated in the same fashion.⁵ (2) When disability benefits replace compensation earned but deferred during marriage (e.g., retirement benefits), they are distributable at a dissolution trial. As we stated in Marriage of Geigle, "If ... a party would be receiving retirement benefits but for a disability, so that disability benefits are effectively supplanting retirement benefits, the disability payments are a divisible asset to the extent they are replacing retirement benefits."⁶ (3) Even when disability benefits are not distributable at a dissolution trial, they remain a future economic circumstance that the trial court should consider when distributing the parties' property.⁷ Federal law preempts the second proposition with respect to a veteran's disability pension. Federal law prohibits a state dissolution court from dividing such a pension, and from distributing by any means any part of such pension, according to Hisquierdo v. Hisquierdo,⁸McCarty v. McCarty,⁹ the Uniformed Services Former Spouses' Protection Act (USFSPA),¹⁰ and Mansell v. Mansell.¹¹

Hisquierdo was decided in 1979. The question was whether the federal Railroad Retirement Act of 1974 prohibited a state dissolution court from dividing the husband's railroad service pension. The Act provided that the payment of retirement benefits was not to "be anticipated,"¹² and that retirement benefits would be paid to the eligible "individual."¹³ The husband asserted that these provisions barred the division of his future pension. The wife asserted that his future pension was divisible as community property under California law; that federal law did not preempt California law; and that the California dissolution court should either (a) "order [the husband] to pay her an appropriate portion of his benefit ... as [he] receives it"¹⁴ or (b) value the pension and "award her a compensating amount of other property[.]"¹⁵ The United States Supreme Court held that the Railroad Retirement Act preempted California's community property scheme, and that federal law prohibited a state dissolution court from giving the wife any part of the husband's railroad pension either (a) by ordering the husband to pay the wife a portion of each monthly payment as he received it or (b) by valuing the pension and granting the wife "an offsetting award" of other assets. In the Court's words, "[a]n offsetting award ... would upset the statutory balance ... just as surely as would a regular deduction from his benefit check."¹⁶

McCarty was decided in 1981. The question presented was "whether, upon the dissolution of a marriage, federal law precludes a state court from dividing military nondisability retired pay pursuant to state community property laws."¹⁷ The relevant federal statute provided in part that a "member of the Army retired under this chapter is entitled to retired pay[.]"¹⁸ The husband, an Army doctor who had served 18 of the 20 years needed to retire, requested in his California complaint for divorce "that all listed assets, including `[a]ll military retirement benefits,' be confirmed to him as his separate property."¹⁹ The wife asked that his retirement benefits be treated as community property and divided. The California trial court ordered the husband to pay the wife half the benefits accrued during marriage, or about 45% of his total nondisability retirement benefits. The United States Supreme Court reversed. Relying in part on Hisquierdo, it ruled that "Congress ha[d] neither authorized nor required the community property division of military retired pay,"²⁰ and that a state dissolution court was precluded from dividing or distributing such pay, even "by the simple expedient of an offsetting award."²¹

The USFSPA was enacted in 1982.²² It defines "disposable retired pay" as "the total monthly retired pay to which a member is entitled less amounts which ... are deducted from the retired pay of such member ... as a result of a waiver of retired pay required by law in order to receive" veteran's disability compensation.²³ It provides, as later amended, that "a court may treat disposable retired pay ... 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."²⁴ Thus it reverses, subject to limitations not pertinent here, McCarty's holding on nondisability retired pay.²⁵

Mansell was decided in 1989. The question was "whether state courts, consistent with [USFSPA] ..., may treat as property divisible upon divorce military retirement pay waived by the retiree in order to receive veterans' disability benefits."²⁶ Noting that Congress had "authorize[d] state courts to treat `disposable retired ... pay' as community property[,]" but that Congress had defined "[d]isposable retired ... pay" so as not to include "amounts waived in order to receive disability benefits[,]"²⁷ the United States Supreme Court held that the USFSPA grants a state dissolution court "the authority to treat disposable retired pay as community property," but not "the authority to treat total retired pay as community property."²⁸ Hence, the Court said, the USFSPA "does not grant state courts the power to...