Yourko v. Yourko
| Docket Number | Record No. 220039 |
| Decision Date | 30 March 2023 |
| Citation | 884 S.E.2d 799 |
| Parties | Lee Ann B. YOURKO v. Michael B. YOURKO |
| Court | Virginia Supreme Court |
Heather Larson Pedersen (Kyle J. Burcham; Pedersen Law, on brief), for appellant
Charles E. Haden, Hampton, on brief, for appellee.
Amicus Curiae: Virginia Chapter of the American Academy of Matrimonial Lawyers (Cassandra M. Chin; Lawrence D. Diehl, Richmond; Nichols Zauzig; Barnes & Diehl, on brief), in support of appellant.
Amicus Curiae: American Academy of Matrimonial Lawyers (Susan M. Butler, Fairfox; ShounBach, on brief), in support of appellant.
PRESENT: Goodwyn, C.J., Powell, Kelsey, McCullough, Chafin, and Mann, JJ., and Millette, S.J.
OPINION BY JUSTICE CLEO E. POWELL
Lee Ann. B. Yourko ("Wife") appeals the decision of the Court of Appeals reversing the circuit court. Specifically, Wife takes issue with the Court of Appeals’ determination that certain indemnification provisions in a property settlement agreement that she entered into with Michael B. Yourko ("Husband") violated federal law and, therefore, were void ab initio.
As part of their divorce proceedings, Husband and Wife negotiated an agreement regarding the division of his military retirement pay. In conjunction with entry of the final divorce decree, the circuit court entered a Military Pension Division Order ("MPDO") which memorialized the parties agreement.1 Under the terms of the MPDO, Wife was entitled to 30% of Husband's "disposable military retired pay."
Paragraph 9 of the MPDO states:
The parties have agreed upon the level of payments to [Wife] to guarantee income to her, based upon military retired pay with a deduction for disability compensation, resulting in [Wife's] share equaling $1,202.70 per month. [Husband] guarantees the level agreed upon by the parties and agrees to indemnify and hold [Wife] harmless as to any breach hereof. Furthermore, if [Husband] takes any action, including additional waiver of retired pay for disability compensation which reduces the former spouse share she is entitled to receive, then he shall indemnify her by giving to her directly the amount by which her share or amount is reduced as additional property division payments which do not terminate upon her remarriage or cohabitation. [Husband] hereby consents to the payment of this amount from any periodic payments he received (such as wages or retired pay from any source) and this clause may be used to establish his consent (when this is necessary) for the entry of an order of garnishment, wage assignment, or income withholding.2
At some point after entry of the MPDO, the agency in charge of distributing military benefits, the Defense Finance Accounting Service ("DFAS"), computed Husband's disposable retired pay to be only $844 per month. Per DFAS, the remainder of his retirement benefits were considered to be disability pay, which is not divisible under federal law. As a result, DFAS calculated Wife's share of Husband's disposable military retirement pay to be only $253.20 per month rather than $1,202.70.
Husband subsequently moved to reinstate the parties’ divorce proceedings to the circuit court's active docket pursuant to Code § 20-121.1. Once his motion was granted Husband moved to amend the final decree, the equitable distribution order and the MPDO. He argued that the parties had erred in their calculation of his disposable retired pay and, as a result, the MPDO required him to pay approximately 140% of his disposable retired pay. Husband further sought to have Paragraph 9 of the MPDO struck as void ab initio as the indemnification provisions were contrary to federal law. Specifically, he claimed that indemnification provisions would require him to pay more than 50% of his disposable retired pay in violation of federal law.
After considering the matter, the circuit court dismissed Husband's motion. The circuit court explained that it had no authority to amend the MPDO because more than 21 days had passed since the order was entered. The circuit court further stated that there were no clerical errors in the MPDO nor was there a mutual mistake of fact by the parties. Finally, the circuit court found that the MPDO "was an agreement" with regard to the amount Wife "was going to get from the military portion ... and that there [were] provisions ... in paragraph 9, as to how it would ensure that [Wife] get that amount."
Husband appealed to the Court of Appeals, arguing that the circuit court erred in ruling that it lacked the authority to amend the MPDO. In a published opinion, the Court of Appeals reversed the decision of the circuit court. Yourko v. Yourko , 74 Va. App. 80, 866 S.E.2d 588 (2021). The Court of Appeals agreed with the circuit court's determination that the MPDO was a final order, that it contained no clerical errors and that there was no mutual mistake of fact. Id. at 89-91, 866 S.E.2d 588. However, it went on to rule that federal law preempted Virginia law on questions involving the divisibility of military retirement benefits. Id. at 96, 866 S.E.2d 588. Relying on the United States Supreme Court's decision in Howell v. Howell , 581 U.S. 214, 137 S.Ct. 1400, 197 L.Ed.2d 781 (2017), the Court of Appeals determined that, "indemnification or reimbursement to compensate a former spouse for the waived military retirement pay was in violation of federal law."3 Id. at 94, 866 S.E.2d 588. Although Howell only addressed situations where indemnification is ordered by a court, the Court of Appeals explained that the difference between court ordered indemnification and contractual indemnification was semantic in nature. Id. at 96, 866 S.E.2d 588. The Court of Appeals went on to hold that, because the indemnification provision was in violation of federal law, it was void ab initio and, therefore, it could "be attacked beyond twenty-one-days from judgment." Id. at 97, 866 S.E.2d 588 (citing Bonanno v. Quinn , 299 Va. 722, 736-38, 858 S.E.2d 181 (2021) ).
Wife appeals.
On appeal, Wife argues that the Court of Appeals erred in interpreting Howell to forbid courts from recognizing indemnification provisions related to military retirement pay in property settlement agreements. Wife contends that the holding of Howell was limited to preventing courts from requiring indemnification. She insists that Howell does not address whether spouses could voluntarily agree to indemnify a former spouse in the event military retirement pay is reduced.4 We agree.
The primary question raised in Wife's appeal is whether the United States Supreme Court's interpretation of the Uniformed Services Former Spouses’ Protection Act ("USFSPA"), 10 U.S.C. § 1408, in Howell invalidates the indemnification provisions of an agreement between the parties. This question involves the interaction of federal statutes, Virginia statutes and United States Supreme Court jurisprudence. As such, this case presents a question of law which we review de novo. See Maretta v. Hillman , 283 Va. 34, 40, 722 S.E.2d 32 (2012).
In 1981, the United States Supreme Court ruled that Congress did not intend to allow courts to divide military retirement pay as part of judicially divisible property in a divorce proceeding.
McCarty v. McCarty , 453 U.S. 210, 223, 101 S.Ct. 2728, 69 L.Ed.2d 589 (1981) (). In reaching this conclusion, the United States Supreme Court noted that Congress treated military retirement pay differently from other federal retirement systems. Id. at 221, 101 S.Ct. 2728. Moreover, it pointed out that Congress had referred to military retirement pay as " ‘a personal entitlement payable to the retired member himself as long as he lives.’ " Id. at 224, 101 S.Ct. 2728 (quoting S. Rep. No. 1480, 90th Cong., 2d Sess., 6 (1968)) (emphasis in original).
In response to McCarty , Congress enacted the USFSPA, which authorized courts to treat veterans’ "disposable retired pay" as judicially divisible property in divorce proceedings. 10 U.S.C. § 1408. Under the USFSPA, "disposable retired pay" is defined as "the total monthly retired pay to which a member is entitled," less certain deductions. 10 U.S.C. § 1408(a)(4)(A). One such deduction occurs where military retirement pay has been waived in order to receive veterans’ disability payments. Id.5 Thus, opting to receive disability payments would result in a reduction of the amount of disposable retired pay that may be divided between the parties.
In Mansell v. Mansell , 490 U.S. 581, 585, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989), the United States Supreme Court addressed the effect that the USFSPA had upon its decision in McCarty . Its analysis began by noting that, because "the application of state community property law to military retirement pay" was "completely pre-empted" by pre-existing federal law, the USFSPA acted as "an affirmative grant of authority giving the States the power to treat military retirement pay as community property."6 Id. at 588, 109 S.Ct. 2023. However, it observed that the power granted by Congress was limited to only a portion of a veteran's military retirement pay. It specifically noted "that the [USFSPA] does not grant state courts the power to treat as property divisible upon divorce military retirement pay that has been waived to receive veterans’ disability benefits." Id. at 594-95, 109 S.Ct. 2023. In other words, the USFSPA was only a partial rejection of McCarty ; a veteran's disability benefits remained a personal entitlement.
Recognizing that the amount of disposable retired pay may be reduced by the actions of a veteran after a property division award was entered in a divorce proceeding, some courts opted to require that veterans reimburse or indemnify their former spouse if the veteran opted to waive military retirement pay for disability pay. See, e.g. , In re Marriage of Howell , 238 Ariz. 407, 361 P.3d 936 (Ariz. 2015) ; Glover v. Ranney , 314 P.3d 535 (Alaska 2013) ; Krapf v....
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