In re the Marriage of: Sandra Howell, Petitioner/Appellee, and John Howell, Respondent/Appellant.
Appeal from the Superior Court in Pima County The Honorable Danelle B. Liwski, Judge No. D78235
Memorandum Decision of the Court of Appeals, Division Two 2 CA-CV 2014-0112 Filed Dec. 18, 2014
Charles W. Wirken (argued), Gust Rosenfeld PLC, Phoenix, Attorney for Sandra Howell.
Barry G. Nelson, Law Office of Barry Nelson, Cortaro; and Keith Berkshire (argued), Maxwell Mahoney, Berkshire Law Office, PLLC, Phoenix, Attorneys for John Howell.
JUSTICE TIMMER authored the opinion of the Court, in which CHIEF JUSTICE BALES, VICE CHIEF JUSTICE PELANDER and JUSTICES BRUTINEL and BERCH (RETIRED) joined.
¶1 Federal law prohibits courts in marital dissolution proceedings from dividing any portion of military retirement pay ("MRP") waived by a retired veteran to receive service-related disability benefits. In 2010, the Arizona Legislature enacted A.R.S. § 25-318.01 to prohibit courts from "making up" for the resulting reduction in MRP by awarding additional assets to the non-military ex-spouse. The issue before us is whether federal law or § 25-318.01 prohibits courts from fashioning such relief when the veteran elects to waive retirement pay after the court has awarded the ex-spouse a share of MRP in a decree entered before 2010. We hold that neither federal law nor § 25-318.01 precludes such an order.
¶2 John Howell and Sandra Howell divorced in 1991. Pursuant to the parties' agreement, the dissolution decree provides that "[Sandra] is entitled to and is awarded as her sole and separate property FIFTY PERCENT (50%) of [John's] military retirement when it begins through a direct pay order." John retired from the Air Force in 1992 after a twenty-year career, and the parties began receiving MRP the next year.
¶3 In 2005, the Department of Veterans Affairs ("VA") approved John's claim that degenerative joint disease in his shoulder directly related to his military service. The VA assigned him a twenty percent disability rating to reflect the extent of his impairment for civilian employment. See 38 C.F.R. § 4.1 (explaining the rating system). He qualified for monthly, tax-exempt VA disability payments, which increased yearly. See 38 U.S.C. § 5301(a) (bestowing tax-exempt status). To prevent "double dipping, " Mansell v. Mansell, 490 U.S. 581, 583 (1989), a veteran who receives MRP cannot collect VA disability benefits unless the veteran waives an equivalent amount of MRP (a "VA waiver"), see 38 U.S.C. §§ 5304-5305. John elected a VA waiver that was effective from July 1, 2004, the day after he filed his claim with the VA.
¶4 As a result of the VA waiver, the Defense Finance and Accounting Service ("DFAS"), which administers MRP, reduced monthly payments to both John and Sandra, and John began collecting VA disability benefits. For example, John's gross MRP in October 2013 was $1, 474. DFAS subtracted the VA waiver amount of $255 to calculate $1, 219 in disposable pay and then paid John and Sandra $609.50 each. Simultaneously, the VA paid John $255 in disability benefits. But for the VA waiver, Sandra would have received an additional $127.50 per month.
¶5 In 2013, Sandra filed a motion to enforce the decree's division of MRP and also sought judgment against John for an arrearage amount equaling the reductions in her share of MRP after the VA waiver. John moved to dismiss the request, arguing that A.R.S. § 25-318.01 barred the family court from requiring John to indemnify Sandra for the reduction in her share of MRP. The court granted Sandra's motion, ruling that she had a vested property right in fifty percent of the MRP, and neither John's election nor § 25-318.01 could deprive her of this right. After an evidentiary hearing, the court awarded Sandra $3, 813 in MRP arrearages incurred after December 1, 2011, but found that the equitable doctrine of laches prevented her from recovering earlier arrearages (the "2014 Order"). It also ruled that "[John] is responsible for ensuring [Sandra] receive[s] her full 50% of the military retirement without regard for the disability."
¶6 The court of appeals affirmed but for a different reason. In re the Marriage of Howell, 2 CA-CV 2014-0112 (Ariz. App. Dec. 18, 2014) (mem. decision). It held that § 25-318.01, by its terms, does not apply to post-decree enforcement proceedings, such as the one Sandra initiated, and the family court therefore correctly refused to apply the statute. Id. at 4-5 ¶¶ 8-9. Sandra did not appeal the family court's laches ruling.
¶7 We granted review because the interpretation of § 25-318.01 is a recurring issue of statewide importance. We have jurisdiction pursuant to article 6, section 5(3) of the ...