COURT OF APPEALS OF VIRGINIA

Present: Ju dges Annunziata, Bumg ardner and Clements Argued at Alex andria, Virginia

PATRICIA D. IRLBACHER MEMORANDUM OPINION * BY v. Record No. 2083-00-4 JU DGE JEAN HARR ISON CLEMENTS AUGUST 7, 2001 GEORGE W. IRLB ACHER, JR.

FROM THE CIRCUIT COUR T OF STAFFORD COUNTY J. Peyton Fa rmer, Judge Charles B. Roberts (R oberts Law Office, on brief), for appellant. Timothy W. Barbrow (J oseph A. Vance, IV & Associates, on brief), for appellee.

Patricia D. Irlbac her (wife) appeals from the equitable distribution order prepar ed by George W. Irlb acher, Jr., (husband) and entered by the tria l court on July 27, 20 00. Wife contends the trial court er red (1) in granting husb and's first ex ception to the commission er's report and ordering that wi fe's retroactive share of husband's mi litary retired pay be based on husband's "net" military retired pay rath er than the "t axable income" portion of his military retired pay, (2) in ordering that wife's prospective shar e of husband's military retired pay and the benefits under the Surv ivor Benefit Plan (SBP ) be calculated using a formula that is inconsistent with the commis sioner's

* Pursuant to Code § 17.1-413, this opinion is not designated for publication.recommendation , (3) in failing to order husband to be responsible for all of the tax cons equences associated wi th the Nort h Carolina property transferred to husb and as recommended by the commissioner, an d (4) in refusing to add certain clarifying language to the or der. For the re asons that follow , we affirm in part, reverse in part, and remand. As the parties are fu lly conversant with the record in this case and because this memorandum opinion carr ies no precedential value, this opin ion recites only those facts and in cidents of the proceedings as necess ary to the parties' understandin g of the disposition of this appeal. On appeal, we view the evidence inthe light most favorable to the prevailing party below an d grant to that evidence all reasonable inferences fair ly deducible therefrom. Wagner v. Wagner , 16 Va. App. 529, 532, 431 S.E.2d 77, 79 (1993). In challenging a deci sion on appeal, the party seeking reversal bears the burden of demo nstrating error on the part of th e trial court. D'Agnese v. D'Agnese , 22 Va. App. 147, 153, 468 S.E.2d 140, 143 (1996). "Fashioning anequitable dist ribution award lies within the sound discreti on of the trial judge and that aw ard will not be set aside unless it is plainly wrong or withou t evidence to support it." Srinivasan v. Scrinivasan , 10 Va. App. 728, 732, 396 S.E.2d 675, 678 (1990). Wife's first thre e assignments of error invo lve claimed inconsistencie s between the trial court's order an d the report of

- 2 -the commissioner . While the report of a commission er in chancery does not carry the we ight of a jury's verdict, it has a presumption of correc tness and shouldbe sustaine d unless the trial court conclu des that there is erro r on the face of the report or that the co mmissioner's findings are not supp orted by credible evidence. Code § 8.01-610; Morris v. United States Bank , 237 Va. 331, 337, 377 S.E.2d 611, 61 4 (1989). "Thi s rule applies with particular force to a commission er's finding of fact based upon evidence taken in his presence, bu t is not applic able to pure conclusions of law contai ned in the report." Hill v. Hill , 227 Va. 569, 577, 318 S.E. 2d 292, 297 (1984) (citations omitted). Although a trial court has su bstantial discre tion in the manner in which it reviews a comm issioner's repo rt, it cannot simply ignore the co mmissioner's findings and substitute its judgment for the commissioner's. Gulfstream Bldg. Ass'n v. Britt , 239 Va. 178, 185, 387 S.E.2d 488, 492 (199 0). Thus, where the trial court disa pproves of or modifies the fi ndings of the commissioner, we "must review the eviden ce and ascert ain whether, under a correct ap plication of the law, th e evidence supports the findings of the commissioner or the conclusion s of the trial

court." Hill , 227 Va. at 577, 31 8 S.E.2d at 296-97. Wife first contends, on appeal, that the trial court erred in ordering husband to pay wife, as her re troactive share of husband's milita ry retired pay, an am ount calculated using husband's "net" military retired pay (i .e., husband's gross - 3 -military retired pay le ss the total of SBP co sts, disability pay (VA waiver), withheld federal and stat e income tax, and payments for insurance an d bonds, rather than, as recommended by the commissioner, the "taxable income" portio n of husband' s military retired pay (i.e., husband's gross military retired pay less the total of SBP costs and VA waiver). We agree. During the commissi oner's hearing, the parties agreed that wife's marital share of husband's mili tary retired pa y should be one-half of 89% (i .e., 44.5%) of husband's mi litary retired pay. However, they di sagreed about whet her the SBP costs and VA waiver should be includ ed in the marita l portion of the retirement pay and whether wife's share should be retroactive. Husband argued that wife's share shou ld not be retroactive and should be limited to 44.5% of the "taxab le income" amount of the military retired pay. Wife argued that wife's share should be retroactive to March 1999 and should be 44 .5% of husband's gross military retired pay. After hearing the evidence and argume nt of counsel, the commissioner recommen ded that wife receive 44.5% of husband's gross military retired pay after the SB P costs and VA waiver are deducted, for a total of $1,545.46 per month, calculated as follows: $3,771 .00 (husband's gross reti rement pay) - $110.06 (SBP costs) - $188.0 0 (VA waiver) = $3,472.94 ("taxable income" portion of husband' s retirement pay); $3,472.94 x 44.5% (percentage of wife's marital share) = $1,5 45.46 (wife' s monthly

- 4 -retroactive sh are). The commis sioner further recommended that this award be made retroactive to February 2000. Husband then timely filed exceptio ns to the co mmissioner's report. Only the firs t exception is relevant to the issues on appeal. In that firs t exception, husband re quested that wife's retroactive sh are of his military retire d pay be calculated using the "net" amount rather than the "taxable in come" amount of his military retired pay because he had alread y paid taxes on the retroactive shar e. After he aring argument on husband' s exceptions to the commission er's report and wife's objections to husband's proposed decree, the tr ial court grante d husband's fi rst exception and, overruling wife's obje ctions, entered the equitable distribution order prep ared by husband. The order provid es that wife's retroact ive share of husband's military retired pay is 44.5% of the "net" amount of husband's military retired pay, for a six-month tota l of $7,524.22, or $1,254.04 per mont h. That total reflects deductions from the marital portion of husband's retire ment pay of not only the income taxes withheld but also husband's insu rance and bond payments, as follows: $3,771 .00 (husband's gross reti rement pay) - $110.06 (SBP costs) - $188.00 (VA waiver) - $3 12.79 (federal income taxes withheld) - $150 .00 (state income taxe s withheld) - $192.09 (payments for insu rance and bonds) = $2,818.06 (h usband's "net" retirement pay); $2,818 .06 x 44.5% (per centage of wi fe's marital share) = $1,254.04 (wife's monthly re troactive share).

- 5 -Husband concedes th e commissioner never considered the issue of whether the wi thheld income tax and th e payments for insurance and bonds should be excluded from the marital port ion of husband's military retired pay because husban d did not rais e the issue before the commission er. Additionally, inexplaining in his exception to the commis sioner's report why the "net" am ount of husband's milita ry retired pay shou ld be used to calculate wife's marital share of that pay, husban d stated solely that he had "already paid taxe s on the retirement pay." He said no thing about the payments for insura nce and bonds. Likewise, at the hearing on husband's except ions to the commis sioner's report, husband made no mention to the trial court of the payments for insurance and bonds. Instead, he simply presented to the court a proposed equitable dist ribution order that stat ed merely that wife's retroactive ma rital share of husband's military retired pay was $7,524.22, or 44.5% of the "net proc eeds" from husband's retirement pay. Th e order providedno details as to what deductions were incl uded to arrive at the "net proceeds." The trial cour t ruled that wife's re troactive sh are of the retirement pay was to be calculated on the "net" amount of the retirement pay and entered the or der prepared by husband. The court, however, heard no evidence and made no findings regarding its ruling. Indeed, it appears from the re cord that the trial court rejected the commissioner 's recommendation and reduced wife's retroactive shar e of husband's military retire d pay without

- 6 -considering the pa rties' respective equiti es and rights in the taxes and payments for insurance and bonds deducted from husband's gross pay. For example, although the record indicates that counsel for husban d argued at the hearing on wife 's motion for reconsideratio n that the insuranc e partly benefite d wife, we find no evidence in the re cord before us as to the nature of the subject insura nce and bonds and wh om they benefite d. Certainly, the trial court ma de no findings in that regard. We conclude, theref ore, that the eviden ce fails to support the decision of the trial cour t to credit hu sband with the additional retroactive amounts of his withhe ld federal and state taxes and deducted payments for insurance and bonds. Conversely, our review of th e record convinces us that the evidence supports the commissioner 's recommendation that the "taxable income" portion of husband's mi litary retired pay be used to calculate wife's retroactive share of that pay. Accord ingly, we hold that the trial court ab used its discretion by improperly substituting its judgment for th e commissioner's. Wife next contends the tria l court erred inentering the equitable distri bution order because th e formula se t forth in paragraph six onpage six of the orde r to compute wife's prospective ma rital share of husband's mi litary retired pay and, upon the death of husb and, wife's share of the SBP bene fits is incorrect and not in accord with the commis sioner's recommendations. Husband ar gues there is no va riance between the

- 7 -commissioner's recommen dations and the formula in the order. We agree with wife. The equitable distribution order ente red by the trial court provides as follows: It appearing to the Court that the Commissioner in Ch ancery took into consideration al l proper eviden ce pertaining to the equitable distribution of the parties' marital proper ties and debts, and pursuant to all factors co ntained in Virginia Code Section 20-107.3 , it is ADJUDGED and DECREED that the recommendati ons and find ings set forth in the Report of the Commis sioner in Chancery dated May 23, 2000, are in corporated into these specific find ings described below. To facilitate the pa rties' use of this decree and as and for information to third parties who may be affected th ereby, certain of the Court's awards may be hereinafter set out, but in no event shall this Decree be deemed to be inco nsistent with the recommendation s of the Comm issioner in Chancery as set forth in his Re port dated May 23, 2000, except insofar as this document has specific changes refl ecting the Judge's granting of exceptions to the Commissioner's Report, such exceptions filed by [husband]. As previously noted, the only exception gran ted by the trial court pertaining to th e issues before us invo lved the calculation of wife's retroactive sh are of husband's mili tary retired pay. Husband concedes th at, in preparing the order, he attempted to accurately set fort h the commission er's recommenda tion in the form of a math ematical formula. He does not dispute the commissioner's recommenda tion or the me aning thereof. In fact, in his brief on appeal, husband, using the fo rmula in the order,

- 8 -reaches the same result recommended by the commissi oner. His understanding of standard mathem atical procedures , however, like his formula, is flawed. The trial cour t failed, along with husband, to grasp the significance of wife's argument on the is sue and ruled simply at the hearing on wife's objections to husband's propos ed order that the "language onpage six, paragraph six, is proper." The commissioner foun d that 89% of husban d's military retired pay is marital prop erty, of which wife is en titled to half. Thus, wife's share of husb and's retireme nt pay is 44.5%. The commissioner further found that wife's prospe ctive share of husband's mili tary retired pay "is 44.5% of his gross retirement pay after the SBP cost and the disability pay are de ducted." "Currently," the comm issioner went on to say, "this yields $1,545.46 per mo nth for her . . . ." This result is calculated as follows: $3,771 .00 (husband's gross reti rement pay) - $110.06 (SBP costs) - $188.00 (VA waiver) = $3 ,472.94; $3,472.94 x 44.5% (percentage of wife's marital share) = $1,5 45.46 (wife' s monthly prospective shar e). Conversely , the formula se t forth in the order, calculated, as indicated, in a straight sequ ence, results in an amount of $1 6.39 less, as follow s: 89% x $3,771.00 (husband's gross retire ment pay) = $3 ,356.19; $3,356 .19 - $110.06 (SBP costs) - $188.00 (VA waiver) = $3 ,058.13; $3,058.13 x 50% = $1,529.07.

- 9 -Thus, the form ula in the equitable di stribution order is flawed because it fa ils to direct the pe rson performing the calculation to first su btract the SBP costs an d VA waiver from the gross retirement pay (or SBP bene fits) before multiplying that amount by 44.5% (or, as set out in the formula in the order, multiplying that amount first by 89% and then by 50%). Brackets or some other ap propriate marks be fore "monthly re tirement pay" and after "amoun t VA waiver" wo uld cure the fo rmula's flaw. We hold, therefor e, that the formul a in the equitable distribution order does not properly reflec t wife's prospective marital share of husband's mili tary retired pa y and the SBP benefits. Accordingly, the tr ial court was pl ainly wrong in entering the order. 1 Wife also contends that paragraph two on page two of the equitable dist ribution order, wh ich provides for the transfer of the parties' North Carolina ho me to husband but makes him responsible on ly for the "tax consequenc es associatedwith such transfer," is not in accord with th e commissioner's recommendation . We agree. The commissioner fo und that the property 's tax basis was low and that there was the prospect for a large income tax liability upon its sale. Husband, the comm issioner found, wanted the home

1 Having resolved this issue on other grounds, we need not address wife's additional argument that the subject formula in the equitable distribution order is contrary to federal law.

- 10 -"and responsibility for . . . th e difficult tax consequence." Wife, on the other hand , the commission er found, woul d neither be able to avoid or handle the tax conseque nces in a timely fashion. Husband had respon sibility for the signific ant mortgage debt on the property. In light of such find ings, the co mmissioner recommended that the home be tran sferred to husban d along with its "difficult tax consequence." We conclude that the commissioner recommended that husband bear all tax consequenc es related to the Nort h Carolina property. The order of the tria l court, read litera lly, however, only assigns to husband th ose tax conseque nces associated with the transfer of the pr operty from wife to husband. Hence, we hold that the trial court's equitable distri bution order is improperly inconsistent withthe commissioner 's recommendationand that the trial court er red in entering the order as drafted. Lastly, wife conten ds the trial court co mmitted re versible error in refusing to add the words "a nd Reservation of Spousal Support" to the existing title of its or der--"Order of Equitable Distribution"- -and in refusing to change the wo rd "spouse" to "former spouse" in the order. Su ch changes, wi fe argues, are necessary to avoid delay in ha ving the order processed and approved by the United States Departme nt of Defe nse Finance Office. Wife, however, conc eded at the re consideration hearing that she did not know the consequences of submitting the order as

- 11 -drafted, without her su ggested changes, to the military finance office. She simply di d not want to "take the chan ce" that the order would be rejected . She presente d no evidence to the trial court to show that th e changes were necessar y and offers us no authority purs uant to which we may conc lude that th e trial court abused its discretion by not including the requested ch anges in the order. More over, as husband points out, the trial court's order specific ally reserves jurisdiction in th e trial court for the purpose of modifyin g the order "in order to effect payment of any retirement benefits for either party." Hence, we hold that the trial court di d not err in ruli ng as it did. Accordingly, the equitable dist ribution order appealed from is affirmed in part an d reversed in pa rt and remanded for entry of an order consistent with this opinion. Affirmed in part, reversed in part and remanded.

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