Opinion ID: 2960871
Heading Depth: 3
Heading Rank: 3

Heading: Unraveling Juan’s retirement pay

Text: In the superior court the parties may have been confused about the nature of Juan’s retirement benefits and whether they were divisible in whole or in part. The undisputed evidence in the record establishes the following: Juan was Chapter 61 retired for permanent physical disability under 10 U.S.C. § 1201; the Army rated Juan’s permanent disability at 70%; because Juan’s 70% disability rating exceeded his 34 Id. at 1261-64. 35 Id. at 1264. 36 221 P.3d 1006, 1011 (Alaska 2009). 37 Id. at 1012-13. -17- 7050 retirement pay multiplier38 Juan was entitled to have his Chapter 61 disability retirement pay calculated using his disability rating;39 Juan’s retirement base pay was $6,355, and his gross Chapter 61 retirement pay was $4,449.40 Juan also received at least $3,213 in monthly VA disability payments, and his monthly VA waiver was $1,424.41 4. The superior court’s retirement benefits rulings The master’s report explained that Juan’s retirement “is completely classified as disability pay. Disability pay is not [divisible] by the court as it is not a marital asset.” And the superior court explained that “[b]ecause of [Juan’s] disability, the government classifies all of his retirement as disability pay, leaving zero disposable retirement pay for a state court to distribute in a divorce.” Pamela asserts that the superior court is incorrect because “based on Juan’s own pay statement, it appears that at least a portion of Juan’s pay was divisible and that 38 Juan’s exact retirement pay multiplier is not clear from the record, but based on 23 years of service it could not have exceeded 57.5%. And Juan testified that he took a career service bonus in 2004 that paid him $30,000 but decreased his retirement pay multiplier by 10% to 47.5%. 39 See 10 U.S.C. § 1401(b) (“If a person would otherwise be entitled to retired pay computed under more than one formula . . ., the person is entitled to be paid under the applicable formula that is most favorable to him.”). Based on approximately 23 years of service Juan’s longevity-based retirement pay multiplier could not have exceeded 57.5%, but Juan’s 70% disability rating provided for his receipt of 70% of his retired base pay. See 10 U.S.C. § 1401(a). 40 Juan’s Chapter 61 pay was based on his 70% disability rating — $6,355 x .70 = $4,449. 41 Juan had to waive a portion of his Chapter 61 disability because Chapter 61 payments may only be received concurrently with VA disability payments up to “the amount of retired pay to which the member would have been entitled under any other provision of law based upon the member’s service in the uniformed services if the member had not been retired under chapter 61 of this title.” 10 U.S.C. § 1414(b)(1). -18- 7050 Pamela would be receiving some of these funds if the trial court had issued a qualifying order.” Pamela specifically argues that Juan received CRDP42 and that “CRDP is divisible upon divorce.” But CRDP does not change the nature of Juan’s Chapter 61 retirement benefit. Juan’s benefits come from two sources — Chapter 61 disability retirement and VA disability payments. Neither source is divisible upon divorce. USFSPA excludes from disposable retired pay all Chapter 61 retirement benefits “equal to the amount of retired pay . . . computed using the percentage of the member’s disability.”43 And as we held in Clauson v. Clauson, state courts have no power to equitably divide VA disability benefits.44 VA disability benefits are not retired pay and do not fall within USFSPA’s definition of disposable retired pay.45 Juan’s Chapter 61 retirement payments were computed using the percentage of his disability rating and are not divisible: Juan was 70% disabled, and his gross retired pay was 70% of his retired base pay. And contrary to Pamela’s assertion that “CRDP is divisible upon divorce” — Juan was receiving $1,789 CRDP — the CRDP portions of Juan’s Chapter 61 payments are not divisible.46 CRDP provides for concurrent receipt of VA disability benefits and military retirement pay.47 If the concurrently received retirement payments are disposable retired pay under USFSPA, 42 See supra note 26 (explaining CRDP). 43 10 U.S.C. § 1408(a)(4)(C). 44 831 P.2d 1257, 1264 (Alaska 1992). 45 Id. at 1262-64; 10 U.S.C. § 1408(a)(4)(B). 46 See 10 U.S.C. § 1408(a)(4)(C). 47 10 U.S.C. § 1414. -19- 7050 then the retirement payments are divisible. Chapter 61 disability retirement payments computed based on a member’s disability percentage are not disposable retired pay under USFSPA — even when received concurrently with VA disability.48 DFAS recognized that Juan received no disposable retired pay and notified Pamela that “[t]he entire amount of the member’s retired/retainer pay is based on disability, thus there are no funds available for payment under the USFSPA.” Because Juan’s military benefits consist entirely of Chapter 61 retirement and VA disability, the superior court did not err when concluding that none of Juan’s military benefits were disposable retired pay. 5. Pamela’s requested presumption Pamela argues that we “should establish a presumption that military qualifying orders shall contain indemnity provisions, to protect the former spouse from a post-decree waiver of military retired pay.” Pamela correctly notes that we have approved the use of indemnity clauses in QMROs.49 But we have only approved the use of indemnity clauses to reimburse spouses for reductions in disposable retirement pay 48 10 U.S.C. § 1408(a)(4)(C). 49 See Glover v. Ranney, 314 P.3d 535, 543 (Alaska 2013) (“Rather than improperly dividing waived benefits, the order awards [the wife] her time rule percentage of disposable retirement pay while requiring [the husband] to indemnify [her] for any subsequent unilateral actions to decrease the total monthly pension payout amounts. The superior court did not err — the order complies with [USFSPA] and our precedent.”); Young v. Lowery, 221 P.3d 1006, 1012-13 (Alaska 2009) (“But the trial court may expressly order [the husband] not to reduce his disposable retired pay and require [him] to indemnify [the wife] for any amounts by which her payments are reduced below the amount set on the date the amended qualified order is entered.”). -20- 7050 due to members’ unilateral waiver of disposable retirement benefits in exchange for VA disability payments.50 In this case, despite Pamela’s contrary assertions, Juan did not unilaterally waive any disposable retired pay. Juan asserted that he took “no such action to convert or change any portion of his military benefits.” The record supports Juan’s assertion. When Juan was Chapter 61 retired by the military, the military had to find that Juan was “unfit to perform the duties of [his] office, grade, rank, or rating because of physical disability.”51 Juan was retired with a 70% disability rating and was awarded 70% of his retirement base pay despite Juan’s years of service otherwise entitling him to no more than 57.5% of his base pay. As explained above, the entirety of Juan’s retirement pay was based on his Chapter 61 disability rating and on his VA disability, and under USFSPA this money is not considered disposable retired pay.52 Unlike VA disability which a member may elect,53 a member does not unilaterally choose to become Chapter 61 retired. Rather, Chapter 61 retirement for permanent disability is based on the Army’s determination that the member’s permanent injuries are so severe that the member is unfit to perform Army duties.54 And when a member waives a portion of Chapter 61 disability pay to receive VA disability, it is not a waiver of disposable retired 50 See Glover, 314 P.3d at 543; Young, 221 P.3d at 1012. And in Clauson v. Clauson, we focused on the “military retiree’s decision to waive retirement pay in order to collect disability.” 831 P.2d 1257, 1263 (Alaska 1992). 51 10 U.S.C. § 1201(a). 52 See supra Part IV.A.4. 53 See 38 U .S.C. § 5100 (“[T]he term ‘claimant’ means any individual applying for, or submitting a claim for, any benefit under the laws administered by the Secretary.”). 54 10 U.S.C. § 1201(a). -21- 7050 pay. Rather it is a waiver of one type of payment that is not considered disposable retired pay — Chapter 61 disability — in exchange for another — VA disability. Pamela fails to recognize the distinction between a member unilaterally deciding to waive disposable retired pay in exchange for VA disability benefits, and a member receiving only two types of nondisposable retired pay after the member is Chapter 61 retired by the Army. The majority of cases Pamela cites supporting her indemnification argument explicitly address waiver of disposable retired pay for VA disability — as opposed to a member receiving and waiving a Chapter 61 disability retirement — and they assert that indemnification is proper because it would be unfair to let the member unilaterally waive disposable retired pay.55 55 See, e.g., Danielson v. Evans, 36 P.3d 749, 751, 755 (Ariz. App. 2001) (addressing “non-disability retirement” pay “waived in order to receive disability benefits”); Surratt v. Surratt, 148 S.W.3d 761, 767 (Ark. App. 2004) (“[The member] could not, by later waiving those benefits in order to receive disability payments, unilaterally deprive [his former spouse] of her property.”); Blann v. Blann, 971 So. 2d 135, 137 (Fla. App. 2007) (“[T]he trial court erred in concluding that there was no authority to enforce the consent final judgment by ordering the former husband to indemnify the former wife after he waived a portion of his military retirement pay so that he might receive veteran’s disability benefits.”); In re Marriage of Neilsen & Magrini, 792 N.E.2d 844, 849 (Ill. App. 2003) (“Based on the foregoing persuasive authority, we believe that a party’s vested interest in a military pension cannot be unilaterally diminished by an act of a military spouse . . . .”); Bandini v. Bandini, 935 N.E.2d 253, 264 (Ind. App. 2010) (“For the foregoing reasons, we hold that a military spouse may not, by a post-decree waiver of retirement pay in favor of disability benefits or CRSC, unilaterally and voluntarily reduce the benefits awarded a former spouse in the dissolution decree.”); Dexter v. Dexter, 661 A.2d 171, 175 (Md. Spec. App. 1995) (“We hold that the voluntary waiver of appellant’s Army retirement pension was under Maryland law a breach of contract, for which the measure of past damages is the amount the receiving spouse would have received had the appellant not committed the breach.”); Krapf v. Krapf, 786 N.E.2d 318, 325 (Mass. 2003) (“While not dispositive on this matter of first impression in Massachusetts, we note that many other State appellate courts have (continued...) -22- 7050 We do not adopt an indemnification presumption in this case because waiver of Chapter 61 retirement benefits is not waiver of disposable retired pay. Requiring indemnification when a member is Chapter 61 retired is akin to an unacceptable division of retirement benefits which are not disposable retired pay — a division foreclosed by USFSPA, Mansell, and Clauson.56 6. The superior court’s QMRO ruling Pamela argues that “the trial court erred when it declined to enter a qualif[ied] order apportioning Juan’s military retirement benefits.” She notes that granting a QMRO is a ministerial act that gives effect to a court-approved property settlement. Pamela also argues that if the court had issued a QMRO then she might have received retirement payments. She finally argues that even if the court correctly 55 (...continued) ordered similar relief against military retirees who waive the military retirement benefits pledged to a former spouse under a separation agreement in order to obtain VA disability payments.”); Megee v. Carmine, 802 N.W.2d 669, 682 (Mich. App. 2010) (“We hold that a military spouse remains responsible to compensate [a] former spouse . . . when the military spouse makes a unilateral and voluntary postjudgment election to waive the retirement pay in favor of disability benefits contrary to the terms of the divorce judgment.”); Shelton v. Shelton, 78 P.3d 507, 508 (Nev. 2003) (“Roland elected to waive all his military retirement benefits for an equivalent amount of tax-exempt disability pay as federal law allows.”); Hisgen v. Hisgen, 554 N.W.2d 494, 496 (S.D. 1996) (“We consider whether a court may require a former spouse to pay as part of a property division an amount equivalent to one-half of a military retirement entitlement when such spouse has waived retirement benefits to receive a corresponding sum in veteran’s disability payments.”); Johnson v. Johnson, 37 S.W.3d 892, 897 (Tenn. 2001) (“We hold that when an [agreement] divides military retirement benefits, the non-military spouse has a vested interest in his or her portion of those benefits . . . . That vested interest cannot thereafter be unilaterally diminished by an act of the military spouse.”). 56 10 U.S.C. § 1408(a)(4); Mansell v. Mansell, 490 U.S. 581, 594-95 (1989); Clauson v. Clauson, 831 P.2d 1257, 1264 (Alaska 1992). -23- 7050 concluded that she would receive no direct payments from DFAS, the failure to issue a QMRO was still reversible error. We have explained that a qualified order “simply enforces a court order calling for division of retirement benefits.”57 As Juan notes, the record establishes that a QMRO would not have resulted in any payments to Pamela directly from DFAS because Juan’s benefits were entirely based on his disability. And as explained in the previous subsection, requiring Juan to directly indemnify Pamela because he was Chapter 61 retired by the Army violates USFSPA, Mansell, and Clauson.58 We therefore conclude that the superior court did not err when refusing to issue an ineffectual order.59 7. The superior court’s Rule 60(b) ruling Pamela argues that the superior court “erred when it declined to provide [her] with any offset for the benefits she lost due to Juan’s receipt of disability benefits.” Although she asserts that this case is not governed by Rule 60(b) because she “was still seeking . . . issuance of the qualifying military order,” she also argues that she was entitled to an “adjustment to the property division, following Juan’s waiver of retirement pay” and that the “failure to address Pamela’s loss of all interest in the retirement benefits constituted an abuse of discretion.” At one point Pamela had asked the superior court for a spousal support award in lieu of Juan’s military benefits. Pamela, at the time 57 Zito v. Zito, 969 P.2d 1144, 1146 (Alaska 1998). 58 10 U.S.C. § 1408(a)(4); Mansell, 490 U.S. at 594-95; Clauson, 8 31 P.2d at 1264. 59 The provision that Pamela requested below required indemnification when “the Service M ember takes actions that reduce[] his disposable retired pay and thereby reduces payments to the Former Spouse.” But Juan’s Chapter 61 retirement is a result of the Army’s determination regarding his ability to perform his duties, and not based on any unilateral waiver of retired pay. Thus the specific QMRO Pamela sought would not have resulted in her receipt of any of Juan’s military retirement benefits. -24- 7050 litigating pro se, thus appears to have attempted to request a modification of the parties’ dissolution agreement, and we consider this a request for Rule 60(b)(6) relief from judgment.60 Rule 60(b)(6) is a catch-all provision, justifying relief from property settlement agreements under extraordinary circumstances.61 In the context of a property division pursuant to a divorce, four “extraordinary circumstances” may justify relief under Rule 60(b)(6): (1) the fundamental, underlying assumption of the dissolution agreement has been destroyed; (2) the parties’ property division was poorly thought out; (3) the property division was reached without the benefit of counsel; and (4) the property in dispute was the parties’ principal asset.[62] The four factors “are not strictly necessary conditions but, rather, are particular instantiations of the equitable factors required to overcome the principle that, at some 60 See O’Link v. O’Link, 632 P.2d 225, 227-28 (Alaska 1981) (treating request to modify divorce decree “as requests for relief from judgment under Civil Rule 60”). We consider Pamela’s request for spousal support a Rule 60(b)(6) motion in spite of Pamela’s own lawyer’s contrary assertions on appeal and Pamela’s statements to the superior court. Pamela was pro se when she requested spousal support, and she was pro se when she informed the superior court that she did not want to “reopen the entire property.” We interpret the pleadings of pro se litigants leniently. DeNardo v. Calista Corp., 111 P.3d 326, 331 (Alaska 2005). It is clear that Pamela requested spousal support in the event she was unable to receive her agreed upon share of Juan’s military retirement. It is not clear that Pamela understood her statements to the superior court to mean she was relinquishing her request for spousal support in lieu of Juan’s military retirement. 61 Sandberg v. Sandberg, 322 P.3d 879, 888-89 (Alaska 2014). 62 Cook v. Cook, 249 P.3d 1070, 1084 (Alaska 2011). -25- 7050 point, litigation must be brought to an end.”63 “Trial courts should use these factors when appropriate, but should also bear in mind the flexible nature of Rule 60(b)(6), keeping in mind that ‘[t]he broad power granted by clause (6) is not for the purpose of relieving a party from free, calculated, and deliberate choices he has made . . . .’ ”64 The superior court applied the Rule 60(b)(6) factors and initially concluded that relief was warranted because: (1) [Juan’s] retirement was a fundamental, underlying assumption of the Guerreros’ dissolution agreement and it is destroyed, (2) the parties’ property division was poorly thought out because it entirely failed to dispose of [Juan’s] retirement, (3) neither party had legal counsel when they entered into the dissolution agreement, and (4) [Juan’s] retirement was the parties’ principal asset. But the superior court later reversed its initial Rule 60(b)(6) ruling “because upon further review [the court] does not find that a fundamental underlying assumption of the dissolution agreement is destroyed.” The superior court noted “had the Court not reversed its [Rule] 60(b) order, the Court would have reconsidered the entire 2009 property distribution.” The record establishes that both parties believed Pamela was entitled to receive some portion of Juan’s military benefits. While Juan disputed the total amount of his benefits Pamela would receive, Juan consistently recognized Pamela should receive some portion of his military benefits. Thus it was error to determine that a fundamental underlying assumption of the parties’ agreement had not been destroyed. Due to Juan’s Chapter 61 retirement by the Army he received no disposable retired pay, 63 Sandberg, 322 P.3d at 889 (quoting Clauson, 831 P.2d at 1261). 64 Id. (alteration in original) (quoting O’Link, 632 P.2d at 229-30). -26­ 7050 and this destroyed the parties’ expectation that Pamela would receive some portion of Juan’s military benefits. The superior court’s earlier analysis of the other factors also is persuasive. The property division was poorly thought out. Despite knowing that Juan was seriously injured in 2007, the parties failed to recognize the possibility that Juan would receive no disposable retired pay, operating under the assumption that Pamela would be able to receive Juan’s military benefits. And neither party was represented by counsel when they dissolved their marriage and settled their property. Finally, Juan’s retirement was the parties’ principal asset.65 Juan argues that the superior court concluded “that the property distribution was still equitable, despite the non-divisibility of retirement pay, considering that the 2009 dissolution was exceptionally favorable to Pamela.” But as Pamela correctly notes, the superior court “never engaged in an equitable division analysis,” and without taking additional testimony regarding marital property and property values the court had insufficient evidence to conduct such an analysis. Because it was an abuse of discretion to refuse to reopen the property settlement agreement and conduct a full equitable division analysis, we reverse the Rule 60(b)(6) decision and remand for further proceedings and a marital property distribution. We reiterate our Clauson holding that on remand the superior court may not “simply shift an amount of property equivalent to the . . . retirement pay from the military spouse’s side of the ledger to the other spouse’s side.”66 But we note that Juan’s and Pamela’s financial conditions, including Juan’s receipt of his military disability 65 The parties’ 2009 dissolution agreement was not detailed and did not reveal the equity, if any, in their real property. But in 2009 Juan was very close to 20 years of service and a guaranteed Army retirement, a valuable asset. 66 Clauson, 831 P.2d at 1264. -27- 7050 retirement benefits, must be considered when equitably dividing the marital estate and when deciding whether to require alimony.67