Barron v. Barron , 246 Ariz. 449 ( 2019 )


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  •                                  IN THE
    SUPREME COURT OF THE STATE OF ARIZONA
    IN RE THE MARRIAGE OF
    SHELLY RAE BARRON,
    Petitioner/Appellee,
    v.
    PAUL ROGER BARRON,
    Respondent/Appellant.
    No. CV-18-0234-PR
    Filed May 21, 2019
    Appeal from the Superior Court in Yuma County
    The Honorable Stephen J. Rouff, Judge Pro Tempore
    No. S1400DO201501132
    VACATED IN PART AND REMANDED
    Opinion of the Court of Appeals
    Division One
    
    796 Ariz. Adv. Rep. 31
    Filed July 31, 2018
    VACATED IN PART
    COUNSEL:
    Mary K. Boyte Henderson (argued), Mary Katherine Boyte, P.C., Yuma,
    Attorney for Shelly Rae Barron
    S. Alan Cook, S. Alan Cook, P.C., Phoenix; Keith Berkshire (argued), Kristi
    Reardon, Erica Gadberry, Berkshire Law Office, PLLC, Tempe; Richard G.
    Maxon, Tempe; Theodore C. Jarvi, Tempe, Attorneys for Paul Roger Barron
    CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE
    CHIEF JUSTICE BRUTINEL and JUSTICES TIMMER, BOLICK, GOULD,
    LOPEZ, and PELANDER (RETIRED) joined.
    BARRON V. BARRON
    Opinion of the Court
    CHIEF JUSTICE BALES, opinion of the Court:
    ¶1            In this divorce case, we hold that federal law does not permit
    a state court to order a military spouse to pay the equivalent of military
    retirement benefits to a former spouse if the military spouse continues to
    work past an eligible retirement date.
    I.
    ¶2             Paul Barron (“Husband”) and Shelly Rae Barron (“Wife”)
    married in 2004, when Husband was an active duty member of the United
    States Marine Corps. When they divorced in 2017, Husband was still an
    active duty service member. As part of the dissolution proceedings, the
    superior court found that Husband could retire in 2023 after twenty years
    of military service and divided the parties’ assets, including Husband’s
    military retirement pay (“MRP”), assuming Husband would apply for and
    collect retirement as soon as he became eligible.
    ¶3           The dissolution decree provided that Wife was entitled to 29%
    of the MRP. The trial judge also ordered Husband, if he chose to work
    beyond his retirement-eligibility date, to begin making payments to Wife
    equivalent to what she would have received as her share of the MRP had
    he retired.
    ¶4             On appeal, Husband argued that the court improperly
    ordered him to indemnify Wife if he chose to remain in the military on
    active duty status. Barron v. Barron, 
    796 Ariz. Adv. Rep. 31
    , 35 ¶ 24 (Ariz.
    App. July 31, 2018). The court of appeals agreed and reversed, reasoning
    that federal law precludes such indemnification. Id at 37 ¶ 30.
    ¶5            We granted review because division of military retirement
    benefits is a recurring legal issue of statewide importance. We have
    jurisdiction under article 6, section 5(3) of the Arizona Constitution.
    II.
    ¶6            Military members may be eligible to retire and receive MRP
    after serving for a certain length of time, typically twenty years or more.
    See Howell v. Howell, 
    137 S. Ct. 1400
    , 1402-03 (2017). Although some states
    had divided MRP upon divorce, in 1981 the United States Supreme Court
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    BARRON V. BARRON
    Opinion of the Court
    held that such orders were preempted because they created a “conflict
    between the terms of the federal retirement statutes and the [state]
    community property right.” McCarty v. McCarty, 
    453 U.S. 210
    , 232, 235
    (1981).
    ¶7            In response, Congress passed the Uniformed Services Former
    Spouses Protection Act (“USFSPA”), 
    10 U.S.C. § 1408
    , which provides the
    “precise and limited” authority to treat certain military retirement benefits
    as divisible property upon divorce. See Mansell v. Mansell, 
    490 U.S. 581
    ,
    588-89 (1989). The USFSPA grants states the authority to divide “disposable
    retired pay” in divorce proceedings. 
    10 U.S.C. § 1408
    (c). Thus, since the
    enactment of the USFSPA, state courts have been able “to treat disposable
    retired pay as community property.” Mansell, 
    490 U.S. at 589
    .
    ¶8             Even before passage of the USFSPA, Arizona generally
    treated military retirement assets as community property, divisible upon
    divorce, like any other retirement asset. See, e.g., Van Loan v. Van Loan, 
    116 Ariz. 272
    , 274 (1977). Since the USFSPA’s enactment, Arizona has chosen
    to treat MRP as community property. See Edsall v. Superior Court, 
    143 Ariz. 240
    , 242 (1984).
    ¶9              Wife argues that the indemnification order in this case was
    proper under Koelsch v. Koelsch, 
    148 Ariz. 176
     (1986). In that case, we
    considered “how and when a non-employee spouse’s community property
    interest in an employee spouse’s matured retirement benefit plan is to be
    paid when the employee wants to continue working, thus delaying receipt
    of the retirement benefits.” 
    Id. at 180
    . As applied to benefits that are
    “matured and payable,” 
    id. at 183
    , we held that “the court can order that
    the non-employee spouse be paid a monthly amount equal to his or her
    share of the benefit which would be received if the employee spouse were
    to retire,” 
    id. at 185
    .
    ¶10            Although we treat MRP as community property, and Koelsch
    permits an indemnification order under state law for public retirement
    benefits when a spouse elects to keep working instead of retiring, Arizona
    may only divide MRP to the extent permitted by federal law. See Howell,
    
    137 S. Ct. at 1403-04
    . Thus, we must first examine the authority granted by
    Congress.
    3
    BARRON V. BARRON
    Opinion of the Court
    ¶11            On that issue, Howell is instructive. That case involved a
    former spouse whose MRP payments were reduced years after the
    dissolution decree because the retired military spouse elected to waive
    MRP to receive disability benefits. 
    Id. at 1402
    . The trial court ordered the
    military spouse to indemnify the former spouse for her vested rights in the
    MRP. In re Marriage of Howell, 
    238 Ariz. 407
    , 408-09 ¶¶ 1-5 (2015), rev’d,
    Howell, 
    137 S. Ct. 1400
    . Relying on the USFSPA and United States Supreme
    Court precedent, we concluded that although a trial court could not, at the
    time of the decree or thereafter, divide MRP that a military spouse has
    waived to obtain disability benefits, the court could require the military
    member to reimburse his former spouse for a post-decree reduction in the
    benefits she received as a result of his electing to receive disability benefits
    in lieu of MRP. 
    Id.
     at 409-10 ¶¶ 10-15.
    ¶12           The Supreme Court reversed. Howell, 
    137 S. Ct. at 1406
    . Like
    us, the Court recognized that, in allowing states to treat MRP as community
    property, “Congress excluded from its grant of authority the disability-
    related waived portion of military retirement pay.” 
    Id. at 1404
    . The Court
    also noted that it had previously held that “federal law completely pre-
    empts the States from treating waived military retirement pay as divisible
    community property,” which was “just what the Arizona family court did
    here.” 
    Id. at 1405
    . Although the divorce decree gave the non-military
    spouse a right to half of MRP, the Court held that such an interest “is, at
    most, contingent, depending for its amount on a subsequent condition: [the
    military spouse’s] possible waiver of that pay.” 
    Id. at 1405-06
    . Thus, under
    Howell, a state court can divide MRP only to the extent it is disposable
    retired pay, as defined by § 1408(a)(4)(A), and a state court may not enter
    orders that “displace the federal rule and stand as an obstacle to the
    accomplishment and execution of the purposes and objectives of
    Congress.” 
    137 S. Ct. at 1406
    .
    ¶13            The grant of authority to divide MRP under the USFSPA
    “does not authorize any court to order a member to apply for retirement or
    retire at a particular time in order to effectuate any payment under this
    section.” § 1408(c)(3). Here, the court of appeals relied on this provision to
    hold that a court cannot order a service member to indemnify the non-
    military former spouse if the service member chooses to work past an
    eligible retirement date. See Barron, 796 Ariz. Adv. Rep. at 36 ¶ 27. The
    court also read Howell as prohibiting the equitable remedy under Koelsch of
    ordering indemnification payments. Id. at 36–37 ¶¶ 28–30.
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    BARRON V. BARRON
    Opinion of the Court
    ¶14           We agree with the court of appeals’ observation that
    § 1408(c)(3) would have little effect if a court, instead of ordering a service
    member to retire, could simply order a member to begin making payments
    as if he or she had retired. However, we focus our attention on the
    definition of “disposable retired pay,” which is the relevant benefit that
    Congress has authorized state courts to divide as part of dissolution
    proceedings. Federal law does not permit states to divide MRP but rather
    grants them the authority to “treat disposable retired pay” as community
    property. § 1408(c)(1) (emphasis added). “Disposable retired pay,” in turn,
    is defined as “the total monthly retired pay to which a member is entitled.”
    § 1408(a)(4)(A) (emphasis added).
    ¶15               We read “entitled” to mean a member has applied and been
    approved for military retirement benefits. Although Congress did not
    define “entitled,” our interpretation effectuates its intent in passing the
    USFSPA. The legislative history reveals Congress’s intent that a military
    member must retire to become “entitled” to MRP. See S. Rep. No. 97-502,
    at 17 (1982) (“[I]t is not enough that the member has sufficient years of
    service so that the member could, if the member so desired,
    retire . . . . Rather, the member must have actually retired from the
    uniformed service or entered some other status in which the member is
    actually entitled to receive retired or retainer pay.”). The Department of
    Defense’s regulations also support this interpretation of “entitled.” See 7B
    Department of Defense, DoD 7000.14-R, Military Pay Policy and Procedures –
    Retired Pay 29-6 (2018) (defining entitlement as “the legal right of a military
    member to receive military retired pay” and differentiating “members who
    actually receive retired pay” from “those who qualify by completing the
    required years of service”).
    ¶16           Moreover, the grant of authority for states to treat disposable
    retired pay as community property only applies to “disposable retired pay
    payable to a member.” § 1408(c)(1) (emphasis added). Unlike the employee
    spouse’s retirement plan in Koelsch, military retirement based on years of
    service is discretionary, and thus a member’s interest in MRP is neither
    vested nor mature until the member retires and benefits are approved. See,
    e.g., 
    10 U.S.C. § 8323
     (granting permissive, not mandatory, authority to
    retire an officer after twenty years of service). Pay that may never be
    received, and the grant of which is discretionary, is not “payable” to a
    member. To the same effect, the legislative history states that “the
    provisions of section 1408 only will permit payments [to a former spouse]
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    BARRON V. BARRON
    Opinion of the Court
    to be made from a member’s or former member’s ‘retired or retainer pay,’”
    S. Rep. No. 97-502, at 15, rather than from active duty pay or prospective
    retirement pay.
    ¶17            Finally, § 1408(c)(3) would be meaningless if “entitled” means
    “eligible” as Wife argues. If a member were “entitled” to disposable retired
    pay before retiring, then Congress would have had no reason to explicitly
    note that courts cannot force retirement in order to effectuate payments
    under the USFSPA. Although the USFSPA contemplates that a court may
    order the division of disposable retired pay in advance of retirement, the
    statutory scheme does not contemplate implementation of that order until
    the member actually retires. See § 1408(d)(1) (“In the case of a member not
    entitled to receive retired pay on the date of the effective service of the court
    order, such payments shall begin not later than 90 days after the date on
    which the member first becomes entitled to receive retired pay.”).
    ¶18           Because the USFSPA only permits state courts to divide
    “disposable retired pay,” and no entitlement to MRP exists until the
    member retires and is approved to receive such benefits, state courts cannot
    order service members to make MRP-based payments to former spouses
    before retirement.
    III.
    ¶19           Here, at the time of the dissolution, Husband had not applied
    for, had not been approved to receive, and was not receiving MRP. The
    dissolution decree provided for a payment to Wife of her share of
    Husband’s MRP starting when Husband purportedly would be eligible to
    retire. This part of the decree was in error.
    ¶20            Before a military spouse retires, a court remains free to enter
    orders awarding a former spouse his or her share of MRP, but such orders
    cannot require payment until the military spouse retires. See, e.g.,
    § 1408(a)(4)(B) (freezing benefits for decrees finalized before retirement);
    § 1408(d)(1) (contemplating orders served on the Secretary before entitled
    to payment). Notably, in Howell, the United States Supreme Court observed
    that a state “remains free to take account of the contingency that some
    military retirement pay might be waived, or . . . take account of reductions
    in value when it calculates or recalculates the need for spousal support.”
    Howell, 
    137 S. Ct. at 1406
    . We express no view, however, on whether or how
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    BARRON V. BARRON
    Opinion of the Court
    the court on remand should make any adjustments based on MRP-related
    contingencies.
    ¶21           For the foregoing reasons, we vacate paragraphs 24 through
    30 of the court of appeals’ opinion, we vacate the portion of the decree
    providing for a Koelsch order, and we remand the case to the superior court
    for further proceedings. We deny Wife’s request for attorney fees and grant
    Husband’s request for costs upon compliance with Arizona Rule of Civil
    Appellate Procedure 21.
    7