Marriage of Herbers and Ferrari CA4/1 ( 2022 )

Filed 11/28/22 Marriage of Herbers and Ferrari CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
In re Marriage of HOLLY
HERBERS and TODD ERIK
FERRARI.
HOLLY HERBERS FERRARI, D079258
Appellant,
v. (Super. Ct. No. D561571)
TODD ERIK FERRARI,
Respondent.
APPEAL from an order of the Superior Court of San Diego County,
Victor N. Pippins, Judge. Affirmed.
Dennis Temko for Appellant.
Patrick L. McCrary for Respondent.
This family law appeal presents a question of contract interpretation.
Ending their twenty year marriage, Holly and Todd Ferrari stipulated how to
divide their community assets in a Marital Settlement Agreement (MSA).1
Among those assets were military retirement benefits accrued during Todd’s
many years of military service. With Todd expecting to retire from the U.S.
Navy in two years, the MSA referenced some relevant statutory criteria,
expressed an intention to divide the pension “equitably,” and fixed a dollar
amount of $2,551 that Holly would receive each month. Later claiming the
inputs used to derive that number were off, Todd successfully moved to
reduce Holly’s share. Reasoning that the parties sought an equitable division
of the military pension pursuant to a statutory formula that factored in a
servicemember’s retired base pay and years of service, the family court
determined it would be inequitable not to reduce Holly’s interest to
accurately reflect Todd’s retired base pay.
Holly appeals, arguing the court misconstrued the plain language of the
MSA and rewrote an agreement that entitles her to a fixed dollar amount.
Finding the MSA ambiguous, we consider the undisputed admissible
extrinsic evidence to reject her claim and affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
Todd and Holly married in 1995 and separated in 2016 after 20 years
and eight months of marriage. The court entered a stipulated judgment of
dissolution in July 2019, incorporating an attached MSA that gave Holly
$616 in monthly spousal support until Todd’s anticipated retirement from the
U.S. Navy in March 2021 and specified a division of community assets,
1 We refer to the parties by their first names for clarity and intend no
disrespect.
2
including the family home, personal property, vehicles, bank accounts,
business interests, and retirement benefits.
Holly’s pension plan from Pfizer was to be divided by way of a Qualified
Domestic Relations Order (QDRO), with each party receiving a community
interest pursuant to the “ ‘[t]ime rule.’ ” Todd’s “Naval Military Service
Retirement Plan” was also addressed:
“The community interest shall be equitably divided
pursuant to National Defense Authorization Act (NDAA) of
2017, § 641, and revised § 624, of the NDAA of 2018: The
amount of retired pay to which Husband (service member)
would have been entitled using the member’s retired pay
base and the number of years of service on the date of the
decree of divorce, dissolution, annulment, or legal
separation, increased by the cost-of-living amounts granted
to military retirees from date of the (divorce) to the date the
member retires. [¶] . . . [¶]
“The Parties married on October 27, 1995. Their marital
status was terminated with entry of Stipulated Dissolution
Judgment herein entered in San Diego County, State of
California.
“The parties were married for a period of ten (10) or more
years during which time the Respondent/Husband
performed at least ten (10) years of service creditable for
retirement eligibility purposes.
“Respondent/Husband is an active duty military member at
the time of this order . . . . [¶] . . . [¶]
“Petitioner/Wife is entitled to a portion of
Respondent/Husband’s United States Military retired pay
as set forth herein.
“Based on foregoing data, Petitioner/Wife as former spouse
is hereby awarded $2,551[ ] monthly of Respondent
member’s disposable military retirement pay.”
In the next subheading, the MSA outlined Holly’s right to participate in
a Survivor Benefit Plan (10 U.S.C. § 1447 et seq.) so that she could continue
3
receiving a portion of Todd’s retirement pay if he died before her. Upon
Todd’s retirement, Holly could elect to participate in the plan and pay the
monthly premiums. This section of the MSA also states:
“The parties intend that the division of military benefits
shall be consistent with [the] Uniformed Services Former
Spouses’ Protection Act [(USFPA)] in effect as of the date of
Judgment, and the Court shall reserve jurisdiction to make
any orders necessary to effectuate the division of military
retirement benefits consistent with the USFPA.
“On the date of Stipulated Marital Dissolution Judgment
entry, the Respondent service member’s military retired
pay base (high-3) was $7,038, and the member had 25 years
11 months of creditable military service.[2]
“On the date of the decree of Marital Dissolution,
Respondent service member’s military retired pay base
(high-3) was $6,821[,] and the member had zero (-0-)
Reserve retirement points.”
Elsewhere in the MSA, Todd and Holly each stipulated to certain
waivers of discovery, investigation, and asset valuation. Both agreed that
they “accepted the statements of each other” or relied on their own knowledge
to negotiate the MSA’s terms and provisions at arm’s length. To minimize
legal expenses, each party limited their attorney’s investigation and
discovery and agreed to “settle the case as set forth in this [MSA] without a
full and complete assessment of the value of the community estate.” Each
further acknowledged “that this [MSA] may or may not result in an equal
division of the community property.” The parties agreed to reserve
jurisdiction in San Diego Superior Court to “[s]upervise the division of assets
as agreed in this Agreement.”
2 The “high-3” (also called “high-36”) retired pay base reflects a
servicemember’s highest average monthly basic pay earned during any three
years or 36 months of service. (10 U.S.C. § 1407(c)(1).)
4
In February 2021, Todd filed an application for ex parte relief, stating
that the MSA contained input errors affecting the division of his military
pension. Concurrently, he filed a “Request for Order to Determine [and]
Correct Judgment Calculation [and/or] Appoint Elisor[,] Execute Errata [and]
[Constructive] Trust” (RFO).
Todd’s attorney William Trausch submitted a declaration stating he
had drafted the portions of the MSA dealing with Todd’s military pension
based on data his client had given him. After serving a copy of the stipulated
judgment on the Defense Finance and Accounting Service (DFAS), Trausch
apparently received an error notice in November 2019.3 He reached out to
Holly’s former counsel and they jointly retained Kristine Colburn, the
attorney who had prepared QDROs for other community assets, to analyze
the underlying data and draft a proposed corrective order. Based on
Colburn’s calculations, Holly was entitled to receive $1,415 per month in net
military pension benefits (after accounting for survivor benefit plan
premiums). Todd sought ex parte relief after Holly refused to sign the
proposed stipulation.
Todd also submitted a declaration in support of his RFO. He explained
that there was an input error in the MSA because he had relied on data
provided by the Naval pay specialist, which confused his active duty pay with
3 DFAS directed Trausch to verify Todd’s social security number and
obtain a court order including “all the necessary elements required to
calculate the division of the military retirement” pursuant to the Uniformed
Services Former Spouses Protection Act (USFSPA) (10 U.S.C. § 1408).
Specifically, DFAS wanted an order specifying, “1. A fixed amount, a
percentage, a formula, or a hypothetical that the former spouse is awarded;
2. The member’s high-3 amount at the time of divorce (the actual dollar
figure); [and] 3. The member’s years of creditable service at the time of
divorce.”
5
his anticipated retirement base pay to arrive at a $2,551 community share.
After further inquiry, it turned out that his actual retirement base pay was
only $4,278 per month, making Holly entitled to $1,415 per month after
deducting her survivor benefit premium.
Finally, Todd filed a notice of lodgment that included various letters
between Trausch, Holly’s former counsel Edward Satuloff, and Colburn. In
June 2020, Trausch wrote to Colburn, copying Satuloff, indicating that after
DFAS had sent its error notice, Todd obtained a Navy paymaster
recalculation of his retired benefits. Colburn replied in August that Holly
was entitled to only $1,415 per month of military pension benefits based on
her calculations.4 Trausch sent Satuloff a stipulation executed by Todd in
September to correct the division of his military pension. A month later,
Holly became self-represented. Trausch wrote to her in December explaining
that there were errors in Todd’s high-3 base pay and hypothetical retired
base pay necessitating recalculation of her spousal interest, and asking her to
sign the stipulation.
Opposing Todd’s ex parte request, Holly filed a responsive declaration.
She explained that DFAS sent an error notice in November 2019 due to a
typographical error with Todd’s social security number. When she
resubmitted the judgment to DFAS with the form properly filled out, she
received no rejection in response. Holly averred that the MSA was negotiated
as a global settlement, with the fixed dollar amount of $2,551 reflecting what
she agreed to accept in exchange for a reduction of spousal support. She
maintained that any error was purely on Todd’s end, and that she was
entitled to the amount in the MSA that DFAS had since accepted.
4 To avoid repetition, Colburn’s methodology is described in the
discussion.
6
Holly lodged e-mails between Trausch and her new counsel, Rebecca
Ritchey. In December 2020, Ritchey told Trausch that if Todd intended to
“renegotiate the amount of monthly pension that [Holly] receives, then we are
going to have to set aside the entire Judgment, as her consent to the
remainder of the agreement is reflexive [sic] of the amount she was receiving
of his pension.”
Finding no emergency, the family court denied Todd’s ex parte request
and set an RFO hearing on April 7, 2021. Holly filed another responsive
declaration again stating there was no error on DFAS’s end once the social
security issue had been corrected. Although Todd felt the MSA misstated
Holly’s share of his military pension, DFAS had accepted the paperwork and
judgment, and there was no indication the amount needed recalculation. 5
Holly reiterated that she had accepted the fixed dollar amount in exchange
for a reduction in spousal support. While the parties could have relied on
percentages, it was Todd who thought it best to set a fixed dollar amount in
the stipulated judgment rather than spend money later to have the order
correctly prepared. When the MSA was being negotiated, Todd’s attorney
apparently e-mailed Holly’s counsel suggesting the $2,551 figure would avoid
the need for a separate court order dividing military retirement, saving fees
and costs.
Todd filed a reply declaration disagreeing that the $2,551 amount was
negotiated as part of a global settlement. He noted that nearly all other
5 Holly filed a supplemental declaration on April 1 reporting the contents
of her conversation with a DFAS agent, who purportedly confirmed that she
was set to receive $2,551 per month as provided in the MSA. Todd objected
to this declaration on hearsay grounds. There is no indication in our record
that the family court ruled on Todd’s objection, and neither party relies on
this evidence on appeal.
7
community assets were equally divided, including the family home and
Holly’s Pfizer pension. Likewise, the MSA indicated that the community
interest in his Naval Military Service Retirement Plan was to be “equitably
divided” based on inputs such as Todd’s retired base pay, years of service
during the marriage, and cost of living adjustments. Correcting the
erroneous inputs resulted in a reduced pension award to both of them, with
Todd set to receive only $2,584 and Holly to receive $1,693 per month. After
he filed his RFO, DFAS had determined that Todd was entitled to only $4,817
per month in gross monthly retired pay, a figure that corresponded with
Colburn’s estimates.6 Accordingly, Todd asked the court to find an error in
the stipulated judgment’s division of his military pension and either correct
the error or appoint an elisor to execute the proposed stipulation for Holly.
Todd further requested that the court place a constructive trust over any
excess retirement amounts Holly had already received.
In conjunction with his reply, Todd lodged four additional exhibits.
Particularly relevant to this appeal, Todd presented e-mails between Trausch
and Holly’s former counsel (Satuloff) before the MSA was signed discussing
the proposed language to divide Todd’s military retirement benefits. He also
submitted DFAS communications from March 2021 reflecting Todd’s actual
monthly retired pay and monthly survivor benefit premiums. With a
supplemental reply declaration, Todd lodged a DFAS letter dated April 1,
2021, finding a high-3 error in the MSA and requesting a clarifying court
order. A separate DFAS letter identified another error in the MSA as to
6 Colburn estimated his retirement base pay as being $4,278, whereas
DFAS calculated it to be $4,817. The disparity in these numbers is
attributable to the statutory “frozen benefit rule,” discussed later.
8
survivor benefits, the premiums for which had to be deducted directly from
Todd’s military retirement pay and not from Holly’s share in the pension.
The parties appeared before Judge Victor Pippins on April 7, 2021. At
the hearing Todd explained that he was not asking for a set aside (Code Civ.
Proc., § 473; Fam. Code, § 2122, subd. (e)), but rather to correct the judgment
to reflect the parties’ agreement. Holly disagreed, claiming the parties had
agreed to a fixed dollar amount. Todd replied that e-mails between the
parties before the MSA’s execution made clear that they sought to apply the
standard formula to divide his military benefits but used the wrong inputs.
To this, Holly suggested that if the court were to correct that one term, it
would rewrite the entire MSA because she “certainly is not getting the benefit
of the bargain.”
The court asked Holly’s counsel what to make of language in the MSA
that the $2,551 figure was “based on the foregoing data.” She responded that
no “data” preceded that phrase. Todd’s counsel urged the court to read the
two separate sections in the MSA dealing with military benefits together. In
Todd’s view, the latter section listed incorrect inputs that informed both the
pension division and Holly’s survivor benefit payments.
Following a half-hour recess, the court announced its ruling. Crediting
language in the MSA that Todd’s military retirement benefits would be
equitably divided based on “foregoing data,” the court reasoned that it would
be inequitable not to correct the $2,551 figure to reflect the actual retired
base pay Todd would receive. The court reasoned that although a number
was listed in the MSA, the parties intended that to reflect a formula, the
inputs for which turned out to be inaccurate. Accordingly, it granted Todd’s
request for order and signed the proposed judgment errata correcting the
judgment to award Holly $1,415 per month in net of Todd’s military
9
retirement benefits. A findings and order after hearing issued, conforming to
the court’s oral ruling.
DISCUSSION
This case ultimately turns out to be relatively straightforward,
requiring application of parol evidence to construe an ambiguous term in the
parties’ MSA. Independently construing the MSA in light of the undisputed
extrinsic evidence, we agree with the trial court that the parties intended an
equal division of the community’s share of Todd’s military pension. To
understand how we reach this conclusion, and why Holly’s arguments miss
the mark, we start with the legal framework governing the division of
servicemembers’ military pensions at dissolution.
A. Background on the USFSPA
“The Federal Government has long provided retirement pay to those
veterans who have retired from the Armed Forces after serving, e.g., 20 years
or more.” (Howell v. Howell (2017) 137 S.Ct. 1400, 1402−1403 (Howell).) For
someone like Todd, who joined the Navy after 1980, his retired pay is
calculated based on an average of his highest 36 months of monthly basic pay
earned during active military service. (10 U.S.C. § 1407(c).) A multiplier is
applied to this “high-3” figure to compute retired pay. (See 10 U.S.C.
§ 1401(a).) Generally, the multiplier equals a servicemember’s years of
service at retirement (including fractional years) times 0.025. (10 U.S.C.
§ 1409(b)−(c); see also 10 U.S.C. § 1405(b) [computation of fractional years of
service].) Retired pay is increased on December 1 of each year for cost of
living adjustments based on changes to the consumer price index. (10 U.S.C.
§ 1401(a).)
Since its passage in 1982, the Uniformed Services Former Spouses’
Protection Act (USFSPA) has authorized states to treat a military veteran’s
10
retirement pay as community property that may be divided at divorce.
(Howell, supra, 137 S.Ct. at pp. 1402, 1403; 10 U.S.C. § 1408(c).) This statute
was enacted to partially abrogate a 1981 United States Supreme Court
decision that held states were preempted from considering any portion of
military retirement pay as community property. (Howell, at p. 1403,
discussing McCarty v. McCarty (1981) 435 U.S. 210, 235.)
The USFSPA does not itself specify any formula for property division.
Rather, it provides that courts may treat military pension as community
property at dissolution. In California, the community interest in retirement
benefits is typically calculated using the “time rule,” which divides an
employee’s length of service during marriage by his or her total length of
service with that employer to create a ratio that reflects the community
interest in that spouse’s retirement benefits. (In re Marriage of Lehman
(1998) 18 Cal.4th 169, 176 (Lehman).) Under the usual formulation in
Family Code section 2550, courts then divide the community portion of the
retirement benefits equally between the parties.7
To receive payments from DFAS in accordance with a qualifying court
order, a former spouse must have been married to the servicemember for 10
or more years during which the servicemember performed at least 10 years of
creditable military service. (10 U.S.C. § 1408(d)(1)−(5) [commonly referred to
as “the 10/10 rule”].) Where the division of military benefits is computed as a
percentage of a servicemember’s disposable retired pay, the former spouse’s
7 Parties are not bound by the “time rule” and 50/50 division and may
stipulate to a different division of retirement benefits. (See In re Marriage of
Thorne & Raccina (2012) 203 Cal.App.4th 492, 504 (Thorne & Raccina)
[former wife’s stipulation to 16 percent of servicemember’s military retired
pay was valid and enforceable notwithstanding her ignorance of the “time
rule”].)
11
payments are proportionally increased by postretirement cost of living
adjustments. (10 U.S.C. § 1408(d)(8).) With some exceptions, “[t]he total
amount of the disposable retired pay of a member payable [to the former
spouse] under all court orders pursuant to subdivision (c) may not exceed 50
percent of such disposable retired pay.” (10 U.S.C. § 1408 (e)(1).)
Effective December 23, 2016, Congress revised the USFSPA to add
what is commonly referred to as the “frozen benefit rule.” (10 U.S.C.
§ 1408(a)(4)(B).) This rule limits the disposable retired pay that can be
divided for dissolutions finalized before a servicemember retires.8 Where
this rule applies, a servicemember’s retired pay for purposes of a property
division with a former spouse is calculated as a hypothetical amount of
retired pay that imagines the servicemember had retired on the date of the
dissolution decree. (Ibid.) In other words, retired pay that is to be divided is
fixed based on the servicemember’s rank and years of service on the
dissolution date, regardless of the ultimate pension at retirement.
B. Question Presented and Standard of Review
Todd and Holly read the MSA’s language dividing Todd’s military
pension differently. According to Holly, the parties agreed to a fixed number
of $2,551 per month. She maintains that the MSA quoted relevant inputs
listed in the USFSPA to reflect their intent that her share would not exceed
50 percent of Todd’s disposable retired pay in compliance with the statute.
And although the $2,551 figure was expressly described as being based on
8 The frozen benefit rule was introduced in section 641 of the National
Defense Authorization Act (NDAA) of 2017 and clarified at section 624 of the
NDAA of 2018. (Pub.L. No. 328-641 (Dec. 23, 2016) 130 Stat. 2000; Pub.L.
No. 91-624 (Dec. 12, 2017) 131 Stat. 1283.)
12
“the foregoing data,” no erroneous input data preceded that phrase so as to
merit a later correction.
By contrast Todd construes the pension and survivor benefit sections of
the MSA together. He claims the parties laid out general criteria affecting
division of his pension by citing to the 2017 NDAA’s definition of retired base
pay, with the figures being merely illustrative of data that would become
known only at a later time. “If the intent was to award Holly a set dollar
amount,” Todd reasons, “it would have been easy . . . simply to state ‘Holly is
awarded $255[1]’, but they did not do so.” In Todd’s view, “the parties used
the phrase ‘based on the foregoing data’ to clarify their intent regarding how
to calculate Holly’s share.”
In other words, we face a question of contract interpretation. Did the
parties intend to divide Todd’s military pension equally using USFSPA
inputs, or did they intend for Holly to receive a fixed dollar amount? In
construing the MSA, we apply the rules governing the interpretation of
contracts generally. (In re Marriage of Iberti (1997) 55 Cal.App.4th 1434,
1439 (Iberti).) Our primary goal is to effectuate the mutual intention of the
parties at the time the contract was formed. (In re Marriage of Nassimi
(2016) 3 Cal.App.5th 667, 688.) If possible, we rely on the contract alone,
using each clause to interpret the others to give effect to every part. (Ibid.)
“When the language of a contract is ‘clear, explicit, and unequivocal, and
there is no ambiguity, the court will enforce the express statutory language.’ ”
(Ibid.; see In re Marriage of Hibbard (2013) 212 Cal.App.4th 1007, 1012–
1013.) “An agreement is not ambiguous merely because the parties (or
judges) disagree about its meaning. Taken in context, words still matter . . . .
‘[W]ritten agreements whose language appears clear in the context of the
13
parties’ dispute are not open to claims of “latent” ambiguity.’ ” (Abers v.
Rounsavell (2010) 189 Cal.App.4th 348, 356.)
Even so, “[a] term of the agreement is ambiguous if it is susceptible of
more than one reasonable interpretation.” (Iberti, supra, 55 Cal.App.4th at
p. 1439.) “Provided it supports a meaning to which the language is
reasonably susceptible, extrinsic evidence is admissible to prove the parties’
intent as to ambiguous terms in a marital settlement agreement.” (Ibid.)
“Where no extrinsic evidence is introduced, or the extrinsic evidence is not in
conflict, we independently construe the agreement.” (In re Marriage of Schu
(2014) 231 Cal.App.4th 394, 399 (Schu).)
C. The MSA is Ambiguous
Despite partisan arguments by both parties, the MSA is ambiguous as
to what Holly and Todd intended in awarding Holly $2,551 per month from
Todd’s military pension. As quoted verbatim in the facts, the section of the
MSA discussing Todd’s pension begins with the statement that the
community interest “shall be equitably divided” pursuant to the 2017 NDAA,
whose frozen benefit rule considers Todd’s hypothetical retired pay on the
date of dissolution, increased by cost of living adjustments. It then lists
various items of information including the parties’ social security numbers,
date of marriage, Holly’s eligibility under the 10/10 rule, and consent to
jurisdiction. “Based on the foregoing data,” the MSA states, Holly “is hereby
awarded $2,551 monthly of [Todd’s] disposable military retirement pay.”
Were this all that the MSA stated, we would be inclined to agree with
Holly—there was no “foregoing data” to suggest the $2,551 figure relied on
any particular inputs. Moreover, the parties agreed elsewhere that the MSA
“may or may not result in an equal division of the community property.” The
“reservation of jurisdiction” section mentions that the court would have
14
jurisdiction to “[s]upervise the division of assets as agreed in this Agreement”
without specifying authority to revisit how the pension was divided. In short,
there is nothing in the language discussed above that would suggest anything
other than an agreement on a fixed dollar amount. As Holly notes, parties
may validly agree to unequal property divisions, and an unequal division
does not suggest an inequitable one. (See, e.g., In re Marriage of Simundza
(2004) 121 Cal.App.4th 1513, 1521 [plain language in the stipulation
indicated agreement that wife would receive a fixed dollar amount of $200
from husband’s pension over a 12-year period]; Thorne & Raccina, supra, 203
Cal.App.4th at p. 504 [stipulation unambiguously awarded wife 16 percent of
servicemember’s military pension notwithstanding her claim that she was
unaware of the “time rule”].)
But this is not all the MSA says. Immediately following the $2,551
figure, the MSA goes on to discuss the Survivor Benefit Plan, an annuity
allowing Holly to recover military pension benefits if Todd predeceased her.
Holly could elect to participate in the plan “at the time of [Todd’s] retirement”
and pay the monthly premiums. The survivor benefit plan section explains
the parties’ express intent for Todd’s military benefits to be divided
“consistent with” the USFSPA and reserved jurisdiction for the Superior
Court “to make any orders necessary to effectuate the division of the military
retirement benefits consistent with the [USFSPA].” The section then lists
inputs that turned out to be wrong regarding Todd’s high-3 retired base pay.
Combined with the parties’ express intent to “equitably” divide the military
pension, it seems plausible that the “foregoing data” refers to the incorrect
input data that follows as part of the discussion of the Survivor Benefit
15
Plan.9 (See Civ. Code, § 1641 [courts should construe contractual clauses
together], 1640 [if a written contract fails to express the parties’ real intent
through mistake or accident, erroneous parts of the writing must be
disregarded].)
Thus, the MSA’s plain language is ambiguous.
D. Extrinsic Evidence Supports the Family Court’s Construction
To resolve the MSA’s ambiguity, we look to admissible extrinsic
evidence to prove a meaning to which the contract is reasonably susceptible.
(Iberti, supra, 55 Cal.App.4th at p. 1439.) Here, that foundational evidence is
undisputed, although the parties seek to draw widely divergent inferences
from the uncontroverted facts. (Medical Operations Management, Inc. v.
National Health Laboratories, Inc. (1986) 176 Cal.App.3d 886, 891 [“[I]t is
only when the foundational extrinsic evidence is in conflict that the appellate
court gives weight to anything other than its de novo interpretation of the
parties’ agreement.”].)
Holly said two things in her declarations—(1) she accepted the fixed
dollar amount in consideration for reduced spousal support (see, e.g., Adams
v. Adams (1947) 29 Cal.2d 621, 624); and, somewhat conflictingly, (2) they
could have used percentages, but it was Todd “who thought it best to have the
amount included in our MSA rather than spend the money later to have it
correctly prepared.” Todd stated in his declaration that the parties sought to
divide the pension equally. In support of his RFO, he lodged an e-mail chain
9 As Holly suggests, it is possible to read “equitable” as merely referring
to the frozen benefit rule, which as a matter of equity does not allow a former
spouse to claim the benefit of postdissolution promotions that increase a
military pension. But that is not the only reading nor the ultimate
interpretation we adopt after consulting relevant extrinsic evidence.
16
that was created a month before the MSA’s execution, in which Todd’s
counsel suggested the $2,551 number.
In claiming that she accepted $2,551 per month from Todd’s pension as
consideration for reduced spousal support, Holly does not point to any
documents or reference any conversations between the parties before the
MSA was signed that would support her professed understanding. California
follows the objective theory of contracts, in which a party’s undisclosed intent
or understanding is irrelevant to contract interpretation. (Kim v. TWA
Construction, Inc. (2022) 78 Cal.App.5th 808, 836, citing Founding Members
of the Newport Beach Country Club v. Newport Beach Country Club, Inc.
(2003) 109 Cal.App.4th 944, 956.) Because Holly’s undisclosed subjective
interpretation does not create a conflict in the admissible extrinsic evidence,
our review is de novo. (See Schu, supra, 231 Cal.App.4th at p. 399.)
As Holly herself referenced in her declaration, there was e-mail
communication between the parties before the MSA was signed. She is
correct that Todd’s counsel thought it best to include a fixed number. But a
full reading of that e-mail chain overwhelmingly supports the trial court’s
conclusion that the MSA intended an equal division of the community’s
interest in Todd’s pension.
On May 31, 2019, Todd’s counsel William Trausch wrote to Holly’s
attorney, Edward Satuloff, indicating that Todd agreed to continue spousal
support until he retired. Although Todd submitted his retirement request
more than a year earlier, he was still waiting for approval and anticipated
retiring on March 1, 2021. Trausch attached a proposed stipulated judgment
for Satuloff’s review.
17
Satuloff replied that same day. He began in a cooperative tone:
“Thank you for preparing the judgment packet. I have
forwarded it to Holly . . . appreciate Todd agreeing to the
ongoing spousal support . . . .”
Reflecting that the parties had reached agreement on virtually every issue,
he went on to identify the “[o]nly remaining concern,” which was “the specific
language needed for the division of the military pension.” Satuloff proposed
some language for Trausch’s review that he believed reflected “the standard
language now used in MSAs.” Setting aside the issue of Holly’s payment of
Survivor Benefit Plan premiums, Satuloff believed the following language
would be “neutral” while ensuring “the proper division”:
“ ‘The parties have a community interest in Husband’s
military retirement benefits due to Husband’s military
service during marriage. Husband is active duty at the
time of the parties’ Judgment. Husband earned at least 10
years of service between the Date of Marriage and the Date
of separation which satisfies the 10/10 Rule. Within 30
days of signing this Agreement, Husband and Wife shall
jointly retain a QDRO attorney to prepare a Domestic
Relations Order which divides the community interest in
the military benefits.
“ ‘The community interest in the military benefits shall be
calculated using the time rule formula where the
numerator is the number of months of creditable service
earned between the Date of Marriage and the Date of
Separation and the denominator is the total number of
months of creditable service earned as of the date the
parties’ Judgment is entered with the court.
“ ‘The parties acknowledge that for purposes of calculating
the community interest, DFAS will use the high-3 salary
and years of service earned as of the parties’ date of
Judgment. [Husband shall be required to provide the
QDRO attorney with salary information and years of
service history to determine the high-3 salary and months
of service as of the parties’ date of Judgment.
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“ ‘There is also a community interest in the Survivor
Benefit Plan and Wife shall be named as the beneficiary of
the Survivor Benefit Plan in the Domestic Relations Order.
The parties intend that the division of military benefits
shall be consistent with Uniformed Services Former
Spouses’ Protection Act (“USF[S]PA”) in effect as of the
date of Judgment, and the court shall reserve jurisdiction
to make any orders necessary to effectuate the division of
the military benefits consistent with the USF[S]PA.’ ”
Satuloff’s proposed language tracked the USFSPA’s frozen benefit rule
and the “time rule” to determine the community’s interest in Todd’s military
pension. Had this language been incorporated into the MSA, a QDRO
attorney would have used relevant inputs to derive the community’s share
thirty days after the judgment and suggest a 50/50 division under Family
Code section 2550. The second paragraph of Satuloff’s e-mail refutes Holly’s
suggestion that the parties negotiated the pension division and spousal
support together. Satuloff’s reference to the “[o]nly remaining concern”
indicates that spousal support had been resolved before the parties turned to
language dividing the pension.
Responding to Satuloff a few days later, Trausch wrote:
“Here is revised Stipulated Judgment Attachment in the
Ferrari matter with Revisions at pages 6‒8 regarding
divisions of retirements. Revisions to Todd’s Military
retirement language was taken directly from DFAS website
materials and sample orders. This language will likely
preclude the necessity of another separate Court order
dividing the military retirement and fees/costs of same.
“Holly’s military retirement amount of $2,551. was
calculated as follows:
“Date of Marriage: 10-27-1995[;]
“Date of Separation: 06-01-2016[;]
“Marital period: 20 years 8 months or 248 months[;]
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“Numerator: 248 months[;]
“Todd’s length of military service to March 1, 2021: 27
years 7 months or 331 months[;]
“Denominator: 331 months[;]
“Calculation: (248/331)/2 = .374 x 100% = 37.4% (Holly’s
community interest)[;] [and]
“Benefit Calculation: 37.4% of $6,821. = $2,551. (Holly’s
benefit[.])”
Trausch’s response to Satuloff contains so many input errors it could
serve as a cautionary tale against lawyers performing anything but the
simplest of mathematical calculations. The marital period was 247 months,
not 248. Todd’s military service was 312 months to the date of the
dissolution judgment, which was the relevant date under the frozen benefit
rule. Dividing these two figures gives Holly a 39.58 percent share in the
retirement, not 37.4 percent. Todd’s retired base pay was also inflated, as
Trausch appeared to use an erroneous high-3 estimate without applying the
statutory multiplier (a product of Todd’s years of service and 0.025, see 10
U.S.C. § 1409(b)−(c)).
Through this thicket of mistakes, what is nevertheless clear is that
Trausch was proposing to use the “time rule” to calculate the community’s
interest in Todd’s pension (dividing months of service during marriage by
total months of service) and thereafter to divide the community’s share
equally between the parties. (See Lehman, supra, 18 Cal.4th at p. 176; Fam.
Code, § 2550.) While hindsight has proven him wrong, Trausch was under
the impression that using inputs “taken directly from DFAS website
materials and sample orders” would “likely preclude the necessity of another
separate Court order dividing the military retirement and fees/costs of same.”
It strains credulity to think that Trausch, as Todd’s lawyer, would reject the
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language proposed by Satuloff and instead insist on some arbitrary fixed
dollar amount that would give Holly substantially more than she would
receive using the formula her own lawyer had suggested. To the contrary,
Trausch proposed $2,551 per month to Holly, imagining this would result in
an equal division based on Satuloff’s formula and avoid the need to obtain a
later court order.
This e-mail exchange establishes that the parties intended an equal
division of the community’s share in Todd’s military pension, but simply
flubbed the numbers. Contrary to Holly’s suggestion that adjusting the
$2,551 figure would reopen the entire MSA, the e-mail chain demonstrates
that the parties resolved the issue of spousal support—with Todd paying
until he retired—before fine-tuning language dividing the military pension.10
What the parties agreed to was not a fixed number, but rather an equitable
division based on the time rule and applicable USFSPA inputs.
Kristine Colburn, the QDRO attorney, corrected Trausch’s input errors.
She first estimated the pot of retirement benefits that was to be divided
under the USFSPA. Applying the frozen benefit rule, Colburn estimated
Todd’s retired base pay as if he had retired on the dissolution date. (10
U.S.C. § 1408(a)(4)(B).) Working backwards, she averaged out the highest 36
months of basic pay to reach a high-3 figure of $6,581. She applied a
10 To the extent the MSA is ambiguous, Holly claims the e-mails support
her, not Todd. She contends Todd rejected the formula division proposed by
Satuloff because a fixed number would eliminate the annual cost of living
adjustments baked into the USFSPA. (See 10 U.S.C. § 1408(d)(8).) But there
is no nonspeculative basis to assume that the parties agreed on a fixed dollar
amount calculated using entirely incorrect inputs to avoid annual cost of
living adjustments. Trausch’s suggestion that using the $2,551 figure would
likely avoid the need for a separate court order appears to accept Satuloff’s
proposed formula as the appropriate methodology to divide the community’s
share.
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multiplier to that number to arrive at his hypothetical retired base pay
amount of $4,278 under the frozen benefit rule. (10 U.S.C. § 1409(b)−(c).) To
determine the community interest in that retired pay, Colburn applied the
usual “time rule.” With 247 months of marriage that overlapped with Todd’s
312 months of military service at the time of dissolution, the marital share of
Todd’s military pension was 79.17 percent. Holly would get half of that
share, or 39.58 percent. (Lehman, supra, 18 Cal.4th at p. 176; Fam. Code,
§ 2550.) Taking from this amount the estimated $278 in monthly survivor
benefit premiums that Holly agreed to pay, Colburn determined that Holly
was entitled to $1,415 per month of Todd’s military pension.
Accepting this analysis, the family court modified the judgment to
reflect this division. In so doing, it did not err.
E. Holly’s Counterarguments
Holly’s various arguments do not persuade us otherwise. First, she
contends that the MSA cited the NDAA factors not to suggest any particular
formula, but rather to prove that Holly would not receive more than 50
percent of Todd’s disposable retired pay from DFAS, as is statutorily
required. (10 U.S.C. § 1408(e)(1).) We agree to a point—the MSA does not
expressly identify any particular formula used to divide the military pension.
It cites the 2017 NDAA to say the pension “shall be equitably divided” under
the frozen benefit rule. The frozen benefit rule, in turn, is not a formula but
merely an input that imagines Todd’s hypothetical retirement pay as if he
retired on the date of dissolution. (10 U.S.C. § 1408(a)(4)(B).) Although the
MSA uses the word “equitably,” it nowhere expresses an intent to award a
50/50 share of the community’s interest, calculated using the time rule.
But that only gets Holly so far. Direct payment is nowhere mentioned
in the MSA or in the parties’ e-mails before its execution. There is no
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reasonable basis to conclude that the parties referenced the NDAA merely to
show they would comply with an unarticulated statutory requirement.
Indeed, at the risk of engaging in more lawyer-math, Holly would receive
more than 50 percent of Todd’s retired base pay if the $2,551 figure were
affirmed.11 More to the point, irrespective of the MSA’s express language,
extrinsic evidence establishes that the parties intended to divide Todd’s
military pension 50/50 using the “time rule” and USFSPA inputs rather than
settle on a fixed dollar amount representing a different percentage.
Next, Holly maintains that the trial court overlooked the plain
language of the MSA. The MSA awarded her $2,551 of Todd’s pension “based
on the ‘foregoing data,’ ” but there was no input data preceding this amount.
Although a high-3 figure of $6,821 was stated under the separate “Survivor
Benefit Plan” section, that did not precede the $2,551 figure. True enough—
we found the MSA ambiguous in part because on its face, this construction
was reasonable. Holly is correct that our role is to ascertain what is written,
not to insert what is omitted. (See Iberti, supra, 55 Cal.App.4th at p. 1440.)
But in resolving contractual ambiguity, we may consider extrinsic evidence
supporting a meaning to which the MSA is reasonably susceptible. (Id. at
p. 1439.) Once we consider the admissible extrinsic evidence, it becomes
clear that the $2,551 figure was indeed derived using an erroneous high-3
11 Holly makes the same mistake Trausch did in his e-mail. Todd’s
retired base pay is his high-3 amount adjusted by a multiplier. (10 U.S.C.
§ 1409(b)−(c).) That multiplier comes to about 65 percent of his high-3
average (0.025 x 26 years of service). Even using the MSA’s inflated high-3
average of $6,821, Todd’s retired base pay amounts to $4,419. $2,551 is more
than 50 percent of this amount.
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input of $6,821 per month—the very input listed under the Survivor Benefit
Plan section of the MSA.12
Finally, Holly points out that Todd did not timely file a set aside
motion. “After entry of a judgment incorporating a marital settlement
agreement, any ground for avoiding the agreement must be pursued by
statutory remedies to set aside the judgment, coupled with a motion to vacate
the ‘tainted’ portions of the underlying agreement.” (Hogoboom & King, Cal.
Practice Guide: Family Law (The Rutter Group 2022) ¶ 9:446; see Code Civ.
Proc., § 473, subd. (b) [six month deadline to set aside on grounds of mistake,
inadvertence, surprise, or excusable neglect]; Fam. Code, § 2122, subd. (e)
[one year deadline to set aside for mistake].) But Todd did not seek to set
aside the MSA on grounds of mistake. He instead sought to clarify its
language to effectuate the parties’ actual intent at the time of contracting.13
Civil Code section 3399 allows a court to revise a contract’s express terms
“[w]hen, through . . . a mutual mistake of the parties, or a mistake of one
party, which the other at the time knew or suspected, a written contract does
not truly express the intention of the parties.” That is all that happened
here.
12 While Holly suggests in passing that the court relied “upon
incompetent evidence,” she does not offer legal authority or explain through
argument why contemporaneous e-mails on the very clause at issue
constituted incompetent extrinsic evidence of the parties’ intent.
13 It is immaterial that a non-California court concluded that a property
division was not void even if erroneously calculated. (Gross v. Wilson (Alaska
2018) 424 P.3d 390, 396−397.) The question is not whether the MSA is
voidable for mistake or even void, but rather whether the parties intended to
give Holly a fixed dollar amount or an equal share based on statutorily
required inputs.
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DISPOSITION
The order is affirmed. Todd is entitled to recover his costs on appeal.
DATO, J.
WE CONCUR:
McCONNELL, P. J.
O’ROURKE, J.
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