Military Pension Division and Application of Res Judicata

BY MARK E. SULLIVAN AND DANIEL JONES

Two 2020 Washington Court of Appeals opinions dealing with military pension division demonstrate the continued resilience of res judicata as a decisional tool for the courts and contain valuable lessons for domestic practitioners.

Both In re Marriage of Weiser¹1 In re Marriage of Weiser, 14 Wn. App. 2d 884, 475 P.3d 237. and In re Marriage of Daniels²2 In re Marriage of Daniels, No. 53224-7-II, 2020 Wash. App. LEXIS 3277, 2020 WL 7365807 (Wash. Ct. App., Dec. 15, 2020) (unpublished). involved disability payments. In Weiser, payments were in the form of Department of Veterans Affairs (VA) disability compensation under U.S.C. Title 38. In Daniels, the payments were military disability retired pay (MDRP) under U.S.C. Title 10, Chapter 61. In neither case was the disability payment divisible as a matter of law under the Uniformed Services Former Spouses’ Protection Act (USFSPA).³3 See 10 U.S.C. § 1408(a)(4)(A)(ii) (disability compensation exclusion), and 10 U.S.C. § 1408(a)(4)(A)(iii) (exclusion regarding military disability retired pay). And yet in both cases the Court of Appeals upheld orders for division.

Background: Disability Payments and the U.S. Supreme Court

The U.S. Supreme Court first dealt with divorce and military disability payments in Mansell v. Mansell.⁴4 Mansell v. Mansell, 490 U.S. 581, 594-95 (1989). It held that divisible retired pay does not include amounts waived to obtain VA disability pay, since those benefits are not “disposable retired pay” under 10 U.S.C. § 1408(a)(4), the section of USFSPA which prescribes what can be divided by a state court in a divorce proceeding.

The Mansell case illustrates application of res judicata to bar subsequent attack on an unappealed order—with the result that even a decision that is wrong on the law can result in an enforceable obligation if it is not appealed.⁵5 The doctrine of res judicata applies when a previous final judgment is identical to the challenged action in A) subject matter, B) cause of action, C) persons and parties, and D) the quality of the persons for or against whom the claim is made. Res judicata bars a party from relitigating claims which have already been decided. It also bars collateral attack; i.e., a claim or motion filed in a different case. In re Marriage of Mason, No. 50009-4-II Consolidated with No. 52959-9-II, 2021 Wash. App. LEXIS 513 (Wash. Ct. App., March 9, 2021) (unpublished), citing In re Marriage of Shortway, 4 Wn. App. 2d 409, 423, 423 P.3d 270 (2018). That is what happened to Maj. Gerald Mansell. While ruling on the trial court’s inability to divide waived military retired pay, the Court nevertheless stated in a footnote that if the California appellate ruling that upheld division of Maj. Mansell’s VA disability pay was based on res judicata, the matter was settled under state law and there would  be no federal constitutional issue.⁶6 Id. at 586 n.5 (“Whether the doctrine of res judicata, as applied in California, should have barred the reopening of pre-McCarty settlements is a matter of state law over which we have no jurisdiction.”) The California state court relied on this footnote to affirm the trial judge’s enforcement of the Mansell settlement agreement, ruling that its prior decision was based on res judicata, not upon a division of the pension.⁷7 In re Marriage of Mansell, 217 Cal. App. 3d 219, 265 Cal. Rptr. 227 (Cal. App. 1989). The Supreme Court denied review of this ruling.⁸8 Mansell v. Mansell, 498 U.S. 806 (1990).

The Supreme Court revisited military pension division, disability payments, and remedies in 2017 in Howell v. Howell,⁹9 Howell v. Howell, 137 S. Ct. 1400 (2017). stating that courts cannot order indemnification of former spouses who receive reduced pension-share payments due to the retiree’s election of VA disability compensation.¹⁰10 The election of VA disability compensation by a retiree requires the waiver of an equivalent amount of retired pay under 38 U.S.C. § 5304-5305. Howell did not involve either res judicata or a settlement requiring the retiree to indemnify the former spouse for the pension-share reduction.

Dissolution and Negotiated Property Distribution Agreements: Weiser

Andrew and Michelle Weiser divorced in 2011. They divided equally Andrew’s military pension in a court order that provided: “In the event the husband’s military retirement benefit shall be reduced or offset by disability pay, such a reduction shall not reduce the amount the wife is entitled to receive each month under the terms of this order.”¹¹11 In re Marriage of Weiser, 14 Wn. App. 2d 884, 887, 475 P.3d 237 (2020) (hereafter “Weiser”). In 2012, Andrew received a 30 percent disability rating by the VA, his pension was reduced accordingly, and he began paying Michelle one-half of the remaining pension instead of one-half of the entire (pre-waiver) pension.

In 2017, Michelle moved for enforcement to recover the portion of Andrew’s pension due to her. Andrew responded that under USFSPA and Howell, the court couldn’t order indemnification. Andrew did not move under CR 60 to modify or reopen the decree.

The case was heard by a commissioner who ruled that the court would enforce the decree “because the clear and unambiguous language of the Agreement, demonstrated that the parties intended for Michelle to receive the amounts indicated.”¹²12 Id. at 891. The commissioner subsequently entered a “Military Retirement Order” requiring Andrew to continue paying 45 percent of the community portion of his full pension. It did not require payment of any portion of Andrew’s disability compensation.

Upon Andrew’s revision motion, the superior court refused to change the commissioner’s ruling, concluding that Howell did not apply because the parties had both negotiated the agreement. The court’s findings stated, “By the terms of their agreement, the husband agreed to reimburse the wife for any sum that she lost due to the waiver” and “[Andrew] failed to do so.”¹³13 Id. Andrew appealed the order. He argued that under Mansell, Howell, and Perkins,¹⁴14 Perkins v. Perkins, 107 Wn. App. 313, 26 P.3d 989 (2001) (upholding judge’s ordering military member to pay civilian spouse the same amount as her lost share of his retired pay, as “permanent compensatory spousal maintenance”). the court erred when it granted Michelle’s motion to enforce and when it found that he had agreed to reimburse Michelle for any amount she lost due to the disability waiver. Michelle argued that Howell does not prohibit indemnification and only applies to property divisions imposed by the court.

The Court of Appeals held that application of res judicata was dispositive and that the judge properly concluded that the agreement required Andrew to reimburse Michelle for any amount she lost due to the disability waiver. It also found no error in the ruling that Andrew had agreed to reimburse Michelle for any amount lost due to the disability waiver.

The court also ruled that a trial court lacks the authority to modify even its own decree in the absence of conditions justifying the reopening of the judgment, noting that a matter that has been adjudicated by a competent court may not be pursued further by the same parties. Thus, under the doctrine of res judicata, a party cannot, through a response to a motion to enforce, reopen the settlement agreement as adopted in the dissolution decree. The court also decided that res judicata protected the finality of the unappealed prior order even where the court’s enforcement of that order resulted in a property division that contradicted federal and state law. Legal errors, according to the court, do not overcome the res judicata effect of prior unappealed final judgments.

Dissolution and Negotiated Property Settlement Agreements: Daniels

Unlike Weiser, the trial court in Daniels did not divide a military pension or impose indemnification terms at a contested hearing. As part of a post-dissolution enforcement action, the parties entered into an agreement in order to obtain an equal division of retirement assets.

Rachell Bonds and Nathaniel Daniels divorced after 14 years of marriage; Bonds was an Army captain at the time, and their settlement divided six retirement accounts into equal shares. It stated that the spouse with the greater-valued accounts would equalize the division by paying the difference to the other spouse. Neither Daniels’ civilian pension nor Bonds’ military retirement was to be divided. Valuation of the accounts showed that Bonds’ retirement accounts were worth more, and she owed Daniels.

In 2012, Bonds had not yet divided or paid the agreed-upon portion of her retirement accounts, and Daniels filed a motion to enforce the dissolution decree. Since Bonds’ accounts did not contain sufficient funds, she asked the trial court to divide her military retirement. Granting her request, the court ordered her to pay Daniels $593.22 per month for more than 20 years. The order did not include any limitations as to the source of the money, and granted the trial court continuing jurisdiction in the event of any reduction of Daniels’ part of the pension.

In 2016 Bonds began receiving pension payments, and the Defense Finance and Accounting Service (DFAS) began paying Daniels $593.22 a month. In 2018, however, the Army determined that Bonds was disabled and eligible for military disability retired pay (MDRP). She began receiving non-divisible MDRP instead of regular divisible pension payments and, as a result, DFAS stopped sending monthly payments to Daniels.

Daniels filed a motion to enforce the decree and the 2014 military retirement order. He also moved under CR 60(b)(6) and (11) to vacate the property award and spousal maintenance provisions, requesting an award of new spousal maintenance or an order requiring Bonds to pay the balance of her debt from other sources. Bonds filed her own CR 60(b) motion to vacate the retirement property division provision and argued that the trial court could not divide disability retirement or order indemnification under Howell. The trial court entered an order enforcing the judgment against Bonds.

Bonds appealed, arguing that the trial court’s order was erroneous as a matter of law because it violated Howell by ordering her to indemnify Daniels for his share of the disposable retired pay that she was no longer eligible to receive. In other words, legal errors overcome res judicata.

The appellate court disagreed, finding that Bonds did not appeal the divorce or the 2013-14 orders, nor did she contest the 2014 military pay division order. Thus, the doctrine of res judicata was held to apply, and the trial court’s order remained enforceable.

Lessons Learned from Weiser and Daniels

What is to be learned from these two decisions? For the lawyer representing the service member or retiree under Washington law, there are two takeaways:

• When faced with a court’s order for indemnification, file an appeal. As the Supreme Court’s decision in Howell states, the trial court lacks the power to order indemnification. Do not allow the res judicata effect of the unappealed lower court order to prevent you from raising this error of law under Howell.
• When negotiating a settlement, be sure to avoid agreement on indemnification in the event that there is a reduction in retired pay due to disability.

On the other hand, when the lawyer represents the former spouse, there are four rules for settlement:

• First, state clearly what the parties anticipate. For example, the preface might read: “The parties recognize the possibility of a reduction in Wife’s pension-share amount if Husband elects VA disability compensation or if he receives a disability retirement. They have made provisions for indemnification below.” These factual assertions will give context to the decisions made in the agreement.
• Second, state the duty of the service member or retiree, John Doe. Require that John reimburse or compensate Jane. Do not prohibit John from taking VA disability compensation; such a prohibition is probably unconstitutional and would likely be ignored anyway.
• Third, be sure the language is unambiguous. There needs to be a clear statement requiring reimbursement such as, “If there is any reduction in Jane Doe’s pension share or amount, John Doe will promptly reimburse her for the loss.” If the parties intend to cover consequential damages, rather than just the reduction in Jane Doe’s payments, then the above sentence would end with “reimburse her for any loss or expenses, including consequential damages and interest at the statutory rate.”
• Finally, make sure that both parties execute the settlement with the proper formalities and that it is incorporated into the divorce decree or entered by the court as a consent order. If it is not appealed (and who appeals a settlement?), it becomes res judicata as to the parties and, under Weiser and Daniels, its requirements are binding on the parties through the doctrine of res judicata.

NOTES    

1.  In re Marriage of Weiser, 14 Wn. App. 2d 884, 475 P.3d 237.

2.  In re Marriage of Daniels, No. 53224-7-II, 2020 Wash. App. LEXIS 3277, 2020 WL 7365807 (Wash. Ct. App., Dec. 15, 2020) (unpublished).

3.  See 10 U.S.C. § 1408(a)(4)(A)(ii) (disability compensation exclusion), and 10 U.S.C. § 1408(a)(4)(A)(iii) (exclusion regarding military disability retired pay).

4.  Mansell v. Mansell, 490 U.S. 581, 594-95 (1989).

5.  The doctrine of res judicata applies when a previous final judgment is identical to the challenged action in A) subject matter, B) cause of action, C) persons and parties, and D) the quality of the persons for or against whom the claim is made. Res judicata bars a party from relitigating claims which have already been decided. It also bars collateral attack; i.e., a claim or motion filed in a different case. In re Marriage of Mason, No. 50009-4-II Consolidated with No. 52959-9-II, 2021 Wash. App. LEXIS 513 (Wash. Ct. App., March 9, 2021) (unpublished), citing In re Marriage of Shortway, 4 Wn. App. 2d 409, 423, 423 P.3d 270 (2018).

6.  Id. at 586 n.5 (“Whether the doctrine of res judicata, as applied in California, should have barred the reopening of pre-McCarty settlements is a matter of state law over which we have no jurisdiction.”)

7.  In re Marriage of Mansell, 217 Cal. App. 3d 219, 265 Cal. Rptr. 227 (Cal. App. 1989).

8.  Mansell v. Mansell, 498 U.S. 806 (1990).

9.  Howell v. Howell, 137 S. Ct. 1400 (2017).

10. The election of VA disability compensation by a retiree requires the waiver of an equivalent amount of retired pay under 38 U.S.C. § 5304-5305.

11. In re Marriage of Weiser, 14 Wn. App. 2d 884, 887, 475 P.3d 237 (2020) (hereafter “Weiser”).

12. Id. at 891.

13. Id.

14. Perkins v. Perkins, 107 Wn. App. 313, 26 P.3d 989 (2001) (upholding judge’s ordering military member to pay civilian spouse the same amount as her lost share of his retired pay, as “permanent compensatory spousal maintenance”).