Janice Hillyer v. Charles Hillyer ( 1999 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
April 15, 1999 Session
JANICE CAROLINE (SHERRILL) HILLYER
v. CHARLES LEE HILLYER
Appeal from the Circuit Court for Montgomery County
No. C3-805 James E. Walton, Judge
No. M1998-00942-COA-R3-CV - Filed March 13, 2001
The issues in this post-divorce case arise because the former husband’s waiver of military retirement
pay in order to receive disability benefits cut off the former wife’s receipt of her portion of the
retirement pay which had been awarded to her in the distribution of marital property. The former
wife filed a contempt petition, seeking to reinstate her portion of the benefits. The trial court, relying
on Gilliland v. Stanley, an unpublished opinion from this court, denied her motion for contempt. In
light of our Supreme Court’s holding in Johnson v. Johnson, 37 S.W.3d 892 (Tenn. 2001), we
reverse and remand.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Reversed and Remanded
PATRICIA J. COTTRELL , J., delivered the opinion of the court, in which WILLIAM C. KOCH , JR., and
WILLIAM B. CAIN , JJ., joined.
Christine Zellar Church, Clarksville, Tennessee, for the appellant, Janice Caroline (Sherrill) Hillyer.
Mark A. Rassas, Clarksville, Tennessee, for the appellee, Charles Lee Hillyer.
OPINION
This appeal involves issues relating to military retirement pay. Federal law authorizes state
courts to treat the “disposable retired pay [of a service member] . . . either as property solely of the
member or as property of the member and his spouse,” 10 U.S.C. § 1408(c)(1),1 thus allowing
division of such retirement benefits as marital property upon the dissolution of a marriage. However,
“disposable retired pay” does not include amounts deducted from that pay as a result of a waiver of
1
In 1982, Congress adopted the Uniformed Services Former Spouses’ Protection Act, codified at 10 U.S.C. §
1408, in response to McCa rty v. McC arty, 453 U.S. 210, 101 S. Ct. 2728 (1981), which held that Federal law pre-empted
the applica tion of state com munity prop erty law to military re tirement pay.
retired pay . . . in order to receive compensation under . . . title 38 [disability pay].” 10 U.S.C. §
1408(a)(4)(B). In order to receive disability pay, a former service member must waive a
corresponding portion of his or her retirement pay. 38 U.S.C. § 5305. Disability pay is exempt from
federal, state and local taxation, and this exemption provides an incentive for a former service
member to make the waiver which otherwise would have no economic impact. Mansell v. Mansell,
490 U.S. 591, 583-84, 109 S. Ct. 2023, 2026 (1989).
At the time the case before us was argued, the law was settled that state courts cannot treat
disability pay as marital property subject to division upon divorce. Mansell, 490 U.S. at 594-95, 109
S. Ct. at 2032 (state court could not treat that portion of husband’s total retirement pay which was
disability pay as marital property in its division of property at the time of divorce).2 However, it
remained unsettled whether a post-divorce waiver of retirement pay in exchange for a corresponding
amount of disability pay could reduce a former spouse’s previous award, as marital property, of a
portion of the military retirement pay. That is the issue presented by the facts of this appeal.
Janice Caroline Sherrill Hillyer (“Wife”) was awarded a divorce from Charles Lee Hillyer
(“Husband”) in 1986. The trial court awarded her $400 per month as alimony for “a period of five
(5) years or until the Defendant’s retirement from military service, whichever event occurs first.”
The court also awarded Wife, as part of her share of marital property, “forty per cent (40%) of the
Defendant’s gross military retirement benefits.” A short time after the divorce, Husband retired from
the military and Wife began receiving her 40% of his retirement pay. 3 Shortly thereafter, Husband
became 100% disabled from heart disease and opted to receive veterans’ disability benefits rather
than retirement pay. As a result of Husband’s waiver of retirement benefits, Wife no longer received
any portion of Husband’s income based on his military service.4
In 1988, after the payments based on Husband’s military service stopped, Wife filed a motion
for contempt and sanctions or, alternatively, for modification of the final decree. In a 1989
2
Ironically, after prevailing before the U.S. Supreme Court, Mr. Mansell got no relief from his divorce decree.
On remand, the California C ourt of Ap peals held th at Mr. M ansell had, b y signing the pro perty settlement agre ement,
waived his right to assert that the court ha s exceede d its jurisdiction by awardin g that portion of his disability benefits
to Ms. M ansell. In re Ma rriage of M ansell, 265 Cal. Rptr. 227, 234 (Ct. App. 1989).
3
Because later statements of the trial court indicated that it attempted to set the alimony at the same amount as
the anticipated r etirement be nefits awarde d to Wife, we assume that 40% of Husban d’s retiremen t pay was app roximately
$400 per month.
4
Federal law provided a mechanism by which a former spouse of a military retiree could receive his or her share
of the retirement pay directly from the military. 10 U.S.C. § 1408 (d); see also M ansell, 490 U.S. at 585, 109 S. Ct. at
2027. An election to receive disability benefit s reduces the amount o f retirement pa y by the amo unt of the disab ility
payment, thereby automatically reducing the direct payment to the former spouse. Johnson v. Johnson, 37 S.W.3d 892,
894 (Tenn. 2001).
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memorandum opinion,5 the trial court rejected Wife’s motion for contempt, but stated that it would
modify the divorce decree to provide for the continuation of the $400 monthly alimony payments
for the five year period following the divorce notwithstanding Husband’s retirement, and award her
a judgment for “arrearages.” In so doing, the trial court fashioned a short-term solution, but did not
address the issue of whether Wife was entitled to her previously awarded share of Husband’s
retirement benefits. Husband paid the judgment and the alimony as ordered. When the modified
alimony award terminated, Husband stopped paying anything to Wife.
In 1996, Wife filed a second contempt petition, arguing that the designation of Husband’s
retirement pay as disability benefits deprived her of the payments ordered under the original divorce
decree by reassigning her portion to Husband, who refused to reimburse her. The petition also
sought judgment on the arrearages Husband had not paid.
A hearing was held on April 28, 1998, at which Husband made the following stipulations:
That in 1988, he suffered, on two separate occasions, two separate heart attacks. In
1993, he underwent bypass surgery, 1995, he was diagnosed with congestive heart
failure, in 1996, he became on the list as a heart transplant candidate. He is now
receiving one hundred percent (100%) VA disability. He did not submit an
application for this. When he was in St. Thomas, it is apparently their procedure,
they mailed his records, since he is a veteran, to the VA and the VA designated him
as one hundred percent (100%) disabled. He receives no military retirement pay.
The only monies that he receives is his VA disability and he has no other income
from other sources.
Relying on Gilliland v. Stanley, No. 3258, 1997 WL 180587 (Tenn. Ct. App. Apr. 16, 1997)
(no Tenn. R. App. P. 11 application filed), an unpublished case from this court, the trial court denied
the relief sought on June 2, 1998. Wife commenced this appeal.
I.
Shortly after argument of this case, this court heard argument in another case involving the
same issue and was informed that several other cases involving the issue were in various stages of
litigation or appeal.6 A few months later, the Western Section of this court released its opinion in
Johnson v. Johnson, No. 02A01-9901-CV-00015, 1999 WL 713574 (Tenn. Ct. App. Sept. 14, 1999),
and held that relief was not available under Tenn. R. Civ. P. 60.02 to a former wife whose monthly
share of the former husband’s military retirement benefits was reduced by $181.00 per month by his
waiver of a portion of his retirement pay for disability benefits. The Supreme Court of Tennessee
5
The trial court’s order, which should have accompanied the memorandum opinion and was to be prepared by
the wife’s then co unsel, was not e ntered until mu ch later. W ife has since retain ed new co unsel.
6
See Smith v. S mith, No. M 1998-0 0937-C OA-R3 -CV, 20 01 W L 2425 62 (Te nn. Ct. App. Mar. 13, 2001) (no
Tenn. R. App. P. 11 application filed).
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then granted permission to appeal in Johnson and has now issued its opinion which guides our
decision in the case before us. Johnson v. Johnson, 37 S.W.3d 892 (Tenn. 2001).
In Johnson, the parties entered into a written marital dissolution agreement (MDA) which
awarded the wife “$1,845.00 per month as support” until the husband retired, at which time she
would “receive one-half of all military retirement benefits due” the husband. Johnson, 37 S.W.3d
at 894. After the husband’s retirement, the wife received $1,446 per month, half of the husband’s
retirement pay, for about a year. The husband “later elected, pursuant to federal law, to receive a
portion of his retirement pay in the form of tax-free disability benefits. His retirement pay was
reduced by the amount of those disability benefits to avoid double payment. . . .” Id. As a result,
the wife’s share of the retirement pay was also reduced. The wife petitioned the court to modify the
final decree, asking that the husband be ordered to pay alimony in the same amount her payments
had been reduced, or in the alternative, to modify the judgment pursuant to Tenn. R. Civ. P. 60.02(5)
(a party may be relieved from judgment for “any other reason justifying relief”). Id. The trial court
and this court denied relief to the wife, holding that Gilliland v. Stanley, which denied relief to the
former spouse under very similar circumstances, controlled. The Supreme Court granted Ms.
Johnson’s application to appeal, and reversed.
The Supreme Court noted, that while alimony awards may be modified under certain
circumstances, “court orders distributing marital property are not subject to modification.” Id. at
895. The Court then held that military retirement pay is marital property subject to distribution and
that the payments to Ms. Johnson were periodic distributions of marital property rather than alimony.
As such, the division of retirement pay was not subject to later modification. Id. Rather than
deciding that this conclusion precluded relief to Ms. Johnson, the Court determined that it had the
opposite effect.
We are of the opinion, however, that Ms. Johnson’s characterization of her petition
as one seeking “modification” is incorrect. The whole of her argument and the
remedy she seeks indicate that she desires no more than that which she originally
received at the time of Mr. Johnson’s retirement: one half of the military retired pay
he was entitled to receive at the time of his retirement. . . . [Her argument] alleges
that the parties agreed to a course of action, that the trial court ordered that action,
and that Mr. Johnson has failed to perform as ordered.
Id. at 895-96.
The Court looked to the terms of the MDA, and determined that “all military retirement
benefits” was not defined in the document, but found the phrase to be unambiguous. Id. at 896. The
Court found that “all military retirement benefits” has a usual, natural, and ordinary meaning, “all
amounts to which the retiree would ordinarily be entitled as a result of retirement from the military.”
Id. Accordingly, the Court held that “Ms. Johnson’s interest in those ‘retirement benefits’ vested
as of the date of entry of the court’s decree and could not be unilaterally altered.” Id. at 897.
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It further held:
That rule of law, however, is the very reason Ms. Johnson prevails in this case. Once
Ms. Johnson obtained a vested interest in Mr. Johnson’s “retirement benefits,” Mr.
Johnson was prohibited from taking any action to frustrate Ms. Johnson’s receipt of
her vested interest. “Nothing in the [USFSPA] suggests that a court’s final award of
a community property interest must [or may] be altered when the military retiree
obtains [disability benefits].” Gaddis, 957 P.2d at 1013.7 Mr. Johnson’s failure to
compensate Ms. Johnson to the extent of her vested interest in his retirement benefits
constituted a unilateral modification of the MDA and the divorce decree in violation
of Towner.8
We hold that when an MDA divides military retirement benefits, the non-military
spouse has a vested interest in his or her portion of those benefits as of the date of the
court’s decree. That vested interest cannot thereafter be unilaterally diminished by
an act of the military spouse. Such an act constitutes an impermissible modification
of a division of marital property and a violation of the court decree incorporating the
MDA.
In so holding, we are undeterred by the United States Supreme Court’s ruling in
Mansell v. Mansell, 490 U.S. 581 (1989). Mansell held that the USFSPA “does not
grant state courts the power to treat as property divisible upon divorce military
retirement pay that has been waived to receive veterans’ disability benefits.” The
trial court’s decree did not divide Mr. Johnson’s disability benefits in violation of
Mansell.
Id. at 897-898 (citations omitted).
The Court remanded the case to the trial court with instructions that the trial court “enforce
its decree to provide Ms. Johnson with the agreed upon monthly payment . . . without dividing Mr.
Johnson’s disability pay,” having already determined that Ms. Johnson’s vested interest in half of
Mr. Johnson’s retirement pay entitled her to $1,446.00 per month. Id. at 898.
II.
The case before us differs from Johnson in one respect: the Hillyers did not have an MDA.
Ms. Hillyer’s right to a share of Mr. Hillyer’s retirement pay arises from the order of the court
entered as part of their divorce proceedings in 1986. The fact that the Hillyers did not have an MDA
7
In re Ma rriage of G addis , 957 P.2d 1010 (Ariz. Ct. App. 199 7).
8
Towner v. Towner, 858 S.W.2d 888 (Tenn. 1993).
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does not affect the application of Johnson to this case.9 The conclusion reached by the Supreme
Court in Johnson is based to a large extent on the principle that a distribution of marital property
cannot be later modified by one of the parties.10 This principle applies because the property division
became a judgment of the court. Towner v. Towner, 858 S.W.2d 888, 890 (Tenn. 1993). Thus, it
is the incorporation of the MDA into the court order which made it nonmodifiable. Id.; Penland v.
Penland, 521 S.W.2d 222, 224 (Tenn. 1975). The Supreme Court’s language in Johnson affirms this
reasoning, “the divorce decree’s apportionment of that marital property is not subject to
modification.” Johnson, 37 S.W.3d at 895. Similarly, the court’s primary holding in Johnson makes
the absence of an MDA irrelevant: “We further hold that Ms. Johnson’s interest in those “retirement
benefits” vested as of the date of the court’s decree and could not be unilaterally altered.” Id. at 897.
The Court further held that an act of a military former spouse which reduces or eliminates a vested
interest of the non-military former spouse in retirement pay “constitutes an impermissible
modification of a division of marital property and a violation of the court decree incorporating the
MDA.” Id. It is just as much an impermissible modification and violation of the court decree where
the division of property was ordered by the court without an MDA.11
III.
Like Ms. Johnson, Ms. Hillyer brought this action “in order to recoup the loss . . . of
support,” in the form of deferred distribution of marital property, that resulted from her former
spouse’s election to receive disability benefits and his failure to directly make up that loss. We hold
that at the entry of the divorce decree Ms. Hillyer obtained a vested right to forty per cent (40%) of
Mr. Hillyer’s “gross military retirement benefits” and is entitled to enforce that decree.
Accordingly, we reverse the trial court’s denial of relief to Ms. Hillyer and remand this case
to the trial court for proceedings necessary and appropriate, consistent with this opinion, to enforce
9
W e note that the case relied upon by the Suprem e Court, In re Ma rriage of G addis , involved a court ordered
property d ivision rather tha n an agreem ent by the par ties. Gadd is, 957 P.2d at 1010.
10
Judicial mo dification ma y be availab le under T enn. R. Civ. P . 60.02 in limited circumstances, but “the bar
for attaining relief is set very high.” Johnson, 37 S.W.3d at 395 n.2.
11
W e are unpersuaded by Mr. Hillyer’s attempts to characterize the waiver of his retirement pay in exchange
for disability benefits as something other than his unilateral act. Having failed to retract the waiver o r to otherwise
disavow the benefits of the substitution of the disability pay, he cannot seek to be relieved of its consequences on the
basis he did not “act.” We note that, pursuant to 3 8 U.S.C . § 5305 , Husban d was only ab le to receive th e disability
benefits “upon the filing . . . of a waiver of so much of [his] retired or retirement pay as is equal in amount to such
pension or compensation.” Further, he has failed to pay his former spouse the money that she stopped receiving dire ctly
from the military, certainly a voluntary and unilateral act on his part. In Johnson, the Supreme Court distinguished other
effects on the amounts received, noting, “of course, normal fluctuations in the value of military retirement benefits not
occasioned by the acts of the parties cannot constitute a unilateral deprivation of a vested inte rest. See Ga ddis, 957 P.2d
at 1011 (describing fluctuation in military spouse’s gross retirem ent pay). But cf. Pierce, 982 P.2d at 999 (likening
retirement benefits diminished by the unilateral act of military spouse to a marital asset that has simply “decli ned in
value”).” Johnson, 37 S.W.3d at 397 n.4.
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its 1986 decree distributing marital property, including consideration of the amount his monthly
obligation to her as well as her request for arrearages. Husband shall be credited with such amounts
as he paid in alimony in accordance with the trial court's order extending the duration of the alimony
obligation. As the Supreme Court directed in Johnson, such enforcement shall be accomplished
without dividing Mr. Hillyer’s disability pay. We interpret that instruction as only limiting the trial
court’s ability to order direct payments to Ms. Hillyer from the payor of Mr. Hillyer's benefits, which
we understand to be the Veterans Administration.
Costs are taxed to the appellee, Charles Lee Hillyer, for which execution may issue if
necessary.
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PATRICIA J. COTTRELL, JUDGE
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