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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Thomas E. Jordan v. Cheryl A. Jordan (2/12/2021) sp-7504
Notice: This opinion is subject to correction before publication in the P ACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
THOMAS E. JORDAN, )
) Supreme Court No. S-17490
Appellant, )
) Superior Court No. 3AN-17-11213 CI
v. )
) O P I N I O N
CHERYL A. JORDAN, )
) No. 7504 - February 12, 2021
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Eric A. Aarseth, Judge.
Appearances: Rhonda Butterfield and Douglas Ryan, Wyatt
& Butterfield LLC, Anchorage, for Appellant. Steven
Pradell, Steven Pradell & Associates, Anchorage, for
Appellee.
Before: Bolger, Chief Justice, Winfree, Maassen, Carney,
and Borghesan, Justices.
WINFREE, Justice.
I. INTRODUCTION
Following a divorce trial the superior court unevenly divided a marital
estate. The smaller share recipient appeals several points related to findings about
alleged marital waste, calculations concerning the parties' future earning capacities, and
consideration of federal disability benefits. We affirm the court's marital waste ruling,
----------------------- Page 2-----------------------
but we remand for further proceedings addressing its calculation of the parties' earning
capacities and its consideration of federal disability benefits.
II. FACTS AND PROCEEDINGS
A. Overview
Thomas and Cheryl Jordan married in 1993. Thomas worked as a dentist;
through a military commission, he began working for the federal Public Health Service
in 1988. He retired in 2015 with a military pension and veteran (VA) disability benefits.
He also had accumulated about $582,000 in retirement accounts by 2017. Cheryl
worked as an administrative assistant before leaving employment in 2006. She had
accumulated about $655,000 in retirement accounts by 2017.
In 2004 they purchased a home in Sitka; in 2006 they purchased a second
home in Sitka to use as their residence and began using the first home as a rental
property. Cheryl also began operating a bed and breakfast (B&B) business on the lower
floor of their residence. They purchased a duplex in Ketchikan in 2014, reserving one
unit for occasional personal use and renting out the other unit.
In September 2017 Cheryl moved to the Ketchikan duplex, and she filed
for divorce in October. In January 2018 Cheryl sought interim relief. She requested,
among other things, possession of the Ketchikan duplex. Thomas did not oppose her
request, but he argued that Cheryl had committed marital waste by abandoning the B&B.
Cheryl replied that she felt she had no choice but to leave Sitka because she feared for
her life. Arguing that Thomas had "[u]nilaterally closed . . . down" the B&B and that he
should not have done so "without [her] approval," she then asked the court to award her
interim possession of their Sitka residence so she could operate the B&B. At a May
evidentiary hearing the court said that Cheryl could "shut down" the B&B because "she
will not be operating it this year." The court granted interim possession of the Ketchikan
duplex to Cheryl and the Sitka residence to Thomas, along with other interim relief.
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Trial was held over three days in August. The parties stipulated to value
the Sitka properties at $750,000 for the residence and $430,000 for the rental. The
superior court adopted the stipulated values, noting that the residence's property value
was separate from the B&B's business value.
Cheryl requested a 60/40 marital asset division. Cheryl testified that she
believed Thomas could continue working; she contended that he is "young" and
"healthy," that he provided no documentation indicating he is unable to work, and that
he could "probably do administrative work . . . as well." Thomas contended there was
no reason to depart from a 50/50 division. He argued that Cheryl could work another 5
to 15 years in an office or running a B&B. Thomas stressed that the most relevant
factors for the court's consideration were income-producing property, age, health, and
Cheryl's unreasonable depletion of marital assets. He contended that earning capacity
was not as significant a factor because his capacity was "coming to a close" due to his
health issues.
Relevant to this appeal, trial issues included the parties' future earning
capacities, the Ketchikan duplex's value, the B&B's business value and operation, and
the reasons Cheryl left Sitka.
B. The Parties' Earning Capacities And Health
Thomas was 56 years old at the time of the trial; he testified that he had
worked for the federal Public Health Service as a dentist from 1988 until retiring in
November 2015 and that he then had taken a different full-time dentist job. Thomas
described a number of his health issues, including arthritis in his hands, vision problems,
fainting spells, and "lower back problems," including "compressed" discs from "sitting
and twisting and turning, doing dentistry for 30 years." When asked whether he could
continue working in "administrative functions" as he gets older, Thomas said he could
not. Thomas stated that he "would love to retire," that he "plan[s] on retiring very soon,"
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and that he was working at the time of trial only to avoid wasting marital assets. He
explained that he receives federal military retirement benefits of $9,430.13 monthly,
including $1,686.13 in VA disability pay.
Cheryl was 55 years old at the time of the trial; she testified that she had not
worked since she left Sitka in September 2017 and that she was in good health. She
stated that she had operated the B&B since 2006 and that its income fluctuated annually.
She described her work history, including her work as an administrative assistant.
Cheryl testified that she had not worked outside the home since 2006 but could easily
obtain an entry-level office job.
C. The Ketchikan Duplex's Valuation
Eachpartyhad an appraiser valuetheKetchikan duplex. Cheryl's appraiser
valued it at $385,000. Thomas's appraiser valued it at $455,000. Neither appraiser
conducted a formal review of the other appraiser's report. Cheryl's attorney indicated
concern because Thomas's appraiser had purchased a property that Cheryl's appraiser
had used for a comparable. The court indicated that it would not exclude Thomas's
appraiser but would take the information "into [the court's] weight."
D. The B&B's Value, Operation, And Alleged Marital Waste
Thomas did not present an expert valuation for the B&B, but he placed the
business's value at $431,607.60. Thomas testified that he had never operated the B&B
but that he had helped with limited tasks on an "emergency basis." Thomas contended
that Cheryl had been the "sole proprietor" and operator of the B&B and that its value
should be held against her because she unreasonably depleted a marital asset when she
left Sitka.
Cheryl's expert valued the B&B at $224,000, factoring in an $18,000
annual allocation for a third-party manager. Cheryl challenged Thomas's waste theory,
stating that she was not motivated by a desire to deprive him of marital property. She
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maintained that it had not been her intent to "abandon the business," that she had hoped
it "would at least still be running until we decided what was going to happen," but that
Thomas had closed it down when she left. Cheryl asked the court to assign Thomas the
B&B's $224,000 value.
E. Findings Of Fact And Conclusions of Law
In January 2019 the superior court issued its findings of fact and
conclusions of law. The court addressed the nine statutory factors for consideration in
1
division of a marital estate.
1 AS 25.24.160(a)(4) requires dividing assets between the parties to "fairly
allocate the economic effect of divorce" and requires considering:
(A) the length of the marriage and station in life of the
parties during the marriage;
(B) the age and health of the parties;
(C) the earning capacity of the parties, including their
educational backgrounds, training, employment skills, work
experiences, length of absence from the job market . . . ;
(D) the financial condition of the parties, including the
availability and cost of health insurance;
(E) the conduct of the parties, including whether there
has been unreasonable depletion of marital assets;
(F) the desirability of awarding the family home, or the
right to live in it for a reasonable period of time, to the party
who has primary physical custody of children;
(G) the circumstances and necessities of each party;
(H) the time and manner of acquisition of the property
in question; and
(I) the income-producing capacity of the property and
(continued...)
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The court noted that the parties were married for over 24 years and that
Thomas at 56 and Cheryl at 55 were in "overall good health with no special needs."
Finding that each was "near the end of their working life," the court placed Thomas's
earning capacity at $200,000 annually, but "limit[ed] his work life as a dentist until 60
years of age due to changes in his eyesight, fine motor skills, lower back pain[,] and
occasional fainting spells." The court placed Cheryl's earning capacity at $50,000
annually until age 65, noting her office and hospitality service experience. The court
characterized their financial condition as "very strong" and noted each had available
low-cost health insurance.
Addressingtheparties' conduct,includingThomas'salleged marital waste,
the superior court stated:
[Cheryl] argues that she had to leave the home for her safety
and that [Thomas] wasted marital income by not continuing
to run the [B&B] from their home. These arguments have no
support in the evidence. [Cheryl's safety] arguments . . . are
speculative at best . . . . The [B&B] was [Cheryl's] business;
once she left the home, there was no one who could
reasonably manage that business.
The court valued the B&B at zero and did not assign it to either party.
The court awarded Thomas the Sitka residence and awarded Cheryl the
Sitka rental. It awarded Cheryl the Ketchikan duplex, using her $385,000 appraisal
value. The court unevenly divided the parties' bank accounts and retirement accounts.
The court awarded Cheryl 37.64%of Thomas's divisible military retirement pay, or 50%
2
of the marital portion of the divisible retirement pay, i.e., the coverture fraction.
1 (...continued)
the value of the property at the time of division; . . . .
2 Wiegers v. Richards-Wiegers , 420 P.3d 1180, 1186 (Alaska 2018) ("We
(continued...)
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The court determined that, apart from Thomas's "greater earning potential
over the next four years," there was "little reason" to depart from an even division. The
court reasoned: "Over the next four years [Thomas] will earn $800,000. Over the next
nine years [Cheryl] will earn $450,000. The difference in income over their working
lives is $350,000, half of which is $175,000." The court accordingly awarded Cheryl an
additional $175,000 to account for the income disparity over their remaining working
careers.
The court noted that although it had no "jurisdiction to divide" Thomas's
VA disability pay, it could consider the "additional income [Thomas] will enjoy over his
lifetime and make other adjustments to ensure a fair and equitable distribution."
Projecting that Thomas would receive $1,686.13 monthly over the expected 24 years of
his lifetime for a total of $485,605.44 in disability pay, the court awarded Cheryl an
additional 37.64% of that total, or $182,781.88. The court explained that adjusting
Thomas's income over his remaining career and life span was equitable because Cheryl
had "no reasonable ability to earn the additional income she enjoyed during" the
marriage.
Thomas sought reconsideration of the approximately 57/43 property
division in Cheryl's favor. Among other points, Thomas argued that the court: (1) failed
to explain why it adopted Cheryl's appraiser's value for the Ketchikan duplex; (2)
misused his VA disability benefits by effectively awarding Cheryl half of a putative
marital portion of the non-divisible asset; (3) misused his potential future income to
2 (...continued)
calculate the marital portion of a benefit using the coverture fraction . . . [,] the numerator
is 'the number of years worked during the period of coverture' and the denominator is
'the total number of years worked.' " (quoting Hansen v. Hansen, 119 P.3d 1005, 1015
(Alaska 2005))).
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award Cheryl a greater share of the marital estate when he had expressed his intent to
retire; and (4) failed to conclude Cheryl had committed marital waste and consequently
assign the B&B's value to her.
The court acknowledged a clerical error in the Ketchikan duplex's value
and increased it to $420,000. The court rejected Thomas's marital waste argument,
calling the"evidenceofunreasonableness insufficient." Thecourtsubsequentlyclarified
that an uneven division was justified "due to the disparity in income over the next few
years" and the "significant transition in terms of [Cheryl's] financial well-being." The
court explained that an additional cash award was "necessary" because for Cheryl to
service "two large mortgages" while living on one-quarter of the income previously at
her disposal would be "extremely difficult." Clarifying that Thomas "will receive 100%
of his disability pay," the court explained that it used "income calculations as a yardstick
to help determine what [Cheryl] needs and what [Thomas] can afford." The court also
explained that it had "used a very conservative measure" for calculating potential future
income and that Thomas "could just as easily move into some other, high-paying
management position."
F. Appeal
Thomas appeals. He argues that the superior court: (1) erred by failing to
conclude that Cheryl had unreasonably depleted the B&B marital asset and assigning its
value to her; (2) erred when considering and calculating the parties' future earning
capacities; and (3) erred by awarding her the equivalent of a marital portion of his
disability benefits.
III. STANDARD OF REVIEW
"The equitable division of marital assets involves three steps:
(1) determining what property is available for distribution, (2) finding the value of
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3
the property, and (3) dividing the property equitably." "The first step, characterizing
property . . . , involves mixed questions of law and fact; 'we review the superior court's
4 We review the
legal conclusions de novo and its factual findings for clear error.' "
second step, valuation of property, for clear error, and the third step, equitable allocation
of property, for abuse of discretion.5 "A property division is an abuse of discretion if it
is clearly unjust; it will also be set aside if it is based on a clearly erroneous factual
finding or mistake of law."6
IV. DISCUSSION
A. The Superior Court Did Not Clearly Err By Determining Cheryl Had
Not Unreasonably Depleted A Marital Asset.
"Alaska Statute 25.24.160(4)(E) instructs trial courts to consider the
conduct of the parties, including whether there has been unreasonable depletion of
marital assets, in dividing marital property."7 "The elements of unreasonable depletion
[i.e. marital waste] are (1) use of [marital] property for the spouse's own benefit, (2) at
3 Limeres v. Limeres , 320 P.3d 291, 296 (Alaska 2014).
4 Wiegers, 420 P.3d at 1182 (quoting Engstrom v. Engstrom , 350 P.3d 766,
769 (Alaska 2015)). This includes determinations of unreasonable dissipation of marital
assets. See Stanhope v. Stanhope , 306 P.3d 1282, 1288 (Alaska 2013) (reviewing for
clear error finding that one spouse wasted marital assets); Elliot v. James , 977 P.2d 727,
733 (Alaska 1999) (holding "court's finding that neither party unreasonably depleted
marital assets [was] not clearly erroneous").
5 Wiegers, 420 P.3d at 1182.
6 Wagnerv.Wagner, 386 P.3d 1249,1251 (Alaska2017); seealso Engstrom,
350 P.3d at 769 ("An abuse of discretion occurs if the court considers improper factors,
fails to consider relevant statutory factors, or assigns disproportionate weight to some
factors while ignoring others.").
7 Elliott, 977 P.2d at 733.
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a time when the marriage is breaking down (either before or after separation), [and]
(3) with an intent to deprive the other spouse of the other's share of the marital
8
property." "[A]ll three of the identified elements are not necessarily present in every
case."9
Thomas contends that the superior court erred by failing to determine that
Cheryl had unreasonably depleted a marital asset when she left the B&B unattended, and
he argues that unreasonable depletion was the logical conclusion flowing from the
court's related findings concerning his conduct. He points to the court's finding that
when Cheryl left there was "no one who could reasonably manage that business." But
that finding related to Cheryl's claim that Thomas had committed marital waste, and it
does not require the court to conclude that Cheryl had committed marital waste.
Thomas cites three Alaska cases as support for his argument. In the first,
10
a spouse vandalized marital property; in the second, a spouse sold marital property in
violation of a court order and collected rent without paying maintenance costs on marital
11 and in the third, a spouse failed to make house payments and ultimately
rental property;
8 Id. ; see also Partridge v. Partridge , 239 P.3d 680, 686 n.21 (Alaska 2010)
("The term 'depletion' is generally reserved for cases where one spouse used marital
property for his or her own benefit with the intent to deprive the other spouse of his or
her share of the marital property.").
9 Jones v. Jones, 942 P.2d 1133, 1140 n.7 (Alaska 1997).
10 Stanhope v. Stanhope, 306 P.3d 1282, 1288 (Alaska 2013) (affirming
court's finding that spouse wasted marital assets by vandalizing home, despite
"conflicting oral accounts of the house's condition").
11 See Hockema v. Hockema, 403 P.3d 1080, 1094 (Alaska 2017)
(determining that it was within court's discretion to consider parties' conduct in marital
asset allocation).
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12
placed the parties' home in foreclosure. Thomas also cites other jurisdictions' cases
13
concerning business closures or lost profits.
Given our deference to the superior
court's weighing of evidence, these cases are unpersuasive.
Cheryl's leaving the B&B without management does not compare with
purposefully vandalizing or selling marital property, collecting rent without maintaining
the property, or failing to make mortgage payments. Even though the superior court was
unconvinced by Cheryl's arguments that she left Sitka out of fear for her safety, it still
could find insufficient evidence of misconduct amounting to marital waste. The court
may have favorably weighed Cheryl's testimony describing her intended efforts to
minimize financial impact. Alternatively, the court may have credited her testimony
about dates the B&B would not have been fully run based on past reservations.
Similarly, the court may have agreed that Thomas could have hired someone to operate
the B&B or used the space as a rental property and avoided the depletion.
The superior court did not explicitly discuss the three unreasonable
depletion elements, but we analyze those elements and conclude that its determination
is merited. Only one element is clear from the facts: the conduct in question - Cheryl's
leaving Sitka, with no one else being reasonably able to manage the B&B - occurred
when the marriage was breaking down. The record lacks any evidence that Cheryl either
used the B&B for her own benefit or derived any tangible, personal benefit by leaving
12 Oberhansly v. Oberhansly , 798 P.2d 883, 885 (Alaska 1990) (upholding
uneven property division because, among other reasons, court "properly considered
[spouse's] fault in allowing most of the household debts to fall in default and in paying
personal debts out of marital assets").
13 Scala v. Scala, 59 A.D.3d 1042, 1043 (N.Y. App. Div. 2009) (affirming
determination that closing masonry business constituted wasteful dissipation of assets);
In re Marriage of Thomas, 608 N.E.2d 585, 587 (Ill. App. 1993) (upholding ruling that
spouse dissipated marital property by causing or allowing marital business devaluation).
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it unattended. Although all three unreasonable depletion elements need not be present,
based on the two missing elements the court was entitled to determine there was
insufficient evidence of unreasonable depletion.
B. It Was An Abuse Of Discretion To Award Cheryl An Additional
$175,000 FromTheMarital EstateBasedOnTheAsserted Differences
In The Parties' Future Earning Capacities.
The superior court considered Thomas's income over both his remaining
working career and his expected life span and attempted to calculate "reasonable
estimates to capture the additional income [Thomas] will enjoy fromwhich [Cheryl] will
not benefit." The court found that Thomas would earn "approximately $200,000 per
year. The court limits his work life as a dentist until 60 years of age due to changes in
his eyesight, fine motor skills, lower back pain[,] and occasional fainting spells. . . .
[Cheryl] has no limitations to her ability to work until she is 65 years of age." It awarded
Cheryl an additional $175,000, explaining that the amount represented Thomas's "status
and rank earned primarily during the marriage" and that Cheryl had "no reasonable
ability to earn the additional income she enjoyed during the 24 years of marriage."
Contending that the superior court erred by awarding Cheryl the additional
funds, Thomas makes three arguments relating to his intent to retire, the court's analysis
of Cheryl's needs, and the court's mathematical calculations.
1. The court did not fail to consider Thomas's expressed intent to
retire.
Thomas first argues that the superior court abused its discretion by failing
to account for his intent to retire when it considered the parties' future earning capacities.
Thomas maintains that the court "failed to consider the multiple times that [he] had
testified that he had already retired once (Nov. 30, 2015), and [that] he wanted to retire
permanently." Thomas emphasizes that he "explained the multiple medical problems
that directly affected his ability to do his best work" and "that he wanted to stop working
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before he lost his skills." Cheryl notes her contrary testimony that Thomas could work
in the future, and she stresses that he "presented no medical evidence, medical records
or testimony from any professional to support his claim that he could not continue to
work as a dentist or in any capacity in the medical community."
Thomas provided no medical evidence regarding an inability to work, and
the testimony presented involves a credibility determination between Thomas and
Cheryl. We give "particular deference to the trial court's factual findings when they are
based primarily on oral testimony, because the trial court, not this court, performs the
14
function of judging the credibility of witnesses and weighing conflicting evidence."
Absent "definite support" for a party's claims of medical inability to work, a court is
entitled to disbelieve testimony standing alone, particularly if it conflicts with testimony
15 And, contrary to Thomas's contention, the court's written
from the opposing party.
finding "limit[ing] his work life as a dentist until 60 years of age due to changes in his
eyesight, fine motor skills, lower back pain, and occasional fainting spells" reflects that
it considered his testimony concerning his health conditions. Given the lack of support
for Thomas's medical inability to continue working until age 60 and the court's apparent
consideration of his alleged intent, we see no error.
2. The court adequately analyzed Cheryl's needs.
Thomas next challenges the superior court's alleged "failure to do any
analysis" of Cheryl's needs. Arguing that "the trial court is required . . . to make detailed
14 Millette v. Millette , 177 P.3d 258, 261 (Alaska 2018) (quoting Ebertz v.
Ebertz, 113 P.3d 643, 646 (Alaska 2005)), overruled on other grounds by Geldermann
v. Geldermann, 428 P.3d 477, 487 n.52 (Alaska 2018).
15 See Sloane v. Sloane, 18 P.3d 60, 66 (Alaska 2001) (rejecting appeal
argument based upon alleged failure to consider medical concerns affecting ability to
work when no evidence had "conclusively state[d] the consequences of . . . ongoing
health concerns" or clearly stated claimed need for several surgeries).
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16
findings as to what the financially disadvantaged spouse's needs are" he identifies the
factor requiring the court to consider "the circumstances and necessities of each party,"
codified at AS 25.24.160(a)(4)(G). But the court sufficiently considered Cheryl's needs,
particularly the "period of significant transition in terms of her financial well-being"
when she will be servicing "two large mortgages" on a quarter of the income amount
Thomas will have. The court clearly was concerned about the parties' significant income
disparity and the debt associated with the properties awarded to Cheryl, and its findings
are sufficient to show that the court considered the issue.
3. Calculations to adjust the marital estate in Cheryl's favor were
clearly erroneous, but the court did not abuse its discretion by
refusing to reduce the award to present value.
Thomas alternatively challenges the court's mathematical calculations,
raising three alleged mistakes: (1) his actual remaining work life until he turns 60 was
38 months, not 48 months, decreasing the calculation for his gross earnings from
$800,000.00 to $633,333.33; (2) not accounting for the income tax obligations on his
$200,000.00 annual wages over 38 months and for Cheryl's projected income tax
obligation; and (3) not reducing to present value the amount awarded to Cheryl based on
the difference in their future earning capacities.
The superior court generally couched its decision in terms of its discretion
to make an uneven division based on the parties' "disparity in income over the next few
years." We see no error in the court's conceptualization of the issue. But at least two
errors affect the division's fairness. First, the ten-month difference in Thomas's
remainingworking career makes asignificant differencein calculatinghisrelevant future
earning capacity. Cheryl provided no concrete response refuting this alleged error, and
we believe the court should make an adjustment for accuracy. Second, the court should
16 Hockema, 403 P.3d at 1088-89.
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have considered tax consequences or at least provided a pertinent explanation why doing
so was unnecessary. We have held that a court should consider "the immediate and
specific tax consequences of its division of property" if a party has advocated for how
"the tax code and regulations apply to the disposition of property so that the court can
17 The court's future earnings calculations and comparison
make a reasoned decision."
had not been part of the parties' trial presentations, and Thomas had no opportunity -
other than his unsuccessful reconsideration motion - to raise the tax issue.
The third error Thomas alleges is that the superior court abused its
discretion by not reducing to present value the award based on the difference in future
earning capacities. He cites only a military retirement and divorce treatise discussing the
importance of assigning a fixed value to a defined benefit plan. But Thomas's argument,
based on earning capacity in his remaining working career and not on a defined benefit
plan, is unpersuasive; we thus reject this alleged error.
4. Summary of our conclusions about the court's future earning
capacities decisions.
The superior court did not fail to consider Thomas's intent to retire or
Cheryl's financial needs, and it was not required to reduce its award to present value.
But we remand for the court to adjust its calculations to account for the ten-month
difference in Thomas's remaining working career and to consider the tax consequences.
C. Awarding Cheryl The Equivalent Of Half Of A Putative Marital
Portion Of Thomas's VA Disability Benefits Was Improper.
Thomas argues that awarding Cheryl the equivalent of half of a marital
portion of his VA disability pay is prohibited. Cheryl maintains that it was in the
superior court's broad discretion to divide the marital estate in her favor "due to the vast
difference" between her $50,000 and Thomas's $200,000 future earning capacities. The
17 Oberhansly, 798 P.2d at 887.
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court acknowledged that it lacked jurisdiction to divide Thomas's VA disability pay but
explained that it could "consider the additional income [Thomas] will enjoy over his
lifetime and make other adjustments to ensure a fair and equitable distribution of the
property." The court calculated that Thomas would receive $1,686.13 in monthly
disability pay for 24 years, totaling $485,605.44; the court then calculated 37.64%of that
total - the coverture fraction the court had calculated for Thomas's federal retirement
- and awarded Cheryl an additional $182,781.88. After Thomas challenged the court's
award as a division of his VA disability benefits, the court clarified that he would receive
100% of his VA disability pay but that the court had used the "income calculations as a
yardstick to help determine what [Cheryl] needs and what [Thomas] can afford."
In Guerrero v. Guerrero we explained marital division of military
18 Relevant to this appeal, VA disability pay is "a
retirement pay and disability benefits.
function of the member's VA disability rating and the member's number and type of
19 "Historically a member's receipt of VA disability payments was
dependents."
20 But in 2004
contingent on the member waiving an equal amount of retired pay."
Congress "modif[ied] the VA waiver requirement and its consequences" by providing
for "concurrent receipt" of retired pay and disability benefits "for certain classes of
eligible retirees."21
One program is concurrent retirement and disability pay (CRDP), "a
phase-in program allowing qualifying disabled veterans to receive VA disability pay
18 362 P.3d 432, 438-41 (Alaska 2015).
19 Id. at 439.
20 Id.
21 2 M ARK E. S ULLIVAN, T HE MILITARY DIVORCE HANDBOOK : A P RACTICAL
GUIDE TO REPRESENTING MILITARY PERSONNEL AND THEIR FAMILIES 673 (3d ed. 2019).
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while waiving incrementally smaller amounts ofretirement pay and providing for receipt
22
of full retirement for all qualified disabled veterans pay by 2014." CRDP
"ameliorat[es] the unfairness of unilateral changes in military pension division orders by
retirees who, after the fact, obtain VA disability compensation and thus reduce the share
23 Thomas emphasizes that he "receives VA disability
of the former spouse."
compensationconcurrently with his fulldisposableretired pay"and that Cheryl thus "has
not 'lost' any part of her portion of [his federal] retirement."
1. Preemption of the VA disability benefits division
Under the Uniformed Services Former Spouses Protection Act (USFSPA)
"state courts 'may treat disposable retired pay payable to a member . . . either as property
solely of the member or as property of the member and [the member's] spouse in
24 But VA disability "is not subject to
accordance with the law of the jurisdiction.' "
property division because it is excluded from the definition of disposable retired pay
under USFSPA."25 In Mansell v. Mansell the U.S. Supreme Court held that 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."26
Following Mansell, in Clauson v. Clauson we held that state courts do not
have the power to "equitably divide veterans' disability benefits received in place of
22 Guerrero, 362 P.3d at 439.
23 SULLIVAN, supra note 21, at 674.
24
Guerrero, 362 P.3d at 440 (quoting 10 U.S.C. § 1408(c)(1) (emphasis
omitted)).
25 SULLIVAN, supra note 21, at 671 (citing 10 U.S.C. § 1408(a)(4)(A)(ii)).
26 490 U.S. 581, 594-95 (1989).
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27
waived retirement pay." In that case a husband waived his military pension to collect
disability benefits, effectively ending his former wife's share of his pension amounting
28 In response the superior court entered an order requiring the husband
to $168 monthly.
to pay his former wife an amount replacing her share of his waived military retirement
29
pay. We vacated the modification order because it had the effect of dividing disability
benefits.30 We explained that USFSPA "prohibits" state courts "from distributing this
type of military benefit to a former spouse when allocating property upon divorce."31 We
also considered the separate but related question whether federal law precludes state
courts from "considering the economic impact that a waiver of military retirement pay
and corresponding receipt of disability pay has on the parties to a divorce."32 We held
that when equitably allocating propertyupon divorce, federal law does not precludestate
courts "from considering . . . the economic consequences of a decision to waive
retirement pay in order to collect disability pay."33 But we explained that "courts should
only consider a party's military disability benefits as they affect the financial
circumstances of both parties."34
27 831 P.2d 1257, 1262 (Alaska 1992).
28
Id. at 1258.
29
Id. at 1259.
30
Id. at 1264 ("Disability benefits should not, either in form or substance, be
treated as marital property subject to division upon the dissolution of marriage.").
31 Id. at 1262.
32 Id.
33 Id. at 1264.
34 Id.
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More recently, in Howell v. Howell the U.S. Supreme Court applied
Mansell to reverse a ruling impermissibly treating waived military retirement pay as
35 In Howell the original divorce decree awarded the veteran's spouse
divisible property.
50% of the veteran's total retirement pay; 13 years later the veteran waived a share of the
retirement pay to receive disability benefits, thereby reducing the former spouse's
share.36 The Arizona family court ordered the veteran to indemnify the former spouse
for the loss caused by the waiver of retirement benefits, and the Arizona Supreme Court
affirmed.37 The Supreme Court rejected this attempt to qualify the order dividing
property as a "reimbursement" or "indemnification," noting that the decision rested
entirely on restoring the portion lost from the waiver.38 The court thus held that federal
law preempts state courts from ordering indemnification for the loss caused by the
veteran's waiver of retirement pay to receive disability benefits where "the amount
39
[awarded to the spouse] mirrors the waived retirement pay, dollar for dollar."
Cheryl argues that Mansell, Howell, and Clauson are distinguishable from
this case because they "concern a spouse who waived military retired pay in order to
receive disability pay." Although acknowledging this difference, Thomas argues that
when combined with two other Alaska cases discussed below, Clauson provides the
35 137 S. Ct. 1400, 1405 (2017).
36 Id. at 1404.
37 Id.
38 Id. at 1406.
39 Id. ; see also SULLIVAN, supra note 21, at 681 ("In effect, [ Howell] sounded
the death knell for courts (when . . . express contractual indemnification or res judicata
is not present) requiring reimbursement for former spouses whose share or amount of
military retired pay has been decreased due to election of a VA waiver." (Emphasis
omitted)).
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relevant holding: "[T]rial courts cannot assign a value to . . . non-divisible disability
benefits and award a marital fraction of that value to the nonmilitary or nondisabled
spouse from marital property." Cheryl's proposed factual distinction is not material.
Whether the disability pay is received concurrently or through waiver, Howell preempts
dividing military disability pay in either form or effect, particularly with a "dollar for
dollar"offset.40
2. Considering VA disability benefits in equitable division
Howell preempts the division of VA disability pay, but the question of
permissibly considering such benefits in an equitable division analysis remains. Our
decisions in Guerrero41 42
and Dunmore v. Dunmore establish guidelines for the analysis.
In Guerrero a couple agreed that the husband would allocate half of his
military retirement benefits to his wife, but the superior court concluded that none of the
43
husband's military benefits were disposable retired pay. The wife challenged that
40 Howell, 137 S. Ct. at 1406; see also In re Marriage of Kraft , 832 P.2d 871,
875-76 (Wa. 1992) (holding that under Mansell courts cannot "reduce military disability
pay to present value where the purpose of ascertaining present value is to serve as a basis
to award the nonretiree spouse aproportionately greater shareofthecommunityproperty
ULLIVAN, supra note 21, at 707 ("A dollar-for-dollar setoff
as a direct offset of assets"); S
of marital . . . property against the present value of the disability award is not allowed
because it would be a violation of the Supremacy Clause as an impermissible
infringement on the exclusion of VA disability pay from pension division set out in
[USFSPA]. If the court simply does indirectly what it is barred from doing directly, the
actions of the trial court may not stand up to appellate scrutiny.").
41 362 P.3d 432 (Alaska 2015).
42 420 P.3d 1187 (Alaska 2018).
43 362 P.3d at 434, 437, 442.
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44
determination, arguing in part that the CRDP the husband received was divisible. But
we rejected that argument, clarifying: "CRDP does not change the nature of [the
husband]'s Chapter 61 retirement benefit. [His] benefits come from two sources -
Chapter 61 disability retirement and VA disability payments. Neither source is divisible
45 Still, we determined that it was "an abuse of discretion to refuse to
upon divorce."
reopen the property settlement agreement and conduct a full equitable division
analysis."46 We remanded, noting that the parties' "financial conditions," including
receipt of military disability retirement benefits, "must be considered when equitably
dividing the marital estate and when deciding whether to require alimony"; but we also
cautioned against "simply shift[ing] an amount of property equivalent to the . . .
retirement pay from the military spouse's side of the ledger to the other spouse's side."47
In Dunmore we considered the relevance of Social Security benefits in the
marital property division; like VA disability payments, Social Security benefits are
48 After the superior court "declined to
precluded from division in divorce proceedings.
consider how the couple's Social Security benefits affected a fair distribution" of their
marital property,49 we agreed that "courts may not evade the federal prohibition [on
dividing Social Security benefits] by offsetting the Social Security benefits with a larger
44 Id. at 441.
45 Id.
46
Id. at 445.
47 Id. (quoting Clauson v. Clauson, 831 P.2d 1257, 1264 (Alaska 1992)).
48 420 P.3d 1187, 1191 (Alaska 2018).
49 Id. at 1189.
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50
award of marital property to the other spouse." But we also clarified that courts may
consider the parties' Social Security benefits as financial condition evidence for the
51 We analogized this approach to VA disability benefits, as
marital property division.
52 Reiterating our Guerrero
"retirement assets that by federal law cannot be divided."
holding, we cautioned against shifting property to "directly offset nondivisible disability
pay" but directed courts to consider the parties' "financial conditions," including
"military disability retirement benefits," when equitably dividing the marital estate.53
The key inquiry in this case is whether the superior court properly limited
its consideration of Thomas's VA disability benefits "as they affect the financial
circumstances of both parties"54 without shifting property to "directly offset nondivisible
disability pay."55 Cheryl argues that the court properly considered Thomas's future
income streams to equitably divide the marital estate and considered his future disability
benefits only to determine her needs and what Thomas could afford. Cheryl emphasizes,
and Thomas acknowledges, Guerrero's holding that the parties' financial conditions,
including disability retirement benefits, must be considered in an equitable division.
Thomas contends that Guerrero's holding should be limited to similar
situations in which military retirement pay "was the parties' principal asset"; he points
out that in Guerrero the husband received over $9,000 monthly in disability pay, and the
50 Id. at 1191.
51 Id. at 1190-93.
52 Id. at 1193.
53 Id. (quoting Guerrero v. Guerrero, 362 P.3d 432, 441, 445 (Alaska 2015)).
54 Clauson v. Clauson , 831 P.2d 1257, 1264 (Alaska 1992).
55 Dunmore, 420 P.3d at 1193.
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56
wife received nothing. Thomas argues that in contrast his disability pay "is a small
proportion of his overall income," only "18% of his total pension income[] and only 6%
of his . . . income when his pension is added to earnings of $200,000/year," and that
Cheryl still would receive "over $2,400/month from [his] military pension." Thomas
also reiterates the additional assets Cheryl received in the division, emphasizing that the
"facts in Guerrero are a far cry from the facts in this case." Although this may be a
notable factual distinction in terms of the division as a whole, it is not a convincing
argument for holding that the consideration of financial circumstances is constrained to
contexts in which the parties' primary asset is not divisible.
3. The superior court's equitable division
The superior court considered Thomas's income over his remaining
working career and his expected life span and attempted "reasonable estimates to capture
the additional income [Thomas] will enjoy from which [Cheryl] will not benefit."
Explaining that this "additional income represents his increased status and rank earned
primarily during the marriage," the court noted that she had "no reasonable ability to earn
the additional income she enjoyed during the 24 years of marriage." Under the legal
framework outlined above, the court began with a sound approach when it "consider[ed]
the additional income [Thomas] will enjoy over his lifetime," then attempted to "make
other adjustments to ensure a fair and equitable distribution of the property." The court
emphasized Cheryl's significant financial transition.
We disagree with Thomas's contention that VA disability payments have
no bearing on an equitable division of marital property. We also are satisfied by the
superior court's reasoning that Cheryl's "period of significant transition in terms of her
financial well-being" justifies a "necessary" additional award "for her support to
56
362 P.3d at 441, 445.
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transition from married to single" and being awarded two properties with large
associated debt. This justifies an unequal distribution based upon Thomas's expected
future working income compared to Cheryl's, as discussed previously.
But the superior court's explanation does not cure the legal defect
surrounding its specific treatment of Thomas's VA disability benefits, and neither does
the court's later explanation of its "inartful order." The court referred to its use of the
incomecalculations asa"yardstick,"but by directly offsetting nondivisibledisability pay
"to the dollar and to the penny," the figure was clearly applied as a dollar for dollar
57 When determining an equitable division, courts
distribution prohibited by Howell .
should avoid using figures equivalent to property that is not divisible, such as VA
disability payments or Social Security benefits. Although these benefits may properly
be considered in assessing a party's financial condition as a whole, dollar for dollar or
any equivalent distribution is preempted by federal law.58
We therefore reverse the superior court's $182,781.88 award to Cheryl
from the marital estate that is the cash equivalent of a coverture fraction of a putative
marital portion of Thomas's lifetime future VA disability benefits, and we remand the
issue for renewed consideration.
V. CONCLUSION
WeAFFIRMthesuperiorcourt'sdecisionrejecting Thomas's marital waste
theory. But we VACATE the property division and REMAND for the court to
reconsider its methodology for awarding Cheryl a portion of the marital estate
compensating for future income disparity.
57 Howell v. Howell , 137 S. Ct. 1400, 1406 (2017) (preempting any situation
in which "the amount [awarded to the spouse] mirrors the waived retirement pay, dollar
for dollar").
58 Id.
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