IN RE: the MARRIAGE OF Jack S. ORR

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Court of Appeal, Second District, Division 2, California.

IN RE: the MARRIAGE OF Jack S. ORR, Jr., and Ellen M. Orr. In re the Marriage of Jack S. ORR, Jr., Petitioner and Respondent, v. Ellen M. ORR, Respondent and Appellant.

Civ. 55093.

Decided: July 30, 1979

Morton L. Greenberg and Mortimer Braus, Beverly Hills, for respondent and appellant. Everett L. Miller, Long Beach, for petitioner and respondent.

Wife appeals an interlocutory judgment of dissolution and asserts, inter alia, that the trial court erred in finding husband's veterans disability benefits to be his separate property.   We affirm the interlocutory judgment.

The parties married in 1959.   In December 1976 husband filed a petition for dissolution.   At the time of the trial in 1977 husband was 53 years old and wife was 43.   There were no children.   Wife earned $300 a month as a domestic.   Husband left the Navy in 1973 after 20 years' service and was classified as unemployable because of a heart condition.   In his financial statement husband declared $1,047 total monthly income, comprised of $297 in social security disability benefits, $703 in Veterans Administration compensation at a 100 percent rate for wartime service-connected disability and unemployability (38 U.S.C., §§ 310, 314, 355), and $47 in disabled veteran's dependency benefits which would terminate upon divorce (38 U.S.C., §§ 315, 3012).   At trial, counsel for wife stipulated that husband's social security disability benefits and Veterans Administration disability compensation were his separate property.

The interlocutory judgment entered in March 1978 confirmed the social security benefits and disability compensation as husband's separate property.   It divided the community assets by awarding husband the family residence, miscellaneous furniture, an automobile, and two bank accounts;  by awarding wife an automobile and one bank account;  and by ordering husband to pay the outstanding obligation on wife's automobile and to pay $3,000 to wife within 90 days.   The court denied spousal support and rejected continuing jurisdiction over the cause.

1. Disability Benefits.   On appeal, wife asserts that the trial court erred in classifying husband's veterans disability compensation as separate property, that she is not bound by her counsel's stipulation, and that the cause should be remanded to the trial court for determination of her community interest in this asset.   Wife bases her contention upon the California Supreme Court's holding In re Marriage of Stenquist (1978) 21 Cal.3d 779, 148 Cal.Rptr. 9, 582 P.2d 96, decided August 1978, five months after entry of the interlocutory judgment at bench.   The issue in Stenquist was whether a community interest existed in a disabled serviceman's retirement compensation calculated on the basis of rank, longevity of service, and disability.  (10 U.S.C., §§ 1201, 1401.)   The court concluded that the amount of compensation, insofar as it merely replaced ordinary retirement compensation, was a community asset divisible upon dissolution, and that only the excess amount of compensation above the amount he would have received as retirement pension without disability could be properly characterized as the serviceman's separate property.  (In re Stenquist, supra, 21 Cal.3d at pp. 782–789, 148 Cal.Rptr. 9, 582 P.2d 96, citing In re Marriage of Fithian (1974) 10 Cal.3d 592, 604, 111 Cal.Rptr. 369, 517 P.2d 449.)

But Stenquist, supra, is not the latest word on community interest in federal benefits, for in January of this year the United States Supreme Court in Hisquierdo v. Hisquierdo (1979) 439 U.S. 572, 99 S.Ct. 802, 59 L.Ed.2d 1, reversed a California Supreme Court ruling that California's community property laws applied to retirement benefits payable under the Railroad Retirement Act (45 U.S.C., § 231, et seq.), and held that no community interest attached to an employee's benefits payable under the Act.   In finding federal preemption in the allocation of a federal entitlement, the United States Supreme Court put primary emphasis upon the Act's anti-attachment provision.  “The critical terms here,” said the court, “include a specified beneficiary protected by a flat prohibition against attachment and anticipation.”  (Hisquierdo, supra, 439 U.S. at ––––, 99 S.Ct. at 809, 59 L.Ed.2d at p. 11.)   This prohibition states:

“Notwithstanding any other law  ․ ․ ․  of any state  ․ ․ ․,  no annuity or supplemental annuity shall be assignable or be subject to any tax or to garnishment, attachment, or other legal process under any circumstances whatsoever, nor shall the payment thereof be anticipated.  ․ ․ ․”  (45 U.S.C., § 231m.)

The court noted that while Congress amended the Social Security Act in 1975 to create an exception to this and similar federal anti-attachment statutes for child support and alimony (42 U.S.C., § 659), a further amendment in 1977 specifically excluded any community property division from the definition of alimony.  (42 U.S.C., § 662(c).)   The court concluded that the purpose of section 231m was to ensure that retirement benefits actually reach the employee beneficiary and that state laws which interfere with this result must, under the Supremacy Clause, defer to federal allocation of benefits.   (U.S.Const., art. VI, cl. 2;  see also Wissner v. Wissner (1950) 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424.)

Hisquierdo, supra, is directly relevant to the issue here—whether Veterans Administration disability benefits are community or separate property—because of the similarity between the anti-attachment statutes for railroad employees and for veterans.   At bench, husband, eligible for a retirement pension (10 U.S.C., §§ 1201, 1401), elected to waive his retirement pension and receive instead wartime disability compensation from the Veterans Administration under the provisions of the Veterans Benefits Acts (38 U.S.C., §§ 3105, 3104;  310, 314).   The monthly benefit paid him by the Veterans Administration is a flat sum determined on the basis of percentage of disability and unemployability, which in his case is 100 percent.  (38 U.S.C., §§ 314, 355.)   As a recipient of Veterans Administration benefits husband is fully protected by the anti-attachment provision of the Veterans Benefits Acts (38 U.S.C., § 3101), which shields disability benefits from legal process in language at least as strong as that used in section 231m of the Railroad Retirement Act.  Section 3101 states:

“Payments of benefits due or to become due under any law administered by the Veterans' Administration shall not be assignable except to the extent specifically authorized by law, and such payments made to, or on account of, a beneficiary shall be exempt from taxation, shall be exempt from the claim of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary.”  (Emphasis added.)

 While the Social Security Act (42 U.S.C., § 659) allows attachment of Veterans Administration benefits to enforce alimony and child support obligations when such benefits are paid to a former serviceman who has waived a portion of his retirement pay in order to receive Veterans Administration compensation (42 U.S.C., § 662(f)(2)), this provision does not apply to community property obligations.   The statute declares that alimony

“․ ․ ․  does not include any payment or transfer of property or its value by an individual to his spouse or former spouse in compliance with any community property settlement, equitable distribution of property, or other division of property between spouses or former spouses.”  (42 U.S.C., § 662(c).)

Furthermore, attachment is not allowed against payments made by the Veterans Administration as compensation for service-connected disability, at least when service-connected disability payments wholly displace retirement pay.  (42 U.S.C., § 662(f)(2).)   Thus, on two grounds, each sufficient in itself—(1) the claim is not for alimony but for community interest;  (2) the benefits arise entirely from service-connected disability—the anti-attachment provision of the Veterans Benefits Acts protects the husband's benefits against the community claim of the wife.   We conclude that Congress made veterans disability benefits, like railroad retirement benefits, free from the community property claims of spouses.  (38 U.S.C., § 3101.)

Our conclusion that Congress intended the disabled veteran to be the sole beneficiary of Veterans Administration disability benefits finds added support in the provision by Congress for a separate benefit for a veteran's dependent spouse (38 U.S.C., § 315), a benefit which terminates on the last day of the calendar year in which annulment or divorce occurs (38 U.S.C., § 3012(b)(2)).   In construing a similar provision in the Railroad Retirement Act (45 U.S.C., § 231d(c)(3)), the court in Hisquierdo, supra, noted that Congress had incorporated a limited community concept in its scheme for allocation of benefits, but had purposefully abandoned this concept in terminating spousal benefits upon divorce.  (Hisquierdo, supra, 439 U.S. at pp. –––– – ––––, ––––, 99 S.Ct. at pp. 809–810, 812, 59 L.Ed.2d at pp. 12–13, 16.)

Finally, we note that Congress could have provided for recognition upon dissolution of marriage of a serviceman's spouse's community interest in disability and retirement benefits, if it had chosen to do so.   The United States Supreme Court pointed out that in 1978 Congress enacted special legislation permitting garnishment of civil service retirement benefits for community property purposes.  (Hisquierdo, supra, 439 U.S. at p. ––––, 99 S.Ct. at p. 812, 59 L.Ed.2d at p. 16;  5 U.S.C., § 8345(j).)   But Congress, presumably for good and sufficient reason, has enacted no comparable provision for benefits payable by the Veterans Administration, and, until Congress chooses to act, its present anti-attachment policy is controlling.

 We conclude, therefore, that Congress intended Veterans Administration disability benefits to remain the separate property of the disabled spouse.   Under the Supremacy Clause, California's community property laws must defer to the specific provision of the Veterans Benefits Acts (38 U.S.C., § 3101) designed to protect those benefits.   Consequently, the wife had no community property interest in the husband's military disability benefits, and the stipulation of counsel and the judgment of the trial court were correct.   Because of our view of the substantive merits of the controversy, we do not reach the issue of the binding effect of wife's counsel's stipulation that husband's veterans disability benefits were separate property.

2. Division of Community Property.   Wife contends that various miscalculations by the trial court in valuing the community's assets and obligations resulted in an unequal division of the community property.   Our review of the record persuades us that the interlocutory decree achieved a substantially equal division of the property of the parties.  (Civ. Code, § 4800.)

 3. Spousal Support.   Finally, wife asserts the trial court abused its discretion in failing to award her spousal support upon dissolution and in terminating continuing jurisdiction over the cause, thereby divesting itself of any opportunity to award her spousal support in the future.   In view of husband's total disability and unemployability, and of wife's gainful employment (Civ. Code, § 4801), we find no abuse of discretion.

The judgment is affirmed.

FLEMING, Acting Presiding Judge.

COMPTON and BEACH, JJ., concur.