Opinion
As Modified Sept. 6, 1985.
Review Granted November 26, 1985.
Opinions on pages 438-495 omitted.
[217 Cal.Rptr. 472]Hunter & Ryan, Daniel B. Hunter, Thomas J. Ryan, McDonald & Allen, James D. Allen, San Diego, for defendant and appellant.
E. Stephen Temko, San Diego, for plaintiff and appellant.
WORK, Associate Justice.
We are confronted with an omitted pension case (Henn v. Henn (1980), 26 Cal.3d 323, 161 Cal.Rptr. 502, 605 P.2d 10) arising out of a 1966 divorce, requiring us to determine whether, in light of post-McCarty modifications to the federal statutory scheme governing military retirement, California courts have the power to award an ex-spouse an interest in the military retiree's pension. Because we conclude within this context there is no complete federal preemption, we further decide the Federal Uniformed Services Former Spouse Protection Act (FUSFSPA), its language and operation, is not inconsistent with applying state marital property laws to divide the gross amount of a military retiree's pension, and thus such state division is not prohibited.
McCarty v. McCarty (1981) 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589.
All statutory references are to Title 10, United States Code section 1408, unless otherwise specified.
I
Max Thompson appeals a judgment awarding his former wife, Virginia, a 30 percent community interest in his military retirement and alternatively contends the award for future payments, if valid, was erroneously computed as a percentage of his gross, rather than net (disposable) pay. Virginia also appeals, complaining the court erroneously denied her arrearages claim for the period from 1970 (when Max began receiving retirement benefits) and late 1980 (when she filed the present action). She further contends the award of arrearages from the date she filed her [217 Cal.Rptr. 473] present suit to partition the community retirement pay to the date of judgment was incorrectly computed on the net, rather than the gross, retirement benefits Max received. As we shall explain, we conclude the trial court not only properly computed Virginia's interest on Max's gross retirement pay, but also did not abuse its discretion in equitably denying her restitution for her interest in retirement benefits received by Max from when he retired in 1970 to the filing of her partition action in 1980. However, it erred in awarding her arrearages from the filing date of the complaint computed on the net, rather than the gross, benefits received.
We use the term "retirement" pay interchangeably with "retainer" pay.
The statutory language quoted above limits this deduction to annuities in favor of the ex-spouse to whom community proceeds are being paid. Because Virginia stipulated to this amount and its source, with an eye to FUSFSPA's distinction between gross and "disposable" retired pay, we assume this is an annuity in her favor.
The factual background is not disputed. At the time of their 1965 separation, Max had accrued 21 years 4 months active military service and was still on active duty. For 60 percent of this service, the parties were married. The dissolution pleadings, proof and the 1966 decree do not mention or dispose of the parties' interests in the military retirement. In the present trial court proceedings, Max stipulated his retirement was both vested and matured at the time of dissolution.
Virginia's action alleges the military retirement is an omitted community asset subject to present partition. The trial court agreed, but for equitable reasons denied her any recovery for her interest in retirement benefits received by Max from the date he retired in 1970 until she filed her partition action in 1980. It further limited her right to recover her community interest from the filing of the 1980 complaint to the date of judgment, to 30 percent of the net or disposable income in order to avoid an "accounting nightmare" because Max had presumably paid taxes on the pension payments received. From the date of judgment, Virginia was awarded 30 percent of Max's gross retirement pay.
II
Virginia seeks to partition an asset, Max's military pension, omitted and unadjudicated in the 1966 divorce. Henn v. Henn, supra, 26 Cal.3d 323, 161 Cal.Rptr. 502, 605 P.2d 10, permits Virginia to bring an independent action to partition such an omitted asset if she had a divisible interest in it at the time of the 1966 divorce. (Shaver v. Shaver (1980), 107 Cal.App.3d 788, 794, 165 Cal.Rptr. 672.) Unless Virginia had such an interest in 1966, she cannot prevail because under California law whether the asset is separate or community is established as of the time the asset is acquired. (Henn, supra, 26 Cal.3d at p. 330, 161 Cal.Rptr. 502, 605 P.2d 10.) That interest is not altered except by judicial decree or the parties' agreement. (Ibid.) Thus, Virginia contends her community property interest attached to the pension before the divorce. Because this asset was not before the court in 1966, her interest was not altered by that judgment. If the asset was a community property asset, Virginia's unadjudicated rights continued in the form of a tenancy in common with Max. (Ibid.) However, if Virginia had no community property interest in Max's pension in 1966, there is nothing to partition now, and Virginia cannot prevail.
Until In re Marriage of Fithian (1974), 10 Cal.3d 592, 111 Cal.Rptr. 369, 517 P.2d 449, the California view regarding the characterization of vested military retirement pensions as community or separate property was unsettled. (See Aloy v. Mash (1985), 38 Cal.3d 413, 416, 212 Cal.Rptr. 162, 696 P.2d 656.) After 1974, California courts uniformly held vested military pensions were community property. However, in McCarty v. McCarty, supra, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589, the Supreme Court held the federal legislative scheme authorizing military pensions impliedly preempted state community property law and prohibited the division of military retirement pay. Reacting to McCarty, Congress amended these statutes by adding section 1408, FUSFSPA, to Title 10 of the United States Code. The compilation [217 Cal.Rptr. 474] of FUSFSPA's legislative history shows Congress' express intent was to remove the effect of McCarty by permitting state courts to apply their marital property laws to military retired pay when fixing the parties' property rights in a divorce, consistent with the application of "such laws to the retired pay of Federal Civil servants, Foreign Service personnel and private sector employees." (Sen.Rept. No. 97-502, 2d Sess. (1982), p. 1; 1982 U.S.Code Cong. & Admin.News p. 1596); italics added.) Consistent with an express intent to erase McCarty's impact on all cases, FUSFSPA's provisions were made retroactive to the day before that decision was filed. (In re Marriage of Sarles (1983), 143 Cal.App.3d 24, 26-29, 191 Cal.Rptr. 514.)
All statutory references are to 10 United States Code unless otherwise specified.
Based on these events, Max contends any award to Virginia is improper because McCarty declares that in 1966 Virginia did not have a community property interest in the military pension. He argues that under McCarty, the divorce court in 1966 lacked jurisdiction to so divide the asset. Because McCarty is not properly construed as acting retroactively, we disagree.
Whether and to what extent an overruling case will be applied retroactively depends on all circumstances of the particular overruling decision involved. (Linkletter v. Walker (1965) 381 U.S. 618, 629, 85 S.Ct. 1731, 1737, 14 L.Ed.2d 601.) In Chevron Oil Co. v. Huson, (1971) 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296, the United States Supreme Court identified three relevant factors: Whether (1) the decision establishes a "new principle of law" by overruling "clear and past precedent"; (2) the history and purpose of the rule announced require retroactive application; and (3) retroactively applying the overruling decision would produce injustice or hardship. (Id., at pp. 106-107, 92 S.Ct. at pp. 355-356.)
The problem arises because of a fundamental split in legal philosophy. Blackstone believed that judges do not "create," but instead "find" the law. A decision interpreting the law, therefore, does no more than declare what the law had always been. An overruling decision, under this theory, also does no more than declare the law--albeit in a more enlightened manner. From this declaratory nature of a judicial decision, the following rule emerges: An overruled decision is only a failure at true discovery and was consequently never the law; while the overruling one was not "new" law but an application of what is, and had been, the "true" law. (Linkletter v. Walker, supra, 381 U.S. 618, 623, 85 S.Ct. 1731, 1734, 14 L.Ed.2d 601.) Here, implicitly recognizing this theory, Max argues McCarty declares what always was, and particularly what was the law in 1966. He contends under the retroactive application of McCarty, Virginia did not have a community property interest in his military pension at the divorce. Thus, he concludes she can take nothing by her action to partition.
This court examined these factors in light of McCarty in In re Marriage of Sheldon (1981), 124 Cal.App.3d 371, 375, 177 Cal.Rptr. 380, and held McCarty not retroactive in the context of a direct appeal from an interlocutory judgment. As to the first two Huson factors, we view our Sheldon analysis as applicable although we deal here with an independent action to partition a community asset omitted at the time of the parties' 1966 divorce. (See In re Marriage of Sheldon, supra, 124 Cal.App.3d 371, 377-379, 177 Cal.Rptr. 380.) As to the third Huson factor, our reasoning in Sheldon pointed to the need for "stability and finality" as outweighing the benefits to be gained by reopening a final property division. (Sheldon, supra, at pp. 379-380, 177 Cal.Rptr. 380.) Henn implicitly holds, however, that the policy favoring equitable division of marital property outweighs that of stability and finality in the limited context of omitted assets. Moreover, the partition action here is an equitable one, permitting the court to consider any unjust or harsh result in making its [217 Cal.Rptr. 475] award. (Hill v. Hattrem (1981), 117 Cal.App.3d 569, 574, 172 Cal.Rptr. 806.) Thus, we conclude McCarty should not be given retroactive effect. "[T]he fact is that no case within our memory has received less retroactive application than McCarty.... [F]or most purposes, McCarty not only is not the law but never really was." (Aloy v. Mash, supra, 38 Cal.3d 413, 421-422, 212 Cal.Rptr. 162, 696 P.2d 656, fn. omitted.)
Henn authorizes an independent action to partition omitted pensions only if the nonemployee spouse had a divisible interest in the asset at the time of the original decree. Thus, we are left with the question whether Virginia had such an interest in 1966. We conclude she did. In Fithian, our Supreme Court held vested military pensions are community property. Although the parties' divorce occurred before that decision, Fithian is given "full retroactive effect" under Henn v. Henn, supra, 26 Cal.3d 323, 328-329, 161 Cal.Rptr. 502, 605 P.2d 10. (See Shaver, supra, 107 Cal.App.3d 788, 794, 165 Cal.Rptr. 672.) In Henn, the court stated as the general rule that overruling -decisions are retroactive. There, the court noted Fithian did not overturn a settled rule of law and applied Fithian retroactively to a 1971 dissolution. The preliminary finding necessary to support a determination of non retroactivity is that the decision must establish a new principle of law by overruling clear past precedent or by deciding an issue of first impression whose resolution was not clearly foreshadowed. (Hurvich v. Califano (D.C.Cal.1978) 457 F.Supp. 760, 762, interpreting Chevron Oil v. Huson, supra, test for retroactivity.) Thus, applying the same United States Supreme Court test for retroactivity to McCarty and Fithian gives different results: McCarty, which overruled clear California law and whose purpose would not be effectuated by retroactive application is deemed prospective. Conversely, Fithian did not overturn a settled rule of law and its purposes are achieved by retroactive application.
Max also argues that FUSFSPA, effective February 1, 1983, cannot be constitutionally applied to cases (his 1966 divorce) decided before its effective date. He contends to retroactively apply FUSFSPA violates the principle of separation of powers as a legislative attempt to annul McCarty. Max misconceives the nature of Virginia's action here. The pension was not before the court in 1966; Virginia's interest was not altered by that decree. This is an independent action to divide an omitted asset; Virginia does not and cannot seek to modify or reopen the 1966 judgment. (In re Marriage of Cobb (1977), 68 Cal.App.3d 855, 860, fn. 1, 137 Cal.Rptr. 670.) In any event, as we shall explain, Virginia's partition action requires an application of FUSFSPA only to the extent FUSFSPA expressly or impliedly preempts California community property laws, which it does only to a limited extent not relevant to the issues posed by this case.
Accordingly, we conclude the court properly applied Henn and its progeny, awarding Virginia her one-half community property interest in Max's vested military pension. Under the circumstances [217 Cal.Rptr. 476] present here, res judicata and collateral estoppel do not bar Virginia's new action to determine her interest in the pension. (See In re Marriage of Davis (1980), 113 Cal.App.3d 485, 488, 169 Cal.Rptr. 863.)
Max incorrectly contends on a variety of theories that his pension was not "vested" at the time of the 1966 divorce. Not only did Max stipulate at trial that the pension was vested, but the facts as conceded in his opening brief establish vesting as a matter of law. At the time of the divorce, Max had more than 21 years active service and could have applied for retirement. A military pension vests when the service member completes the required number of years of service and is eligible for a pension. (Bensing v. Bensing (1972), 25 Cal.App.3d 889, 892, 102 Cal.Rptr. 255, cited as a vested pension in In re Marriage of Brown (1976), 15 Cal.3d 838, 842, 126 Cal.Rptr. 633, 544 P.2d 561; see also Ruchti v. Goldfein (1980), 113 Cal.App.3d 928, 931, fn. 1, 170 Cal.Rptr. 375; Aloy v. Mash, supra, 38 Cal.3d 413, 415, fn. 1, 212 Cal.Rptr. 162, 696 P.2d 656.) Moreover, the fact that Max could lose his retirement pay if court-martialed does not make the pension nonvested; rather, it is simply vested "subject to divestment." (In re Marriage of Brown, supra, 15 Cal.3d 838, 842, fn. 2, 126 Cal.Rptr. 633, 544 P.2d 56.)
III
Assuming we reject his other arguments, Max relies on section 1408(a)(4) and (c)(1) to argue that California can only declare a community property interest in a portion of his retirement pay; that part which is defined as "disposable." In essence, the "disposable" retirement pay is the gross pay less statutorily specified deductions which, except for the retiree's individual withholding tax liability, are under the direct or indirect control of the retiree, and will significantly vary among retirees with the same gross retirement pay. Max contends California is precluded from awarding an ex-spouse more than the community property interest (one-half) in a retiree's disposable retirement pay.
Section 1408(a)(4) states: " 'Disposable retired or retainer pay' means the total monthly retired or retainer pay to which a member is entitled (other than the retired pay of a member retired for disability under chapter 61 of this title) less amounts which--
We find Max's proposition illogical. Applying his theory, former spouses whose community property interests were acquired over exactly the same time period, whose military retiree spouses receive exactly the same gross retirement benefits, are subject to receiving different sums if, for example, their respective spouses are in different tax brackets, or if one understates his dependents, or if one commits torts against the government or incurs other indebtednesses to it for which the ex-spouse bears no liability. We can conceive of no legitimate governmental interest, nor has Max suggested any, which would rationally support such disparate treatment. [217 Cal.Rptr. 477]
For example, consider the situations of two divorced military retirees, identical in every respect except one has no source of income other than the pension while the other has significant additional income. In our progressive tax system, the effective tax rates for these two persons will significantly vary, because the rates are a function of total taxable income. As to the retiree with additional taxable income, he has the ability to have a greater percentage of his pension payments withheld upon application than is directly attributable to his gross retirement pay. (See Decisions of the Comptroller General (1984) § B-213895, pp. 322-331.) This, in turn, will reduce his "disposable pay" and accordingly (under Max's argument), the amount of the pension subject to division by the court as community property. Under such a theory, the community property interests of the two ex-spouses in two pensions of identical amounts would differ.
We have serious concerns Max's theory renders FUSFSPA unconstitutional on equal protection grounds. Our obligation to interpret statutes harmoniously with the constitution (California Housing Finance Agency v. Elliott (1976), 17 Cal.3d 575, 594, 131 Cal.Rptr. 361, 551 P.2d 1193) is another reason for our interpreting FUSFSPA to avoid Max's proffered irrationality.
IV
Max does not suggest there is logic in his position, nor that disparate treatment will not occur. He argues that FUSFSPA, while it overruled McCarty, only grants the states a limited waiver of the preemption McCarty found implicit in the pre-existing statutes.
Max's proposition flows from a flawed premise. He views McCarty's holding of preemption as an immutable given, believing any power which the states now possess to characterize military pensions as community property must derive from an express authorization in FUSFSPA. His approach is similar to that expressed in In re Marriage of Costo (1984), 156 Cal.App.3d 781, 786, 203 Cal.Rptr. 85, where the reviewing court merely looked to the face of section 1408 and determined Congress did not give California the unlimited right to treat military retirement pay according to its laws.
His argument is founded on a misunderstanding of the holding in McCarty, supra, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589. The Supreme Court in McCarty addressed the question of implied preemption. Finding no express statement by Congress that state community property laws were preempted in regard to military pensions (see id., at pp. 236-237, 101 S.Ct. at pp. 2743-2744 (dis. opn.)), the Court instead considered a variety of circumstantial evidence, including related statutory schemes and the objectives of the military retirement system, in determining application of state community property laws to military pensions would do such "major damage" to "clear and substantial" federal interests as to require a finding of implied preemption under the Supremacy Clause. (See id., at p. 220, 101 S.Ct. at p. 2735; Hisquierdo v. Hisquierdo (1979) 439 U.S. 572, 581, 99 S.Ct. 802, 808, 59 L.Ed.2d 1.)
The McCarty holding of implied preemption is thus a contextual one, taking into account all relevant facts and circumstances. Those facts and circumstances have now changed by reason of Congress' enactment of FUSFSPA. Accordingly, the question we must address here is not whether FUSFSPA expressly grants to the states the power to divide the gross amount of military pensions, but whether under the present federal scheme there remains a conflict between the federal retirement statutes and California community property rights threatening clear and substantial federal interests with grave harm. Stated differently, were McCarty to be decided after FUSFSPA, would the Supreme Court imply preemption?
We note a basic proposition: "The whole subject of the domestic relations of husband and wife, parent and child, belongs to the laws of the states and not to the laws of the United States." (Ex Parte Burrus (1890) 136 U.S. 586, 593-594, 10 S.Ct. 850, 853, 34 L.Ed. 1500.) That Congress was aware of this principle and intended that state laws apply to the characterization of military pensions as community property is made abundantly clear by the legislative history surrounding the enactment of FUSFSPA.
Senate Report No. 97-502, expressly details the legislative intent and purpose underlying FUSFSPA. For instance, its stated primary purpose "is to remove the effect of the United States Supreme Court decision in McCarty v. McCarty, 453 U.S. 210 [101 S.Ct. 2728, 69 L.Ed.2d 589] (1981) ... by permitting ... courts, consistent with the appropriate laws, to once again consider military retired pay when fixing the property rights between the parties to a divorce, dissolution, annulment or legal separation...." (Sen.Rept. No. 97-502, supra; p. 1; 1982 U.S.Code Cong. & Admin.News p. 1596.)
Any doubt as to the intended scope of the foregoing sweeping language is dispelled at page 5 of the Report; 1982 U.S.Code Cong. & Admin.News p. 1599: "[T]he committee intends the legislation to restore the law to what it was when the courts were permitted to apply State divorce laws to military retired pay." (Italics added.) [217 Cal.Rptr. 478] Thus, it is clear FUSFSPA's primary purpose is to remove obstacles the state courts may encounter in applying their divorce laws to military retired pay as those laws were being applied before the decision in McCarty v. McCarty, and as if that decision never existed. Pre-McCarty California decisions treated military retirement benefits like all other community property, dividing the total (gross) benefits. (See In re Marriage of Fithian, supra, 10 Cal.3d 592, 595, 604, 111 Cal.Rptr. 369, 517 P.2d 449.)
In a post-McCarty decision, this court rejected the identical argument Max pursues, finding the divisible community property interest is in the total military retirement benefits earned during the course of the marriage, and not in a reduced sum derived by treating the disposable retired pay as the only part which may be treated as a community property asset. Although our treatment of this issue in In re Marriage of Scott (1984), 156 Cal.App.3d 251, 202 Cal.Rptr. 716, was recognizably summary, an alternative result is inconsistent with the express congressional intent to restore the state court's ability to apply the law to military retired pay as it was applied pre-McCarty.
Not only does the legislative history of FUSFSPA document Congress' understanding that state laws characterizing military pensions as community property would apply in the same way as they did before McCarty, but even the McCarty analysis, applied after the enactment of FUSFSPA, would yield the conclusion there is no longer any implicit conflict between state laws and the federal scheme.
The grave harm to "clear and substantial" federal interests found in McCarty was premised on the belief "Congress has enacted a military retirement system designed to accomplish two major goals: to provide for the retired service member, and to meet the personnel management needs of the active military forces. The community property division of retired pay has the potential to frustrate each of these objectives." (McCarty v. McCarty, supra, 453 U.S. 210, 232-233, 101 S.Ct. 2728, 2741, 69 L.Ed.2d 589.)
McCarty first reasoned that any community property division of retired pay could disrupt the carefully balanced scheme Congress had devised to encourage service members to set aside a portion of their retired pay as an annuity for surviving spouses or dependent children. (McCarty v. McCarty, supra, 453 U.S. 210, 233, 101 S.Ct. 2728, 2741, 69 L.Ed.2d 589.) The Supreme Court speculated that by diminishing the amount available to the retiree, a community property division would make it less likely the retired service member would choose to reduce his or her retired pay still further by purchasing such an annuity. Now, by defining disposable pay in FUSFSPA to exclude all annuity disbursements for beneficiaries other than the ex-spouse, Congress must be deemed to have expressly rejected this concern for disruption.
Second, McCarty suggests community property interests " 'diminish that portion of the benefit Congress had said should go to the retired [service member] alone.' " (McCarty v. McCarty, supra, 453 U.S. 210, 233, 101 S.Ct. 2728, 2741, 69 L.Ed.2d 589.) This thought is based on language in Hisquierdo, supra, 439 U.S. at page 590, 99 S.Ct. at page 812, a case involving the Railroad Retirement Act which, unlike FUSFSPA, expressly states "not withstanding any other law of the United States or of any State ... no annuity or supplemental annuity shall be assignable or be subject to any tax or garnishment, attachment, or other legal process under any circumstances whatsoever, nor shall the payment thereof be anticipated." (45 U.S.C. § 231m.) (As the court noted in Hisquierdo, Congress had expressly granted a separate spouse's benefit which terminated upon absolute divorce.) Conversely, FUSFSPA specifically allows garnishment under the same conditions to which garnishments of active military duty pay have always been subject. (See discussion, infra.)
Third, the McCarty majority found the value of retired pay to induce enlistment or reenlistment is diminished to the extent the service member recognizes he or she may [217 Cal.Rptr. 479] be involuntarily transferred to a state which would divide that pay upon divorce. It found a direct "interference with the goals of encouraging orderly promotion and a youthful military...." (McCarty v. McCarty, supra, 453 U.S. 201, 235, 101 S.Ct. 2728, 2742, 69 L.Ed.2d 589.) On the contrary, by enacting FUSFSPA, Congress is expressly stating the extent of that interference is not found to be sufficient to preclude the states from applying their community property/family laws to military retired pay.
This basis for McCarty's holding was disputed by contrary findings of the Senate Committee. (Sen.Rept. No. 97-502, supra, pp. 7-8; 1982 U.S.Code Cong. & Admin.News pp. 1602-1603.)
Thus, each of McCarty's factual predicates for finding implied preemption disappeared when FUSFSPA was enacted. Max cites no other adverse impact, substantial or otherwise, on congressional military goals to justify a finding the Supremacy Clause demands subordination of state laws solely because they would treat gross military retirement pay as community property.
V
Even if the present federal statutory scheme governing military retirement does not impliedly preempt, in a general sense, the application of California community property laws in total, it remains to be determined whether any specific provision of FUSFSPA expressly require a limited change in pre-McCarty California practice. We have concluded it is unnecessary to find an express authorization in FUSFSPA for California courts to divide the "gross" amount of a military retiree's pay. However, we now address Max's argument FUSFSPA expressly prohibits state courts from dividing more than the retiree's "disposable" pay. In support of his contention he relies on section 1408(c)(1): "Subject to the limitations of this section, a court may treat disposable retired or retainer pay ... as property of the member and his spouse in accordance with the law of the jurisdiction of such court." (Italics added.)
We read section 1408(c)(1) as being aimed at an entirely different proposition. Direct payments were not available to ex-spouses for judgments awarding marital property interests against military retirement pay before the enactment of FUSFSPA. Section 1408 is primarily devoted to establishing a scheme to permit the ex-spouse to "garnish" retirement pay and, at the same time, to afford the military retiree similar protections previously given other retired federal employees by limiting the amount of funds subject to garnishment. (See 22 U.S.C. § 4044 et seq., but compare 5 U.S.C. § 8345(j).) Thus, only "disposable" pay is garnishable. (See 42 U.S.C. § 659, amended in 1975 to permit direct enforcement of court orders for child support and alimony from the net (disposable) retired pay of present or former federal employees, including members of the armed services.) By a 1977 amendment to 15 United States Code section 1673(b), Congress specifically limited garnishments to a percentage of disposable earnings. Under these federal garnishment statutes, the disposable earnings limitation does not affect the size of the retiree's legal obligation to the ex-spouse, but only places limitations on monies that can be directly collected from the government employer in a pay period. (See Evans v. Evans (W.D.Okla.1976) 429 F.Supp. 580.)
"The Act does not limit the total amount of a service member's indebtedness but rather limits collecting indebtedness from the service member's retired pay. In this regard, the Act essentially does no more than most garnishment laws in establishing a collection ceiling. The clear intent of the Act is to protect retired members from financial deprivation." (Hauserman and Fethke, Military Pensions as Divisible Assets: The Uniformed Services Former Spouses' Protection Act (1984) 11 J. of Legislation 27, 37; italics added.)
That FUSFSPA is primarily concerned with the garnishment of military retired pay is further revealed in its statutory title: Payment of retired and retainer pay in compliance with court orders. Given this focus, the provisions of section 1408 define the manner and extent to which a state [217 Cal.Rptr. 480] court can order the Service Secretary to direct the military retiree's pay. Section 1408(a)(2) identifies the class of court orders to which FUSFSPA applies as those specifically providing for the payment of an amount from the disposable retired or retainer pay of a retiree, this amount being expressed in dollars or as a percentage of the disposable pay. ( § 1408(a)(2)(C).) These need not, and normally would not, be judgments or decrees, but garnishments or other court orders issued to enforce awards in judgments or decrees. After service of a court order providing for payment from the retired pay, the Service Secretary is limited to complying with the order by diverting funds only from the retiree's disposable pay. ( § 1408(d)(1).) This is without regard to whether the judgment underlying the served court order was for child support, alimony, attorneys fees or to satisfy a division of community property. ( § 1408(a)(2).) Further, the Service Secretary typically may not pay out more than fifty percent of the disposable pay to satisfy the obligations to be enforced by the court order. ( § 1408(e)(1).)
Significantly, Congress recognized the 50 percent cap placed upon the Service Secretary's authority to comply with court orders could leave portions of a retiree's obligations for community property divisions unsatisfied. The Senate Report emphasizes: "Moreover, [FUSFSPA] makes it clear that the mere attainment of that [50 percent] ceiling in no way absolves the former member of still outstanding legal obligations for alimony, child support or other payments. Any such unsatisfied obligation may be enforced by any means available under law...." (Sen.Rept. No. 97-502, supra, p. 11; 1982 U.S.Code Cong. & Admin.News p. 1606; italics added.) To this end, section 1408(d)(5) provides: "If a court order ... provides for a division ... of community property ... in addition to an amount of disposable retired or retainer pay, the Secretary concerned shall ... pay ... [any amount payable to the former spouse from the retiree's disposable pay.]" Section 1408(e)(6) further provides:
"Nothing in this section shall be construed to relieve a member of liability for the payment of alimony, child support, or other payments required by a court order on the grounds that payments made out of disposable retired or retainer pay under this section have been made in the maximum amount permitted under paragraph (1) or subparagraph (B) of paragraph (4). Any such unsatisfied obligation of a member may be enforced by any means available under law other than the means provided under this section in any case in which the maximum amount permitted under paragraph (1) has been paid and under section 459 of the Social Security Act (42 U.S.C. 659) in any case in which the maximum amount permitted under subparagraph (B) of paragraph (4) has been paid." (Italics added.)
Congress thus expressly anticipated court orders would reflect obligations from community property divisions in excess of disposable pay ( § 1408(d)(5)) and emphasized the limitations on the Service Secretary's ability to reach the retiree's gross pay was not to be deemed a limitation on the state court's ability to define the community property interests at the time of dissolution. ( § 1408(e)(6).)
Max disputes the interpretation of section 1408(c)(1) as merely relating to enforcement of court orders. He refers to language in House of Representatives Report No. 749, 97th Congress, 2d session (1982) p. 165 (1982 U.S.Code Cong. & Admin.News p. 1570), suggesting the preliminary House version of the legislation, similar to that finally enacted in FUSFSPA, "would permit disposable military retired pay to be considered as property in divorce settlements under certain specified conditions." (Italics added.)
Page 4 of Senate Report No. 97-502, 1982 U.S.Code Cong. & Admin.News p. 1598, however, differs from the preliminary language in the House Report cited by Max. It declares the states' ability to create community property interests extends to "the military retired pay," not to disposable [217 Cal.Rptr. 481] retired or retainer pay. The Report states that after FUSFSPA marital assets would again be treated according to divorce and property laws of the respective states, subject only to the express limitations imposed by FUSFSPA. (Ibid.) Only three such limitations have been identified, and they apply solely to the enforcement of court orders through direct payments by the appropriate Service Secretary to the ex-spouse.
Senate Report No. 97-502, supra, p. 4, 1982 U.S.Code Cong. & Admin.News p. 1599, states: "S. 1814 imposes three distinct limits on the division or enforcement of court orders against military retired pay in divorce cases. First, the total amount of the disposable retired or retainer pay of a member which the Service Secretary could pay out to satisfy a court order for prospective obligations could not exceed 50 percent of such pay. Second, this bill would not create in the spouse or former spouse any right, title or interest which could be sold, assigned, transferred or disposed of by will or inheritance. Third, the courts could not direct that a service member retire at a particular time in order to effectuate any payment out of retired pay to a spouse or former spouse...." (See also Horkovich, Uniformed Services Former Spouses' Protection Act: Congress' Answer to McCarty v. McCarty Goes Beyond the Fundamental Question (1982) Air Force L.Rev. 287, 298-299.)
In sum, considering its intent and operation, we find FUSFSPA is not inconsistent with a division of gross, rather than disposable, military retired pay. FUSFSPA's intended limitations reach only restrictions on the garnishment of and direct payment from the retiree's disposable pay. Characterization of retirement pay remains a state law question. Thus, in California the military retiree's gross pay is a community asset subject to equal division.
Applying its own marital property laws, the Minnesota Court of Appeals reached, without lengthy discussion, a similar conclusion in Deliduka v. Deliduka (Minn.1984) 347 N.W.2d 52.
VI
Virginia seeks her share of the military pension payments Max received from July 1970 (date Max retired) to November 5, 1980 (date Virginia brought the partition action). Although the court found against Max's defense of laches, the court denied Virginia this retroactive award, stating it would be unfair in light of "all the facts," particularly Max's almost total custody and support of the parties' children during this period. Asserting Max's failure to prove an equitable defense (laches) precludes the court from totally denying her these past payments, Virginia contends the court should have awarded her the one-half community interest from July 1970.
The court assumed Virginia would have been required to pay child support had Max been ordered to pay part of his pension to Virginia during this period.
Although the Supreme Court in Henn v. Henn, supra, determined omitted military pensions may be later divided in a partition action, the court left open the recovery of pension payments already made. (Henn v. Henn, supra, 26 Cal.3d 323, 332-333, 161 Cal.Rptr. 502, 605 P.2d 10.) The court declared the enforcement of the wife's right in the pension payments received since the initial adjudication does not present any danger of unjust enrichment because the husband "may seek to limit retrospective enforcement ... on an equitable estoppel theory by demonstrating that she in fact received additional support payments in lieu of a share in the pension. [Citation, fn. omitted.]" (Id., at p. 332, 161 Cal.Rptr. 502, 605 P.2d 10.) Noting it may be substantially more burdensome for the husband to account for the pension payments he had received since the initial property division than to comply with a partition effected at that time, the Court stated that that problem could be "adequately addressed under the defense of laches." (Id. at pp. 332-333, 161 Cal.Rptr. 502, 605 P.2d 10). Here, the court found against Max's [217 Cal.Rptr. 482] claim of laches; Max does not contend the court erred in this respect.
The Court explained: "The exercise of a court's authority to so limit equitable relief will provide litigants with an additional incentive to assert all tenable community property rights in assets known to exist at the time of the initial judicial distribution of the marital community." (Henn v. Henn, supra, 26 Cal.3d 323, 333, 161 Cal.Rptr. 502, 605 P.2d 10.)
Henn instructs the trial court to apply equitable principles in determining whether to enforce by restitution a spouse's community property interest in pension payments received by the retiree spouse before partition and to what degree. (Cf. Hill v. Hattrem, supra, 117 Cal.App.3d 569, 574, 172 Cal.Rptr. 806.) Where the court finds no unjust result in awarding full retroactive benefits, the court may "tailor the form of that award" to avoid placing an undue burden on the spouse ordered to pay. (Id., at p. 575, 172 Cal.Rptr. 806.)
Virginia argues the court may only consider "equitable defenses" such as waiver, estoppel and laches in deciding whether to award retroactive payments. She contends under Henn and Hill the court must grant such benefits if the earning spouse fails to prove such an equitable defense. Absent such a defense, Virginia argues the court may only tailor the form of the award (for example, monthly payments), but not the award itself.
We do not read the cases so narrowly. In Hill, the court identifies estoppel and "due process" as considerations in granting this "equitable relief." (Hill v. Hattrem, supra, 117 Cal.App.3d 569, 574, 172 Cal.Rptr. 806.) Due process is not the type of standard "equitable defense" Virginia contends the court is limited to. Instead, it shows the concern with hardship and fairness Henn demands. The Hill court explains that "these principles may be relevant due to the potential hardship and unfairness of result in this case involving litigation of newly discovered rights when substantial reliance may have been placed upon previous law." (Ibid.) Accordingly, the court stressed that on remand "it is incumbent upon [Husband] to present extrinsic evidence to the trial court of any inequities that may follow in restoring to [Wife] the full amount of her community share in the retirement benefits received to date...." Thus, in determining whether to award these retroactive benefits, the court may consider any facts relevant to the fairness of such payments. Contrary to Virginia's assertion, the court here was not limited to tailoring the form of an award upon finding no laches. Rather, the court must apply "equitable principles," both defenses and general considerations, to determine whether to enforce her community share in the retirement benefits received, whether whole or in part, and then determine whether "tailoring" is appropriate.
The court here found it would be inequitable to force Max to compensate Virginia for her past community share after he provided the sole support for their five children during their minority (except for one child during a limited time). Moreover, Virginia was not required to make any financial contribution to support four of the children and, during the period she had custody of one child, Max provided support. On this record, the court did not abuse its discretion.
VII
The court awarded Virginia her community property interest in Max's "disposable" retired pay for the period November 5, 1980, through June 15, 1983. In her appeal, Virginia correctly contends the court should have awarded her an interest in Max's gross, not net, retired pay. As we have explained, the court, guided by equitable considerations, could have decided to enforce her community interest in the pension payments received only in part and/or tailor Max's method of restitution. However, here the record shows no equitable considerations warranting partial enforcement. The trial court's sole reliance upon the presence of a potential "accounting nightmare" is an insufficient basis to deny full enforcement under these circumstances involving this period of less than three years.
DISPOSITION
The judgment is reversed in part and the trial court is directed to award Virginia her community property interest in Max's [217 Cal.Rptr. 483] gross retired pay received between the date of filing her complaint to the date of judgment and to recompute the interest due. In all other respects, the judgment is affirmed.
WIENER, Acting P.J., concurs.
LEWIS, Associate Justice, dissenting.
I dissent.
Max and Virginia were divorced in 1966 and she remarried. He was found to be without fault and awarded all the community property. She was found to be solely at fault and an unfit and improper person to have custody of the parties' children. The custody of all the minor children was awarded to him. Neither pleading nor the judgment mentioned his military retirement pension which, by stipulation in this separate action, was vested because of 21 years, 4 months' active duty, although he had not retired.
In 1980, Virginia filed this action to partition Max's military retirement pay, asserting it was an omitted asset under Henn v. Henn (1980) 26 Cal.3d 323, 161 Cal.Rptr. 502, 605 P.2d 10. On March 22, 1982, the court ruled under McCarty v. McCarty (1981) 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589, that Max's military retirement pension was his separate property.
Noting Congress had passed the Federal Uniformed Services Former Spouses Protection Act (FUSFSPA) effective February 1, 1983, Virginia filed a motion to enter judgment different than announced. The court vacated its previous ruling and continued the matter until June 1983. The court then found Max's pension was an unadjudicated asset at the 1966 divorce and partitioned the asset.
I
If Virginia had a divisible interest in Max's pension in 1966, she is entitled to bring a separate action in 1980 to partition that asset (Henn v. Henn, supra, 26 Cal.3d 323, 161 Cal.Rptr. 502, 605 P.2d 10; Shaver v. Shaver (1980) 107 Cal.App.3d 788, 794, 165 Cal.Rptr. 672), so the first question is: Did Virginia have a divisible interest in the pension in 1966? The United States Supreme Court declared in McCarty v. McCarty, supra, 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589, that as a matter of federal law as it existed in 1981, and the same law that existed in 1966, spouses did not have a divisible interest in service members' pensions and the California court system's assumption that it had jurisdiction to divide those assets was wrong. Nothing Congress did thereafter, in enacting FUSFSPA, or the California court system did thereafter, can change or affect the final declaration by the United States Supreme Court as to the meaning of the federal law as it existed up to 1981.
For the limited question of whether a 1966 judgment left anything further to be litigated, we should follow the rule announced by the United States Supreme Court. The zeal of the California courts to ignore the decision of that court, as reflected in Aloy v. Mash (1985) 38 Cal.3d 413, 421-422, 212 Cal.Rptr. 162, 696 P.2d 656, "[t]he result is that, for most purposes, McCarty not only is not the law but never really was" and "Courts of Appeal with rare unanimity, seized on FUSFSPA to obliterate all traces of McCarty " (id., at p. 421, fn. 4, 212 Cal.Rptr. 162, 696 P.2d 656), should not be extended to allow a party seeking to avoid the general principles of res judicata and collateral estoppel to obtain an asset her judge could not have awarded her had he correctly applied federal law and would not have awarded her under the then existing California law. The majority are troubled by giving any "retroactive effect" to McCarty, but apparently not the least bit troubled about making a drastic change in the economic lives of two people divorced almost 20 years ago because of a statute enacted in 1983 and a whole new body of divorce law created several years after these parties reordered their lives.
II
If the majority are correct in concluding the trial court properly granted partition of [217 Cal.Rptr. 484] the pension, the division should have been of the "disposable" retired pay, because that is what the statute says.
Under California law before McCarty, supra, vested military retirement benefits were community property to the extent acquired during marriage. (In re Marriage of Fithian, supra, 10 Cal.3d 592, 596, 111 Cal.Rptr. 369, 517 P.2d 449.) Courts equally divided the community's interest by ordering payment of one-half the community's gross amount. (See In re Marriage of Wilson (1974) 10 Cal.3d 851, 856, 112 Cal.Rptr. 405, 519 P.2d 165.) McCarty changes all this.
In McCarty, the court found military retirement pay was a "personal entitlement" of the service member. (453 U.S. at p. 226, 101 S.Ct. at p. 2738.) Community property division frustrated Congress' goals to provide for the retired service member and to meet the personnel management needs of the active military forces. (Id., at pp. 232-233, 101 S.Ct. at pp. 2741-2742.) The court concluded "Congress has weighed the matter, and '[i]t is not the province of state courts to strike a balance different from the one Congress has struck.' " (Id., at p. 236, 101 S.Ct. p. 2743, quoting Hisquierdo v. Hisquierdo (1979) 439 U.S. 572, 590, 99 S.Ct. 802, 813, 59 L.Ed.2d 1.)
Congress has reweighed the matter and struck a new balance in FUSFSPA, which makes specific entitlement as well as enforcement provisions with respect to military retirement pay. The extent to which the impact of McCarty was eliminated by FUSFSPA is controlled by FUSFSPA itself. Despite broad statements in some cases that FUSFSPA "overrules McCarty " (see, e.g., In re Marriage of Buikema (1983) 139 Cal.App.3d 689, 691, 188 Cal.Rptr. 856), a more accurate description is FUSFSPA was enacted to ameliorate the holding of McCarty. (In re Marriage of Costo (1984) 156 Cal.App.3d 781, 786, 203 Cal.Rptr. 85.)
Thus, the state law premise--military retirement pay is a community asset subject to equal division--is inapplicable here. Instead, bound by the Supremacy Clause, McCarty and FUSFSPA, our starting point should be military retirement pay is divisible only to the extent permitted by FUSFSPA. Even if, after FUSFSPA, one can say there is no more implied federal preemption, the Supremacy Clause still compels the conclusion that where federal law directly conflicts with state law, the federal law must prevail. Here, construing Title 10, United States Code section 1408(c)(1) 1 as we should, directly conflicts with California community property law. The federal law must prevail.
Section 1408(c)(1) states, in part: "Subject to the limitations of this section, a court may treat disposable retired or retainer pay ... either as property solely of the member or as property of the member and his spouse in accordance with the law of the jurisdiction of such court." (Emphasis added.) Unlike pre-McCarty California law permitting division of a service member's gross retirement pay, here Congress granted to the states the limited right to divide "disposable retired pay."
Section 1408(a)(4) expressly defines "disposable retired or retainer pay." There is no ambiguity. There is nothing to construe. Section 1408(a)(4) states, in part:
" 'Disposable retired or retainer pay' means the total monthly retired or retainer pay to which a member is entitled ... less amounts which
"...
"(C) are properly withheld for Federal, State, or local income tax purposes, if the withholding of such amounts is authorized or required by law and to the extent such amounts withheld are not greater than would be authorized if such member claimed all dependents to which he was entitled; [and less amounts which--]
"... [217 Cal.Rptr. 485]
"(F) are deducted because of an election under chapter 73 of this title to provide an annuity to a spouse or former spouse to whom payment of a portion of such member's retired or retainer pay is being made pursuant to a court order under this section."
Therefore, FUSFSPA operates only on "disposable" pay, which is the gross amount less certain deductions including income tax withholding and specific annuities.
Here, the parties stipulated Max's "net" monthly military retired pay in 1983 is $1,592.15, representing the actual sum received by him after withholding tax and survivor benefit plan cost. 2 FUSFSPA requires these amounts (withholding and annuity) be subtracted from the total retired pay before the states can divide the remaining "disposable retirement pay." (See In re Marriage of Costo, supra, 156 Cal.App.3d 781, 786, 203 Cal.Rptr. 85.) Thus, Max correctly contends the court should not have awarded Virginia "thirty percent of all gross sums paid by the United States Government." Instead, under FUSFSPA, the court should have awarded Virginia her one-half community property interest only in Max's disposable retirement pay.
Citing In re Marriage of Scott (1984) 156 Cal.App.3d 251, 202 Cal.Rptr. 716, Virginia contends this court has previously held FUSFSPA requires application of the community's percentage interest to gross retirement pay. However, the holding of Scott is that In re Marriage of Gillmore (1981) 29 Cal.3d 418, 174 Cal.Rptr. 493, 629 P.2d 1, applies to military pension pay so as to permit division and payment of military retirement to the nonmember spouse before the service member actually retires. In Scott, the service member spouse argued any preretirement division was impossible because the court could not determine the dollar amount of his future withholding. Thus, the court could not determine the "disposable retired or retainer pay." On these facts, the Scott court applied Gillmore, granting the nonmember spouse an interest in his vested and matured military pension even though the member spouse chose to remain on active duty. Here, however, Max presently receives his retired pay. The amount of his tax withholding is known. Scott does not hold and does not compel a holding here that FUSFSPA permits a court to divide gross retired or retainer pay.
Congress did not give California the unlimited right to treat military retirement pay in accordance with its general community property laws. (In re Marriage of Costo, supra, 156 Cal.App.3d 781, 786, 203 Cal.Rptr. 85.) Congress provided only for the division of "disposable" retired pay rather than "gross" retired pay. FUSFSPA adds other rules limiting California's traditional community property treatment of military retired pay. For example, state court subject matter jurisdiction over military retired pay is restricted. ( § 1408(c)(4); see In re Marriage of Jacobson (1984) 161 Cal.App.3d 465, 469-470, 207 Cal.Rptr. 512.) Thus, the premise that Virginia is "entitled" to her one-half of the community is erroneous in this context. Here, under the Supremacy Clause, Virginia is entitled only to what FUSFSPA plainly gives her.
The majority contend section 1408(c)(1)'s use of the word "disposable" is "primarily devoted to establishing" a garnishment scheme (p. 479). Thus, the majority concludes nothing prohibits awarding a gross amount of retirement pay.
The majority opinion misreads FUSFSPA. Other courts and commentators agree: FUSFSPA creates two "conceptually and effectively distinct branches." (Note, Closing the McCarty-USFSPA Window: A Proposal for Relief from McCarty-Era Final Judgments, 63 Tex.L.Rev. 497, 510 (1984).) One branch creates a direct enforcement mechanism so certain orders may be paid directly from the military [217 Cal.Rptr. 486] to the former spouse. The other branch partially nullifies McCarty allowing states to apply their marital property law to this asset. "Proper interpretation of [FUSFSPA] treats each branch independently." (Ibid.) A fair reading of FUSFSPA confirms this interpretation. Section 1408(c) is devoted to entitlement rules and includes a provision restricting state court subject matter jurisdiction over military pensions. Subdivisions (d) through (f) deal with direct enforcement. Perhaps the most probative evidence showing this distinction between entitlement provisions and direct enforcement provisions is in section 1408(d)(2). Under that section, a former spouse married less than 10 years cannot obtain direct enforcement (garnishment). However, this 10-year rule applies only to direct enforcement rights; the spouse married less than 10 years is still entitled to her community property interest under section 1408(c)(1). (Konzen v. Konzen (1985) 103 Wash.2d 470, 693 P.2d 97.)
The majority heavily relies on legislative history to support their conclusion. However, Congress' intent (which is, after all, what we are supposed to be searching for) must be determined primarily from the statute's language. "Absent a clear indication of legislative intent to the contrary, the statutory language controls its construction." (Ford Motor Credit Co. v. Cenance (1981) 452 U.S. 155, 158, fn. 3, 101 S.Ct. 2239, 2241, fn. 3, 68 L.Ed.2d 744; emphasis added.) Here, section 1408(c)(1) is clear: courts may "treat" (i.e., deal with) only "disposable" retired pay. This language is in the entitlement provisions of FUSFSPA. Commentators agree:
"[T]he Congressional reversal of McCarty is partial.... [C]ourts can deal only with disposable retired or retainer pay.
"...
"The act authorizes courts to divide 'disposable' retired or retainer pay upon divorce.... [I]t is important to recognize that this authorization contains an internal limitation. Only disposable retired or retainer pay may be treated pursuant to the law of the jurisdiction." (Newton and Trail, Uninformed [sic] Services Former Spouses' Protection Act--A Legislative Answer to the McCarty Problem, 46 Tex.Bar J. 291, 293-294 (1983).)
Accordingly, only a "clear" statement of legislative intent to the contrary should alter our interpretation. Contrary to the majority, the legislative history is not clear. At one point in a general description of the enacting bill, the legislative history states, "The House amendment would permit disposable military retired pay to be considered as property in divorce settlements under certain specified conditions." (House of Rep.Report No. 749, 97th Cong. reprinted at p. 165, 1982 U.S.Code Cong. & Admin.News, p. 1570; emphasis added.) Two pages later, the same report states, "The conferees agreed to remove the restriction that would require 10 years of marriage before military retired pay could be considered property by the courts." (Id., at p. 1572.) Conspicuously absent from this last quotation is the modifier "disposable" present just two pages before. Uncertainty results. The majority cites other portions of the legislative history to support their view that FUSFSPA was intended to "restore the law to what it was" before McCarty (majority opn. p. 478, ante ). However, other portions of the same Senate report are ambiguous, stating, "The purpose of this five-section bill is to remedy some of the problems which are experienced by former spouses of members of the uniformed services." (1982 U.S.Code Cong. & Admin.News, p. 1607.) Our interpretation of section 1408(c)(1) is consistent with these statements of legislative purpose.
In any event, it may well be that the conference report, cited by the majority, is what the members of the conference committee intended. However, that is not what the drafter of the bill itself put into the document ultimately passed.
Certainly there is no cannon against construing a statute as saying what it obviously means. (See Roschen v. Ward (1929) 279 U.S. 337, 339, 49 S.Ct. 336, 336, 73 [217 Cal.Rptr. 487] L.Ed. 722.) The interpretation of section 1408(c)(1) which limits the court's power to treat only the disposable retired pay as community property is reconcilable with the intent apparent in the remainder of the statute. The idea that Congress wanted to limit state court's authority to divide military retired pay appears in subdivisions (c)(2) [property interest] and (c)(4) [subject matter jurisdiction]. Subdivision (c)(1) similarly restricts state court power while also effectuating Congress' goal of providing some protections for former military spouses.
Because there is no ambiguity in section 1408(c)(1) and the ordinary meaning applied to this section is reconcilable with the remainder of FUSFSPA, I would hold courts may apply community property principles to only the disposable retired or retainer pay.
However, "[w]hatever doubts of a philosophical nature may remain, the law is nevertheless clear: a state court has power to give an overruling decision prospective application only, and to deny it any retroactive effect." (Collins v. Webb (D.C.Cal.1955) 133 F.Supp. 877, 879.) This principle derives from the view that judges make law rather than declare the law. Adherents to this view state that a decision of a state's highest court, though later overruled, is law nonetheless for intermediate transactions. (See Linkletter v. Walker, supra, 381 U.S. 618, 625, 85 S.Ct. 1731, 1735, 14 L.Ed.2d 601.)
On a similar note, Max also asserts that division of his military retirement pay is prohibited, because it is reduced compensation for reduced current services and, to the extent earned after his separation from Virginia, is not community property. However, in In re Marriage of Fithian, supra, 10 Cal.3d 592, 604, 111 Cal.Rptr. 369, 517 P.2d 449, the California Supreme Court held "military retirement pay must be realistically viewed as compensation for past, not present, services." The Supreme Court in McCarty did not overrule Fithian's characterization of military retired pay as deferred compensation. (See McCarty v. McCarty, supra, 453 U.S. 210, 223, 101 S.Ct. 2728, 2736, 69 L.Ed.2d 589.)
"(A) are owed by that member to the United States;
"(B) are required by law to be and are deducted from the retired or retainer pay of such member, including fines and forfeitures ordered by courts-martial, Federal employment taxes, and amounts waived in order to receive compensation under title 5 or title 38;
"(C) are properly withheld for Federal, State, or local income tax purposes, if the withholding of such amounts is authorized or required by law and to the extent such amounts withheld are not greater than would be authorized if such member claimed all dependents to which he was entitled;
"(D) are withheld under section 3402(i) of the Internal Revenue Code of 1954 (26 U.S.C. 3402(i)) if such member presents evidence of a tax obligation which supports such withholding;
"(E) are deducted as Government life insurance premiums (not including amounts deducted for supplemental coverage); or
"(F) are deducted because of an election under chapter 73 of this title to provide an annuity to a spouse or former spouse to whom payment of a portion of such member's retired or retainer pay is being made pursuant to a court order under this section."
Section 1408(c)(1) states: "Subject to the limitations of this section, a court may treat disposable retired or retainer pay ... as property of the member and his spouse in accordance with the law of the jurisdiction of such court."
To compound the inequity, assume further the retiree with additional income was entitled to claim substantial deductions in a given tax year resulting in no tax liability. On filing his return, the retiree would receive a tax refund of all monies previously withheld from his pension payments. Yet, under Max's theory, there is no way his ex-spouse could assert a community interest in the refund, to which she would have been entitled had there been no withholding.