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Property Distribution/Separation Agreement/Military Disability Benefits
© 1994 National Legal Research Group, Inc.
VIRGINIA: Owen v. Owen, 14 Va. App. 623, 419 S.E.2d 267 (1992).
The parties were married in 1963 while the husband was serving in the United States Army. The parties separated in 1987. At that time the husband had been on active duty with the Army for 25 years. In November 1988, the parties entered into a Property Settlement Agreement (PSA). Paragraph 4A provided that upon the husband's retirement from the Army, the wife was to receive one-half of his gross retirement pay based on 25 years of service. That paragraph further contained a guarantee and indemnification clause:
- Husband guarantees to the Wife that he shall not merge his military and any possible future government pension, nor take any action so as to defeat the Wife's right to share in the monthly retirement benefits as set forth in this Agreement. Husband guarantees this and agrees to indemnify against any breach by him and agrees to hold the Wife harmless against any such breach.
The parties were issued a final decree of divorce on January 20, 1989. Subsequently, the husband retired and applied for disability benefits from the Department of Veteran Affairs. In March 1990, the trial court determined that the wife was entitled to receive $1,241 per month pursuant to Paragraph 4A of the PSA. Three months later the husband was awarded 60% disability compensation, resulting in a corresponding decrease in his retirement benefits. The husband notified the wife that he was reducing the monthly retirement payments to reflect the decrease. The wife petitioned for an interpretaion of the PSA and an order compelling the husband to pay one-half of the military retirement benefits without a reduction for disability payments. The trial court granted the wife the requested relief.
The Virginia Court of Appeals affirmed. The husband contended that, pursuant to Mansell v. Mansell, 490 U.S. 581 (1989), the Uniform Services Former Spouses' Protection Act does not grant a state court the power to divide military retirement pay waived to receive veterans' disability benefits. The court agreed but said that the issue in this case was not division of disability benefits but whether parties may use a settlement agreement to guarantee a certain level of income by providing for alternate payments to compensate for a reduction in payment based on a reduction in retirement benefits. Here the agreement did not attempt to assign disability benefits to the wife. Rather, it insured her a steady monthly payment in return for waiving spousal support upon the husband's retirement. The court rejected the husband's argument that the plain language of the agreement entitled the wife to only one-half of his retirement payments and that his actions were not taken to defeat any right of hers to retirement pay. It held that the agreement reflected the parties' clear intent to maintain a stable level of income for the wife. Owen v. Owen, 14 Va. App. 623, 419 S.E.2d 267 (1992).
Editor's Note: The court's holding in Owen is significant because it provides lawyers with guidance as to a method for protecting a dependent spouse from the Mansell result. Pursuant to Owen, if parties to a property settlement agreement include a guarantee and indemnification clause in a provision dividing military retirement benefits, a court has the power to order the retiree spouse to provide the other spouse with a steady level of income, even if the retirement benefits are subsequently reduced due to a retiree's decision to waive retirement benefits in lieu of receiving disability pay. The Owen holding makes sense in that in Mansellthe Supreme Court did not make any ruling regarding the divorcing parties' right to enter into a contract dividing military disability payments. Even though a separation agreement was involved in that case, the Court refused to consider whether the contractual provision against assignment of veterans' benefits applied to the case. Mansell v. Mansell, supra, 490 U.S. at 587, n. 6. Rather, the Court in Mansell merely held that dis ability payments could not be divided under equitable distribution or community property principles.
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