362 P.3d 1034
Ariz.2015Background
- Robert and Diane Merrill divorced in 1993; the decree awarded each one-half of Robert’s military retired pay (MRP) and issued a QDRO implementing that award.
- Robert later became unemployable from service-connected injuries; in 2004 the VA rated him 100% and he became eligible for Combat-Related Special Compensation (CRSC).
- Federal law allows a veteran to waive part of taxable MRP to receive tax-free CRSC and prohibits state courts from treating CRSC as divisible retired pay.
- Robert waived a significant portion of his MRP to receive CRSC, sharply reducing Diane’s monthly MRP share (e.g., from $1,116 to $133 in 2010).
- Diane sought arrearages and future compensation; the family court denied relief citing A.R.S. § 25-318.01. The court of appeals initially reversed (holding indemnification available), but after the legislature amended § 25-318.01 to include CRSC and made it retroactive to 2010, the court of appeals vacated the award.
- The Arizona Supreme Court granted review to decide whether § 25-318.01 bars indemnification for post-decree MRP waivers to obtain CRSC when the divorce decree predated the statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether A.R.S. § 25-318.01 applies to Diane’s enforcement petition | §25-318.01 applies only to original dispositions or modifications under §§25-318/25-327, not to enforcement of an existing decree; Diane sought enforcement | Court of appeals and Robert contended the family court modified property terms under §25-327, so §25-318.01 applies | Court held §25-318.01 applies because the court necessarily modified the original property disposition under §25-327 when granting indemnification relief |
| Whether §25-318.01 can be applied to vested property rights awarded before the statute’s effective date | Diane: her share of MRP vested in 1993; retroactive application would violate due process (as-applied challenge) | Robert: Diane waived this claim or any vested right is only to 50% of whatever MRP is paid monthly, so no impairment | Court held the statute cannot be applied to bar indemnification for decrees entered before the statute’s effective date; Diane’s vested right protected by due process as in Howell |
| Whether plaintiff waived the as-applied constitutional challenge by failing to serve §12-1841 notice | Diane argued §12-1841 not required for as-applied challenge | Robert argued noncompliance with §12-1841 forfeits the challenge | Court held §12-1841 notice is for facial challenges; Diane did not waive the as-applied claim and was not required to comply |
| Whether federal law (treating CRSC as non-retired pay) precludes state indemnity | Implicitly: indemnity is permissible despite federal limits on dividing CRSC | Robert: federal law prevents state courts from dividing or compensating for reductions caused by CRSC waiver | Court followed In re Marriage of Howell reasoning and held federal law does not bar state courts from ordering indemnification for reductions caused by a post-decree CRSC waiver when decree predated statute |
Key Cases Cited
- Merrill v. Merrill, 230 Ariz. 369, 284 P.3d 880 (App. 2012) (court of appeals initially held veteran must indemnify non-military ex-spouse for MRP loss)
- Ethington v. Wright, 66 Ariz. 382, 189 P.2d 209 (Ariz. 1948) (purpose of notice requirement to protect state interests when statute's constitutionality is attacked)
- Arrett v. Bower, 237 Ariz. 74, 345 P.3d 129 (App. 2015) (permitting intervention or opportunity to be heard when notice procedures not followed)
- DeVries v. State, 219 Ariz. 314, 198 P.3d 580 (App. 2008) (discussing uncertainty whether §12-1841 covers as-applied challenges)
- Grammatico v. Industrial Commission, 208 Ariz. 10, 90 P.3d 211 (App. 2004), aff’d 211 Ariz. 67, 117 P.3d 786 (App. 2005) (examples of courts permitting state officials to defend statutes’ constitutionality post-notice issues)
- Kepple v. Fairman Drilling Co., 615 A.2d 1298 (Pa. 1992) (authority noting notice to attorney general not required for as-applied challenges)
- Lazo v. Bd. of County Comm’rs of Bernalillo County, 690 P.2d 1029 (N.M. 1984) (authority holding notice required for as-applied challenges)