Biondo v. Biondo

• Decision Date: 15 March 2011
• Docket Number: Docket No. 294694.
• Citation: 291 Mich.App. 720,809 N.W.2d 397
• Parties: BIONDO v. BIONDO.
• Court: Court of Appeal of Michigan — District of US

291 Mich.App. 720

809 N.W.2d 397

BIONDO

v.BIONDO.

Docket No. 294694.

Court of Appeals of Michigan.

Submitted Jan. 5, 2011, at Detroit.Decided March 15, 2011, at 9:00 a.m.

Gornbein Smith Peskin–Shepherd PLLC, Bloomfield Hills (by Danielle A. Smith) for James F. Biondo.

Colleen V. Ronayne, Sylvan Lake, for Mary L. Biondo.

Before: KIRSTEN FRANK KELLY, P.J., and GLEICHER and STEPHENS, JJ.

GLEICHER, J.

James Franklin Biondo and Mary Lynne Biondo were married for more than 40 years. Their consent judgment of divorce equally divided the marital estate and required them to “equalize their social security benefits.” When Mary Biondo sought a court order compelling performance of the judgment's social security provision, James Biondo asserted that federal law preempted its enforcement. The circuit court ruled that “[a] deal is a deal,” and declined to strike the social security provision from the divorce judgment. We granted leave to appeal to consider whether federal law preempts the consent judgment's social security formula. We hold that it does, reverse the circuit court ruling to the contrary, and remand for further proceedings.

I. UNDERLYING FACTS AND PROCEEDINGS

The parties married in 1964, and in July 2007 consented to the entry of a divorce judgment. During the marriage, James Biondo worked for Ford Motor Company, while Mary Biondo cared for the parties' two children, who are now adults. The marital property included a home in Birmingham, two vehicles, and several bank accounts. The consent judgment “reserved for future adjudication” the issue of spousal support derived from “earned income,” and forever barred spousal support based on nonearned income. A specific provision, entitled “Social Security Benefits,” obligated the parties to “ equalize their social security benefits.” After entry of the divorce judgment, the parties stipulated to the entry of a qualified domestic relations order (QDRO), which allocated to Mary Biondo 50 percent of James Biondo's accrued retirement benefits as of the date of the divorce. The parties agree that they intended the consent judgment's property division to equally divide the marital estate.

In July 2009, Mary Biondo filed in the circuit court a motion seeking “compliance” with the judgment's “Social Security Benefits provision.” Mary Biondo averred that James Biondo had failed to make timely and full social security equalization payments. James Biondo responded that the judgment's social security formula violated federal law, and that any order enforcing the social security benefits term would be invalid. After a motion hearing, the circuit court entered an order announcing in relevant part that “the Court will enforce the property settlement provision regarding Social Security Benefits contained in the July 10, 2007 consent judgment of divorce.” We granted James Biondo's application for leave to appeal. Biondo v. Biondo, unpublished order of the Court of Appeals, entered February 23, 2010 (Docket No. 294694).

II. ANALYSIS

James Biondo contends that the circuit court “lack[ed] subject matter jurisdiction to enforce the social security property provision of the parties' ... judgment of divorce.” According to James Biondo, 42 U.S.C. § 407 preempts state courts from transferring any of an individual's social security benefits “by any legal process to any ... person other than that person whom the Federal Government intended to be the recipient of those benefits.” “Whether a trial court has subject-matter jurisdiction is a question of law that this Court reviews de novo.” Etefia v. Credit Technologies, Inc., 245 Mich.App. 466, 472, 628 N.W.2d 577 (2001). We also review de novo whether federal law preempts state law. People v. Kanaan, 278 Mich.App. 594, 601, 751 N.W.2d 57 (2008).

“Under the Supremacy Clause of the United States Constitution, U.S. Const., art. VI, cl. 2, federal law preempts state law where Congress so intends.” Konynenbelt v. Flagstar Bank, FSB, 242 Mich.App. 21, 25, 617 N.W.2d 706 (2000). Generally, federal law does not preempt laws governing divorce or domestic relations, a legal arena belonging to the states rather than the United States. Hisquierdo v. Hisquierdo, 439 U.S. 572, 581, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979). Thus, “[s]tate family and family-property law must do major damage to clear and substantial federal interests before the Supremacy Clause will demand that state law be overridden.” Id. (quotation marks and citation omitted). Here, we consider whether the federal interest in social security benefits preempts enforcement of the parties' agreement to equalize their social security benefits.

We begin our analysis by consulting the specific federal statute at issue, § 407(a) of the Social Security Act:

The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. [42 U.S.C. § 407(a) ].

James Biondo's preemption argument rests on the language of this statute prohibiting transfer, assignment, “execution, levy, attachment, garnishment,” or application of “other legal process” to a beneficiary's right to collect social security benefits. In Hisquierdo, 439 U.S. 572, 99 S.Ct. 802, the United States Supreme Court construed strikingly similar language in the Railroad Retirement Act of 1974(RRA), 45 U.S.C. § 231 et seq.¹ The parties in Hisquierdo divorced in California. Hisquierdo, 439 U.S. at 573, 99 S.Ct. 802. The California Supreme Court ruled that the husband's railroad retirement benefits constituted community property subject to division in the divorce judgment. Id. The United States Supreme Court reversed the California Supreme Court, holding that 45 U.S.C. § 231m preempted California's community-property law. Hisquierdo, 439 U.S. at 590, 99 S.Ct. 802. The United States Supreme Court explained that the statutory language comprising 45 U.S.C. § 231m reflected congressional intent that a “specified beneficiary” would receive benefits undiminished by “ attachment and anticipation.” Hisquierdo, 439 U.S. at 582, 99 S.Ct. 802. The statute's “critical terms” prohibiting assignment, garnishment, attachment or subjection to legal process “prevent[ ] the vagaries of state law from disrupting the national scheme, and guarantee[ ] a national uniformity that enhances the effectiveness of congressional policy.” Id. at 582, 584, 99 S.Ct. 802.

Notably, in Hisquierdo the Supreme Court interpreted § 231m as not only barring automatic, direct payments of RRA benefits from one spouse to another, but as also prohibiting “offsetting award[s]” intended to compensate one spouse for the value of the benefit expected by the other. Id. at 588, 99 S.Ct. 802. The Supreme Court reasoned that because § 231m contemplates that payments are not to be “anticipated,” an award intended to offset future payments would permit a divorcing spouse to receive a beneficial interest in retirement payments that had not yet accrued to the other spouse. Id. The Court further observed that a counterbalancing award of RRA benefits “would upset the statutory balance and impair [the retiree's] economic security just as surely as would a regular deduction from his benefit check.” Id. Consequently, the Court concluded that state marital-property laws must yield to Congress's determination that RRA benefits “should go to the retired worker alone....” Id. at 590, 99 S.Ct. 802.

Like 45 U.S.C. § 231m of the RRA, 42 U.S.C. § 407(a) prohibits the assignment of social security benefits and removes social security benefits from the reach of “attachment, garnishment, or other legal process....” That virtually identical language appears in both statutes compels us to apply Hisquierdo, and to declare that § 407(a) preempts the social security equalization provision in the Biondos' consent judgment. We find additional support for our holding in Hisquierdo itself, where the Supreme Court specifically analogized the RRA to the Social Security Act, observing that the former RRA “was amended several times to make it conform more closely to the existing Social Security Act.” Hisquierdo, 439 U.S. at 574 n. 3, 99 S.Ct. 802.²

Furthermore, we find it significant that Congress created an exception to 42 U.S.C. § 407(a) when it enacted 42 U.S.C. § 659(a), which permits the states to employ social security benefits for the enforcement of child support and alimony obligations. Application of social security benefits for marital property purposes remains specifically excluded from this exception, because Congress declared in 42 U.S.C. § 659(i)(3)(B)(ii) that the term “ alimony” does not encompass “any payment or transfer of property or its value by an individual to the spouse or a former spouse of the individual in compliance with any community property settlement, equitable distribution of property, or other division of property between spouses or former spouses.” Therefore, we conclude that the circuit court erred by enforcing the consent judgment's social security provision.

In reaching this conclusion, we specifically reject James Biondo's suggestion that the circuit court did not possess subject-matter jurisdiction to enter the terms of the parties' consent judgment of divorce. That federal law has preempted a portion of the parties' consent judgment of divorce in no manner deprives the circuit court of subject-matter jurisdiction in this divorce matter. The Social Security Act simply does not divest state courts of subject-matter jurisdiction in divorce cases. Rather, the Supremacy Clause preempts state laws regarding the division of marital property only to the extent they are inconsistent with 42 U.S.C. § 407(a). The Michigan Supreme Court has explained this distinction as follows:

The loose practice has grown...