Boulter v. Boulter

• Decision Date: 03 January 1997
• Docket Number: No. 27228,27228
• Parties: , 52 Soc.Sec.Rep.Ser. 561 Ronald O. BOULTER, Appellant, v. Noleen BOULTER, Respondent.
• Court: Nevada Supreme Court

Page 112

930 P.2d 112

113 Nev. 74, 52 Soc.Sec.Rep.Ser. 561

Ronald O. BOULTER, Appellant, v. Noleen BOULTER, Respondent.

No. 27228.

Supreme Court of Nevada.

Jan. 3, 1997.

Allison, MacKenzie, Hartman, Soumbeniotis & Russell and Karen A. Peterson, Carson City, for Appellant.

Leslie J. Shaw, Stateline, for Respondent.

OPINION

PER CURIAM:

After a thirty-seven year marriage, appellant Ronald Boulter filed a complaint for divorce against his wife, respondent Noleen Boulter, on April 18, 1990. Subsequently, Ronald and Noleen executed a property settlement agreement. The district court entered a decree of divorce which, by its terms, ratified, merged and incorporated the property settlement agreement. Eight months later, Noleen filed a motion for an order compelling enforcement of the divorce decree. Specifically, she asked for enforcement of paragraph 4(E) of the property settlement agreement. ¹

When Ronald turned 65, he refused to apply for social security benefits, and refused to directly deposit the equivalent of one-half of his benefits (as if he were receiving them), into Noleen's bank account. Noleen contends that paragraph 4(E) required Ronald, upon reaching age 65, to pay her a sum equal to one-half of his monthly social security entitlement earned prior to the end of 1990. Pursuant to the agreement, Noleen sought attorney's fees and costs for filing the motion. ²

Ronald opposed the motion, arguing that federal law prohibits the division of social security benefits in a marital dissolution proceeding. Alternatively, he argued that Noleen's motion should be denied because the language of the property settlement agreement neither required Ronald to apply for benefits at a certain age nor required him to pay Noleen one-half of his benefits at a certain age, and only required the equalization and payment of benefits actually received by the parties.

The district court granted Noleen's motion because the property settlement agreement equalizing social security benefits was not in violation of federal social security statutes. Moreover, the district court held that since Ronald's former attorney prepared the agreement, any ambiguity should be resolved against Ronald. Finally, the district court determined that Noleen was entitled to an award of attorney's fees and costs under the agreement as prevailing party. This appeal ensued.

DISCUSSION

In pertinent part, the federal Social Security Act provides that:

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) (1983).

Ronald contends that his right to future social security payments is being subjected to legal process in violation of § 407(a) because the district court incorporated the property settlement agreement into the divorce decree and because this court is now employed to enforce that decree. We agree.

Any state action is preempted by a conflicting federal law, such as the Social Security Act, under the Supremacy Clause of the United States Constitution, Article VI, Clause 2. Kirk v. Kirk, 577 A.2d 976, 979 (R.I.1990).

The [Social Security Act], consistent with its remedial purpose, provides for the various contingencies of life including the dissolution of marriage. Since the statute itself provides for an equitable distribution of its benefits to ... divorced spouses, ... we will not disturb the statutory scheme by suggesting any award of any part of the actual social security retirement benefits to which respondent may be entitled upon his reaching retirement age.

In re Marriage of Hawkins, 160 Ill.App.3d 71, 111 Ill.Dec. 897, 901, 513 N.E.2d 143, 147 (1987) (citations omitted) (emphasis added); see also Olson v. Olson, 445 N.W.2d 1, 11 (N.D.1989) (social security is immune to adjustment by state courts in dividing marital property); Umber v. Umber, 591 P.2d 299, 301-02 (Ok.1979) (Congress intended to provide distribution of social security benefits between spouses at time of divorce, thus placing the subject beyond state control); Matter of Marriage of Swan, 301 Or. 167, 720 P.2d 747, 751-52 (1986) (Congress intended to preempt state property division law as applied to social security benefits of a spouse upon divorce); Richard v. Richard, 659 S.W.2d 746, 749 (Tex.App.Ct.1983) (Congress exempted social security benefits from state law regarding property division since divorced spouse is provided social security benefits).

The United States Supreme Court has construed § 407(a) to impose "a broad bar against the use of any legal process to reach all social security benefits." Philpott v. Essex County Welfare Bd., 409 U.S. 413, 417, 93 S.Ct. 590, 592, 34 L.Ed.2d 608 (1973). In enacting such anti-assignment statutes, "Congress has afforded recipients [protection] from creditors, taxgatherers, and all those who would 'anticipate' the receipt of benefits...." Hisquierdo v. Hisquierdo, 439 U.S. 572, 575-76, 99 S.Ct. 802, 805, 59 L.Ed.2d 1 (1979), superseded in part by 45 U.S.C. § 231m (1986). ³

In the instant case, the district court merged the property settlement agreement that equalized social security benefits into the divorce decree. We hold that under Philpott, the district court's decree constitutes state action that has been preempted by the federal Social Security Act. Philpott, 409 U.S. at 417, 93 S.Ct. at 592-93. Because the court was without power to take any action regarding the parties' social security benefits, paragraph 4E was not properly incorporated into the divorce decree. Accordingly, this court may not sustain the district court order enforcing paragraph 4(E) of the decree. We must therefore determine whether the lower court may nevertheless order enforcement of a private agreement dividing future payments of social security.

In U.S. v. Eggen, 984 F.2d 848 (7th Cir.1993), the court held that once social security benefits "are paid over to the recipient, ... he can use them to satisfy his preexisting obligations." Id. at 850 (citing Ponath v. Hedrick, 22 Wis.2d 382, 126 N.W.2d 28, 31 (1964)). In Ponath the court stated that,

Federal cases construing 42 U.S.C.A. § 407, hold that the provision seeks to prevent transfer of benefits prior to receipt.... The section is intended to preclude a person entitled to benefits ... from transferring his right before, but not after the Administrator has recognized it. The provisions of section 407 apply to the assignment of future receipts, not to received benefits.

Ponath 126 N.W.2d at 31 (quoting Beers v. Federal Security Administrator, 172 F.2d 34, 36 (2d Cir.1949)).

Noleen contends that the division of social security benefits was a voluntary agreement between two private individuals to divide the benefits once they were received, and not an agreement dividing future social security benefits.

Although social security recipients may use the proceeds of their social security, after their receipt, to satisfy preexisting obligations, they may not contract to transfer their unpaid social security benefits. Thus, in contracting to give Noleen one-half of his benefits before he was eligible to receive them, Ronald ineffectually "transferred his right" to the benefits. Because Ronald and Noleen attempted to transfer their rights to future benefits in violation of 42 U.S.C. § 407(a), the agreement was invalid and neither this court nor the district court may order its enforcement.

Moreover, the fact that the property settlement agreement was entered into voluntarily by the parties is without relevance. As another court correctly ruled, "Congress' clear and stringent interpretation of the prohibition on transfer or assignment of benefits in section 207(b) ... compels us to strictly interpret that clause to prohibit voluntary as well as involuntary transfers or assignments." Ellender v. Schweiker, 575 F.Supp. 590, 599 (S.D.N.Y.1983), appeal dismissed, 781 F.2d 314 (2nd Cir.1986). If voluntary assignments and transfers of future benefits were allowed, the "security" aspect of the social security program would frequently be jeopardized. Moreover, as discussed above, the agreement in this case is prohibited by federal statute.

Even if the benefits were...