Depot v. Depot

• Decision Date: 29 March 2006
• Citation: Depot v. Depot, 2006 ME 25, 893 A.2d 995 (Me. 2006)
• Parties: Carol DEPOT v. David DEPOT.
• Court: Maine Supreme Court

Page 995

893 A.2d 995

2006 ME 25

Carol DEPOT v.David DEPOT.

Supreme Judicial Court of Maine.

Argued: June 14, 2005.

Decided: March 29, 2006.

Justin W. Leary(orally), Sharon, Leary & DeTroy, Auburn, for plaintiff.

E. Chris L'Hommedieu(orally), L'Hommedieu Law Office, P.A., Lewiston, for defendant.

Panel: SAUFLEY, C.J., and CLIFFORD, DANA, ALEXANDER, CALKINS, and LEVY, JJ.^*

Majority: SAUFLEY, C.J., and CLIFFORD, ALEXANDER, and LEVY, JJ.

Dissenting: DANA, and CALKINS, JJ.

LEVY, J.

[¶ 1]David Depot appeals from a divorce judgment entered in the District Court(Lewiston, Lawrence, J.) contending that the court erred when it awarded Carol Depot marital property to offset a portion of an accountant's estimate of the present value of David's expected Social Security benefits.Because we agree, we vacate the judgment.

I.BACKGROUND

[¶ 2]Carol Depot filed for divorce after thirty-three years of marriage.At the time of the divorce, she was fifty-five years old and David Depot was fifty-seven.The court entered a detailed divorce judgment with extensive findings of fact and legal analysis.In identifying the parties' marital property, the court explicitly included the present value of the parties' expected Social Security benefits¹ and attempted to accomplish an equal division of the parties' retirement related assets in its overall distribution of the marital property:

Carol David
                  Social Security benefits                   $116,976               $255,382
                  Maine State Retirement System
                    benefits                                  67,623
                  Carol's IRA (Auburn Savings
                    and Loan)                                  4,047
                  David's IRA (Fidelity)                       85,868                 19,132
                                                          ___________________________________
                                                           $274,514               $274,514
                                                          ====================================
                

[¶ 3]The court awarded Carol almost eighty-two percent ($85,868) of David's Fidelity IRA account to balance the perceived "present value" of all of their existing retirement assets, including Social Security benefits:

The court is considering the value of the Social Security benefits based upon the Law Court decision in Pongonis v. Pongonis,606 A.2d 1055(Me.1992)(held that the deferred distribution value of Social Security benefits is a relevant factor to be considered in this division of marital property).Defendant's Social Security benefits have a value significantly greater than the combined value of Plaintiff's IRA account, Social Security benefits and Maine State Retirement Account and this disparity is directly relevant to the determination of the parties' Fidelity IRA account.

The court also awarded Carol general spousal support in the initial amount of $200 a month, increasing to $400 a month until 2007, and then increasing to $600 per month to continue until she dies or remarries, or until David dies or reaches the age of sixty-six.This appeal followed.

II.DISCUSSION

[¶ 4] David argues that Social Security benefits are not marital property and any consideration of anticipated Social Security benefits that impacts the division of marital property amounts to an offset prohibited by Hisquierdo v. Hisquierdo,439 U.S. 572, 99 S.Ct. 802, 59 L.Ed.2d 1(1979).Carol argues that the court committed no error in the manner in which it considered Social Security benefits.Whether Social Security benefits are marital property and whether a court may offset a perceived prospective disparity in Social Security benefits by awarding one spouse a compensating share of other retirement benefits are questions of law that we review de novo.SeeSpooner v. Spooner,2004 ME 69, ¶ 7, 850 A.2d 354, 358.

[¶ 5]We address, in turn: (A) whether Social Security benefits may be treated as "property" pursuant to 19-A M.R.S. § 953(2005);(B) whether other marital property may be used as an offset to compensate one spouse for the anticipated Social Security benefits to be received by the other spouse; and (C) the extent to which anticipated Social Security benefit payments are a relevant factor in the division of marital property.

A.Social Security Benefits are not Marital Property

[¶ 6]Courts that have considered the issue have universally acknowledged that Social Security benefits are not marital property and are not subject to division in divorce actions.²Several reasons support this principle.In the Social Security Act, Congress created an extensive and highly regulated benefit scheme, cf.Helvering v. Davis,301 U.S. 619, 644-45, 57 S.Ct. 904, 81 L.Ed. 1307(1937), and reserved to itself "[t]he right to alter, amend or repeal any provision of th[e Act]."42 U.S.C.A. § 1304(West 2003).Thus, as opposed to divisible property, Social Security benefits are a "form of social insurance" in which beneficiaries have a "noncontractual interest."Flemming v. Nestor,363 U.S. 603, 609, 610, 80 S.Ct. 1367, 4 L.Ed.2d 1435(1960).In § 402 of the Social Security Act, Congress enumerated certain benefits to be received by divorced individuals and the circumstances under which a divorced individual may receive a benefit based on his or her former spouse's benefits.See42 U.S.C.A. § 402(b), (c)(West Supp.2005).

[¶ 7] Of particular importance to this discussion, in § 407(a) of the Act, Congress prohibited a beneficiary from transferring or assigning Social Security benefits to another, and prohibited the use of legal process to reach those benefits:

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.A. § 407(a)(West 2003).Although the Act creates a narrow exception to this rule by allowing for the collection of child and spousal support, 42 U.S.C.A. § 659(a)(West 2003), Congress has specifically excluded any similar payment obligation arising from "any community property settlement, equitable distribution of property, or other division of property between spouses or former spouses."42 U.S.C.A. § 659(i)(3)(B)(ii)(West 2003).

[¶ 8] Federal law preempts any state law that otherwise authorizes the distribution of these benefits.SeeHisquierdo,439 U.S. at 575-76, 590, 99 S.Ct. 802(holdingRailroad Retirement Act's anti-alienation provision preempted state community property law);see alsoMcCarty v. McCarty,453 U.S. 210, 232, 101 S.Ct. 2728, 69 L.Ed.2d 589(1981)(holding that military retirement pay was separate property because the federal military retirement scheme preempted state property laws).Although Congress has legislatively countermanded the holdings in Hisquierdo and McCarty by making railroad and military retirement benefits subject to community property law, see45 U.S.C.A. § 231m(b)(2)(West 1986)and10 U.S.C.A. § 1408(c)(1)(West 1998), Congress has not passed similar legislation with respect to the division of Social Security benefits.

[¶ 9] As the trial court noted in its judgment, we previously addressed whether a trial court may consider a spouse's anticipated Social Security benefits as a relevant factor in arriving at its division of the parties' pensions and other marital assets in Pongonis,606 A.2d 1055.In Pongonis,the trial court's division of the parties' retirement assets was based in part on its findings regarding the annual income the wife was expected to receive from her Social Security benefits in the future.Id. at 1057-58.The husband, who was not eligible for Social Security benefits because he participated in the State retirement system, was expected to receive annual retirement payments starting at $7800 and increasing to $15,300.Id.The wife was expected to receive $13,475 annually from a combination of Social Security benefits and her employer-sponsored pension plan.Id. at 1058.The trial court did not attribute a lump sum deferred distribution or present value to the anticipated Social Security benefits, and did not treat the benefits as if they were property.Id.We affirmed the trial court's consideration of the wife's anticipated Social Security benefit payments as a relevant factor, and its decision to award the husband's State retirement benefits to him and the wife's private retirement benefits to her.Id. at 1057-58.

[¶ 10]Pongonis does not stand for the proposition that a divorce court may attribute a lump-sum value to Social Security benefits, based on either deferred distribution or present value formulas, and treat the Social Security benefits as marital property.This is in harmony with § 407(a)'s prohibition on transfers and assignments of Social Security benefits.Thus, a Maine court may not assign a lump sum value to Social Security benefits and either transfer or offset those benefits when exercising its authority to divide marital property pursuant to 19-A M.R.S. § 953.

B.Marital Property May not be Used as an Offset to Compensate One Spouse for the Anticipated Social Security Benefits to be Received by the Other Spouse

[¶ 11] Although the United States Supreme Court has not directly addressed the issue of whether a state court may use marital property to offset anticipated Social Security benefits, in Hisquierdo,the Supreme Court addressed a similar question-pertaining to Railroad Retirement benefits.In that case, the Supreme Court held that (1) a direct division of Railroad Retirement benefits violated the nonassignment provision of the Railroad Retirement Act; and (2) using other assets to balance or offset one spouse's expected Railroad Retirement benefits was tantamount to anticipating and dividing those benefits in violation of the Act. 439 U.S. at 583, 588-90, 99 S.Ct. 802.The Supreme Court expressly...