In re Marriage of Hulstrom

• Citation: 276 Ill.Dec. 730,794 N.E.2d 980,342 Ill. App.3d 262
• Decision Date: 29 July 2003
• Docket Number: No. 2-02-0960.,2-02-0960.
• Parties: In re MARRIAGE OF Everett E. HULSTROM, Petitioner-Appellant, and Ila J. Hulstrom, Respondent-Appellee.
• Court: United States Appellate Court of Illinois

794 N.E.2d 980

342 Ill. App.3d 262

276 Ill.Dec. 730

In re MARRIAGE OF Everett E. HULSTROM, Petitioner-Appellant, and

Ila J. Hulstrom, Respondent-Appellee.

No. 2-02-0960.

Appellate Court of Illinois, Second District.

July 29, 2003.

Henry S. Dixon, Dixon & Dixon Law Offices, Dixon, for Everett E. Hulstrom.

Louis F. Pignatelli, Patrick J. Liston, Pignatelli, Liston & Mertes, P.C., Rock Falls, for Ila J. Hulstrom. Justice BYRNE delivered the opinion of the court:

Petitioner, Everett E. Hulstrom, appeals from the order of the circuit court denying his petition to modify the judgment dissolving the parties' marriage. We reverse as void the portion of the dissolution judgment dividing the marital property, and we remand the cause with directions.

FACTS

On August 19, 1994, the trial court dissolved the parties' 46-year marriage and incorporated their marital settlement agreement into the judgment. At the time of the dissolution, petitioner and respondent, Ila J. Hulstrom, were 67 and 65 years old, respectively, and each was receiving social security benefits. The marital settlement agreement provides in relevant part:

"1. The Social Security paid on behalf of [petitioner] and [respondent] shall be combined monthly and paid to [respondent], where, on the tenth of each month, one-half of the combined Social Security payment shall be deposited by direct deposit from [respondent's] account into an account designated by [petitioner]. To the extent that such Social Security payments to either party are income, and to such an extent that the party who receives the greater amount of Social Security receives income from the party to whom the greatest amount of Social Security is paid, that amount of Social Security shall be income to the receiving party to the extent that it was income to the paying party.

* * *

8. To the fullest extent provided by law, each party waives maintenance now and all times in the future."

On May 24, 2002, petitioner petitioned to modify the portion of the judgment allocating the social security benefits. Petitioner alleged that paragraph 1 of the settlement agreement "purports to distribute a Social Security benefit as a property right when, in fact and in law, it is a support matter." Petitioner alleged that the parties should no longer share their social security benefits because (1) petitioner's income had decreased significantly; (2) his medical expenses had increased due to his failing health; (3) respondent had remarried and was financially secure; and (4) paragraphs 1 and 8 of the settlement agreement were inconsistent.

At a hearing on the petition, petitioner testified to his declining income and deteriorating health, including a form of Parkinson's disease from which he suffers. Petitioner and respondent had each remarried, but respondent did not notify petitioner of her remarriage.

On July 25, 2002, the trial court denied the petition to modify the judgment, finding that the parties had followed the settlement agreement for eight years and had never treated the equal division of social security benefits as maintenance. The court concluded that respondent's remarriage would not end her right to one-half of the couple's benefits because the parties had viewed them as marital property. The court emphasized that the parties considered the equal division of benefits when dividing the remaining marital assets. The court denied petitioner's subsequent motion to reconsider on August 30, 2002, and petitioner timely appealed on September 4, 2002.

ANALYSIS

On appeal, petitioner argues that the trial court erroneously determined that the equal division of the parties' social security benefits was an unmodifiable distribution of marital property, rather than a modifiable maintenance obligation that terminated automatically upon respondent's remarriage. Petitioner presents two theories on appeal: (1) because state trial courts lack jurisdiction to order the division of social security benefits in marriage dissolution cases, the marital settlement agreement disposing of the parties' social security benefits may not be enforced; and (2) even if the circuit court had jurisdiction over the issue, the social security benefits qualify as "maintenance" rather than "marital property" under the Illinois Marriage and Dissolution of Marriage Act (Marriage Act) (see 750 ILCS 5/503(a), 504(a) (West 2000)).

Respondent alternatively contends that (1) the agreement's social security provision is a valid allocation of marital property rather than a description of petitioner's prospective maintenance obligation and (2) if this court decides that the provision is invalid, a new hearing is necessary for the redistribution of the marital assets.

The issue of whether a state trial court lacks jurisdiction to enforce the provision of a marital settlement agreement dividing social security benefits is a question of first impression in Illinois. However, two other jurisdictions have ruled that a settlement agreement dividing such benefits as marital property is void for violating the anti-alienation provision of the Social Security Act (42 U.S.C. § 407(a) (2000)). Gentry v. Gentry, 327 Ark. 266, 938 S.W.2d 231 (1997); Boulter v. Boulter, 113 Nev. 74, 930 P.2d 112 (1997). We find these cases to be persuasive and directly on point.

It is well settled that, under the supremacy clause of the United States Constitution, a federal law preempts a conflicting state law and the state law is nullified to the extent that it actually conflicts with federal law. U.S. Const., art. VI; In re Marriage of Wiseman, 316 Ill.App.3d 631, 637, 249 Ill.Dec. 935, 737 N.E.2d 325 (2000).

Section 407(a) of the Social Security Act provides as follows:

"(a) The right of any person to any future payment under this subchapter shall not be transferrable 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) (2000).

The Supreme Court has stated that section 407(a) imposes "a broad bar against the use of any legal process to reach all social security benefits." Philpott v. Essex County Welfare Board, 409 U.S. 413, 417, 93 S.Ct. 590, 592, 34 L.Ed.2d 608, 612 (1973). In Philpott, the Court held that section 407(a) of the Social Security Act, which prohibits the use of "any legal process" to reach "social security benefits," bars all claimants, including a state. Philpott, 409 U.S. at 417, 93 S.Ct. at 592, 34 L.Ed.2d at 612.

In Hisquierdo v. Hisquierdo, 439 U.S. 572, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979), the Court interpreted section 231m(a) of the Railroad Retirement Act of 1974 (45 U.S.C. § 231m(a) (1976)), which is virtually identical to section 407(a) of the Social Security Act. The statute at issue in Hisquierdo provided that, "notwithstanding any other law of the United States, or of any State, territory, or the District of Columbia, no annuity or supplemental annuity shall be assignable or be subject to any tax or to garnishment, attachment, or to other legal process under any circumstances whatsoever, nor shall the payment thereof be anticipated." 45 U.S.C. § 231m(a) (1976). The Court stated that, by enacting such anti-assignment statutes, Congress has "afforded recipients [protection] from creditors, taxgatherers, and all those who would `anticipate' the receipt of benefits." Hisquierdo, 439 U.S. at 575-76,99 S.Ct. at 805,59 L.Ed.2d at 7.

In Boulter, the trial court dissolved the parties' 37-year marriage and incorporated a property settlement agreement into the judgment of dissolution. Pursuant to paragraph 4E of the agreement, the parties agreed to pool and divide equally the social security benefits accrued during the marriage. Boulter, 113 Nev. at 75, 930 P.2d at 113. When the husband turned 65 years old, he refused to apply for social security benefits, and the wife moved to enforce the agreement. The trial court granted the wife's motion, and the husband appealed.

Relying upon Philpott and Hisquierdo, the Nevada Supreme Court held that the trial court's incorporation of the property settlement agreement into the divorce decree qualified as state action that had been preempted by section 407(a) of the Social Security Act. The Boulter court also quoted with approval the Illinois Appellate Court, which had stated that "`"[t]he [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 the 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."'" (Emphasis added.) Boulter, 113 Nev. at 77, 930 P.2d at 113 quoting, In re Marriage of Hawkins, 160 Ill.App.3d 71, 77-78, 111 Ill.Dec. 897, 513 N.E.2d 143 (1987), quoting In re Marriage of Evans, 85 Ill. App.3d 260, 263, 40 Ill.Dec. 713, 406 N.E.2d 916 (1980), rev'd on other grounds, 85 Ill.2d 523, 55 Ill.Dec. 529, 426 N.E.2d 854 (1981).

The Boulter court then ruled that, "[b]ecause the [trial] court was without power to take any action regarding the parties' social security benefits, paragraph 4E [the settlement provision dividing the accrued but unpaid social security benefits] was not properly incorporated into the divorce decree. Accordingly, this court may not sustain the district court order enforcing paragraph 4E of the decree." Boulter, 113 Nev. at 78, 930 P.2d at 114.

The wife alternatively asserted that the voluntary nature of the settlement agreement obligated the husband to pay one-half of his social security benefits. In rejecting the wife's argument, the Boulter court held that Congress's clear intent in enacting ...