In re the Marriage of Herbert L. Anderson

• Decision Date: 23 December 2010
• Docket Number: No. 09CA2592.,09CA2592.
• Parties: In re the MARRIAGE OF Herbert L. ANDERSON, Appellant,andMarilyn D. Anderson, Appellee.
• Court: Colorado Court of Appeals

252 P.3d 490

In re the MARRIAGE OF Herbert L. ANDERSON, Appellant,andMarilyn D. Anderson, Appellee.

No. 09CA2592.

Colorado Court of Appeals, Div. II.

Dec. 23, 2010.

Antolinez Miller, LLC, Joseph H. Antolinez, Melissa E. Miller, Littleton, Colorado, for Appellant.Paul A. Frederiksen, Englewood, Colorado, for Appellee.Opinion by Judge GABRIEL.

In this post-dissolution of marriage matter, Herbert L. Anderson (husband) appeals from the district court's order denying his motion to set aside or modify certain property division provisions of the decree entered in conjunction with the dissolution of his marriage to Marilyn D. Anderson (wife). As a matter of first impression in Colorado, we hold, consistently with the decisions of apparently all other state courts to have addressed this issue, that the settlement agreement provision that was incorporated into the decree and required husband to pay part of his future Social Security benefits to wife was void. We further hold that, because of the Supremacy Clause implications, husband was not barred by the principles of equitable estoppel from challenging the void judgment. We reject, however, husband's contention that the district court erred in affirming the magistrate's ruling that his periodic payments to wife for health insurance or health care were part of the property division, rather than maintenance. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

I. Background

The parties dissolved their marriage in 1994. Their separation agreement, which the court incorporated into the decree, provided, in relevant part:

As a provision of property settlement and not as spousal support, when the parties begin to receive benefits from Social Security after age sixty-five (65), [husband] shall pay to [wife] a monthly sum of Two Hundred Twenty–Five and no/ 100 Dollars ($225.00) from his Social Security benefits. In the future, this amount will be increased or decreased by an amount equal to fifty percent (50%) of any increase or decrease in [husband's] Social Security benefits. [Husband] will file to begin receiving Social Security benefits on or before March 1, 1994.

....

As a provision of property settlement and not as spousal support, [husband] will pay a monthly sum not to exceed, nor less than, One Hundred Fifty Dollars ($150.00) for [wife] to provide for her own health insurance and/or health care.

In 2008, husband moved to set aside these provisions pursuant to C.R.C.P. 60(b), or in the alternative to modify them pursuant to section 14–10–122(1)(a), C.R.S.2010. A district court magistrate denied C.R.C.P. 60(b) relief but set a hearing concerning the alternative motion for modification. Thereafter, the magistrate denied that motion. Husband then petitioned for review of the magistrate's orders pursuant to C.R.M. 7(a), and the district court affirmed.

Husband now appeals.

II. Social Security Benefits

Husband first contends that the district court erred in denying him relief under C.R.C.P. 60(b) from the provision of the decree requiring him to pay part of his future Social Security benefits to wife. We agree.

We review the district court's decision as to whether to grant relief under C.R.C.P. 60(b) for an abuse of discretion. See SR Condos., LLC v. K.C. Constr., Inc., 176 P.3d 866, 868 (Colo.App.2007). We review de novo, however, whether the decree provision requiring husband to pay part of his future Social Security benefits to wife conflicts with the Social Security Act and thereby violates the Supremacy Clause of the United States Constitution, U.S. Const. art. VI, cl. 2. See Kohn v. Burlington N. & Santa Fe R.R., 77 P.3d 809, 811 (Colo.App.2003) (“Federal preemption is a question of law subject to de novo review by this court.”).

A. Violation of the Social Security Act

The anti-assignment clause of the Social Security Act provides:

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) (2010).

This provision “imposes a broad bar against the use of any legal process to reach all social security benefits.” Philpott v. Essex Cnty. Welfare Bd., 409 U.S. 413, 417, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973). Thus, a state court in a dissolution proceeding cannot distribute or divide a spouse's future Social Security benefits as marital property. In re Marriage of Morehouse, 121 P.3d 264, 265 (Colo.App.2005); In re Marriage of James, 950 P.2d 624, 628–29 (Colo.App.1997). Nor may a court employ an indirect offset, as a part of the overall marital property distribution, to account for the value of a spouse's Social Security benefits. See Morehouse, 121 P.3d at 266; James, 950 P.2d at 629. An exception to this rule is set forth in 42 U.S.C. § 659(a) (2010), which allows Social Security benefits to be taken for the payment of child support or maintenance.

The issue presented here, namely, whether spouses may contract between themselves as part of the property division in a marriage dissolution to require payment of one spouse's future Social Security benefits to the other, is an issue of first impression in Colorado. Other jurisdictions that have considered this issue, however, appear to have held uniformly that a settlement agreement provision that distributes future Social Security benefits as marital property is void because it violates the anti-assignment provision of the Social Security Act. See, e.g., Gentry v. Gentry, 327 Ark. 266, 938 S.W.2d 231, 232–33 (1997); In re Marriage of Hulstrom, 342 Ill.App.3d 262, 276 Ill.Dec. 730, 794 N.E.2d 980, 986 (2003); Boulter v. Boulter, 113 Nev. 74, 930 P.2d 112, 114 (1997); Simmons v. Simmons, 370 S.C. 109, 634 S.E.2d 1, 4 (S.C.Ct.App.2006); see also United Student Aid Funds, Inc. v. Espinosa, ––– U.S. ––––, ––––, 130 S.Ct. 1367, 1377, 176 L.Ed.2d 158 (2010) (judgment void when, among other things, court lacked jurisdiction to enter it); Osband v. United Airlines, Inc., 981 P.2d 616, 619 (Colo.App.1998) (“If federal law preempts state law, the state trial court lacks subject matter jurisdiction to hear a claim.”). For the reasons that follow, we view these authorities as persuasive and thus hold that the separation agreement provision requiring husband to pay part of his future Social Security benefits to wife is void.

Applying the Supremacy Clause, state courts have consistently held that the Social Security Act precludes them from treating Social Security benefits as property. See, e.g., Simmons, 634 S.E.2d at 3–4 (collecting cases). Thus, state courts lack subject matter jurisdiction to divide parties' Social Security benefits in a property distribution. See James, 950 P.2d at 629; accord Gentry, 938 S.W.2d at 232–33; Boulter, 930 P.2d at 114; Simmons, 634 S.E.2d at 4. Moreover, as various courts have observed, and we agree, the thrust of those cases holding that the Social Security Act preempts state courts from transferring benefits as property is that state courts are without power to enforce private agreements dividing future payments of Social Security benefits when those agreements violate the prohibition against transfer or assignment of future benefits. Simmons, 634 S.E.2d at 4; accord Gentry, 938 S.W.2d at 232.

B. Wife's Contentions

Notwithstanding the foregoing, wife contends that (1) the division of benefits here was a voluntary agreement to divide the benefits once they were received, and not an agreement dividing future Social Security benefits; (2) once such benefits were paid to husband, he was entitled to do with them as he pleased; (3) the magistrate here did not directly or indirectly distribute the Social Security benefits as part of the overall property distribution but merely considered them as a relevant economic circumstance; and (4) principles of equitable estoppel bar husband from challenging the decree. We reject each of these contentions in turn.

First, contrary to wife's assertion, the parties' agreement clearly and unambiguously provided for the transfer of future and as yet unpaid Social Security benefits from husband to wife. Thus, the agreement constituted a transfer of husband's rights to future benefits in violation of 42 U.S.C. § 407(a), and the district court lacked jurisdiction to enforce it. See Boulter, 930 P.2d at 114–15 (rejecting a wife's argument that a division of Social Security benefits was an enforceable agreement between two private individuals to divide the benefits once they were received, as opposed to an agreement dividing future benefits); accord Gentry, 938 S.W.2d at 232–33; Simmons, 634 S.E.2d at 4–5.

Second, the fact that the parties' agreement was entered into voluntarily is immaterial. “Congress' clear and stringent interpretation of the prohibition on transfer or assignment of benefits in [42 U.S.C. § 407(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); accord Boulter, 930 P.2d at 114–15; Simmons, 634 S.E.2d at 5.

Third, contrary to wife's assertions, the magistrate here did not merely consider husband's future Social Security benefits as a financial circumstance when dividing the marital property.

[W]hile a trial court may not distribute marital property to offset the computed value of Social Security benefits, it may premise an unequal distribution of property—using, for example, a 60–40 formula instead of 50–50—on the fact that one party is more likely to enjoy a secure retirement. We will not presume that an unequal distribution reflects an impermissible offset of Social Security benefits, especially when the distribution is justified by a combination of factors.

Morehouse...