Manning v. Schultz

• Decision Date: 21 February 2014
• Docket Number: No. 12–121.,12–121.
• Citation: 2014 VT 22,93 A.3d 566
• Court: Vermont Supreme Court
• Parties: Pauline MANNING v. Michael SCHULTZ.

93 A.3d 566

2014 VT 22

Pauline MANNING

v.Michael SCHULTZ.

No. 12–121.

Supreme Court of Vermont.

Feb. 21, 2014.

Mary G. Kirkpatrick of Kirkpatrick & Goldsborough, PLLC, South Burlington, for Plaintiff–Appellee.

Susan M. Murray of Langrock Sperry & Wool, LLP, Burlington, for Defendant–Appellant.

Present: REIBER, C.J., DOOLEY, SKOGLUND and BURGESS, JJ., and BENT, Supr.J., Specially Assigned.

BURGESS, J.

¶ 1.The principal question presented in this appeal from a final judgment of divorce is whether, as husband contends, the trial court erred in its division of the marital estate by including an offset for the disparity in value between the parties' projected Social Security retirement benefits.We conclude that this was error, and therefore reverse and remand.

¶ 2.The facts may be summarized as follows.The parties were married in 1992, and had three children who were still minors at the time of these proceedings.The parties separated in March 2010, and wife filed a complaint for divorce shortly thereafter.The trial court held a contested hearing over two days in February and April 2011.At the time of the hearing, wife worked part-time for a school district, earning approximately $14,000 a year with health insurance benefits.The court found that wife intended to return to school to obtain a master's degree in public administration, which could triple her earnings.During the marriage, husband worked for more than twelve years as a vice president at the University of Vermont, earning approximately $155,000 per year.Due to events not directly relevant to this appeal, husband resigned his position shortly after the conclusion of the hearing and the University provided him with a severance package.The court found that husband's future employment prospects were “unknown and speculative.”

¶ 3.The parties did not agree on the assets to be included in the marital estate.Wife submitted a list of assets (“Exhibit D”) with a total value of $1,152,325.86, including $88,158 identified as the difference between the present value of husband's and wife's projected Social Security benefits.The value was determined by wife's accountant and credited toward husband's suggested share of the marital estate, with a corresponding offset in value for wife.Wife proposed that she be awarded either sixty percent of the value of the entire estate plus spousal maintenance, or eighty percent without maintenance.Husband submitted a separate list of marital assets which totaled $978,504 and did not include the Social Security differential.Husband proposed an award to wife of sixty percent of the value of the estate plus rehabilitative maintenance for a period of several years.

¶ 4.In its written ruling, the trial court found that wife's proposed property division as set forth in her Exhibit D was “a reasonable one” and gave her the option of choosing either the eighty/twenty division that she had proposed or an award of sixty percent plus maintenance until she reached the age of sixty-seven.Wife subsequently opted for the higher percentage of the marital estate without the maintenance, and the trial court entered a final judgment consistent with that choice and with the proposed division set forth in Exhibit D, attached to the judgment.Husband's two subsequent motions to reconsider were denied.This appeal followed.

¶ 5.Husband contends that, by including the Social Security differential in his portion of the marital estate and awarding wife $88,158 to offset the value, the trial court here violated both state and federal law.The federal claim is predicated on case law holding that the Social Security Act preempts state courts from treating Social Security retirement benefits in divorce proceedings as marital property to be valued and either divided or—as here—directly offset by other property.Wife maintains that the preemption claim was not raised in the trial court, and therefore, was not preserved for review on appeal.SeeRutland Herald v. Vt. State Police,2012 VT 24, ¶ 33, 191 Vt. 357, 49 A.3d 91(“We will not entertain arguments on appeal if they were not preserved in the trial court.”).Although husband observes, in response, that he objected to the trial court's consideration of Social Security benefits as unduly “speculative” in both his proposed findings and subsequent motions to reconsider, we do not find this sufficient to fairly apprise the trial court of the federal preemption claim.¹SeeState v. Ben–Mont Corp.,163 Vt. 53, 61, 652 A.2d 1004, 1009(1994)(“To properly preserve an issue for appeal a party must present the issue with specificity and clarity in a manner which gives the trial court a fair opportunity to rule on it.”).As we have frequently cautioned, “[a]n objection on one ground does not preserve an appeal on other grounds.”State v. Bubar,146 Vt. 398, 400, 505 A.2d 1197, 1199(1985);see alsoState v. Hinchliffe,2009 VT 111, ¶ 32, 186 Vt. 487, 987 A.2d 988(holding that objection raising the “constitutional problem of notice” did not adequately preserve appeal based on claim that statute was “unconstitutionally vague and overbroad”);State v. Bissonette,145 Vt. 381, 392, 488 A.2d 1231, 1237(1985)(holding that objection to question on ground that matter was “collateral” did not preserve appeal on ground that it implicated prior bad act).Although, as discussed below, the claims are somewhat related, we cannot in good faith conclude that husband's argument based solely on the assertion that Social Security benefits are too speculative to be considered a marital asset fairly and reasonably apprised the trial court of a claim predicated upon federal preemption.Accordingly, we are compelled to conclude the claim was not properly preserved for review on appeal.

¶ 6.This does not, however, end our analysis.As discussed below, an important facet of the federal preemption decisions is their recognition that Social Security benefits are not a property or contractual right amenable to division but rather a product of social-welfare legislation that is open to alteration, modification, reduction, or even elimination at the will of Congress.Wholly apart from the question of federal supremacy, therefore, we may conclude under our own state statutes and case law that the inherently uncertain and changeable nature of such benefits renders them too intangible to be characterized as marital property or considered in the division of the marital estate.Husband's objection on the ground that the parties' anticipated Social Security benefits were unduly speculative, therefore, was sufficient to preserve the state-law issue for review.

¶ 7.In a seminal decision upholding a section of the Social Security Act providing for the termination of benefits to deported aliens, the U.S. Supreme Court held that the law did not deprive the petitioner of “an accrued property right.”Flemming v. Nestor,363 U.S. 603, 608, 80 S.Ct. 1367, 4 L.Ed.2d 1435(1960).As the Court explained, the “noncontractual interest” of an employee covered by the Act could not be analogized to that of holder of an annuity or pension bottomed on contractual premium payments.Id. at 610, 80 S.Ct. 1367.The beneficiary's interest rests, instead, on “a highly complex and interrelated statutory structure” continually responsive to “the manifold specific problems presented by the Social Security program.”Id.While undoubtedly designed to function for the indefinite future, the Act's provisions rely “on predictions as to expected economic conditions which must inevitably prove less than wholly accurate, and on judgments and preferences as to the proper allocation of the Nation's resources which evolving economic and social conditions will of necessity in some degree modify.”Id.Indeed, in recognition of the need for flexibility to adjust Social Security benefits to “ever-changing conditions,”Congress expressly reserved the “ ‘right to alter, amend, or repeal any’ ” of the Act's provisions.Id. at 610–11, 80 S.Ct. 1367(quoting42 U.S.C. § 1304).

¶ 8.With the Social Security Act's inherent fluidity in mind, the U.S. Supreme Court has held that federal law precludes a state court from dividing or offsetting retirement benefits under analogous provisions of the Railroad Retirement Act, which provides retirement benefits for railway workers not covered by Social Security.Hisquierdo v. Hisquierdo,439 U.S. 572, 588–89, 99 S.Ct. 802, 59 L.Ed.2d 1(1979).While relying on a specific section of the Railroad Act—identical to a section in the Social Security Act—providing that retirement benefits may not be subject to attachment, garnishment “or other legal process,”id. at 576, 99 S.Ct. 802, the Supreme Court observed that its holding barring consideration of such inherently fluid “expectations” also served to preserve “congressional freedom to amend the Act, and so serves much the same function as the frequently stated understanding that programs of this nature convey no future rights.”Id. at 589, 99 S.Ct. 802.

¶ 9.Relying, in turn, on these landmark Supreme Court decisions, state courts“have universally acknowledged that Social Security benefits are not marital property and are not subject to division in divorce actions.”Depot v. Depot,2006 ME 25, ¶ 6, 893 A.2d 995;see generallyB. Turner, Social Security: A 2005 Update, 17 No. 4 Divorce Litigation 53 (2005)(noting that “state courts are in uniform agreement [that] Social Security benefits cannot be treated as marital or community property”).Courts that have considered the issue have also generally concluded that anticipated Social Security benefits may not be used as an offset to compensate one spouse for the allocation of marital benefits to the other.See, e.g., Webster v. Webster,271 Neb. 788, 716 N.W.2d 47, 55(2006)(“The weight of authority has concludedthat an offset of Social Security benefits is prohibited.”);Olson v. Olson,445 N.W.2d 1, 11(N.D.1989)(...