Marriage of Zahm, In re

• Decision Date: 17 June 1999
• Docket Number: No. 66895-7,66895-7
• Citation: 978 P.2d 498,138 Wn.2d 213
• Court: Washington Supreme Court
• Parties: In re the MARRIAGE OF L. Dianne ZAHM, Respondent, and Kermit A. Zahm, Petitioner.

Page 498

138 Wn.2d 213

978 P.2d 498

In re the MARRIAGE OF L. Dianne ZAHM, Respondent and Kermit A. Zahm, Petitioner.

No. 66895-7.

Supreme Court of Washington En Banc.

Argued Feb. 24, 1999.

Decided June 17, 1999.

William S. Lowry, Walla Walla, Christopher Constantine, Tacoma, for Petitioner.

Albert Golden, Walla Walla, for Respondent.

JOHNSON, J.

This case primarily involves the judicial characterization of social security payments when dividing property in a marital dissolution action. We must decide whether the trial court properly characterized petitioner's social security benefits, an Idaho bank account, and a home in Walla Walla, Washington. Petitioner also claims the trial court erred in awarding maintenance to respondent. We affirm the Court of Appeals.

FACTS

Petitioner and respondent married in June 1978. They separated in 1986 and divorced in 1987. Approximately 18 months later, the Zahms reunited and the 1987 divorce decree was set aside and the action dismissed. The couple permanently separated in 1995. As Both petitioner and respondent brought separate property to their 1978 marriage. Prior to her marriage to petitioner, respondent owned a townhouse in Eagle, Idaho. The Zahms resided at the Eagle, Idaho townhouse for approximately the first two years of their marriage. Respondent then sold her townhouse and placed the sale proceeds into bank accounts in her name and the names of her daughters from a previous marriage. In addition to those accounts, respondent also maintained separate accounts for herself and her daughters with New York Life Insurance. At the conclusion of the Zahms' marital dissolution proceeding, the trial court characterized the bank accounts originally established with proceeds of the Idaho townhouse sale, and the New York Life Insurance account as respondent's separate property.

part of the Zahms' marital dissolution proceeding, the trial court characterized and distributed the couple's separate and community property.

Petitioner owned a townhouse in Boise, Idaho prior to marrying respondent. In 1983, while married to respondent, petitioner paid the balance in full on his townhouse. He then sold that house in 1988. The buyer's monthly payments on the Boise townhouse were placed in the Zahms' joint First Interstate Bank account in Washington (First Interstate/Washington). The First Interstate/Washington account was also funded by monies from a First Interstate Bank account in Idaho (First Interstate/Idaho). At the conclusion of the Zahms' marital dissolution proceeding, the trial court characterized the monies in both bank accounts as community property.

In 1990, the Zahms purchased a home in Walla Walla and resided there. The Zahms split the down payment on the house, each paying approximately $9,000, and both signed a promissory note to secure a loan for the home's balance of $54,900. At the time of trial, the Walla Walla home had appreciated to a market value of $107,725. At the conclusion of the Zahms' marital dissolution proceeding, the trial court characterized the Walla Walla home as community property.

In 1991 and 1993, petitioner assigned the interest in the buyer's note for the Boise home to Metropolitan Mortgage. Petitioner received over $55,000 from Metropolitan Mortgage, which was deposited into the First Interstate/Idaho account. The names on the First Interstate/Idaho account's signature card are those of petitioner, respondent and petitioner's son from a previous marriage. Petitioner claimed at trial that respondent's name appeared on the First Interstate/Idaho account exclusively for estate planning purposes and that respondent never signed checks on that account. In 1994, petitioner withdrew $51,223.57 from the First Interstate/Idaho account to pay the balance remaining on the Walla Walla home's mortgage. At the time of trial, the balance remaining in the First Interstate/Idaho account was $6,002.00; the trial court characterized those funds as community property.

At the time of trial, petitioner received monthly income from federal social security, his military retirement plan, his Veteran's Administration disability plan, his federal technician's pay, and his Idaho State retirement plan. These income sources totaled $3,762 per month. All these monies were automatically deposited every month into the First Interstate/Idaho Bank account. At the conclusion of the Zahms' marital dissolution proceeding, the trial court characterized these monies as community property. However, the trial court neither assigned nor calculated in a future value of these monies as part of the court's property characterization and distribution.

Respondent filed for divorce from petitioner in February 1995. A dissolution trial was conducted in November 1996. The superior court entered its findings of fact, conclusions of law, and a decree of dissolution on May 20, 1996. The court decree, inter alia, characterized the First Interstate/Idaho account, the Walla Walla home, and petitioner's social security benefits as community property. Petitioner was also ordered to pay maintenance for respondent. Petitioner appealed the trial court's decision. In its opinion, the Court of Appeals agreed with petitioner that the trial court improperly characterized his social security benefits, but found the error to be harmless. The court affirmed the trial court

on the remaining issues raised by petitioner. In re Marriage of Zahm, 91 Wash.App. 78, 955 P.2d 412 (1998). Petitioner timely appealed.

ANALYSIS

Petitioner argues the trial court erred when it included petitioner's social security benefits in its distribution of the Zahms' community property. Petitioner argues federal social security law generally makes monies payable under the social security system indivisible and not subject to reassignment. Petitioner contends these restrictions mandate our finding that the trial court's distribution of petitioner's benefits contravened federal law. The Court of Appeals agreed and ruled the trial court erred in listing petitioner's social security benefits as community property; however, the court found the error harmless. We affirm.

RCW 26.09.080 governs the disposition of property in marital dissolution cases. That statute instructs trial courts to make a "just and equitable" distribution of the parties' property. The statute's nonexclusive list of factors for consideration by the trial court include the nature and extent of the community property, the nature and extent of the separate property, duration of the marriage, and the resulting economic circumstances of each spouse when the property is divided. RCW 26.09.080. A fair and equitable division by a trial court "does not require mathematical precision, but rather fairness, based upon a consideration of all the circumstances of the marriage, both past and present, and an evaluation of the future needs of parties." In re Marriage of Crosetto, 82 Wash.App. 545, 556, 918 P.2d 954 (1996).

At issue here is the interplay between RCW 26.09.080 and 42 U.S.C. § 407(a) of the Social Security Act (Act), the latter of which forbids transfer or reassignment of "[t]he right of any person to any future payment under this title...." While the Act does permit reassignment of social security benefits to pay for alimony or child support, it categorically excludes any similar payment obligation in conformity with a community property settlement, equitable distribution of property, or other division between spouses or former spouses. 42 U.S.C.A. § 659(i)(3)(B)(ii).

In 1979, the United States Supreme Court held the federal constitution's supremacy clause preempted California's community property laws. Hisquierdo v. Hisquierdo, 439 U.S. 572, 590, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979). The judicial application of California's community property laws, therefore, could not supplant the terms of the federal Railroad Retirement Act of 1974, 88 Stat. 1305, § 45 U.S.C. 231 (Railroad Retirement Act). Hisquierdo, 439 U.S. at 590, 99 S.Ct. 802. In its analysis, inter alia, the Supreme Court analogized between Railroad Retirement Act benefits and federal social security benefits holding, inasmuch as both benefits are the products of noncontractual agreements, they are fundamentally similar. Hisquierdo, 439 U.S. at 574-75, 99 S.Ct. 802. The Supreme Court ultimately held Railroad Retirement Act benefits are not subject to distribution as property in a dissolution proceeding. Hisquierdo, 439 U.S. at 590, 99 S.Ct. 802. Given the Supreme Court's assertion of an affinity between Railroad Retirement Act benefits and federal social security benefits in Hisquierdo, we conclude social security benefits themselves are not subject to division in a marital property distribution case. However, this conclusion does not resolve precisely the exact question presented here because while the trial court did characterize the social security benefits as community property, it did not order an actual distribution of those benefits.

Following Hisquierdo, some state appellate courts have held social security benefits are not subject to distribution as community property. In Luna v. Luna, 125 Ariz. 120, 123, 608 P.2d 57 (1979), the Arizona Supreme Court held payments received by a spouse in the form of social security disability benefits were the receiving spouse's separate property and should not be characterized as community property. Likewise, in In re Marriage of Hillerman, 109 Cal.App.3d 334, 339-41, 167 Cal.Rptr. 240 (1980), the California Court of Appeals held, although social security plans and private pension plans are similar, peculiarities in the federal social security plan render it insurmountably problematic to characterize and redistribute those benefits as community property, in the manner a court might properly do with private pension plan benefits. The California court also reasoned that problems in identifying social security benefits as community property were...