Russ v. Russ

Decision Date24 September 2019
Docket NumberNo. A-1-CA-36190,A-1-CA-36190
Citation456 P.3d 1100
Parties Angela RUSS, Plaintiff-Appellee/Cross-Appellant, v. Jeffrey L. RUSS, Defendant-Appellant/Cross-Appellee, and New Mexico Human Services Department, Intervenor.
CourtCourt of Appeals of New Mexico

New Mexico Family Law, PC, Amanda A. Aragon, Albuquerque, NM for Appellee

Michelle Cortez, Albuquerque, NM, L. Helen Bennett, Albuquerque, NM for Appellant

HANISEE, Judge.

{1} Jeffrey Russ (Husband) appeals a district court order requiring reimbursement to Angela Russ (Wife), along with continued payments to her, of half of Husband’s military retirement pay (Retirement Pay), pursuant to their Marital Settlement Agreement (MSA). At issue is what remains owed to Wife after Husband waived his Retirement Pay in exchange for receiving disability-based Combat Related Special Compensation (CRSC). Husband argues the United States Supreme Court’s recent decision in Howell v. Howell, ––– U.S. ––––, 137 S. Ct. 1400, 197 L.Ed.2d 781 (2017) preempts New Mexico case law and prohibits the district court from ordering Husband to reimburse Wife for waived Retirement Pay. Although we agree with Husband that our contrary decision in Hadrych v. Hadrych , 2007-NMCA-001, 140 N.M. 829, 149 P.3d 593, is no longer controlling precedent after Howell , we nonetheless conclude there to be sufficient reason under still-applicable New Mexico precedent to deny retroactive application of Howell . We therefore affirm on grounds different than those relied on by the district court.

BACKGROUND

{2} Husband and Wife married in 1993. Husband served in the military for the duration of the thirteen-year marriage. Upon their divorce in 2006 the parties entered into the MSA. Incorporated into the district court’s final decree, the MSA stated that "as a compromise division of community assets," Husband and Wife agreed that Wife "receive 50 [percent] of [Husband’s] disposable [R]etirement] [P]ay which was earned during the term of [their] marriage." Husband retired from the military and began receiving Retirement Pay effective January 1, 2011. On April 6, 2011, Wife filed a motion to amend the MSA to state instead that Wife would receive "50 [percent] of [Husband’s] disposable [R]etirement [P]ay from date of retirement" so that the Defense Finance and Accounting Service would disperse her portion of the Retirement Pay. Without a response from Husband, the district court entered an order approving the change less than a week later.

{3} From January 2011 until May 2014, Husband received monthly Retirement Pay varying in amount from $1,578 to $1,638. Wife received her portion of Husband’s Retirement Pay from August 2011 until April 2014. On May 1, 2014, Husband began receiving CRSC, as a consequence of his conversion of 100 percent of his Retirement Pay to CRSC, eliminating altogether Wife’s monthly percentage of Husband’s Retirement Pay under the MSA. On April 11, 2014, Wife filed an emergency motion to enforce the MSA requesting that the district court compel Husband to pay Wife the amount "she would be getting from her portion of [Husband’s] [R]etirement [P]ay and to award her back pay from the time the retirement benefits ceased." On May 23, 2014, Husband also filed a motion to enforce the MSA, arguing that the language of the MSA should not have been modified, and that Wife is only entitled to half of Husband’s Retirement Pay during the marriage , equaling 32.2 percent of Husband’s monthly Retirement Pay, and that disbursements under Husband’s CRSC benefits are his "separate property."

{4} After a hearing on January 4, 2016, the district court determined that the issue of whether, under the MSA, Husband’s CRSC benefits "converted from Retirement [Pay] to CRSC post-retirement[, remain] a community asset and [are] divisible" would be resolved following a trial on the merits. A bench trial took place on November 21, 2016, after which the district court entered its findings of fact, conclusions of law, and order of judgment (Order) on December 19, 2016. The district court found: (1) "[Wife] began receiving her vested portion of the [R]etirement [Pay]" in August 2011, Husband "cannot escape the responsibility of paying [Wife] what the parties agreed she earned during the time that he served in the military, no matter what name is attributed to that compensation or the source from which [Husband] pays [Wife]"; (3) principles of equity required that Wife receive 32.3 percent of the Retirement Pay in accordance with the amount she "earned for the term of the marriage "; (4) Husband owes Wife $22,243.09 in military retirement arrears,1 and; (5) Wife owes Husband $8,738 in overpaid child support, which was used by the district court to offset the overall judgment against Husband. The district court then ordered Husband to pay Wife $529.07 a month—the sum of 32.3 percent of Husband’s Retirement Pay—for as long as allowed by the Department of Defenses’ Military Retirement Regulations, and an additional $500 a month to be paid toward the overall $13,505.09 judgment owed to Wife. Husband timely appealed the district court’s order.

DISCUSSION

{5} On appeal, Husband argues that the United States Supreme Court decision in Howell abrogates this Court’s past decisions in Hadrych , 2007-NMCA-001, 140 N.M. 829, 149 P.3d 593, and Scheidel v. Scheidel , 2000-NMCA-059, 129 N.M. 223, 4 P.3d 670. Both opinions held, in differing circumstances, that a court can order a military spouse to indemnify a non-military spouse for post-divorce decree military waivers of military retirement pay. Husband also argues that Howell should be applied retroactively in this case in accordance with the factors in Beavers v. Johnson Controls World Services, Inc. , 1994-NMSC-094, ¶ 23, 118 N.M. 391, 881 P.2d 1376, because (1) Howell did not create a new principle of law as federal statute and the United States Supreme Court’s decision in Mansell v. Mansell , 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989) prohibited waived military retirement pay from categorization as community property by family courts; (2) limiting application of Howell would frustrate congressional intent as manifested within the Uniformed Services Former Spouses’ Protection Act (USFSPA) 10 U.S.C. § 1408 (2018) ; and (3) equity favors retroactive application since hardship endured by non-military spouses is outweighed by hardship endured by military veterans receiving disability due to their own inability to support themselves.

{6} Wife answers that Howell does not abrogate Scheidel because Scheidel addressed a contractual provision of indemnification; and the MSA contains a release clause analogous to an indemnity provision which protects Wife’s contractual interest in Husband’s Retirement Pay and bars Husband from seeking application of Howell because to do so would deprive Wife of her share of the Retirement Pay. Wife further contends that Howell should not be applied retroactively because it applies a new principle of law by overruling past precedent and because retroactivity would burden the judicial system, economically devastate non-military spouses receiving military retirement payments, and unfairly reduce Wife’s share of community property originally agreed to in the MSA. Wife does not rebut Husband’s argument that Howell abrogated Hadrych .

Standard of Review

{7} "[T]his Court has applied a de novo standard to questions of federal preemption." Humphries v. Pay & Save, Inc. , 2011-NMCA-035, ¶ 6, 150 N.M. 444, 261 P.3d 592. In addition, we affirm for reasons different than those relied on by the district court only in circumstances that are not unfair to the appellant. Meiboom v. Watson , 2000-NMSC-004, ¶ 20, 128 N.M. 536, 994 P.2d 1154 ("This Court may affirm a district court ruling on a ground not relied upon by the district court, but will not do so if reliance on the new ground would be unfair to appellant." (alteration, internal quotation marks, and citation omitted)).

Federal Preemption

{8} Both parties address Scheidel and Hadrych in light of their factual similarity to the instant case. Husband argues that both cases are abrogated by Howell , whereas Wife argues that Scheidel is factually distinct from Howell thereby avoiding abrogation. Federal preemption only applies "in situations where Congress has announced a ‘clear and manifest purpose’ " for state application since New Mexico courts "maintain a strong preference against the doctrine." Humphries , 2011-NMCA-035, ¶ 7, 150 N.M. 444, 261 P.3d 592 ; Lohman v. Daimler-Chrysler Corp. , 2007-NMCA-100, ¶ 15, 142 N.M. 437, 166 P.3d 1091 ("Courts apply a strong presumption against preemption, particularly in areas of law that are traditionally left to state regulation."). Federal law preempts "the application of state community property law to [R]etirement [P]ay." Howell, 137 S. Ct. at 1403 (internal quotation marks and citation omitted). The USFSPA states that a state "may treat [veterans’] disposable retired pay[,]" § 1408(c)(1), as divisible property upon divorce, but expressly excludes from the definition of disposable retired pay any amount "deducted from the retired pay ... as a result of a waiver ... required by law in order to receive [disability benefits]." § 1408(a)(4)(A)(ii). As such, and based upon our thorough review of Howell , we have determined only the holding in Hadrych must be considered incongruent with the holding in Howell . We explain.

{9} During the pendency of this appeal, the United States Supreme Court issued Howell . In Howell , a veteran husband "waived a share of the retirement pay in order to receive nontaxable disability benefits from the Federal Government[,]" resulting in a reduction in his ex-spouse’s share of his retirement payment. 137 S. Ct. at 1402, 1404. The parties were divorced before the husband’s retirement, at which time the non-veteran wife was awarded 50 percent of the husband’s military retirement as her sole and...

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