The Montana Supreme Court recently held that federal law does not prevent state courts from enforcing separation agreements which divide veteran's disability pay. In In re Stone, 21 Fam. L. Rep. (BNA) 1100 (Mont. 1995), the parties' separation agreement contained a maintenance provision which required the husband to pay to the wife half of his veteran's disability pay. The agreement was incorporated into a divorce decree. Several years later, the husband sought to modify the maintenance award, arguing that it was contrary to federal law.
The trial court refused to modify the award, and the Montana Supreme Court affirmed. While the Supreme Court has held that veteran's disability pay cannot be divided under community property or equitable distribution law, Mansell v. Mansell, 490 U.S. 581 (1989), the court held that Mansell does not prevent division under a theory of contract. The husband voluntarily agreed to divide his veteran's benefits, the court held, and that contract was enforceable. Two dissenting justices would have construed Mansell to make the contract provision in question unenforceable.
Both opinions in Stone missed several important points of law. To understand these points, it is necessary to examine in detail the relevant Supreme Court decision, Mansell v. Mansell, supra.
The parties in Mansell were divorced in 1979. The divorce decree incorporated a separation agreement which divided the husband's veteran's disability pay. The issue of the state court's authority to divide such pay was never raised in the divorce case, and the divorce decree became final. Several years later, the husband filed a collateral attack upon the divorce decree, arguing for the first time that the court lacked authority to divide his disability pay. The state court assumed without deciding that the judgment could be reopened if erroneous, and then held that disability pay could be divided.
On further appealed, the Supreme Court accepted the California court's assumption that the judgment could be reopened. Addressing the merits, it then held that federal law preempted state law and prevented division of veteran's disability pay. The case was then remanded back to California for further proceedings consistent with the Supreme Court's decision.
On remand, however, the California Court of Appeals revisited its earlier assumption that the judgment could be reopened. Reviewing this issue on its merits for the first time, the court determined that the prior judgment was in fact final and thus could not be reopened. The husband argued in response that Mansell retroactively voided the 1979 decree, but the court disagreed. Mansell did not deprive state courts of subject matter jurisdiction, the court said; it merely required that veteran's disability benefits be divided exclusively under federal law. Because the Supreme Court's opinion was one of substantive law rather than jurisdiction, the hodling was not retroactive. The California court therefore held that 1979 California decree was therefore valid, it actually divided the husband's disability pay.
Not surprisingly, the husband appealed the holding on remand back to the Supreme Court, arguing that the state court had defied the Supreme Court's order. Significantly, however, the Supreme Court denied certiorari to review the case. cite. If the Court had any intention of treating Mansell as a jurisdictional holding, it would have accepted the petition. By denying review, the Supreme Court effectively adopted the California court's reasoning that Mansell was a rule of substantive law and not a rule of jurisdiction.
Returning now to the facts of In re Stone, the flaws in both opinions in that case become apparent. To begin with, the majority opinion missed a fundamental factual point which distinguished Mansell from Stone. In Mansell, the agreement divided veteran's disability pay as a matter of property division, but in Stone, the agreement divided such pay as a matter of spousal support. A pre- Mansell decision from the Supreme Court expressly held that veteran's disability pay is a proper source for spousal and child support, and Mansell expressly cited that decision with approval. Rose v. Rose, 481 U.S. 619 (1987). Relying upon Rose, cases after Mansell have held that the case simply does not apply to alimony. Womack v. Womack, 307 Ark. 269, 818 S.W.2d 958 (1991) (even though alimony was expressly awarded "in lieu of" division); Riley v. Riley, 82 Md. App. 400, 571 A.2d 1261 (1990); Weberg v. Weberg, 158 Wis. 2d 540, 463 N.W.2d 382 (Ct. App. 1990). The Montana court therefore could have avoided Mansell simply by noting that Mansell applies only to property division.
The dissenting justices seemed to disagree with the conclusion that the benefits were divided as alimony, and may have intended to take the position that the benefits were property division. If the benefits were property division, however, the result was still no different. Stone, like Mansell, was a collateral attack upon a valid final divorce decree. Neither the majority nor the dissent in Stone showed any awareness of the fact that the California courts ultimately divided the benefits at issue in Mansell on a theory of res judicata, and that the Supreme Court refused to reverse that division. Since Stone was likewise a post-divorce proceeding, Mansell actually supports the position that the benefits at issue in Stone were divisible. Because the Montana court relied only upon the first Mansell decision and ignored the subsequent remand, it missed entirely the significance of the fact that the case involved post-divorce relief. For specific post-Mansell cases holding that a final judgment cannot be modified or collaterally attacked for noncompliance with Mansell, see In re Zrubek, 149 B.R. 631 (Bankr. D. Mont. 1993); Evans v. Evans, 75 Md. App. 364, 541 A.2d 648 (1988).
For these reasons, the Stone court could have resolved the questions before it without ever reaching the substantive issue of whether the property division portion of a separation agreement can divide veteran's disability pay. Once it reached this issue, however, the court reached exactly the right result. In footnote 6 of its Mansell opinion, the Supreme Court noted that any attempt to divide veteran's disability benefits by contract would face an obstacle in 38 U.S.C. 5301(a) (1994), which prevents contractual assignements of such benefits. 490 U.S. at 586 n.6. Because the California state courts had not relied on the contractual element, however, the Supreme Court likewise chose to ignore that element. It therefore expressly refused to consider any of the issues arising out of 5301(a). If the court had intended to consider Mansell as a contract case, it would have had to consider the anti-assignment statute. The court's failure to consider that statute is good evidence that the contract issues simply were not addressed by the Mansell opinion.
Because the Supreme Court expressly refused to consider the contractual element in Mansell, that case cannot be read to express any opinion either way on whether veteran's disability benefits can be divided by contract. In Rose v. Rose, supra, however, the court did reach something close to that issue, holding that the anti-assignment statute did not prevent enforcement of spousal support or child support provisions in a separation agreement. The reasoning behind this holding was that veteran's disability benefits were intended to protect the veteran and his or her family against outside creditors, and were not intended to protect the veteran against contracts signed within the family. If the purpose of the anti- assignment statute was to protect the veteran's entire family, it then follows logically that that statute should not prevent division of veteran's disability benefits by private agreement. The Stone court therefore reached the correct result. For additional cases holding that military benefits normally preempted by federal law can be divided by private agreement, see Maxwell v. Maxwell, 796 P.2d 403 (Utah Ct. App. 1990) (stipulation dividing husband's gross retirement pay, without making the various deductions set forth in 10 U.S.C.A. 1408(a)(4) (Supp. 1993), could be enforced without violating Mansell); see also In re MacMeeken, 117 B.R. 642 (D. Kan. 1990) (stating in dicta that "this court does not find any Congressional intent in the [USFSPA] to prevent or protect service members from disposing of their disposable retirement benefits as they choose," even if the same division would violate federal law if ordered by a court); but see McMahan v. McMahan, 567 So. 2d 976 (Fla. Dist. Ct. App. 1990); Moon v. Moon, 795 S.W.2d 511 (Mo. Ct. App. 1990).
In the final analysis, therefore, Stone is a well- reasoned and important decision. The court stretched to reach the issue it addressed, and missed several opportunities to resolve the case on a simpler basis. Nevertheless, the holding that Mansell does not apply to private agreements is entirely correct, and the court's reasoning was very well-stated. Future courts should agree with Stone that Mansell applies only where the state court seeks as a matter of first instance to divide veteran's disability benefits in the absence of a private agreement.