Opinion ID: 885405
Heading Depth: 1
Heading Rank: 4

Heading: VA Disability May be Considered as a Financial Circumstance of the Parties

Text: ¶ 29 In making an equitable apportionment of marital property, Montana trial courts are directed to consider, inter alia, the station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties; custodial provisions; whether the apportionment is in lieu of or in addition to maintenance; and the opportunity of each for future acquisition of capital assets and income. Section 40-4-202(1), MCA. The statute mandates that the court make an equitable property distribution in light of the totality of the parties' post-dissolution economic circumstances. Indeed, without full information before it regarding the financial circumstances of each party, a district court would be hard pressed to achieve an equitable distribution or determine whether maintenance is necessary in addition to or in lieu of property apportionment. ¶ 30 Generally, Montana law prefers property dispositions over maintenance in dissolution matters. In re Marriage of Smith (1993), 260 Mont. 533, 536, 861 P.2d 189, 191; see also In re Marriage of Dowd (1993), 261 Mont. 319, 325, 862 P.2d 1123, 1127 (concluding that when properly read together, §§ 40-4-202 and -203, MCA, instruct a district court, where appropriate, to order a division of marital property, as opposed to an award of maintenance, to satisfy the financial needs of the parties). ¶ 31 Notably, the USFSPA speaks only to a state court's power to treat VA disability benefits as marital property divisible upon dissolution. See 10 U.S.C. § 1408(c)(1). Similarly, nothing in 38 U.S.C. § 5301(a) prohibits consideration of a veteran's disability benefits as a financial circumstance relevant to achieving an equitable property apportionment sufficient to provide for the reasonable needs of the other spouse post-dissolution. See § 40-4-203(1)(a), MCA. ¶ 32 Consistent with the requirements of both state and federal law, we therefore held in Marriage of Murphy that Mansell . . . does not prohibit ... consideration of [a veteran's] disability [benefits] as part of his [or her] potential future income. Our legislature has specifically provided that courts must consider the potential future earning power of the parties when making its division of the marital estate. Section 40-4-202, MCA.... VA disability benefits are part of [a veteran's] future income earning potential. Marriage of Murphy, 261 Mont. at 368, 862 P.2d at 1146. ¶ 33 Other jurisdictions are in accord with this approach, both in community property states, see, e.g., In re Marriage of Kraft (1992), 119 Wash.2d 438, 832 P.2d 871; Rothwell v. Rothwell (Tex.App.1989), 775 S.W.2d 888; and Bewley v. Bewley (1989), 116 Idaho 845, 780 P.2d 596, as well as in equitable distribution states like Montana, see, e.g., Clauson v. Clauson (Alaska 1992), 831 P.2d 1257; Jones v. Jones (1989), 7 Haw.App. 496, 780 P.2d 581; and Davis v. Davis (Ky.1989), 777 S.W.2d 230. ¶ 34 In short, consistent with both state and federal law, a district court may consider VA disability benefits in the same way it considers each party's ability to earn income post-dissolution as an important factor in achieving an equitable property division, Jones, 780 P.2d at 584, thus avoiding the need to award spousal maintenance. Such an approach is consistent with Montana law to the extent that it furthers our policy of favoring property distribution over maintenance. It is also consistent with federal law in that it provides a disabled veteran sole possession of his or her disability benefits both in law and in fact. Clauson, 831 P.2d at 1263 n. 9. ¶ 35 However, we caution trial courts to be careful not to achieve indirectly what they may not do directly. Disability benefits should not, either in form or substance, be treated as marital property subject to division upon the dissolution of marriage. Clauson, 831 P.2d at 1264. See, e.g., Marriage of Kraft, 832 P.2d at 875-76 (holding that [i]t is improper under Mansell for the trial court to reduce military disability retirement pay to present value where the purpose of ascertaining present value is to serve as a basis to award the nonretiree spouse a proportionally greater share of the [marital] property as a direct offset of assets ) (emphasis added); Clauson, 831 P.2d at 1264 (holding that it is in direct contravention of the holding in Mansell  for a trial court to simply shift an amount of property equivalent to the [cash value of the veterans' disability benefits] from the military spouse's side of the ledger to the other spouse's side) (emphasis added); Jones, 780 P.2d at 583-84 (holding that it is error under Mansell to reduce military disability retirement pay to its present value and then use that value as basis for awarding other spouse offsetting marital property of equal cash value ). ¶ 36 Since we reverse the District Court's property distribution as erroneous, the court will have to revisit the interrelated questions of property apportionment, spousal maintenance, and child support. In this case, however, the parties held minimal marital property and Justin's VA disability pay constitutes his only current source of income. Should the court's new property distribution appear inadequate to provide for Brandy's reasonable needs post-dissolution, then the District Court may consider awarding Brandy spousal maintenance under § 40-4-203, MCA, in lieu of or in addition to what marital property the court may legally apportion to her. Even though Justin's VA disability benefits are his sole current source of income and, thus, would necessarily be used to satisfy his maintenance obligations, such action is permitted under the logic of the U.S. Supreme Court's decision in Rose v. Rose (1987), 481 U.S. 619, 107 S.Ct. 2029, 95 L.Ed.2d 599. ¶ 37 In Rose, the Tennessee trial court held the veteran spouse in contempt for failing to pay ordered child support. The veteran challenged that action on appeal, arguing that it was impermissible since his income was composed almost entirely of disability benefits received from the VA. See Rose, 481 U.S. at 622, 107 S.Ct. at 2032, 95 L.Ed.2d at 605 (noting that the veteran also received nominal monthly disability income from the Social Security Administration). After reviewing the legislative history applicable to what is now 38 U.S.C. § 5301(a) (formerly 38 U.S.C. § 3101(a)), the Court held that VA disability benefits were never intended to be exclusively for the subsistence of the beneficiary. Rather, Congress intended such benefits to support not only the veteran, but the veteran's family as well. Recognizing an exception to the application of [§ 5301(a)'s] prohibition against attachment, levy, or seizure in this context would further, not undermine, the federal purpose in providing these benefits. Rose, 481 U.S. at 634, 107 S.Ct. at 2038, 95 L.Ed.2d at 613. The Court thus held that the [n]either the Veterans' Benefits provisions of Title 38 nor the garnishment provisions of the Child Enforcement Act of Title 42 preempt the authority of state courts to enforce a child support order against a veteran, even where the veteran's income is composed of VA disability benefits that would necessarily be used to pay child support. See Rose, 481 U.S. at 636, 107 S.Ct. at 2039, 95 L.Ed.2d at 614. ¶ 38 Under the logic of Rose, since Congress clearly intended veterans' disability benefits to be used, in part, for the support of veterans' dependents, Rose, 481 U.S. at 631, 107 S.Ct. at 2036, 95 L.Ed.2d at 610-11, a state court is clearly free to consider post-[dissolution] disability income and order a disabled veteran to pay spousal support even where disability benefits will be used to make such payments. Clauson, 831 P.2d at 1263 n. 9. In addition to Alaska, several other jurisdictions have concluded that federal law does not prohibit considering veterans' disability pay as a source of income in awarding spousal maintenance. See In re Marriage of Kraft (1992), 119 Wash.2d 438, 832 P.2d 871; Womack v. Womack (1991), 307 Ark. 269, 818 S.W.2d 958; In re Marriage of Nevil (Colo. Ct.App.1991), 809 P.2d 1122; Riley v. Riley (1990), 82 Md.App. 400, 571 A.2d 1261; Lambert v. Lambert (1990), 10 Va.App. 623, 395 S.E.2d 207; Weberg v. Weberg (1990), 158 Wis.2d 540, 463 N.W.2d 382; see also Lawrence J. Golden, Equitable Distribution of Property § 6.06A, at 182 (Supp.1993). ¶ 39 Nor, because of the qualitative difference between a maintenance award and a property distribution award, does a trial court's award of maintenance which will be paid with military disability benefits accomplish indirectly what, may not be accomplished directly under Mansell. See Marriage of Nevil, 809 P.2d at 1123; but see § 25-13-608(2)(b), MCA (stating that under Montana law, a judgment debtor's disability benefits are exempt from execution except where, as here, execution would be levied for maintenance to be paid to a former spouse who is the custodial parent of a child for whom support is owed or owing). ¶ 40 In conclusion, a trial court in a marriage dissolution action may consider military disability retirement pay as a source of income in awarding spousal or child support, or generally as an economic circumstance of the parties justifying a disproportionate award of [marital] property to the nonretiree spouse. Marriage of Kraft, 832 P.2d at 877. Such a narrow interpretation of federal preemption in this area, is entirely consistent with the principle that domestic relations are preeminently matters of state law. Mansell, 490 U.S. at 587, 109 S.Ct. at 2028, 104 L.Ed.2d at 684. ¶ 41 (2) Did the District Court err in awarding attorney's fees? ¶ 42 Justin contends that the District Court erred under both state and federal law in awarding attorney's fees to Brandy. Justin argues that since VA disability constitutes his only current source of income, the District Court's award of attorney's fees effectively runs afoul of Mansell and Marriage of Murphy. Justin further argues that payment of Brandy's attorney's fees will necessarily have to be made from property that is exempt from being executed upon by creditors pursuant to 38 U.S.C. § 5301 and § 25-13-608, MCA. This claim raises a question of law which we review de novo. Marriage of Barker, 264 Mont. at 113, 870 P.2d at 88. ¶ 43 As determined under the first issue on appeal, an award of spousal maintenance or child support may be levied against VA disability payments notwithstanding the anti-attachment strictures of 38 U.S.C. § 5301(a). However, Justin points this Court to authority suggesting that an award of attorney's fees and costs to a spouse in a dissolution action is not on the same footing as an award for maintenance or support and, therefore, cannot be enforced against exempt property. See Jane Massey Draper, Annotation, Enforcement of Claim for Alimony or Support, or for Attorneys' Fees and Costs Incurred in Connection Therewith, Against Exemptions, 52 A.L.R.5th 221, 285-89, 1998 WL 1803 (1998). As Justin suggests, the rationale for treating an award of maintenance differently from an award of attorney's fees is that, in contrast to deeply rooted familial support obligations which transcend ordinary debt, an award of attorney's fees simply establishes a debtor-creditor relationship to which exempt property statutes are applicable. See, e.g., Stone v. Stone (1934), 188 Ark. 622, 67 S.W.2d 189, 191 (holding that award to spouse's attorney to be paid out of veteran spouse's exempt military pension created a debtor-creditor relationship, thus falling within statutory exemption). ¶ 44 Similarly, this Court has held that since an award of maintenance is based on the natural obligation or moral duty of one spouse to support the other spouse and children, it is to be distinguished from an ordinary judgment debt to which the exemptions of § 25-13-608, MCA, apply. See In re Marriage of Boharski (1993), 257 Mont. 71, 74-76, 847 P.2d 709, 712-13 (holding that union disability payments do not constitute exempt property under § 25-13-608, MCA, with respect to award of maintenance); see also § 25-13-608(2)(a)-(b), MCA (providing, as amended in 1997, that disability payments are not exempt from execution for child support or for maintenance to be paid custodial parent of child for whom support is owed or owing). ¶ 45 Thus, the question that arises is whether an award of attorney's fees in a dissolution action amounts to a judgment debt within the meaning of § 25-13-608, MCA. As analyzed below, we conclude that it does. Therefore, an award of attorney's fees in a dissolution action may not be executed against exempt VA disability benefits. See § 25-13-608(c)-(d), MCA; 38 U.S.C. § 5301(a). ¶ 46 In reaching our decision, we are aware that some courts have treated an award of attorney's fees in a dissolution action as a form of spousal maintenance and, on that basis, have upheld the award against exempt property. See, e.g., Bickel v. Bickel (1972), 17 Ariz.App. 29, 495 P.2d 154, 156 (holding that where attorney's fees are awarded as part of the same dissolution decree awarding spousal support, award may be enforced against exempt property because such fee is as much support as any payments directly to the [spouse]); Gerold v. Gerold (1971), 6 Or.App. 353, 488 P.2d 294, 294-95 (holding that notwithstanding what is now 38 U.S.C. § 5301(a), award of maintenance and attorney's fees proper because the exemption statute was intended to serve as a shield for the veteran and his dependents, not to serve as a sword to be used by the veteran against his dependents). ¶ 47 Notwithstanding those decisions, we begin with the following general observation: The award of attorney fees has been described as an incident of[,] ... as an accessory to, or in the very same category as, other maintenance-related obligations. However, the award of such, fees is not an element of, and is independent of, the division of property, and has been characterized as not related to, or as separate from, and not to be considered as, maintenance. [Emphasis added.] 27B C.J.S. Divorce § 343, at 157 (1986) (footnotes omitted). ¶ 48 In resolving this matter, we take guidance from the Supreme Court of Missouri's en banc decision in Dyche v. Dyche (Mo.1978), 570 S.W.2d 293. Montana, like Missouri, is one of a handful of states that have adopted the attorney's fees provision (§ 313) of the Uniform Marriage and Divorce Act. See 3 Family Law and Practice § 39.01[4][b], at 39-8 (Arnold H. Rutkin ed., 1995). In Dyche, the court faced the question of whether garnishment in aid of execution on a judgment for attorney's fees awarded in a dissolution proceeding was within the support exception to statutory limitations on garnishment. The Dyche court noted that prior to Missouri's adoption of the Uniform Marriage and Divorce Act, there was no express statutory authorization for the award of attorney's fees in a dissolution proceeding, but that judicial interpretation had allowed attorney's fees as being a form of and included within a court's statutory authority to award alimony. See Dyche, 570 S.W.2d at 295-96. ¶ 49 Similarly, prior to Montana's adoption of the Uniform Marriage and Divorce Act, including the attorney's fees provision of § 40-4-110, MCA, the trial courts of this state were statutorily authorized, pending a final dissolution decree, to award `as alimony any money necessary to enable the [spouse] to ... prosecute or defend the action.' See Crum v. Crum (1960), 137 Mont. 407, 408-09, 352 P.2d 988, 989 (quoting § 21-137, RCM (1947)); Albrecht v. Albrecht (1928), 83 Mont. 37, 46, 269 P. 158, 161 (quoting § 5769, RCM (1921)). Under that statutory scheme, an award of attorney's fees clearly was a form of temporary support or alimony pendente lite. ¶ 50 However, the statutory scheme changed dramatically with the Montana Legislature's enactment of the Uniform Marriage and Divorce Act in 1975. Now there is a separate statute pertaining to the award of costs and attorney's fees in a dissolution action (§ 40-4-110, MCA), which is entirely distinct from the statutory provisions for an award of temporary maintenance or support pending dissolution (§ 40-4-121, MCA), an award of post-dissolution maintenance (§ 40-4-203, MCA), or an award of post-dissolution child support (§ 40-4-204, MCA). Importantly, an award of attorney's fees is not subject to the statutory provisions for an award of support or maintenance. Rather, it involves a separate inquiry into the financial resources of both parties at the time attorney's fees are considered, and the court is authorized in its discretion to order the attorney's fees to be paid directly to the attorney, who may enforce the order in the professional's name. Section 40-4-110(1), MCA. ¶ 51 The Dyche court determined that the separate treatment of maintenance and child support, as one type of an award, and litigation costs and attorney fees as another type of an award, demonstrates a legislative intent not to ... award attorney fees as an incident to ... maintenance. Dyche, 570 S.W.2d at 296. We agree with the Dyche court, which reasoned that there is compelling rationale for treating such awards differently. The primary purpose of maintenance and child support is to provide subsistence for the spouse and the children; not to provide immediate payment of a debt to a third party. Dyche, 570 S.W.2d at 296. Therefore, to permit a judgment for attorney's fees to be executed against exempt property would, in the words of the Dyche court, defeat the purpose of the awards for maintenance and child support, and would permit the attorney for the spouse to whom the award was made to receive preferential treatment over other creditors of the debtor, for example, [the debtor-spouse's] own attorney. Dyche, 570 S.W.2d at 297. ¶ 52 Statutes establish the law of this state regarding the subjects to which they relate. Section 1-2-103, MCA. We hold that the separate statutory provisions for an award of attorney's fees and an award of maintenance or support in a dissolution action express a legislative intent that a judgment for attorney's fees not be characterized as a form of maintenance or support. Thus, we further hold that both Montana and federal law prohibits an attorney's fees award from being executed upon VA disability benefits. We need not reach Justin's other claims regarding the award of attorney's fees. ¶ 53 We note that the District Court did not direct that the award of attorney's fees be paid from Justin's VA disability benefits. Justin received several assets of value in the marital property distribution and, as Brandy argues, he is free to satisfy the attorney's fee award from that and other property without impinging upon his exempt property. On remand, we direct the District Court to reconsider the necessity for an award of attorney's fees after revisiting the questions of property distribution, maintenance, and child support. However, the court shall entertain any showing by Justin that the amount of the attorney's fees award, if any, exceeds the value of his non-exempt property. ¶ 54 Lastly, both parties intimate that this Court should grant them damages on appeal. We are permitted to grant damages whenever it appears that an appeal was taken without substantial or reasonable grounds. Rule 32, M.R.App.P. We decline to award damages in this case; the appeal was meritorious. ¶ 55 Reversed and remanded for further proceedings consistent with this opinion. J.A. TURNAGE, C.J., and JAMES C. NELSON, JIM REGNIER, W. WILLIAM LEAPHART, JJ., concur.