Opinion ID: 885405
Heading Depth: 1
Heading Rank: 3

Heading: Federal Law Preempts Inclusion of VA Disability Benefits in a Marital Estate

Text: ¶ 18 Our holding today turns primarily upon the U.S. Supreme Court's interpretation of the preemptive scope of the USFSPA. The Court determined, in Mansell, that the Act has pre-emptive effect of its own. Mansell, 490 U.S. at 591, 109 S.Ct. at 2030, 104 L.Ed.2d at 687 (rejecting the argument that the Act is solely a federal garnishment statute). In 1982, the USFSPA was enacted by Congress in direct response to the Court's decision in McCarty v. McCarty (1981), 453 U.S. 210, 101 S.Ct. 2728, 69 L.Ed.2d 589, which held that the federal statutes then governing military retirement pay preempted the authority of state courts to treat military retirement pay as marital property. The McCarty Court reasoned that since Congress intended that military retirement benefits reach only the veteran and no one else, treating such pay as marital property under state law would do clear damage to federal military personnel objectives. See McCarty, 453 U.S. at 232-35, 101 S.Ct. at 2741-42, 69 L.Ed.2d at 605-07. ¶ 19 Congress, in enacting the USFSPA on the heels of McCarty, thus authorized state courts to treat disposable retired pay as marital property. See 10 U.S.C. § 1408(c)(1). The Act defines disposable retired pay as expressly excluding, inter alia, military retirement pay waived to receive a corresponding amount of VA disability benefits pursuant to Title 38 of the United States Code, as well as military disability retirement pay received pursuant to Chapter 61 of Title 10. See 10 U.S.C. § 1408(a)(4)(B)(C). Under the Wartime Disability Compensation Act, 38 U.S.C. § 1110, and the Peacetime Disability Compensation Act, 38 U.S.C. § 1131, VA disability payments are authorized for any disability resulting from personal injury suffered or disease contracted in line of duty, in the active military, naval, or air service, with the two pieces of legislation being identical in their language except one applies during a period of war while the other applies during other than a period of war. Compare 38 U.S.C. § 1110, with 38 U.S.C. § 1131. These are the Title 38 disability sections referred to in 10 U.S.C. § 1408(a)(4)(B). In re Marriage of Jennings (1999), 138 Wash.2d 612, 980 P.2d 1248, 1251. ¶ 20 Here, Justin's VA disability benefits are plainly received under Title 38. Hence, the dispositive question becomes whether those Title 38 VA disability benefits fall outside the definition of disposable retired pay contained in the USFSPA. Following passage of the Act but prior to the Mansell decision, state courts were split on the question of whether Title 38 VA disability pay could be included in a marital estate and divided as marital property. Compare In re Marriage of Daniels (1986), 186 Cal.App.3d 1084, 231 Cal.Rptr. 169, and Campbell v. Campbell (La.Ct.App.1985), 474 So.2d 1339 (opting for divisibility), with Davis v. Davis (Ky.1989), 777 S.W.2d 230, In re Marriage of Costo (1984), 156 Cal.App.3d 781, 203 Cal. Rptr. 85, and Ex parte Burson (Tex.1981), 615 S.W.2d 192 (finding federal preemption). ¶ 21 However, Mansell definitely resolved the above split in state court authority. In Mansell, the U.S. Supreme Court construed Congress' enactment of the USFSPA as evincing an intent to restore to the states only part of their pre- McCarty authority to divide military retirement pay. See Mansell, 490 U.S. at 587-88, 109 S.Ct. at 2028, 104 L.Ed.2d at 684 (concluding that since McCarty held that federal law completely pre-empted the application of state marital property laws to military benefits, Congress could overcome the McCarty decision only by enacting an affirmative grant of authority to the states). The Mansell Court therefore determined that the USFSPA was intended to only partially overrule the total preemption holding of McCarty. ¶ 22 Given the very precise statutory definition of disposable retired pay contained in the USFSPA, which states are authorized by § 1408(c)(1) of the Act to treat as marital property, the Court reasoned that if military benefits other than disposable retired pay were divisible in a dissolution proceeding, then Congress' careful definition of that term would be superfluous. We quote from the Mansell decision: Section 1408(c)(1) of the Act affirmatively grants state courts the power to divide military retirement pay, yet its language is both precise and limited.... [U]nder the Act's plain and precise language, state courts have been granted the authority to treat disposable retired pay as [marital] property; they have not been granted the authority to treat total retired pay as [marital] property. [Emphasis added.] Mansell, 490 U.S. at 588-89, 109 S.Ct. at 2028-29, 104 L.Ed.2d at 685. ¶ 23 After the U.S. Supreme Court's plain language interpretation of the Act in Mansell, federal law preempts state courts from exercising jurisdiction in a dissolution proceeding over any military benefit that is not disposable retired pay. Under the plain language of the USFSPA, disposable retired pay by definition excludes VA disability benefits received under Title 38. 10 U.S.C. § 1408(a)(4)(B). Therefore, noting the personal nature of VA disability pay, we held in Marriage of Murphy that [t]he Act defines the disposable retired or retainer pay as not including VA disability specifically.  Marriage of Murphy, 261 Mont. at 367, 862 P.2d at 1145 (emphasis added); see also In re Marriage of Stone (1995), 274 Mont. 331, 335-36, 908 P.2d 670, 673 (noting that the Act prohibits state courts and state legislatures from dividing veterans' disability benefits). ¶ 24 In sum, [a]fter Mansell, veterans' disability pay clearly constitutes the owning spouse's nonmarital property. Lawrence J. Golden, Equitable Distribution of Property § 6.06A, at 181 (Supp.1993); see also Note, Mansell v. Mansell: How it Changed the Definition of Marital Property for the Military Spouse, 30 J. Fam. L. 97, 109 (1991-92) (The holding of Mansell clearly prevents state courts from treating military disability benefits as marital property subject to division on divorce.). ¶ 25 Moreover, as Justin correctly asserts, VA disability benefits are further federally protected from inclusion in a marital estate by the anti-attachment clause of 38 U.S.C. § 5301, which provides that VA benefits are exempt from the claim of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatsoever, either before or after receipt by the beneficiary. 38 U.S.C. § 5301(a). Indeed, had the U.S. Supreme Court failed in Mansell to find VA disability benefits exempt from marital property distribution under the USFSPA's definition of disposable retired pay, it would have eviscerated the force of 38 U.S.C. § 5301(a). cf. Mansell, 490 U.S. at 598, 109 S.Ct. at 2034, 104 L.Ed.2d at 691 (O'Connor, J., dissenting (addressing what was formerly 38 U.S.C. § 3101(a)).) ¶ 26 Although the Mansell majority declined to decide whether the federal anti-attachment clause of what is now 38 U.S.C. § 5301 independently protects VA disability pay from inclusion in a marital estate, Mansell, 490 U.S. at 587 n. 6, 109 S.Ct. at 2027 n. 6, 104 L.Ed.2d at 684 n. 6, several state courts both before and after Mansell have reached such a conclusion. See, e.g., Murphy v. Murphy (1990), 302 Ark. 157, 787 S.W.2d 684; In re Marriage of Howell (Iowa 1989), 434 N.W.2d 629; In re Marriage of Costo (1984), 156 Cal.App.3d 781, 203 Cal. Rptr. 85; In re Marriage of Hapaniewski (1982), 107 Ill.App.3d 848, 63 Ill.Dec. 535, 438 N.E.2d 466; Rickman v. Rickman (1980), 124 Ariz. 507, 605 P.2d 909; Ex parte Johnson (Tex.1979), 591 S.W.2d 453. These cases establish the general proposition that awarding VA disability pay upon dissolution amounts to a seizure of those benefits in violation of 38 U.S.C. § 5301. ¶ 27 We hold that in enacting both the USFSPA and 38 U.S.C. § 5301(a), Congress has positively required by direct enactment that state courts be preempted from including VA disability benefits in a marital estate. The property division dictates of § 40-4-202, MCA, must yield to federal law, for to allow inclusion of VA disability benefits in a marital estate would do major damage to clear and substantial federal objectives. Hisquierdo, 439 U.S. at 581, 99 S.Ct. at 808, 59 L.Ed.2d at 11. We further hold, therefore, that the District Court erred in awarding a portion of Justin's VA disability benefits to Brandy as part of the equitable distribution of marital property. ¶ 28 Because questions of equitable distribution, spousal maintenance, and child support are inextricably intertwined, this case must be remanded to the District Court for reconsideration of the dissolution decree in its entirety. Consequently, we deem it appropriate, for purposes of guidance on remand, to address what authority the courts of Montana have over VA disability benefits without running afoul of the Supremacy Clause.