Court Opinion

ID: 2654306
Source: CourtListenerOpinion
Date Created: 2014-02-24 18:04:37.886524+00
Date Added: 2024-06-11T11:58:15.424703
License: Public Domain

2014 VT 22

Manning v. Schultz (2012-121)
 
2014 VT 22
 
[Filed 21-Feb-2014]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports. 
Readers are requested to notify the Reporter of Decisions by email at:
JUD.Reporter@state.vt.us or by mail at: Vermont Supreme Court, 109 State
Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections
may be made before this opinion goes to press.
 
 

2014 VT 22

 

No. 2012-121

 

Pauline Manning

Supreme Court

 

 

 

On Appeal from

     v.

Superior Court, Chittenden
  Unit,

 

Family Division

 

 

Michael Schultz

January Term, 2013

 

 

 

 

Brian
  J. Grearson, J.

 

Mary G. Kirkpatrick of Kirkpatrick & Goldsborough, PLLC,
South Burlington, for 
  Plaintiff-Appellee.
 
Susan M. Murray of Langrock
Sperry & Wool, LLP, Burlington, for Defendant-Appellant.
 
 
PRESENT:    Reiber,
C.J., Dooley, Skoglund and Burgess, JJ., and Bent, Supr. J., 
                    
Specially Assigned
 
 
¶ 1.            
BURGESS, J.   The principal question presented in this
appeal from a final judgment of divorce is whether, as husband contends, the
trial court erred in its division of the marital estate by including an offset
for the disparity in value between the parties’ projected Social Security
retirement benefits.  We conclude that this was error, and therefore
reverse and remand.
¶ 2.            
The facts may be summarized as follows.  The parties were married
in 1992, and had three children who were still minors at the time of these
proceedings.  The parties separated in March 2010, and wife filed a
complaint for divorce shortly thereafter.  The trial court held a
contested hearing over two days in February and April 2011.  At the time
of the hearing, wife worked part-time for a school district, earning
approximately $14,000 a year with health insurance benefits.  The court
found that wife intended to return to school to obtain a master’s degree in
public administration, which could triple her earnings.  During the
marriage, husband worked for more than twelve years as a vice president at the
University of Vermont, earning approximately $155,000 per year.  Due to
events not directly relevant to this appeal, husband resigned his position
shortly after the conclusion of the hearing and the University provided him
with a severance package.  The court found that husband’s future
employment prospects were “unknown and speculative.”     
¶ 3.            
The parties did not agree on the assets to be included in the marital
estate.  Wife submitted a list of assets (“Exhibit D”) with a total value
of $1,152,325.86, including $88,158 identified as the difference between the
present value of husband’s and wife’s projected Social Security benefits. 
The value was determined by wife’s accountant and credited toward husband’s
suggested share of the marital estate, with a corresponding offset in value for
wife.  Wife proposed that she be awarded either sixty percent of the value
of the entire estate plus spousal maintenance, or eighty percent without
maintenance.  Husband submitted a separate list of marital assets which
totaled $978,504 and did not include the Social Security differential.    Husband
proposed an award to wife of sixty percent of the value of the estate plus
rehabilitative maintenance for a period of several years.       
¶ 4.            
In its written ruling, the trial court found that wife’s proposed
property division as set forth in her Exhibit D was “a reasonable one” and gave
her the option of choosing either the eighty/twenty division that she had
proposed or an award of sixty percent plus maintenance until she reached the
age of sixty-seven.  Wife subsequently opted for the higher percentage of
the marital estate without the maintenance, and the trial court entered a final
judgment consistent with that choice and with the proposed division set forth
in Exhibit D, attached to the judgment.  Husband’s two subsequent motions
to reconsider were denied.  This appeal followed.  
¶ 5.            
Husband contends that, by including the Social Security differential in
his portion of the marital estate and awarding wife $88,158 to offset the
value, the trial court here violated both state and federal law.  The
federal claim is predicated on case law holding that the Social Security Act
preempts state courts from treating social security retirement benefits in
divorce proceedings as marital property to be valued and either divided or—as
here—directly offset by other property.  Wife maintains that the
preemption claim was not raised in the trial court, and therefore, was not
preserved for review on appeal.  See Rutland Herald v. Vt. State Police,
2012 VT 24, ¶ 33, 191 Vt. 357, 49 A.3d 91 (“We will not entertain arguments on
appeal if they were not preserved in the trial court.”).  Although husband
observes, in response, that he objected to the trial court’s consideration of
Social Security benefits as unduly “speculative” in both his proposed findings
and subsequent motions to reconsider, we do not find this sufficient to fairly apprise the trial court of the federal preemption claim.[1]  See State v. Ben-Mont Corp.,
163 Vt. 53, 61, 652 A.2d 1004, 1009 (1994) (“To properly preserve an issue for
appeal a party must present the issue with specificity and clarity in a manner
which gives the trial court a fair opportunity to rule on it.”).  As we
have frequently cautioned, “[a]n objection on one ground does not preserve an
appeal on other grounds.”  State v. Bubar,
146 Vt. 398, 400, 505 A.2d 1197, 1199 (1985); see also State v. Hinchliffe, 2009 VT 111, ¶ 32, 186 Vt. 487, 987 A.2d
988 (holding that objection raising the “constitutional problem of notice” did
not adequately preserve appeal based on claim that statute was
“unconstitutionally vague and overbroad”); State v. Bissonnette,
145 Vt. 381, 392, 488 A.2d 1231, 1237 (1985) (holding that objection to
question on ground that matter was “collateral” did not preserve appeal on
ground that it implicated prior bad act).  Although, as discussed below,
the claims are somewhat related, we cannot in good faith conclude that
husband’s argument based solely on the assertion that Social Security benefits
are too speculative to be considered a marital asset fairly and reasonably
apprised the trial court of a claim predicated upon federal preemption. 
Accordingly, we are compelled to conclude the claim was not properly
preserved for review on appeal.  
¶
6.            
This does not, however, end our analysis.  As discussed below, an
important facet of the federal preemption decisions is their recognition that
Social Security benefits are not a property or contractual right amenable to
division but rather a product of social-welfare legislation that is open to
alteration, modification, reduction, or even elimination at the will of
Congress.  Wholly apart from the question of federal supremacy, therefore,
we may conclude under our own state statutes and case law that the inherently uncertain
and changeable nature of such benefits renders them too intangible to be
characterized as marital property or considered in the division of the marital
estate.  Husband’s objection on the ground that the parties’ anticipated
Social Security benefits were unduly speculative, therefore, was sufficient to
preserve the state-law issue for review.
¶
7.            
In a seminal decision upholding a section of
the Social Security Act providing for the termination of benefits to deported
aliens, the U.S. Supreme Court held that the law did not deprive the petitioner
of “an accrued property right.”  Flemming v. Nestor, 363 U.S. 603, 608 (1960).  As the
Court explained, the “noncontractual interest” of an
employee covered by the Act could not be analogized to that of holder of an
annuity or pension bottomed on contractual premium payments.  Id. at 610.  The beneficiary’s interest rests,
instead, on “a highly complex and interrelated statutory structure” continually responsive to “the manifold specific problems
presented by the Social Security program.”  Id.  While
undoubtedly designed to function for the indefinite future, the Act’s
provisions rely “on predictions as to expected economic conditions which must
inevitably prove less than wholly accurate, and on judgments and preferences as
to the proper allocation of the Nation’s resources which evolving economic and
social conditions will of necessity in some degree modify.”  Id. 
Indeed, in recognition of the need for flexibility to adjust Social Security
benefits to “everchanging conditions,” Congress
expressly reserved the “right to alter, amend, or repeal any” of the Act’s
provisions.  Id. at 610-11 (quoting 42 U.S.C. § 
1304).  
¶
8.            
With the Social Security Act’s inherent
fluidity in mind, the U.S. Supreme Court  has
held that federal law precludes a state court from dividing or offsetting
retirement benefits under analogous provisions of the Railroad Retirement Act,
which provides retirement benefits for railway workers not covered by Social
Security.  Hisquierdo v. Hisquierdo, 439 U.S. 572,
588-89 (1979).  While relying on a specific section of the Railroad
Act—identical to a section in the Social Security Act—providing that retirement
benefits may not be subject to attachment, garnishment “or other legal
process,” id. at 576, the Supreme Court
observed that its holding barring consideration of such inherently fluid
“expectations” also served to preserve “congressional freedom to amend the Act,
and so serves much the same function as the frequently stated understanding
that programs of this nature convey no future rights.”  Id.
at 589.
¶
9.            
Relying, in turn, on these
landmark Supreme Court decisions, state courts “have universally
acknowledged that Social Security benefits are not marital property and are not
subject to division in divorce actions.”  Depot v. Depot, 2006 ME
25, ¶ 6, 893 A.2d 995; see generally B. Turner, Social Security: A 2005
Update, 17 Divorce Litigation 53 (2005) (noting that “state courts are in
uniform agreement [that] Social Security benefits cannot be treated as marital
or community property”).  Courts that have considered the issue have also
generally concluded that anticipated Social Security benefits may not be used
as an offset to compensate one spouse for the allocation of marital benefits to
the other.  See, e.g., Webster v. Webster, 716 N.W.2d 47, 55 (Neb.
2006) (“The weight of authority has concluded that an offset of Social Security
benefits is prohibited.”); Olson v. Olson, 445 N.W.2d 1, 11 (N.D. 1989)
(recognizing that “Social Security cannot be distributed or used as an offset
in division of marital property”); see generally Turner, supra, 17
Divorce Litigation 53 (“State courts also agree that Social Security benefits
cannot be divided indirectly by means of a direct setoff.”).[2] 
  
¶
10.        
State courts have divided, however, on whether Social Security benefits
may be a general consideration in the trial court’s equitable distribution of
the marital estate, even if they are not expressly divided or used as an
offset.  Some have concluded that courts may consider a party’s
anticipated Social Security benefits, describing them variously as “one factor,
among others, in making an equitable distribution,” Mahoney v. Mahoney,
681 N.E.2d 852, 856-57 (Mass. 1997), a “relevant factor” in the court’s
division of marital property, Depot, 2006 ME 25, ¶ 18, or “a relevant
and equitable factor in making an equitable distribution.”  Neville v.
Neville, 2003-Ohio-3624, ¶ 11, 791 N.E.2d 434. 
Others have rejected this approach, concluding that it masks what otherwise
still amounts to an offset in the asset distribution based on a prohibited
expectancy.  See, e.g., In re Crook, 813 N.E.2d at 205
(“Instructing a trial court to ‘consider’ Social Security benefits . . . either
causes an actual difference in the asset distribution or it does not.  If
it does not, then the ‘consideration’ is essentially without meaning.  If
it does . . . [t]his works as an offset meant to equalize the property
distribution.”); Wolff v. Wolff, 929 P.2d 916, 921 (Nev. 1996) (“
‘Considering’ [wife’s] Social Security benefits does not change the fact that
this is still an offset, and therefore, error.”); In re Swan, 720 P.2d
747, 752 (Or. 1986) (“[T]he value of Social Security benefits of either spouse
may not be considered in the division of property.”).   
¶
11.        
Viewed in the light of our own law and precedents and the nature of the
benefits at issue, we have little difficulty agreeing with those courts that
have concluded that Social Security retirement benefits are not marital
property and should not be divided, offset, or considered in the court’s
distribution of the marital estate.  Under 15 V.S.A. §
751(a), “[a]ll property owned by either or
both of the parties, however and whenever acquired, shall be subject to the
jurisdiction of the court” for “equitable distribution.” (Emphasis
added).  As we have seen, however, it is well settled that Social Security
retirement benefits are neither owned in any proprietary sense nor are they
marital “property” subject to division.  Instead, Social Security benefits
are provided by a federal social insurance system subject to revision at
congressional will, and therefore cannot be more than an expectancy whose value
cannot be “assessed without excessive speculation.”  McDermott v.
McDermott, 150 Vt. 258, 260, 552 A.2d 786, 788 (1988); see also Billings
v. Billings, 2011 VT 116, ¶ 18, 190 Vt. 487, 35 A.3d 1030 (holding that
revocable trusts and wills are “only an expectancy” and therefore “are not
marital property to be distributed by the court”).  For this reason,
therefore, such benefits cannot be considered marital property subject to
division.  See Depot, 2006 ME 25, ¶ 6 (noting that one reason
courts have “universally acknowledged that Social Security benefits are not
marital property” is that “as opposed to divisible property, Social Security
benefits are a form of social insurance in which beneficiaries have a noncontractual interest” (quotations omitted)); Olson,
445 N.W.2d at 6 (observing that Congress’s “retained power to alter, amend, or
repeal [Social Security] benefits makes it awkward for the courts to count
benefits as assets of definable value”); see generally Turner, supra, 17 Divorce
Litigation 53 (observing that, because Social Security benefits may be modified
at will by Congress, “it is doubtful whether they would constitute ‘property’
under state law even if an express [preemption] provision were not
present”).  
¶
12.        
Accordingly, we conclude that the trial
court erred in treating the parties’ respective anticipated Social Security
benefits as assets of the marital estate, reducing them to a purported present
value, allocating the differential to husband, and awarding wife a direct
offset on account.  Omitting the value of these benefits only marginally
affects the marital estate, valued at over $1 million, and we therefore remand
for the trial court to recalculate the award pursuant to the original
percentage division of eighty percent for wife and twenty percent for husband.
Reversed
and remanded for further proceedings consistent with the views expressed herein.
 

 

 

FOR THE COURT:

 

 

 

 

 

 

 

 

 

 

 

Associate
  Justice

 

[1] 
In his proposed findings, husband asserted, more specifically, that “[a]ny value as to unrealized Social security benefits is
speculative as there is no way to predict either what the parties will be
earning in the future, nor what may happen to the law governing Social Security
benefits in the future.”    

[2] 
In McCarty v. McCarty, 453 U.S. 210, 235-36 (1981), the high court also
held that federal law prohibited state courts from allocating military
retirement benefits as marital property.  Congress subsequently
countermanded the holdings in Hisquierdo and McCarty
to make railroad and military retirement benefits subject to marital
distribution, but failed to similarly amend the Social Security Act—an omission
which courts have construed to confirm Congress’s view that Social Security
benefits may not be divided as marital property.  See, e.g., In re
Crook, 813 N.E.2d 198, 204 (Ill. 2004); Depot, 2006 ME 25, ¶ 8; see
also Youngbluth v. Youngbluth,
2010 VT 40, ¶ 12, 188 Vt. 53, 6 A.3d 677 (discussing federal law governing
disposition of military retirement benefits).