Court Opinion

ID: 4676378
Source: CourtListenerOpinion
Date Created: 2021-04-12 08:09:23.026036+00
Date Added: 2024-06-11T08:03:32.070249
License: Public Domain

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      IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: __________________

Filing Date: April 1, 2021

NO. S-1-SC-37962
ANGELA RUSS,
      Petitioner-Respondent,
v.

JEFFERY L. RUSS,
      Respondent-Petitioner,

NEW MEXICO HUMAN SERVICES
DEPARTMENT,

      Intervenor.

ORIGINAL PROCEEDING ON CERTIORARI
Debra Ramirez, District Judge

L. Helen Bennett, P.C.
Linda Helen Bennett
Albuquerque, NM
Cortez & Hoskovec, LLC
M. Michelle Cortez
Albuquerque, NM

for Respondent-Petitioner

New Mexico Family Law, P.C.
Amanda Ann Aragon
Albuquerque, NM
for Petitioner-Respondent
                                      OPINION

THOMSON, Justice
{1}   The Uniformed Services Former Spouses’ Protection Act, 10 U.S.C. § 1408

(2018), establishes that states “may treat veterans’ disposable retired pay as divisible

property, i.e., community property divisible upon divorce.” Howell v. Howell, ___

U.S. ___, 137 S. Ct. 1400, 1403 (2017) (internal quotation marks and citation

omitted). However, 10 U.S.C. § 1408(a)(4)(A)(ii) “expressly exclude[s] from its

definition of ‘disposable retired pay’ amounts deducted from that pay ‘as a result of

a waiver . . . required by law in order to receive’ disability benefits.” Howell, 137 S.

Ct. at 1403 (alteration in original) (quoting 10 U.S.C. § 1408(a)(4)(A)).

{2}   The United States Supreme Court announced this rule in Mansell v. Mansell,

490 U.S. 581 (1989), and “held that federal law forbade [a state] from treating the

waived portion as community property divisible at divorce.” Howell, 137 S. Ct. at

1403. The Howell Court applied the Mansell rule and clarified that even if the waiver

“of the retirement pay in order to receive nontaxable disability benefits” occurs

“[l]ong after the divorce,” a state may not “subsequently increase, pro rata, the

amount the divorced spouse receives each month from the veteran’s retirement pay

in order to indemnify the divorced spouse for the loss caused by the veteran’s

waiver.” Howell, 137 S. Ct. at 1402.
{3}   When Angela Russ (Spouse) and Jeffery Russ (Veteran) divorced, they agreed

to divide Veteran’s military retirement pay as part of the community property.

Nonetheless, about eight years after their divorce, Veteran waived his retirement pay

in order to receive a disability benefit from the federal government. His waiver

occurred after Mansell was issued, but before Howell was issued. The question

presented to this Court is whether the Court of Appeals correctly determined that

Howell does not apply to this case.

{4}   If the Howell Court’s application of the Mansell rule applies, Veteran may

unilaterally change his federal benefit as he did. This change precludes Spouse from

receiving any of his retirement benefit from the federal government, regardless of

what he agreed to when they divorced. If the Howell Court’s application of the

Mansell rule does not apply, then Veteran must indemnify Spouse for her share of

his waived retirement benefit. Although equitable principles may suggest that we

should determine that Howell does not apply in this case, the Supremacy Clause of

the federal constitution, U.S. Const. art. VI, cl. 2, precludes that application of

equity.

{5}   “The Supremacy Clause, U.S. Const., Art. VI, cl. 2, does not allow federal

retroactivity doctrine to be supplanted by the invocation of a contrary approach to

retroactivity under state law.” Harper v. Virginia Dep’t of Tax’n, 509 U.S. 86, 100

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(1993). In other words, a New Mexico court must apply federal law, not state law,

to determine the retroactivity of a federal rule announced by the United States

Supreme Court. Nonetheless, the Court of Appeals determined that Howell, 137 S.

Ct. 1400, “does not apply retroactively in New Mexico.” Russ v. Russ, 2020-NMCA-

008, ¶ 20, 456 P.3d 1100. Therefore, we reverse the Court of Appeals because that

court based its decision on New Mexico law instead of the applicable, controlling

federal law.

I.    BACKGROUND
{6}   Veteran and Spouse married in 1993. They separated in 2006, and in May of

that year, they entered into a Marriage Settlement Agreement (Agreement), which

became part of the district court’s Final Decree of Dissolution of Marriage. The

Agreement provided that (1) Veteran had an interest in his “retired military pay”

which “is divisible in divorce proceedings”; and (2) “as a compromise division of

community assets [the parties] have stipulated and agreed that [Spouse] shall receive

50% of [Veteran’s] disposable retired pay which was earned during the term of [the

parties’] marriage.”

{7}   In 2014, Veteran waived his entitlement to retired military pay in order to

instead receive Combat Related Special Compensation (CRSC), a disability benefit.

See 10 U.S.C. §1408(a)(4)(A)(ii) (excluding from the definition of “disposable

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retired pay” that amount of retired pay waived as “required by law in order to receive

compensation” for a veteran’s disability benefit); 10 U.S.C. § 1413a(b)(2) (2018)

(establishing criteria for determining the amount of compensation due to an “eligible

combat-related disabled uniformed services retiree” who elects such benefits in lieu

of receiving “retired pay”).

{8}   The Defense Finance Accounting Service notified Spouse that Veteran

waived all of his retirement benefits to instead receive CRSC, which meant that she

would no longer receive a portion of his retired pay. Spouse filed an emergency

motion to enforce the Agreement with the district court and argued that Veteran’s

election to receive a disability benefit in lieu of military retired pay and effectively

reducing Spouse’s benefits was prohibited under New Mexico law. Spouse asked

the district court to order Veteran “to reimburse [her] for underpayment of her

portion of his military retirement pay with interest.”

{9}   Following a trial on the matter, the district court entered a judgment in favor

of Spouse and determined, relevant to this appeal:

      (1) on “May 1, 2011, [Veteran] applied for and elected to receive the
      Veteran’s Administration Waiver . . . and Concurrent Retirement and
      Disability Pay . . . or [CRSC]”;
      (2) on “May 1, 2014, [Veteran] began receiving the military disability
      pay referred to as [CRSC]”;

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       (3) “military disability pay is not divisible as community property upon
       divorce”;

       (4) Veteran “cannot escape the responsibility of paying [Spouse] 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 he pays her”; and therefore,

       (5) Veteran “owes [Spouse] a total in military retirement arrears of
       $22,243.09.”
Veteran appealed the determination that he must indemnify Spouse for the waived

amounts of retired military pay; Spouse cross-appealed other determinations that do

not concern the issue on appeal to this Court.

{10}   The Court of Appeals sought a solution in equity, framing the question as:

“what remains owed to [Spouse] after [Veteran] waived his [military retirement pay]

in exchange for receiving disability-based Combat Related Special Compensation

(CRSC).” Russ, 2020-NMCA-008, ¶ 1. The Court of Appeals determined that the

United States Supreme Court in Howell permitted Veteran’s unilateral election to

receive CRSC in lieu of a retired pay and prohibited a district court from ordering a

veteran who elects to receive CRSC to reimburse the veteran’s spouse for waived

retired pay. Id. ¶ 9. However, the Court of Appeals determined that the Howell Court

announced a new rule of federal law, id. ¶ 17, and that there was “sufficient reason

under still-applicable New Mexico precedent to deny retroactive application of

Howell,” id. ¶ 1. The Court of Appeals therefore affirmed the district court’s

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judgment that ordered Veteran to reimburse Spouse. Id. ¶ 21. Veteran petitioned this

Court for a writ of certiorari, which we granted.

II.    ANALYSIS
{11}   The Court of Appeals applied New Mexico law to determine that Howell does

not apply retroactively in New Mexico. Id. ¶¶ 15, 20. But federal law does not allow

states to apply their own law to supplant a rule of federal law in this instance. U.S.

Const., art. VI, cl. 2; Harper, 509 U.S. at 100.

A.     Standard of Review
{12}   This Court reviews legal questions, for example, whether federal law

preempts state law, de novo. See Self v. United Parcel Serv., Inc., 1998-NMSC-046,

¶ 6, 126 N.M. 396, 970 P.2d 582 (stating that “[w]e review . . . legal questions de

novo”).

B.     Howell Must Be Applied Retroactively
{13}   New Mexico generally presumes that a rule of law announced in a civil case

applies retroactively. Beavers v. Johnson Controls World Servs, Inc., 1994-NMSC-

094, ¶ 21, 118 N.M. 391, 881 P.2d 1376. This presumption applies unless there is

“an express declaration, in the case announcing the new rule,” that clarifies whether

the rule is intended to operate retroactively or “intended to operate with modified or

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selective (or even, perhaps pure) prospectivity.” Id. ¶ 22. “Absent such a declaration,

the presumption may be overcome by a sufficiently weighty combination of one or

more . . . factors.” Id. (recognizing the three-factor test adopted from Chevron Oil

Co. v. Huson, 404 U.S. 97, 106-107 (1971)).

{14}   However, Howell was issued by the United States Supreme Court and

announced or applied a rule of federal law. See 137 S. Ct. at 1405-06. In contrast to

New Mexico law, the United States Supreme Court abandoned the practice of

presuming retroactivity and of the applicability of the Chevron Oil three-factor test.

Specifically, the United States Supreme Court stated:

       When [the United States Supreme Court] applies a rule of federal law
       to the parties before it, that rule is the controlling interpretation of
       federal law and must be given full retroactive effect in all cases still
       open on direct review and as to all events, regardless of whether such
       events predate or postdate [the Court’s] announcement of the rule.

Harper, 509 U.S. at 97; see also Beavers, 1994-NMSC-094, ¶ 22 (acknowledging

the new “hard-and-fast rule” that applies to federal cases). In other words, when a

new federal rule of law is announced by the United States Supreme Court in a civil

case it always applies retroactively. Harper, 509 U.S. at 97.

{15}   The rule announced by the Harper Court governs the retroactive effect of

Howell and clearly establishes that Howell must be given full retroactive effect. Id.

The Court of Appeals observed that “[t]he United States Supreme Court did not

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explicitly state whether its opinion in Howell should apply retroactively or

prospectively” and applied “the three-factor Beavers test” to conclude that “Howell

does not apply retroactively in New Mexico.” Russ, 2020-NMCA-008, ¶¶ 14-20.

The Court of Appeals conclusion ignores the federal rule announced in Harper.

{16}   The fact that the United States Supreme Court did not explicitly state that

Howell applies retroactively is irrelevant to the analysis here. See Harper, 509 U.S.

at 97; accord Beavers, 1994-NMSC-094, ¶ 22. The United States Supreme Court

has expressly stated that when it applies a rule of federal law it is the “controlling

interpretation of federal law and must be given full retroactive effect.” Harper, 509

U.S. at 97, 100 (“The Supremacy Clause, U.S. Const., Art. VI, cl. 2, does not allow

federal retroactivity doctrine to be supplanted by the invocation of a contrary

approach to retroactivity under state law.”). Howell must be given retroactive

application.

C.     Howell Does Not Prohibit a District Court From Considering Deeply
       Rooted Moral Obligations Such as Familial Obligations
{17}   Federal law preempts any state from treating “as property divisible upon

divorce military retirement pay that has been waived to receive veterans’ disability

benefits.” Mansell, 490 U.S. at 594-595. Federal law also preempts states from

“increas[ing], pro rata, the amount the divorced spouse receives each month from

                                          8
the veteran’s retirement pay in order to indemnify the divorced spouse for the loss

caused by the veteran’s waiver,” even when that waiver occurs “[l]ong after the

divorce.” Howell, 137 S. Ct. at 1402.

{18}   The rule applied in Howell may seem inequitable. It allows a veteran to

unilaterally decide to convert a divisible community asset into a nondivisible

personal asset long after an agreement was reached or an initial division of property

rights was determined. See, e.g., In re Marriage of Cassinelli, 229 Cal. Rptr. 3d 801,

808 (2018) (“Because CRSC is not retired pay—just as veteran’s disability benefits

are not retired pay—under [USFSPA] as construed in Mansell, a state court does not

have jurisdiction to treat CRSC as community property.”). The Howell Court

“recognize[d] . . . the hardship that congressional pre-emption can sometimes work

on divorcing spouses.” 137 S. Ct. at 1406. Nevertheless, Howell is federal law, and

our courts are bound by Harper, the Supremacy Clause, and the principles of

federalism.

{19}   Yet, New Mexico courts are not powerless to seek a just result. “[A] family

court . . . remains free to take account of . . . reductions in value when it calculates

or recalculates the need for spousal support.” Howell, 137 S. Ct. at 1406. The United

States Supreme Court has stated that “[v]eterans’ disability benefits compensate for

impaired earning capacity . . . and are intended to provide reasonable and adequate

                                           9
compensation for disabled veterans and their families.” Rose v. Rose, 481 U.S. 619,

630 (1987) (internal quotation marks and citation omitted). In general, the amount

of disability benefits “belies . . . that Congress intended these amounts alone to

provide for the support of the children of disabled veterans.” See id. at 630-31

(discussing veterans’ benefits under another section of the United States Code).

{20}   Thus, the district court may address Spouse’s contention that additional

contribution is required from Veteran depending on the circumstances presented.

See Howell, 137 S. Ct. at 1406; see also Rule 1-060(B) NMRA (providing

circumstances under which, “[o]n motion and on such terms as are just, the court

may relieve a party or the party’s legal representative from a final judgment, order,

or proceeding”). The district court should not rest its decision on the need to

indemnify Spouse or replace her portion of Veteran’s retirement benefit. Instead, the

district court should direct its attention toward the “family support obligations

[which] are deeply rooted moral responsibilities” rather than an agreement

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concerning the division of community property.1 Rose, 481 U.S. at 631-32

(identifying an exception for additional contribution when the determination is based

on moral obligations rather than a “business relationship” between spouses for their

mutual financial benefit).

III.   CONCLUSION
{21}   Based on the foregoing, we reverse the Court of Appeals determination that

Howell is not given full retroactive effect in New Mexico and remand for further

proceedings consistent with this opinion.

{22}   IT IS SO ORDERED.

                                              DAVID K. THOMSON, Justice

       1
        See, e.g., Alwan v. Alwan, 830 S.E.2d 45, 48 (Va. Ct. App. 2019)
(distinguishing Howell by concluding that “it said nothing about the propriety of a
state court’s consideration of military disability benefits as a source of funds in
making a child support award” (emphasis added)); Matter of Braunstein, 236 A.3d
870, 876 (N.H. 2020) (same) cert. denied, No. 20-267, ___ S. Ct. ___, 2020 WL
6551782 (Nov. 9, 2020); Lesh v. Lesh, 809 S.E.2d 890, 899 (N.C. Ct. App. 2018)
(same); Phillips v. Phillips, 820 S.E.2d 158, 163-164 (Ga. Ct. App. 2018) (vacating
the trial court’s order in part because it “overstepped its authority” by ordering the
husband to indemnify the wife if he elected to convert military retired pay to
disability pay, but remanding and noting that “the trial court has a broad discretion
to make an equitable division of [the marital property] upon consideration of all the
relevant evidence”) (alteration in original) (internal quotation marks and citation
omitted).

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WE CONCUR:

MICHAEL E. VIGIL, Chief Justice

BARBARA J. VIGIL, Justice

C. SHANNON BACON, Justice

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