Marriage of Lutes v. Lutes , 328 Mont. 490 ( 2005 )

No. 04-416
IN THE SUPREME COURT OF THE STATE OF MONTANA
2005 MT 242
IN RE THE MARRIAGE OF
RODNEY THOMAS LUTES,
Petitioner and Respondent,
v.
CYNTHIA JANE LUTES,
Respondent and Appellant.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade, Cause No. BDR 96-472
The Honorable Julie Macek, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Joan E. Cook, Attorney at Law, Great Falls, Montana
For Respondent:
Daniel L. Falcon, Falcon Lester & Schaff, Great Falls, Montana
Submitted on Briefs: September 26, 2005
Decided: September 27, 2005
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Cynthia Jane Lutes (Cynthia) appeals from the denial by the Eighth Judicial District
Court, Cascade County, of her motion that Rodney Thomas Lutes (Rodney), her ex-husband,
be held in contempt for his failure to pay to Cynthia a portion of his Veteran’s
Administration (VA) disability pay as a division of the marital estate, as agreed to and made
a part of their Decree of Dissolution of Marriage. We affirm.
ISSUES
¶2 We consider the following issues:
¶3 1. Whether the Order refusing to hold Rodney in contempt is an appealable order
under § 3-1-523, MCA.
¶4 2. Whether the District Court blatantly abused its discretion in refusing to hold
Rodney in contempt for his failure to pay the VA disability benefits, in light of Montana and
federal authority preempting state courts from including VA disability benefits in the
equitable division of a marital estate.
FACTUAL AND PROCEDURAL BACKGROUND
¶5 Cynthia and Rodney divorced on October 29, 1997, when the District Court entered
a Decree of Dissolution. The Decree incorporated a Property Settlement Agreement and an
Addendum thereto (together the “Agreement”), executed on September 12, 1997, and
October 7, 1997, respectively. The Agreement provided that Cynthia would receive a
portion of Rodney’s Air Force retirement benefits and a portion of Rodney’s VA disability
benefits as a part of the equitable distribution of their marital estate. Pursuant to the
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Agreement, the Department of Defense was to pay the share of retirement benefits directly
to Cynthia and Rodney was to pay the share of VA disability benefits to Cynthia on a
monthly basis. Neither the Agreement nor the Decree provided for any maintenance or child
support payments, and custody and visitation were not at issue.
¶6 Rodney first failed to make a number of the VA disability payments to Cynthia in
2002. He made only partial payments of the VA disability benefits through the rest of 2002
and all of 2003, and he stopped making those payments altogether in 2004. Rodney
remained current on all other payments under the Agreement. Cynthia brought this action
in the District Court, seeking to hold Rodney in contempt for failing to make the VA
disability payments pursuant to the Agreement. The District Court held a hearing at which
the parties presented evidence and made oral arguments. The District Court denied the
request for contempt and Cynthia appeals.
STANDARD OF REVIEW
¶7 Contempt orders in family law cases may be appealed “only when the judgment or
order appealed from includes an ancillary order that affects the substantial rights of the
parties involved.” Section 3-1-523(2), MCA. Where we review a district court’s decision
not to find a party in contempt, we will not reverse the decision absent a blatant abuse of
discretion. In Re Marriage of Baer, 1998 MT 29, ¶¶ 44-45, 287 Mont. 322, ¶¶ 44-45, 954
P.2d 1125, ¶¶ 44-45. We review a district court’s legal conclusions de novo, seeking to
determine whether the court correctly interpreted the law. Marriage of Strong v. Strong,
2000 MT 178, ¶ 11, 300 Mont. 331, ¶ 11, 8 P.3d 763, ¶ 11 (citing In re Marriage of Barker
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(1994), 264 Mont. 110, 113, 870 P.2d 86, 88)
DISCUSSION
¶8 We first determine whether the Order denying the request for contempt is an
appealable order. This analysis requires us to determine whether the court’s Order denying
the Motion for Contempt includes an ancillary order affecting the substantial rights of the
parties. Section 3-1-523(2), MCA.
¶9 The District Court denied Cynthia’s Motion for Contempt because the District Court,
following our decision in Strong, did not have “the authority to enforce the Property
Settlement Agreement between the parties as it concerns the division of [Rodney’s] military
disability benefits.” In Strong we recognized that federal law, specifically the Uniformed
Services Former Spouses’ Protection Act, 10 U.S.C. § 1408 (USFSPA), and 38 U.S.C.
§ 5301 (providing that VA benefits are exempt from the claims of creditors), preempts the
state from distributing VA benefits as a part of the marital estate. Strong, ¶ 27 (following
Mansell v. Mansell (1989), 490 U.S. 581, 109 S. Ct. 2023, 104 L. Ed. 2d 675); see also In re
Marriage of Murphy (1993), 261 Mont. 363, 862 P.2d 1143.
¶10 We generally reject the direct appeal of a contempt order in a dissolution of marriage
case that goes purely to the district court’s contempt power and does not “adjudicate any
ancillary matters falling within [the court’s] continuing jurisdiction over the rights of the
parties . . . .” In re Marriage of Grounds v. Coward, 2000 MT 128, ¶ 9, 300 Mont. 1, ¶ 9,
2 P.3d 822, ¶ 9. Direct appeal of a contempt order is appropriate only where “a court in a
single judgment, issues an order of contempt . . . and an ancillary order within its jurisdiction
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in determining the rights of the parties . . . .” Grounds, ¶ 6 (emphasis deleted).
¶11 Here the District Court ruled on Cynthia’s request for contempt and in so doing
adjudicated additional matters relating to federal preemption of the division of VA disability
benefits in the Agreement and Decree. The District Court’s determination affects the
substantial rights of the parties under the Agreement and Decree, most significantly
Cynthia’s, as the Order refusing to hold Rodney in contempt does not stand as a mere “lone
contempt order.” See Lee v. Lee, 2000 MT 67, ¶ 37, 299 Mont. 78, ¶ 37, 996 P.2d 389, ¶ 37
(a “lone contempt order” may not be reviewed on direct appeal). Instead, the District Court’s
denial of the contempt depends on, or is “ancillary” to, the District Court’s ruling on federal
preemption affecting the enforceability of the Agreement and Decree. We therefore
conclude that the District Court’s Order denying Cynthia’s Motion for Contempt is
appealable, as it includes an ancillary order affecting the parties’ substantial rights.
Grounds, ¶ 6; Lee, ¶ 37.
¶12 We next must determine whether the District Court’s refusal to hold Rodney in
contempt constituted a “blatant abuse of discretion.” Baer, ¶¶ 44-45. We evaluate whether
the trial court acted arbitrarily or exceeded the bounds of reason resulting in substantial
injustice. State v. Kearney, 2005 MT 171, ¶ 12, __ Mont. __, ¶ 12, __ P.3d __, ¶ 12. The
District Court’s Order denying the request for contempt hinges on its legal conclusions
regarding federal preemption and our decision in Strong. Ultimately, then, we must
determine de novo the legal question of whether the District Court correctly interpreted
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Strong, as the refusal to hold Rodney in contempt turns on whether federal law preempts the
division of VA disability benefits as a part of the marital estate.
¶13 The evidence shows that the Agreement and Decree required Rodney to pay VA
disability benefits as a part of the equitable distribution of the marital estate. The evidence
shows that Rodney entered into such Agreement and Decree voluntarily, and willingly made
those payments for several years. The evidence further shows that Rodney stopped making
those payments. On these facts alone, the refusal to hold Rodney in contempt might appear
to be a blatant abuse of discretion. As it turns out, however, the federal preemption trumps
the District Court’s authority to enforce Rodney’s obligation to pay the VA disability
benefits as part of the equitable distribution of the marital estate under the Agreement and
Decree.
¶14 As we noted above, the District Court denied Cynthia’s Motion for Contempt based
on Strong, in which we held that federal law preempts the state from distributing VA
benefits as a part of the marital estate. Strong, ¶ 27. We agree. Therefore, although the
evidence showed that Rodney had violated the terms of the Agreement, and hence the
Decree, by withholding payment of Cynthia’s share of his VA disability benefits, federal law
preempts the District Court from enforcing the Decree in regard to division of those benefits.
Given the weight of authority here, we must conclude that the District Court acted within its
discretion in refusing to hold Rodney in contempt.
¶15 Cynthia argues nevertheless that Rodney should be held in contempt because he
voluntarily entered into the Agreement to pay the VA disability benefits and he should,
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therefore, be forced to honor the Agreement and be estopped from attacking it. Relying
primarily on In re Marriage of Stone (1995), 274 Mont. 331, 908 P.2d 670, Cynthia argues
that the federal preemption found in Strong does not extend to preempt enforcement of
Rodney’s obligation to pay VA disability benefits under the Agreement and Decree in this
case. Cynthia’s reliance on Stone is misplaced.
¶16 The District Court concluded that our decision in Strong effectively overruled Stone.
We agree. Stone involved a property settlement agreement whereby the parties agreed to use
the proceeds from the husband’s VA disability benefits to pay maintenance. In upholding
the District Court’s denial of the husband’s motion to modify his maintenance obligations
based upon the provisions of the USFSPA, we concluded in Stone that the voluntary
contractual agreement between the parties did “not purport to assign [husband’s] veterans’
disability benefits to [wife].” Stone, 274 Mont. at 335, 908 P.2d at 673. We held that
though federal law “prohibits state courts . . . from dividing veterans’ disability benefits,
neither the Act nor the Supreme Court’s opinion in Mansell clearly preempt the parties’
ability to contract.” Stone, 274 Mont. at 335-36, 908 P.2d at 673. In Strong, however, we
concluded that the district court did not have the authority to enforce a property settlement
agreement provision the object of which was to distribute VA benefits as part of the marital
estate. Strong, ¶ 27. We said that “federal law preempts state courts from exercising
jurisdiction in a dissolution proceeding over any military benefit that is not ‘disposable
retired pay.’” Strong, ¶ 23 (emphasis deleted).
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¶17 We made no distinction in Strong between the exercise of jurisdiction in cases
involving maintenance and cases involving the division of the marital estate. While we did
not explicitly state in Strong that we were overruling Stone, that conclusion is inescapable.
In the wake of Strong, a district court may not order the division or allocation of VA benefits
to satisfy any marital obligation, be it maintenance or division of the marital estate,
regardless of whether the parties previously agreed to do so in a property settlement
agreement. We therefore now expressly hold that Stone was overruled by Strong.
¶18 Cynthia further argues on appeal that Rodney should be estopped from claiming the
invalidity of the Agreement. She failed, however, to present this argument to the District
Court. A party who wishes to rely on an estoppel argument must plead it; failure to do so
deems the argument waived. Williard v. Campbell (1932), 91 Mont. 493, 503, 11 P.2d 782,
786. This Court will not address issues raised for the first time on appeal. State v. Wetzel,
2005 MT 154, ¶ 13, 327 Mont. 413, ¶ 13, 114 P.3d 269, ¶ 13.
¶19 While we conclude here that federal preemption precludes the state from treating
Rodney’s VA disability benefits as part of the marital estate, it is worth noting what else we
said in Strong. At ¶ 40, quoting In re Marriage of Kraft (Wash. 1992), 832 P.2d 871, 877,
we said that “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.” Today, however, on the narrow review of an order
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denying contempt, we stand in no position to undo or redo the court’s Order dividing the
marital estate to comport with the intent of this proviso.
¶20 For the foregoing reasons, the District Court is affirmed.
/S/ PATRICIA O. COTTER
We Concur:
/S/ JAMES C. NELSON
/S/ JOHN WARNER
/S/ JIM RICE
Justice W. William Leaphart dissenting.
¶21 I dissent.
¶22 In In re Marriage of Strong, 2000 MT 178, ¶ 16, 300 Mont. 331, ¶ 16, 8 P.3d 763,
¶ 16, we held that federal law preempts the State from distributing V.A. benefits “as part of
a marital estate.” The Court reasons that Strong “effectively overruled Stone” and goes on
to rationalize that “[w]e made no distinction in Strong between the exercise of jurisdiction
in cases involving maintenance and cases involving the division of the marital estate.” ¶¶ 16
and 17.
¶23 First of all, that Strong did not expressly overrule Stone suggests that the Court
implicitly recognized that the maintenance issue in Stone was distinguishable from a division
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of the marital estate. Secondly, whether or not the Court in Strong drew a distinction
between maintenance and division of the marital estate, the federal precedent as well as the
Montana statutes do draw such a distinction.
¶24 The federal precedent, Mansell v. Mansell (1989), 490 U.S. 581, 109 S. Ct. 2023, 104
L. Ed. 2d 675, relied upon in Strong, preempts a state from distributing federal benefits “as
marital property.” Mansell, 490 U.S. at 588-89. In Strong, as in Lutes, the issue is whether
the court can distribute benefits as part of the marital estate. The answer is no, it cannot.
In Stone, however, the Court did not purport to divide the benefits as part of the marital
estate. Rather, the parties agreed that the husband would pay maintenance and that he would
obligate himself to pay such maintenance from his benefits.
¶25 Stone is premised on the fact that maintenance is separate and distinct from the
division of marital property–which is the subject of the Mansell preemption. This distinction
is bourne out by the Montana statutes which provide that, in determining the amount of
maintenance, the court must consider the financial resources of the party seeking
maintenance, “including marital property apportioned to him . . . .” Section 40-4-203(2)(a),
MCA. In other words, the amount of maintenance is determined after the marital property
has been divided. Since maintenance is separate and distinct from the distribution of the
marital estate, it is not subject to the preemption.
¶26 Not only did Strong not overrule Stone, it in fact recognized the distinction between
division of property and an award of maintenance by holding that, although the court could
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not consider the V.A. benefits for purposes of dividing the marital estate, it could consider
post-dissolution V.A. benefits in determining the amount of maintenance. Strong, ¶¶ 29-
¶40. Stone is entirely consistent with Strong in that it recognizes that the parties can
voluntarily contract to pay the maintenance with the very same benefits that the court itself
can “consider.” Such an agreement as to maintenance does not mean that the V.A. benefits
have been distributed “as part of the marital estate.”
¶27 In needlessly overruling Stone, the Court has obliterated the distinction between
maintenance and division of the marital property. The Court reads more into the preemption
doctrine than is necessary and does so at the expense of the constitutionally-protected right
to contract.
/S/ W. WILLIAM LEAPHART
Chief Justice Karla M. Gray and Justice Brian Morris join in the dissent of Justice Leaphart.
/S/ KARLA M. GRAY
/S/ BRIAN MORRIS
Chief Justice Karla M. Gray, dissenting.
¶28 I join in Justice Leaphart's dissent. In particular, I expressly second his statements
that Strong not only did not overrule Stone, but that the two are entirely consistent. In any
event, however, it is important to point out that even if the Court were correct, this case
points out the necessity that we either harmonize a prior decision, properly distinguish it or
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explicitly overrule it. The failure to do so creates the very kinds of problems encountered
here by litigants, legal practitioners, trial courts and this Court.
¶29 I write separately with regard to an issue Cynthia raises but the Court, quite properly,
does not address. The Court notes at ¶18 that Cynthia did not present her estoppel argument
to the District Court and, for that reason, we do not address it because it is raised for the first
time on appeal. This result should not, in my view, necessarily be interpreted to mean that
Cynthia is now without any avenue of relief regarding the correct--but unfortunate--result
in this case. Relief may be available to her via such means as a motion to reopen the
property disposition pursuant to § 40-4-208(3)(b), MCA, or some appropriate action
pursuant to Rule 60(b), M.R.Civ.P., with regard to the Property Settlement Agreement
incorporated into the Decree here. I am not advising that Cynthia take any further action or
follow either of these potential avenues of redress; nor, of course, can anyone know whether
or to what extent actual redress might be forthcoming. I merely write to express my view
that Cynthia is not necessarily at the "end of the road" with regard to the issues in this case.
/S/ KARLA M. GRAY
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