Russ v. Russ ( 2021 )


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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
    2
    (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
    3
    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]”;
    4
    (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
    5
    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
    6
    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
    7
    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
    10
    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).
    11
    WE CONCUR:
    MICHAEL E. VIGIL, Chief Justice
    BARBARA J. VIGIL, Justice
    C. SHANNON BACON, Justice
    12