In Re the Marriage of Stone

NO. 94-479
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995

APPEAL FROM: "District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable John M. McCarvel, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Joan E. Cook; Miller & Cook, Great Falls, Montana

For Respondent:
K. Dale Schwanke; Jardine, Stephenson, Blewett &
Weaver, Great Falls, Montana

Submitted on Briefs: June 8, 1995
Decided: December 20, 1995
Filed:
Justice W. William Leaphart delivered the Opinion of the Court

Kenneth Stone appeals from the September 21, 1994, order of
the Eighth Judicial District Court, Cascade County, denying his
motion to modify his maintenance obligation. We affirm.
We restate the issues raised on appeal as follows:
1. Did the District Court violate the Uniformed Services
Former Spouses' Protection Act, 10 U.S.C. 5 1408, in adopting the
maintenance provision in the parties' settlement agreement in its
award of maintenance to Barbara?
2. Did the District Court err in authorizing maintenance
which may potentially amount to more than 50 percent of Kenneth's
disposable income, as calculated under 10 U.S.C. § 1408?
Kenneth Stone (Kenneth) and Barbara Stone (Barbara) were
married in 1959 and divorced in 1985. The District Court entered
its Findings of Fact, Conclusions of Law and Decree of Dissolution
on March 28, 1985, reserving the maintenance and property
settlement issues. In April of 1985, Kenneth and Barbara entered
into a property settlement agreement, pursuant to § 40-4-201, MCA.
The agreement divided the marital estate and provided that Kenneth
would pay maintenance to Barbara. Specifically, the maintenance
provision stated that "Husband shall pay to Wife one-half of his
gross retirement benefits through the Clerk of the Court, Cascade
County, State of Montana. Said sum shall be paid by the fifth
(5th) day of each month and shall be increased as the cost of
living increases are received." In an attempt to clarify this
maintenance provision, an addendum was added, which read in part:
The term "retirement benefits" for this purpose includes
the gross payments receivable by Husband from the United
States Air Force and from the Veterans' Administration h
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 anv combination; the present system reflects a gross
retirement benefit, less that portion which is paid by
the Veterans' Administration, with the balance being
payable through the U.S. Air Force Retirement Center.
Husband agrees that the Court may make and enter an Order
obligating Husband to make the assignment agreed upon
herein pursuant to Section 40-4-207, Montana Codes
Annotated. The orovision herein for division of these
qross retirement benefits shall not be modifiable.
[Emphasis added.]
Both parties intended the term "retirement benefits" to include
retirement pay and Veterans' Administration disability pay, and the
purpose of the addendum was to clarify that disability pay was to
be included. When Kenneth and Barbara signed the property
settlement agreement, and the addendum, both were represented by
counsel.
In 1993, after paying maintenance as required under the
agreement for more than eight years, Kenneth moved the court to
modify the amount of maintenance. Kenneth argued the maintenance
provision and addendum violated federal law. Specifically, he
asserted that the inclusion of disability pay in the amount to be
paid as maintenance was contrary to the Uniformed Services Former
Spouses' Protection Act, 10 U.S.C. § 1408. The District Court
denied Kenneth's motion to modify the maintenance award noting that
Kenneth and Barbara, having been fully advised by counsel, entered
into a voluntary settlement agreement which included the disputed
maintenance provision. Further, the District Court determined that
Kenneth was estopped from contesting the amount of maintenance he
had agreed to pay. Kenneth appeals from the District Court's
determination.
 1. Did the District Court violate the Uniformed Services
Former Spouses' Protection Act, 10 U.S.C. 5 1408, in adopting the
maintenance provision in the parties' settlement agreement in its
award of maintenance to Barbara?
Kenneth alleges that the maintenance provision in the
settlement agreement treats his veterans' disability benefits as
marital property and divides the benefits in violation of the
Uniformed Services Former Spouses' Protection Act (the Act) and the
United States Supreme Court's interpretation of the Act in Manse11
v. Manse11 (1989), 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.Zd 675.
In Mansell, the Supreme Court held that "under the Act's plain and
precise language, state courts have been granted the authority to
treat disposable retirement pay as community property; they have
not been granted the authority to treat total retirement pay as
community property." Mansell, 490 U.S. at 589.
Here, however, we note that Kenneth and Barbara entered into
a voluntary settlement agreement, pursuant to 5 40-4-201, MCA, in
which, separate from the division of the marital property, they
agreed to divide the total amount of Kenneth's retirement pay as
maintenance. See Marriage of Blair (Mont. 1995), 894 P.2d 958,
964, 52 St.Rep. 401, 405 (Leaphart, J., concurring). Section 40-4-
201 (2) , MCA, provides:
In a proceeding for dissolution of marriage or for legal
separation, the terms of the separation agreement, except
those providing for the support, custody, and visitation
of children, are binding upon the court unless it finds,
after considering the economic circumstances of the
parties and any other relevant evidence produced by the
parties, on their own motion or on request of the court,
that the separation agreement is unconscionable.
. . .

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 (5) Terns of the agreement set forth in the decree are
enforceable by all remedies available for enforcement of
a judgment, including contempt, and are enforceable as
contract terms. [Emphasis added.]
A separation agreement is binding on the court unless it provides
for the support, custody, or visitation of children or unless the
court finds the agreement to be unconscionable. Section 40-4-
201(2), MCA. Here, the custody, support, and visitation of
children were not at issue, nor did the court find the agreement to
be unconscionable. Thus, the District Court was required by law to
abide by the maintenance agreement of the parties. Further, we
note that at the discretion of the parties the terms of the
separation agreement can be set forth in the decree, or the decree
can merely identify that a separation agreement exists and that its
terms are not unconscionable. Section 40-4-201(4), MCA.
Although Kenneth‘s and Barbara's separation agreement was
incorporated into the decree, it was not required to be
incorporated. Thus, contrary to the dissent's suggestion that the
court, once it incorporates the agreement into the decree "has,
itself, divided the disability benefits," the court has not done
the "dividing" of benefits, rather, the parties have. First of
all, there is no requirement that the terms of the agreement be
incorporated into the decree; that decision is left to the
discretion of the parties. Secondly, even if the parties elect to
have the terms incorporated into the decree, the court has no
discretion to engage in any sua sponte division of assets in the
context of maintenance or property distribution. Rather, the
court, absent a finding of unconscionability, has no choice but to
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honor the parties' agreement. Section 40-4-201(2), MCA. That the
terms of the maintenance agreement are binding independently from
the decree is illustrated by the fact that under Montana law, even
if the parties choose not to have the terms incorporated into the
decree, the terms are, nonetheless, enforceable as contract terms.
Section 40-4-201(5), MCA; see also Marriage of Lorge (1984), 207
Mont. 423, 429, 675 P.2d 115, 117 (stating that where the terms of
an agreement are not set forth in the decree the agreement retains
the status of a private contract). In addition, if the parties
choose to incorporate the agreement into the decree the terms of
the agreement are enforceable by contempt as well as in contract.
Section 40-4-201(5), MCA.
In the instant case, the agreement and the addendum clearly
intended to include Kenneth's Veterans' Administration disability
payments within the maintenance award. This voluntary contractual
agreement between the parties does not purport to assign Kenneth's
veterans' disability benefits to Barbara. In any event, Kenneth
and Barbara had the power to enter into the settlement agreement
regardless of the Act. In confronting this issue, the Idaho Court
of Appeals observed that:
Richard additionally asserts that the [court's order] is
erroneous on the basis that it essentially divides his
disability pay, an item of his separate property which is
not divisible. &Mansellv. Mansell, 490 U.S. 581, 109
S.Ct. 2023, 104 L.Ed.2d 675 (1989). [Citation omitted.]
This argument is misplaced. The parties negotiated for
and mutuallv asreed to a division of the military retired
pay which granted Elisabet a specific monthly sum. . .
The two supplemental orders issued by the court did not
alter this agreed-to division of the asset, but served
simply to enforce it.

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McHugh V. McHugh (Idaho Ct. App. 1993), 861 P.2d 113, 115.
In Mansell, the parties also had entered into a property
settlement agreement. Mansell, 490 U.S. at 585-86. However, the
Supreme Court's analysis relies on the preemption of California's
community property law by the Act. While the Act prohibits state
courts and state legislatures from dividing veterans' disability
benefits, neither the Act nor the Supreme Court's opinion in
Manse11 clearly preempt the parties' ability to contract.
There is no language in the Act, or in Mansell, which leads to
the inevitable conclusion that the individual's freedom to contract
has been suspended. Even though there was a property settlement
agreement in Mansell, the Supreme Court did not hold that the
parties were not free to contract. Rather, the Court held that
state courts "have not been granted the authority to treat total
retirement pay as community property." Mansell, 490 U.S. at 589.
The Supreme Court's conclusion that a state court's division of
veterans' disability pay, pursuant to community property law, is
preempted by the Act is supported by the Court's analysis. The
Court, however, did not analyze the Act in the context of contract
law as opposed to preemption law. Thus, the validity or invalidity
of that agreement was not the basis for the Court's holding.
The maintenance provision at issue in Kenneth's and Barbara's
separation agreement, which is separate from the property division
portion of the agreement, provides that "[hlusband shall pay to
Wife one-half of his gross retirement benefits." At the time of
the agreement, both parties agreed that this would include his
veterans' disability pay. In addition, the maintenance provision
regarding Kenneth's gross retirement benefits clearly states that
it "shall not be modifiable." The District Court merely required
Kenneth to do that which he, with the knowledge of the law and
advice of counsel, had agreed to do. The Act may insulate
disability benefits from distribution by the court or through
community property law. However, that preemption does not mean
that the veteran is stripped of his right to enter into a contract
of his own free will. Kenneth did exactly that and should be
required to honor that agreement.
2. Did the District Court err in authorizing maintenance
which may potentially amount to more than 50 percent of Kenneth's
disposable income, as calculated under 10 U.S.C. § 1408?
Kenneth next contends that an award of maintenance that
potentially exceeds 50 percent of his disposable income violates
the Act. Kenneth misreads the federal statute.
The section of the Act referred to by Kenneth is 10 U.S.C. 5
1408(e) (1) which states that "[tlhe total amount of the disposable
retired or retainer pay of a member pavable under subsection QJ-
may not exceed 50 percent of such disposable retired or retainer
pay." (Emphasis added.) This referenced subsection, 10 U.S.C.

§ 1408(d), allows the garnishment of a service-person's pay in
order to satisfy a child support, maintenance, or property
settlement judgment. Read together, these sections state that the
federal government will not garnish more than 50 percent of a
service-person's disposable retirement pay, even if the judgment
outstanding exceeds that amount. Nothing in the Act prohibits a

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state court from approving a maintenance or custody award in any
amount. Accordingly, we hold that the District Court did not err
in upholding the maintenance provision in the parties' settlement
agreement.
Affirmed.

We concur.

Justices

Justice Charles E. Erdmann did not participate.
Justice Terry N. Trieweiler dissenting
I dissent from the majority opinion.
In MUnSellx ?!4UnS& (1989), 490 U.S. 581, 109 S. Ct. 2023, 104

L. E d . 2d 675, the United States Supreme Court held that state
courts are preempted by federal law from dividing veterans'
disability benefits and awarding any portion of them to the former
spouse of a disabled veteran. It did not matter in that case that
the parties before the court had also consented to the division of
disability benefits which the Supreme Court held could not be
divided.
The following facts were the foundation for the Manse11

decision:
Their marriage ended in 1979 with a divorce decree
from the Merced County, California, Supreme Court. . .
Mrs. Manse11 and Major Manse11 entered into a property
settlement which provided, in part, that Major Manse11
would pay Mrs. Manse11 50 percent of his total military
retirement pay, including that portion of retirement pay
waived so that Major Manse11 could receive disability
benefits. Civ. No. 55594 (May 29, 1979). In 1983, Major
Manse11 asked the Superior Court to modify the divorce
decree by removing the provision that required him to
share his total retirement pay with Mrs. Mansell. The
Superior Court denied Major Mansell's request without
opinion.
Mansell, 490 U.S. at 585-86.

In other words, the California Superior Court treated that
retiree's disability benefits as community property because he and
his former spouse agreed that they could be treated as community
property. However, it did not matter to the Supreme Court that a
property settlement agreement formed the basis for the California
Court's decision. Whether or not based on an agreement, it looked

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to the substance and effect of the California Court's decree and
held that:
For the reasons stated above, we hold that the
Former Spouses' Protection Act does not grant state
courts the power to treat as property divisible upon
divorce military retirement pay that has been waived to
receive veterans' disability benefits.
Mansell, 490 U.S. at 594-95.

The majority opinion overlooks the fact that a separation
agreement, by itself, has no binding effect until approved by the
district court and made part of the district court's decree.
Section 40-4-201, MCA. Once the court makes terms which divide
disability benefits part of its decree, it has, itself, divided
disability benefits, and it cannot do so.
If an underlying agreement between the parties made any
difference, a different result would have been required in Manse11

where an agreement was also the basis for the decree which the
court said could not be enforced. For example, in McMahan v. McMahan

(Fla. Dist. Ct. App. 1990), 567 So. 2d 976, the Florida Appellate
Court reversed a trial court judgment which adopted a settlement
agreement which permitted a wife to receive part of a husband's
military disability benefits. That court held that: " [Wle reverse
in that case law has now convincingly established that no portion
of a military pension which is attributable to disability is
subject to distribution for the benefit of the other spouse."
McMahan, 567 So. 2d at 978.

Unlike the majority, the Florida Court was not persuaded that
the source of the court's judgment was an agreement freely entered

11
into between the parties. In language relevant to this case, it
observed that:
Finally, appellee's argument that this case is
distinguishable from federal and state precedent reaching
a contrary result, because it involves a contract between
parties, is without merit. Manse11 also involved a
property settlement agreement which required Mr. Manse11
to pay his wife 50 percent of his total retirement pay,
which necessarily included a portion of disability
benefits. Despite the existence of this contract, the
United States Supreme Court determined that federal law
controlled, and that the wife was not entitled to any
portion of the military retirement pay that constituted
disability.
McMahan . 567 So. 2d at 979.

The majority attempts to distinguish Manse11 on the basis of its

holding that the Uniformed Services Former Spouses' Protection Act
preempts California's community property law. However, what the
majority overlooks is that the division of property in Manse11 was

not based on California's community property law. It was based on
an agreement between the parties. Therefore, the fact that
California is a community property state and Montana is not makes
no difference.
Of course, the Supreme Court, in Mansell, did not hold that the

parties are not free to contract. What the Court held is that the
state courts in California could not enforce, by decree, provisions
of a property settlement between parties which violated the
Uniformed Services Former Spouses' Protection Act, 10 U.S.C.
§ 1408.
Based on the majority's rationale, the U.S. Supreme Court
could not have arrived at the conclusion that it arrived at in

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Mansell. It would have to have held that in spite of the Act the

parties had to do what they had agreed to do--divide the husband's
military disability benefits.

The similarities between Manse11 and the circumstances in this

case are striking. The only difference is that instead of Kenneth

Stone's disability benefits being distributed as property, they

have been distributed as maintenance. However, if dividing
veterans' disability benefits is impermissible, it cannot be
legitimized by simply disguising the property distribution as a

maintenance award. To hold otherwise is to ignore the substance of

the District Court's decree and sanction a shell game, the purpose
of which is to circumvent laws intended for the protection of

disabled veterans.

For these reasons, I dissent from the majority opinion. I
would reverse the order of the District Court and hold that its

decree approving a separation agreement which effectively divided

veterans' disability benefits violated the Uniformed Services
Former Spouses' Protection Act, 10 U.S.C. 5 1408, and therefore,

was preempted by federal law.

Jusjice
/

Justice James C. Nelson joins in the foregojng dissenting opinion.