Marital settlement agreements (MSA) are the backbone of a divorce. They set down in writing the agreements reached by the divorcing parties, and they should be carefully crafted with an eye to the future and possible changes in circumstances. Absent such foresight, a couple can find itself back in court – even years after the divorce is final. This is particularly true concerning spousal support, or alimony agreements.*

Fattore v Fattore, 485, N.J. Super.75 (App. D.V. 2019)

The Fattores were a military couple, married for 35 years. At the time of their divorce in 1999, Mr. Fattore was employed in the Army National Guard and his wife was an operating room nurse. The divorce was not contentious, and both agreed to a mutual waiver of spousal support. Likewise, they agreed that Mrs. Fattore would receive 50% of the military pension accumulated by her husband during the marriage. A qualified domestic relations order (QDRO) -a judicial document that splits a retirement pension by recognizing its joint marital ownership – was prepared and duly entered into by the couple.

After the divorce, even though they had children and grandchildren in common, the couple did not stay in contact.

In 2002, Mr. Fattore became disabled and was eligible to collect his pension. Military pensions are taxable, however, and Mr. Fattore opted to receive tax-free VA disability benefits instead. His ex-wife was not notified.

Eight years later, and unaware of the change in circumstances, Mrs. Fattore contacted the Army to find out why she had not yet started to receive her share of her ex-husband’s military pension.  The Army informed her that her ex-husband’s decision to receive tax-free VA disability benefits supplanted his right to receive military pension benefits. The pension, 50% of which was Mrs. Fattore’s, simply no longer existed.

Mrs. Fattore was not in a financial position to dispute this outcome until 2016 when she filed a motion to compel her ex-husband to compensate her for the loss of her share of the military pension. In February 2017, a New Jersey Trial Court ordered Mr. Fattore to pay his ex-wife an amount the court-appointed appraiser had determined to be equal to Mrs. Fattore’s interest in the military pension. Mr. Fattore appealed.

The USFSPA & Howell v Howell, 137 S. Ct. 1400 (2017)

The Uniformed Services Former Spouses Protection Act (USFSPA) was enacted in 1982 as a means to protect divorcing spouses of military personnel. The Act created a means for veterans’ disposable retirement pay to be treated as community property during divorce. The USFSPA explicitly excludes from disposable pay any amounts waived to receive VA disability compensation.

Howell v Howell, a US Supreme Court case that examined this issue, confirmed the exclusion. The case was decided just prior to Mr. Fattore’s appeal. The Court reiterated that Federal Law “completely pre-empts the States from treating waived military retirement pay as divisible community property.” Id. at 1405.

The Court further found that the family court order that required Mr. Howell to reimburse his ex-spouse for the loss of her share of his military pension was a semantic side-stepping of congress’ intent to shield VA disability benefits from being treated as community property. No equivalent compensation could be permitted.

Although the Court was not unsympathetic to the plight of disenfranchised spouses affected by its ruling, the justices argued that family courts should take the possible loss in value of a military pension into account at the time of the divorce.

Fattore: Resolution

The New Jersey Appeals Court agreed with Mr. Fattore that Howell v Howell rendered the decision to replace the amount of the lost military pension from other assets erroneous as a matter of law. Although equivalent compensation was disallowed, the Court found that Mr. Fattore’s decision to accept VA disability payments in lieu of pension benefits constituted a substantial change in circumstances that warranted a review of the couple’s spousal support waiver. They felt that the record demonstrated Mrs. Fattore waived spousal support in exchange for the promise of her future share in her ex-husband’s military pension. They remanded the case to permit Mrs. Fattore to pursue an spousal support claim.

 

Galassi v Galassi, 2009-NMCA-026

At the time of their divorce, the Galassis painstakingly constructed a spousal support schedule as part of their MSA:

“[Husband] shall pay spousal support in the amount of $2,100 per month for twelve (12) months beginning January 20, 2004. Beginning January 20, 2005, [Husband] shall pay spousal support in the amount of $2,000 per month for twelve months. Beginning January 20, 2006, [Husband] shall pay spousal support in the amount of $1,900 per month for twelve months. Beginning January 20, 2007 through December 20, 2008, [Husband] shall pay spousal support in the amount of $1,500 per month.   The spousal support shall be non-modifiable for five (5) years, after which it shall terminate.” Galassi v. Galassi, 2009-NMCA-026 ¶3.

Clear as a bell, right? Except that nowhere was the possibility of Mrs. Galassi’s remarriage considered. But remarry she did, in 2005, well before the termination of the spousal support agreement. Mr. Galassi went to District Court to terminate the support. He cited common law and prior New Mexico case law to support his assertion that spousal support terminated upon remarriage, absent demonstrable extraordinary circumstances.

Specifically, he rested his case on a 1956 New Mexico Supreme Court case, Kuert v. Kuert, 60 N.M. 432, 292 P.2d 115 (1956). In this case, the New Mexico Supreme Court held that “remarriage creates a prima facie case that alimony should stop unless the recipient shows exceptional conditions calling for continued support.” Id. 439-40, 292 P.2d at 120.   Mr. Galassi argued that the Kuert decision should still hold sway. Mrs. Galassi claimed that changes to the statutes governing spousal support in 1993 and 1997 amendments displaced the Kuert ruling.

Current New Mexico Spousal Support Statutes

The substance of the statutory provision related to spousal support established by Kuert remained substantially unchanged until 1993. In that year, New Mexico Section 40-4-7(B) upended existing law by completely revising the existing law. The first provision simply changed the nomenclature from “alimony” to “spousal support”, but subsections (a) through (e) defined five categories of spousal support, four of which were new:

Provision

  • detailed support of indefinite duration. This was roughly analogous to the spousal support previously allowed.
  • defined rehabilitative support to aid in increasing the receiving spouse’s ability to self-support. This provision could be conditioned on compliance with a rehabilitation plan.
  • defined transitional support as an award to supplement the receiving spouse’s income for a stated period. Transitional support did not include any condition other than it have a definite term.
  • and (e) allowed an award of a single sum payable in one or more installments. Under Subsection (d) single sum support stops “only” upon the death of the receiving spouse. Under Subsection (e), even the death of the receiving spouse does not end the obligation to pay the single sum agreed to.

And most pertinently to the Galassi case, the new provision also allowed the designation of rehabilitative or transitional support “as nonmodifiable with respect to the amount or duration of the support payments[.]”  Section 40-4-7(B)(2)(b).

Galassi resolution

The New Mexico Court of Appeals found for Mrs. Galassi, stating that the statutory standard of nonmodifiability controls. It reversed the district court’s order terminating Mrs. Galassi’s spousal support and remanded the case for further proceedings.

Conclusion

Both these cases started with the divorcing couples in agreement as to how they wanted to split their assets during divorce, both in intent and in detail. They were careful to set up the proper documents (the QDRO in Fattore and a very specific payment schedule in Galassi). The fact that they both ended up back in court and in appeal puts the onus very squarely on family court and family law attorneys to do a better job of contingency anticipation and planning.

 

*spousal support is the preferred term for alimony in New Mexico (and many other states) law. Alimony remains the preferred term in New Jersey.