SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-882-94T3
ALBERT F. CHESTONE,
Plaintiff-Appellant,
v.
ROSE B. CHESTONE,
Defendant-Respondent.
Argued October 5, 1995 - Decided November
27, 1995
Before Judges King, Kleiner and Humphreys.
On appeal from the Superior Court of
New Jersey, Chancery Division, Family Part,
Bergen County.
James R. Stevens argued the cause for
appellant (Randall, Randall & Stevens,
attorneys; Mr. Stevens, on the brief).
William C. Rindone, Jr. argued the cause for
respondent (Liebowitz & Liebowitz, attorneys;
Mr. Rindone, on the brief).
The opinion of the court was delivered by
KLEINER, J.A.D.
Plaintiff Albert Chestone appeals from the trial court's
order that he maintain his former spouse as survival beneficiary
of his pension subsequent to and in spite of the court's order of
divorce. Plaintiff is a retired federal employee and
distribution of his pension benefits is governed by federal law.
The issue before us is whether the trial court erred by refusing
to apply relevant federal statutes.
In December 1976, plaintiff, while married to his first
wife, retired after thirty years of service as a special agent
with the Federal Bureau of Investigation. His federal pension
had vested and upon retirement he began to receive about $3,000
per month as retirement benefits. Plaintiff's wife was
designated as a survivor annuitant on that pension. To pay the
deposit necessary for this designation, plaintiff's monthly
benefits were reduced by approximately $1,000.
Plaintiff's wife died in 1980. Subsequent to her death, he
met Rose E. Schmelz. Plaintiff and Schmelz developed a romantic
relationship. In anticipation of their marriage, they entered
into an "Ante-nuptial Agreement," dated January 20, 1988. They
were married on February 6, 1988.
The ante-nuptial agreement provided in part:
1. Each party accepts the provisions of
any Last Will and Testament that may
presently exist or hereafter be made by each
of them in full discharge, settlement and
satisfaction of any and all other right,
title and interest he or she might otherwise
have or acquire in each other's estate or
property including, but not limited to his or
her "marital share", pursuant to NJSA 3B:1-1
et seq. and more specifically this instrument
is a waiver of our respective rights to elect
against any Will made by the other.
. . .
3. In addition to the real property
referred to above each party agrees that any
asset owned by either party as of the date of
the marriage shall remain the separate
property of each such party.
In January 1990, plaintiff designated defendant as the
survival annuitant of his pension. Plaintiff's monthly benefits
were reduced accordingly. The election application bears the
following condition on page one: "Important: You cannot change
or cancel your election after we have received a valid
application." The application states that there are multiple
payment options available to the electing annuitant. The
application also provides under the heading "Law and Regulations"
that "[a] change in beneficiary may be made at any
time and without the knowledge or consent of the previous
beneficiary, and this right cannot be waived or restricted."
The parties separated on June 24, 1992. Plaintiff filed a
complaint for divorce and defendant filed a counterclaim for
divorce. The issues at trial were limited to (1) defendant's
pretrial claim that she should be entitled to remain as the
designated survivor annuitant on plaintiff's pension, and (2)
defendant's demand that her counsel fees and accountant fees be
paid by plaintiff. The trial judge reserved decision and
rendered a written opinion. A dual judgment of divorce was
entered on September 12, 1994. The judgment of divorce,
encompassing the judge's conclusions, provided in part:
(1) The plaintiff shall continue to name
the defendant as the survivor annuity
beneficiary of the plaintiff's Civil Service
Retirement System Pension and shall take no
action to remove the plaintiff as survivor
annuity beneficiary. In the event the United
States Office of Personnel Management
requires additional documentation, both the
plaintiff and defendant shall execute any and
all documents to effectuate this
determination.
(2) The plaintiff shall pay to
attorneys for defendant, counsel fees and
costs in the sum of $12,000, and $861.00 to
[defendant's accountant].
Plaintiff's appeal raises four points of error:
POINT I
THE TRIAL COURT EXCEEDED ITS AUTHORITY BY NOT
CONSIDERING JUDICIAL NOTICE OF APPLICABLE
FEDERAL LAW.
POINT II
A PROPER APPLICATION OF THE APPLICABLE
FEDERAL REGULATIONS EXCLUDES DEFENDANT FROM
CONTINUING AS THE SURVIVOR ANNUITANT.
POINT III
THE TRIAL COURT HAS MISAPPLIED THE CONCEPT OF
"GIFT" TO PLAINTIFF'S PENSION.
POINT IV
THE TRIAL COURT ABUSED ITS DISCRETION IN
AWARDING DEFENDANT ATTORNEY'S FEES.
We conclude that the trial judge erred in his failure to
apply and interpret the federal regulations that control
plaintiff's federal Civil Service pension. We are therefore
constrained to reverse that component of this appeal. Our
decision renders plaintiff's argument in Point III as moot.
Additionally we conclude that the trial court may have reached
the decision awarding counsel fees and costs to defendant
predicated upon an erroneous conclusion as to plaintiff's income.
We therefore reverse the decision as to counsel fees and costs
and remand the matter for reconsideration.
Prior to trial, defendant asserted that federal regulations applicable to retirement pensions preclude plaintiff's right to remain as a designated survivor annuitant subsequent to the dissolution of marriage. In response to defendant's federal-based arguments, the trial court's opinion stated:
Federal statutes do not apply within the scope of this courts' consideration, including those that discuss federal acceptance of a provision for equatable distribution in a state divorce decree. This court's concern is equitable distribution on the state level; the federal government's disposition of its own matters based on this decree is of no consequence here.
Having concluded that federal regulations had no applicability to the divorce proceeding, the trial court concluded that the designation of defendant as beneficiary of plaintiff's civil service annuity amounted to an interspousal gift, and as such, the judge concluded that N.J.S.A. 2A:34-23 required the court to equitably divide the annuity. That conclusion was error because it ignores New Jersey and federal case law which holds that federal law may be applicable in certain instances to dissolutions of marriages and property distributions incident thereto. See, e.g., Biles v. Biles, 163 N.J. Super. 49, 54 (Ch. Div. 1978); McCarty v. McCarty, 453 U.S. 210, 220, 101 S. Ct. 2728, 69 L.Ed.2d 589 (1981).
Ordinarily, matters of domestic relations are left to the sole province of the states. See Biles, 163 N.J. Super. at 54; McCarty, 453 U.S. at 220. However the Supremacy Clause of the
Constitution of the United States, U.S. Const. art. 6, cl. 2,
mandates that state law is overridden where it does "major
damage" to "clear and substantial" federal interests. Hisquierdo
v. Hisquierdo,
439 U.S. 572, 581, 99 S. Ct., 802,
59 L.Ed.2d 1
(1979). "The pertinent questions are whether the right as
asserted conflicts with the express terms of federal law and
whether its consequences sufficiently injure the objectives of
the federal program to require nonrecognition." Id. at 583. We
have enunciated our standard as requiring a determination whether
the state law "presents an obstacle to the accomplishment and
execution of the objection of the federal legislation . . . ."
Biles, 163 N.J. Super. at 54. In Biles, we held that the trial
court's order permitting the satisfaction of alimony arrears from
a husband's currently-paid pension benefits did not frustrate the
objectives of the Employee Retirement Income Security Act. Id.
at 56.
The Third Circuit has recognized that application of federal
law may be appropriate in the normally exclusive state domain of
domestic relations. United States v. Smith,
398 F.2d 173, 178
(3rd Cir. 1968).See footnote 1 Similarly, in construing a matrimonial decree
which affected Federal Railroad Retirement Act rights, the United
States Supreme Court concluded that invocation of the Supremacy
Clause required that Congress have "positively required by direct
enactment" that state law be preempted. Hisquierdo, 439 U.S. at
581 (quoting Wetmore v. Markoe,
196 U.S. 68, 77,
25 S. Ct. 172,
49 L.Ed.2d 390 (1904)). This requirement is met when Congress
has identified a clear and substantial interest that is
undermined by state action. Ibid. Where the intent of Congress
is clear, a state court order will fail if its enforcement will
frustrate a federal policy. Id. at 584.
The proposition is evident based upon Hisquierdo and Biles
that our courts must take judicial notice of relevant federal
statutory schemes affecting property rights which are subject to
equitable distribution. A review of the federal statutory scheme
must also encompass a review of pertinent federal regulations
enacted in aid of the federal statute. Associated East Mortgage
Co. v. Young,
163 N.J. Super. 315, 320-21 (Ch. Div. 1978).
We conclude that the trial court was required to utilize a
two-step analysis prior to equitably distributing property rights
that were created by federal legislation. First, the trial court
must determine the purpose of Congress in enacting a particular
statute. The answer will be gleaned from the statutory language,
the legislative history of the statute, and from federal
regulations enacted in aid of the legislation.See footnote 2 Second, the
trial court must determine whether an order of equitable
distribution would conflict with clear and substantial federal
interests. Hisquierdo, 439 U.S. at 585; McCarty, 453 U.S. at
232.
Here, the trial court erred when it refused to consider the
federal statute and regulations constituting the Civil Service
Retirement System. Although there exist no expressly stated
interests behind the CSRS, the federal government certainly
benefits from uniform and efficient administration of its
employees' pensions. Furthermore, the effect of a pension to
encourage retirement and prevent a logjam of promotions may be
undermined. Errors at the state level that frustrate these
interests must be reversed.
Administration of plaintiff's retirement benefits is governed by the Civil Service Retirement System (CSRS). 5 U.S.C. §§ 8331 to 8348. This system is made up of the Civil Service Retirement Benefits Act and its amendments, including the Civil Service Retirement Spouse Equity Act (CSRSEA), effective May 7, 1985. Administration of the CSRS is handled by the U.S. Office of Personnel Management (OPM). The OPM has promulgated an extensive scheme of regulations, 5 C.F.R. §§ 831.601 to .685, which, in conjunction with the CSRS, determines the treatment of survivor annuities of retired federal employees. OPM was not
authorized to honor orders awarding survivor benefits until May
7, 1985, the effective date of the CSRSEA.
Prior to OPM's regulations, Congress rendered CSRS benefits
exempt from legal process, except as provided for by federal law.
5 U.S.C. §8346(a). As part of the CSRSEA amendments, Congress
made provisions for former spouses of federal employees or
retirees. Specifically,
5 U.S.C. §8339(j)(5)(A) concerns the
divorce of a retiree or employee. That subpart reads:
Any reduction in an annuity for the
purpose of providing a survivor annuity for
the current spouse of a retired employee or
Member shall be terminated for each full
month-
. . .
(ii) after the dissolution of the
spouse's marriage to the employee or Member,
except that an appropriate reduction shall be
made thereafter if the spouse is entitled, as
a former spouse, to a survivor annuity under
section 8431(h) of this title.
Clearly, a former spouse's interest in a survivor annuity is
destroyed upon divorce unless the requirements of § 8431(h) are
met. Section 8431(h) provides that a former spouse is entitled
to a survival annuity under the terms of "any decree of divorce .
. . or any court order . . . incident to such decree."
Ordinarily, OPM must comply with court orders or decrees in
connection with divorces of employees or retirees. 5 C.F.R. §
838.101. Therefore, a trial court's order to a retiree
preventing him from removing his former spouse as a beneficiary
of the retiree's survivor annuity would generally be binding on
the OPM. However, this mandate is limited to court orders that
qualify under the OPM regulations. 5 C.F.R. §§ 838.801 to .807
sets forth the requirements of a qualifying court order. If a
court order does not qualify for OPM acceptance, the order cannot
affect an employee annuity. 5 C.F.R. § 838.102.
5 C.F.R. § 838.802 provides:
(a) A court order awarding a former
spouse survivor annuity under CSRS is not a
court order acceptable for processing unless
the marriage terminated on or after May 7,
1985.
(b) In the case of a retiree who retired
under CSRS before May 7, 1985, a court order
awarding a former spouse survivor annuity
under CSRS is not a court order acceptable
for processing unless the retiree was
receiving a reduced annuity to provide a
survivor annuity to benefit that spouse on
May 7, 1985.
Applying this subsection to the trial court's order in the
present matter, the requirement of paragraph (a) is obviously
satisfied. Plaintiff's marriage to defendant terminated on
September 12, 1994, well after the May 7, 1985 cutoff date.
However, examining paragraph (b), plaintiff clearly was not
"receiving a reduced annuity to provide a survivor annuity to
benefit [Rose] on May 7, 1985." Therefore, the trial court's
order would not be acceptable for processing.
As noted, the judgment provided: "The plaintiff shall
continue to name the defendant as the survivor annuity
beneficiary of the plaintiff's Civil Service Retirement System
Pension and shall take no action to remove the plaintiff as
survivor annuity beneficiary." Although the divorce judgment did
not precisely award the survivor annuity to defendant, the
practical effect of the judgment was to grant to defendant the
right to plaintiff's survival annuity and to do so irrevocably.
We find that this practical effect is sufficient to bring the
judgment within the scope of § 838.802(b).
We additionally note that 5 C.F.R. § 838.1004(d) is helpful
to our analysis. That section generally applies to retirement
benefits, not survival annuities. However, paragraph (d) applies
expressly to former spouse annuities, defined as "a recurring
benefit under CSRS that is payable to a former spouse after the .
. . retiree's death." 5 C.F.R. § 831.603. Therefore, the
paragraph is applicable to plaintiff's survival annuity. It
provides in pertinent part that a court order affecting a former
spouse annuity is not a qualified court order if: (i) the
marriage was terminated after May 7, 1985; (ii) the employee
retired prior to May 7, 1985; and (iii) in the case of a post-retirement marriage, the annuitant had not elected to provide a
survivor annuity for that spouse before May 7, 1985. We conclude
that the divorce judgment is not qualified because prior to May
7, 1985, OPM has no authorization to honor such orders. Although
the marriage of plaintiff and defendant occurred after OPM
authorization, plaintiff retired prior to that event. Also, as
of May 7, 1985, plaintiff had not elected for the protection of
defendant. The judgment of divorce therefore is not a qualified
court order that OPM is authorized to honor.
We are additionally persuaded of the correctness of our
conclusion by a recent decision of the Merit Systems Protection
Board (MSPB), Nelson v. Office of Personnel Management,
59 M.S.P.R. 612 (1993), aff'd,
48 F.3d 1238 (Fed. Cir. 1995).See footnote 3 The
facts in Nelson are strikingly similar to those now before us.
In Nelson, a married federal employee retired in 1979. Id. at
613. His wife died in 1984. Ibid. Nelson remarried in 1986 and
elected an annuity reduction to provide a survivor annuity for
his second wife. Ibid. Nelson subsequently divorced his second
wife in 1990 and was ordered by the court to retain his second
wife as his survivor annuitant. Ibid.
OPM refused to honor the state court's order on the grounds
that: (1) the order dissolved a marriage that took place after
May 7, 1985, when the OPM received statutory authorization to
honor orders awarding survivor benefits, and (2) the marriage was
to an annuitant who retired prior to OPM authorization. Id. at
614.
The MSPB found correctly that absent express authority, OPM
may not honor a court order that requires a retiree to "continue
to have his CSRS annuity reduced to provide survivor benefits"
for a former spouse. Id. at 615. The MSPB predicated this
conclusion on
5 U.S.C. §8346(a) and 5 C.F.R. § 838.1004(d)
which, when read in conjunction, provide that CSRS benefits are
exempt from legal process unless the OPM has authority to honor
an affecting court order. The MSPB stated that "Congress did not
intend for the provisions of the CSRSEA that relate to the award
of former spouse survivor benefits to apply to [Nelson] and those
similarly situated." Ibid.
Persuaded by Nelson, we conclude that OPM has no actual
authority to honor the trial court's order and as such that
component of the divorce judgment is a nullity.See footnote 4 Accordingly,
we reverse that component of the judgment of divorce.
Defendant contends that a trial court's award of counsel fees and accountant expenses may be allowed in a matrimonial matter only as permitted by rule of court, a statute, or a contract.
R. 4:42-9(a)(1) provides:
In a family action, the court in its discretion may make an allowance . . . on
final determination to be paid by any party
to the action, including if deemed to be just
any party successful in the action, on any
claim for divorce, nullity, support . . . .
N.J.S.A. 2A:34-23 provides in part:
The court may order one party to pay a
retainer on behalf of the other for expert
and legal services when the respective
financial circumstances of the party make the
award reasonable and just. In considering an
application, the court shall review the
financial capacity of each party to conduct
the litigation and the criteria for award of
counsel fees that are then pertinent as set
forth by court rule. Whenever any other
application is made to a court which includes
an application for pendente lite or final
award of counsel fees, the court shall
determine the appropriate award for counsel
fees, if any, at the same time that a
decision is rendered on the other issue then
before the court and shall consider the
factors set forth in the court rule on
counsel fees, the financial circumstances of
the parties, and the good or bad faith of
either party.
A court should consider need, financial ability to pay, and
the recipient's good faith when awarding attorney's fees.
Williams v. Williams,
59 N.J. 229, 233 (1971). The judge must
also determine the extent of the award. Argila v. Argila,
256 N.J. Super. 484, 490 (App. Div. 1992). In making that
determination "it is necessarily implicit that there may be
allowed only such fees as represent reasonable compensation for
such legal services performed as were reasonably necessary in the
prosecution or defense of the litigation." Ibid. In Mayer v.
Mayer,
180 N.J. Super. 164 (App. Div.) certif. denied,
88 N.J. 494 (1981), we wrote:
The fee should not be fixed by simply taking
the total time assertedly expended by
counsel, without critical review and
examination of the nature and extent of the
services, and multiplying the total number of
hours by the charges fixed in a retainer
agreement made between the wife and her
attorney -- to which charges the husband
never consented or agreed.
[Id. at 169.]
"In determining the reasonableness of any fee award, `[t]he
initial focus in the calculus is appropriately directed to the
time expended in pursuing the litigation.'" Argila, 256 N.J.
Super. at 492 (quoting Singer v. State,
95 N.J. 487, 499, cert.
denied,
469 U.S. 832,
105 S. Ct. 121,
83 L. Ed.2d 64 (1984)).
But the time expended is only one of the factors to be
considered. Ibid. R. 4:42-9(b) provides that "all applications
for the allowance of fees shall be supported by an affidavit of
services addressing the factors enumerated by RPC 1.5(a)." Those
factors are:
(1) the time and labor required, the
novelty and difficulty of the questions
involved, and the skill requisite to perform
the legal service properly;
(2) the likelihood, if apparent to the
client, that the acceptance of the particular
employment will preclude other employment by
the lawyer;
(3) the fee customarily charged in the
locality for similar legal services;
(4) the amount involved and the results
obtained;
(5) the time limitations imposed by the
client or by the circumstances;
(6) the nature and length of the
professional relationship with the client;
(7) the experience, reputation, and
ability of the lawyer of lawyers performing
the services;
(8) whether the fee is fixed or
contingent.
[R.P.C. 1.5(a).]
An award of counsel fees is within the discretion of the
trial court. Williams, 59 N.J. at 233. However, unless an award
represents an abuse of discretion, we ordinarily will not disturb
that award on appeal. Fidelity Union Trust Co. v. Berenblum,
91 N.J. Super. 551, 561 (App. Div. 1960).
In our review of the record we note that plaintiff's annual
income is approximately $38,000 and is comprised primarily of
pension benefits. Although plaintiff also maintains a business,
plaintiff testified that his business has operated at a loss for
the past five years. Plaintiff's 1992 tax federal tax return
included a $16,000 deduction for a business loss. Yet the trial
judge concluded that plaintiff's income was $44,000. We are
unable to discern how the trial court reached that conclusion.
We also note that the trial court recognized that "not much
financial information was submitted to the court" because the
trial focused primarily on the survival annuity issue.
We find that the record demonstrates that defendant's income
from her employment was approximately $30,000 per year. It is
apparent that the trial court may have failed to consider that
plaintiff's income was not disproportionate to defendant's income
and that no evidence exists in the record to justify an award to
defendant encompassing the entire expense incurred by defendant
for attorney and accountant services.
Because the trial judge may have reached the counsel fee
decision predicated upon an erroneous conclusion as to
plaintiff's income, we reverse that award and remand that issue
for reconsideration predicated upon the principles discussed in
this opinion.
The component of the judgment of divorce prohibiting
plaintiff from changing the survivor annuitant of his pension is
reversed. The award of counsel fees and accountant expenses is
reversed and remanded to the trial court for reconsideration.
Footnote: 1 The substantive holding in Smith has since been
rendered obsolete by subsequent amendments to the Civil Service
Retirement Benefits Act. We consider the principle enunciated in
Smith, that New Jersey courts should consider federal law in
disposing of marital assets in divorce proceedings where one
spouse is entitled to a federal pension, a viable concept.
Footnote: 2 The court may also review other legislation to discern
the intent of Congress. For example, the trial court here was
concerned with the Civil Service Retirement Benefits Act. A
review of that legislation would have led to a review of the
Civil Service Retirement Spouse Equity Act (CSRSEA), enacted in
1984.
Footnote: 3 The Federal Circuit has classified its opinion as not
citable as precedent.
Footnote: 4 The briefs on appeal indicated that plaintiff intended
to remarry and was desirous of naming his third wife as a
survivor annuitant. At oral argument, we were advised that
plaintiff has in fact remarried. Plaintiff provided the court at
oral argument with a communication from the United States Office
of Personnel Management dated September 5, 1995 providing in
part:
This is in reply to your inquiry concerning
survivor annuity benefits for your former and
current spouses.
. . .
Rose is not eligible for a survivor benefit
as a former spouse because your annuity was
not reduced to provide a survivor benefit for
her on May 7, 1985 {CFR 838.802 (b)}. . . .
We adjusted your annuity to eliminate the
reduction for a survivor benefit effective
October 1, 1994.
We denied a motion to supplement the record with this letter and include it for clarification purposes only.