Peace v. Peace ( 2014 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
In re the Matter of:
Donna J. Peace, Petitioner/Appellee,
v.
Edward D. Peace, Respondent/Appellant.
No. 1 CA-CV 13-0150
FILED 5-8-2014
Appeal from the Superior Court in Navajo County
No. S0900D020070343
The Honorable Ralph Hatch, Judge
AFFIRMED IN PART, REVERSED IN PART
COUNSEL
Edward D. Peace, Sr., Pinetop
Respondent/Appellant
OPINION
Judge Lawrence F. Winthrop delivered the opinion of the Court, in which
Presiding Judge Patricia A. Orozco and Judge Kenton D. Jones joined.
W I N T H R O P, Judge:
¶1 Edward D. Peace, Sr. (“Husband”) seeks review, inter alia, of
a family court order and subsequent civil judgment finding him in
contempt of court for misappropriating his children’s Social Security
PEACE v. PEACE
Opinion of the Court
benefits. Husband has raised other issues that do not meet criteria for
publication, which we address in a separate, contemporaneously filed
memorandum decision. See Ariz. R. Sup.Ct. 111(b), (h) (West 2014).1
Because we conclude federal law preempts the family court’s authority to
review Husband’s use of his children’s Social Security benefits, we reverse
that portion of the family court’s order finding Husband in contempt and
vacate that portion of the civil judgment related to the misappropriated
benefits. Otherwise, we affirm the order and judgment in all other
respects.
FACTS AND PROCEDURAL HISTORY
¶2 In July 2007, Donna J. Peace (“Wife”) filed a petition for
dissolution of marriage, seeking physical custody of the parties’ four
children and an award of child support. In August 2009, the family court
entered a signed decree of dissolution addressing the division of the
parties’ assets and liabilities, child support and custody, and spousal
maintenance. This court affirmed the family court decree in Peace v. Peace,
1 CA-CV 09-0668, 2011 WL 192896 (Ariz. App. Jan. 20, 2011) (mem.
decision).
¶3 In June 2012, Wife filed petitions to modify parenting time
and for contempt. In her petition for contempt, Wife alleged Husband
was delinquent in satisfying court ordered child support arrearages, costs,
and attorneys’ fees; relevant to this appeal, Wife also alleged Husband
had misappropriated Social Security benefits owed to the children. 2 After
taking evidence, the family court found Husband in contempt, in part
because Husband “misappropriated” his children’s Social Security
benefits from June 2009 to March 2010 by spending those funds at his
discretion while Wife had sole legal custody of the children. The court’s
signed order converted the amount of “misappropriated” Social Security
benefits into a civil judgment.
1 We cite the current Westlaw version of the applicable statutes,
regulations, and rules, because no revisions material to this decision have
since occurred.
2 The children receive a monthly benefit of $362 each as a result of
Husband’s application for and receipt of early Social Security benefits.
From June 2009 until March 2010, Husband was designated by the Social
Security Administration as a “representative payee,” authorized to receive
these payments on behalf of the children.
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PEACE v. PEACE
Opinion of the Court
¶4 Husband filed a timely notice of appeal. As addressed in
this opinion, Husband challenges that portion of the family court’s order
finding him in contempt of court. A finding of civil contempt is not
appealable. See, e.g., Berry v. Superior Court, 163 Ariz. 507, 508, 788 P.2d
1258, 1259 (App. 1989) (“The rule is well established that civil contempt
adjudications are not appealable.”). In the exercise of our discretion,
however, we elect to treat Husband’s appeal from the family court’s
contempt order as a petition for special action and accept special action
jurisdiction. See State ex rel. Dep’t of Econ. Sec. v. Burton, 205 Ariz. 27, 30,
¶ 18, 66 P.3d 70, 73 (App. 2003); Ariz. Rev. Stat. (“A.R.S.”) § 12-
120.21(A)(4).
ANALYSIS
¶5 Husband argues the family court erred in finding he
misappropriated and converted the children’s Social Security benefits
from June 2009 to March 2010. During this time, Wife had sole legal
custody of the children, and the family court apparently determined Wife
should have been the designated representative payee entitled to receive
the children’s Social Security benefits.
¶6 Under Title 20, Code of Federal Regulations, Section
404.2035(a):
A representative payee has a responsibility to—
(a) Use the benefits received on [the beneficiary’s] behalf
only for [the beneficiary’s] use and benefit in a manner and
for the purposes he or she determines, under the guidelines
in this subpart, to be in [the beneficiary’s] best interests[.]
Husband argues that, as a representative payee pursuant to 20 C.F.R. §
404.2035(a), he had absolute and unreviewable discretion to allocate the
children’s Social Security benefits as he deemed in their best interests from
June 2009 to March 2010, irrespective of the legal effect of Wife’s sole legal
custody of the children at that time.
¶7 Husband’s argument requires us to decide whether federal
law preempts a state court from reviewing a representative payee’s use of
Social Security funds. “State law is preempted by federal law . . . when
state law regulates conduct in a field Congress intended the federal
government to occupy exclusively . . . .” Hutto v. Francisco, 210 Ariz. 88,
90, ¶ 7, 107 P.3d 934, 936 (App. 2005) (citations omitted).
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PEACE v. PEACE
Opinion of the Court
¶8 State courts “are divided on whether the doctrine of federal
preemption precludes state courts from exercising jurisdiction to direct a
representative payee’s disposition of derivative Social Security funds.”
LaMothe v. LeBlanc, 193 Vt. 399, 425-26, ¶ 66-67, 70 A.3d 977, 995-96 (2013)
(Dooley, J. concurring in part, dissenting in part) (collecting cases).
However, Congress and the Social Security Administration (“SSA”) have
enacted extensive oversight mechanisms regarding the use of these federal
funds, indicating congressional intent to occupy the field. See, e.g., 42
U.S.C. § 408(a)(5) (“Whoever . . . having made application to receive
payment under this subchapter for the use and benefit of another and
having received such a payment, knowingly and willfully converts such a
payment, or any part thereof, to a use other than for the use and benefit of
such other person . . . shall be guilty of a felony and upon conviction
thereof shall be fined under Title 18 or imprisoned for not more than five
years, or both.”); 42 U.S.C. § 405(j)(3)(A) (“[T]he Commissioner of Social
Security shall establish a system of accountability monitoring whereby [a
representative payee] shall report not less often than annually with
respect to the use of such payments.”); 20 C.F.R. § 404.2065 (explaining
record keeping requirement of representative payee); 20 C.F.R. § 404.2025(explaining ability of the SSA to stop sending benefit payments to
representative payee for non-compliance). As the West Virginia Supreme
Court has noted:
It is clear from the U.S.C. and the C.F.R. that the SSA is in the
proper position to address [mismanagement of funds], either
administratively or by referral to the appropriate authorities
for prosecution under United States Code. The [state] court
lacks jurisdiction to order that the funds be returned, or to
mandate where they are to be distributed.
In re Haylea G, 745 S.E.2d 532, 539 (W. Va. 2013); see also In re Ryan W., 76
A.3d 1049, 1059 (Md. 2013) (“[S]uch disputes are for resolution within the
federal administrative process and subject to further federal judicial
review.”).
¶9 We conclude the family court lacked jurisdiction to review
Husband’s management of derivative Social Security benefits, to find
Husband in contempt concerning the use of such funds, or to enter a civil
judgment in favor of Wife on that basis. Because federal law occupies the
field, a family court is preempted from reviewing the actions of a
representative payee.
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PEACE v. PEACE
Opinion of the Court
CONCLUSION
¶10 We reverse the family court’s order as it pertains to
Husband’s use of his children’s Social Security benefits from June 2009 to
March 2010, and vacate the related entry of judgment in the amount of
$13,000 plus accruing interest.
:MJT
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