The Servicemembers Civil Relief Act: Important New Protections For Those in Uniform

 

by Terry M. Jarrett¹

Introduction

Federal and state governments have long recognized the need to provide certain legal protections for individuals entering or called to active duty in the military service. "The very nature of military service often compromises the ability of service members to fulfill their financial obligations and to assert many of their legal rights."² During times of past national crisis, Congress and state legislatures passed various laws to protect service members. The goal of these laws was to allow service members to focus on their military duties without worrying about civil obligations back home. Historically, such laws were effective only for a limited duration. Once the crisis was over, the protections expired.

In 1940, Congress passed the Soldiers' and Sailors' Civil Relief Act (SSCRA).³ This was Congress' first attempt to provide permanent legal protection to service members. For the past 60-plus years, it has been a powerful tool to assist service members who struggle to meet financial and legal obligations while called away on active duty.

On December 19, 2003, President Bush signed into law the new Servicemembers Civil Relief Act (SCRA),⁴ which updates and revises the protections afforded to service members. A rewrite was necessary to clarify ambiguous language in the old law, incorporate or overrule "many years of judicial interpretation," and modernize the law to reflect economic and social changes since 1940.⁵

These protections can be particularly significant for reservists and National Guard members called to extended active duty in response to the current war on terrorism. Many times, such a service member can have trouble meeting financial obligations incurred before military service due to a reduction in income as a result of entering active military service.

While providing protections to service members, the SCRA also affects individuals and businesses that transact business with service members, such as landlords and creditors. The new SCRA will have a wide-ranging impact on state debtor/creditor law, landlord/tenant law, tax law, insurance law, administrative law, and civil practice and procedure. The purpose of this article is to alert practitioners of the changes and explain many of the new provisions of the SCRA.⁶

II. History

Financial and legal protections for service members in the United States date back to the War of 1812. Louisiana enacted "stay laws" that "suspended all proceedings in civil cases" involving soldiers "for four months as the British [army was] advancing on New Orleans."⁷

During the Civil War, Congress recognized the need to protect service members from civil obligations while on military duty away from home. For the duration of the war, Congress passed a total moratorium on civil actions brought against Union soldiers and sailors.⁸ Essentially, the law provided that any civil legal action involving a soldier or sailor was put on hold until after the soldier or sailor returned from the war. "Examples of civil matters included breach of contract, bankruptcy, foreclosure or divorce proceedings."⁹ Congress' purpose in passing the moratorium was twofold: "to protect both national interests and those of service members."¹⁰ For purposes of maintaining morale, Congress did not want service members "to fight the war [while] worrying about problems that might arise at home."¹¹ Moreover, "most soldiers and sailors during the Civil War were not well paid, so it was [hard] for them to honor their pre-service debts, such as mortgage payments or other credit [obligations]."¹² Several southern states also passed similar legislation to protect Confederate soldiers and sailors.¹³

Congressional concern about protecting the rights of service members was raised again during World War I when the Soldiers' and Sailors' Civil Relief Act of 1918 was passed.¹⁴ Interestingly, the 1918 act "was drafted in six weeks by [Judge Advocate General Attorney] Major John Wigmore," who would later become the renowned "Dean of Northwestern University's Law School and author of the [famous treatise], Wigmore on Evidence."¹⁵

Like the Civil War-era moratorium, the 1918 legislation was designed to protect the rights of service members while they were away serving in the war. "Although the 1918 Act did not include a total moratorium on civil actions, it did protect service members from . . . repossession of property, bankruptcy, foreclosure or other such actions while they were [fighting the war.]"¹⁶ The 1918 act also covered "default judgments, stays of proceedings, evictions, mortgage foreclosure, insurance, and installment contracts."¹⁷ The 1918 act expired shortly after World War I ended.¹⁸

Congress acted again during World War II. The SSCRA enacted by Congress in 1940 essentially was a reenactment of the 1918 law. It was passed to protect the rights of the millions of service members activated for World War II. The major difference between the 1940 act and the 1918 version was that there was no provision for the 1940 act to expire, as the 1918 version did after World War I. Accordingly, since 1940, members of the military have been afforded the protections of the SSCRA.

The SSCRA provided a number of significant protections to service members. These included: staying civil court proceedings if military service materially affected the service member's ability to defend his or her interest; reducing interest rates to six percent on pre-service loans and obligations; requiring a court order before a service member's family could be evicted from a rented residence for non-payment if the monthly rent was $1,200 or less; terminating a pre-service residential lease; and allowing service members to retain their state of residence for tax purposes despite military relocations to other states.

The SSCRA was amended 13 times to keep pace with a changing military and changing world, with amendments added in 1991 during the first Gulf War and amended most recently in 2002.¹⁹

However, ambiguous language in some of the provisions of the SSCRA made for inconsistent interpretation and enforcement. Judicial decisions over the years have chipped away at important protections. Economic and social changes have diluted many of the protections. The post-September 11 war on terrorism means that unprecedented numbers of reservists and National Guard personnel are being called to active duty.²⁰ It became apparent that revisions to modernize and clarify the law were long overdue.

III. Highlights of the New SCRA

Purpose. As determined by Congress, the purposes of the SCRA are:

(1) to provide for, strengthen, and expedite the national defense through protection extended by this Act to service members of the United States to enable such persons to devote their entire energy to the defense needs of the Nation; and (2) to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of service members during their military service.²¹

Definition of Military Service. Prior to 2002, those members in the National Guard were covered only if they were serving in the federal service (Title 10 status). The 2002 amendments to the SSCRA extended the definition of "military service" to include members of the National Guard serving at the state level for more than 30 consecutive days "for purposes of responding to a national emergency declared by the president and supported by federal funds"²² (Title 32 status). The SCRA incorporates the 2002 definition so that the SCRA applies to National Guard members serving in Title 10 status or Title 32 status.

Definition of "Dependent" Expanded. It is important to note that the SCRA not only protects service members, but also their family members in certain instances. The SCRA's definition of dependent now includes anyone "for whom the servicemember [has] provided more than one-half of the individual's support for 180 days immediately preceding an application for relief under [the SCRA.]"²³

Expanded Protection to Cover Administrative Agency Proceedings. The SSCRA only applied to civil court proceedings and did not include administrative hearings. As administrative agency proceedings have expanded over the years at both the state and federal level-many times as a solution to alleviate court backlogs-it became clear that service members were losing protections. As a result, the SCRA defines "court" to include both federal and state (including political subdivisions thereof) administrative agency proceedings in addition to civil court proceedings.²⁴ The SCRA does not apply to criminal court proceedings.

Notification to Service Members. The SSCRA contained no requirement to notify service members of their legal rights. The SCRA includes an important notification provision requiring the services to "ensure that notice of the benefits accorded by [the SCRA] is provided in writing to [service members]."²⁵

Waiver. The SSCRA allowed a service member to waive, in writing, certain benefits of the law. A provision of the SCRA restates and clarifies that service members may waive SCRA rights and protections if executed in writing during or after the period of the service member's military service.²⁶

Entitlement to Legal Representation. The SCRA adds a provision clarifying that a legal representative may represent the interests of a service member in any matter covered by the SCRA. It defines a legal representative as an attorney or "[a]n individual possessing a power of attorney" "acting on the behalf of a servicemember."²⁷ The former SSCRA was silent on this issue.

Protection Against Default Judgments. The SCRA provides that no default judgment may be taken against a service member without the court determining if an individual is in the military and appointing counsel to defend the service member's rights if appropriate. Before a court can enter a default judgment against a service member, the person who is suing the service member must present to the court an affidavit stating that the defendant is not in military service.²⁸ If the defendant is in the military and the plaintiff fails to file the affidavit, the court will appoint an attorney to represent the defendant service member's interests.²⁹ The court may also require the plaintiff to post a bond to protect the defendant against harm.³⁰ "If a default judgment is entered . . . against a servicemember," the SCRA provides that the judgment may be reopened if the service member makes an application within 90 days after leaving active duty, shows he or she was prejudiced, and shows that he or she had a valid legal defense.³¹

Stay of Proceedings. Another significant protection under the SCRA relates to stays of civil actions and proceedings. The SSCRA granted a court discretion on whether to grant a stay.³² The test was whether military service materially affected the service member's ability to participate in the case.³³ The SCRA revises the temporary stay provision so that it is automatic for 90 days upon application of the service member. "The application for a stay . . . [must] include the following: (A) [a] letter or other communication . . . stating the manner in which [the servicemember's] military duty requirements materially affect the servicemember's ability to appear and stating a date the servicemember will be available to appear [and] (B) [a] letter . . . from the servicemember's commanding officer stating that the servicemember's current military duty prevents appearance and that military leave is not authorized for the servicemember at the time of the letter."³⁴

Importantly, the SCRA also provides that a personal or other request for a stay "does not constitute an appearance for jurisdictional purposes" nor waive "any substantive or procedural defense."³⁵ Under the SSCRA, there was a concern that a service member making a direct application to the court for a stay constituted a general appearance in the case, thus conferring personal jurisdiction over the service member. The SCRA eliminates that concern.

The automatic 90-day stay may be extended at the discretion of the court upon application by the service member.³⁶ If the court denies the request for an additional stay, the court must appoint counsel to represent the service member in the case.³⁷

The SCRA also increases the period of "military service" for purposes of stay provisions to apply while an individual is either "in military service or within 90 [formerly 60] days after termination or release from [such] service."³⁸

Excess Interest Forgiven, Not Deferred. One of the most significant and often-invoked provisions under the SSCRA limited the amount of interest allowed to be collected on debts of active duty service members to six percent per year. The SSCRA required the reduction of interest on any pre-service loan to six percent.³⁹ Over the years, conflicting interpretations created ambiguity as to whether the excess over six percent was permanently forgiven or temporarily deferred. The SCRA restates and clarifies the six percent interest rate cap by specifying that "[i]nterest in excess of 6 percent per year" is forgiven, not deferred.⁴⁰ Furthermore, the monthly payment must be recalculated and reduced by the amount of interest saved during the covered period.⁴¹ To be entitled to the six percent cap, the service member must provide written notice to the creditor with a copy of his or her orders.⁴²

SCRA Not Exclusive Remedy. Several sections in the SCRA clarify that nothing in the SCRA precludes the service member from pursuing any legal remedy not otherwise specified in the SCRA for a violation of the SCRA. For example, if state law permits a litigant to seek consequential and punitive damages, the penalties specified for an SCRA violation are not exclusive, and the service member can seek money damages.⁴³

Eviction Protection. Another key provision in the SCRA protects a service member or his or her dependents from being evicted from their dwelling. The SSCRA provided that a landlord could not evict a service member or his or her dependents from a residence without a court order when the monthly rent was $1,200 per month or less.⁴⁴ In today's economic climate, the $1,200 cap does not afford much protection. The SCRA improves eviction protection by precluding evictions from premises occupied by service members for which the monthly rent does not exceed $2,400.⁴⁵ This provision applies regardless of whether dwellings were rented before or after entering military service. Moreover, the SCRA includes an inflationary provision that automatically adjusts the $2,400 cap by authorizing annual adjustment based upon the urban rental-housing component of the consumer price index.⁴⁶ A landlord who knowingly violates this provision shall be guilty of a misdemeanor.⁴⁷

Limits Power of Landlord to Terminate Pre-Service Lease. For service members who, prior to entry into military service, entered into an installment contract for the purchase of real or personal property, the SSCRA prohibited creditors from terminating contracts and repossessing property for non-payment or breach occurring prior to or during military service without a court order.⁴⁸ The SCRA restates this provision and extends coverage to residential leases so that a landlord cannot terminate a lease of a service member protected by the SCRA without a court order.⁴⁹ A landlord who knowingly violates this provision commits a misdemeanor.⁵⁰

Lease Termination Made Easier for Service Members. While limiting the power of a landlord to terminate a lease, the new SCRA makes it simpler for a service member to terminate a lease. The SCRA expands the termination of real property leases provision by adding language similar to standard military lease termination clauses. If a service member executes a lease during military service "and thereafter receives military orders for a permanent change of station" (PCS) move or a deployment order of 90 days or more, the service member can terminate the lease by giving the landlord written notice.⁵¹ Lease termination will be effective 30 days after the first day the next rent payment is due.

Automobile Leases Covered. One of the more significant provisions in the SCRA is an added protection for service members who have motor vehicle leases. A new provision authorizes the termination of pre-service motor vehicle leases if service members are called to military service for not less than 180 days.⁵² The same section also authorizes termination of motor vehicle leases if, while in military service, service members receive "military orders for a permanent change of station outside of the continental United States or to deploy with a military unit for a period of not less than 180 days."⁵³ The service member must provide a written termination request, a copy of his orders, and must return the vehicle within 15 days of delivery of the written termination.⁵⁴ No early termination charge is allowed, but certain specified fees are permitted. Congress also added a provision requiring lessors to refund lessee rent and lease charges paid in advance "within 30 days of the effective date of the termination of the lease."⁵⁵

There is also a lessor protection provision under this section allowing a lessor to seek relief from a court so long as the application is filed in court prior to the termination date stated in the written notice. The court may modify the relief granted to the service member under this provision "as justice and equity may require."⁵⁶ Anyone who knowingly repossesses or attempts to repossess property in violation of this section is guilty of a misdemeanor.⁵⁷

Life Insurance Protection Added. Under the SSCRA, a service member with a life insurance policy could request from the Department of Veterans Affairs a deferment of premiums during military service. If the request was approved, the United States guaranteed the payments, and the insurer could not cancel the policy, decrease coverage or increase premiums. The service member then had two years after returning from military service to repay all premiums and interest.⁵⁸ The SCRA retains this provision, but increases the total amount of life insurance covered from $10,000 to $250,000.⁵⁹

Tax Changes. The SSCRA provided that a service member does not change his or her tax domicile or residency simply because the service member moved due to military orders.⁶⁰ The SCRA restates this provision. However, under the SSCRA several states used a service member's military income to increase the tax rate of the non-military income of the service member or spouse. Congress added an important new provision to the SCRA that provides: "a tax jurisdiction may not use the military compensation of a nonresident servicemember to increase the tax liability imposed on other income earned by the nonresident servicemember or spouse that is subject to tax by the jurisdiction."⁶¹ This negates the so-called "Kansas Rule" that permitted a state to tax the non-military income at a higher rate.⁶²

Power of Attorney Extension. During mobilization readiness programs, service members routinely execute powers of attorney so that their appointed representatives can handle financial matters while the service members are away. These powers of attorney generally include an expiration date anticipated to be somewhere around the soldier's return date. Section 702 of the SCRA retains the section in the SSCRA that automatically extends the effectiveness of a power of attorney of a service member while the member is listed in a missing status.

Liability Insurance Protection for Lawyers. The SCRA provides an important new protection for attorneys who are called to active duty. Under the SSCRA, it was unclear whether a lawyer called to active duty was entitled to suspend his or her malpractice insurance and then have it reinstated upon return. The SCRA includes legal services as a professional service specifically named under the provision that provides for suspension and subsequent reinstatement of existing professional liability insurance coverage for designated professionals serving on active duty.⁶³ The SCRA also allows the Secretary of Defense to determine other professional services for protection under this provision.⁶⁴

Health Insurance Protection. The SCRA contains a new provision guaranteeing that an individual's personal health insurance that was terminated because of entry into military service must be reinstated upon release from military service without any exclusions or waiting periods.⁶⁵ The service member must apply for reinstatement no later than 120 days after termination of or release from active military service.⁶⁶

Guarantee of Residency for Voting Purposes. The SCRA incorporates a voting rights provision that guarantees a service member's right to cast an absentee ballot in federal, state, or local elections, if absent from the service member's normal residence or domicile due to military orders.⁶⁷ This mirrors a similar provision in the federal election laws, but it makes sense to reiterate the guarantee in the SCRA.

Trade or Business Owner Protection. Under the SSCRA, there was considerable confusion as to whether the SSCRA's protections extended to a service member's trade or business. A new provision in the SCRA says that if a service member is personally liable for a trade or business obligation or liability, non-business assets are not available for satisfaction of that obligation or liability during his or her military service.⁶⁸ In effect, this keeps the service member's military pay and other non-business assets sheltered from the service member's business creditors for the duration of active military service. An obligor who feels unfairly burdened may apply to a court for relief, and the court may modify the relief afforded to a service member under this section "as justice and equity require."⁶⁹

IV. Conclusion

The SCRA represents an important modernization to the rights and protections of service members. Equally, the SCRA benefits those who transact business with service members, such as landlords and creditors, by clarifying ambiguous language, providing clear parameters, and even providing equitable relief in some circumstances. The increasing reliance on Reserve and National Guard personnel to augment the active components in the war on terrorism only means that the protections and rights afforded to service members by the SCRA will continue to be significant. After all, as Professor Wigmore stated in his testimony before Congress in support of the 1918 act, "'You drop everything you have; drop all your relations and all your business affairs, and all the property you have, and we will take you, and maybe your life.' We say to him, 'Leave your family; leave your affairs, and sacrifice a great deal actually and sacrifice everything potentially.'"⁷⁰ Those service members who have answered the call, especially those who have been placed in harm's way, have earned these protections, and more.

APPENDIX (PDF - 1 page)

Footnotes

¹ Terry M. Jarrett is a first lieutenant in the Army Reserve Judge Advocate General's Corps. In his civilian life, he is the general counsel to Secretary of State Matt Blunt. Mr. Jarrett received his J.D., 1996, from the University of Missouri-Columbia School of Law.

² Rod Powers, Soldiers and Sailors Civil Relief Act Simplified at http://usmilitary.about.com/cs/sscra/a/sscra.htm (last visited June 14, 2004).

³ Soldiers' and Sailors' Civil Relief Act of 1940, ch. 888, 54 Stat. 1178 (1940).

⁴ Servicemembers Civil Relief Act, Pub. L. No. 108-189, 117 Stat. 2835, codified as amended at 50 U.S.C. § 501 (2003), available at http://usmilitary.about.com/library/milinfo/scra/blscramenu.htm.

⁵ Rod Powers, New Law Rewrites Soldiers & Sailors Relief Act (SSCRA) (last modified Jan. 22, 2004), at http://usmilitary.about.com/cs/sscra/a/scra1.htm (last visited June 14, 2004).

⁶ The appendix provides a cross reference between many of the important sections of the SSCRA and the SCRA.

⁷ H.R. Rep. No. 108-81, 108th Cong. 1st Sess. (2003), 2003 U.S.C.C.A.N. 2367, 2377.

⁸ Act of June 11, 1864, ch. 118, 13 Stat. 123 (1864); Mary Kathleen Day, Comment, Material Effect: Shifting the Burden of Proof for Greater Procedural Relief Under the Soldiers' and Sailors' Civil Relief Act, 27 Tul. L.J. 45, 46 (1991).

⁹ Soldiers' and Sailors' Civil Relief Act of 1940: A Brief History at http://defenselink.mil/specials/Relief_Act_Revision/history.html (last visited June 15, 2004).

¹⁰ Id.

¹¹ Id.

¹² Id.

¹³ William Morris Robinson, Justice in Grey: A History of the Judicial System of the Confederate States of America (Harvard Univ. Press 1941) pp. 83-88.

¹⁴ Soldiers' and Sailors' Civil Relief Act of 1918, ch. 20, 40 Stat. 440 (1918).

¹⁵ H.R. Rep. No. 81, 108th Cong. 1st Sess. (2003), 2003 U.S.C.C.A.N. 2367, 2377.

¹⁶ Soldiers' and Sailors' Civil Relief Act of 1940: A Brief History at http://defenselink.mil/specials/Relief_Act_Revision/history.html (last visited June 15, 2004).

¹⁷ H.R. Rep. No. 81, 108th Cong. 1st Sess. (2003), 2003 U.S.C.C.A.N. 2367, 2377.

¹⁸ Id. at 2378.

¹⁹ Veteran Benefit Act of 2002, Pub. L. 107-330, 116 Stat. 2820 (2002).

²⁰ As of March 17, 2004, there were 178,152 Reservists and National Guard members on active duty. United States Department of Defense News Release No. 184-04, National Guard and Reserve Mobilized as of March 17, 2004, at http://www.defenselink.mil/releases/2004/nr20040317-0465.html (last visited on June 15, 2004).

²¹ Servicemembers Civil Relief Act § 2, Pub. L. No. 108-189, codified as amended at 50 U.S.C. § 502 (2003).

²² See id. § 101(2).

²³ See id. § 101(4).

²⁴ See id. §§ 101(5) & 102.

²⁵ See id. § 105.

²⁶ See id. § 107.

²⁷ See id. § 109.

²⁸ See id. § 201(b)(1).

²⁹ See id. § 201(b)(2).

³⁰ See id. § 201(b)(3).

³¹ See id. § 201(g).

³² 50 U.S.C. app. § 521(b)(4)(d) (2000).

³³ See id.

³⁴ Servicemembers Civil Relief Act § 202(b).

³⁵ See id. § 202(c).

³⁶ See id. § 202(d)(1).

³⁷ See id. § 202(d)(2).

³⁸ See id. § 202(a)(1).

³⁹ 50 U.S.C. app. § 527(a)(2) (2000).

⁴⁰ Servicemembers Civil Relief Act § 207(a)(1) and (2).

⁴¹ See id. § 207(a)(3).

⁴² See id. § 207(b)(1).

⁴³ See id. § 301(c)(2).

⁴⁴ 50 U.S.C. app. § 530(a) (2000).

⁴⁴ Servicemembers Civil Relief Act § 301(a)(1)(A)(ii).

⁴⁶ See id. § 301(a)(2).

⁴⁷ See id. § 301(c)(1).

⁴⁸ 50 U.S.C. app. § 531(1) (2000).

⁴⁹ Servicemembers Civil Relief Act § 302(a).

⁵⁰ See id. § 302(b)(1).

⁵¹ See id. § 305(b).

⁵² See id. § 305(b)(2)(A).

⁵³ Id.

⁵⁴ See id. § 305(c).

⁵⁵ See id. § 305(f).

⁵⁶ See id. § 305(g).

⁵⁷ See id. § 305(h)(1).

⁵⁸ 50 U.S.C. app. §541 (2000).

⁵⁹ Servicemembers Civil Relief Act § 402(c).

⁶⁰ 50 U.S.C. app. § 574(1) (2000).

⁶¹ Servicemembers Civil Relief Act § 511(d).

⁶² United States v. State of Kan., 580 F. Supp. 512 (D. Kan. 1984), aff'd, 810 F.2d 935 (10th Cir. 1987). Missouri was one of several states that followed the Kansas Rule under the SSCRA.

⁶³ Servicemembers Civil Relief Act § 703(a)(2)(A).

⁶⁴ Id.

⁶⁵ See id. § 704(a) and (b).

⁶⁶ See id. § 704(d).

⁶⁷ See id. § 705.

⁶⁸ See id. § 706(a).

⁶⁹ See id. § 706(b).

⁷⁰ Amy J. McDonough, Gregory M. Huckabee & Christopher C. Gentile, Crisis of the Soldiers' and Sailors' Civil Relief Act: A Call for the Ghost of Major (Professor) John Wigmore, 43 Mercer L. Rev. 667, 690 (1992), citing Soldiers' and Sailors' Civil Relief Bill: Hearings and Memoranda Before the Subcomm. of the Comm. on the Judiciary, 65th Cong., 1st and 2d Sess. 9 (1917).