Cherry v. Cherry

• Decision Date: 13 May 2020
• Docket Number: No. CV-19-363,CV-19-363
• Citation: 603 S.W.3d 585,2020 Ark. App. 294
• Parties: William B. CHERRY, Appellant/Cross-Appellee v. Rhonda Marlene CHERRY (Now Fulkroad), Appellee/Cross-Appellant
• Court: Arkansas Court of Appeals

2020 Ark. App. 294

603 S.W.3d 585

William B. CHERRY, Appellant/Cross-Appellee

v.Rhonda Marlene CHERRY (Now Fulkroad), Appellee/Cross-Appellant

No. CV-19-363

Court of Appeals of Arkansas, DIVISION II, III & IV.

Opinion Delivered: May 13, 2020

Rehearing Denied July 15, 2020

Bell & Boyd, PLLC, Magnolia, by: Karen Talbot Gean, for appellant.

Crane, Phillips & Rainwater, PLLC, by: Steve R. Crain, for appellee.

RITA W. GRUBER, Chief Judge

The parties in this case, William Cherry and Rhonda Cherry (now Fulkroad), were divorced by a decree entered on February 3, 2016,¹ after twenty-five years of marriage. William appeals from the divorce decree and a postdecree order, arguing that the circuit court erred in (1) calculating income for purposes of alimony; (2) awarding alimony as a substitute for division of nonmarital property; (3) holding him in contempt, calculating an arrearage, and imposing a fine for nonpayment of alimony; and (4) finding no change of circumstances to support a reduction or elimination of the alimony award. Rhonda cross-appeals, arguing that the circuit court erred in (1) finding that two annuities resulting from William's personal-injury settlement were not marital property, and (2) refusing to order William to obtain a life-insurance policy or maintain her as beneficiary on the annuities to secure payment of alimony after his death. We affirm.

I. Facts

William and Rhonda married in 1990 and have two children. William was a truck driver, and Rhonda stayed at home to care for their children. In addition, Rhonda took care of William's mom who suffered from Alzheimer's and lived with them for twelve years prior to her death. On March 20, 2006, William was driving his truck on the job when another truck broadsided him. The accident resulted in severe traumatic injuries, which left him permanently disabled and unable to work.

William filed a personal injury suit and reached a settlement in 2009, which is the main focus of the present appeal. The approximately four-million-dollar settlement consisted of three annuities. The first annuity is a Medicare set-aside annuity that pays William $11,602 annually to cover his medical expenses or reimburse Medicare. The annual lump-sum payments are guaranteed for thirty-two years with the last payment to be made in April 2041.

The other two annuities are almost identical. One pays William $2,903 monthly for life, guaranteed for thirty years, as well as lump-sum payments every five years—$25,000 in May 2013, $50,000 in May 2018, $50,000 in May 2023, $50,000 in May 2028, and $100,000 in May 2033. The other annuity pays William $2950 monthly for life, guaranteed for thirty years, with an identical lump-sum payment schedule. In addition to the annuity payments, William receives $826 in Social Security disability benefits each month.

Rhonda filed for divorce on December 23, 2014, requesting temporary and permanent alimony. William filed a counterclaim for divorce. At the temporary hearing, the court ordered temporary alimony of $1600 a month. Prior to the final hearing, the parties reached an agreement as to the majority of their marital property but asked the circuit court to determine the status of William's annuities and Rhonda's request for permanent alimony.

Following the hearing, the circuit court entered an order on February 3, 2016, granting Rhonda a divorce, finding that the annuities were not marital property, and ordering William to pay Rhonda permanent alimony of $2750 a month. William appealed from this order, and Rhonda cross-appealed. See footnote 1.

After dismissal, Rhonda filed a motion for contempt on June 22, 2018, stating in part that William had failed to pay the full amount of the court-ordered alimony and asking the court to order William to obtain a life-insurance policy to secure payment of the alimony award or to maintain her as a beneficiary on the annuities. William denied that he was in contempt claiming that he had been paying monthly alimony of $1800 based on the parties’ "agreement" and asked the court to reconsider the award of permanent alimony, or alternatively, to modify it based on a material change in circumstances.

In a December 31, 2018 order, the circuit court (1) dismissed William's counterclaim for divorce; (2) found William in contempt for failing to pay the court-ordered alimony, ordered him to pay $44,850 in arrears to be paid within thirty days, and if not paid within thirty days, ordered that he be fined $50 a day until the judgement is satisfied; (3) denied Rhonda's request that William be ordered to obtain life insurance or maintain her as the beneficiary on the annuities; (4) declined to amend the order of alimony on reconsideration; (5) and denied William's request for modification of alimony based on changed circumstances. William filed a timely notice of appeal, and Rhonda filed a timely notice of cross-appeal.

We first turn to Rhonda's cross-appeal because her first point may be dispositive of William's arguments pertaining to the award of alimony and her second point can be addressed independent of William's direct appeal.

II. Rhonda's Cross-Appeal

A. The Circuit Court Erred When It Ruled that the Income Annuities from the Personal-Injury Settlement Were Not Marital Property under Arkansas Code Annotated Section 9-12-315(b)(6)

Rhonda argues that the circuit court erred when it ruled that the income annuities from the personal injury settlement were not marital property under Arkansas Code Annotated section 9-12-315(b)(6) (Repl. 2015).

Divorce cases are reviewed de novo. Kelly v. Kelly , 2011 Ark. 259, at 5–6, 381 S.W.3d 817, 822–23. A circuit court's determination of whether certain property is marital property is a fact question that will not be reversed unless it is clearly erroneous. Hargrove v. Hargrove , 2015 Ark. App. 45, at 1–2, 453 S.W.3d 683, 684. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a distinct and firm conviction that a mistake has been committed. Id.

Arkansas Code Annotated section 9-12-315(b)(6), provides:

(b) For the purpose of this section, "marital property" means all property acquired by either spouse subsequent to the marriage except:

....

(6) Benefits received or to be received from a workers’ compensation claim, personal injury claim, or Social Security claim when those benefits are for any degree of permanent disability or future medical expenses[.]

Here, it is undisputed that William's injury occurred during the marriage; he is permanently disabled as a result of the accident and no longer able to work; and his personal injury suit was settled in the form of three annuities in 2009. The only dispute is whether the annuities fall within the exception of section 9-12-315(b)(6) —benefits received or to be received from a personal injury claim when those benefits are for any degree of permanent disability or future medical expenses.

Rhonda argues, as she did below, that the two almost identical annuities do not fall within the exception.² The circuit court found that because William is totally and permanently disabled, the annuity payments and the monthly Social Security payments received by William cannot be designated as marital property because of the exclusion under Arkansas Code Annotated section 9-12-315(b)(6).

Relying on Clayton v. Clayton , 297 Ark. 342, 760 S.W.2d 875 (1988), Rhonda contends that subsection (b)(6) excepts only the portion of the personal injury claim for permanent disability or medical expense. In contrast to the present case, the personal injury claim in Clayton had not been liquidated at the time of the divorce, and the supreme court remanded for further proceedings to determine whether the benefits, if any, from the claim must be considered marital property. The supreme court explained that

[Act 676 of 1987] excepted from marital property only those benefits from an unliquidated personal injury claim that would be for any degree of permanent disability or future medical expenses. With these specific benefits excepted, the remaining benefits or elements of damage from one's personal injury claim are subject to division as marital property pursuant to Ark. Code Ann. § 9-12-315(a)(1)(A).

Clayton , 297 Ark. at 344, 760 S.W.2d at 877.³

After Clayton , the supreme court stated in Mason v. Mason , 319 Ark. 722, 731, 895 S.W.2d 513, 517 (1995), that "the mere labeling of a claim as ‘personal injury’ does not satisfy the requirement for exemption from marital property. It is necessary that the claim be for a degree of permanent disability or future medical expenses." The Mason court implemented a two-prong test to determine whether a claim labeled as a "personal injury" satisfies the requirement for an exemption from marital property: (1) the claim must be for a degree of permanent disability or future medical expenses, and (2) the injury must be sustained on the job or in the consequence of a tortious act. See Skelton v. Skelton , 339 Ark. 227, 237, 5 S.W.3d 2, 7 (1999) ; Collins v. Collins , 347 Ark. 240, 61 S.W.3d 818 (2001).

In both Collins and Skelton , the appellants challenged the circuit court's findings that the settlements were excepted from the definition of marital property. The supreme court affirmed in both cases. In Collins , the court held that overwhelming evidence supported the circuit court's conclusion that the award was for a degree of permanent disability and not subject to division. Collins , 347 Ark. at 251, 61 S.W.3d at 826. The Skelton court stated that the parties did not dispute that Mr. Skelton was injured on the job or the 1991 determination that Mr. Skelton suffered from an anxiety disorder. Skelton , 339 Ark. at 237, 5 S.W.3d at 7. The court noted that eight years after the 1991 determination, Mr. Skelton continued to be compensated for that disability; therefore, the continued compensation reflects he still suffered from a degree of permanent disability. Id.

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