Cook v. Cook

• Citation: 102 Idaho 651,637 P.2d 799
• Decision Date: 07 October 1981
• Docket Number: No. 13245,13245
• Parties: Irene M. COOK, Plaintiff-Respondent, v. William L. COOK, Defendant-Appellant.
• Court: United States State Supreme Court of Idaho

Page 799

637 P.2d 799

102 Idaho 651

Irene M. COOK, Plaintiff-Respondent, v. William L. COOK, Defendant-Appellant.

No. 13245.

Supreme Court of Idaho.

Oct. 7, 1981.

Rehearing Denied Dec. 22, 1981.

James H. Paulsen, Sandpoint, for defendant-appellant.

Steven L. Herndon, Sandpoint, for plaintiff-respondent.

BAKES, Chief Justice.

The parties, Irene and William Cook, were married in California on December 4, 1967. They lived in California until August, 1969, when they purchased a truck and travel trailer and traveled around the northwest United States and parts of Canada before settling in Sandpoint, Idaho, in April, 1970. At the time of the marriage, defendant owned separate property in the approximate value of $23,025. During the time they lived in California, the parties were each employed; however, while they were traveling, neither party had income.

After settling in Sandpoint, the parties established a retail antique, art and handicrafts store under the name of The Pine Tree. Defendant was also employed for approximately six months as a truck driver, until he was involved in an accident. As a result of that accident, defendant was determined to be totally and permanently disabled and began to receive bi-weekly workmen's compensation benefits.

On October 5, 1976, Irene Cook filed for a divorce. The divorce was granted and a division of property made. In making the division of property, the magistrate concluded reluctantly that Guy v. Guy, 98 Idaho 205, 560 P.2d 876 (1977), required that the workmen's compensation benefits be classified as community property. The division of the community property consequently included the present value of the workmen's compensation benefits based upon the defendant's life expectancy. The defendant was awarded the right to receive all future benefit payments, and the plaintiff received an offsetting award of property. In addition, the magistrate held that most of the defendant's separate property had been comingled with the community property. Although the court recognized that the existence of separate property could be established by the "accounting method" of tracing, see Evans v. Evans, 92 Idaho 911, 453 P.2d 560 (1969); Houska v. Houska, 95 Idaho 568, 512 P.2d 1317 (1973); Houska v. Houska, 97 Idaho 316, 543 P.2d 869 (1975), it held that such could not be done with reasonable certainty in this case. These conclusions were affirmed on appeal to the district court, and the defendant now further appeals to this Court.

The defendant first argues that Guy v. Guy, supra, is distinguishable from the case at bar, and that the courts below erred in applying that case to classify defendant's right to receive future workmen's compensation benefits as community property. We agree. In Guy it was held that the right to receive future payments under a group term disability insurance policy provided by an employer as partial compensation for community labors was community property subject to division upon divorce. In reaching that conclusion, this Court focused particularly upon the fact that the disability benefits in Guy were "paid as partial consideration for past employment." 98 Idaho at 207, 560 P.2d at 878. We distinguished the California cases of In re Marriage of Jones, 13 Cal.3d 457, 119 Cal.Rptr. 108, 531 P.2d 420 (1975), and In re Marriage of Loehr, 13 Cal.3d 465, 119 Cal.Rptr. 113, 531 P.2d 425 (1975), by pointing out that those decisions rested upon the conclusion that "federal military disability benefits do not primarily serve as a form of deferred compensation for a serviceman's past employment," while in Guy v. Guy, we emphasized "that in the case at bar the disability benefits do not constitute a gratuity, but rather compensation for appellant's labors." Id., 98 Idaho at 208, 560 P.2d at 879.

Workmen's compensation, however, is not "compensation for (a person's) labors." Rather it stands in place of an employee's common law right of civil action against his employer for damages on account of on-the-job personal injury. I.C. § 72-201; Gifford v. Nottingham, 68 Idaho 330, 193 P.2d 831 (1948): Close v. General Constr. Co., 61 Idaho 689, 106 P.2d 1007 (1940). Certainly, an employee's pre-workmen's compensation right to sue his employer would not be considered a fringe benefit of employment. It follows that the same is also true of an employee's right to receive workmen's compensation. Consequently, the question of whether workmen's compensation benefits constitute community property requires an analysis separate from that applicable to an insurance policy which is provided by the employer as a fringe benefit of the employment.

The classification of property as separate or community is controlled initially by I.C. § 32-903 ¹ and § 32-906. ² Applying those sections, the plaintiff argues that when a right to receive workmen's compensation becomes vested due to the occurrence of a work-related injury during marriage, the right to benefits is wholly community property because it is "property acquired after marriage," but not acquired by "gift, bequest, devise or descent, ... or with the proceeds of ... separate property." However, such an argument places too strict a construction upon the word "acquired." Where property, or the right to receive property, is acquired during marriage as compensation for some right personal to one spouse alone, that property takes its character from the right violated and is the separate property of that injured spouse. Jurek v. Jurek, 124 Ariz. 596, 606 P.2d 812, 814 (1980); Fredrickson & Watson Constr. Co., v. Boyd, 102 P.2d 627, 629 (Nev.1940). This Court has recently recognized that rule by holding the pain and suffering component of a tort recovery for a personal injury to be the separate property of the injured spouse. Rogers v. Yellowstone Park Co., 97 Idaho 14, 539 P.2d 566 (1974); see Guy v. Guy, 98 Idaho at 208, 560 P.2d at 879. By the same token, the word "acquired" should not be read over broadly to require that every award of workmen's compensation be deemed community property in total simply because the injury upon which the benefits are premised occurred during marriage.

Each person possesses a right to the personal financial security which arises from his own capacity to work and earn a living. Our legislature has chosen to secure that right to a certain extent by enacting a workmen's compensation law. See I.C. § 72-201. Our prior cases make it clear that the purpose of the workmen's compensation law is to make good the loss or impairment of earning power resulting from on the job injury. ³ Brock v. City of Boise, 95 Idaho 630, 632, 516 P.2d 189, 191 (1973); Griffin v. Potlatch Forests, Inc., 93 Idaho 174, 176, 457 P.2d 413, 415 (1969); Arnold v. Splendid Bakery, 88 Idaho 455, 463, 401 P.2d 271, 275-76 (1965); Frisk v. Garrett Freightlines, 76 Idaho 27, 32, 276 P.2d 964, 967 (1954); Kelley v. Prouty, 54 Idaho 225, 244, 30 P.2d 769, 776 (1934); Flynn v. Carson, 42 Idaho 141, 153, 243 P. 818, 821 (1926). During marriage, however, that personal right to financial security becomes subordinated to the interests of the marital community. As a consequence, income attributable to a spouse's earning capacity during marriage is community property. See Hooker v. Hooker, 95 Idaho 518, 511 P.2d 800 (1972); Hiatt v. Hiatt, 94 Idaho 367, 487 P.2d 1121 (1971).

Nevertheless, once a marriage is terminated and the community is dissolved, each person's right to work toward securing his own financial wellbeing continues on. It follows that since workmen's compensation is paid to make good the impairment or loss of an individual's future capacity to earn, the community cannot lay claim to the whole of the benefit where it compensates for a period of disability which extends beyond the time of divorce. To hold otherwise would result in the deprivation of an individual's basic source of financial security. The dispositive question in classifying workmen's compensation benefits as community or separate property, therefore, is not whether the right to receive benefits vested during marriage, but rather to what extent the award compensates for loss of earning capacity during marriage. Other community property jurisdictions have reached similar conclusions. E.g., Bugh v. Bugh, 125 Ariz. 190, 608 P.2d 329 (Ariz.App.1980); Hicks v. Hicks, 546 S.W.2d 71 (Tex.Civ.App.1977).

It is a basic concept of community property law that all property acquired during marriage is presumed to be community property. Guy v. Guy, supra; Suter v. Suter, 97 Idaho 461, 546 P.2d 1169 (1976); Simplot v. Simplot, 96 Idaho 239, 526 P.2d 844 (1974). The same is true in the case of workmen's compensation benefits, particularly since it is unforeseeable if or when a marriage will end in divorce. However, once a marriage is terminated it becomes evident that the community's interest in a workmen's compensation award is limited, and benefits beyond an amount attributable to lost earning power during the marriage constitute the separate property of the injured spouse. See Bugh v. Bugh, supra; Hicks v. Hicks, supra. Such is the situation in the case at bar. Accordingly, we find that the courts below erred in treating the defendant's right to receive future workmen's compensation benefits as community property.

Additionally, the defendant claims error in the magistrate's conclusion that the evidence was insufficient to enable the court to trace the defendant's separate property through the accounting method. See Evans v. Evans, 92 Idaho 911, 453 P.2d 560 (1969); Houska v. Houska, 95 Idaho 568, 512 P.2d 1317 (1973); Houska v. Houska 97 Idaho 316, 543 P.2d 869 (1975). In deciding this point, the magistrate concluded that "this court cannot find by a preponderance of the evidence what the combined earnings of plaintiff and defendant were during the marriage, nor can it determine what the community expenses were. To do so would be to engage in speculation." The evidence of net...