Drake v. Drake

• Decision Date: 25 February 1999
• Citation: 555 Pa. 481,725 A.2d 717
• Parties: Jane E. DRAKE, Appellee, v. James G. DRAKE, Appellant.
• Court: Pennsylvania Supreme Court

725 A.2d 717

555 Pa. 481

Jane E. DRAKE, Appellee, v. James G. DRAKE, Appellant.

Supreme Court of Pennsylvania.

Submitted June 29, 1998.

Decided February 25, 1999.

James G. Drake, pro se.

Janette Baisley, for Jane Drake.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.

OPINION

NEWMAN, Justice.

We granted review in this matter to resolve whether a commutation award in a workers' compensation claim is marital property and therefore subject to equitable distribution pursuant to Sections 3501 and 3502 of the Divorce Code.¹

FACTS

James Drake (hereinafter Husband) and Jane E. Drake (hereinafter Wife) were married on April 23, 1977. It was the first marriage for both parties. Husband and Wife have two children, Tiffany born on September 5, 1977, and James born on August 8, 1979. In December of 1977, several months after the couple married, Husband received his Bachelor of Science degree in geography, whereas, Wife had three years of college and needed credits to complete her degree. During the marriage, Wife was a homemaker until she went back to school and obtained a medical technology degree in 1983. Since then, she worked as a medical technologist, and was the main financial support for the family, because two years after she started her career, Husband suffered a work-related injury. At the time of parties separated in 1993, Wife earned $29,836 per year in employment income.

Husband was unemployed for the first year and a half of the marriage, and the parties lived on public assistance during that time. On January 9, 1978, Husband began work at Tygart Steel (employer) as a laborer. He worked there until July 29, 1985, at which time he injured the tendons and ligaments in his right wrist at work. At the time of his injury, Husband earned $371.28 per week ($19,306.56 per year or $1,608.88 per month). Husband also suffers from diabetes, which is unrelated to his work injury.

Following his wrist injury, Husband received workers' compensation benefits of $247.95 every two weeks ($6,446.70 per year, $537.23 per month or $123.38 per week). In April of 1988, Husband's employer apparently concluded that he could perform light duty work, and his status was changed to partial disability. However, he continued to receive payments until December 7, 1989 when his benefits terminated. (The record does not indicate if his benefits were reduced from April 1988 through December 1989.)

On October 3, 1990, employer and Husband entered a supplemental agreement, in which Husband agreed to a commutation² of his workers' compensation benefits for $42,000.00 (less counsel fees of $1,500). This lump sum award represented partial disability payments for a period of 447 and 1/7 weeks beginning December 7, 1989 (eight and one-half years, or until July 3, 1998). The Agreement also provided that Husband was "to place said commuted amount in an IRA account and in a high interest bearing account. Claimant also intend [sic] to obtain a Master's Degree to further his employment opportunities." As stated before, Husband had a Bachelor of Science degree. He returned to school following his work injury and obtained a teaching certificate in April 1987. However, there is no information in the record that he earned any credits towards a master's degree, either before or after the commutation agreement. Instead, since December 1987 through the time of this appeal, Husband has worked as a part time substitute teacher for the Ringgold School District. He has not obtained a full time job of any sort since his work injury. At the time of the parties' separation in 1993, Husband earned about $8,000.00. Wife alleges that Husband does not want to work in a school district other than Ringgold, a fact that Husband disputes.

After the Husband's work injury, Wife was primarily responsible for the marital expenses. For most of the marriage, the parties resided at 17 Second Street Extension, Donora, Pennsylvania, the house in which Husband was raised. The couple bought the residence from Husband's family in 1977 for $25,000.00. At the time of separation, the parties stipulated that the fair market value of house was $71,000.00, excluding any recorded encumbrance on the property. (Husband contended at the hearing that there was an outstanding debt on the property of $5,557.00.)³

The Drakes separated July 28, 1993, and on August 8, 1993, Wife filed a complaint in divorce and a petition for custody of the couple's two children. The Court of Common Pleas of Washington County (trial court) appointed a Master in Divorce on March 27, 1995. Both parties consented to the entry of a final divorce decree on August 14, 1995. The Master issued a Report on January 4, 1996, in which he recommended that the marital estate be divided equally, with Husband receiving the marital home and Wife receiving various bank deposit accounts and proceeds from insurance. The bulk of the accounts were funded with the commutation award. The Report further recommended that the Husband pay Wife $15,000.00 in cash within 120 days. If the amount was not paid in 120 days, the house was to be sold and the $15,000.00 taken from the proceeds of the sale. The Master specifically found that the proceeds of the commutation of Husband's workers' compensation benefits were marital property because they were received during the marriage and replaced wages earned during the marriage. The trial court adopted the Master's findings and said that Husband's workers' compensation settlement was reimbursement for lost wages during the marriage and therefore, was martial property.

Husband filed exceptions to the Master's Report, which the trial court denied by Order dated February 14, 1996. In a separate Order, the trial court granted the parties a final decree in divorce. A timely appeal to the Superior Court was filed by Husband on a number of grounds, including the allegation that the trial court erred because it failed to take into consideration the $5,557.00 of marital debt attributable to the marital residence, and that it improperly included the commutation award as a marital asset. The Superior Court affirmed the trial court, finding that the evidence supported the distribution of assets that Husband's workers' compensation settlement was reimbursement for lost wages during the marriage and therefore, it was marital property. We granted appeal to decide only if the commutation award was marital property.

ANALYSIS

I. Introduction

Before we reach the exact issue on appeal, it is useful to begin our review with a brief history of the distribution of assets and liabilities as part of a divorce. Through the first half of the twentieth century, most states limited the grounds for divorce and, before granting one, required a spouse to show some form of marital offense on the part of the other spouse. See, e.g., Sarah E. Fette, Comment, Learning From Our Mistakes: The Aftermath of the American Divorce Revolution as a Lesson in Law to the Republic of Ireland, 7 Ind. Int'l & Comp. L.Rev. 391, 393 (1997). These fault-based laws were often unrelated to the true causes of the breakdown of a marriage. In the middle of this century the divorce laws gradually relaxed, and in recent years, a number of legislatures, including ours, enacted no-fault divorce laws (although Pennsylvania retained a fault-based provision for divorce). 23 Pa.C.S.A. §§ 3102, 3301(a), (c), (d). Currently, such no-fault laws exist in most jurisdictions across our nation. Fette, supra; See also, 24 Am.Jur.2d Divorce and Separation § 29 (1983). The purpose of these no-fault divorce laws is to effect a "clean break" between spouses, and encourage a one-time division of marital property. Fette, supra (citing Cynthia Starnes, Divorce and the Displaced Homemaker, 60 U. Chi. L.Rev. 67, 108 (1993)).

Concurrent with the arrival of no-fault divorce, many states in the second half of this century rejected traditional principles of division of property following divorce and adopted "equitable distribution" to divide assets at divorce. The traditional methods to divide property at divorce were based on very different systems, either the title⁴ or the community property⁵ system. A majority of states, including Pennsylvania, had used some form of the title system. See generally DiFlorido v. DiFlorido, 459 Pa. 641, 331 A.2d 174 (1975); Deborah H. Bell, Equitable Distribution: Implementing the Marital Partnership Theory Through the Dual Classification System, 67 Miss. L.J. 115 (1997).

The theory of equitable distribution derives from the "marital partnership" theory of community property law. However, the courts attempt to split property equitably, instead of equally, taking into consideration such factors as length of marriage, the contributions of both spouses, ages and health of each spouse. Obviously, a benefit of equitable distribution versus the community property system is that equitable distribution statutes allow a considerable degree of judicial discretion in the distribution of property. Whereas community property regimes automatically grant each spouse a one-half interest in the marital asset at issue, the equitable distribution scheme allows the trial court to weigh the particular equities of the case to control the asset allocation.

Currently, most states have adopted some form of an equitable distribution scheme, but they use different methods for classifying assets included in the divisible estate. Some states may include all property that either spouse owns, with no distinction between marital and separate property, even if obtained before the marriage or by gift. See, e.g., Joseph A. McKnight, Defining Property Subject to Division at Divorce, 23 Fam. L.Q. 193, 196 (Summer, 1989).

However, most states including Pennsylvania, have chosen some form of "dual classification" system of equitable distribution, in which the court must distinguish between property that is marital and that which is...