Fabich v. Fabich

• Decision Date: 30 December 1999
• Docket Number: No. 98–383.,98–383.
• Citation: 744 A.2d 615,144 N.H. 577
• Court: New Hampshire Supreme Court
• Parties: Kimberly M. FABICH v. Robert A. FABICH, Sr.

144 N.H. 577

744 A.2d 615

Kimberly M. FABICH

v.Robert A. FABICH, Sr.

No. 98–383.

Supreme Court of New Hampshire.

Dec. 30, 1999.

Law Office of Joshua L. Gordon, of Concord (Joshua L. Gordon on the brief and orally), for the plaintiff.

Braiterman Law Offices, of Concord (John D. Cameron on the brief and orally), for the defendant.

JOHNSON, J.

The defendant, Robert A. Fabich, Sr., appeals the order of the Superior Court (Abramson , J.) distributing the parties' marital property, see RSA 458:16–a (1992), in a divorce proceeding filed by the plaintiff, Kimberly M. Fabich. We reverse and remand.

The parties were married on October 25, 1980. That same year, the defendant became employed by the Hampton Police Department and, during the course of the marriage, was employed as a firefighter in Hampton, North Hampton, and Bedford. The plaintiff filed a libel for divorce in July 1995, citing irreconcilable differences which have caused the breakdown of the marriage. See RSA 458:7–a (1992) (amended 1998). During the divorce proceedings, the plaintiff sought one-half of the defendant's interest in the New Hampshire Retirement System (retirement system), see RSA ch. 100–A (1990 & Supp.1999), as part of the parties' property settlement.

The defendant began his participation in the retirement system in 1980, and remained in the system during the entire course of the marriage. Cf . Holliday v. Holliday , 139 N.H. 213, 217, 651 A.2d 12, 15 (1994) (for purposes of property distribution, relevant period of employment in pension system is from the date of marriage to the date divorce proceedings began). After the plaintiff filed her libel for divorce, however, the defendant was injured at work and deemed to be permanently disabled. The defendant applied for and received accidental disability retirement benefits from the retirement system effective January 1997. See RSA 100–A:6, II (1990 & Supp.1997) (amended 1997, 1999). During the divorce proceedings, the defendant contended that the plaintiff was not entitled to collect one-half of the defendant's monthly accidental disability retirement benefit. He asserted that those payments were not "pension" benefits that would be divisible marital property, see RSA 458:16–a, I, but rather was compensation for the lost income that he would have earned had he not been disabled. Thus, he argued that his disability payments could be considered in the calculation of only alimony and support obligations. See RSA 458:17, :19 (1992 & Supp.1999). The superior court disagreed, concluding that his entire monthly benefit was attributable to the marital estate and subject to equitable distribution. Accordingly, the court ordered the defendant to pay one-half of his monthly accidental disability benefits to the plaintiff as part of the parties' property settlement. This appeal followed.

On appeal, the defendant contends that the superior court erred in concluding that his accidental disability benefits constitute marital property and that the court's distribution of the parties' assets was inequitable. "[T]rial courts are afforded broad discretion in divorce matters," Magrauth v. Magrauth , 136 N.H. 757, 760, 622 A.2d 837, 838 (1993) (quotation omitted), and we will not overturn the trial court's rulings regarding property settlement absent an abuse of discretion, see Rothbart v. Rothbart, 141 N.H. 71, 74, 677 A.2d 151, 153 (1996), or error of law. See Hillebrand v. Hillebrand , 130 N.H. 520, 522–23, 546 A.2d 1047, 1048 (1988). Because we agree with the defendant that the superior court erred in attributing his entire accidental disability benefit to the marital estate, we reverse and remand.

The question of whether disability retirement benefits constitute a pension divisible as marital property, or compensation that is not part of the marital estate, is one of first impression in this State. Jurisdictions that have considered the issue are divided. See Thompson v. Thompson , 642 A.2d 1160, 1163 (R.I.1994) (collecting cases). Some jurisdictions conclude that disability retirement benefits are earned over the course of the marriage, and thus the payments represent foregone wages that are properly part of the marital estate. See, e.g. , Lookingbill v. Lookingbill , 301 Md. 283, 483 A.2d 1, 4 (1984). Others deem such benefits to be compensation for lost earning capacity and for pain and suffering, and thus constitute the separate property of the disabled spouse. See, e.g. , Christmas v. Christmas , 787 P.2d 1267, 1268 (Okla.1990). A significant number of jurisdictions, after reviewing the respective merits of these two methods, see, e.g ., In re Marriage of Saslow , 40 Cal.3d 848, 221 Cal.Rptr. 546, 710 P.2d 346, 351–52 (1985), employ a functional approach. Depending on the circumstances surrounding the award of the pension, these courts may apportion part of the benefits received as retirement pay to the marital estate and deem the rest to be compensation that is separate property. See, e.g ., Johnson v. Johnson , 117 N.C.App. 410, 450 S.E.2d 923, 926–27 (1994). Courts employing this functional approach have not hesitated, however, to conclude that an employee spouse's entire disability pension is truly compensatory and thus is separate property available for the calculation of only support and alimony obligations. See, e.g., In re Marriage of Anglin , 52 Wash.App. 317, 759 P.2d 1224, 1229 (1988).

We conclude that the functional approach is the most reasonable and best comports with our view that there be an equitable division of the parties' property during dissolution proceedings. Cf . RSA 458:16–a, II; Hanson v. Hanson , 121 N.H. 719, 720, 433 A.2d 1310, 1311 (1981) (marital property to be divided in a "just" manner, according to the "equities of the circumstances").

First, the functional approach will result in the fairest distribution of disability benefits. If the employee spouse can demonstrate that the benefits received are "true disability benefits" intended only to compensate for lost earning capacity and personal pain and suffering, a court may not deem such payments to be marital property subject to equitable dissolution simply because the statute employs the term "pension" for a payment that is personal to the employee spouse. See Ciliberti v. Ciliberti , 374 Pa.Super. 228, 542 A.2d 580, 582 (1988). Moreover, the functional approach guards against a potential abuse of the retirement system, whereby an employee spouse chooses to receive disability benefits in lieu of a matured right to retirement benefits, and deprives the non-employee spouse of his or her "interest in an asset earned and accumulated during the marriage by invoking a condition wholly within [the employee spouse's] control." Allard v. Allard , 708 A.2d 554, 558 (R.I.1998) ; see Avallone v. Avallone , 275 N.J.Super. 575, 646 A.2d 1121, 1125 (1994) ; Saslow, 710 P.2d at 350; cf . RSA 100–A:6, I(b), II(b). An inflexible rule that disability pension benefits are always income and never contain a retirement component "would have the effect of permanently depriving [the non-employee spouse] of any share of [the employee spouse's] pension. That would run counter to our recognition that marriage is, among other things, an economic partnership and that pension benefits can be one of the largest assets of that partnership." Avallone, 646 A.2d at 1125.

Furthermore, the functional approach is consistent with our statutes and case law, which emphasize the importance of giving trial courts the flexibility to make equitable decisions on matters of dissolution. See RSA 458:16–a, II; Rothbart , 141 N.H. at 76–77, 677 A.2d at 154 (court, in the exercise of its equitable powers, need not strictly apply common law formula to value pensions); Rahn v. Rahn , 123 N.H. 222, 225, 459 A.2d 268, 269 (1983) ("marital property is to be divided not by some magic formula," but in a just manner) (decided under prior law). Our dissolution statutes do not require the court to divide property equally. See RSA 458:16–a. Rather, the court "must apportion the estate according to the equities of the circumstances." Hanson , 121 N.H. at 720, 433 A.2d at 1311; see Rothbart , 141 N.H. at 76, 677 A.2d at 154. Thus, our statutes and case law evince "a wise legislative recognition of the fact that the establishment of hard and fast rules in this area would only lead to inequities and untenable results as the myriad of possible situations came before the courts." In re Marriage of Kittleson , 21 Wash.App. 344, 585 P.2d 167, 172 (1978).

Finally, the functional approach best reflects the reality that

disability benefits may serve multiple purposes. They may compensate for the loss of earnings resulting from compelled premature retirement and from a diminished ability to compete in the employment market. Disability benefits may also serve to compensate the disabled person for personal suffering caused by the disability. Finally, disability benefits may serve to replace a retirement pension by providing support for the disabled worker and his family after he leaves the job.

Ciliberti , 542 A.2d at 582; see Kittleson , 585 P.2d at 171–72. Thus, "[t]o the extent that the disability pension compensates the recipient for lost earning capacity and suffering caused by the disability, it is the sole and separate property of the employee spouse and is not subject to equitable distribution." Allard , 708 A.2d at 557. It is available, however, to determine support and alimony obligations of the disabled spouse. See Thompson , 642 A.2d at 1164; cf. RSA 458:17, :19. Where the payments more closely resemble a retirement benefit, however, "the amount received by the disabled employee in lieu of retirement benefits remains marital property subject to distribution ... [and] as the employee spouse approaches retirement, this component may become the predominant function served by the disability pension." Allard , 708 A.2d at 557 (citation omitted).

In its order, the superior court implicitly...