Fox v. Fox

Decision Date12 April 1999
Docket NumberNo. 980198,980198
Citation1999 ND 68,592 N.W.2d 541
PartiesShirley J. FOX, Plaintiff, Appellee and Cross-Appellant, v. Abe L. FOX, Defendant, Appellant and Cross-Appellee.
CourtNorth Dakota Supreme Court

Patricia E. Garrity, of Bair, Bair & Garrity, LLP, Mandan, N.D., for plaintiff, appellee and cross-appellant.

Orell D. Schmitz, of Schmitz, Moench & Schmidt, Bismarck, N.D., for defendant, appellant and cross-appellee.

SANDSTROM, Justice.

¶1 Abe L. Fox appealed from a judgment granting him and Shirley J. Fox a divorce, claiming the trial court erred in valuing and dividing their marital property. Shirley Fox cross-appealed from the judgment, claiming the trial court erred in failing to award her cash spousal support. We conclude the trial court erroneously valued the parties' marital estate. We reverse and remand for the trial court to revalue the marital property, and to reconsider the distribution and Shirley Fox's request for cash spousal support.

I

¶2 Abe Fox and Shirley Fox were married in 1965 and have two adult children. Abe Fox was a physician who worked as a pathologist during most of the marriage. In 1994 he became disabled. Abe Fox, who was 60 at the time of trial, receives disability payments of $17,200 per month until he turns 65. Shirley Fox, who was 59 at the time of trial, completed two-and-one-half years of college during the marriage but did not earn a degree. She has not worked outside of the home since 1966. According to Shirley Fox, Abe Fox recently became aggressive and angry, and began irrationally handling financial matters. In 1997, after 32 years of marriage, she brought this divorce action.

¶3 The trial court valued the parties' marital property at almost $4 million, awarding Shirley Fox $1,823,747 in property and Abe Fox $2,032,093 in property. The court treated Abe Fox's future disability payments as marital property and valued them at $1,032,000, representing the total payments he will have received from January 1998 until he turns 65. He was awarded the disability payments as part of his property distribution. The court valued the parties' home at $295,000 and awarded it to Shirley Fox. In the event she sells the home, the court awarded him 50 percent of the equity from the sale. He was also ordered to "pay the mortgage payments, real estate taxes, special assessments, insurance on the house, utilities, and any necessary home repairs and maintenance."

¶4 The trial court did not include in the parties' marital property, or assign a value to, a self-sustaining irrevocable life insurance trust created by Abe Fox, under which Shirley Fox serves as trustee for the benefit of the family. The court refused to place a value on the trust and include it in the marital estate, reasoning there was no "competent evidence on which I can base a value for the trust in terms of a distribution of property that will be meaningful or fair to both sides." The court also denied Shirley Fox's request for a cash award of spousal support. The court reasoned, given the property distribution, the "evidence does not support requiring Abe to pay spousal support to Shirley in order for her to maintain her standard of living or to support herself."

¶5 The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. The parties' appeals are timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, § 6, and N.D.C.C. § 28-27-01.

II

¶6 Upon granting a divorce, the trial court is required by N.D.C.C. § 14-05-24 to make an equitable distribution of the marital estate. Gibbon v. Gibbon, 1997 ND 210, p 6, 569 N.W.2d 707. All of the real and personal property accumulated by the parties, regardless of the source, must be included in the marital estate. Gaulrapp v. Gaulrapp, 510 N.W.2d 620, 621 (N.D.1994). There is no set formula for dividing a marital estate, but the trial court must equitably divide the property, based upon the circumstances of the particular case. Nelson v. Nelson, 1998 ND 176, p 6, 584 N.W.2d 527.

¶7 A property distribution need not be equal to be equitable, but a substantial disparity must be explained. Fisher v. Fisher, 1997 ND 176, p 15, 568 N.W.2d 728. A homemaker's contributions deserve equivalent recognition in a property distribution upon dissolution, Young v. Young, 1998 ND 83, p 15, 578 N.W.2d 111, and a lengthy marriage generally supports an equal division of all marital assets. Glander v. Glander, 1997 ND 192, p 11, 569 N.W.2d 262. The court's valuation and division of property are findings of fact and will not be reversed on appeal unless they are clearly erroneous under N.D.R.Civ.P. 52(a). Wilhelm v. Wilhelm, 1998 ND 140, p 11, 582 N.W.2d 6. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, although there is some evidence to support it, on the entire evidence, we are left with a definite and firm conviction a mistake has been made. Keller v. Keller, 1998 ND 179, p 10, 584 N.W.2d 509.

A

¶8 Abe Fox argues the trial court erred in including his future disability payments as part of the couple's marital property. He claims when the erroneously-included $1,032,000 is subtracted from his part of the property distribution, there is a substantial disparity in the property division, which the trial court failed to explain. Shirley Fox agrees the trial court erroneously labeled the disability payments as property, but contends removing them from the property distribution nevertheless results in an equitable division that was adequately explained by the trial court.

¶9 The trial court's inclusion of Abe Fox's $1,032,000 in future disability payments as marital property subject to distribution is clearly erroneous because it was induced by an erroneous view of the law. Although pensions and retirement benefits are marital assets subject to equitable distribution by the court, see Nelson, 1998 ND 176, p 7, 584 N.W.2d 527, disability payments do not constitute marital property, because they are intended as replacement for income the disabled spouse would be earning currently and would be able to earn in the future had the spouse not become disabled. See, e.g., Moore v. Moore, 710 A.2d 633, 635 (Pa.Super.1998); Allard v. Allard, 708 A.2d 554, 557 (R.I.1998); Tinsley v. Tinsley, 326 S.C. 374, 483 S.E.2d 198, 202 (App.1997). Disability payments resemble social security payments, see Tinsley, which this Court has ruled are not marital property subject to equitable distribution. See Kluck v. Kluck, 1997 ND 41, p 32, 561 N.W.2d 263; Olson v. Olson, 445 N.W.2d 1, 11 (N.D.1989). Compare Vitko v. Vitko, 524 N.W.2d 102, 104 (N.D.1994) (holding forthcoming military disability payments are not marital property). Rather, disability payments are income which may nevertheless be considered in determining the ultimate economic circumstances of the parties in a divorce. See Knoop v. Knoop, 542 N.W.2d 114, 118 (N.D.1996); Vitko; Olson, 445 N.W.2d at 14-15 (VandeWalle, J., concurring in result).

¶10 Shirley Fox claims this error is harmless because the Ruff-Fischer guidelines combine concepts of marital property and income and are to be used both in making an equitable distribution of property and in awarding spousal support. See, e.g., Lohstreter v. Lohstreter, 1998 ND 7, p 25, 574 N.W.2d 790. According to Shirley Fox, most of the assets given to her in the property distribution are not income-producing assets, and when all other facets of the property distribution and the parties' incomes are considered together, the distribution is fair and equitable.

¶11 The trial court's error was substantial, adding more than $1 million to Abe Fox's side of the property distribution ledger; and, as we explain later, the trial court made other errors in valuing and distributing the parties' marital property. Under these circumstances, we are unconvinced the trial court would have made the same division of property even if it had not considered the future disability payments as part of the marital estate.

B

¶12 Abe Fox argues the trial court erred in failing to assign a value to an irrevocable life insurance trust he established as part of the couple's estate plan. Shirley Fox is trustee, and the trust corpus consists of life insurance policies on Abe Fox's life with death benefits totaling $814,969 and a cash value totaling $290,000 at the time of trial. Because the trust corpus consists of life insurance policies, the trust is not expected to initially generate any income. Nevertheless, Shirley Fox is given the right to receive all net income in regular installments from the trust during her lifetime. She also has the right during her lifetime to withdraw the principal in an amount not to exceed the greater of $5,000 or 5 percent of the value of the principal determined at the end of each calendar year. Although she has the right to cash in the life insurance policies and invest the $290,000 to generate income, she testified she had no plans to do so. Consequently, the trust is not currently generating any income, and unless she changes her mind, the trust will not generate any income until Abe Fox dies.

¶13 Abe Fox argued to the trial court the trust should be valued at its present cash value of $290,000. Shirley Fox argued no value should be assigned to the trust or, in the alternative, the trust should be assigned a value representing the present value of her right to withdrawal upon Abe Fox's death. Her certified public accountant testified the present value of that right was $50,000. The trial court placed no value on the trust, reasoning:

It is undisputed that the cash value of the insurance policies that are the corpus of the trust totals $290,000 and that the death benefit of the policies is $814,969. Shirley can never get either of these amounts though. Even if she were to cause the insurance policies to be cashed in, she would only be entitled to the...

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