Gibbons v. Gibbons

• Decision Date: 18 March 2009
• Docket Number: No. 2D07-5480.,2D07-5480.
• Citation: 10 So.3d 127
• Parties: Mark H. GIBBONS, Appellant/Cross-Appellee, v. Martha Lee James GIBBONS, Appellee/Cross-Appellant.
• Court: Florida District Court of Appeals

10 So.3d 127

Mark H. GIBBONS, Appellant/Cross-Appellee, v. Martha Lee James GIBBONS, Appellee/Cross-Appellant.

No. 2D07-5480.

District Court of Appeal of Florida, Second District.

March 18, 2009.

Virginia R. Vetter, Tampa, for Appellant/Cross-Appellee.

Ellen E. Ware and Jeanie E. Hanna of Ware Law Group, P.A., Tampa, for Appellee/Cross-Appellant.

WALLACE, Judge.

Mark H. Gibbons (the Husband) raises multiple challenges to the provisions of the final judgment that dissolved his marriage to Martha Lee James Gibbons (the Wife). The Wife cross-appeals. Two issues warrant discussion: (1) the trial court's award to the Wife of one-half of the benefits payable under the Husband's private disability insurance policies after the Husband reaches the age of sixty-five (the post-65 disability benefits) and (2) the trial court's decision to classify as nonmarital the Wife's indebtedness on certain shareholder loans made to her from the parties' closely held corporation before the filing of the petition for dissolution of marriage.

I. THE HUSBAND'S DISABILITY POLICIES

A. The Factual Background

The parties were married in 1976. The Husband is a member of The Florida Bar and worked as an attorney in Tampa until he became disabled. The Wife is a teacher and librarian at a middle school.

The parties separated in 2002, but the petition for dissolution of marriage was not filed until February 7, 2006. The final judgment was entered on October 16, 2007. On the date of the entry of the final judgment, the Husband was fifty-five years old and the Wife was fifty-six.

The Husband is disabled as a result of a medical condition. The onset of the Husband's medical condition occurred in 1994, but he continued to work as an attorney until 2000. The Husband has been receiving disability benefits since 1994.

Before the inception of his disabling medical condition, the Husband wisely purchased three separate disability insurance policies—one with Monarch Life Insurance Company and two with Unum.¹ At the time of the final hearing, the Husband was receiving $2100 per month from the Monarch policy and $648.60 per month from each of the Unum policies.

The payments from the Monarch policy are scheduled to terminate when the Husband reaches the age of sixty-five years. The Unum policies have a different structure. Unlike the Monarch policy, the benefits payable under the Unum policies do not automatically terminate when the Husband reaches a specific age. The Husband testified that the benefits payable under the Unum policies continue "indefinitely," subject to the condition that he remains disabled. The policies were not introduced into evidence.

B. The Trial Court's Ruling

After the final hearing, the trial court classified the Husband's three private disability policies as marital property and made the following detailed ruling concerning them:

The husband's disability policies are marital property. They were contracted during the marriage, and premiums were paid from marital funds. The wife argues the court should separate the "pain and suffering" value of the proceeds from the "retirement" value of the proceeds, citing Rumler v. Rumler, 932 So.2d 1165 (Fla. 2d DCA 2006). Rumler, however, provides scant guidance in this case, because the contractual disability policies here are different in nature than the city of Homestead retirement plan implicated in Rumler. Contractual disability policies are strictly economic, intended to cover lost earnings, with no component of compensation for pain and suffering. This fact distinguishes Freeman v. Freeman, 468 So.2d 326 (Fla. 5th DCA 1985), cited by the husband.

Some of these disability policies continue beyond normal retirement age, on the theory that the disabled person could have contributed to a retirement plan and become entitled to retirement payments had he remained working. Some policies stop benefits at retirement age, on the theory that the income replacement benefit was sufficient that the recipient could contribute to his own retirement fund. The husband in this case had two policies of the first kind, and one of the second. Following Rumler and its implications for this case, the income from the policies from now until the husband reaches 65, while arguably a marital asset, is the reason the wife cites for denial of the husband's alimony claim: that he has this income and therefore no "need" for alimony purposes. Since these payments exist to replace income lost due to [the] husband's disability, the court treats the payments as if they were income, rather than an asset. Not so with the payments arriving after the husband reaches age 62.[²] The right to receive those payments in the future is the very definition of a retirement plan, subject to equitable distribution under section 61.076(1). Once the husband reaches age 62, the wife is entitled to half of each disability policy benefit payment.

Based on this ruling, the trial court ordered that "[o]nce the Husband reaches the normal retirement age of 65, the Wife shall receive one-half of each disability policy benefit payment, either directly, if possible, or, if not, by immediate payment to her by the Husband upon his receipt of each payment."

Because the benefits payable under the Monarch policy are scheduled to terminate when the Husband reaches the age of sixty-five, the final judgment does not impact that policy. The effect of the trial court's order is to give the Wife one-half of the benefits payable under the two Unum policies once the Husband reaches the age of sixty-five.

C. The Parties' Arguments

On appeal, the Husband challenges the award of one-half of the post-65 disability benefits to the Wife. The Husband argues that his disability policies are not marital assets. He also points out that there is no competent, substantial evidence in the record that any portion of the benefits payable under his disability policies represents or is a substitute for retirement benefits.

In response, the Wife argues that the disability policies are marital assets under section 61.075(5)(a)(4), Florida Statutes (2005), because they were purchased with marital funds. According to the Wife, the trial court properly concluded that the post-65 disability benefits are retirement benefits—not payments on account of the Husband's disability—because sixty-five is the normal age of retirement.

D. Discussion

Generally speaking, an employer-sponsored disability pension does not constitute a marital asset subject to equitable distribution. See Gay v. Gay, 573 So.2d 180, 180 (Fla. 2d DCA 1991) (holding that a disabled spouse's disability plan was not a marital asset) (citing Freeman v. Freeman, 468 So.2d 326, 328 (Fla. 5th DCA 1985) (holding that a disability pension designed to compensate an employee for lost earnings and injuries (including pain and suffering) sustained on the job was not a marital asset)); Hoffner v. Hoffner, 577 So.2d 703, 704 (Fla. 4th DCA 1991) (concluding that the husband's disability pension was not a marital asset subject to equitable distribution). Similarly, where the money that a disabled spouse receives from disability benefits from a private disability policy constitutes payment for future lost wages based on the disabled spouse's inability to work, the disability policy is a nonmarital asset not subject to equitable distribution. See Kay v. Kay, 988 So.2d 1273, 1275 (Fla. 5th DCA 2008).

On the other hand, retirement benefits are subject to equitable distribution. See Smith v. Smith, 934 So.2d 636, 640 (Fla. 2d DCA 2006). As this court has recently noted:

"[A] spouse's entitlement to pension or retirement benefits must be considered a marital asset for purposes of equitably distributing marital property." Acker v. Acker, 904 So.2d 384, 386 (Fla. 2005) (quoting Diffenderfer v. Diffenderfer, 491 So.2d 265, 270 (Fla.1986)); see also § 61.075(5)(a)(4), Fla. Stat. (2003) (defining "marital assets" to include "[a]ll vested and nonvested benefits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs"); § 61.076(1) ("All vested and nonvested benefits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs are marital assets subject to equitable distribution."); Reyher v. Reyher, 495 So.2d 797, 799 (Fla. 2d DCA 1986).

Rumler v. Rumler, 932 So.2d 1165, 1166 (Fla. 2d DCA 2006) (alterations in original). Thus benefits payable to a disabled spouse will be treated differently for purposes of equitable distribution depending upon whether the benefits are characterized as disability benefits or as retirement benefits. See id. See generally Kenneth Strauss, Characterization for Purposes of Divorce: Retirement Pension Benefits vs. Disability Benefits, 11 J. Contemp. Legal Issues 234 (2000) (discussing the disparate treatment of retirement and disability benefits in divorce).

The difference in the treatment of disability benefits and retirement benefits for the purpose of equitable distribution requires careful analysis where a disability pension or private disability policy is at issue. As one court has noted:

[D]isability 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 v. Ciliberti, 374 Pa.Super. 228, 542 A.2d 580, 582 (1988). Thus, reaching a correct result relative to the equitable distribution of "disability benefits" requires looking beyond labels to the character and purpose of the benefit...