Gragg v. Gragg

• Decision Date: 31 January 2000
• Docket Number: 98-00734
• Citation: 12 S.W.3d 412
• Parties: C. WINSTON GRAGG, Plaintiff/Appellee, v. NELLIE C. GRAGG, Defendant/Appellant. AppealIN THE SUPREME COURT OF TENNESSEE AT JACKSON (HEARD AT MEMPHIS) Filed:
• Court: Tennessee Supreme Court

C. WINSTON GRAGG, Plaintiff/Appellee v NELLIE C. GRAGG, Defendant/Appellant

Appeal No. W1998-00734-SC-R11-CV

IN THE SUPREME COURT OF TENNESSEE AT JACKSON

(HEARD AT MEMPHIS)

Filed: January 31, 2000

Shelby Circuit

Hon. Kay S. Robilio, Judge

Defendant/Appellant

Thomas R. Prewitt, Sr., ARMSTRONG, ALLEN, PREWITT, GENTRY, JOHNSTON & HOLMES, PLLC, Memphis, Tennessee

Plaintiff/Appellee

Hal Gerber, GERBER LAW OFFICE, Memphis, Tennessee

FOR PUBLICATION

AFFIRMED.

DROWOTA, J.

OPINION

The issue of first impression in this appeal is whether, under Tennessee law, disability benefits from a private disability insurance policy acquired with marital funds during the marriage are subject to distribution upon divorce as marital property. See Tenn. Code Ann. 36-4-121 (1996). We conclude that disability benefits replace lost income and are not marital property subject to distribution upon divorce. However, such benefits may be considered by a trial court when determining alimony and child support obligations. Accordingly, the judgment of the Court of Appeals is affirmed.¹

BACKGROUND

The facts pertinent to the legal issue in this appeal are undisputed. The appellant, Nellie C. Gragg, and the appellee, G. Winston Gragg, were married on September 4, 1971. The parties separated on December 10, 1993, and Dr. Gragg filed the present action for divorce on September 12, 1994.

Dr. Gragg is a medical doctor specializing in anesthesiology. During the course of the marriage, he obtained two policies of disability insurance. The first policy was issued on May 13, 1977 by Provident Life and Accident Insurance Company and provides for disability benefits of $2,000 per month during total disability until Dr. Gragg attains the age of sixty-five.² The second policy was issued by Continental Assurance Company on July 15, 1988 and provides for disability benefits of $5,000 per month with an automatic annual increase of five percent to account for cost of living increases. This policy provides that disability benefits will continue to be paid during Dr. Gragg's lifetime so long as he remains disabled.

Dr. Gragg became totally disabled in late October of 1994, and likely

will not ever be able to resume his practice as an anesthesiologist. At the time of trial, the parties stipulated that Dr. Gragg was receiving monthly benefits under the two disability polices in the amount of $7,750 and that this amount would increase to $8,000 per month beginning in October of 1998. The parties stipulated that the premiums paid for these two polices up to the time when Dr. Gragg became disabled had amounted to $45,000 and had been paid with marital funds earned by Dr. Gragg. Each policy includes a provision for waiver of premiums during the period of total disability, so Dr. Gragg has paid no premiums since his disability commenced in October of 1994. The parties also stipulated that all marital property should be divided equally between them.

The trial court found that "[a]s a matter of law, all benefits paid by the two insurance companies to Husband both before and after the divorce constitute marital property subject to division pursuant to T.C.A. 36-4-121 and all benefits, beginning with the payments due in March, 1998 and thereafter, should be divided equally between the parties." The decree was later amended to provide that in the event an appellate court held the disability benefits to be separate property belonging to Dr. Gragg rather than marital property subject to distribution, Ms. Gragg should be paid $2,500 per month alimony in futuro until death or remarriage.

Dr. Gragg appealed the trial court's decision with respect to the disability benefits. The Court of Appeals reversed "that part of the trial court's decree which awarded Wife a part of the disability income benefits as a marital distribution." The Court of Appeals disagreed with the trial court's classification of the benefits as marital property and held that the "benefits constitute substituted income to Husband and are available for such obligations as might be imposed by the court." Accordingly, the Court of Appeals affirmed that portion of the trial court's judgment which awarded Ms. Gragg $2,500 per month alimony in futuro until death or remarriage.

Thereafter, this Court granted Ms. Gragg's application for permission to appeal to consider whether disability benefits received by one spouse from two private insurance policies are subject to distribution upon divorce as marital property. For the reasons that follow, we now affirm the judgment of the Court of Appeals.

DISABILITY BENEFITS - CLASSIFICATION

Our analysis of the issue in this appeal necessarily begins with Tenn. Code Ann. 36-4-121 which defines marital and separate property as follows:

(b)(1)(A) "Marital property" means all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage up to the date of the final divorce hearing and owned by either or both spouses as of the date of filing of a complaint for divorce, except in a case of fraudulent conveyance in anticipation of filing, and including any property to which a right was acquired up to the date of the final divorce hearing, and valued as of a date as near as reasonably possible to the final divorce hearing date.

(B) "Marital property" includes income from, and any increase in value during the marriage of, property determined to be separate property in accordance with subdivision (b)(2) if each party substantially contributed to its preservation and appreciation and the value of vested pension, retirement or other fringe benefit rights accrued during the period of the marriage.

. . . .

(2) "Separate property" means:

(A) All real and personal property owned by a spouse before marriage;

(B) Property acquired in exchange for property acquired before the marriage;

(C) Income from and appreciation of property owned by a spouse before marriage except when characterized as marital property under subdivision (b)(1); and

(D) Property acquired by a spouse at any time by gift, bequest, devise or descent.

Tenn. Code Ann. 36-4-121(b)(1)(A), (B) & (2) (1996)(emphasis added). We are mindful that the role of this Court in construing statutes is to ascertain and give effect to legislative intent. See Cronin v. Howe, 906 S.W.2d 910, 912 (Tenn. 1995). When the language of a statute is unambiguous, legislative intent is to be ascertained from the plain and ordinary meaning of the statutory language used. See Carson Creek Vacation Resorts, Inc. v. State, Dep't of Revenue, 865 S.W.2d 1, 2 (Tenn. 1993). However, the issue in this appeal can not be resolved simply by reference to the plain language of this statute. This statute does not explicitly declare that benefits from a private disability insurance contract are marital property, nor does the statute specifically state that such benefits are separate property. Where as here, the parties legitimately have different interpretations of the same statutory language, an ambiguity exists, and we may consider the legislative history and the entire statutory scheme for interpretive guidance. See Carter v. State, 952 S.W.2d 417, 419 (Tenn. 1997); Owens v. State, 908 S.W.2d 923, 926 (Tenn. 1995); Lyons v. Rasar, 872 S.W.2d 895, 897 (Tenn. 1994).

Applying these rules, we first note that marital property is broadly defined to include "all" real, personal, tangible, and intangible property acquired during the course of the marriage by either or both spouses and includes "any property to which a right was acquired up to the date of the final divorce hearing." Tenn. Code Ann. 36-4-121(b)(1)(A); see also Cohen v. Cohen, 937 S.W.2d 823, 826 (Tenn. 1996). The current definition of marital property was adopted in 1983,³ and, according to its House sponsor, the legislation was intended "to codify existing case law, to define marital property more clearly, and to recognize homemakers' contributions." Kendrick v. Kendrick, 902 S.W.2d 918, 924 (Tenn. Ct. App. 1994). The broad statutory definition of marital property is followed by Tenn. Code Ann. 36-4-121(b)(1)(B) which states that marital property "includes. . . the value of vested pension, retirement or other fringe benefit rights accrued during the period of the marriage." Use of this broad statutory definition followed by language stating that the definition "includes" specific items indicates that the enumerated items are illustrative, not exclusive. See Kendrick, 902 S.W.2d at 924. In other words, the property interests identified in Section 36-4-121(b)(1)(B) are simply illustrative of the types of intangible property interests that may be classified as marital property. Id. Other types of intangible property interests which are similar to those enumerated in the statute should also be considered marital property.

We have previously held that both vested and unvested retirement benefits constitute marital property under the statutory definitions set out above. See Cohen, 937 S.W.2d at 828. Relying upon the broad statutory definition of marital property and this Court's decision in Cohen, Ms. Gragg argues that the disability benefits at issue are marital property because the premiums were paid with marital funds and because the disability giving rise to the right to receive the benefits commenced during the marriage. In contrast, Dr. Gragg argues that the disability benefits are not marital property. He points out that the illustrative types of intangible property enumerated in Tenn. Code Ann. 36-4-121(b)(1)(B) are either forms of, or analogous to, annuity insurance and emphasizes that the statute does not mention any type of casualty insurance. See Tenn. Code Ann. 56-2-201(2) (Supp. 1999) (stating that disability insurance is casualty insurance). Dr. Gragg stresses that, unlike annuity insurance benefits, disability insurance benefits do not represent deferred compensation for services rendered but...