In re Heinrich

• Decision Date: 09 November 2012
• Docket Number: No. 2012–098.,2012–098.
• Parties: In the Matter of Kenneth HEINRICH and Dorothy Heinrich.
• Court: New Hampshire Supreme Court

164 N.H. 357

55 A.3d 1025

In the Matter of Kenneth HEINRICH and Dorothy Heinrich.

No. 2012–098.

Supreme Court of New Hampshire.

Argued: Oct. 18, 2012.

Opinion Issued: Nov. 9, 2012.

Germaine & Blaszka, P.A., of Derry (Brian G. Germaine on the brief and orally), for the petitioner.

Steven G. Shadallah, of Salem, by brief and orally, for the respondent.

DALIANIS, C.J.

The petitioner, Kenneth Heinrich, appeals the final decree entered by the 10th Circuit Court—Derry Family Division (Sadler, J.) in his divorce from the respondent, Dorothy Heinrich. He argues that the trial court erred when it determined that his lump sum workers' compensation settlement is property subject to equitable distribution. Alternatively, he contends that the trial court's division of this award is inequitable. We affirm.

The trial court found the following facts. The parties married in June 1969. Both parties worked during their marriage—the petitioner as a mechanic, and the respondent as a nurse. The parties have an adult daughter with special needs to whom the respondent primarily attends.

The petitioner filed for divorce on August 19, 2009, one day after he received a lump sum settlement of a workers' compensation claim. The amount of the award was $241,570.00. It was calculated based upon the petitioner's life expectancy and future earnings. The petitioner had the option of taking the award as a lump sum payment or as weekly payments. Before the lump sum award was issued, he had been receiving $442.04 weekly. He chose to receive the award as a lump sum payment instead of continuing to receive the weekly payments.

The trial court first determined that the lump sum award is subject to equitable distribution. See RSA 458:16–a, I (2004). The trial court then rejected the petitioner's argument that the entire award should be distributed only to him. The court determined that an equal division of this asset is equitable because of: (1) the parties' long-term marriage; (2) the respondent's need to work flexible hours so that she can attend to the needs of the parties' daughter; (3) the fact that the petitioner receives social security income, but the respondent does not; (4) the fact that the petitioner owns his home, while the respondent rents her home; and (5) the equal division of the parties' remaining assets. The trial court specifically ruled that the equal division of the lump sum workers' compensation award "helps to equalize the financial aspects of [divorce on] each party, taking into consideration their access to ongoing income and assets and after reviewing their fixed and discretionary monthly expenses." This appeal followed.

We first address whether the trial court erred when it decided that the petitioner's lump sum workers' compensation settlement is property subject to equitable distribution. We review this determination de novo. In the Matter of Chamberlin & Chamberlin, 155 N.H. 13, 16, 918 A.2d 1 (2007).

In New Hampshire, by statute, "all tangible and intangible property and assets, real or personal, belonging to either or both parties, whether title to the property is held in the name of either or both parties," is subject to equitable distribution. RSA 458:16–a, I. Property subject to equitable distribution "includes any property acquired up to the date of a decree of legal separation or divorce." Holliday v. Holliday, 139 N.H. 213, 215, 651 A.2d 12 (1994) ; see RSA 458:16–a, II (2004).

The petitioner argues that because the settlement "replaces income that he would have earned after the dissolution of his marriage, it should not be deemed a marital asset subject to division under RSA 458:16–a, I." In so arguing, he primarily relies upon In the Matter of Valence and Valence, 147 N.H. 663, 798 A.2d 35 (2002). In Valence, we decided that to determine whether unvested stock options "belonged" to the husband upon the dissolution of the parties' marriage, we had to apply a time-based formula to determine the portion of the options that were attributable to his employment during the marriage. Valence, 147 N.H. at 667–68, 798 A.2d 35. We reasoned that such a formula was necessary because the stock options at issue "may have been a reward for past services, an incentive for future services, or a combination of both." Id. at 668, 798 A.2d 35. We likened the unvested stock options at issue to certain retirement benefits to which we apply the Hodgins formula. Id. at 667, 798 A.2d 35; see Hodgins v. Hodgins, 126 N.H. 711, 715–16, 497 A.2d 1187 (1985) (superseded on other grounds by RSA 458:16–a, I (1992)).

Valence stands in contrast to In the Matter of Preston and Preston, 147 N.H. 48, 780 A.2d 1285 (2001), and In the Matter of Sukerman & Sukerman, 159 N.H. 565, 986 A.2d 467 (2009). Preston concerned the equitable distribution of an annuity issued to the husband in settlement of a personal injury claim; Sukerman concerned the equitable distribution of an accidental disability pension benefit. Preston, 147 N.H. at 48, 780 A.2d 1285; Sukerman, 159 N.H. at 567, 986 A.2d 467. In both cases, we held that the property at issue—the annuity and the pension benefit—was subject to equitable distribution. Preston, 147 N.H. at 50, 780 A.2d 1285; Sukerman, 159 N.H. at 567, 986 A.2d 467.

In Preston, we explained:

Courts in other jurisdictions have followed one of three approaches to classifying personal injury awards or settlements in this context. The first approach always classifies the award or settlement as the personal and separate property of the injured spouse. Under the second approach, the "analytical approach," whether the award is deemed the separate property of the injured spouse depends upon the purpose of the settlement. If the settlement award is intended to compensate for personal losses, such as pain and suffering, then the award is separate property. If it is intended to compensate for losses to the marital estate, such as lost wages incurred during the marriage, it is marital. The third approach, known as the "mechanistic approach," provides that, "regardless of the underlying purpose of the award or the loss it is meant to replace, if the award or settlement was acquired during the marriage, it is deemed to be marital property."

Preston,

147 N.H. at 49, 780 A.2d 1285 (citations omitted). We observed that the analytical approach is used in jurisdictions that, unlike New Hampshire, classify property as "marital" and "separate," and divide only "marital property." See

id. at 50, 780 A.2d 1285. The analytical approach "is popular among community property states." In re Marriage of McNerney, 417 N.W.2d 205, 207 (Iowa 1987).

The analytical approach, we reasoned, did not fit with New Hampshire's legislative scheme, under which all property "belonging to either or both parties" is subject to equitable distribution. Preston, 147 N.H. at 49, 780 A.2d 1285 (quotation omitted; emphases added). New Hampshire, we explained, "permit[s] the distribution of all of the property of divorcing parties without regard to title, or to when or how acquired." Id. (quotations omitted). Accordingly, we held that "the mechanistic approach best comports with New Hampshire's equitable distribution law." Id. at 50, 780 A.2d 1285.

As with personal injury settlements, courts generally apply either the analytical or the mechanistic approach to dividing workers' compensation awards. See Annotation, Divorce and Separation: Workers' Compensation Benefits as Marital Property Subject to Distribution, 30 A.L.R.5th 139, 149–50 (1995). As with personal injury awards, "dual property" jurisdictions, meaning those that classify property as either "marital" or "separate" and divide only "marital" property, tend to apply the analytical approach. See id. at 149–50. Jurisdictions such as New Hampshire, which divide "all property that either spouse owns, with no distinction between marital and separate property," Drake v. Drake, 555 Pa. 481, 725 A.2d 717, 721 (1999), tend to apply the mechanistic approach. See, e.g., Johnson v. Johnson, 638 S.W.2d 703, 704 (Ky.1982).

We continue to believe that the mechanistic approach best comports with the statutory definition of "property" subject to equitable distribution. See Preston, 147 N.H. at 49–50, 780 A.2d 1285; RSA 458:16–a, I. Under this approach, if the workers' compensation award was acquired during the marriage, meaning before the decree of divorce or legal separation, it is property subject to equitable distribution. See Preston, 147 N.H. at 49, 780 A.2d 1285; Johnson, 638 S.W.2d at 704. "While some differences exist between a personal injury award and a workers' compensation award, the overall approach" in Preston "is generally compatible with treating workers' compensation benefits as a divisible asset." In re Marriage of Schriner, 695 N.W.2d 493, 497–98 (Iowa 2005). Had the legislature wanted to exclude workers' compensation benefits from the definition of "property" for equitable division purposes, it could have done so. See id. at 498.

Here, the trial court found that the petitioner obtained his lump sum award the day before he filed for divorce. Thus even if, as the petitioner urges, the date on which he filed for divorce determines the property subject to equitable distribution, but see Holliday, 139 N.H. at 215, 651 A.2d 12, he acquired the award during the marriage, making it subject to equitable distribution.

The petitioner "seeks to avoid this outcome by claiming that workers' compensation benefits are not actually property, but income." Schriner, 695 N.W.2d at 498. "Moreover, he asserts his specific compensation award largely represented future income." Id.

We recognize that workers' compensation benefits are considered "income" for child support purposes. See RSA 458–C:2, IV (2004). This does not mean, however, "that benefits received and retained during the marriage cannot be considered property at the time of the divorce." Schriner, 695 N.W.2d at 498. "Child support is mainly predicated upon earnings, but...