In re Marriage of Schriner

• Decision Date: 29 April 2005
• Docket Number: No. 03-1131.,03-1131.
• Citation: 695 N.W.2d 493
• Parties: In re the MARRIAGE OF Deann Patricia SCHRINER and John Kenneth Schriner Upon the Petition of Deann Patricia Schriner, Appellee, And Concerning John Kenneth Schriner, Appellant.
• Court: Iowa Supreme Court

695 N.W.2d 493

In re the MARRIAGE OF Deann Patricia SCHRINER and John Kenneth Schriner

Upon the Petition of Deann Patricia Schriner, Appellee,

And Concerning John Kenneth Schriner, Appellant.

No. 03-1131.

Supreme Court of Iowa.

April 29, 2005.

James W. Affeldt and Robert M. Hogg of Elderkin & Pirnie, P.L.C., Cedar Rapids, for appellant.

Matthew J. Brandes and Elizabeth V. Croco of Simmons, Perrine, Albright & Elwood, P.L.C., Cedar Rapids, for appellee.

CADY, Justice.

In this appeal, we must primarily decide whether or not workers' compensation benefits awarded to one spouse during the marriage become divisible property at the time of the divorce. The district court considered the past and future compensation payments as a divisible asset, and our court of appeals affirmed the district court. On further review, we conclude workers' compensation benefits received and retained during the marriage are a divisible asset, but future proceeds are the separate property of the injured spouse. We vacate the decision of the court of appeals and affirm the district court decree as modified by this opinion.

I. Background Facts and Proceedings

DeAnn and John Schriner were married for thirty-three years — from 1970 until 2003. They had three children during the marriage. DeAnn stayed home with the children for twelve years while John worked in maintenance and as an electrician. At the time of the divorce, he was employed full-time as an electrician for Quaker Oats. He earned $25.38 per hour. His annual income was $70,181. John generally worked overtime throughout his career. In 1984, DeAnn began working at the office of the Linn County clerk of court, where she continued to work at the time of the divorce. She earned $15.86 per hour, and her annual income was $28,353.

In May 2001, John suffered a work-related injury to his neck. He filed a workers' compensation claim and was awarded 125 weeks of benefits at $731.26 per week. At the time of the divorce, John had received eighty-one payments totaling $59,151. He expected to receive forty-four future payments totaling $32,256. John suffered another work-related injury to his lower back in January 2003. He claimed this injury made him unable to work overtime.

DeAnn and John separated in January 2002, and DeAnn petitioned for dissolution of the marriage the following month. Because DeAnn claimed the workers' compensation benefits received by John were marital property, John retained the funds in a separate account pending the dissolution of marriage.

The case was tried to the district court, which resulted in a decree for dissolution of marriage on May 29, 2003. The court awarded DeAnn $1400 per month in spousal support until age sixty-six and $700 per month after that time until her death, John's death, or her remarriage. In awarding spousal support, the trial court included John's overtime earnings in considering his ability to contribute to DeAnn's support. The district court equally divided the property of the parties. This resulted in a property award to each party valued at $264,488. In making the property division, the district court included the workers' compensation award from John's injury in 2001 as divisible property. Of the $59,151 paid out to John and held in a separate account, the district court awarded DeAnn $22,110 and awarded John $37,041. The district court then awarded the forty-four weeks of remaining benefits, valued at $32,131, to John. DeAnn made no claim to the workers' compensation benefits payable on account of John's most recent injury, and the court did not include those benefits in the property distribution scheme.

John appealed, and we transferred the case to the court of appeals. The court of appeals affirmed the district court decree. On further review, John claims the workers' compensation award was income and should have been excluded as an item of marital property subject to division by the district court. He also claims his overtime income cannot be considered in determining spousal support because his work injury prevented him from working overtime. He further claims he should not be required to work overtime to support DeAnn when she does not support herself by working overtime.

II. Standard of Review

Our review in dissolution cases is de novo. In re Marriage of Benson, 545 N.W.2d 252, 253 (Iowa 1996); Iowa R.App. P. 6.4. "`Although our review of the trial court's award is de novo, we accord the trial court considerable latitude in making this determination and will disturb the ruling only when there has been a failure to do equity.'" In re Marriage of Romanelli, 570 N.W.2d 761, 763 (Iowa 1997) (citing In re Marriage of Spiegel, 553 N.W.2d 309, 319 (Iowa 1996)).

III. Workers' Compensation Benefits as Divisible Property

Like most other states, Iowa is known as an "equitable distribution" jurisdiction for purposes of dividing property in a dissolution of marriage. In re Marriage of McNerney, 417 N.W.2d 205, 207 (Iowa 1987) (citing Iowa Code § 598.21(1) (1985)). See generally Joseph A. McKnight, Defining Property Subject to Division at Divorce, 23 Fam. L.Q. 193 (1989). "Equitable distribution" essentially means that courts divide the property of the parties at the time of divorce, except any property excluded from the divisible estate as separate property, in an equitable manner in light of the particular circumstances of the parties. McNerney, 417 N.W.2d at 207.

In Iowa, two types of property, inherited property and gifts received by one party, are specifically excluded by statute from the divisible estate. Iowa Code § 598.21(1) (2003). This property is normally awarded to the individual spouse who owns the property, independent from the equitable distribution process. Yet, this exclusion is not absolute. Iowa has a unique hybrid system that permits the court to divide inherited and gifted property if equity demands in light of the circumstances of a spouse or the children. Id. § 598.21(2). Property not excluded is included in the divisible estate.

Under our statutory distribution scheme, the first task in dividing property is to determine the property subject to division. The second task is to divide this property in an equitable manner according to the factors enumerated in the statute, see id. § 598.21(1), as well as other relevant factors determined by the court in a particular case.

Our statute is written to define divisible property as "all property" of the parties, other than the two classes of excluded property. Id. The statute provides:

Upon every judgment of annulment, dissolution or separate maintenance, the court shall divide the property of the parties and transfer the title of the property accordingly.... The court shall divide all property ... equitably between the parties....

Id. This broad declaration means the property included in the divisible estate includes not only property acquired during the marriage by one or both of the parties, but property owned prior to the marriage by a party. In re Marriage of Brainard, 523 N.W.2d 611, 616 (Iowa Ct.App.1994). Property brought into the marriage by a party is merely a factor to consider by the court, together with all other factors, in exercising its role as an architect of an equitable distribution of property at the end of the marriage. Iowa Code § 598.21(1)(b). More importantly, the statute makes no effort to include or exclude property from the divisible estate by such factors as the nature of the property of the parties, the method of acquisition, or the owner. "All property," except inherited or gifted property, is included, and the circumstances and underlying nature of the included property are generally considered as factors that impact the second task of determining an equitable division, along with all other relevant factors. See id. § 598.21(1)(a)-(m). The question presented by this appeal, one of first impression in Iowa, is how an award of workers' compensation made to one spouse during the marriage fits within the "equitable distribution" framework. John argues that the workers' compensation award received in this case was predicated on an unscheduled injury resulting in a permanent partial disability and was primarily intended to compensate him for the loss of his earning capacity over his lifetime. See Trade Prof'ls, Inc. v. Shriver, 661 N.W.2d 119, 123 (Iowa 2003) ("To evaluate an unscheduled disability, courts use the industrial method, which measures an employee's loss of earning capacity.") (citing Simbro v. Delong's Sportswear, 332 N.W.2d 886, 887 (Iowa 1983)). Consequently, John claims the workers' compensation award, like inherited and gifted property, should fairly and logically be set aside to him and excluded from the property division.

The approach advocated by John has been adopted in many other jurisdictions and has become known as the "analytic approach" to distribution of workers' compensation. See generally Annotation, Divorce and Separation: Workers' Compensation as Marital Property Subject to Distribution, 30 A.L.R.5th 139, 150 (1995) [hereinafter Divorce and Separation]. States that follow this approach primarily look to the underlying nature of the loss that makes up the award. See id. (stating that analytical approach "look[s] to the nature of the underlying loss"). Under this method of distributing workers' compensation,

[a]ny portion awarded to compensate for lost wages during the marriage or for medical expenses paid with marital funds is marital property. Any portion paid to compensate an individual for lost premarital or postmarital wages or for medical expenses paid with separate funds is the injured spouse's separate property.

Id.

Other states follow what is known as the "mechanistic approach." Id. Under this approach, a workers' compensation award is property subject to division "if the award was received, or the right to receive the award accrued, during the marriage." Id. This approach is commonly used...