Krebs v. Krebs

• Decision Date: 13 February 1989
• Docket Number: No. 87-0110,87-0110
• Court: Wisconsin Supreme Court
• Parties: In re the Marriage of Karen A. KREBS, Petitioner-Appellant, v. Edward T. KREBS, Respondent-Petitioner.

Page 240

435 N.W.2d 240

148 Wis.2d 51

In re the Marriage of Karen A. KREBS, Petitioner-Appellant, v. Edward T. KREBS, Respondent-Petitioner.

No. 87-0110.

Supreme Court of Wisconsin.

Argued Jan. 3, 1989.

Decided Feb. 13, 1989.

John H. Short, Fort Atkinson (argued), for respondent-petitioner; Vance, Wilcox, Short & Ristow, S.C., Fort Atkinson, on briefs.

Russell W. Devitt, Whitewater (argued), for petitioner-appellant; Soffa & Devitt, Whitewater, on brief.

STEINMETZ, Justice.

The issue in this case is whether in a divorce action, when dividing the proceeds of a personal injury claim involving a structured settlement, a circuit court shall presume that the injured spouse is entitled to the entire amount recovered for the loss of bodily function, pain and suffering. Without the benefit of the holding in Marriage of Richardson v. Richardson, 139 Wis.2d 778, 407 N.W.2d 231 (1987), the Jefferson county circuit court, Judge John B. Danforth, held that the proceeds of the settlement were subject to the presumption of equal division between the parties. Sec. 767.255, Stats.

Relying on Richardson, the court of appeals, in an unpublished decision, reversed and remanded the case for application of a presumption that the injured spouse is entitled to the proceeds of the settlement. 142 Wis.2d 945, 419 N.W.2d 573. We agree with the decision of the court of appeals.

Edward and Karen Krebs married in 1981. In 1982, Karen was injured in an automobile accident involving an uninsured motorist. In December, 1983, Karen and Edward entered a structured settlement agreement with their insurance carrier calling for immediate payments of $1,000 to Edward, $24,000 to Karen, and $2,000 payable to both under a medical payments provision, and payments to Karen of $200 per month for five years starting February 1, 1984, $300 per month for five years starting February 1, 1989, and $546 per month for life beginning February 1, 1994, with payments for 30 years certain after February 1, 1994. If Karen died within 30 years of February 1, 1994, payments were to be made to Edward as her primary beneficiary with their children as secondary beneficiaries.

This divorce action was commenced in the Jefferson county circuit court on September 13, 1985. On October 14, 1986, after a trial to the court, the parties were granted a judgment of divorce. At the time of the trial, the parties stipulated that the present value of the unpaid payments of the settlement was $63,211. The remainder of the net divisible property was approximately $30,000. The parties agreed to an in-kind property division and agreed to divide the marital estate equally but for the personal injury structured settlement.

The trial court found that the insurance policy which led to the structured settlement was purchased during the marriage of the parties and the premiums were paid with marital funds. Until the parties separated, Edward and Karen deposited all settlement proceeds in their joint account and used the payments for marital purposes.

Karen offered no evidence of loss of bodily function or earning capacity. She did testify that a periodic numbness in her arms persisted to the date of the trial and that she was told that glass had to be taken out of her arm in the future. The trial court found Karen's injuries which led to the settlement were permanent but cosmetic involving scarring to her left arm and legs. The trial court also found that Karen had no loss of bodily function or loss of earning capacity.

According to the structured settlement agreed to by the parties, a portion of the settlement was represented by an annuity payable to Karen with Edward retaining a survivorship interest in the annuity. In dividing the settlement proceeds, the trial court considered the source of the payments and the fact that Karen was the injured party.

The trial court recognized the presumption of equal division of marital property. Sec. 767.255, Stats. The trial court then concluded that the proceeds of the settlement stemming from the uninsured motorist policy were divisible property and therefore subject to the presumption of equal division. However, because Karen suffered some residual effects of the accident, the trial court departed from the equal division and divided the post-divorce installments 70 percent to Karen and 30 percent to Edward.

On January 15, 1987, Karen Krebs appealed the trial court's judgment. On May 21, 1987, the last brief was filed in the court of appeals. On June 17, 1987, this court mandated the Richardson opinion. The court of appeals reversed the trial court relying on Richardson.

Edward Krebs argues there is a presumption of equal division attached to the future payments coming from the structured settlement for various reasons: (1) the structured settlement is a joint survivorship annuity; (2) the uninsurance coverage was acquired with marital funds; or (3) prior to their divorce, the payments were treated as joint marital funds, used for marital purposes, and it follows that the presumption of equal division should attach to post-divorce payments. These arguments ignore the development of Wisconsin divorce law insofar as the principles of equitable distribution are concerned.

Upon divorce, a trial court exercises its discretion in the division of the property. Sec. 767.01, Stats. In Matter of Marriage of Jasper v. Jasper, 107 Wis.2d 59, 63-64, 318 N.W.2d 792 (1982); Wilberscheid v. Wilberscheid, 77 Wis.2d 40, 44, 252 N.W.2d 76 (1977). In order to sustain a discretionary act, this court must find that: (1) the trial court examined the relevant facts; (2) applied the appropriate law; and (3) demonstrated a rational process in reaching a conclusion that a reasonable judge could reach. Loy v. Bunderson, 107 Wis.2d 400, 414-15, 320 N.W.2d 175 (1982) citing Miller v. Belanger, 275 Wis. 187, 81 N.W.2d 545 (1957); Estate v. Baumgarten, 12 Wis.2d 212, 107 N.W.2d 169 (1961). Accordingly, "discretionary determination, to be sustained, must demonstrably be made and based upon the facts appearing in the record and in reliance on the appropriate and applicable law." Hartung v. Hartung, 102 Wis.2d 58, 66, 306 N.W.2d 16 (1981).

We conclude that the circuit court erred in applying the presumption of equal division to the unpaid portion of the structured settlement. We hold that in ordering a divorce, the circuit court should begin with a presumption that the injured person is entitled to the structured settlement amounts which are not specifically allocated. Because the circuit court based the property division on an error of law, we conclude that the circuit court's division of the future payments constitutes an abuse of discretion and must be reversed. The court of appeals is affirmed.

In Richardson, 139 Wis.2d at 785, 407 N.W.2d 231, this...