Marriage of Leland, Matter of

• Decision Date: 15 March 1993
• Docket Number: No. 27617-4-I,27617-4-I
• Court: Washington Court of Appeals
• Parties: , 16 Employee Benefits Cas. 2395 In the Matter of the MARRIAGE OF Linda L. LELAND, Respondent, and Carl Robert Leland, Appellant.

Page 57

69 Wn.App. 57

847 P.2d 518, 16 Employee Benefits Cas. 2395

In the Matter of the MARRIAGE OF Linda L. LELAND, Respondent and Carl Robert Leland, Appellant.

No. 27617-4-I.

Court of Appeals of Washington Division 1.

March 15, 1993.

Review Denied July 8, 1993.

Malcolm Edwards, Edwards Sieh Wiggins & Hathaway, Seattle, for appellant.

Richard H. Blacklow, Donald A. Mallett, Mallett & Brown, Seattle, for respondent.

KENNEDY, Judge.

Robert Leland appeals the trial court's characterization of such disability payments as he may receive after he reaches the age of 65 as pension benefits to be divided equally with his former spouse Linda Leland. We affirm.

FACTS

Robert and Linda Leland were married in July 1965. They separated in April 1989. Robert became fully disabled, as the result of an hereditary eye defect, in 1985. The defect is incurable and Robert's vision continues to deteriorate. He has been unemployed since 1985. He is not likely to become re-employed. He was 48 years old at the time of the trial.

During the marriage the parties purchased three disability insurance policies, using community funds to pay the premiums. At the time of trial, Robert was receiving a monthly income of $7435, from the following sources:

                93"067061  $4000                                                     Prudential
                                                                                        policy
                                                                                    payable for
                                                                                       Robert's
                                                                                   lifetime, so
                                                                                     long as he
                                                                                        remains
                                                                                       disabled
                

                     1100  Massachusetts Mutual policy, payable until Robert is
                             65, so long as he remains disabled
                      970  Massachusetts Mutual policy, payable until Robert is
                             65, so long as he remains disabled
                      464  Social security payment for the parties' daughter
                             Kari (age 13 at the time of trial)
                      901  Social security disability income
                ---------
                    $7435  Total
                ----------
                

                Under current tax laws these monthly payments are tax free.   The privately purchased insurance contracts do not provide for any increases for cost of living.   All three policies contain premium waiver clauses while Robert remains disabled.   All payments will cease at the time of Robert's death.   Under the terms of the Prudential policy, had Robert become disabled after the age of 50, rather than before reaching that age, the payments would have ceased when he turned 65.   Because he became disabled before the age of 50, the Prudential payments will continue for his lifetime, provided only that he remains disabled from all employment for which he is reasonably fitted by education, training and experience. 1
                

Linda Leland was 47 years of age at the time of trial. She served primarily as a homemaker during most of the marriage. In 1986, after taking some courses at Bellevue Community College, she commenced a career as a real estate agent and earned $9700 that year. In 1989, which was an exceptional year for real estate sales in the Seattle area, she earned $26,000. Linda intends to remain in real estate sales. The trial court found that she is "fully qualified to make a fair income in this pursuit." At the time of trial, Linda's net monthly income was $1725.

The parties acquired certain real and personal community property having a net value of $280,000 at the time of trial. The trial court divided this property equally between the parties, noting that, if Robert had not been disabled and on a fixed income, a disproportionate award in Linda's favor would have been justified. ²

The court characterized all of Robert's privately purchased disability income to be received until he is 65 as "income replacement" in which the marital community has no interest. ³ To the extent that Robert may receive income under the Prudential policy after he turns 65, the court characterized the payments as "pension" income in which the marital community retains an interest. Linda was awarded 50 percent of all such "pension" payments, the payments to be divided on a monthly basis as Robert receives them.

Robert appeals, arguing that the monthly payments he may receive from Prudential after the age of 65 retain their character as disability income in which the marital community has no interest, as a matter of law. He also argues that, even if the trial court did properly determine that the post-age 65 disability insurance policy payments are in the nature of pension income, the trial court abused its discretion in awarding any portion to Linda.

ARGUMENTS

We first examine the Washington case law upon which each party has relied in arguing his and her positions.

Case Law Presented by Robert

In the case of In re Marriage of Kraft, 119 Wash.2d 438, 832 P.2d 871 (1992), ⁴ the issue was whether the trial court In the case of In re Marriage of Brown, 100 Wash.2d 729, 675 P.2d 1207 (1984), the issue was whether a potential recovery in tort for a spouse's personal injuries suffered during marriage is to be characterized as community property at the time of a marital dissolution proceeding. In the early case of Hawkins v. Front-St. Cable Ry. Co., 3 Wash. 592, 28 P. 1021 (1892), the court determined that a claim for personal injury to a married person by a third party tort feasor is community property. The Brown court overruled Hawkins and its progeny, holding, instead, that such a claim is not community property as defined in RCW 26.16.030 because the claim is not property "acquired" during marriage.

                properly appliedMansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 675 (1989), in its treatment of the husband's military disability pay as an asset of the community.   In Mansell the United States Supreme Court ruled that, because the Uniformed Services Former Spouses Protection Act excludes disability pay from "disposable retired or retainer pay", 5 the state courts may not treat military disability pay as property divisible upon divorce.   In Kraft, the trial court reduced both the disability and the nondisability portion of Mr. Kraft's military pension to its present value and awarded Mrs. Kraft an offsetting share of the other available assets.   Our state Supreme Court reversed the trial court, insofar as the disability pay had been treated as an asset, holding that it is improper under Mansell for a trial court to reduce military disability pay to present value for the purpose of awarding the nonretiree spouse a proportionally greater share of the community property.  Kraft, 119 Wash.2d at 448, 832 P.2d 871
                

[W]e believe that the word "acquired" should be construed to encompass wages and other property acquired through the toil, talent, or other productive faculty of either spouse, but not compensation for personal injury. Such a construction is consistent with the basic principle that, except for gifts to the community, community property consists only of that which is acquired by onerous title, or in exchange for other community property.

(Citations omitted.) Brown, 100 Wash.2d at 737, 675 P.2d 1207.

The Brown court reasoned further that, if such a recovery in tort is not community property, it should partake of the same character as that which has suffered the injury or loss.

Thus, damages for physical injury and pain and suffering, which compensate the injured spouse for the harm to his or her separate individuality, should be separate property. Damages for injury-related expenses should be community or separate according to which fund incurs the expenses. Similarly, damages for lost wages and diminished earning capacity should partake of the same community or separate character as the wages and earning capacity they are intended to reimburse or make whole.

Brown, 100 Wash.2d at 738, 675 P.2d 1207.

Finally, Robert relies upon the case of In re Marriage of Anglin, 52 Wash.App. 317, 759 P.2d 1224 (1988). In Anglin, the issue was whether the husband's LEOFF 1 ⁶ disability award was for lost future wages or whether the award was community property. The Anglin court noted that, under RCW 41.26.120, the disability allowance was available regardless of vesting. ⁷ Unlike a retirement benefit, a LEOFF 1 disability award is subject to periodic review. Until the disabled employee is 50, he or she is subject to periodic medical examinations to determine whether the disability continues. After age 50, the medical examinations cease, and the disabled employee will then receive disability benefits or retirement benefits, whichever is greater, for the remainder of his or her lifetime. RCW 41.26.130.

Because Mr. Anglin was under the age of 50, the court held that the disability award was based solely on his disability, rather than being in the nature of a retirement benefit. Accordingly, the benefit was for lost future (post-dissolution) wages and was not a marital asset to be distributed by the trial court. That the parties had executed a statutory, three-pronged community property agreement did not change the result, as such an agreement has no application to wages Robert argues that Kraft, Brown and Anglin, taken together, stand for the proposition that disability payments received after marital dissolution are the separate income of the disabled person, as a matter of law, and may not be divided as property in a dissolution proceeding, regardless of the source of such payments. Because the disability payments will end if Robert should overcome his disability and return to full employment, Robert also appears to argue that the future payments he may receive are a mere expectancy. In Washington law a mere expectancy does not rise to the level of a...