Sherman v. Sherman

• Decision Date: 01 September 1987
• Docket Number: No. WD,WD
• Citation: 740 S.W.2d 203
• Parties: Barbara E. SHERMAN, Respondent, v. Bill J. SHERMAN, Appellant. 38838.
• Court: Missouri Court of Appeals

Page 203

740 S.W.2d 203

56 USLW 2191

Barbara E. SHERMAN, Respondent, v. Bill J. SHERMAN, Appellant.

No. WD 38838.

Missouri Court of Appeals Western District.

Sept. 1, 1987.

Motion for Rehearing and/or Transfer to Supreme Court Denied

Oct. 27, 1987.

Application to Transfer Denied Dec. 15, 1987.

Preston L. Cain, Kansas City, for appellant.

Don Witt and Robert H. Shaw, Platte City, for respondent; Witt, Boggs, Shaw & Van Amburg, of counsel.

Before LOWENSTEIN, P.J., and PRITCHARD and TURNAGE, JJ.

PRITCHARD, Judge.

The issue is whether, upon dissolution, the trial court erred in awarding the wife, in a division of marital property, 27 1/2% of the husband's disability benefits which were being received by him from a private policy held by him in the Mutual Life Insurance Company Long Term Disability Plan. This court holds that the trial court did so err.

The parties were married on June 25, 1970, but no children were born of the marriage. The husband, however, adopted two of the children of the wife by a prior marriage. The trial court found that these two children were emancipated at the time of dissolution, April 14, 1986, so no child support was awarded. Neither was any maintenance awarded.

The husband had been employed since July, 1967, and had solely made payroll contributions for the premiums on the Mutual Life disability policy, and a total of $1,300 was paid in premiums thereon, but the record does not show what portion of them was paid prior to (or during) the marriage. The husband was receiving $1,166.32 in monthly disability benefits (because of a heart condition) at the time of trial, which would be paid so long as he was disabled or until he reached age 65. At that age, disability payments would cease and he would start receiving about $433 per month from a deferred vested pension plan. His normal retirement date would be July 1, 1993. In addition to the Mutual Life disability payments, the husband was receiving $723 per month from social security. If he were able to go back to work, the disability benefits would cease.

The trial court ordered that the benefits of Union Mutual Life Insurance Company Long Term Disability Plan, and the pension plan vested in the husband from Burns and McDonnell Engineering Company be divided so that 27 1/2% of the disability and pension was ordered to be paid directly to the wife.

Although there have been cases in this state holding that pension benefits may properly be divided, in appropriate cases, since that rule was adopted in Kutcha v. Kutcha, 636 S.W.2d 663 (Mo. banc 1982) [see, e.g., Haun v. Haun, 677 S.W.2d 927 (Mo.App.1984); Lynch v. Lynch, 665 S.W.2d 20 (Mo.App.1983); Cregan v. Clark, 658 S.W.2d 924 (Mo.App.1983); and Weiss v. Weiss, 702 S.W.2d 948 (Mo.App.1986) ], there are none which treat private disability insurance plans, such as the one at bar, as being subject to such division. Courts in other jurisdictions are divided on the question, with differing rationale. See generally, "In Sickness and in Health? Disability Benefits as Marital Property", 24 J.Fam.L. 657 (1985-86).

In Guy v. Guy, 98 Idaho 205, 560 P.2d 876 (1977), a community property state, a group term disability insurance policy to employee, Guy, was involved. The policy acquired no cash or loan value and the premiums were paid solely by the employer. The trial court had divided the net monthly benefits equally between the parties as community property under Idaho statutes. The Supreme Court affirmed, rejecting the California approach that disability insurance proceeds are separate property, holding, 560 P.2d p. 879, "In the case at bar, the benefits vested during the time of the marriage. Clearly community labor was the source of the benefits. Hence, we continue to look in Idaho to the source of the benefit rather than the purpose of payment analysis rationale of the California court in [In re Marriage of Olhausen, 48 Cal.App.3d 190, 121 Cal.Rptr. 444 (1975) ]." The court said that the benefits were fringe benefits or emoluments of appellant's employment and therefore they derived from his community labors. The Idaho court also placed emphasis on its court's equitable powers and discretion to divide community property toward the end of achieving a just and equitable result.

In Simmons v. Simmons, 568 S.W.2d 169 (Tex.Civ.App.1978), a Delta Airlines pilot's long-term monthly disability benefits were provided by his employer. The court rejected his contentions that the benefits were for personal injury and that they were for loss of earning capacity after divorce, saying, p. 170, "Without question the payments made by Delta were community property since this contractual right was a part of his compensation during marriage because it was one of the benefits flowing from his employment with Delta."

Non-community property states have also taken the view that disability benefits are divisible marital property. Smith v. Smith, 84 Ill.App.3d 446, 39 Ill.Dec. 905, 405 N.E.2d 884 (1980), was there a case of first impression. In that case, the husband was employed as a pilot for United Airlines, and became disabled from a heart attack, receiving a "disability pension" of $2,367 per month. Although the opinion does not say so, presumably the disability provision was provided by United Airlines as a part of the husband's emoluments of employment. The court looked to the Illinois Marriage and Dissolution Act, and held, 405 N.E.2d p. 886, "As the subject disability pension does not expressly fall into an excepted category, it constitutes marital property if it can be characterized as property acquired during the marriage." The court then noted 405 N.E.2d at page 890, that longevity pensions in Illinois constitute marital property, saying further, "The disability pension at bar differs from such longevity pension only in its compensatory element, its mode of inception and possibly its duration. Given the classificatory directive of section 503(a), we hold the disability benefits at bar to similarly constitute marital property."

The Smith case cited and quoted from Kruger v. Kruger, 139 N.J.Super. 413, 354 A.2d 340 (1976), which involved both military retirement and disability benefits which the husband was irrevocably entitled to receive for life, holding that to the extent the entitlements were based upon military service during the marriage, they were subject to equitable distribution. The Kruger court rejected the claim that disability benefits offset current wages lost because of diminished earning capacity because there was no proof that the dollar work ability of the husband had been reduced.

In Lookingbill v. Lookingbill, 301 Md. 283, 483 A.2d 1 (1984), a fireman was retired as a result of a work-related injury, and was awarded an allowance under a retirement disability plan to which he had, during coverture, contributed by deductions from his wages for some years. The court affirmed a division of the disability benefits between husband and wife as constituting marital property by making an analogy between pension benefits which are "actually partial consideration for past employment", and holding, 483 A.2d at p. 4, "Pension payments are actually partial consideration for past employment whether the maturity of the pension is contingent upon age and service or upon disability. Thus a disability plan, like a service plan, is property and, within the meaning of the Act, constitutes marital property subject to equitable distribution."

In Morrison v. Morrison, 286 Ark. 353, 692 S.W.2d 601 (1985), the court allowed a division of disability retirement benefits, to which husband became entitled as a result of his employment by the Los Angeles Fire Department, having contributed to the fund therefor 11% of his salary from 1965 through 1977. The court followed the Illinois Smith case, supra, in holding that the similar Arkansas statute mandates that all non-exempted property is marital...