Ward v. Ward, C0-89-1371
| Decision Date | 10 April 1990 |
| Docket Number | No. C0-89-1371,C0-89-1371 |
| Citation | 453 N.W.2d 729 |
| Parties | In re the Marriage of Patricia Ann Thompson WARD, petitioner, Respondent, v. David Gene WARD, Appellant. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
Trial court erred in characterizing proceeds from a personal injury settlement as marital property and in determining that the proceeds, if nonmarital in nature, should be apportioned.
Patricia A. Dolentz, St. Cloud, for respondent.
Marianne M. Milloy, Brainerd, for appellant.
Considered and decided by WOZNIAK, C.J., and RANDALL and SCHUMACHER, JJ.
David Ward appeals from the decree entered in a marital dissolution proceeding. He challenges the trial court's division of the proceeds he received in settling a personal injury claim. The trial court characterized the proceeds as marital property and awarded half to respondent, Patricia Ann Thompson Ward. Appellant also disputes the trial court's finding that, even if nonmarital property, the proceeds should be apportioned to "achieve equity." We reverse.
The parties were married in 1966. In August 1984, David injured his back while working as a truck driver on a maintenance crew. He also performed carpentry work for his employer. He began receiving disability payments, his employer paid his medical expenses, and he returned to work. David resigned in 1985 due to continuing back problems. He had been earning a net monthly income of $1,200 while permanently employed. Since 1985, he has worked intermittently.
David began a personal injury action against his employer and the manufacturer of a product he was handling at the time of injury. He borrowed against an impending settlement of his claims and used part of the loan to pay marital debts. Another part of the loan was used by Patricia to secure living quarters when she left the parties' home in June 1987. David received the settlement proceeds in April 1988, almost a year after the parties separated. No workers' compensation was paid.
In July 1987, Patricia petitioned for dissolution of the marriage. The parties stipulated to her custody of the remaining minor child, to a waiver of spousal maintenance, and to an equal division of personal property as well as marital debt. Real property was transferred to David in exchange for Patricia's retention of her employee profit sharing plan. The parties were unable to agree on the amount of child support to be paid and the marital/nonmarital classification of David's personal injury settlement.
David has been enrolled in a vocational course which will enable him to be employed as an activity director in an elderly care setting. His back injury prevents him from continuing work in carpentry or as a truck driver. At the hearing, David testified that he is forced to leave school during the day because of back pain. He cannot canoe, ride a motorcycle, has difficulty shaving, and is restricted in the amount of weight he can lift. David also testified that he has restricted range of motion in his right hip and leg.
Patricia is employed as an office manager and earns a net monthly income of $1,187. She has held her current position for eight years. Her benefits include paid vacation, profit sharing, health insurance, and disability benefits.
The trial court awarded child support of $300 monthly based on David's ability to earn $1,200 net per month. David does not contest the child support award. The sole issue on appeal is the trial court's division of the personal injury settlement. The trial court found the remaining $48,000 of the settlement to be a marital asset and awarded Patricia half.
1. Did the trial court err in treating the personal injury settlement as marital property?
2. Did the trial court err in finding that the settlement should be apportioned if it is nonmarital property?
1. Again we are confronted with the important question of whether proceeds of a settlement recovered by a spouse for his or her personal injuries sustained during the parties' marriage constitute marital property subject to distribution upon dissolution of the marriage or whether they are the separate, nonmarital property of the injured spouse. In light of the differences between an award of workers' compensation, a judgment obtained in a tort action brought to recover for personal injuries, and a settlement of a personal injury lawsuit, we renew our attention to the method of determining the marital/nonmarital nature of the proceeds received.
Minn.Stat. Sec. 518.54, subd. 5 (1986) defines marital and nonmarital property. Property acquired during the marriage and before a decree of legal separation is presumed to be marital property. 1 Minn.Stat. Sec. 518.54, subd. 5 (1986). However, when property acquired during the marriage is acquired in exchange for property acquired either before or after the marriage, it retains the nonmarital character of the exchanged-for property. Minn.Stat. Sec. 518.54, subd. 5(b)-(d). Following this approach, we have held that the characterization of monies realized from a personal injury award or settlement depends upon the purpose of recovery. Van De Loo v. Van De Loo, 346 N.W.2d 173, 176 (Minn.Ct.App.1984).
Proceeds from a personal injury claim may be composed of many elements of recovery. Some part may represent compensation for injury to or loss of marital property, for injury to the separate property of the noninjured spouse, and for injury to the separate property of the injured spouse. Injury to marital property includes the wages lost during the parties' marriage, lost earning capacity experienced during the marriage, and medical expenses paid out of marital funds. Injury to the separate property of the noninjured spouse includes loss of consortium. Injury to the separate property of the injured spouse includes pain, suffering, and disability, as well as economic losses which occur prior to the parties' marriage or subsequent to its termination.
It is the amount of recovery allocated for loss of marital property which is subject to distribution upon dissolution of the marriage. See id. at 177. The amount allocated for loss to either spouse's separate property retains its nonmarital character. Id. at 175-76; see also Gerlich v. Gerlich, 379 N.W.2d 689, 691 (Minn.Ct.App.1986), pet. for rev. denied (Minn. Mar. 21, 1986). Because the purpose of recovery determines whether it is marital or nonmarital property, we will more closely examine the nature of the loss being compensated.
Workers' compensation awards differ significantly from a tort award for personal injury. Whereas the amount of workers' compensation is based on lost earning capacity, only the tort action includes damages for pain and suffering. Settlement of such a tort claim brings extrinsic factors to bear on the amount negotiated. The factors considered include the risk and expense associated with litigation, the difficulty in surmounting a claim of contributory negligence or in establishing damages, the relative abilities of the parties to meet their burdens of proof, and the availability of evidence. Consideration of the risk and expense of litigation alone may operate to reduce the amount received in settling the claim. Damages for pain and suffering may be the only element of loss left compensated by a negotiated settlement.
Recovery for noneconomic damages such as pain and suffering stands on a different footing than recovery for the economic losses caused by injury. Pain and suffering, disability, and loss of the ability to lead a normal, healthy life are losses personal to the injured spouse. See Gerlich, 379 N.W.2d at 691; Van De Loo, 346 N.W.2d at 177. The physical and mental health of a spouse is not a marital asset which can be distributed upon the dissolution of the parties' marriage. Compensation for loss of health is not marital property. It would be unfair for the other spouse to benefit from the misfortune of the injured spouse. As has been reasoned elsewhere, the law does not require either spouse to contribute his or her bodily health and powers to the assets distributed as marital property. Johnson v. Johnson, 317 N.C. 437, 450, 346 S.E.2d 430, 437 (1986) (citations omitted).
This case also raises the issue of future economic damages, an issue not previously addressed by this court. The concept of personal security has been helpful in determining the nature of a loss in earning capacity sustained after marital dissolution caused by injuries which occurred during the marriage.
A "right to personal security" is owned by an individual and is brought into the marriage by the...
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