*1
v. DRAKE, Appellant.
James G.
Supreme Pennsylvania.
Submitted June 1998.
Decided Feb. *4 Drake, se. pro
James G. Drake. Baisley,
Janette for Jane ZAPPALA, FLAHERTY, CAPPY, C.J., and Before SAYLOR, CASTILLE, NIGRO, NEWMAN and JJ.
OPINION NEWMAN, Justice. granted this to resolve whether a
We review matter mari- in a workers’ claim is commutation award distribution tal therefore pursuant 3501 and 3502 of the Divorce Code.1 to Sections
FACTS (hereinafter Husband) Drake
James Drake and Jane E. (hereinafter Wife) on April were married 1977. It was parties. two first both Husband and Wife have seq. 3101 et § 1. 23 Pa.C.S.A.
486
children, 5, born Tiffany 1977, on September and James born on August 8,1979. In 1977, December of several months after married, the couple Husband received his Bachelor Science degree in whereas, geography, had Wife three years college and needed credits her complete degree. During the marriage, Wife was a homemaker until she went back to school and obtained a medical technology degree in 1988. then, Since she worked as a medical technologist, was the main support financial for family, years because two after career, she started her Husband suffered a work-related injury. 1993, At of parties separated the time in Wife earned $29,836 per year employment income. unemployed
Husband was year for first and a half of the marriage, and parties public lived on assistance during 9, 1978, January time. On began Husband work at Tygart (employer) Steel as a laborer. He worked there until July 1985, at he injured which time the tendons and ligaments in right his wrist at work. At injury, the time his ($19,306.56 Husband per per year earned week $371.28 month). $1,608.88 per diabetes, Husband also suffers from which is injury. unrelated to his work
Following his wrist injury, Husband received workers’ com- ($6,446.70 every two pensation per benefits weeks $247.95 week). month or year, per per April of $537.23 $123.38 employer that he apparently Husband’s concluded could work, duty light changed partial and his status was perform However, disability. he continued to receive until payments (The when his December benefits terminated. record if April his benefits were reduced from does indicate 1989.) through December 3, 1990, a
On and Husband entered employer October to a agreed Husband com supplemental agreement, which $42,000.00 for workers’ benefits mutation of his payment "one form of for another. A award substitutes commutation law, right to receive a variable or In civil the conversion of the payment; periodical payment right gross into the to receive a fixed or another, money payment payment sort of or of substitution of one duty or performance compulsory lieu of a of a labor. Commutation (less $1,500). sum award lump represent This counsel fees 1/7 for a of 447 and weeks disability period payments ed partial until 7,1989 years, one-half (eight December beginning 1998). that Husband provided also Agreement July and in in an IRA account said commuted amount place was “to Claimant also intend bearing [sic] account. high interest *6 employment opportu further his Degree a obtain Master’s before, a of Husband had Bachelor Science As stated nities.” following injury to school his work degree. He returned However, April in 1987. there teaching a certificate obtained credits any in the that he earned is no information record commu a before after the degree, master’s either towards Instead, through the since December agreement. tation a part has worked as time appeal, of this Husband time He the District. has Ringgold School substitute teacher injury. his work job any full time of sort since not obtained a 1993, parties’ in Husband earned separation At time of the the $8,000.00. alleges that Husband does not want to about Wife Ringgold, than fact that work in school district other disputes. Husband injury, primarily re- Husband’s work Wife was
After the the For most of sponsible expenses. for the marital Extension, Donora, at 17 Street parties the resided Second the which Husband was raised. The Pennsylvania, house in 1977 for family from Husband’s bought the residence couple $25,000.00. stipulated of separation, parties At the time $71,000.00, excluding fair value house was that the market of (Husband con- on the any recorded encumbrance at that an debt on hearing outstanding tended there was $5,557.00.)3 of agreement, usually may private it is done under a bo effected but (5th ed.1990). Dictionary 254 statute.” Black's Law excep- Following property, 3. of Flusband filed an the Master's division Report alleging, among things, other that the tion the Master’s did take the marital residence had a Master into consideration that $5,557.00. excep- mortgage remaining of The trial court overruled the Superior regarding The held Husband’s tion. contention stipulated mortgage and Wife to the was meritless because Husband residence, $5,557.00 including remaining, debt value the marital and that the Master took this amount into consideration when he 28,1993, The Drakes separated July on and August Wife a complaint filed in divorce and a petition for custody of the couple’s two children. The Court of Common Pleas of (trial court) Washington County appointed a in Di- Master vorce on March parties Both consented to the entry a final August divorce decree on 1995. The Master Report 4,1996, issued a on January which he recommended the marital estate be divided equally, with Husband receiving the marital home receiving and Wife bank various deposit proceeds accounts from insurance. bulk the accounts were funded with commutation award. The Report further recommended that the Husband pay Wife $15,000.00 in days. cash within 120 If the amount was not paid days, $15,000.00 the house was be sold and. the taken the proceeds from sale. specifically The Master found that proceeds commutation Husband’s workers’ benefits were marital property because they during were received and replaced wages earned adopted trial court *7 findings compensa- Master’s and said that Husband’s workers’ tion settlement was for wages during reimbursement lost the therefore, and was marriage property. martial exceptions Report, Husband filed to the Master’s which the February trial court denied Order In by dated a Order, separate granted trial the a final parties the court timely Superior A to was appeal decree divorce. the Court filed a of grounds, including Husband on number the it allegation the trial court erred because failed to take $5,557.00 into to consideration the of marital debt attributable residence, it improperly the marital and that included as The Superior commutation award a marital asset. court, finding supported
affirmed the trial the evidence workers’ compensa- the distribution of assets that Husband’s wages during for tion settlement was reimbursement lost therefore, granted it We property. and was $15,000.00 pay Wife ordered Husband to a divided the and only of issue payment. granted We review this matter on the of cash properly considered as marital whether commutation was property.
489 was marital commutation award only if the to decide appeal ANALYSIS
I. Introduction it is useful appeal, issue on reach the exact Before we of history of distribution review with a brief begin to our the first Through of divorce. a part and liabilities assets century, grounds most states limited of twentieth half one, spouse a required and, granting before for divorce of other part on the form of marital offense show some Comment, From See, Fette, Learning. E. e.g., Sarah spouse. Revo Divorce the American Mistakes: Our Aftermath of Ireland, 7 Ind. Republic in Law the lution as a Lesson (1997). laws These fault-based L.Rev. 393 Comp. Int’l & to the true causes of breakdown often unrelated were century divorce laws of this the middle legisla relaxed, years, and in recent a number gradually ours, (although tures, divorce laws including enacted no-fault divorce). 23 provision a fault-based Pennsylvania retained (c), (d). 3301(a), no-fault Currently, §§ such Pa.C.S.A. Fette, jurisdictions our nation. exist in most across laws § also, Separation Divorce and See Am.Jur.2d supra; (1983). effect divorce laws these no-fault purpose encourage one-time spouses, a “clean break” between Fette, (citing supra Cynthia of marital property. division Homemaker, Starnes, Chi.L.Rev. Displaced and the U. Divorce (1993)). divorce, many of no-fault states Concurrent with arrival rejected princi- traditional century the second half this ples following adopted of division of divorce tradi- assets at divorce. The “equitable distribution” divide *8 on tional at divorce were based property methods divide community very different either the title4 systems, (also system) dividing system 4. The title called the common law essentially required property spouse property to award to the courts Bell, marriage. supra property during title to at 117- who held 1.02, Turner, Equitable Property § (citing 119 Brett at R. Distribution of (2d ed.1994) al., (1996)). Family 4 Law As a and Leslie Harris et property5 system. states, A majority of including Pennsylva- nia, had used some form of system. the title See generally v. DiFlorido, DiFlorido Pa. (1975); A.2d 174 Bell, Equitable Distribution: Deborah H. Implementing the Marital Partnership Theory Through the Dual Classification System, (1997). 67 Miss. L.J. 115
The theory of equitable distribution derives from the “marital partnership” theory of community property law. However, the courts attempt to split property equitably, in equally, stead of into taking consideration such factors as length of marriage, of both contributions spouses, ages health each spouse. Obviously, equitable benefit of distribution versus the community property is system equitable distribution statutes allow a degree considerable judicial discretion the distribution of property. Whereas community property regimes automatically grant spouse each a one-half issue, interest the marital at asset distribution scheme the trial particu allows court weigh the lar equities control case to the asset allocation.
Currently, most states have adopted some form of an equi- scheme, table distribution but they use different for methods classifying assets included the divisible estate. Some states may all owns, include property spouse either with no result, name, property a Husband would all titled retain in his and a keep property Wife would titled in her name. The court would equally property jointly spouses. divide divorcing held between the Generally, property if a Wife had earning potential insufficient divorce, support permanent alimony. herself after courts would award alimony usually monthly period, was a set amount an indefinite party alimony until died either or Wife remarried. Awards of in the Bell, system closely were title related to fault-based notions of divorce.
supra, at 119. community system, jurisdictions property 5. The still in effect in some divorce, and, today, couple upon an treats the married economic unit equally property acquired during the the court divides all and income irrelevant; marriage. party's spouse A title to is each However, of all obtained owns one-half inheritance, properly spouse through gift, gets that either or which was separate with owned before nine states Texas, Mexico, Louisiana, community property systems are New Ari- California, Idaho, Nevada, zona, (with Washington, and Wisconsin Act). adoption Property of Uniform Marital
491 if even separate property, marital and between distinction See, A. gift. e.g., Joseph marriage byor before obtained Divorce, at to Division Subject Defining Property McKnight, 1989). (Summer, 193, 196 L.Q. 23 Fam. have chosen
However, Pennsylvania, including states most distribu- system form of “dual classification” some property distinguish between tion, must the court which before the Court separate which is is and that that marital The line at times the marital divides equitably mixed with is shared or blurs, separate property such as when assets, case-by-case on a often be settled and must marital dispute. is some when there basis Equitable Statute Pennsylvania’s Distribution
II. categorize first to requires Code court The Divorce nonmarital. Pa.C.S.A. as marital or property items marital 3501(a). statute, prop defines at Section § erty as: marriage, party during acquired by either property
[A]ll value, date of final to the prior the increase including ... acquired nonmarital separation, any property method of Timing § rather than the 23 Pa.C.S.A. under property is marital property controls what obtaining presumes property acquired statute the Code and the 3501(b).6 § 23 Pa.C.S.A. during marriage is “marital.” 9, 13, 610 416 Pa.Super. Bank v. Fidelity See also Carroll (1994) (1992), 652 A.2d aff'd, 539 Pa. A.2d is during marriage spouse gets that either (property marital). presumed 3501(b) property statutory presumption that all sets forth the
6. Section during fits acquired marriage is unless it within one 3501(a), exceptions as follows: eight set forth in Section by during the personal property acquired party either All real or property regardless of whether marriage presumed be is to marital by co- individually parties in form of title held or some by tenancy, tenancy tenancy ownership joint common or such as by entirety. presumption property of marital is overcome property acquired listed in subsec- showing that the was a method (a). tion 3501(b). § 23 Pa.C.S.A. definition, Notwithstanding this the Code lists eight classifi- cations marital, of property that are not even though pos- during sessed parties’ marriage.7 These exceptions gener- ally exclude that a spouse owned before he she “acquired” has such gift as a or an 3501(a)(1) (a)(2). inheritance. 23 Pa.C.S.A. *10 The Code also from excludes marital property federal disabili- payments ty and proceeds from a settlement or if to right receive such award “accrued” outside the marriage. 3501(a)(6), (a)(8). § 23 Pa.C.S.A. estate,
Once court defines the marital it then divides the property according following to the enumerated factors of Section 3502:
(1) length The of the marriage. (2) Any marriage of prior party. either (3) health, station, age, income, The amount and sources of skills, estate, vocational employability, liabilities and needs of each of the parties. exceptions
7. These are as listed follows: (1) Property acquired prior marriage property acquired or in exchange (2) property acquired prior marriage. for by Property parties agreement excluded valid of the entered into before, during marriage. or after (3) by Property acquired gift, except spouses, bequest, between devise or descent. (4) divorce, acquired separation Property after of final until date except (5) property acquired exchange for marital assets. sold, granted, Property party conveyed which a has or otherwise disposed good prior of in faith and for value to the date of final separation. (6) attachment, levy exempt pursu- Veterans’ benefits from or seizure 85-857, (Public September ant to act of Law 72 Stat. 1229), amended, except by a as for those benefits received veteran portion military pay where the veteran has waived a of his retirement compensation. receive order to veterans’ (7) Property property mortgaged to the has extent which been good prior or faith for value to the date of otherwise encumbered separation. final (8) Any payment as a of an award or settlement for received result any prior of accrued to the or cause action or claim which separation regardless payment of when the after the date final of was received. § 23 Pa.C.S.A. 3501. education, training
(4) party one contribution The party. of the other power earning or increased acquisitions (5) for future party of each opportunity income. assets and capital including,
(6) but parties, of both of income The sources medical, retirement, or other benefits. to, insurance limited in the (7) party of each dissipation The contribution appreciation depreciation preservation, acquisition, party the contribution of including property, homemaker.
(8) apart party. to each of the set The value (9) living parties established standard including (10) each party, circumstances of The economic ramifications, the time the Federal, local at State and tax is to become effective. division (11) serving as the custodian party will be Whether minor children. any dependent *11 § 3502.
23 Pa.C.S.A. Compensation III. Treatment Workers’ Commutation Award inquiry to here: analysis the above apply nowWe of workers’ of a commutation a Are proceeds that because begin by presuming claim marital We property? and injury sustained his work-related unquestionably Husband during the of his commutation award the proceeds received However, if Hus is marital the award by acquired “was that the commutation award band can show 3501(a)(1) (a)(8), then these through forth in a method” set subject would not be separate property are his proceeds 3501(b). § 23 Pa.C.S.A. to distribution. award is his that the commutation argues
Husband entire “disability” payment it a property either because is separate replacement it of future alternatively, because a represents First, argument we earnings. address Husband’s 494
award is a “disability” payment and not consequently part of the marital estate. Disability
a. payment: only provision within the concerning Divorce Code disability payments 3501(a)(6), Section which provides that federally disability created veterans’ payments are 3501(a)(6) property. Section defines these benefits include: Veterans’ attachment, benefits from exempt levy seizure pursuant 2, (Public act September 1958 Law 85- 857, 1229), amended, 72 Stat. except those benefits received a veteran where the veteran has waived portion of military his pay retirement order receive compensation. veterans’
This statutory language conforms the Divorce Code with decisions, federal statutes and Supreme United States which taken together, hold that federal law governs these federal benefits and the cannot states treat them as marital property at divorce.
In McCarty v. 453 McCarty, U.S. 101 69 S.Ct. (1981), L.Ed.2d divided Supreme Court found that the statute, federal which created these service connected disabili- ty payments, controlled and that military benefits were not assignable. Accordingly, held that a -McCarthy military pen- plan was not division at divorce. sion. response decision, to McCarty Congress enacted Spouse Uniformed Services Former Act Protection Act) provided military Protection that certain (Spouse pay, “disposable or retainer pay,” retirement retired could be (1982). § community property. U.S.C that, Mansell, After Mansell v. 490 U.S. S.Ct. 2023,104 (1989), Supreme L.Ed.2d 675 Court held that the *12 Act military Protection allowed states treat retire- Spouse disability as marital not pay property, ment but veterans’ conclusion, kind. In this páyments any reaching Man- although Spouse Act sell court found that Protection pay property, a state to treat retirement as marital permitted for proviso disability payments. Apply- it did not make such disability were payments in McCarty, these the rationale ing not Protection Spouse covered assignable, were Act, property. could not be marital and Opinion, in this we we set forth
For the reasons
is
disability payment
per se
that a
Husband’s
reject
argument
our
property.8
of marital
While
from the
excluded
definition
disability benefits from
veterans’
specifically excludes
statute
any
for
other
no
exclusion
it makes
such
marital property,
is not a
that
disability payment
A
disability
type
payment.
any
not fit within
does
veterans’ benefit
federally created
3501(a)(1)
(a)(8)
through
in Section
set forth
exceptions
Court
Superior
can
property
be
regard.
in this
arguments
rejected Appellant’s
appropriately
Compensation
b. Workers’
earnings:
replacement
of future
commu
argument that the
Husband’s
We next address
it
because
property
from marital
award is excludable
tation
impres
issue of first
This
an
earnings.
“future”
represents
Some
guidance.
other
jurisdictions
and we look to
sion
compensation
jurisdictions
lump sum workers’
exclude
earnings,”
if
“future
replaces
marital
it
award from
workers’
so hold. Those that exclude
others do not
while
the analytic
from
estate follow
compensation
the divisible
look to the nature
classify
property9
approach
Superior Court cases have intimated that
We are
that some
8.
aware
See,
property.
per
disability payments
se excludable from marital
are
(1988).
Ciliberti,
Pa.Super.
In
e.g.,
of the underlying loss when
the
classifying
award as marital or
separate property. Generally,
if the award replaces
lost
wages during the marriage,
then the award is marital proper-
However,
ty.
to the extent
that the award represents
future
earnings, disability, or personal
injury compensation,
the
See,
award is separate property.
e.g.,
Annotation,
Divorce
Separation:
and
Compensation
Workers’
as Marital
Benefits
Distribution,
Property Subject to
(1997);
Under the
replaces
the award
is irrelevant
that
analytic, it
unlike the
In
of loss.
injury,
type
other
earnings, personal
future
injury
any personal
stead,
“unitary”
classifies
approach
separate
and therefore
“personal”
or settlement as
of the underlying
injured spouse, regardless
of the
Richards,
See,
v.
e.g., Richards
replaces.
the award
loss that
G.S.,
(1955);
308,
B.S. v. Richard
Gloria
This result appears if identical we take the facts in DeRos- sett and examine them pursuant our Divorce Code. Section 3501(a)(8), the subsection of the statute that deals specifically awards, with monetary states that payments may not be if marital property they are the result of: any cause of action claim which accrued prior to the marriage or after the date of final separation regardless of payment when the was received. added); § Pa.C.S.A. 3501(a)(8)(emphasis also Platek See v.
Platek,
Pa.Super.
(1982);12
represented earnings of those commutation right seek whether Here, Husband suffered accrued thereafter, 29,1985. he filed Soon July on injury work-related biweekly and received bene compensation petition a workers’ that, his employer After in October Husband fits. partial disability his to commute agreement into an entered 7, 1989, as agreed date December effective payments, Thus, disability. as of partial date of Husband’s the effective right enforceable certainly had an December Husband award, claim and Husband’s sum commutation lump to this Code, “accrued,” in the Divorce well term used generally of 1993. See separated July the parties before Wolfe, Co. v. Association Ins. Pennsylvania Manufacturers’ *16 (1993) subrogation rights to did (right Pa. 626 A.2d settlement); Bell third tortfeasor offered party not vest until a (cause (1943) 666, 669, of Brady, v. 346 Pa. 31 A.2d suit). has the to institute only right action accrues when one Therefore, Superior properly affirmed the trial court’s finding that the commutation award is marital proper- ty.
The inquiry does not end here. Once a court concludes that a workers’ compensation award is marital property, it has discretion to all, award or a portion, of that injured award spouse. Although our Divorce Code does not allow us to consider the purpose award if deciding the award is separate it property, does require an equitable examination of these considerations at the time the court divides the property. Concerns for the injured spouse’s financial security, disability, employability specifi are and/or cally addressed Section 3502. The Divorce Code directs the consider, factors, courts to among health, other “age, station, income, skills, amount and sources vocational em estate, ployability, liabilities and needs” of parties, and “the sources of income of both parties, including, but not medical, retirement, limited insurance or other benefits.” 3502(a)(3); 3502(a)(6). DeRossett, Sections supra. See also (While rejecting the “analytic” approach, concerns addressed statutory there were part mechanism to divide equitably that property.) entirely
It is that a possible court could distribute injured workers’ compensation solely entire award to the health, spouse, skills, his assuming age, or her vocational employability and access to this supported benefits determina here, tion. It is possible, also the court could appropriately noninjured proceeds spouse distribute the of the award to the replacement the award represented wages during because may The court consider the purposes health, injured employability spouse’s divide marital accordance with injury equitably property, the mandates Section 3502.
CONCLUSION compen we hold that workers’ Pennsylvania, sation commutation award that “accrued” pur- can be marital distribution *17 3502 of Divorce Code. We 3501 and the to Sections suant not that the court our does mean conclusion emphasize award, the even that proceeds or must divide the equally the award. keep should not entire injured spouse the to, or can, any have all part but does not award trial court must injured spouse. also to the We proceeds entirely the all marital required court is not to divide stress that the percentage on same spouses the based the property between merely gives as marital Classifying property the of division. the as the authority to divide award family the court the particular may require. in the case equities presented proceeds from For award or settlement example, the only may or claim be the disability workers’ the injured spouse who collects asset in a long provide in a to for himself herself may position monies be injured spouse. It could be that better than the other award, a settlement financially dependent upon is not spouse dependent noninjured spouse completely bemay whereas the circumstances, divide the may it. In the court on these to the nonin- majority going with hand, spouse other who collects jured On the spouse. disability may have health concerns payment particular injured spouse. be the entire award could distributed to depends presented particu- in each simply upon equities It lar circumstance. finder, case, court, fact made this trial as the criteria set forth Section
distribution based on eleven affirmed this find- Superior appropriately 3502.14 The Court scheme established ing evaluating after the overall distribution it give court order. Would have made sense to by the give the Husband the left from commutation and monies to the question the marital home? That reserved Wife court, Superior properly and the discretion the trial trial to without a that the finding showing refused disturb that Here, court its the master and the trial abused discretion. upon court made an educated distribution based presented attempted it. Husband has equities § Pa.C.S.A. 3502. pursue his degree, master’s as he said he would in the agreement and it appears from the record he has not attempted broaden his base geographically or otherwise Further, increase his income. he has a residence valued at $71,000.00 that he sell living can expenses, including rent to subsidize his income. has major Wife been a to the support marriage, both in raising the children contributing her income for expenses. She supported also the marital *18 expenses, Husband, as well accident, from the date of the 29, 1985, July until the Husband received lump sum in 1990, period years. a of five She does own not a residence and every there is reason to believe that Husband can earn the same future income as Wife. The distribution of marital prop- erty equitable an any manner protected future income that was of concern in the commutation at award issue this case.
The commutation award at issue here marital property, and appropriately the trial court distributed it in accordance with our Divorce Code. We affirm the Superior decision of the Court, which affirmed the decision of trial court.
Justice CASTILLE files dissenting opinion in which Jus- ZAPPALA joins. tice Justice,
CASTILLE, dissenting. Here, that, majority posits pursuant to subsection 3501(a)(8),it is irrelevant whether a settlement or award is for personal injuries, disability payments, wages, lost or future Instead, earnings. majority timing reasons right pivotal to receive the award is the factor in the determi- I nation property. of whether or the award is marital dissent I do not believe that workers’ respectfully because compensation represents commutation award which future subject equitable earnings property is marital distribution. Pennsylvania’s provides: Divorce Code 3501. Definitions
(a) proper- rule.—As used in this “marital chapter, General all ty” acquired by party means either property value, prior to the date marriage, including the increase acquired any nonmarital separation, of final (1) (3), except: paragraphs pursuant (8) of an as a result received Any payment or claim which accrued any cause action settlement for of final separation or after the date prior to was received. regardless payment when § 3501. 23 Pa.C.S. Moore, (Pa.Super.1998), 710 A.2d
In Moore v. 3501(a)(8) to interpret subsection Court refused Superior mari- commutation award as compensation include a workers’ injured at Moore, was work the husband tal property. court found sum trial lump payment. one-time received a commutation compensation of the worker’s proceeds that the distribution. award were marital reversed, the benefits in finding Superior and, earnings consequent- in lieu of future were question paid Id. at 635. ly, did not constitute portion of Moore. The reasoning I am persuaded represents commutation award which a workers’ *19 future, injured ability loss of to work the employee’s the be separation, of should not past the date long often right other spouse A no the distribution. has equitable ends; therefore, the the earnings after spouse’s right compensation to a workers’ should have no spouse for those is intended as a substitute commutation award that earnings. future out, jurisdictions courts in other majority points
As the
have
similar conclu-
which have addressed this issue
reached
(Fla.1989)
Weisfeld, 545
sions. See
v.
So.2d
Weisfeld
loss of
of worker’s
future
(portion
earnings
of
and future medical
earning capacity
and loss
injured
are
expenses
separate property
spouse);
(a
(Alaska 1987)
Miller,
Miller v.
For aforementioned and would re- dissent the Superior verse Court and remand for a determination portion what of the award the husband’s future represented earnings after date separation order to exclude of. from portion distribution. joins ZAPPALA dissenting opinion.
Justice this