137 Wash. 2d 756 | Wash. | 1999
Lead Opinion
Petitioner Michael A. Brewer seeks review of a decision of the Court of Appeals, Division Two, which reversed and remanded to the Clark County Superior Court a ruling characterizing monthly payments to a permanently disabled spouse under a private disability insurance policy after dissolution of a marriage as separate property and not community property. We granted review. We affirm the Court of Appeals in part and reverse it in part.
QUESTION PRESENTED
The question presented in this case is whether monthly payments to a permanently disabled spouse under a private disability insurance policy after dissolution of a marriage constitutes separate property and not community property, even though the policy was acquired during the marriage and premiums were paid from community funds before premiums were waived by the issuing companies.
STATEMENT OF FACTS
Petitioner Michael A. Brewer and Respondent Deborah
On March 3, 1995 Petitioner served Respondent with a summons and petition for dissolution of marriage which he
A. The Petitioner’s New York Life and Mutual of New York disability insurance benefits are not assets subject to division in this case. Such benefits should be awarded to the Petitioner Michael Brewer free of any claims of the Respondent Deborah Q. Brewer.
The court notes that the community paid about $12,000 in premiums for such disability pay; however the court also notes that the community received about $6,000 on a monthly basis from these private disability policies, from the time of the Petitioner’s disability until the parties separation, as well as during the period of parties separation under court order which also benefited the parties.
B. Furthermore, the property division in this case is fair and equitable in that it has also taken into account and recognized the disability benefits received and to be received by the Petitioner. The court notes that the Respondent has a substantial separate property estate that the Petitioner does not have. Furthermore, the court has made disproportionate award of community property in favor of the Respondent. The total property award received by Respondent is in excess of that to be received by Petitioner. Such award takes into consideration the fact of the disability payments that Petitioner has and will receive.[13]
Each party was awarded all policies insuring their own lives.
In addressing the MONY and NYLIC disability insurance policies, the trial court concluded that the community paid the last actual premiums on all policies immediately prior to the onset of Petitioner’s disability in December 1991,
The Court of Appeals, the Honorable Karen G. Seinfeld writing, reversed the trial court, holding that the court “erred in ruling that [Dr. Brewer’s] postdissolution disability payments [are] . . . separate property.”
DISCUSSION
Petitioner Michael A. Brewer contends the Court of Appeals erred in ruling that private disability insurance benefits are a divisible asset in a dissolution proceeding. He claims that court’s decision is in conflict with Supreme Court decisions in In re Marriage of Brown
Respondent Deborah Q. Brewer answers to the contrary that the Court of Appeals was correct. She asserts that the decision is based on Chase v. Chase
The principal issue addressed by the Court of Appeals was whether the “trial court err[ed] in characterizing post-dissolution disability payments as [Petitioner Michael A. Brewer’s] separate property.”
Characterization of property as community or separate is not controlling in division of property between the parties in a dissolution proceeding, but
In Chase this court announced the rule that “if . . . premiums are paid with community funds, the insurance proceeds are community property.”
Brown, in defining community property, limited it to acquisitions “through the toil, talent or other productive faculty of either spouse, but not compensation for personal injury.”
A logical application of Brown to privately purchased disability insurance policies suggests that after dissolution of a marriage payment of monthly benefits which constitute future income, or compensation for pain and suffering, should be characterized as separate property even though premium payments were made from community funds during the marriage.
Petitioner asserts that proceeds from privately purchased
Under RCW 26.09.080 trial courts have broad discretion in the distribution of property and liabilities in marriage dissolution proceedings.
Under the facts of this case, the trial court did not abuse its discretion in distributing future monthly disability payments to Petitioner Michael A. Brewer under the private disability insurance policies purchased during the marriage with premiums paid from community funds. The community paid $12,000.00 in premiums on the policies and received disability payments totaling $300,000.00 prior to the dissolution.
SUMMARY AND CONCLUSIONS
The Court of Appeals agreed with the trial court only in its distribution of property in this dissolution, but disagreed with its comments that it felt bound to award future disability payments under the disability insurance policies to Petitioner Michael A. Brewer as his separate property. The Court of Appeals, relying upon Chase v. Chase,
Under Brown, monthly payments under a disability insurance policy intended to compensate the insured for future income or pain and suffering should be characterized as separate property. Monthly payments under the policy which compensate for expenses incurred during the marriage, or earnings lost during the marriage or payments which are in fact deferred compensation, should be characterized as community property in proportion to the community’s contribution to those expenses or to the deferred compensation plan.
Although under RCW 26.09.080 the trial court in a dis-soultion proceeding must consider the character and status of property before distribution, the actual characterization of property as community or separate is not essential to the exercise of discretion by the trial court in distributing assets and liabilities. The trial court under the facts of this case, in the exercise of its discretion, could award future disability payments to Petitioner Michael A. Brewer, regardless whether those payments are characterized as community property or separate property. The fact the trial court characterized the disability policies as separate prop
We therefore disagree with the Court of Appeals only in its determination that remand to the trial court was necessary. Any error committed by the trial court in concluding the disability insurance benefits were not assets subject to division was cured by the authority given courts under RCW 26.09.080 to divide both community property and separate property between the parties in a marriage dissolution, keeping in mind the correct character and status of the property and determining what is “fair, just and equitable, under all the circumstances.”
We conclude instead that the privately purchased disability insurance policies (Mutual of New York and New York Life Insurance Company) for Petititoner Michael A. Brewer acquired during the marriage with premiums paid from community funds retained their character as community property until the dissolution; but after the dissolution monthly payments to Petitioner Michael A. Brewer changed in character to his separate property. The trial court incorrectly concluded the disability insurance benefits were “not assets subject to division in this case.”
We agree with the Court of Appeals on its conclusion that property distribution in this case was proper, but disagree only with that portion of its decision which remanded the case to the Clark County Superior Court. In so doing, we affirm the decision of the trial court which awarded to Petitioner Michael A. Brewer as his separate property future monthly disability payments under the private disability insurance policies purchased during his marriage to Respondent Deborah Q. Brewer with premiums paid from community funds during the marriage until the premiums were waived by the companies issuing the policies.
Clerk’s Papers at 243. On May 20, 1988 the parties entered into a prenuptial agreement, listing most of their premarital assets and debts, which was not directly related to the disputed ruling and is not in the record before this court. Clerk’s Paper at 244.
Id. at 250.
Id. at 249.
Id.
Id. Multiple sclerosis is a chronic disease in which there is scattered demyelination of the central nervous system principally characterized by speech defects and loss of muscular coordination. Webster’s New World Dictionary (2d College ed. 1986).
Clerk’s Papers at 249.
Id. The record does not include documentation from the Social Security Administration nor copies of the disability insurance policies.
Id. This includes $2,793.00 per month from the NYLIC disability policy, earned by Petitioner during the marriage as a job-related benefit at Kaiser. The two privately purchased MONY disability policies pay $1,000.00 and $2,400.00 per month.
Id.
Id. at 1-5.
Id. at 269-71.
Id. at 243-53.
13Id. at 252-53 (emphasis added).
Id. at 246.
Id. at 247.
Id. at 248.
Id. at 250. Respondent receives Social Security payments as a result of her former husband’s death which she uses for her children’s living expenses. She receives $839.00 per month for her youngest child, and might receive an additional $839.00 for the older child if she successfully appeals the Social Security allocation. Her children also have trust resources to provide for educational and related expenses. Clerk’s Papers at 249.
Id. at 247-48.
Id. at 248.
Id. at 250.
Id.
Id. at 245.
Id.
Id.
Id.
Id. at 250-51.
Id.
Id. at 251, 252.
Id. at 251.
Id. Petitioner presented testimony at trial that he cannot reasonably expect to reach the “retirement” age of 65 years because his illness has reduced his life expectancy to 45 years.
In re Marriage of Brewer, 89 Wn. App. 425, 427, 949 P.2d 404 (1998). See also Clerks Fapers at 252.
Id. at 430.
Id. at 431.
100 Wn.2d 729, 675 P.2d 1207 (1984).
103 Wn.2d 236, 692 P.2d 175 (1984).
27 Wn. App. 539, 619 P.2d 991 (1980).
52 Wn. App. 317, 759 P.2d 1224 (1988).
74 Wn.2d 253, 444 P.2d 145 (1968).
Moreman v. Butcher, 126 Wn.2d 36, 39, 891 P.2d 725 (1995).
Brewer, 89 Wn. App. at 426.
ld. at 430.
Blood v. Blood, 69 Wn.2d 680, 682, 419 P.2d 1006 (1966).
Id.
Friedlander v. Friedlander; 80 Wn.2d 293, 303, 494 P.2d 208 (1972).
RCW 26.16.030; see also Harxy M. Cross, The Community Property Law in Washington (Revised 1985), 61 Wash. L. Rev. 17, 28 (1986).
Cross, supra; see In re Marriage of Brown, 100 Wn.2d 729, 734, 675 P.2d 1207 (1984) (citing In re Marriage of Parsons, 28 Wn. App. 276, 622 P.2d 415, review denied, 95 Wn.2d 1019 (1981)).
Chase 74 Wn.2d at 257 (“Favoring, as it does, the existence of community as opposed to separate property, the law will resolve the doubts between them in favor of a community status.”).
Id.
Answer to Pet. for Review of Deborah Brewer at 6.
Aetna Life Ins. Co. v. Wadsworth, 102 Wn.2d 652, 659, 689 P.2d 46 (1984) (“[T]he character of funds used to pay for the most recent term should determine the character of a term life insurance policy.”).
Cross, supra, note 46, at 64-65.
Id.
Brown, 100 Wn.2d at 737.
Id. at 738.
Id.
Id. 738-39.
Cross, supra, note, at 64-65.
Id.
128 Wn.2d 765, 778, 912 P.2d 463 (1996) (“Despite the general community property presumption under RCW 26.16.030, Washington courts have refused to treat disability income, including disability pensions, as community assets subject to allocation in a dissolution proceeding in the absence of substantial elements of either deferred compensation or retirement. Such payments are for lost future income and are not ‘earned’ as are retirement benefits.”). See also In re Marriage of Kollmer, 73 Wn. App. 373, 870 P.2d 978 (1994).
Brown, 100 Wn.2d at 738-39.
Supplemental Br. of Pet’r at 5.
In re Marriage of Konzen, 103 Wn.2d 470, 477-78, 693 P.2d 97 (1985) (former RCW 26.09.080 provides “[T]he court shall, without regard to marital misconduct, make such disposition of the property and liabilities of the parties, either community or separate, as shall appear just and equitable after considering all relevant factors including, but not limited to: (1) [t]he nature and extent of the community property; (2) [t]he nature and extent of the separate property; (3) [t]he duration of the marriage; and (4) [t]he economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live [in it] . . . for reasonable periods to a spouse having custody of any children.” (emphasis added)).
Konzen 103 Wn.2d at 478.
In re Marriage of Hadley, 88 Wn.2d 649, 656, 565 P.2d 790 (1977) (citing Baker v. Baker, 80 Wn.2d 736, 498 P.2d 315 (1972)).
Brewer 89 Wn. App. at 427. See also Clerk’s Eapers at 252.
74 Wn.2d 253, 444 P.2d 145 (1968).
100 Wn.2d 729, 675 P.2d 1207 (1984).
Clerk’s Papers at 252.
Concurrence Opinion
(concurring) — I agree with the majority that the rule enunciated in In re Marriage of Brown, 100 Wn.2d 729, 675 P.2d 1207 (1984), applies to wage-replacement disability insurance benefits. I write separately because (1) I would specifically overrule Chase v. Chase, 74 Wn.2d 253, 444 P.2d 145 (1968), and (2) I would clarify that post-dissolution wage-replacement benefits are not “assets” that are before the trial court in a dissolution proceeding.
Courts and commentators alike have recognized the inconsistency in Washington’s case law in this area. See, e.g., In re Marriage of Huteson, 27 Wn. App. 539, 542-43, 619 P.2d 991 (1980) (questioning both the logic and wisdom of Chase, and holding “To treat . . . disability payments as a community asset would unfairly and permanently burden those future earnings to the same extent as would an award of permanent alimony.”); In re Marriage of Brewer, 89 Wn. App. 425, 430, 949 P.2d 404 (1998) (noting that, in light of criticism and newer case law, the continuing viability of the Chase rule “is questionable”)
The authors of the State Bar Association Community Property Deskbook state:
Disability payments normally represent compensation for diminished earning capacity, replacing lost wages. Thus viewed, the payments are not a form of deferred compensation, rather they are a form of current compensation.
The California courts have held that disability payments received during marriage will be considered community property. Payments to be received after dissolution of marriage will be considered separate property.
This result should be reached in Washington under the reasoning of In re Marriage of Brown .... Earlier cases, however, reached a contrary result.
Washington State Bar Ass’n, Community Property Deskbook § 3.24, at 3-31 to 3-32 (2d ed. 1989) (citation omitted). See also In re Marriage of Nuss, 65 Wn. App. 334, 343, 828 P.2d 627 (1992) (disability benefits which are in the nature of compensation for lost future wages are not an asset for distribution upon dissolution; by contrast, disability benefits which are in the nature of deferred compensation or retirement pay are community property); In re Marriage of Anglin, 52 Wn. App. 317, 324, 759 P.2d 1224 (1988) (disability benefits characterized as repayment for lost future wages were not a marital asset to be characterized and distributed by the court).
In my view, we should clarify the law by overruling Chase and hold: Disability payments which are in the nature of earnings replacement are treated the same as the earnings
Durham, Madsen, and Alexander, JJ., concur with Guy, C.J.
Because of the similarity of the facts in this case and those in Chase v. Chase, 74 Wn.2d 253, 444 P.2d 145 (1968), I cannot fault the Court of Appeals for feeling—reluctantly—bound to follow the rule articulated in Chase.