GILMORE E. RAPHAEL, Plaintiff and Respondent, v. JUNE S. BLOOMFIELD, Defendant and Appellant.
No. B162439
Second Dist., Div. Five
Nov. 21, 2003.
617
Holmes & Holmes and Linda T. Barney for Defendant and Appellant.
Law Office of Peter I. Bersin, Peter I. Bersin; Drucker & Steinschriber and Stephen Marc Drucker for Plaintiff and Respondent.
OPINION
MOSK, J.—
INTRODUCTION
In In re Marriage of McDonald (1975) 52 Cal.App.3d 509 [125 Cal.Rptr. 160] (McDonald), the Court of Appeal held that a workers’ compensation lump sum award pursuant to a settlement agreement1 received by an injured
BACKGROUND
Wife and husband were married in May 1994 and separated in August 2000. Both spouses suffered work-related injuries during their marriage and applied for workers’ compensation benefits. Husband settled his workers’ compensation claim and received a lump sum payment of $45,000 in October 2000, two months after he and wife separated. Wife, who was determined to be 90.1 percent permanently disabled, settled her workers’ compensation claim and received a lump sum payment of $311,859.04 in February 2000, six months before she and husband separated.
Husband petitioned for dissolution of the marriage in February 2001. At trial, the only contested issue was whether the workers’ compensation awards each spouse received were community property. Relying upon
The trial court found that husband‘s award was his separate property, but that wife‘s award was community property—thereby impliedly finding that there was no binding oral agreement. The court ordered wife to pay husband $155,929.52, i.e., one-half of wife‘s lump sum award. Represented by new
The trial court denied wife‘s motion, finding there was no error of law because the court did not have evidence before it at trial to rebut the section 760 presumption of community property. Wife timely appealed from the judgment and order denying her motion.
DISCUSSION
A. Can This Court Consider a Theory That Was Not Raised at Trial?
On appeal, wife contends that her workers’ compensation award was not community property because it represents future payments to compensate her for her diminished earning capacity and for her future medical expenses. Wife did not advance this argument during the trial in this case (although she did make the argument in her posttrial motion for reconsideration or for a new trial). As noted above, wife asserted at trial that her workers’ compensation award was her separate property based upon an alleged oral agreement between wife and husband.
Ordinarily, “[t]he theory upon which a case was tried in the court below must be followed on appeal.” (Strasberg v. Odyssey Group, Inc. (1996) 51 Cal.App.4th 906, 920 [59 Cal.Rptr.2d 474].) Nevertheless, a reviewing court may consider points not raised at trial when important issues of public policy are involved (Frink v. Prod (1982) 31 Cal.3d 166, 170 [181 Cal.Rptr. 893, 643 P.2d 476]; accord, In re Marriage of Weaver (1990) 224 Cal.App.3d 478, 488 [273 Cal.Rptr. 696]) or when a contention newly made on appeal presents a question of law based upon undisputed facts (Seeley v. Seymour (1987) 190 Cal.App.3d 844, 856 [237 Cal.Rptr. 282]). Because wife‘s appeal raises a question of law involving an important issue of public policy not previously addressed in California case law, we consider her contention.
B. Is a Lump Sum Workers’ Compensation Award Received During a Marriage Community Property?
Although no published California case has addressed the precise issue in this case—i.e., whether a workers’ compensation lump sum award received prior to marital separation is community property—the California Supreme
In Jones, supra, 13 Cal.3d 457, one spouse was injured while serving in the military. The injured spouse was “retired for disability” and received monthly disability pay. (Id. at p. 459.) When the noninjured spouse filed suit for dissolution of the marriage, she asserted that the injured spouse‘s right to disability pay was a community asset. The Supreme Court disagreed. It explained that disability payments “serve to compensate the disabled veteran for the loss of military pay caused by his premature retirement and for his diminished ability to compete for civilian employment. [Citation.] So long as the marriage subsists, the veteran‘s reduced earnings works a loss to the community. But such community loss does not continue after dissolution; at that point the earnings or accumulations of each party are the separate property of such party. [Citation.] Then any diminution in earning capacity becomes the separate loss of the disabled spouse.” (Id. at p. 462.) The court concluded, “Since disability pay serves primarily to compensate the disabled serviceman for current suffering and lost earning capacity, we conclude that only such payments as are received during the marriage constitute a community asset. The veteran‘s right to payments subsequent to dissolution is his separate and personal right.” (Id. at p. 464.)
The Court of Appeal in McDonald, supra, 52 Cal.App.3d 509, came to the same conclusion with regard to workers’ compensation permanent disability pay. The court noted that in Northwestern Redwood Co. v. Industrial Acc. Commission of California (1920) 184 Cal. 484 [194 P. 31] (Northwestern), the California Supreme Court held that the wife of an industrially injured spouse could recover workers’ compensation permanent disability benefits owed to her spouse after he deserted her and was never heard from again, under a statute that allowed a lien on workers’ compensation benefits where
This same reasoning leads us to conclude that, notwithstanding the section 760 community property presumption, a lump sum permanent disability award received prior to separation is the injured spouse‘s separate property to the extent it is meant to compensate for the injured spouse‘s diminished earning capacity (and/or medical expenses) after separation. The Supreme Court‘s statement in Northwestern, supra, 184 Cal. at page 486, that workers’ compensation benefits are community property does not govern because later authorities have limited the effect of Northwestern and its peculiar facts to benefits owed and received during the parties’ marriage. (McDonald, supra, 52 Cal.App.3d at p. 511.) Here, at least a portion of the lump sum award received during the marriage represented future benefits, and therefore some of the benefits were not owed during the marriage. Moreover, the result in Northwestern and our holding here are consistent with the workers’ compensation statutory scheme, which expressly allows a lien against workers’ compensation benefits in favor of a deserted spouse but disallows liens other than those enumerated in
There is no logical reason to treat a lump sum workers’ compensation award differently based upon whether it is received before or after separation, because the timing of the receipt is unrelated to the purpose of the award. An injured spouse who receives a lump sum award the day before a marital separation has the same diminished earning capacity, and the same need for compensation to offset that diminished earning capacity, as he or she would have if the award were received the day after the separation. Yet were we to hold that the award is community property if it is received the day before the separation, the purpose of the workers’ compensation award would be thwarted because the injured spouse would not be compensated adequately for his or her diminished future earning capacity. Moreover, if an award received the day before separation were to be deemed community property, the noninjured spouse would receive a windfall because only a portion, if any, of the award is intended to compensate for a loss to the community.
Therefore, we hold that only that portion of a workers’ compensation permanent disability award received before a marital separation that is intended to compensate for the injured spouse‘s reduced earnings during the marriage (before separation), or for injury-related expenses paid with community funds, constitutes community property. The remainder of any such award is the separate property of the injured spouse.
C. Was There Evidence Admitted at Trial That Any Portion of Wife‘s Award Was Attributable to Postseparation Payments or Expenses?
A question remains regarding whether there was evidence admitted at trial in this case that establishes that the lump sum award wife received was attributable to future disability payments and future medical expenses. At the hearing on wife‘s motion for reconsideration or a new trial, the trial court stated that there was no such evidence admitted at trial.4 There was, however, evidence admitted at trial that shows the nature of the award, from which the court could have determined the portion of the lump sum award not subject to division as community property.
Exhibit 1 to husband‘s trial brief consisted of seven pages. The first page of the exhibit is a document entitled “Joint Order Approving Compromise & Release,” which appears to have attached a two-page document entitled “Compromise and Release,” which in turn attaches several exhibits. One of the exhibits attached to the Compromise and Release is a document entitled “Workers’ Compensation Commutation Worksheet,” which shows the computation of the present value of wife‘s disability life pension.6
The Compromise and Release states, among other things, that (1) wife has been paid for all periods of temporary disability, and has received $58,354.90 in permanent disability payments (through January 28, 2000); (2) all medical expenses incurred through the date of approval of the Compromise and Release would be paid by the insurance carrier, and all future medical expenses would be paid by wife; (3) attorney fees would be deducted from the $400,000 workers’ compensation lump sum settlement payment; and (4) the insurance carrier would take credit from the settlement for the $58,354.90 permanent disability payments already paid. The Workers’ Compensation Commutation Worksheet shows that wife‘s permanent disability benefit rate was $230.00 per week, that she would receive that weekly benefit for 11.2633 years, that she had a life pension rate of $115.96 per week, and that the pension had a commuted value of $61,413.81. This evidence shows that only a small fraction of the $400,000 settlement represented disability payments that otherwise would have been paid before wife and husband separated (from January 28, 2000 through August 2000); the remainder of the settlement, therefore, represented postseparation payments and medical expenses.
Although there was evidence that some of the award was wife‘s separate property, we reject wife‘s contention that she necessarily is entitled to the entire lump sum award as her separate property. To the extent a portion of the lump sum award represented benefits that, in the absence of wife‘s settlement, would have been paid prior to the parties’ separation (i.e., the weekly disability payments she would have received from the time of the settlement until separation), those payments would be community property under Northwestern, supra, 184 Cal. at page 486, as later interpreted by McDonald, supra, 52 Cal.App.3d 509.
D. Conclusion
Wife was found to be 90.1 percent permanently disabled as a result of job-related injuries, and therefore presumably will be unable to support herself through employment for the rest of her life. The purpose of workers’ compensation insurance generally, and the purpose of wife‘s lump sum award specifically, is to provide that support. Under husband‘s theory, however, he is entitled to half of that award. Neither the law nor the equities justify such a cruel result. There can be no dispute that at least part—and no doubt most—of the lump sum award wife received six months before the marital separation represented payments intended to support wife postseparation. By distributing half of wife‘s award to husband, the trial court not only gave a windfall to husband, it took away wife‘s primary means of support, contravening the purpose of workers’ compensation insurance. The law should not and does not condone the use of the theory of trial doctrine to perpetuate that result. Under these circumstances, reversal of the judgment is neither unfair to the trial court nor unjust to husband.
The judgment is reversed. The matter is remanded to the trial court to determine what portion, if any, of wife‘s workers’ compensation lump sum award was attributable to disability and life pension payments owed before the marital separation or to medical expenses paid with community funds. That portion shall be distributable as community property, and the remainder of the lump sum award shall be deemed wife‘s separate property. Wife shall recover her costs on appeal.
Armstrong, J., concurred.
GRIGNON, Acting P. J., Dissenting.—I have grave concerns about the correctness of the majority‘s holding that a workers’ compensation lump sum permanent disability award received during the marriage is separate property. (Northwestern Redwood Co. v. Industrial Acc. Com. (1920) 184 Cal. 484 [194 P. 31] [workers’ compensation permanent disability benefits are community property]; cf. In re Marriage of Stenquist (1978) 21 Cal.3d 779; In re Marriage of Jones (1975) 13 Cal.3d 457; In re Marriage of Fisk (1992) 2 Cal.App.4th 1698; In re Marriage of McDonald (1975) 52 Cal.App.3d 509 [payments received postseparation or postdissolution are separate property].) I also have grave concerns about the propriety of the majority‘s conclusion that certain documents may have been received into evidence, and therefore may be relied on to support the majority‘s opinion, when the trial court expressly stated the documents had not been received into evidence. I will, however, leave these concerns for another case in which the issues are properly before us.
I dissent on the ground that the entire case, including trial, proceeded on one theory, and the theory relied on by the majority to reverse the judgment of the family law court relies on an entirely different theory, not raised by Wife until posttrial motions. In my view, the theory of trial doctrine should be applied to restrain us from addressing Wife‘s new theory of the case.
“The theory upon which a case was tried in the court below must be followed on appeal.”1 (Strasberg v. Odyssey Group, Inc. (1996) 51 Cal.App.4th 906, 920.) ” ‘A party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant. [Citation.]’ ” [Citations.]” (Ibid.) The theory of trial
There is an exception to the theory of trial doctrine. An appellate court has discretion to consider a new and different theory ” ‘where a question of law only is presented on the facts appearing in the record.’ [Citation.] “But if the new theory contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at the trial the opposing party should not be required to defend against it on appeal.” ’ ” (Strasberg v. Odyssey Group, Inc., supra, 51 Cal.App.4th at p. 920.) A new legal theory is more likely to be considered on appeal if an important issue of public policy is involved. (In re Marriage of Freeman (1996) 45 Cal.App.4th 1437, 1450 [53 Cal.Rptr.2d 439]; In re Marriage of Weaver (1990) 224 Cal.App.3d 478, 488.) In exercising its discretion as to the application of this exception, the appellate court should consider whether the party raising the new theory waived the right to assert the new theory. (In re Marriage of Weaver, supra, 224 Cal.App.3d at p. 489.)
Wife‘s theory of the trial was that there was an unequivocal oral agreement and pattern of behavior between the parties from the date of marriage to the time of physical separation that the earnings of the parties would be their separate property. Wife argued that Husband should be equitably estopped from asserting his community property interest in her workers’ compensation award by the preexisting oral agreement. The case was tried on this theory and all of the evidence and argument presented by the parties related to this theory. The family law court found that the workers’ compensation award received during the marriage was community property. In a motion for reconsideration or new trial, for the first time Wife argued that the workers’ compensation award was not community property. The family law court rejected this theory on the ground that it had not been timely raised and the documents supporting the argument had not been received into evidence. The family law court denied the motion.
Wife raises this same new theory on appeal. The majority concludes it is purely a legal issue. It is not. As indicated by the majority, the entirety of the workers’ compensation award paid to Wife is not separate property under any