Lowery v. Lowery

⁴²⁶ HARRELL, Judge. Jack Winston Lowery appeals from a judgment of the Circuit Court for Allegany County granting appellee, Patricia A. Lowery, a monetary award of $27,748.50 as part of the winding-up of the dissolution of their marriage. Mr. Lowery objects to the circuit court’s characterization as marital property of a portion of the workers’ compensation settlement he received related to an injury sustained prior to the date on which the parties were married. Although we agree in principle with the circuit court’s determination that the portion of a workers’ compensation settlement that provides compensation for lost wages or future earning capacity constitutes marital property, we conclude that the evidence adduced on this matter failed to establish which portion of the settlement at issue qualified as marital property.

Therefore, we shall vacate the judgment of the circuit court and remand this case for further proceedings not inconsistent with this opinion. ISSUES Appellant presents the following questions for our review, which we have rephrased as follows: 1. Whether the settlement of workers’ compensation claims related to an injury which occurred prior to the parties’ marriage constitutes marital property subject to distribution in a divorce proceeding. 2. Whether the trial court abused its discretion by granting Mrs. Lowery a monetary award of $27,748.50 because she failed to present sufficient evidence to establish which portion of the workers’ compensation settlement was marital property. 3.

Whether the circuit court committed reversible error by granting appellee a monetary award which exceeded the value of the marital property. FACTS The Lowerys were married in Tennessee on 7 January 1982. Soon thereafter, they established residence in Allegany Coun ⁴²⁷ ty, Maryland. Their marriage, by all appearances, was a troubled one.

They endured separations on several occasions. The parties’ final separation occurred on 31 July 1994. Mr. Lowery had been employed with Kelly-Springfield Tire Company (Kelly-Springfield) for twenty-six years, from June 1961 through June 1987. The settlement proceeds that form the basis of the instant controversy stem from a rotator cuff injury Mr. Lowery suffered while at work on 26 September 1976.

Although he continued to work at Kelly-Springfield after his injury, appellant filed at least three workers’ compensation claims. 1 Further, he underwent surgery twice to repair his rotator cuff. Following those operations, Mr. Lowery developed multiple pulmonary emboli, 2 and in 1981, he experienced repeated episodes of thrombophlebitis 3 in his left leg. Between 1981 and 1987, he received three separate workers’ compensation awards for permanent partial disability in the amounts of $4,000, $8,000 and $25,000, respectively. 4 Mr. Lowery’s employment with Kelly-Springfield ended in June 1987 due to a plant shutdown. Since that time, he has worked occasionally as a bartender.

From 1987 until 1995, Mr. Lowery did not receive any workers’ compensation benefits. Mr. Lowery filed a Complaint for limited divorce on the grounds of desertion and constructive abandonment on 1 August 1994. Mrs. Lowery filed her Answer on 11 October and a Counter-Complaint on 17 October seeking either a limited divorce on the ground of constructive desertion or an ⁴²⁸ absolute divorce on the ground of adultery, as well as the disposition of various property issues. 5 On 12 April 1995, appellant entered into an Agreement of Final Compromise and Settlement with Kelly-Springfield and its workers’ compensation insurer, Travelers Indemnity Company (Travelers), in settlement of his three workers’ compensation claims. The agreement explicitly provided that it was a settlement of all claims that Mr. Lowery might have for an injury he sustained on or about 26 September 1976.

Under the terms of the settlement, appellant received a lump sum payment of $7,500 6 and monthly payments of $500.00 for his life. The agreement guaranteed that under the annuity, Mr. Lowery, or his estate, would receive a minimum aggregate amount of at least $120,000, payable in monthly increments of $500.00 over a period of twenty years. The agreement, however, did not elaborate on whether its purpose was to compensate Mr. Lowery for lost wages or earning capacity, medical expenses, disfigurement, etc. Moreover, the agreement did not specify the period of lost wages or earning capacity that it was designed to cover. On 12 May 1995, pursuant to a hearing held on 9 May 1995, the court entered a Judgment of Absolute Divorce in favor of Mrs. Lowery on the ground of adultery, 7 while expressly reserving disposition of the property issues.

An evidentiary hearing on the issues reserved by the trial court was conducted on 3 July 1995. On 11 December 1995, the court issued a Memorandum and Judgment granting Mrs. Lowery a mone ⁴²⁹ tary award of $27,748.50 and reduced that sum to a judgment in personam against appellant. The findings made by the court that are relevant to this appeal include (1) appellee possessed tangible personal property valued at $167.50 and appellant possessed tangible personal property valued at $11,-664.20, and (2) $44,000 of appellant’s 12 April 1995 workers’ compensation settlement constituted marital property. The court concluded that the $44,000 sum was compensation to Mr. Lowery for loss of his earning capacity during the marriage. 8 Mr. Lowery filed an appeal on 5 January 1996.

ANALYSIS I. Appellant’s initial contention is that his workers’ compensation settlement was not marital property because it was compensation for an injury which occurred before the parties were married. He directs the Court’s attention to the definition of marital property contained in Md.Code Ann., Fam.Law § 8-201(e) (1991 Rep.Vol. & 1996 Supp.) which reads as follows: § 8-201. Definitions. (e) Marital Property. — (1) “Marital property” means the property, however titled, acquired by 1 or both parties during the marriage. * * * * * * (3) ... “marital property” does not include property: (i) acquired before the marriage; * * or (iv) directly traceable to any of these sources. ⁴³⁰ Mr. Lowery maintains that his workers’ compensation claims constituted a property interest.

Because the injury occurred before the marriage, his claims, and the property rights derived therefrom, were acquired by appellant before the parties were married. Because marital property does not include property acquired before the marriage, Mr. Lowery contends that his workers’ compensation claims, and the settlement check and annuity directly traceable to them, were not marital property. Appellant also seeks to distinguish Queen v. Queen, 308 Md. 574 , 521 A.2d 320 (1987), the lone Maryland authority on whether workers’ compensation awards constitute marital property. The Queens were married in 1964.

In 1982, Mr. Queen was injured while at work. Id. at 576 , 521 A.2d at 321 . One month prior to Mrs. Queen’s filing for divorce in 1984, Mr. Queen received a lump sum workers’ compensation award for permanent partial disability. The circuit court granted Mrs. Queen’s prayer for an absolute divorce and subsequently determined that the lump sum permanent partial workers’ compensation award was marital property.

Id. at 576 , 521 A.2d at 322 . This decision was vacated by the Court of Appeals. The Court held that only that portion of Mr. Queen’s permanent partial disability award that compensated for loss of earning capacity during the marriage constituted marital property subject to equitable distribution. . Id. at 586-87 , 521 A.2d at 327 .

As Mr. Lowery is quick to point out, Mr. Queen’s award was for an injury which occurred during the marriage, while appellant’s award related to an injury sustained prior to the marriage. Thus, according to appellant, Queen is not controlling. The essence of appellant’s position is that the time of the accrual of the right to recovery should be determinative as to whether a workers’ compensation claim is marital property. Because his injury occurred and his accompanying right to assert a workers’ compensation claim accrued prior to the parties’ marriage, appellant argues that the 1995 settlement which relates to that injury should not be characterized as ⁴³¹ marital property. 9 At first blush appellant’s argument regarding Queen is appealing.

A mechanical application of § 8-201(e)(3) produces the result he desires. Further, our research uncovered at least one uncited opinion, based on facts analogous to the case at bar, from another jurisdiction supporting appellant’s contention. In re Marriage of Drone, 217 Ill.App.3d 758, 160 Ill.Dec. 601 , 577 N.E.2d 926 (1991). In Drone, the Illinois intermediate appellate court adopted the position that the time of accrual of a workers’ compensation claim is dispositive on the issue of whether proceeds derived from that claim are marital property.

One year after the Drones were married, Mr. Drone received a $37,000 settlement from a workers’ compensation claim for injuries he sustained prior to the marriage. The appellate court agreed with Mr. Drone’s contention that the award was separate property because the right to the benefits accrued prior to the parties’ marriage. Mr. Lowery essentially asks this Court to adopt what has become recognized as the “mechanistic approach” for determining whether a workers’ compensation settlement or award should be characterized as marital property. Under this approach, a workers’ compensation settlement or award is deemed marital only if the right to assert the claim accrued during the marriage.

Jurisdictions which apply the mechanistic approach base their reasoning almost entirely upon the definition of marital property contained in their property disposition statutes which exclude property acquired before the marriage. Other cases adopting the mechanistic approach include the following: Johnson v. Johnson, 638 S.W.2d 703 (Ky.1982); Smith v. Smith, 113 Mich.App. 148 , 317 N.W.2d 324 (1982); Orszula v. Orszula, 292 S.C. 264 , 356 S.E.2d 114 (1987). ⁴³² ' Nevertheless, a closer examination of the Maryland Court of Appeals’s opinion in Queen indicates that the approach taken in Drone, and advocated by appellant here, does not comport with Maryland jurisprudence on this question. In its opinion, the Court in Queen considered authority from other jurisdictions having equitable distribution provisions in their marital property statutes which held that the date the workers’ compensation claim accrued determined its classification as marital or not. 308 Md. at 582 , 521 A.2d at 324-25 . 10 In its holding, the Queen Court chose, instead, to focus on the purpose of the benefits as being determinative of whether a particular workers’ compensation settlement or award- was marital property. The Queen Court determined that to the extent that a workers’ compensation award compensates for loss of earning capacity during the marriage, it is marital property.

In determining whether the permanent partial disability award at issue in this case is marital property “acquired” during the marriage, we consider not only the date of the award, but also the nature of the benefit which it represents. Id. at 585 , 521 A.2d at 326 . Accordingly, the Queen Court distinguished between a permanent disability and a temporary one, stressing that a permanent disability award is designed to compensate for a loss of future earning capacity. Because the Workmen’s Compensation Act ... requires employers to provide such coverage for their employees, workers’ compensation benefits constitute a type of employment related benefit which replaces the common-law right of employees to bring tort actions against the employers for job-related injuries. ⁴³³ The amount and duration of workers’ compensation benefits depend on the injury sustained by the employee.

Injuries are classified under the Workmen’s Compensation Act ... according to whether they are: 1) partial or total; and 2) temporary or permanent.... A temporary, as distinguished from permanent disability, exists “until the injured workman is as far restored as the permanent character of the injuries will permit.” Jackson v. Bethlehem-Fairfield Shipyard, 185 Md. 335, 339 , 44 A.2d 811 (1945). Differentiating between temporary and permanent disabilities, several courts have observed that temporary disability payments are a substitute for lost wages during the temporary disability period, while permanent disability is for permanent bodily impairment and is designed to indemnify for the insured employee’s impairment for future earning capacity. Thus, these courts indicate that permanent disability is not based solely on loss of wages but is based on actual incapacity to perform the tasks usually encountered in one’s employment, and on physical impairment of the body that may or may not be incapacitating.

See In re Marriage of Robinson, ... 54 Cal.App.3d [682,] 685-86, 126 Cal.Rptr. 779 [ (1976) ]; Russell v. Bankers Life Co., 46 Cal.App.3d 405, 415-16 , 120 Cal.Rptr. 627 (1975). if! $ $ 4 $ Turning to the facts of the present case, we note that the award was received approximately one year before the couple divorced. We note also that the purpose of the Workmen’s Compensation Act is to assist workers and then-families, Queen v. Agger, 287 Md. 342, 343 , 412 A.2d 733 (1980), and that the Marital Property Act should be construed liberally to effect its broad remedial purpose. Harper v. Harper, 294 Md. 54, 64 , 448 A.2d 916 (1982). Nonetheless, we hold that only the portion of the husband’s awaird compensating for loss of earning capacity during the marriage is marital property subject to equitable distribution by the trial judge. 308 Md. at 585-87 , 521 A.2d at 326-27 (emphasis added). ⁴³⁴ In addition, the Court concluded that the Legislature did not intend for the non-injured spouse to share in the injured spouse’s workers’ compensation award beyond the period the parties were married.

Id. at 587 , 521 A.2d at 327 . Based upon our examination of the language quoted above, we read Queen as holding that the purpose of the benefits, rather than the timing of the