Murray v. Murray

J. FREDERICK SHARER, Judge (Retired, Specially Assigned). The parties to this appeal, appellant, Anthony Murray, and appellee, Teresa Murray, were divorced absolutely by judgment of the Circuit Court for Montgomery County, entered on September 19, 2007. Of primary concern in this appeal is the trial court’s disposition of marital property, particularly its treatment of funds received by Teresa in settlement of an employment discrimination claim. In his appeal, Anthony presents four questions for our consideration, which we have distilled and rephrased as: 1 1.

Whether the trial court erred in ruling that proceeds from Teresa’s employment discrimination claim were not marital property. 2. Whether the trial court erred in its unequal division of the proceeds of the sale of the marital home. For the reasons that follow, we shall vacate the judgment of the circuit court and remand this matter for further appropriate proceedings. ⁵⁵⁸ FACTS and PROCEEDINGS 2 Anthony Murray and Teresa Murray (the plaintiff below) were married on May 20, 1998. They are the parents of two children, ages ten and four at the time of the trial. 3 Both parties were employed: Teresa as an attorney, Anthony as a clerk with the Internal Revenue Service.

The litigation was initiated by Teresa’s complaint for absolute or limited divorce on the ground of constructive desertion. Anthony answered and filed a counter-complaint alleging desertion. Ultimately, the parties stipulated, and the trial court found, that they had voluntarily lived separate and apart, without interruption, for 12 months prior to August 16, 2006. The divorce was granted on that ground.

I. The Employment Discrimination Settlement—Marital Property? During the marriage, Teresa was employed as an attorney by O’Donoghue & O’Donoghue in Washington, D.C. Her employment with that law firm was terminated, by her employer, effective December 31, 2002. Thereafter, Teresa filed an employment discrimination suit against the law firm, and individual partners and employees of the firm, in the Superior Court of the District of Columbia. Her complaint was founded in alleged discriminatory and retaliatory practices by the firm and its employees, in violation of the District of Columbia Family and Medical Leave Act, as well as breach of contract.

She sought damages for lost wages and salary, compensatory damages for claims under the District of Columbia Human Rights Act, consequential damages allowable under the Family and Medical Leave Act, and punitive damages. ⁵⁵⁹ Teresa’s claims were resolved by the execution of a settlement agreement and general release, effective July 21, 2006 (“the settlement agreement”). Significant among the terms of the settlement agreement was the payment to Teresa of $550,000. The net proceeds of the settlement were paid to Teresa, after expenses of suit and counsel fees, in two installments—$425,000 within 14 days of July 21, 2006, and $125,000 on January 2, 2007. The record does not disclose the actual net amount paid to her, but the trial court found that, at the time of the August 15-16, 2007 merits divorce trial, Teresa had retained $274,000 of the settlement in the form of two $50,000 college savings plans and $174,000 in a bank account.

Also, in the June 8, 2007 joint statement filed by the parties pursuant to Md. Rule 9-207, (stating that the parties were not in agreement as to whether the settlement proceeds were marital or non-marital property), Teresa asserted that she retained $300,000 from the settlement proceeds. As to the settlement proceeds, in a written Opinion and Order dated September 19, 2007, the trial court found: Testimony at trial indicated that, several months after the parties separated, [Teresa] settled a discrimination lawsuit she had filed against her former employer. The lawsuit was filed during the marriage, regarding alleged practices by the employee that occurred during the marriage. [Anthony] contends that the settlement ... is marital property. [Teresa] contends that the settlement does not specify which portion represents back pay, lost wages, pain and suffering, or other elements of damage. Therefore, she claims, it cannot be categorized as marital property.

There is nothing in the Marital Property Act indicating a legislative preference for the classification of property as marital, as opposed to non-marital. The party who asserts a marital interest in property bears the burden of producing evidence as to the identity and value of such property. Melrod v. Melrod, 83 Md.App. 180 , 574 A.2d 1 (1990). In Queen v. Queen, 308 Md. 574 , 521 A.2d 320 (1987), appellant received a Workmen’s Compensation Act award one year before divorce, for injuries sustained in an employ ⁵⁶⁰ ment-related accident that occurred during the marriage.

The Court of Appeals held that only the portion of the award representing loss of earning capacity during the marriage was marital property, subject to equitable distribution. In this regard, the [Cjourt said: “Due to the personal nature of the injuries giving rise to a permanent partial disability award, we cannot conclude that the General Assembly intended a noninjured spouse to share in the compensation for the injured spouse’s loss of future earning capacity representing a time period beyond the dissolution of the marriage.” The court has examined the First Amended Complaint filed in the discrimination case; [Anthony] is not a party, and there was no claim for loss of consortium. The Settlement Agreement and General Release does not name [Anthony], nor delineate what the $550,000 represents, other than a settlement amount. Because it is [Anthony’s] burden to identify and value the property he seeks to classify as marital, there is simply no credible evidence from which the court can conclude that this sum is marital property.

Standard of Review Our review of a decision of a trial court sitting without a jury is governed by Md. Rule 8-131(c): (c) Action tried without a jury. When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. “The deference shown to the trial court’s factual findings under the clearly erroneous standard does not, of course, apply to legal conclusions.” Karsenty v. Schoukroun, 406 Md. 469, 502 , 959 A.2d 1147 (2008) (quoting Griffin v. Bierman, 403 Md. 186, 195 , 941 A.2d 475 (2008)). “We, instead, review de novo the trial court’s legal conclusions.” Griffin, 403 Md. at 195 , 941 A.2d 475 . See also, Alston v. Alston, 331 Md. 496 , ⁵⁶¹ 504, 629 A.2d 70 (1993) (“a trial court must exercise its discretion in accordance with correct legal standards.”).

DISCUSSION We start with the well-established proposition that only marital property is subject to the equitable distribution provisions of Md.Code (2006 Repl.Vol.), Family Law Article (“FL”) §§ 8-201, et seq. Marital property is “all property, however titled, acquired by 1 or both parties during the marriage.” FL § 8~201(e)(l). Before this Court, Anthony renews the arguments he pressed below—that the entire proceeds from the settlement of Teresa’s employment discrimination claims are marital property, and that the trial court erred in not including those funds in its identification of marital property subject to equitable distribution via a monetary award. Three Significant Cases: Queen, Lowery, and Newborn The question of whether all or part of employment discrimination and/or wrongful discharge settlement proceeds or awards, received by a spouse during the marriage, are marital property has not been addressed by our courts.

Before our more extensive discussion of the analysis to be applied to the facts before us, we take time to summarize the three reported Maryland cases that bear upon that analysis: Queen v. Queen, 308 Md. 574 , 521 A.2d 320 (1987), Lowery v. Lowery, 113 Md.App. 423 , 688 A.2d 65 (1997), and Newborn v. Newborn, 133 Md.App. 64 , 754 A.2d 476 (2000). It is those cases upon which appellant relies to support his contention that the settlement proceeds ought to have been found to be marital property. In each of those cases, the courts have taken up the status of workers’ compensation and personal injury awards, vis a vis marital property. David Queen, during his marriage, suffered a work-related injury for which he received, also during the marriage, a lump sum permanent partial disability settlement.

The trial court determined the settlement proceeds to be marital property. ⁵⁶² The Court of Appeals undertook a review of decisions of other jurisdictions dealing with whether, and to what extent, workers’ compensation benefits are marital property. After doing so, the Court observed: 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. 308 Md. at 585 , 521 A.2d 320 . The Court concluded, id. at 586-87 , 521 A.2d 320 : [W]e hold that only the portion of the husband’s award compensating for loss of earning capacity during the marriage is marital property subject to equitable distribution by the trial judge. Due to the personal nature of the injuries giving rise to a permanent partial disability award, we cannot conclude that the General Assembly intended a noninjured spouse to share in the compensation for the injured spouse’s loss of future earning capacity representing a time period beyond the dissolution of the marriage.

Because the record did not “disclose the information essential to computing the portion of the husband’s award, if any, allocable as marital property,” the Court remanded for additional fact finding. Lowery v. Lowery also dealt with the status of a workers’ compensation lump sum benefit payment received during the marriage although, in contrast to Queen , Jack Lowery’s benefits were for injuries that occurred prior to the marriage. As did the Court of Appeals in Queen , this Court remanded for additional fact finding. We opined: Thus, if the purpose of the [workers’ compensation] settlement or award is to compensate a person for lost wages during the marriage or medical expenses previously paid from marital assets, then the settlement or award is charac ⁵⁶³ terized as marital property.

Conversely, if the award compensates for lost premarital or post-marital wages or for medical expenses paid from separate funds, then the award should be characterized as non-marital. 118 Md.App. at 434, 688 A.2d 65 . Three years later in Newborn v. Newborn, the issue before this Court was the marital or non-marital status of the proceeds of a personal injury settlement received by the husband, Herbert Newborn, for injuries suffered during the marriage. In this regard, we held that the treatment of personal injury settlements or awards should be no different than the treatment that had been afforded to workers’ compensation awards in Queen and Lowery . As implicitly recognized by Judge Chasanow in Blake [v. Blake, 341 Md. 326 , 670 A.2d 472 (1996)], there is no good reason why we should use the analytical approach [4] when considering workers’ compensation awards and use a differ ⁵⁶⁴ ent approach when considering a recovery by a spouse that comes about as a result of a tort judgment or settlement.

Newborn, 133 Md.App. at 93 , 754 A.2d 476 . As were Queen and Lowery, Newborn was remanded to the trial court. Although we determined that Mrs. Newborn had failed to meet her burden of proving 5 that the tort recovery funds were marital property, because the ... issue resolved in this case was one of first impression, we think that fundamental fairness requires us to remand the case to give Ms. Newborn an opportunity to put on evidence to prove what portion of the personal injury settlement was marital. Id. at 96, 754 A.2d 476 .

Analytical Approach Adopted Under what has become styled in such cases as the analytical approach, in the absence of a statutory definition of marital property that specifically addresses whether all or part of such settlement proceeds or awards received by the claimant spouse during the marriage are marital property, that determination turns on the underlying nature of the damages that the recovery is intended to remedy, rather than the mere timing of the underlying claim or settlement/award. See Blake v. Blake, 341 Md. 326, 346-47 , 670 A.2d 472 (1996); Queen, 308 Md. at 585 , 521 A.2d 320 ; Newborn, 133 Md.App. at 90-91 , 754 A.2d 476 ; Lowery, 113 Md.App. at 434 , 688 A.2d 65 ; Turner, supra, § 6:55; Annotation, Divorce and Separation: Determination of Whether Proceeds From Personal Injury Settlement or Recovery Constitute Marital Property, 109 A.L.R.5th 1 , 35-54, § 5[a] (2003). As noted, Maryland courts have adopted the analytical approach in the context of both personal injury tort and workers’ compensation claims. See Blake, 341 Md. at 344 , 670 ⁵⁶⁵ A.2d 472 (applying analytical approach to personal injury settlement proceeds); Queen, 308 Md. at 586-87 , 521 A.2d 320 ; Lowery, 113 Md.App. at 434-35 , 688 A.2d 65 ; Newborn, 133 Md.App. at 92-93 , 754 A.2d 476 .

Only that portion of such claim proceeds which compensates the claimant spouse for lost wages or earning capacity during the marriage, medical expenses paid from marital funds, or for joint loss of consortium, is marital property subject to equitable distribution. Blake, 341 Md. at 344-45 , 670 A.2d 472 (holding only proven portion of liquidated personal injury settlement for “loss to the marital unit” was marital property); Queen, 308 Md. at 586-87 , 521 A.2d 320 (same as to workers’ compensation award); Lowery, 113 Md.App. at 434 , 688 A.2d 65 (stating “if the purpose of the settlement or award is to compensate [the injured spouse] for lost wages during the marriage or medical expenses previously paid from marital assets, then [it] is characterized as marital property.”); Newborn, 133 Md.App. at 93 , 754 A.2d 476 (holding personal injury proceeds “paid to reimburse the [marital unit] for medical expenses ... [marital] wages ... and ... for their joint claim for loss of consortium” is marital property) (emphasis in original). By contrast, to the extent the proceeds compensate the injured spouse for future post-marital wages, bodily injury, or pain and suffering, they constitute the non-marital property of the recipient spouse. Blake, 341 Md. at 344 , 670 A.2d 472 ; Queen, 308 Md. at 587 , 521 A.2d 320 .

The rationale for treating economic and non-economic loss differently for purposes of identifying the marital property pool subject to equitable distribution, is that damages for bodily pain, suffering, and loss are “uniquely personal” to the injured spouse. Unkle v. Unkle, 305 Md. 587, 596 , 505 A.2d 849 (1986). On the other hand, damages for lost wages or earning capacity during the marriage, paid medical expenses and consortium loss all compensate a loss incurred by the “marital entity.” Blake, 341 Md. at 345 , 670 A.2d 472 . This reasoning is sound and we apply it here.

We see no reason why such proceeds or awards for the same types of economic and non-economic loss as those recovered in a ⁵⁶⁶ personal injury or workers’ compensation claims should be treated any differently under Fam. Law Art. 8—201(e)(1). Like a personal injury claim, an employment-related discharge claim also lies in tort. See generally, Newell v. Runnels, 407 Md. 578 , 967 A.2d 729 (2009); Adler v. Am.

Standard Corp., 291 Md. 31 , 432 A.2d 464 (1981). In Newborn, 133 Md.App. at 92-93 , 754 A.2d 476 , we likewise found support for the adoption of the analytical approach to determine the marital property status, if any, of personal injury settlements and awards in the earlier use of this approach by the Court of Appeals as to Queen’s workers’ compensation award. In doing so, Judge Salmon, writing for the Newborn Court, aptly observed: “there is no good reason why we should use the analytical approach when considering workers’ compensation awards and use a different approach when considering a recovery by a spouse that comes about as a result of a tort judgment or settlement.” Id. Furthermore, in Lowery, 113 Md.App. at 433 , 688 A.2d 65 , we observed at that time that the analytical approach was “the modern and prevailing rule,” and later in Newborn , as being a doctrine “in its ascendency.” 133 Md. App. at 91 , 754 A.2d 476 .

See also, 109 ALR 5th § 5[a] at 35; Turner, supra, § 6:55, 318 n. 3; Gary M. Skoloff, et al., 2 Valuation and Distribution of Marital Property § 23.08[l][a] 134 (2009) (“recent trend in equitable distribution states has been toward the analytical approach.”). Skoloff lists 20 equitable distribution states which have, thus far, adopted the analytical approach for determining the marital or non-marital status of various types of compensatory recovery damages. Id. at § 23.08[l][b] 136.1-138. We observe that our holding is consistent with the decisions of other jurisdictions which have also employed the same classification approach, whether analytical, mechanical or unitary, to determine whether a spouse’s settlement proceeds or award is marital property or the separate property of the injured spouse, irrespective of whether the recovery was in tort or resulting from a workers’ compensation claim. 6 See ⁵⁶⁷ Turner, § 6:59, 341 (“most states apply the same approach to classification of both personal injury proceeds and worker’s compensation proceeds.

This is a logical result ... ”). Accordingly, we hold that the analytical approach is to be employed by the trial court to determine whether all or part of employment-related discharge or discrimination settlement proceeds or awards constitute marital property. Undifferentiated Settlement Proceeds. Because the type of compensatory loss determines the classification of the recovery proceeds as being marital property or the separate property of the claimant spouse, the trial court must closely examine the underlying nature of that loss.

See Queen, 308 Md. at 587 , 521 A.2d 320 ; Newborn, 133 Md.App. at 95-97 , 754 A.2d 476 ; Lowery, 113 Md.App. at 438-39 , 688 A.2d 65 . Where the settlement proceeds or an award do not allocate between economic and non-economic damages, as in this case, the trial court must, nonetheless, review the evidence presented regarding the underlying case and make its own allocation as to the different types of loss. Id. Other jurisdictions have also required the trial court to identify the nature of damages of unallocated settlement proceeds or awards.

See Parde v. Parde, 258 Neb. 101 , 602 N.W.2d 657, 664-65 (1999) (stating trial court was required to analyze the nature and underlying reason for the unallocated personal injury award to determine whether it included lost marital earnings and/or pain and suffering); Myers v. Myers, 741 ⁵⁶⁸ So.2d 274, 280 (Miss.Ct.App.1998) (reversing trial court’s finding that personal injury proceeds transmuted into separate property of both spouses and remanding with instructions to allocate the proceeds between economic and non-economic damages); Marcum v. Marcum, 116 Ohio App.3d 606 , 688 N.E.2d 1085 (1996) (affirming trial court’s own allocation of damages to unallocated personal injury lump sum settlement); Viviano v. Allard, 197 A.D.2d 210 , 611 N.Y.S.2d 666 (1994) (damages from wrongful termination suit could be all or part marital property, remanding for allocation between martial and separate property estates); Landwehr v. Landwehr, 111 N.J. 491 , 545 A.2d 738, 744 (1988) (stating that in the case of an unallocated award or settlement, “upon the subsequent division of the spouses’ property, a matrimonial judge can allocate the lump sum.”). We observe here that the identification of marital and non-marital property is a question of fact and we will not disturb a factual finding unless it is clearly erroneous. Gordon v. Gordon, 174 Md.App. 583, 625-26 , 923 A.2d 149 (2007). The allocation as to the economic and non-economic loss regarding settlement proceeds or an award recovered in tort or by a workers’ compensation claim is also question of fact.

See generally, Newborn, 133 Md.App. at 93 , 754 A.2d 476 . The trial court will not be reversed if there is any credible evidence to support its allocation. As noted, Queen, Lowery, and Newborn uniformly remanded the property classification at issue to the trial court for additional fact finding to both determine