Queen v. Queen

MURPHY, Chief Judge. The Property Disposition in Annulment and Divorce Law, Maryland Code (1984), § 8-201(e) of the Family Law Article defines “marital property” to mean “the property, however titled, acquired by 1 or both parties during the marriage. (2) ‘Marital property’ does not include property: (i) acquired before the marriage; (ii) acquired by inheritance or gift from a third party; (iii) excluded by valid agreement; or (iv) directly traceable to any of these sources.” The primary issue in this case is whether a lump sum workers’ compensation award for permanent partial disability for injury sustained during the marriage constitutes marital property within the contemplation of § 8-201(e). ⁵⁷⁶ I. David and Dora Queen were married on October 26, 1964 and had three children during the course of their nearly twenty-year marriage, one of whom was an emancipated adult at the time the divorce proceedings began. After the wife first left the family home in late December of 1982, the parties separated and reconciled periodically throughout the first half of 1983.

On July 23, 1984, the wife filed a complaint for a divorce a vinculo matrimonii from the husband. The two minor children of the parties, Peter, age six, and Hope, age sixteen, were then under the wife’s care and custody. On April 28, 1982, before the initial separation, the husband sustained an injury to his neck and shoulders while working as an assistant pressman at Saul Lithograph Co., Inc. He had worked for this employer since 1970, but was discharged in November of 1982, shortly after he was injured. The husband received $276.70 per week in workers’ compensation benefits from May 1982 to September 1983; the benefit amount was then reduced to $143.32 per week from September 1983 to June 1984.

On June 18, 1984, the husband received a lump sum permanent partial disability settlement of $60,000, less $5,000 in attorney’s fees and costs. The husband deposited the award in a separate bank account in his name only. The Circuit Court for Calvert County (Bowen, J.) granted the wife’s prayer for absolute divorce on August 12, 1985. The court determined that the marital property consisted of the parties’ house in College Park, furniture acquired during the marriage, and the husband’s fully vested, noncontributory, profit-sharing retirement plan.

The husband was ordered to pay $300 monthly for child support. The court entered a supplemental judgment on November 12, 1985. It determined that the lump sum permanent partial workers’ compensation award was marital property. The court did not award alimony to the wife.

After adjusting the equities of the parties in the marital property, the ⁵⁷⁷ court ordered the husband to pay $33,490 to the wife. Custody of the minor child was permanently awarded to the wife on December 13, 1985. The husband appealed, challenging both the marital property and child custody awards. We granted certiorari before consideration of the appeal by the Court of Special Appeals to review the important issues raised in the case.

II

We first review the husband’s contention that his lump sum workers’ compensation award is not marital property. In interpreting provisions of the Marital Property Act, we have considered the Report of the Governor’s Commission on Domestic Relations Law (1978), which reflects the Act’s history. As we said in Unkle v. Unkle, 305 Md. 587, 595 , 505 A.2d 849 (1986), “[T]he statute indicates that nonmonetary contributions within a marriage should be recognized in the event that a marriage is dissolved; that a spouse whose activities do not include the production of income may nevertheless have contributed toward the acquisition of property by either or both spouses during the marriage; that when a marriage is dissolved the property interests of the spouses should be adjusted fairly and equitably, with careful consideration given to both monetary and nonmonetary contributions made by the respective spouses; and that the accomplishment of these objectives necessitates that there be a departure from the inequity inherent in Maryland’s old ‘title’ system of dealing with the marital property of divorcing spouses.” In undertaking to define the reach of the term “marital property” under § 8-201(e), we observed in Deering v. Deering, 292 Md. 115, 125 , 437 A.2d 883 (1981), quoting Diffendall v. Diffendall, 239 Md. 32, 36 , 209 A.2d 914 (1965) that “property” ordinarily embraces “ ‘everything which has exchangeable value or goes to make up a man’s wealth — every interest or estate which the law regards of sufficient value for judicial recognition.’ ” Moreover, when ⁵⁷⁸ used without express or implied qualifications, we have said that property “ ‘may reasonably be construed to involve obligations, rights and other intangibles as well as physical things/ ” Unkle, supra, 305 Md. at 595 , 505 A.2d 849 (quoting Bouse v. Hutzler, 180 Md. 682, 686 , 26 A.2d 767 (1942)). In Deering, supra, we held that a spouse’s pension rights, to the extent accumulated during the marriage, constituted a form of “marital property” subject to equitable distribution upon dissolution of marriage. 1 We reasoned that pensions are similar to other types of employee benefits “acquired” during the marriage, such as stock options and profit-sharing plans.

We noted also that both spouses have the same retirement expectations regarding pensions as they would had they used the contributions to the pension plan to buy other deferred income assets. Moreover, we stated that the fact that a pension right might be conditioned upon the occurrence of certain events, such as continued employment did not “degrade that right to an expectancy [because] ... [t]he law has long recognized that a contingent future interest is property.” Id. 292 Md. at 128 , 437 A.2d 883 (quoting In re Marriage of Brown, 15 Cal.3d 838 , 126 Cal.Rptr. 633 , 638 n. 8, 544 P.2d 561 , 566 n. 8 (1976)). Thus, under Deering , it is immaterial whether the retirement plan was vested or not, contributory or noncontributory. Rather, the critical issue was “ ‘whether a property right has been acquired during the marriage and whether equity warrants its inclusion in the marital estate in light of its limitations.’ ” Id., 292 Md. at 127 , 437 A.2d 883 (quoting Weir v. Weir, 173 N.J.Super. 130 , 413 A.2d 638, 640 (1980)). ⁵⁷⁹ We again addressed spousal rights to a pension plan in Lookingbill v. Lookingbill, 301 Md. 283 , 483 A.2d 1 (1984).

At issue there was a work-related disability pension plan to which the husband had been making obligatory contributions. We held that the rationale of Deering supported the conclusion that a disability plan, in appropriate circumstances, may constitute marital property. We stated: “There are many types of retirement plans under which the rights the beneficiaries possess often differ, depending on a wide variety of factors. Deering , following the dominant trend of the law, rejected such distinctions in making the threshold determination of whether a retirement plan is marital property....

Pension payments are actually partial consideration for past employment whether the maturity of the pension is contingent upon age and service or upon disability. Thus, a disability plan, like a service plan, is property and, within the meaning of the Act, constitutes marital property subject to equitable distribution.” Lookingbill, supra, 301 Md. at 289 , 483 A.2d 1 . One year later in Archer v. Archer, 303 Md. 347 , 493 A.2d 1074 (1985), we concluded that a professional degree or license is not marital property. We reasoned that neither possessed the essential characteristics of either a present or a future property interest.

We there said: “While pension rights, as in Deering , constitute a current asset which the individual has a contractual right to receive, such rights are plainly distinguishable from a mere expectancy of future enhanced income resulting from a professional degree. The latter is but an intellectual attainment; it is not a present property interest. It is personal to the holder; It cannot be sold, transferred, pledged or inherited. It does not have an assignable value nor does it represent a guarantee of receipt of a set monetary amount in the future, such as pension benefits ....

At best, it represents a potential for increase in a person’s earning capacity made possible by the degree and license in combination with innumerable other factors ⁵⁸⁰ and conditions too uncertain and speculative to constitute ‘marital property’ within the contemplation of the legislature____ (Citations omitted). Moreover, as Dewitt v. Dewitt, 98 Wis.2d 44 , 296 N.W.2d 761 (1980), makes clear, income earned after the marriage is dissolved as a result of the degree/license would in no event constitute ‘marital property’ within the definition of that term in § 8-201(e), since it would not have been acquired during the marriage.” Archer, supra, 303 Md. at 357-58 , 493 A.2d 1074 . Most recently, we held that an inchoate tort claim for personal injury that accrued while the spouses were separated, but before they divorced, was not “marital property”. Unkle, supra, 305 Md. at 587 , 505 A.2d 849 .

In that case, the husband suffered two broken legs in an accident at an amusement park during the period of the couple’s separation. We stated that an unliquidated tort claim for money damages is a chose in action and thus potentially assignable, but that this fact alone did not determine whether the claim constituted marital property. We explained: “The claim is uniquely personal to the holder. And while it may have some attributes of personal property, the claim was not, within the ambit of the statutory language, ‘acquired’ during the marriage by one or both spouses.

It arose from purely fortuitous circumstances and not from any on-going marital initiative to acquire marital assets. The claim simply accrued to the injured spouse as a result of an accident and was his separate property____ The claim is simply not the type of resource contemplated by the statutory definition of marital property even though, in part at least, payment of the claim would produce monies which would replenish marital assets previously diminished through payment of medical expenses and the loss of wages.” Id. at 596 , 505 A.2d 849 . Although the question of whether workers’ compensation benefits are marital property is one of first impression in ⁵⁸¹ this Court, several other state courts have considered the issue. The timing of the award and of the receipt of benefits has played a key role in their decisions.

The majority view is that workers’ compensation benefits awarded before the parties’ divorce for work-related injuries occurring during the marriage are marital property. 2 Some courts presume that property not expressly excluded as separate property by the language of their state’s marital property act is included as marital property. See Goode v. Goode, 286 Ark. 463 , 692 S.W.2d 757, 758-59 (1985); In re Marriage of Dettore, 86 Ill.App.3d 540 , 42 Ill.Dec. 51, 52-53 , 408 N.E.2d 429, 430-31 (1980); Lukas v. Lukas, 83 Ill.App.3d 606 , 39 Ill.Dec. 161, 166 , 404 N.E.2d 545, 550 (1980); Johnson v. Johnson, 638 S.W.2d 703, 704 (Ky.1982); Quiggins v. Quiggins, 637 S.W.2d 666, 668-69 (Ky.Ct.App. 1982); Gonzalez v. Gonzalez, 689 S.W.2d 383, 385-86 (Mo. App.1985); Hughes v. Hughes, 132 N.J.Super. 559 , 334 A.2d 379, 380-81 (1975). Some courts have also reasoned that workers’ compensation acts generally seek to aid not merely the injured worker, but the worker’s family as well, and the benefits are therefore marital property.

See Smith v. Smith, 113 Mich.App. 148 , 317 N.W.2d 324, 326 (1982); Evans v. Evans, 98 Mich.App. 328 , 296 N.W.2d 248, 248 (1980), leave denied, 410 Mich. 884 (1981); Hughes v. Hughes, supra, 132 N.J.Super. 559 , 334 A.2d at 381 . Final ⁵⁸² ly, some courts have analogized workers’ compensation benefits to personal injury awards, or portions thereof, which they previously held to constitute marital property. See Bugh v. Bugh, 125 Ariz. 190 , 608 P.2d 329, 331 (1980); Cook v. Cook, 102 Idaho 651 , 637 P.2d 799, 801 (1981); Gonzalez v. Gonzalez, supra, 689 S.W.2d at 385-86 ; Hughes v. Hughes, supra, 132 N.J.Super. 559 , 334 A.2d at 380-81 ; Hicks v. Hicks, 546 S.W.2d 71, 73 (Tex.Civ.App. 1976). Courts are divided, however, where the workers’ compensation periodic payments extend beyond the dissolution of the marriage or a lump sum award is made after the divorce.

Courts in “common law” states having equitable distribution provisions in their marital property statutes generally hold that the date the compensation claim accrues, rather than the date the award is received, determines the classification of the property as marital or separate. 3 See, e.g., Goode v. Goode, supra, 286 Ark. 463 , 692 S.W.2d at 758 ; In re Marriage of Thomas, 89 Ill.App.3d 81 , 44 Ill.Dec. 430, 431 , 411 N.E.2d 552, 553 (1980); Smith v. Smith, supra, 113 Mich.App. 148 , 317 N.W.2d at 326 ; Hughes v. Hughes, supra, 132 N.J.Super. 559 , 334 A.2d at 382 . Thus, according to these courts, it makes no difference whether the award is paid during or after the marriage; a few courts have pointed out that to hold otherwise would encourage delay in the filing of the workers’ compensation claim. As the court stated in In re Marriage of Dettore, supra, 42 Ill.Dec. at 53 , 408 N.E.2d at 431 : “We cannot condone a result which invites workman’s compensation claimants to protract the arbitration for their award so as to shield that award from equitable division by the dissolution court. We must hold that if the claim for a compensation award accrues during the ⁵⁸³ marriage, the award is marital property regardless of when received.” See also Goode v. Goode, supra, 692 S.W.2d at 759 ; In re Marriage of Thomas, supra, 44 Ill.Dec. at 432 , 411 N.E.2d at 554 .

A few common law jurisdictions, however, have held otherwise. In Mosley v. Mosley, 682 S.W.2d 462 (Ky.Ct. App.1985), for example, the court held that the husband’s workers’ compensation benefits, which had not been received prior to dissolution of the marriage, were not marital property. The court stated: “A workers’ compensation award differs from a pension. A pension accrues while one is working and, to the extent that it has accrued and is vested prior to the dissolution of a marriage, it must be considered with the marital estate.

Workers’ compensation benefits are based on something that happened while one was employed and, although the event may have occurred during the time of the marriage, the compensation is awarded to replace the injured or diseased employee’s loss of ability to work in the future. The benefits are not earned as compensation for working; they are paid to assist workers who will have diminished future earnings due to a work-caused injury or disease. Payments that are received, or weekly benefits that have actually accrued but have not yet been paid as of the date of the dissolution of the marriage, are to be included as marital property, just as earned income. But, payments which accrue and are paid after the dissolution of the marriage are not part of the marital property any more than the worker’s future earnings would be.

Compensation benefits, together with other income of a spouse, may be considered when determining what, if any, maintenance to award to the other spouse, but the nonworking spouse is not entitled to any specific portion of the future income from the worker’s disability compensation.” Id. at 463 . Cf. Gloria B.S. v. Richard G.S., 458 A.2d 707 (Del.Fam.Ct.1982) (workers’ compensation award received ⁵⁸⁴ or to be received is separate property not subject to equitable distribution even though the injury occurred during the marriage); Gerlich v. Gerlich, 379 N.W.2d 689 (Minn. App.1986) (workers’ compensation settlement based on permanent disability was given to compensate injuries personal to a spouse