Pat C. Fragile
Carl
W. Roop
Stacey L. Daniel-Fragile Roop,
Smith & Roop
Beckley, West Virginia Beckley,
West Virginia
Attorneys for the Appellant, Attorney
for the Appellee,
Martha Carol Staton
Steven
Edward Staton
JUSTICE DAVIS delivered the Opinion of the Court.
1. “In reviewing a final order entered
by a circuit judge upon a review of, or upon a refusal to review, a final order
of a family court judge, we review the findings of fact made by the family court
judge under the clearly erroneous standard, and the application of law to the
facts under an abuse of discretion standard. We review questions of law de
novo.” Syllabus, Carr v. Hancock, 216 W. Va. 474, 607 S.E.2d
803 (2004).
2. “W. Va.
Code, 48-2-1(e)(1) (1986) [W. Va. Code § 48-1-233 (2001) (Repl. Vol.
2004)], defining all property acquired during the marriage as marital
property except for certain limited categories of property which are considered
separate or nonmarital, expresses a marked preference for characterizing the
property of the parties to a divorce action as marital property.” Syllabus
point 3, Whiting v. Whiting, 183 W. Va. 451, 396 S.E.2d 413 (1990).
3. “'To
the extent that its purpose is to compensate an individual for pain, suffering,
disability, disfigurement, or other debilitation of the mind or body, a personal
injury award constitutes the separate nonmarital property of an injured spouse.'
Syl. Pt. 1, Hardy v. Hardy, 186 W. Va. 496, 413 S.E.2d 151 (1991).” Syllabus
point 2, Huber v. Huber, 200 W. Va. 446, 490 S.E.2d 48 (1997). 4.
Benefits that actually compensate for disability are separate property because
such monies are personal to the spouse who receives them. In some cases, benefits
will need to be separated into a retirement component and a true disability component,
classifying the retirement component as marital property and the disability component
as separate property.
Davis, Justice:
Martha Carol Staton (hereinafter “Mrs.
Staton”), appeals from an order entered June 30, 2004, by the Circuit Court
of Raleigh County. By that order, the circuit court reversed the portion of an
order of the family court that awarded Mrs. Staton an equitable share of Stephen
Edward Staton's (hereinafter “Mr. Staton”) police disability pension.
The circuit court found that the family court was correct in classifying Mr.
Staton's pension as a disability pension; however, the circuit court found that
the family court erred in finding that the pension was a marital asset subject
to equitable distribution. On appeal, Mrs. Staton argues that Mr. Staton's pension
was a marital asset subject to equitable distribution. Based upon the parties'
arguments, the record designated for our consideration, and the pertinent authorities,
the decision of the circuit court is affirmed in part, reversed in part, and
remanded for further consideration.
Mr. and Mrs. Staton were married in 1986.
Prior to their marriage, Mr. Staton began employment with the City of Beckley
Police Department in 1974. During his tenure with the police department, Mr.
Staton contributed seven percent of his salary to the City of Beckley Retirement
Fund. This employment continued until Mr. Staton was deemed disabled due to a
knee injury on March 12, 1996. During the marriage, the parties received almost
$80,000.00 from the disability fund. Mr. and Mrs. Staton separated on April
26, 2000, and Mrs. Staton filed for divorce.
The family court entered an order on May
3, 2002, and ordered that “[Mrs. Staton] shall be awarded a portion of [Mr.
Staton's] pension account in relation to the years of the marriage and that [Mr.
Staton] shall cooperate in all respects to cause a Qualified Domestic Relations
Order to be entered.” Mr. Staton appealed to the circuit court. The circuit
court remanded the matter by order entered August 14, 2002, for the family court
to take evidence to determine whether the pension was a retirement pension or
a disability pension. The circuit court stated that the “[family court order]
does not state whether the pension is a disability pension or a retirement pension.
[Mr. Staton's] objection claims that it is a disability pension, and that unlike
a retirement pension, it is not subject to marital distribution and the entry
of a [Qualified Domestic Relations Order].” The circuit court reasoned that
if the pension was to compensate Mr. Staton for future lost wages, then it was
separate property and not subject to distribution. The circuit court directed:
Upon
remand of this issue, the family court will take such evidence as it deems necessary
to ascertain whether [Mr. Staton's] pension is a disability pension or a retirement
pension. If it is found to be a disability pension, the payments received during
marriage will be deemed to have been distributed with the parties's (sic) marital
assets as determined at the time of separation. With respect to future payments,
the family court will determine whether those payments compensate [Mr. Staton]
for lost future income. If so, the payments are separate property and the value
of the disability pension is not subject to marital
distribution. If, however, the family court finds that any portion of the future
payments are intended to restore a lost or damaged marital asset, such portion
would be a marital asset subject to distribution.
If
upon these principles the family court finds that [Mr. Staton's] disability pension
is not subject to distribution as a marital asset, the future income he derives
from the pension should be included in the income upon which child support and
spousal support shall be calculated. If, however, the family court finds that
all or part of the disability pension is subject to marital distribution, the
family court must calculate the portion of his future payments that constitutes
marital property, and only the remainder will be deemed part of [Mr. Staton's]
income for the purposes of the calculation of child support and spousal support.
If
the disability pension is not marital property, it is not subject to a [Qualified
Domestic Relations Order] or to any further attention. If it is partly marital
and partly nonmarital property, it is subject to a [Qualified Domestic Relations
Order] only as to the portion that is marital property, if the administration
of the disability pension is such that only a part of it can be subjected to
a [Qualified Domestic Relations Order]. If the family court finds that it is
partly marital and partly nonmarital, and that the fund from which payments are
made cannot be segregated for [Qualified Domestic Relations Order] purposes,
the family court may calculate the portion of each future payment that constitutes
marital property, and the remainder of each payment will be deemed [Mr. Staton's]
income for the purposes of the calculation of child support and spousal support.
Under that arrangement, [Mr. Staton] will pay a portion of each future disability
payment as marital distribution, and a portion as child and/or spousal support.
On remand, a hearing was held on April 11,
2003, and the family court heard testimony from the distributor of the fund,
and determined that “[Mr. Staton] began receiving
a disability pension on March 12, 1996[,] and continues to receive said pension.” Further,
the family court found that “on the date of being awarded the disability
pension [Mr. Staton] was eligible for retirement with the City of Beckley and
would have earned approximately sixty three percent (63%) of his pension and
he became vested in such pension program in August of 1994.”
The family court based these determinations
on the testimony of Gary Sutphin, the City Treasurer and Recorder for the City
of Beckley, West Virginia, who testified as to the distribution of the police
pension fund. (See footnote
1) Mr. Sutphin testified that there is no difference between the
money collected by the City of Beckley Police Department for an employee's retirement
pension versus an employee's disability pension. The money collected out of each
check goes into a general fund that is available upon retirement. However, because
Mr. Staton was disabled, he was able to receive a disability award and to access
the pension fund prior to reaching the age of retirement.
Mr. Sutphin also explained that retirement
benefits are calculated based on the
average of the three highest years of salary, and that salary can include payment
for unused sick time, vacation time, comp. time, and overtime. He further espoused
that disability benefits are determined based on sixty percent of the salary
at the time of the disability, and do not include any buyback of unused benefits.
The disability benefits are eligible for cost of living increases. It was further
explained by Mr. Sutphin that retirement pensions are based on years of service
and age; whereas, disability pensions are based on injury and illness.
The record reveals that Mr. Staton, at the
time of his disabling injury, had worked long enough to meet the years of service
component of his retirement. However, while he was vested in his retirement,
he had not met the age requirement to begin drawing a full retirement. Because
he was not yet able to draw his retirement, Mr. Staton exercised his right to
draw disability benefits, which have no age prerequisite. Based on evidence taken
from Gary R. Sutphin, City Treasurer and Recorder of Beckley, West Virginia,
the family court found that “the disability pension was a replacement of
lost wages and future lost wages on behalf of [Mr. Staton].” The family
court directed that the disability pension be subjected to a marital distribution.
Mr. Staton appealed, and the circuit court
found in its June 30, 2004, order that the pension was correctly classified as
a disability pension by the family court; however, the
circuit court further found that the family court erred in concluding that
it was a marital asset subject to equitable distribution. The circuit court
reasoned that “a pension that functions as compensation for a disability
or injury is separate property, but a pension that functions as a retirement
pension (deferred compensation) is marital property. . . . The evidence received
by the Family Court with respect to the pension plan for policemen of the City
of Beckley indicates, however, that the pension received by [Mr. Staton] is
purely a disability pension.” Therefore, the circuit court determined
that the portion of the family court's order subjecting the disability pension
to equitable distribution was in error.
Mrs. Staton appeals to this Court and argues
that the pension was marital property. She avers that the disability pension
was disbursed from funds that Mr. Staton paid into during the marriage, thereby
creating an asset from the work of Mr. Staton. Therefore, Mrs. Staton contends
that she is entitled to an equitable distribution of the funds. Both parties
have requested their attorneys' fees and costs.
The standard of review with which we approach
this matter has been explained as follows:
In
reviewing a final order entered by a circuit judge upon a review of, or upon
a refusal to review, a final order of a family
court judge, we review the findings of fact made by the family court judge
under the clearly erroneous standard, and the application of law to the facts
under an abuse of discretion standard. We review questions of law de novo.
Syl., Carr v. Hancock, 216 W. Va. 474, 607 S.E.2d 803 (2004). See
also Syl. pt. 2, Lucas v. Lucas, 215 W. Va. 1, 592 S.E.2d 646
(2003) (“In reviewing challenges to findings made by a family court judge
that also were adopted by a circuit court, a three-pronged standard of review
is applied. Under these circumstances, a final equitable distribution order
is reviewed under an abuse of discretion standard; the underlying factual findings
are reviewed under a clearly erroneous standard; and questions of law and statutory
interpretations are subject to a de novo review.”). Mindful of
these standards, we proceed to consider the parties' arguments.
The sole issue for resolution on appeal is
whether disability pension benefits are separate or marital property. Mrs. Staton
argues that the pension was a marital asset subject to equitable distribution.
Mr. Staton argues that a disability award should be treated as a personal injury
award and is, therefore, separate property. He expands his argument by alleging
that, to the extent that the payment replaces past lost wages and compensates
for past medical expenses, it is marital property. However, to the extent the
payment compensates for future post-separation lost income, it is separate property.
In a divorce proceeding, subject to some
limitations, all property is considered marital property. “Except as otherwise
provided in this section, upon every judgment of annulment, divorce or separation,
the court shall divide the marital property of the parties equally between the
parties.” W. Va. Code § 48-7-101 (2001) (Repl. Vol. 2004). Our
case law also recognizes a preference for categorizing property as marital property. “'W. Va.
Code, 48-2-1(e)(1) (1986) [W. Va. Code § 48-1-233 (2001) (Repl. Vol.
2004)],[ (See
footnote 2) ] defining all property acquired during the
marriage as marital property except for certain limited
categories of property which are considered separate or nonmarital, expresses
a marked preference for characterizing the property of the parties to a divorce
action as marital property.' Syl. pt. 3, Whiting v. Whiting, 183 W. Va.
451, 396 S.E.2d 413 (1990).” Syl. pt. 1, Koontz v. Koontz, 183
W. Va. 477, 396 S.E.2d 439 (1990) (per curiam).
Despite the preference of earmarking property
as marital property, certain properties are characterized as separate property. (See
footnote 3) “'To
the extent that its purpose is to
compensate an individual for pain, suffering, disability, disfigurement, or
other debilitation of the mind or body, a personal injury award constitutes
the separate nonmarital property of an injured spouse.' Syl. Pt. 1, Hardy
v. Hardy, 186 W. Va. 496, 413 S.E.2d 151 (1991).” Syl. pt. 2, Huber
v. Huber, 200 W. Va. 446, 490 S.E.2d 48 (1997). Further, “[a]
loss of consortium claim is the separate nonmarital property of the uninjured
spouse.' Syl. Pt. 4, Hardy v. Hardy, 186 W. Va. 496, 413 S.E.2d
151 (1991).” Syl. pt. 3, id. However, “[e]conomic losses,
such as past wages and medical expenses, which diminish the marital estate
are distributable as marital property when recovered in a personal injury award
or settlement.” Syl. pt. 2, Hardy, 186 W. Va. 496, 413 S.E.2d
151.
This Court, in Conrad v. Conrad, 216
W. Va. 696, 612 S.E.2d 772 (2005) (per curiam), (See
footnote 4) recently discussed the issue of long-term disability
benefits and whether such proceeds are properly characterized as separate or
marital property. In that case, this Court found that the long term disability
benefits were marital property. This determination was based, in large part,
on the fact that the parties had a specific conversation about the need to
secure their future. Toward that end, the parties in Conrad decided
jointly to apply for such benefits and paid the premiums on a monthly basis
for thirty years. In Conrad, the receipt of long-term disability benefits
began prior to the parties' separation and was secured through premiums paid
during the marriage from marital funds.
We reasoned that
[t]he
majority of courts contemplating the proper classification of disability benefits
have adopted an approach which focuses on the underlying purpose of the specific
disability benefits at issue. Thus, benefits which actually compensate for disability
are classified as separate property because they are personal to the spouse who
receives them. However, where justified by the particular facts of the case,
courts adopting this approach have separated the benefits into a retirement component
and a true disability component, classifying the retirement component as marital
property and the disability component as separate property.
Conrad, 216 W. Va. at ___, 612 S.E.2d at 776 (internal citations
omitted). Therefore, we previously discussed and now specifically hold that
benefits that actually compensate for disability are separate property because
such monies are personal to the spouse who receives them. In some cases, benefits
will need to be separated into a retirement component and a true disability
component, classifying the retirement component as marital property and the
disability component as separate property. Further, in Conrad, we stated
that there is no “hard and fast rule that all disability benefits are,
or are not, marital property subject to distribution. . . . Rather, the . .
. determination [must be made] on a case-by-case basis
according to the particular facts[,] giving careful consideration to the entire
marital property and keeping an eye toward a just and equitable distribution.” Id.,
216 W. Va. at ___, 612 S.E.2d at 776-77 (quoting Metz v. Metz,
61 P.3d 383 (Wyo. 2003)).
In the case presently pending before this
Court, the parties did not decide to jointly apply for the disability benefits.
Rather, seven percent of Mr. Staton's pay was automatically withheld from his
monthly income. The record shows that Mr. Staton suffered an injury and was disabled
from his job. Because of his disability, he was able to access the police pension
fund earlier than he could have for retirement purposes. Under these circumstances,
we find that the family court and the circuit court were correct in their determination
that Mr. Staton received a disability award. While this is money that would have
been earmarked for retirement and was in essence deferred compensation, the fact
that it was disbursed as disability money changed the manner in which it was
calculated and distributed by the pension fund. However, the fact that Mr. Staton
received a disability award from the police pension fund does not preclude him
from subsequently receiving a retirement award from the same fund.
During oral argument before this Court, Mr.
Staton's attorney argued that his client was receiving a disability award and
that it would convert to a retirement pension upon his client's retirement. Mr.
Staton's counsel, also during oral argument before this Court,
stated that the issue of the disbursement of the fund once it converted to
retirement money was not addressed by the lower court, and provided no further
explanation. It appears counsel for Mrs. Staton agrees with this proposition
because, during oral argument before this Court, he stated that Mrs. Staton
would receive the same percentage of disbursement once it converted from disability
to retirement.
While it is clear that Mr. Staton is receiving
a disability award, it is also clear, based on the arguments of counsel before
this Court, that Mr. Staton's disability benefit was capable of conversion to
a retirement benefit at some future point in time. (See
footnote 5) Earlier, werecognized the possibility that some cases
require apportioning of retirement benefits versus disability benefits. Under
this scenario, Mrs. Staton is entitled to an equitable distribution of any monies
from the police pension fund that are truly for retirement purposes; however,
she is not entitled to a distribution of disability monies. Therefore, the circuit
court's determination that the disability award constitutes only separate property
is reversed, and remanded with instructions to take any evidence needed to determine
at what point in time Mr. Staton was or is able to draw retirement benefits. (See
footnote 6) The lower court should then proceed
to determine the net value of the retirement benefits as of the date of the
parties' separation. (See
footnote 7) Mrs. Staton is then entitled to an equitable share
of those proceeds based on the number of years of the parties' marriage.
In reaching this conclusion, we realize that
the alimony award and the child support award may need to be adjusted. Mrs. Staton
received a monthly alimony award of $550.00 beginning on November 1, 2001, and
ending on October 31, 2008. (See
footnote 8) She also was awarded $672.91 per month in child support
until the minor children reach the age of majority or until they complete secondary
school. In calculating the amount of these awards, the lower court included the
amount of Mr. Staton's disability award in his monthly salary. On remand, the
lower court is directed to determine the portion of the disability award that
actually represents retirement money. Mrs. Staton is entitled to only an equitable
distribution
of the retirement money, and the retirement component should not be included
in the disability portion that is properly included as part of Mr. Staton's
monthly salary in determining alimony and child support obligations.
In summary, we affirm the lower court's determination
that Mr. Staton was awarded a disability pension. We reverse the lower court's
order that found the entire award was disability, and remand this matter for
a determination of the date on which Mr. Staton became or will become eligible
to draw his retirement pension. The lower court should assess the value of the
retirement benefits as of the date of separation, and Mrs. Staton is entitled
to her equitable distribution of any portion of the disability award that is
retirement money. Further, the lower court is instructed to re-evaluate the alimony
and child support awards based on any reductions in Mr. Staton's monthly salary
when his retirement benefits are apportioned out of his monthly disability award.
Further, we note that both parties have requested their attorneys' fees and costs. (See
footnote 9) This matter should also be addressed by the lower court,
and it should exercise its discretion in making any awards.