SONDRA CAROLE JOHNSON v. GEORGE FRANK JOHNSON
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RENDERED: March 19, 1999; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1998-CA-000420-MR
SONDRA CAROLE JOHNSON
APPELLANT
APPEAL FROM LETCHER CIRCUIT COURT
HONORABLE SAMUEL T. WRIGHT, III, JUDGE
ACTION NO. 96-CI-000391
v.
GEORGE FRANK JOHNSON
APPELLEE
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE:
JOHNSON, KNOX, and SCHRODER, JUDGES.
KNOX, JUDGE:
Appellant, Sondra Carole Johnson (Sondra), appeals
the judgment of the Letcher Circuit Court holding that appellee’s
workers’ compensation benefits were entirely non-marital
property, not subject to division at dissolution of marriage.
Sondra and appellee, George Frank Johnson (George),
were married on May 12, 1994.
In August 1994, George filed a
workers’ compensation claim arising out of a work-related injury
he sustained in December 1993.
The administrative law judge
(ALJ) found George to have a 75% permanent partial disability,
concluding, however, that one-third (1/3) of his disability predated the occupational injury and, as such, was not compensable.
George appealed this decision to the Workers’ Compensation Board
(Board) which reversed and remanded the claim to the ALJ for
entry of a conforming award.
George’s employer appealed the
Board’s decision to this Court, which affirmed.
A subsequent
appeal was taken to the Kentucky Supreme Court, which, on June
19, 1997, rendered an opinion affirming the decision of the Court
of Appeals and remanding the matter to the ALJ.
Ultimately, the
ALJ’s final opinion and award were entered on September 24,
1997.1
In December 1996, while his workers’ compensation claim
was winding its way through the court system, George filed a
petition for dissolution.
On July 2, 1997, the circuit court
entered a partial decree of dissolution, reserving all questions
of property and maintenance for future determination.
Sondra
filed a motion to set aside the partial decree on the basis that
it may possibly divest her of a property right in the pending
workers’ compensation claim.
The dissolution cause came on for
hearing before the domestic relations commissioner on September
22, 1997.
As a result of that hearing the commissioner filed his
findings on October 3, 1997, recommending, in part, that any
workers’ compensation benefits to be received as a result of the
pending claim were non-marital property belonging to George.
Sondra filed exceptions to these findings.
1
On remand, the ALJ entered an opinion and award on
September 5, 1997. However, there was an oversight with respect
to the payment of interest on the benefits and George filed a
petition for reconsideration on September 10, 1997. It was from
this petition that, on September 24, 1997, the ALJ’s final
opinion and award were entered.
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On October 30, 1997, a check in the amount of
$40,794.14 was issued to George by his employer’s insurer,
representing past due benefits for the period of August 19, 1994,
to November 3, 1997.
Sondra’s motion to have the partial decree
set aside was denied on January 30, 1998.
The circuit court’s
ruling on the exceptions was entered on February 4, 1998, and
ordered, inter alia, that at the time of the final hearing,
September 22, 1997, George’s workers’ compensation claim was not
final, though remanded to the ALJ by the Supreme Court, and no
benefits had actually been paid over to him prior thereto.
The
court reasoned that since George had not actually received the
benefits during the marriage, the injury claim and benefits
therefor were not marital property.
The court further found
that, even if the benefits were marital property, KRS 403.190(1)
would be applicable to the distribution of same.
In applying
said statute the court concluded:
Respondent would not be entitled to any
disposition of the workers’ compensation
award because she did nothing to contribute
to the acquisition of the award, there was
very little property to be divided, the
duration of the marriage was only 30 months,
the Petitioner is now totally disabled, the
Respondent is able bodied and holds a college
degree, and there were no children of the
marriage.
On appeal, Sondra argues the court erred in failing to
award her any portion of the workers’ compensation benefits as
marital property.
She posits a percentage of the benefits,
representing back pay prior to the dissolution, constitutes
marital property regardless of when they were received.
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George,
on the other hand, contends the circuit court correctly decided
the matter.
We disagree.
As a preliminary issue, we note that KRS 403.190(2)
pronounces that marital property consists of all property
acquired by either spouse subsequent to the marriage with certain
enumerated exceptions, none of which are applicable under these
facts.
Although the court cites case law in support of its
findings, we believe it misconstrued the appropriate application
of that authority.
Addressing the court’s view that benefits
must, necessarily, be received during the marriage in order for
them to assume the posture of martial property, we believe Mosley
v. Mosley, Ky. App., 682 S.W.2d 462 (1985) to be controlling.
In Mosley, this Court considered the appropriate
division of workers’ compensation benefits where a party to the
dissolution received a lump sum representing back pay and was to
receive future payments which would accrue and be made postdissolution.
After contemplating the nature and purpose of a
workers’ compensation award, i.e. “to replace the injured or
diseased employee’s loss of ability to work in the future[,]”
this Court concluded:
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.
Id. at 463. (Emphasis added).
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As such, irrespective of the actual time frame in which
the benefits are received, whether it be pre- or postdissolution, that portion of the award representing benefits
which accrued during the marriage is to be treated as marital
property, just as earned income.
In the case sub judice, George
was paid $40,794.14 which represented back pay for the period of
August 19, 1994, to November 3, 1997.
In that the parties were
not legally divorced until July 2, 1997, that portion of the past
due benefits which accrued during the marriage, or between August
14, 1994, and July 2, 1997, constitutes marital property, subject
to division.
As noted supra, the circuit court hypothesized that
even if the workers’ compensation benefits were marital property
then KRS 403.190(1) would be applicable to the distribution of
same.
In applying the relevant factors under KRS 403.190(1), the
court appears to have relied heavily on Reeves v. Reeves, Ky.
App., 753 S.W.2d 301 (1988).
We do not believe Reeves to be
dispositive since the facts underlying Reeves are readily
distinguishable from those at hand.
In Reeves, this Court addressed the division of an
award for injuries under the Jones Act where the parties’
marriage had lasted a mere nineteen (19) months, and the injury
occurred a scant six (6) weeks following the marriage.
The
appellant in that case settled the Jones Act claim for $175,000
which was reduced to $107,500 following the payment of medical
expenses, costs, and attorney fees.
The appellant voluntarily
paid the appellee $7,500, yet the circuit court allocated to her
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twenty-five percent (25%) of the final award.
On appeal, this
Court concluded the Jones Act award to be marital property, but
in applying KRS 403.190(1)2 to the division thereof, stated as
follows:
The appellee did nothing to contribute
to the acquisition of the award. There was
very little property to be divided other than
[t]he Jones Act award. The duration of the
marriage was only nineteen months, and the
parties had been separated the last six of
those. Appellant is now totally disabled,
while the appellee is able-bodied. There
were no children of the marriage.
2
KRS 403.190(1) provides:
(1) In a proceeding for dissolution of the
marriage or for legal separation, or in a
proceeding for disposition of property
following dissolution of the marriage by a
court which lacked personal jurisdiction over
the absent spouse or lacked jurisdiction to
dispose of the property, the court shall
assign each spouse’s property to him. It
also shall divide the marital property
without regard to marital misconduct in just
proportions considering all relevant factors
including:
(a) Contribution of each spouse to
acquisition of the marital property,
including contribution of a spouse as
homemaker;
(b) Value of the property set apart to each
spouse;
(c) Duration of the marriage; and
(d) Economic circumstances of each spouse
when the division of property is to become
effective, including the desirability of
awarding the family home or the right to live
therein for reasonable periods to the spouse
having custody of any children.
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We hold that any disposition of the
award to the appellee above the $7,500
voluntarily paid to her would be an abuse of
discretion under the statute.
Reeves, 753 S.W.2d at 302.
It is our opinion the facts above-stated differ from
those at bar in that the Jones Act award represented a lump sum
award with no future payments for loss of ability to earn income
due to the injuries sustained.
It stands to reason that equity
would dictate a lopsided division of such an award, especially in
light of the fact that the parties had lived together as man and
wife for scarcely over one (1) year.
However, before us is a
situation in which the lump sum payment merely represented back
pay, a portion of which accrued during the marriage.
George will
continue to receive future benefits to be dedicated to his own
interest as a result of his injuries.
We believe that where a workers’ compensation award
represents back pay, a portion of which accrued during the
marriage, these funds represent marital property, as they operate
as an income substitute.
The trial court then must, through
application of KRS 403.190(1), consider an equitable division of
that asset, and make findings of fact peculiar to the case with
respect to each of the criteria contained in KRS 403.190(1).
Concerning the case at hand, we believe the circuit
court’s finding that Sondra was not entitled to any portion of
George’s workers’ compensation award was an inaccurate
application of legal precedent.
As such, we remand this matter
to the Letcher Circuit Court to further consider the division of
that asset considering KRS 403.190(1).
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ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Darrell Hall
Whitesburg, Kentucky
Gene Smallwood, Jr.
Whitesburg, Kentucky
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