DAVID EDWIN TURPIN v. NORMA LYNN TURPIN
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RENDERED: JULY 21, 2006; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO.
2004-CA-002082-MR
DAVID EDWIN TURPIN
APPELLANT
v.
APPEAL FROM BOYLE CIRCUIT COURT
HONORABLE DARREN W. PECKLER, JUDGE
ACTION NO. 00-CI-00286
NORMA LYNN TURPIN
APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE:
COMBS, CHIEF JUDGE; BARBER AND MINTON, JUDGES.
COMBS, CHIEF JUDGE:
David Turpin appeals from an order of the
Boyle Circuit Court awarding his ex-wife, Norma Turpin, a share
of his disability benefits.
He argues that the trial court
improperly treated the benefits as marital property.
We are
bound by the precedent of the Kentucky Supreme Court in the case
of Holman v. Holman, 84 S.W.3d 903 (Ky. 2002), which
characterized as non-marital certain disability payments:
namely, those which replace future income that a spouse would
earn after the dissolution of the marriage.
The disability
benefits at issue in this case fit what Holman defines as nonmarital in nature.
Therefore, we vacate the order of the trial
court and remand this case for entry of an order denying Norma’s
request to divide David’s pension.
David and Norma were married from 1989 to 1999.
During that entire time, David worked as a firefighter and
contributed to a retirement plan administered by a state agency.
When they divorced, the Pulaski Circuit Court entered an order
restoring non-marital property, dividing marital property, and
establishing custody and support for their minor children.
The
court ordered David to “execute any and all documents necessary
to have entered a Qualified Domestic Relations Order [a QDRO]
dividing one-half to each of the parties [the] retirement plan
currently held by [David.]”
David took no action to comply with
the order to execute a QRDO relating to his pension.
Four years after the divorce, in December 2003, David
became disabled and was unable to continue his employment as a
firefighter.
He applied for and received disability retirement.
At that point, his pension ceased to exist and became instead a
disability retirement plan.
The funds which he would have
received at normal retirement age were transferred to an account
from which he currently receives disability benefits to replace
the income that he would have otherwise earned as a firefighter.
After learning that David’s disability was not subject to
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division under a QDRO, Norma filed a motion asking the Boyle
Circuit Court to divide David’s disability benefits in the same
manner that the original dissolution decree had sought to divide
his pension.
The trial court made a finding that Norma was
entitled to the one-half of the value of David’s pension which
accrued while the parties were married.
In an order dated
September 9, 2004, the court made the following findings:
Based upon a statement provided by the
Kentucky Retirement Systems dated May 10,
2004, a copy of which has been filed in the
record, the Court finds that the current
total vested value of [David’s] retirement
is $41,063.21 as of January 1, 2004; that
the value of [David’s] retirement prior to
the parties’ marriage was $510.99 and is
[David’s] non-marital property; that the sum
of $26,010.71 accrued during the marriage of
the parties and is marital property subject
to division by this order; that the sum of
$14,541.91 accrued after the date of the
parties’ Final Decree herein and is
[David’s] non-marital property; that [David]
receives monthly benefits of $1,662.18 from
the Kentucky Retirement Systems as the
result of his disability; that the marital
percentage of the retirement subject to
division by this Order shall be determined
by dividing the marital value of $26,010.71
by the total value of $41,063.21; that the
marital percentage of the total value is
63.33%, which is $1,052.66; that [Norma] is
entitled to receive one-half (1/2) of said
amount or $526.33 per month from each of
[David’s] monthly disability benefits
retroactive to the date [David] first began
to draw said benefits in January 2004; and
that [David’s] retirement is a hazardous
duty retirement not subject to division by
qualified domestic relation orders pursuant
to the provisions of ERISA.
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The trial court then ordered David to pay Norma $526.33
immediately upon receipt of each disability check for as long as
he continues to draw disability benefits.
The order was
retroactive to January 2004. This appeal followed.
David argues that the trial court erred in dividing
his disability benefits.
He relies on Holman, supra, which
designates such benefits as non-marital and, therefore, not
subject to division.
In the alternative, he contends that the
trial court abused its discretion in the method it utilized to
divide his disability benefits so as to result in a windfall to
Norma.
Norma contends that the facts in Holman are
distinguishable and that it does not control in this case.
Despite the factual differences between the two cases,
we are persuaded that the reasoning of the Kentucky Supreme
Court in Holman applies in this case.
for sixteen years.
The Holmans were married
Both before the marriage and during the
first six years of the marriage, the husband worked as a
firefighter.
After thirteen years of service, he became
permanently disabled and began drawing disability benefits -even though he was able to work as a car salesman.
The parties
divorced ten years later, and the wife claimed that the
husband’s disability benefits were (at least in part) marital in
nature because contributions were made to his pension during the
marriage.
The trial court held that the disability benefits
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were marital property because they had been serving as income
during the marriage.
The wife was awarded one-half of the
marital contribution to the husband’s pension, which represented
31% of the disability benefits.
The Court of Appeals affirmed,
noting that there was no statutory exemption providing that the
disability benefits be classified as non-marital property.
Recognizing that the issue was one of first
impression, the Kentucky Supreme Court examined statutes and
case law from other jurisdictions and adopted an analytical
approach to classifying disability benefits.
Under this approach, benefits which actually
compensate for disability are not classified
as marital property because such benefits
are personal to the spouse who receives them
and compensate for loss of good health and
replace lost earning capacity.
Holman, 88 S.W.3d 903, 906.
In reversing the Court of Appeals,
the Supreme Court explained as follows:
Pension and retirement benefits
compensate individuals who live past
retirement age. Such benefits constitute
deferred compensation for services rendered
and function as a substitute for life
savings. Like any joint savings accumulated
during the marriage, pension and retirement
benefits are subject to distribution as
marital property upon divorce. On the other
hand, disability benefits do not substitute
for savings but instead 'protect against the
inability of an individual to earn the
salary or wages to which he or she was
accustomed in the immediate past.'
Generally, therefore, disability benefits
replace income which is lost before
retirement. Logic dictates that disability
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benefits and income should be treated in the
same manner since disability benefits are
income replacement. Since the future income
of each spouse is not classified as marital
property, disability benefits which replace
future income should not be classified as
marital property.
We recognize that marital funds were
used to acquire Appellant's disability
coverage, but that does not change the
character of the property the disability
benefits replace. Disability coverage itself
has been analogized to a form of term
insurance "from which the marital
partnership derived a full measure of
protection during the marriage." Like the
proceeds of property insurance that take
their character from the nature of the
property they replace and not from the
source of the funds used to pay the
insurance premium, Appellant's disability
benefits should be classified according to
the nature of the wages they replace rather
than the source of the funds used to acquire
his disability coverage.
(Footnotes omitted).
Holman at 907-908.
In relying upon Holman, David argues that his
disability benefits were received as a replacement for future
income that he would have earned after the dissolution.
Therefore, they are non-marital and not subject to division.
Norma argues that David’s pension was fully vested at the time
of their divorce.
Therefore, upon entry of the dissolution
decree, she believes that she immediately acquired one-half of
the pension account as her separate property pursuant to our
holding in Brosick v. Brosick, 974 S.W.2d 498 (Ky. App. 1998).
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Kentucky law allows the division of pensions which are
vested yet immature.
While Norma may have owned a portion of
David’s retirement at the time of the divorce, she had no
immediate right to receive any funds from his pension at that
point.
If David had quit his job as a firefighter before
working long enough to be entitled to retirement benefits, he
would have received only the money that he had paid into his
pension account.
Norma would have been entitled to her marital
portion of those funds.
If he had continued to work as a
firefighter until he qualified for retirement, David and Norma
would each have received a portion of his monthly retirement
benefits.
However, when David became disabled, his pension
account ceased to exist and was converted instead into a
disability retirement account.
Pursuant to Holman, supra,
Norma’s separate property interest was extinguished at that
time.
Thus, Holman takes the division of a pension a step
beyond Brosick by addressing the impact of disability payments
as transforming the nature of the funding source.
Norma also contends that David’s appeal from the order
entered by the Boyle Circuit Court is an impermissible
collateral attack against the original decree of dissolution of
the Pulaski Circuit Court.
She argues that the time for taking
an appeal from the dissolution decree is long past and that we
are not permitted to examine the issue of the proper
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classification of the pension at this time.
We disagree.
David
did not appeal from the original judgment of the Pulaski Circuit
Court, and our opinion in no way considers the propriety of that
court’s division of the pension.
It was Norma who invoked the
jurisdiction of the Boyle Circuit Court.
Upon discovering that
David’s disability was no longer subject to division under a
QDRO, Norma asked the Boyle Circuit court to divide David’s
pension.
That is the order from which this appeal is properly
taken.
Under the controlling precedent set forth in Holman,
supra, we hereby vacate the order of the Boyle Circuit Court and
remand this case for entry of an order denying Norma’s motion to
divide David’s disability retirement benefits.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Joseph Brand Venters
Somerset, Kentucky
Larry D. Catlett
Harrodsburg, Kentucky
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