1. Divorce_equitable distribution_disability insurance payments_separate property
There was evidence to support the trial court's finding in an equitable distribution action
that disability benefits received post-separation were separate property. The focus is on the
nature of the wages being replaced and the benefits do not become marital because the source of
the premiums was marital.
2. Appeal and Error_assignment of error_favorable judgment
An assignment of error was insufficient for review where defendant requested an unequal
distribution in her favor, received that distribution, and then alleged that the trial court erred by
not providing an equal distribution.
3. Divorce_equitable distribution_weight of distributional factors
The trial court in an equitable distribution action is not required to reveal the exact weight
given to each distributional factor on which evidence is presented.
H. Paul Averette for plaintiff-appellee.
Charles W. McKeller for defendant-appellant.
McGEE, Judge.
Karol Finkel (defendant) and Charles E. Finkel (plaintiff)
were married on 11 March 1973, separated on 15 August 1999, and
divorced on 10 October 2000. During the marriage, plaintiff
practiced dentistry for a professional association doing business
as Charles E. Finkel, D.D.S., P.A. The professional association
was dissolved in 1991 and the assets were distributed to the
parties. Beginning in January 1991, plaintiff received benefits
from two disability insurance policies totaling $17,000 per monthdue to a somatic condition, dysthymia, which is characterized as
chronic mild depression. Premiums for the insurance policies were
paid by the professional association. Under both disability
policies, plaintiff could continue to receive monthly benefits so
long as he remained disabled and did not return to work in the
field of dentistry.
Plaintiff filed a complaint on 28 January 2000 seeking a
divorce from bed and board, as well as equitable distribution.
Defendant filed a counterclaim on 27 March 2000 for alimony, post
separation support, an interim distribution of marital property,
and she also sought an unequal distribution of marital property in
her favor.
Judgment was entered on 1 March 2002 on the parties' equitable
distribution claims. The trial court made extensive findings of
fact regarding the assets of the parties, including the
classification of income from plaintiff's disability insurance
policies as separate property. The trial court considered that
income as a distributional factor and ultimately distributed the
property in favor of defendant. The trial court awarded
$452,349.50 in marital property to defendant and $430,652.50 in
marital property to plaintiff. Only the issue of equitable
distribution is the subject of this appeal. Defendant appeals.
[1] In defendant's first assignment of error, she argues the
trial court erred in classifying as separate property the
disability benefits received by plaintiff after the date of
separation. It is defendant's contention that the benefits are
best characterized as marital property and therefore subject todistribution. After careful consideration of defendant's argument,
we are not persuaded and find that this assignment of error is
without merit.
Under our equitable distribution statute, upon application of
a party, the trial court determines what is the marital property
and divisible property of the parties. N.C. Gen. Stat. § 50-20(a)
(2001). Initially, "'[the] party claiming that property is marital
has the burden of proving beyond a preponderance of the evidence'
that the property was acquired: by either or both spouses; during
the marriage; before the date of separation; and is presently
owned." Fountain v. Fountain, 148 N.C. App. 329, 332, 559 S.E.2d
25, 29 (2002)(quoting Lilly v. Lilly, 107 N.C. App. 484, 486, 420
S.E.2d 492, 493 (1992)(citations omitted)). Once a party meets
this burden, the burden shifts to the other party to show by a
preponderance of the evidence that the property is best
characterized as separate. Lilly, 107 N.C. App. at 486, 420 S.E.2d
at 493.
A variety of methods have been adopted by different
jurisdictions to aid in determining whether property is
appropriately classified as separate, marital, or divisible. See
Johnson v. Johnson, 117 N.C. App. 410, 412, 450 S.E.2d 923, 925
(1994). Our Supreme Court rejected a mechanistic, more literal
approach to the classification of property in equitable
distribution actions and instead adopted the analytic approach in
reviewing classification of personal injury awards. Johnson v.
Johnson, 317 N.C. 437, 451, 346 S.E.2d 430, 438 (1986). Under the
analytic approach, the pertinent question is what are the benefitsor proceeds at issue intended to replace. See Johnson, 317 N.C. at
446-47, 346 S.E.2d at 435. Courts that have adopted the analytic
approach in classifying property for the purpose of equitable
distribution have "'consistently held that the portion of [a
personal injury] award representing compensation for non-economic
losses _ i.e., personal suffering and disability _ is the separate
property of the injured spouse; the portion of an award
representing compensation for economic loss . . . during the
marriage . . . is marital property.'" Johnson, 117 N.C. App. at
412, 450 S.E.2d at 925 (quoting Johnson, 317 N.C. at 447-48, 346
S.E.2d at 436); see also Cooper v. Cooper, 143 N.C. App. 322, 545
S.E.2d 775 (2001)(utilizing the analytic approach, Social Security
benefits are disability benefits intended to replace loss of
earning capacity and are thus separate property).
Applying the reasoning of the Supreme Court, our Court held
that "disability retirement benefits" which were intended to
replace the recipient's loss of earning capacity due to disability
were the separate property of that spouse. Johnson, 117 N.C. App.
at 414, 450 S.E.2d at 926. In Johnson, we asked "whether the
benefits that plaintiff received were truly disability benefits or
were retirement benefits (compensation for economic loss)." Id. at
412, 450 S.E.2d at 925. Our Court's decision in Johnson is on
point as to the issue before our Court in the present case.
Courts in a majority of other states have elected to follow
the analytic approach in classifying disability benefits received
after separation as separate property. See Hatcher v. Hatcher, 933
P.2d 1222 (Ariz. Ct. App. 1996); Holman v. Holman, 84 S.W.3d 903(Ky. 2002); Chance v. Chance, 694 So. 2d 613 (La. Ct. App. 1997);
Sherman v. Sherman, 740 S.W.2d 203 (Mo. Ct. App. 1987); Gann v.
Gann, 620 N.Y.S.2d 707 (N.Y. Sup. Ct. 1994), aff'd, 649 N.Y.S.2d
154 (N.Y. App. Div. 1st Dep't 1996) ; Gragg v. Gragg, 12 S.W.3d 412
(Tenn. 2000); In re Marriage of Brewer, 976 P.2d 102 (Wash.
1999)(post-dissolution disability insurance benefits are separate
property of the disabled spouse regardless of whether marital funds
paid the premiums).
In the case before us, the scope of review is limited to
whether there was any competent evidence to support the findings of
the trial court that the disability benefits received post-
separation were separate property. See Taylor v. Taylor, 92 N.C.
App. 413, 417, 374 S.E.2d 644, 646 (1988). The trial court's
findings will only be upset if "the decision was unsupported by
reason and could not have been the result of a competent inquiry."
Crowder v. Crowder, 147 N.C. App. 677, 681, 556 S.E.2d 639, 642
(2001). Therefore, findings of fact are deemed conclusive if they
are "supported by any competent evidence in the record." Id.
The trial court, citing our decision in Johnson regarding
retirement disability benefits, found that the disability benefits
received by plaintiff, from and after the date of separation, were
the separate property of plaintiff. As noted in Johnson, the
better practice would have been for the trial court to expressly
state that the disability benefits were due to plaintiff's own
disability and were for the purpose of replacing his loss of
earning capacity. Johnson, 117 N.C. App. at 413, 450 S.E.2d at
926. However, we find that the evidence presented at trial wassufficient to support the trial court's finding that plaintiff's
benefits received post-separation were his separate property.
There are two disability insurance policies in this case; one
maintained by Jefferson-Pilot Corporation (Jefferson-Pilot policy)
and the other by Unionmutual Stock Life Insurance Company of
America (Unionmutual policy). The Jefferson-Pilot policy,
originally issued by Chubb Life, is self-described as an "income
replacement policy." This policy was conditionally renewable up to
plaintiff's seventy-second birthday. The Unionmutual policy,
calling itself a "disability income policy," agrees to pay a
monthly benefit for total disability for so long as plaintiff
remains totally disabled until he reaches age sixty-five. It is
evident from the language of both policies that the monthly benefit
contains no retirement component and the policies are for the
purpose of compensating plaintiff for his loss of health and
earning capacity due to disability.
Both policies permit plaintiff to continue to receive the
monthly benefit even if he finds employment in a field other than
dentistry. We find these policy stipulations to be irrelevant for
the purposes of classification of the property. The disability
benefits received by plaintiff replace his post-separation loss of
earning capacity as a dentist. He is unable to work as a dentist
as long as he remains disabled.
Defendant emphasizes that the premiums were paid by the
professional association, which was a marital asset prior to its
dissolution. Thus, defendant argues that because the source of the
premiums was marital in origin and those premiums served to depletethe marital assets, the proceeds of the disability insurance
policies should be marital as well. We note that there are other
forms of personal injury compensation, such as Social Security
disability benefits, that have a similar source of funds, yet are
deemed separate property. See Cooper, 143 N.C. App. 322, 545
S.E.2d 775. The monthly benefits do not lose their classification
as separate property because the source of the premiums was
marital. In assessing the status of disability benefits in
equitable distribution actions, the analytic approach mandates the
focus be directed at what is the nature of the wages being
replaced.
Furthermore, as this Court noted in Johnson, "[p]ublic policy
supports our holding that benefits which are truly 'disability'
benefits should be the separate property of the disabled spouse."
Johnson, 117 N.C. App. at 414, 450 S.E.2d at 927. To hold
otherwise would be to deprive the disabled spouse of a means of
future support, particularly where that spouse is likely to have a
greater need for the benefits.
[2] Defendant also assigns error to the trial court's failure
to "equally divide the marital assets of the parties in the absence
of a finding or conclusion that an equal division was not equitable
and without identifying the weight assigned to each distributional
factor found."
As a general rule, the party who prevails at trial may appeal
where the judgment is less favorable than that party thinks is
just. Casado v. Melas Corp., 69 N.C. App. 630, 635, 318 S.E.2d
247, 250 (1984). However, in this case defendant requested anunequal distribution in her favor and received an unequal
distribution in her favor. Yet, she alleges the trial court erred
in failing to provide an equal distribution. Thus, defendant
argues that the trial court erred because it should have provided
a judgment less favorable to her.
N.C.R. App. P. 10(c)(1) provides that an assignment of error
"is sufficient if it directs the attention of the appellate court
to the particular error about which the question is made."
Accordingly, we find that the first half of defendant's second
assignment of error is insufficient for this Court to review.
[3] The later half of defendant's second assignment of error
faults the trial court for failing to indicate the weight it
allotted to each distributional factor considered. It is within
the trial court's discretion to determine the weight attributed to
any of the N.C. Gen. Stat. § 50-20(c) factors on which evidence was
presented. Daetwyler v. Daetwyler, 130 N.C. App. 246, 250, 502
S.E.2d 662, 665, disc. review denied, 349 N.C. App. 528, 526 S.E.2d
174 (1998), aff'd, 350 N.C. 375, 514 S.E.2d 89 (1999). "It is not
required that the trial court make findings revealing the exact
weight assigned to any given factor." Id. We find no merit in
defendant's argument.
Affirmed.
Judges BRYANT and GEER concur.
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