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§ 20-107.3. Court may decree as to property of the parties.

A. Upon decreeing the dissolution of a marriage, and also upon decreeing a divorce from the bond of matrimony, or upon the filing with the court as provided in subsection J of a certified copy of a final divorce decree obtained without the Commonwealth, the court, upon request of either party, shall determine the legal title as between the parties, and the ownership and value of all property, real or personal, tangible or intangible, of the parties and shall consider which of such property is separate property, which is marital property, and which is part separate and part marital property in accordance with subdivision A 3. …

2. Marital property is (i) all property titled in the names of both parties, whether as joint tenants, tenants by the entirety or otherwise, except as provided by subdivision A 3, (ii) that part of any property classified as marital pursuant to subdivision A 3, or (iii) all other property acquired by each party during the marriage which is not separate property as defined above. All property including that portion of pensions, profit-sharing or deferred compensation or retirement plans of whatever nature, acquired by either spouse during the marriage, and before the last separation of the parties, if at such time or thereafter at least one of the parties intends that the separation be permanent, is presumed to be marital property in the absence of satisfactory evidence that it is separate property. For purposes of this section marital property is presumed to be jointly owned unless there is a deed, title or other clear indicia that it is not jointly owned.

a. In the case of income received from separate property during the marriage, such income shall be marital property only to the extent it is attributable to the personal efforts of either party. In the case of the increase in value of separate property during the marriage, such increase in value shall be marital property only to the extent that marital property or the personal efforts of either party have contributed to such increases, provided that any such personal efforts must be significant and result in substantial appreciation of the separate property.

For purposes of this subdivision, the nonowning spouse shall bear the burden of proving that (i) contributions of marital property or personal effort were made and (ii) the separate property increased in value. Once this burden of proof is met, the owning spouse shall bear the burden of proving that the increase in value or some portion thereof was not caused by contributions of marital property or personal effort.

“Personal effort” of a party shall be deemed to be labor, effort, inventiveness, physical or intellectual skill, creativity, or managerial, promotional or marketing activity applied directly to the separate property of either party.

b. In the case of any pension, profit-sharing, or deferred compensation plan or retirement benefit, the marital share as defined in subsection G shall be marital property.

c. In the case of any personal injury or workers' compensation recovery of either party, the marital share as defined in subsection H of this section shall be marital property.

Any marital property, which has been considered or ordered transferred in granting the monetary award under this section, shall not thereafter be the subject of a suit between the same parties to transfer title or possession of such property.

H. In addition to the monetary award made pursuant to subsection D, and upon consideration of the factors set forth in subsection E, the court may direct payment of a percentage of the marital share of any personal injury or workers' compensation recovery of either party, whether such recovery is payable in a lump sum or over a period of time. However, the court shall only direct that payment be made as such recovery is payable, whether by settlement, jury award, court award, or otherwise. “Marital share” means that part of the total personal injury or workers' compensation recovery attributable to lost wages or medical expenses to the extent not covered by health insurance accruing during the marriage and before the last separation of the parties, if at such time or thereafter at least one of the parties intended that the separation be permanent.

Virginia Code § 20-107.3

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Thomas v. Thomas, 13 Va. App. 92, 408 S.E.2d 596 (1991)

In the Court of Appeals of Virginia

Argued at Richmond, Virginia

DONNA CAPLE THOMAS

RICHARD WILLIAM THOMAS

Record No. 0210-90-2

Decided: September 10, 1991

SUMMARY

Wife appealed the judgment of the circuit court making an equitable distribution award. She argued that the trial court erred in failing to classify as marital property a lump sum personal injury award the husband received during the marriage (Circuit Court of King George County, Richard H. C. Taylor, Judge).

The Court of Appeals reversed, holding that the personal injury settlement proceeds were marital property.

HEADNOTES

(1) Domestic Relations — Equitable Distribution — Classification of Property. — Separate property does not by the express terms of the statute include the proceeds of a personal injury claim; thus, because of the presumption favoring marital property, the recipient of a personal injury settlement has the burden of proving that the funds are separate property.

(2) Domestic Relations — Equitable Distribution — Classification of Property. — Personal injury awards for economic loss to the marriage -lost wages, medical expenses, and attorney's fees are marital property. [Page 93]

COUNSEL

Joseph A. Vance, IV (Roberts, Sokol, Ashby & Jones, on brief), for appellant.
Murray M. Van Lear, II (Scott, Dalton & Van Lear, on brief), for appellee.

OPINION

BENTON, J. — Donna Caple Thomas appeals from the trial judge's monetary award entered upon the dissolution of the parties' marriage. She raises two issues: (1) whether a lump-sum personal injury settlement, which her husband received during the course of the marriage for injuries incurred also during the course of the marriage, is presumptively marital property, and (2) assuming the settlement to be separate property, whether the record demonstrates that the settlement fund was transmuted into marital property. We hold that the personal injury settlement proceeds were marital property.

The husband and the couple's son suffered severe personal injuries in an automobile accident on March 9, 1985. The husband settled his personal injury claim in January 1987 for $493,585.90 plus his attorney's fees. The record does not reflect what portion of the settlement was for economic loss, but it does show that the husband earned $800 per week before the accident totally disabled him. After the accident, the husband began receiving Social Security benefits totalling approximately $1,100 per month. The husband paid $15,000 in medical bills from the settlement funds. The remaining medical expenses were satisfied by the wife's employee health insurance.

When the parties separated on June 13, 1987, the husband had approximately $300,000 of the settlement remaining. Because he did not receive monetary support from his wife, he used a portion of the money for his and the children's support. He loaned $120,000 to a friend upon the friend's oral agreement to repay and $25,000 to another friend, also without a written agreement. The wife filed for divorce on July 8, 1988. Upon decreeing an absolute divorce on February 1, 1990, the trial judge classified the settlement proceeds as the husband's separate property. The wife [Page 94] received a $55,000 lump-sum monetary award, representing half of the marital estate.

(1) We apply the equitable distribution statute as it existed in July 1988, when the wife filed the bill of complaint. Price v. Price, 4 Va. App. 224, 230, 355 S.E.2d 905, 908 (1987). In Smoot v. Smoot, 233 Va. 435, 357 S.E.2d 728 (1987), the Supreme Court determined that property subject to equitable distribution must be classified as either separate or marital and refused to recognize a hybrid classification. Id. at 439-41, 357 S.E.2d at 730-31. "Virginia was the only state [to] follow[] the unitary theory of property." L. Golden, Equitable Distribution of Property 298 (B. Turner Supp. 1990).

Our statute contains the following classification definitions:

Separate property is (i) all property acquired by either party before the marriage; (ii) all property acquired during the marriage by bequest, devise, descent, survivorship or gift from a source other than the other party; and (iii) all property acquired during the marriage in exchange for or from the proceeds of sale of separate property, provided that such property acquired during the marriage is maintained as separate property.

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All property . . . acquired by either spouse during the marriage, and before the last separation of the parties . . . is presumed to be marital property in the absence of satisfactory evidence that it is separate property.

Code §§ 20-107.3(A)(1) and (2) (as amended 1988). Separate property does not by its express terms include personal injury settlements. Thus, because of the presumption favoring marital property, the husband bore the burden of proving that the settlement proceeds existing at the time the parties separated were his separate property. Taylor v. Taylor, 9 Va. App. 341, 344, 387 S.E.2d 797, 799 (1990).

Interpreting a statutory definition of marital property virtually identical to Virginia's definition, the Illinois Court of Appeals in In re Marriage of Burt, 144 Ill. App. 3d 177, 494 N.E.2d 868 (1986), addressed the issue "whether a cause of action for personal [Page 95] injuries to a party to a dissolution proceeding occurring during the pendency of the proceedings is marital property, in whole or in part, within the meaning" of the statutory definition of marital property.¹ Id. at 178, 494 N.E.2d at 869. The court determined that "such a cause of action is marital property in its entirety." Id. The court reasoned that nothing in the language defining non-marital property specifically exempted causes of action, personal injury awards, or settlements from the class of marital property classification. Id. at 182, 494 N.E.2d at 870-71; see Ill. Ann. Stat. ch. 40, para. 503(a) (Smith-Hurd Supp. 1991). See also In re Marriage of Gan, 83 Ill. App. 3d 265, 269, 404 N.E.2d 306, 309 (1980) ("personal injury settlement does not fit within any of the exceptions to marital property enumerated in the Act" and, therefore, it is presumed to be marital). Our statute mandates the same result.

(2) Even if we were to find more persuasive the view that personal injury settlements for those non-economic injuries particular to the injured spouse are more akin to separate property, see L. Golden, supra, at § 6.26, we cannot ignore the equally persuasive view that awards for economic loss to the marriage — lost wages, medical expenses, and attorney's fees — are marital property. See id. at §§ 6.24-6.25. This is not to say that a lump-sum personal injury award preserved in a single corpus will be divided by a court into separate and marital parts with the latter only being subject to equitable distribution. A court must classify an asset as either marital or separate property. Smoot, 233 Va. at 439-41, 357 S.E.2d at 730-31. The burden, in this instance, lies on the husband to prove that the settlement funds are entirely separate. Otherwise, they are presumed marital and subject to equitable distribution.² [Page 96]

The record contains no evidence as to what exactly the husband's settlement contemplated. The husband established that the awards excluded attorney's fees and medical expenses, except for $15,000 that settled a disputed medical fee. The record demonstrates that the parties' insurance covered the balance of medical payments. Thus, through the process of elimination, the husband attempted to prove the settlement funds consisted only of non-economic damages. Further evidence established that the husband's injuries precluded him from pursuing his regular employment from which he was paid $800 per week. Although he began receiving Social Security benefits, they amounted to a sum substantially less than his pre-accident income. Absent proof that the settlement funds were exclusively for injuries personal to the husband and did not include consideration for economic losses, the factfinder was not reasonably able to conclude that the husband rebutted the statutory presumption.

Because we conclude that the trial judge erred in classifying the settlement proceeds as separate property, we reverse the equitable distribution award and remand the case for a reconsideration of the monetary award consistent with this opinion.

Reversed and remanded.

Baker, J., and Cole, J.,^* concurred.

FOOTNOTES

¹ We expressly refrain from considering whether a cause of action accruing during the marriage and before separation is property subject to equitable distribution. A claim which has been reduced to a monetary award or settlement, however, is property subject to the equitable distribution statute.

² Of course, the classification of marital property does not automatically entitle the uninjured spouse to any predetermined amount of the settlement proceeds. Code § 20-107.3(E) provides:

The amount of any division . . . shall be determined by the court after consideration of . . .

2. The contributions . . . of each party in the acquisition . . . of such marital property of the parties;

6. How and when specific items of such marital property were acquired."

^* Judge Cole participated in the hearing and decision of this case prior to the effective date of his retirement on April 30, 1991 and thereafter by designation pursuant to Code § 17-116.01

Thomas v. Thomas, 13 Va. App. 92, 92-96, 408 S.E.2d 596, ___ (1991)

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Ralston v. Ralston, 19 Cir. C149597 (1998)

In the Circuit Court of Fairfax County

Ralston

In Chancery No. 149597

Decided: February 12, 1998

COUNSEL

Richard P. Buzan

KELLOGG, KREBS & MORAN

4153 Chain Bridge Road

Fairfax, VA 22030

David L. Duff 11320 Random Hills Road

Suite 525

Fairfax, VA 22030

LETTER OPINION BY JUDGE MICHAEL P. MCWEENY:

This matter came before the Court upon motions for exclusive use, spousal support, child support, equitable distribution of the parties' property and attorney's fees. Testimony was presented on February 10, 1998, and the Court took the ruling under advisement.

The Court now has had the opportunity to review the pleadings, the transcript of the Commissioner's hearing, the Report of the Commissioner the evidence presented, exhibits and Stipulations submitted, and argument of counsel. They have been weighed pursuant to the factors contained in §§ 20-107.1, 20-107.3, 20-108.1 and 20-108.2. For the reasons specified below, the Court makes the following findings of fact and conclusions of law.

EQUITABLE DISTRIBUTION

The Court first will address equitable distribution of the property.

Initially, the parties have stipulated to distribution of the husband's Civil Service Retirement Plan, his Thrift Savings Plan, the Ford Crown Victoria, the Plymouth Voyager, the Capital One account, and most items of marital personal property. It is agreed that the Court only need address the AK-47 Rifle, the lawnmower, the piano, and the marital share of the husband's personal injury case.

The Court finds that the husband has proven the tracing of the funds required for the purchase and repair of the piano to post-separation earnings of the husband. Therefore, the piano is classified as the husband's separate property.

In addressing the personal injury settlement, the statute must be examined: Section 20-107.3(H) reads:

. . . the court may direct payment of a percentage of the marital share of any personal injury . . . recovery of either party. . . . "Marital share" means that part of the total personal injury . . . recovery attributable to lost wages or medical expenses to the extent not covered by health insurance accruing during the marriage and before the last separation of the parties. . . .

The personal injury action is the result of a motor vehicle accident occurring on October 25, 1996. Thus the cause of action accrued 16 days prior to the final separation on November 10, 1996 (as determined by the Commissioner in his Report). Medical expenses were accrued during those 16 days and the husband was unable to work. The evidence is clear that all medical expenses were covered and paid by health insurance and that, as the result of sick leave, no lost wages were incurred. In Thomas v. Thomas, 13 Va. App. 92 (1991), the Court of Appeals made it clear that while a personal injury recovery accruing prior to separation is presumed marital, it is the "awards for economic loss to the marriage — lost wages, medical expenses, and attorney's fees" which are the marital property contemplated. Here, there are no uncovered medical expenses and there is no evidence as to whether "sick leave" has any value, i.e. whether accrued sick leave must be paid for upon termination of employment. The Court finds no proven economic loss. In addition, it is noted that the so-called "double recovery" under the medical payments coverage of the Nationwide policy maintained by the parties was deposited and used for marital purposes. In accord with Thomas, supra, the Court finds there is no marital position of the husband's personal injury claim.

The remaining two assets to be classified are both marital. The lawnmower is valued at $275.00 and the AK-47 Rifle (on limited evidence) is valued between $100 and $550.

The marital debt issue is complicated by the Supplemental Custody Order entered herein by Judge Keith on February 6, 1998. By the terms of that Order "(t)he parties shall pay, according to their guideline income percentages, the following costs and expenses: (a) child day care; (b) un-reimbursed medical, dental, vision, orthodontia and mental health; (c) all counseling/gatekeeper mediation services referred to in this Order." As there is no reference to retroactivity in the Order, the Court finds that it does not control the debt incurred prior to its date.

As the husband has agreed to pay for Dr. Nay's bill, the only marital debt established by the evidence is as follows: Ann Travers, $255.00; Joseph Polumbi, $200.00; and David Shotack, $360.00.

This case involves a marriage of approximately fourteen years. The husband made the majority of the monetary contributions and the wife made the majority of the non-monetary contributions, both to the acquisition and case of marital assets and to the well-being of the family. The bankruptcy clearly disrupted the family's economic well-being; however, the Court finds no evidence that the attempt to form an independent business was either ill-advised or against the wishes of the wife. The Court rejects a finding of "negative non-monetary contributions."

The husband and wife are 45 and 44 respectively, and both are in good physical and mental health. Both have college degrees. The wife is a certified massage therapist and the husband is the Chief Hazmat Officer for the National Parks Service.

No circumstances or factors contributing to the dissolution of the marriage have been presented.

Considering the foregoing, the distribution of the property by stipulation, the lack of liquidity of the remaining marital estate, and the lack of evidence relating to any tax consequences, equitable distribution is to be as follows:

1. The wife shall retain the lawnmower and the husband shall retain the AK-47 rifle.

2. The marital debts shall be apportioned as the responsibility of the party designated as follows:

Ann Travers — wife

Joseph Polumbi — husband

David Shotack — husband

3. Considering the nature of the stipulation and distribution, neither party is granted a monetary award.

MOTION FOR EXCLUSIVE USE

The Court finds no evidence to support an award of exclusive use of the marital residence. The motion is denied.

SPOUSAL SUPPORT

In addressing support, the Court first makes a finding that overtime pay is no longer available to the husband. Thus, his gross monthly income is $5130 and hers is $1250. Both parties submitted income and expense statements; however, both statements presuppose that he or she is in exclusive possession of the home. The Court also took into consideration the distribution (with stipulations) pursuant to § 20-107.3 and the expense allocation pursuant to the Supplemental Custody Order of February 6, 1998, and the factors recited earlier as they related to § 20-107.1. Upon all of the evidence, Mr. Ralston shall pay Mrs. Ralston the sum of $600.00 per month as spousal support.

CHILD SUPPORT

The Court next turns to the issue of child support. Again, the Court considered the evidence and factors as set forth above, and viewed them in light of the provisions of §§ 20-108.1 and 20-108.2. The presumptive figure was determined and a copy of the worksheet is attached as Exhibit A to this opinion letter. There are no facts requiring deviation from the guidelines, and accordingly Mr. Ralston will pay Mrs. Ralston the monthly sum of $175.00 as child support.

ATTORNEY'S FEES

The Court notes that the parties have proven substantial attorney's fees for each side. Review of the file reflects no fewer than twenty-one orders entered resolving various disputes. While it is clear that the case has been over-litigated, the Court is unable to find that one side is responsible and, indeed, mutual combat seems the more likely explanation. Each party shall bear his or her own attorney's fees.

Mr. Buzan is instructed to prepare a Final Decree.

APPENDIX: EXHIBIT A

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A worksheet appears at this point in the opinion.

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Ralston v. Ralston, 19 Cir. C149597 (1998)

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