Supreme Court of the State of Washington
Opinion Information Sheet
Docket Number: 66577-0
Title of Case: In RE the Marriage of Michael A. Brewer and
v.
Deborah Q. Brewer
File Date: 05/06/1999
Oral Argument Date: 01/14/1999
SOURCE OF APPEAL
----------------
Appeal from Superior Court,
Clark County;
95-3-00355-6
Honorable Robert L. Harris, Judge.
JUSTICES
--------
Authored by Charles Z. Smith
Concurring: Charles W. Johnson
Philip A. Talmadge
Richard B. Sanders
Faith E Ireland
Richard P. Guy
Gerry L. Alexander
Barbara A. Madsen
Barbara Durham
COUNSEL OF RECORD
-----------------
Counsel for Petitioner(s)
John R. Stichman
Stichman Hoke Fels
411 E Evergreen Blvd
Vancouver, WA 98660
Susan D. Pitchford
800 N Devine Rd
Vancouver, WA 98661
Counsel for Respondent(s)
Philip A. Foster
Attorney At Law
St Johns Professional Ctr
2011 St Johns Blvd
Vancouver, WA 98661
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
)
IN RE MARRIAGE OF )
)
MICHAEL A. BREWER, ) Number 66577-0
)
Petitioner )
)
v. ) En Banc
)
DEBORAH Q. BREWER, )
)
Respondent )
) Filed May 6, 1999.
)
SMITH, J.Petitioner Michael A. Brewer seeks review of a decision of
the Court of Appeals, Division II, which reversed and remanded to the Clark
County Superior Court a ruling characterizing monthly payments to a
permanently disabled spouse under a private disability insurance policy
after dissolution of a marriage as separate property and not community
property. We granted review. We affirm the Court of Appeals in part and
reverse it in part.
QUESTION PRESENTED
The question presented in this case is whether monthly payments
to a permanently disabled spouse under a private disability insurance
policy after dissolution of a marriage constitutes separate property and
not community property, even though the policy was acquired during the
marriage and premiums were paid from community funds before premiums were
waived by the issuing companies.
STATEMENT OF FACTS
Petitioner Michael A. Brewer and Respondent Deborah Q. Brewer
were married on May 20, 1988 in King County, Washington.1 No children were
born of the marriage,2 although Respondent has two children from a prior
marriage.3 Respondent has been a full-time elementary school teacher since
1977 with net income between $2,200.00 and $2,300.00 per month.4 At the
time of the marriage Petitioner was a dentist who practiced his profession
at the Kaiser Company until December 1991 when he was diagnosed with a
progressively deteriorating disease, multiple sclerosis.5 Petitioner was
unable to continue the practice of dentistry.6 The Social Security
Administration determined him to be permanently disabled. A similar
determination was made by the companies issuing his disability insurance
policies, Mutual of New York (MONY) and New York Life Insurance Company
(NYLIC).7 Petitioner receives a monthly non-taxable income of $6,193.00
from the disability insurance policies and $1,212.00 from Social Security,
totaling approximately $7,400.00.8 This is his sole source of income.9
On March 3, 1995 Petitioner served Respondent with a summons and
petition for dissolution of marriage which he filed in the Clark County
Superior Court.10 On March 1, 1996 the Honorable Robert L. Harris signed a
decree of dissolution.11 The following statements concerning the disability
insurance policies were made by the trial court in the findings of fact
and conclusions of law:12
A. The Petitioner's New York Life and Mutual of New York
disability insurance benefits are not assets subject to division in this
case. Such benefits should be awarded to the Petitioner Michael Brewer free
of any claims of the Respondent Deborah Q. Brewer.
The court notes that the community paid about $12,000 in
premiums for such disability pay; however the court also notes that the
community received about $6,000 on a monthly basis from these private
disability policies, from the time of the Petitioner's disability until the
parties separation, as well as during the period of parties separation
under court order which also benefited the parties.
B. Furthermore, the property division in this case is fair
and equitable in that it has also taken into account and recognized the
disability benefits received and to be received by the Petitioner. The
court notes that the Respondent has a substantial separate property estate
that the Petitioner does not have. Furthermore, the court has made
disproportionate award of community property in favor of the Respondent.
The total property award received by Respondent is in excess of that to be
received by Petitioner. Such award takes into consideration the fact of
the disability payments that Petitioner has and will receive.13
Each party was awarded all policies insuring their own lives.14 The
parties were to equally divide cassette tapes valued at $1,500.00, family
photographs, and share reproduction costs for the photographs.15 No
maintenance was ordered.16 Child support was not an issue.17 In the
findings of fact and conclusions of law the trial court indicated awards to
Petitioner of approximately $56,521.00 net value in community assets, plus
a marital lien of $10,000.00, and community debts of $11,500.00 for a total
of $55,021.00;18 and to Respondent approximately $94,057.00 in community
assets less the marital lien of $10,000.00, and community debts of
$11,800.00 for a total of $72,257.00.19 Judge Harris determined that, based
on this distribution of property, Respondent had a disproportionate award
of community property in her favor in addition to approximately $350,000.00
in separate assets, for a total of $422,257.00.20 The value
of assets awarded Respondent far exceeded the value of assets awarded to
Petitioner.21 The specific values constituting the totals were not
indicated precisely by the trial court, but a fair summary and comparison
of property awarded the parties in this dissolution is represented in the
chart which follows.
Property Awarded to
Respondent Deborah Q. Brewer
Community Property
Beach house in Seaview, Washington.
Approximate value $120,000.00 subject
to debt of $57,200.00, net $62,800.00.
Washington State defined benefit retirement
plan (TERS II). Value
$16,782.00
Respondent's $1.5 million MONY life
insurance policy subject to its premiums and
interest. No cash value indicated.
Beach house furnishings. Value $3,777.00.
Furniture and furnishings in family
residence. Value $9,613.00, plus
$1,000.00 for the Dickens collection.
Equal share in cassette tapes valued at
$1,500.00, or $750.00.
Separate Property
Family residence in Vancouver, Washington
valued at $140,200.00, subject to
marital lien of $10,000.00, net $130,200.00.
Jefferson Pilot Life Insurance Policy.
Cash value $115,000.00.
Jaguar automobile valued at $11,000.00.
Mountain cabin. No cash value indicated.
Dean Witter Account. No cash value indicated.
$20,000.00 bond gift from Orm Kellet.
Other Property
Depository funds in Respondent's name in
Northwest Bank. No cash value indicated.
Frequent flyer miles in Respondent's name
or in the name of her children.
No cash value indicated.
Interest in Mount Hood Jazz Festival tickets.
No cash value indicated.
Equal division of family photographs.
No cash value indicated.
Property Awarded to
Petitioner Michael A. Brewer
Community Property
Grand Flamingo time share located in
Nevada valued at $1,000.00 subject to
debt of $6,330.00, net -$5,330.00.
Petitioner's defined benefit plan pension
through prior employment as a
dentist with Kaiser. Value $7,129.00.
$5,866.00 cash withdrawn from MONY life
insurance policy.
$8,045.00 insurance payment received from
Mutual of Enumclaw.
Petitioner's Jefferson Pilot Life Insurance
policy. Approximate cash value $1,192.00
Petitioner's term life insurance policy
through Kaiser. No cash value assigned.
Marital lien on family residence, $10,000.00.
1989 Ford Bronco automobile. Community
value $14,500.00.
Personal property valued at $6,500.00.
Guns valued at $1,300.00.
Equal share in cassette tapes valued at
$1,500.00, or $750.00.
Separate Property
Other Property
Disability insurance benefits under the New
York Life Insurance and Mutual Insurance
of New York policies. No value indicated.
Social Security disability payments.
Other Property
Bank of Mount Hope depository funds
valued at $1,090.00. Depository funds
in Seafirst Bank and Bank of America.
No cash value indicated.
Frequent flyer miles in Petitioner's name.
No cash value indicated.
Equal division of family photographs.
No cash value indicated.
Based upon the dissolution decree, the approximate value of
community and separate assets awarded to the parties is indicated in the
following summary:
Awarded to Respondent
Deborah Q. Brewer
Community assets $ 94,057.00
Less marital lien - 10,000.00
Subtotal $ 84,057.00
Less community debt- 11,800.00
Subtotal $ 72,257.00
Separate assets $350,000.00
Total assets $422,257.00
Awarded to Petitioner
Michael A. Brewer
Community assets $ 56,521.00
Plus marital lien + 10,000.00
Subtotal $ 66,521.00
Less community debt- 11,500.00
Subtotal $ 55,021.00
Separate assets $ -0-
Total assets $ 55,021.00
Although the trial court awarded the disability insurance payments
to Petitioner Michael A. Brewer as "separate property," it assigned no
value to the policies. The court awarded the family residence in Vancouver,
Washington to Respondent as her separate property subject to a lien in
favor of Petitioner.22 The trial court determined the community contributed
approximately $20,000.00 in funds and labor to the family residence,
entitling the marital community to a claim against the home of $20,000.00.23
Petitioner was granted a marital lien of $10,000.00, one-half the total,
secured by a note and deed of trust at no interest if paid before July 1,
1996.24 After that date the debt would accrue at 12% per annum until paid.25
In addressing the MONY and NYLIC disability insurance policies, the
trial court concluded that the community paid the last actual premiums on
all policies immediately prior to the onset of Petitioner's disability in
December 1991,26 after which no further premiums were paid under waiver
provisions in the policies.27 The trial court concluded that Respondent
Deborah Q. Brewer had no claims to the disability policies28 because (1) the
policies were intended to replace future income for Petitioner at income
levels he attained before his disability and at levels for a dentist which
were expected to increase;29 (2) the policies were not intended for
retirement purposes because they terminate when Petitioner reaches age 65;30
and (3) the community paid approximately $12,000.00 in premiums on the
policies and received from them approximately $300,000.00 in monthly
disability payments prior to the dissolution.31
The Court of Appeals, the Honorable Karen G. Seinfeld writing,
reversed the trial court, holding that the court "erred in ruling that {Dr.
Brewer's} postdissolution disability payments {are} . . . separate
property."32 The case was remanded to allow the trial court to "exercise
its discretion to either reaffirm its distribution {of property} or
redistribute the property" according to the Court of Appeals' decision.33
Petitioner then sought review by this Court, which was granted on July 8,
1998.
DISCUSSION
Petitioner Michael A. Brewer contends the Court of Appeals erred in ruling
that private disability insurance benefits are a divisible asset in a
dissolution proceeding. He claims that court's decision is in conflict
with Supreme Court decisions in In re Marriage of Brown34 and In re Marriage
of Hall35 and in conflict with prior Court of Appeals decisions in In re
Marriage of Huteson36 and In re Marriage of Anglin.37
Respondent Deborah Q. Brewer answers to the contrary that the Court
of Appeals was correct. She asserts that the decision is based on Chase v.
Chase38 which has not been overruled by Brown, nor is it in conflict with
Brown because the cases have different facts and address different issues.
Neither party disputes the trial court's findings of fact. They are thus
verities on this appeal.39
The principal issue addressed by the Court of Appeals was whether the
"trial court err{ed} in characterizing postdissolution disability payments
as {Petitioner Michael A. Brewer's} . . . separate property."40 Despite
questioning the continued viability of Chase, the Court of Appeals relied
upon it in concluding that the trial court mischaracterized as Petitioner's
separate property monthly payments under the disability insurance policies
privately purchased with community funds.41
Characterization of property as community or separate is not
controlling in division of property between the parties in a dissolution
proceeding, but42 "the court must have in mind the correct character and
status of the property . . . before any theory of division is ordered."43
All property, both separate and community, is before the court.44 Under RCW
26.16.010 and RCW 26.16.020 separate property is "{p}roperty and pecuniary
rights" owned by each spouse before marriage or acquired afterwards by
gift, bequest, devise, descent or inheritance." Under RCW 26.16.030
community property is property that is not defined as separate property
under RCW 26.16.010 or RCW 26.16.020 and is "acquired after marriage by
either husband or wife or both . . . ."45 In prior decisions this Court has
favored characterizing property as community instead of as separate
property unless there is clearly no question of its character.46 The
decision in Chase is consistent with that approach.47
In Chase this Court announced the rule that "if . . . premiums are
paid with community funds, the insurance proceeds are community property."48
Respondent asserts "{t}here has been no . . . change or inconsistency in
Washington law that mandates essentially rethinking {Chase}."49 This
assertion is not correct. Chase does not accurately reflect the current law
for characterizing proceeds of insurance policies in dissolution
proceedings.50 Professor Harry M. Cross, an acknowledged authority on
community property in Washington, suggests that the rule announced in Chase
that "if the community pays premiums, insurance proceeds are community
property" should not apply to disability policies.51 He suggests that
disability insurance payments should be characterized in the same manner as
tort damages were characterized in Brown.52
Brown, in defining community property, limited it to acquisitions
"through the toil, talent or other productive faculty of either spouse, but
not compensation for personal injury."53 Under that definition, the case
held tort damages which compensate for services or earnings lost by the
community, or for expenses incurred by the community during the injury,
would be community property;54 but tort damages which compensate for pain
and suffering to the injured party and injury-related expenses after
dissolution of the marriage would be separate property.55 The Court
reached this conclusion in order to eliminate the inequity of an uninjured
spouse sharing in reimbursement of expenses for which that person has no
liability.56
A logical application of Brown to privately purchased disability
insurance policies suggests that after dissolution of a marriage payment of
monthly benefits which constitute future income, or compensation for pain
and suffering, should be characterized as separate property even though
premium payments were made from community funds during the marriage.57
Insurance compensating for expenses incurred during a marriage or for
earnings lost during the marriage or proceeds that in fact constitute
deferred compensation should be characterized as community property in
proportion to the community's contribution to those expenses or deferred
compensation.58 This Court has previously recognized disability payments
which are in fact deferred compensation in Arnold v. Department of
Retirement Sys..59 Thus, as in Brown, a former spouse not responsible for
an injured ex-spouse's future expenses would not "share in reimbursement
for expenses which {that person} . . . is not obligated to, and does not,
pay."60
Petitioner asserts that proceeds from privately purchased disability
insurance policies should not be a divisible asset in marital dissolution
proceedings regardless whether they are characterized as separate property
or community property.61
Under RCW 26.09.080 trial courts have broad discretion in the
distribution of property and liabilities in marriage dissolution
proceedings.62 This discretion applies to distribution of monthly payments
under privately purchased disability insurance policies acquired during the
marriage. Distribution of property by the trial court should be disturbed
only if there has been a manifest abuse of discretion.63 The trial court is
in the best position to assess the assets and liabilities of the parties
and determine what is "fair, just and equitable under all the
circumstances."64
Under the facts of this case, the trial court did not abuse its
discretion in distributing future monthly disability payments to Petitioner
Michael A. Brewer under the private disability insurance policies purchased
during the marriage with premiums paid from community funds. The community
paid $12,000.00 in premiums on the policies and received disability
payments totaling $300,000.00 prior to the dissolution.65 In making
distribution to the parties, the trial court properly determined what was
fair, just and equitable under all of the circumstances.
SUMMARY AND CONCLUSIONS
The Court of Appeals agreed with the trial court only in its distribution
of property in this dissolution, but disagreed with its comments that it
felt bound to award future disability payments under the disability
insurance policies to Petitioner Michael A. Brewer as his separate
property. The Court of Appeals, relying upon Chase v. Chase,66 concluded
that disability insurance payments were community property. But this Court
in Marriage of Brown,67 has moved away from such an absolute conclusion.
Under Brown, monthly payments under a disability insurance policy
intended to compensate the insured for future income or pain and suffering
should be characterized as separate property. Monthly payments under the
policy which compensate for expenses incurred during the marriage, or
earnings lost during the marriage or payments which are in fact deferred
compensation, should be characterized as community property in proportion
to the community's contribution to those expenses or to the deferred
compensation plan.
Although under RCW 26.09.080 the trial court in a dissoultion
proceeding must consider the character and status of property before
distribution, the actual characterization of property as community or
separate is not essential to the exercise of discretion by the trial court
in distributing assets and liabilities. The trial court under the facts of
this case, in the exercise of its discretion, could award future disability
payments to Petitioner Michael A. Brewer, regardless whether those payments
are characterized as community property or separate property. The fact the
trial court characterized the disability policies as separate property,
even if in error, would not affect the discretionary disposition to
Petitioner Michael A. Brewer. The trial court, under Brown, could
properly characterize the monthly disability payments after the dissolution
as the separate property of Petitioner Michael A. Brewer.
We therefore disagree with the Court of Appeals only in its
determination that remand to the trial court was necessary. Any error
committed by the trial court in concluding the disability insurance
benefits were not assets subject to division was cured by the authority
given courts under RCW 26.09.080 to divide both community property and
separate property between the parties in a marriage dissolution, keeping in
mind the correct character and status of the property and determining what
is "fair, just and equitable under all the circumstances."
We conclude instead that the privately purchased disability
insurance policies (Mutual of New York and New York Life Insurance Company)
for Petititoner Michael A. Brewer acquired during the marriage with
premiums paid from community funds retained their character as community
property until the dissolution; but after the dissolution monthly payments
to Petitioner Michael A. Brewer changed in character to his separate
property. The trial court incorrectly concluded the disability insurance
benefits were "not assets subject to division in this case."68
We agree with the Court of Appeals on its conclusion that property
distribution in this case was proper, but disagree only with that portion
of its decision which remanded the case to the Clark County Superior Court.
In so doing, we affirm the decision of the trial court which awarded to
Petitioner Michael A. Brewer as his separate property future monthly
disability payments under the private disability insurance policies
purchased during his marriage to Respondent Deborah Q. Brewer with premiums
paid from community funds during the marriage until the premiums were
waived by the companies issuing the policies.
Footnotes
1 Clerk's Papers at 243. On May 20, 1998 the parties entered into a
prenuptial agreement, listing most of their premarital assets and debts,
which was not directly related to the disputed ruling and is not in the
record before this Court. Clerk's Paper at 244.
2 Id. at 250.
3 Id. at 249.
4 Id.
5 Id. Multiple sclerosis is a chronic disease in which there
is scattered demyelination of the central nervous system principally
characterized by speech defects and loss of muscular coordination.
Webster's New World Dictionary, (2nd College ed. 1986).
6 Id.
7 Id. The record does not include documentation from the
Social Security Administration nor copies of the disability insurance
policies.
8 Id. This includes $2,793.00 per month from the NYLIC disability policy,
earned by Petitioner during the marriage as a job-related benefit at
Kaiser. The two privately purchased MONY disability policies pay $1,000.00
and $2,400.00 per month.
9 Id.
10 Id. at 1-5.
11 Id. at 269-71.
12 Id. at 243-53.
13 Id. at 252-53 (emphasis added).
14 Id. at 246.
15 Id. at 247.
16 Id. at 248.
17 Id. at 250. Respondent receives Social Security payments as a result
of her former husband's death which she uses for her children's living
expenses. She receives $839.00 per month for her youngest child, and might
receive an additional $839.00 for the older child if she successfully
appeals the Social Security allocation. Her children also have trust
resources to provide for educational and related expenses. Clerk's Papers
at 249.
18 Id. at 247-48.
19 Id. at 248.
20 Id. at 250.
21 Id.
22 Id. at 245.
23 Id.
24 Id.
25 Id.
26 Id. at 250-51.
27 Id.
28 Id. at 251, 252.
29 Id. at 251.
30 Id. Petitioner presented testimony at trial that he cannot
reasonably expect to reach the "retirement" age of 65 years because his
illness has reduced his life expectancy to 45 years.
31 In re Marriage of Brewer, 89 Wn. App. 425, 427, 949 P.2d 404 (1998).
See also Clerks Papers at 252.
32 Id. at 430.
33 Id. at 431.
34 100 Wn.2d 729, 675 P.2d 1207 (1984).
35 103 Wn.2d 236, 692 P.2d 175 (1984).
36 27 Wn. App. 539, 619 P.2d 991 (1980).
37 52 Wn. App. 317, 759 P.2d 1224 (1988).
38 74 Wn.2d 253, 444 P.2d 145 (1968).
39 Moreman v. Butcher, 126 Wn.2d 36, 39, 891 P.2d 725 (1995).
40 Brewer, 89 Wn. App. at 426.
41 Id. at 430.
42 Blood v. Blood, 69 Wn.2d 680, 682, 419 P.2d 1006 (1966).
43 Id.
44 Friedlander v. Friedlander, 80 Wn.2d 293, 303, 494 P.2d 208 (1972).
45 RCW 26.16.030; see also Harry M. Cross, The Community Property Law
in Washington (Revised 1985), 61 Wash. L. Rev. 17, 28 (1986).
46 Cross, supra; see In re Marriage of Brown, 100 Wn.2d 729, 734, 675 P.2d
1207 (1984) (citing Marriage of Parsons, 28 Wn. App. 276, 622 P.2d 415,
review denied, 95 Wn.2d 1019 (1981)).
47 Chase 74 Wn.2d at 257 ("Favoring, as it does, the existence of
community as opposed to separate property, the law will resolve the doubts
between them in favor of a community status.").
48 Id.
49 Answer to Pet. for Review of Deborah Brewer at 6.
50 Aetna Life Ins. Co. v. Wadsworth, 102 Wn.2d 652, 659, 689 P.2d 46
(1984) ("{T}he character of funds used to pay for the most recent term
should determine the character of a term life insurance policy.").
51 Cross, supra, note 46, at 64-65.
52 Id.
53 Brown, 100 Wn.2d at 737.
54 Id. at 738.
55Id.
56 Id. 738-39.
57 Cross, supra, note, at 64-65.
58 Id.
59 128 Wn.2d 765, 778, 912 P.2d 463 (1996) ("Despite the general community
property presumption under RCW 26.16.030, Washington courts have refused to
treat disability income, including disability pensions, as community assets
subject to allocation in a dissolution proceeding in the absence of
substantial elements of either deferred compensation or retirement. Such
payments are for lost future income and are not 'earned' as are retirement
benefits."). See also In re Marriage of Kollmer, 73 Wn. App. 373, 870 P.2d
978 (1994).
60 Brown, 100 Wn.2d at 738-39.
61 Supplemental Br. of Pet'r at 5.
62 In re Marriage of Konzen, 103 Wn.2d 470, 477-78, 693 P.2d 97 (1985)
(former RCW 26.09.080 provides "{T}he court shall, without regard to
marital misconduct, make such disposition of the property and liabilities
of the parties, either community or separate, as shall appear just and
equitable after considering all relevant factors including, but not limited
to: (1) {t}he nature and extent of the community property; (2) {t}he nature
and extent of the separate property; (3) {t}he duration of the marriage;
and (4) {t}he economic circumstances of each spouse at the time the
division of property is to become effective, including the desirability of
awarding the family home or the right to live {in it} . . . for reasonable
periods to a spouse having custody of any children." (emphasis added)).
63 Konzen 103 Wn.2d at 478.
64 In re Marriage of Hadley, 88 Wn.2d 649, 656, 565 P.2d 790 (1977)
(citing Baker v. Baker, 80 Wn.2d 736, 498 P.2d 315 (1972)).
65 Brewer 89 Wn.App. at 427. See also Clerk's Papers at 252.
66 74 Wn.2d 253, 444 P.2d 145 (1968).
67 100 Wn.2d 729, 675 P.2d 1207 (1984),
68 Clerk's Papers at 252.
Concurrence by Guy, C.J.
66577-0
GUY, C.J. (concurring) I agree with the majority that the rule
enunciated in In re Marriage of Brown, 100 Wn.2d 729, 675 P.2d 1207 (1984),
applies to wage-replacement disability insurance benefits. I write
separately because (1) I would specifically overrule Chase v. Chase, 74
Wn.2d 253, 444 P.2d 145 (1968), and (2) I would clarify that post-
dissolution wage-replacement benefits are not "assets" that are before the
trial court in a dissolution proceeding.
Courts and commentators alike have recognized the inconsistency in
Washington's case law in this area. See, e.g., In re Marriage of Huteson,
27 Wn. App. 539, 542-43, 619 P.2d 991 (1980) (questioning both the logic
and wisdom of Chase, and holding "To treat . . . disability payments as a
community asset would unfairly and permanently burden those future earnings
to the same extent as would an award of permanent alimony."); In re
Marriage of Brewer, 89 Wn. App. 425, 430, 949 P.2d 404 (1998) (noting that,
in light of criticism and newer case law, the continuing viability
of the Chase rule "is questionable");1 1 Washington State Bar Ass'n, Family
Law Deskbook sec. 38.3(5), at SU-38-2 (Supp. 1996) ("The status of
Washington law as to when disability benefits to be paid after entry of a
decree constitute 'property' subject to distribution by the trial court in
a dissolution action is 'not all together clear.' In fact, some Washington
cases classify disability benefits as property subject to distribution,
others classify them as income not subject to distribution, and still
others classify disability benefits as part property and part income." );
Harry M. Cross, The Community Property Law in Washington (Revised 1985), 61
Wash. L. Rev. 13, 64 (1986) ("the proper treatment of disability insurance
or pension payments . . . should be reconsidered in light of the decision
in Brown"); Kenneth W. Weber, 20 Washington Practice, Family & Community
Property Law sec. 32.17, at 190-91 (1997) ("retirement benefits are
generally considered deferred compensation for past services, and . . . are
considered an asset and divisible as such. . . . By contrast, disability
benefits that are in the nature of compensation for lost future wages
(sometimes called future earnings replacement) are generally not an asset
for distribution upon dissolution, though contrary results have been
reached in a few cases." (footnote omitted).
The authors of the State Bar Association Community Property Deskbook
state:
Disability payments normally represent compensation for diminished earning
capacity, replacing lost wages. Thus viewed, the payments are not a form
of deferred compensation, rather they are a form of current compensation.
The California courts have held that disability payments received
during marriage will be considered community property. Payments to be
received after dissolution of marriage will be considered separate
property.
This result should be reached in Washington under the reasoning of In
re Marriage of Brown . . . . Earlier cases, however, reached a contrary
result.
Washington State Bar Ass'n, Community Property Deskbook sec. 3.24, at 3-31
to 3-32 (2d ed. 1989) (citation omitted). See also In re Marriage of Nuss,
65 Wn. App. 334, 343, 828 P.2d 627 (1992) (disability benefits which are in
the nature of compensation for lost future wages are not an asset for
distribution upon dissolution; by contrast, disability benefits which are
in the nature of deferred compensation or retirement pay are community
property); In re Marriage of Anglin, 52 Wn. App. 317, 324, 759 P.2d 1224
(1988) (disability benefits characterized as repayment for lost future
wages were not a marital asset to be characterized and distributed by the
court).
In my view, we should clarify the law by overruling Chase and hold:
Disability payments which are in the nature of earnings replacement are
treated the same as the earnings of a healthy spouse. Therefore, when the
parties are married and not separated, the replacement earnings would be
community property; assets purchased with or generated by community funds
are assets belonging to the community. RCW 26.16.030. When the parties
are separated, their earnings whether a result of wage replacement
disability benefits or of personal labor are separate property. RCW
26.16.140. Future, post-dissolution earnings, whether received from
employment, business ventures, investment, or disability benefits, are not
"assets" which are before the court for disposition in a dissolution
action. See Brown, 100 Wn.2d at 738; In re Marriage of Hall, 103 Wn.2d
236, 247, 692 P.2d 175 (1984) (future earning capacity is not a marital
asset). However, the trial court may consider such earnings when
determining what constitutes a fair and equitable distribution of the
assets and debts which are before the court. RCW 26.09.080 (economic
circumstances of each spouse is a relevant factor in making a property
disposition); Hall, 103 Wn.2d at 247; In re Marriage of Leland, 69 Wn. App.
57, 72, 847 P.2d 518 (1993). The trial court also may consider such
earnings when determining the propriety and amount of any maintenance
award. RCW 26.09.090.
Footnote
1 Because of the similarity of the facts in this case and those in Chase v.
Chase, 74 Wn.2d 253, 444 P.2d 145 (1968), I cannot fault the Court of
Appeals for feeling reluctantly bound to follow the rule articulated in
Chase.