When lawsuit judgments may or may not be marital property: lessons from Utah appellate case law
In the Utah divorce case of Andersen v. Andersen, 379 P.3d 933 (Utah Court of Appeals 2016), the husband appealed the trial court’s denial of his claim that the settlement proceeds he had received from city in civil rights lawsuit were marital rather than separate property.
Did the Utah Court of Appeals agree?
Let’s read a summary of the case and then before I tell you the decision, reach your own conclusions first. The paragraph notations in the summary below are references to the paragraph numbers in the Court of Appeals’ decision.
¶5 In March 2015, the trial court held a two-day bench trial. With regard to Husband’s income and child support, the court noted that it had “great difficulty in attributing full candor to [Husband] on financial matters.”
¶7 In distributing the parties’ marital property, the trial court included $130,000 that Husband received in a settlement from Riverton City stemming from a civil suit alleging the city violated the Fair Housing Act. Husband argued the settlement proceeds were separate property because they were received as the result of a personal injury. To support his contentions, Husband provided a copy of his amended complaint (the Amended Complaint) and a settlement agreement (the Settlement Agreement).
¶8 The trial court ultimately concluded the settlement proceeds were marital property because the “complaint sought only damages and sought compensation for lost rents and costs and attorney fees for bringing the action” and therefore determined that Wife was entitled to a portion of the proceeds.
¶16 Husband argues “the court erred in determining factually and legally that the settlement from the civil rights lawsuit was marital property.” He argues it was legal error not to conclude that the settlement was for a personal injury. He further asserts “the court’s determination that absolutely no part of the settlement was to compensate for personal injury is unsupported by any facts or findings.” Finally, Husband argues the trial court “erred in deciding not to hear testimony from [his attorney in the civil rights case] about the nature of the settlement.”
¶17 “There is no fixed formula upon which to determine a division of properties in a divorce action….” Naranjo v. Naranjo, 751 P.2d 1144, 1146 (Utah Ct. App. 1988). Accordingly, “[w]e afford the trial court considerable latitude in adjusting financial and property interests, and its actions are entitled to a presumption of validity.” Bradford v. Bradford, 1999 UT App 373, ¶ 25, 993 P.2d 887 (citation and internal quotation marks omitted). Thus, “changes will be made in a trial court’s property division determination in a divorce action only if there was a misunderstanding or misapplication of the law resulting in substantial and prejudicial error, the evidence clearly preponderates against the findings, or such a serious inequity has resulted as to manifest a clear abuse of discretion.” Id. (citation and internal quotation marks omitted).
¶18 “In addressing the distribution of property between divorcing spouses, the trial court must first determine whether the assets in dispute are marital or separate property.” Keyes v. Keyes, 2015 UT App 114, ¶ 28, 351 P.3d 90 (citing Dahl v. Dahl, 2015 UT 23, ¶ 121, 345 P.3d 566). “Marital property is ordinarily all property acquired during the marriage … whenever obtained and from whatever source derived.” Id. (omission in original) (citation and internal quotation marks omitted); see also Gardner v. Gardner, 748 P.2d 1076, 1078–79 (Utah 1988) (explaining that “marital property encompasses all of the assets of every nature possessed by the parties, whenever obtained and from whatever source derived” (citation and internal *938 quotation marks omitted)). By contrast, “separate property, which may include premarital assets, inheritances, or similar assets, will be awarded to the acquiring spouse.” Keyes, 2015 UT App 114, ¶ 28, 351 P.3d 90 (citation and internal quotation marks omitted).
¶19 Here, relying on Husband’s testimony, the Amended Complaint, and the Settlement Agreement, the court determined that Husband’s compensation was marital property. Specifically, it concluded,
The First Amended Complaint does not mention personal injury. The Settlement Agreement does not use the words “personal injury” anywhere in the document. The allegations included injuries that could be considered personal, such as an arrest, but the settlement did not describe whether the payment was based solely on the Fair Housing Act violations or other aspects of the litigation. The court cannot guess the payment amount was selected because of personal injury, again no claims being directly styled personal injury. The complaint sought only damages and sought compensation for lost rents and costs and attorney fees for bringing the action.
The trial court declined to find that the settlement was for a personal injury. But even if we assume it erred by failing to conclude that violations of the Fair Housing Act are not considered personal injuries, we are not convinced the court erred when it determined the settlement was marital property.
¶20 This court [i.e., the Utah Court of Appeals] has explained that compensation for a personal injury can be either separate property or marital property, depending on the nature of the damages. Naranjo, 751 P.2d at 1148. Specifically, “amounts received as compensation for pain, suffering, disfigurement, disability, or other personal debilitation are generally found to be the personal property of the injured spouse in divorce actions.” Id.; see also Izatt v. Izatt, 627 P.2d 49, 51 (Utah 1981) (determining that a wife’s personal injury compensation related to a medical malpractice suit that caused her to have two cardiac arrests was her personal property). But “money realized as compensation for lost wages and medical expenses, which diminish the marital estate, are considered to be marital property.” Naranjo, 751 P.2d at 1148; see also Bugh v. Bugh, 125 Ariz. 190, 608 P.2d 329, 331–32 (Ariz. Ct. App. 1980) (concluding that compensation awarded to an injured employee for lost wages and medical expenses, and not pain and suffering, was marital property).
¶21 So, even assuming Husband’s civil rights action against Riverton City equated to a personal injury claim, whether Husband’s claims were for personal injuries is not determinative of whether the compensation for those claims constitutes marital or separate property. Rather, the court must look to the nature of the personal injuries to determine whether the compensation is for injuries usually considered so personal as to render it separate property.
¶22 In Naranjo v. Naranjo, 751 P.2d 1144 (Utah Ct. App. 1988), this court affirmed the trial court’s determination that the defendant’s compensation for lost wages and medical costs for a knee injury incurred in an industrial accident was marital property. Id. at 1146, 1148–49. The defendant injured his knee during his marriage to the plaintiff. The injury prevented the defendant from working for nine months and required numerous surgeries. Id. at 1146. At trial, he argued the compensation was not marital property and that “he planned to use the award proceeds to meet his future medical expenses and to offset his potential reduced earning capacity.” Id. The defendant further explained that he was unable to articulate how much of the compensation was for pain and suffering “because the judgment was awarded in Colorado, and, according to Colorado procedure, the jury verdict was not broken into general or special damages.” Id. at 1148. Nevertheless, the trial court found that the defendant had failed to meet his burden of showing the amount of the award attributable to pain and suffering. Id. at 1146.
¶23 Like the defendant in Naranjo, Husband argues the settlement was separate property, not marital. But Husband has failed to set forth any evidence to show that any amount of the settlement was for pain and suffering. The evidence Husband offered regarding the settlement was his own testimony, the Amended Complaint, and the Settlement Agreement. At most the Amended Complaint alleged Husband was harassed by a city official and was arrested. Husband’s prayer for relief in the Amended Complaint only requested compensation for “lost rental income,” “start-up costs lost,” “[r]easonable [a]ttorney fees,” and civil penalties and punitive damages “in an amount sufficient to punish” the City for violating the Fair Housing Act. At no point did it suggest Husband sought compensation for pain and suffering, nor does it allege the City violated any law that would warrant special damages that could be considered so personal as to render them separate property. Furthermore, as the trial court explained, the Settlement Agreement “did not describe whether the payment was based solely on the Fair Housing Act violation or other aspects of the litigation.”
¶29 We therefore conclude the trial court did not err when it determined that the settlement proceeds were marital property. Further, because he failed to actually object to the court not hearing the attorney’s testimony, Husband has not preserved the issue for appeal. In any event, he has not met his burden of proof to demonstrate that not hearing the attorney’s testimony was a harmful error.
¶33 Husband has failed to meet his burden of demonstrating the court erred in determining the settlement proceeds from Husband’s suit against Riverton City were marital property. Although a suit alleging violations of civil rights may be characterized as a personal injury lawsuit, our court has explained that proceeds from a personal injury lawsuit may be either separate or marital property, depending on the nature of the relief sought. See Naranjo v. Naranjo, 751 P.2d 1144, 1146 (Utah Ct. App. 1988). Thus, because Husband sought compensation for lost wages and rents—costs usually defined as marital—we cannot agree with Husband that the district court erred.
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