The Better Chancery Practice Blog

Gail Williams received more than $50,000 from Dow Chemical in settlement of a defective breast implant suit she had filed. She deposited the money in an account separate from her husband, Phillp, and spent some of it. When the couple went through a divorce, Phillip argued that the remaining $25,000 was acquired during the marriage, and that it should be subject to equitable distribution. He pointed out that the breast implants had been paid for with $8,000 of marital funds; ergo, the proceeds from them should be marital property. The chancellor treated the account as Gail’s separate property, not subject to division, and Phillip appealed.

The COA affirmed on November 5, 2013, in Williams v. Williams. Judge Fair’s opinion includes a nifty recitation of the applicable law. Here it is:

¶15. As recognized by the chancellor, in an equitable division of property brought into or acquired during a marriage, the property must first be subjected to a Hemsley analysis, the determination of whether assets are marital or separate and assignment of a value to each item or groups of items. Property acquired during marriage is presumed marital. In this case Gail had received a money settlement based on defective breast implants made by Dow Chemical Company during the marriage. She kept it, however, in a separate account in her name only. The sum in the account was alternatively stated in the record as $25,097, $25,075, or “about $25,000.”

¶16. The Supreme Court of Mississippi had wrestled with determination of the status of personal injury settlements as marital or separate property long before it handed down the Hemsley and Ferguson cases on July 7, 1994. In fact, in Hemsley it noted specifically the case of Regan v. Regan, 507 So. 2d 54 (Miss. 1987), as a harbinger of things to come. In Regan, using language adopted in Hemsley some seven years later, the supreme court had held that:

Incident to a divorce the Chancery Court certainly has the power to look behind the formal state of title to property and decree an equitable division of jointly accumulated property, the division to be made by reference to the economic (though not necessarily monetarily economic) contributions made by each to the acquisition and maintenance of the property. Pickle v. Pickle, 476 So. 2d 32, 34 (Miss. 1985); Spearman v. Spearman, 471 So. 2d 1204, 1205-06 (Miss. 1985); Watts v. Watts, 466 So. 2d 889, 890-91 (Miss. 1985); cf. Pickens v. Pickens, 490 S o.2d 872, 875-76 (Miss. 1986). Here, however, the evidence is overwhelming that these monies derived in substantial part, if not in whole, from Lloyd’s personal injury claim. The Chancery Court in its opinion notes:

It is undisputed that the origin of the money was a 1981 settlement of a personal injury/loss of consortium claim arising from defendant’s [Lloyd’s] injuries.

While it is true that the evidence suggests that a good bit of the settlement proceeds have been expended for the mutual benefit of the parties, there is no evidence that Lloyd ever made any gift of one-half or any other part of the proceeds to Jeanette. See May v. Summers, 328 So. 2d 345, 347-48 (Miss. 1976); Tucker v. Tucker, 252 Miss. 344, 358, 173 So. 2d 405, 411 (1965). To the extent that the funds reflected by the certificate of deposit were in fact derived from the Lloyd’s maritime personal injury claim, they are his property and may not be ordered shared with his wife as a part of a property division incident to divorce proceedings. See Amato v. Amato, 180 N.J. Super. 210, 434 A.2d 639, 641-44 (1981).

The Chancery Court erred when it ordered the certificate of deposit divided equally between the parties. Rather, the property division should have reflected, pro-rata, the extent to which the settlement proceeds were fairly attributable to the respective claims of Lloyd and Jeanette. On this appeal Lloyd strongly urges that Jeanette had no claim and, accordingly, that he should receive the entire certificate of deposit. There is enough in the record, however, to suggest to us that this may well not be the case. Under the circumstances we remand to the Chancery Court and direct that court to determine the amount of the $225,000.00 settlement attributable to the claims of Lloyd and the amount of that settlement attributable to the claims of Jeanette. The proportions can then easily be calculated from which it will follow that the certificate of deposit will be divided in those proportions.

Regan v. Regan, 507 So. 2d 54, 56-57 (Miss. 1987).

¶17. Regan was recognized twelve years later by this Court in decisions, later affirmed by the supreme court, holding that funds acquired in a personal injury case are not automatically separate property. Justice Mills began the supreme court’s opinion by noting:

We granted certiorari to address the division of personal injury settlements between spouses in divorce proceedings. The Court of Appeals found that the law has broadened in favor of the non-injured spouse since we last squarely addressed the issue in Regan v. Regan, 507 So. 2d 54 (Miss. 1987). The Court of Appeals reversed and remanded to the Chancery Court of Panola County for further proceedings. Tramel v. Tramel, *** So.2d ***, 1998 WL 536861 (Miss. Ct. App. Aug. 18, 1998). Finding the decision of the Court of Appeals to be correct, we affirm.

Tramel v. Tramel, 740 So. 2d 286, 286 (¶1) (Miss. 1999). Revisiting the subject addressed in Regan was found appropriate because:

In 1994, this Court completely transformed the law of property division in divorce proceedings in Hemsley v. Hemsley, 639 So. 2d 909 (Miss. 1994), and Ferguson v. Ferguson, 639 So. 2d 921, 930 (Miss. 1994). In Hemsley, we held:

We define marital property for the purpose of divorce as being any and all property acquired or accumulated during the marriage. Assets so acquired or accumulated during the course of the marriage are marital assets and are subject to an equitable distribution by the chancellor. We assume for divorce purposes that the contributions and efforts of the marital partners, whether economic, domestic or otherwise are of equal value.

Tramel, 740 So. 2d at 288 (¶9).

¶18. In their Tramel opinions, both of our appellate courts described the three approaches being taken by other states in classification of personal injury settlements in equitable division cases. They drew from the comprehensive discussion in the South Carolina Supreme Court Case of Marsh v. Marsh, 437 S.E.2d 34 (S.C. 1993), which set out the three methods of classification then in use: (1) award to the injured spouse; (2) the analytic approach in which compensation for pain and suffering is personal, compensation for loss of wages during the marriage is marital, but future economic compensation non-marital; and (3) a mechanistic finding the settlement, since acquired during marriage, is wholly marital property. Declining, however, to leave the choice of approaches to the trial court as did the South Carolina court, our courts adopted the reasoning in Georgia and North Carolina cases, rejecting the first and third mechanistic approaches and adopting the analytical approach. Our supreme court expressly overruled any provisions of Regan contrary to its adoption of the analytic approach and held that the lines “a chancellor must draw, as difficult as they may be, are these:

1) that portion of the proceeds allocable to compensation to the initially injured spouse for pain, suffering, and disfigurement should be awarded in its entirety to the injured spouse;

2) that portion of the proceeds allocable to lost wages, lost earnings capacity, and medical and hospital expenses, to the extent those apply to the time period of the marriage, are marital assets and are to be divided according to equitable distribution principles; and,

3) that portion of the proceeds allocable to loss of consortium should be awarded in its entirety to the spouse who suffered that loss.

Tramel, 740 So. 2d at 291 (¶18).

¶19. In her opinion in this case, the chancellor found:

After a careful consideration of the proof presented in this matter and the application of the above summarized guidelines, the Court finds all of the real property and personal property addressed in these proceedings is marital property subject to equitable distribution, with the exception of the personal injury settlement proceeds received by Gail. Those funds are contained in the Woodman of the World account #973 in Gail’s name, in the approximate amount of $25,097. See Exhibits 17, 18 and 32. These funds were obtained by Gail as a result of a settlement with Dow concerning defective breast implants. Pursuant to the principles set forth in Tramel v. Tramel, 740 So. 2d 286, 291 (Miss. 1999), the Court finds those personal injury proceeds were for Gail’s pain and suffering and disfigurement. Further, insufficient proof was presented to establish those funds had been co-mingled with marital assets.

(Emphasis added). The account records show the principal amount deposited and withdrawal of interest, as testified to by Gail, on that money, which she said was commingled with marital funds. Gail testified that her full settlement was for $45,000, and she was additionally awarded $5,000 for medical expenses for corrective surgery. She paid $20,000 for a new car, a marital asset, and placed the remaining $25,000 in a separate account. She related that she and Phillip discussed why she wanted it in her name at the time. “It was for pain and suffering,” she said three times in her testimony, adding that the additional $5,000 was for medical expenses. She concluded by saying that there were also accounts in Phillip’s name only and that she wanted to have that account in hers only. It was established that the cost of the implant surgery, which occurred fifteen years before trial, was paid from the marital checking account. The amount paid is not in the record on appeal, although Phillip claims it is, and that it is $8,000. The chancellor found Gail’s testimony that the amount left in the account is for pain and suffering to be credible, and not directly contradicted by Phillip’s testimony.

¶20. We affirm the chancellor’s finding the settlement proceeds were separate property as well within her discretion.

Not much more needs to be said except that what you have there is the body of a brief if you’re ever called upon to recite the law on the issue of equitable distribution of personal injury settlement proceeds.