Attorney for Appellant Attorney for Appellee
Chris M. Teagle Robert G. Forbes
Muncie, Indiana Hartford City, Indiana
Appeal from the Blackford Circuit Court, No. 05C01-0009-DR-65
The Honorable Bruce C. Bade, Judge
On Petition To Transfer from the Indiana Court of Appeals, No. 05A02-0211-CV-929
February 10, 2005
(1) a present right to withdraw pension or retirement benefits;
(2) the right to receive pension or retirement benefits that are not forfeited upon termination of employment or that are vested (as defined in Section 411 of the Internal Revenue Code) but that are payable after the dissolution of marriage; and
the right to receive disposable retired or retainer pay (as defined in
10 U.S.C. 1408(a)) acquired during the marriage that is or may be payable
after the dissolution of marriage.
I.C. § 31-9-2-98(b). It has long been the law in this State that future earnings are not considered part of the marital estate for purposes of property division. Neffle v. Neffle, 483 N.E.2d 767, 769 (Ind. Ct. App. 1985), trans. denied; In re Marriage of McManama, 399 N.E.2d 371, 373 (Ind. 1980); Wilcox v. Wilcox, 173 Ind. App. 661, 365 N.E.2d 792, 795 (1977). In Leisure v. Leisure, this Court held that workers compensation benefits represent future earnings and thus are not vested property interests subject to division in a marital estate. 605 N.E.2d 755, 759 (Ind. 1993). [I]t is now generally accepted that workers compensation is awarded in lieu of lost wages and not as damages for pain, suffering, and monetary loss caused by the fault of the employer. Id. at 758 (citation omitted). Implicit in Leisure is that an award of damages for pain and suffering may be included as a part of the marital pot. Cf. Dusenberry v. Dusenberry, 625 N.E.2d 458, 462 (Ind. Ct. App. 1993) ([A] tort claim for personal injury which has not been reduced to a judgment has no readily ascertainable value and is not marital property capable of division at the time of dissolution.).
In the case before us Husband contends that the similarities between FELA and Indianas Workers Compensation Act dictate that his lump sum FELA settlement should not be included as a part of the marital estate subject to distribution. It is true that both FELA and Indianas workers compensation statute are similar in some respects. Congress enacted FELA in 1908 creating a federal remedy designed to shift the cost of the inevitable death and injuries from railroad employment from the employee to the employer. Consol. Rail Corp. v. Gottshall, 512 U.S. 532, 542 (1994). In similar fashion the policy underlying Indianas Workers Compensation Act is to shift the economic burden for employment-connected injuries from the employee to the employer. Sims v. United States Fidelity & Guar. Co., 782 N.E.2d 345, 351 (Ind. 2003).
Nonetheless there are important distinctions between the two systems. First, FELA is
not a workers compensation statute. Davis v. Illinois Cent. R.R. Co., 359
F.2d 780, 781 (6th Cir. 1966) (Congress has not . . . seen
fit to provide a work[ers] compensation statute for railroad employees.); Barrett v. Toledo,
Peoria & W. R.R. Co., 334 F.2d 803, 804 (7th Cir. 1964) (The
Supreme Court . . . has through the years steadfastly maintained that [FELA]
is neither an insurance nor work[ers] compensation Act but a negligence statute.).
Second, under Indianas workers compensation statute, regardless of fault, an employee is entitled
to damages if the employee suffers an accidental injury arising out of and
in the course of employment. Sims, 782 N.E.2d at 352. By
contrast, FELA imposes liability only for negligent injuries. Wilkerson v. McCarthy, 336
U.S. 53, 61 (1949); see also Bethlehem Steel Corp. v. Consol. Rail Corp.,
740 N.E.2d 900, 907 (Ind. Ct. App. 2000) (FELA is not a no-fault
statute and damages are not owed because an employee is injured.), trans. denied.
Third, and most important for our purposes here, an award under FELA
may also include damages for pain and suffering. See Norfolk and W.
Ry. Co. v. Ayers, 538 U.S. 135, 141 (2003) (holding that under FELA,
railroad workers who developed the disease asbestosis were entitled to recover for fear
of developing cancer as a part of pain and suffering damages); Nairn v.
Natl R.R. Passenger Corp., 837 F.2d 565, 568 (2nd Cir. 1988) (finding a
jury award of $400,000 for pain and suffering excessive in case prosecuted under
FELA for a work-related injury).
In this case the trial court found that although a portion of Husbands
FELA settlement represented an award for future wages, and thus not a part
of the marital estate subject to distribution, the court also found that a
portion of the settlement included an award for pain and suffering. Relying
on Smith v. Smith, 676 N.E.2d 388 (Ind. Ct. App. 1997), trans. not
sought, the trial court included the entire FELA settlement in the marital estate.
In Smith, Husband sued his employer for an on-the-job injury and eventually
entered a settlement agreement that included a lump sum payment. Upon dissolution
of the parties marriage the trial court included the lump sum payment within
the marital estate and divided it accordingly. On appeal Husband argued error
claiming the payment should be treated similarly to workers compensation benefits and thus
excluded from the marital pot. Noting that the settlement agreement did not
specify whether the payments represented reimbursement for pain and suffering, lost wages, or
future income, the Court of Appeals observed: (i) the parties signed a release
of all claims which implied that the settlement included an award for pain
and suffering, and (ii) with the exception of a modest payment made to
Wife, the record was unclear as to what the remaining payments represented.
Id. at 391. The Court then concluded, We will not undertake to
divide the settlement into separate and marital parts with only the latter being
subject to division. Because the settlement for the personal injury action represents
compensation for more than any decreased working capacity, Leisure does not preclude us
from affirming the trial courts division. Id. (citations omitted). It is
the quoted language on which the trial court in this case relied in
concluding that the entire FELA settlement should be included in the marital estate.
A FELA settlement may be awarded in lieu of future lost wages only,
or may also include an award for pain and suffering. Where the
settlement is in lieu of future lost wages only, then it is not
property within the meaning of the dissolution statute and thus is not subject
See Leisure, 605 N.E.2d at 759. In those instances
where the settlement incorporates an award for both pain and suffering and future
lost wages, then only that portion which is awarded for pain and suffering
may be included as a part of the marital estate. We thus
disapprove of language in Smith suggesting an entire lump sum settlement is included
in the marital pot on the basis that a portion of the settlement
is subject to distribution.
In summary, we hold that any part of a FELA award representing future
losses is not marital property subject to distribution. Rather, only that portion
of the award intended as compensation for past losses, that is, losses incurred
during the marriage, is included in the marital estate.
This does not mean that the trial courts judgment in this case should be reversed. True, there was evidence before the trial court indicating that the FELA award was based upon [Husbands] lost future earnings and earning capacity and also took into account Husbands pain and suffering. Appellants App. at 57. However, it is also true that there was no evidence presented to the trial court indicating which amounts were attributable to past pain and suffering a marital asset subject to distributionversus the amounts attributable to lost wages or future income non assets not subject to distribution.
The presumption of our dissolution statute is that all the assets of either
party or both parties are property subject to division. I.C. § 31-9-2-98(b).
The party who seeks to rebut the presumption, i.e., the party who
seeks to have property not included (or at least not divided), bears the
burden of demonstrating that the statutory presumption should not apply. This is
so because an exclusion from the marital estate directly implicates whether the marital
property will be equally divided. And our dissolution statute provides that a
party seeking to rebut the presumption of equal division of marital property bears
the burden of proof in doing so. I.C. § 31-15-7-5; see also,
Hyde v. Hyde, 751 N.E.2d 761, 765-66 (Ind. Ct. App. 2001) (holding that
wife seeking to exclude property from the marital estate bore the burden of
rebutting the presumption of an equal distribution of marital property); Wilson v. Wilson,
732 N.E.2d 841, 847 (Ind. Ct. App. 2000) (declaring that if Husband wanted
to have the extent of his pre-marital employment contribution to his pension considered
as rebutting the presumption of an equal division of marital property, he should
have introduced some evidence during the hearing of the pensions value.)
It was Husband in this case who sought to exclude the FELA award as marital property. Although that portion of the FELA award based upon lost future earnings and earning capacity, similar to workers compensation benefits, is not a vested property interest subject to distribution as a present marital asset. . . ., Leisure, 605 N.E.2d at 759, here, Husband failed to carry his burden of proof demonstrating that a portion of the award should not have been included in the marital estate. Therefore we cannot say that the trial court erred by including the entire award in the marital pot and distributing it accordingly.
I concur with the majority's conclusion that any part of an FELA settlement
representing future losses is not marital property, and that any portion intended as
compensation for losses incurred during the marriage is included in the marital estate.
I disagree, however, with the majority's decision to create a presumption
that all assets of either or both parties in a dissolution case are
marital property subject to division.
The applicable statute specifies with particularity those assets that are included in the
marital estate subject to division. It provides:
In an action for dissolution of marriage under IC 31-15-2-2, the court shall divide the property of the parties, whether:
(1) owned by either spouse before the marriage;
(2) acquired by either spouse in his or her own right:
(A) after the marriage; and
(B) before final separation of the parties; or
(3) acquired by their joint efforts.
Indiana Code § 31-15-7-4(a). This marital estate statute does not establish any presumption that property individually acquired after final separation is subject to distribution. To the contrary, it excludes from distribution all property acquired by either spouse in his or her own right after final separation.
The majority infers a presumption that all assets are subject to division from
the language of Indiana Code § 31-15-7-5, which begins "The court shall presume
that an equal division of the marital property between the parties is just
and reasonable." This presumption, however, favors only equal division "of the marital
property" eligible for distribution under Indiana Code § 31-15-7-4(a). But it does
not establish a presumption of equal division of property not subject to such
distribution. Thus, as to property acquired by either party in their own
right after final separation, there is absolutely no presumption of equal division.
Such property is simply not part of the marital estate and is not
subject to division at all.
The majority correctly observes that "a party seeking to rebut the presumption of
equal division of marital property bears the burden of proof." [Slip opin.
at 6] (emphasis added). But this presumption applies only to marital property,
not to property outside the marital estate--property acquired in a party's own right
after final separation. I.C. 31-15-7-4(a).
By creating a presumption that all property owned by either or both spouses
is within the marital estate notwithstanding the marital estate statute, the majority also
creates risks of uncertainty as to various other types of property outside the
marital estate. If the presumption applies here to the FELA award, will
it also apply to a personal injury settlement intended to provide compensation for
future losses and/or suffering; to an unvested interest in an employee pension plan;
or to various other property interests received after final separation and before the
final dissolution decree such as an inheritance, an investment that realizes substantial appreciation,
or lottery winnings?
Today's creation of the artificial presumption as a tool of appellate review is
unnecessary. Our review of a trial court's determination as to the extent
of the marital estate is properly guided by Indiana Trial Rule 52(A), not
by evaluating whether one spouse or another adequately overcame a presumption. The
Rule states that "the court on appeal shall not set aside the findings
or judgment unless clearly erroneous, and due regard shall be given to the
opportunity of the trial court to judge the credibility of the witnesses."
Among the trial court's extensive findings of fact regarding the husband's FELA settlement,
the court noted that the husband was seeking a $750,000 settlement based upon
lost future earnings and earning capacity, loss of hospitalization and medical benefits, pain
and suffering, and disability. Finding of Fact ¶6 in order of September
10, 2002. It further found that the $250,000 settlement ultimately reached included
an agreement not to return to work/resignation, and a release of claims "for
hearing loss (known or unknown), any and all occupational claims, claims under the
ADA and all other claims." Id. at ¶8. The court did
not, however, make any findings identifying which portion of the settlement represented losses
incurred during the marriage and which was for future losses.
The trial court concluded that "due to the fact that the eventual $250,000.00
settlement that was reached includes more tha[n] future lost wages, the settlement is
in fact a marital asset," and thus subject to division. Conclusions of
Law ¶4 in order of September 10, 2002. This conclusion was based
on the trial court's belief that "if a personal injury settlement includes pain
and suffering and is not limited to future lost wages, the settlement is
a marital asset. Smith v. Smith [676 N.E.2d 388 (Ind. Ct. App.
1997)]." Id.at ¶2. But this Court today expressly disapproves Smith
and holds instead that any part of the settlement "representing future losses is
not marital property subject to distribution" and that "only that portion of the
award intended as compensation for past losses, that is, losses incurred during the
marriage, is included in the marital estate." [Slip opin. at 5.] Because
the trial court's conclusions are thus clearly erroneous as a matter of law,
its judgment should be vacated and this cause remanded for a redistribution of
Instead of remanding for further consideration, however, the majority creates an evidentiary presumption and finds that the husband failed to sustain his burden of proof to rebut this new presumptionone that did not exist at the time the parties presented their evidence and the trial court evaluated it. At the least, the parties and the trial court should be given an opportunity to apply this new presumption to the facts of this case. I believe that remand is appropriate.