Ex-wife not entitled to half of personal injury settlement

A trial court erred when it said a woman was entitled to half of the lawsuit proceeds her ex-husband received from a motorcycle crash he was in after he filed for divorce, a Michigan Court of Appeals panel has held.

While the ex-husband argued the lawsuit proceeds were not marital property, the trial court said the ex-wife was entitled to half of the proceeds and also awarded her attorneys’ fees.

The appeals court disagreed.

“In the [consent judgment of divorce], the phrase ‘marital portion’ clearly and unambiguously refers to marital assets, and the personal-injury proceeds received as a result of suing the tortfeasor are considered separate property,” the panel pointed out. “The lawsuit against the tortfeasor did not include a loss-of-consortium claim, and there is no evidence that the settlement check was made payable to both parties or was treated like marital property.”

The unpublished decision is Simmons v. Simmons ( MiLW 08-108014 , 4 pages). Judges Stephen L. Borrello, Brock A. Swartzle and Adrienne N. Young sat on the panel.

Neither Waterford attorney Timothy P. Flynn of Clarkston Legal, who represented the plaintiff, nor John L. Lengemann of Morrice Lengemann & Miller in Imlay City, who represented the defendant, could be reached for comment.

Background

In January 2021, Leo Simmons filed for divorce from Phyllis Simmons. He was involved in a June 2021 motorcycle crash that resulted in the amputation of his leg.

The Simmonses participated in mediation in November 2021. The January 2022 consent judgment of divorce, or CJOD, included its terms, including a section titled “Pending Litigation.”

The CJOD provided that the defendant “is awarded 50% of the marital portion of any lawsuit proceeds realized relating to Plaintiff’s motorcycle accident in June 2021 (excluding any damages for pain and suffering and / or lost wages) including being responsible for 50% of any net medical expenses not covered by the claims incurred through the date of the judgment of divorce. Plaintiff shall continue to keep Defendant notified of any updates in his lawsuit .”

The defendant moved in November 2022 to enforce the judgment and for costs and fees. She contended that the plaintiff had taken funds from his retirement account after mediation, and that she received $350, rather than roughly $16,000, as agreed upon. She also asked the trial court to order the plaintiff to provide information about his personal injury lawsuit.

In a subsequent order, the Lapeer Circuit Court said each party was entitled to their own retirement accounts and denied the defendant’s request for attorneys’ fees. The trial court also ordered the plaintiff to provide information about his lawsuit to the defendant.

Asserting that her ex-husband had settled his lawsuit for $100,000, the defendant moved for an order to escrow his lawsuit proceeds. Noting that there were reductions in the settlement, she contended that her ex-husband would receive about $50,000 and that she was due of that amount. She also requested attorneys’ fees.

The Lapeer Circuit Court ordered that, once the plaintiff received proceeds from his lawsuit, he was to issue to defense counsel a check for 50% of the proceeds to be held in escrow until further order of the court.

The plaintiff, however, claimed that pain and suffering and personal-injury proceeds are separate property. As such, there was no marital portion of his lawsuit settlements. He moved the trial court to release the lawsuit proceeds, asserting that the parties negotiated at mediation that half of only the “marital portion of the proceeds” be divided. He argued that he negotiated the term “marital” into the CJOD because he “was under the reasonable belief that there would be no marital proceeds.”

The trial court held a hearing on the motions, with the plaintiff arguing that the lawsuit proceeds were not marital property and the defendant asserting that “the thrust of the agreement” was that the lawsuit proceeds would be divided. The defendant also argued that the underinsured coverage had been purchased with marital assets during the marriage.

The trial court held that the defendant was entitled to half of her ex-husbands’ lawsuit proceeds and awarded her attorneys’ fees.

This appeal followed.

CJOD

The panel looked to 2005’s Pickering v. Pickering decision, which said that “Proceeds from a personal injury suit meant to compensate for pain and suffering are not joint marital property.”

However, the judges noted that a trial court may treat such a settlement as marital property when “the original action included a loss of consortium and the settlement check was made payable to both parties and treated by the parties as marital property.”

Here, however, there was no proof that the settlement check was made payable to both parties or was treated like marital property.

The panel rejected the ex-wife’s argument that the agreement specifically would not have excluded proceeds for “pain and suffering” or “lost wages” if the parties intended for it to adhere to caselaw defining marital property.

“The language of the parties’ agreement specifically excludes defendant from sharing in lost wages to which she may otherwise have been entitled,” they wrote. “The inclusion of this language does not detract from the plain meaning of the contract, which otherwise provides for a division of any marital portion of the lawsuit proceeds.”

The judges also pointed out that the circumstances differ from one where a court determines to invade separate property.

“The CJOD in this case included the terms of the settlement agreement, meaning that it was not necessary for the trial court to make any decisions about the distribution of the assets,” they said.

The trial court erred by finding that the defendant was entitled to half of the proceeds from her ex-husband’s personal injury lawsuit.

Underinsured coverage

The defendant, however, was entitled to half of the underinsured coverage.

Under the facts here, the judges rejected the plaintiff’s argument that the underinsured settlement also should be included within “pain and suffering” and excluded from the marital estate under the parties’ CJOD.

The panel said there is “ample caselaw establishing that proceeds from tort claims for ‘pain and suffering’ are separate from marital property.”

“The husband’s person, and any rights or interests that naturally flowed from it, were never a marital asset,” the judges wrote. “The underinsured contract, however, was unambiguously an asset of the marital estate, and any rights or interests that naturally flowed from it were a marital asset. To divest defendant of her share of proceeds from that marital asset, the CJOD would need to have been more explicit to put defendant on notice that she was giving up a valuable asset.”

Finally, the panel said the trial court erred awarding attorneys’ fees to the defendant.

“Although defendant mentioned plaintiff’s withdrawal of retirement funds at the hearing about the lawsuit proceeds, the trial court had denied defendant’s request for attorney fees in its order about the retirement funds,” the judges said. “Because it was not unreasonable for plaintiff to contest the release of personal-injury funds, an award of attorney fees related to that disagreement is not proper.”

The matter returns to Lapeer County.

If you would like to comment on this story, contact Cory Linsner at clinsner@milawyersweekly.com .

 

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