Wisconsin Lawyer: Wisconsin Lawyer February 2000: Court of Appeals Digest 3:

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February 01, 2000

Wisconsin Lawyer February 2000: Court of Appeals Digest 3

Divorce - Property Division - Use of Coverture Fraction to Divide Retirement Account

Hokin v. Hokin, No. 98-3680 (filed 21 Oct. 1999) (ordered published 22 Nov. 1999)

The parties married in 1978 and divorced in 1998. A critical issue in the divorce case was the division of the husband's retirement account, which by far was the most significant asset. The trial court used a coverture fraction to divide the asset. In this fraction the numerator is the length of the marriage (20 years) and the denominator is the total number of years the husband participated in the retirement plan (41 years). The court awarded 20/41 of the value of the retirement account on the date of trial to the husband and then divided 20/41 equally between the husband and wife.

The wife contended on appeal that in using a coverture fraction to divide the largest asset in the marital estate, the court improperly relied on the Wisconsin Marital Property Act (Wis. Stat. chapter 766). Under the Marital Property Act a coverture fraction is applied to determine what portion of a pension is individual rather than marital property. However, the division of property upon divorce is not governed by the Marital Property Act but instead by chapter 767. With regard to the division of property on divorce, the only property that remains individual property and not subject to division is property acquired before or during the marriage by gift or inheritance, or funds acquired from either. All other property is part of the marital estate, and the court is to presume that it is to be divided equally, although the court may alter the distribution after considering various factors. Under the divorce statute a spouse's entire interest in a pension - whether existing before the marriage or acquired during a marriage - is part of the marital estate subject to division in divorce. The increase in value of property brought to the marriage, including interest in a pension, also is part of the marital estate subject to division in divorce.

The appellate court agreed with the wife that no Wisconsin case has held that the use of a coverture fraction is or may be permissible to divide a pension. It did not, however, agree with her conclusion that a trial court may never do so. Property brought to a marriage is an appropriate factor to consider in deviating from the presumed equal division of the marital estate and the coverture fraction may, depending on the facts in a particular case, be an appropriate way to divide a spouse's pension as part of the overall division of property. The inquiry in each case is whether the use of a coverture fraction is a proper exercise of the court's discretion in dividing the marital estate of the parties, given the particular facts of the case and the applicable statutory and case law.

Divorce - Limited-term Maintenance - Substantial Change in Circumstances

Murray v. Murray, No. 99-1369-FT (filed 13 Oct. 1999)(ordered published 22 Nov. 1999)

The parties divorced after 25 years of marriage. The family court approved their marital settlement agreement that resolved all of the issues between them and the judgment incorporated the agreement by reference. Among its terms the agreement provided the wife with limited-term maintenance for 10 years on a downward sliding scale.

With just two payments remaining under the limited-term maintenance provision, the wife filed a motion for a modification of the judgment, seeking a "reasonable sum" of maintenance beyond the 10-year termination date. The circuit court granted the motion and the court of appeals, in a decision authored by Judge Nettesheim, reversed.

Limited-term maintenance has various purposes. In most cases, it provides the recipient spouse with funds for training that might lead to employment, thereby creating an incentive for that spouse to seek employment or better employment. When used for this purpose, limited-term maintenance seeks to place the recipient spouse in a self-supporting economic situation by the end of the maintenance period. The ability of the family court to modify a limited-term maintenance award serves as a "safety net" in a situation where the recipient spouse has not been able to become self-supporting, has not malingered, and has accepted as much employment as he or she can obtain.

In this case the court of appeals held that the record did not support the wife's claim that the limited-term maintenance was designed to provide funds for employment training or to serve as an incentive to seek more lucrative employment. Among other things the wife testified that she was satisfied with her employment at the time of divorce, that she had not sought any other employment during the ensuing years, and that her current employment situation is what she had contemplated 10 years earlier at the time of the divorce. Thus, the wife did not view the limited-term maintenance award as designed to provide her with funds for training that might lead to other, more lucrative, employment or to provide her an incentive to seek employment. Under these circumstances the "safety net" provided by a modification of the limited-term maintenance is neither necessary nor appropriate.

The marital settlement agreement resolved all issues between the parties. It thus served another of the purposes of limited-term maintenance: limiting the responsibility of the payor-spouse to a time certain and avoiding future litigation. In such a setting, absent a substantial change in circumstances, the parties may rightfully expect that their disputes are in repose and that they may move on in their lives with relative certainty.

The court held that the law of change of circumstances should not require the payor-spouse to finance the unwise or imprudent financial decisions of the recipient spouse. The court stressed that it was not speaking of unanticipated financial reversals produced by the recipient spouse's financial decisions. Rather, it was speaking of financial decisions that a person should reasonably know would produce economic difficulty or distress. In this case the wife conducted her financial affairs as if the limited-term maintenance payments would endure permanently. But, said the court, it is not the purpose of maintenance - much less limited-term maintenance - to provide a permanent annuity. Given the wife's conduct and the other circumstances of this case, the court concluded that it would be unjust and inequitable to the husband to break the terms of the parties' agreement and allow for an award of permanent maintenance.

Marital Property - Pensions - Disposition of Assets When Employee Murdered the Nonemployee Spouse

Hackl v. Hackl, No. 99-0499 (filed 7 Oct. 1999) (ordered published 22 Nov. 1999)

Bradley and Diane Hackl were married in 1988. In 1996, as the two were divorcing, Bradley murdered Diane. He was convicted of the crime and sentenced to life in prison. Bradley had worked as a union mason for almost 40 years and had contributed to a pension fund since 1957. From prison, Bradley applied for and began to receive monthly pension benefits.

In probate proceedings regarding Diane's estate, her personal representative asserted that the pension was marital property and claimed an undivided one/half interest in the pension as an estate asset. Bradley objected, arguing that Diane's marital property interest in his pension terminated upon her death, and that the pension must thus be classified as wholly his individual property. The circuit court concluded that Diane's interest in Bradley's pension survived her death and ordered that a constructive trust be imposed on an undivided one-half of it. In a decision authored by Judge Deininger, the court of appeals affirmed.

Bradley claimed on appeal that the circuit court erred by failing to follow sections 766.31(3) and 766.62(5) of the Wisconsin Statutes. Generally, these statutes provide that a nonemployee spouse's interest in his or her spouse's "deferred employment benefit plan" terminates upon the nonemployee spouse's death. There was no dispute that Bradley's pension fell within the statutory definition of a "deferred employment benefit plan." However, the court of appeals concluded that the trial court's order imposing the constructive trust is consistent with the equitable principle, which has long applied in Wisconsin, that a murderer should not be allowed to benefit from his or her crime.

The appellate court further concluded that the circuit court fashioned the proper remedy by imposing a constructive trust on what it deemed to be Diane's marital property interest in Bradley's pension. Bradley's pension constituted marital property, and Diane retained an interest in a portion of the pension until the instant of her death. Bradley obtained her interest as a consequence of his killing her. The Restatement of Restitution provides that "where two persons have an interest in property and the interest of one of them is enlarged by his murder of the other, to the extent to which it is enlarged he holds it upon a constructive trust for the estate of the other." The court of appeals concluded that this was precisely the circumstance presented by this case.

In footnote the court noted that the provisions of Wisconsin Statutes section 854.14 (1997-98) were not effective at the time of Diane's death in 1996. Under this statute the "unlawful and intentional killing of the decedent ... revokes every statutory right or benefit to which the killer may have been entitled by reason of the decedent's death." Because the new statute did not apply to Diane's death, and because the court of appeals decided the present case on common law principles, it did not consider whether the statute addresses the termination of a marital property interest under sections 766.31(3) and 766.62(5) that results from an interspousal murder.

Insurance

Nursing Homes - Terminated Employees - "Personal Injury Offenses"

St. Paul Fire and Marine Ins. Co. v. Hausman, No. 99-1125-FT (filed 5 Oct. 1999) (ordered published 22 Nov. 1999)

Hausman, a licensed social worker, was employed by a nursing home in 1993. After her internal complaints about substandard care for residents were ignored, she complained to governmental agencies. Later that same year she was suspended and then terminated by the nursing home, which cited her poor performance. Hausman later brought an action for wrongful termination and related claims against her former employer, the nursing home. The nursing home's general liability insurer, St. Paul, brought this declaratory judgment action seeking a finding that the policy did not provide coverage on these claims. The circuit court ruled that St. Paul did not have coverage for the claims.

The court of appeals, in an opinion written by Judge Peterson, reversed. Section 50.70(1)(e) of the Wisconsin Statutes prohibits employers from intentionally retaliating against nursing home residents or employees who report abuses to state officials. Its "overriding purpose" is to protect both residents and employees. This purpose was "sufficiently similar and necessary to ensuring patients' rights" and therefore qualified "under the insurance policy language as a law similar to a patient's bill or rights." Finally, it was irrelevant that Hausman's legal theory of liability was "wrongful discharge"; the nursing home interfered with her rights and caused damage.

UM Coverage - Unidentified Vehicle

Dehnel v. State Farm Mut. Auto Ins. Co., No. 98-3187 (filed 30 Sept. 1999) (ordered published 22 Nov. 1999)

In 1996 Dehnel was driving westbound on a highway when he passed a semitrailer driving eastbound. As the vehicles passed one another, ice dislodged from the semitrailer, struck Dehnel's windshield, and injured him. Dehnel never discovered the identity of the other driver or the truck's owner. He filed a claim with State Farm under his uninsured motorist (UM) coverage, which was denied.

The court of appeals, in an opinion written by Judge Roggensack, affirmed. Dehnel relied entirely upon section 632.32(4)(a) of the Wisconsin Statutes; he conceded that the policy language did not provide coverage and that his claim sounded solely in the statute. Case law required "that the unidentified vehicle meet the criteria of a statutory hit-and-run in order to cause it to be an uninsured vehicle for which coverage was required." The case law further established that "hit-and-run" status requires "a hit or touching between the two vehicles." No such contact occurred in this case. Dehnel argued, however, that his predicament fell within the statute because the truck carried an object (the ice) that later struck his vehicle. The court conceded that Wisconsin case law had not addressed this issue and other states were divided. In the end, however, the court of appeals was reluctant to enlarge the statutory interpretation established by the supreme court in earlier decisions.

Municipal Law

Annexation - Referendums

City of Chippewa Falls v. Town of Hallie, No. 99-0832 (filed 19 Oct. 1999) (ordered published 22 Nov. 1999)

Owners of real estate located in the Town of Hallie (the town) petitioned for direct annexation by the City of Chippewa Falls (the city) pursuant to section 66.021 of the Wisconsin Statutes. The city in effect accepted the petition. When the town received notice, opponents circulated a petition for a referendum on the annexation. The requisite number of qualified voters living in the area proposed for annexation signed the petition. The city brought this action for a declaratory judgment to have the petition for referendum declared invalid because it failed to comply with sections 66.021(5) and 8.40(2). Specifically, the petition for referendum had to be circulated by persons who lived in the area subject to annexation. The circuit court granted judgment in favor of the city.

The court of appeals, in a decision authored by Chief Judge Cane, affirmed. Section 8.40(2) of the Wisconsin Statutes requires that an affidavit of a "qualified elector" appear at the bottom of each petition circulated. Under section 66.021(5) a petition for referendum can be signed only by those residing within the proposed area of annexation. Reconciling the statutes, the court held that "when sec. 8.40(2) requires that the affiant/circulator reside within the 'jurisdiction or district' in which the petition is circulated, it can only mean that the affiant/circulator must reside within the proposed area of annexation."

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