Geraw v. Geraw

2021 VT 45

Ronald Geraw v. Pamela Geraw

No. 2020-263

Supreme Court of Vermont

January Term, 2021

June 11, 2021

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.

On Appeal from Superior Court, Chittenden Unit, Family Division

Thomas Carlson, J.

Thomas C. Nuovo of Bauer Gravel Farnham, LLP, Colchester, for Plaintiff-Appellant.

Samantha M. Henchen of Henchen Law Office, PLLC, Colchester, for Defendant-Appellee.

PRESENT: Reiber, C.J., Robinson, Eaton, Carroll and Cohen, JJ.

¶ 1. REIBER, C.J. This case involves wife's longstanding efforts to collect money owed to her by husband under a 2013 final divorce order as reduced to a money judgment in 2018. Husband contends that his current assets, including a home and tractor, are exempt from collection under 21 V.S.A. § 681 because he purchased them with workers' compensation settlement funds. If this argument fails with respect to the tractor, husband asserts that the tractor should be exempt under 12 V.S.A. § 2740(19) because it is "reasonably necessary" for his support. Husband further argues that an investment account he holds is a Workers' Compensation Medicare Set-Aside Account (WCMSA) that is also exempt from collection. We affirm.

I. Prior Litigation

¶ 2. Husband suffered a work-related injury in 2010 during the parties' marriage. He settled his worker's compensation claim in December 2014, after the parties' divorce became final. He received a lump-sum payment of $350,000 (less $42,112.58 in attorney's fees and expenses) as "compensation for permanent impairment."

¶ 3. At the time of the parties' 2013 divorce, "[h]usband's sole source of income . . . was temporary workers' compensation benefits, which he expected to terminate at the end of 2014."¹ Geraw v. Geraw, No. 2014-044, 2014 WL 3715005, *1 (Vt. July 24, 2014) (unpub. mem.), https://www.vermontjudiciary.org/sites/default/files/documents/eo14-044.pdf [https://perma.cc/7EEZ-KMSE]. Because he had insufficient income to pay maintenance, the court focused "on property division in lieu of maintenance to generate income." Id. (quotation omitted). It awarded husband the primary marital asset—the marital home—and ordered him to pay wife $75,275 within nine months or make other arrangements to pay wife that sum. We affirmed the final divorce order on appeal. See id.

¶ 4. Husband did not pay wife as ordered and he stopped paying the mortgage as of September 2014. See Geraw v. Geraw, No. 2019-041, 2019 WL 3545447, *1 (Vt. July 12, 2019) (unpub. mem.), https://www.vermontjudiciary.org/sites/default/files/documents/eo19-041.pdf[https://perma.cc/K87F-GUZJ]. Wife moved to enforce the final divorce order and in April 2015, the court modified the final divorce order, by agreement, awarding wife the former marital home and directing that it be sold. The court noted that wife could pursue additional enforcement actions if she were not made whole. Wife netted approximately $7460 from the sale. See id.

¶ 5. Wife then moved to enforce the April 2015 order and collect the deficiency. Husband responded by moving to modify the 2015 order. In December 2018, the court denied husband's motion and awarded wife judgment for the deficiency—$67,815.48 plus interest at the statutory rate. We affirmed this decision on appeal. See id.

II. Collection Efforts and Order on Appeal

¶ 6. Following our decision, litigation of wife's ongoing collection effort resumed. Husband continued to "drag[] his feet" in responding to wife's requests for discovery of his current income and assets, leading wife to file a motion to compel. The court set a new discovery schedule and at wife's request, scheduled a hearing. Prior to the hearing, wife filed a memorandum in support of her attempt to reach husband's workers' compensation and pension benefits. Husband did not receive a copy of this document before the hearing because it was mailed to an infrequently checked address for husband's attorney.

¶ 7. Following the hearing and the submission of post-hearing memoranda, the court ruled on issues raised by wife's motion to enforce.² As set forth below, it rejected husband's assertion that 21 V.S.A. § 681 shielded assets he purchased using workers' compensationsettlement funds and it applied 12 V.S.A. § 2740 to determine the extent to which husband's assets were subject to collection.

¶ 8. Husband had the following assets. He purchased a home on twenty-five acres in 2015 for $221,500 cash using funds from his worker's compensation settlement. He then conveyed the property to a revocable living trust, subject to a life interest for the benefit of his "partner." The same year, husband purchased with workers' compensation settlement funds a $24,000 Kubota tractor—now worth $15,000—and a 2016 Toyota RAV 4. Husband also owned an unregistered 2001 Ford 150 pickup and a 1980 Chevrolet Camaro, both of which he was awarded in the final divorce order. No evidence was presented as to the value of these vehicles.

¶ 9. Husband had income of $1732 per month in Social Security Disability Insurance payments and $2140 in other disability/pension benefits from an unspecified source. His income essentially equaled his claimed expenses.

¶ 10. Husband claimed that he transferred ownership of the tractor to his sister sometime after April 2015 as a loan repayment. He provided no proof of any loans or any ownership documents. The court found that husband had exclusive use and possession of the tractor and he had used it to maintain his home since its purchase. Husband also asserted that he shared ownership of the Camaro with his sister, again as a loan repayment, and that he shared ownership of the RAV 4 and pickup truck with his daughter for unexplained reasons.

¶ 11. The court did not find husband credible and rejected his testimony. It found that husband had been litigating his liability to wife for seven years after failing to comply with various orders. Along the way, he had tried to insulate all his property from wife's claims by way of transfers to a trust and into alleged shared ownership with his sister and daughter. Husband had a substantial savings account but had never started to fulfill his longstanding obligation to wife. The court found no indication that husband's sister had any use, possession, or benefit from the tractor or Camaro and as noted, there was no documentation of any of the alleged lending or obligationto repay. Based on the evidence presented thus far, and considering the factors in Vermont's fraudulent conveyance statute, 9 V.S.A. § 2288(b), the court stated that it was considering the possibility that husband intended these transfers to hinder, delay, and defraud wife.

¶ 12. The court further found that husband had a local bank account but transferred it to an American Express investment account at some point, allegedly to satisfy Medicare rules. These account statements showed a balance in husband's money market account of nearly $60,000 in May 2018 reduced to $5300 by August 2019; his checking account hovered around $2200.

¶ 13. The court found that no evidence was offered at the hearing as to the amount held on account nor was a specific account identified. As best the court could discern, that was because husband refused to provide such information in longstanding discovery requests. While husband testified that the source of the funds in this unspecified account was another part of his workers' compensation settlement, he did not introduce any documents to support such assertion and the court found husband not credible. The court further noted that husband did not offer any evidence as to how those funds were reasonably necessary for his support, as his current expenses appeared to be met by his current income.

¶ 14. With these findings in mind, the court considered possible statutory exemptions. It rejected husband's assertion that any asset he purchased with workers' compensation settlement funds was exempt under 21 V.S.A. § 681. Section 681 prohibits the assignment of claims for workers' compensation and provides, with an exception not applicable here, that "[c]ompensation and claims therefor shall be exempt from all claims of creditors." The court relied on the plain language of the statute, explaining that it did not mention tracing workers' compensation funds to other assets. The court contrasted this with 12 V.S.A. § 2740(19), where the Legislature had expressly recognized the prospect of tracing benefits. See id. (exempting "property traceable to or the debtor's right to receive, to the extent reasonably necessary for the support of the debtor and any dependents of the debtor," certain enumerated benefits and types of compensation). The courtalso noted that other statutory provisions specifically allowed garnishment of workers' compensation benefits and even execution in some instances. See 15 V.S.A. §§ 780-790 (providing that both child support and spousal support can be collected by withholding from "workers' compensation or insurance policies of any type" with remedy for spousal support extending only to wage-withholding orders and not to judgment lien and trustee process as with child support).

¶ 15. The court concluded that while § 681 plainly barred "creditors" from obtaining a lien or encumbrance of a pending claim for workers' compensation and the income stream from ongoing workers' compensation payments, this did not extend to assets acquired with those proceeds. The court saw legislative logic behind this approach—it kept creditors out of the workers' compensation award process by preventing liens on claims and direct compensation and it left the prospect of collection against...