On certification to the Superior Court, Appellate Division.
For affirmance -- Chief Justice Wilentz and Justice O'Hern. For reversal -- Justices Clifford, Handler, Pollock, Garibaldi and Stein. O'Hern, J., dissenting. The Chief Justice joins in this opinion.
[111 NJ Page 493] This appeal requires us to determine whether all or part of the settlement proceeds that a spouse receives during a marriage for claims arising out of his or her personal injuries constitutes a marital asset subject to equitable distribution pursuant to N.J.S.A. 2A:34-23. We hold that the portion of the settlement that is intended to compensate for lost earnings and the medical expenses of the injured spouse is subject to distribution, but the remainder of the settlement, which is intended to compensate for personal pain, suffering, and the mental and physical disabilities of the injured spouse or for the loss of consortium or services suffered by the uninjured spouse, are not distributable.
Grace Landwehr and Raymond Landwehr were married in 1959 and have three children. On July 31, 1978, Raymond Landwehr was injured in an automobile accident. As a result he sustained numerous personal injuries and was hospitalized for over a week and out of work for three months. During most of his recuperation, Mr. Landwehr collected weekly disability payments of one-hundred and thirty-eight dollars. (His weekly salary was two-hundred dollars.) All of his hospital and medical bills were paid by insurance.
Throughout his recuperation, Mr. Landwehr's wife, Grace, attended him, took care of their three children, and ran their household. She also worked outside the home. Shortly after his accident, while Mr. Landwehr was in the hospital, Mrs. Landwehr brought an attorney to him to discuss their legal rights with regard to the accident. During the attorney's initial interview with the Landwehrs, Mrs. Landwehr informed him that she wanted to pursue a per quod (loss of consortium or services) derivative action in connection with any lawsuit that might be brought. The attorney agreed to pursue all appropriate actions, and effected a settlement with the insurance carrier in May 1980 for twenty-six thousand dollars. No pleadings were ever filed.
The Landwehrs separated in June of 1981. On October 29, 1981, Mrs. Landwehr filed a complaint for divorce. On October 24, 1983, a final judgment of divorce was entered. At that time the court reserved judgment on whether the personal injury settlement was subject to equitable distribution under N.J.S.A. 2A:34-23.
Subsequently, the trial court decided that Mrs. Landwehr was entitled to the portion of the personal injury settlement that was intended to cover her per quod claim, and to one-half of the portion of the settlement that was intended to cover Mr. Landwehr's lost wages; and that Mr. Landwehr was entitled to keep the remainder of the settlement. The court held that the funds
that had been intended to compensate Mr. Landwehr for his personal injuries were not distributable under N.J.S.A. 2A:34-23.
The Appellate Division reversed that judgment. It held that the entire personal injury settlement was marital property subject to equitable distribution. Landwehr v. Landwehr, 200 N.J. Super. 56 (1985). Thereafter the trial court entered a second order holding that Mrs. Landwehr was entitled to forty percent of the settlement.
Mr. Landwehr appealed that order. He argued that the trial court lacked jurisdiction to make the award;*fn1 that the award was so excessive that it constituted an abuse of discretion; and that personal injury settlement proceeds should not be subject to equitable distribution under N.J.S.A. 2A:34-23. The Appellate Division dismissed the first two contentions as "clearly without merit." And it held that the prior Appellate Division decision in this case, which concluded that all of the settlement proceeds that Mr. Landwehr received were subject to equitable distribution, had become the "law of the case." Thus it refused to reconsider that issue, and affirmed the trial court. The defendant then petitioned this court for certification to determine whether all of the settlement proceeds from the personal injury claim were subject to equitable distribution.
The "'law of the case' doctrine sometimes requires a decision of law made in a particular case to be respected by all other lower or equal courts during the pendency of that case." State v. Reldan, 100 N.J. 187, 203 (1985). Under even the most rigorous application of that doctrine this court is not bound by
prior opinions issued by lower courts. Moreover, we see no reason to penalize Mr. Landwehr for proceeding before the trial court to determine the specific, practical effects of the first adverse Appellate Division decision before he undertook this appeal. See generally Justice Robert L. Clifford, Civil Interlocutory Appellate Review in New Jersey, 47 Journal of Law and Contemporary Problems 87, 89 (Summer 1984) (noting that appeals are best taken from final orders after all the stakes in a litigation are clear). Accordingly, we granted certification, 104 N.J. 473 (1986); and now reverse the judgment of the Appellate Division.
In 1971, the Legislature amended N.J.S.A. 2A:34-23 to provide in cases of divorce for the equitable distribution of marital property. L. 1971, c. 212, § 8. No legislative history explained what constituted marital property under the statute. Accordingly, the only guideline was the statutory definition of what property was subject to distribution, viz, "the property, both real and personal, which was legally and beneficially acquired by [the divorcing parties] or either of them during the marriage." See Mahoney v. Mahoney, 91 N.J. 488, 495 (1982). Construing that broad definition in Painter v. Painter, 65 N.J. 196, 217 (1974), we held the legislative intent "to be that all property, regardless of its source, in which a spouse acquire[d] an interest during the marriage [was] eligible for distribution in the event of divorce." Specifically, we held that property acquired during the marriage "by gift, or inheritance or indeed in any other way would be subject to equitable distribution." Id. at 214-15 (emphasis added).
Relying on our expansive definition of property in Painter, the Appellate Division decided that claims arising out of personal injuries are subject to equitable distribution under N.J.S.A. 2A:34-23. In Di Tolvo v. Di Tolvo, 131 N.J. Super. 72 (1974), the court held that a husband's cause of action for personal
injuries arising out of an automobile accident was marital property under the statute. The court recognized that there are strong arguments against equitable distribution of such a claim but it felt constrained by "the construction of the 1971 amendment to the divorce act given by Painter." Id. at 82. Accordingly, it ruled that when a court distributes marital property incident to a divorce, it should equitably allocate future recovery on personal injury claims, "irrespective of the value of each spouse's claims that would normally be measured in the negligence action itself." Id. at 80. Subsequent cases approved and followed the Di Tolvo rule. See, e.g., Harmon v. Harmon, 161 N.J. Super. 206 (App.Div.1978) (holding that settlement monies received during the course of a marriage in satisfaction of a negligence action arising out of personal injuries sustained by the husband are eligible for equitable distribution); Hughes v. Hughes, 132 N.J. Super. 559 (Ch.Div.1975) (unliquidated workers' compensation claim for personal injuries subject to distribution).
In Kruger v. Kruger, 73 N.J. 464 (1977), we determined that military retirement pay and monthly disability benefits were eligible for equitable distribution. We relied on our decision in Painter that "all" property acquired during the marriage was eligible for equitable distribution. We did not address the distributability of personal injury claims. However we did, by way of dictum, cite the Appellate Division's decision in Di Tolvo ...