Downs v. Downs

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, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.
 
                                No. 88-283
 
 
 
Kevin A. Downs                               Supreme Court
 
     v.                                      On Appeal from
                                             Chittenden Superior Court
Susan A. Downs
                                             June Term, 1989
 
 
Thomas L. Hayes, J.
 
Blais, Cain, Keller & Fowler, Inc., Burlington, for plaintiff-appellee
 
Robert B. Hemley and Norman Williams of Gravel & Shea, Burlington, for
   defendant-appellant
 
 
 
PRESENT:  Allen, C.J., Peck, Gibson, Dooley and Morse, JJ.
 
 
 
     GIBSON, J.   Plaintiff and defendant both appeal from a provision in
their divorce decree that sought to compensate defendant Susan Downs for
funds contributed during the marriage toward plaintiff Kevin Downs'
attainment of a medical degree.  We reverse and remand the case for further
proceedings consistent with the views expressed herein.
                                    I.
     Kevin and Susan were married in August of 1976.  At that time, Kevin,
who had just graduated from college, and Susan, who had completed three
years of university study, agreed that she would leave school and work
while he attended medical school.  Susan worked as a clerk at a department
store from the fall of 1976 until March of 1980, a month before the birth of
the parties' first child.  Most of her salary was used to pay for living
expenses while Kevin attended school; Kevin borrowed money through various
loans to pay for his school expenses.  Susan did not work outside the home
after the birth of the parties' first child, and a second child was born in
1982, at which time Kevin was in the midst of a four-year medical residency
at the Medical Center Hospital of Vermont.  In August of 1983, Kevin moved
out of the family home, and later that year, moved in with another woman and
her two children.  Shortly thereafter, he filed for divorce.  After
finishing his residency in 1984, he began working as an obstetrician and
gynecologist in practice with another doctor at an initial salary of
approximately $60,000 a year, with an expectation of earning up to $200,000
a year in the near future.
     After a hearing in July of 1984, the court granted Kevin a divorce and
awarded custody of the children to Susan.  The court also awarded her $1000
worth of home furnishings and a partially paid family car, and ordered that
Kevin pay (1) $500 a month to Susan in rehabilitative maintenance for five
years, (2) $500 a month per child in child support, (3) the children's
health insurance, plus all reasonable medical, dental and hospital expenses
not covered by insurance, (4) all reasonable expenses for higher education
for the children, and (5) $50,590 to Susan within five years, a sum
representing the total salary earned by her during the years she worked
while Kevin attended medical school, plus interest at the rate of ten
percent compounded annually.
     In reaching the $50,590 figure, the court reasoned that an educational
degree is not property, but that "the increased earning potential made
possible by the degree is an asset to be distributed by the court."  The
court then proceeded to make its disposition of Kevin's enhanced earning
potential under the property settlement statute, 15 V.S.A. { 751.  The
court considered itself unable, however, to award Susan any portion of the
increase in Kevin's earning potential resulting from his medical degree
because, while there was expert testimony that he could expect future
earnings with a discounted present value of three million dollars, there was
no testimony regarding the differential in earning capacity between a person
with a four-year college degree and a person with a medical degree.  Because
of this, the court felt confined to making an award based on restitution,
which it determined to be $50,590.
     Following Susan's motion to alter or amend the order and for a partial
new trial, the court held a second hearing and issued a revised order,
awarding her $125,000 for Kevin's enhanced earning capacity and $77,281 for
her nonmonetary contributions to the marriage.  Kevin appealed the revised
order, and we reversed the judgment, reinstating the original order because
the revised order had not been issued until after the expiration of the nisi
period.  Downs v. Downs, 150 Vt. 647, 549 A.2d 1382 (1988).  Susan now
appeals the original order, seeking a property division or maintenance award
that reflects Kevin's increased earning potential resulting from his degree
and her nonmonetary contributions to the marriage.  In his cross-appeal,
Kevin claims that the court erred in making its property disposition,
arguing that, since he did not have the ability to pay the restitution
amount at the time of the divorce, the order amounted to an improper award
of property not acquired during the marriage.
                                    II.
     In a case of first impression in Vermont, we consider the "diploma
dilemma."  The issue is what remuneration is available to a spouse who
sacrifices career opportunities in order to further the other spouse's
attainment of a professional degree, only to see his or her expectations of
future financial security undermined when the student spouse, upon receiving
the degree, shortly thereafter seeks a divorce.  Although the trial court
retains wide discretion in fashioning property and maintenance awards,
Buttura v. Buttura, 143 Vt. 95, 99, 463 A.2d 229, 231 (1983), any award
must fall within the flexible confines of Vermont's statutory guidelines.
See 15 V.S.A. {{ 751, 752.
     Before addressing Vermont's relevant statutory provisions, we review
how other jurisdictions have handled this issue.  A few courts have held
that a professional degree or the enhanced earning potential that it
represents is a marital asset subject to distribution upon divorce of the
parties.  See, e.g., In re Marriage of Horstmann, 263 N.W.2d 885, 891 (Iowa
1978); Woodworth v. Woodworth, 126 Mich. App. 258, 261, 337 N.W.2d 332, 334
(1983); O'Brien v. O'Brien, 66 N.Y.2d 576, 586-88, 489 N.E.2d 712, 717-18,
498 N.Y.S.2d 743, 748-49 (1985).  In O'Brien, the court stated that a
professional license constituted marital property, but based its decision on
the state's Equitable Distribution Law, in which the court found a clear
legislative mandate to include an interest in a professional license as
marital property.  O'Brien, 66 N.Y.2d  at 583-84, 489 N.E.2d  at 715, 498 N.Y.S.2d  at 746.
     Some courts have held that a professional degree is not an asset to be
divided, but that the supporting spouse is entitled to compensation for the
 amount of his or her investment in the student spouse's education.  See,
e.g., DeLa Rosa v. DeLa Rosa, 309 N.W.2d 755, 759 (Minn. 1981) (supporting
spouse awarded lump sum equalling monies she spent toward student spouse's
living and educational expenses); Hubbard v. Hubbard, 603 P.2d 747, 751-52
(Okla. 1979) (supporting spouse entitled to lump-sum award in lieu of
property to prevent unjust enrichment).  Under certain circumstances, for
instance where there is insufficient property to divide, other courts have
provided "reimbursement alimony" or "rehabilitative alimony" awards rather
than lump-sum awards.  See, e.g., Saint-Pierre v. Saint-Pierre, 357 N.W.2d 250, 253 (S.D. 1984) (court should award reimbursement alimony in proper
case); cf. Mahoney v. Mahoney, 91 N.J. 488, 501-05, 453 A.2d 527, 534-36
(1982) (only issue at trial was reimbursement claim, but degree holder's
earning capacity was held to be a factor in determining permanent alimony,
which could be adjusted in future if actual earnings diverged greatly from
court's estimate).  These courts point out that a professional degree,
unlike a vested pension whose value can be readily computed, provides
nothing more than the possibility of enhanced earnings that may never be
realized.  See, id. at 496-97, 453 A.2d  at 531-32.
     The majority of courts have found fertile, neutral ground between the
approaches described above.  These courts hold that a professional degree is
not an asset subject to property distribution upon divorce, but, in the
interest of justice and equity, fashion a maintenance award using the
increased earning potential of the spouse with the degree as a relevant
factor in determining an appropriate award.  See, e.g., In re Marriage of
Olar, 747 P.2d 676, 680-81 (Colo. 1987) (en banc); Drapek v. Drapek, 399
Mass. 240, 246, 503 N.E.2d 946, 950 (1987); Stevens v. Stevens, 23 Ohio St.
3d 115, 120, 492 N.E.2d 131, 135 (1986); DeWitt v. DeWitt, 98 Wis. 2d 44,
60-61, 296 N.W.2d 761, 769 (1980); cf. Washburn v. Washburn, 101 Wash. 2d 168, 176-79, 677 P.2d 152, 157-58 (1984) (en banc) (increased earning
potential is a relevant factor in making maintenance award; no need to
address "metaphysical" question of whether professional degree is property).
According to these courts, an award of a lump sum would be based on
speculative future earnings of the degree holder and amount to an improper
attempt to apportion after-acquired property.  See, e.g., DeWitt, 98 Wis. 2d
at 58-59, 296 N.W.2d  at 768.  Further, because a maintenance award is
subject to later modification, in contrast to a property award, which may
not be modified, such an award could be adjusted as a result of the effect
of future events on the earning capacity of the spouse holding the degree.
See, e.g., Drapek, 399 Mass. at 244, 503 N.E.2d  at 949.  This approach
accords with existing Vermont law.  15 V.S.A. { 758; Ellis v. Ellis, 135 Vt.
83, 85, 370 A.2d 200, 201-02 (1977).
     We agree with the majority reasoning and hold that increased earning
capacity is not property subject to distribution under 15 V.S.A. { 751.
Thus, the trial court erred in treating Kevin's increased earning potential
as an asset to be disposed of under the property settlement statute.
Indeed, under { 751 "the contribution by one spouse to the education,
training, or increased earning power of the other" is one of the factors to
be considered in making a property settlement, 15 V.S.A. { 751(b)(5); hence,
it is logical to conclude that increased earning power itself is not marital
property.  See Hodge v. Hodge, 337 Pa. Super. 151, 156, 486 A.2d 951, 953
(1984) (court reached similar conclusion under similar statute).  Of course,
as provided in { 751(b)(5) and depending upon the circumstances, contribu-
tions to increased earning power could be a significant factor in deter-
mining a fair distribution of marital property.  See Mahoney, 91 N.J. at
504, 453 A.2d  at 535-36.
     In situations as in the instant case, however, where there is not
enough property to fairly compensate the supporting spouse for contributions
toward the other spouse's attainment of a degree, Vermont's maintenance
statute, 15 V.S.A. { 752, is sufficiently flexible to permit the court's
consideration of the future earning prospects of the student spouse.  Under
{ 752(a), a court may order permanent or rehabilitative maintenance payments
if it finds that the spouse seeking maintenance (1) lacks sufficient income,
property, or both, "to provide for his or her reasonable needs," and (2)
cannot support himself or herself "through appropriate employment at the
standard of living established during the marriage or is the custodian of a
child of the parties."  We agree with the Colorado Supreme Court in Olar,
which construed similar statutory language in a case addressing the same
issue that is now before us.  That court stressed the word "reasonable" in
the phrase "reasonable needs" and "appropriate" in the phrase "appropriate
employment," emphasizing that maintenance can be a tool to balance equities
whenever the financial contributions of one spouse enable the other spouse
to enhance his or her future earning capacity.  Olar, 747 P.2d  at 681-82.
Thus, "reasonable needs" can mean more than mere sustenance and "appropriate
employment" more than the ability to find work.  Id.  "[M]aintenance is not
just a means of providing bare necessities, but rather a flexible tool by
which the parties' standard of living may be equalized for an appropriate
period of time."  Washburn, 101 Wash. 2d  at 179, 677 P.2d  at 158.
     Once the threshold criteria of { 752(a) have been met, the court shall
award maintenance "in such amounts and for such periods of time as the court
deems just, after considering all relevant factors, including, but not
limited to" such components as the financial resources of the party seeking
maintenance, the property settlement awarded to that party, the party's
ability to meet his or her needs independently, and the time and expense
necessary for the party seeking maintenance to acquire an education so that
he or she can find appropriate employment.  { 752(b)(1) and (2) (emphasis
added).
     The scope of the statute is clearly broad enough to permit courts to
consider the increased earning capacity engendered by a professional degree
in determining an award of maintenance.  Accordingly, we hold that, when one
spouse obtains a professional degree during the marriage, but the marriage
ends before the benefits of the degree can be realized, the future value of
the professional degree is a relevant factor to be considered in reaching a
just and equitable maintenance award.  The trial court retains broad
discretion in determining the amount and duration of any maintenance award,
McCrea v. McCrea, 150 Vt. 204, 207, 552 A.2d 392, 394 (1988); appropriate
factors for the court to consider in making such an award are set forth in
15 V.S.A. { 752(b), and would include the future earning prospects of the
student spouse.  Further, upon remand, the parties in the instant case may
provide any current, relevant information in order that the court can arrive
at a just maintenance award.  See Klein v. Klein, No. 89-131, slip op. at 8
(Vt. Feb. 2, 1990).
     Susan also contends that the trial court erred by refusing to allow an
award based on her nonmonetary contributions to the household and child
rearing because of the absence of testimony evaluating the contributions.
Because a maintenance award is not based on a theory of restitution, the
issue is inapposite in light of our opinion here.
     Finally, because the property division and maintenance award are so
closely related, see 15 V.S.A. { 751(b)(7), the property division must be
vacated in order to allow the trial court leave to revise it if necessary.
DeGrace v. DeGrace, 147 Vt. 466, 470, 520 A.2d 987, 990 (1986).
     The provisions of the February 19, 1985 order dividing the parties'
property and requiring that plaintiff pay defendant $500 per month
maintenance and the sum of $50,590 within five years are vacated; in all
other respects, the decree is affirmed.  The matter is remanded for further
proceedings consistent with this opinion.
 
 
                                        FOR THE COURT:
 
 
 
                                        _______________________________
                                        Associate Justice