Hayden v. Hayden

Hayden v. Hayden (2002-235); 176 Vt. 52; 838 A.2d 59

2003 VT 97

[Filed 10-Oct-2003]


       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, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2003 VT 97

                                No. 2002-235


  Janis Hayden	                                 Supreme Court

                                                 On Appeal from
       v.	                                 Addison Family Court


  Rex Hayden	                                 September Term, 2003 (FN1) 


  Matthew I. Katz, J.

  Susan M. Murray and Abby C. Moskovitz of Langrock Sperry & Wool, LLP,
    Middlebury, for Plaintiff-Appellant.
    
  Rex Hayden, Pro Se, Newmarket, Alabama, for Defendant-Appellee.	


  PRESENT:  Amestoy, C.J., Johnson and Skoglund, JJ., and Gibson, J. (Ret.),
            Specially Assigned

        
       ¶  1.  JOHNSON, J.   Plaintiff Janice Hayden appeals from an order
  of the Addison Family Court ordering defendant Rex Hayden to pay plaintiff
  $1000 per month in spousal maintenance and dividing the parties' marital
  property between them.  Plaintiff contends that the maintenance award is
  insufficient to meet her reasonable needs and that the property division is
  inequitable.  She argues that the family court erred: (1) in valuing
  defendant's 401(k) plan on the date the parties separated instead of on the
  date of the final hearing in this matter; (2) in excluding funds
  contributed to defendant's IRA before his marriage when valuing the IRA for
  purposes of property division; (3) in considering a "hypothetical" real
  estate commission on a potential sale of the marital home in determining
  defendant's rightful share of the parties' property; (4) in failing to
  divide the parties' assets on an "essentially equal" basis even though it
  had expressed an intent to do so; and (5) in ordering a maintenance award
  that subordinated plaintiff's need for spousal maintenance to defendant's
  desire to avoid bankruptcy.  We reverse. 


       ¶  2.  The parties were married in 1985, and separated in 2000. 
  Defendant is a mechanical engineer currently earning $81,000 per year. 
  Plaintiff has an associate's degree in health information technology and
  has worked sporadically in various administrative assistant jobs, but at
  the time of the final hearing she held no steady employment.  Plaintiff's
  ability to work was a contested issue at the final hearing.  Due to various
  health problems, her doctor testified that she would have difficulty in an
  employment situation requiring prolonged concentration or physical
  activity.  Nevertheless, the trial court found that she could successfully
  handle part-time employment. 

       ¶  3.  The parties' marriage produced one child, a daughter who was
  four-and-one-half years old at the time of the final hearing in this case. 
  Plaintiff has custody of the child, and defendant has visitation rights. 
  The court found that "[c]ustody of the child is not a bar to the wife's
  working.  The child is presently in full-time daycare . . . . The mother
  testified the full-time daycare is 'for her good and mine.' "  Thus the
  trial court determined that despite its finding that plaintiff suffers from
  sleep apnea, degenerative arthritis, depression, and reflux/hiatal hernia,
  and given that her daughter was in day care, plaintiff should be able to
  work part-time. 
   
       ¶  4.  The parties have come to an agreement regarding parental
  rights and responsibilities and related issues; thus, the only outstanding
  issues on appeal are property valuation, property division, and spousal
  maintenance.  The existence of almost $70,000 in credit card debt, held
  separately by the parties, complicates the situation.  Defendant holds
  slightly more debt than plaintiff, but both face significant minimum
  monthly payments. 

       ¶  5.  The court awarded defendant an IRA, a 401(k) retirement
  account, a truck, the marital home, and tools and equipment, which the
  trial court valued at $82,000, while awarding plaintiff two IRAs, a car,
  and a trailer with a total value of $78,000.  In its conclusions, the court
  stated that the "[a]ssets of the parties should be divided equally," and
  the decision noted that the distribution made by the court was "essentially
  equal."  The trial court did not state explicitly how it valued the
  retirement accounts awarded to defendant.  The parties disagreed over the
  appropriate valuations for these two accounts, each proposing different
  values based on different assumptions about the extent to which the
  accounts were marital property.  Both parties agree, however, that the
  court accepted defendant's suggested assessment, valuing the 401(k) account
  at the date of separation and excluding money contributed to the IRA by
  defendant prior to the parties' marriage.  As a result, the value
  attributed to the accounts by the trial court was $31,246 less than the
  total amount of money in the accounts on the day of the final hearing. 
  Considering the retirement accounts awarded to defendant to be worth their
  value on the day of the final hearing, the court awarded defendant assets
  worth $113,000, and awarded plaintiff assets worth $78,000.  This means
  that defendant received 59% of the assets, and plaintiff received 41% of
  the assets. 
   
       ¶  6.  The court also awarded plaintiff spousal maintenance in the
  amount of $1000 per month.  The trial court stated that the maintenance
  award was intended to comply with this Court's holding that spousal
  maintenance is intended to correct the vast inequality of income resulting
  from the divorce, Russell v. Russell, 157 Vt. 295, 299, 597 A 2.d 798, 800
  (1991), and should be awarded "to equalize the standard of living of the
  parties for an appropriate period of time."  Downs v. Downs, 159 Vt. 467,
  469, 621 A 2.d 229, 230 (1993).  The court found that based on the monthly
  budget presented by defendant detailing expenses of $5,548 per month,
  defendant could afford to pay $1000 in maintenance while still making $770
  monthly minimum credit card payments.  Plaintiff had submitted monthly
  expenses of $6,935, but this included $4,185 in credit card debt that the
  trial court found plaintiff would be unable to repay. (FN2)  Excluding credit
  card payments, plaintiff's actual monthly expenses total $2,757.  The
  court's maintenance award of $1000 per month, when added to the $771 per
  month she receives in child support payments, leaves plaintiff with a
  monthly shortfall of $986.  The trial court concluded that plaintiff "will
  be able to meet her reasonable needs if she pursues even part-time
  employment."

                                     A.
   
       ¶  7.  Plaintiff first contends that the court erroneously treated a
  significant portion of the funds contained in retirement accounts awarded
  to defendant as nonmarital property.  The trial court valued defendant's
  401(k) retirement account on the date the parties separated in March 2000
  rather than on the date of the final hearing in January 2002, thus
  attributing $13,568 less to the account than the amount of money it
  actually contained on the date of the final hearing.  Similarly, the trial
  court undervalued defendant's IRA account by attributing a value to the
  account that excluded the amount that defendant had accrued in this account
  prior to the parties' marriage.  Defendant's submissions to the trial court
  describe the value for the account used by the trial court as the IRA's
  "marital value."  The so-called marital value of the IRA was $17,678 less
  than the monetary value of the account on the date of the final hearing. 

       ¶  8.  The court erred when it failed to consider the entire monetary
  value of the retirement accounts at the time of the final hearing as assets
  to be distributed between the parties.  Under Vermont law, "[a]ll property
  owned by either or both of the parties, however and whenever acquired,
  shall be subject to the jurisdiction of the court."  15 V.S.A. § 751(a);
  Wall v. Moore, 167 Vt. 580, 581, 704 A.2d 775, 777 (1997) (mem.).  Assets
  are valued for distribution purposes as of the date of the final hearing,
  regardless of whether acquired before or after the marriage.  See Camisa v.
  Camisa, 168 Vt. 563, 565, 714 A.2d 641, 644 (1998) (mem.) (after remand,
  court required to rely on the current value of an asset rather than its
  value at the time of the first hearing); Milligan v. Milligan, 158 Vt. 436,
  440, 613 A.2d 1281, 1284 (1992) ("The trial court has power to distribute
  marital assets, including bank accounts and securities, in whatever manner
  it finds just and equitable, regardless of the prior owner."); Cleverly v.
  Cleverly, 151 Vt. 351, 354-55, 561 A.2d 99, 101 (1989) ("It is an abuse of
  discretion for the trial court to premise its division of marital property
  on outdated valuations of the assets involved.").
   
       ¶  9.  While the trial court opinion contains no discussion that
  could assist this Court in meaningful review, defendant proposes two legal
  bases for the trial court's order.  First, defendant cites the provision of
  15 V.S.A. § 751 that allows the trial court, in making a property
  settlement, to consider "the party through whom the property was acquired." 
  15 V.S.A. § 751(b)(10).  Ample precedent establishes the trial court's
  authority to restore property to the partner who brought the property to
  the marriage.  See, e.g., Myott v. Myott, 149 Vt. 573, 578-79, 547 A.2d 1336, 1340 (1988) (approving trial court's award of plaintiff's vested
  pension benefits to plaintiff while other assets were divided equally
  between the parties); Klein v. Klein, 150 Vt. 466, 469, 555 A.2d 382, 384
  (1988) (approving award that takes into account that a "substantial share
  of the assets came from plaintiff's inheritance from his father").  The
  trial court is still, however, required to consider the property as part of
  the marital estate and to explain the basis for its disposition, which did
  not occur here.  See Osborn v. Osborn, 147 Vt. 432, 433, 519 A.2d 1161,
  1162 (1986) (requiring the trial court to consider husband's undistributed
  share of his mother's estate in formulating appropriate property
  settlement, as "[u]nder 15 V.S.A. §§ 751 the trial court was required to
  settle the rights of the parties to all of their property"); Richard v.
  Richard, 146 Vt. 286, 287, 501 A.2d 1190, 1190 (1985) (emphasizing that
  court's findings that are the basis for a property settlement must always
  "provide a clear statement as to what was decided and why").

       ¶  10.  Defendant's second justification for the trial court's
  valuation of the two retirement accounts is based on Russell v. Russell,
  157 Vt. 295, 305, 597 A.2d 798, 804 (1991).  In Russell, we held that the
  date of separation of the parties should be used for the purpose of
  determining what proportion of a pension should be subject to the claims of
  an employee's former spouse, because the date of separation "is most
  reflective of the functional end of marriage and will be a relatively easy
  benchmark to determine."  Id.  The parties in Russell had agreed to
  distribute the husband's pension between them when it came due, rather than
  to assign a monetary value to the pension at the time of the final hearing
  and subject this value to equitable distribution.  Id. 
   
       ¶  11.  As we explained in Russell, when a court apportions a pension
  between parties to a divorce, it "must apply a coverture fraction to
  reflect the proportion of the entire pension attributable to the marriage." 
  Id.  The coverture fraction reflects the proportion of the entire pension
  attributable to the marriage.  Id.; McDermott v. McDermott, 150 Vt. 258,
  261, 552 A.2d 786, 789 (1988).  The numerator of the coverture fraction
  represents the amount of time that the employee participated in the plan
  during the marriage.  McDermott, 150 Vt. at 261, 552 A.2d  at 789. 

       ¶  12.  Russell deals with the narrow question of how a court can
  ensure proportional benefit of a former spouse in a pension that is only
  partially attributable to a marriage.  This case presents a different fact
  pattern; the trial court based its award upon the value of the retirement
  accounts in question on a specific date rather than the value of the
  pension when it became due.  In McDermott, another case involving
  distribution of pension funds and the application of the coverture
  fraction,  the trial court distributed the entire present value of a
  pension without taking into account that only a proportion of the total
  value of the pension was subject to distribution because part of the
  pension's projected value reflected plaintiff's future earnings rather than
  earnings during the course of the marriage.  We reversed and remanded for
  determination of a coverture fraction and the percentage of the value of
  the account that was attributable to the marriage.  Id.  McDermott requires
  a trial court to provide for equitable distribution of only that portion of
  a pension that is attributable to the marriage, but does not require the
  trial court to use a particular cut-off date in calculating the coverture
  fraction.  Id.
   
       ¶  13.  Similarly, Russell does not establish a hard and fast rule
  regarding the date on which a coverture fraction should be based, but it
  does lay out the principles that should guide a court's decision.  See
  Russell, 157 Vt.  at 305, 597 A.2d  at 804.  In Camisa, we affirmed a trial
  court's decision to determine the coverture fraction based on the date of
  the initial divorce decree.  Camisa, 168 Vt. at 564, 714 A.2d  at 642.  The
  trial court based this determination on the principle that the coverture
  fraction should "'reflect the number of years in which both parties
  contributed to the growth of the pension.'"  Id.  Under the circumstances,
  the trial court considered the date of the initial divorce decree rather
  than the date of separation an appropriate benchmark.  Id.  As Camisa
  illustrates, this Court will defer to the trial court's exercise of
  discretion in apportioning pensions between parties to a divorce as long as
  the trial court has supported its decision with adequate factual findings
  and reasoning to support its determination. 
   
       ¶  14.  In this case, the trial court's failure to provide reasoned
  findings supporting its valuation of the two accounts calls its disposition
  into question.  "We will uphold the court's valuation conclusions as long
  as they are supported by adequate findings, which are in turn supported by
  sufficient evidence in the record."  Kanaan v. Kanaan, 163 Vt. 402, 405,
  659 A.2d 128, 131 (1995).  This decision was not based upon adequate
  findings.  The decision contains no discussion of Russell or any other
  basis for the exercise of discretion.  The trial court in this case simply
  excluded from its property disposition money that existed in retirement
  accounts awarded to defendant on the date of the final divorce hearing, in
  effect granting this money outright to defendant with no discussion of the
  basis for this disposition.  As plaintiff argues, one reason that this was
  error is that a part of the increase in the value of defendant's 401(k)
  from the date of separation to the date of the final hearing resulted not
  merely from his contributions, but from market appreciation.  Even if the
  trial court intended to apply the Russell rule and divide only those
  pension funds that were accumulated during the period of the marriage,
  there can be no question that the appreciation on funds contributed to the
  account during the period of the marriage should have been subject to such
  division between the parties to the marriage.  In fact, such appreciation
  on the funds would have been incorporated into the award if the trial court
  had calculated the coverture fraction to use to determine what portion of
  the account was marital property.  The effect of such a calculation would
  have been to illustrate that defendant received a larger property
  settlement than it appears he received based on the trial court's
  undervaluation of the accounts awarded to defendant, and that the division
  of property did not meet the trial court's goal of an "equal" distribution.
   
       ¶  15.  Section 751 of Title 15 V.S.A. requires that the trial court
  explain its rationale for awarding funds placed in a retirement account
  before the marriage and following separation to the employee spouse rather
  than dividing these funds equally.  The trial court's decision contains no
  discussion of the factors that § 751 requires the court to consider in
  formulating a property settlement.  On remand, the trial court must
  consider the factors laid out in 15 V.S.A. § 751(b) in making an equitable
  property settlement.  Two factors are relevant to the treatment of money
  accumulated in a retirement account before or after the pendency of a
  marriage.  First, in formulating an equitable property division, the trial
  court is to consider the party through whom the property was acquired.  15
  V.S.A. § 751(b)(10).  Second, the trial court is to consider "the
  contribution of each spouse in the acquisition, preservation, and
  depreciation or appreciation in value of the respective estates . . ."  Id.
  § 751(b)(11).  While these factors may favor defendant's position that he
  was entitled to keep the money in the accounts, other factors delineated in
  § 751(b) lend support to plaintiff's claim that she should be entitled to a
  more generous proportion of the available assets.  Notably, the trial court
  is required to consider the age and health of the parties and their
  respective vocational skills and employability.  15 V.S.A. § 751(b)(2)-(3). 
  Furthermore, findings regarding the source of the funds that husband
  contributed to his 401(k) account during the period between separation and
  divorce, and particularly the extent to which such contributions could
  otherwise have been used to offset the expenses being incurred by the
  parties (both of whom managed to accumulate substantial credit card debt
  during the period in question) would assist in review of whether awarding
  these funds to defendant outright was consistent with the statutory mandate
  of formulating an equitable distribution of assets.

                                     B.

       ¶  16.  Plaintiff next contends that the trial court erred in
  considering a hypothetical real estate commission on the marital home as
  one justification for the $4,000 discrepancy between the property awards
  according to which defendant received more than plaintiff.  Although
  according to the trial court's own valuations, plaintiff's total property
  award amounted to $78,000, while defendant's came to $82,000, the trial
  court observed that the deduction of a six percent real estate commission
  for the future sale of the marital home rendered these awards "essentially
  equal."  Potential costs such as taxes or commissions cannot affect the
  valuation of a marital asset.  See Johnson v. Johnson, 158 Vt. 160, 165,
  605 A.2d 857, 860 (1992).  Yet, the trial court has the discretion to
  consider such costs in establishing the amount and method of payment of any
  monetary award.  Id.  See also Cabot v. Cabot, 166 Vt. 485, 496, 697 A.2d 644, 651 (1997) (affirming the trial court's consideration of potential tax
  liability on an investment account in dividing marital property).  In this
  case, the court considered the implications of a hypothetical real estate
  commission on the overall difference between the property awards but did
  not deduct the real estate commission from its valuation of the marital
  home.  We find no abuse of discretion in the trial court's consideration of
  the commission.

                                     C.
   
       ¶  17.  In light of our reversal for redetermination of the property
  division, we do not reach plaintiff's remaining claims on appeal that the
  trial court failed to divide the parties' assets on an "essentially equal"
  basis and that the maintenance award of $1000 per month subordinated
  plaintiff's reasonable needs to defendant's desire to avoid bankruptcy.  In
  awarding maintenance, the trial court is required to consider the property
  division between the parties pursuant to 15 V.S.A. § 752(a)(1) and (b)(1). 
  Cleverly v. Cleverly, 151 Vt. 351, 357, 561 A.2d 99,102-03 (1989).  Changes
  in the property division therefore require reconsideration of the
  maintenance award as well.  Id.; Johnson, 158 Vt. at 165, 605 A.2d  at 860.  

       Reversed and remanded. 

                                       
                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice


______________________________________________________________________________
                                  Footnotes


FN1.  This appeal was originally argued in January 2003, and then
  resubmitted on briefs in September 2003 following the recusal of Justice
  Dooley from the case.

FN2.  On appeal plaintiff does not argue that she would in fact be able to
  make the credit card payments in her name, apparently conceding that these
  debts would never be repaid.  She argues, however, that the trial court
  erred in awarding her maintenance that did not meet her monthly expenses
  while her husband was left with sufficient monthly income to pay off the
  credit card debt that exists in his name.