Milligan v. Milligan

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                                 No. 89-589


 Nancy A. Muller Milligan                     Supreme Court

                                              On Appeal from
      v.                                      Windham Superior Court

 William M. Milligan                          December Term, 1991



 Richard W. Norton, J.

 William M. McCarty and Benjamin S. McCarty of McCarty Law Offices,
   Brattleboro, for plaintiff-appellee

 Bruce M. Lawlor of Lawlor & Polidor, P.C., Springfield, for
   defendant-appellant


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      DOOLEY, J.   Defendant, William Milligan, appeals the judgment in this
 divorce case, arguing that the superior court (1) had no authority to order
 him to terminate his qualified tax-shelter annuity; (2) improperly ordered
 that some of the annuity's proceeds be placed in a trust fund to defray
 educational costs of his adult children; and (3) improperly awarded
 attorney's fees to plaintiff, Nancy Milligan.  We affirm the order to ter-
 minate the annuity and the attorney's fees award; we reverse the order to
 create the educational trust and remand.
      In December 1989, the court issued a decree of divorce on the grounds
 that the parties had lived apart for more than six months.  The parties,
 married in 1966, have three daughters, who were twenty-one, twenty, and
 fifteen years of age at the time of the decree.  Defendant was a hospital
 administrator and earned approximately $90,000 annually in salary and
 benefits at the time of the order.  Plaintiff was a graduate student in
 anthropology and earned an annual stipend of approximately $4,500, while
 expecting to earn approximately $30,000 annually after receiving her
 doctorate in 1993.  The parties' most substantial assets were the marital
 home, found by the court to be worth $150,000 with a mortgage of $28,000,
 and three { 403(b) qualified tax-shelter annuities held by defendant.  See
 26 U.S.C.A. { 403(b).  The annuity accounts, consisting of regular
 contributions made by defendant and his employer in lieu of salary, were
 worth approximately $190,000.
      The trial court awarded the marital home, subject to mortgage and
 taxes, to plaintiff.  The court determined that the annuities were marital
 property and awarded two of the accounts to defendant.  It ordered that
 defendant liquidate the third annuity, with an approximate value of $70,000,
 and pay any taxes or penalties resulting from the early withdrawal of the
 funds.  The proceeds of the account were to be distributed in three ways:
 first, to reimburse the parties for expenses incurred by each during the
 breakup of the marriage; second, to discharge certain financial obligations
 of the parties; and third, to the extent any funds remained, to establish a
 trust, the income and corpus of which would be used to help pay educational
 expenses for the three children "until each obtains a baccalaureate degree
 or discontinues pursuit of a college degree, or until the fund is
 exhausted."  The order placed approximately $13,000 in the educational
 trust.  Any money remaining in the trust after its termination was to be
 divided equally between the parties.  The court awarded plaintiff $13,000 in
 attorney's fees, the amount it found she had incurred, and ordered defendant
 to pay $8,000 of those fees to plaintiff's counsel by February 1, 1990.
      Defendant argues first that the court did not have the authority to
 order him to terminate the pension fund annuity.  In support of this
 position, he first asserts that the pension is not marital property and
 cannot be distributed.  He claims that the court reached the extent of its
 power in considering the existence of the pensions as a factor in
 distributing other property pursuant to 15 V.S.A. { 751(b).
      We have affirmed trial court orders that used the approach defendant
 seeks in Victor v. Victor, 142 Vt. 126, 129, 453 A.2d 1115, 1116 (1982) and
 Myott v. Myott, 149 Vt. 573, 579, 547 A.2d 1336, 1340 (1988).  More
 recently, however, we have held that pension rights acquired by a party to a
 divorce during the course of the marriage constitute marital property and
 are subject to equitable distribution along with other assets.  McDermott v.
 McDermott, 150 Vt. 258, 259, 552 A.2d 786, 788 (1988).  This is because the
 money in the account was either deposited at the party's option, or by the
 employer "`in lieu of higher compensation which would otherwise have
 enhanced . . . the marital standard of living.'"  Id. at 259-60, 552 A.2d  at
 788 (quoting Majauskas v. Majauskas, 61 N.Y.2d 481, 491-92, 463 N.E.2d 15,
 20-21, 474 N.Y.S.2d 699, 705 (1984)).  There is no general barrier to
 distribution of the pensions as marital assets.
      Defendant's overall complaint, however, is that the court exceeded its
 powers in ordering termination of the pension because a { 403(b) pension is
 restricted, and termination, if possible, will result in substantial tax
 liability and penalties.  We have repeatedly held that the "disposition of
 property pursuant to a divorce decree is a matter of wide discretion for the
 trial court."  Lalumiere v. Lalumiere, 149 Vt. 469, 471, 544 A.2d 1170, 1172
 (1988).  We will not disturb that disposition unless the court's "'discre-
 tion was abused, withheld, or exercised on untenable grounds or to a
 clearly unreasonable extent.'"  Id. (quoting Roberts v. Roberts, 146 Vt.
 498, 499, 505 A.2d 676, 677 (1986)).  Applying the court's findings and the
 evidence in the record to the statutory factors in 15 V.S.A. { 751(b), we
 find no abuse here.
      In McDermott, we acknowledged that distribution of pension funds is
 "particularly problematic" and that courts normally use either an "offset"
 method or a "deferred distribution or reserved jurisdiction method."  150
 Vt. at 260, 552 A.2d  at 788.  The term "offset" refers to the practice of
 immediately distributing marital assets by awarding the pension to the
 employee and other property to compensate the employee's spouse.
 Essentially, defendant's position is that the court was required to use an
 offset distribution in this case.  McDermott does not, however, require in
 all cases the use of an offset method, which is only one way of immediately
 distributing the value of the pension along with other marital assets.
      The trial court, having already assigned the house to plaintiff, deemed
 it equitable to give her more.  It concluded that liquidation of the account
 was necessary to provide plaintiff her share of its value immediately, and
 to pay debts and obligations of the parties, stating that there were
 "immediate financial needs and no other resource to meet that need."  Thus,
 the offset method was inadequate to achieve an equitable distribution of
 marital assets.
      The trial court has power to distribute marital assets, including bank
 accounts and securities, "in whatever manner it finds just and equitable,
 regardless of its prior owner."  Condosta v. Condosta, 142 Vt. 117, 123,
 453 A.2d 1128, 1131 (1982).  Although we have not directly addressed the
 court's power to order the sale of a marital asset, we have affirmed such
 awards.  See, e.g., Roberts v. Roberts, 146 Vt. 498, 499, 505 A.2d 676, 677
 (1986).  We conclude that it is within the court's discretion to order that
 marital property held by one or both parties be liquidated and immediately
 reduced to cash when the court finds it necessary, as here, to meet
 immediate needs.  See Carr v. Carr, 108 Idaho 684, 688, 701 P.2d 304, 308
 (1985) (court properly ordered sale of truck stop, parties' jointly held
 business asset, "to give each spouse the immediate control of his or her
 share of the property"); Breda v. Breda, 788 S.W.2d 769, 771-72 (Mo. Ct.
 App. 1990) (court properly ordered sale of marital residence when property
 could not be divided in kind, the sale was in the best interests of one of
 the parties, and wife had failed to show that there were sufficient assets
 other than the residence which could compensate husband for award of
 property outright to wife).
      In affirming the court's power to order termination of the pension, we
 reject defendant's claim that the restrictions on termination made the order
 inappropriate.  Defendant failed to respond to discovery orders to produce
 the documents that showed the terms governing the pension, and his testimony
 about his power to terminate the pension and the consequences of terminating
 the pension was inconclusive.  At times, defendant testified that he was
 prohibited from gaining immediate access to the pension funds; he also
 testified that he could gain access, but only by paying a large tax penalty.
 In the absence of clear evidence from defendant, the court turned to the
 applicable provision of the Internal Revenue Code, 26 U.S.C. { 403(b)(11),
 and noted that it allows withdrawal of pension funds "in the case of hard-
 ship."  The court concluded that a hardship existed and the funds would be
 available.
      Given the evidence and arguments made before the trial court, we cannot
 conclude that its determination was an abuse of its wide discretion.  See
 Prescott v. Smits, 146 Vt. 430, 433-34, 505 A.2d 1211, 1213 (1986)
 (contention raised but not fairly presented in trial court not preserved for
 appeal); In re Marriage of Grubb, 721 P.2d 1194, 1196 (Colo. Ct. App. 1986)
 (consideration of tax consequences is at trial court's discretion; court
 properly ignored tax consequences where evidence of them was speculative);
 Noll v. Noll, 55 Ohio App. 3d 160, 163-64, 563 N.E.2d 44, 48 (1989) (court's
 refusal to reduce value of pension by future tax consequences was not error
 since the court has wide discretion and must divide the property equitably,
 not necessarily equally).  If, after the judgment, defendant found it
 impossible to carry out the trial court's specific order because the funds
 in the pension account were, indeed, inaccessible to him, his recourse was
 to file a motion in the trial court for relief from the judgment, as
 permitted by V.R.C.P. 60(b).  See, e.g., Cameron v. Cameron, 150 Vt. 647,
 648, 549 A.2d 1043, 1043-44 (1988); Blanchard v. Blanchard, 149 Vt. 534,
 536-37, 546 A.2d 1370, 1372 (1988).
       Defendant next argues that the court improperly ordered that part of
 the proceeds of the liquidated annuity account be placed in trust for the
 purpose of assisting the parties' daughters with the payment of educational
 costs.  The court based this aspect of its order on its conclusion that the
 parties "have contractually agreed to provide for college education of their
 three children."  The conclusion is supported by a finding of fact that the
 parties made "an agreement early in their marriage that their children also
 should be given every opportunity to obtain a college education, and they .
 . . [would] provide this chance."  The court found its authority to order a
 post-majority education allotment in 15 V.S.A. { 659(b), which provides
 that "[i]f the parties agree, the court may include in the child support
 order an additional amount designated for the purpose of providing for post-
 secondary education."  Apparently, the court concluded that the obligation
 it recognized under { 659(b) could support a property distribution award
 pursuant to { 751.
      We concur with defendant that the parties' agreement to send the
 children to college, to the extent it existed, was not of the type governed
 by { 659(b).  The "agreement" found by the court occurred early in the
 marriage when the children were young and long before divorce was
 contemplated.  The agreement specified in the statute is one to place the
 post-majority support provision in the court order.  Such a statutory
 authorization is necessary because the barrier to a post-majority support
 order is commonly held to be jurisdictional.  See, e.g., Spingola v.
 Spingola, 93 N.M. 598, 600, 603 P.2d 708, 710 (1979).  This construction is
 consistent with our holdings that contracts between spouses for payment of
 money made prior to a marriage or during a marriage are not ordinarily
 enforceable in a divorce action unless they "contemplate a divorce."  See
 Carter v. Carter, 76 Vt. 190, 191, 56 A. 989, 990 (1904).  It is also
 consistent with the law of other states that recognize stipulations for
 post-majority support filed as part of the divorce action.  See Horan,
 Postminority Support for College Education -- A Legally Enforceable
 Obligation in Divorce Proceedings?, 20 Fam. L. Q. 589, 593 (1987) (courts
 "will not compel postminority support unless the parties voluntarily agreed
 to undertake the responsibility to pay such support"); H.P.A. v. S.C.A., 704 P.2d 205, 210 (Alaska 1985) (voluntary establishment of college fund is not
 an agreement to assume a share of the costs of college education).  Since
 the "agreement" found by the trial court is not of the type recognized by {
 659(b), we cannot accept the rationale used by the court to support the
 educational trust order.
      We must consider, then, whether the court had the power to order the
 trust in the absence of the parties' agreement.  The order involved is one
 that distributes marital property pursuant to 15 V.S.A. { 751, and not one
 that establishes an obligation to support the parties' children during
 their college years.  Although we have held that property must normally be
 distributed between the parties, Senesac v. Senesac, 135 Vt. 24, 25, 370 A.2d 214, 215 (1976), it is appropriate to use a property award to discharge
 an obligation to provide support.  Thus, educational trusts have been
 endorsed by most courts in jurisdictions where there is an underlying
 obligation of the parent to provide support during the educational years.
 See, e.g., Davis v. Davis, 268 N.W.2d 769, 778 (N.D. 1978).  In this case,
 there is such an obligation with respect to Laura Milligan until she reaches
 eighteen years of age.
      We have held, however, that a property order cannot be used to create
 an obligation to support children beyond their minority.  Quesnel v.
 Quesnel, 150 Vt. 149, 151, 549 A.2d 644, 646 (1988).  The court has no power
 to order creation of an educational trust for use beyond the age of majority
 of the children.  To the extent that the order of the court did so for the
 older daughters, and for the younger daughter once she turned eighteen, it
 cannot be sustained on this record.
      Although we must reverse the property distribution of the pension funds
 to establish the educational trust, we emphasize that the error lies in the
 specification of the use of the funds.  The court is free to distribute
 property to plaintiff even though she may indicate an intent to use it to
 provide for the post-secondary education of children of the parties.  See
 id.
      The reversal of the order establishing the educational trust may affect
 the distribution of the property generally.  We therefore vacate the pro-
 perty distribution to give the court discretion to fashion a new order.
      Finally, defendant claims that the court improperly awarded plaintiff
 $13,000 in attorney's fees, arguing that it failed to make findings on the
 financial circumstances of the parties and made other erroneous findings.
 He further argues that the court considered fees incurred for matters other
 than this divorce action, and that there was no evidence to support the
 reasonableness of the fees.  These contentions are without merit.
      The trial court may award attorney's fees in a divorce action at its
 discretion.  Cleverly v. Cleverly, 151 Vt. 351, 358, 561 A.2d 99, 103
 (1989).  The basic procedural requirements for an award were set out in Ely
 v. Ely, 139 Vt. 238, 242, 427 A.2d 361, 364 (1981) and bear repeating here
 because they resolve much of defendant's claim:
         [t]he peculiar nature of divorce and similar actions,
         involving almost always the financial circumstances and
         abilities of the parties as matters in controversy, and
         being matters of common occurrence in the trial courts,
         obviates the necessity for a separate hearing, or the
         taking of particular evidence, on the question of
         awarding of attorney fees or suit money.  In the usual,
         and vast majority of, cases such allowance borders on
         judicial routine, and is supported by evidence bearing
         on the circumstances of the parties generally.  In the
         rare case where the aggrieved party desires to
         demonstrate basic unreasonableness of the charges in
         question, that right can be protected by appropriate
         motion to amend or alter the judgment under V.R.C.P.
         59(e).

 Thus, there was no need for a separate hearing on attorney's fees, and the
 detailed findings on the general financial circumstances of the parties
 support the fee award.  See Bissonette v. Gambrel, 152 Vt. 67, 72, 564 A.2d 600, 602 (1989).  Nor is separate evidence of the reasonableness of the fees
 required.  The trial court may rely in a divorce case on its "'own knowledge
 and experience.'"  Bibens v. Bibens, 144 Vt. 287, 288, 476 A.2d 134, 135
 (1984) (quoting Young v. Northern Terminals, Inc., 132 Vt. 125, 130, 315 A.2d 469, 473 (1974)).  If defendant believed that the fees were unreason-
 able, he was free to pursue his claim through a separate post-judgment
 motion.
      Defendant also contests the court's reliance in assessing fees on its
 need to compel discovery.  He  asserts that both sides were equally derelict
 in responding to discovery.  While both parties failed to comply with
 discovery requests, the critical omission involved the terms of defendant's
 annuity, as discussed above.  It was within the court's discretion to take
 into account the failure to provide this information.
      Finally, defendant claims that certain charges were for representation
 on matters not related to the divorce.  Again, defendant failed to raise
 this issue below to allow factual development.  The charges were apparently
 for assistance in clarifying plaintiff's debt and credit problems which the
 court found had grown out of mutual obligations of the parties.  We find no
 abuse of discretion in the fee award.
      The order of the court distributing the marital property is reversed;
 in all other respects the divorce judgment is affirmed.  The matter is
 remanded for a new property order.

                                         FOR THE COURT:




                                         Associate Justice