Source: http://www.courts.maine.gov/opinions_orders/opinions/documents/02me156wa.htm
Timestamp: 2014-07-31 21:38:28
Document Index: 197876244

Matched Legal Cases: ['§ 902', '§ 902', '§ 953', '§ 953', '§ 953', '§ 953', '§ 953', '§\n953', '§ 953', '§ 953', '§ 953', '§ 953', '§ 1', '§ 953', '§ 953', '§ 953', '§ 953', '§ 953', '§ 951', '§ 951', '§ 951', '§ 951', '§ 951', '§\n951', '§ 953', '§ 953', '§ 953', '§ 951', '§ 953']

Skip Maine state header navigation State Search: Agencies | Online Services | Help Page Tools Page Tools Map addresses En español En français English Warner v. Warner
Docket: Lin-01-421
Decided: October 3, 2002
[¶1] Barry Warner appeals from a divorce
judgment by the Superior Court (Lincoln County, Mills, C.J.). His principal contentions are that the court erred in:
(1) granting Barbara Warner a divorce on the ground of adultery and permitting
the finding of adultery to influence its distribution of marital property and
its discretionary trial rulings; (2) treating all of the securities which make
up his stock portfolio as marital property; (3) awarding Barbara monthly
spousal support in the amount of $1000 per month until December 30, 2009, that
then increases to $2000 per month and cannot be decreased thereafter; (4)
requiring him to maintain a $300,000 life insurance policy or other security to
secure the payment of spousal support; and (5) awarding Barbara $35,000 in
attorney fees.[1] We affirm the
judgment's award of a divorce to the parties, but otherwise vacate the
judgment's property, spousal support, and attorney fees awards. I. CASE
[¶2] Barry and Barbara Warner were married
in 1965 and through most of their marriage resided together in Maine until
their separation in 1999. They
have one adult son. The court
determined that Barbara's expected annual income from all sources is $32,022 as
follows: $15,000 from her part-time work as a massage therapist; $15,149 in
income from J.B.B., Inc., a corporation established by the parties during their
marriage which owns and leases real estate; and $1873 rental
income from a condominium in Florida, which she inherited from her father. Barry was determined to have an
expected annual income of $65,500 from the following sources: annual
distributions totalling $25,000 from the Robert Lyon Warner Trust of which he
is a beneficiary; investment income of $34,500 based upon an estimated 6%
return on his stock portfolio valued at $575,000; and $6000 in wages from
part-time employment. Both parties
were age fifty-nine at the time of the divorce hearing.
[¶3] In 1963, prior to the marriage, Barry
inherited stocks and bonds then worth approximately $215,000. In December 1966, after the parties
married, Barry inherited additional securities. His total stock portfolio was worth approximately $290,000
as of January 1967. In 1992, Barry
received an additional distribution of stocks worth approximately $94,000 by
the Putnam Trust from his father's estate. The court determined that the total value of Barry's stock
portfolio as of April 30, 2001, was $545,977.
[¶4] The stocks and bonds inherited by Barry
prior to and during the marriage were held solely in his name throughout the
marriage. All of the stocks and
bonds he inherited in 1963 and 1966 have been sold or otherwise transferred,
and none of the stocks and bonds Barry currently owns are the same as those he
inherited in 1963 and 1966. Because of poor record-keeping, it was not possible for Barry or his
expert accounting witness to trace the proceeds of the sales of the securities
received in 1963 and 1966 to the current stock portfolio. The earliest date of acquisition of any
of the thirty-seven individual securities owned by Barry as of the divorce
hearing was June of 1982. [¶5] The marital property included
residences in Bristol, Maine, and Boulder, Colorado, and commercial real estate
in Damariscotta, Maine. The parties
had originally operated a motorcycle, snowmobile, and automobile repair and
sales business with a gasoline station on the Damariscotta property. After the sales and repair portion of
the business was destroyed by fire in 1984, the parties discontinued their
business operations and began leasing the property. The corporation that they formed to own the property,
J.B.B., Inc., currently produces a net income of approximately $15,000 a year. [¶6] Each party had individual retirement
accounts, and the parties also owned significant personal property, including
many antique motorcycles. The only
substantial disputes regarding marital versus nonmarital property concerned (1)
the stock portfolio managed by Barry that Barbara claimed was marital property,
and (2) the Florida condominium owned by Barbara that Barry claimed was marital
property. [¶7] The court granted a divorce to Barbara
on the ground of adultery and to Barry on the ground of irreconcilable marital
differences. The court determined that
the Florida condominium inherited by Barbara from her father, valued at
$40,000, was nonmarital property and set it apart to her. It also determined that the entire
stock portfolio was marital property and awarded it to Barry. Barry was awarded marital property
worth $819,887, including the stock portfolio valued at $545,977, and Barbara
was awarded marital property worth $746,785. There is no significant contest regarding the values the
court assigned to the marital property. In finding the entire stock portfolio owned by Barry to be marital
property, the court reasoned that: (1) the stocks were acquired during the
marriage; (2) they could not be traced back to proceeds from stocks acquired
prior to the marriage; (3) Barry failed to prove that marital funds were not
invested in the current portfolio; and (4) Barry "had a substantial active role
during the marriage in managing, preserving or improving the property." [¶8] The court's distributive award of
marital and nonmarital property is summarized as follows:
DISTRIBUTION OF ASSETS AND DEBTS TO BARBARA
Asset Debt Net
Value Owed Value
Bristol, Me., residence $225,000 $225,000
J.B.B., Inc. $433,000 $6928 $426,072
Vehicle and personal property $22,560
IRAs $71,654
Bank and related financial accounts $1499
MARITAL NET WORTH $746,785
Florida condominium $40,000
Personal property $8450
Savings account $2000
TOTAL NONMARITAL NET WORTH $50,450
DISTRIBUTION OF ASSETS AND DEBTS TO BARRY
Boulder, Co., residence (2/3rds interest) $339,000[2] $129,722 $139,518
Damariscotta, Me., parcel $11,000
Vehicles and personal property $41,130
IRAs $66,387
Bank and related financial accounts $15,875
Stock portfolio $545,977
MARITAL NET WORTH $819,887
Personal property $33,150
NONMARITAL NET WORTH $33,150
[¶9] With its allocation of property, the
court determined that Barbara would have a projected annual income of
approximately $32,000 and that Barry would have a projected annual income of
approximately $65,000. Based
primarily on the differences in the parties' projected incomes, Barbara's
health problems, and the standard of living achieved during the marriage, the
court awarded Barbara spousal support in the amount of $1000 per month until
December 30, 2009, that then increases to $2000 per month, and that the "amount
and term of support to be paid after 12/30/99 cannot be decreased."[3] The court
further specified that (1) the spousal support award would not terminate on Barry's
death or on Barbara's remarriage or cohabitation, and (2) Barry must maintain a
$300,000 life insurance policy, with Barbara as the sole beneficiary, or
provide other security acceptable to Barbara and her counsel to secure the
payment of the spousal support. The court also awarded Barbara $35,000 toward her attorney fees.
[¶10] After the initial judgment, Barry filed
two motions to reconsider. In
response to these motions, the court clarified certain findings and made
additional findings regarding the Putnam Trust stocks, the Robert Lyon Warner
Trust and Barry's anticipated income. It also clarified that the award of spousal support would terminate on
Barbara's death. After the rulings
on the motions to reconsider, Barry brought this appeal.
A. Grounds for
[¶11] On Barbara's complaint and Barry's counterclaim for divorce, a divorce was granted to Barbara on the ground of adultery, 19-A M.R.S.A. § 902(1)(A) (1998), and to Barry on the ground of irreconcilable marital differences, 19-A M.R.S.A. § 902(1)(H) (1998). Both grounds are authorized by statute and were supported by the evidence. Barry contends that the adultery finding supports his contention that the trial court committed error by using fault to affect its decision regarding distribution of the marital property. However, there is no indication in the court's judgment that it considered fault in its division of marital property, and the judgment reflects that the court sought to make an equitable distribution of the property it had determined to be marital property.
[¶12] Barry also asserts that the court's
finding of fault affected its findings and discretionary rulings by favoring
Barbara. As with the complaint
regarding the allocation of the marital property, there is nothing in the
court's decision or otherwise in the record to support this claim. Certainly, the court made rulings and
factual findings with which reasonable parties can disagree. Courts necessarily must make such
findings in contested cases. However, the findings the court made are consistent with the
record. They demonstrate no bias
against Barry and reflect an effort to achieve a near equal division of marital
property and a responsible arrangement for spousal support. The claims regarding use of fault in
the court's decision-making are unsupported by the text of the court's decision
or by a reasonable review of the record.[4] B. The Stock
Portfolio [¶13] For the great bulk of the stock
portfolio, there can be no serious dispute that the property was acquired
during the marriage and was properly determined by the court to be marital
property pursuant to 19-A M.R.S.A. § 953(3) (1998). All of the evidence indicated that the
stock that Barry acquired prior to the marriage, or shortly after the marriage,
was sold. There is, however, no
"paper trail" establishing that the current holdings in the portfolio were
acquired with proceeds from the sale of the securities Barry inherited before
and shortly after the parties' marriage in 1965. Therefore, apart from the Putnam Trust stocks inherited by
Barry in 1992, there is no basis to claim that either the portfolio or its
increases in value during the marriage are nonmarital property. The presumption that these
stocks, acquired during the marriage, are marital property was not
rebutted. See 19-A M.R.S.A. § 953(3).
C. The Putnam
[¶14] The trial record establishes without contradiction that on December 21, 1992, Barry received ownership of seven individual stocks "that were released from a trust that had been set up by Mr. Warner's grandfather and his first wife . . . . The term Putnam dealt with the trustee at the time . . . ." [5] The court specifically found that "[i]n 1992, the defendant received an additional inheritance of investments with a total value of approximately $94,000.00." [6] [¶15] Following Barry's acquisition of these
securities in 1992, he sold all of his shares of three of the seven Putnam
Trust stocks, and no evidence was introduced that would have enabled the court
to trace the proceeds from these sales. The uncontradicted evidence demonstrates the following post-acquisition
activity for the remaining four Putnam Trust stocks:[7]
Exxon 582
Shares Inherited
Split 1997
Currently Owned 2.
Shares Currently Owned 3.
5.190 Shares Dividend
gifted in 1997
11.506 Shares Dividend
Shares Currently Owned
50 Shares Purchased
[¶16] Apart from the purchase of fifty
additional shares of Union Pacific stock in 1999, none of the shares of these
four stocks were acquired by any method other than Barry's 1992 inheritance,
subsequent stock splits and, in the case of Proctor & Gamble, dividend
reinvestment. Both Barbara and her
expert witness, a certified public accountant, offered no testimony or opinions
regarding the Putnam Trust stocks. The court was not faced with choosing between two contradictory theories
regarding the source of acquisition of the Exxon, General Electric, Proctor
& Gamble, and Union Pacific stocks in the Warner portfolio as of the
divorce trial. [¶17]
Notwithstanding the detailed and uncontradicted information introduced with
respect to the Putnam Trust stocks, the divorce judgment does not address these
stocks separate from its more general discussion of Barry's overall stock
portfolio. Although the court
identified gaps in the evidence regarding the acquisition of the parties'
securities as the basis for its conclusion that the entire portfolio was
marital property, none of the gaps identified by the court pertain to the
Putnam Trust stocks. The court
ultimately concluded:
All of the securities in the current portfolio were purchased during the marriage. The defendant has failed to demonstrate that marital funds were not invested in the currently held portfolio. See [19-A M.R.S.A.] § 953(2)(E)(1)(a) & (3) (1998 & Supp. 2000). Further, the defendant had a substantial active role during the marriage in managing, preserving, or improving the property. See id. § 953(2)(E)(1)(b) & (2)(c). The stock portfolio is marital property and is awarded to the defendant as his exclusive property, subject to any encumbrances, which he will pay and will hold the plaintiff harmless therefrom.
[¶18] In responding to Barry's post-judgment
motion for reconsideration and, in particular, the judgment's treatment of the
Putnam Trust stocks as marital property, the court made the following specific
court relies on the language in the Divorce Judgment regarding the stock
portfolio. The defendant's
testimony was, in large part, rejected by the court as not credible. Further, a substantial active role in
management of a portfolio is not disproved by a lack of trading activity in a
[¶19] Barry argues that because the court
received evidence specific to the four remaining Putnam Trust stocks, it should
have considered the post-acquisition history of each stock and not limited its
analysis to the entire Warner stock portfolio as a whole. We agree. [¶20] Publicly traded securities are a
species of property that generally require individual analysis under Maine's
marital property statute. See,
e.g., Clum v. Graves, 1999 ME 77, ¶ 14,
729 A.2d 900, 906 (discussing the securities that comprise the portfolio); Harriman
v. Harriman, 1998 ME 108, ¶¶ 1-2, 710 A.2d
923-924 (listing individual stocks). A "portfolio" is not a species of property unless the evidence regarding
the portfolio fails to reasonably permit the trial court to identify and distinguish
the various investments comprising it.[8] It is not
sufficient for a divorce court to limit its analysis under 19-A M.R.S.A. § 953
to a stock portfolio as a whole when it has before it discrete information that
reasonably permits an assessment of some or all of the individual securities
that comprise the portfolio.[9]
[¶21] Here, the court had before it detailed
information pertaining to the acquisition and subsequent history of the four
Putnam Trust stocks inherited by Barry in 1992 that he still owned at the time
of the divorce hearing. In addition,
Adams testified at length regarding his tracing and evaluation of each of these
stocks. Although it would have
been very helpful in this complicated case for Barry to have offered an
illustrative aid, see M.R. Evid. 616,
or summary exhibit, see M.R. Evid.
1006, that graphically segregated the Putnam Trust stocks from the rest of the
Warners' portfolio, Adams's testimony and, in particular, his working papers
received in evidence, provided a clear picture and history of each stock.[10] The court's
finding that the Putnam Trust stocks were inherited in 1992 with a value of
$94,000 reflects that it was cognizant of the evidence specific to the Putnam
Trust stocks. Its failure to
analyze those stocks separate from the Warners' overall portfolio, however,
resulted in its erroneous conclusion that "all of the securities in the current
portfolio were purchased during the marriage." This conclusion directly conflicts with its separate finding
that Barry "inherited" the Putnam Trust stocks in 1992. 1. Marital Property Presumption
[¶22] The analysis of the evidence pertaining
to the Putnam Trust stocks begins with the application of the marital property
presumption. 19-A M.R.S.A. §
953(3). Because the stocks were
acquired during the marriage, the stocks are presumptively marital
property. Section 953(3) directs
that "[t]he presumption of marital property is overcome by a showing that the
property was acquired by a method listed in subsection 2." Id. The next step, therefore,
is to determine whether, by a preponderance, the evidence establishes any of
the five statutory exceptions for overcoming the marital property presumption
set forth in section 953(2)(A)-(E). 19-A M.R.S.A. § 953(2)(A)-(E) (1998 & Supp. 2001). One of the methods of acquisition listed
in section 953(2) is bequests. Id. § 953(2)(A) (1998). Here, the divorce court found that the Putnam Trust stocks were acquired
by a bequest when it concluded that they were inherited by Barry in 1992. This finding is sufficient to overcome
the marital property presumption.
[¶23] Having determined that the property was
acquired by a method that is an exception to the marital property presumption,
the court must next determine whether the shares of stock currently owned are
the same as those acquired by a bequest. This is relatively simple with respect to the Union Pacific stock
because the number of shares currently owned were not affected by any sales,
gifts, or dividend reinvestment but only by a separate purchase of fifty
additional shares. The fifty
additional shares fall squarely within the marital property presumption and
were properly treated as such by the court. The acquisition of fifty additional shares does not,
however, affect the nonmarital character of the 165 inherited shares.
The analysis is only slightly more
complicated with respect to the remaining three securities: Exxon, General
Electric, and Proctor & Gamble. The number of shares of Exxon, General Electric, and Proctor &
Gamble stock currently owned by Barry are greater than those acquired in 1992
as a result of either stock splits or dividend reinvestment. 2. Stock Splits [¶25] A stock split is defined as "[t]he
issuance of two or more new shares in exchange for each old share without
changing the proportional ownership interests of each shareholder." Black's
Law Dictionary 1432 (7th ed. 1999). It does not constitute income to the owner of the stock, nor
does it generate an increase in the investment's value. The fact that the number of shares of
Exxon, General Electric, and Proctor & Gamble stock increased following
their acquisition due to stock splits is a neutral event with respect to the
application of Maine's marital property statute. 3. Dividend Reinvestment
[¶26] The increase in the number of shares of stock resulting from dividend reinvestment - here, 16.696 shares of Proctor & Gamble stock - is generally also a neutral event for purposes of applying Maine's marital property statute to shares of stock acquired by one of the methods listed in section 953(2)(A)-(E). The income reflected in the dividend of a publicly traded security is the product of the company's financial performance, not the effort or contributions of either or both spouses. A spouse's decision to have dividends reinvested in the stock, rather than paid as cash, is a routine investment decision that does not transform the inherited shares of stock responsible for the reinvested dividends into marital property. In addition, as is considered in greater detail below, the new shares acquired through "reinvested income" are also nonmarital property "unless either or both spouses had a substantial active role during the marriage in managing, preserving or improving the property." 19-A M.R.S.A. § 953(2)(E)(1)(b) (Supp. 2001).
[¶27] As publicly traded securities, any increase in the market value of the shares of Exxon, General Electric, Proctor & Gamble, and Union Pacific during the marriage was the product of market forces, not Barry's marital effort. The increase in value of a nonmarital asset resulting strictly from market forces has generally been treated as also constituting nonmarital property. See, e.g., Clum, 1999 ME 77, ¶ 13, 729 A.2d at 906 (explaining that "[i]f the appreciation occurs because of increases in market value, the appreciation remains nonmarital property."); Nordberg v. Nordberg, 658 A.2d 217, 219 (Me. 1995) (finding nonmarital funds at issue remained nonmarital despite increase in value of funds due to fluctuations in the market during course of marriage); MacDonald v. MacDonald, 532 A.2d 1046, 1050 (Me. 1987) (stating that the "increase in value . . . attributable to the inherent value of the property and the economic factors affecting it" is nonmarital property). This view is now codified in section 953(2)(E), which expressly establishes "[t]he increase in value of a spouse's nonmarital property" as an exception to marital property, and section 953(2)(E)(1)(a), which further provides that "'[i]ncrease in value' includes . . . [a]ppreciation resulting from market forces." 19-A M.R.S.A. § 953(2)(E)(1)(a) (Supp. 2001). Thus, the increase in value of the shares of the Putnam Trust stocks resulting from market appreciation is nonmarital property.
5. Substantial Active Role in Managing,
Preserving, or Improving Property [¶28] The final step in the analysis of the
four remaining Putnam Trust stocks is to consider the application of section
953(2)(E)(1)-(2).[11] The divorce
court concluded that all increases in the value of the Warners' stock
portfolio, which includes the four remaining Putnam Trust stocks, were entirely
marital property, in part because Barry played "a substantial active role
during the marriage in managing, preserving, or improving the property." It further concluded with respect to
the Putnam Trust stocks that "a substantial active role in management of a
portfolio is not disproved by a lack of trading activity in a particular
investment." In reaching these
conclusions, the court misconstrued section 953(2)(E)(1)-(2).
[¶29] In 2000, the Maine Legislature revised
the marital property statute as it pertains to the treatment of the increase in
value of nonmarital property during marriage in response to our decisions in Clum
v. Graves, 1999 ME 77, 729 A.2d 900, and Harriman
v. Harriman, 1998 ME 108, 710 A.2d
923. See P.L. 1999, ch. 665, § 1 (effective August 11, 2000). In Clum and Harriman, we
treated the portion of the increased value of nonmarital investment assets
resulting from both market appreciation and the reinvestment of income such as
dividends and capital gains as marital property. Clum, 1998 ME 108, ¶
15, 729 A.2d at 906-07; Harriman, 1998
ME 108, ¶ 8, 710 A.2d at 924-25. In so ruling, we focused upon the well-established principle that the
party asserting that the increase in value of an otherwise nonmarital asset is
also nonmarital property has the burden of proving the same. See Kapler v. Kapler,
2000 ME 131, ¶ 7, 755 A.2d 502, 506. [¶30] At the time Clum and Harriman were decided, section 953(2)(E) of the marital property statute provided, in pertinent part, that "'marital property' means all property acquired by either spouse subsequent to the marriage, except: . . . E. The increase in value of property acquired prior to marriage." 19-A M.R.S.A. § 953(2)(E) (1998). In both Clum and Harriman the party claiming that the increase in value was nonmarital property failed to meet its burden of proof by failing to introduce evidence from which the court could distinguish (1) the increased value of a stock or mutual fund resulting from market forces, from (2) the increased value of a stock or mutual fund resulting from the reinvestment of income through reinvested dividends or capital gains. We therefore concluded that all of the increases in value should be treated as marital property in accordance with the marital property presumption, 19-A M.R.S.A. § 953(3).
[¶31] In response to these holdings, section
953(2)(E) (1998) was amended by the Legislature.[12] See 19-A M.R.S.A. § 953(2)(E)(1)-(2) (Supp. 2001). Revised section 953(2)(E)(1)(a)
establishes that to the extent a party demonstrates that the increase in value
of a spouse's nonmarital stock resulted from "market forces," the increased
value is nonmarital property regardless of whether the spouse or spouses played
a substantial active role in managing the stock. In addition, sections 953(2)(E)(1)(b) and (2)(c) establish
that to the extent a party demonstrates that the increase in value of a
spouse's nonmarital stock resulted from reinvested income and capital gain, the
increased value is nonmarital property unless it is also established that
"either or both spouses had a substantial active role during the marriage in
managing, preserving or improving the property."[13] 19-A M.R.S.A. § 953(2)(E)(1)(b) & (2)(c) (Supp. 2001).
[¶32] In this case, the "increase in value" of the four remaining Putnam Trust stocks, as distinguished from the Warners' portfolio as a whole, must be analyzed pursuant to section 953(2)(E)(1) and (2). It is not sufficient to conclude that, overall, a spouse was substantially and actively involved in the management of a couple's investment portfolio and that, a fortiori, the same is true for each investment within the portfolio. Section 953(2)(E)(1)(b) and (2)(c) is focused upon a spouse's "substantial active role . . . in managing, preserving or improving the property" and not, more generally, upon all property of the same type or character. Id. § 953(2)(E)(1)(b) & (2)(c) (emphasis added). In addition, pursuant to section 953(2)(E)(1)(b) and (2)(c), the question of whether Barry had a substantial active role in managing the Putnam Trust stocks only applies to the shares of stock acquired with reinvested income and does not apply to increases in the value of the stocks resulting from market forces.
[¶33] Although the record supports the
court's finding that Barry "had and continues to have a substantial active role
in managing [his] investments,"[14] the only evidence specific to any action taken by him over
a nine-year period associated with an increase in value of the Proctor &
Gamble stock from "reinvested income and capital gain" was the decision to
enroll in the stock's dividend reinvestment program. The routine and
rudimentary nature of the decision to enroll in a dividend reinvestment program
does not constitute substantial or active management, particularly where there
is no evidence as to the time, energy, and resources expended in conjunction
with the decision.[15] See Nordberg v. Nordberg,
658 A.2d 217, 219 (Me. 1995) (explaining that spouse's single act of directing
transfer of funds from account established prior to marriage to another account
did not affect funds' nonmarital status). [¶34] We conclude that the court's finding
that Barry had "a substantial active role in managing [his] investments"
cannot, without more, form the basis for concluding that he had a substantial
active role in the management of the four remaining Putnam Trust stocks and, in
particular, the increase in value associated with the Proctor & Gamble stock. Further, even if we assume that he did
have a substantial active role in the management of the Putnam Trust stocks,
the only portion of the stocks that can potentially be deemed marital property
in accordance with section 953(2)(E)(1)(b) and (2)(c) are the 16.696 shares of
Proctor & Gamble stock that were acquired during the marriage through
reinvested income. Notwithstanding
evidence of Barry's substantial active role in the management of his portfolio
as a whole, all of the original shares of stock he inherited in 1992, as
increased by stock splits, should be treated as nonmarital property pursuant to
section 953(2)(A); the increase in value of those shares of stock due to market
forces should be treated as nonmarital property pursuant to section 953(2)(E)(1)(a);
and the increase in the number of shares of Proctor & Gamble stock acquired
with reinvested income should be treated as nonmarital property pursuant to
section 953(2)(E)(1)(b) and (2)(c).
[¶35] Together, the four Putnam Trust stocks
comprise approximately $166,424 of the stock portfolio valued at approximately
$545,977 awarded by the divorce judgment to Barry as marital property. On remand, the court will need to
reconsider its overall distribution of the Warners' marital property after setting
apart to Barry the four Putnam Trust stocks as nonmarital property.[16]
D. Spousal
[¶36] Barry challenges the court's spousal
support award asserting the court erred (1) in its determination of the
parties' incomes and expenses; (2) by ordering an irreducible increase in the
amount of spousal support eight years in the future from $1000 per month to
$2000 per month; and (3) by requiring him to maintain a $300,000 life insurance
policy payable to Barbara, or other security acceptable to Barbara and her
attorney, to secure the payment of spousal support.
1. Parties' Incomes [¶37] The record supports the court's
conclusion that because of the parties' relative economic circumstances, their
thirty-five years of marriage, their ages, and Barbara's questionable health
and its impact upon her capacity to continue her massage business, an
indefinite award of general spousal support to Barbara was justified. This finding is not clear error. Similarly, the court's findings
regarding the parties' respective living expenses were based upon competent
evidence and are not clear error.
[¶38] The statute directs that one of the
factors the court must consider when determining spousal support is the "income history and income
potential of each party." 19-A
M.R.S.A. § 951-A(5)(E) (Supp. 2001); Sorey v. Sorey, 1998 ME 217, ¶ 10, 718 A.2d 568, 570. The court found, based upon Barbara's
income history and potential, that her expected income was approximately
$32,000, consisting of $15,000 from her part-time work as a massage therapist,
$15,149 per year in income from J.B.B., Inc., and $1873 per year rental income
from her Florida condominium. The
court determined that Barry will have a post-divorce annual income of
approximately $65,500 comprised of annual distributions totalling $25,000 from
the Robert Lyon Warner Trust, investment income of $34,500 based upon an
estimated 6% return on his stock portfolio valued at $575,000, and $6000 in
wages from part-time employment. [¶39] Barry asserts that the court committed
clear error in its determination of the parties' incomes because (1) the court
valued the stock portfolio as worth $545,977, not $575,000, in the property
distribution section of the divorce judgment; (2) it attributed his potential
IRA income to him but failed to attribute Barbara's potential IRA income to
her; and (3) it failed to account for the fact that his holdings will be
reduced by $35,000 in order to pay $35,000 in attorney fees as ordered by the
judgment, and by an additional $22,043 from a corporate investment account that
was included in the valuation of Barry's stock portfolio but awarded to Barbara
as part of the assets of J.B.B., Inc.[17]
[¶40] In its judgment the court stated that
Barry "agreed at trial that six percent would be a reasonable return from his
stocks, bonds, and IRA's [sic]; that return totals $34,500 annually." In its order on the motions to
reconsider the court explained that it based this finding on the defendant's testimony
that his holdings were worth $575,000. It also found that "The IRA's [sic] are increasing in value. That increase should not be ignored
because its receipt may be deferred." The trial transcript reflects that when Barry was asked to estimate the
total value of "all holdings," including his IRAs, he estimated the total value
at $575,000. This testimony is,
however, inconsistent with the court's separate findings that the stock
portfolio has a value of $545,977, and the IRA accounts awarded to Barry have a
value of $66,387, for a combined value of $612,364.
[¶41] Because the judgment reflects that the
court intended to include the potential income from the IRAs awarded to Barry
in determining his ability to pay spousal support, it should have also
attributed the potential income from the IRAs awarded to Barbara in determining
her need for spousal support. The
IRA accounts awarded to Barbara had a total value of $71,654 that, at an
assumed 6% rate of return, would produce income of $4299 per year. [¶42] The judgment should also account for
the fact that Barry's overall holdings, whether valued at $575,000 or $612,364,
will be reduced by (1) $35,000 in attorney fees he was ordered to pay
Barbara within sixty days of the judgment; and (2) $22,043 from the Vanguard
Index 500 account that was awarded to Barbara as an asset of J.B.B., Inc., but
which was included in the stock portfolio in arriving at its overall
value. At a 6% rate of return,
these adjustments in the value of the investment assets available to Barry
would reduce Barry's income by $3422 per year. [¶43] Considered together, the foregoing
adjustments are substantial and should be taken into account in determining the
income potential of the parties, see
19-A M.R.S.A. § 951-A(5)(E) (Supp. 2001), and Barry's ability to pay spousal
support, see id. § 951-A(5)(B) (Supp. 2001).[18]
2. Irreducible Increase in Spousal Support [¶44] The court specified that the spousal
support award would increase to $2000 a month on December 30, 2009, more than
eight years after the court's order. It also specified that this award would survive Barry's death
and could not be decreased. As
reflected in the court's order on the motions to reconsider, this doubling of
the amount of spousal support was tied to Barry's anticipated receipt of a 20%
share of the Robert Lyon Warner Trust, which is to be distributed in 2009. The court determined that the trust's
value as of September 1999 was $7,487,509.67. [¶45] Certainly, receipt of a 20% share of a
trust, worth approximately $1.4 million dollars to Barry, could, if and when
received, constitute a substantial change of circumstances justifying an
increase in the spousal support payment. However, in other respects, mandating that there be a $2000 monthly payment
beginning in December 2009 and barring reduction of that payment are heavily
based on speculative predictions of the parties' future economic
circumstances. First, it assumes
that Barry's estate will be entitled to receive his share of Robert Lyon Warner
Trust proceeds if he dies prior to the distribution. Neither party introduced a copy of the trust instrument, nor
did the court receive any testimony which specifically addressed the trust's
provisions as they pertain to whether trust proceeds are payable to a
beneficiary's estate. Although the
court found that the trust was "irrevocable," it received no evidence from
which it could determine whether Barry's right to receive a distribution from
the trust in 2009 is contingent upon his survivorship.[19] It also
received no evidence from which it could determine whether the trust is
permitted or required to make distributions to other individuals or payments
(for example, the payment of administration expenses) prior to its termination
in 2009 that would diminish the value of Barry's 20% share.
[¶46] The court's order also assumes that the
trust, eight years hence, will have a value similar to that which it had in
September of 1999, although the court received no evidence regarding the nature
of the assets comprising the trust's corpus. However, the recent history of stock valuations demonstrates
the speculative nature of predicting the future value of investment assets
without considering the assets' market volatility. We take judicial notice of the fact that stock values are
dramatically lower today than they were six months ago. Recent history demonstrates the
potential for unforseen events to dramatically and adversely affect stock
[¶47] Because spousal support is necessarily based to some extent on prediction of future economic events, some future uncertainty is appropriate in developing spousal support obligation calculations. Dramatic changes for better or worse in the circumstances of the payor or the payee can be accommodated by the capacity of either party to return to court and request a change in the amount of spousal support based on a demonstrated substantial change of circumstances. 19-A M.R.S.A. § 951-A(4) (Supp. 2001); see also Spencer v. Spencer, 1998 ME 252, ¶ 9, 720 A.2d 1159, 1162. That possibility is taken away when, as here, a court orders, as authorized by law, that a spousal support award be guaranteed to survive after death of the payor and that it not be decreased. 19-A M.R.S.A. § 951-A(3)(A), (4), (8) (Supp. 2001). [¶48]
When such an order prohibiting change is entered, we must necessarily review
much more carefully the extent to which the future economic conditions of the
parties may be based upon speculative prediction. We have stated on several occasions that spousal support
awards may not be based on speculative predictions of future economic
circumstances. Ketchum v.
Ketchum, 1998 ME 62, ¶ 5, 707 A.2d 803,
804-05, aff'd 2000 ME 13, 743 A.2d
1270; Ryan v. Ryan, 1997 ME 136, ¶ 8,
697 A.2d 60, 61-62. Here, the
award is unduly speculative because there is no evidence from which the court
could determine the likely value of Barry's share of the Robert Lyon Warner
Trust eight years in the future, nor was there evidence from which the court
could determine whether the Robert Lyon Warner Trust proceeds would be paid to
Barry's estate if he is not alive at the time of the distribution in 2009. The predictive judgment required of the
court is often difficult and requires a careful analysis of the evidence as it
pertains to future events and circumstances. In this case, closer scrutiny of the terms of the trust
instrument, as well as the nature of the investments comprising the trust
corpus and the degree of market risk associated with them, would be essential
to determine whether Barry or his estate will receive a trust distribution in
2009 that approaches the amount forecasted in 2001. It is incumbent upon the party seeking an unmodifiable award
of general support to provide the court with competent evidence from which a
predictive judgment can be made. [¶49] Accordingly, the immediate award of
spousal support in the amount of $1000 per month must be vacated because of the
adjustments that should be made to the parties' respective incomes, and the
future award of spousal support, as it relates to the $2000 monthly payments to
be instituted as of December 30, 2009, must also be vacated because it is
unduly speculative. We therefore
remand for full reconsideration of the spousal support award. On remand, the court should redetermine
the amount of its spousal support award effective as of the entry of the
divorce judgment, taking into consideration the adjustments discussed
above. In addition, in view of the
passage of time, the court may receive evidence to determine whether there has
been a substantial change in the parties' financial circumstances since the
entry of the divorce judgment and, if so, order a prospective modification of
the spousal support award. 3. Life Insurance or Other Security
[¶50] The divorce judgment provides that the
spousal support "will survive the death of the defendant. The defendant will
maintain life insurance in the amount of $300,000 with the plaintiff as the
sole beneficiary or will provide other security acceptable to the plaintiff and
her attorney to secure payments." Barry asserts that, as ordered, if he predeceases Barbara the
life insurance requirement will result in a windfall to Barbara because she
will be entitled to receive both the $300,000 life insurance payment and
continued spousal support. In
addition, Barry complains that the court received no evidence regarding the
availability and cost of the life insurance, and its impact upon his ability to
pay monthly spousal support.
[¶51] The requirement of life insurance or
other security for spousal support awards is authorized by 19-A M.R.S.A. §
951-A(7) (Supp. 2001), which provides in part that "[t]he court may also order
the obligated party to maintain life insurance or to otherwise provide security
for the payment of spousal support in the event the obligation may survive the
obligated party's death." In Bryant
v. Bryant, 411 A.2d 391, 394 (Me. 1980),
we recognized the court's authority to employ life insurance as security for
spousal support where the "life insurance . . . can take the place of the
periodic payments after the payor's death." In Bryant, however,
we vacated the divorce judgment's life insurance requirement because the court
had not received evidence of either the availability or cost of such insurance,
and could not, therefore, determine the payor's ability to obtain the insurance
and pay for it. Id. at 395. [¶52] Here, as in Bryant, the court did not receive evidence of the availability or
cost of the life insurance policy that it required Barry to obtain for
Barbara's benefit. In addition,
the divorce judgment does not address whether the $300,000 life insurance
benefit is intended to replace or merely supplement Barry's estate's obligation
to pay monthly spousal support following Barry's death. [¶53] Accordingly, we vacate the divorce judgment's provision regarding life insurance or other security and remand it to the court to permit it to receive evidence as to the availability and cost of life insurance to Barry; to address the impact of the cost of the life insurance upon Barry's ability to pay monthly spousal support; and to address whether the life insurance is intended to replace or supplement the ongoing spousal support in the event Barry predeceases Barbara. Consideration may also be given to whether the amount of insurance or security should reflect a descending benefit or security level to take into consideration the amount of support ordered and Barbara's life expectancy, if the parties' introduce evidence which reasonably permits the same.
[¶54] Attorney fees awards in actions for
divorce are reviewed for an abuse of discretion. Largay v. Largay,
2000 ME 108, ¶ 16, 752 A.2d 194, 198. In this case, the award of $35,000 towards Barbara's attorney fees was
within the court's discretion. The
award considered the differing economic circumstances of the parties, and the
substantial efforts that both parties were required to undertake to litigate
the marital versus nonmarital status of the portions of the stock portfolio
exclusive of the Putnam Trust stocks. However, because the court on remand must reconsider all aspects of the
parties' financial relationship reflected in both the court's property
distribution and spousal support awards, it must also, by necessity, reconsider
the amount of attorney fees to be awarded to Barbara.
Therefore, the entry shall be:
Judgment vacated in part and remanded to the Superior Court
to (1) reconsider the distribution of marital property and to set apart to
Barry Warner the Putnam Trust stocks as his nonmarital property; (2) reconsider
the spousal support award and the associated requirement of life insurance or
other security; and (3) reconsider the attorney fees award, all in accordance
with this opinion. In all other
Jonathan C. Hull, Esq.
Damariscotta, ME 04543-0880
[1] Barry raises additional issues that we find to be without merit and do not
[2] The parties' son owns a one-third interest in the Boulder residence. The
record suggests that both parties valued the Boulder residence at $330,000, not
$339,000 as found by the court. See Plaintiff's Ex. 16. Upon remand, the court will have the opportunity to determine which of
the two values is correct.
The court found in connection with this increase that Barry, as a beneficiary of the Robert Lyon Warner Trust that was worth $7,487,509.67 in 1999, will receive a distribution of 20% of the trust in 2009. [4]
We also reject Barry's claim that the court erred by failing to accept his defense of condonation to Barbara's claim of adultery. The court correctly noted that condonation is not an absolute defense and is merely a factor to be considered in determining whether adultery has been established. See Schneider v. Richardson, 438 A.2d 896, 898 (Me. 1981). [5] This testimony was provided by Scott Adams, an attorney and certified
public accountant, who examined all of Barry's records pertaining to the
securities and testified as an expert witness. Barry also testified that he received the seven Putnam Trust
stocks as "an inheritance."
[6] The number of shares and values of the seven Putnam Trust stocks are
reflected in a 1992 year-end listing of stocks and securities that was received
Stock Price Shares Value
Amer. Home Prod. $67.50 165 $11,138
Block H R $39.75 165 $6559 Exxon $61.13 582 $35,575
General Ele $85.50 132 $11,286
Philip Morris $77.13 81 $6247
Proctor & Gamble $52.63 264 $14,157
Union Pacific $58.50 165 $9653
Total $94,615
This history is based on the report, testimony, and work papers of Scott Adams. Adams traced the Putnam Trust stocks from their date of acquisition to the present. Contrary to the trial court's finding that "the foundation for Mr. Adams's opinion was a history provided by the defendant," Adams also analyzed voluminous account statements, correspondence, confirmation statements, journal entries, tax returns, and other documents pertaining to the Warner securities for the period 1965 to 2000. Barbara also offered a certified public accountant, Eric Purvis, as an expert witness who testified regarding the Warners' securities. Although Purvis disputed Adams's analysis regarding most of the Warners' investment portfolio, he offered no specific testimony or opinions regarding the Putnam Trust stocks. [8] As used in connection with investments, "portfolio" refers to "all of
the securities held for investment by an individual, bank, investment company,
etc." Webster's New World College
Dictionary 1122 (Michael Agnes ed., 4th ed. 1999).
[9] In addition to the four Putnam Trust stocks, the Warners owned a total
of thirty-three stocks and mutual funds at the time of the divorce trial, not
including any stocks or mutual funds held in their IRA accounts.
[10] The difficulty faced by the court in distinguishing the history of the Putnam Trust stocks from the remainder of Barry's portfolio began with Barry's failure to address the issue, other than a cursory mention, in his pretrial memorandum. The difficulty was then compounded by Barry's trial strategy of treating his entire stock portfolio as nonmarital property, notwithstanding the absence of the documentary evidence needed to adequately trace the acquisition history of most of the securities. This required the court to analyze a thirty-eight year history of numerous stock trades and the opening and closing of several brokerage accounts, based in large measure upon piecemeal information. When a party fails to adequately organize the presentation of evidence of complicated and lengthy financial transactions, the court may consider requiring the party to prepare and submit illustrative aids, summary exhibits and other testimonial aids "so as to (1) make the interrogation and presentation [of evidence] effective for the ascertainment of the truth, [and] (2) avoid needless consumption of time . . . ." M.R. Evid. 611(a).
2. Definition. For purposes of this section, "marital property" means all
property acquired by either spouse subsequent to the marriage, except:
E. The increase in value of property acquired prior to the
marriage and the increase in value of a spouse's nonmarital property as defined
in paragraphs A to D.
(b) Appreciation resulting from reinvested income and capital
gain unless either or both spouses had a substantial active role during the
marriage in managing, preserving or improving the property. (2) "Increase in value" does not include:
(a) Appreciation resulting from the investment of marital
funds or property in the nonmarital property; (b) Appreciation resulting from marital labor; and (c) Appreciation resulting from reinvested income and capital
gain if either or both spouses had a substantial active role during the
marriage in managing, preserving or improving the property.
19-A M.R.S.A. § 953(2)(E)(1)-(2) (Supp.
[12] The Maine Family Law Advisory Commission authored the statutory revision
and submitted the following "comment" in support of it:
revision of 19-A M.R.S.A. § 953(2)(E), prepared in response to the decisions of
Clum v. Graves, 1999
ME 17, and Harriman v. Harriman, 1998 ME 108, makes two changes to the operation of Maine's
marital property law. First,
it excludes the increase in value of non-marital property from the definition
of marital property if no marital effort or money is expended. The portion of the increase resulting
from the reinvestment of the property's income or appreciation during the
marriage remains non-marital, so long as neither spouse had a substantial and
active role in the management, preservation or improvement of the property
during the marriage. For example,
if dividends, interest or capital gains are routinely reinvested in a spouse's
non-marital retirement, investment, savings or other financial account, the
resulting increase in value remains non-marital property. On the other hand, if funds invested in
a spouse's non-marital account involved the substantial active involvement of
either or both spouses, the increase in value may be found to be marital
property. The determination of
what constitutes "substantial and active" involvement by a spouse will depend
upon the type of management, maintenance or improvement customarily associated
with the type of property at issue.
spouse's active and substantial involvement does not depend upon whether the
spouse received compensation for her or his efforts. A spouse's active, but uncompensated time spent managing his
or her premarital stock portfolio during the marriage is marital effort and any
increase in the value of the portfolio flowing from reinvested income will be
treated as marital property. Similarly, the increase in value of a non-marital business during
marriage resulting from reinvesting the business' income in the business will
also be treated as marital property if either or both spouses actively managed
the business during the marriage. See,
e.g., MacDonald v. MacDonald, 582 A.2d 976 (Me. 1990). Nominal, inconsequential or sporadic actions by a spouse in connection
with non-marital property will not cause the increase in value of the property
attributable to reinvested income to be treated as marital property. See, e.g., Nordberg v. Nordberg, 658 A.2d 217 (Me. 1995).
provision also does not require proof that a spouse's active and substantial
involvement in the asset's management, preservation or improvement was directly
responsible for the income generated by a non-marital asset. It is a spouse's dedication of time and
skills to the property during the marriage which brings the property's income
within the ambit of the marriage's "shared enterprise." It is not necessary to
prove that the spouse's involvement was responsible for the income produced by
second change made by the amendment is to expand the exception to the marital
property presumption to include non-marital property acquired during the
marriage. The predecessor
provision only applied to the "increase in value of property acquired prior to
the marriage." (Emphasis
added.) This amendment removes
this limiting language so that it now applies to all non-marital property,
whether acquired prior to marriage or during the marriage (through gift,
bequest, devise, or decent) or property excluded by agreement of the
parties). The
amendment does not address situations in which spouses rely exclusively on
their marital funds during the marriage so as to preserve either or both
spouse's premarital investment, retirement or similar accounts. The Courts can achieve an equitable
distribution in such circumstances through the provisions of 19-A M.R.S.A. § 953(B)
(the court must consider the value of the non-marital property set apart to
each spouse in arriving at an equitable distribution), as well as through an
award of reimbursement spousal support statute. See L.D. 2276 (proposed 19-A M.R.S.A. § 951-A(2)(C)).
Maine Family Law Advisory Commission,
Recommendation to the Maine Legislature, Joint Standing Committee on the
Judiciary, Regarding L.D. 2267 cmt. 1-3 (Feb. 23, 2000) [hereinafter
FLAC Recommendation].
The approach employed in Clum and Harriman generally mandated the use of an expert witness to analyze each investment and distinguish increases in value resulting from market forces, from increases in value resulting from reinvested income and capital gain. The revision of section 953(2)(E) may reduce the frequency with which expert testimony is required because the expertise required to parse the appreciation history of stocks or other publicly traded securities is no longer central to the court's inquiry. Expert testimony may continue to be necessary, however, in those instances where the court determines that "either or both spouses had a substantial active role during the marriage in managing, preserving or improving the property" or when a particular investment was acquired with both marital and nonmarital funds.
[14] Barbara testified that Barry's only job in recent years was his
management of the investments and that he devoted a significant amount of time
to it. Barry testified that he
dedicated, on average, about one hour per week to his stock portfolio. Barry's demonstrated knowledge
regarding his stocks and his expertise in utilizing his computer and the
Internet in connection with them, together with his interrogatory answers in
which he stated "he is self employed and his job is managing his financial
affairs and investments," caused the court to conclude that he had a
substantial active role in managing the investments. [15] "Nominal, inconsequential or sporadic actions by a spouse in connection
attributable to reinvested income to be treated as marital property." FLAC Recommendation, supra note 12, at cmt. 2.
The value of the Putnam Trust stocks set apart to Barry must still be considered by the court in arriving at an equitable distribution of the marital property. 19-A M.R.S.A. § 953(1)(B) (1998) ("[T]he court shall . . . divide the marital property in proportions the court considers just after considering all relevant factors, including: . . . [T]he value of the property set apart to each spouse"). In addition, the fifty shares of Union Pacific stock acquired in 1999 must be treated as marital property.
Barry raises additional challenges to the spousal support determination that we find to be without merit and do not address.
Barry also asserts on appeal that the funds deposited in the IRA accounts cannot be accessed by either party without incurring a substantial penalty and should not, therefore, be viewed as a current source of income for either party. Although we do not address this issue, the court may, at its discretion, reconsider this issue on remand.
[19] The court made the following specific findings in its order on
defendant's two motions to reconsider regarding the Robert Lyon Warner Trust: Although
marked as defendant's exhibit 3, the trust documents were not offered into
evidence. The defendant did not
testify that his receipt of the Robert Lyon Warner Trust in 2009 is dependent
on his survival. He testified
about what would have happened 'back then' if he had died before the birth of
his son. He testified during his
deposition that he would be able to take care of his wife for the next 30-40
years, 'one way or the other.'
At the time of the divorce trial in 2001, the parties'
son was 30 years of age. Defendant's deposition testimony to the effect that, prior to the birth
of his son 30 years ago, he anticipated that he could take care of his wife for
30 to 40 years establishes that he expected that he would receive regular payments
of income from the Trust until 2009, which is approximately 38 years from the
birth of the parties' son. This
testimony does not establish whether Barry must survive to receive his 20%
distributive share in 2009. Similarly, the fact that Barry "did not testify that his receipt of the
Robert Lyon Warner Trust in 2009 is dependent upon his survival" also does not
establish whether there is a survivorship requirement because Barry provided no