Opinion ID: 1997538
Heading Depth: 1
Heading Rank: 2

Heading: equals

Text: equitable award to working spouse. DeLa Rosa, supra, 309 N.W.2d at 759. Using this formula, the wife in this case asserts that she contributed $69,526 to $74,030 in earnings to the marriage; that her husband contributed earnings and stipends of $51,454 to $51,748; that the direct costs of his medical education were $18,220; and that he contributed medical school loans of $13,457 (valued as of the trial date). Applying these figures to the DeLa Rosa formula, the wife calculates her contribution as $13,000, without including interest, adjustments for inflation, or her non-financial contributions. The wife introduced evidence at trial that the value of the $13,000 contribution indexed for inflation is $28,560. See also Lundberg, supra, 107 Wis. 2d at 5. A second approach is looking at opportunity costs. The trial court may in determining the award to the supporting spouse consider the income the family sacrificed because the student spouse attended school rather than accepting employment. In this case the wife introduced evidence that the husband's increased earnings during the seven-year marriage had he not pursued medical education and training would have been $45,700 after taxes, or $69,800 indexed for inflation. See also Lundberg, supra, 107 Wis. 2d at 5. A third approach enables the trial court to consider compensating the supporting spouse according to the present value of the student spouse's enhanced earning capacity. This approach recognizes the spouse's lost expectation of sharing in the enhanced earning capacity; it gives the supporting spouse a return on his or her investment in the student spouse measured by the student spouse's enhanced earning capacity. In this case an economist, called as a witness by the wife, estimated the value of the husband's enhanced earning capacity to be $266,000. The economist's figure was the product of multiplying the husband's after-tax annual enhanced earnings of $13,000 (the difference between the husband's annual salary as a physician and the 1979 mean salary for white college-educated males in his age group) by 32.3 (estimated years remaining in the husband's expected working life) discounted to its present value. See also Lundberg, supra, 107 Wis. 2d at 5. Using this calculation the wife asserts she would be entitled to one half of the present value of the husband's enhanced earning capacity, or $133,000. Because many unforeseen events may affect future earnings, this third approach has been subject to criticism. Calculations of the expected stream of income may not take into account such variables as market opportunities, individual career choices and abilities, and premature death. Other approaches are, however, subject to criticism for giving the student spouse a windfall and for failing to recognize the supporting spouse's lost expectations. Another approach is a variation of the labor theory of value suggested by wife's counsel at oral argument. Under this approach the trial court considers the value of the supporting spouse's contribution to the marriage at one half of the student spouse's enhanced yearly earning power for as many years as the supporting spouse worked to support the student. Under this theory the wife's contribution might be valued at $45,500 (one half of $13,000 × 7), which perhaps should be discounted to present value. As stated before, no mathematical formula or theory of valuation settles the case. Each case must be decided on its own facts. The guiding principles for the trial court are fairness and justice. Our legislature has created a progressive and flexible scheme for trial courts to compensate a supporting spouse; flexibility will maximize the fairness achieved in each case. Leaving the ultimate determination of the award and the manner of arriving at it to the trial court's discretion comports with the notion of flexibility inherent in secs. 767.255 and 767.26, Stats. 1981-82, and recognized by this court in Lundberg and Roberto. Accordingly the trial court may in each case use one or more of the above described approaches, as well as any other approach suitable for that case. The trial court's discretion must, of course, be exercised within the guidelines set forth in the statutes and cases. And whatever factors the trial court takes into account in determining the award to the supporting spouse, it must also take into account the student spouse's contributions and efforts in supporting the family and attaining the degree and the efforts that will be expended in earning the enhanced income. The student spouse has worked hard to obtain the degree, will have to work hard to earn the future stream of income, and should not be penalized. Granting equity to the supporting spouse should not result in inequity to the student spouse. On review of the trial court's award this court will not disturb the trial court's division of marital property or award or denial of maintenance unless an abuse of discretion is shown. Jasper v. Jasper, 107 Wis. 2d 59, 63, 318 N.W.2d 792 (1982). The exercise of discretion, however, is not the equivalent of unfettered decision making. Vander Perren v. Vander Perren, 105 Wis. 2d 219, 227, 313 N.W.2d 813 (1982). The trial court has to articulate its reasoning on the basis of the standards which the legislature and this court have set forth as guidelines for determining property division and maintenance. The trial court's articulation of its reasoning process is essential to aid the trial court in reaching a reasonable determination and to aid this court in giving meaningful review of the discretionary decision. Hartung v. Hartung, 102 Wis. 2d 58, 66, 306 N.W.2d 16 (1981); In the Interest of D.H., 76 Wis. 2d 286, 305, 251 N.W.2d 196 (1977). A reviewing court will uphold the trial court's discretionary determination of maintenance and property division if it is based on facts appearing in the record and on the application of appropriate legal standards and the award itself is not, under the circumstances, either excessive or inadequate. Bahr v. Bahr, 107 Wis. 2d 72, 77, 318 N.W.2d 391 (1982). [3] In this case we conclude that the trial court abused its discretion in three respects: it improperly based its denial of maintenance on the wife's lack of need; it failed to articulate fully its reasoning as to denial of maintenance and as to the property division; and the award was clearly inadequate to compensate the wife under the circumstances of this case. In making its determination as to maintenance, the trial court denied maintenance to the wife stating that the wife was young, in good health, and lacked financial need. This reasoning is contrary to Lundberg in which we held that even though the wife was not in need she might be awarded maintenance to compensate her for her contribution to the husband's education, training, and enhanced earning capacity. See also Roberto v. Brown, supra, 107 Wis. 2d at 22. [4] While the trial court specifically stated that it considered the husband's enhanced earning capacity, it did not explain why it nevertheless denied maintenance to the wife. In determining maintenance payments, the trial court is supposed to consider the educational level of the parties at the time of marriage and divorce, the contribution by one party to the education, training or increased earning power of the other, and the property division. Sec. 767.26(3) (4) (9), Stats. 1981-82. In this case these factors point toward awarding maintenance, yet the trial court denied maintenance. Under these circumstances denial of maintenance without an articulation of a rationale constitutes an abuse of discretion. Although the trial court stated that this record requires other than a fifty/fifty division, it failed to explain how it would compensate the wife for her contribution to the husband's education and how it arrived at the property division as a form of compensation. The legislature has directed the trial court to divide the marital property equally between the parties but has authorized the trial court to alter this distribution after considering such factors as the contribution of each party to the marriage, giving appropriate economic value to each party's contribution in homemaking, the contribution by one party to the education, training, or increased earning power of the other, the earning capacity of each party, and the maintenance payments. Sec. 767.255 (3) (5) (6) (8), Stats. 1981-82. In the trial courts' division of property the wife received approximately 50 percent of the assets and was held responsible for none of the debts. Thus the wife might be viewed as having received more than the statutory 50 percent presumptive share of property through her release from debts. To calculate the amount of benefit she may have received from her release from debt, we must analyze the debts the husband assumed upon the divorce. We do not view the wife as benefiting from the husband's assumption of the education expenses, the land contract liability, or the real estate. Since the husband received both the enhanced earning capacity and the home (in which he had lived during the separation), he should rightfully pay the education expenses, the land contract balance, and the real estate taxes. These debts go along with the assets. The wife did, however, benefit when the trial court required the husband to pay the joint marital debt of approximately $28,000 incurred for acquisition of property and living expenses. The wife's share of this debt would apparently be $14,000. Indeed on review the wife acknowledges that she received an approximate $14,000 benefit from the trial court's assignment of debts, but she asserts that the release from debts is inadequate to compensate her for contributing total financial and homemaking support of the family unit for four years, contributing almost one half of the financial support of the unit for three years, and foregoing the husband's earnings during this period and his enhanced earnings in the future. The husband argues, in effect, that the $14,000 the wife received in excess of the 50-50 marital property division is adequate compensation for her contribution since her total financial contribution during the marriage was $18,000 to $22,000 more than the husband's and that one half of this sum is attributable to his support and one half to hers. [6] The husband therefore argues that the wife was compensated $14,000 for her financial contribution to her husband of $9,000 to $12,000. We are not persuaded by the husband's reasoning. His calculation ignores the wife's non-financial contribution to the marriage and does not include a rate of return on the wife's contribution or adjustment for inflation or consideration of her lost expectation of sharing in his enhanced earning capacity to which she contributed. Using only a factor for inflation, the wife estimates her $13,000 contribution to the marriage as being worth $28,000 at the time of divorce. Thus the wife asserts on review that in addition to the release from liability of $14,000, she is entitled to an additional award of at least $14,000. The husband further argues that the award puts the wife in the same position after divorce as she was in before marriage. She leaves the marriage with some property and a job. She did not want further education and was not thwarted in the enjoyment of a career. We are not persuaded by this reasoning because it fails to address the issue which this court has recognized in the university degree-divorce decree cases, namely, that concepts of fairness and equity require that the supporting spouse be compensated when the student spouse leaves the marriage with an earning capacity substantially increased through the other spouse's efforts and sacrifices and the supporting spouse leaves the marriage with little property and a lower earning capacity than the student spouse. Although the trial court may not be able to compensate the wife in this case by giving her the opportunity to pursue the career she wanted as a homemaker and parent, compare Roberto v. Brown, supra, 107 Wis. 2d at 22, the court can compensate her for the contribution she made in supporting the couple while the husband pursued his professional education. [7] According to the record the wife's contribution was valued between $13,000 (without adjustment for interest and inflation) and $133,000. Where the marriage terminates before the parties benefited economically from the university degree or license acquired during the marriage and before substantial assets are accumulated, an award of 50 percent or even more of the marital property is unlikely to compensate the supporting spouse fully. The wife would have received 50 percent of the property even if she had not supported her husband financially while he was in school. In Roberto v. Brown, supra, 107 Wis. 2d at 23, we held that a property award of 70 percent of the property was insufficient to compensate the wife for her contributions and foregone opportunities. The award in this case which denied maintenance, divided the assets equally, and relieved the wife of approximately $14,000 in debts seems insufficient compensation for her significant financial and non-financial contributions to this marriage over a seven-year period, her lost expectation of sharing in his enhanced earning capacity, and the valuations of her contribution. Because the trial court did not articulate its reasoning and did not specifically address the guidelines set forth in the statutes and the cases and because the award on its face appears inadequate, we conclude that the trial court abused its discretion. We therefore vacate the award and remand the cause to the trial court to reconsider all the evidence and provide for fair and equitable compensation to the wife for her contribution to the enhanced earning capacity of the husband, whether it be by further award of property or award of maintenance or both. We reverse the decision of the court of appeals. We vacate that part of the judgment of the circuit court relating to the property division and denial of maintenance payments and remand the matter to the circuit court for further proceedings consistent with this opinion. By the Court. Decision of the court of appeals is reversed; judgment of the circuit court vacated in part; cause remanded to the circuit court for further proceedings. WILLIAM J. CALLOW, J. (concurring). Although I agree with the result in this case, I do not agree with the majority's third formula for calculating a maintenance or property division award in cases where one spouse has contributed toward the other spouse's pursuit of an advanced educational degree. See Supra at pp. 213, 214. As I stated in my concurrence to our decision in In re Marriage of Lundberg, 107 Wis. 2d 1, 15, 318 N.W.2d 918 (1982), I do not approve of an award formula which is based upon the dependent spouse's future earning potential. Because the third formula is based upon future earning potential, I conclude that it goes beyond the compensation approved by this court in Lundberg, supra, and Roberto v. Brown, 107 Wis. 2d 17, 318 N.W.2d 358 (1982). In Lundberg and Roberto, we approved compensation to the supporting spouse for his or her actual support contributions and foregone opportunities in his or her own career while the dependent spouse was pursuing an advanced education. See Roberto, 107 Wis. 2d at 22. In essence, we sought to make the supporting spouse whole by compensating for actual sacrifices made during the marriage. We did not approve of any compensation formula which would award the supporting spouse a share of the dependent spouse's future earning potential. The majority's third formula compensates the supporting spouse according to the value of the other spouse's enhanced earning capacity. The formula multiplies the spouse's after-tax annual enhanced earnings (based on the difference between the projected professional salary and the mean income for a person of that category with a college education) by the spouse's estimated remaining working years. Supra at p 214. This formula clearly is based upon the dependent spouse's future earning potential because it estimates what the spouse could earn over his or her career and then awards the supporting spouse a share of that potential income. This result, I believe, goes beyond the compensation this court approved in Lundberg and Roberto. The majority characterizes this formula as a return on the supporting spouse's investment made in the other spouse's enhanced earning capacity. We did not approve of such an award in Lundberg and Roberto. Those decisions recognized only compensation for actual sacrifices made during the marriage, not for lost expectations of sharing in future potential earnings. The majority's formula goes beyond simple compensation for actual sacrifices made during the marriage and enters the category of an award based upon what the supporting spouse might have realized had the marriage continued. As the majority recognizes, this type of award has been criticized because it fails to take into account unforeseen variables such as market opportunities, individual career choices and abilities, and premature death. See Supra at p. 214. I believe that these considerations make an award based on future potential earnings too speculative to be approved by this court. Accordingly, I do not approve of the majority's third formula or any other award formula based upon future earning potential.