Opinion ID: 2308398
Heading Depth: 2
Heading Rank: 3

Heading: Substantial Active Role in Managing the Investments

Text: [¶ 22] Pitcher argues that the facts found by the trial court must, as a matter of law, lead to the conclusion that he did not take a substantial active role in managing the trust into which he placed his inheritance because he was only sporadically and casually involved in managing the trust investments. Accordingly, he contends that the court erred in finding that the increase in value of his inheritance was marital property subject to division in the parties' divorce judgment. [¶ 23] As noted, we have interpreted section 953(2)(E) to mean that, when a spouse has a substantial active role in managing a nonmarital stock, an increase in the stock's value through reinvested income and capital gain will become marital property, though an increase in value through market forces [6] will remain nonmarital: 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. Warner, 2002 ME 156, ¶ 31, 807 A.2d at 620. Dividend reinvestment is considered a routine investment decision that does not constitute a substantial active role and will not transform an increase in value into marital property. Id. ¶ 26, 807 A.2d at 617. [¶ 24] We had occasion to apply section 953(2)(E), and to interpret the term substantial active role in Warner, 2002 ME 156, 807 A.2d 607. We concluded there that the husband had not taken a substantial active role in managing his reinvestments for a particular set of stocks because the only evidence of action by him was the decision to enroll in [one stock's] dividend reinvestment program, and because there was no evidence as to the time, energy, and resources expended in conjunction with the decision. Id. ¶ 33, 807 A.2d at 620-21. [¶ 25] Although our analysis of the facts in Warner provides some guidance regarding the meaning of the term substantial active role, the term remains ambiguous. Accordingly, we turn to legislative intent, including the statute's legislative history, to further explicate the meaning of the statutory language. See Saucier v. Nichols Portland, 2007 ME 132, ¶ 8, 932 A.2d 1178, 1181. [¶ 26] The summary to the committee amendment that enacted the current section 953(2)(E) describes, the types of activity that are relevant in determining whether a spouse took a substantial active role in managing investments: [I]f dividends, interest or capital gains were routinely reinvested in a spouse's nonmarital retirement, investment, savings or other financial account, the resulting increase in value remains nonmarital property. On the other hand, if funds invested in a spouse's nonmarital 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. A spouse's active and substantial involvement does not depend upon whether the spouse received compensation for the spouse's efforts. A spouse's active but uncompensated time spent managing the spouse's 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 nonmarital business during marriage resulting from reinvesting the business's income in the business will also be treated as marital property if either or both spouses actively managed the business during the marriage. See MacDonald v. MacDonald, 582 A.2d 976 (Me.1990). Nominal, inconsequential or sporadic actions by a spouse in connection with nonmarital property will not cause the increase in value of the property attributable to reinvested income to be treated as marital property. See Nordberg v. Nordberg, 658 A.2d 217 (Me.1995). This 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 nonmarital asset. It is a spouse's dedication of time and skills to the property during the marriage that 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 the property. Comm. Amend. A to L.D. 2267, No. H-917, Summary (119th Legis. 2000). [¶ 27] Based on this legislative history and our case law, we hold that, to determine whether a spouse played a substantial active role in managing investments, a court must consider, among other factors: (1) whether a spouse engaged in routine reinvestment or, instead, actively managed the asset, id. ; (2) whether the actions of a spouse were nominal, inconsequential, or sporadic, id. ; (3) whether a spouse invested substantial marital time and energy in managing the asset, id. ; Warner, 2002 ME 156 ¶ 33, 807 A.2d at 621; (4) whether a spouse had an occupation separate from managing that property, Warner, 2002 ME 156, ¶ 33 n. 14, 807 A.2d at 621; and (5) whether a spouse's knowledge of and involvement with the property is casual or in-depth, id. ; Comm. Amend. A to L.D. 2267, No. H-917, Summary (119th Legis. 2000). [¶ 28] Considering these factors and the court's factual findings in the case before us, we conclude that Pitcher did not play a substantial active role in managing his inheritance. Pitcher did only what any reasonable investor must do to preserve and maintain his or her investments. He relied primarily on experts to manage his investments. He met with his broker quarterly, responded to queries from his broker, occasionally suggested investments, and kept track of his investments' performance on his computer. Passive actions, such as following stock performance online, responding to the necessary inquiries from a broker, and meeting several times a year with a broker to review a portfolio, simply do not constitute the kind of active involvement that the Legislature anticipated would contribute to the conversion of nonmarital increases in value to marital property. If they did, the only real way for a married individual to maintain a nonmarital stock portfolio would be through a blind trust. Such distance is not required by law. [¶ 29] The only component of Pitcher's conduct that could be seen as exceeding the conduct of an ordinary investor was his occasional suggestion of stock purchases to his broker. We conclude that those minimal actions are insufficient to constitute a substantial active role in the management of his investments. Managing the investments was not his central or even secondary occupation, and his efforts with regard to those investments did not consume the sort of marital effort and energy that would render the increase in value a marital asset. As the Legislature's summary to committee amendment A to L.D. 2267 suggests, more than' this sort of routine attention to investments is required to constitute a substantial active role in managing those investments. [¶ 30] Accordingly, we vacate the court's judgment and remand for the court to allocate the entire value of the trust to Pitcher. Because it is possible that this change will affect the court's overall distribution of property, see Warner, 2002 ME 156, ¶ 35, 807 A.2d at 621, we remand the matter to the District Court for further proceedings. The entry is: Judgment vacated and remanded for further proceedings consistent with this opinion.