In re Balanson

• Decision Date: 29 May 2001
• Docket Number: No. 99SC811.,99SC811.
• Citation: 25 P.3d 28
• Parties: In re the Marriage of Bonnie BALANSON, Petitioner/Cross-Respondent, and Richard Balanson, Respondent/Cross-Petitioner.
• Court: Colorado Supreme Court

25 P.3d 28

In re the Marriage of Bonnie BALANSON, Petitioner/Cross-Respondent, and

Richard Balanson, Respondent/Cross-Petitioner.

No. 99SC811.

Supreme Court of Colorado, En Banc.

May 29, 2001.

As Modified on Denial of Rehearing June 25, 2001.

Litvak, Litvak, Mehrtens and Epstein, P.C., Ronald D. Litvak, W. Troy Romero, Denver, CO, Attorneys for Petitioner/Cross-Respondent.

Stevens, Littman & Biddison, LLC, Craig A. Weinberg, Andrew C. Littman, Boulder, CO, Attorneys for Respondent/Cross-Petitioner.

Justice RICE delivered the Opinion of the Court.

We issued a writ of certiorari to review the court of appeals' judgment in In re Balanson, 996 P.2d 213 (Colo.App.1999). In Balanson, the court of appeals affirmed in part and reversed in part final trial court orders entered as part of the dissolution of the marriage of Bonnie Balanson ("Wife") and Richard Balanson ("Husband"). The trial court's judgment included orders concerning Husband's employee stock options, Wife's interest in a family trust, interspousal gifts, maintenance, attorney fees, and child support. The court of appeals reversed the portion of the trial court's judgment concerning the classification and division of Husband's stock options and the portion concerning Wife's maintenance award. The court of appeals affirmed, however, the trial court's determinations concerning Wife's interest in the family trust and the interspousal gifts, holding that the trial court's errors with regard to these issues were harmless. Finally, the court of appeals affirmed the trial court's ruling on the issue of child support.

We granted certiorari to determine the appropriate treatment in a dissolution of marriage case of unexercised stock options, future interests in family trusts, and interspousal gifts. We also granted certiorari to determine whether the trial court properly determined Wife's child support award. Finally, we granted certiorari to determine whether a trial court's maintenance and attorney fee awards should be recalculated when its property division determinations are found to be incorrect.

We now reverse in part and affirm in part the court of appeals' judgment and hold that: (1) transfers of property from one spouse to another may, under certain circumstances, constitute "gifts" that do not constitute marital property; (2) employee stock options granted in consideration for future services, where such services have not yet been completed, do not constitute marital property; (3) a beneficiary's remainder interest in a trust from which a trustee may, in his discretion, distribute income and principal, constitutes "property" for purposes of property division in a dissolution case; and (4) substantial errors in a trial court's property division determination or significant changes in the value of marital property may require reconsideration of a trial court's maintenance award.

FACTS AND PROCEDURAL HISTORY

In April 1997, Wife filed a petition to dissolve her twenty-six year marriage to Husband. A decree of dissolution effective October 1997 was entered by the trial court. In its permanent orders, the trial court determined that certain assets constituted marital property and that approximately sixty percent of such property should be awarded to Wife and approximately forty percent should be awarded to Husband.

Specifically, the court found that Husband's stock options were granted by his employer, 3D Systems Corporation ("3D"), in consideration for future services and thus would not become marital property until Husband had performed those future services. Because Husband had performed approximately one year of services from the date the options were granted to the date of the permanent orders, the court found that Husband had the right to exercise roughly twenty-one percent of the options, which thus constituted marital property. However, because the exercise price of the options exceeded the value of the stock at that time, the court found that such property had minimal or no value and thus awarded Husband all of the 3D stock options.

As to the family trust established by Wife's parents, the court found that Wife had a vested remainder in the corpus of the trust because the trust could not be revoked, altered or modified. Thus, the court found that Wife's interest in the trust constituted property. The trial court found that such property constituted separate property, rather than marital property, however, because Wife's interest in the trust was a gift to her during the marriage. Nevertheless, the court also found that the appreciation on Wife's separate property interest during the marriage constituted marital property, but because the amount of such appreciation was uncertain, the court awarded the entire amount of Wife's interest in the trust to Wife. Alternatively, the court found that even if Wife's interest in the trust did not constitute marital property, it was an economic circumstance that should have been considered in dividing the marital property. The court further noted that such division would not be different even if Wife's interest in the trust were not considered to be marital property.

The trial court also found that gifts made to Wife by Husband during the marriage constituted marital property. In reaching this conclusion, the court noted that while gifts given by third parties to one spouse constitute separate property, Colorado statutes do not address the classification of interspousal gifts. In light of its recognition of the policy in Colorado that marriage is a partnership, or a shared enterprise, the court concluded that interspousal gifts constitute marital property. In the alternative, the court found that even if the gifts constituted Wife's separate property, such gifts should be considered as an economic circumstance in dividing the martial property.

The trial court further determined that because Wife lacked sufficient property to meet her reasonable needs and was unable to support herself through appropriate employment, an award of maintenance was appropriate. Thus, the court ordered Husband to pay Wife maintenance in the amount of $8,700 per month beginning in January 1998, with that amount being reduced over time to reflect Wife's increasing earning ability.

Finally, the trial court awarded Wife child support to meet the needs of her then minor daughter in the amount of $1,604 per month. The trial court also ordered Husband to pay Wife's attorney fees in the amount of $12,500.

On appeal, the court reversed the trial court's ruling as to Husband's stock options, holding that under this court's decision in In re Marriage of Miller, 915 P.2d 1314 (Colo. 1996), only vested stock options are marital property. Balanson, 996 P.2d at 220. The court of appeals reasoned that because Husband had performed part of the services that would entitle him to exercise, at future dates, options of certain shares beyond the twenty-one percent of the shares found by the trial court to have been exercisable by Husband, the trial court should have concluded that such options constituted marital property. Id. at 219. Thus, the court of appeals remanded the issue to the trial court to determine the marital portion of Husband's stock options above the twenty-one percent found by the trial court to be exercisable by Husband at the time of the final orders. Id. at 220.

The court of appeals also held that the trial court erred in ruling that Wife held a property interest in the entire corpus of her family's trust. Id. The court determined Wife's father had unfettered discretion to distribute to himself as much of the income and principal as he saw fit to distribute. Id. at 222. Thus, the court concluded that the trust did not constitute a property interest, but merely an expectancy. Id. Accordingly, the court held that the trial court erred in determining that Wife held a property interest in the trust. Id. The court also held, however, that the trial court's error was harmless because the trial court properly considered Wife's interest in the trust as an economic circumstance in dividing the marital property. Id.

The court of appeals further determined that the trial court incorrectly ruled that all interspousal gifts necessarily constitute marital property. Id. at 223. The court held, however, that because the trial court had alternatively concluded that even if such gifts were separate property, they constituted an economic circumstance relevant in dividing the marital property, the trial court's error was harmless. Id.

The court of appeals also held that while the trial court was not required to reconsider its property division determination in light of a decrease in the value of one of the marital accounts, the trial court should reconsider Wife's maintenance award in light of the decrease. Id. at 226. Wife's maintenance award had been calculated in part based on her ability to generate a certain monthly income from her awarded portion of the value of the account. The court reasoned that because the decrease in that account's value prevented Wife from generating the expected monthly amount, her maintenance award should be recalculated. Id.

Finally, the court of appeals upheld the trial court's determination as to child support. Id. at 227. In doing so, the court of appeals rejected Wife's argument that the trial court's award failed to consider her daughter's share of the family's room and board expenses. Id. at 226. The court concluded that because the trial court had determined Wife's monthly needs by reducing the prior family expenditures, which had been based on a family of four, to expenses for a family of two, the daughter's standard and ongoing living expenses were included in Wife's maintenance award. Id. at 227.

We granted certiorari to review the court of appeals' judgment concerning the division of Husband's stock options, Wife's interest in the family trust, and the interspousal gifts. We also granted...