Davidson v. Davidson

• Decision Date: 22 May 1998
• Docket Number: No. S-96-951,S-96-951
• Citation: 254 Neb. 656,578 N.W.2d 848
• Parties: Richard K. DAVIDSON, Appellant and Cross-Appellee, v. Marsha C. DAVIDSON, Appellee and Cross-Appellant.
• Court: Nebraska Supreme Court

Page 848

578 N.W.2d 848

254 Neb. 656

Richard K. DAVIDSON, Appellant and Cross-Appellee, v. Marsha C. DAVIDSON, Appellee and Cross-Appellant.

No. S-96-951.

Supreme Court of Nebraska.

May 22, 1998.

Syllabus by the Court

1. Divorce: Property Division: Alimony: Attorney Fees: Appeal and Error. In actions for dissolution of marriage, an appellate court reviews the case de novo on the record to determine whether there has been an abuse of discretion by the trial judge. This standard of review applies to the trial court's determinations regarding division of property, alimony, and attorney fees.

2. Divorce: Appeal and Error. Appeals in domestic relations matters are heard de novo on the record, and thus, an appellate court is empowered to enter the order which should have been made as reflected by the record.

3. Divorce: Property Division. The marital estate includes property accumulated and acquired during the marriage through the joint efforts of the parties.

4. Divorce: Property Division: Stock. Employee stock options and stock retention shares are a form of deferred compensation, and in Nebraska, deferred compensation is property for purposes of determining the contents of the marital estate.

5. Divorce: Property Division. As a general rule, all property accumulated and acquired by either spouse during the marriage is part of the marital estate, unless it falls within an exception to the general rule. Such exceptions include property accumulated and acquired through gift or inheritance or property held in trust by a third person, but do not include property obtained through one or both spouses' employment.

6. Divorce: Property Division: Stock: Time. In applying the time rule, it is incumbent upon the trial court to calculate whether and to what extent the options or retention shares were granted as compensation for past, present, or future services. Then the trial court should determine what percentage of each portion thereof was accumulated and acquired during the marriage.

7. Employer and Employee: Stock. To determine which percentage represents compensation for past, present, and future services, neither the language of the employee stock option or stock retention share agreement itself nor the testimony of the employer is dispositive. Relevant, nonexhaustive considerations include whether the employee stock options or stock retention shares were intended to (1) secure optimal tax treatment, (2) induce the employee to accept employment, (3) induce the employee to remain with the employer, (4) induce the employee to leave his or her employment, (5) reward the employee for completing a specific project or attaining a particular goal, and (6) be granted on a regular or irregular basis.

8. Divorce: Property Division. In a dissolution action, the date upon which the marital estate is valued should be rationally related to the property composing the marital estate.

9. Divorce: Property Division: Alimony. In dividing property upon a dissolution of marriage and in determining alimony, a court should consider four factors: (1) the circumstances of the parties; (2) the duration of the marriage; (3) the history of contributions to the marriage, including contributions to the care and education of the children and interruption of personal careers or educational opportunities; and (4) the ability of the supported party to engage in gainful employment without interfering with the interests of any minor children in the custody of each party.

10. Divorce: Property Division: Alimony: Appeal and Error. Alimony payments paid during the pendency of an appeal must be credited toward the payor's other alimony and property division payments.

11. Divorce: Attorney Fees. The award of attorney fees in a dissolution action involves consideration of such factors as the nature of the case, the amount involved in the controversy, the services performed, the results obtained, the length of time required for preparation of the case, the skill devoted to preparation and presentation of the case, the novelty and difficulty of the questions raised, and the customary charges of the bar for similar services.

Edward D. Hotz, of Hotz & Weaver, Omaha, for appellant.

John S. Slowiaczek, Sandra L. Dougherty, and Virginia A. Albers, of Lieben, Dahlk, Whitted, Houghton, Slowiaczek & Jahn, P.C., Omaha, for appellee.

WHITE, C.J., and CAPORALE, WRIGHT, CONNOLLY, GERRARD, STEPHAN, and McCORMACK, JJ.

CONNOLLY, Justice.

The central issue on appeal in this marital dissolution is whether and to what extent an interest in stock option and retention stock benefit plans provided by a spouse's employer constitutes marital property. We conclude that such plans, in the instant case, constitute marital property and that a time rule should be applied to determine to what extent the stock options and retention shares were earned during the marriage. Because the trial court erroneously excluded certain unvested stock options and retention stock, we affirm as modified.

I. BACKGROUND

Richard K. Davidson and Marsha C. Davidson were married on June 5, 1993.

Prior to the marriage, Marsha was employed by Security Benefit Group in Topeka, Kansas, where she earned approximately $45,000 per year, plus benefits. At the time of the marriage, Marsha had a bachelor's degree in English education and a master's degree in curriculum and education, and had finished the bulk of the classwork for an additional master's degree and her coursework on a Ph.D. She completed her Ph.D. in adult education during the marriage.

Marsha left her career in Topeka so that she could live in Omaha, Nebraska, with Richard. This was Marsha's third marriage. She had a 17-year-old child from one of her prior marriages who accompanied her to Omaha to live with Richard.

Marsha did not work outside the home during the marriage. She did, however, expend time and energy in community service. Although Richard testified that Union Pacific did not require his wife to devote time and effort to community activities, he did testify that he felt a personal obligation to give something to the Omaha community and that Marsha had helped him to fulfill that perceived obligation.

Richard's previous marriage, which lasted 19 years, ended in November 1992. Two children were born to that marriage, both living with their natural mother during this marriage. At trial, one child was in college, and the other was a senior in high school.

Richard was employed by the Union Pacific throughout his marriage to Marsha. Richard's career in the railroad industry began in 1960 with the Missouri Pacific Railroad, where he was employed as a brakeman. By 1982, when the Missouri Pacific Railroad was purchased by the Union Pacific, Richard was acting as the Union Pacific's vice president of operations. Two years later, Richard was promoted to executive vice president of operations of the Union Pacific Railroad (Railroad), and in 1991, he became the Railroad's president. Within a matter of weeks, Richard became the Railroad's chairman, while retaining his position as president.

Richard's achievements continued during his marriage to Marsha. In 1994, approximately 1 year into the marriage, Richard was named president of the Union Pacific Corporation (Corporation). The Corporation is the parent company of the Railroad. Where the record is unclear as to this distinction, the term "Union Pacific" will be used. Finally, in 1995, Richard was promoted to chief operating officer of the Corporation. Richard held that position at the time of trial and testified that he expected to become chairman of the Corporation by the end of the year.

Problems arose during the marriage, and by June 1, 1995, the parties had separated. Richard filed a petition for dissolution on June 29, and a trial was held on May 7, 8, and 24, 1996. The primary point of contention at trial was the marital estate; specifically, the value of the marital estate and each party's contribution thereto. Richard's accountants prepared two financial statements concerning Richard's assets. The first financial statement was calculated as of May 31, 1993, immediately prior to the marriage. The second statement was calculated as of December 31, 1995, after the parties' separation but approximately 4 months prior to the trial. Rather than identify and value each asset, the trial court relied on Richard's financial statements to calculate the value of the marital estate. The trial court determined that the increase in Richard's net worth between May 31, 1993, and December 31, 1995, was the value of the marital estate.

During the relevant period, Richard's taxable income was $4,051,854 in 1993; $1,578,435 in 1994; and no taxable income in 1995 because of a loss carryover from a farming operation. A large portion of Richard's compensation during those years was composed of employee stock options and stock retention shares.

Stock retention shares are stock shares that are unvested when granted but will vest at some predetermined point in time. In the instant case, Richard's unvested retention shares would vest only if Richard remained employed with Union Pacific until a certain point in time.

An employee stock option is an employee's contractual right to purchase an employer's stock during a specified period at a predetermined price. An employee stock option may be vested and matured, vested and unmatured, or unvested. If the employee has an absolute right to exercise the option immediately, the option is vested and matured. If the employee cannot exercise the option until some future date, but the employee has an absolute right to exercise the option on that date, the option is vested and unmatured. If the option cannot be exercised until some future date and the option is subject to divestment, the option is unvested.

Richard had received stock options and stock retention shares from the Corporation since 1983. At the time of trial, Richard had both vested and...