Downs v. Downs

• Decision Date: 06 April 1990
• Docket Number: No. 88-283,88-283
• Citation: 574 A.2d 156,154 Vt. 161
• Parties: Kevin A. DOWNS v. Susan A. DOWNS.
• Court: Vermont Supreme Court

Page 156

574 A.2d 156

154 Vt. 161

Kevin A. DOWNS v. Susan A. DOWNS.

No. 88-283.

Supreme Court of Vermont.

April 6, 1990.

Blais, Cain, Keller & Fowler, Inc., Burlington, for plaintiff-appellee.

Robert B. Hemley and Norman Williams of Gravel & Shea, Burlington, for defendant-appellant.

Before ALLEN, C.J., and PECK, GIBSON, DOOLEY and MORSE, JJ.

GIBSON, Justice.

Plaintiff and defendant both appeal from a provision in their divorce decree that sought to compensate defendant Susan Downs for funds contributed during the marriage toward plaintiff Kevin Downs' attainment of a medical degree. We reverse and remand the case for further proceedings consistent with the views expressed herein.

I.

Kevin and Susan were married in August of 1976. At that time, Kevin, who had just graduated from college, and Susan, who had completed three years of university study, agreed that she would leave school and work while he attended medical school. Susan worked as a clerk at a department store from the fall of 1976 until March of 1980, a month before the birth of the parties' first child. Most of her salary was used to pay for living expenses while Kevin attended school; Kevin borrowed money through various loans to pay for his school expenses. Susan did not work outside the home after the birth of the parties' first child, and a second child was born in 1982, at which time Kevin was in the midst of a four-year medical residency at the Medical Center Hospital of Vermont. In August of 1983, Kevin moved out of the family home, and later that year, moved in with another woman and her two children. Shortly thereafter, he filed for divorce. After finishing his residency in 1984, he began working as an obstetrician and gynecologist in practice with another doctor at an initial salary of approximately $60,000 a year, with an expectation of earning up to $200,000 a year in the near future.

After a hearing in July of 1984, the court granted Kevin a divorce and awarded custody of the children to Susan. The court also awarded her $1000 worth of home furnishings and a partially paid family car, and ordered that Kevin pay (1) $500 a month to Susan in rehabilitative maintenance for five years, (2) $500 a month per child in child support, (3) the children's health insurance, plus all reasonable medical, dental and hospital expenses not covered by insurance, (4) all reasonable expenses for higher education for the children, and (5) $50,590 to Susan within five years, a sum representing the total salary earned by her during the years she worked while Kevin attended medical school, plus interest at the rate of ten percent compounded annually.

In reaching the $50,590 figure, the court reasoned that an educational degree is not property, but that "the increased earning potential made possible by the degree is an asset to be distributed by the court." The court then proceeded to make its disposition of Kevin's enhanced earning potential under the property settlement statute, 15 V.S.A. § 751. The court considered itself unable, however, to award Susan any portion of the increase in Kevin's earning potential resulting from his medical degree because, while there was expert testimony that he could expect future earnings with a discounted present value of three million dollars, there was no testimony regarding the differential in earning capacity between a person with a four-year college degree and a person with a medical degree. Because of this, the court felt confined to making an award based on restitution, which it determined to be $50,590.

Following Susan's motion to alter or amend the order and for a partial new trial, the court held a second hearing and issued a revised order, awarding her $125,000 for Kevin's enhanced earning capacity and $77,281 for her nonmonetary contributions to the marriage. Kevin appealed the revised order, and we reversed the judgment, reinstating the original order because the revised order had not been issued until after the expiration of the nisi period. Downs v. Downs, 150 Vt. 647, 549 A.2d 1382 (1988) (mem.). Susan now appeals the original order, seeking a property division or maintenance award that reflects Kevin's increased earning potential resulting from his degree and her nonmonetary contributions to the marriage. In his cross-appeal, Kevin claims that the court erred in making its property disposition, arguing that, since he did not have the ability to pay the restitution amount at the time of the divorce, the order amounted to an improper award of property not acquired during the marriage.

II.

In a case of first impression in Vermont, we consider the "diploma dilemma." The issue is what remuneration is available to a spouse who sacrifices career opportunities in order to further the other spouse's attainment of a professional degree, only to see his or her expectations of future financial security undermined when the student spouse, upon receiving the degree, shortly thereafter seeks a divorce. Although the trial court retains wide discretion in fashioning property and maintenance awards, Buttura v. Buttura, 143 Vt. 95, 99, 463 A.2d 229, 231 (1983), any award must fall within the flexible confines of Vermont's statutory guidelines. See 15 V.S.A. §§ 751, 752.

Before addressing Vermont's relevant statutory provisions, we review how other jurisdictions have handled this issue. A few courts have held that a professional degree or the enhanced earning potential that it represents is a marital asset subject to distribution upon divorce of the parties. See, e.g., In re Marriage of Horstmann, 263 N.W.2d 885, 891 (Iowa 1978); Woodworth v. Woodworth, 126 Mich.App. 258, 261, 337 N.W.2d 332, 334 (1983); O'Brien v. O'Brien, 66 N.Y.2d 576, 586-88, 489 N.E.2d 712, 717-18, 498 N.Y.S.2d 743, 748-49 (1985). In O'Brien, the court stated that a professional license constituted marital property, but based its decision on the state's Equitable Distribution Law, in which the court found a clear legislative mandate to include an interest in a professional license as marital property. O'Brien, 66 N.Y.2d at 583-84, 489 N.E.2d at 715, 498 N.Y.S.2d at 746.

Some courts have held that a professional degree is not an asset to be divided, but that the supporting spouse is entitled to compensation for the amount of his or her investment in the student spouse's education. See, e.g., DeLa Rosa v. DeLa Rosa, 309 N.W.2d 755, 759 (Minn.1981) (supporting spouse awarded lump sum equalling monies she spent toward student spouse's living and educational expenses); Hubbard v. Hubbard, 603 P.2d 747, 751-52 (Okla.1979) (supporting spouse entitled to lump-sum award in lieu of property to prevent unjust enrichment). Under certain circumstances, for instance where there is insufficient property to divide, other courts have provided "reimbursement alimony" or "rehabilitative alimony" awards rather than lump-sum awards. See, e.g., Saint-Pierre v. Saint-Pierre, 357 N.W.2d 250, 253 (S.D.1984) (court should award reimbursement alimony in proper case); cf. Mahoney v. Mahoney, 91 N.J. 488, 501-05, 453 A.2d 527, 534-36 (1982) (only issue at trial was reimbursement claim, but degree holder's earning capacity was held to be a factor in determining permanent alimony, which could be adjusted in future if actual earnings diverged greatly from court's estimate). These courts point out that a professional degree, unlike a vested pension whose value can be readily computed, provides nothing more than the possibility of enhanced earnings that may never be realized. See id. at 496-97, 453 A.2d at 531-32.

The majority of courts have found fertile, neutral ground between the approaches described above. These courts hold that a professional degree is not an asset subject to property distribution upon divorce, but, in the interest of justice and equity, fashion a maintenance award using the increased earning potential of the spouse with the degree as a relevant factor in determining an appropriate award. See, e.g., In re Marriage of Olar, 747 P.2d 676, 680-81 (Colo.1987) (en banc); Drapek v. Drapek, 399 Mass. 240, 246, 503 N.E.2d 946, 950 (1987); Stevens v. Stevens, 23 Ohio St.3d 115, 120, 492 N.E.2d 131, 135 (1986); DeWitt v. DeWitt, 98 Wis.2d 44, 60-61, 296 N.W.2d 761, 769 (1980); cf. Washburn v. Washburn, 101 Wash.2d 168, 176-79, 677 P.2d 152, 157-58 (1984) (en banc) (increased earning potential is a relevant factor in making maintenance award; no need to address "metaphysical" question of whether professional degree is property). According to these courts, an award of a lump sum would be based on speculative future earnings of the degree holder and amount to an improper attempt to apportion after-acquired property. See, e.g., DeWitt, 98 Wis.2d at 58-59, 296 N.W.2d at 768. Further, because a maintenance award is subject to later modification, in contrast to a property award, which may not be...