Garcia v. Mayer
| Decision Date | 07 May 1996 |
| Docket Number | Nos. 16663,16817,s. 16663 |
| Citation | 920 P.2d 522,1996 NMCA 61,122 N.M. 57 |
| Parties | Kimberley GARCIA, f/k/a Kimberley Mayer, Petitioner-Appellee, v. Michael J. MAYER, Respondent-Appellant. |
| Court | Court of Appeals of New Mexico |
1. Michael Mayer (Husband) appeals from two judgments arising from the dissolution of his marriage to Kimberley Garcia (Wife). The dispute on appeal centers on certain stock options granted Husband by his
employer, Qual-Med, Inc. He contends that (1) the parties' Marital Settlement Agreement awarded him the stock options, (2) even if the stock options were not addressed by the Martial Settlement Agreement, they were his separate property, and (3) even if the marital community had an interest in the options, the district court improperly calculated the extent of that interest. In addition, Husband challenges the district court's awards of prejudgment interest and attorney's fees. We affirm.
2. On January 7, 1992 Husband and Qual-Med entered into a non-qualified stock option agreement. The agreement provided Husband with options to purchase 12,500 shares of Qual-Med stock at a price of $14.875 per share. His right to exercise the options vested in installments. The right to purchase 2500 shares vested one year from the date of the agreement, on January 7, 1993. Options to purchase additional increments of 2500 shares vested on each of the following four anniversary dates. Once the right to exercise an option vested, the right could be exercised during the following three years.
3. On August 27, 1993 the parties were divorced. At that time options to purchase 2500 shares had vested. There is no dispute regarding the interests of the parties in those options, because they were specifically addressed in the Marital Settlement Agreement incorporated into the final decree of divorce.
4. The day after entry of the decree, Qual-Med signed a merger agreement with another corporation. As a result of the merger, the remaining options to purchase 10,000 shares vested as of August 28, 1993. Also, the market price of Qual-Med stock increased dramatically--from $14 a share to as high as $32 a share. Husband exercised the options to purchase 10,000 shares and then sold the shares at a profit. Upon learning that Husband had exercised at least some of the options, Wife petitioned the district court to declare that Husband held half of the options in trust for her and that Husband should pay her accordingly.
5. Husband contends that the Marital Settlement Agreement unambiguously distributed the unvested stock options to him and that Wife waived her right to any of the options. Wife, on the other hand, contends that the document itself is ambiguous and that the evidence at trial established that the agreement did not address the unvested options.
6. Whether an agreement contains an ambiguity is a question of law. Mark V, Inc. v. Mellekas, 114 N.M. 778, 781, 845 P.2d 1232, 1235 (1993). We determine that the Marital Settlement Agreement is ambiguous with respect to whether it distributes the unvested options.
7. Several provisions of the agreement are pertinent. The introductory paragraphs contain the following sentence:
[Wife] and [Husband] by their signatures below have stipulated that they have separated and are incompatible, that they have considered all their rights and duties with respect to support, property, debts, and other matters, and that this Agreement is a complete and fair settlement of all rights and obligations arising out of their marriage.
The section disposing of personal intangible property includes the following language:
The personal intangible property of each of the parties is hereby described and set over unto each party as follows:
1. To [Wife], as her sole separate property, the following:
....
e. One half of [Husband's] vested stock options, or 1,250 shares.
2. To [Husband], as his sole separate property, the following:
....
c. One half of [Husband's] vested stock options, or 1,250 shares.
3. [Wife] waives all other claims to [Husband's] pension and retirement investments and PTO [paid time off].
The release paragraph states as follows:
Each party is released and absolved from any obligations to the other except those obligations arising out of this Agreement, and each releases the other from any liabilities, debts or obligations of any kind incurred by the other and from any claims or demands except those arising out of this Agreement. Each party relinquishes any right, title or interest in or to any earnings, accumulations, future investments, money or property of the other party except as contained herein.
8. Although the agreement purports to settle "all rights and obligations arising out of [the] marriage," it omits any mention of the unvested options. There are at least four possible reasons for the omission: (1) the parties intended the options to remain in Husband's hands; (2) they assumed that the unvested options were Husband's separate property and did not need to be addressed by the agreement, (3) the omission was an oversight, or (4) they were unable to agree on how to dispose of the unvested options and therefore left the matter for future resolution. The introduction and disposition provisions of the agreement do not resolve the intent of the parties on the matter.
9. Husband contends that any ambiguity is removed by the provision that "[e]ach party relinquishes any right, title or interest in or to any earnings, accumulations, future investments, money or property of the other party except as contained herein." That language, however, is itself ambiguous. Husband argues that he retains all rights to the options because the options constituted "earnings" and the provision relinquished any interest Wife may have in his earnings. Yet one could just as well refer to the options as "property." If "property of the other party" means "separate property of the other party"--a reasonable construction of the language--then the release provision has no application to the community's interest in the unvested options. We hold that the language within the Marital Settlement Agreement is insufficient in itself to resolve the ambiguity.
10. Husband's reliance on Pacheco v. Quintana, 105 N.M. 139, 730 P.2d 1 (Ct.App.1985), cert. quashed, 105 N.M. 94, 728 P.2d 845 (1986), is misplaced. The marital settlement agreement at issue in Pacheco provided that the husband would "retain the balance of the community property as his sole and separate estate," with certain enumerated exceptions. Id. at 140, 730 P.2d at 2. That language unambiguously provided for the disposition of any community property not specifically divided by the agreement. Id. at 142, 730 P.2d at 4. The language before us on this appeal is not nearly as precise in this regard.
11. Because the Marital Settlement Agreement is ambiguous, its meaning is a question of fact. Mark V, 114 N.M. at 781-82, 845 P.2d at 1235-36. In this case the trial judge acted as the finder of fact; if her findings are supported by substantial evidence, we must affirm. See Baker v. Benedict, 92 N.M. 283, 287, 587 P.2d 430, 434 (1978). We need not set forth the evidence she relied upon. Suffice it to say that the testimony and documentary evidence regarding the negotiation of the agreement would support a determination by a reasonable person that division of the unvested options was not resolved by the agreement. We therefore affirm the district court's decision to divide the unvested options without reference to the agreement.
12. The failure of the Marital Settlement Agreement to apportion the unvested options does not mean that Wife was entitled to an interest in the options. She had an interest in the options only if they were, at least in part, community property. Husband contends that the unvested options were his separate property. We disagree.
13. At the time of the divorce decree Husband had no right to exercise any of the unvested options. Nevertheless, his stock option agreement with Qual-Med conferred a contingent benefit. Part of the labor necessary to earn the ultimate benefit (the vested options) had been performed by Husband during the marriage. The fruit of a spouse's labor before divorce is community property. See Irwin v. Irwin, 121 N.M. 266, 269, 910 P.2d 342, 345 (Ct.App.1995); DeTevis v. Aragon, 104 N.M. 793, 798, 727 P.2d 558, 563 (Ct.App.1986).
14. We have previously held that a contingent benefit may be marital property even if it has no value at the time of the divorce. See Berry v. Meadows, 103 N.M. 761, 767, 713 P.2d 1017, 1023 (Ct.App.1986). InBerry the husband had worked for his employer for four years prior to the divorce. The employer provided retirement benefits, but they would not vest until Husband had worked for the employer for ten years. We stated: "When a substantial portion of the time and labor of a spouse has been expended during marriage to obtain retirement benefits but the right in retirement benefits has not yet vested, the worker has still accrued a valuable right in a contingent benefit." Id. at 766, 713 P.2d at 1022.
15. Likewise, although Husband would not have a vested right in the options unless he continued to work for Qual-Med after dissolution of the marriage, his contract with Qual-Med provided "a valuable right in a contingent benefit." We therefore hold that the community had an interest in the unvested options to the extent that the ultimate vested rights were earned by Husband's labor during marriage.
16. We recognize that some other jurisdictions have held that stock options not vested at the time of divorce cannot be marital property. See Hann v. Hann, 655 N.E.2d 566 (Ind.Ct.App.1995); Hall v. Hall, 88 N.C.App. 297, ...
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