Golden v. Cooper-Ellis

• Citation: 2007 VT 15,924 A.2d 19
• Decision Date: 02 March 2007
• Docket Number: No. 05-065.,No. 05-169.,05-065.,05-169.
• Parties: Jo-Ellen GOLDEN (Cooper-Ellis) v. Peter COOPER-ELLIS.
• Court: United States State Supreme Court of Vermont

924 A.2d 19

2007 VT 15

Jo-Ellen GOLDEN (Cooper-Ellis) v. Peter COOPER-ELLIS.

No. 05-065.

No. 05-169.

Supreme Court of Vermont.

March 2, 2007.

Katherine A. Hayes, J.

Jeremy Dworkin, South Londonderry, for Plaintiff-Appellee and Cross-Appellant.

Bettina V. Buehler of McCarty, Buehler & Bixby, P.C., Brattleboro, and Jill Hersh of Hersh Family Law Practice, San Francisco, California, for Defendant-Appellant and Cross-Appellee.

Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.

DOOLEY, J.

¶ 1. Husband Peter Cooper-Ellis appeals from both the final divorce order dividing the parties' marital estate and orders denying his subsequent motion to modify spousal maintenance and child support. Husband makes numerous contentions of error. Most significantly, he claims that the family court erred when it included all of his unvested stock options in the marital estate. Husband also claims that the court erred in its (1) determination of the present value of his unvested stock options at the date of trial, (2) division of the assets of the marital estate based on outdated valuations, (3) finding that he had an interest attributable to the marital estate in a residence he co-owned with his brother, (4) setting his maintenance and support obligations on annual income levels contrary to previous findings, and (5) denial of his motion to modify the spousal maintenance and child support awards. We affirm.

¶ 2. The parties were married on July 31, 1986, and have three children, Molly, Jonathan, and Andrew, born in the marriage. Husband also has an adult daughter from a prior marriage, and a baby daughter born to his current partner with whom he resides in California. Although the determination of the actual date of separation is complicated by the fact that husband has been employed in California since 1999 while wife has continued to reside in Vermont, the family court found that the parties permanently separated, with no attempt to resume married life, in April 2002.

¶ 3. At the time the parties met and began their marriage, both were employed and earning similar salaries. When the children were born, wife originally continued working full-time and then worked part-time until the spring of 1995 when she remained at home as their primary care-giver. The parties' oldest child, Molly, suffers from Smith-Meginis Syndrome, which is untreatable. Molly is also diagnosed as mildly retarded, and she has difficulty regulating her temper and is physically aggressive. The parties have agreed that wife will continue to be Molly's primary caregiver; Molly, now eighteen years old, has a normal life-expectancy. Jonathan, now seventeen years old, moved to California and resides there with husband. Andrew is thirteen years old and continues to reside with wife in Vermont.

¶ 4. Husband lives in California and is currently employed by BEA Systems as executive vice-president of engineering. The family court found husband's total annual income excluding stock options to be $430,000. Central to this dispute, however, the family court found that a significant part of husband's income is provided to him through stock options in his employer's company, and the court made findings of the income husband receives from the exercise of those options and the value of those options. The court's apportionment of the option shares constitutes the most litigated aspect of the divorce.

¶ 5. Husband's employer provided him with groups of stock options on twenty-three occasions from September 16, 1997 to the end of trial. The options are a central, if irregular, part of husband's compensation package. The options cannot be exercised immediately. Under the 1997 stock option plan adopted by the company, which generally applied after that date, twenty-five percent of the amount could be exercised at the one year anniversary of the date of the grant. At each monthly interval thereafter 1/48th of the amount could be exercised until all are accounted for at the four year anniversary. All options must be exercised within ten years of the date they are granted. For purposes of analysis, we refer to options that can be exercised as "vested."

¶ 6. Husband can exercise the options only if he is an employee of BEA Systems on the date of exercise. The options consist of both nonqualified options, which are transferable, and incentive options, which are nontransferable and taxed at a much lower rate than nonqualified options. Option exercise prices range from $3.45 per share to $62.13 per share. At the time of the divorce hearing, some vested options were underwater — that is, the price at which husband could purchase the stock was higher than the market value price — so exercising those options would bring no benefit. The period remaining for exercise of those options not yet exercised ranged at trial from three and one-half years to nearly ten years.

¶ 7. As of March 29, 2004, husband had been awarded stock options to purchase 953,100 shares of BEA Systems stock and had exercised options as to 267,352 of these shares, leaving options for 685,748 shares unexercised. Options for 308,132 of the remaining shares were vested, although many were underwater, and husband had between three and one-half and ten years to exercise these options depending on when they were granted. The rest — options on approximately 375,000 shares — remained unvested. From 2000 to 2004, husband received nearly $6,000,000 in profit from acquiring the stock pursuant to the options. His average annual income from the exercise of stock options has been $1,191,838.

¶ 8. At the conclusion of the final hearing, the family court issued a lengthy order. Ultimately, the court divided the value of the marital estate assets equally between the parties. It also set forth a child support order and an order for husband to pay wife spousal maintenance. The specifics of the contested issues are outlined below. The most contested is the family court's inclusion of all of husband's stock options, including the options that had not vested at the time of the final hearing, in the marital estate for equitable division.

I. Stock Options

¶ 9. Husband argues that the family court erred in awarding wife one-half of his employee stock options that were unvested at the time the parties separated. He stipulates that some portion of the unvested options may be considered marital property, but argues that the portion that is marital property must be attributable to his work during the marriage and most of the stock options were awarded for work in the future. He argues that the family court should have divided the options according to a "time rule" designed to determine what portion of the options can be included in the marital estate and what part are his separate property. Additionally, he argues that no options awarded after the date of separation should be considered marital property.

A.

¶ 10. We start with husband's second argument and address whether the family court erred by including in the marital estate options acquired between the date of the parties' separation and the date of the final divorce hearing. The governing statute regarding the distribution of marital assets requires that "[a]ll property owned by either or both of the parties, however and whenever acquired, . . . be subject to the jurisdiction of the court." 15 V.S.A. § 751(a) (emphasis added). Assets are normally valued for distribution as of the day of the final divorce hearing, regardless of whether they were acquired during or after the parties separated. Hayden v. Hayden, 2003 VT 97, ¶ 8, 176 Vt. 52, 838 A.2d 59; see also Nuse v. Nuse, 158 Vt. 637, 638, 601 A.2d 985, 986 (1991) (mem.) (upholding court's inclusion of house acquired after separation as marital asset subject to division); Bero v. Bero, 134 Vt. 533, 535, 367 A.2d 165, 167 (1976) (affirming inclusion of tort settlement received after divorce was filed as marital asset). Nothing in the statutory wording suggests that the court's jurisdiction to divide property of the parties extends only to property owned as of the date the parties separated. Thus, the family court acted within its discretion in considering stock options received by husband after the date of separation and including them in the marital estate for division.

¶ 11. Husband's argument on this point is linked to his primary argument that the family court should have included as marital property only part of the unvested stock options, and that the appropriate cut-off date for purposes of an allocation formula is the date of separation. For this argument, as well as his larger argument, husband draws from our pension cases which have sometimes used the date of separation as a temporal dividing line. See, e.g., Russell v. Russell, 157 Vt. 295, 305, 597 A.2d 798, 804 (1991). Russell is based on the determination in that case that the date of separation was the "date . . . most reflective of the functional end of marriage." Id.

¶ 12. In Hayden, we explained that Russell dealt with how to apportion pension funds, and not the definition of marital property, and in any event, set no hard and fast rule. Hayden, 2003 VT 97, ¶¶ 12-13, 176 Vt. 52, 838 A.2d 59. That caution about the use of Russell is particularly applicable here. Apparently because of the overall performance of BEA Systems, the company did not award stock options for an extended period, and many of the options it had awarded were underwater. In part to make up for these shortfalls, it awarded substantial options between the date the family court determined that the parties "separated" and the date of dissolution of the marriage. Using the date of separation as a cut-off date would fail to capture as marital property a significant part of husband's compensation for the marital period. See, e.g., Pascale v. Pascale, 140 N.J. 583, 660 A.2d 485, 498 (1995) (stock options awarded after termination of marriage were properly included as marital...