Jones v. Jones, 20-P-1217

CourtAppeals Court of Massachusetts
Writing for the CourtSULLIVAN, J.
PartiesLISA M. JONES v. ANDREW D. JONES (and a consolidated case[1]) .
Docket Number20-P-1217
Decision Date14 September 2022

LISA M. JONES
v.

ANDREW D. JONES (and a consolidated case[1]) .

No. 20-P-1217

Appeals Court of Massachusetts, Norfolk

September 14, 2022


Heard: January 6, 2022.

Divorce and Separation, Modification of judgment, Separation agreement, Alimony, Child support. Practice, Civil, Declaratory proceeding, Contempt, Attorney's fees.

Complaint for divorce filed in the Norfolk Division of the Probate and Family Court Department on April 13, 2005.

Complaint in equity filed in the Norfolk Division of the Probate and Family Court Department on August 17, 2011.

After consolidation, a complaint for modification, filed on November 2, 2010, was heard by George F. Phelan, J.; a complaint in equity was heard by him; a complaint for contempt, filed on April 7, 2017, was heard by him; and a motion for attorney's fees, filed on May 30, 2019, was also heard by him.

Richard M. Novitch (Dea Ilia Coka &Gary Owen Todd also present) for the wife.

Gayle Stone-Turesky (Judith McKinnon &Svana Calabro also present) for the husband.

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Present: Green, C.J., Sullivan, &Henry, JJ.

SULLIVAN, J.

In this appeal from multiple judgments,[2] the wife raises numerous issues, namely (1) whether the husband's stock options, issued after the divorce, should have been treated as bonus income, once exercised, for purposes of alimony; (2) the propriety of the retroactive termination of the husband's alimony obligation; (3) whether income received from the exercise of stock options or preferred shares should have been considered for purposes of child support; and (4) whether the wife was in contempt and liable for payment of the husband's attorney's fees for applying to private schools for the children, and enrolling the children, without consulting with the husband.

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The primary issue on appeal is the meaning of the phrase "any manner of bonus" in the parties' separation agreement, which merged into the judgment of divorce nisi. We write today to emphasize what may be obvious -- the importance of clear drafting regarding the division of income, bonuses, stock options, and other forms of executive or deferred compensation in separation agreements.

Executive compensation is a complex topic, one which frequently arises in high-asset divorce matters. Executive compensation plans and agreements must take into consideration matters as diverse as executive retention, fair and competitive compensation, reporting obligations, tax considerations, and the desirability of the sale or the takeover of the company (or lack thereof). While the executive compensation agreements themselves may provide background relevant to an understanding of the terms of the separation agreement, and the parties' understanding of the compensation scheme at the time they negotiated the terms of their agreement, it is the intent of the parties to the divorce, not the intent of the company -- or even the labels attached to various forms of compensation by the company -- that ultimately governs. In this case, after a careful and thorough review, the judge found that by referring to "any manner of bonus" the parties did not include stock or

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stock options in the definition of "bonus."[3] That finding was fully supported by the evidence and did not constitute an error of law as to the definition of "bonus."

We also conclude that the judge did not abuse his discretion or err as a matter of law with respect to his treatment of the husband's alimony obligation, or with respect to the finding of contempt against the wife. However, because the parties may not define "bonus" in such a way as to limit the husband's obligation to pay child support, we remand for reconsideration of child support. Accordingly, we affirm in part and vacate in part.

Background.

We summarize the procedural history, reserving particular facts for later discussion. The parties were divorced by a judgment of divorce nisi dated April 11, 2006, which incorporated their separation agreement of the same date, the relevant provisions of which merged with the judgment. In November 2010, the wife filed a complaint for modification seeking increased support. In February 2011, the husband filed

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a counterclaim for modification, which he later amended, seeking a reduction in his support obligations.

In August 2011, the wife filed a complaint for declaratory relief seeking a determination whether $1 million received by the husband from a former employer was a bonus under the separation agreement, thus requiring him to pay fifteen percent to the wife as alimony and sixteen percent to the wife as child support. The husband counterclaimed in equity. The parties filed cross motions for summary judgment, and the judge entered summary judgment in favor of the wife, concluding that the $1 million received by the husband was a bonus and ordering the husband to pay $310,000 to the wife. The husband appealed, and a panel of this court vacated the judgment and remanded for further proceedings in an unpublished decision, concluding that summary judgment was inappropriate as there was a triable issue of fact as to the meaning of the word "bonus" because the word "bonus" as used in the separation agreement, as well as the dictionary definition of the word "bonus," were ambiguous. The panel instructed that the parties could submit extrinsic evidence of intent. See Jones v. Jones, 87 Mass.App.Ct. 1110 (2015).[4]

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The parties also filed complaints for contempt, which were consolidated with the modification action and the declaratory relief matter. The trial commenced in May 2017. On May 3, 2019, the judge issued findings and four separate judgments that, among other things, (1) declared that the agreement's bonus provision did not apply to stock or stock options, and pertained only to "performance-based incentive payments"; (2) retroactively terminated the husband's alimony obligation, prospectively increased his child support obligation, and eliminated his obligation to contribute to the children's college funds; and (3) adjudicated the wife guilty of contempt for enrolling the parties' children in private school and ordered her to pay the husband's attorney's fees in connection with that contempt complaint. This appeal followed.

Discussion.

1. Bonus.

a. Facts.

We summarize the judge's factual findings, supplemented by the evidence in the record consistent with those findings. During the marriage, the parties enjoyed a lifestyle the husband described as middle income and the wife described as upper income. The wife did not work during the marriage but returned to work after the divorce as a project manager at a large professional services company.

The judge found that both parties were able to maintain their previous lifestyle, however characterized.

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During the marriage, the husband worked at several companies where his compensation consisted of base salary, cash bonuses, and stock options. The separation agreement provided, in relevant part, that the husband would pay $900 in alimony per week and $334 in child support per week, along with additional child support and alimony equivalent to "[thirty-one percent] of the gross amount of any manner of bonus paid by his employer, to him, within [ten] days of his receipt of said payment, [sixteen percent] as child support and [fifteen percent] as alimony."[5]The phrase "any manner of bonus" was not defined in the agreement.

The parties negotiated the alimony and child support provisions, including the bonus provision, of the separation agreement over many months starting in 2005 and culminating from January 2006 to April 2006. Written proposals were exchanged. The judge found, and the record supports the finding, that the husband objected at every turn to including in the bonus provision any interest in stock options that were granted after the separation.[6] The wife requested a percentage of any "income

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allotment" going forward as child support. The husband rejected this proposal. The wife also proposed that she receive a percentage "of any manner of bonus, incentive payment or other type of lump sum payment by his employer, to him." The husband instructed his lawyer that he would agree to pay alimony and child support on cash bonuses and not on any other form of compensation, based on his belief (or desire) that options granted or exercised after the separation were earned by him alone and not attributable to the marriage.[7] In each instance, the language was removed. As previously noted, the final language in the separation agreement provided only for division "of any manner of bonus."

In 2007, approximately one year after the divorce, the husband signed an offer letter with Integrity Interactive Corporation (Integrity), which provided for $200,000 in annual

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compensation, a bonus of up to forty percent of his salary, and incentive stock options. He signed a stock option agreement, which granted him an option to purchase 106,883 shares of common stock. The stock options were subject to an accelerated vesting schedule if Integrity was sold or merged, and the husband was, with some exceptions, required to exercise those options within three months of the termination of his employment.

In 2010, Integrity's chief executive officer, Thomas Anderson, endeavored to increase the husband's compensation to make up for a perceived inadequacy in the husband's initial grant of stock options. At the time that assessment was made, however, Integrity was in the process of being sold, thus preventing the grant of additional stock options.[8] Anderson prepared a board presentation that proposed to give the husband "additional compensation" in the event of the sale of the company within six months. The additional compensation was described as a severance package, as the acquiror had its own management team and the husband would lose his job. The package included a "one-time severance payment" of $1...

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