Kasser v. Kasser, 03-065.

• Decision Date: 06 January 2006
• Docket Number: No. 03-065.,03-065.
• Citation: 895 A.2d 134,2006 VT 2
• Court: Vermont Supreme Court
• Parties: Lawrence N. KASSER v. Eileen M. KASSER.

895 A.2d 134

2006 VT 2

Lawrence N. KASSER v. Eileen M. KASSER.

No. 03-065.

Supreme Court of Vermont.

January 6, 2006.

COPYRIGHT MATERIAL OMITTED

Matthew T. Birmingham, III of Birmingham & Moore, P.C., Ludlow, for Plaintiff-Appellee.

Martha M. Davis of Law Office of Martha M. Davis, Windsor, for Defendant-Appellant.

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

¶ 1. REIBER, C.J.

Wife Eileen M. Kasser appeals from the family court's final divorce order, which divided the parties' sizeable marital estate. The parties' wealth stems largely from hotel investments, title to which are held by husband Lawrence N. Kasser and various trusts. Husband and wife agreed that, in dividing the marital estate, the court should not liquidate the hotel properties, nor should it invade the trusts. The family court assessed the value of the hotel properties and the trusts, in addition to other assets, and determined the portion attributable to the marital estate. Wife argues that the court abused its discretion in determining the value of the marital estate, dividing the marital assets, and calculating maintenance. We affirm.

¶ 2. The family court made the following findings. Husband and wife were married in 1980. They have three children together, two of whom are in college, and one of whom, a minor, attends a private boarding school. Husband was born in 1943, and he was trained as an architect. Wife was born in 1949, and she holds a bachelor's degree in fine arts. The parties moved to Vermont in 1981. Since that time, with one small exception, wife has been a full-time homemaker. Between 1981 and 1988, husband worked as an architect. During this time, the parties enjoyed a modest lifestyle.

¶ 3. In 1987, husband began acquiring hotel properties. In 1988, husband received $1,400,000 from the sale of a family business, and he closed his architectural practice. In 1991, husband's father died. Husband's share of the estate, $750,000, was placed in the Lawrence Kasser Irrevocable Trust. This trust pays income to husband for life. When husband dies, the parties' children receive the income and, eventually, the principal. The parties also created irrevocable trusts in their children's names, and they regularly contributed the maximum amount allowed by law to each trust, i.e., $60,000 per year. After 1994, husband became more involved in the purchase of hotel properties. The parties' lifestyle improved, and they became affluent.

¶ 4. In late 1996, wife became disenchanted with husband and with her life in Vermont. She contemplated divorce. In the summer of 1997, she moved to Boston where husband and the parties' minor child later joined her. In June 1998, husband and child returned to Vermont. In February 1999, husband initiated divorce proceedings.

¶ 5. The family court held a five-day hearing and issued a lengthy final divorce order in January 2003. The court first assessed the value of eight hotel properties, relying heavily on testimony provided by husband's expert, whom it found credible. The court found that the first hotel property, referred to as the "Exit 6" property, was worth $60,000, and it was owned by the children's trusts. A second property, the Springfield Holiday Inn, was owned by a subchapter S corporation called Preferred Motor Inns of New England, Inc. (PMI). The children's trusts held 99% of the PMI stock, while husband owned 1%. The court found that the Springfield property was worth $1,400,000, and husband's 1% share was worth $14,000. Husband also owned a 50% share in a Holiday Inn in Weirton, West Virginia. This hotel had a net equity value of negative $1,170,000, and husband's 50% share was negative $585,000. The court also assessed the value of five additional hotel properties in which husband held a 50% interest.

¶ 6. Based on its findings, the court concluded that the full net equity value of the eight hotel properties was $7,499,000. Taking husband's 1% interest in the Springfield Holiday Inn into account, the court found that husband's interest in these hotels was $3,064,000. The court recognized that the parties sharply disagreed as to the value of husband's interests in the various hotel properties, particularly the effect of husband's 50% ownership. The court rejected husband's argument that his "minority" shares were without value, and instead found that husband's partial ownership diminished the present value of his interest by 25%-33%. The court thus found that husband's interest in the hotel properties was worth between $2,000,000 and $2,225,000.

¶ 7. The court turned next to the Lawrence Kasser Irrevocable Trust, which had a value of $850,000. The court found that husband received approximately $1250 per month in income from the trust, and he also used the trust as a source of borrowing for his hotel investments. The court explained that husband had a limited right to invade the principal of the trust for his benefit during his lifetime, but a prudent fiduciary would not exercise that right absent dire need, which appeared unlikely given husband's financial situation. Thus, because husband did not have an unlimited right to the principal, the court considered this asset as a source of income only. The court determined the value and ownership of numerous other assets, including a condominium in New York City and three condominiums in Vermont owed primarily by the children's trusts.

¶ 8. The court found that husband also had an investment account, called the Streamway Investment Account, with a value of $551,673. The bulk of the account's assets were in three promissory notes. One note had a face value of $200,000, but it did not pay interest and was not being amortized. A second note was from PMI for $250,000, which paid $2000 in monthly interest. A third note from the Falmouth Motel for $100,000 paid $1250 in monthly interest. The account also held a small investment in another entity, which had a value of $1784. The court found that, in total, husband received $3250 per month in interest from the Streamway account.

¶ 9. Based on extensive findings, the court concluded that the gross marital estate was worth approximately $3,160,000. The court arrived at this figure by adding together the diminished value of the hotel/motel properties ($2,100,000), the net value of the marital homestead ($285,000), husband's interest in a company called Vermont Teas ($30,000), husband's IRA accounts ($118,000), wife's IRA ($27,000), two cars ($15,000), the Streamway Investment Account ($551,500), husband's personal checking account ($5000), husband's interest in another business ($10,000), and a tractor ($20,000). The court considered this a somewhat flexible figure given the nature of the marital assets and the many variables inherent in the valuation process.

¶ 10. In reaching its conclusion, the court considered wife's assertion that the value of the PMI stock, the Exit 6 property, and the New York and Vermont condominiums held by the children's trusts should be considered marital assets. Wife argued that husband had transferred these assets to the children's trusts in fraud of her rights in the marital estate. The court rejected this argument and found that the establishment of the children's trusts, and the contributions to them and their management, had been prudent and not done with any purpose to deplete the marital estate. The court found that husband had faithfully contributed to these trusts the maximum amount allowed by the gift tax law, i.e., $20,000 per child or $60,000 per year. The court explained that wife was aware of the establishment of the children's trusts and was generally aware of the transactions taking place with respect to them. Based on these and other findings, the court found that husband's actions had been undertaken with the intent of wisely providing for the children's future while preserving a source of income and borrowing.

¶ 11. The court next considered how best to distribute the marital assets, mindful of the parties' stipulation that the assets not be liquidated nor the trusts invaded. In addition to other assets, the court awarded husband his interests in the hotel businesses and related entities, as well as his interests in the various trusts. Husband received the marital home, with a net value of $285,000. He was ordered to pay wife $345,000 to offset this award, which the court considered a partial division of the overall marital estate. Husband was also ordered to pay wife $300,000 as an additional distribution of cash in lieu of marital property, payable in ten annual payments of $30,000 at a 6% interest rate, plus interest on the unpaid balance at a rate of 6% per year. Husband was also ordered to buy wife a new car at a cost of $40,000, maintain health insurance for wife, and name wife as a beneficiary in his life insurance policy. Based on a pretrial stipulation between the parties, the court also ordered husband to pay the "reasonable" expenses of wife's financial expert. The court found that of the $37,465 that remained outstanding on the expert's bill, $20,000 was reasonable and should be paid by husband. The court held wife responsible for the balance.

¶ 12. The court turned next to maintenance. It found that the parties had enjoyed an affluent lifestyle and wife had no income other than the $3500 per month that husband was paying during the divorce proceedings. The court noted that husband had also been paying for all of wife's household expenses, including the mortgage, during this period, and thus the $3500 monthly payment had been available to wife solely for her personal needs. Based on numerous findings, the court concluded that, in light of its distribution of the marital estate, including the $712,000 awarded to wife ($345,000 in cash; $300,000 payable over ten years at 6% interest; her IRA worth $27,000; and a $40,000 car), and considering the factors set forth in 15 V.S.A. § 752, wife's reasonable needs, as...