Lee v. Andochick

• Decision Date: 03 October 2008
• Docket Number: No. 2598, Sept. Term, 2006.,2598, Sept. Term, 2006.
• Parties: Keith A. LEE v. Lori L. ANDOCHICK.
• Court: Court of Special Appeals of Maryland

957 A.2d 1038

182 Md. App. 268

Keith A. LEE v. Lori L. ANDOCHICK.

No. 2598, Sept. Term, 2006.

Court of Special Appeals of Maryland.

October 3, 2008.

Jerrold A. Thrope (Sheila K. Sachs, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, on brief), Baltimore, for Appellant.

Vincent M. Wills (Patrick W. Dragga, on brief), Rocville, for Appellee.

Panel: SALMON, CHARLES E., MOYLAN, JR., Ret. Specially Assigned, and RAYMOND G., THIEME, JR., Ret. Specially Assigned, JJ.

SALMON, J.

Keith A. Lee, appellant, has a projected salary for 2006 of $1,760,282.00 annually and, after taxes, a net income of $998,000.00. Appellee-cross-appellant, Dr. Lori Andochick, a dentist, grosses $267,000.00 per year. Her after-tax income (without alimony) is approximately $203,300.00 per year.¹

After a trial in the Circuit Court for Frederick County, the court granted Dr. Andochick an award of 1) indefinite alimony in the amount of $10,000.00 per month starting January 1, 2007; 2) child support in the amount of $15,000.00 per month; 3) a monetary award of $1,250,000.00 payable at the rate of $250,000.00 per year for five years; and 4) attorney's fees of $150,000.00. Additionally, Mr. Lee was ordered to pay for the cost of his children's private school, including tuition, transportation, lunch, fees, and cost of extracurricular activities, which amounts to about $2,200.00 per month.

Under ordinary circumstances, requiring Mr. Lee to pay alimony and support payments totaling $326,400.00 a year might seem reasonable in light of his large annual income. But a factor that clouds the issue is the fact that he is burdened with almost $6,000,000.00 in debt and is required to pay over $635,000.00 annually in principal and interest on that debt.

For the reasons spelled out below, the judgment entered by the circuit court will be affirmed in part, reversed in part, vacated in part, and the case shall be remanded to the Circuit Court for Frederick County for further proceedings consistent with the views expressed in this opinion.

I.

The parties married in October 1993, separated in May 2004, and were granted a judgment of absolute divorce on January 12, 2007. Two children were born of the marriage: Alexander, born July 10, 1995, and Olivia, born May 13, 1997. Since the commencement of the marriage, Mr. Lee has been employed by an investment firm known as "Brown Capital Management" ("Brown Capital"), a subchapter S corporation headquartered in Baltimore, Maryland. Mr. Lee was hired by Brown Capital in 1991 to create a division that would invest in small companies, on behalf of clients of Brown Capital. When he was hired in 1991, Mr. Lee was offered a choice as to how he would be compensated. The first option was to have an "industry competitive salary" and cash bonus each year. The second option was to be paid a "livable" wage which would be just enough money to pay his mortgage, feed his family, and cover his travel expenses. But if he chose the latter option, Mr. Lee would also receive a percentage of revenues generated by Brown Capital. Mr. Lee selected the second, more risky, option. His starting salary was $50,000.00. He was also offered, and accepted, an "entrepreneurial" option, which allowed him the right to purchase 5% of the stock of Brown Capital at a later date.

About two years after the parties were married, in 1995, Brown Capital's business started to grow at a fast pace and the corporation began to acquire significant assets. Mr. Lee was offered the right to purchase another 5% of stock in Brown Capital. It was not, however, until 1999 that Mr. Lee exercised his options and purchased 10% of the corporation's stock. The purchase price for the stock was $837,500.00. To finance the purchase, he borrowed $670,000.00 from Eddie C. Brown, the chief stockholder of Brown Capital and its major-domo. A promissory note, evidencing this debt, required Mr. Lee to make quarterly payments to Mr. Brown of $17,365.43 through January 1, 2006, when the entire balance was to come due.

Mr. Lee acquired an additional 2,650 shares of Brown Capital in the period between 2000 and 2002. And, on September 30, 2003, he signed an agreement to buy 3,350 shares of the company for $2,696,750.00. The agreement provided that Mr. Lee was to pay $539,350.00 at the time that the agreement was signed, with the remaining principal and interest to be paid in five annual installments of $431,480.00. The terms of this agreement were later changed so that Mr. Lee was obligated to make a balloon payment of $2,013,573.00 on September 30, 2011, in lieu of annual installments. The revised interest due under this last mentioned note is $7,031.00 per month.

Mr. Lee's stock in Brown Capital was worth, as of the date of the divorce, $6,272,000.00. Currently, Mr. Lee owes Mr. Brown $2,506,869.00 on two promissory notes and, due to his stock purchases, he also owes Harbor Bank an additional $574,081.00. After subtracting the monies borrowed to make the stock purchases, the marital property value of the stock in Brown Capital was $3,191,050.00 as of the date of the divorce.

Currently Mr. Lee owns 16% of the stock in Brown Capital. His wages since 1999 have been: 2006: $1,760,282 [projected]; 2005: $2,336,631; 2004: $3,466,681; 2003: $2,526,512; 2002: $4,339,411; 2001: $2,769,815; 2000: $2,503,049; 1999: $1,346,539.

Mr. Brown testified that from the end of 2004 to the end of 2005 there had been approximately a 50% drop ($5,278,000,000.00 to $2,636,000,000.00) in the dollar amount of money invested by Brown Capital. Brown Capital lost "a number of clients" during that period and also lost the assets represented by those clients in that one-year period. The reason for the loss of clients was because Brown Capital's performance relative to that of other money managers did not meet certain industry benchmarks.

In regard to the issue of what income could be expected in the future, the trial judge in his written opinion said:

Mr. Brown testified that in the past few years [Brown Capital] has been less successful than it had been previously. He attributes the trend to a combination of factors: under performance of managed assets as compared to benchmarks i.e., Standard and Poors Index, a loss of clients and concomitant reduction in assets under management. He produced company records which demonstrate a downward trend.

[Mr. Lee's] compensation is determined by calculating 20.5% of fees generated by the Small Company Investment Services unit of BCM and 1.5% [of] fees generated by mid/large capitalization mutual funds. Mr. Brown testified that he granted the latter to [Mr. Lee] as an extra benefit to him. Those fees have diminished consistently in 2004 and 2005.

[Mr. Lee] attributes some of the decrease in income to his preoccupation with the pending divorce proceeding. He has deferred the filing of his 2005 income tax return, and the evidence he submits regarding that income is somewhat vague. However the court can ascertain that in 2005 he earned $468,061.00 in dividend distributions. His expert witness calculated his 2006 gross income will be $1,760,282.00.

Dr. Andochick finished dental school in December 1990. She was immediately hired by a small dental practice outside of Charlottesville, Virginia. After her 1993 marriage, Dr. Andochick regularly commuted from the home she and Mr. Lee shared in Frederick, Maryland to Charlottesville, Virginia. She would leave on Monday morning and drive to Charlottesville and stay with friends in that town until Thursday. She would then return to Frederick on Friday evening.

About two years after the parties were married, Dr. Andochick accepted an offer from her father to join his dental practice in Frederick. Since the fall of 1995, Dr. Andochick has continued to practice dentistry with her father. As of the date of trial, she works 32 hours per week and earns $267,000.00 annually.

Both of the parties are 46 years of age and are in good health. During the marriage, they enjoyed an "extravagant" lifestyle. The trial judge summarized his "lifestyle findings" as follows:

The parties enjoyed a very high standard of living in the later part of their marriage as their wealth increased. During the years between 1999 and 2004, they jointly earned between $2.7 million and $3.6 million annually. They bought a mansion and spent great sums of money on its expansion. They went on extravagant vacations and traveled by private jet. They enjoyed their trips to Bermuda to such an extent that they seriously considered buying a vacation home there. The children are enrolled in private school and various extracurricular activities. The parties employed domestic help; [Dr. Andochick] has had at least one in-home assistant daily to assist with household maintenance and the transporting of children. They own four motor vehicles of substantial value.

II. Construction of and Improvements to the Marital Home

The marital home mentioned in the excerpt just quoted is located at 7700 Fingerboard Road in Frederick County. The home was completed in March 1998 on property that was purchased, pre-marriage, by Mr. Lee. The home as originally built was huge, containing almost 7000 square feet above grade and a 5000 square-foot basement together with an 1100 square-foot garage. Construction on the marital home was financed with two loans. The first loan, evidenced by a note signed by both parties on March 8, 1996, was in the original amount of $875,000.00 and was secured by a thirty-year first mortgage payable to M & T Bank. As of the date of trial, $759,831.00 was due on that loan. The second loan was made by Harbor Bank and has a current balance of $165,970.00; it is secured by a fifteen year mortgage on the marital home. This second loan was obtained in Mr. Lee's name alone. Even though the marital home, as constructed, was a true "show place," the parties elected to make additional renovations and improvements. In 2002 they initially planned to add a pool,...