Marriage of Jones, In re, 90SC22

• Citation: 812 P.2d 1152
• Decision Date: 17 June 1991
• Docket Number: No. 90SC22,90SC22
• Parties: In re MARRIAGE OF David JONES, Petitioner/Cross-Respondent, and Patricia L. Jones, Respondent/Cross-Petitioner.
• Court: Supreme Court of Colorado

Page 1152

812 P.2d 1152

60 USLW 2107

In re MARRIAGE OF David JONES, Petitioner/Cross-Respondent,

and

Patricia L. Jones, Respondent/Cross-Petitioner.

No. 90SC22.

Supreme Court of Colorado,

En Banc.

June 17, 1991.

Barry D. Roseman, Denver, for petitioner/cross-respondent.

Mygatt & Bratun, Juliana J. Bratun, Boulder, for respondent/cross-petitioner.

Justice ERICKSON delivered the Opinion of the Court.

We granted certiorari to review In re Marriage of Jones, 791 P.2d 1173 (Colo.App.1989). In this dissolution of marriage proceeding, the court of appeals held that the increase in value of a discretionary trust, which named the wife as a beneficiary, was not marital property, but that income derived from the trust during the marriage was marital property. We granted certiorari to review the court of appeals holding and on the issue of whether the wife's status as a beneficiary of the trust should be considered an economic circumstance in dividing the marital property. We affirm in part, reverse in part, and remand with directions.

The marriage of Patricia and David Jones was dissolved in July 1987, after twelve years. The only disputed issue in this dissolution proceeding was the division of marital property. During their marriage, the wife became a beneficiary of a testamentary trust created by the will of Lois M. Distel, the wife's mother (Distel trust). The named trustees were the wife's father, Joseph A. Distel, and the First National Bank of Boulder, Colorado. The trustees had uncontrolled discretion to distribute income and principal from the trust to Joseph Distel, the wife, or to the wife's descendants for expenses that the trustees determined to be necessary for their "health, welfare, comfort, support, maintenance and education." The trust was to terminate upon the death of both Joseph Distel and the wife, ¹ and the trust proceeds were to be distributed to the wife's descendants, if any, otherwise to Lois Distel's heirs.

When originally funded, the trust corpus was valued at $118,378.93. That value increased to $160,519.52 by November 1987, when the judgment and permanent order dividing the Jones' marital property was issued by the district court. During her marriage to David Jones, the wife received approximately $38,000 in income from the trust.

In June 1981, Joseph Distel purchased a house in Lafayette, Colorado, for $138,500. Shortly thereafter, the wife and husband moved into the Lafayette house rent free. The couple extensively remodeled the house, both devoting a substantial amount of their own time and physical labor to that renovation. The wife paid for the materials, using the $38,000 she received from the trust. In March 1983, after the renovations were substantially complete, Joseph Distel deeded the house to the wife as her sole and separate property, subject to two deeds of trust and a promissory note. At that time, the house had increased in value to between $160,000 and $177,000. From March 1983 until the date of the decree of dissolution, July 30, 1987, the value of the house appreciated another $15,000.

The trial judge valued the marital estate at $55,000, and ordered distribution of 55% to the wife and 45% to the husband. The court found that neither the increase in the value of the trust corpus nor the increase in value of the Lafayette house between 1981 and March 1983 was marital property.

The court of appeals affirmed the trial court's finding that the increase in value of the trust was not marital property. 791 P.2d at 1174-75. The court said, however, that the income received by the wife from the trust was marital property, and because those payments had primarily been used to renovate the house, the increase in the value of the house based on those renovations was marital property subject to division. Id. at 1175-76. ² We granted the husband's petition for certiorari on the issues of whether the appreciation in value of the trust corpus was marital property, and whether the wife's interest in the trust was an economic circumstance. We granted the wife's cross-petition for certiorari on the issue of whether income from the trust was marital property.

I

The husband claims that the court of appeals erred in holding that the appreciation in value of the trust corpus during the marriage was not marital property.

Colorado's Uniform Dissolution of Marriage Act, §§ 14-10-101 to -133, 6B C.R.S. (1987 & 1990 Supp.), distinguishes marital and separate property. § 14-10-113. Under section 14-10-113(2), all property acquired by either spouse subsequent to the marriage is considered marital property except:

(a) Property acquired by gift, bequest, devise, or descent;

(b) Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent;

(c) Property acquired by a spouse after a decree of legal separation; and

(d) Property excluded by valid agreement of the parties.

Section 14-10-113(1) requires an equitable distribution of marital property, regardless of fault, after all relevant factors are considered, including the contributions of each spouse, the value of property set apart to each spouse, the economic circumstances of each spouse, and any increase, decrease, or depletion in the value of any separate property during the marriage. See Carlson v. Carlson, 178 Colo. 283, 497 P.2d 1006 (1972); In re Marriage of McGinnis, 778 P.2d 281 (Colo.App.1989). Separate property acquired either before the marriage, or under subsections 14-10-113(2)(a) or (b), however, is considered marital property, and thus divisible, only to the extent that "its present value exceeds its value at the time of the marriage or at the time of the acquisition if acquired after the marriage." § 14-10-113(4); see In re Marriage of Campbell, 43 Colo.App. 72, 599 P.2d 275 (1979).

Both parties agree that the trust corpus is not marital property and thus not divisible between them. The husband, however, argues that the trust is separate property under subsection 14-10-113(2)(a), and that the increase in value of the trust corpus during the marriage is marital property subject to division. Although any appreciation in the value of separate property during a marriage is marital property under section 14-10-113, we have said that "there are necessary limits upon what may be considered 'property.' " In re Marriage of Graham, 194 Colo. 429, 432, 574 P.2d 75, 76 (1978).

In Graham, we said that a college degree, while a relevant factor in determining the proper division of property, was not itself "property," either marital or separate. Id. at 432-33, 574 P.2d at 77-78. "An educational degree, such as an M.B.A., is simply not encompassed even by the broad views of the concept of 'property.' It does not have an exchange value or any objective transferable value on an open market.... It cannot be assigned, sold, transferred, conveyed, or pledged." Id. at 432, 574 P.2d at 77. See also Menor v. Menor, 154 Colo. 475, 482, 391 P.2d 473, 477 (1964) (husband's insurance policy with no cash surrender value was not an asset subject to division as "property").

In In re Marriage of Rosenblum, 43 Colo.App. 144, 602 P.2d 892 (1979), the court of appeals rejected the argument now asserted by the husband. In Rosenblum, the husband, while married, was named both a beneficiary and a co-trustee for a trust created by the husband's mother. Id. at 145, 602 P.2d at 893. During the marriage, the trust increased in value from $200,000 to $3,500,000, and the wife claimed that the increase was marital property subject to division. Id. The court of appeals rejected that argument, concluding that the husband's rights in the trust were not "property" for purposes of section 14-10-113. Id. at 147, 602 P.2d at 894. As here, the trustees in Rosenblum were given absolute discretion to distribute all, any, or none of the trust income or principal, and, so long as the husband was a trustee, no income or principal could be distributed to him in excess of that necessary for his health, education, support, or maintenance.

Although a beneficiary of such a discretionary trust does have rights therein, those rights are merely an expectancy and do not rise to the level of property....

Husband's rights in the trust have no cash surrender, loan, redemption, or lump sum value, and no value realizable after death. Neither could the corpus or income of the trust be reached by his creditors until a distribution occurred.

Rosenblum, 43 Colo.App. at 146, 602 P.2d at 894 (citations omitted).

The court of appeals in Rosenblum relied in part on Ellis v. Ellis, 191 Colo. 317, 552 P.2d 506 (1976), which held that future payments of military retirement pay were not "property" for purposes of section 14-10-113. While acknowledging its applicability, the husband here argues that Rosenblum was overruled by In re Marriage of Gallo, 752 P.2d 47 (Colo.1988), which overruled Ellis and held that vested and matured military retirement pay is property under section 14-10-113, and In re Marriage of Grubb, 745 P.2d 661 (Colo.1987), which held that vested but unmatured employer-supported pension plans are property subject to division.

In Ellis, we said that military retirement pay was not marital property because it did not have "any of the following elements: cash surrender value; loan value; redemption value; lump sum value; and value realizable after death." 191 Colo. at 319, 552 P.2d at 507. Two years later, we distinguished employee contributions to the Public Employees Retirement Association (PERA) when holding that those contributions were marital property subject to division. In re Marriage of Mitchell, 195 Colo. 399, 579 P.2d 613 (1978). In Mitchell, we emphasized that there was nothing "speculative or uncertain about the husband's right to the money," 195 Colo. at 403, 579 P.2d at 616, and then distinguished PERA contributions from military retirement pay on the basis that the military...