Milligan v. Milligan

• Decision Date: 15 May 1992
• Docket Number: No. 89-589,89-589
• Citation: 158 Vt. 436,613 A.2d 1281
• Parties: Nancy A. Muller MILLIGAN v. William M. MILLIGAN.
• Court: Vermont Supreme Court

Page 1281

613 A.2d 1281

158 Vt. 436

Nancy A. Muller MILLIGAN v. William M. MILLIGAN.

No. 89-589.

Supreme Court of Vermont.

May 15, 1992.

William M. McCarty and Benjamin S. McCarty of McCarty Law Offices, Brattleboro, for plaintiff-appellee.

Bruce M. Lawlor of Lawlor & Polidor, P.C., Springfield, for defendant-appellant.

Before ALLEN, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.

DOOLEY, Justice.

Defendant, William Milligan, appeals the judgment in this divorce case, arguing that the superior court (1) had no authority to order him to terminate his qualified tax- shelter annuity; (2) improperly ordered that some of the annuity's proceeds be placed in a trust fund to defray educational costs of his adult children; and (3) improperly awarded attorney's fees to plaintiff, Nancy Milligan. We affirm the order to terminate the annuity and the attorney's fees award; we reverse the order to create the educational trust and remand.

In December 1989, the court issued a decree of divorce on the grounds that the parties had lived apart for more than six months. The parties, married in 1966, have three daughters, who were twenty-one, twenty, and fifteen years of age at the time of the decree. Defendant was a hospital administrator and earned approximately $90,000 annually in salary and benefits at the time of the order. Plaintiff was a graduate student in anthropology and earned an annual stipend of approximately $4,500, while expecting to earn approximately $30,000 annually after receiving her doctorate in 1993. The parties' most substantial assets were the marital home, found by the court to be worth $150,000 with a mortgage of $28,000, and three § 403(b) qualified tax-shelter annuities held by defendant. See 26 U.S.C.A. § 403(b). The annuity accounts, consisting of regular contributions made by defendant and his employer in lieu of salary, were worth approximately $190,000.

The trial court awarded the marital home, subject to mortgage and taxes, to plaintiff. The court determined that the annuities were marital property and awarded two of the accounts to defendant. It ordered that defendant liquidate the third annuity, with an approximate value of $70,000, and pay any taxes or penalties resulting from the early withdrawal of the funds. The proceeds of the account were to be distributed in three ways: first, to reimburse the parties for expenses incurred by each during the breakup of the marriage; second, to discharge certain financial obligations of the parties; and third, to the extent any funds remained, to establish a trust, the income and corpus of which would be used to help pay educational expenses for the three children "until each obtains a baccalaureate degree or discontinues pursuit of a college degree, or until the fund is exhausted." The order placed approximately $13,000 in the educational trust. Any money remaining in the trust after its termination was to be divided equally between the parties. The court awarded plaintiff $13,000 in attorney's fees, the amount it found she had incurred, and ordered defendant to pay $8,000 of those fees to plaintiff's counsel by February 1, 1990.

Defendant argues first that the court did not have the authority to order him to terminate the pension fund annuity. In support of this position, he first asserts that the pension is not marital property and cannot be distributed. He claims that the court reached the extent of its power in considering the existence of the pensions as a factor in distributing other property pursuant to 15 V.S.A. § 751(b).

We have affirmed trial court orders that used the approach defendant seeks in Victor v. Victor, 142 Vt. 126, 129, 453 A.2d 1115, 1116 (1982), and Myott v. Myott, 149 Vt. 573, 579, 547 A.2d 1336, 1340 (1988). More recently, however, we have held that pension rights acquired by a party to a divorce during the course of the marriage constitute marital property and are subject to equitable distribution along with other assets. McDermott v. McDermott, 150 Vt. 258, 259, 552 A.2d 786, 788 (1988). This is because the money in the account was either deposited at the party's option, or by the employer " 'in lieu of higher compensation which would otherwise have enhanced ... the marital standard of living.' " Id. at 259-60, 552 A.2d at 788 (quoting Majauskas v. Majauskas, 61 N.Y.2d 481, 491-92, 463 N.E.2d 15, 20-21, 474 N.Y.S.2d 699, 705 (1984)). There is no general barrier to distribution of the pensions as marital assets.

Defendant's overall complaint, however, is that the court exceeded its powers in ordering termination of the pension because a § 403(b) pension is restricted, and termination, if possible, will result in substantial tax liability and penalties. We have repeatedly held that the "disposition of property pursuant to a divorce decree is a matter of wide discretion for the trial court." Lalumiere v. Lalumiere, 149 Vt. 469, 471, 544 A.2d 1170, 1172 (1988). We will not disturb that disposition unless the court's " 'discretion was abused, withheld or exercised on untenable grounds or to a clearly unreasonable extent.' " Id. (quoting Roberts v. Roberts, 146 Vt. 498, 499, 505 A.2d 676, 677 (1986)). Applying the court's findings and the evidence in the record to the statutory factors in 15 V.S.A. § 751(b), we find no abuse here.

In McDermott, we acknowledged that distribution of pension funds is "particularly problematic" and that courts normally use either an "offset" method or a "deferred distribution or reserved jurisdiction method." 150 Vt. at 260, 552 A.2d at 788. The term "offset" refers to the practice of immediately distributing marital assets by awarding the pension to the employee and other property to compensate the employee's spouse. Essentially, defendant's position is that the court was required to use an offset distribution in this case. McDermott does not, however, require in all cases the use of an offset method, which is only one way of immediately distributing the value of the pension along with other marital assets.

The trial court, having already assigned the house to plaintiff, deemed it equitable to give her more. It concluded that liquidation of the account was necessary to provide plaintiff her share of its value immediately, and to pay debts and obligations of the parties, stating that there were "immediate financial needs and no other resource to meet that need." Thus, the offset method was inadequate to achieve an equitable distribution of marital assets.

The trial court has power to distribute marital assets, including bank accounts and securities, "in whatever manner it finds just and equitable, regardless of the prior owner." Condosta v. Condosta, 142 Vt. 117, 123, 453 A.2d 1128, 1131 (1982). Although we have not directly addressed the court's power to order the sale of a marital asset, we have affirmed such awards. See, e.g., Roberts v. Roberts, 146 Vt. at 499, 505 A.2d at 677. We conclude that it is within the court's discretion to order that marital property held by one or both parties be liquidated and immediately reduced to cash when the court finds it necessary, as here, to meet immediate needs. See Carr v. Carr, 108 Idaho 684, 688, 701 P.2d 304, 308 (1985) (court properly ordered sale of truck stop, parties' jointly held business asset, "to give each spouse the immediate control of his or her share of the property"); Breda v. Breda, 788 S.W.2d 769, 771-72 (Mo.Ct.App.1990) (court properly ordered sale of marital residence when property could not be divided in kind, the sale was in the best interests of one of the parties, and wife had failed to show that there were sufficient assets other than the residence which could compensate husband for award of property outright to wife).

In affirming the court's power to order termination of the pension, we reject defendant's claim that the restrictions on termination made the order inappropriate. Defendant failed to respond to discovery orders to produce the documents that showed the terms governing the pension, and his testimony about his power to terminate the pension and the consequences of terminating the pension was inconclusive. At times, defendant testified that he was prohibited from gaining immediate access to the pension funds; he also testified that he could gain access, but only by paying a large tax penalty. In the absence of clear evidence from defendant, the court turned to the applicable provision of the Internal Revenue Code, 26 U.S.C. § 403(b)(11), and noted that it allows withdrawal of pension funds "in the case of hardship." The court concluded that a hardship existed and the funds would be available.

Given the evidence and arguments made before the trial court, we cannot conclude that its determination was an abuse of its wide discretion. See Prescott v. Smits, 146 Vt. 430, 433-34, 505 A.2d 1211, 1213 (1985) (contention raised but not fairly presented in trial court not preserved for appeal); In re Marriage of Grubb, 721 P.2d 1194, 1196 (Colo.Ct.App.1986) (consideration of tax consequences is at trial court's discretion; court properly ignored tax consequences where evidence of them was speculative); Noll v. Noll, 55 Ohio App.3d 160, 163-64, 563 N.E.2d 44, 48 (1989) (court's refusal to reduce value of pension by future tax consequences was not error since the court has wide discretion and must divide the property equitably, not necessarily equally). If, after the judgment, defendant found it impossible to carry out the trial court's specific order because the funds in the pension account were, indeed, inaccessible to him, his recourse was to file a motion in the trial court for relief from the judgment, as permitted by V.R.C.P. 60(b). See, e.g., Cameron v. Cameron, 150 Vt. 647, 648, 549 A.2d 1043, 1043-44 (1988); Blanchard v. Blanchard, 149 Vt. 534, 536-37, 546 A.2d 1370, 1372 (1988).

Defendant next argues that the court improperly ordered that part of the proceeds of the liquidated annuity account be...