Ross v. Ross, 1308

• Decision Date: 01 September 1990
• Docket Number: No. 1308,1308
• Citation: 600 A.2d 891,90 Md.App. 176
• Parties: , 60 USLW 2559 Jay S. ROSS v. Inas M. ROSS. ,
• Court: Court of Special Appeals of Maryland

Page 176

90 Md.App. 176

600 A.2d 891, 60 USLW 2559

Jay S. ROSS v. Inas M. ROSS.

No. 1308, September Term, 1990.

Court of Special Appeals of Maryland.

Jan. 30, 1992.

Certiorari Granted June 19, 1992.

Harvey B. Steinberg (Kevin G. Hessler and Harvey B. Steinberg on the brief), Rockville, for appellant.

Barbara J. Gorinson (Thomas W. Kavanagh and Joseph, Greenwald & Laake, P.A. on the brief), Greenbelt, for appellee.

Argued Before WILNER, C.J., GARRITY, J., and JAMES T. SMITH, Jr., Judge, Specially Assigned.

GARRITY, Judge.

This appeal by Jay S. Ross is from an order of the Circuit Court for Montgomery County (McKenna, J.) which granted Inas M. Ross' Motion to Reconsider and resolved issues concerning marital property, the monetary award, expert witness fees, and litigation expenses. The order, in effect, overruled a prior order entered by a retiring judge of the same court. The appellant presents the following issues for our review:

1. Whether the court erred when it signed a Judgment of Absolute Divorce which in effect overruled the prior divorce decree entered in the same case by another judge from the same court;

2. Whether the court erred in classifying a pre-emptive right, or right of first refusal, to purchase stock as marital property 3. Whether the court erred in valuing the stock of a closely held corporation at fair market value in light of a restrictive shareholders' agreement;

4. Whether the court abused its discretion when it established a payment schedule, with interest, for the monetary award rather than making an award on an "if, as, and when" basis;

5. Whether the court erred when, having concluded that certain marital property had been dissipated, it included that property in computing the monetary award; and

6. Whether the award of attorney fees and expenses should be vacated if the monetary award is vacated.

Facts

Jay and Inas Ross were married on July 23, 1963. Their union yielded three children, one of whom was a minor at the time of the lower court proceedings. During the course of the marriage, Mrs. Ross bore the responsibility for the housework and child care and held either full or part-time jobs for the greater part of the marriage. At the time of trial, Mrs. Ross was employed by the City of Takoma Park as a clerk, earning $24,000 a year.

Throughout most of the marriage, Mr. Ross worked for Pioneer Technologies Group, Inc., a closely held Maryland corporation that is controlled by a small group of individuals, the Washington Shareholders, and a parent corporation, Prioneer-Standard Electronics, Inc. At the time of the trial, Mr. Ross held the positions of Vice President and General Manager, and earned about $178,600 a year. In addition to his base salary, he received an annual performance bonus, as well as a sum pursuant to an agreement with the company solely for the purchase of shares of stock belonging to former shareholders. During the marriage, he purchased a total of 7,130 shares, 6,594 shares acquired prior to the parties' separation and 536 shares subsequent thereto. At issue, however, will be the classification of certain shareholder rights not exercised during marriage.

I.

After Mrs. Ross filed a Complaint for Absolute Divorce, the case was referred to a domestic relations master for a hearing on the issues of marital property, attorney's fees, and expert witness fees. Judge Calvin R. Sanders held a hearing on Mr. Ross' exceptions to the report and recommendations of the master during which the exceptions were sustained in part. Judge Sanders retired shortly thereafter and Mrs. Ross' request for the court to reconsider its ruling was referred to Judge James J. McKenna, who granted the motion and entered a decree consistent with the master's recommendations.

Appellant contends that Judge McKenna erred when he signed the six month old proposed master's report without a hearing on the motion and without an explanation of his ruling. Relying on Driver v. Parke-Davis & Co., 29 Md.App. 354, 348 A.2d 38 (1975), and dicta in Insurance Co. v. Thrall, 181 Md. 19, 27 A.2d 353 (1942), appellant argues that these cases stand for the proposition that the trial judge is in a position of greater responsibility than a judge ruling on pretrial matters and, therefore, is entitled to reject a prior decision made by a pretrial judge, in this case, the master. Appellant then argues that a judge who is considering a post judgment motion is without authority to modify a prior ruling of the trial judge. We disagree. Md.Rule 2-536 provides, in essence, that in the event of a judge's termination of office, any other judge of that court may perform the act or duty of the previous judge. Under Md.Rule 2-535, in the exercise of power incident to all courts of record, the succeeding judge, Judge McKenna, was vested with the authority to revise the judgment pursuant to the timely filed motion.

II.

Appellant argues that the court erred in classifying his pre-emptive right to purchase Pioneer stock as an option to purchase, and therefore subject to equitable distribution as marital property. Appellant contends that as a shareholder of Pioneer Standard he is bound by a stock purchase agreement which restricts the right of any shareholder to sell, transfer, or otherwise dispose of shares in Pioneer.

The agreement at hand details the terms by which a shareholder's stock is disposed of in the event of death, retirement, or termination of employment, or in the event that a shareholder wishes to sell his stock. The agreement confers upon the remaining shareholders the right to acquire the shares owned by the deceased, retiring, or terminating shareholder at the book value of such shares determined as of the date of the corporation's fiscal year end for the year immediately preceding the death, retirement, or termination. If two or more shareholders desire to purchase stock offered for sale, the right to purchase is directly proportional to the capital stock the shareholder owns as it bears to the total shares issued and outstanding. If the shareholders fail to purchase any portion or all of the stock, then the corporation is bound, in certain instances, to purchase the stock. ¹ The primary difference between purchasing the stock under the various circumstances lies in the amount and manner of payment.

The master determined that Mr. Ross' ownership interest was an option to purchase and constituted marital property. He then ordered that 40 percent of the profit Mr. Ross derived therefrom be awarded to Mrs. Ross on an "if, as and when" basis. After considering Mr. Ross' exceptions to the master's report, Judge Sanders ruled that the possible right to purchase another's shares did not constitute an option and did not have a present value. In his written opinion and order Judge Sanders wrote, "[i]t is speculative as to whether or not any such shares will ever be offered for sale, and if so offered, whether or not its then value will exceed the book value." On reconsideration, however, Judge McKenna agreed with the master.

Maryland has yet to consider whether a pre-emptive right to purchase stock which is acquired during marriage but not exercised prior to the termination of the marriage is marital property subject to equitable distribution. Preliminary to our determination of whether this pre-emptive right is marital property, we must determine if it is property within the meaning of the Marital Property Act, and, if so, whether it was acquired during the marriage. Green v. Green, 64 Md.App. 122, 133, 494 A.2d 721 (1985).

Section 8-201(e) of the Md.Fam.Law Code Ann. (1984) defines marital property as "property, however titled, acquired by 1 or both parties during the marriage." ² Property has been further defined as

a term of wide and comprehensive signification embracing "everything which has exchangeable value or goes to make up a man's wealth--every interest or estate which the law regards of sufficient value for judicial recognition."

* * *

In Bouse v. Hutzler, 180 Md. 682, 686 (1942), we said that the word "property," when used without expression or implied qualifications, "may reasonably be construed to involve obligations, rights and other intangibles as well as physical things." "Goodwill," for example, has been characterized as a legally protected valuable property right. (citations omitted).

Archer v. Archer, 303 Md. 347, 356, 493 A.2d 1074 (1985).

A pre-emptive right is an exclusive right to have the first opportunity to purchase upon specified terms, but only if the owner chooses to sell. VI American Law of Property § 26.64 (A.J. Casner ed. 1952). A pre-emption differs from a traditional option in that:

An option creates in the optionee a power to compel the owner of property to sell it at a stipulated price whether or not he be willing to part with ownership. A pre-emption does not give to the pre-emptioner the power to compel an unwilling owner to sell; it merely requires the owner, when and if he decides to sell, to offer the property first to the person entitled to the pre-emption, at the stipulated price. Upon receiving such an offer, the pre-emptioner may elect whether he will buy. If he decides not to buy, then the owner of the property may sell to anyone.

Id. at 507. See also, Dennis Rourke Corp. v. Ferrero Construction, 64 Md.App. 694, 703, 498 A.2d 689 (1985).

In seeking to uphold the lower court, appellee relies upon Green, supra, wherein we noted that restricted stock option plans, like pension plans, are a form of employee compensation, "providing to the employee the right to accept within a prescribed time period and under certain conditions the corporate employer's irrevocable offer to sell its stock at the price quoted. If the employer attempts to withdraw the offer, the employee has a 'chose in action' in contract against the employer."

Unlike a stock option or a pension plan, a pre-emption is a mere possibility or expectancy, contingent upon...