Warren v. Warren

• Decision Date: 18 January 2005
• Citation: 2005 ME 9,866 A.2d 97
• Parties: Jenny WARREN v. Claude WARREN.
• Court: Maine Supreme Court

866 A.2d 97

2005 ME 9

Jenny WARREN v. Claude WARREN.

Supreme Judicial Court of Maine.

Argued: November 17, 2004.

Decided: January 18, 2005.

Michael P. Asen, Esq. (orally), MittelAsen, LLC, Portland, for plaintiff.

Leonard M. Gulino, Esq. (orally), Berstein, Shur, Sawyer & Nelson, P.A., Portland, for defendant.

Panel: SAUFLEY, C.J., and CLIFFORD, RUDMAN, DANA, ALEXANDER, and LEVY, JJ.

ALEXANDER, J.

[¶ 1] Claude Warren appeals from a divorce judgment entered in the District Court (Portland, Horton, J.), adopting the report of a referee. Claude contends that the court erred by (1) including in the marital estate the increase in value of stock acquired by Claude before the marriage, based on a finding that the increase resulted from marital labor pursuant to 19-A M.R.S.A. § 953(2)(E)(2)(b) (Supp.2004); (2) failing to award Claude reimbursement support even though the divorce occurred shortly after Jenny Warren received her MBA; and (3) distributing the marital property approximately equally. We affirm the judgment.

I. CASE HISTORY

[¶ 2] Jenny Warren filed the action for divorce in May 2002. In March 2003, the District Court entered a stipulated order appointing a referee pursuant to M.R. Civ. P. 53(a). The referee held a hearing over three days in June 2003, and filed a report with the District Court in November 2003. The case history is based on the record developed at the hearing.

[¶ 3] In the late 1970s, Claude, a machinist, joined the newly-formed Bushmaster Firearms, Inc. He was hired by the company's majority stockholder to get the production lines up and running. Jenny went to work at Bushmaster in the late 1980s. The parties met at work, and were married on September 3, 1989.

[¶ 4] Before the marriage, Claude had acquired 1260 shares of the capital stock of Bushmaster Firearms. He acquired 211 additional shares during the marriage. The 1471 shares owned by Claude represent approximately 13.96 percent of the company's issued and outstanding stock. The majority of shares of the closely held corporation is owned by a single stockholder.

[¶ 5] Claude initially designed the products and created the assembly lines for Bushmaster. In later years, he was in charge of production. His titles included Vice President for Manufacturing and Vice President for Operations. He was responsible for product design, purchasing, manufacturing, and hiring and supervising production employees.

[¶ 6] Claude was not involved in financial management, marketing, or strategic planning for Bushmaster. He asserts that he made a substantial contribution to the success of Bushmaster because he designed the product and put in place the production systems that made the company run. He testified that the company "is my whole life," and that he is "one of the guys that made the company what it is today."

[¶ 7] The company grew from three employees in the late seventies, to over seventy employees at the end of the marriage. The company had a tenfold expansion in sales from 1989 to 2002. Until recently, Bushmaster neither retained nor reinvested profits; it distributed nearly all its profits to shareholders. The majority stockholder made all decisions regarding distributions, employee compensation, bonuses, and benefits. Claude's compensation from wages, distributions and bonuses for the year 1989 was $97,808. His compensation peaked in 1994 at $1,781,346, and in the last year of his employment, 2001, was $539,851.

[¶ 8] By the late 1990s, Claude was effectively removed from his position at Bushmaster, though he continued to draw a salary until December of 2001, when his employment was officially terminated. Claude entered into a noncompete contract with Bushmaster, agreeing not to work for a competing company for five years. For the first three years of the agreement, he was paid $100,000 annually as consideration for not competing. He will receive no payment in the final two years of the agreement.

[¶ 9] Claude was fifty-seven years old at the time of the divorce hearing, and has some health issues.

[¶ 10] Before and during the marriage, Jenny also worked at Bushmaster. She started as an invoice clerk, then moved into purchasing, where she worked directly for Claude. The evidence indicates that Jenny also devoted a great amount of time and energy to the company during the marriage. She resigned her position in June of 2000. Jenny's compensation in 1989 was $20,415. At the time of her resignation she was earning at a rate of $70,000 to $80,000 per year.

[¶ 11] After she left Bushmaster, Jenny decided to complete her education. She finished her undergraduate degree in September of 2000. In January of 2001, she started an MBA program. She graduated in May of 2002, and filed this action for divorce later that same month. She was not employed while she attended school. Jenny was thirty-eight years old at the time of the divorce hearing. She is in good health but does not intend to seek employment, except, perhaps, part-time consulting work.

[¶ 12] Other than the premarital stock, neither party brought any significant assets to the marriage. At the time of the divorce, aside from the Bushmaster stock, the marital estate consisted of cash, liquid securities, and real estate worth more than $3,000,000.

[¶ 13] Both parties' experts testified that the Bushmaster stock was difficult to value due to several factors: the stock is not publicly traded; there are restrictions on the sale of the stock; the industry is heavily regulated; and the value is susceptible to swings in sales related to political events and third-party litigation.

[¶ 14] The referee valued the premarital Bushmaster stock at $24 per share at or near the time of the marriage, for a total value of $30,240, and between $1641 and $1737 per share on December 31, 2002. This value was within the range of values testified to by the parties' experts.¹ Using the value found by the referee, the nonmarital shares appreciated in value at least $2,067,660 during the marriage.

[¶ 15] The referee determined that the increase in. value of the nonmarital Bushmaster stock that occurred during the marriage resulted from marital labor and therefore was marital property. The referee included that value in the marital estate, and effectuated an equitable distribution that resulted in each party receiving approximately one-half of the marital property. The referee did not award spousal support to either party.

[¶ 16] Claude filed a motion to amend the report or for additional findings of fact. The requested amendment related to the purchase price of the Bushmaster stock. Claude requested additional findings related to the parties' current circumstances, living expenses, and prospects for employment. The referee made additional findings pursuant to M.R. Civ. P. 53(e)(5), but declined to amend the report.

[¶ 17] Claude objected to acceptance of the referee's report. After reviewing the record and hearing arguments of the parties, the District Court pursuant to M.R. Civ. P. 53(e)(2), determined that the referee's findings of fact were not clearly erroneous, and entered judgment adopting the referee's report. Claude timely filed his notice of appeal to this Court.

[¶ 18] Claude contends that the court erred by including the increase in value of the Bushmaster stock in the marital estate, and acted outside its discretion by dividing the marital property approximately equally and failing to award him reimbursement support.

II. STANDARD OF REVIEW

[¶ 19] When a trial court accepts a report of a referee, the findings of the referee become the trial court's findings, and we review those findings directly. Hennessy v. Fairley, 2002 ME 76, ¶¶ 17-18, 796 A.2d 41, 47.

[¶ 20] The determination of whether property is marital or nonmarital is a question of fact that we review for clear error. Sewall v. Saritvanich, 1999 ME 46, ¶ 14, 726 A.2d 224, 227-28. However, the application of the law to the facts is reviewed de novo. Spooner v. Spooner, 2004 ME 69, ¶ 7, 850 A.2d 354, 358. When we are asked to "determine [which] rule should be utilized in deciding whether property is marital or nonmarital, we do so de novo without deferring to the trial court's view of the law but honoring the trial court's finding of the facts as long as they are supported by the evidence." Id.

[¶ 21] We review, for a sustainable exercise of discretion, the grant or denial of spousal support, Urquhart v. Urquhart, 2004 ME 103, ¶ 3, 854 A.2d 193, 194, and the equitable distribution of marital property, Murphy v. Murphy, 2003 ME 17, ¶ 27, 816 A.2d 814, 822.

III. LEGAL ANALYSIS

A. Appreciation in Value of Nonmarital Property

[¶ 22] The Legislature has adopted the "`shared enterprise or partnership theory' of marriage recognized in community property states." Long v. Long, 1997 ME 171, ¶ 7, 697 A.2d 1317, 1320 (quoting Tibbetts v. Tibbetts, 406 A.2d 70, 76 (Me.1979)). A fundamental principle of community property law is that "the fruits of labor performed during marriage by either spouse ... belong to the marital community, and are not the separate property of the laboring spouse." AMERICAN LAW INSTITUTE, PRINCIPLES OF THE LAW OF FAMILY DISSOLUTION: ANALYSIS AND RECOMMENDATIONS 4.05, cmt. a (2000). This principle is articulated in Maine law by 19-A M.R.S.A. § 953(2)(E)(2)(b). We are asked to decide whether the appreciation in value of Claude's premarital stock is fruit of labor performed by Claude during the marriage, and whether it was properly allocated to the marital estate.

[¶ 23] The statute that governs the appreciation in value of nonmarital property during the marriage, 19-A M.R.S.A. § 953(2)(E) (1998 & Supp.2004), provides, in relevant part:

2. Definition. For purposes of this section, "marital property" means all property acquired by either spouse subsequent to the marriage, except:

....

E. The increase in value of property acquired prior to the marriage and the increase in value of a spouse's nonmarital

...