6. Economic/Sociological Considerations
Constitutional provisions must be interpreted within the context of the
times. . . . As one court said: 'We must interpret the constitution in accordance with the
demands of modern society or it will be in constant danger of becoming atrophied and, in
fact, may even lose its original meaning.'. . . It is this court's duty to assure that our
constitution does not become 'a magnificent structure . . . to look at, but totally unfit
for use.'. . . Moreover, a constitution is, in Chief Justice John Marshall's words,
'intended to endure for ages to come, and, consequently, to be adapted to the various
crises of human affairs.'. . . One court put it this way: 'In short, the [Washington]
constitution was not intended to be a static document incapable of coping with changing
times. It was meant to be, and is, a living document with current effectiveness.' We
agree. The Connecticut constitution is an instrument of progress, it is intended to stand
for a great length of time and should not be interpreted too narrowly or too literally so
that it fails to have contemporary effectiveness for all of our citizens.
(Citations omitted.) State v. Dukes, 209 Conn. 98, 114-15, 547 A.2d
The standards of General Statutes §§ 46b-81 and 46b-82 contain
both social and economic factors. "The trial court must consider all relevant
statutory criteria in a marital dissolution action but it does not have to make express
findings as to the applicability of each criteria." Burns v. Burns, supra, 41
Conn. App. 725-26; See also Weiman v. Weiman, 188 Conn. 232, 234, 449 A.2d 151
(1982). "The trial court may place varying degrees of importance on each
criterion according to the factual circumstances of each case." Carpenter v.
Carpenter, 188 Conn. 736, 740-41, 453 A.2d 1151 (1982). "In family matters, the
court exercises its equitable powers. The balancing of equities is a matter which falls
within the discretion of the court." (Internal quotation marks omitted.) Burns v.
Burns, supra, 724. Kakalik v. Bernardo, 184 Conn. 386, 395, 439 A.2d 1016 (1981).
"For that reason, equitable remedies are not bound by formula but are modeled to the
needs of justice." Burns v. Burns, supra, 724; Oneglia v. Oneglia, 14 Conn.
App. 267, 271-72, 540 A.2d 713 (1988); Lawler v. Lawler, 16 Conn. App. 193, 204,
547 A.2d 89 (1988). This court may consider that one factor does not have any
applicability or it may consider that one factor has very strong applicability. The
statute is gender neutral and permits each party, regardless of sex, to be considered.
"An equitable division of property upon divorce or dissolution envisions that full
recognition by the courts will be given to the noneconomic contributions of both
spouses." O'Neill v. O'Neill, supra, 13 Conn. App. at 311. The comments of
Representative Griswold are a clear admonition to the court that this new divorce law was
designed to help the rights of women in this state. In fact the economic conditions of
women since the passage of these equitable distribution statutes have not fared as well as
Three arguments are advanced in support of this last prong of State v.
Geisler: (1) "marriage is a partnership" is a growing social consensus, (2)
nonmonetary contributions must be considered, and (3) equal division is necessary to
overcome unequal economic treatment of women post-judgment. All three arguments will be
1. Marriage is a partnership is a growing social consensus. In addition
to the matters cited previously, the partnership model attempts to correct the
disadvantages suffered by homemakers whose "nonmarket production" has been
presumed to be "gratuitous." A. L. Estin, "Love and Obligation: Family Law
and the Romance of Economics," 36 Wm. and Mary L. Rev. 992-94 (1995).
A 1992 law review article cited by the plaintiff conducted an extensive
review of a book entitled, Divorce Reform at the Crossroads, edited by Stephen D. Sugarman
and Herma Hill Kay. (New Haven, Connecticut, Yale University Press, 1990). J. T. Oldham
"Putting Asunder in the 1990's," 80 Cal. L. Rev. 1091 (July 1992) (book review).
Referring to the "marriage is a partnership" concept early in its review the
article states, "there is consensus that spouses should, at a minimum, share the
tangible property accumulated during marriage due to either spouse's efforts. Nearly all
states permit some form of equitable division of property on divorce. Underlying the
system of equitable division is a conception of marriage as 'partnership.' Because each
'partner' in the marriage is seen as having facilitated the other's achievements,fairness
requires the partners to share all accumulated wealth if the marriage ends in divorce. A
corollary to the 'partnership' theory of marriage is the theory that premarital assets
should not be divided at divorce. Because the nonacquiring spouse typically did not
facilitate acquisition of premarital assets, the marital estate has no claim to such
property. Therefore, most states generally limit the divisible estate to property acquired
during marriage." J. T. Oldham, supra, 80 Cal. L. Rev. 1093-94.
It should be noted that Connecticut differs in the above
generalizations: (1) "marriage is a partnership" is not contained in
Connecticut's equitable distribution scheme; (2) Connecticut is an all property state and
has no concept or definition of marital or premarital (separate) property; (3) all
property, even that acquired by one spouse before the marriage, can be divided between the
parties at the dissolution of the marriage; (4) each partner's monetary and nonmonetary
contributions to the marriage must be considered; and (5) the above quote from the
California Law Review does not mandate the application of a fifty-fifty presumption.
Despite the concept of "marriage is a partnership,"the above
law review article is replete with studies of others in the field that reach a variety of
conflicting conclusions. The article notes that there is no consensus of recommendations
on solving the problem of the economic detriment suffered by divorced women in the last
twenty years, "there is no agreement regarding how to address all the questions
resulting from no-fault divorce. . . ." J. T. Oldham, supra, 80 Cal. L. Rev. 1131-32.
It was further noted that if the concept of "marriage is a partnership" was
logically extended, assets and income upon the marriage's dissolution would be distributed
in accordance with the commercial principles of the Uniform Partnership Act where the
parties would "share equally in the profits and surplus" of the relationship.
General Statutes § 36-39, et seq. (repealed July 1, 1997); General Statutes § 34-300, et
seq. (effective July 1, 1997).
As further support that "marriage is a partnership" is a
growing consensus, the plaintiff points to ALI, Tentative Draft No. 2 § 415 and the
Uniform Probate Code discussed by Professor Martha A. Fineman. In her book, Illusion of
Equality, she noted that "many unacknowledged problems exist with the partnership
approach." In her law school classes, Professor Fineman uses extensive examples from
actual cases including the facts, holdings and footnotes of O'Neill v. O'Neill, 13
Conn. App. 300, 536 A.2d 978. She does agree that all of the cases considered in her
courses involve less assets and income than this case. The only wealth discussed in her
courses deals with the subject of prenuptial agreements and not the distribution of the
assets and income of wealthy individuals.
Most writers now agree that such a system would be unfair. "Many
marriages do not accumulate a significant amount of property. Spouses can have very
different economic prospects at the time of divorce, and the differences often stem at
least in part from roles assumed during marriage. To adjust for this disparity, all states
except Texas have accepted alimony as a potential supplement to the equitable distribution
system." J. T. Oldham, "Putting Asunder in the 1990's," 80 Cal. L. Rev.
1091, 1094-95 (1992).
Finally the author of the law review article, J. Thomas Oldham, a law
professor from the University of Houston and the 1991 author of treatise on divorce,
separation and the distribution of property, displays the problems with establishing a
fifty-fifty presumption. He suggests a presumptive result that the marital estate should
be divided equally in childless marriages, noting that those marriages have fewer
characters of an economic partnership. Presumptive rules for marriage with children would
have to be subject to different rules depending on the length of the marriage and
"whether the wife worked full time during the marriage without a substantial career
disruption." J. T. Oldham, supra, 80 Cal. L. Rev. 1129. Even in this simple
recitation of Professor Oldham's position, the exceptions have already eaten up the
2. Nonmonetary contributions must be considered.
In virtually every reported case in Connecticut since 1988 nonmonetary
contributions have been weighed. The doctrine is well entrenched. It is not applied to
obtain a fifty-fifty division but it "recognizes the value of nonfinancial
contributions of homemakers to the acquisition of marital property." J. Avner,
"Using the Connecticut Equal Rights Amendment at Divorce to Protect Homemakers'
Contributions to the Acquisition of Marital Property," 4 U. Bridgeport L. Rev. 265,
3. Equal division is necessary to overcome unequal economic treatment
of women post judgment.
In support of the third argument the plaintiff cites the following.
"Judges clearly disagree (91.9 percent) with the proposition that, where a wife's
primary contribution is as a homemaker, the husband's cash contributions entitle him to a
larger share of the marital estate." Gender, Justice and the Courts, Report of the
Connecticut Task Force, September, 1991, p. 139-40. The Task Force did not study actual
gender bias but the perception of gender bias. A statewide survey supported the Task
Force's conclusion in which litigants, general public, court staff, lawyers and judges
responded. For gender bias to be shown, it must be supported by evidence of its existence,
i.e., analysis of actual case decisions or tabulated surveys, and not a general
questionnaire of what those involved in the system perceive.
The Chief Justice of the Connecticut Supreme Court, Ellen A. Peters, in
1988 appointed the Connecticut Task Force on Gender, Justice and the Courts to determine
the degree of gender bias within the court system and present recommendations for the
lessening and, if possible, the eradication of gender bias. Chief Justice Peters'charge to
the Task Force stated: "Impartial decision making by the judiciary is the hallmark of
a civilized society. The distortion of judicial decisions by gender bias on unfounded
stereotypes must be eliminated from our court system. It is the duty of this task force to
determine the presence and extent of gender bias in Connecticut courts and to develop
strategies for its eradication. Our citizens come to our courts seeking evenhanded review
of their claims, and we are committed to a judicial system that accords all its
participants the same measure of consideration, respect and justice." Gender, Justice
and the Courts, Report of the Connecticut Task Force, Introduction, p.6, September, 1991.
Further, the introduction concludes its preliminary tracing of women's
roles by stating, "while the roles of women have changed drastically as a result of
the women's movement of the 1970's, society's attitudes have not yet caught up to the
progress women themselves have already made. The feedback directed to the task force at
hearings and in response to questionnaires indicates that remnants of these past images
remain with us in the form of gender bias, a prejudice that harms both women and men as
they participate in the Connecticut legal system." Gender, Justice and the Courts,
Introduction, p. 7. The Task Force report concludes at the end of the Introduction,
"It is our judgment, then, that gender bias is present not only among judges,
attorneys and court staff, but in the structure of the culture within which we
labor." Gender, Justice and the Courts, Introduction, p. 8. Gender bias reports from
New York, New Jersey and Rhode Island support this conclusion. "Although the law as
written is for the most part gender neutral, stereotyped myths, beliefs and biases were
found to sometimes affect judicial decision-making in the areas investigated. . . ."
Gender, Justice and the Courts, Introduction, p.5, citing First Year Report of the New
Jersey Supreme Court Task Force on Women in the Courts, June, 1986.
Hundreds of recommendations were received by the Connecticut Task Force
to eliminate gender bias. One of the recommendations to the Judicial Department was to
"Review and, when necessary, re-word the Connecticut Practice Book and all forms and
publications produced by the court system to make certain that language contained therein
is gender-neutral." Gender, Justice and the Courts, supra, 19. As to family orders
the report concludes: "While the home typically is awarded to the woman, this often
presents her with problems in maintenance costs. It also presents difficulty in equitably
distributing the remainder of the estate. This inequity detrimentally impacts both men and
women. There is much work to be done within the system to reach the reality of equitable
distribution of estates, fair alimony and support awards and adequate enforcement of
visitation." Gender, Justice and the Courts, supra, 30.
The major concerns of property settlement were outlined by the Task
Force: more frequent use of short term alimony, failure to consider tax considerations of
property settlements and women getting nonincome producing assets while men get business
assets. There was no mention of Connecticut creating a community property system nor
amending the equitable distribution statutes to set forth a fifty-fifty presumption. The
only property distribution fact mentioned was that "in 44 percent of divorces, the
spouses owned a home; women are twice as likely as men to be awarded the home as part of a
financial settlement." Id., 33.
Significantly, none of the four recommendations made by the Task Force
to the General Assembly mentioned amending the equitable distribution scheme. The Task
Force did recommend that the Judicial Branch "develop programs to further educate
judges . . . in subjects that will address . . . principles of equitable distribution and
studies and statistics on the economic consequences of divorce, including a realistic
understanding of child rearing and opportunities in the job market." Id., 34.
In some cases where the man was the primary financial provider and the
woman a homemaker throughout their marriage, some parties believe that any amount awarded
to the woman should only be sufficient to tide her over until she can find employment. On
the other hand, some parties believe that the man should continue to provide for the woman
in the same manner to which she has become accustomed, even when it is apparent that one
income cannot maintain two households in the same manner it had maintained one. Still
others argue that the full-time homemaker's contribution, while not as visible as a cash
income, is a genuine contribution to the family's standard of living over time, and should
be recognized during the distribution of property. There is little doubt, however, that
court orders serve to perpetuate the 'feminization of poverty' by not adequately
addressing the long-term effects of the economic orders they issue.
A brief marriage with no children, where both parties have few assets
and both are employed in the pursuit of a career, cannot be viewed in the same light as a
lengthy marriage where children have reached their majority. In the latter situation, the
assets may be considerable, and the homemaker who has been out of the employment market
place for decades finds her opportunities to begin or renew a career are severely limited,
if not non-existent.
The evidence of gender bias regarding property distribution was mostly
anecdotal and based on the questionnaires. It concludes: "The differing perceptions
set before our task force by the public, and by those surveyed, clearly demonstrate the
confusion surrounding the economics of dissolution of marriage." Id., 140.
"In 1985, California sociologist Lenore Weitzman, in a widely
accepted study in her state, found that the standard of living for men rose 42 percent
following divorce while it plummeted as much as 72 percent for women and children."
Gender, Justice and the Courts, supra, 141; see generally Lenore Weitzman, The Divorce
James McLinden, in an article entitled 'Separate but Unequal: The
Economic Disaster of Divorce for Women and Children,' analyzed a sample of divorces from
New Haven County to compare the consequences of fault verses no-fault divorce. . . . The
report concluded that after dissolution of marriage, men retained a much higher percent of
their pre-divorce per capita median income than did the women. Other studies have reached
similar conclusions. . . .
In a random telephone survey conducted by the Institute for Social
Inquiry of the University of Connecticut for The Connecticut Study [in the summer of
1990], 400 residents who were divorced in Connecticut after January 1, 1980, were queried
concerning post-divorce changes in their per capita income, their standard of living and
their compliance with court-ordered divorce settlements.
One of the more startling findings of the study is that the mean per
capita income of women at the moment they are divorced in Connecticut drops an average of
16 percent while the mean per capita income of men increases an average of 23 percent.
Gender, Justice and the Courts, supra, 141-42.
"If equitable distribution is more or less defined by a
significant number of attorneys, family relations counselors and judges as equal
distribution of assets, and the woman is awarded the family home in most cases, it is more
likely than not (since the home is usually the largest asset of the marriage) that the man
will be awarded most of the liquid assets in order to balance the distribution of the
estate." Id., 147.
The plaintiff cites a series of cases in which a trial court awarded
substantial portions of the martial assets to the spouse who earns less but contributes
substantially to the nonmonetary products of the marriage, e.g., Wrobleski v.
Wrobleski, 653 A.2d 732 (R.I. 1995); de Castro v. de Castro, 415 Mass. 787, 616
N.E.2d 52 (1993); Parrott v. Parrott, 278 S.C. 60, 292 S.E.2d 182 (1982); In
re Marriage of Hunt, 909 P.2d 525 (Colo. 1995). Similar cases from Connecticut have
already been cited for this same result. None of these cases establish an ERA violation.
As an adjunct to the last argument, the plaintiff rightly points out
the difficulties in quantifying the value of a wife's noneconomic contributions contrasted
with the easier calculation of the husband's economic contribution.
Unlike the husband's tangible monetary contributions, wives'
contributions are not neatly quantifiable. If the wife satisfies the court that she has
contributed to the marriage, she then must establish the value of her share of the marital
estate. . . . Because courts still accord the husband's wage-earner role greater value
than the wife's homemaker role . . . the presumption of equal division would help prevent
courts from undervaluing wives' contributions.
Mark Sessums, "What Are Wives Contributions Worth Upon Divorce?:
Toward Fully Incorporating Partnership Into Equitable
Distribution," 41 Fla. L. Rev. 987, 1026-27 (1989).
Few would dispute that labor is divided on the basis of gender in this
country. In the private sphere of the home, women remain primarily responsible for
housekeeping and nurturing tasks. In the public sphere of the marketplace, a
disproportionate number of women remain isolated in the "pink collar ghettos" of
nursing, teaching, and clerical work. In both spheres, women's work has historically been
Her husband's earnings act as a buffer for the married female
wage-earner, affording her some relief from her own inadequate wages or lack of job
opportunities. She loses this buffer at divorce, when she must meet greatly increased
expenses with greatly reduced income. To the extent that couples conform to
male-breadwinner/female-homemaker stereotypes, the hardship for the woman is exacerbated.
Barbara Stark, "Burning Down the House: Toward A Theory of More
Equitable Distribution," 40 Rutgers L. Rev. 1176-77 (1988).
A woman's standard of living has been reported to decrease by 73% at
the time of the divorce while men's standard of living is raised by 42%. L. Weitzman, The
Divorce Revolution, (1985) p. 323. "No fault divorce statutes were a first response
by legislatures to conform the law of divorce to contemporary social and economic
realities, particularly women's participation in the labor force and their correspondingly
increased autonomy. Those statutes were far from perfect, and it cannot be disputed that
many women have suffered disastrous financial consequences that they might have been
spared but for no-fault." B. Stark, supra, 40 Rutgers L. Rev. 1197 (1988). The first
no-fault divorce statute was passed by the California legislature in 1969. The percentage
of married women working outside the house has increased: 16% in 1939, 27.4% in 1940, 46%
in 1974 and 52.1% in 1982. The percentage of divorced women working outside the house in
1977 was 73%. O'Kelly, "Entitlements to Spousal Support After Divorce," 61 N.D.
L. Rev. 225, 239-40 (1985). But is should be noted that 60% of divorcing couples have less
than $20,000 in assets. B. Stark, supra, 40 Rutgers L. Rev. 1210 (1988).
If the legislature felt, that based upon the economic detriment that
had been suffered by women since the passage of no-fault divorce, it could have made
changes to the statutory scheme. The legislature is keenly aware of that fact. Also, if
the legislature intended to correct the scheme by creating a fifty-fifty presumption in
light of the ERA, it could have done so. "It is a generally accepted principle of
statutory construction that the legislature is aware of the court's interpretation of a
statute." Trella v. Trella, 24 Conn. App. 219, 221, 587 A.2d 162 (1991).
Finally, the defendant requests that for the benefit of the trial
bench, the bar and litigants we establish guidelines with respect to financial awards in
family matters. By the very nature of these cases we cannot do so. Unfortunately there are
no fixed stars in the family relations firmament on which to train a judicial sextant.
While trial judges are not authorized to 'shoot the moon,' 'differences inherent in
particular family situations require that the court's discretion be broad enough to make
suitable orders upon dissolution of marriage to fit the circumstances.' Lane v. Lane,
187 Conn. 144, 147, 444 A.2d 1377 (1982).
Krause v. Krause, 189 Conn. 570, 572, 456 A.2d 1204 (1983).
After applying the six standards, this court concludes that General
Statutes § 46b-81 and § 46b-82 do not violate the ERA of the Connecticut constitution. State
v. Geisler, 222 Conn. 672, 685, 610 A.2d 1225.
MARRIAGE IS NOT A PARTNERSHIP IN CONNECTICUT
No Connecticut case holds that "marriage is a partnership."
Some cases do refer to the concept. The plaintiff's first paragraph in her post trial
brief cites Krafick v. Krafick, 234 Conn. 783 at 795, 663 A.2d 365 (1995).
"Marriage is among other things 'a shared enterprise or joint undertaking in the
nature of a partnership to which both spouses contribute - directly and indirectly,
financially and nonfinancially - the fruits of which are distributable at divorce.'"
The above phrase is attributed to J. Gregory, The Law of Equitable Distribution, (1989) §
1.03 pp. 1-6. This treatise has not been cited in any other reported Connecticut case,
before or since Krafick. The general issue in Krafick was whether Connecticut was an
"all-property" state and specifically whether vested pension benefits were
subject to equitable distribution. The reference to "partnership" was in a
paragraph supporting the proposition that property is a term to be broadly interpreted. In
that context the use of the phrase, "marriage is a partnership" is gratuitous.
The phrase is in quotation marks indicating the source but not necessarily approval of the
quote. The court considers the "partnership" reference nonbinding dicta.
O'Neill v. O'Neill, supra, 13 Conn. App. at 310-11 is also cited
in support of the above quoted section of Krafick, supra, 234 Conn. at 795. There
is no reference in the body of O'Neill to "partnership." The only reference in
O'Neill to "partnership" is in footnote 1, referring to a New Jersey case
outlining "the essential supportive role played by the wife in the home. Other than
the phrase "akin to a partnership," no mention is made in O'Neill. No argument
is made either in O'Neill or the New Jersey case that "marriage is a
partnership." The phrase "marriage is a partnership" is not supported by Krafick
v. Krafick, supra, 234 Conn. at 795 or by O'Neill v. O'Neill, supra, 13 Conn. App.
at 309 n. 1.
The latest case mentioning "partnership" in a marriage
context is in actuality a tort case involving the bringing of a post dissolution action
claiming damages for misconduct that had occurred during the marriage. Delahunty v.
Massachusetts Mutual Life Ins. Co., 236 Conn. 582, 674 A.2d 1290 (1996). The plaintiff
wife sought damages from her ex-husband, his life insurance agent and the life insurance
company for fraud in cashing in a life insurance policy that she owned. The differences
between a tort action and a dissolution action were discussed.
A tort action, the purpose of which is to redress a legal wrong by an
award of damages, is not based on the same underlying claim as an action for dissolution,
the purpose of which is to sever the marital relationship, to fix the rights of the
parties with respect to alimony and child support, and to divide the marital estate.
Although in a dissolution action, the trial court must consider the conduct of the
parties, the judgment in a dissolution action does not provide direct compensation as such
to a party for injuries suffered during the marriage. Alimony is intended to provide
economic support for a dependant spouse, and the division of marital property is intended
to recognize and equitably recompense the contributions of the parties to the marital
partnership. Tort actions and dissolution actions lack the duplication that the doctrine
of res judicata was aimed at preventing. Additionally, a dissolution action is equitable
in nature and requires a trial to the court, while a civil trial of a claim for damages
based upon conduct occurring during the marriage is legal in nature, may involve the right
to punitive damages and may, as in this case, involve the right to a jury trial.
Id., 592-93. This court considers the phrase "to the
marital partnership" gratuitous, not necessary to the Delahunty decision and not
binding on this court.
This court has been able to find one other case in Connecticut in which
the argument of "marriage is a partnership" was made. Cersosimo v. Cersosimo,
188 Conn. 385, 400, 449 A.2d 1026 (1982). It involved a post-judgment modification of
alimony in which the defendant ex-wife claimed that she did not receive an equitable share
in the 1966 divorce. She argued that since the advent of no-fault divorce and the ERA the
"ground rules in awarding alimony and child support have changed and it is now
assumed that marriage is more of an equal partnership whereby each spouse has the same
equal opportunity to secure their rights under the law." (Internal quotation marks
omitted.) Id., 399-400. The Supreme Court held since the 1966 decree had been
subsequently modified the facts "do not require that we answer the question as
posed." Id., 400.
In urging this court to adopt the concept of "marriage is a
partnership," the plaintiff reaches back to colonial history older than the
Connecticut colony. In 1619 at the first Legislative Assembly in the new world, the
General Assembly of Virginia in a petition to the founding company said: "Also they
wilbe pleased to allowe to the male children of them and of all others begotten in
Virginia, being the only hope of Posterity, a single share a piece, and shares for their
wives as for themselves; because that in a newe plantation it is not known whether man or
woman be the more necessary." Jon Pary, Proceedings of the General Assembly of
Virginia, July 30-August 4, 1619.
This reference is contained in a 1994 Mississippi case that developed
from the following facts: "The wife contributed her share by rocking the cradle,
keeping the house, and caring for the children. Although the husband was bringing in the
income, still marriage is pretty much a 50/50 partnership as to property acquired during
the marriage regardless of the role played by the parties." Hemsley v. Hemsley,
639 So. 2d 909, 914 (Miss. 1994). In sustaining the equal division of a pension the
court concluded: "We, today, recognize that marital partners can be equal
contributors whether or not they both are at work in the market place. We define marital
property for the purpose of divorce as being any and all property acquired or accumulated
during the marriage. Assets so acquired or accumulated during the course of the marriage
are marital assets and are subject to an equitable distribution by the chancellor. We
assume for divorce purposes that the contributions and efforts of the marital partners,
whether economic, domestic or otherwise are of equal value." Id., 915.
Mississippi is not a community property state. It has no statutory
definition of marital and separate property. Its statutes contain common law title rules,
the last state to do so. By case law, until Hemsley, Mississippi was the only remaining
common law property state (property at divorce is distributed according to title). Hemsley
was a 5-3 decision with three separate dissents. In effect the dissents can be summed up:
"Because a far-reaching decision broadly redefining the rights in property of the
citizens of this state should be implemented by our Legislature, I cannot concur with the
majority's suggestion that all assets acquired during a marriage are jointly accumulated,
therefore, subject to equitable division." Hemsley v. Hemsley, supra, 918
(Lee, J., dissenting). "I disagree with this Court's decision to judicially legislate
the issue of marital property." Hemsley v. Hemsley, supra, 918 (McRae, J.,
Connecticut for years did not recognize a spouse's separate consortium
claim in a personal injury case. Hopson v. St. Mary's Hospital, 176 Conn. 485, 487, 408
A.2d 260 (1979). Until Hopson there was no common law action for loss of consortium.
There is and never has been a statutory action for loss of consortium. It was noted in
Hopson that the 1877 Married Women's Act gave women, for the first time, the right to sue.
"It was generally held that the new status of married women implied at least some
rights of consortium on their part." Id., 489. Noting a trend in this country,
Connecticut adopted the following phrase from a 1950 federal case "consortium was
defined as a 'conceptualistic unity' which combines inseverably both 'sentimental' and
'service' elements." Id.
Consortium has been later discussed in a number of Connecticut cases,
none of which allude to marriage as a partnership. The Connecticut Supreme Court defines
consortium as "encompassing the services and/or the financial support of a spouse,
'and the variety of intangible relations which exist between spouses living together in a
marriage.'" Champagne v. Raybestos-Manhattan, Inc., 212 Conn. 509, 553, 562 A.2d
1100 (1989). Some of these intangibles are affection, society, companionship,sexual
relations, dependence, reliance, sharing and aid. Baiardi v. Baiardi, 1991 Conn. Super.
LEXIS 1244, Superior Court, judicial district of Fairfield at Bridgeport, Docket No.
233515 (May 23, 1991, Bassick, J.) (6 C.S.C.R. 582) (1991 Ct. Sup. 4237, 4239).
Martha A. Fineman, the Marvin T. Moore Professor of Law of Columbia
University Law School testified that "marriage is a partnership" is a concept
consistent with Connecticut law. A professor since 1976, she specializes in family law and
social matters involving the family. She is a member of a number of national associations
and boards dedicated to this legal area. She has written and lectured extensively
including being selected as the Prutzker Distinguished Visiting Professor at Northwestern
University School of Law this past semester. She has written two books on the subject and
a third is in progress. In 1991 Professor Fineman wrote, The Illusion of Equality: The
Rhetoric and Reality of Divorce Reform, in which the central issue is that no fault
divorce has affected the allocation of assets and the economic consequences of divorce. In
1995 she published, The Neutered Mother, the Sexual Family and other Twentieth Century
Tragedies, which noted the devaluation of the caretaker in trial decisions. Her work in
progress, Engendering Justice, argues that domestic labor has not been evaluated in the
same manner as physical labor. Professor Fineman was disclosed by the plaintiff as an
expert five weeks prior to her testimony. Despite two objections by the defendant the
court permitted her to testify. Practice Book § 220(D); Sturdivant v. Yale-New Haven
Hospital, 2 Conn. App. 103, 107, 476 A.2d 1074 (1984) (lateness of disclosure); Kowalewski
v. Mutual Loan Co., 159 Conn. 76, 80, 266 A.2d 379 (1970) (expert witness generally
not permitted to render an opinion on the ultimate question to be decided by the trier of
Professor Fineman had read the parties' depositions, the plaintiff's
trial testimony, the pleadings in this case, Connecticut statutes, Connecticut cases and
the 1974 ERA. She is familiar with Connecticut law since she refers to O'Neill v. O'Neill
in her law school courses. She states that the equitable distribution scheme in
Connecticut is fairly typical. She notes that Connecticut, as was true for most states,
had a "hierarchical" concept of marriage. The husband owned the property, he had
title and was entitled to the property on divorce because of this title and he alone had
an obligation to support his wife at divorce. "No fault" created an
"egalitarian" concept of marriage, and equity, not title, determined the
division upon divorce. Alimony became less important. The partnership theory was
introduced to marriage. She notes that Connecticut statutes and case law do not use the
term "partnership." She does indicate that a number of states have established a
fifty-fifty presumption and some of these states with a fifty-fifty presumption recite the
Connecticut type criteria as deviation standards. She does admit that no Connecticut
statute or case mandates a fifty-fifty presumption. Footnote 2 of O'Neill hints, though,
that a non fifty-fifty division would violate the state ERA.
It was Professor Fineman's opinion that "marriage is a
partnership" is a Connecticut concept and that there is an initial presumption of
fifty-fifty with deviation based on the specific facts of the case. She says that
Connecticut does not hold to a "ritualistic mathematical formula." As examples
of such a deviation she pointed to (1) one spouse's dire needs based on medical or
emotional incapacity,(2) one spouse is the primary caretaker and thus sacrificed his or
her own career, (3) dissipation of assets or other economic misconduct, and (4) if
standards of living after divorce would be disparate. She states that there are two
authorities that buttress this opinion, the Uniform Probate Code and the American Law
Institute's Principles of the Law of Family Dissolution: Analysis and Recommendations
(Tentative Draft No. 2, 1996).
The Uniform Probate Code specifically adopts a partnership mode of
marriage and in a long term marriage, defined as fifteen years, the spouse's elective
share would be 50%. Connecticut has not adopted the Uniform Probate Court. Schapira v.
Connecticut Bank & Trust Co., 204 Conn. 450, 460, 528 A.2d 367 (1987); Crafts
v. Newtown Probate Court, 1993 Conn. Super. LEXIS 2145, Superior Court, judicial
district of Danbury at Danbury, Docket No. 302091 (August 17, 1993, Stodolink, J.) (8
C.S.C.R. 1055) (1993 Ct. Sup. 7468, 7473-74); General Statutes § 2-80. The current
spousal elective share statute states, "The 'statutory share' means a life estate of
one-third in value of all the property passing under the will, real and personal, legally
or equitably owned by the deceased spouse at the time of his or her death. . . ."
General Statutes § 45a-436(a). This statute was last modified in 1990 to include the
phrase "statutory share." P.A. 90-146. The life use in one-third as an elective
share has been Connecticut law for over a hundred years. General Statutes § 45a-436
(formerly General Statutes § 45-273a; formerly 1949 Rev., S. 7309); Dalia v. Lawrence,
226 Conn. 51, 69, 627 A.2d 392 (1993); Stewart v. Stewart, 5 Conn. 316, 319 (1824).
The American Law Institute's Principles of the Law of Family
Dissolution: Analysis and Recommendations (Tentative Draft No. 2) recommends in § 4.15(1)
"in every dissolution of marriage, the presumption arises that marital property shall
be divided so that the spouses receive marital property equal in value, although not
necessarily identical in kind." The presumption can be rebutted in only two
circumstances: (1) it is equitable to compensate a spouse for a "loss
recognized" in whole or in part, with an enhanced share of the marital property or
(2) one spouse is entitled to an enhanced share of the marital property because the other
spouse previously made an improper disposition of some portion of it. Id., § 4.15
(2)(a)and 2(b). Each of the four deviations proposed by Professor Fineman's testimony fits
within these two ALI deviation standards. In essence Professor Fineman's testimony is that
Connecticut should adopt § 4.15 of the ALI, Tentative Draft No. 2. Connecticut has not
done this either by statute or case law. The ALI Comments to § 4.15 also note that this
rule is a "replacement of need." Each party's "needs" is a Connecticut
criterion and the statute makes it mandatory that a trial judge considers each and every
criterion. The adoption of § 4.15, by replacing need with compensable law, violates the
statutory equitable distribution scheme and cannot become Connecticut law until the
legislature sees fit to change the statutes. See General Statutes § 2-80 (the
"Commission on Uniform Legislation . . . shall examine the subject of marriage and
divorce. . . .").
Professor Fineman did not interview the defendant nor anyone at GE. She
had formulated her general opinion even before reviewing the various Wendt documents and
depositions. She admitted that there are "many unacknowledged problems with the
partnership approach." "The next divorce reference, argues Columbia Law School
Professor, Martha Albertson Fineman, should focus on ways of leaving both spouses with
roughly equal standards of living. Given women's rising earnings, low-earning men would
benefit from this standard too." Washington Post, March 28, 1993. Exhibit 69. In her
1991 book, The Illusion of Equality, at page 10, Professor Fineman wrote that the law
cannot be used to make the change. She admitted on cross examination that the legislature
should make the change to equal distribution, not the courts.
The adoption of the concept of "marriage is a partnership" in
Connecticut would create a slippery slope. This court also notes the lack of a consensus
among writers on the statutory scheme necessary to engraft this commercial standard into
the vagaries of family life.
A special benefit of a system which allows for equitable
considerations, especially in the family law field, is to afford the judge before whom the
litigants appear, subject to applicable legal principles, the opportunity to fashion a
remedy which achieves a just result. While critics may claim this results in
inconsistency, we believe the strength of the judicial system is enhanced when the
judiciary possesses the ability in family law cases to tailor a remedy to fit the
circumstances of the individual litigants before the court.
In re Marriage of Hug, 154 Cal. App. 3d 780, 201 Cal. Rptr. 676,
Our function is to ascertain what the legislature intended and to
enforce that intent rather than to substitute our "own ideas of what might be a wise
provision in place of a clear expression of legislative will." Penfield v. Jarvis,
175 Conn. 463, 474-75, 399 A.2d 1280 (1978).
Although early man once roamed post-glacial Connecticut, there has been
no Connecticut evidence of "Homo Economicus." This court will dig no further
into the moraine to discover such a being, for the first to discover "Homo
Economicus" can then declare "marriage is a partnership" but, until that
day dawns, no. See Bea A. Smith, "The Partnership Theory of Marriage: A Borrowed
Solution Fails," 68 Tex. L. Rev. 689 (1990).
Marriage is not a commercial partnership in Connecticut.
OPTION VESTING RULES AND TAX CODE TREATMENT OF STOCK OPTIONS ARE
IRRELEVANT IN DETERMINING WHETHER THE OPTIONS ACQUIRED DURING THE MARRIAGE AND NOT
EXERCISABLE UNTIL AFTER DISSOLUTION ARE PART OF THE ESTATE OF THE EMPLOYEE SPOUSE AND
SUBJECT TO MARITAL DISTRIBUTION
An employee stock option is a contractual right to purchase stock on or
before a specified date at a predetermined price. I.R.C. § 1234(a). There are two
classifications of options: (1) statutory or qualified options, those granted under and
governed by specific I.R.C. sections and (2) nonstatutory or nonqualified options, those
governed under the more general I.R.C. principles of compensation and recognition of
income. Either type of option is an agreement under which the holder of the option has the
right, but not the obligation, to purchase corporate shares at a fixed price on a fixed
date, or within a range of dates. Treas. Reg. § 1.421-7(a)(1) (1978) .
Under the Code, the holder (employee) of a nonstatutory option must
recognize income at the time the option is granted if the option has a "readily
ascertainable fair market value" at the time of grant. Treas. Reg. §§ 1.83-1(a),
1.83-7(a) (1978); 26 C.F.R. § 1.83-7 (1978). If the option is "actively traded on an
established market" the Code considers the option to have a "readily
ascertainable fair market value." Treas. Reg. § 1.83-7(b)(1) (1978) .
The Code establishes four conditions necessary for an option that is
not "actively traded on an established market" to meet the "readily
ascertainable fair market value" standard: (1) the option is transferable by the
optionee, (2) the option is exercisable immediately in full when granted, (3) there can be
no condition or restriction on the option that would have a significant effect on its fair
market value, and (4) the fair market value of the option privilege is readily
ascertainable. Treas. Reg. §§ 1.83-7(b)(2) and 1.83-7(b)(3) (1978). All four conditions
must be met. Since these conditions are seldom satisfied, most nonqualified, nonstatutory
stock options not traded on an established market, do not have a readily ascertainable
fair market value. 1997 U.S. Master Tax Code, (CCH) § 1923. If there is no "readily
ascertainable fair market value" at the time of the grant, the optionee recognizes
income at the time of the option either: (1) becoming "substantially vested" or
(2) is no longer subject to a "substantial risk of forfeiture." I.R.C. § 83(a)
(1994); Treas. Reg. § 1-83-1 (1978). Any profit is a short term capital gain, taxable at
ordinary income rates. I.R.C. § 1234(b).
This type of employee benefit was reported in a recent non-IRS Ohio tax
Quantifying the value of a stock option at the time of its grant is a
complex task, subject to the vagaries of market forecast and compounded by the fact that
no ready market can exist for nontransferable stock options. The IRS resolves the
difficulty of valuing a nontransferable stock option by waiting until the option is
exercised, at which time there is a recognition of income equal to the difference between
the option price and the fair market value of the stock at the time of the exercise. At
the moment that the income is recognized, a fair market value can be assigned to the stock
Rice v. Montgomery, 104 Ohio App. 3d 776, 663 N.E.2d 389, 392
The true value of the stock option to its owner is the potential for
appreciation in stock price without investment risk. If the stock price were to drop, the
owner of the option simply would not exercise it, because he could instead buy the stock
more cheaply on the market. As stated by Treas. Reg. 1.83-7(b)(3), the value of this type
of stock option is risk-free appreciation.
The GE Unvested Stock Option and Appreciation Rights Plan is a
nonstatutory, nonqualified plan. The parties so agree. The issue here is whether the
"unvested" tax treatment and the IRS's consideration of the "substantial
risk of forfeiture" rules are relevant. The defendant claims that a determination of
a "substantial risk of forfeiture" by the IRS renders the stock options a
"mere expectancy" and "speculative" in value. The plaintiff claims
that the dissolution trial court is not bound by the Code in this determination. A
"substantial risk of forfeiture" exists under the IRS Code when the right in the
property transferred is conditioned, directly or indirectly, upon the future performance
of substantial services, and the possibility of forfeiture exists if such condition is not
satisfied. 26 C.F.R. § 1-83-3(c). When the restriction is lifted, the substantial risk of
forfeiture terminates, and the employee incurs a tax liability. All three of GE contingent
resources discussed in this decision have a "substantial risk of forfeiture" as
defined by the IRS Code. The plaintiff points to four current benefits the defendant has
by reason of the "unvested stock options" granted during the marriage but which
are not exercisable until after the dissolution: (1) it has value now, (2) there is an
opportunity to profit in the future with stock price increases, (3) there is no cash at
risk, and (4) it defers to a future date any tax obligation.
Majority opinions and dissents from sister states refer to this
conflict and hold that the IRS rules of "substantial risk of forfeiture" and
"substantially vested" are irrelevant to whether or not a dissolution court can
distribute unvested stock options. These cases are: In re Marriage of Miller, 915 P.2d
1314, 1317 (Colo. 1996); Salstrom v. Salstrom, 404 N.W.2d 848, 850 (Minn. Ct. App.
1987) ("Federal tax laws have little relevance to the characterization of
property as marital or nonmarital under Minnesota law."); McGrew v. McGrew, 151
N.J. Super. 515, 377 A.2d 697 (App. Div. 1977); In re Marriage of Short, 71 Wash.
App. 426, 442, 859 P.2d 636 (1993), rev'd on other grounds, 125 Wash. 2d 865, 890
P.2d 12 (1995) (in determining whether unvested stock options are community property
for marital distribution, tax laws are "not the tail that wags the dog"); Hann
v. Hann, 655 N.E.2d 566 (Ind. Ct. App. 1996) (Chezem, J., dissenting) (tax laws do not
control the issue of whether unvested stock options are property. Majority decided the
issue without discussing the tax definitions or treatment); Sturtevant v. Sturtevant,
146 Conn. 644, 648, 153 A.2d 828 (1959) ("'Net income' was not defined in the
agreement. Therefore it should be given its ordinary meaning as used in general accounting
practice as distinguished from any special meaning it may have under the federal income
tax laws."). The court finds these cases persuasive and holds that the Internal
Revenue Code and the regulations promulgated thereunder are irrelevant to the issue at
OTHER JURISDICTIONS HAVE DISCUSSED WHETHER STOCK OPTIONS ARE
Unvested exercisable stock options are generally considered property
for marital distribution purposes in most jurisdictions. Garcia v. Mayer, 1996 NMCA 61,
122 N.M. 57, 920 P.2d 522 (Ct. App. 1996). "An option to sell stock is labelled a
'put'. . . . The terms of the option determine whether it is or is not transferable. There
is a recognized exchange for many transferable puts and calls. As a result, many of the
transferable options have a value fixed daily in the marketplace just as does traded
common stock. Nontransferable options cannot be traded on an exchange, and their value
must be arrived at in another manner. However, they constitute marital property just the
same as traded options or traded common stock." Richardson v. Richardson, 280 Ark.
498, 659 S.W.2d 510, 513 (1983).
Common threads in many of these cases which have discussed stock
options are: (1) the stock options are issued as an employment benefit, (2) the employee
has a present contractual right to these benefits although the possession or enjoyment is
contingent, and (3) many of the contingencies are within the control of the employee such
as continued employment and satisfactory job performance. Stock options are discussed in
the following cases:
1. Garcia v. Mayer, 1996 NMCA 61, 122 N.M. 57, 920 P.2d 522 (Ct.
App. 1996). This case relates that a majority of jurisdictions have determined that
unvested stock options are marital property, and discusses the difference between options
awarded for past or present performance as opposed to future services.
2. In re Marriage of Brown, 15 Cal. 3d 838, 544 P.2d 561, 126 Cal.
Rptr. 633 (1976). This early California case discusses the division of pension
benefits and was relied on by the Hug court. In an earlier case, French v. French, 17
Cal. 2d 775, 112 P.2d 235 (1941), the court held that nonvested pension rights are not
property, but a mere expectancy, and thus, not a community asset subject to division upon
dissolution of a marriage. Overruling French, the court in Brown said: "the French
rule cannot stand because nonvested pension rights are not an expectancy, but a contingent
interest in property; furthermore, the French rule compels an inequitable division of
rights acquired through community efforts. Pension rights, whether or not vested,
represent a property interest; to the extent that such rights derive from employment
during coverture, they comprise a community asset subject to division in a dissolution
proceeding." In re Marriage of Brown, supra, 15 Cal. 3d 841-42, 544 P.2d 562-63.
3. In re Marriage of Hug, 154 Cal. App. 3d 780, 201 Cal. Rptr. 676
(1984). The Hug case was the first California case to hold that unvested stock options
are property. The options were divided using a coverture factor time rule.
4. In re Marriage of Nelson, 177 Cal. App. 3d 150, 222 Cal. Rptr.
790 (1986). Here, the court, citing In re Marriage of Hug, established a different
coverture factor for dividing unvested stock options as property. "It was therefore
appropriate to place more emphasis on the period following each grant to the date of
separation, as the trial court did here, than on the employee's entire tenure with the
company up to the time of separation as the Hug court did." In re Marriage of
Nelson, supra, 222 Cal. Rptr. 793 n. 3.
5. In re Marriage of Harrison, 179 Cal. App. 3d 1216, 225 Cal. Rptr.
234 (1986). The Harrison case followed In re Marriage of Nelson with a slight
variation regarding vesting as opposed to exercisability.
6. In re Marriage of Walker, 216 Cal. App. 3d 644, 265 Cal. Rptr. 32
(1989). This California case held that unvested stock options are property subject to
division in a dissolution since they are benefits attributable to past and future
employment efforts. The actual formulas of Hug, Harrison and Walker are diagrammed in the
7. In re Marriage of Miller, 915 P.2d 1314 (Colo. 1996). In
Miller, the court found that unvested stock options earned during the marriage can be
divided using a time rule and those unvested stock options that are granted entirely for
past or present services are considered entirely marital regardless of the contingencies.
Options granted for future services are not marital property and, thus, not divisible at
8. In re Marriage of Moody, 119 Ill. App. 3d 1043, 457 N.E.2d 1023,
75 Ill. Dec. 581 (1983).
9. In re Marriage of Frederick, 218 Ill. App. 3d 533, 578 N.E.2d
612, 161 Ill. Dec. 254 (1991).
10. In re Marriage of Isaacs, 260 Ill. App. 3d 423, 632 N.E.2d
228, 198 Ill. Dec. 169 (1994). Moody, Frederick, and Isaacs are examples of cases that
consistently hold that unvested, nontransferable employee stock options may be allocated
in a dissolution proceeding using the retention of jurisdiction distribution method, i.e.,
if, as and when they are exercised.
11. Goodwyne v. Goodwyne, 639 So. 2d 1210 (La. Ct. App.), writ
denied, 645 So. 2d 211 (1994). This case involved an unusual fact pattern and
supports the theory that unvested stock options are divisible. At the time of the decree
the unvested stock options were "under water" - had no intrinsic value - and the
options were divided in a post judgment proceeding when the options had developed value.
12. Green v. Green, 64 Md. App. 122, 494 A.2d 721 (Ct. Spec. App.
1985). The court in Green found that unvested stock options earned as compensation
during the marriage but not vesting until after the date of dissolution were marital
property to be divided on a case by case basis based on flexible standards.
13. Salstrom v. Salstrom, 404 N.W.2d 848 (Minn. Ct. App. 1987).
14. Lomen v. Lomen, 433 N.W.2d 142 (Minn. Ct. App. 1988). Here,
unvested stock options granted during the marriage, not vesting until after the
dissolution, were subject to an apportionment fraction. They had marital and nonmarital
aspects. In Salstrom the options were not found to be granted solely for future services.
15. Smith v. Smith, 682 S.W.2d 834 (Mo. Ct. App. 1984). The
court found unvested stock options to be property, similar to other employee benefits, and
subject to marital division.
16. Callahan v. Callahan, 142 N.J. Super. 325, 361 A.2d 561 (Ch.
1976). This early case held nontransferable stock options, not subject to
contingencies and acquired during marriage, are subject to equitable distribution since
they are a form of compensation. The difficulties of division were noted, and a
constructive trust was imposed on the husband in favor of the wife for a portion of the
shares of the stock options.
17. Richardson v. Richardson, 280 Ark. 498, 659 S.W.2d 510 (1983).
The court found that stock options obtained during the marriage under a restricted stock
option plan have value and are marital property.
18. Pascale v. Pascale, 274 N.J. Super. 429, 644 A.2d 638 (App. Div.
1994). Stock options received by an employee spouse after a divorce were not subject
to equitable division since they were given in recognition of premarital efforts and
designated as incentive for future efforts. This case reaffirmed Callahan, holding
unvested stock options are property.
19. Demo v. Demo, 101 Ohio App. 3d 383, 655 N.E.2d 791 (1995).
In this case, stock options granted pursuant to a GE Long Term Incentive Plan had been
"earned" by the employee spouse prior to the date of marriage even though they
were awarded immediately after the marriage. The option plan "'intended to provide
special recognition and potential long-term value to key employees who demonstrate
sustained high performance.'" Stock options were held to be employee's separate
property pursuant to Ohio statutory definitions because the award was based on job
performance prior to the marriage.
20. In re Marriage of Short, 125 Wash. 2d 865, 890 P.2d 12, 16-17
(1995). Here, the issue of whether unvested stock options in Microsoft were considered
community property depended on whether the options were granted to compensate the employee
for past, present or future employment. Unvested options awarded for past and present
services were held to be marital property regardless of the continuing restriction on
transfer or vesting. Unvested options granted for future services are deemed to be
acquired periodically in the future as the options vest and are subject to a time rule
division to allocate the shares between marital (community) and nonmarital (separate)
property. A different time rule than In re Marriage of Hug was used to differentiate
between unvested options that are clearly separate property for which no time rule would
be applied, and those which include both a community effort and separate effort.
21. Chen v. Chen, 142 Wis. 2d 7, 416 N.W.2d 661 (Ct. App. 1987),
review denied, 419 N.W.2d 562 (1988). The court found that unvested stock options
are not mere gratuities but are "economic resources" comparable to pension and
other employee benefits. They are enforceable contract rights, and thus, allocable using a
discretionary time rule based on the factual determination of whether the options were
awarded for past or present services as opposed to future services.
22. In re Powell, 147 Ore. App. 17, 934 P.2d 612 (1997). The
parties agreed that unvested stock options were marital property. The court divided
unvested stock options using a time rule, not the equal division requested by the wife.
"No one rule will produce a just and proper result in all cases and that no one rule
will be responsive to the many different reasons why stock options are granted."
Three states have held that unexercisable or unvested stock options are
not subject to distribution. One such case is Hann v. Hann, 655 N.E.2d 566 (Ind. Ct.
App. 1995). Hann is largely based upon an Indiana statute. "The current version
of I.C. 31-1-11.5-2(d) defines property as follows: (d) The term 'property' means all the
assets of either party or both parties, including: (1) a present right to withdraw pension
or retirement benefits; (2) the right to receive pension or retirement benefits that are
not forfeited upon termination of employment, or that are vested, as that term is defined
in Section 411 of the Internal Revenue Code, but that are payable after the dissolution of
marriage. . . ." Id., 569 . Thus, Indiana defines "property" as
including vested pension plans. "We denominate . . . [the] options as 'unmatured' in
the sense that they were not exercisable at the time of dissolution. We further denominate
the options as 'unvested' in the sense that the options are subject to forfeiture in the
event that Daniel dies, is fired or otherwise terminates his employment with Biomet."
655 N.E.2d 569 n. 1. This statute has fostered a line of cases in the last ten
years that have "consistently held that only property in which the party has a vested
interest at the time of dissolution may be divided as a marital asset." Id., 569.
By way of example, Hann in footnote 2 claims that the most recent of these cases holds,
"'A chose in action, not vested but rather contingent and speculative in nature and
in value, is not capable of division and thus not marital property subject to equal
distribution under the Dissolution of Marriage Act.'" Id., 569 n. 2, quoting Mullins
v. Matlock, 638 N.E.2d 854, 856 (Ind. Ct. App. 1994).
The Hann court then goes on to find that unvested stock options are
"closely analogous" to unvested pension plans and therefore, are not marital
property. "Given our legislature's position on unvested pension benefits and
Indiana's equitable distribution means for the distribution of marital property, we find
that our treatment of Daniel's stock options is fully in accord with Indiana law on the
subject of division of future income interests." Hann v. Hann, supra, 655 N.E.2d
571. Hann v. Hann cites with approval two other cases which this court can distinguish
and are not controlling. These cases are Hall v. Hall [(1987), N.C.App., 88 N.C. App.
297, 363 S.E.2d 189] from North Carolina and Wikel v. Wikel [(1992), Wis.App., 168
Wis. 2d 278, 483 N.W.2d 292] from Wisconsin.
There is no statutory definition in Connecticut of marital property.
Connecticut, unlike Indiana, is an "all-property state." Vested pensions are
includable as marital property. Krafick v. Krafick, supra, 234 Conn. at 798. Thus,
vested stock options are includable as marital property. Id., 798 n. 23. Choses in
action are includable as marital property in Connecticut. Raccio v. Raccio, 41 Conn.
Supp. 115, 122, 556 A.2d 639 (1987); Tyc v. Tyc, 40 Conn. App. 562, 564, 672 A.2d
526 (1996). This court is not bound by Hann. v. Hann.
The defendant also cites Hall v. Hall 88 N.C. App. 297, 363 S.E.2d
189 (1987) and Boger v. Boger, 103 N.C. App. 340, 405 S.E.2d 591 (1991) in
support of his position. "Options which are not exercisable as of the date of
separation and which may be lost as a result of events occurring thereafter, and are,
therefore, not vested, should be treated as the separate property of the spouse for whom
they may, depending upon circumstances, vest at sometime in the future." Hall v.
Hall, supra, 363 S.E.2d 196. Both cases suffer from the same infirmity. They are based
on the interpretation of North Carolina statutes. Unlike Connecticut, North Carolina
statutes state "nonvested pension, retirement and deferred compensation rights shall
be considered separate property." An expectation of a future right contingent upon
continued service is by statute separate property. N.C. Gen. Stat. §§ 50-20(b)(1), and
(b)(2) (1995). For the same reasons set forth in the prior paragraph regarding Hann v.
Hann, this court cannot rely on these North Carolina cases. They were both influenced by a
statute that has no parallel in Connecticut. As a matter of fact, the North Carolina
statute does not state that the contingent resources are not "property," just
that they are treated as "separate property."
Oklahoma is the third state holding that stock options, not exercisable
at the end of the marriage do not constitute marital property. Ettinger v. Ettinger,
637 P.2d 63 (Okla. 1981). Ettinger was based on Oklahoma statutes that still contain
some vestiges of common law title doctrine. "The court shall enter its decree
confirming in each spouse the property owned by him or her before marriage and the
undisposed-of property acquired after marriage by him or her in his or her own
right." Okla. Stat. § 43-121. In 1972 a decree was entered awarding the wife
one-half of the husband's unvested stock options. In a 1981 contempt proceeding the trial
court vacated the 1972 option order because the wife was not given the options. No out of
state cases were cited by the Oklahoma Supreme Court. The case had overtones of res
judicata, modification of contract (consent decree) and Oklahoma's title definition of
property.The case declared that the unvested options should be divided as per the 1972
decree. Oklahoma gives the parties to a marriage the right to declare certain personal
property separate property. "A full and complete inventory of the separate personal
property of either spouse may be made out and signed by such spouse. . . . The filing of
the inventory in the county clerk's office is notice and prima facie evidence of the title
of the party filing such inventory." Okla. Stat. § 43-207. Although Oklahoma does
not have a statutory definition of marital or separate property, cases after Ettinger have
created a rebuttable presumption. "There is a rebuttable presumption that property
acquired during coverture is property acquired by the joint efforts of husband and
wife." Manhart v. Manhart, 725 P.2d 1234, 1240 (Okla. 1986).
Given the title component of Oklahoma's property distribution scheme,
the inventory filing concept creating separate property, the res judicata issue and the
1972 consent decree issue, the underpinnings of Ettinger are weakened for Connecticut
comparison purposes. Ettinger is based on statutes that have a different foundation than
the Connecticut equitable scheme.
After reading the above cases as well as all the Connecticut appellate
and trial court cases on this subject, the court attempted to find an out of state case
that closely approximated Connecticut's equitable distribution scheme. This court found
most of the out of state cases not persuasive on the following grounds: (1) although
purporting to decide the issue of "property" many of the decisions were from
community property or quasi-community property states; (2) a number of the states had
little connection with Connecticut common law tradition, for example, Louisiana; (3) a
number of the states have statutes that define, to some extent, what is or is not included
as "marital property." This court would prefer not to rely on any decision that
comes from such a "dual property" jurisdiction.
The case of Cohen v. Cohen, 937 S.W.2d 823 (Tenn. 1996) meets
this court's requirements. Tennessee is neither a community property, quasi-community
property nor a dual-property state. It has a common law tradition. The statutory
definition of marital property in Tennessee is virtually all inclusive. "Marital
property, under our law, includes 'all' property 'acquired. . . during the course of the
marriage' or to which 'a right was acquired up to the date of the final divorce hearing.'
Tenn. Code Ann. § 36-4-121(b)(1)(A) (1991 Repl.)" Cohen v. Cohen, supra, 937
S.W.2d 827. This statute is consistent with Connecticut's statutory "all
property" equitable distribution scheme. Krafick v. Krafick, supra, 234 Conn. at
801. Cohen v. Cohen, supra, 829, cites Krafick v. Krafick as dicta. Cohen
includes a litany of cases from 35 additional states in support of its conclusion, that
"unvested retirement benefits accruing during the marriage constitute marital
property": Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii,
Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Minnesota, Mississippi,
Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma,
Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia,
West Virginia and Wyoming. Cohen also holds that a spouse's direct financial contributions
to household expenses and indirect contributions as a homemaker are contributions to the
appreciation of the other spouse's separate property.
The GE "unvested stock options" plan, the "restricted
stock" and "supplemental pension plan" are all employment benefits issued
to the defendant during the marriage as a result of his employment efforts, either past,
present or future. They are contingent on events that may or may not occur, but if they
occur they will occur after the date of dissolution of marriage. For the purpose of this
decision, the court believes all three contingent resources are subject to a similar
analysis as to whether they are property. Therefore, although Cohen v. Cohen involves an
unvested pension plan, this court believes its holding is applicable to all three
This court finds persuasive the following conclusion: "In these
decisions, retirement benefits have been described as part of the consideration earned by
an employee, In re Marriage of Brown, 126 Cal. Rptr. at 637, 544 P.2d at 565, and
as a form of deferred compensation provided by the employer for work already performed. .
. . Since the benefits are acquired with the fruits of the wage earner's labor, were it
not deferred it could benefit the parties during the marriage." (Citation omitted.) Cohen
v. Cohen, supra, 937 S.W.2d829; see also Deering v. Deering, 292 Md. 115, 437 A.2d
883, 888 (1981). This quotation has a parallel in Connecticut. "Pension benefits
represent a form of deferred compensation for services rendered." Thompson v.
Thompson, 183 Conn. 96, 100, 438 A.2d 839.
Cohen cited a few jurisdictions that do not recognize unvested
retirement benefits as marital property due to their contingent and speculative nature:
Arkansas, Indiana, North Carolina and Ohio. This court believes that the 1992 Ohio case
cited in Cohen may have been overruled by Demo v. Demo, 101 Ohio App. 3d 383, 655
N.E.2d 791 in 1995. This court has already stated its reasons why Indiana, North
Carolina and Oklahoma cases are not authoritative. Cohen did rely on its intermediate
appellate court and made three observations which this court finds persuasive.
"Three helpful observations made by the Court of Appeals in
Kendrick bear repeating: 1) Only the portion of retirement benefits accrued during the
marriage are marital property subject to equitable division. 2) Retirement benefits
accrued during the marriage are marital property subject to equitable division even though
the non-employee spouse did not contribute to the increase in their value. 3) The value of
retirement benefits must be determined at a date as near as possible to the date of the
divorce." Cohen v. Cohen, supra, 937 S.W.2d 830; see also Kendrick v.
Kendrick, 902 S.W.2d 918, 922 (Tenn. Ct. App. 1994).
Cohen noted that the difficulty in dividing future benefits is aided by
the use of elastic, equitable approaches. Cohen then discussed the present cash value
method, placing a present value on the retirement benefits as of the date of the final
decree. That present cash method uses discounts for mortality, interest, inflation and any
applicable taxes as well as the circumstances under which this method would be used. Cohen
also discussed the "deferred distribution" or "retained jurisdiction"
method, the formulas used and the circumstances under which this method could be used.
"The choice of valuation method remains within the sound discretion of the trial
court to determine after consideration of all relevant factors and circumstances. While
the parties are entitled to an equitable division of their marital property, that division
need not be mathematically precise. . . . It must, however, reflect essential fairness in
light of the facts of the case." (Citations omitted.) Cohen v. Cohen, supra, 937
The difficulty in dividing future benefits is aided by the use of
elastic, equitable approaches. . . . Most courts use one of two techniques. . . . The
first approach, known as the present cash value method, requires the trial court to place
a present value on the retirement benefit as of the date of the final decree. . . . To
determine the present cash value, the anticipated number of months the employee spouse
will collect the benefits (based on life expectancy) is multiplied by the current
retirement benefit payable under the plan. . . . This gross benefit figure is then
discounted to present value allowing for various factors such as mortality, interest,
inflation, and any applicable taxes. . . . Once the present cash value is calculated, the
court may award the retirement benefits to the employee-spouse and offset that award by
distributing to the other spouse some portion of the marital estate that is equivalent to
the spouse's share of the retirement interest. . . . The present cash value method is
preferable if the employee-spouse's retirement benefits can be accurately valued, if
retirement is likely to occur in the near future, and if the marital estate includes
sufficient assets to offset the award. . . .
In other circumstances in which the vesting or maturation is uncertain
or in which the retirement benefit is the parties' greatest or only economic asset, courts
have used the 'deferred distribution' or 'retained jurisdiction' method to distribute
unvested retirement benefits. This method has distinct advantages when the risk of
forfeiture is great. . . . Under such an approach, it is unnecessary to determine the
present value of the retirement benefit. Rather, the court may determine the formula for
dividing the monthly benefit at the time of the decree, but delay the actual distribution
until the benefits became payable. . . . The marital property interest is often expressed
as a fraction or a percentage of the employee spouse's monthly benefit. The percentage may
be derived by dividing the number of months of the marriage during which the benefits
accrued by the total number of months during which the retirement benefits accumulate
before being paid. . . .
One advantage to the deferred distribution method is that it allows an
equitable division without requiring present payment for a benefit not yet realized and
potentially never obtained. . . . Another advantage to the approach is that it equally
apportions any risk of forfeiture. While a disadvantage may be that the approach requires
a trial court to retain jurisdiction to oversee the payment, the entry of an order
awarding a certain percentage of the benefits at the time of payment should lessen the
administrative burden of the court. Courts routinely retain jurisdiction to supervise
payments of alimony and child support and have, in the past, successfully divided vested
pension rights by awarding each spouse a share. An administrative burden should not excuse
an inequitable distribution of marital property.
(Citations omitted.) Cohen v. Cohen, supra, 937 S.W.2d 831.
By the end of 1997, New York had joined the substantial majority of
states holding that "restricted stock and stock option benefit plans provided by a
spouse's employer constitutes marital property for the purposes of equitable distribution,
where the plans come into being during the marriage but are contingent on the spouse's
continued employment with the company after the divorce." DeJesus v. DeJesus, 90
N.Y.2d 643, 665 N.Y.S.2d 36, 687 N.E.2d 1319 (1997). Although remanded to the trial
court for a factual determination as to the exact terms and conditions of the plans, New
York's highest court in a seven judge panel unanimously joined the majority of
jurisdictions that use a time rule to divide such contingent resources.
On remittal, application of the rules we have enunciated should resolve
the issue of what portions of the plans constitute marital property, reflecting the wife's
right to share in whatever value of the stock plans accrued during the marriage, during
which time she contributed to her husband's successful career in banking through her
services as wife and homemaker. The remainder would be separate property, not subject to
equitable distribution, which the husband has the right to enjoy, as separate property
traceable to the years outside of the marriage, the fruit of his sole labors.
The trial court concluded that all the stock plans are deemed to be
marital property. DeJesus v. DeJesus, 163 Misc. 2d 267, 270, 620 N.Y.S.2d 704 (Sup. Ct.
1994) . The Appellate Division had affirmed the trial court holding that
"considering the characteristics of the employee benefit plan . . . both plans
constituted deferred compensation for employment during the term of the marriage and are
entirely marital property." DeJesus v. DeJesus, 227 A.D.2d 583, 643 N.Y.S.2d 387
(N.Y. App. Div.).
In DeJesus the New York Court of Appeals cited a number of the out of
state cases reviewed by this court. "This is the first time we are called upon to
determine the manner in which stock plans are to be distributed in a matrimonial action,
and we deem it instructive to review the approaches to distribution of nonvested stock
plans of other states. Although we recognize that some of the referenced cases were
decided in community property jurisdictions, the underlying consideration common to stock
plan valuation and equitable distribution disputes are quite similar." DeJesus v.
DeJesus, 90 N.Y.2d 643, 665 N.Y.S.2d 36, 687 N.E.2d 1319 (1997).
New York relied most heavily on the method of dividing the options set
forth in Colorado In re Marriage of Miller, supra, 915 P.2d 1319. A four step
process was outlined: (1) the shares traced to past and future services; (2) that portion
determined to be for compensation for past services is marital to the extent that the
marriage coincides with the period of the titled spouse's employment, up until the time of
the grant; (3) that portion determined to be an incentive for future services; the marital
share of that portion will be determined by a time rule employed in 1996 by the California
Court of Appeals in In re Marriage of Nelson; and (4) all portions then found to be
marital, (i) that portion that is compensation for past services and (ii) that portion of
the future services deemed to be marital after application of the time rule, will then be
divided between the parties using the equitable distribution criteria. "We are
persuaded that a Miller type analysis best accommodates the twin tensions between portions
of stock plans acquired during the marriage versus those acquired outside of the marriage,
and stock plans which are designed to compensate for past services versus those designed
to compensate for future services." DeJesus v. DeJesus, 90 N.Y.2d 643, 665
N.Y.S.2d 36, 687 N.E.2d 1319 (1997).
It should be noted that New York had already adopted a time rule for
division of pension rights.The portion of the plans comprising marital property was found
to be proportional to the ratio of (1) the time from the grant of the plans until the
commencement of the divorce action over (2) the time from the grant until the employee's
interest vests. Majauskas v. Majauskas, 61 N.Y.2d 481, 463 N.E.2d 15, 22, 474 N.Y.S.2d
This court has examined virtually every other trial court decision in
Connecticut dividing stock options in a marital dispute. These cases will be reviewed in
the next section of this decision. Other then Grich v. Grich, 1996 Conn. Super. LEXIS
3451 (1997), none of these cases discuss coverture factor variables or legal rationale
for their division. Benson v. Benson, 1997 Conn. Super. LEXIS 1519 (1997), relies
on Thompson in dividing an unvested pension equally. Many of the cases discuss stock
options and fail to note the difference between vested and unvested stock options,
treating vested stock options in the same fashion as unvested stock options. It does not
appear that any definitive difference in those options was brought to the attention of the
trial court in those cases. Except for Cohen v. Cohen and Grich v. Grich these Connecticut
and out of state cases have little precedential value. NO REPORTED CONNECTICUT CASE DEALS
DIRECTLY WITH ISSUES OF "CONTINGENT RESOURCES"
Despite the fact that no appellate court has dealt with the subject,
numerous Connecticut trial judges have divided contingent resources. Only one case has set
forth the rationale and legal authority and a few have set forth the method of
distribution. Most cases imply that contingent resources can be divided between spouses.
In chronological order the trial court decisions in Connecticut are:
1. Cole v. Cole, 1992 Conn. Super. LEXIS 465, Superior Court,
judicial district of Fairfield at Bridgeport, Docket No. 278856 (February 27, 1992,
Ballen, J.) (1992 Ct. Sup. 1086) (awarded wife 50% of net proceeds of vested and unvested
stock options to be paid when the options were exercised)
2. O'Leary v. O'Leary, 1992 Conn. Super. LEXIS 1019, Superior
Court, judicial district of Fairfield at Bridgeport, Docket No. 270660 (April 10, 1992,
Karazin, J.) (1992 Ct. Sup. 3313) (husband's restricted stock contingencies lapsing after
the dissolution did not prevent trial court from treating it as an asset by making a
present offset cash award to the wife)
3. Holst v. Bucci, 1994 Conn. Super. LEXIS 558, Superior Court,
judicial district of Ansonia-Milford at Milford, Docket No. 040763 (March 4, 1994,
Coppeto, J.) (1994 Ct. Sup. 2232) (awarded wife 30% of the proceeds of vested and unvested
stock options to be paid at the time the husband exercises the option)
4. Lockett v. Lockett, 1994 Conn. Super. LEXIS 2427, Superior
Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 130043 (September 27,
1994, Moran, J.) (1994 Ct. Sup. 9861) (awarded wife 50% of the proceeds, net of taxes, of
unvested stock options at the time of exercise and allocated to wife the power to direct
the time her portion of the options would be exercised)
5. Cole v. Cole, 1995 Conn. Super. LEXIS 2609, Superior Court,
judicial district of Stamford-Norwalk at Stamford, Docket No. 138899 (September 15, 1995,
Novack, J.) (1995 Ct. Sup. 10441) (unvested stock options left entirely to employee
husband who was ordered to pay 50% of the net gain on any stock options exercised within
five years of the decree, not to exceed a set amount)
6. Eveland v. Eveland, 1996 Conn. Super. LEXIS 236, Superior
Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 141866 (January 30,
1996, Harrigan, J.) (1996 Ct. Sup. 1030) (employee spouse awarded all unvested stock
options presumably by an offset method, other assets awarded to non-employee spouse)
7. Walker v. Walker, 1996 Conn. Super. LEXIS 1162, Superior
Court, judicial district of Hartford-New Britain at Hartford, Docket No. 531465 (May 5,
1996, Brennan, S.J.R.) (1996 Ct. Sup. 4232) (wife entitled to equal share in husband's
vested and unvested stock options)
8. Bornemann v. Bornemann n2, Superior Court, judicial district of New
Haven at New Haven, Docket No. 628215 (July 18, 1996, Munro, J.) (in a short term marriage
with parties of modest means, husband's vested and unvested stock options were divided
between the parties. At the time of trial, the husband's job had terminated and he
received a severance package. An argument was made that all stock options had vested. In a
decision rendered from the bench, the court devoted one half page to the stock options out
of a 40 page transcript. No cases were cited nor was a rationale given concerning the
stock options. Oral argument on this matter, including the stock options, was held before
the Supreme Court on February 20, 1998)
n2 This case is added for discussion purposes only. It was not relied
on by this court in this decision, and its inclusion has no effect on the orders issued on
December 3, 1997.
9. Grich v. Grich, 1996 Conn. Super. LEXIS 3451, Superior Court,
judicial district of Hartford-New Britain at Hartford, Docket No. 525311 (January 2, 1997,
Brennan, S.J.R.) (1996 Ct. Sup. 630) (the court found unvested stock options are marital
property, to be divided by the time rule of In re Marriage of Hug. The court cites and
discusses Hann and Hall in opposition, and California, New Jersey, Minnesota, Wisconsin,
Missouri, Washington, Maryland, Louisiana, New Mexico and Arkansas cases in support of the
10. Benson v. Benson, 1997 Conn. Super. LEXIS 1519, Superior
Court, judicial district of Waterbury at Waterbury, Docket No. 128549 (June 3, 1997,
Shortall, J.) (1997 Ct. Sup. 6358) (3 Conn. Ops. 243) (divided unvested police pension
equally in a ten year, two children marriage, citing Krafick v. Krafick, 234 Conn. at
798 n. 23, 663 A.2d 365, and Thompson v. Thompson, as cited in Krafick v. Krafick,
supra, 794 n. 20. No coverture factor was used, but the husband commenced his police
pension employment during the marriage and had 1 1/2 years until vesting at the time of
A number of Connecticut Appellate Courts have considered similar issues
and furnish some guidance:
1. Denley v. Denley, 38 Conn. App. 349, 353, 661 A.2d 628 (1995)
(post judgment exercise of unvested stock options awarded to one party discussed without
comment by the Appellate Court)
2. Lawler v. Lawler, 16 Conn. App. 193, 198, 547 A.2d 89 (1988)
(periodic alimony award upheld which included an automatic future share in the payee
spouse's earned income should it be increased without requiring a showing of a change in
circumstance. Quoting Rubin v. Rubin, supra, 204 Conn. 224, 233-34, 527 A.2d 1184,
the court said, there is no "'principle of law that necessarily precludes a trial
court, in exercising its discretion to fashion an alimony award, from ordering a payment
that is contingent upon some future event.'" This contingent order was allowed on the
basis that the "prospective pay increases here relate to his own income rather than
to the expectancy of a beneficiary interest in a third person's property." Lawler
v. Lawler, supra, 16 Conn. App. 198.)
3. Thompson v. Thompson, supra, 183 Conn. at 100 ("Pension
benefits represent a form of deferred compensation for services rendered. In re
Marriage of Brown, 15 Cal. 3d 838, 845, 544 P.2d 561, 126 Cal. Rptr. 633 (1976). As
such they are conceptually similar to wages. General Statutes §§ 46b-81(c) and 46b-82
both require the trial court to consider, inter alia, the occupation and the amount and
sources of income of each of the parties when ordering property assignments and alimony.
Just as current and future wages are properly taken into account under these statutes, so
may unaccrued pension benefits, a source of future income, be considered.").
The plaintiff has the stronger side of the argument based on the
current Connecticut cases. The following argument made by the defendant is weak and is not
supported by Connecticut cases:
The net result of his positions is to suggest that the court should
ignore the significant distinctions between the unilateral hope of a testamentary
interest, the receipt of which depends solely on the absolute and unfettered future whims
of a third party, and unvested employment benefits which operate in accordance with known
contractual terms and which depend for ultimate receipt upon a defined set of
circumstances and conditions, many of which are in the sole control of the employee.
Plaintiff's Reply Memorandum Re: Treatment of Stock Options,
February 24, 1997,p. 6.
STATUTES IN CONNECTICUT AS TO "VESTING" ARE IRRELEVANT TO
THIS COURT'S CONSIDERATION
Connecticut is an equitable distribution state. Bratz v. Bratz, 4
Conn. App. 504, 507, 495 A.2d 292 (1985). By statute the trial court can consider, in
regard to the assignment of property, the "amount and sources of income" and
"estate . . . of each of the parties," General Statutes § 46b-81(c); and in
regard to alimony, the "amount and sources of income" and "estate . . . of
each of the parties," General Statutes § 46b-82. A recent decision by the
Connecticut Supreme Court defined pension benefits as property for marital distribution
purposes. "The distribution of assets in a dissolution action is governed by §
46b-81. . . . This approach to property division is commonly referred to as an
'all-property' equitable distribution scheme. . . . It does not limit, either by timing or
method of acquisition or by source of funds, the property subject to a trial court's broad
allocative power. . . ." (Citations omitted.) Krafick v. Krafick, supra, 234 Conn.
792. Connecticut's distribution statutes do not contain a definition of "marital
property," nor is any property specifically excluded.The statute limits neither the
type nor nature of property that can be subject to court order. Therefore, it would be
possible for a spouse to receive at dissolution a large percentage of an inheritance that
the other party received a few days before the marriage dissolution action was filed, even
though that party made no contribution to the acquisition, preservation or appreciation of
that inherited property. General Statutes § 46b-81. Brody v. Brody, 1997 Conn. Super.
LEXIS 845, Superior Court, judicial district of New Haven at New Haven, Docket No.
379062 (March 31, 1997, Alander, J.) (1997 Ct. Sup. 1889); Brown v. Brown, 1996 Conn.
Super. LEXIS 2338, Superior Court, judicial district of Waterbury at Waterbury, Docket
No. 127949 (September 4, 1996, Shortall, J.) (1996 Ct. Sup. 5578 JJ).
Connecticut cannot consider an item of property for marital
distribution if it is a mere expectancy or a contingency which may never occur, Rubin
v. Rubin, 204 Conn. 224, 231, 527 A.2d 1184 (1987); uncertain as to the amount that
would actually be received, Eslami v. Eslami, 218 Conn. 801, 808, 591 A.2d 411 (1991);
or not susceptible to reasonably accurate quantification, Thompson v. Thompson, 183
Conn. 96, 101, 438 A.2d 839 (1981); Stewart v. Stewart, 1993 Conn. Super. LEXIS
1018, Superior Court, judicial district at New London at New London, Docket No. 516125
(May 4, 1993, Teller, J.) (1993 Ct. Sup. 4376, 4383).
In the pension area, Krafick established a three step procedure
regarding the equitable distribution of each resource. "First, whether the resource
is property within § 46b-81 to be equitably distributed (classification); second, what is
the appropriate method for determining the value of the property (valuation); and third,
what is the most equitable distribution of the property between the parties
(distribution)." Krafick v. Krafick, supra, 234 Conn. 792-93. Prior to
Krafick, Connecticut law permitted a court to consider pensions either as a source of
income or property. Askinazi v. Askinazi, 34 Conn. App. 328, 339, 641 A.2d 413 (1994).
Krafick defined vested pension as property only.
Although the parties raised the issue as to whether unvested assets can
be distributed in Connecticut dissolutions, this issue may continue to surface as to other
assets that contain contingencies and terms far different than presented here. The term
"vesting" in a marital property division setting has acquired a special meaning,
different from the contractual conditions of the asset itself. Thus, the continued use of
"vesting" and "nonvesting" may be misleading in a marital distribution
context. "The Identification and Division of Intangible Community Property: Slicing
the Invisible Pie," 6 U.C. Davis L. Rev. 26, 29-31 (1973); Bensing v. Bensing, 25
Cal. App. 3d 889, 102 Cal. Rptr. 255 (1972); In re Marriage of Brown, 15 Cal. 3d
838, 842, 544 P.2d 561, 126 Cal. Rptr. 633 (1976); In re Marriage of Miller, 915
P.2d 1314, 1317 (Colo. 1996).
The use of the words "vested," "nonvested" and
"unvested" is inconsistent. No Connecticut marital case or statute contains a
definition of these terms. The IRS has its own definition of these terms. Employment
benefit agreements may contain their own definitions. "Unvested" appears in only
three Connecticut statutes, all in the ecclesiastical corporate area; General Statutes
§§ 33-264d, 33-264b and 33-278b, all refer to the receipt of vested or unvested gifts or
legacies. "Nonvested" appears in five Connecticut statutes, all regarding the
Rule Against Perpetuities. All five statutes refer to the phrase "nonvested property
interest." General Statutes §§ 45a-491 to 45a-495. "Vest,"
"vesting" or "unvested" appears in 285 Connecticut statutes. These
references include references to Superior Court judges "vested and nonforfeitable
right to retirement salary after ten years of service," General Statutes § 51-49a;
vested retirement salary after age 65 or twenty years of service as a judge, General
Statutes § 51-50a; and rights of a surviving spouse of a vested Superior Court judge,
General Statutes § 51-51(c). It should be noted that a Superior Court judge's retirement
benefits are not similar to those of other state employees because a judge attains the
position usually after completion of a prior legal career. These retirement statutes are
not binding in this case.
Five other statutes contain references to the terms "vest,"
"vesting" or "vested" which this court finds should be mentioned, but
are not of assistance in resolving the issues of this case.
1. General Statutes § 52-278a(e) defining property for prejudgment
remedy purposes. "'Property' means any present or future interest in real or personal
property, goods, chattels or choses in action, whether such is vested or contingent."
This statute will be further discussed under the topic, "Should a bright line rule be
established that all unvested employment plans are property for marital distribution
2. General Statutes § 52-350a(16) defining property for post judgment
purposes. "'Property' means any real or personal property in which the judgment
debtor has an interest which he could assign or transfer, including (A) any present or
future right or interest, whether or not vested or liquidated, (B) any debt, whether due
or to become due, and (C) any cause of action which could be assigned or
transferred." This too will be further discussed under the "bright line
3. General Statutes § 47a-1(e) defining an "owner" for
landlord/tenant purposes. "'Owner' means one or more persons, jointly or severally,
in whom is vested (1) all or part of the legal title to property or (2) all or part of the
beneficial ownership and a right to present use and enjoyment of the premises and includes
a mortgagee in possession." It has been held that a mere property manager is an
"owner" for the purpose of commencing a summary process action. Webb v.
Ambler, 125 Conn. 543, 552-53, 7 A.2d 228 (1939); Turnpike Properties v. Nagot,
1994 Conn. Super. LEXIS 3099, Superior Court,judicial district of Fairfield at
Bridgeport, Docket No. 927841 (November 14, 1994, Tierney, J.) (13 Conn. L. Rptr. 112)
(1994 Ct. Sup. 12060, 12065).
4. General Statutes § 47-31(b) stating that plaintiffs can join
defendants in an action to quiet title "whether the claim or possible claim be vested
5. General Statutes § 48-22 stating the proceedings in an eminent
domain case "when such remainder, reversion or executory devise is contingent, so
that it is not certain in whom the same will ultimately vest. . . ."
Case law use of "vested" is not particularly helpful in the
marital context either. In a discontinuance of highway case under General Statutes §
13a-55, the Appellate Court found that property rights to a discontinued road became
vested in 1910 in the defendant's predecessors in title. Rudewicz v. Gagne, 22 Conn.
App. 285, 290, 582 A.2d 463 (1990). Thus, it was held that a 1959 statutory amendment
had no effect. "An enactment cannot be applied retroactively where a vested right
intervenes." Id., 290. In a state employment layoff case influenced by a
statute passed during the employee's appeal period, the Supreme Court held, "A vested
right is one that equates to legal or equitable title to the present or future enjoyment
of property, or to the present or future enforcement of a demand, or a legal exception
from a demand made by another." State v. State Employees' Review Board, 239 Conn.
638, 653, 687 A.2d 134 (1997). "This argument reveals a misunderstanding of the
difference between the vesting of a property right and the possession of property." Bartlett
v. Bartlett, 220 Conn. 372, 379, 599 A.2d 14 (1991).
Finally, the defendant in support of his claim that the employment
plans are not property and cannot be divided argues, "In contrast, 'unvested'
benefits are those which are contingent, not fixed, and non-possessory. It is conceded
that all of the benefit programs at issue are unvested." Defendant's Memorandum of
Law: Are Unvested Rights "Property" Under Connecticut General Statutes Section
46b-81, December 16, 1996 p. 2. No authority is furnished by the defendant for the above
statement. However, that statement is preceded by the following definition from Black's
Law Dictionary (6th Ed. 1990):
Vested rights are defined as those which are: . . . Fixed; accrued;
settled; absolute, complete. Having the character or given the rights of absolute
ownership; not contingent; not subject to be defeated by a condition precedent. . . .
Rights are vested when the right to enjoyment, present or prospective, has become property
of some particular person or persons as present interest; mere expectancy of future
benefits, or contingent interest on property founded on anticipated continuance of
existing laws does not constitute 'vested right.' . . ."
This definition covers the waterfront and is too broad to be of value
in this case.
No consistent application of the terms "vest,"
"vesting," "vested," "nonvested" and "unvested"
can be drawn from these references. The continued use of these phrases will render opaque
already muddy waters. The court does note the legislative preference to refer to
"contingent" as the opposite of "vested" in certain statutes: General
Statutes § 52-278a(e) (prejudgment remedy definition of property), General Statutes §
47-31(b) (joining defendants in quiet title actions), and General Statutes § 48-22
(eminent domain). This court feels the use of the phrase "contingent resources"
for these types of assets, now and in all future cases, is appropriate.
"CONTINGENT RESOURCES" DERIVED FROM EMPLOYMENT ARE PROPERTY
FOR CONNECTICUT MARITAL DISTRIBUTION PURPOSES
This court will analyze three "contingent resources" that
accrued from the defendant's employment which the parties have agreed are
"unvested": unvested stock options, restricted stock and supplemental pension.
The court believes that the standards set forth in the last three sections of this
decision and the criteria contained in General Statutes § 46b-81(c) are sufficient to
make a determination as to whether or not these "contingent resources" are
property for marital distribution purposes. "It often represents the most important
asset of the marital community." In re Marriage of Brown, supra, 15 Cal. 3d 847
The defendant is the Chief Executive Officer of GECS, a division of
General Electric Corporation (GE). All the corporate benefits that the defendant has
obtained as Chief Executive Officer of GECS are paid, vested and allocated in accordance
with General Electric Corporation's pension plans, options and stock agreements. GECS has
no separate option agreements, pension plans or restrictive stock agreements. They are all
GE agreements and plans.
GE is a Fortune 500 company. It is ranked as one of the largest
companies in the United States. It is one of the world's largest corporations. GE has been
involved in the Dow Jones average longer than any other member. GE is a conglomerate with
seven separate divisions, the largest division being GECS. GE initially made light bulbs
and then electrical household appliances. GECS's original purpose was to lend money to
purchasers of GE appliances. GE has since expanded into such diverse ventures as the
manufacture of railroad cars, leasing of airplanes and manufacturing of a variety of
commercial products. GESC has equally expanded into a myriad of other businesses,
including the ownership of other financial institutions.
A recent press release issued by GECS contained the following: "GE
Capital Services, with assets of more than $227 billion, is a global diversified financial
services company with 27 specialized businesses. A wholly owned subsidiary of
Fairfield-based General Electric Co., GE Capital Services provides equipment management,
midmarket and specialized financing, specialty insurance and a variety of consumer
services, such as car leasing, home mortgages and credit cards, to businesses and
individuals around the world. GE is a diversified manufacturing, technology and service
The parties agree that they first considered the principle legal issue
in this case to be whether unvested stock options are property for Connecticut marital
distribution purposes. It was conceded that vested stock options are property subject to
marital distribution since they contain no contingencies. The legal issues have expanded
considerably, but the treatment of options remain an undecided legal issue. Each of the
three assets in question involves various contingencies which in turn lead to a number of
questions. What contingencies must occur before the GE stock options become vested? What
contingencies must occur before the restricted GE stock becomes unrestricted? What
contingencies must occur for the supplemental pension plan to be vested?
At the commencement of the trial on December 4, 1996, there was a
fourth contingent resource, the GE Long Term Performance Award. This award commenced July
1, 1994 and ended on December 31, 1996. Since the defendant satisfied the contingencies as
of December 31, 1996 and the award was payable to him in February, 1997 prior to the
conclusion of the trial, the entire GE Long Term Performance Award was distributable
property and no longer a contingent resource. The total award was $7,000,000. The
defendant received $350,000 in February, 1997, a sum sufficient to pay the 1.45% medicare
tax due on the entire $7,000,000 and the federal and state income taxes due on the
$350,000. The remaining $6,650,000 was deferred by reason of a written deferral election
signed by the defendant on December 19, 1996. Exhibit 73. The defendant elected to defer
95% of the benefits on a before-tax basis. He further elected to receive payment of the
deferred $6,650,000 in 20 installments commencing March 1 (or as soon thereafter as
practical) following year of termination of employment. "Deferral payments following
termination of employment will be in Cash." Exhibit 73, page 1. The defendant did
testify that some of the deferred award may be paid in the form of GE stock which would
then receive current dividends either on a direct or accumulated basis. The defendant
designated "my estate" as the primary beneficiary. This Long Term Award will not
be further discussed until the ORDERS section of this decision.
The defendant has been issued, over a period of time, multiple shares
of "unvested" GE stock options. In addition, he owns substantial shares of GE
vested stock options. A stock option is a contract issued by a corporation usually to a
high ranking employee. The employee is furnished the right to purchase the corporate stock
at some time in the future for the price that the stock was trading for at the time of its
initial grant. The stock value at the time of its grant is called the "exercise
price" or "strike price." The GE unvested stock options in this case were
granted in multiples of thousands of shares and vest over a period of time. The earliest
vesting is three years after grant, and the latest is six or seven years after grant.
The value to the employee of the stock option is the so-called
"intrinsic" price. The "intrinsic" price is the difference between the
current market price of the stock less the market price at the time of grant times the
number of shares of stock options that have been issued. For example, if on March 1, 1997,
the price of GE stock was $70 per share, the defendant was granted 1,000 shares of stock
options on October 1, 1990 when GE stock was selling at $50 per share, $50 would be the
"exercise or strike price." The difference is $20 per share, times the 1,000
shares. The GE stock options have an "intrinsic" value $20,000.00 on March 1,
Stock options have additional benefits to the issuing corporation.
Stock options can be a combination of either compensation for past, present or for future
services. Unvested stock options granted to a valued employee that vest in five years,
provided the employee is still with GE, are an incentive for the employee to remain with
GE, a concept often referred to as "golden handcuffs." Hann v. Hann, 655
N.E.2d 566, 572 (Ind. Ct. App. 1995) (Chezem, J., dissenting). The options are
worthless if the employee leaves GE during those five years.
Stock options have additional benefits to the employee. The employee
does not have to pay cash to: (1) obtain the grant, (2) retain the right to exercise the
options during the period of ownership, or (3) sell the stock. If the stock goes below the
"exercise or strike price" the employee has lost no cash out of his pocket. The
option is just not exercised. The employee's money is not at risk. If the stock increases,
the proceeds from the sale would be sufficient to pay the "exercise or strike
Each of the phrases, "vested," "unvested,"
"restricted" and "unrestricted" are either corporate definitions or
those contained within the marketplace. These definitions, by themselves, do not greatly
assist the court in deciding this issue. Many of these definitions are driven by the
Internal Revenue Code and concern corporate taxes. Generally, if an unvested stock option
is granted to a high ranking corporate employee subject to various contingencies, there is
a substantial tax benefit to the corporation and the employee. The corporation may take a
deduction for corporate income tax purposes without the expenditure of cash at the time
the employee exercises the stock option. The corporation does not have any cash outlay at
any time, either at the granting of the stock option or the date of exercise by the
employee. As to the employee, no income tax is due at the time of the issuance of the
stock option. A small medicare tax must be paid by the employee at issuance. Only when the
contingencies terminate, the stock becomes "vested" and the stock is then sold,
is an income tax obligation created for the employee. The employee has the stock sale cash
proceeds to pay this tax obligation. The employee does not have to pay cash to receive or
exercise the option. Therefore, the tax code provides a substantial benefit to both the
corporation and to the high ranking corporate executive. Many of these assets are created
in an "unvested" capacity for tax purposes. Those tax considerations are not
relevant to the court's determination as to whether or not those employer issued
"contingent resources" are property which can be divided for marital
"The true value of the stock option to its owner is the potential
for appreciation in stock price without investment risk. If the stock price were to drop,
the owner of the option simply would not exercise it, because he could instead buy the
stock more cheaply on the market. As stated by Treas. Reg. 1.83-7(b)(3), the value of this
type of stock option is risk-free appreciation." Rice v. City of Montgomery, 104
Ohio App. 3d 776, 663 N.E.2d 389, 392 (1995). "In fact, the only risk to the
owner of a stock option is the risk of a potential 'lost opportunity cost' - in other
words, the option may peak at a higher spread between the option price and the market
price before the owner actually exercises the option, thereby giving the owner a smaller
than optimal net gain. However, there is never a risk of loss because the lowest value an
option can have is zero." Rice v. City of Montgomery, supra, 663 N.E.2d 394.
The issuance by a corporation to an employee of stock options, vesting
20% a year for the next five years, in exchange for a valid consideration constitutes a
contract between the corporation and the employee. This contract can be enforced by the
employee's heirs when the employee has died within one year of grant. Ellis v. Emhart
Mfg. Co., 150 Conn. 501, 505, 191 A.2d 546 (1963). The consideration for the stock
options was his continued employment with the corporation. Tilbert v. Eagle Lock Co.,
116 Conn. 357, 362, 165 A. 205 (1933); Finley v. Aetna Life & Casualty Co., 5
Conn. App. 394, 407, 499 A.2d 64 (1985).
Both the restricted stock and the stock options cannot be sold on the
open market by the employee even though the stock options have been granted and the
restricted stock issued. The restricted stock currently pays periodic dividends at the
regular GE dividend rate per share of restricted stock even though the restrictions have
not yet terminated. Some vesting of supplemental pension and restricted stocks can be
considered as "packaging out" but the restricted stock units (RSUs) are then
terminated. This "packaging out" benefit will be discussed later in this
The supplemental pension plan issued to the defendant also contains
contingencies. They are slightly different than the contingencies of restricted stock or
unvested stock options. The defendant must be employed by GE for five consecutive years
immediately prior to the date of retirement in order to be vested in the supplemental
pension plan. If the defendant were to retire at the projected age of 65, since he is now
55, that five year consecutive period would not yet have started. The terms of the
supplemental pension plan will be discussed in more detail starting on page 335 of this
There are four restrictions for each of the three "contingent
resources," i.e., "unvested stock options," "restricted stock"
and "supplemental pension plan":
1. The defendant must be a continuous employee of GE up to the date of
2. GE shall not have discontinued the entire plan or agreement. GE does
have the unilateral right to discontinue all three of these "contingent
resource" programs on a system wide basis
3. The defendant must not have been fired, retired or his employment
4. GE has the right to cancel the "contingent resource"
benefit on an individual basis and has done so on a number of occasions
The language of the GE Restricted Stock Units (RSUs) contingencies are
as follows: (1) "The Company shall have the right at any time in its sole discretion
to amend, alter, suspend, discontinue or terminate any RSU without consent of the
Grantee." Exhibit 95, Tab 11, Page 3, Section 5, Restricted Stock Grant Form; (2)
"Any RSU for which the restrictions do not lapse in accordance with the terms in
Paragraph 4 above shall be canceled." Exhibit 95 Tab 11, Page 3, Section 5 Restricted
Stock Grant Form; (3) "No Award . . . and no right under any such award shall be
assignable, alienable, saleable, or transferable by a Participant." Exhibit 95, Tab
7, Page 6, GE Long Term Incentive Plan Governing Stock Options and Restricted Stock; (4)
"No Award . . . and no right under any such Award may be pledged, alienated,
attached, or otherwise encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the Company or any
Affiliate." Exhibit 95, Tab 7, Page 6, GE Long Term Incentive Plan Governing Stock
Options and Restricted Stock; (5) "The Board of Directors may amend, alter, suspend,
discontinue or terminate the plan. . . ." Exhibit 95, Tab 7, Page 6, GE Long Term
Incentive Plan Covering Stock Options and Restrictions Stock; and (6) "The company or
an affiliate may at any time dismiss a participant from employment, free from liability,
or any claim under the plan, unless otherwise expressly provided in the plan, or in any
award agreement." Exhibit 95, Tab 7, Page 6, GE Long Term Incentive Plan Governing
Stock Options and Restricted Stock.
The language of the GE Stock Option grants and Stock Appreciation
Rights contingencies are as follows: (1) "The Company reserves the right to alter,
suspend, discontinue or terminate any Options without the consent of the Grantee."
Exhibit 95, Tab 10, Page 2, Section 4, GE Stock Option Grant Form; (2) "The Options
shall be null and void to the extent the grant of Options or exercise thereof is
prohibited under the laws of the country of residence of the grantee." Exhibit 95,
Tab 10, Page 2 Section 4, GE Stock Option Grant Form; (3) - (6) Same as contingencies 3 -
6 of the GE Restricted Stock Units (RSUs). Exhibit 95 Tab 7, Page 6; and (7) "Any
rights or obligations related to Stock Appreciation Rights, performance units or
restricted stock . . . may be altered, suspended or terminated at any time without such
consent." Exhibit 95, Tab 8, Page 6, 1983, Stock Option Performance Unit Plan.
The defendant claims that these contingencies are such that the
"contingent resource" amounts to a "mere expectancy." Rubin v
Rubin, supra, 204 Conn. 231. The defendant also argues that there is no mathematical
calculation that can be performed to accurately value each of these "contingent
resources" and, therefore, "its value, however. could not be ascertained with
certainty." Eslami v. Eslami, supra, 218 Conn. 806. Moreover, the defendant
claims that they are not "susceptible to reasonably accurate quantification"
since GE can cancel the benefits. In addition, the defendant could very well be hired away
by another corporation or otherwise earlier retire. Thompson v. Thompson, supra, 183
Conn. 101. The defendant notes the following possibilities in his December 16, 1996
Memorandum. "Such factors as the financial condition of GE, GE Capital, the stock
market, competitive offers from other employers, the prospect of creating his own company,
his health or simply a desire to retire early may all impact upon his future at GE
Capital." Defendant's Memorandum, supra, 11-12.
An argument similar to that made by the defendant is contained in a
recent Florida case involving the issue of whether contingent attorney fees can be
considered an asset. Florida, by statute, permits non-vested pension plans to be divided.
The trial court noted the real difference between non-vested pensions and recoveries in
contingency cases. "The contingency lawyer may labor like Hercules for more years
than it takes a pension to vest, reason like Cardozo, and orate like Webster but, in the
end, recover nothing." Roberts v. Roberts, 23 Fam. L. Rptr. 1211 (1997) (Fla.
Dist. Ct. App. February 26, 1997, Farmer, J.).
The defendant offered the expert testimony of Jay Smolin, a CPA with
KPMG Peat Marwick LLP. Mr. Smolin had prepared the parties' income tax returns for the
past 15 years. The first financial statement he prepared for the parties was in relation
to this litigation. He prepared three such financial statements: December 31, 1995,
Exhibit 61; March 31, 1996, Exhibit 62; and December 31, 1996, Exhibit 70. He also
prepared two large exhibits containing notes, GE documents, financial calculations and
work sheets. These voluminous exhibits were placed in loose leaf binders indexed by tabs.
Exhibit 63 and Exhibit 104. Mr. Smolin received a B.A. in Accounting and an MBA in
Accounting from the University of Michigan. He has been with KPMG Peat Marwick LLP or its
predecessor, Peat Marwick Mitchell for over 20 years.
In preparing the three unaudited financial statements he signed a
certification, "We have compiled the accompanying statement of financial condition of
Gary C. and Lorna J. Wendt as of December 31, 1996, in accordance with standards
established by the American Institute of Certified Public Accountants." Exhibit 70,
Page 2, Accountant's Compilation Report dated January 14, 1997. Mr. Smolin verified that
Exhibit 71, "Personal Financial Statement Guide," was the current copy of the
AICPA standards. "The purpose of this guide is to assist the accountant in applying
professional standards to engagements involving personal financial statements."
Exhibit 71, Page 1. Assets should be presented at their estimated current values.
"Future Interests and Similar Assets" are discussed. "Nontransferable
rights to receive future sums that have all the following characteristics should be
presented as assets at their discounted amounts:
. The rights are for fixed or determinable amounts.
. The rights are not contingent on the holder's life expectancy or the
occurrence of a particular event, such as disability and death.
. The rights do not require future performance of service by the
Exhibit 71, AICPA Standards, supra, 56-57.
Since the "contingent resources" all contained a variety of
contingencies including future service with GE, Mr. Smolin concluded that they did not
meet the AICPA asset standards as future interests. He included a detailed explanation of
the "contingent resources" in Exhibits 61, 62 and 70 including the amount of
grants or RSUs, date of issuance, strike price and the like. As to each Mr. Smolin placed
a value of zero based on the Personal Financial Statement Guide. This testimony and
exhibit were offered to support the defendant's claim that these contingent resources are
mere expectancies and not property for marital distribution purposes.
To support the AICPA's guide Mr. Smolin contacted investment managers
at Bank of Boston, Sanford Bernstein and Thompson, Brown and Plunkett. He inquired as to
(1) whether there was a market for the unvested stock options and restricted stock, (2)
who would be the potential buyers, and (3) what records are kept for any such transactions
of unvested stock options and restricted stock. A hearsay objection was sustained as to
these subjects. The court determined from the plaintiff's expert that there was no ready
market. No investment manager answered those three questions.
The plaintiff, on the other hand, claims that the "contingent
resources" are assets that are furnished to the defendant by reason of his
employment. The restricted stock is currently paying cash dividends. Expectancy or
contingency rules apply to inheritances and generally not to employment assets. She
further argues that there are actuarial rules by which the valuation and quantification of
the asset can be determined using regularly accepted accounting principles. The plaintiff
also argues that the divestment contingencies are either not likely to occur or are
largely within the control of the defendant. Therefore, the plaintiff argues that under
Eslami and Thompson these are not contingent assets.
"'The fact that a contractual right is contingent upon future
events does not degrade that right to an expectancy.'. . . Thus, we conclude that
'property' as used in § 46b-81, includes the right, contractual in nature, to receive
vested pension benefits in the future." (Citation omitted.) Krafick v. Krafick,
supra, 234 Conn. 797-98. "Difficulties in ascertaining the amount that would
actually be received may be resolved if the amounts can be ascertained using reasonably
accurate quantification methods." King v. King, 1997 Conn. Super. LEXIS 613,
Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 142960
(March 6, 1997, Tierney, J.) (1997 Ct. Sup. 2075, 2079) (3 Conn. Ops. 432, 433).
A similar reasoning has recently been applied to Workers' Compensation
benefits. In determining that future benefits are an existing interest, the Appellate
Court noted that the trial court erred when it excluded a significant unliquidated award,
i.e.,the defendant's workers' compensation claim for future benefits due to a loss of
earning capacity. Tyc v. Tyc, 40 Conn. App. 562, 566-68, 672 A.2d 526 (1996).
'The terms "estate" and "property" as used in
the statute connote presently existing interests. 'Property' entails 'interests that a
person has already acquired in specific benefits.' Board of Regents v. Roth, 408 U.S.
564, 576, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972) . . . Rubin v. Rubin, 204 Conn.
224, 230-31, 527 A.2d 1184 (1987). The issue is whether future benefits paid under a
claim, filed pursuant to General Statutes § 31-308a, are an existing interest includable
as part of the marital estate. We agree they are such an existing interest.
In failing to consider the defendant's § 31-308a claim as part of the
marital estate, the court excluded a significant unliquidated award, the defendant's
recovery for loss of earning capacity. The exclusion of the § 31-308a claim is contrary
to the purpose of § 46b-81, which requires an equitable distribution. A claim under §
31-308a is susceptible to valuation and is not a mere expectancy. Expectancy describes the
interest of a person who merely foresees that he might receive a future benefit; the
defining characteristic of an expectancy is that its holder has no enforceable right to
his benefit. Krafick v. Krafick, supra, 234 Conn. 797.
While a claim under § 31-308a is separate and distinct from specific
indemnity benefits awarded pursuant to General Statutes § 31-308, and while § 31-308a
benefits are not available until specific indemnity benefits are exhausted, such benefits
constitute a presently existing interest. We do not agree with the defendant's argument
that 'property' entails only interests that a person has already acquired in specific
benefits. As our Supreme Court has recently stated in construing § 46b-81, property is
defined 'as the term "commonly used to denote everything which is the subject of
ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or
personal; everything that has an exchangeable value or which goes to make up wealth or
estate. It extends to every species of valuable right and interest, and includes real and
personal property, easements, franchises, and incorporeal hereditaments."' Krafick
v. Krafick, supra, 234 Conn. 794.
Tyc v. Tyc, supra, 40 Conn. App. at 567-69.
In an employment setting, informal discussions can become an
enforceable contract even if these discussions involve representations of infrequency of
company layoffs and other such indefinite terms. See, for example, the terms and
conditions of the employment by Aetna Life & Casualty Company of Thomas P. Finley. Finley
v. Aetna Life & Casualty Co., 5 Conn. App. 394, 399-401, 499 A.2d 64 (1985),
rev'd, 202 Conn. 190, 520 A.2d 208 (1987).
The contingency of survival may be subject to reasonably accurate
quantification. In the estates and trusts area, a spouse's remainder interest in the
principal of a trust may be vested subject to total divestment if that spouse fails to
survive the preceding income beneficiary's life estate. The life expectancy of both the
holder of the life estate and the spouse's remainder interest can be subject to
"reasonably accurate quantification." "The plaintiff's future interests
appear to constitute present property rights." Carlisle v. Carlisle, 1994 Conn.
Super. LEXIS 2662, Superior Court, judicial district of Stamford-Norwalk at Stamford,
Docket No. 132653 (October 21, 1994, Harrigan, J.) (12 Conn. L. Rptr. 535) (1994 Ct. Sup.
10744). "Present property interests, regardless of value, are components of a party's
'estate.'" Id. "Future interests subject to conditions may be valued by applying
actuarial principles." Id.
The court in Tremaine v. Tremaine, 235 Conn. 45, 67, 663 A.2d 387
(1995), permitted trust income to be considered for income division purposes under
"amount and sources of income under C.G.S. § 46b-82" but not relevant as a
factor of "estate. . . of each parties" under General Statutes § 46b-82. The
rationale of this conclusion was: (1) the trust instrument directed the trustee to make
regular payments to the defendant of all the income earned by the trust for the duration
of the defendant's life; (2) the trustee would pay to the defendant so much of the trust
principal as shall in the sole discretion of the trustee be necessary or advisable for the
comfort, care and maintenance and support of the defendant; and (3) the trust instrument
authorized the defendant's selected investment advisor to direct trustee's power of
discretion for the invasion of principal. Although the trust principal was exercised for
the income beneficiary by purchasing a house and invading $50,000 of principal, this was
held not to be quantifiable since those events may not occur in the future. Therefore, the
trust principal was not included as part of the estate. Trust income was included for
periodic alimony purposes. Tremaine v. Tremaine, supra, 235 Conn. 66. "We
conclude only that the trial court, in establishing its award of periodic alimony on
remand, may not consider the value of the entire trust corpus as an asset of the
defendant." Id. Therefore, Tremaine satisfied the Thompson "reasonably accurate
quantification" standards by considering trust income for periodic alimony purposes.
In Tremaine, the Supreme Court stated that the trial court, on remand,
may consider the following attributes of the defendant's trust for the purpose of
determining alimony: (1) the income produced by the trust corpus reasonably expected from
the prudent investment of the trust corpus since the defendant was its income beneficiary;
(2) any payment actually bestowed on the defendant by the trustee including invasion of
principal by the trustee; (3) any payment or other benefit actually bestowed on the
defendant by the trustee including the value to the defendant of a rent free residence;
and (4) "if the plaintiff can establish that a market exists for the defendant's
interest in the trust, the trial court would not be precluded from assigning a value to
that interest for the purpose of determining the defendant's net worth. We intimate no
view, however, on whether the trust does, in fact, have a market value, and, if so, what
that value may be." Tremaine v. Tremaine, supra, 235 Conn. 66 n. 20.
Pensions too can be valued based upon reasonably accurate quantifiable
standards. "Just as current and future wages are properly taken into account under
these statutes, so may unaccrued pension benefits, a source of future income, be
considered." Thompson v. Thompson, supra, 183 Conn. 100. "The present
value of a pension benefit may be arrived at by using generally accepted actuarial
principles to discount for mortality, interest and the probability of the employee
remaining with the employer until retirement age." Id., 101; see also Klittner
v. Klittner, 1994 Conn. Super. LEXIS 28, Superior Court, judicial district of
Stamford-Norwalk at Stamford, Docket No. 086220 (January 5, 1994, Leheny, J.) (1994 Ct.
Sup. 116) (Annuity payment can be determined using an actuarial table). The defendant has
been employed by GE for more then 20 years. He is vested in a series of benefits including
the regular GE pension and stock options. He also holds additional rights in unvested
stock options, restricted stock and a supplemental pension plan. None of these programs
are unique to the defendant. They are common benefits granted to all GE high level
executives. The defendant has been the Chief Executive Officer of GECS since 1983. It is
the largest division of GE. It is the most successful division of GE and has been made
more successful since the defendant's involvement as Chief Executive Officer. Mr. Wendt is
55 years of age and in good health. There was no evidence presented at trial indicating
that the defendant is going to voluntarily terminate his relationship with GE, retire or
There is no indication that GE has or had a company policy of
terminating the individual contingent resource plans of high executives. There is some
evidence indicating that approximately 3% of those individual plans had been terminated
over the years by GE. There was no analysis performed on those terminations. They appeared
to have been treated on a case by case basis. The facts of one case would be irrelevant to
the facts of another case. The amount of the terminations were so small as to be
considered by this court to be a statistical anomaly and therefore not relevant to this
case. There is no evidence that GE has a policy of terminating entire contingent resource
Connecticut does not consider a "mere expectancy" to be
property. Eslami v. Eslami, supra, 218 Conn. 808. Vested pensions not yet in pay
status analyzed under this mere expectancy standard, have been found to be property. Krafick
v. Krafick, supra, 234 Conn. 797-98. "The fact that a contractual right is
contingent upon future events does not degrade that right to an expectancy." In re
Marriage of Brown, 15 Cal. 3d 838, 847 n. 8, 126 Cal. Rptr. 633, 544 P.2d 561; Krafick
v. Krafick, supra, 797. Brown, cited with approval by Krafick, draws a distinction between
money received from contractual rights as opposed to those received from a future
beneficence. Brown relies on Washington cases to draw this distinction. "The term
expectancy describes the interest of a person who merely foresees that he might receive a
future beneficence, such as the interest of an heir apparent . . . or of a beneficiary
designated by a living insured who has a right to change the beneficiary . . . . As these
examples demonstrate, the defining characteristic of an expectancy is that its holder has
no enforceable right to his beneficence." (Citations omitted.) In re Marriage of
Brown, supra, 15 Cal. 3d 844-45. "The cases discussing the interest an insurance
beneficiary clarify the distinction between an expectancy and a contractual right. The
interest of a beneficiary designated by an insured who has the right to change the
beneficiary is, like that of a legatee under a will, a mere expectancy of a gift at the
time of the insured's death . . . . But if the holder acquires a contractual right to be
named as a beneficiary of the policy, his interest is no longer an expectancy, but a
property right." (Citations omitted; internal quotation marks omitted.) Id., 845
n. 6. Brown refers to a pension benefit as representing a form of deferred
compensation for services rendered. The employee's right to such a benefit is a
contractual right derived from the terms of the employment contract and the employee's
efforts. A contractual right is not an expectancy but more like a chose in action and,
therefore, is a form of property." Id., 845.
This court, therefore, finds as to each of the three contingent
resources as set forth above: GE Unvested Stock Options and Appreciation Rights plan; GE
Restricted Stock Plan; and GE Supplemental Pension Plan and Retirement Allowance: (1) all
these benefits have been furnished to the defendant, Gary Wendt, by his employer, (2) they
are his contractual rights, (3) these contractual rights are subject to certain
contingencies that are quantifiable and reasonably ascertainable using generally
recognized accounting and actuarial principles. This court, therefore, holds that all
three "contingent resources" are "property" for marital distribution
This conclusion has been supported by the testimony of the plaintiff's
valuation expert, Scott A. Nammacher. He reviewed all the relevant GE documents contained
in Exhibit 95. See Exhibit 100, Pages 1 and 2 for documents reviewed. He studied numerous
treatises on valuation and was familiar with financial matters relating to GE and GECS.
Although offered by the plaintiff as an expert for the purposes of placing a value on the
GE Unvested Stock Options and Restricted Stock, he necessarily had to examine the
contingencies and likelihood of their occurring.
In discussing the Restricted Stock, the features Mr. Nammacher
considered important were: (1) the GE plan was in writing and complete; (2) the Restricted
Stock (RSU) paid current "dividend equivalents"; (3) the RSUs vest immediately
upon the defendant's death; (4) in some cases when GE high executives are "packaged
out," the restrictions are lifted on their RSUs; (5) in some cases high executives
recruited by other companies are paid by those other companies, as a signing bonus, a
portion of the RSUs left behind on the table, often 50% of their value; (6) the GE RSUs
were granted partially for future performance; and (7) the RSUs can be transferred on an
"if, as and when basis" without violating their terms or conditions. This
recitation confirms this court's conclusion that the RSUs are property for marital
distribution purposes. The method of distribution will be discussed later.
In discussing the Unvested Stock Options, the features Mr. Nammacher
considered important were: (1) GE was a well known company, a stable company and one of
the largest in the world; (2) if the defendant dies the stock will vest; (3) the GE plan
was in writing and complete; (4) there are vesting provisions upon an early retirement due
to disability; (5) there is less likelihood that the defendant will just pick up and
retire; (6) the options are subject to a "packaging out" benefit similar to the
RSUs; (7) the hiring of the defendant by another company may likely result in a hiring
bonus being paid to him in partial compensation for the stock options left on the table at
GE; (8) the options were granted partially for future performance; and (9) the options can
be transferred on a "if, as and when" basis without being declared null and
void. This recitation confirms this court's conclusion that the unvested stock options are
property for marital distribution purposes. The method of distribution will be discussed
The court is mindful that not all of these "contingent
resources" can be valued today in an exact dollar amount. Therefore, those
"contingent resources" may require a different method of distribution. Krafick
v. Krafick, supra, 234 Conn. 800. Three methods of distribution of pension benefits
were outlined in Krafick. (1) present value or offset method, (2) present division method,
and (3) reserved jurisdiction method. Id., 800-04. The reserved jurisdiction
method, also referred to as "if, as and when," "allows a court to 'base its
distribution upon actual figures [as to what benefits are being paid] rather than
assumptions as to retirement age and other variables.'" Id., 803. The fact
that this court considers the three contingent resources (akin to future interests)
property does not require the court to divide the resource between the parties at
dissolution. Carlisle v. Carlisle, supra, 1994 Conn. Super. LEXIS 2662, Superior
Court, Docket No. 132653 (1994 Ct. Sup. 10751).
NO BRIGHT LINE RULE CAN BE ESTABLISHED THAT ALL UNVESTED EMPLOYMENT
PLANS ARE PROPERTY FOR MARITAL DISTRIBUTION PURPOSES
The plaintiff has asked this court to establish a bright line rule that
"all unvested employment plans are property for marital distribution purposes in
Connecticut." The plaintiff claims this is the logical next step predicted by the
unanimous Supreme Court in Krafick. Plaintiff's counsel note two footnotes that point in
Moreover, we are persuaded that pension benefits are sufficiently
susceptible to valuation to distinguish them from the type of potential interest in money
that might be received under a will whose validity is being contested . . . . In this
case, the right to receive such benefits is not nearly so uncertain, as some benefits will
be paid unless the defendant dies before retirement. Moreover, the problem of estimating
the value of such benefits is more properly dealt with not as a problem of classification,
but as a problem of valuation and distribution.
Krafick v. Krafick, supra, 234 Conn. 797-98, n. 21.
Although we do not reach nonvested pension benefits here, we note
that the same reasoning has been applied to find that such benefits also, as an initial
matter, constitute property. See Laing v. Laing, 741 P.2d 649 (Alaska 1987); Johnson
v. Johnson, 131 Ariz. 38, 638 P.2d 705, modified and affirmed, 131 Ariz. 47, 638
P.2d 714 (1981); In re Marriage of Brown, supra, 15 Cal. 3d 838; Robert C.S.
v. Barbara J.S., 434 A.2d 383 (Del. 1981); Deering v. Deering, supra, 292 Md. 115
(rejecting as dispositive on issue of status as property the concept of vesting); Whitfield
v. Whitfield, 222 N.J. Super. 36, 535 A.2d 986 (1987).
Krafick v. Krafick, supra, 234 Conn. 799, n. 23.
The plaintiff also points to two quotes from the language of In
re Marriage of Brown, supra, 15 Cal. 3d 842. "Thus, fringe benefits such as
employee retirement, employer-paid life insurance and employee stock options are community
property to the extent they are earned by the time, skill and effort of a spouse during
marriage. . . . Fringe benefits consisting of contractual rights to future benefits after
separation, though unvested and unmatured are property subject to allocation between
community and separate interests at the time of dissolution." In re Marriage of
Harrison, 179 Cal. App. 3d 1216, 225 Cal. Rptr. 234, 239 (1986). It should be noted
that Brown and Harrison only dealt with stock options that could not be exercised due to
contingencies. Therefore, the mention of the other fringe benefits in Harrison is dicta.
No such mention is contained in Brown.
The plaintiff claims that a bright line rule "will promote
certainty and efficiency." Mac's Car City, Inc. v. Di Loreto, 238 Conn. 172, 181,
679 A.2d 340 (1996). Bright line rules have been applied in family cases.
"Therefore, a bright line rule requiring compliance with a child support order,
regardless of the eventual outcome of an appeal of that order, will reduce the possibility
of the increased friction that could arise from a real, or perceived, manipulation by an
alleged contemnor of the timing of the hearing on a motion for contempt." Mulholland
v. Mulholland, 229 Conn. 643, 653, 643 A.2d 246 (1994).
The plaintiff approaches this argument from a number of points of view:
(1) due process definitions of property, (2) statutory definitions, (3) case law
definitions, (4) property definitions in Connecticut dissolution actions, (5) decisions
from other jurisdictions, and (6) effect of difficulty in valuation. Due to the social and
legal implications of this case in Connecticut and elsewhere, this court will discuss all
of these approaches.
1. Due Process Definitions of Property
"No State shall make or enforce any law which shall abridge the
privileges or immunities of citizens of the United States; nor shall any State deprive any
person of life, liberty or property, without due process of law; nor deny to any person
within its jurisdiction the equal protection of laws." U.S. Const., Amend. XIV. The
plaintiff's argument does not focus on the taking provision of the due process clause but
on the property definition as established by case law. The federal constitution does not
define what is "property." That is left for statutes and cases.
Many of these cases involve public employment, i.e., does the claimant,
a public employee, have a property right in continued employment. Reagan v. United
States, 182 U.S. 419, 425, 21 S. Ct. 842, 45 L. Ed. 1162 (1901). If such a property
right exists, the issue then becomes could the state deprive the claimant of this property
right without due process. Goss v. Lopez, 419 U.S. 565, 573-74, 95 S. Ct. 729, 42 L.
Ed. 2d 725 (1975); Memphis Light Gas & Water Division v. Craft, 436 U.S. 1,
11-12, 98 S. Ct. 1554, 56 L. Ed. 2d 30 (1978). "Property interests are not
created by the Constitution, they are created and their dimensions are defined by existing
rules or understandings that stem from an independent source such as state law. . .
.'" Cleveland Board of Education v. Loudermill, 470 U.S. 532, 538, 105 S. Ct.
1487, 84 L. Ed. 2d 494 (1985) (An Ohio statute specifically creates a property
interest in classified civil service employees) The plaintiff citesBoard of Regents v.
Roth, 408 U.S. 564, 569, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972) (in discussing
property rights in general, the court held that nontenured university teacher does not
have a property right when not reappointed beyond the statutory one year term).
Connecticut has adopted the reasoning of these cases, e.g., Bartlett
v. Krause, 209 Conn. 352, 367, 551 A.2d 710 (1988) (a fire marshal has a property
right in continued employment as per General Statutes § 29-297). Due process rights
attach once it is determined that property rights exist and the employment cannot be
terminated without a finding of cause at a due process hearing held at a meaningful time
in a meaningful manner. Cleveland Board of Education v. Loudermill, supra, 470 U.S.
Connecticut is an employment-at-will state. Unless protected by
statute, contract, implied contract, discrimination or public policy grounds, an employer
can terminate an employee at will for any reason at any time without a hearing. Sheets
v. Teddy's Frosted Foods, Inc., 179 Conn. 471, 474, 427 A.2d 385 (1980). No due
process rights attach to employment-at-will.
The Roth court considered whether or not the claimant,as a nontenured
university teacher, had a property interest. The court stated: "The respondent surely
had an abstract concern in being rehired, but he did not have a property interest
sufficient to require the University authorities to give him a hearing when they declined
to renew his contract of employment." Board of Regents v. Roth, supra, 408 U.S.
578. Prior to reaching this conclusion the Supreme Court in Roth reviewed other cases:
Goldberg v. Kelly, 397 U.S. 254, 268 n. 15, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1961)
(a person receiving welfare benefits under statutory and administrative standards defining
eligibility has an interest in continued receipt of these benefits that is safeguarded by
procedural due process); Slochower v. Board of Education, 350 U.S. 551, 76 S. Ct. 637,
100 L. Ed. 692 (1956)(public college professors with tenure have a property right); Wieman
v. Updegraff, 344 U.S. 183, 73 S. Ct. 215, 97 L. Ed. 216 (1952)(college professors and
staff members dismissed during their contracts have due process property rights); Connell
v. Higginbotham, 403 U.S. 207, 208, 91 S. Ct. 1772, 29 L. Ed. 2d 418 (1971)(violation
of due process found where summary dismissal from public employment without hearing or
inquiry for a teacher hired without tenure or a formal contract, but nonetheless with a
clearly implied promise of continued employment).
In this context, the Roth court reached this general conclusion:
Certain attributes of 'property' interests protected by procedural due
process emerge from these decisions. To have a property interest in a benefit, a person
clearly must have more than an abstract need or desire for it. He must have more than a
unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to
it. It is a purpose of the ancient institution of property to protect those claims upon
which people rely in their daily lives, reliance that must not be arbitrarily undermined.
It is a purpose of the constitutional right to a hearing to provide an opportunity for a
person to vindicate those claims.
Board of Regents v. Roth, supra, 408 U.S. 577.
The plaintiff did not separately brief this argument in relation to
the due process clause of article first, § 8 of the Connecticut constitution, and thus,
has abandoned any state constitutional basis.
The plaintiff uses this quotation from Roth to springboard to her claim
that the defendant's contractual contingent benefits with GE are property. "The same
analysis applies to many types of unvested employment benefits and programs including
those at issue in this case: although eligibility is not fixed, there are known terms by
which that eligibility is established." Plaintiff's Memorandum Re: Definition of
Property, February 24, 1997, p. 5. This argument is not persuasive on two grounds: (1) the
plaintiff cites no authority for the leap of logic bootstrapping Roth employment cases to
corporate contingent benefits, and (2) "property" defined in the cited due
process cases is derived from either a statute, noncontingent rights established in
contracts, or state regulations. "Property interests, of course, are not created by
the Constitution. Rather, they are created and their dimensions are defined by existing
rules or understandings that stem from an independent source such as state law-rules or
understandings that secure certain benefits and that support claims of entitlement to
those benefits." Board of Regents v. Roth, supra, 408 U.S. 577; East
Hartford Housing Authority v. Parker, 1992 Conn. Super. LEXIS 2778, SuperiorCourt,
judicial district of Hartford-New Britain at Hartford, Docket No. 163027 (August 7, 1992,
Holzberg, J.) (7 Conn. L. Rptr. 422) (1992 Ct. Sup. 8735, 8740); Joy v. Daniels, 479
F.2d 1236 (4th Cir. 1973); Lopez v. Henry Phipps Plaza South, 498 F.2d 937 (12th
2. Statutory definitions
It is a given that General Statutes § 46b-81 does not define
"property" as "estate" or as any other criterion used in the statute.
The plaintiff, while conceding that fact, draws the court's attention to other Connecticut
statutes that define "estate" and "property." Her argument is that
such definitions provide some guidance as to the scope that might reasonably be attributed
to such terms. The fact that a particular type of asset or interest is considered
"property" for one purpose, at least, suggests that it should be similarly
classified for other purposes. Property is defined for the purposes of prejudgment
attachments as "any present or future interest in real or personal property, goods,
chattels or choses in action, whether such is vested or contingent." General Statutes
§ 52-278a(e). "'Property' means any real or personal property . . . including (A)any
present or future right or interest, whether or not vested . . . ." General Statutes
§ 52-350a(16) (sets forth definitions regarding executions). Property for larceny
purposes is defined as an "article of value of any kind." General Statutes §
Although the plaintiff cites the prejudgment remedy statute, General
Statutes § 52-278a(e), as defining property as that which is "vested or
contingent," no cases in support of that statute have been cited. A number of cases
have held that not all interests in property can be subject to a levy of execution. Humphrey
v. Gerard, 83 Conn. 346, 354, 77 A. 65 (1910)(an interest in real property which is so
indeterminate, uncertain or contingent, that it cannot be appraised or sold is not subject
to levy on execution); Smith v. Gilbert, 71 Conn. 149, 156, 41 A. 284 (1898)
(possible life estate is a legacy which may become due but it is not subject to
attachment); Johansson v. Black, 1997 Conn. Super. LEXIS 1034, Superior Court,
judicial district of Ansonia-Milford at Milford, Docket No. 572885 (April 14, 1997,
Corradino, J.) (3 Conn. Ops. 542) (a chose in action, i.e., a possible recovery in a tort
action, is not subject to attachment as property under General Statutes § 52-278(c)).
The reference to other statutes that contain definitions of a word or
phrase not specifically defined in the statute in question is a proper tool of
interpretation. State v. Havican, 213 Conn. 593, 601, 569 A.2d 1089 (1990); State
v. Hill, 201 Conn. 505, 516-17, 518 A.2d 388 (1986). This rule has a practical
limitation. It has been held that it is not particularly helpful, in determining the
meaning of an undefined word in a Connecticut criminal statute, to cite the definition of
that word in other Connecticut civil statutes. State v. Radzvilowicz, 47 Conn. App. 1,
41, 703 A.2d 767 (1997). Therefore, it is not helpful to this court to cite the
criminal definition of "property" in a family context nor the civil pre or post
judgment definition of "property" in a family context. "This is not
particularly helpful in considering this criminal statute." Id.
The plaintiff correctly notes that for the purposes of prosecuting
larceny, granting prejudgment remedies or issuing post judgment executions,
"contingent resources" are considered "property." The larceny
definition of "property" was in existence in 1973. The prejudgment remedy
definition of "property"was adopted by the 1973 legislature. The execution
statutes have defined "property" broadly for many years prior to 1973. The
legislature adopted the current equitable distribution scheme in its 1973 session without
specifically defining "property" or "estate." The plaintiff's argument
proves the opposite. The legislature knew how to define property. It had defined
"property" in a number of other contexts. It could have provided such a
definition if it had wished to do so. It is not for the courts to supply a missing
definition, it is for the legislature.
3. Case law definitions
The plaintiff cites only one case, Ross, a trial court decision
suspending an attorney for appropriating clients funds. The first Ross suspension was
issued in a written opinion dated January 23, 1996. Statewide Grievance Committee v.
Ross, 1996 Conn. Super. LEXIS 172, Superior Court, judicial district of New Haven at
New Haven, Docket No. 370261 (January 23, 1996, Booth, J.) (1996 Ct. Sup. 731). For some
unknown reason a new hearing was held on the same allegations in August 1996, and a
suspension was issued for three years in a written opinion dated October 18, 1996. Statewide
Grievance Committee v. Ross, 1996 Conn. Super. LEXIS 2724, Superior Court, judicial
district of New Haven at New Haven, Docket No. 370261 (October 18, 1996, Barnett, J.)
(1996 Ct. Sup. 8218) (Ross II). The issue in the second case was, whether or not Attorney
Ross violated Rule 1.15 of the Rules of Professional Conduct by cashing a $300 check
payable to Ross to be used by Ross to pay a real estate appraisal bill of Frank N. Mona.
Ross deposited the $300 check to his personal account and did not pay Mona until he filed
a grievance complaint.
Rule 1.15 obligates a lawyer to hold property of a client or third
person separate from the lawyer's own property. The rule does not contain a definition of
"property." "In the present situation, where no statute restricts the
purview of Rule 1.15 the word 'property' should be interpreted according to its common
understanding as expressed in the law and in dictionaries." Id.
The plaintiff cites a quote found in Ross II from Black's Law
Dictionary (6th ed. 1990) at page 1095 defining "property" as the term
"commonly used to denote everything that is the subject of ownership, corporeal or
incorporeal, tangible or intangible, visible or invisible, real or personal; everything
that has an exchangeable value or which goes to make up wealth or estate. It extends to
every species of valuable right and interest and includes real and personal property,
easements, franchises, and incorporeal hereditaments." Plaintiff's Memorandum Re:
Definition of Property, February 24, 1997, p.7. Ross II concluded that as broad a
definition as possible of property must be given in the context of the sui generis
disciplinary proceeding in order to safeguard the courts and public from misconduct.
It appears to this court that the use of the this broad definition of
property was not necessary to decide Ross II. The issue of "property" was not
addressed in Ross I. A check is property as per General Statutes § 42a-3-104 and Black's
does not have to tell us that. Ross II does not support the plaintiff's claim.
Furthermore, in Ross II Judge Barnett cited Krafick v. Krafick,
supra, 234 Conn. 794, not as support of the definition of property, but as the
location of the very cite of Black's Law Dictionary used by the plaintiff. Krafick cannot
support the plaintiff's arguments that property includes all contingent resources. Krafick
gave the Supreme Court the opportunity to create a bright line rule which it opted not to
create. In Krafick, the paragraph after the Black's Law Dictionary quotation contains the
following footnote: "We reject the defendant's assertion that Thompson v.
Thompson, supra, 183 Conn. 96, settled either the status of vested pension benefits
under § 46b-81 or the proper valuation of such benefits. In Thompson, we addressed
nonvested pension benefits and concluded only that such interests were not too speculative
to be taken into account in some fashion by the trial court in crafting its financial
orders in a dissolution action. Id., 100-101." Krafick v. Krafick, supra,
794-95, n. 20. It should be noted in Thompson there was sparse evidence as to the status
of the pension in question. "The record is rather sparse with respect to exactly what
the plaintiff's rights in the plan were." Thompson v. Thompson, supra, 183 Conn.
101 n. 4. Therefore, this court does not rely on the phrase "nonvested pension
benefits." Under the facts of Thompson the phrase has no meaning.
4. Property definitions in Connecticut dissolution actions
The plaintiff does not cite any Connecticut case that holds that
contingent resources are property for marital distribution purposes. Rather she cites
cases that distinguish between those interests which are based on defined rules or
understandings and those which are based on mere hopes or uncontrolled whims. For example,
in Salvio v. Salvio, 186 Conn. 311, 323, 441 A.2d 190 (1982), the court held that
bank accounts totalling $25,000 in trust for the minor children with a parent named as
trustee were parental property to be divided and not children's separate property.
"In the absence of any unequivocal act by the defendant rendering the savings account
trusts irrevocable or otherwise transferring ownership rights to the beneficiaries, we
conclude that [the children] held no beneficial interest in the accounts at the time of
the dissolution of their parents' marriage." Id. In Krause v. Krause, 174 Conn.
361, 365, 387 A.2d 548 (1978), the court held that an irrevocable trust or terms of a
will of a living person is a mere expectancy. "Expectancy is the bare hope of
succession to the property of another, such as may be entertained by an heir apparent.
Such a hope in inchoate. It has no attribute of property, and the interest to which it
relates is at the time nonexistent and may never exist." (Internal quotation marks
omitted) Id. In Rubin v. Rubin, 204 Conn. 224, 232 (1987), an award to the wife of
the husband's one third of the net estate that he may receive from either the intervivos
trust created by his mother or from a testamentary gift or other form of inheritance from
his mother, was set aside because the mother was still alive and the husband's rights were
a "mere expectancy." "We are not persuaded that the contingent nature of
the award of expected property in the present case brings that award within the ambit of
§ 46b-81." Id. The court in Bartlett v. Bartlett, supra, 220 Conn. 380, found
that proof of the vesting of the defendant's right to inheritance in his deceased mother's
estate was sufficient to support a motion to modify despite the fact that the estate had
not yet been settled or distributed.
The plaintiff concludes the discussion of these cases with the
following statement: "The decision regarding the division or consideration of such
things as choses in action or employment benefits stand in sharp contrast to the decisions
relating to the types of expectancies noted above." This court agrees with that
characterization, and to that extent has determined that under the facts of this case, the
three contingent resources in question are property for distribution purposes. In strong
support of that rule is Thompson v. Thompson, supra, 183 Conn. 100-01. Thompson
gave the Supreme Court the opportunity to discuss in one case, two contingent resources:
(1) potential inheritance, and (2) unvested pension benefits. Citing Krause v. Krause, the
court in Thompson stated, "the present value of a potential inheritance is extremely
difficult to calculate, largely because of the unquantifiable aspects of human nature
which often cause wills to be revised." Thompson v. Thompson, supra, 101. In
contrast Thompson held that the present value of a pension benefit may be arrived at by
using generally accepted actuarial principles to discount for: (1) current investment in
the plan, (2) the probability of the employee remaining with the employer until retirement
age, (3) whether the employee survives to his projected retirement age (mortality), (4)
how long he lives after retirement (mortality), and (5) what his compensation level is
during his remaining years of service. Id.,100-01.
This court has applied these five considerations of Thompson to the
facts of this case and has determined that the three contingent resources are
"susceptible to reasonably accurate quantification" under Thompson v.
Thompson, supra, 183 Conn. 100-01, and thus, are property subject to distribution
under General Statutes § 46b-81. This court, though, does not glean from Thompson or the
other cited cases, a bright line rule that all contingent resources emanating from
employment are property for marital distribution purposes.
5. Decisions from other jurisdictions
The plaintiff claims that whether a state's law is community property,
all property equitable distribution or dual property equitable distribution containing a
statutory definition of property, there must be a preliminary determination of whether the
disputed item is "property." An example is the Colorado statute that defines
marital property as "all property acquired by either spouse subsequent to the
marriage," but does not further define "property." In re Marriage of
Miller, 915 P.2d 1314, 1316 (Colo. 1996). This is contrasted with Indiana which
excludes nonvested pension plans from consideration as property. Hann v. Hann, 655
N.E.2d 566 (Ind. Ct. App. 1995). This court agrees with the plaintiff that Connecticut
has shown no reluctance in relying on out of state cases in the marital distribution area.
Krause v. Krause, supra, 174 Conn. at 365; Krafick v. Krafick, supra, 234 Conn.
800; O'Neill v. O'Neill, supra, 13 Conn. App. at 311; Thompson v. Thompson,
supra, 183 Conn. 100; Rubin v. Rubin, supra, 204 Conn. 231. So too, this court
has relied on a 1996 decision of the Tennessee Supreme Court in formulating its opinion.
Yet no out of state case has been cited that establishes a bright line rule that all
contingent employee benefits are distributable.
Although not the same as pension and other contingent employment
benefits, workers compensation cases have been looked at through a number of approaches.
One is the "mechanical approach," establishing a bright line rule that a
workers' compensation settlement, even if for future benefits, is marital property if the
underlying claim occurred during the marriage. Under the mechanical approach timing is
everything. A second approach is the "analytic approach." Under this method the
nature of the claim,its component parts and the character of the settlement are all
analyzed to determine if the award is marital property, separate property or both.
"Our analysis of case law from other jurisdictions indicates that this is the modern
and prevailing rule on this issue." Lowery v. Lowery, 23 Fam. L. Rptr. 1163, 1164
(1997) (Md. Ct. Spec. App., January 30, 1997, Harrell, J.) Connecticut has not adopted
the "mechanical approach" regarding the inclusion of various forms of workers'
compensation benefits in marital distributions. Tyc v. Tyc, supra, 40 Conn. App. 569.
Put another way, the court must determine whether the option rights
were, in whole or in part, compensation for effort prior to the date of the stock option
agreement or whether the option rights were granted solely as an incentive for future
employment and effort.
There is no a priori reason to treat all options the same. The purpose
of awarding options to employees may differ from company to company and may even change
from time to time within a single company. No single characterization can be given to
employee stock options. Whether they can be characterized as compensation for future
services,for past services, or for both, depends upon the circumstances involved in the
grant of the employee stock option.' . . . Consequently, 'No single rule or formula is
applicable to every dissolution case involving employee stock options. Trial courts should
be vested with broad discretion to fashion approaches which will achieve the most
equitable results under the facts of each case.
Garcia v. Mayer, 1996 NMCA 61, 122 N.M. 57, 920 P.2d 522 (N.M. Ct.
see also In re Marriage of Hug, 154 Cal. App. 3d, 780, 201 Cal.
Rptr. 676 (1984).
"Treatises which describe employee stock options in the context of
general corporations law strongly suggest that contractual rights to such benefits vary so
widely as to preclude the accuracy of any but the most general characterization of
them." In re Marriage of Hug, supra, 201 Cal. Rptr. 679.
6. Effect of difficulty in valuation
The defendant claims that since the contingent resources cannot be
evaluated with a specific dollar amount, they are uncertain as to the amount that would
actually be received, Eslami v. Eslami, supra, 218 Conn. 806; or not susceptible of
reasonable quantification, Thompson v. Thompson, supra, 183 Conn. 101; King v.
King, supra, 1997 Conn. Super. LEXIS 613, Superior Court, Docket No. 142960 (1997 Ct.
Sup. 2077). The plaintiff rebuts that argument by citing a number of cases in which the
distribution of the property was upheld despite the fact that the value could not be
established with mathematical accuracy: Raccio v. Raccio, 41 Conn. Supp. 115, 122, 556
A.2d 639 (1987) (unliquidated pending personal injury action is "estate" of
a spouse and can be divided under General Statutes § 46b-81); Tyc v. Tyc, supra, 40
Conn. App. 566 (unliquidated workers' compensation claim is "estate" of a
spouse and can be divided under General Statutes § 46b-81); Burns v. Burns, 41 Conn.
App. 716, 721, 677 A.2d 971 (failure of trial court to set forth monetary values of
property prevented the Appellate Court from reviewing the disproportionate award claim but
did not require the reversal of the decision since no articulation was filed by the
appellant); Puris v. Puris, 30 Conn. App. 443, 450, 620 A.2d 829 (1993) (failure of
trial court to establish value of defendant's business without a motion of articulation
being filed, was not error).
The inability of a trial court to establish damages within mathematical
certainly does not affect its ability to render a decision. The general rule is:
Although damages often are not susceptible of exact pecuniary
computation and must be left largely to the sound judgment of the trier; Johnson v.
Flammia, [169 Conn. 491, 500, 363 A.2d 1048 (1975)]; this situation does not
invalidate a damage award as long as the evidence afforded a basis for a reasonable
estimate by the [trier] of that amount. Paiva v. Vanech Heights Construction Co., 159
Conn. 512, 517, 271 A.2d 69 (1970). . . . Conaway v. Prestia, supra, 191 Conn.
[484,] 494[, 464 A.2d 847]. Mathematical exactitude in the proof of damages is often
impossible, but the plaintiff must nevertheless provide sufficient evidence for the trier
to make a fair and reasonable estimate. . . . Falco v. James Peter Associates, Inc.,
165 Conn. 442, 445, 335 A.2d 301 (1973).
(Internal quotation marks omitted.) 24 Leggett Street Ltd.
Partnership v. Beacon Industries, Inc., 239 Conn. 284, 309, 685 A.2d 305 (1996).
As restated, the rule on determining the value of assets in a marital
dissolution case the rule is:
[A] trial court, in valuing the parties'assets upon dissolution, has
considerable discretion in selecting and applying an appropriate valuation method. 'In
assessing the value of . . . property . . . the trier arrives at his own conclusions by
weighing the opinions of the appraisers, the claims of the parties, and his own general
knowledge of the elements going to establish value, and then employs the most appropriate
method of determining valuation. . . . The trial court has the right to accept so much of
the testimony of the experts and the recognized appraisal methods which they employed as
he finds applicable; his determination is reviewable only if he misapplies, overlooks, or
gives a wrong or improper effect to any test or consideration which it was his duty to
regard.'. . . Turgeon v. Turgeon, 190 Conn. 269, 274, 460 A.2d 1260 (1983); See
also Siracusa v. Siracusa, 30 Conn. App. 560, 568-71, 621 A.2d 309 (1993).
Krafick v. Krafick, supra, 234 Conn. 799-800.
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