USE OF DATE OF SEPARATION IN THE "COVERTURE FACTOR" IS PROPER
IN THIS CASE
There are two rules that must be applied in equitable distribution in
Connecticut: (1) there is no concept of separate property in Connecticut dissolution; all
property acquired during the marriage, whether from the efforts of one party, both parties
or a third party source such as inheritance, are subject to distribution. "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." Krafick v. Krafick, supra, 234
Conn. at 792; (2) all assets must be valued as of the date of dissolution, not some
earlier date unless there are "exceptional intervening circumstances." Sunbury
v. Sunbury, 216 Conn. 673, 676, 583 A.2d 636 (1990).
While the court has discretion to allow or to disallow one spouse
to share in the assets acquired by the other after separation; Papageorge v.
Papageorge, 12 Conn. App. 596, 600, 533 A.2d 229 (1987); a court is not prohibited
from awarding one spouse a share in the other's assets no matter when acquired, even if
the acquisition occurs after a separation. This is so for two reasons. First, the
non-monetary contributions of one spouse, such as the primary care of children and the
upkeep of the family home, may have enabled the other spouse to acquire or to retain
assets; O'Neill v. O'Neill, supra [13 Conn. App. 300,] 311[, 536 A.2d 978 (1988)];
and such contribution can continue after the parties' separation. Second, assets are
valued as of the date of dissolution, rather than as of the date of an earlier separation.
Zern v. Zern, 15 Conn. App. 292, 296, 544 A.2d 244 (1988).
Roach v. Roach, 20 Conn. App. 500,508, 568 A.2d 1037 (1990).
The statutory criteria of "the contribution of each of the parties
in the acquisition, preservation or appreciation in value of their respective
estates" permits the court to weigh the efforts expended by the parties in relation
to those assets during the entire term of the marriage. General Statutes §§ 46b-81(c)
and 46b-82. For example, an inheritance received by one party early in the marriage
invested in the marital home would no doubt be divided between both parties. It may be
that the same inheritance received late in the marriage may not be divided between both
parties without evidence that the nonrecipient spouse assisted in its acquisition,
preservation or appreciation. In either event the inheritance received prior to the
dissolution must be included as an asset and must be valued as of the date of dissolution
unless there are exceptional intervening circumstances. Zern v. Zern, 15 Conn. App.
292, 296, 544 A.2d 244 (1988).
Efforts made by the parties to the acquisition, preservation, or
appreciation of the resource after their separation has been determined to be of interest
in many cases. "The evidence in this case indicates that the bulk of the property
owned by the plaintiff was acquired after his separation from the defendant and that the
defendant played no role in either the acquisition or preservation of that property. Thus,
the trial court's decision to award the defendant the only property the plaintiff
possessed upon separation was clearly an exercise of lawful discretion." Papageorge
v. Papageorge, 12 Conn. App. 596, 600, 533 A.2d 229 (1987). So too, stock options
acquired after the separation of the parties have been similarly treated. "This
percentage is substantially less than the percentage applied to other assets, primarily
because of its nature. The unexercised options may be worth nothing. If the stock price
increases, this may be due, is some small part, to defendant's (employee) efforts.
Plaintiff should not share in this." Callahan v. Callahan, 142 N.J. Super. 325,
361 A.2d 561, 564 n. 1 (Ch. 1976). Applying this concept another all-property state
held that inflation and other economic factors that increase the value of an asset during
the pending of the divorce, not attributable to the parties' efforts, are separate
property. Brooks v. Brooks, 733 P.2d 1044 (Alaska 1987).
The extent to which the efforts of one spouse may have led to an
increase in value of property without any monetary or nonmonetary contribution by the
other spouse after the parties' separation should be taken into account by the trial court
in determining the division of property incident to a dissolution of marriage action. Papageorge
v. Papageorge, 12 Conn. App. 596, 599-600, 533 A.2d 229 (1987); General Statutes §
46b-81(c). The foregoing proposition, however, does not require deviation from the general
rule that the parties' assets are to be valued as of the date of dissolution.
Zern v. Zern, 15 Conn. App. 292, 296, 544 A.2d 244 (1988).
The plaintiff's financial valuation expert, Mr. Nammacher, analyzed GE
and GECS's operations as well as their financial performances and outlooks. His report is
Exhibit 99. He needed to conduct such a study in order to value the GE restricted stock
and stock options. "A recent article in Business Week, indicated that much of the
growth and investor interest in GE stems from GE's efforts to get into the service
business, including GECS's getting more involved in both the insurance field (via
acquisitions) and the computer service field (competing with the likes of IBM, EDS,
formerly Electronic Data Systems, Perot Systems and others.") Exhibit 99, Page 5.
"Mr. Wendt has been employed by GE since 1975, and is currently the Chief Executive
Officer of GE Capital and a Senior Vice President of GE. It has been his efforts in the
last ten years that have driven the growth in GECS, and resulted in significant
improvements in the value of GE stock." Exhibit. 99, Page 6.
Exhibit 61 is a financial statement dated 12/31/95 showing net worth of
$29,245,506. Exhibit 70 is a financial statement dated 12/31/96 showing a net worth of
$48,114,137. Both financial statements show virtually the same holdings. There was
credible evidence that the defendant's efforts as CEO of GE and manager of the family
assets produced this growth. This was not contradicted by the plaintiff nor was there any
evidence of her contributions toward that massive post-separation asset increase. Blake
v. Blake, 207 Conn. 217, 230, 541 A.2d 1201.
Exhibit 62 shows cash, money market funds and marketable securities of
$10,827,575 as of 12/31/95, one month after the separation. Exhibit 70 shows cash, money
market funds and marketable securities of $17,551,432 as of 12/31/96, a difference of
$6,723,857. This is a 62% increase in cash or cash equivalents during a period where the
parties were separated and the defendant alone was managing the assets.
Exhibits 61 and 70 demonstrate an asset increase of $13,000,000 in
calendar year 1996. $7,000,000 was due to the vesting of the GE Long Term Performance
Award. Additional benefits were also granted to the defendant prior to 1996 and some of
those benefits vested in 1996. These benefits were contingent on the defendant remaining a
GE employee as of the date of vesting or lapse of the restrictions. If it had not been for
the employment of the defendant throughout all of 1996, the $7,000,000 GE Long Term
Performance Award would not be a marital asset and would not have been paid by GE to
either Mr. or Mrs. Wendt at any time. So too the benefits and the vesting of prior
benefits could not have occurred but for the continued employment of the defendant. The
appreciation of these assets is solely due to the efforts of the defendant and cannot be
attributed to the plaintiff, the corporate health of GE, the upturn in the stock market or
market forces in general.
This $19,000,000 increase is assets post separation is the most
dramatic increase in the Wendt assets. Three other financial statements signed by both
parties were offered: Exhibit 122, May 1, 1992; Exhibit 121, May 1, 1993 and Exhibit 120,
September 1, 1994. Virtually the same assets were included in these three statements.
Presumably, the assets were augmented by the partial vesting of some assets, investment of
excess earnings in those years and receipt of bonus and other forms of incentive
compensation. A comparison of the asset change, acknowledged in writing signed by both
parties, is markedly more modest than that of the post separation increase. The assets
listed include cash, money market investment terms, stock portfolios, GE stock, real
property, deferred assets, savings, retirement, automobiles and personal property. The
total net assets shown on these three exhibits are: May 1, 1992, $8,111,300, Exhibit 122;
May 1, 1993, $10,700,200, Exhibit 121; and September 1, 1994, $12,506,300, Exhibit 120.
The parties were separated all of 1996. The defendant hosted a formal
Christmas party in December, 1996 without the plaintiff's assistance. The defendant
testified the party was a success. The plaintiff did not go on the 1996 Pinnacle Club trip
to China or the Pinnacle Club inspection trip to the Baltic countries. Both trips,
according to the defendant's testimony, were a success.
GE compensates a high executive based on "his performance and the
size of this business and the importance of that business to the overall health and well
being of General Electric Company in the future." Testimony of Norman LaFlamme, a
member of GE's Compensation Committee, Tr. January 30, 1997, p. 47. The defendant
continued to be well compensated post separation.
Mr. LaFlamme has sat on the GE compensation committee for the past 10
years, all during the defendant's tenure as CEO of GECS. The Committee, in determining the
defendant's salary, carefully reviews the defendant's performance for the prior years and
the results attributed to his efforts toward the success of GECS. He testified that in all
the years he has sat on the committee the efforts of the plaintiff have never been
considered in determining the defendant's compensation package. In fact the plaintiff's
name never came up in the discussions. The court finds from these facts that the efforts
of the defendant, not the plaintiff, have increased the net worth post-separation.
The Sunbury v. Sunbury rule as to evaluation has been tested on a
number of occasions. These occasions give a glimpse of what other trial judges feel are
"exceptional intervening circumstances" so that a date other than the date of
the decree is the date of valuation. The following cases test this rule:
1. Zern v. Zern, 15 Conn. App. 292, 544 A.2d 244 (1988). This
pre-Sunbury case involved a 1979 marriage, 1984 separation, and 1987 decree. The court
ordered assets divided with a value as of the date of separation since the wife had
nothing to do with the increase in the value of assets after the separation. The use of
this valuation date was held to be error because the trial court did not follow the proper
two step process of: (1) the assets must be valued as of the date of the decree, and (2)
the efforts of each spouse that contributed to that value, including the lack of one
spouse's efforts post separation, should "be taken into account by the trial court in
determining the division of property incident to a dissolution of marriage action." Zern
v. Zern, supra, 296.
2. Sunbury v. Sunbury, 216 Conn. 673, 676, 583 A.2d 636 (1990).
On remand for reconsideration of the court's original financial orders, the trial court
correctly valued the assets as of the date of the dissolution rather than the date of the
hearing following remand. The trial court on remand did not consider evidence that the
defendant's employee profit sharing plan had quadrupled in value since the date of
dissolution. The Supreme Court upheld the trial court's remand decision citing the
language from General Statutes §§ 46b-81(c) and 46b-82, "at the time of entering a
decree." It should be noted that there was no evidence of either party's efforts
toward increasing the profit of the employee's company. It appears the Sunburys were
people of modest means, and the employee was not a high ranking executive leading a
worldwide business conglomerate. It should also be noted that Sunbury involved post
dissolution asset increases since the dissolution decree remained in effect and the
dissolution itself was not the subject of the remand. So the asset increase was post
dissolution, not between the parties' separation and the decree. "An increase in the
value of the property following a dissolutiondoes not constitute such an exceptional
3. Watson v. Watson, 1991 Conn. Super. LEXIS 710, Superior
Court, judicial district of New London at Norwich, Docket No. 089389 (April 8, 1991,
Axelrod, J.) (6 C.S.C.R. 475) (1991 Ct. Sup. 3152). Here, a 1988 decree was reversed and
remanded by the Appellate Court in 1991 after the 1990 Sunbury decision. The trial court
valued the assets as of the date of the original 1988 decree, not as of the 1991 remand
hearing. The parties did submit current financial information at the 1991 remand hearing.
4. Greger v. Greger, 1992 Conn. Super. LEXIS 3332, Superior
Court, judicial district of Hartford-New Britain at Hartford, Docket No. 281700 (December
1, 1992, Doherty, J.) (8 C.S.C.R. 26) (1992 Ct. Sup. 10778). On remand from the Appellate
Court, the defendant claimed that the plaintiff's dilatory conduct constituted a
"substantial intervening circumstance" which permitted the remand court to use
the remand hearing date as the date of valuation. The trial court found a different
"substantial intervening circumstance," i.e., a change in the status of the
defendant's pension, and valued the assets as of the date of the remand hearing. The court
noted that "such a change in the status of the pension is distinguishable from the
mere appreciation of such an asset which was found not to be a substantial intervening
circumstance in the Sunbury case."
5. Flynn v. Flynn, 1995 Conn. Super. LEXIS 2099, Superior Court,
judicial district of Stamford-Norwalk at Stamford, Docket No. 136550 (July 18, 1995,
Harrigan, J.) (1995 Ct. Sup. 7666). This case involved a 21 year marriage, with both
parties in their early 40's. The defendant wife was a supervising executive with a
national corporation, and as such she had considerable company stock as well as unvested
stock options. The court found that much of the "appreciation was and is passive due
to market forces and not dependant on any decision of the parties." The parties'
separated on January 17, 1994 and the decree was entered on July 18, 1995. Citing Papageorge
v. Papageorge, 12 Conn. App. 596, 533 A.2d 229, the court held that "as
instructed by the case of Zern v. Zern, 15 Conn. App. 292, 544 A.2d 244, this court
is not using valuations as of the separation date." The court did note that the
growth in value of the defendant's stock holdings, "while passive in nature, occurred
after the irretrievable breakdown of the marriage."
6. Berish v. Berish, 69 Ohio St. 2d 318, 432 N.E.2d 183 (1982).
The choice of a date of valuation was left to the trial court's discretion where there was
no statutory date for valuing property. "Since equity could require valuation as of
the date of the de facto termination of the marriage or some other date prior to trial . .
. the trial court must be permitted to utilize alternative valuation dates, such as the
time of permanent separation or de facto termination of the marriage, or the time of
trial, rather than being bound to some simple formula." Annot., 34 ALR 4th 63, 75
7. Savides v. Savides, 400 Mass. 250, 508 N.E.2d 617 (1987). In
this case, the parties separated, discontinuing any further marital relationship, ten
years prior to the divorce. The children were already grown and out of the house. The
parties did not live in the same house. The wife no longer contributed a portion of her
salary to the maintenance of the husband or the children. The trial court concluded that
the wife made no contribution after the separation after using a statute nearly identical
to Connecticut's language as to "contribution." Savides involved a 1956
marriage, 1974 separation with the wife remaining in the marital home, and a 1985 divorce.
After the separation the husband's automobile sales business grew and as of 1985 he had
assets of $5,000,000. The trial court awarded the wife the entire family house valued at
$130,000 at the divorce, $245,000 cash and $250 per week alimony. The Supreme Judicial
Court of Massachusetts affirmed stating: "The judge did not, as the wife suggests,
assign the marital property solely by reference to the date of the parties' separation.
The findings make clear that the judge did consider events after the parties' separation,
including their relationship and the husband's greatly increased estate, but concluded
that the wife's contribution to marital property ceased in October, 1974. . . . In
considering the increase in value of property after separation, it was not error for the
judge to exclude the wife's participation in that increase where she made no contribution
to the marriage after that time and the increase in value was solely attributable to the
husband's efforts." Savides v. Savides, supra, 508 N.E.2d 619.
8. Quinn v. Quinn, 83 Md. App. 460, 575 A.2d 764, 767 (1990).
This case was remanded to the trial court to have a hearing on "the extent to which
the efforts of one spouse may have led to acquisition of property or an increase in its
value without any monetary or nonmonetary contribution by the other spouse . . . should,
be taken into account in determining what would constitute an equitable monetary
award." The evidence disclosed that substantial post separation efforts by the
husband had increased the marital assets.
9. Carney v. Carney, 202 A.D.2d 907, 609 N.Y.S.2d 425 (App. Div.
1994). The court held that the wife was not entitled to share in the increased value
of a husband's building post separation, absent a showing that her efforts contributed to
In the leading case on the subject of using a coverture factor or time
rule to divide stock options, the California Court of Appeals approved a formula to
include the date of separation of the parties in the numerator . "It would appear to
be most equitable to fix the value of the community interests as of the date of separation
. . . ." In re Marriage of Hug, 154 Cal. App. 3d 780, 201 Cal. Rptr. 676, 686
(1984); see also In re Marriage of Nelson, 177 Cal. App. 3d 150, 222 Cal. Rptr. 790
(1986) (using date of separation in a coverture factor different from Hug); In re
Marriage of Short, 125 Wash. 2d 865, 872, 890 P.2d 12 (1995) (using date parties found
to be "living separate and apart" in stock option time rule).
"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; see also In
re Marriage of Harrison, 179 Cal. App. 3d 1216, 225 Cal. Rptr. 234 (1986); Pascale
v. Pascale, 274 N.J. Super. 429, 644 A.2d 638, 642 (App. Div. 1994).
It is not universal among the states that the date of dissolution is
the date of valuation of the assets. Other states have statutes that require valuation of
assets at a variety of dates prior to the decree: N.C. Gen. Stat. § 50-21(b); Va. Code
Ann. § 20-107.3; N.Y. Dom. Rel. Law § 286B(1)(c); S.C. Code Ann. § 20-7-471; Tenn. Code
Ann. § 36-4-121; Wash. Rev. Code § 26.16.140. In North Carolina marital property is
defined as "all real and personal property acquired by either spouse or both spouses
during the course of the marriage and before the date of the separation of the parties,
and presently owned. . . ." N.C. Gen. Stat. § 50-20(b)(1)(1995). Thus, under the
North Carolina scheme, if property was acquired after the parties' separation but before
the decree, there would be no need to value it since it is not marital property. In West
Virginia a number of cases deal with the interpretation of the statutes that hold
"passive appreciation of separate property of either of the parties to a marriage or
that increase which is due to inflation or to a change in market value resulting from
conditions outside the control of the parties, is separate property which is not subject
to equitable distribution. W. Va. Code, § 42-2-1(f)(6)(1986); Shank v. Shank, 182 W.
Va. 271, 387 S.E.2d 325 (1989). Although Connecticut does not have the concepts of
marital and separate property in its statutory scheme, these examples are instructive when
a Connecticut trial judge seeks to use an earlier date for evaluation by the use of
"an exceptional intervening circumstance." Sunbury v. Sunbury, 216 Conn. 673,
676, 583 A.2d 636. For a similar concept see Hartog v. Hartog, 85 N.Y.2d 36, 647
N.E.2d 749, 623 N.Y.S.2d 537 (N.Y. 1995); McLeod v. McLeod, 74 N.C. App. 144, 327
S.E.2d 910 (N.C. Ct. App. 1985).
"In order to do equity, a trial court must be permitted to
utilize alternative valuation dates, such as the time of permanent separation or de facto
termination of the marriage, where reasonable under the facts and circumstances presented
in a particular case. In this fashion, the trial court will have the necessary flexibility
to exercise its discretion in making truly equitable awards consistent with legitimate
expectations of the parties." Berish v. Berish, 69 Ohio St. 2d 318, 321, 432
N.E.2d 183, 185 (1982).
This court has attempted to value the assets as of the date of the
decree, December 3, 1997. By dividing a majority of the assets in kind, the court believes
it has accomplished that result. The contingent resources were divided by a coverture
factor using the date of separation due to the lack of plaintiff's
"contributions" after the parties' separation. The use of this coverture factor
divides the assets as of the date of separation. These assets were valued as of the date
of the decree and merely divided as of the date of separation.
As an alternative finding this court finds there are "exceptional
intervening circumstances" in this case and the date of separation for the evaluation
of the GE "contingent resources" is a proper date of valuation for division
purposes. These circumstances are: (1) the parties separated on December 1, 1995 with the
complaint issued on December 19, 1995; (2) after the separation they no longer resided
together; (3) after the separation the defendant no longer resided in the marital home;
(4) both children were adults and had long since vacated the marital home; (5) the
plaintiff thereafter performed no homemaker contributions for the defendant; (6) the
plaintiff thereafter performed no corporate wife contributions for either the defendant or
GECS; (7) there was no in home or other business entertainment performed by the plaintiff;
(8) the GE employment benefits were contributed to solely by the defendant from and after
the date of separation; (9) the "contingent resources" increased substantially
in value partially due to the defendant's efforts; (10) the increase in the
"contingent resources" was not due to any efforts by the plaintiff; and (11) the
other noncontingent assets that increased in value, principally due to the increase in
value of GE stock since the separation, have been valued as of the date of the decree and
divided as of the date of the decree. Papageorge v. Papageorge, supra, 12 Conn. App.
600; Sunbury v. Sunbury, supra, 216 Conn. at 676.
GENERAL STATUTES §§ 46b-81 AND 46b-82, UTILIZING THE CRITERION
"NEEDS", CONTAINS A BROAD DEFINITION OF NEEDS
The plaintiff argues that the criterion "needs" under General
Statutes §§ 46b-81(c) and 46b-82 must be read expansively. This expansive reading is
permitted by the broad discretion granted to the trial court in determining the type,
duration and amount of alimony proper in each case. Baker v. Baker, 166 Conn. 476, 488,
352 A.2d 277 (1974). In the exercise of that discretion the court must take into
account the statutory criteria. Krieble v. Krieble, 168 Conn. 7, 7-8, 357 A.2d 475
(1975). The plaintiff claims that a narrow reading of "needs" is at the
heart of her gender bias claims. The plaintiff claims that to limit a periodic alimony
award based on the bare bones sustenance needs of a wife constitutes gender bias. She
candidly admits no case supports this claim directly. The plaintiff's 13 page memorandum
of February 5, 1997 does support her argument on "enough is enough" but not her
claim that a narrow reading of "needs" constitutes gender bias.
General Statutes § 46b-81(c) contains eighteen separate criteria. The
"contribution" criterion was expanded in O'Neill v. O'Neill, 13 Conn. App.
300, 311, 536 A.2d 978, to include nonmonetary contributions of the parties. The court
is not required to give equal weight to each of the criterion. It may reject the
applicability of one or more criterion or give more weight to one over the other. It still
must consider all the criteria. Kane v. Parry, 24 Conn. App. 307, 313-14, 588 A.2d 227
Connecticut case law permits the court to consider factors which are
not contained within the listed statutory criteria. A reading of each of these cases
reveals only a hint of factors a court may consider that are not specifically set forth in
1. Russo v. Russo, 1 Conn. App. 604, 607, 474 A.2d 473 (1984).
The trial court judge considered the husband's child from a former marriage, who was
raised by the plaintiff from age four, but was married and no longer living at home. The
court stated that "it may also consider factors not contained within the statute if
they are relevant to an equitable disposition of realty."
2. Robinson v. Robinson, 187 Conn. 70, 72, 444 A.2d 234 (1982).
The trial judge considered "the humiliation and mental suffering of the
plaintiff" by the adulterous defendant in awarding the marital home to the plaintiff
husband. The court stated that "in the exercise of its inherent equitable powers, it
may also consider any other factors which may be appropriate for a just and equitable
resolution of the marital dispute."
3. Pasquariello v. Pasquariello, 168 Conn. 579, 585, 362 A.2d 835
(1975). The court held that the trial court's order that the parties sell jointly
owned Connecticut real property despite the then statute which only authorized the court
the power to "assign," was within the court's general equitable powers in a
4. Thomas v. Thomas, 159 Conn. 477, 482, 271 A.2d 62 (1970).
This case held that the court had equitable power, outside of statutory power, to order a
party to change the beneficiary of a life insurance policy.
5. Stoner v. Stoner, 163 Conn. 345, 356, 307 A.2d 146 (1972).
The court held that the trial court had equitable power to order a party to pay third
party fees to an accountant and an investigator.
6. Krasnow v. Krasnow, 140 Conn. 254, 261-63, 99 A.2d 104 (1953).
This case held that the court had equitable power, not specifically authorized by statute,
to order one party to pay the attorney's fees incurred by another in a dissolution.
7. Borkowski v. Borkowski, 228 Conn. 729, 744, 638 A.2d 1060 (1994).
The court held that the trial court had power to consider the defendant as the cause of
the plaintiff's permanent disability in determining modification of the plaintiff's
A dissolution action is essentially equitable in nature. Pasquariello
v. Pasquariello, 168 Conn. 579, 584, 362 A.2d 835 (1975). "The power to act
equitably is the keystone to the court's ability to fashion a relief in the infinite
variety of circumstances which arise out of the dissolution of a marriage." Id.
585. This language and the cases cited support the conclusion that any strict reading
of the statutory criteria should not be countenanced and that the statutes should be
liberally construed concerning equitable distribution criteria. O'Neill v.
O'Neill,supra, 13 Conn. App. at 301. This court has already concluded that a limited
reading of "needs" to create the "enough is enough" theory is not
consistent with the Connecticut equitable distribution scheme.
Connecticut recognized the common law concept of necessaries. Rotch
v. Miles, 2 Conn. 638, 645 (1818). "A wife, deserted by her husband, and without
the means of supporting herself and children, is invested with a legal right to take up
necessaries, on his credit, for the maintenance of herself and family. . . . In the term
necessaries are comprised, food, drink, clothing, washing, physic, instruction and a
competent place of residence. This is the utmost limit of the common law." (Citations
omitted.) Id. 651. In an early divorce case in which the wife sought payment of her
attorney fees as "necessaries," her request was denied. "The common law
defines necessaries, to consist only of necessary food, drink, clothing, washing, physic,
instruction and a competent place of residence." Shelton v. Pendleton, 18 Conn.
417, 422 (1847). The Married Women's Act of 1877 created a new cause of action so that
both spouses were "liable where an article purchased by either shall have in fact
gone to the support of the family, or for the joint benefit of both or for the reasonable
apparel of the wife or for reasonable support while abandoned by her husband." 1877
Conn. Pub. Acts ch. 2.
DISSENT: This 1877 Act, in effect, expanded the term
"necessaries." That section of the act was amended from time to time and has now
been recodified. General Statutes § 46b-37. Included in the necessary support statute are
the following: (1) "The reasonable and necessary services of a physician or
dentist" General Statutes § 46b-37(b)(1); (2) "hospital expenses rendered the
husband or wife or minor child while residing in the family of its parents" General
Statutes § 46b-37(b)(2); (3) "the rental of any dwelling unit actually occupied by
the husband and wife as a residence and reasonably necessary to them for that
purpose" General Statutes § 46b-37(b)(3); and (4) "any article purchased by
either which has in fact gone to the support of the family, or for the joint benefit of
both." General Statutes § 46b-37(b)(4). No longer is the word
"necessaries" limited to the common law minimal definition. Fitzmaurice v.
Buck, 77 Conn. 390, 393, 59 A. 415 (1904).
Under General Statutes § 46b-37, "support of the family,"
has been held to mean articles for the sustenance of the family whereas the very next
section of the statute, "for the joint benefit of both," has been held to mean,
"'Whatever promotes prosperity and personal happiness; advantage; profit;
good.'" Ferrigino v. Keasbey, 93 Conn. 445, 450-51, 106 A. 445 (1919).
"There is no limitation of the liability of husband and wife with respect to articles
which in fact go to the family support, or for the joint benefit of both." Id.
453. While this court recognizes that these cases often turn on issues of family
agency, the nature of the items sued upon under the statute contains no limit, as was
first recognized by our common law. In Ematrudo v. Gordon, 100 Conn. 163, 164, 123 A.
14 (1923), the court found that cosmetic plastic surgery may be a necessary under the
statute depending on the pecuniary situation of the parties, their social surroundings and
general course of life. In Zybura v. Zybura, 142 Conn. 553, 556, 115 A.2d 452 (1955)
the court found the husband's financial condition and the husband and wife's station in
life relevant in determining the amount of support the husband owed the wife.
Needs are more than what is commonly understood as necessaries.
Necessary is defined as "absolutely needed" akin to required. Webster's Seventh
New Collegiate Dictionary. Need has multiple dictionary definitions: "2 : a lack of
something requisite, desirable, or useful" or "4 : want of the means of
subsistence," akin to poverty. Id. Although need can mean subsistence level, that
definition is inconsistent with "necessary." The Connecticut legislature,
familiar with the common law definition of necessaries, meant by the passage of the 1877
act and the current General Statutes § 46b-37 to offer a more expansive use of
necessaries. Therefore, by the use of the even more expansive word "needs" as a
criterion in the equitable distribution statute, the General Assembly did not intend to
set any limit to "needs."
In other circumstances courts have permitted alimony awards to stand
regardless of the fact that the amount may be more than the basic requirements of living.
For example; (1) if the nonmodifiability clause is clear and unambiguous, it will be
upheld regardless of the fact that the payment may be more than the recipient's
demonstrated "needs," General Statutes § 46b-86(a); Scoville v. Scoville,
179 Conn. 277, 279, 426 A.2d 271 (1979); (2) alimony awarded as a percentage of the
payer's income may also exceed the payee's demonstrated "needs," Burns v.
Burns, 41 Conn. App. 716, 727, 677 A.2d 971 (1996); and (3) alimony may continue
beyond the payee's remarriage or cohabitation, where presumably the payee's
"needs" would have decreased. Vandal v. Vandal, 31 Conn. App. 561, 565, 626
A.2d 784 (1993).
Sections 46b-81(c), 46b-82 and 46b-84(b) all require that the trial
court consider the 'station' of each spouse. The most pertinent definition of 'station' in
Webster, Third New International Dictionary, is 'social standing.' A person's social
standing is strongly correlated to his standard of living, although other factors may be
important as well. Our courts have frequently considered the standard of living enjoyed by
spouses in determining alimony or in dividing marital property. Whitney v. Whitney, 171
Conn. 23, 27-29, 368 A.2d 96 (1976); Tobey v. Tobey, 165 Conn. 742, 747-49, 345
A.2d 21 (1974); Stoner v. Stoner, 163 Conn. 345, 350, 307 A.2d 146 (1972); Morris
v. Morris, 132 Conn. 188, 191-94, 43 A.2d 463 (1945).
Blake v. Blake, 207 Conn. 217, 232, 541 A.2d 1201 (1988).
It is well known in wealthy circles that one person's needs is
another person's luxuries. It was not so many years ago that it was a luxury to own a car.
It is now mandatory in most middle class families to have two cars. Three car garages are
found in many middle class neighborhoods. One person's needs truly are another person's
luxuries. See Blake v. Blake, supra, 207 Conn. 227 involving $7,200,000 conceded
assets in 1988 in which the "station," "social standing" and
"standard of living" played a prominent role.
General Statutes §§ 46b-81 and 46b-82 contain no definition of
"needs." It is in addition to the criterion of "station of life."
"Needs" appears to relate to financial needs. As to diverse wants, desires or
perceptive needs, none of these are set forth clearly in the statute. In a family with
substantial assets the following, although luxuries for most people, may very well be
considered "needs": country club membership, vacation home, private pool,
vacations, vacations with friends all paid by you, live-in household help, charitable
contributions, capital charitable contributions of the leadership variety, power,
prestige, reputation that goes with having significant money, reputation for generosity in
the charitable community, the ability to acquire excess assets for the purpose of relying
on those assets to keep up the lifestyle when earnings may be less because the prime wage
earner is earning less, gifts to children and other blood relatives, gifts to children and
grandchildren to pass wealth onto the next generation in a tax free capacity and
continuing currently existing patterns of charitable donations. Money needed to maintain a
luxury standard of living comparable to the one enjoyed during the marriage has been held
by one court to satisfy the criterion of "needs." "When resolving alimony
disputes, the standard of need is measured by the 'station' of the parties - by what is
required to maintain a standard of living comparable to the one enjoyed during the
marriage." Rosenblatt v. Kazlow-Rosenblatt, 39 Mass. App. Ct. 297, 655 N.E.2d 640,
643 (1995); Stoner v. Stoner, 163 Conn. 345, 354, 307 A.2d 146 (1972).
This court is convinced that each and every single one of these factors
apply in the plaintiff's situation. Her financial "needs" as defined by General
Statutes §§ 46b-81 and 46b-82 encompass each and every one of the items set forth in the
paragraph above. To suggest that the criterion "needs" has some finite limit is
in effect to give paramount weight to the finite limit created by the application of that
one criterion. "No single criterion is preferred over the others." Carpenter
v. Carpenter, 188 Conn. 736, 740-41, 453 A.2d 1151 (1982); Sands v. Sands, 188
Conn. 98, 102, 448 A.2d 822 (1982); Siracusa v. Siracusa, 30 Conn. App. 560, 567,
621 A.2d 309 (1993).
The court already has indicated its disavowal of the "Enough is
Enough" theory. The factor of sufficient cash to be able to meet whatever her basic
needs such as food and shelter is not an adequate consideration under the statute. The
statute contemplated that based upon the plaintiff's "station in life" she would
have excess "needs." This broad reading of the statutory criteria is consistent
with the broad reading in two other sections of the statute approved in Krafick v.
Krafick, supra, 234 Conn. 783, 795, 663 A.2d 365 and O'Neill v. O'Neill, supra, 13
Conn. App. at 312.
Although for years the parties lived modestly, and maybe somewhat
frugally in a conservative lifestyle, their recent lifestyle is that of luxury. It may be
that they lived a luxurious lifestyle because GE paid for their travel. The plaintiff is
entitled to receive the income necessary to continue that lifestyle. That was their normal
lifestyle. Although gifts to charity may very well be met by the Wendt Family Trust, she
is still entitled to be make similar donations based on her ability to give. Provisions
for the children's future is a consideration. The defendant paid for the children's
college education although the parties had no legal obligation to do so. Both children are
now self sufficient. Although self sufficient, the defendant is paying for one child's
graduate school. The plaintiff should have sufficient money to be able to make those type
of voluntary contributions on her own.
Political power, personal power, security, economic independence,
freedom to do what you want, financial ability to do what you want, pleasure, greed,
control, public awareness of your wealth, and the ability to relax knowing that you have
no financial problems in the future are all "needs" satisfied by adequate money.
Although money cannot buy happiness, it can buy each one of the above items. Although
happiness is not defined as a "need," every single one of the other items
mentioned in this section is a "need" under General Statutes §§ 46b-81(c) and
HOW TO TREAT THE DEFENDANT'S EXCESS INCOME
The defendant is a highly compensated CEO of a division of a world wide
corporation. His financial affidavit indicates an annual salary of $1,100,000. He has
received salary increases on a regular basis in the past ranging from 7% to 20% annually.
He received "dividend equivalents" on his GE restricted stock of $358,200. He
reports on the income portion of his financial affidavit an item, "Incentive
Compensation," of an additional $1,125,000 although part of that was a discretionary
1995 award paid in February, 1996. He also received other forms of compensation not
reported as current income but treated by this court as assets: Unvested stock options and
appreciation rights, Deferred Incentive Compensation program and the completion of a 30
month incentive award on December 31, 1996, later deferred by the defendant until
retirement. Assuming the accuracy of the deductions for taxes set forth in the defendant's
financial affidavit and not factoring in the deductibility of periodic alimony paid to the
plaintiff, the defendant shows $1,437,595 as net employment income on his November 24,
1997 financial affidavit. This is more than enough to pay the expenses listed in his
financial affidavit as well as the expenses listed in the plaintiff's financial affidavit.
The defendant clearly has excess income.
How should the court treat this excess income? The defendant claims
that none of it should be paid to the plaintiff since she will have more than sufficient
income from the assets awarded to her to pay for her expenses. The plaintiff wants to
share in a percentage of all the defendant's income, including this excess income. She
requests alimony of one-third of his base salary and incentive compensation (gross amount,
not excluding deferrals). She has calculated this sum as $2,600,000 for 1996 of which she
would get $866,666 leaving the defendant with $1,733,333. In addition, since she is asking
for one-half of the restricted stock, she would be entitled to receive directly from GE
one-half of the "dividend equivalents" currently being paid. The total of the
one-third alimony and the dividend equivalents would give the plaintiff $1,045,666 per
year.In addition, the plaintiff will receive income on the cash, cash equivalents and
other assets awarded to her. If these assets are invested conservatively, substantial
income will be produced. As of the last date of trial, it is noted that investment grade
long term New York City and New York State obligations were priced to yield approximately
6% annually. These investments are free of federal tax and, thus, have a pretax equivalent
yield much higher. Grant's Interest Rate Observer, Vol. 15, No. 2, January 31, 1997.
General Statutes §§ 46b-81(c) and 46b-82 do not discuss "excess
income"; they discuss only "amounts of income," "sources of
income," and "the opportunity of each for future acquisition of capital assets
and income." The ability of a person to save permits them to acquire assets in the
future. This is a statutory criterion. If the court could not consider excess income, then
one statutory criterion would not be considered. This is not Connecticut law.
Additionally, neither alimony nor property are to be divided by a
formula. Most decrees divide income so that each party receives less than his or her
stated expenses. This occurs in 95% of divorces. "Divorce is generally a zero sum
economic transaction; there is not enough money in the marital settlement pot for both
parties to live post divorce at the same standard of living as before the divorce." Hutchings
v. Hutchings, 1993 Conn. Super. LEXIS 498, Superior Court, judicial district of
Litchfield at Litchfield, Docket No. 054449 (February 22, 1993, Dranginis, J.) (1993 Ct.
Sup. 1871, 1876). "Unfortunately, as in most cases, there are not enough assets left
to satisfy the parties' needs, and they must adjust their lifestyles drastically with the
income available." Borchers v. Borchers, 1995 Conn. Super. LEXIS 1277,
Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 307421 (April 21,
1995, Petroni, J.) (1995 Ct. Sup. 3386, 3390). This case is in that small minority where
one party can pay what the other expresses as "needs." There is no reason, even
under these unusual circumstances, to depart from the rule in Connecticut. Enough is
Enough is not a Connecticut concept, and this court sees no reason why one party cannot be
awarded more than what their stated "needs" are. This is the underlying concept
permitting alimony to continue after remarriage. Both parties will retain income that is
larger than the expenses in their financial affidavits. The excess income has been divided
equitably in the ORDERS section of this decision.
"GENIUS FACTOR" IS NOT RECOGNIZED IN CONNECTICUT
The defendant offered extensive evidence of his career, both before and
during GECS. Numerous exhibits documented the growth of GECS under his leadership. A video
was offered which contains portions of GECS promotional material and a "let's go get
'em" speech by the defendant to high ranking GECS at a corporate conference. Exhibit
111. The defendant points to this evidence in support of his argument that it was largely
through his efforts that the parties were able to accumulate the assets which the court is
today dividing. Evidence was offered through other witnesses that support the inference
that the defendant was "a deal maker" and the employee who was most responsible
for the financial success of GECS. The defendant did not, though, directly claim that he
was a "genius."
The plaintiff assumes that the defendant's claim is that it "was
his extraordinary skill and business acumen which led to the accumulation of the marital
estate now in dispute." Plaintiff's Memorandum Re: Relevance of the "Genius
Factor" in Property Distribution, February 24, 1997. No Connecticut case cites this
"super contribution" theory. The statutory factor that considers the area in
question is "The court shall also consider the contribution of each of the parties in
the acquisition, preservation or appreciation in value of their respective estates."
General Statutes § 46b-81(c).
The intellectual method by which the assets were acquired is not a
statutory criterion. If the assets were attributed to one spouse and that one spouse only,
and the assets were acquired by inheritance, luck, lottery winnings or manna from heaven,
this court should still find that the noncontributory spouse made no contributions to the
"acquisition, preservation or appreciation in the value of their respective
estates." The method of acquisition is irrelevant, but the effort of acquisition is
The plaintiff cites deCastro v. deCastro, 415 Mass. 787, 616 N.E.2d
52, 55 (1993) for the proposition that the "genius factor" is not relevant
in an equitable distribution scheme. "The husband contends that the Data General
stock was the greatest single asset of the marital estate and that the judge failed to
make findings, based on the evidence,as to the husband's revolutionary designs, the
founding and developing of Data General, and the husband's unique role in the computer
industry." Id. The Massachusetts statutory scheme is in many ways similar to
Connecticut's. Mass. Gen. L. ch. 208, § 34 (1990).
Two states do permit consideration of the "genius factor." Parrett
v. Parrett, 146 Wis. 2d 830, 432 N.W.2d 664 (Ct. App. 1988); Lester v. Lester, 547
So. 2d 1241 (Fla. Dist. Ct. App. 1989). Both decisions were distinguished in deCastro.
The Massachusetts statute notes one of the factors in dividing property: "The court
may also consider the contribution of each of the parties to the acquisition, preservation
or appreciation in value of their respective estates and the contribution of each of the
parties as a homemaker to the family unit." Mass. Gen. L. ch. 208, § 34 (1990).
Although Connecticut's statute does not specifically include the homemaker's contribution,
it is clear from O'Neill v. O'Neill, supra, 13 Conn. App. at 310, that nonmonetary
contributions of the homemaker are included within "contribution." Connecticut
also prefixes its statute with the use of "shall consider."
"The test to be applied in determining whether a statute is
mandatory or directory is whether the prescribed mode of action is the essence of the
thing to be accomplished, or in other words, whether it relates to a matter of substance
or a matter of convenience." (Internal quotation marks omitted.) Katz v.
Commissioner of Revenue Services, 234 Conn. 614, 617, 662 A.2d 762 (1995). If a matter
of substance, the statutory use of shall is mandatory. Hall Manor Owner's Assn. v. West
Haven, 212 Conn. 147, 152-53, 561 A.2d 1373 (1989). In applying the statutory
criteria, the trial court is required to consider each and every factor. This is
mandatory, and each criterion is a matter of substance. Sands v. Sands, 188 Conn. 98,
102, 448 A.2d 822 (1982).
Does the use of "may" in the Massachusetts statute in the
application of the "contribution" factor require Connecticut to apply the
"genius factor" when its statute makes consideration of "contribution"
mandatory? "The judge was not compelled to consider the husband's contributions to
the computer industry in distributing the marital property." deCastro v. deCastro,
supra, 415 Mass. 792. Although Connecticut is required to consider each statutory
criterion, the trial judge is not required to apply each factor or to apply each factor
equally. That decision is left to the discretion of the Connecticut judge. This court
finds deCastro instructive and feels that Connecticut ought not to adopt the "genius
factor" or "super contribution theory." Fucci v. Fucci, 179 Conn. 174,
179, 425 A.2d 592 (1979). How can a court determine if the effort was ordinary
industriousness, incredible luck or true genius? So too the contributions made by the
defendant to GECS are not relevant except to the extent that it relates to one of the
statutory factors, i.e., a workaholic may have caused the breakup of a marriage (fault),
his efforts to create profits for the company increased benefits in his personal life
(standard of living) and his efforts to expand the size of the corporation increased the
price of company stock held by the parties (contribution to the acquisition and
appreciation of the parties' estate). General Statutes § 46b-81(c).
Of course the plaintiff would agree that the increase in the price of
GE stock over the years is relevant even if attributed to the defendant's
"genius" or "super contribution." The lines, thus, are blurred when
corporate contributions are considered. Still the court must not consider the "genius
PLAINTIFF'S NONMONETARY CONTRIBUTIONS DO NOT JUSTIFY THE RELIEF SOUGHT
During the trial of this case the death of two prominent married
individuals within one week of each other brought this issue into focus for the court. Had
these recently deceased persons been before this court and subject to Connecticut's
equitable distribution statutes, how would they have fared when compared to the orders set
forth in this case?
Claudia Ellen Ledington Sanders died on December 31, 1996. She was the
widow of Colonel Harland Sanders. The Colonel founded Kentucky Fried Chicken. His face
appears in the corporate logo and has been used consistently in all advertising and
promotions. No one knows for sure who developed the 12 secret herbs and spices used in the
KFC special recipe, but the Colonel claimed ownership. The business was created in the
Sanders family kitchen. Mrs. Sanders would work in the kitchen late at night packaging the
herbs and spices. In the 1950's the Colonel would visit each prospective KFC franchise and
cook chicken using the secret sauce while Mrs. Sanders would greet customers. Years later
when the franchise became more successful, she travelled extensively with the Colonel. She
and the Colonel promoted KFC in 25 foreign countries. She was featured in ads and
promotions, side by side with the Colonel, he in white military garb, and she in an
"'It boggles the mind just to think of all the procedures and
precautions the company takes to protect my recipe, especially when I think how Claudia
and I used to operate. She was my packing girl, my warehouse supervisor, my delivery
person - you name it. Our garage was the warehouse,' Harland Sanders once said. 'We could
not have been the company we are now without Claudia's contributions.'" said David
Novak, group president and chief executive officer of KFC, upon Mrs. Sanders' death. See
obituary of Claudia Sanders by Jennifer Hewlitt, Knight-Ridder Newspapers (Greenwich Time
January 3, 1997).
They met in Kentucky in the 1940's. He owned a restaurant, and she
worked there as a waitress. They married shortly thereafter. The first KFC franchise was
created in 1952. KFC grew throughout the southern states and expanded into all fifty
states. As of the time of Mrs.Sanders' death, KFC had over 6,000 franchises located in 55
countries. Mrs. Sanders' contribution to the "acquisition, preservation or
appreciation in the value of their respective estates" appears to be more significant
than the evidence of the plaintiff's contributions.
Harry B. Helmsley died on January 4, 1997. He resided in New York and
owned a substantial home in Connecticut. He was a major force in the New York City real
estate business. He developed sales syndication and management techniques that enabled him
to prosper as a property manager, commissioned broker and real property owner. More than
twenty years ago he hired his current wife, Leona, to work in his real estate management
company, Helmsley-Spear, Inc. She became one of his most valued employees and an expert in
real estate management and promotion in her own right. Leona and Harry married. The
Helmsleys, using his money, acquired a number of marquis hotels in Manhattan. Heavily
featured in high end magazine advertisements, Leona Helmsley's image was of a luxury hotel
manager who cared for her guests. She became nationally known, even more well known than
her husband. The total Helmsley assets have grown in the last twenty years and are now in
the range of $5,000,000,000 according to the September 22, 1997 issue of the Wall Street
She was sentenced to prison in 1992 for tax violations. The "Queen
of the Palace" became known in the media as the "Queen of Mean." She
remained the principal manager of the Helmsley family's interests during the 1980's and
1990's. Although a majority of the shares of Helmsley Enterprises, Inc., the corporation
owning the assets of the Helmsley empire, were owned by Harry B. Helmsley, Leona was a
paid officer and director. She was a paid officer and director of the management company,
Helmsley-Spear, Inc. Harry Helmsley was ill for most of the 1990's and unable to make
personal appearances. Leona alone managed the Helmsley real estate empire. The Wall Street
Journal reported that the family fortune was not affected either by Mr. Helmsley's lengthy
illness or Leona Helmsley's imprisonment from 1992 to 1994. Leona M. Helmsley's
"contribution to the acquisition, preservation or appreciation in the value of their
respective estates" appears to be more significant than the evidence of the
Mrs. Sanders and Mrs. Helmsley were not involved in a dissolution of
their respective marriages. Their backgrounds are offered as examples of spousal
contributions to a high asset marriage. Many reported divorce cases furnish examples of
business contributions made by both parties. The outcome of one dissolution litigation
should not control the outcome of another. Each must be analyzed on a case-by-case basis,
applying and weighing the statutory factors. The following cases are examples of business
contributions by both parties:
1. White v. White, 382 Pa. Super. 478, 555 A.2d 1299 (Pa. Super. Ct.
1989). This case involved a 1946 marriage, 1970 separation and a 1985 divorce. The
husband and wife were both 61. The wife worked in the husband's lumber business for the
last 14 years prior to their 1970 separation without being paid. The husband's business
was worth $2,735,000. The wife received $2,000,000 out of total marital assets of
2. Capasso v. Capasso, 129 A.D.2d 267, 517 N.Y.S.2d 952 (App. Div.
1987). The wife was awarded a substantial portion of the parties' varied assets due to
her direct contributions. These contributions included renovating a Fifth Avenue co-op
purchased for $765,000 in 1980 and valued at $6,000,000 in 1995, a major role in
purchasing another parcel of real property which increased by 25% (over $200,000) in three
years, working in early years in formation of husband's construction and real estate
business doing payroll, picking up bids, making and taking deliveries, meeting with
executives, and dealing with clients and contractors.
3. Miller v. Miller, 352 N.W.2d 738, 741 (Minn. 1984). The wife
made substantial contributions in amassing a marital estate of over $14,000,000 in a
development, construction, motel and apartment business. The wife kept the business books
and did payroll for years. On occasions she tended to the motel management. The wife set
up the office and decorated the model units in various condominium projects. She also
dealt with prospective purchasers.
4. Burkhart v. Burkhart, 169 Ind. App. 588, 349 N.E.2d 707, 714
(1976). The wife supported the husband during the depression years and used her
family's inheritance to pay off a large stock loss. She also engaged in business
entertainment. The wife was awarded $1,300,000 out of a total marital estate of
5. Goldberg v. Goldberg, 691 S.W.2d 317 (Mo.Ct. App. 1985). This
case involved a 22 year marriage with $2,846,000 in marital property generated by the
workaholic husband in a business given to the wife by her parents. The business doubled.
The husband was found to have made "a sizeable but indirect contribution to the
value" of the company stock and was awarded $550,000. Id. 319.
Each of the considerations set forth in this section of the decision,
as well as the findings of fact already made, support this court's conclusion that the
Wendt assets should not be distributed equally.
DOES THE COURT HAVE THE POWER TO CHANGE AN IRREVOCABLE LIFE INSURANCE
TRUST OR IN LIEU THEREOF ORDER THE ACQUISITION OF LIFE INSURANCE COVERAGE?
GE has provided group life insurance coverage on the defendant's life
in what the parties claim is a face amount of $13,000,000. On January 22, 1993, the
parties executed an irrevocable life insurance trust. Exhibit 96. Certain GE group life
insurance policies were transferred and conveyed to the trust. The purpose of this trust
was to take the GE group life insurance benefit out of the parties' decedent estates and
to provide estate tax free benefits to future Wendt generations. It is a generation
skipping trust. At issue was whether this court could order a change in the beneficiary
designation of those policies from the irrevocable life insurance trust as primary
beneficiary to the plaintiff as primary beneficiary? If not, can the court order the
defendant to purchase additional life insurance coverage of $5,000,000 on his life naming
the plaintiff as beneficiary? To assist the court in deciding this issue the parties filed
a written stipulation as follows: (1) the defendant is in good health, (2) the defendant
is otherwise insurable, (3) the defendant can afford to pay whatever premiums may be
imposed by reason of a new $5,000,000 life insurance policy, and (4) the court, regardless
of this stipulation, upon entering a judgment in this matter may retain continuing
jurisdiction to render appropriate orders regarding the life insurance issues.
Connecticut is an all property state. It has no definition of marital
property or separate property. It has little history of identifying specific types of
property that are included in the court's discretionary power of distribution. Krafick
v. Krafick, supra, 234 Conn. at 792. Life insurance policies are property for marital
distribution purposes. Mauro v. Mauro, 16 Conn. App. 680, 683, 548 A.2d 471 (1988).
The court has the power to order a party to name the beneficiary of a life insurance
policy and maintain the policy. Papageorge v. Papageorge, supra, 12 Conn. App. 598;
Leo v. Leo, 197 Conn. 1, 2-3, 495 A.2d 704 (1985). The court has the power to
change the beneficiary of a life insurance policy. Broaca v. Broaca, 181 Conn. 463,
464, 469, 435 A.2d 1016 (1980). The court can name a party as the irrevocable
beneficiary on a life insurance policy. Mauro v. Mauro, supra, 682. The court has
the power to change the beneficiary of a group life insurance policy. Thomas v. Thomas,
159 Conn. 477, 482-83, 271 A.2d 62 (1970).
"The order may direct that security be given therefor on such
terms as the court may deem desirable, including an order to either party to contract with
a third party for periodic payments or payments contingent on a life to the other
party." General Statutes § 46b-82 (above language added in P.A. 83-527). This
statute authorizes the court to order one party to acquire life insurance coverage naming
the recipient spouse as beneficiary in order to secure an order of periodic alimony. Even
if there is no award of periodic alimony, the court has the authority to order a change in
an existing life insurance policy. Gallo v. Gallo, 184 Conn. 36, 47, 440 A.2d 782
(1981); Papageorge v. Papageorge, supra, 12 Conn. at 598; Mauro v. Mauro,
supra, 16 Conn. App. 682; Leo v. Leo, supra, 197 Conn. 7; Wolk v. Wolk, 191
Conn. 328, 333, 464 A.2d 780 (1983); Broaca v. Broaca, supra, 181 Conn. 465.
The power of the court to assign, modify or amend coverage offered by
insurance policies and their component parts is not by statute but the "inherent
equitable power of the court." Gallo v. Gallo, supra, 184 Conn. 47. This is so
even though there is no link between the life insurance benefits and the payment of
periodic alimony pursuant to General Statutes § 46b-82. Thomas v. Thomas, supra, 159
Conn. 482-83; Pasquariello v. Pasquariello, supra, 168 Conn. 585.
The trial court also has the authority to order a party to purchase a
new life insurance policy. Michel v. Michel, 31 Conn. App. 338, 341, 624 A.2d 914
(1993). "We do not mean to imply that a trial court may not order life insurance
if it is not in force at the time of the dissolution.To the contrary, it may do so if it
has evidence before it that would create a proper foundation for such an order." Id.,
341 n. 3. The court must have the following evidence prior to ordering one party to
acquire a new life insurance policy: (1) the cost of the premium, (2) the health
insurability of the insured, (3) the financial ability of the insured to pay the premium,
and (4) whether the life insurance company would offer such a policy based on underwriting
factors of risk and insurability. Id., 341. The parties' stipulation has furnished
sufficient foundation in this case to satisfy the first three prongs. As to the fourth,
the court can draw a fair inference that the defendant would satisfy the underwriting
requirements because: (1) his job is not hazardous to his health, (2) a medical exam can
confirm that the defendant's health is good, (3) the defendant's financial affidavit
demonstrates that he can pay the premium, (4) the financial affidavit demonstrates that
the purchase of such a large policy is for a valid reason, and (5) there is no evidence
that the defendant engages in habits, sports or hobbies that may be dangerous to his
health, i.e., sky diving, bungy jumping,moto-cross racing or hurling. Wolf v. Wolf, 39
Conn. App. 162, 172, 664 A.2d 315. Upon the defendant's death the parties' children
are the principal beneficiaries of the life insurance trust. This court has no
jurisdiction to order child support past eighteen absent a written agreement. Kennedy
v. Kennedy, 177 Conn. 47, 52, 411 A.2d 25 (1979). This rule applies also to
modification of child support. Hirtle v. Hirtle, 217 Conn. 394, 399, 586 A.2d 578
(1991). So too, the court has no right to enter orders on assets that no long belong
to either party. This court has no power to modify that trust agreement since both
children are more than eighteen years of age. This court has no jurisdiction to award any
payments to or for the benefit of the children. General Statutes § 1-1d; Broaca v.
Broaca, supra, 181 Conn. 495; Miller v. Miller, 181 Conn. 610, 613-14, 436 A.2d 279
(1980); Valante v. Valante, 180 Conn. 528, 532, 429 A.2d 964 (1980). The
children were not joined as parties in this case. Costello v. Costello, 186 Conn. 773,
776-77, 443 A.2d 1282 (1982). The children were not represented by separate counsel. Guille
v. Guille, 196 Conn. 260, 267-68, 492 A.2d 175 (1985).
The court also does not have either the statutory or inherent power to
order the parties to "utilize marital property to establish a trust fund for the
education of the minor children." Wolf v. Wolf, supra, 39 Conn. App. at 170.
"Accordingly, we interpret the statute to mean that marital property other than real
property can be assigned only to the parties to the marriage. Therefore, an award of
marital property to the children of the marriage is beyond the authority of the trial
There appears to be a slight exception to this rule. If the parties
prior to the dissolution have already established funds for the benefit of the children,
then those funds, even if located in revocable joint accounts, can be considered marital
property and the statutory prohibition of General Statutes § 46b-81(a), which was the
underpinning of Wolf v. Wolf, would seem not to apply. Louney v. Louney, 13 Conn. App.
270, 274, 535 A.2d 1318 (1988). The court in Louney felt that its order that the wife
act as trustee and utilize funds from revocable joint accounts held by the parties' minor
children with their mother for the education of the children was in the nature of support
and maintenance of the children. Louney noted that the children were minors at trial and
it was not error to keep that educational trust payment obligation in effect for the minor
children. Id., 275. The court lacked the authority at the decree to enter orders as
to the oldest child who was then an adult. The Louney "trust funds," between
$28,000 and $34,000, all came from the husband and were paid to the wife periodically
before the filing of the dissolution into a joint bank account, the wife and child listed
as joint depositors on each child's separate account.
The plaintiff is requesting that this court order a change of
beneficiary in the $13,000,000 life insurance policies. The policies were not offered as
an exhibit. There was no evidence as to the procedures necessary to effect a change in
these life insurance policies. The transfer procedures also appear more complicated by the
fact that an irrevocable life insurance trust is the beneficiary as well as the
"owner" of the policies.
As a general rule, a change of beneficiary of an insurance policy can
be effected only by following the procedure prescribed by the policy. . . . There is a
well-recognized exception to this rule - that a change of beneficiary is effective when
the insured has done all in his power to comply with the procedure set out in the policy
but has failed because of some circumstance beyond his control. . . . Proof of intention
alone is not sufficient, but where the intention is manifest and substantial affirmative
action has been taken by the insured to effectuate a change of beneficiary the courts
generally will make the change effective even though there has not been a strict
compliance with the terms of the contract.
(Citations omitted.) Aetna Life Ins. Co. v. Hartford National Bank
& Trust Co., 146 Conn. 537, 541, 153 A.2d 448 (1959).
The principal benefit of an irrevocable life insurance trust is to take
the proceeds of the life insurance policy owned by the trust out of the insured's taxable
estate. The reduction of federal estate and Connecticut succession and estate taxes is
substantial, often exceeding half the value of the policies. The transfer of the policies
on the grantor's life to an irrevocable trust or the issuance of life insurance policies
on the grantor's life upon application by the trustee of an irrevocable trust is governed
by IRS rules. Essentially, the grantor must not retain an indicia of ownership in the
policies after the creation of the irrevocable life insurance trust. I.R.C. § 674; Treas.
Reg. § 1.674(a)-(i). "If the trust is to be irrevocable in order to remove the
principal of the trust (including the face values of the life insurance policies at death)
from the testator's gross estate, the grantor should not retain the power to revoke or
amend the trust, nor any incidents of ownership over such policies. It should be noted,
however, that the creation of an irrevocable trust might create gift tax
consequences." Connecticut Will Manual (Union Trust) § XVII-39 n. 2 (1984). Examples
of indicia of ownership, that if exercised by the grantor will bring the proceeds of the
life insurance policy back into the grantor's taxable estate are: (1) the right to borrow
against the cash surrender value; (2) the right to pledge, lien or hypothecate the policy;
(3) the right to change the beneficiaries; and (4) the privilege of paying premiums on the
policy. Yes, payment of premiums is a right, and the IRS recognizes this as an indicia of
In order to avoid these indicia of ownership, the trust must (1) be
irrevocable, (2) have a trustee who performs all acts regarding the policy, (3) not permit
the grantor to exercise any control over the policy, (4) retain the sole power to revoke
or change the terms of the trust, and (5) be the person or entity who pays the premiums.
There are three methods approved by the IRS for the grantor to indirectly pay the premiums
without that payment becoming an indicia of ownership: (1) make an irrevocable gift of
additional funds to the trustee along with the conveyance and transfer of the life
insurance policy, which funds will be invested by the trustee without further control by
the grantor, producing sufficient funds to pay the premiums; (2) if the policies conveyed
to the trust are group policies, the employer can pay the premium directly but the premium
is subject to a gift tax to the grantor in the year of payment, Rev. Rul. 76-490;
or (3) make an annual gift to the trust sufficient to cover the annual premium and follow
the procedures established by the leading tax case of Crummey v. Commissioner, 397 F.2d
82 (9th Cir. 1968) described below in an excerpt from the Connecticut Will Manual.
RIGHT TO WITHDRAW ADDITIONS-GIFT TAX EXCLUSION. Giving a beneficiary a
non-cumulative right (whether or not exercised) to withdraw all or part of annual
additions to a trust will allow the annual exclusion granted by Internal Revenue Code, §
2503(b). Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968); Reg. 25.2503-3(b);
Rev. Rul. 80-261, 1980-2 C.B. 279. In the usual situation, it is not contemplated that
the right to
withdraw will be exercised. The right to withdraw should be made
non-cumulative, and limited as to time. The tax year of the trust or a shorter period of
time (such as 30 days) may be submitted for the calendar year. IRS Letter Rul. 7939061;
IRS Letter Rul. 8003033.
Connecticut Will Manual, supra, § XVII-41 n. 1.
Using the $10,000 tax free federal gift exclusion each year, the
grantor, under this third method of paying the premium, makes an annual gift to the trust,
usually some time prior to the date the premium is due. The gift is unconditional, and the
grantor cannot restrict the use of these funds by the trustee. The gift should not be in
the exact amount of the premium but should be sufficient, along with other funds the
trustee has on hand to pay the premium when due. When the trustee receives the gift, the
trustee must write a letter to each income beneficiary giving them 30 days within which to
accept his or her portion of the grantor's recent gift. If the beneficiary requests
payment of the funds neither the trustee nor the grantor can prevent the beneficiary from
being paid the funds, even if that leaves the trustee with insufficient money to pay the
premium. Once 30 days passes with no request for payment by the beneficiary, the trustee
is free to do whatever the trustee wishes to do with the funds, which hopefully is pay the
annual premium. These notices to the beneficiaries are known as "Crummey"
The parties both signed reciprocal wills prepared by the same estate
planning attorney at about the same time that the January 22, 1993 irrevocable life
insurance trust was signed. The parties stipulated that the defendant's will provided that
upon his death the plaintiff would receive 50%. Since the commencement of this action, the
defendant has executed a codicil to his 1993 will. The trustees were changed, and an
additional specific bequest was added. This was done post separation without prior
notification to the plaintiff. In all other regards the defendant's will remains as signed
in 1993. The plaintiff views this as an effort to deprive her of a portion of the Wendt
The plaintiff notes that a significant change from the draft to the
final signed trust was made by the defendant and this will affect the plaintiff
financially. The January 23, 1993 Irrevocable Life Insurance Trust, Exhibit 76, changed
the definition of "grantor's wife." The plaintiff was designated as the
"grantor's wife" in the 1992 unsigned draft, Exhibit 123, but when the final
irrevocable life insurance trust was signed on January 27, 1993, "Grantor's
wife" was defined as the person who was the spouse of Gary C. Wendt, the grantor, as
of the date of his death. Thus, the plaintiff wishes this court to intervene and fashion
appropriate orders to undo this inequitable act.
Both the signed and the unsigned trust state, "Lorna Joyce Wendt
of Stamford, Connecticut (hereafter called the 'trustee')." The plaintiff is and
continues to be designated as the Trustee of the irrevocable life insurance trust. Article
First, Paragraph E of Exhibit 123, the draft trust, states, "The Grantor is married
to Lorna Joyce Wendt and any reference herein to his 'wife' refers only to her." In
Exhibit 76, the signed January 22, 1993 trust, Article First, Paragraph D states:
Unless otherwise specified, the terms 'wife' and 'spouse' as used
throughout this Agreement shall be deemed to refer to the person to whom the Grantor is
married and with whom the Grantor is living as husband and wife when such person would,
from time to time, pursuant to the terms of this Agreement, become entitled to any benefit
hereunder or have any power of appointment related to this Agreement, and to the person to
whom the Grantor is married and with whom the Grantor is living as husband and wife at the
time of his death.
Exhibit 63, Tab 6 includes materials supplied by GE regarding the
status of the various life insurance policies. In regard to the life insurance trust, the
GE generated documents are not consistent. The five GE group life insurance policies
listed in Exhibit 63, Tab 6 total $8,461,374 with the fifth policy listed without a face
amount. This is far from the $13,000,000 of life coverage referred to in the testimony of
the parties. To further confuse the issue: (1) the defendant testified he does not know
how much life insurance he has; (2) the life insurance policies were not listed on either
party's financial affidavit; (3) schedule A to the signed January 22, 1993 irrevocable
life insurance trust, Exhibit 76, conveys to the trust "any group life insurance on
his life now or hereafter issued through General Electric Capital Credit Co. or any
successor thereto"; (4) the evidence does not disclose what entity is "General
Electric Capital Credit Co." or who its successor may be; (5) Exhibit 75 is a one
page document, front and back, outlining the "Gary Wendt GE Life Insurance Summary as
of December 31, 1995" and it totals $11,261,415 total natural death plus an
additional $1,345,000 accidental death for a grand total of $12,606,415. It is unclear
whether this is the document the parties are relying on in discussing $13,000,000 life
insurance coverage; (6) Exhibit 75 is difficult to compare with Exhibit 63, Tab 6. No
policy numbers or companies are listed, although the primary owner and beneficiary of all
but the $191,091 GE supplemental life is the trust; (7) no transfer documents were offered
into evidence and (8) as of December 31, 1996 the defendant's GE Group policies owned by
the trust with the trust as beneficiary were: Total Natural Death, $13,225,275 and
Accidental Death, $1,850,000; Total Death, $15,075,275. Exhibit 114. The court is left
with doubt as to whether any accidental death policy was ever meant to be transferred to
the irrevocable life insurance trust.
It should be noted that a draft copy, Exhibit 123, and a signed copy,
Exhibit 76, of the life insurance trust were offered into evidence. Neither copy listed
the policies by number, face amount or company. The actual transfer documents addressed to
Metropolitan Life Insurance Company contains face amounts of policies that are at variance
with the GE supplied documents in Exhibit 63, Tab 6. The GE Supplemental Life is still
owned by the defendant naming the plaintiff as beneficiary. There are no transfer
documents for the GE Leadership Policy. There are no statements as to face amount of the
GE Group Policy PGL1020 issued by Employers Reassurance Corporation.
The defendant was advised of the limitations created by assigning life
insurance policies to an irrevocable trust by a letter from GE dated December 17, 1992,
receipt of which was acknowledged by the defendant by his signature on that letter.
"If the assignment is made, you will permanently lose all control over your insurance
under that policy, and full control (including, but not limited to the right to make any
required contributions to maintain the insurance in force, the privilege of obtaining an
individual policy of life insurance, the right to change the beneficiary and the right to
specify how death benefits should be paid) will pass to your assignee - who, in turn, will
be able to assign this control to others." Exhibit 125. Both parties signed the
irrevocable assignment documents.
The trust names the plaintiff as trustee and the two individuals as
successor trustee and co-trustee upon: (1) the appointment by the plaintiff, (2) the death
of the defendant, or (3) the total vacancy in the office of Trustee. A third individual
trustee named in the draft was not named in the signed trust. Both trusts state,
"This Agreement and any trust created hereunder shall be irrevocable and shall not be
subject to alteration or amendment in any respect."
Both parties signed pre-printed forms prepared by GE and the Employers
Reassurance Company entitled "Absolute Assignment to Trustee" on January 22,
1993. Exhibit 125. The plaintiff signed a form letter to GE regarding the
"irrevocable assignment by Gary C. Wendt to Lorna Joyce Wendt as Trustee" on
January 22, 1993. Exhibit 125. Both parties signed the Irrevocable Life Insurance
Agreement on January 22, 1993. Exhibit 75. GE sent a letter to the defendant dated
December 17, 1992 which carefully outlines the irrevocable nature of the assignment of the
group policies to the life insurance trust and the dire tax consequences of exercising any
rights under the policy. The defendant signed a copy of that letter on January 22, 1993
stating, "I acknowledge receipt of this letter and agree to the terms and conditions
stated therein." Exhibit 125.
Exhibit 125, in easy to read numbered paragraphs, stated as follows:
B. Assignment of Rights
The employee making the assignment transfers to the assignee all his
present and future rights under the policy including the following:
1. Right to designate and to change the beneficiary;
2. Right to make any required contributions with respect to the
employee's insurance in the event the employee cancels his payroll deduction
3. Right to obtain increased or decreased amounts of group insurance as
a result of changes in the employee's salary;
4. Right to reassign the group insurance without the consent of the
5. Right to elect an optional mode of settlement and to revise a
previous election, subject in either case to acceptance by the Insurance Company.
6. Right to convert the Group Life Insurance to an individual policy in
the event that the insured employee is separated from General Electric Company. Such life
insurance policy may include an accidental death benefit subject to the ERC's then
existing underwriting practices; and
7. All other rights of ownership of any nature now or hereafter
provided under the policy affected by the assignment.
F. Tax Considerations
1. Revenue Ruling 69-54
This ruling of the Internal Revenue Service holds that an absolute
assignment by an employee of all of his incidents of ownership (including the conversion
privilege) in a group term life insurance policy maintained by his employer is effective
to prevent the insurance death proceeds from being included in his gross estate for
Federal estate tax purposes under Internal Revenue Code Section 2042, provided that both
the applicable state law and the policy permit the employee to make such assignment.
3. Assignments Cannot be Revoked
Once done, an assignment cannot be undone with the cooperation of the
assignee. Therefore, an employee should reflect on the undesirable complications and loss
of control which might result if an assignment is followed by changes in family
circumstances such as death of the assignee, divorce, remarriage, incompetence, etc. Also,
there could possibly be changes in the Federal tax law that could change some of the tax
In addition, the defendant was given similar advice as to the
irrevocable nature of the assignment and the adverse tax consequences if the trust was
amended or its terms not complied with, in two separate letters by the attorney preparing
the documents. Exhibit 124, September 3, 1992 and Exhibit 126, July 6, 1993. In addition
both parties met with that attorney who advised them of the seriousness and irrevocably of
the assignments to the trust. Finally, both parties signed the January 22, 1993 documents
in the presence of their attorney. Testimony of Lorna Wendt, February 11, 1997.
Although the terms of the signed trust severely impact the plaintiff
financially upon the entry of a decree of dissolution of marriage, the fact remains she is
still designated as the trustee. Although her trusteeship ends upon the defendant's death,
she has the power prior to his death to appoint the named trustee. The two named trustees
are longtime personal friends of both parties. The spouses of these two named trustees
testified for the plaintiff. The "grantor's wife" is not the named trustee. The
trustee still has the discretion to apportion income between the plaintiff's two children
and any future Mrs. Gary C. Wendt as well as exercise the power of principal invasion in
favor of the two daughters. The remainder beneficiaries are currently the parties'
children and future grandchildren. This court is satisfied, under the facts, documents and
law, that it has no power to amend the trust and change any of its terms and conditions.
No such authority has been furnished to this court by the plaintiff. On January 22, 1993
the plaintiff approved the trust. Her signature as trustee appears in the second to last
page of the trust. Exhibit 76. Those terms and conditions as to the trustee, powers of the
trustee and definition of grantor's "wife" and "spouse" were
satisfactory to her only a few years ago. The plaintiff has furnished no reasons why this
court should disrupt a critical estate plan knowingly created by the joint efforts of the
THE STANDARDS IN SEALING THE FILE AND/OR CLOSING TRIAL UNDER GENERAL
STATUTES §§ 46b-11, 46b-49 & PRACTICE BOOK § 211B
On the first day of evidence the defendant filed a Motion to Seal the
File and Close the Hearing. This court permitted the intervention of Dow Jones and
Companies, the parent company of the Wall Street Journal. The plaintiff and Dow Jones
opposed the motion. The motion was filed under the authority of General Statutes §
46b-11, § 46b-49 and Practice Book § 211B. The court granted the motion in a limited
form sealing the file and closing the court as to "any information obtained in this
case before that information is filed publicly by General Electric or its subsidiaries and
concerning the defendant, Gary C. Wendt, as an 'insider.'"
The court's December 4, 1996 decision from the bench was reduced to
writing and filed on December 6, 1996. Wendt v. Wendt, 45 Conn. Supp. 208 (1998)
(Tierney, J.). The intervenor, Dow Jones and Companies, filed an immediate appeal with the
Appellate Court. Wendt v. Wendt, AC 16592. In its December 4, 1996 decision this court
ordered that "the trial will continue without interruption. There will be no 72 hour
stay of the effective date of this decision." See Practice Book § 211B(d); General
Statutes § 51-164X. In response to that order, Dow Jones and Companies appeared before
this court and filed an Emergency Motion for Stay dated December 5, 1996. A similar motion
was also filed directly with the Appellate Court. This court, after a hearing in which
both parties and the intervenor were present, denied the Motion for Stay. The intervenor
then filed a Motion for Review of the trial court's denial of the stay with the Appellate
Court in accordance with Practice Book § 4166.
On December 6, 1996 the Appellate Court acted on the two motions before
it regarding the stay. The Motion for Review of the trial court's denial of the stay of
execution was granted, and the following order was entered by the Appellate Court on
December 6, 1996, "Ordered that the Motion for Review is Granted but the relief
sought therein is denied." The Appellate Court also decided the December 5, 1996
Emergency Motion of Dow Jones and Companies for a stay to be issued by the Appellate
Court. This motion was denied by the Appellate Court on December 6, 1996. In the interim
General Electric Company sought to intervene in the matters before the Appellate Court. It
withdrew its Motion to Intervene on December 6, 1996. Dow Jones and Companies' application
to the Supreme Court for Review of the two Appellate Court decisions was denied. The trial
continued throughout these appellate reviews.
No testimonial or documentary "insider" information was
offered at trial This court has no knowledge of the status of the appeal dated December 5,
1996 taken by Dow Jones and Companies. In any event since there is no stay in effect, the
appeal does not prevent the rendering of a judgment in this matter.
The issue of courtroom closure in a family matter is a matter of first
impression. There are no reported decisions from an appellate court in Connecticut on
General Statutes §§ 46b-11, 46b-49 and /or Practice Book § 211B. There is only one
trial court decision analyzing these authorities. Saundry v. Saundry, 1996 Conn. Super.
LEXIS 1784, Superior Court, judicial district of New Haven at Meriden, Docket No.
253546 (July 15, 1996, Silbert, J.) (17 Conn. L. Rptr. 373) (1996 Ct. Sup. 5204-ZZZ)
(refusal to close court in contested dissolution due to concerns of the disclosure of
financial records of the plaintiff's solo law practice or the defendant's employment as a
Corrections officer due to fear that such a disclosure could result in a threat to the
safety of the minor children). Other courts have used these statutory authorities, but
these reported cases furnish no analysis:
1. In the Matter of Reisman, Probate Court, judicial district of West
Hartford (December 19, 1995, Berman, J.) (1995 Ct. Sup. 14607). The issue was whether
under General Statutes § 45a-98(a)(6) the Probate Court had the authority to order that
the trust documents and accountings remain confidential. The Probate Court denied the
request stating that "the statutory purpose of § 45a-175 would not be served by
keeping the trust accountings and the trust documents confidential. The settlor's privacy
interest is not sufficient to outweigh the public's interest in openness and accessibility
of probate court files." The decision noted that Practice Book § 211B contained a
similar balancing test. The Probate Court relied on City of Hartford v. Chase, 733 F.
Supp. 533, 535 (D. Conn. 1990), cited in this court's December 4, 1996 Memorandum of
Decision, Wendt v. Wendt, supra, Superior Court, Docket No. 149562 (1996 Ct. Sup.
2. Denning v. Denning, 1994 Conn. Super. LEXIS 1144, Superior
Court, judicial district of New London at Norwich, Docket No. 101918 (May 6, 1994, Teller,
J.) (1994 Ct. Sup. 4962). In a contested dissolution, without stating reasons or legal
analysis, the court entered the following order: "Pursuant to General Statutes §
46b-11, pages 4 through 7, inclusive, of this memorandum shall be kept confidential and
not open to public inspection except upon order of the court." The decision is
reported but it is not clear whether pages 4 through 7 are included in the public
document. A portion of the reported decision discusses the following: "the parties
were destructive of each other, themselves and, as a consequence, their marriage. They
abused alcohol and drugs regularly. As a result of the plaintiff's heavy drug use and his
hospitalization, the wife commenced a dissolution in 1988, which was ultimately not
pursued." There were minor children. Visitation was at issue and counsel for the
minor children participated in the trial. Events regarding the welfare of the oldest
daughter occurring at a motorcycle rally figured prominently in the trial court's
3. Hughes v. Hughes, 1990 Conn. Super. LEXIS 722, Superior
Court, judicial district of New Haven at New Haven, Docket No. 268305 (July 30, 1990,
Reynolds, STR) (1990 Ct. Sup. 333). This case involved a contested dissolution in which a
Motion to Keep Records Confidential under General Statutes § 46b-11 was granted by the
trial court without factual findings or statutory analysis. The decision, which is public,
is extensive and details many of the facts found by the court. The two children, 14 and
16, lived with the mother and were found to have a stable relationship with their father.
Therefore, there appeared to be no major issue regarding the children. The court cannot
glean from the 13 page reported decision the rationale for ordering the "Records to
be kept confidential."
4. Gennarini v. Gennarini, 2 Conn. App. 132, 139, 477 A.2d 674
(1984). This case considered the possible use of General Statutes § 46b-11, § 46b-49
and/or Practice Book § 478 (now Practice Book § 1261) to minimize the impact on a child
witness by requiring the child's testimony to be heard in chambers or in a closed
In criminal cases the rule has been applied more frequently, and thus,
guidelines are clearer. State v. McCloud, 36 Conn. Supp. 352, 354, 422 A.2d 327 (1980).
(In a criminal trial public was excluded and file and transcripts sealed after attorney
and guardian ad litem for two minors represented that they would not testify unless the
public was excluded. A newspaper moved to vacate the order. The motion was denied on the
basis that the minors' testimony would be of details that were "violent, lurid,
revolting and embarrassing." Trial court cited Practice Book § 895 as authority for
The court may, under certain circumstances, close the trial to the
public, but the public's objection is entitled to a meaningful hearing. Practice Book,
1978, § 895 provides for the exclusion of the public when there is a substantial
likelihood that its presence would unduly inhibit any testimony. The Connecticut Supreme
Court has sustained the trial court's exclusion of the general public when lurid details
of a crime must be related by the victims; State v. Purvis, 157 Conn. 198, 207, 251
A.2d 178; State v. Gionfriddo, 154 Conn. 90, 93, 221 A.2d 851; and Connecticut
is not alone. Exclusion has been upheld in cases involving violent crimes against minors; Geise
v. United States, 262 F.2d 151 (9th Cir.); where child testified concerning revolting
facts; Beauchamp v. Cahill, 297 Ky. 505, 180 S.W.2d 423; where embarrassment could
prevent testimony; State v. Callahan, 100 Minn. 63, 110 N.W. 342; during the
testimony of a ten-year-old rape victim; Hogan v. State, 191 Ark. 437, 86 S.W.2d 931;
and where evidence is obscene. State v.
Croak, 167 La. 92, 118 So. 703. These were done over the
objection of the defendants who were entitled to a public trial.
State v. McCloud, supra, 36 Conn. Supp. 353.
There is no appellate court decision on Practice Book § 211B, but its
companion criminal rule, Practice Book § 895, has been discussed on appeal.
"Practice Book § 895 provides that, in general, a judicial authority shall not order
closure but may if it concludes that such order is necessary to preserve an interest that
is determined to override the public's interest in attending court. The order shall be no
broader than necessary and the judicial authority shall articulate the overriding interest
being protected and shall specify its finding." State v. Kelly, 45 Conn. App. 142,
144-45 n. 8, 695 A.2d 1 (1997).
The issue in State v. Kelly concerned pretrial hearings addressing a
November 15, 1996 Hartford Courant newspaper article in which uncharged allegations of
sexual assault against the defendant were reported. The defendant moved to dismiss the
current kidnapping and sexual assault charges on the basis of prejudicial pretrial
publicity. This court was the trial judge. Jury selection was imminent. The case had and
was receiving massive publicity. All were concerned with being able to select a jury. This
court had already ordered that uncharged misconduct of other sexual assault allegations
were not admissible in the state's case-in-chief. The court was concerned that further
dissemination of this six month old news article published 80 miles from the trial site
would regenerate substantial local media coverage. That fact could possibly affect the
ability of a jury to be selected. This court, therefore, closed the court for the limited
purpose of hearing evidence on the portion of the Motion to Dismiss relating to the
November 15, 1996 Hartford Courant article. The Hartford Courant and other media appealed.
The Appellate Court reversed and vacated the closure order. The Motion to Dismiss was then
heard in open court and denied by the trial court.
The necessity for closure, given the tenuous connection between what
might be elicited at a hearing on the defendant's motion to dismiss and the ability to
obtain an impartial jury in Stamford, is especially questionable in light of the extensive
prior publicity concerning the defendant and the charges against him, including the
extensive publicity about the Hartford Courant article
itself. The trial court summed up the prior dissemination of the
Hartford Courant article by stating that the 'cat is out of the bag.'
State v. Kelly, supra, 45 Conn. App. 148.
This court, notwithstanding its actions in Wendt v. Wendt and State v.
Kelly, strictly applies the rules and routinely denies Motions to Seal Files and Motions
to Close Proceedings.It has and will continue to deny closure and sealing motions in the
following type of family cases: (1) contested custody and visitation, (2) agreement by all
parties and counsel, (3) parties who are attorneys, (4) public officials, (5) celebrities,
(6) false financial affidavits by parties, and (7) IRS problems or events that may have an
adverse IRS impact. This court has sealed files in the following types of cases: (1) child
custody and/or visitation when child abuse has been alleged for fear a child who later
attains majority will have access to the parents' file, and (2) elected officials whose
financial disclosure may prevent them from having adequate time to perform their public
The closing of courts and sealing of files should be limited given the
guidelines of Practice Book §§ 211B and 895. General Statutes § 46b-11 is over 30 years
old. General Statutes § 46b-49 appears to have been passed by the General Assembly in
1973. In 1978, the judges of the Superior Court adopted Practice Book § 478 regarding
closing the court in family cases in response to General Statutes § 46b-49. In the same
year, Practice Book § 895, concerning closing criminal courts was adopted.Effective
October 1, 1997 Practice Book § 478 was redesignated Practice Book § 1261 which now
requires court closure comparable to Practice Book § 211B. Practice Book § 211B requires
a 72 hour automatic stay. General Statutes § 46b-11 and § 46b-49 do not require such a
stay. Practice Book § 211 was a new rule, adopted October, 1995. Practice Book § 211 was
not referenced in State v. Kelly since Practice Book § 895 has no automatic 72 hour stay
provision. Practice Book § 211B applies only to civil cases including "family
matters." Practice Book § 1200.
This court concludes that there can not, nor should there be, a bright
line rule for the closing of proceedings or sealing of files in a family matter. Cox
Broadcasting Corp. v. Cohn, 420 U.S. 469, 496, 95 S. Ct. 1029, 43 L. Ed. 2d 328 (1975).
It is a balancing test to be performed by a trial judge given the right of public access
to trials. The few cases reported in this area may be helpful in the future to trial
courts, litigants and those interested in public access.
The evidence presented indicates that the marriage has broken down
irretrievably, and, therefore, judgment may enter dissolving the marriage on those
The court has carefully considered the following in reaching the
decision reflected in the orders that follow: Connecticut General Statutes §§ 46b-62,
46b-81 and 46b-82, O'Neill v. O'Neill, 13 Conn. App. 300, 536 A.2d 978 (1988) the
testimony of the witnesses, the exhibits filed, claims of law, relevant case law and Scherr
v. Scherr, 183 Conn. 366, 368, 439 A.2d 375 (1981).
The following orders may enter:
1. The defendant will transfer to the plaintiff all his right, title
and interest in and to the marital residence at 328 Erskine Road, Stamford, Connecticut
and the adjoining lots, described on his financial affidavit as Lot # 3 and Lot # 6, free
and clear of all encumbrances, mortgages and liens. The plaintiff is to have the exclusive
possession thereof effective on the date of the decree. The existing $1,000,000 first
mortgage will be paid off by the defendant within 30 days from the date of this decision.
Written proof of said payment made by the defendant to the first mortgagee along with a
release of the first mortgage in recordable form will be furnished to the plaintiff
immediately. Real estate taxes for the period ending December 31, 1997 and homeowner's
insurance and utilities, if not yet paid by the parties, will be paid through and
including December 31, 1997 by the defendant, and he shall provide proof of payment to the
plaintiff. Thereafter, the plaintiff will pay for all expenses whatsoever regarding the
real property and hold the defendant harmless therefrom.
2. The defendant will transfer to the plaintiff all his right, title
and interest in and to the real property located at 48 Spadefish Lane, Key Largo, Florida.
Thereafter, the plaintiff will pay for all expenses whatsoever regarding the real property
and hold the defendant harmless therefrom. All rents and security deposits, if any, shall
be assigned and paid to the plaintiff thereafter.
3. The defendant shall pay to the plaintiff as periodic alimony the sum
of $252,000 per year payable in equal monthly installments of $21,000.00 on the first day
of each month. Said periodic alimony is to terminate upon the occurrence of the first of
the following events: the death of the plaintiff, the plaintiff's remarriage or a court
finding under General Statutes § 46b-86(b) as amended. The alimony is otherwise
nonmodifiable as to amount, term and conditions.The first payment shall be due on December
3, 1997 prorated to the first day of the following calendar month.
4. The defendant shall retain as his own property, free and clear of
any claim by the plaintiff, the following real property whether held in his name or
jointly (Defendant's financial affidavit dated November 24, 1996): (1) two lots in
Homosassa, Florida (Aie); (2) land and buildings at 39 Wilshire Road, Greenwich,
Connecticut (Aiib); (3) unit 2G, Soundview Towers, Stamford, CT (Aif); and (4) mortgage
note and deed at Unit 11 J, Hayes House, Stamford, Connecticut (Aig).
5. The parties shall divide equally all of the currently available
cash, stocks, bonds and mutual fund assets of the parties regardless of the registered
title, valued as of the date of this decision, including, but not limited, to the
1. Fleet Bank Galaxy (plaintiff)
2. Fleet Bank checking (joint)
3. Fleet Bank checking (plaintiff)
4. Fleet Bank MMA (plaintiff)
5. Fleet Bank Savings (joint)
6. Paine Webber Tax Exempt MMA (joint)
7. General Electric Elfun MMA (joint)
8. Paine Webber portfolio (joint)
9. Elfun Global Fund (joint)
10. Elfun Tax Exempt Fund (joint)
11. Fleet Brokerage portfolio (joint)
12. Elfun Tax Exempt Fund (joint)
13. General Electric Savings & Security
Program Mutual Fund (joint)
14. Paine Webber portfolio (defendant)
15. General Electric Interest plus (defendant)
16. U.S. Series E Bonds (defendant)
17. Elfun Trusts (joint)
18. Elfun Tax Exempt Fund # 1 (defendant)
19. Elfun Tax Exempt Fund # 2 (defendant)
In addition to those specific assets the following amounts will be
added back in for equal division purposes: (a) the funds used to purchase the real
property at 39 Wilshire Road, Greenwich, Connecticut not including the $180,000 down
payment; (b) attorney fees, expert fees and costs of litigation paid by each party on and
after January 1, 1997; and (c) any expenditure not in the usual course of business or for
customary and usual household expenses from said cash, stocks, bonds and mutual fund
assets of the parties including transfers to other investment vehicles. Once these sums
are added back, the total will be divided equally between the parties with each party to
be given distribution credit for the amounts set forth in sections (a), (b) and (c) of
this paragraph. The court will retain continuing jurisdiction over the valuation,existence
and/or division of said assets. General Statutes § 46b-4.
6. The plaintiff is awarded, as her own separate property free and
clear of all claims by the defendant, all fixtures, furniture, furnishings, decorations,
bric-a-brac and items of tangible personal property located at 328 Erskine Road, Stamford,
Connecticut and 48 Spadefish Lane, Key Largo, Florida. The defendant shall receive from
the 328 Erskine Road house, his personal and business papers as well as his golf clubs and
related golf equipment.
7. The defendant is awarded, as his own separate property free and
clear of all claims by the plaintiff, all fixtures, furniture, furnishings, decorations,
bric-a-brac and items of tangible personal property located at 39 Wilshire Road,
8. There are two items of personality that are not subject to orders #
6 and # 7. (a) a painting entitled "Maria Callas" by Daniel Authquart located in
the foyer of 328 Erskine Road and (b) a Turkish carpet hanging in the family room at 328
Erskine Road. Neither party offered testimony as to those items, but both did submit post
trial affidavits. The court enters the following orders as to the two items of personal
property: one party, chosen by lot, will select one item and that item shall become his or
her own personal property, free and clear of any claim by the nonselecting party. The item
not selected shall become the property of the nonselecting party, free and clear of any
claim of the selecting party. The fair market value of the two items will be equalized and
offset by a cash payment. The market value shall be determined by an appraiser selected by
mutual agreement of the parties. If no one appraisal can be agreed upon, each party shall
select one appraiser, and the two appraisers will select a third appraiser. The median
appraisal will be the market value. All appraisals, whether sole appraisal or median
appraisal, will be binding. The cost of all appraisals shall be paid by the parties
equally. The above orders will remain the orders of this court, notwithstanding the fact
that the court did not hear testimony concerning the two items of personal property. In
the event neither party files a written motion within 20 days from the date of this
decision (which date shall not be extended under any circumstances) to hear additional
evidence pursuant to General Statutes § 46b-4 andRoss v. Ross, 172 Conn. 269, 273, 374
A.2d 185 (1977), the above orders will be the final orders of this court.
9. The plaintiff shall be awarded all the right, title and interest in
and to the membership and privileges of the Ocean Reef Club, Key Largo, Florida and the
Stanwich Club, Greenwich, Connecticut. In the event that the bylaws and rules and
regulations of the Stanwich Club so permit and do not conflict with the award to the
plaintiff of the Stanwich Club membership, the court grants permission for the defendant
to retain and/or apply for membership in the Stanwich Club. The plaintiff shall support
and endorse all such application efforts by the defendant. The defendant shall pay all
dues, fees and assessments of the Stanwich Club membership up to and including December 3,
1997. The plaintiff shall pay all unpaid personal charges incurred by her and her guests
at any time and all dues, fees and assessments of the Stanwich Club membership after
December 3, 1997. If an initiation, application and/or bond fee is to be paid to the
Stanwich Club, each party is to pay his or her own fees.
The above orders will remain the orders of this court, notwithstanding
the fact that the court did not hear testimony concerning the Stanwich Club. In the event
neither party files a written motion within 20 days from the date of this decision (which
date shall not be extended under any circumstances) to hear additional evidence pursuant
to General Statutes § 46b-4 and Ross v. Ross, 172 Conn. 269, 273, 374 A.2d 185 (1977),
the above orders will be the final orders of this court.
10. The defendant shall be awarded all the right, title and interest in
and to the membership and privileges of the Nantucket Golf Club.
11. Each party shall pay his or her own counsel fees, expert fees,
witness fees and costs of litigation.
12. Any hold harmless order contained in these orders shall include the
right by the other party to collect attorney's fees incurred in defending the claim and/or
in prosecuting any efforts to enforce said hold harmless agreement.
13. The defendant shall pay for and hold the plaintiff harmless from
any and all claims, liabilities, obligations, demands, deficiencies, assessments,
penalties and interest arising out of any joint federal or state income tax returns filed
by the parties. The defendant will provide to the plaintiff all documents and information,
in form and content satisfactory to the plaintiff's tax advisor, necessary for the
plaintiff to file tax returns in the future. All prior joint tax returns and the documents
and information supporting said returns shall be shared by the parties upon written
demand. All refunds and credits shall become the defendant's sole and exclusive property.
14. Although not an asset of the parties, both parties are co-trustees
of the Wendt Family Foundation. Exhibit 88. As of December 31, 1995 the assets of the
Foundation were $832,733. Exhibit 63, Tab 11, Page 40. The assets of the Foundation will
be divided in half. A separate new Foundation will be created with each half to be used
for the same uses and purposes as the existing Wendt Family Foundation. Each new
Foundation will be separate and apart from the other. Each party will tender their written
resignation as trustee of the existing Wendt Family Foundation. Each party will select the
trustee or trustees of one new Foundation only. The costs incurred by both parties in
establishing or dividing said existing Wendt Family Foundation and/or creating these new
Foundations shall be shared equally by the parties themselves,not the Foundation or
successor Foundations. If this division, resignation and/or selection process causes
adverse tax consequences, impacts the tax free status, or affects the corporate viability
of the existing Wendt Family Foundation or the new Foundations, this court will retain
continuing jurisdiction to fashion some other order in regard to the division and
management of the Wendt Family Foundation. That future order may include but may not be
limited to the appointment of three trustees of the existing Wendt Family Foundation, the
plaintiff and defendant each choosing one co-trustee and a third co-trustee chosen by the
two named co-trustees. The vote of two co-trustees would be necessary to make any decision
in the existing Wendt Family Foundation.
15. The parties currently hold assets in revocable trusts for the two
children. They are not listed in the parties' financial affidavits or the parties'
financial statements. The parties agree that these assets belong to the respective
children. The parties are ordered to relinquish their trusteeships and to either appoint a
new trustee or convey the assets to the children directly. The assets of the various
revocable trusts as of December 31, 1996 are shown in Exhibit 127.
16. The General Electric Qualified Pension Plan, currently vested, will
be divided by the parties equally. The plaintiff's fifty percent interest in the General
Electric Qualified Pension Plan will be secured by a Qualified Domestic Relations Order.
Until the QDRO is issued in compliance with this order, the defendant
is ordered to retain the plaintiff as the surviving spouse on the GE Qualified Pension
Plan for all death benefits accrued/earned during the marriage, and eligible for any
payments afforded a surviving spouse per the terms of said plan. The plaintiff shall have
the right to all notices and information given to the participant with respect to the
plan, including, but not limited to the annual benefit statement, plan documents and
related summary plan descriptions. The defendant shall not remove any prior employee plan
contributions or take out any loans from any plans without the prior written consent of
All QDROs in regard to this pension plan shall be executed within sixty
(60) days of the date of this decree. Exhibit 106, Page 4.
Defendant is to furnish written authorization to appropriate General
Electric Corporation (GE) Personnel and Human Resources Departments for the release of any
and all pertinent pension and related data on an annual basis to the plaintiff and her
designated advisors in order to review the status and accuracy of potential benefits to be
paid to the plaintiff. Said authorization shall request that GE release said information
in writing within 30 days of the request. Exhibit 106, Page 3.
17. The defendant is awarded all the right, title and interest in and
to the General Electric Supplementary Pension Plan (nonqualified plan) including whatever
"retirement allowance" payment that may be paid to the defendant by General
Electric Corporation. Said Supplementary Pension Plan is payable to a GE executive who has
worked for five years immediately prior to his retirement or 60th birthday, whichever
first occurs. No vesting accrues or service credit accrues for any employment by GE prior
to that five year period. The defendant's date of birth is March 13, 1942. Exhibit 63, Tab
4, Page 8. As of the last day of trial in February, 1997 the defendant was 54. He has a
projected retirement age of 65. Therefore, all GE employment services to be rendered by
the defendant in order to become eligible for said GE Supplementary Pension Plan would be
post-separation. At five years after the December 1, 1995 separation, the defendant will
be 58. In the event the defendant retires, dies or otherwise is entitled to receive any
benefits or payment from the General Electric Supplementary Pension Plan prior to December
1, 2000 including whatever "retirement allowance" payment on said Supplementary
Pension Plan the defendant may be entitled to or any death benefits, the plaintiff is
awarded one-half of a "coverture factor" of that payment received by the
defendant or any death benefits if the defendant dies prior to December 1, 2000. The
coverture factor will be determined by a fraction, the denominator of which shall be 60
months, and the numerator shall be the number of months from the date of first payment to
December 1, 2000 (five years from the December 1, 1995 separation). For example, if the
defendant went into pay status on December 1, 1998 on his Supplementary Pension Plan
augmented by a GE "retirement allowance" receiving $50,000 per month, the
numerator would be 24 months from December 1, 1998 to December 1, 2000 over the
denominator of 60 months. The fraction would be 24/60th or 40%, and the plaintiff would be
entitled to receive one-half of that 40% of the $50,000 monthly benefit, i.e. $10,000 per
month paid to the plaintiff each month effective December 1, 1998.
In the event said GE Supplementary Pension Plan is not subject to a
QDRO or Domestic Relations Order (DRO), the plaintiff's portion of said plan, as ordered,
shall be paid directly to her by GE. In the event said payment cannot be made directly to
her by GE, the defendant and/or his estate shall make said payments directly to the
plaintiff in the amount, dates and manner that the plaintiff would have received it if
made directly by GE. This is a property distribution order, and said payments are neither
periodic alimony nor payments in the nature of periodic alimony.
18. The defendant holds 199,000 shares of restricted stock in General
Electric Corporation that were granted to him at various dates. The restrictions will not
start to lapse until June, 1998. Exhibit 70, Note 13. The 199,000 shares of restricted
stock pay a "dividend equivalent" equal to the current dividend paid by GE on
its common stock. Exhibit 63, Tab 14, Page 2 discloses these dividend equivalents to be
$396,000/year. The plaintiff is awarded one-half of the "dividend equivalent"
and/or dividends on the entire 199,000 shares of GE restricted stock to be paid if and
when received by the defendant. The defendant is awarded the remaining one-half of the
"dividend equivalent" and/or dividends as well as the 199,000 shares of GE
restricted stock. This obligation of the defendant and/or his estate will end on the
plaintiff's death. This payment cannot otherwise be modified, terminated or suspended. In
the event the defendant sells said shares the defendant shall pay to the plaintiff
periodic alimony in the amount equivalent to said dividends and/or dividend equivalents
terminating only upon the plaintiff's death. In the event GE issues new stock or splits
its stock, the 199,000 shares will be proportionately increased and so will the periodic
alimony payments and/or "dividend equivalent" payments and/or dividends.
19. The plaintiff is awarded one-half of 17/30th (i.e. 17/60th to
plaintiff, 43/60th to defendant) of the $6,650,000 deferred portion of the defendant's
General Electric Long Term Performance Award ("special bonus") to be paid out by
GE, upon the defendant's retirement, over a twenty year period. Exhibit 70, Note 14;
Exhibit 63, Tab 11, Page 11 and Page 14; Exhibit 73. The plaintiff shall receive said
payments "if, as and when" said payments are made to the defendant and/or the
defendant's estate. The defendant shall not deduct the medicare tax he has paid, and each
party will pay for and hold the other party harmless from all other taxes that may be due
on his or her share. This is an award of property and not periodic alimony, and, thus, is
not subject to divestment or modification. It is binding on the defendant and his estate.
The 17/30th represents the number of months from the inception of the plan, July 1, 1994,
to the completion of the plan, December 31, 1996, divided by the number of months from the
inception of the plan to the parties' December 1, 1995 separation. Said payment shall be
made to the plaintiff together with all interest, dividends, dividend equivalents,
accumulated dividends, stock, stock splits, earnings and increases in the valuation from
January 1, 1997, the effective date of the twenty year election made by the defendant. If
necessary, said transfer shall be secured by a QDRO or DRO.
20. The defendant shall be awarded all the right, title and interest in
the General Electric Savings and Security Program (401K plan), free and clear of any claim
by the plaintiff. Exhibit 70, Note 8.
21. The defendant shall be awarded all the right, title and interest in
the General Electric Deferred Incentive Compensation Plan, free and clear of any claim by
the plaintiff. Exhibit 70, Note 9.
22. The defendant shall be awarded all the right, title and interest in
the General Electric Executive Deferred Salary Plan, free and clear of any claim by the
plaintiff. Exhibit 70, Note 10.
23. The defendant shall pay to the plaintiff the sum of $2,000,000 as
property distribution to be paid by January 6, 1998.
24. According to the December 31, 1996 unaudited financial statement
prepared by KPMG Peat Marwick, LLP, Exhibit 70, the defendant owns 175,000 shares of
General Electric Vested Stock Options and Appreciation Rights in the following amounts:
100,000 units granted 11/20/92 with a $40.00 per share exercise price, 70,000 units
granted 9/10/93 with an exercise price of $48.3125 and 5,000 units granted 6/24/94 with an
exercise price of $46.25. Exhibit 70, Note 11. That unaudited financial statement used the
"intrinsic value" method, with a December 31, 1996 NYSE price of GE common stock
at $98 7/8 per share. On May 12, 1997 GE common stock split 2 for 1 and, thus, the number
of options have doubled to conform to this stock split. As of the date of separation,
December 1, 1995, GE was trading at $72.00 per share. As of October 7, 1997 GE was trading
at $72.00 per share in its split status or $144.00 per share at the pre May 12, 1997 stock
split number of stock options. Based on the facts found, this court will divide the
175,000 vested stock options and appreciation rights based as of the date of separation,
December 1, 1995. The "intrinsic value" of the 175,000 stock options as of
December 1, 1995 was $3,200,000 for the 11/20/92 grant, $1,658,125 for the 9/10/93 grant
and $128,750 for the 6/24/94 grant for a total "intrinsic value" of $4,986,875.
This amount is before taxes. The vested stock options have no cash
value until exercised and when exercised the tax is due at short term capital gains tax
rates, i.e., ordinary income tax rates. Assuming current maximum rates for IRS, Medicare
and Connecticut taxes, the net after tax of $4,986,875 "intrinsic value" would
be $2,804,219. One half of said sum ought to be distributed to the plaintiff. The
defendant shall pay that sum in cash and not in any portion of the options. The doubling
of GE stock since the date of separation is not due to the plaintiff's efforts, but she
should share in the general increase in the investment community.
Therefore, the defendant shall pay to the plaintiff the sum of
$1,700,000 as property. The defendant is awarded all the right, title and interest in the
175,000 General Electric Vested Stock Options and Appreciation Rights, free and clear of
all claims by the plaintiff.
25. The defendant holds 420,000 stock options and appreciation rights
in General Electric common stock which were unvested as of the last date of trial in
February, 1997. Exhibit 70, Note 12. Although one portion of a grant vested on September
16, 1997, after trial and prior to the date of this decision, this court will treat all
420,000 stock options as unvested. This court has already concluded that a portion of
these unvested stock options is marital property. The court has also concluded that the
unvested stock options were granted for future services so a coverture factor must be
established. Based on the facts found, the level of the contributions made by the
plaintiff as corporate wife and the lack of such evidence of those contributions after the
date of separation, December 1, 1995, the court will use a "coverture factor."
The coverture factor will be determined by a fraction, the denominator of which shall be
the number of months from the date of grant to the date of vesting and are not subject to
divestment, and the numerator will be the number of months from the date of grant to
December 1, 1995. This fraction will be multiplied by the number of shares to be vested at
that date of vesting. The price of GE common stock on the date of separation will be used,
i.e., $72.00 per share, to calculate an "intrinsic value." The unaudited
financial statement as of December 31, 1996, established the date of grant, date of
vesting, the exercise price and number of options vesting as of the date of vesting.
Exhibit 70, Note 12. In re Marriage of Nelson, 177 Cal. App. 3d 150, 155, 222 Cal.
Rptr. 790, 793 (1986); In re Marriage of Harrison, 179 Cal. App. 3d 1216, 225 Cal.
Rptr. 234, 237 n. 1 (1986); In re Marriage of Miller, 915 P.2d 1314, 1319 (Colo.
1996); DeJesus v. DeJesus, 90 N.Y.2d 643, 665 N.Y.S.2d 36, 687 N.E.2d 1319 (1997);
Majauskas v. Majauskas, 61 N.Y.2d 481, 463 N.E.2d 15, 22, 474 N.Y.S.2d 699 (N.Y. 1984).
There are eight separate dates of vesting so eight separate coverture
factors have to be calculated:
1. 70,000 units granted 9/10/93 vesting 9/10/98
date of grant 9/10/93 to 12/1/95 = 26.7 = 44.5%
date of grant 9/10/93 to 9/10/98 60
70,000 x 44.5% = 31,150 units to be divided.
$72-$48.3125 exercise price = $23.6875 intrinsic value per share x
31,150 units = $737,866
2. 5,000 units granted 6/24/94 vesting on 9/24/98
6/24/94 to 12/1/95 = 17.233 = 44.19%
6/24/94 to 9/24/9839
5,000 x 44.19% = 2210 units to be divided
$72-$46.25 exercise price = $25.75 x 2210 units = $56,908
3. 57,500 units granted 9/16/94 vesting 9/16/97
9/16/94 to 12/1/95 = 14.5 = 40.277%
9/16/94 to 9/16/97 = 36
57,500 x 40.28% = 23,161 units to be divided
$72-$51.00 exercise price = $21.00 x 23,161 = $486,381
4. 57,500 units 9/16/94 vesting 9/16/99
9/16/94 to 12/1/95 = 14.5 = 24.166%
9/16/94 to 9/16/99 = 60
57,500 x 24.17% = 13,898 units to be divided
$72-$51.00 exercise price = $21.00 x 13,898 units = $291,858
5. 57,500 units granted 9/15/95 vesting 9/15/98
9/15/95 to 12/1/95 = 2.566 = 7.12%
9/15/95 to 9/15/98 =36
57,500 x 7.12% = 4094 units to be divided
$72-$63.8750 exercise price = $8.125 x 4094 = $33,264
6. 57,500 units granted 9/15/95 vesting 9/15/2000
9/15/95 to 12/1/95 = 2.566 = 4.28%
9/15/95 to 9/15/00 =60
57,500 x 4.28% = 2461 units to be divided
$72-$63.8750 exercise price = $8.125 x 2461 = $19,996
7. 57,500 units granted 9/13/96 vesting 9/13/99
9/13/96 to 12/1/95 = 0 = 0%
9/13/96 to 9/13/99 = 36
57,500 x 0% = 0 units to be divided
$72-$88.375 exercise price = 0
8. 57,500 units granted 9/13/96 vesting 9/13/2001
9/13/96 to 12/1/95 = 0 = 0%
9/13/96 to 9/13/01 = 60
57,500 x 0% = 0 units to be divided
$72-$88.375 exercise price = 0
Total "intrinsic values" after application of coverture
Theseunvested stock options have certain risks attached to them:
(1)the defendant will not be employed by GE as of the date of vesting and thus the options
will have no value; (2) the defendant will not be employed by GE as of the date of vesting
and he has not been offered a "separation package" by GE which includes vesting
of some portion of the options and thus the options will have no value; (3) scenario # 2
occurs, the defendant is offered vesting only in GE stock in which the coverture factor is
zero; (4) scenario # 2 occurs, GE offers no "separation package" and the
defendant is offered a substantial signing bonus by his new employer, in effect rendering
the GE options valueless yet the defendant still would receive substantial equivalent
value from his new employer; (5) GE amends, suspends, alters, modifies or terminates the
stock option plan either individually or company wide; and (6) GE common stock falls to a
level below the pre-May 12, 1997 stock split price of $72.00/share. Although the plaintiff
in her claims for relief wished to accept these risks, this court feels otherwise.
"Long term and deferred sharing of financial interests are obviously too susceptible
to continued strife and hostility, circumstances which our courts traditionally strive to
avoid to the greatest extent possible." (Internal quotation marks omitted.) Krafick
v. Krafick, supra, 234 Conn. at 802. The defendant is better able to bear "the
entire risk of forfeiture before maturity." Id. There are sufficient "other
assets by which to offset the value" of the unvested stock options. Id.
The court is not satisfied that any of the methods of evaluating
unvested stock options testified to by the plaintiff's expert are appropriate. The court
therefore cannot place an exact value on the unvested stock options either at the date of
separation or at any other time. It can use the "intrinsic value" to obtain an
approximate value. Using the "intrinsic value" method for all 420,000 shares of
GE unvested stock options, the plaintiff's expert arrived at a figure using the then GE
common stock price of $102.75 per share. Exhibit 99; Exhibit G. The same expert using the
Black-Scholes model obtained a value ten percent lower than the above "intrinsic
value." Exhibit 99, Page 18. The "intrinsic value" method produced a higher
result; a benefit to the plaintiff if the "intrinsic value" method is used.
Therefore, this court feels that the use of the "intrinsic value" method is
appropriate under the facts and circumstances of this case.
The $1,626,273 value is the "intrinsic value" of the 420,000
GE unvested stock options which are to be divided between the parties after application of
the coverture factor. It used the date of separation value of $72.00/share. This amount is
before taxes. Assuming current maximum rates for IRS, Medicare and Connecticut taxes, the
net after taxes of $1,626,273 "intrinsic value" would be $914,486. One half of
said sum ought to be distributed to the plaintiff. The defendant shall pay that sum in
cash and not in any portion of the options. The doubling of GE stock since the date of
separation is not due to the plaintiff's efforts, but she should share in the general
increase in the investment community.
Therefore, the defendant shall pay to the plaintiff the sum of
$1,107,000 as property. The defendant is awarded all the right, title and interest in the
420,000 General Electric Unvested Stock Options and Appreciation Rights, free and clear of
all claims by the plaintiff.
26. The defendant shall retain all voting and property rights, if any,
in any vested stock options, unvested stock options or restricted stock units. The
defendant shall not pledge, assign, lien, encumber or otherwise transfer said options and
units until the defendant has complied in full with the orders set forth as to each
resource. Once the orders as to said resource are complied with, the remainder of the
resource will be owned by the defendant free and clear of any court restrictions or claims
and demands made by the plaintiff.
27. The defendant shall be entitled to retain the $20,888 cash
surrender value of the GE supplemental life insurance, its death benefit of $196,507, as
well as all ownership rights, including the right to designate the beneficiary. Exhibit
70, Note 15.
28. The plaintiff shall have all rights permitted to her under any
state or federal law for converting existing health insurance from a group plan to her
separate coverage including, but not limited to the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability and Accountability
Act of 1996 (HIPAA). The defendant shall cooperate and sign all documents necessary to
allow the plaintiff to obtain such health insurance coverage for herself. The plaintiff
shall pay all costs and premiums for the maintenance of said health insurance coverage.
29. The plaintiff shall be entitled to retain and use, separate and
apart from the defendant, the Macy's credit card, including the All President's Club
benefit and the 45% lifetime discount for her lifetime to the extent authorized by Macy's
and the All President's Club program. The defendant shall sign all necessary documents to
put this order into effect. This is property distribution and is not in the nature of
30. All payments made by the defendant to and for the benefit of the
plaintiff, directly or indirectly, during the pendency of this matter until the date of
the decision shall not be taxable to the plaintiff nor deductible to the defendant as
31. An issue arose during trial concerning certain group life insurance
policies in the estimated face amount of $13,000,000 insuring the defendant's life with
premiums being paid for the most part, by GE as an employee benefit; the policies were
owned by a January 22, 1993 irrevocable life insurance trust. The issue was, whether the
court could order a change in these policies, and if not, could the court order the
defendant to obtain new life insurance policies at his own cost and expense. The legal
status regarding the irrevocable life insurance trust was not fully presented at trial.
The parties attempted to deal with that issue by filing a post trial stipulation on April
Despite that stipulation the court will not: (1) order the defendant to
obtain additional life insurance coverage since the plaintiff has sufficient assets and
sufficient security concerning the periodic payments ordered by this court due to the
extent of the defendant's assets; or (2) modify, change or make any orders as to the
irrevocable life insurance trust dated January 22, 1993 because of the adverse estate tax
consequences, the effect of such modification on the heirs of the parties, the heirs were
not joined as parties in this case, the heirs were not represented by counsel in this
matter, and both parties agreed in writing in 1993 to establish such an irrevocable
transfer of the insurance policies. Thus, the plaintiff will remain as trustee under said
trust agreement, and neither party is permitted to take any action that would adversely
affect said trust or the life insurance policies owned by said trust.
The above orders will remain the orders, notwithstanding the fact that
the court did not hear testimony concerning the January 22, 1993 Irrevocable Life
Insurance Trust. In the event neither party files a written motion within 20 days from the
date of this decision (which date shall not be extended under any circumstances) to hear
additional evidence pursuant to General Statutes § 46b-4 and Ross v. Ross, 172 Conn.
269, 273, 374 A.2d 185 (1977), the above orders will be the final orders of this
32. The IRAs that are presently listed in the names of the plaintiff
and the defendant will become his or her own separate property free and clear of any and
all claims by the other party.
33. The parties have been ordered to divide equally the joint checking
accounts pursuant to paragraph 5 hereof. All checks that have been written prior to
December 3, 1997, shall be paid and cleared from that account. The parties shall then
equally divide the checking account.
34. The parties lease their automobiles. The automobile leases do not
appear in the defendant's financial affidavit as an asset,liability or expense. The
automobiles do not appear in the plaintiff's financial affidavit as an asset or liability.
The plaintiff does include two automobiles on the expense section of her financial
affidavit: Jeep $530/month and Jaguar $750/month. Neither party offered any evidence as to
any vehicle, Exhibit 91. The vehicles are not included in the parties' last annual
financial statement. Exhibit 70. A portion of the lease cost paid by GE is taxable income.
Exhibit 91. Neither party referred to any vehicles in their Claims for Relief nor asked
for any court orders in regard to motor vehicles. There was no testimony about motor
vehicles nor did any of the exhibits refer to the motor vehicles. The court concludes that
each party has sufficient liquid assets to be able to purchase or lease and maintain
personal transportation. This court will enter no orders in regard to automobiles.
35. The parties shall execute all Qualified Domestic Relations Orders
(QDRO) and/or Domestic Relations Order (DRO) as may be required, as well as all deeds,
transfers, conveyances, assignments and any other such documents that are necessary to
comply with the orders of this court. This court will retain continuing jurisdiction
concerning the execution, preparation, modification and signature of any of those
documents, including the terms and conditions of any and all QDROs and/or DROs that are
needed to accomplish the purposes of this order.
36. The plaintiff shall pay her portion of any taxes which may be
assessed as a result of: the exercise and/or division of any of these assets to her, the
distribution or division of these assets to her, any accrued income contained in the
assets that have been distributed to her and the percentage that income relates to the
entire principal and accrued income of that asset. The plaintiff shall hold the defendant
37. The defendant shall pay his portion of any taxes which may be
assessed as a result of: the exercise and/or division of any of these assets to him, the
conversion of any stock units, the exercise of any stock options, the distribution or
division of these assets to him, any accrued income contained in the assets that have been
distributed to him and the percentage of that income relating to the entire principal and
accrued income of those assets. The defendant shall hold the plaintiff harmless therefrom.
38. A contingent wage execution shall issue. Both parties are ordered
to sign the appropriate court documents in that regard.
39. The distribution and division of these assets are based upon the
latest numbers furnished to the court at oral argument on February 27, 1997. The court
notes that these numbers have no doubt changed since February 27, 1997. The court must
consider values as of the date of dissolution. Sunbury v. Sunbury, 216 Conn. 673, 676,
583 A.2d 636 (1990). Certain assets were divided as of the value at the date of
separation. This court has covered the subject of the date of valuation in the Memorandum
of Decision including the fact that this is a large and volatile asset case in which the
value of the principal asset, various holdings of GE common stock, has virtually doubled
since the parties' separation. The court believes that no further orders are needed.
Notwithstanding that fact, the court will consider a Motion for Articulation and/or
Reargument regarding any change in the value of the property from February 27, 1997, the
last hearing date, to the date of dissolution. Id., 676-77; Practice Book §§
204A, 204B, 326, 4051 and 4059; General Statutes § 46b-4.
40. The court finds that it is likely that one or both of the parties
will appeal this decision and that issues may be raised as to whether or not said appeal
or appeals automatically operate as a stay of execution pursuant to Practice Book § 4046.
The plaintiff has filed motions pursuant to Practice Book § 4047 seeking post-judgment
relief. These motions were filed prior to judgment. In accordance with the above authority
and Yontef v. Yontef, 185 Conn. 275, 293-94, 440 A.2d 899 (1981) this court enters
the following orders:
A stay of execution shall issue as to all orders set forth in this
decision except as to (1) exclusive possession in paragraph 1, (2) periodic alimony in
paragraph 3, (3) periodic payments of "dividend equivalents" in paragraph 18,
and (4) the dissolution of the marriage. Tessitore v. Tessitore, 31 Conn. App. 40, 46
n. 5, 623 A.2d 496 (1993); Santoro v. Santoro, 33 Conn. App. 839, 840, 639 A.2d
1044 (1994). As to the orders of exclusive possession of the marital home pursuant to
paragraph 1, periodic alimony pursuant to paragraph 3, "dividend equivalents"
pursuant to paragraph 18 and the dissolution of the marriage, there shall be no stay of
execution.Practice Book § 4046. In the event any of these four orders are automatically
stayed pursuant to Practice Book § 4046, this court hereby terminates any stay of
execution as to said four orders subject to the parties' filing a Motion for Review under
Practice Book § 4053. Practice Book § 4049. In addition both parties are bound
immediately to the "automatic orders" set forth in Practice Book §§ 1204 (1),
(2), (7) and (8) until these orders are terminated, modified or amended by further order
of the court upon motion of either of the parties.
41. Counsel for the plaintiff shall prepare at her own expense, the
judgment file, deeds, conveyance documents and any Qualified Domestic Relations Orders
and/or Domestic Relations Orders.
By this court,
KEVIN TIERNEY, JUDGE
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