Dissolution of marriage
Child custody
Child support
Protecting yourself
Dominican Republic
Same-Sex Marriage NEW
Common law marriage
CT family law statutes
About Hilary B. Miller, Esq.
Other family law links
How to contact us
Disclaimer/Privacy

LexisNexis Martindale-Hubbell Peer Review Rated for Ethical Standards and Legal Ability
   
Wendt vs. Wendt

Note: this is the complete text of Judge Kevin Tierney's monumental decision.  It is divided into five sections.  This is Section Five

Go to Section One  Two  Three  Four (previous).

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 intervening circumstance."

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 (1984).

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 the appreciation.

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 (1991).

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 the statute:

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 dissolution decision.

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 alimony.

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 46b-82.

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 relevant.

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 factor."

 

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 antebellum gown.

"'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 Journal.

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 plaintiff's contributions.

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 $5,500,000.

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 $3,500,000.

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 court." Id.

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 ownership.

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" letters.

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 family assets.

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 authorization;

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 insured employee;

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 aspects involved.

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 parties.

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. 6461, 6463).

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 decision.

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 courtroom.

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 closure)

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 duties.

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.

ORDERS

The evidence presented indicates that the marriage has broken down irretrievably, and, therefore, judgment may enter dissolving the marriage on those grounds.

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 following:

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, Greenwich, Connecticut.

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 the plaintiff.

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 factor


1) $737,866

2) $56,908

3) $486,381

4) $291,858

5) $33,264

6) $19,996

7)0

8)0

$1,626,273


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 periodic alimony.

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 periodic alimony.

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 7, 1997.

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 court.

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 harmless therefrom.

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

Return to top of page

Go to Section One  Two  Three  Four (previous).

Return to Connecticut Divorce Home Page