Two Chunks of Cash

Original Twitter?

MacKenzie v. MacKenzie, 2017 VT 111

By Elizabeth Kruska

Editor's Note: Sometimes you go to a doctor to get a second opinion. And sometimes the editors at SCOV Law write summaries about the same opinion so you get to read two versions of the same case. For the other one, click here.

This is kind of a long opinion but is pretty clear in its fundamental discussion of property division in divorce cases.

Christina Forstmann MacKenzie and Doug MacKenzie (not to be confused with Doug McKenzie of Strange Brew, eh?) began a relationship in 2002. Both were married at the time, although not to each other. Each was divorced in 2004, and they started living together. They got married in June 2007 and separated in February 2014. Christina filed for divorce a few months later. They had a fourteen-day divorce hearing going from March 2015 to January 2016. The court issued its order in October 2016.

The issue in the case had to do with property distribution, as this was a marriage with considerable property. In the end, Doug was awarded the parties’ home in Winhall, Vermont, although Christina was allowed to continue living there until her daughter graduated high school. Doug was also ordered to pay Christina a sum of money. The court also took up the issue of spousal maintenance, or alimony. The court ordered Doug to pay Christina an additional “cash transfer,” calling it property in lieu of maintenance. To be clear – there was the “property” chunk of cash and a “property in lieu of maintenance” chunk of cash. Two chunks of cash.

It wasn’t clear, though, what was property and what was property in lieu of maintenance, so the parties both filed motions to clarify. This happens sometimes. Courts do their best to issue orders that are clear, but sometimes there needs to be additional clarification. Parties are allowed to ask for that so everyone understands what’s ordered and expected.

The trial court, in response, amended some findings and said that the second portion – the property in lieu of maintenance portion – was meant to offset a particular bank account awarded to Doug, and partly as a spousal maintenance award. Unfortunately, it still wasn’t clear what part of that award was property division and what part was property in lieu of maintenance.

So, Christina appealed, raising a number of points of error. First, she argued that the court should have factored in the length of the pre-marital relationship in creating its award. Second, she argued that by making that “cash transfer” as partially property and partially property in lieu of maintenance, the court erred in not explaining how the division of assets was equitable and how the maintenance award would enable to continue living in her established lifestyle. Last, she argued there were errors in how the trial court valued the marital estate.

SCOV reverses, and orders the trial court to make additional findings, and to reconsider the property distribution, particularly where certain deferred compensation was concerned.

Taking the arguments in turn, SCOV determines that the trial court acted within its discretion in using the actual length of the marriage – as opposed to the length of the cohabitation relationship – as an appropriate factor in figuring out maintenance. Generally, longer marriages result in higher maintenance calculations. Here, the argument was that although they were only married for about seven years, the relationship was actually about ten years long. There have been times when a trial court correctly factored in a pre-marital relationship. It is permissible for a court to consider the relationship before marriage, but it’s always going to be highly fact-specific as to whether that is a proper consideration. Here, although the parties lived together for a few years before getting married, there were other facts that cut against factoring in that cohabitation time. Because those facts were properly in the record, the court could make findings based on them, and SCOV finds the trial court did not abuse its discretion in doing so.

Second, Christina argued that the “cash transfer” payment leaves room for speculation about the fairness of the property award and also the sufficiency of the maintenance award. She argued that the trial court did not make sufficient findings about her reasonable needs post-divorce, or on Doug’s post-separation income. Her argument was that the property division should take place first, and then the trial court figures out maintenance from there.

SCOV agrees the trial court could have been clearer in how it was apportioning that cash award, in terms of property and property in lieu of maintenance. Property division is meant to be done equitably, and is meant to give each spouse a proportionally just piece of the marital estate. The court has to consider lots of different factors in creating a property award. Maintenance is meant to give a spouse additional funds or property so they can continue living in accordance with the lifestyle lived during the course of the marriage. In creating a maintenance award, the court has to figure out what the lifestyle is or was, along with the respective parties’ health, prospective earning capacities, and other factors. The factors for property distribution and maintenance are a little different, because they’re meant to do different things.

Now we hit the part about why the case was reversed. Doug worked in financial services, and received his compensation partly in cash and partly in deferred stock options. Without getting too far into the weeds on something hard to explain, it’s basically this: he received the stock options while they were still married, but the stock options had not yet vested. It would be hard to put an exact value on the stocks because stock prices fluctuate. That said, there is precedent that the stock options themselves are considered marital property even if vesting occurs after the divorce is final.

This issue became confusing because Christina’s property in lieu of maintenance award was meant, in part, to offset a certain bank account awarded to Doug. That account included all of Doug’s deferred compensation and various bonuses during the pendency of the divorce. It also got confusing when the trial court said any funds accrued in that account after the date of separation belonged to Doug, but also somehow ruled that the deferred stock options Doug got during the marriage were marital property. This is all very summarized. There’s more to it – I suggest reading the opinion, as I am afraid I would make things confusing by trying to explain it all.

SCOV agrees that how the trial court characterized the stock options in its property analysis versus in its maintenance analysis is unclear. It reverses and instructs the trial court to consider all property owned by the parties, and value that property as closely as possible at the date of the final hearing. From there, the court is able to allocate the property however it sees fit under the property division statute. In terms of Doug’s deferred compensation, SCOV ordered the trial court to identify and value any deferred compensation – including after the date of separation – and apportion it equitably, and explain the apportionment. If it was earned during the marriage, even if it wasn’t vested, it’s considered marital property. And the value assigned to it has to be as of the date of the final divorce hearing. In the event this valuation changes anything in terms of property distribution, the court could also reconsider its property in lieu of maintenance award.

Last, Christina also argued there were some inconsistencies in terms of resolving some debts, and also at valuation of the entire marital estate. This is also reversed to be considered on remand.

Judge Teachout was specially assigned to this case, and issued a dissenting opinion. She said that although some of the language in the trial court’s order was unclear in terms of what it categorized as marital property (or not), the actual award was more telling than the labels on it. She pointed out that the trial court clearly went through the different pieces of property, how the parties acquired them and when the property was acquired. In her opinion, the trial court was clear in how it meant for property to be distributed, and the fact it was called one thing versus something else was harmless at best.