Mason v. Mason
2006 VT 58, 904 A.2d 1164, 180 Vt. 98 (2006)
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Rule of Law:
When the right to a future benefit, such as a stock split, vests in a marital asset prior to the finalization of a divorce decree, that right travels with the shares allocated in the property settlement, even if the benefit is realized after the decree is entered.
Facts:
- Wife and husband were negotiating a divorce and their primary marital asset was 48,200 shares of Union Bank stock held in wife's name.
- The record date for a three-for-two stock split was set for July 26, 2003, entitling all shareholders of record on that date to the benefit of the split.
- On July 31, 2003, wife learned about the impending stock split from her financial advisor.
- Wife did not disclose her knowledge of the stock split to husband during their settlement negotiations.
- On August 4 and August 6, 2003, wife and husband respectively signed a stipulation, incorporated into their final divorce decree on August 6, that required wife to transfer 16,066 shares to husband.
- The stock split occurred on August 11, 2003.
- On August 14, 2003, wife transferred 16,066 post-split shares to husband, which had a significantly lower value per share and represented a much smaller portion of the total asset than originally negotiated.
Procedural Posture:
- Following the property transfer, husband filed a motion for relief from judgment in the family court, alleging wife had fraudulently concealed information about the stock split.
- Husband subsequently withdrew the motion for relief from judgment.
- Husband then filed a motion for enforcement of the divorce decree in the family court.
- The family court granted husband's motion, ordering wife to transfer an additional 8,033 shares of stock to him.
- Wife (appellant) appealed the family court's enforcement order to the Vermont Supreme Court.
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Issue:
Does a spouse awarded a specific number of shares in a divorce stipulation also have a right to the additional shares from a stock split when the record date for that split occurred before the divorce was finalized, but the split itself occurred after?
Opinions:
Majority - Skoglund, J.
Yes. A spouse awarded a specific number of shares is entitled to the additional shares from a subsequent stock split if the right to that split vested while the shares were still marital property. The court reasoned that the right to the benefit of the stock split vested in all shareholders of record on July 26, 2003. Although husband was not a shareholder of record, the stock was marital property on that date, meaning the right to the split attached to the shares themselves. Therefore, when the parties agreed to transfer 16,066 shares, those shares carried the embedded, vested right to the split. In awarding husband the additional 8,033 shares, the family court was not modifying the original divorce decree but simply enforcing its terms, as the shares stipulated on August 6 were pre-split shares by definition. Wife could not unilaterally decide to transfer post-split shares of a lesser value.
Analysis:
This decision clarifies the treatment of assets that change in nature between a divorce agreement and the physical transfer of the property. It establishes that a right that vests in an asset while it is still marital property is part of that property's value and must be included in the division. This precedent prevents a party with superior knowledge from unfairly benefiting from the timing of corporate actions like stock splits. It reinforces the principle of full candor in divorce negotiations, even though the holding rests on property law principles rather than a finding of fraud.
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