Divorce Mediation Blog

It is marital -- or isn't it? Canisius v. Morgenstern

Wednesday, August 19, 2015

The Massachusetts Appeals Court's recent case, Canisius v. Morgenstern, followed substantial precedent for the proposition that contractual rights that accrue during marriage are divisible marital assets, even when the financial fruits of those rights a) may stretch beyond conclusion of the marriage, and b) may be uncertain, even speculative, as to amount or ultimate duration.

In correctly reversing a trial court judge for implicitly excluding potential post-divorce book (and possibly film) income from asset division, the appellate court added royalty rights to stock options, many trust benefits, "guaranteed" partnership distributions and pension plans, a growing list of assets that are divisible despite indeterminate values and time of future enjoyment.

Then, after finding and explaining the trial judge's error, the Appeals Court gave parameters for remand, instructing the Probate judge to revise his property judgment, to include the net-after-tax royalties that the wife may later receive, for "if and when" division. Shadowing the Supreme Judicial Court's Baccanti v. Morton ("time" formula for granted but unvested stock options), the Canisius court preemptively endorsed a "sliding scale of decreasing percentages".

This suggestion was necessary and appropriate to capture the concept that future royalties may increasingly be seen as the product of the wife's post-divorce efforts, where the initial flow of royalties had subsided substantially pre-divorce, and a future revival of fortune would likely arise from the wife's own post-divorce professional efforts, be they purely promotional or by future creativity that causes renewed interest in her inaugural book. Think To Kill a Mockingbird and Go Set A Watchman, but in reverse!

So far so good.

But -- and we wish there weren't a "but" -- the Appeals Court then exceeded all of the Massachusetts precedent on which it relied, by inviting the trial judge on remand to include a "specific termination date." In other words, the wife's royalty rights may be perpetual, but at some yet-to-be defined point, they would cease to be marital at all.

Really? If not so for options, trusts and pensions, then why for royalties?

We understand the court's equitable impulse. The parties were, after all, married for barely 5 years at the time of separation. Doesn't fairness suggest that a time be reached where the relationship of future royalties to the parties’ mutual marital efforts melts to zero? Maybe. But does reason dictate the same result? Probably not.

Think about it. The court concluded that the contract was a product of the marriage. A reducing fraction of division is a proxy for the declining ratio of marital to post-marital efforts. But, once the nexus is drawn on a property theory, how can it be extinguished, let alone merely by time, when the underlying rights persist? Is it not arbitrary to say that the marital gift keeps on giving, but at some point it stops giving to both partners, whose marital enterprise brought it forth? A right is a right, unless it is not.

In fairness, the opinion stated: "That the future royalty, and other payments in the present case are to be divided on an if and when received basis does not require that such payments continue indefinitely." (Italics ours.) Thus, appellate panel did not exactly mandate the result, but it repeated the concept no fewer that 3 times in one paragraph, and its footnote. By doing so, the Appeals Court irrevocably changed the dialogue on remand, and in any future appeal, especially striking since the opinion does not identify it is as an issue that was raised by the trial judge, or by either party on appeal.

Clearly, the Appeals Court could not find Massachusetts precedent to support its time limit suggestion. Its only citation is to Connecticut's Gallo v. Gallo, a 1981 case of the Supreme Court of Connecticut that upheld a sharing of the husband's academic text and workbook revenue, post-divorce, but for a period of 5 years only, with little explanation except its apparent acceptance of the husband's trial testimony that he expected royalties to extend for that time period. If the Appeals Court felt compelled to import authority to establish a time limit parameter, was it prudent to ground it in a case where the foreign court had, in fact, upheld royalty share for the entire expected duration of royalties?

As we have worried in the past here, when appellate courts go beyond what needs to be decided in a precedent case (Canisius is a "reported case", and hence, deemed precedent), the law of unintended consequences too often intrudes.

What facts can this trial judge find on remand to fix the vanishing point of marital nexus? Length of the marriage? A fraction of same? The wife's projection of likely duration? An "expert's" word? We worry that whatever time limit the trial court chooses, as he inevitably will, will simply fuel the next appeal. How then will the Appeals Court discern sound discretion from an abuse?

To say nothing of the fact that that the Appeals Court also said that the "...judge may also limit... amount to be received..."

Stay tuned.

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