Chimes v. Michael

THIEME, Judge. This is an appeal of a Judgment of Absolute Divorce entered on March 11, 1999, after a two-day trial during February in the Circuit Court for Montgomery County. On May 7, 1998, appellant Marc Jeffrey Chimes filed a Complaint for Custody, requesting custody and support of the parties’ six-year-old daughter, Meryn. Appellee Caroline Fleming Michael counterclaimed for custody and divorce.

Chimes then counterclaimed as well for divorce, a monetary award, future payment of proceeds from stock options when exercised, and legal fees. Before trial, the parties agreed to joint legal custody, with Chimes having primary physical custody of the child. The issues contested at trial focused on marital property, primarily Michael’s America Online employee stock options worth more than $10 million before taxes. The court below granted Chimes the use and possession of the family home and car, child support, a monetary award of $1,493,423.20, and an “if, ²⁷⁵ as and when” order directing the future distribution of stock options that were not yet fully vested.

The court divided equally between the parties the marital property other than the stock options, including monetary proceeds resulting from the exercise of more than $1 million in options. As for the options, the court divided vested but unexercised options 75 percent to Michael and 25 percent to Chimes; the value of the vested options was rolled into Chimes’s monetary award. The non-vested options will be subject to the same division, but only after application of a coverture fraction similar to the “Bangs formula” used for pension assets. 1 The coverture formula will exclude from division a portion of the options that increases with time. The longer Michael waits to exercise the options, the less money Chimes may receive.

The court also set child support, by allocating Meryn’s needs equally between parties. The Judgment was amended by an Order entered April 13,1999, in order to clarify certain matters, including the tax rate and which options would be used to pay Chimes’s “if, as and when” award. Michael fully satisfied the monetary award judgment, and Chimes accepted a sum representing the entire award. He nevertheless appeals the judgment and raises the following questions: 1.

Did the trial court abuse its discretion when it awarded Chimes 25 percent of the marital stock option rights, while dividing equally all other marital property, including the proceeds of stock options granted and exercised during the marriage? ²⁷⁶ 2. Did the trial court abuse its discretion by applying a coverture fraction or time rule similar to the so-called “Bangs formula” to adjust Chimes’s rights in the stock options? [ 2 ] 3. Did the trial court err when it admitted and relied upon expert opinion as to the value of non-vested stock options, where the expert testified that it is not possible to value non-vested options within a reasonable degree of professional certainty? 4. Did the trial court abuse its discretion when it split the child’s support needs equally between parties and denied accounting from the date of the filing?

Michael filed a motion to dismiss this appeal based on the fact that Chimes had been paid and accepted the monetary award before he filed a notice of appeal. We denied without prejudice, and she renewed the motion in her brief. We now grant her motion to dismiss as to the first three issues raised on appeal. We explain herein.

As to the fourth issue, child support, we answer “yes, in part, and no, in part” to the question presented and we explain. Facts Chimes and Michael were married on October 21, 1989. One child, a daughter named Meryn Michael Chimes, was born of the marriage on July 19, 1992. At the time of trial, Chimes and Michael were, respectively, forty-five and thirty-seven years of age.

When the parties married, Chimes was the primary breadwinner, and he remained so until 1997. Michael worked freelance for over two years following Meryn’s birth. In May 1995, she went to work for America Online (AOL), where she is still employed. Chimes lost his consulting job of ten years in December 1997, and he remains unemployed.

By his own testimony, his efforts to seek new employment have been quite limited. ²⁷⁷ During the time they lived together, any money the parties earned went into, and any expenses the parties paid came out of, the joint family account. When Meryn was an infant, the parties hired a full-time care giver and housekeeper, Della Aguilar, who has continued to work for Chimes to date on a part-time basis. The parties’ marriage was troubled for a long time prior to the divorce. They began discussing separation in 1993, and in spring 1996, Chimes gave a neighbor a copy of a draft separation agreement.

A month before the separation, Chimes informed Aguilar, and Michael moved out on December 20,1996. Michael obtained her employment at AOL through family contacts. When she began work there, she was granted options for 12,000 shares of stock. Three thousand of those options vested after her first anniversary with the company and an additional 3,000 per year vested on May 30 of 1997, 1998, and 1999.

Michael was granted 1,000 additional options in October 1997. These options vested at the rate of 250 per year on October 31 of 1997, 1998, and 1999. The final 250 will vest October 31, 2000. Thus, when the parties separated, on December 30, 1996, only 3,000 options of the 13,000 granted had vested, and the market price of AOL stock was $33.25 per share.

On August 29, 1997, AOL granted Michael 1,000 more options, scheduled to vest at the rate of 250 per year on August 29 of 1998, 1999, 2000, and 2001. On September 1, 1998, almost two years after the parties’ separation, Michael received another 1,300 options, slated to vest at the rate of 325 per year on September 1 of 1999, 2000, 2001, and 2002. The value of AOL stock fluctuates, but it has “increased wildly,” in the chancellor’s words, since the grants. 3 ²⁷⁸ Chimes’s expert acknowledged at trial that the stock options were granted to Michael, in part, as an incentive for her continued employment with AOL. The AOL stock option plan states: A Participant who ceases to be an employee, director or consultant of the company or of an Affiliate (for any reason other than termination “for cause,” disability or death) may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, in accordance with the pertinent Option Agreement.

An option holder who becomes disabled may exercise any options within one year of the date of termination for disability, and an optionee’s estate may exercise any options within one year of death. According to the plan, the options are not transferrable by Michael; nor may they be assigned, pledged, or hypothecated in any way; nor are they subject to execution, attachment, or similar process. The parties stipulated that all options, both vested and non-vested, were marital property. As of the trial date, Michael held 45,000 vested options from the first grant, 1,348 from the second grant, and 1,000 from the third grant.

The parties agreed at the trial that these options were worth in excess of $7.2 million before taxes, and $3.9 million after taxes. The parties also stipulated that, on the day of the trial, Michael owned 31,600 non-vested options, including 24,000 from the first grant, 2,000 from the second grant, 3,000 from the third grant, and 2,600 from the fourth grant. The majority of these shares, 24,000, vested about three months after the trial. Chimes’s expert valued the non-vested shares at $4,151,499, whereas Michael’s expert, Jeffrey Capron, testified “that it is not possible to identify a value for non-vested options within a reasonable degree of professional certainty,” and that the “better view” is that valuing non-vested options is “so speculative” that an opinion cannot be rendered.

Capron’s proposed ²⁷⁹ method of distribution for the “if, as and when” award was to apply a coverture fraction, see supra, note 1, to non-vested options. This methodology effectively dilutes Chimes’s share over the long run, if Michael delays in exercising them. The trial court admitted Capron’s testimony, over Chimes’s objections. After a two-day trial on the merits, the court below granted the parties a Judgment of Absolute Divorce and entered in favor of Chimes a judgment of $1,493,423.20, representing 50 percent of the marital property, including the proceeds of those options that had been exercised before the date of divorce, and 25 percent of the after-tax value of vested stock options that had not been exercised. 4 The court also divided the non-vested options 75 percent to Michael and 25 percent to Chimes, to be distributed on an “if, as and when” basis.

The non-vested options were subject to the coverture fraction. The trial court found Meryn’s support needs to be $2,250 per month, and it split those costs evenly between Chimes and Michael. Because Chimes is the custodial parent, Michael must pay him $1,000 per month. She also covers the child’s health insurance premiums.

The court denied Chimes’s request for attorneys’ fees and costs. On March 2, 1999, Michael filed a Motion to Alter or Amend the Judgment. An Order amending the Judgment was entered on April 15, 1999. On May 3, following Michael’s payment in full, Chimes filed a line indicating that the judgment had been satisfied.

Discussion I Chimes’s first three questions address the court’s methodology for dealing with the stock options, especially those options ²⁸⁰ that had not vested at the time of trial. He objects to the 75:25 division of all unexercised options, as well as to the court’s use of the coverture formula for the non-vested options and reliance on Michael’s expert witness for testimony on eventual distribution of the proceeds. Michael moves to dismiss these issues. We find her rationale for dismissal to be dispositive, and we therefore grant her motion, declining to reach the merits of Chimes’s appeal.

Michael argues, and we agree, that by accepting the benefits of the trial court’s judgment — indeed, the full satisfaction of the monetary award — Chimes has “lost by acquiescence in, or recognition of, the validity of the decision below from which the appeal is taken.” Rocks v. Brosius, 241 Md. 612, 630 , 217 A.2d 531 (1966); see also Suburban Dev. Corp. v. Perryman, 281 Md. 168, 171 , 377 A.2d 1164 (1977) (“It is a well-established rule in this State that unless the decree also adjudicates a separate and unrelated claim in favor of a litigant, he cannot, knowing the facts, both voluntarily accept the benefits of a judgment or decree and then later be heard to question its validity on appeal.”); Bowers v. Soper, 148 Md. 695, 696 , 130 A. 330 (1925) (“Upon the plainest principles of estoppel [appellant] is prevented from successfully disputing a disposition of funds thus made with his consent.”); Stewart v. McCaddin, 107 Md. 314, 318-19 , 68 A. 571 (1908) (“He thus acquiesced in, and invoked the authority of, the very order from which he had appealed.... Under these circumstances, he cannot be permitted to question the validity of the order.”). More recently, we reiterated this principle in Fry v. Coyote Portfolio, LLC, 128 Md.App. 607, 616 , 739 A.2d 914 (1999): It is well settled in Maryland, and the law generally is to the effect, that, if a party, knowing the facts, voluntarily accepts the benefits accruing to him under a judgment, order, or decree, such acceptance operates as a waiver of any errors in the judgment, order, or decree and estops that party from maintaining an appeal therefrom.

Events that transpired since the judgment convince us that Chimes recognized the validity of the Judgment of Absolute ²⁸¹ Divorce, as amended, and took action inconsistent with his right to appeal by eagerly accepting the benefits of that judgment, even as he twice filed Notices of Appeal. In the Judgment of Absolute Divorce, Chimes received from the trial court a monetary award in his favor for $1,493,423.20. The judgment was docketed on March 11, 1999, and Michael satisfied it within weeks. On March 19, she sent Chimes a check for $750,000 in partial satisfaction.

On about March 29, pursuant to Chimes’s instructions, Michael transferred an additional $727,552.20 to his attorney’s escrow account. She delivered the final installment, a check for $15,871, to Chimes’s attorney on April 13. Chimes wasted no time in accepting the judgment’s benefits. Only eight days after the judgment was docketed, he accepted and negotiated Michael’s first check.

Less than a week later, on March 25, he filed a Request for a Writ of Garnishment— as was his right — to execute on the unsatisfied portion. Although the writ was never served, the docket shows that Chimes personally procured it, as agent for his attorney. On April 9, when he had received all but the small final installment of the award, Chimes filed a Notice of Appeal with this Court, challenging the trial court’s equitable distribution of the same. On April 28, when he filed the statement of satisfaction required by Maryland Rule 2-626(a), 5 Chimes also filed a second Notice of Appeal for the judgment as it had been amended by the order of April 13.

He now stands before this Court, having accepted almost $1.5 million from the equitable distribution of marital assets, and appeals the same. Chimes argues that he has not accepted any portion of the “if, as and when” award of non-vested options, and that such award is independent from the monetary award entered by ²⁸² the chancellor. He contends that the monetary award is “unrelated to, or independent of, the unfavorable portion of the decree,” i.e., the award of non-vested options and, thus, “acceptance of the benefit under (this] unrelated or independent portion of the decree will not result in a waiver of the right to appeal from the other unfavorable independent portion of the decree.” Fry, 128 Md.App. at 616 , 739 A.2d 914 . We disagree.

Chimes’s reading of the Maryland law of equitable distribution clearly contradicts our statutes and cases. Although a marital estate may include many categories of property — real estate, vehicles, retirement funds, stock portfolios, bank accounts, jewelry, antiques, collectibles, precious metals — all the property together is but a single pie to be divided between the divorcing parties. Thus, a judgment of divorce might divide the various forms of property in differing proportions, but at bottom it is a unitary plan for the distribution of assets. Title 8 of the Family Law Article makes this scheme clear.

The court first must identify all marital property before it begins the process of distributing it. See Md.Code (1984, 1999 Repl. Vol.), § 8-203(a) of the Family Law Article. Next, the court must determine the economic value of all marital property, except retirement benefits.

See Md.Code (1984, 1999 Repl. Vol.), § 8-204 of the Family Law Article. Finally, if division of property by title is unfair, the court must use the factors under section 8-205(b) to adjust the equities and rights of the parties by granting a monetary award. See Md.Code (1984, 1999 Repl.Vol.), § 8-205(b) of the Family Law Article.

If one element of the plan changes, the other elements will necessarily shift so that the overall result is equitable. See, e.g., Long v. Long, 129 Md.App. 554, 579 , 743 A.2d 281 (2000) (the chancellor “has been granted all the discretion and flexibility he needs to reach a truly equitable outcome,” and “(o]ur statutes give him considerable discretion in balancing cash awards against alimony and future awards from retirement accounts”); Doser v. Doser, 106 Md.App. 329, 351 , 664 A.2d 453 (1995) (“If the court determines that the division of marital property based on title would be unfair, the court has ²⁸³ several options. It may order a party to pay a fixed sum of cash and immediately reduce that order to judgment; it may establish a schedule for future payments of all or part of the award; it may transfer ownership of an interest in a pension, retirement, profit sharing, or deferred compensation plan from one party to the other.”) (citations omitted). Even if our family law precedents were not so clear, we also note that a claim for equitable distribution forms but one “convenient trial unit” under Maryland’s “transaction test” analysis for the purposes of issue and claim preclusion.

See Kent County Bd. of Educ. v. Bilbrough, 309 Md. 487 , 525 A.2d 232 (1987). In Bilbrough , the Court of Appeals approved the American Law Institute standard for determining which issues comprise a single “transaction” and may be considered part of the same claim, and which comprise a “series” of separate, though related, transactions and must be treated as different claims: What factual grouping constitutes a “transaction”, and what groupings constitute a “series”, are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties’ expectations or business understanding or usage. Id. at 498 , 525 A.2d 232 (quoting Restatement (Second) of Judgments § 24); see also Gertz v. Anne Arundel County, 339 Md. 261, 269-70 , 661 A.2d 1157 (applying Bilbrough “time, space, origin, or motivation” factors), cert. denied, 339 Md. 261 , 661 A.2d 1157 (1995). Because our statutory scheme promotes a unitary plan for the distribution of assets, equitable distribution can only be, in our view, a single transaction involving several categories of property.

Moreover, we have little doubt that the underlying motivations and the parties’ expectations here were at one time the same regardless of category of property. They simply sought to divide all the property fairly. ²⁸⁴ Chimes now creates an artificial distinction between the vested and non-vested options. We, however, perceive these two categories as having the same characteristics of time, space, origin, and motivation. AOL, the single originator, was motivated to grant Michael all of the options as part of her compensation.

Although the four different grants had been offered to Michael at four different times during her employment, some options from each grant had vested as of the divorce and some had not. The monetary award that Chimes has already recognized and from which he has benefitted encompassed the options from each grant that had already vested as of the divorce. Thus, the distinction between vested and non-vested options has no real meaning in determining the fault lines between “convenient trial units,” because both types of options shared the same significant characteristics. Armed with his pseudo-distinction, Chimes cannot appeal the judgment.

Chimes also insists that his appeal is not barred because he seeks only to increase an award that is an undisputed minimum. He believes this to be true because Michael dismissed her cross-appeal. See Dietz v. Dietz, 351 Md. 683, 685 , 720 A.2d 298 (1998) (“the acquiescence rule does not apply where there is no cross-appeal and the appellant seeks only an increase in an undisputed minimum”). That Chimes’s award might increase on remand is not enough, however, to convert his monetary award to an “undisputed minimum.” Although Dietz involved an appeal of a monetary award made during equitable distribution, it may be distinguished from the instant case on its facts.

In that case, the trial court ordered the award, which represented the husband’s interest in a partnership, to be paid in monthly installments of $1,250 over a fifteen-year period. Id. at 686 , 720 A.2d 298 . When we heard Dietz, we barred the appeal, holding that the exception to the acquiescence rule for spousal support cases, see, e.g., Lewis v. Lewis, 219 Md. 313 , 149 A.2d 403 (1959), did not apply, because a monetary award is not spousal support. See Dietz v. Dietz, 117 Md.App. 724, 739 , 701 A.2d 1144 (1997). ²⁸⁵ Cf.

Lewis, 219 Md. at 317 , 149 A.2d 403 (“the bar cannot be raised where the [alimony] benefits accruing to the wife, by reason of the award, provide necessary support until the final adjudication of the case”). Reversing our holding, the Court of Appeals equated the monthly award payments made to Mrs. Dietz to those payments made in the context of workers’ compensation, alimony, and condemnation cases, and it held that the acquiescence rule did not bar the appeal. Id. at 692-93, 720 A.2d 298 (“Rather, our decisions in the workers’ compensation, spousal support, and condemnation contexts are the most analogous to the instant matter.”) (emphasis added). Although it by no means sought to blur the distinction between alimony and monetary awards, see McAlear v. McAlear, 298 Md. 320, 347-48 , 469 A.2d 1256 (1984) (despite similarities in form and interdependence between the two, a monetary award paid out in installments is distinct from alimony), the Court of Appeals treated the two types of award alike under the acquiescence rule.

Yet, the Court reminded us that “the acquiescence doctrine ‘is a severe one and should not be extended.’ ” Dietz, 351 Md. at 695 , 720 A.2d 298 (quoting Lewis, 219 Md. at 317 , 149 A.2d 403 ) (citing Petillo v. Stein, 184 Md. 644, 649 , 42 A.2d 675 (1945)). For that reason, it held that “[t]he holding in Lewis should not be read to mean that the acquiescence rule applies in divorce cases unless the order under which benefits have been taken and which has been appealed is an order for support....” Id. Instead, “the acquiescence rule does not apply where there is no cross-appeal and the appellant seeks only an increase in an undisputed minimum.” Id. As we read Dietz today, the Court of Appeals reached its conclusion based on the alimony-like effect of a scheme of monthly payments, rather than on that scheme’s actual nomenclature.

In workers’ compensation, alimony, and condemnation cases, which the Court found analogous to the facts in Dietz, the defendant enters the litigation with a clear understanding that he owes a specific statutory or common law obligation to the plaintiff, whether it be the cost of medical treatment, support for necessities, or the fair market value of ²⁸⁶ land. See, e.g., Bethlehem Steel Co. v. Mayo, 168 Md. 410, 413 , 177 A. 910 (1935) (workers’ compensation case, stating that acquiescence rule does not apply “where the right to the benefit received is conceded by the opposition party, or where the appellant would be entitled thereto in any event”). Here, the large lump sum award already enjoyed by Chimes does not have the support-like effect of the payments made in Dietz. 6 The analogy is ineffective. Dietz is also distinguishable from the present case in that Mrs. Dietz only accepted a small portion of the judgment before she appealed.

See also Sanford, 295 N.W.2d at 142 (payments totaling $18,7000 already accepted by wife were insubstantial amount in light of the entire marital estate at issue). Chimes, in contrast, accepted the entire monetary award, even seeking to execute on its unpaid portions and filing a Notice of Appeal on the same day that he entered a line stating that the judgment had been satisfied. Finally, although Dietz considerably broadens the exception stated in Lewis to the acquiescence rule, it does