Golden v. Cooper-Ellis (2005-065 & 2005-169)

2007 VT 15

[Filed 02-Mar-2007]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2007 VT 15

                          Nos. 2005-065 & 2005-169


  Jo-Ellen Golden (Cooper-Ellis)                 Supreme Court

                                                 On Appeal from
       v.                                        Windham Family Court


  Peter Cooper-Ellis                             February Term, 2006


  Katherine A. Hayes, J.

  Jeremy Dworkin, South Londonderry, for Plaintiff-Appellee and
    Cross-Appellant.

  Bettina V. Buehler of McCarty, Buehler & Bixby, P.C., Brattleboro, and Jill
    Hersh of Hersh Family Law Practice, San Francisco, California, for
    Defendant-Appellant and Cross-Appellee.


  PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

       ¶  1.  DOOLEY, J.  Husband Peter Cooper-Ellis appeals from both the
  final divorce order dividing the parties' marital estate and orders denying
  his subsequent motion to modify spousal maintenance and child support. 
  Husband makes numerous contentions of error.  Most significantly, he claims
  that the family court erred when it included all of his unvested stock
  options in the marital estate.  Husband also claims that the court erred in
  its (1) determination of the present value of his unvested stock options at
  the date of trial, (2) division of the assets of the marital estate based
  on outdated valuations, (3) finding that he had an interest attributable to
  the marital estate in a residence he co-owned with his brother, (4) setting
  his maintenance and support obligations on annual income levels contrary to
  previous findings, and (5) denial of his motion to modify the spousal
  maintenance and child support awards.  We affirm.
   
       ¶  2.  The parties were married on July 31, 1986, and have three
  children, Molly, Jonathan, and Andrew, born in the marriage.  Husband also
  has an adult daughter from a prior marriage, and a baby daughter born to
  his current partner with whom he resides in California.  Although the
  determination of the actual date of separation is complicated by the fact
  that husband has been employed in California since 1999 while wife has
  continued to reside in Vermont, the family court found that the parties
  permanently separated, with no attempt to resume married life, in April
  2002. 

       ¶  3.  At the time the parties met and began their marriage, both were
  employed and earning similar salaries.  When the children were born, wife
  originally continued working full-time and then worked part-time until the
  spring of 1995 when she remained at home as their primary caregiver.  The
  parties' oldest child, Molly, suffers from Smith-Meginis Syndrome, which is
  untreatable.  Molly is also diagnosed as mildly retarded, and she has
  difficulty regulating her temper and is physically aggressive.  The parties
  have agreed that wife will continue to be Molly's primary caregiver; Molly,
  now eighteen years old, has a normal life-expectancy.  Jonathan, now
  seventeen years old, moved to California and resides there with husband. 
  Andrew is thirteen years old and continues to reside with wife in Vermont.

       ¶  4.  Husband lives in California and is currently employed by BEA
  Systems as executive vice-president of engineering.  The family court found
  husband's total annual income excluding stock options to be $430,000. 
  Central to this dispute, however, the family court found that a significant
  part of husband's income is provided to him through stock options in his
  employer's company, and the court made findings of the income husband
  receives from the exercise of those options and the value of those options. 
  The court's apportionment of the option shares constitutes the most
  litigated aspect of the divorce. 
   
       ¶  5.  Husband's employer provided him with groups of stock options
  on twenty-three occasions from September 16, 1997 to the end of trial.  The
  options are a central, if irregular, part of husband's compensation
  package.  The options cannot be exercised immediately.  Under the 1997
  stock option plan adopted by the company, which generally applied after
  that date, twenty-five percent of the amount could be exercised at the one
  year anniversary of the date of the grant.  At each monthly interval
  thereafter 1/48th of the amount could be exercised until all are accounted
  for at the four year anniversary.  All options must be exercised within ten
  years of the date they are granted.  For purposes of analysis, we refer to
  options that can be exercised as "vested."  

       ¶  6.  Husband can exercise the options only if he is an employee of
  BEA Systems on the date of exercise.  The options consist of both
  nonqualified options, which are transferable, and incentive options, which
  are nontransferable and taxed at a much lower rate than nonqualified
  options.  Option exercise prices range from $3.45 per share to $62.13 per
  share.  At the time of the divorce hearing, some vested options were
  underwater-that is, the price at which husband could purchase the stock was
  higher than the market value price-so exercising those options would bring
  no benefit.  The period remaining for exercise of those options not yet
  exercised ranged at trial from three and one-half years to nearly ten
  years.  

       ¶  7.  As of March 29, 2004, husband had been awarded stock options to
  purchase 953,100 shares of BEA Systems stock and had exercised options as
  to 267,352 of these shares, leaving options for 685,748 shares unexercised. 
  Options for 308,132 of the remaining shares were vested, although many were
  underwater, and husband had between three and one-half and ten years to
  exercise these options depending on when they were granted.  The
  rest-options on approximately 375,000 shares-remained unvested.  From 2000
  to 2004, husband received nearly $6,000,000 in profit from acquiring the
  stock pursuant to the options.  His average annual income from the exercise
  of stock options has been $1,191,838.  
   
       ¶  8.  At the conclusion of the final hearing, the family court
  issued a lengthy order.  Ultimately, the court divided the value of the
  marital estate assets equally between the parties.  It also set forth a
  child support order and an order for husband to pay wife spousal
  maintenance.  The specifics of the contested issues are outlined below. 
  The most contested is the family court's inclusion of all of husband's
  stock options, including the options that had not vested at the time of the
  final hearing, in the marital estate for equitable division.

                              I.  Stock Options

       ¶  9.  Husband argues that the family court erred in awarding wife
  one-half of  his employee stock options that were unvested at the time the
  parties separated.  He stipulates that some portion of the unvested options
  may be considered marital property, but argues that the portion that is
  marital property must be attributable to his work during the marriage and
  most of the stock options were awarded for work in the future.  He argues
  that the family court should have divided the options according to a "time
  rule" designed to determine what portion of the options can be included in
  the marital estate and what part are his separate property.  Additionally,
  he argues that no options awarded after the date of separation should be
  considered marital property.

                                     A.
   
       ¶  10.  We start with husband's second argument and address whether
  the family court erred by including in the marital estate options acquired
  between the date of the parties' separation and the date of the final
  divorce hearing.   The governing statute regarding the distribution of
  marital assets requires that "[a]ll property owned by either or both of the
  parties however and whenever acquired . . . be subject to the jurisdiction
  of the court."  15 V.S.A. § 751(a) (emphasis added).  Assets are normally
  valued for distribution as of the day of the final divorce hearing,
  regardless of whether they were acquired during or after the parties
  separated.  Hayden v. Hayden, 2003 VT 97, ¶ 8, 176 Vt. 52, 838 A.2d 59;
  see also Nuse v. Nuse, 158 Vt. 637, 638, 601 A.2d 985, 986 (1992) (mem.)
  (upholding court's inclusion of house acquired after separation as marital
  asset subject to division); Bero v. Bero, 134 Vt. 533, 535, 367 A.2d 165,
  167 (1976) (affirming inclusion of tort settlement received after divorce
  was filed as marital asset).  Nothing in the statutory wording suggests
  that the court's jurisdiction to divide property of the parties extends
  only to property owned as of the date the parties separated.  Thus, the
  family court acted within its discretion in considering stock options
  received by husband after the date of separation and including them in the
  marital estate for division. 

       ¶  11.  Husband's argument on this point is linked to his primary
  argument that the family court should have included as marital property
  only part of the unvested stock options, and that the appropriate cut-off
  date for purposes of an allocation formula is the date of separation.  For
  this argument, as well as his larger argument, husband draws from our
  pension cases which have sometimes used the date of separation as a
  temporal dividing line.  See, e.g., Russell v. Russell, 157 Vt. 295, 305,
  597 A.2d 798, 804 (1991).  Russell is based on the determination in that
  case that the date of separation was the "date . . . most reflective of the
  functional end of marriage."  Id.  

       ¶  12.  In Hayden, we explained that Russell dealt with how to
  apportion pension funds, and not the definition of marital property, and in
  any event, set no hard and fast rule.  Hayden, 2003 VT 97, ¶¶ 12-13.  That
  caution about the use of Russell is particularly applicable here. 
  Apparently because of the overall performance of BEA Systems, the company
  did not award stock options for an extended period, and many of the options
  it had awarded were underwater.  In part to make up for these shortfalls,
  it awarded substantial options between the date the family court determined
  that the parties "separated" and the date of dissolution of the marriage. 
  Using the date of separation as a cut-off date would fail to capture as
  marital property a significant part of husband's compensation for the
  marital period.  See, e.g., Pascale v. Pascale, 660 A.2d 485, 498 (N.J.
  1995) (stock options awarded after termination of marriage were properly
  included as marital property).  We conclude that the family court acted
  within its discretion in determining that the stock options awarded after
  separation were marital property subject to distribution. 
        
                                     B.

       ¶  13.  The crux of the issue on appeal is the court's treatment of
  husband's unvested stock options, whether acquired before or after the
  parties separated.  As we noted above, husband concedes that some part of
  these options may be considered marital property.  We agree.  Accord In re
  Marriage of Hug, 201 Cal. Rptr. 676, 685 (Ct. App. 1984); In re Marriage of
  Miller, 915 P.2d 1314, 1319 (Colo. 1996); Bornemann v. Bornemann, 752 A.2d
  978, 985 (Conn. 1998); Batra v. Batra, 17 P.3d 889, 894 (Idaho Ct. App.
  2001); Goodwyne v. Goodwyne, 639 So. 2d 1210, 1213 (La. Ct. App. 1994);
  Otley v. Otley, 810 A.2d 1, 6 (Md. Ct. Spec. App. 2002); Baccanti v.
  Morton, 752 N.E.2d 718, 727 (Mass. 2001); Salstrom v. Salstrom, 404 N.W.2d
  848, 850-51 (Minn. Ct. App. 1987); Davidson v. Davidson, 578 N.W.2d 848,
  855 (Neb. 1998); In re Valence, 798 A.2d 35, 39 (N.H. 2002); Callahan v.
  Callahan, 361 A.2d 561, 563 (N.J. Super. Ct. Ch. Div.1976); Garcia v.
  Mayer, 920 P.2d 522, 525 (N.M. Ct. App. 1996); DeJesus v. DeJesus, 687
  N.E.2d 1319, 1323 (N.Y. 1997); Fisher v. Fisher, 769 A.2d 1165, 1169 (Pa.
  2001); Bodin v. Bodin, 955 S.W.2d 380, 381 (Tex. Ct. App. 1997); In re
  Marriage of Short, 890 P.2d 12, 15 (Wash. 1995) (en banc); Chen v. Chen,
  416 N.W.2d 661, 663 (Wis. Ct. App. 1987), review denied, 419 N.W.2d 562
  (Wis. 1988).  But see Hann v. Hann, 655 N.E.2d 566, 569 (Ind. Ct. App.
  1995); Hall v. Hall, 363 S.E.2d 189, 195-96 (N.C. Ct. App. 1987); Ettinger
  v. Ettinger, 637 P.2d 63, 65 (Okla. 1981).  Unlike the family court,
  however, husband takes the position that some of the unvested options were
  given as compensation for future work to occur after the dissolution of the
  marriage, and these options cannot be considered part of the marital
  estate.  In making this argument, he draws on two sources in particular-the
  factual record as to the purpose of the stock options, and our treatment of
  employee pensions as part of marital property-as well as decisions from
  other states.  We first turn to his sources for his argument.
   
       ¶  14.  There is no question that as an upper level executive,
  husband received stock options as part of his basic compensation package,
  and the family court so found.  The court summarized the evidence on the
  purposes of the stock option plan as follows:

      [I]n granting stock options to employees, employers have many
    goals.  They seek to retain employees whose work they value; they
    seek to align the employees' interests with those of shareholders
    in the company; they seek to motivate the employee to perform
    better in the future; and they seek to give the employee the
    incentive to stay.  These purposes are overlapping and
    inextricably entwined. . . .
      Jeanne Wu, a senior vice-president for human resources at
    BEA, testified that . . . such options are used to reward employees 
    for performance, and to retain them for the future. . . . 

      The [BEA] . . . compensation committee report confirmed that:
    "Because of the direct relationship between the value of an option
    and the stock price, the Compensation Committee believes that
    options motivate executive officers to manage the Company in a
    manner that is consistent with stockholder interests.  Stock
    option grants are intended to focus the attention of the recipient
    on the Company's long term performance, which the Company believes
    results in improved stockholder value, and to retain the service
    of the executive officers in a competitive job market by providing
    significant long-term earnings potential." . . . The Committee
    noted finally that "the decision to grant an award is primarily
    based upon a subjective evaluation of the past as well as future
    anticipated performance."

  Based on this evidence, husband argues that the main purpose of the stock
  options is to reward future performance and to keep him working for the
  company in the future.  To the extent the unvested options are rewards for
  future performance to occur after the dissolution of the marriage, he
  argues that they cannot be considered marital property.

       ¶  15.  Husband's second source for his position is our treatment of
  employment-related pensions.  Our leading case is McDermott v. McDermott,
  150 Vt. 258, 552 A.2d 786 (1988), in which we discussed how to value and
  distribute a pension held by one of the spouses if it has vested but not
  matured.  We held that a pension is marital property.  Id. at 259, 552 A.2d
  at 788.  We held, however, that the court could distribute only that part
  of the pension that was earned during the marriage, and provided the basis
  for making that calculation as follows:
   
      [T]he court must determine what portion of the entitlement was
    acquired during the marriage, and this is accomplished by
    factoring in the so-called "coverture fraction." . . . The
    numerator of the fraction is the number of months or years that
    the employee participated in the plan during the marriage, and the
    denominator is the total number of months or years that the
    employee will have participated in the plan at retirement.  Where
    the immediate offset method is used, the present value of the
    benefits is calculated, and this figure is then multiplied by the
    coverture fraction.  The result represents the present value of
    the benefits attributable to the marriage, and the court
    distributes the marital property on that basis.

  Id. at 261, 552 A.2d at 789.  We reversed the trial court's decision in
  McDermott because the court valued the pension based on its full value at
  the time of the employee's retirement "without acknowledging that a portion
  of the calculated value reflect[ed] plaintiff's future earnings."  Id.  We
  have reiterated the holding of McDermott in Hayden, 2003 VT 97, ¶ 11, and
  Russell, 157 Vt. at 305, 597 A.2d at 804.     ¶  16.  Terming the
  apportionment formula in McDermott a "time rule," husband argues that the
  pension cases are applicable to stock options and whenever present value of
  an asset is based on future work, as well as current and past work, we are
  required to use a "time rule" to apportion the value to ensure that
  compensation for future work is not considered marital property.  Thus, he
  argues that, because the family court failed to apportion the unvested
  options according to a time rule, we must reverse and remand for a proper
  apportionment.

       ¶  17.  There is some merit to husband's argument, but it faces two
  significant difficulties.  Husband has relied on the family court's summary
  of the evidence, as well as the testimonial and documentary evidence.  The
  court's summary is not, however, the equivalent of findings.  See Embree v.
  Balfanz, 174 Vt. 560, 562, 817 A.2d 6, 9 (2002) ("A recitation of the
  evidence . . . is not a finding of the facts.") (quoting Krupp v. Krupp,
  126 Vt. 511, 514, 236 A.2d 653, 655 (1967)). The only findings on this
  issue are embedded in the conclusions as follows:
   
      All of the stock options granted to the defendant through the date
    of the final hearing are marital property, as all are awarded
    during the marriage, and were attributable to his work during the
    marriage.  The fact that part of the employer's motivation in
    awarding these options was to spur the defendant to greater
    productivity or better performance in the future is not relevant
    to the question of whether these options were property acquired
    during the marriage.

  Thus, the court's findings, while sparse, are directly contrary to
  husband's position.  If the findings  are not clearly erroneous in light of
  the evidence actually presented, we must uphold them. (FN1)  Mizzi v.
  Mizzi, 2005 VT 120, ¶ 7, ___ Vt. ___, 889 A.2d 753 (mem.).  We consider
  whether the findings are clearly erroneous below.  

       ¶  18.  The second problem is more complicated and involves the
  difference between apportionment of pension benefits and stock options.  As
  husband argues, courts from around the country have used principles
  applicable to apportioning pensions in allocating stock options between
  marital and separate property.  At the level of general principles, we
  agree with these decisions.  There are, however, differences in the nature
  of pensions and stock options that make allocation of stock options more
  complicated.

       ¶  19.  Pensions are a form of deferred compensation typically based
  on regular contributions made by the employer and employee.  Because
  regular contributions are made over time, it is relatively easy to
  apportion between contributions made during the marriage and those made
  after the marriage has ended so that contributions made following the end
  of the marriage are not considered marital property and are not included in
  the value of the pension available for distribution.  Thus, in the pension
  context, McDermott endorses the use of a "time rule" to apportion based on
  the time of the contribution.
   
       ¶  20.  The purpose of the pension is clear-to provide income after
  retirement.  The purpose of awarding stock options is less clear, in part
  because multiple motives are invariably involved.  See Hug, 201 Cal. Rptr.
  at 680.  If we used a time rule exclusively to apportion stock options, we
  would be holding that all options that become vested after the cut-off
  time-here the date of the final divorce hearing-are awarded as compensation
  for future work.  While it is conceivable that the facts might support such
  a conclusion in an individual case, such a case would be rare.  Much more
  common are circumstances in which some part of the options represent
  deferred compensation for past or present performance, even though vesting
  occurs in the future after the expiration of the temporal cut-off date. 
  Options that are deferred compensation for past and present performance
  must be considered marital property even though vesting occurs in the
  future.  

  ¶  21.  Two additional points are important to the allocation issue. 
  First, the purpose of awarding stock options cannot be determined by
  generalizations about the purpose of compensation.  As the family court
  noted, all compensation is given in part to keep employees productive and
  thus to induce future desirable performance.  It cannot be said that,
  because the purpose of compensation is to ensure future productivity, such
  compensation is given for future work.

  ¶  22.  Second, we have assumed for purposes of discussing husband's
  position that only the purpose of the options and the time period for
  vesting are relevant to allocate the options between  marital and
  nonmartial property.  In some cases, there is another factor, as described
  by the Supreme Judicial Court of Massachusetts in Baccanti:

      In addition, there may be circumstances, such as a long-term
    marriage in which both parties have contributed to the
    "partnership" and the options are exercisable soon after the
    divorce, where the judge finds that stock options should be deemed
    wholly marital property even though the options were given for
    services to be performed in part after dissolution of the
    marriage.  In these cases, the judge must determine the extent of
    each spouses' contribution to the asset. . . .  The trial judge
    has discretion . . . to decide whether an asset should be included
    in the marital estate based on the parties' joint efforts in
    acquiring that asset and should not necessarily be confined by the
    period of the marriage.  However, the fact that only one party may
    exert efforts after dissolution of the marriage to obtain the
    asset should be taken into account when dividing property in a
    divorce proceeding.   

  752 N.E.2d at 728-29 (internal citations omitted).  The court provided
  examples in a footnote, and specifically described a situation in which
  "the value of the employee to the employer, which caused the employer to
  reward the employee with stock options, may have come about as a result of
  the marital partnership" and "[t]he nonemployee spouse may have contributed
  to the employee spouse's ability to achieve the position for which the
  options were given."  Id. at 729 n.6; accord Pascale, 660 A.2d at 498-99.
  (FN2)   We mention this additional factor here because of its potential
  applicability to this case as discussed infra.
   
       ¶  23.  We return to husband's position and our reasons for rejecting
  it.  Putting together the evidence and the pension cases, husband argues
  that the family court should have allocated the unvested stock options
  exclusively by use of a time formula derived from the pension cases. 
  Although there are variations in the details of such formulae, the typical
  formula would, for each block of options, contain a numerator of the time
  period between the date of the award of the options and the final hearing,
  (FN3)  and a denominator of the time period between the date of the award
  of the options and the date of vesting.  See Davidson, 578 N.W.2d at 857.
  (FN4)  The resulting percentage would be multiplied by the value of each
  block of options to produce the value that is marital property.  As our
  analysis above makes clear, we cannot endorse husband's argument that
  application of a time rule alone would produce a correct allocation.  At
  best, the evidence supports a conclusion that some part of husband's
  unvested options are for past and present work and some are for future
  work.  The part for present and past work is marital property in its
  entirety irrespective of when it becomes vested.  The only stock options
  that should be apportioned between marital and separate property are those
  awarded as compensation for future services, and only if the nonemployee
  spouse's contribution to acquiring those options is not a factor.  For
  those options, a "time rule" is used frequently, but not always, as an
  appropriate method of apportionment.  

       ¶  24.  Thus, with stock options, there are actually two levels of
  apportionment.  See Miller, 915 P.2d at 1319 (setting forth two-step
  allocation analysis); Bornemann, 752 A.2d at 989 (outlining allocation
  steps); Valence, 798 A.2d at 39 (directing that time rule applies only to
  options found to be an incentive for future services); DeJesus, 687 N.E.2d
  at 1323 (summarizing and adopting distinct allocation steps); Short, 890
  P.2d at 16-17 (applying two-tired allocation analysis).  The first is based
  on the purpose of the stock option grant and seeks to separate out options
  granted for future performance from those granted for present and past
  performance.  At this level, the court may also look at the contribution
  made by the non-employee spouse to the acquisition of stock options in the
  future.  See Baccanti, 752 N.E.2d at 729 n.7.  The second level apportions
  only those options granted for future performance, and not attributable to
  the non-employee spouse, to determine how much of that future performance
  occurred within the marriage.

       ¶  25.  We recognize that the first level of apportionment does not
  lend itself to a mathematical formula, and the family court should consider
  all relevant factors.  In this process, neither the language of the stock
  option agreement nor the employer's testimony is dispositive.  Davidson,
  578 N.W.2d at 856.  Among the relevant factors are:
   
    whether the employee stock options . . . were intended to (1)
    secure optimal tax treatment, (2) induce the employee to accept
    employment, (3) induce the employee to remain with the employer,
    (4) induce the employee to leave his or employment, (5) reward the
    employee for completing a specific project or attaining a
    particular goal, and (6) be granted on a regular or irregular
    basis.

  Id.
       ¶  26.  This case turns primarily on the first apportionment level
  because the family court held that none of the options were awarded for
  future services and considered all the awarded options as marital property. 
  Thus, the court never reached the second level where it might have applied
  a time rule.

       ¶  27.  Although the findings are sparse, we conclude that they are
  not clearly erroneous and the conclusion that the unvested stock options
  are marital property is supported by the findings.  By the time of the
  trial, all pre-separation stock options had been exercised or were
  underwater such that exercise of the options did not make economic sense. 
  In fact, although employer had awarded options to husband twice in 2000,
  three times in 2001, and once in 2002 prior to the separation, none had
  been exercised because they had no value in light of the stock price.  In
  July 2002, employer awarded options on 424,000 shares at very low option
  prices, and most of these remain unvested.  This amount of shares was
  almost as many as employer had awarded to husband in all the years of his
  employment.  Although employer awarded options to husband in November 2002,
  April 2002, and February 2004, the numbers of shares-61,000 in the
  aggregate-and the option prices are far less favorable.  Thus, the July
  2002 options account for virtually all of the unvested stock option value
  in dispute in this appeal.

       ¶  28.  The family court did make findings about the situation in
  2002:
   
      The defendant received a substantial award of stock options during
    June 2002.  At that time, BEA Systems and many other companies
    were recovering from a significant downturn in the technology
    stock market (a.k.a. "the dot com bust"), and were concerned about
    retaining employees whose stock options were now largely worthless
    (underwater).  BEA's stock value had dropped from around $60 per
    share to under $10.  They therefore issued new stock options with
    lower prices to the defendant and other key employees, in order to
    encourage them to remain there.

  These findings should be read in light of the court's earlier finding that
  stock options had become a significant and essential component of the
  compensation package for executives.  Thus, they were being offered as an
  alternative to fixed salary for upper level employees.  See DeJesus, 687
  N.E.2d at 1324 (one factor for apportionment is whether stock options are
  offered as an alternative to fixed salaries).  For two years, the highest
  level employees in the company took a very large cut in compensation.  When
  the economic situation of the company improved, the company restored the
  full compensation package.  Based on these circumstances, the family court
  could reasonably find that the July 2002 options were really a make-up
  award for the employees maneuvering the company through the dot com bust to
  a profitable future. 

       ¶  29.  The court could also consider wife's contribution in
  determining what was marital property as we discussed above.  We think the
  court could consider this factor because of wife's post-divorce commitment
  to take care of the parties' disabled daughter even after the daughter
  reached the age of majority.  The family court found that the daughter
  would always require significant adult supervision and would never be able
  to live on her own.  As the family court found, wife's assumption of the
  role of caretaker for the disabled daughter is a "benefit to the defendant,
  and has enabled him to pursue his career without concern about Molly's
  welfare, and with very little direct involvement in her care."  Central to
  the stock option issue is the fact that wife continued to assume that
  caretaking role after the divorce, and thus continued to contribute to
  husband's ability to put long hours into his career without having to
  participate in the care of the adult daughter.
   
       ¶  30.  Although factually somewhat different, we find comparable the
  decision of the Connecticut Supreme Court in Bornemann, 752 A.2d 978.  In
  that case, husband received stock options as part of his hiring package,
  and they vested over a five year period.  Id. at 982.  However, husband was
  fired before the last two-fifths of the options vested in the fourth and
  fifth year.  Id.  The termination agreement allowed husband to still
  exercise the fourth and fifth year options as an employee as long as he
  abided by the terms of the termination agreement-for example, that he not
  obtain other employment that conflicted with the interests of the employer. 
  Id. at 983.  Meanwhile, husband and wife separated, and wife asserted that
  the unvested fourth and fifth year options were marital property.  The
  superior court agreed, and the Supreme Court affirmed against husband's
  contention that the options were awarded for future performance of the
  termination agreement.  Id. at 986-87.  

       ¶  31.  The court found that stock options "are analogous to pension
  benefits in that they bestow a right upon the holder to receive a benefit
  under prescribed conditions."  Id. at 985.  It went on to hold that "[i]n
  determining when unvested stock options were earned, or will be earned, the
  purpose for which the options were granted must be considered."  Id. at
  987.  Finally, it upheld the superior court finding as not clearly
  erroneous, concluding that the purpose of the stock option grant was to
  reward husband for past services "and that it was in exchange for those
  services that the defendant was paid his salary through December 1996, and
  was offered the opportunity to retain the options."  Id. at 991.  In
  response to husband's argument that the court should have, at the least,
  used a time rule to apportion the options, the Supreme Court responded that
  because "we have already determined that the options are marital property
  in their entirety, there is no need to employ a time rule in this case." 
  Id. at 991 n.11.  
   
       ¶  32.  Because the family court's finding is not clearly erroneous,
  and the factor of wife's continuing contribution to husband's ability to
  remain productive and earn options supports the decision as to what is
  marital property, we affirm the family court's decision that all the
  unvested stock options are marital property.  Although the court could have
  found, based on the evidence, that part of the purpose of the award of
  options was as compensation for future performance, we act under a limited
  standard of review that allows us to reverse only if findings are clearly
  erroneous based on the evidence.  Mizzi, 2005 VT 120, ¶ 5.  In reaching
  this conclusion, we stress that we are responding only to the issues raised
  by husband both below and on appeal.  Husband has not challenged the
  sparseness of the court's findings and, although he sought use of a time
  rule, he failed to recognize that application of a time rule was only a
  secondary step to allocation based on the purpose of the stock option
  awards and the contribution of wife.  Although he had the burden of proof,
  Baccanti, 752 N.E.2d at 730, he made no argument to the court as to how it
  could determine the purposes of the options and how it should allocate
  based on service.  See id. at 731-32 (husband waived appeal issue where he
  argued only that unvested options were separate property and did not
  address allocation issue).  

       ¶  33.  Looking at the family court's decision overall, we find it
  more than fair to husband.  While stock options are an essential component
  of husband's compensation, the family court considered his future income as
  if he would not be awarded stock options in the future as he had in the
  past.  As a result, the stock options in dispute represent only a
  relatively small part of husband's future compensation, and the bulk of
  that compensation will not be considered either in the property
  distribution or in the maintenance award.  See n.5 infra. To the extent
  there is unfairness in the overall result, it has disadvantaged wife and
  not husband.  

                                     C.

       ¶  34.  Next, husband claims the family court erred when it valued the
  unvested stock options for purposes of distribution because the unvested
  stock options are subject to forfeiture should he stop working for the
  company.  He argues that the court can distribute the options only in kind
  without assigning a value to them.

       ¶  35.  At trial, both sides presented experts as to the valuation of
  the stock options, and both experts presented testimony on whether a value
  could be assigned with reasonable certainty.  Based on the testimony, the
  family court concluded that all of the stock options could be valued, and
  further concluded that the parties actually "came close to an agreement on
  [the stock option] value," differing only by about $308,000.  It adopted a
  valuation roughly in the middle of the values proffered by the expert
  witnesses, setting the value of all the options, vested and unvested, at
  $2,646,000.  Based on that valuation, it split the transferable stock
  options, giving each party fifty percent.  It left the incentive stock
  options, which cannot be transferred, with husband.  In value terms, wife
  received options, both vested and unvested, worth $1,226,421, and husband
  received options, vested and unvested, worth $1,419,579.   The value of the
  additional options awarded to husband was offset by additional property
  awarded to wife to reach a nearly exact fifty-fifty division of the marital
  assets.  The court noted, however, that the valuation of the
  non-transferable options was probably low because they receive more
  favorable capital gains tax treatment.  Finally, the family court
  specifically declined to set up a trust, as the court did in Callahan, 361
  A.2d at 563, to distribute the stock options because "such a vehicle would
  require these parties to continue to have contact and would also likely
  require the court to continue . . . supervision or involvement in these
  parties' affairs.  This is not in anyone's interests."
                           
       ¶  36.  We reject husband's contention that the family court erred in
  its valuation of the unvested stock options.  The family court's basis for
  this valuation is well reasoned and based on adequate findings supported by
  evidence in the record.  See Kanaan v. Kanaan, 163 Vt. 402, 405, 659 A.2d
  128, 131 (1995) ("[W]e will uphold the court's valuation conclusions as
  long as they are supported by adequate findings, which are in turn
  supported by sufficient evidence in the record.");  Chilkott v. Chilkott,
  158 Vt. 193, 197, 607 A.2d 883, 885 (1992) (use of expert testimony to
  value a pension fund is the proper method).  In fact, we have previously
  affirmed valuing property despite the existence of contingencies that, if
  not realized, would mean the property value could change in the future. 
  See Chilkott, 158 Vt. at 197, 607 A.2d at 885 (trust interest); McDermott,
  150 Vt. at 260, 552 A.2d at 788 (pension fund).  Specifically, we have
  approved the valuation of pensions where the spouse, like husband here,
  must continue to work to be able to exercise the asset.  See, e.g.,
  McDermott, 150 Vt. at 260, 552 A.2d at 788.  As we noted in Chilkott, even
  though the asset's value may be "contingent on the worker reaching
  retirement, . . .  [o]nce we accept the pension contingency, the
  contingencies in the instant case do not defeat the applicability of §
  751(a)."  Chilkott, 158 Vt. at 197, 607 A.2d at 885. 

       ¶  37.  We also note in this case that the consequence of an incorrect
  valuation is relatively small.  Except for the eight percent of the options
  awarded solely to husband because they were nontransferable, all other
  options were split equally between the parties so that the impact of a
  misvaluation was shared equally.  See McDermott, 150 Vt. at 261, 552 A.2d
  at 789 (affirming trial court's method of property distribution where it
  "ensures that the parties share the risk of forfeiture through unemployment
  or death"). 

       ¶  38.  Finally, we note that other courts have addressed the issue of
  valuation and authorized valuation of unvested options despite the
  contingencies involved.  See, e.g., Otley, 810 A.2d at 10-11.  In Davidson,
  the court specifically endorsed the Black/Sholes method of valuing unvested
  options, the method used by wife's expert witness in this case.  578 N.W.2d
  at 858.
   
       ¶  39.  The family court specifically determined that the stock
  options could be valued, and that another method of distribution would be
  unworkable for the parties and the court.  See McDermott, 150 Vt. at
  260-61, 552 A.2d at 788 (affirming distribution method that promotes
  immediacy and finality).  The court's decision to divide the property in
  order to reach an equitable distribution was well within its broad
  discretion to distribute property.  See Cabot v. Cabot, 166 Vt. 485, 497,
  697 A.2d 644, 652 (1997) (upholding family court's distribution and noting
  irrelevance of possible inaccuracy of net estate value where both parties
  would bear burden of inaccuracy and overall distribution would still be
  just); McDermott, 150 Vt. at 261, 552 A.2d at 789.  We affirm its decision. 

                           II.  Date of Valuations

       ¶  40.  Husband's next argument is that the court erred by valuing the
  parties' assets as of the beginning of the final hearing and ignoring
  evidence that those valuations had become inaccurate by the end of the
  final hearing.  Specifically, husband argues that the court (1) ignored the
  fact that BEA Systems stock was dropping in value as the trial went on, and
  the drop affected the valuation of the stock options, and (2) ignored the
  distributions of money from a Merrill Lynch account that the court valued
  and distributed.  In making these arguments, husband relies on the
  principle that the court should not "premise its division of marital
  property on outdated valuations of the assets involved" and that equitable
  division "cannot be achieved by reliance on stale valuation data." 
  Cleverly v. Cleverly, 151 Vt. 351, 355, 561 A.2d 99, 101 (1989).

       ¶  41.  Husband made these arguments in his motion to reconsider, and
  the court responded as follows:

    The defendant essentially argues that the court erred in making
    its findings as to the value of the marital assets based upon
    evidence presented at trial because those values fluctuated, as
    the experts for both sides conceded, from week to week during
    trial.  However, the court has no realistic choice but to makes
    such findings, using its best judgment.  The court does not agree
    that its figures were "stale."  The court made its decisions based
    on its best judgment and based upon the evidence presented by both
    parties.  The court is satisfied that, in the long term, the
    valuation used by the court will, when all aspects of the property
    division and valuation are taken into account, result in a just
    and equitable division between the parties.

  The merits hearing in this case took eight trial days, spread over three
  months. In this context, constant updating of the value of assets is
  practically impossible.  We agree that the court acted well within its
  discretion in its valuation and in denying the motion to modify.
   
       ¶  42.  Our precedents rejecting stale valuations involve time gaps
  between valuation of assets and the distribution of those assets far longer
  than is arguably involved here.  Cleverly involves a gap of three years. 
  Id. at 354, 561 A.2d at 101.  In Albarelli v. Albarelli, 152 Vt. 46, 48,
  564 A.2d 598, 599 (1989), we added that "marital assets should be valued as
  close to the date of trial as possible."  The valuations in this case
  easily met the timeliness standards of our precedents. 

                             III.  Real Property

       ¶  43.  Husband and his brother Fraser own, as tenants in common,
  three lots of land in Putney, each with a building.  One contains the
  marital homestead in which wife lives.  Another contains a house in which
  Fraser lives.  The third contains a cottage and barn.  The evidence
  indicated that Fraser built his house and made substantial improvements to
  it thereafter.  Because of that work, husband's evidence indicated that the
  brothers made an oral agreement that Fraser would own outright his house
  and the land on which it stands, and husband would own outright the third
  parcel with the cottage and barn.  This oral agreement was not
  memorialized, and the record title reflects the ownership of all the lots
  as tenants in common.  

       ¶  44.  Husband claims that grounds exist to reform the deed in equity
  to represent the oral agreement of the brothers, and that the family court
  erred when it refused to enforce the oral agreement.  He further argues
  that Fraser owns the property based on adverse possession or quantum
  meruit.  He argues that as a result, the value of his interest in the
  Putney property should be reduced by approximately $94,500.  
   
       ¶  45.  The family court is a court of limited jurisdiction, 4 V.S.A.
  § 454, and that jurisdiction does not include reformation of deeds or
  determination of actions for adverse possession or quantum meruit between
  brothers.  We recognize that husband does not actually want the family
  court to reform the deed, but instead to act as if it had been reformed. 
  We find that procedure untenable.  According to husband's argument, the
  family court would have to take the house and building occupied by Fraser
  out of the marital property, but husband could thereafter sell his half
  interest in the same property to a bona fide purchaser because the record
  title remains with him.  

       ¶  46.  We are also concerned about burdening divorce proceedings with
  additional ancillary litigation that delays resolution of the divorce
  issues.  See Ward v. Ward, 155 Vt. 242, 247, 583 A.2d 577, 581 (1990). 
  This concern is hardly theoretical in a divorce proceeding as complex as
  this one and where wife contests husband's position both factually and
  legally.  If husband believes that the record title does not represent the
  true ownership interests, he should have brought an action to reform the
  deeds in superior court.  We hold that the family court properly acted
  within its discretion in determining husband's real property interests
  based on the record title.  

                     IV.  Custody and Maintenance Award

       ¶  47.  The family court has considerable discretion in ruling on
  maintenance, and the party seeking to overturn a maintenance award must
  show there is no reasonable basis to support the award to succeed on
  appeal.  Sochin v. Sochin, 2004 VT 85, ¶ 10, 177 Vt. 540, 861 A.2d 1089
  (mem.).  Thus, this Court's review is limited to determining whether the
  family court's exercise of discretion was proper and whether a reasonable
  basis supports the award.  See Kasser v. Kasser, 2006 VT 2, ¶ 16, 179 Vt.
  259, 895 A.2d 134; Johnson v. Johnson, 155 Vt. 36, 40, 580 A.2d 503, 506
  (1990).
   
       ¶  48.  Husband argues that the court made two errors in determining
  his annual income on which the maintenance and child support award was
  based.  Generally, the family court concluded that husband's salary,
  including wages and bonuses but not including stock options, was $430,000
  per year.  It also concluded that husband will continue to be awarded stock
  options that would produce an income of roughly $60,000 annually, (FN5)
  creating a total income of $490,000.  Husband claims first that the base
  amount is inconsistent with the evidence and the findings, and second, that
  the stock option income is speculative and represents "double dipping" on
  assets distributed as property.  We begin with the first claim of error.

       ¶  49.  The court concluded that husband's "base salary as of the
  conclusion of the hearing was $300,000 per year."  The court further found
  that since husband's employment with BEA Systems, he has received both
  bonuses and stock options in addition to his base salary, and the base
  salary increased each year of his employment.  The court found that husband
  "had the potential to receive additional bonuses each year of 30% of base
  pay, and then from November 2001 to the present, he has had the potential
  to receive bonuses of up to 60% of his base pay."  Although the court
  calculated that husband's average annual bonus from January 2000 through
  May 2004 was only $76,492, it also found that "[h]is bonuses have shown a
  trend of significant increases each year."  In fact, it found that should
  husband reach his potential of a bonus at the rate of sixty percent of his
  current base pay, "this would amount to $180,000 in additional wages." 
  Considering husband's increasing base salary and the increasing amount of
  bonuses, the court concluded that husband's annual income, excluding that
  from stock options, is $430,000. 

       ¶  50.  The family court's finding of husband's annual salary at
  $430,000 is fully supported by the record.  The court was not required to
  use either the average of prior bonus awards or the current base salary to
  determine husband's future income given the history of increases in both
  amounts.  We find that the court's income determination, apart from the
  stock option income, was within its discretion.  See Kohut v. Kohut, 164
  Vt. 40, 44, 663 A.2d 942, 945 (1995) (court could determine obligor's
  future income in part on his begining a new job that would produce a better
  income).
   
       ¶  51.  We have already discussed the court's determination that
  husband would earn $60,000 annually on the sale of stock options, as well
  as our conclusion that this determination was  low.  We address here only
  husband's arguments that the court "double dipped" by counting the options
  as both assets and income, and that the court prematurely counted the
  income from future stock option awards.

       ¶  52.  As we said above, the court appeared to derive the $60,000
  additional annual income from future stock option awards.  Since the stock
  options had not yet been provided to husband, and were not part of the
  property distribution, his "double dipping" argument does not apply.

       ¶  53.  We add, however, that husband's "double dipping" argument is
  erroneous.  In making it, he relies on a case that defined capital gains
  for child support purposes to ensure that obligors in similar circumstances
  were treated equally.  See Mabee v. Mabee, 159 Vt. 282, 286, 617 A.2d 162,
  164 (1992) (holding that capital gain resulting from appreciation in value
  of property received in asset distribution could not also be considered
  income for child support obligation).  The situation is totally different
  here.  Husband was awarded stock options worth over $1,400,000, many of
  which were vested, and it is reasonable to expect that these assets will
  earn income.  This income must be considered in determining an appropriate
  maintenance award.  See 15 V.S.A. § 752(b)(6).  Indeed, the family court
  considered the availability of income from the assets awarded to wife in
  determining her need for maintenance.  
   
       ¶  54.  Husband's other argument is that future awards of stock
  options cannot be considered income because, as the court found, there will
  be at least a year delay in husband's ability to exercise these options. 
  This argument calls for a fine tuning of maintenance awards that is
  unrealistic and would keep the parties in court forever.  As the court
  found, stock options were a normal part of husband's compensation package,
  and he received them on a regular basis.  At the conclusion of the divorce
  proceeding, he was holding options worth over $1,400,000.  It is reasonable
  to assume that he would generate at least $60,000 in income from these
  options in the short term while the stream of income from future awards was
  reestablished.  See Hiett v. Hiett, 158 S.W.3d 720, 724 (Ark. Ct. App.
  2004) (stock options anticipated in the future represent income for
  purposes of setting an alimony level).  

                          V.  Changed Circumstances

       ¶  55.  This case comes to us after the consolidation of two separate
  appeals.  The first, considered above, involves the original divorce order. 
  The second, considered here, involves the denial of husband's subsequent
  motion to modify his child support and spousal maintenance obligations
  based on allegedly changed circumstances.   Husband made the motion to
  modify on March 5, 2005, only three months after the original divorce
  decree was issued and less than two months after the denial of his motion
  to modify and amend the divorce order.  While the grounds were extensive,
  they rely on two central points: (1) husband's income decreased from
  $490,000-the court's finding as to his income-to $353,500, and (2) his
  eldest son, Jonathan, made an "unanticipated permanent move to California"
  greatly increasing his expenses and reducing wife's expenses.  He argued
  that either or both of these grounds constitute a real, substantial, and
  unanticipated change of circumstances sufficient to modify the maintenance
  and child support orders.

       ¶  56.  In a brief order issued on April 6, 2005, after a hearing, the
  court denied the motion ruling:

    The allegations in these motions consist almost entirely of
    challenges to the court's findings of fact in the divorce decree. 
    These issues are to be resolved on appeal.  The balance of the
    motion consists largely of allegations regarding facts that could
    have been presented at trial (e.g. the reasonably anticipated
    expenses related to Jonathan's relocation), or that are very far
    from being unanticipated or substantial in nature.  The defendant
    has failed to meet his burden of alleging a real, substantial, and
    unanticipated change in material circumstances since the issuance
    of the court's final order. 

  Husband's argument on appeal is that the decrease in income and increase in
  expenses constitute unanticipated changes in circumstances as a matter of
  law.
   
       ¶  57.  The family court may modify a child support or spousal
  maintenance order only upon a showing of real, substantial, and
  unanticipated change of circumstances.  15 V.S.A. § 660(a) (child support);
  id. § 758 (spousal maintenance).  A change in circumstances is a
  jurisdictional prerequisite to such modifications, Harris v. Harris, 168
  Vt. 13, 17, 714 A.2d 626, 629 (1998), and the burden is on the moving party
  to establish the requisite change, Habecker v. Giard, 2003 VT 18, ¶ 5,
  175 Vt. 489, 820 A.2d 215.  "There are no fixed standards for determining
  what meets this threshold," and we must evaluate whether a given change is
  substantial "in the context of the surrounding circumstances."  Taylor v.
  Taylor, 175 Vt. 32, 36, 819 A.2d 684, 688 (2002).  The ruling is
  discretionary so we will not reverse a decision on whether the threshold
  has been met unless the court's discretion "was erroneously exercised, or
  was exercised upon unfounded considerations or to an extent clearly
  unreasonable in light of the evidence."  Id. (citation omitted).  

       ¶  58.  The main grounds for the denial of the motion were that
  husband was trying to relitigate decisions made in the divorce decision and
  that he moved too soon to establish that circumstances had changed with
  respect to his income or expenses.  In addition, the court found that the
  expenses for Jonathan were or should have been anticipated by the time of
  the divorce hearing.  Indeed, the divorce decision stated that the parties
  had concluded that Jonathan, who was sixteen years old at the time of the
  decision, "would spend this school year (2004-2005) in San Francisco,
  living with the defendant and attending a day school there" and that costs
  of schooling and child care for Jonathan  "must be adjusted for the fact
  that [husband] is now paying Jonathan's costs."   
   
       ¶  59.  We recognize that, in circumstances where an obligor achieves
  a substantially lower income than the projection upon which a maintenance
  order is based, the family court can find changed circumstances.  See
  Stickney v. Stickney, 170 Vt. 547, 548, 742 A.2d 1228, 1231 (1999) (mem.). 
  This does not mean, however, that the court must find changed circumstances
  if the obligor's income is underperforming the projection three months
  after the maintenance order is issued.  This case demonstrates why a family
  court could require the obligor to show underperformance over a substantial
  period of time to justify a downward modification in child support or
  maintenance.  Husband's income history showed great volatility from year to
  year, but on average husband earned far more than the income figure on
  which the court set the maintenance and child support awards.  The court
  acted well within its discretion to rule that husband's proffer of reduced
  income was more a challenge to the divorce decision than a demonstration of
  changed circumstances and, as a demonstration of changed circumstances, was
  inadequate.  Similarly, we affirm the family court's decision that the
  additional expenses for Jonathan were not unanticipated and should have
  been shown at the divorce hearing.

       ¶  60.  Finally, we consider wife's cross-appeal claims.  Wife
  cross-appealed from the original divorce decision raising three issues, but
  added in her brief that she would waive consideration of the cross-appeal
  issues if the divorce judgment were affirmed in response to husband's
  claims on appeal.  We have rejected husband's claims on appeal and have
  affirmed the divorce decision as well as the rulings on the post-judgment
  motions.  Thus, in accordance with wife's contingent waiver, we dismiss her
  cross-appeal.  

       Affirmed.

                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice



------------------------------------------------------------------------------
                                  Footnotes


FN1.  Husband has assumed that the court's finding that "all . . . [the
  options] were attributable to his work during the marriage" is a conclusion
  of law and argues that it is inconsistent with the court's findings.  By
  the court's findings, husband means the summary of the evidence, which does
  not constitute findings as we noted in the text.  We have treated husband's
  argument as if he were arguing that the court's finding on this point is
  clearly erroneous.

FN2.  We recognize that this theory might support a conclusion that some part
  of options granted after the dissolution of the marriage are marital
  property.  We are not going that far in this case.  There is also an issue,
  as discussed infra, whether options awarded in the future are better
  considered either as income or as income-producing property in the
  determination of maintenance and child support.

FN3.  Consistent with our analysis above, we have substituted the date of the
  final hearing for the date of separation-the date proposed by husband.

FN4.  In some states, the applicable formula must exclude any stock option
  that vested prior to the marriage and any portion of an unvested option
  that reflects compensation for work prior to the marriage.  Thus, Davidson
  suggests three formulae depending on the circumstances.  578 N.W.2d at 857. 
  Under 15 V.S.A. § 751(a), marital property includes property brought into
  the marriage by either spouse.  See Colm v. Colm, 137 Vt. 487, 490-91, 407
  A.2d 184, 186 (1979).

FN5.  Although the family court did not specify how it derived this figure,
  we infer that it represents the interest on the first year of stock options
  awarded to husband under the property distribution.  This figure ignores
  the future vesting of stock options pursuant to awards made prior to the
  final hearing and, more important, assumes that husband will never receive
  future stock options, an assumption at variance with the facts found by the
  court.  If anything, the family court undervalued the income from husband's
  stock option stream. 


