COURT OF APPEALS OF VIRGINIA
Present: Judges Coleman, Willis and Elder Argued at Salem, Virginia
SARAH RUTH WOFFORD TATUM
v. Record No. 0438-00-3
JOSEPH KENNETH TATUM MEMORANDUM OPINION * BY JUDGE SAM W. COLEMAN III JOSEPH KENNETH TATUM DECEMBER 5, 2000
v. Record No. 0443-00-3
FROM THE CIRCUIT COURT OF ROANOKE COUNTY Roy B. Willett, Judge
Cheryl Watson Smith (Mundy, Rogers & Frith, L.L.P., on briefs), for Sarah Ruth Wofford Tatum.
William H. Cleaveland (Rider, Thomas, Cleaveland, Ferris & Eakin, P.C., on briefs), for Joseph Kenneth Tatum.
Both Sarah Tatum (wife) and Joseph Tatum (husband) appeal the
circuit court's equitable distribution, spousal support, and child
support awards. Husband argues that the circuit court erred in
reopening its equitable distribution order to consider the value
and distribution of his stock options. Wife argues that the
* Pursuant to Code § 17.1-413, this opinion is not designated for publication. circuit court erred in: (1) valuing husband's stock options on
the date of separation; (2) offsetting the husband's spousal
support obligation against wife's child support obligation;
(3) failing to consider the spousal support factors set forth in
Code § 20-107.1; (4) imputing income to her; and (5) awarding her
insufficient spousal support. For the following reasons, we
reverse and remand.
I. BACKGROUND
Husband and wife were married January 5, 1980. They were
divorced by final decree on May 27, 1997. Two children were born
to the marriage. Wife is a registered nurse, but at the time of
the parties' separation, wife had not been employed as a clinical
nurse for nearly fourteen years. During the marriage, husband was
employed by Wachovia Bank and, as part of his compensation,
husband received stock options, all of which were acquired during
the marriage and prior to the final separation. After the
divorce, husband exercised his options and purchased 4,700 shares
of stock for approximately $142,175. In December 1998, after
husband exercised the options, he sold the stock for over
$400,000.
A. Stock Options
A hearing on the equitable distribution issues was conducted
in June 1997 and the trial court entered an "Interlocutory Decree"
dated October 1, 1997, in which the trial court equitably
- 2 - distributed the parties' retirement accounts, vehicles, 401K plan,
and husband's interest in C&T Properties. The trial judge ordered
that the marital residence be sold and the parties divide the
proceeds equally and that "they shall endeavor to agree upon the
distribution of the household furnishings." The decree further
provided that the "court takes under advisement issues concerning
child support, spousal support, and an award of attorney's fees
and costs, pending the sale of the marital property and other
matters set forth in this order." At the hearings preceding the
October 1, 1997 decree, the parties presented no evidence
concerning the value or ownership of husband's stock options and
the decree did not mention the stock options. The decree provided
that in the event the parties were not able to agree upon the sale
or value of certain assets they "may set the matter for hearing."
In August 1998, after all other equitable distribution issues
had apparently been resolved, wife filed a notice for a "pre-trial
conference" "for the purpose of addressing a mechanism for the
resolution of the remaining issues in this matter." Wife
asserted, among other things, that the classification, evaluation,
and distribution of husband's stock options remained an issue to
be decided. In January 1999, wife filed a motion for entry of an
order finding that husband's stock options are marital property
and awarding wife an equitable share. The record shows that wife
was informed and knew of the existence of the stock options as
- 3 - early as November 22, 1996, when she was provided the information
concerning husband's ownership in "Supplemental Answers to
Defendant's Interrogatories."
The trial court referred the issue to a commissioner in
chancery. The commissioner opined that the trial court had
jurisdiction to hear and decide the issues concerning the stock
options because the trial court's October 1, 1997 decree was
interlocutory and was not a final decree equitably distributing
all of the parties' property. The commissioner specifically noted
that the October decree provided, with respect to the parties'
401K and thrift savings plan, "[t]hat the parties shall endeavor
to reach agreement concerning the value of said contributions. If
the parties are unable to reach agreement, then the parties may
set the matter for hearing." The commissioner further found that,
although husband informed wife of the stock options on or about
November 22, 1996, prior to the equitable distribution hearing,
the failure by either party to raise the issue at the equitable
distribution hearing was "a mutual mistake or oversight." Thus,
the commissioner ruled that the stock options were marital
property and that she would proceed to equitably distribute them.
She further ruled that the valuation date for the stock options
should be April 8, 1996, the date the parties separated, because
the parties agreed to that evaluation date as to the other
property at the December 21, 1998 hearing. The commissioner
- 4 - further found that as of April 8, 1996, the value of the options
"on paper" was $12,925 but, because of the speculative nature of
the options, they had zero marital property value.
The trial court's final decree dated January 27, 2000
provided:
[Wife's] failure to raise the stock options as an issue at the equitable distribution hearing in this matter in June 1997 was an oversight by [wife]. The court concludes that the Commissioner erred by finding that the total value of the marital share of stock was zero. The court finds that the value of the Wachovia stock at issue was $12,925 on the date of the separation of the parties, April 8, 1996, and awards [wife] 50% of that sum, which is $6,462.50.
B. Child and Spousal Support
As to matters of child and spousal support, in May 1996, the
court had entered an interlocutory decree ordering that the
parties’ two children shall reside with wife at the marital
residence, husband shall pay wife $1,323 per month in temporary
child support, and pay the mortgage and utilities for the marital
residence. In February 1997, the circuit court modified the
spousal support award and ordered husband to pay wife $500 per
month in temporary spousal support. In April 1998, the juvenile
and domestic relations district court transferred custody of the
two children to husband and ordered wife to pay husband $128.31
per month in child support. Husband appealed the child support
order, arguing that wife should be required to pay more child
- 5 - support because she was voluntarily unemployed and income should
be imputed to her.
At the circuit court hearing conducted in March 1999, wife
testified that she had enrolled in the seminary at Baylor
University in Waco, Texas in November 1998. Prior to relocating,
wife had been employed at Gentle Shepherd Hospice for
approximately six months at an annual salary of $30,000 with the
possibility of earning "on-call pay." She voluntarily left that
employment in July 1998 because she was unhappy at the position
and was required to perform duties for which she was not
qualified. When she left her employment, wife knew that she
intended to pursue her studies in women's ministries. Wife
further testified that she could no longer pursue a career in
clinical nursing because she has been diagnosed with dyslexia.
At the time of the March 10, 1999 child and spousal support
modification hearing, wife was paying husband $128.31 per month in
child support and husband was paying wife $500 per month in
spousal support. Following the hearing on child and spousal
support, the trial court suspended both support obligations,
giving the following explanation:
The Court recognizes the authority it has to order spousal support and certainly to order child support. I don't know that I have done this before, but, based upon any figures I would have used and the tax consequences to him deducting spousal support and her having income on it and he clearly having the exemptions of the two
- 6 - child dependants, the Court finds that is imminently equitable with all the history of this case, certainly with the expense he is about to incur and which I believe will be incurred regarding counseling for these . . . girls.
At a hearing on April 2, 1999, the trial court further
stated:
It was my opinion that when tax consequences were considered on the spousal support and the amount of child support that would have been awarded and the acrimony between the parties, that there would have been a virtual equality in payment one to other, that is, the former husband to the former wife and vice versa, in spousal support and the child support.
In an effort to limit and end this litigation, the Court simply suspended both based upon those very similar numbers and based upon the total inability of these people to communicate and get along hoping that they could then communicate and deal with one another with the children, who are more important than any of these other things that we are talking about.
I said to counsel on the face of it that doesn't look like the proper thing for the Court to do, but I hope everybody understands why the Court did as it did on the ongoing support payments.
II. ANALYSIS
1. Finality of October 1997 Decree
Neither party raised the issue of the stock options at the
June 1997 equitable distribution hearing. Husband contends that
the October 1, 1997 decree which followed that hearing was a
- 7 - final decree and Rule 1:1 precluded the trial court from
"reopening" the equitable distribution order to consider the
stock option issue. However, the trial court ruled that the
equitable distribution issues had not been finally litigated and
wife was not precluded from having that issue decided. After
considering the stock option evidence, the court valued the
stock options as of April 8, 1996, the date of separation, at
$12,925 and ordered that husband pay wife half of that sum.
"A final decree is one 'which disposes of the whole subject,
gives all the relief that is contemplated and leaves nothing to
be done by the court.'" Wells v. Wells, 29 Va. App. 82, 85-86,
509 S.E.2d 549, 551 (1999) (quoting Erikson v. Erikson, 19 Va.
App. 389, 390, 451 S.E.2d 711, 712 (1994) (internal quotation
marks and citations omitted)).
We agree with the trial court that the October 1, 1997
equitable distribution order did not dispose of all the equitable
distribution issues and, therefore, was not a final decree. The
decree provided for the sale of the marital residence and the
distribution of the proceeds, distribution of the husband's
retirement accounts, and distribution of husband's partnership
interest in C&T Properties. However, the trial court did not
determine the value of husband's interest in C&T properties or
equitably divide that asset. Rather, the court directed that the
parties shall either agree to the value of the husband's interest
- 8 - or engage the services of an appraiser. If the parties could not
reach an agreement, the matter would be scheduled for a hearing.
Clearly, the court was providing a method to evaluate this marital
asset. Further, the court stated, with respect to husband's
combined 401K and Thrift Savings Plan, that wife shall receive
one-half of the balance of the account, less any contributions
made by husband after the date of separation. The court ordered
that "the parties shall endeavor to reach agreement concerning the
value of said contributions. If the parties are unable to reach
agreement," then the matter may be set for a hearing. Here again
the court directed the method by which the court and parties were
to value this marital asset. Additionally, the trial court stated
that it was taking the attorney's fees and spousal and child
support issues under advisement, pending the sale of the marital
home.
Accordingly, we find that, although the October 1, 1997
equitable distribution order purported to distribute the parties'
assets, some of the assets had not been valued, and valuation was
contingent upon agreement of the parties or was pending a further
hearing. Therefore, the October decree was an interlocutory
decree, and the trial court retained jurisdiction to consider
further valuation and distribution of the marital assets.
- 9 - 2. Valuation of Stock Options
The trial court conducted the first evidentiary hearing on
the marital assets in June 1997 and entered its interlocutory
equitable distribution decree in October 1997. After the court
entered the interlocutory equitable distribution decree, wife
requested equitable distribution of husband's stock options. The
trial court conducted a separate hearing in September 1999 solely
for the purpose of determining the classification and value of the
stock options, all of which had been acquired during the marriage.
In December 1998, prior to the equitable distribution hearing,
husband had exercised the options and purchased the stock.
We hold that the trial court erred in finding that the value
of the marital asset was the value of the stock options as of the
date of separation, rather than the net value of the stock at the
time the stock had been sold. We do not agree that wife
acquiesced in using the date of separation as the date for valuing
the stock options merely because she may have agreed upon that
date for valuing other marital assets. The fact that she
acquiesced in using the separation date as the appropriate date
for valuing the property which the court was considering is not
binding where the court later considers the value of other
property that has significantly appreciated or depreciated in
value due solely to passive factors. The valuation date should be
that date which most accurately reflects the fair market value of
- 10 - the asset to the parties. See Rowe v. Rowe, 33 Va. App. 250,
264-65, 532 S.E.2d 908, 915-16 (2000).
Admittedly, had the court been required to value the stock
options as of the separation date, their value would have been
speculative as the special commissioner and trial court ruled.
However, because the valuation hearing for this asset took place
after the options had been exercised and after the stock had been
sold, the value of the marital asset had been fixed and the court
erred in not using the date of the evidentiary hearing to
determine the value of the asset.
"We have stressed that the trial judge in evaluating marital property should select a valuation 'that will provide the Court with the most current and accurate information available which avoids inequitable results.'" Gaynor v. Hird, 11 Va. App. 588, 593, 400 S.E.2d 788, 790-91 (1991) (quoting Mitchell v. Mitchell, 4 Va. App. 113, 118, 355 S.E.2d 18, 21 (1987)); see also Wagner v. Wagner, 16 Va. App. 529, 531, 431 S.E.2d 77, 78 (1993) (en banc) (stating that "the reasons for re-valuation on remand are the same as in the original hearing -- to obtain the most accurate valuation and equitable distribution"). We held [in Mitchell] that because the Code "does not fix a date for determining the value of [the parties' assets], the trial court must select a valuation date if the parties cannot agree to one." Mitchell, 4 Va. App. at 118, 355 S.E.2d at 21. The 1998 amendments to Code § 20-107.3(A) codified the rule announced in Mitchell. Code § 20-107.3(A) provides:
"The court shall determine the value of any such property as of the date of the evidentiary hearing on the evaluation issue. Upon motion of either party made no less
- 11 - than twenty-one days before the evidentiary hearing the court may, for good cause shown, in order to attain the ends of justice, order that a different valuation be used."
Rowe, 33 Va. App. at 263-64, 532 S.E.2d at 915.
Here, the court erred by not adhering to the mandate of
Code § 20-107.3(A) to use the date of the evidentiary hearing
for evaluating the marital asset. We hold, therefore, that the
trial court erred in failing to value the stock options as of the
date of the September 1999 evidentiary hearing, which was after
husband had exercised the options and the value of the asset had
become fixed. On remand, the trial judge shall determine the
actual net value of the stock as of the date of the evidentiary
hearing and shall then equitably distribute the net value of the
marital asset between the parties in accordance with the
provisions of Code § 20-107.3(E). While we note the husband
invested significant funds in order to exercise the options, on
these facts the capital investment to exercise the options, even
if partly from separate funds, was not at risk since the stock had
to be sold immediately and, therefore, the increase in value was
marital because it was not the result of the husband's active
efforts. See Code § 20-107.3(A)(1).
We next consider the propriety of the trial court's order
"offsetting" husband's spousal support obligation against wife's
child support obligation and suspending any child or spousal
- 12 - support awards. We hold that the trial court erred by offsetting
the support obligations, by failing to calculate and order the
payment of the child support and spousal support awards, and by
suspending the determination of the child or spousal support
award.
In April 1998, the juvenile and domestic relations district
court transferred custody of the parties' two children to husband
and ordered wife to pay husband $128.31 per month in child
support. While it is unclear from the record how the court
determined the $128.31 amount, apparently the juvenile and
domestic relations district court had awarded this amount based
upon the parties' actual incomes and by applying the child support
guidelines. The juvenile and domestic relations district court
also had ordered husband to pay wife $500 per month spousal
support. Thus, at the time the circuit court heard the child and
spousal support issues, the wife had been ordered to pay husband
$128.31 per month for support of the two children and husband had
been ordered to pay wife $500 per month for spousal support.
When the issues of child and spousal support then came before
the trial court for a permanent award, the wife took the position
that her $500 per month spousal support award should be increased
and that no income should be imputed to her for purposes of either
spousal or child support because she is a full-time student and is
not capable of gainful employment in her prior profession as a
- 13 - nurse. The husband contended, on the other hand, that wife is
fully capable of gainful employment as evidenced by her last
employment at an annual salary of $30,000 and that income should
be imputed to her for purposes of reducing her spousal support
award and increasing her child support obligation.
The trial court found that wife was voluntarily unemployed,
that she was capable of being gainfully employed, and imputed
income of $30,000 per year to her. However, without determining
the amount of child support to which the children were entitled or
the amount of spousal support to which the wife might be entitled,
the trial court then suspended husband's spousal support
obligation and wife's child support obligation.
As we have held, "pursuant to Code § 20-108.1(B) . . . the
court has an affirmative duty to calculate expressly the
presumptive guideline amount of child support under the
guidelines and, if it deviates from that presumptive amount, to
explain adequately the basis for such deviation." Herring v.
Herring, 33 Va. App. 281, 287, 532 S.E.2d 923, 927 (2000). "The
trial court's deviation from the child support guidelines
without first calculating and stating the presumptive amount of
support due constitute[s] reversible error." Id. at 283-84, 532
S.E.2d at 925. Moreover, an award that fails to state the
presumptive amount of the award or the basis and amount of the
deviation, does not provide an adequate basis for future
- 14 - modifications of support. See id. at 288-89, 532 S.E.2d at 927.
As we have stated,
to allow the non-conforming award to stand without adequate explanation as to how the amount of support was determined would seriously handicap a court overseeing future modification proceedings because that court would have an insufficient understanding of the manner in which the existing award was set and the extent to which a change in circumstances might warrant a change in the amount of support.
Id. at 289, 532 S.E.2d at 927 (citation omitted).
Here, the trial court, failed to "calculate expressly the
presumptive amount of child support under the guidelines."
Although the pre-existing award of $128.31 per month from the
juvenile and domestic relations district court was presumably
based on the child support guidelines, the circuit court, when
considering permanent child support, is not relieved of the
responsibility to determine the presumptive amount based on the
child support guidelines. Even assuming that $128.31 would have
been the correct presumptive amount under the guidelines, by
offsetting or suspending the award the court deviated from the
guidelines without making a sufficient explanation, particularly
without addressing the effect that imputed income would have
upon the determination. Although husband asks us to approve the
trial court's ruling suspending his right to receive child
support, he does so provided we suspend and offset his obligation
to pay spousal support. We hold that husband's attempt to waive
- 15 - child support is ineffectual; the father cannot waive the
children's right of support from a parent. See generally Kelley
v. Kelley, 248 Va. 295, 298, 449 S.E.2d 55, 56 (1994)
("[P]arents cannot contract away their children's rights to
support nor can a court be precluded by agreement from
exercising its power to decree child support."). Child support
and spousal support involve separate rights and obligations
between different parties and are to be determined based on
separate statutory factors. Cf. Code §§ 20-107.1(E) and
20-108(B). For these reasons, a court is not authorized to
offset one support obligation against another or to suspend
those obligations. See Mosley v. Mosley, 30 Va. App. 828, 837,
520 S.E.2d 412, 416-17 (1999) (holding that "a disabled,
non-custodial parent may not receive credit for social security
disability payments in excess of that due for child support as
against past-due spousal support" because payments of child
support are for the benefit of the child and are based on the
child's status as a dependant of the non-custodial parent,
whereas spousal support is awarded based on the circumstances of
the parties' prior marriage); see also Poland v. Poland, 895
S.W.2d 670, 672 (Mo. Ct. App. 1995) (holding that husband was
not entitled to offset monies he owed wife for child support
against monies wife owed him pursuant to property settlement
agreement because wife received child support monies in trust
- 16 - for the benefit of the children). Accordingly, the court erred
in failing to expressly determine the child support award and
the spousal support award amounts and erred in offsetting the
awards against one another. Thus, we reverse the trial court's
ruling and remand the spousal and child support awards to the
trial court for determination.
In regard to the spousal support award, wife also contends
that the trial court erred by failing to consider the factors
articulated in Code § 20-107.1, by imputing $30,000 in income to
her, and by making an insufficient award of spousal support.
Because we have held that the trial court erred in its equitable
distribution decision in valuing the stock options and in
offsetting and suspending wife's child support obligation and
husband's spousal support obligation, on remand the trial court
must necessarily reconsider an award of spousal support in light
of the factors set forth in Code § 20-107.1(E). See Code
§ 20-107.1; Woolley v. Woolley, 3 Va. App. 337, 344, 349 S.E.2d
422, 426 (1986) (holding that failure to consider the factors set
forth in Code § 20-107.1 in determining the spousal support award
constitutes reversible error). Therefore, we do not separately
address the insufficiency of the spousal support award or the
failure to apply the statutory factors since those matters will be
reconsidered on remand. However, because the trial court's
finding that wife was voluntarily unemployed and imputing $30,000
- 17 - in income to her will affect the support awards on remand, we must
address that issue.
"The decision to impute income is within the sound discretion
of the trial court and its [decision] will not be reversed unless
plainly wrong or unsupported by the evidence." Blackburn v.
Michael, 30 Va. App. 95, 102, 515 S.E.2d 780, 784 (1999) (citation
omitted). In determining whether to impute income, "the trial
court must consider the [parties'] earning capacity, financial
resources, education and training, ability to secure such
education and training, and other factors relevant to the
equities of the parents and the children." Niemiec v.
Commonwealth, 27 Va. App. 446, 451, 499 S.E.2d 576, 579 (1998)
(citation omitted). Wife acknowledges that she voluntarily left
her prior employment to attend the seminary and that her
decision to do so rather than work is a sufficient basis to
support the imputation of income. However, she argues that the
amount of income imputed to her, $30,000, is not supported by
the record. We disagree. At the time wife voluntarily left her
employment with Gentile Shepherd Hospice, she was earning
$30,000 per year plus on-call pay. Although wife asserted that
she left her employment because she was displeased with the
hours and type of work, she admitted that she voluntarily
terminated her employment because she no longer wanted to pursue
a career in nursing. See Antonelli v. Antonelli, 242 Va. 152,
- 18 - 156, 409 S.E.2d 117, 119-20 (1991) (finding that spouse is not
prohibited from voluntarily changing employment; however, when
the party, under a court-ordered obligation to pay child
support, chooses to pursue other employment, the risk of the
spouse's success is upon the spouse not the spouse's children).
Accordingly, we hold that the trial court's order imputing $30,000
annual income to wife, based on the facts that existed at the time
of the trial court's order, was not erroneous and shall be
considered by the trial court on remand to the extent that the
imputation justifies a deviation from the child support
guidelines, Code § 20-108.1(B)(3) and to the extent that it
affects a spousal support award, Code § 20-107.1(9), (10) and
(11). However, we note that, on remand, the trial court may need
to consider any change in circumstances which, including but not
limited to intervening employment, may have occurred during the
pendency of the appeal that would affect the amount of income
imputed to wife during any ensuing time periods.
For the foregoing reasons, we reverse the trial court's
decree and remand for further proceedings consistent with this
opinion.
Reversed and remanded.
- 19 -