In TN Divorce, Not Dissipation When Wife Refused Sale of Stock Options
Tennessee divorce law case summary – stock option valuation and dissipation. Tennessee divorce and family law from the Tennessee Court of Appeals. Note: This is the second case summary on this blog.
Sharon Kay Long v James Erdine Long – Tennessee Stock Option Valuation and Dissipation Law
With regards to a determination of marital assets to be equitably distributed upon divorce, when are stocks considered separate property? Tennessee Court of Appeals case Long v. Long gives some insight as to what a Tennessee divorce court would decide.
Sharon and James Long were married on March 4, 1989 in Woodbridge, Virginia. The couple had two sons and one daughter together and Mr. Long also had two children from a previous marriage.
At the time the couple got married they lived in Orlando, Florida. Mr. Long had been employed at Lowe’s Home Improvement store in Orlando for ten years and Ms. Long was a clerical employee for a computer company.
In April 1989, shortly after getting married, Mr. Long left Lowe’s to go to work for Builder’s First Source (“BFS”), a publicly-traded construction supply company. The couple then relocated to Virginia as required by Mr. Long’s new job with BFS. After the couple had their first child, Jeffrey, the couple agreed that Ms. Long would stop working in order to stay at home to raise their child and be a homemaker.
In 1994, Mr. Long was promoted to a management position with BFS which required the family to move back to Orlando. In December 1996, the couple welcomed their second child, Justin. In August 1999, Mr. Long was transferred again, and eventually the family settled in Hendersonville, Tennessee. In October 1999, not long after moving to Tennessee, the couple’s third child, Brooke, was born.
At some point during the marriage, Mr. Long started an affair with another woman and began taking his girlfriend on trips and buying her jewelry as well as other gifts. Ms. Long found out about her husband’s extramarital affair and filed for divorce on June 13, 2005 alleging irreconcilable differences, inappropriate marital conduct, and adultery.
Once the parties separated, Mr. Long moved to Maryland, though he remained with his long time employer BFS. Part of Mr. Long’s employment compensation with BFS included shares of company stock options, and after many years of employment, Mr. Long eventually acquired several thousand shares.
In May 2006, the parties and their attorneys communicated about the jointly-owned BFS stock and stock options. Mr. Long strongly recommended the immediate exercise of the options and sale of all stock since he believed that the stock price would soon fall drastically. However, Ms. Long refused to sell the stock.
On June 5, 2006, Mr. Long filed a motion with the Trial Court requesting permission to sell some of the jointly-owned BFS stock. He claimed that the share price of BFS stock had plummeted, resulting in a $22,000 loss in one week. Mr. Long characterized his wife’s refusal to agree to sell the stock as a dissipation of marital assets. His motion was continued until trial. In his trial memorandum, Mr. Long asserted that the loss in value that resulted from Ms. Long’s refusal to sell the BFS stock was in excess of $123,000.00.
At trial, the court heard testimony from Ms. Long’s brother, Wayne Canada, who was Mr. Long’s immediate supervisor at BFS. Mr. Canada testified that during 2006, BFS stock dropped from $22 per share to $15 per share. Mr. Canada also stated that he sold a part of his BFS holdings at around the time Mr. Long asked his wife to agree to sell some of their shares.
Ms. Long testified that she considered ownership of the BFS stock to be a long-term investment. She acknowledged that she was aware that her brother, Mr. Canada, had sold some of his BFS stock, but she knew that the stock was marital property and wanted to wait until the final division of property hearing and she did not feel comfortable selling the stock at that time.
Mr. Long testified that the parties owned 6,500 shares of BFS stock, as well as stock options acquired during the marriage. However, he asserted that 5,000 of the 6,500 shares were purchased with the proceeds from the sale of stock from another company, which he had purchased before the marriage. Consequently, Mr. Long believed that only 1,500 of the 6,500 shares of BFS stock were marital property.
On November 1, 2006, the Trial Court entered a final decree of divorce and decided that all of the shares of BFS stock, as well as the stock options, were marital property, but declined to consider Ms. Long’s refusal to sell the parties’ BFS stock as a dissipation of assets. According to the Trial Court’s distribution of the marital estate, Ms. Long received, among other assets, half of the vested BFS stock options, and half of the 6,500 shares of BFS stock.
Both parties filed then competing motions to alter or amend the decree. The Trial Court altered its decree in part by awarding all 6,500 shares of the BFS stock to Mr. Long. However, Mr. Long appealed the Trial Court’s decree, arguing that the court’s distribution of the marital estate was inequitable since it failed to take into account Ms. Long’s alleged dissipation of marital assets.
The Court of Appeals affirmed the Trial Court’s determination that Ms. Long’s refusal to sell the stocks did not amount to dissipation of marital assets, since there was no evidence indicating that Ms. Long had the intention to deplete marital assets, or that her behavior was a careless wasting of marital property.
No. M2006-02526-COA-R3-CV (Tenn. Ct. App. July 3, 2008).
See original opinion for exact language. Legal citations omitted.
To learn more about Tennessee business valuation law, see Business Valuation in Tennessee Divorce Law. To learn more about the division and valuation of professional practices in divorce, see When Professionals Divorce in Tennessee: Valuing Professional Practices.
Miles Mason, Sr. JD, CPA handles complex divorce matters including business valuations and forensic accounting issues. View his professional biography listing books and articles published on business valuation and forensic accounting and seminars presented to lawyers, judges, business valuation experts, and forensic accountants. Miles Mason, Sr. authored The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, published by the American Bar Association. The Miles Mason Family Law Group, PLC’s offices are located in Memphis, Tennessee and serves West Tennessee and Nashville. Contact Us today at (901) 683-1850.
