King v. Howard
158 A.3d 878
| Del. | 2017Background
- Husband (King) and Wife (Howard) married in 2002, separated Nov. 10, 2013, and divorced Aug. 14, 2014; four children.
- While married (Sept. 2013), Wife signed a Transaction Bonus Agreement (TBA) providing a bonus payable "at the closing" if an Exit Event (sale) occurred and she satisfied performance and employment conditions.
- The company was sold and Wife received the full transaction bonus (net of taxes) after separation but before divorce.
- Section 6 of the TBA allowed partial forfeiture/repayment of the bonus if Wife’s employment terminated for Cause or without Good Reason after closing (reductions of two‑thirds or one‑third depending on timing).
- Family Court treated the payment as a retention bonus and held only one‑third of the bonus was marital property, dividing that one‑third 65% to King and 35% to Howard.
- King appealed; the Supreme Court reviewed whether the full bonus was marital property and whether the forfeiture provisions altered that classification.
Issues
| Issue | Plaintiff's Argument (King) | Defendant's Argument (Howard) | Held |
|---|---|---|---|
| Whether the transaction bonus is marital property | Bonus paid/acquired before divorce is marital; presumption that post‑marriage pre‑divorce assets are marital | If earned before divorce, it is marital; alternatively, argues small marital share because most work occurred post‑separation | Entire bonus is marital property because it was earned at closing during marriage despite forfeiture risk |
| Proper date for determining marital status of bonus | Date of divorce controls; since payment and right to payment vested before divorce, it is marital | Agrees date of divorce controls but argues equitable considerations reduce share | Date of divorce controls; earned at closing pre‑divorce, so marital |
| Effect of post‑closing forfeiture provisions on whether bonus was "earned" during marriage | Forfeiture makes two‑thirds unvested at divorce; thus only one‑third earned and marital | Forfeiture does not negate that bonus vested at closing; possibility of forfeiture doesn’t convert earned pay into nonmarital | Forfeiture clauses do not defeat a vested right: possibility of forfeiture does not prevent the full bonus from being marital property |
| How the marital bonus should be divided | Family Court’s 65/35 split of one‑third was appropriate | Family Court should divide the entire bonus equitably considering contributions and statutory factors | Remanded to Family Court to equitably divide the full bonus using 13 Del. C. § 1513(a) factors |
Key Cases Cited
- Glanden v. Quirk, 128 A.3d 994 (Del. 2015) (date of divorce controls identity of marital property; legal standard for review)
- Lynam v. Gallegher, 526 A.2d 878 (Del. 1987) (property received after marriage and before divorce is marital absent exceptions)
- Walter W.B. v. Elizabeth P.B., 462 A.2d 414 (Del. 1983) (date of divorce, not separation, controls marital classification)
- Sayer v. Sayer, 492 A.2d 238 (Del. 1985) (income is marital when actually earned or right to presently receive it exists)
- Frank G.W. v. Carol M.W., 457 A.2d 715 (Del. 1983) (trust distributions during marriage are marital; distributions after divorce are not)
- Ables v. Ables, 540 S.W.2d 769 (Tex. Civ. App. 1976) (possibility of forfeiture does not destroy vested property character for divorce division)