Did wife waive her 5th Amendment privilege against testifying about her adultery and was husband’s stock purchase agreement properly classified as hybrid property?

Did wife waive her 5th Amendment privilege against testifying about her adultery and was husband’s stock purchase agreement properly classified as hybrid property?

Yes, in the case of Allen v. Allen, Record No: 0562-16-4 (Feb. 2017), where the Virginia Court of Appeals ruled wife waived her privilege by claiming to be a good and faithful wife and husband’s stock purchase was treated as a deferred compensation plan.

The parties were married for almost fourteen years before separating.  One child was born of the marriage.  Husband invented an app to add recipes to shopping lists five years before they separated.  He attracted investors and later sold all the stock in the companied he formed to market the app to Conde Nast and became employed as its seller representative under a noncompete clause.  The stock for husband’s start up business sold for over 12 million dollars with a manager’s carve out, although the company had a negative book value.  Husband satisfied the terms of his contract with Conde Nast and received payments for the stock it purchased over a period of four years, including two which were paid after the parties separated.

Husband and wife entered into a written separation agreement for a no fault divorce and a pendente lite consent order under which husband paid wife spousal support of $7,000 a month.  Wife filed a motion for an alternate valuation date for the stock payments husband received after the parties separated.  Both husband and a Conde Nast employee testified about the terms and value of husband’s stock sale and employment.  The trial court judge hearing equitable distribution found all property to be hybrid property, noting husband’s required efforts at Conde Nast after separation, and awarded wife a coverture fraction to determine wife’s interest in the stock purchase payments.  The coverture fraction was based on the number of days after husband founded the company until the date of separation divided by the number of days from founding to final receipt of payment under the stock purchase agreement.  Wife was awarded $3,400 a month in permanent spousal support and $25,000 in attorney’s fees.

Wife appealed the case to the Virginia Court of Appeals, arguing that the trial court erred in awarding only a fraction of the value of the stock sale as it was entirely marital property and sold during the marriage.

The appellate court first recognized the applicable standard of review, that the evidence would be viewed in a light favorable to the prevailing party, all reasonable inferences in its favor, citing Congdon v. Congdon, 20 Va. App. 255, 578 S.E.2d 833 (2003).  The court then recognized that wife’s challenge to the classification of property in equitable distribution was a fact finding that would stand unless clearly wrong or unsupported by the evidence, citing Wright v. Wright, 61 Va. App. 432, 737 S.E.2d 519 (2013).  Here, the parties’ economic partnership ceased upon separation, as noted by the trial judge with his reliance on Dietz v. Dietz, 17 Va. 203, 436 S.E.2d 463 (1993).  The trial court reasonably found the stock purchase agreement to be a deferred compensation plan properly divided by the coverture fraction used by the trial court, even though it was atypical.  Further, the Court of Appeals recognized that the time of classification of property in equitable distribution is made at the date of acquisition, not at the date of vesting. Shuman v. Shuman, 282 Va. 443, 717 S.E.2d 410 (2011).

The appellate court also upheld the testimony of the Conde Nast employee over wife’s objection, as the employee had first hand knowledge of the terms and basis for the stock purchase agreement in her position at the company.  The trial court did not err in refusing to use an alternate valuation date for the sale of the company stock, as husband used the proceeds to pay taxes and marital debt, with each spouse receiving half of the remaining net proceeds.

Finally, the trial court properly found wife had waived her 5th Amendment privilege against self-incrimination by testifying that she had been a faithful and dutiful wife during the marriage in response to a general question.  Even if erroneous, the finding was harmless error as her testimony was cumulative, supported by other evidence in the record.

The appellate court found no abuse of discretion in the trial court’s award of spousal support, as the judge had properly considered the factors under Virginia Code §20-107.1(E), and found wife’s expenses to be inflated.  Husband had concluded his employment with Conde Nast, and the court properly considered his severance package, the amount of debt and spending during the marriage as offsetting his previously high income.

You should consult with your Virginia divorce lawyer or Glen Allen divorce lawyer James H. Wilson, Jr., to discuss how adultery might affect the outcome of your divorce case.

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