Appeal from the Circuit Court of Cook County; the Hon. Wayne
W. Olson, Judge, presiding.
JUSTICE MCGLOON DELIVERED THE OPINION OF THE COURT:
Respondent appeals from the judgment entered in a dissolution of marriage proceeding. On appeal, respondent contends that the trial court abused its discretion by (1) apportioning to him unexercised options to purchase stock; (2) classifying as marital property his contractual interest in real property; and (3) applying the criteria of section 503(d) of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1981, ch. 40, par. 503(d)).
We affirm in part, reverse in part, and remand.
Petitioner and respondent were married on August 25, 1975. No children were born during the marriage. The parties separated in December 1979. Shortly thereafter, respondent was injured as a result of an automobile accident. Although respondent testified that his health was deteriorating as a result of the accident, he has not filed a personal injury or workers' compensation claim to date.
In 1981, respondent earned $52,500 as a vice-president of Bally Manufacturing Corporation (Bally). Petitioner earned $11,500 from part-time employment as an optician.
On May 4, 1981, petitioner filed a petition for the dissolution of their marriage. The trial court entered an agreed order which awarded petitioner temporary support and divided the proceeds of a certain bank account equally between the parties. After a bifurcated hearing, a judgment dissolving their marriage was entered on August 26, 1982. In addition, the judgment classified the following assets as marital property and distributed them as follows: petitioner was awarded (1) the marital residence valued at $72,000, subject to a $33,500 mortgage; (2) a 1979 Oldsmobile automobile; (3) a Honda motorcycle; (4) a snowmobile; and (5) household furnishings. In addition to the above items, respondent was ordered to pay petitioner $30,000 in installments of $750 per month.
Respondent was awarded (1) all interest in stock options to purchase Bally's stock below market value, valued at $25,700; (2) all rights to respondent's profit-sharing account at Bally that had become vested, valued at $30,000; (3) the interest held by respondent in contract to purchase real estate located at 1812 Sprucewood, Lindenhurst, Illinois (Sprucewood property), valued at $11,000; (4) a 1975 Ford automobile; (5) a Honda motorcycle; (6) a camper; (7) a boat and trailer; (8) various items of personal property; and (9) any and all rights that may arise out of a cause of action involving personal injuries sustained by respondent in the 1980 automobile accident.
First, respondent contends that it is inequitable to distribute to him unexercised options to purchase 3,000 shares of Bally common stock which the court valued at $25,700. Arguing that the trial court's valuation is erroneous in that the options have no value until such time as they are exercised, he further contends that the trial court should retain jurisdiction over the case until the options are exercised or expire. We agree.
Respondent was the recipient of two stock options. The stock option agreements are contained in the record. One agreement, dated August 16, 1978, provides that respondent shall have the right to acquire 2,000 shares of Bally common stock at a price of $21.47 per share. The second agreement, dated March 27, 1980, grants respondent the right to purchase an additional 1,000 shares at $20.25 per share. The agreements, by their terms, limit respondent's right to exercise the option to a specific percentage of the aggregate number of shares. This percentage increases by 20% each year until the option is fully vested four years and six months after the date of issuance. Both agreements provide that the options are nontransferable and expire five years and one month after issuance. Finally, the agreements provide that if respondent's employment terminates, the options expire after a three-month period.
In valuing respondent's right to exercise his option to purchase Bally stock, the trial court subtracted the cost of 3,000 shares, at the reduced option prices, from the price it would have cost respondent to acquire the same number of shares on the New York Stock Exchange. The court determined the latter price by taking judicial notice of the closing price ($29.20) at which Bally stock was traded on the market on June 6, 1982 (the day before the hearing), and multiplying that price by the aggregate number of shares subject to both agreements. The calculations performed determined the profit that respondent would realize if he were able to purchase 3,000 shares of Bally's common stock at the price fixed by the company's nonqualified stock option plan and sell them at the market value on June 6, 1982.
The judgment for dissolution of marriage states that the option to purchase Bally stock below market value was property accumulated by the parties during the marriage. The court then allocated to respondent the various marital property listed above, including all interest and rights granted respondent pursuant to the stock option agreements.
The issue of whether potential future benefits arising out of one's employment should be treated as marital property has been addressed by this court in several cases. (See In re Marriage of Evans (1981), 85 Ill.2d 523, 426 N.E.2d 854, and the cases cited therein.) Our research has disclosed no cases which deal specifically with options to purchase stock granted to an employee as compensation for services he performed during the marriage. However, in Evans, the trial court awarded petitioner a one-half share in 527 "vested" shares of stock held by respondent in the employee's investment program established by the employer-company. Respondent was awarded ownership of the other half of the 527 shares. The trial court refused to treat the additional stock in respondent's investment account as marital property since the respondent's receipt of those shares was contingent upon his continued employment. All rights to these "unvested" shares of stock were, nevertheless, awarded to respondent.
In reversing the trial court, a majority of the appellate court held that the shares of stock held in respondent's investment program account represented "non-vested" rights susceptible to valuation and should have been classified as marital property for the purposes of a property division in a marriage dissolution proceeding. Justice Barry disagreed with the majority's classification of the non-vested shares of stock as marital property. He reasoned that the respondent had no withdrawal rights in the stock and that receipt of said stock was contingent upon respondent's continued employment. Although the non-vested shares of stock were admittedly a resource, Justice Barry concluded that they were contingent and speculative and therefore neither property nor marital property. He believed, however, that non-vested employee benefits should be treated as anticipated income and considered by the trial court in deciding whether to award maintenance.
The Illinois Supreme Court reversed the appellate court. The court initially considered the question of whether a contractual right to future income is "property" to be divided under section 503(c) of the Act. (Ill. Rev. Stat. 1979, ch. 40, par. 503(c).) In considering this question, the ...