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King v. Howard

Supreme Court of Delaware

March 15, 2017

BRAD KING, [1] Respondent Below, Appellant/Cross-Appellee,
v.
KAREN L. HOWARD, Petitioner Below, Appellee/Cross-Appellant.

          Submitted: March 1, 2017

         Court Below-Family Court of the State of Delaware File No: CN13-06206 Petition No: 14-00708

         Upon appeal from the Family Court: REVERSED and REMANDED.

          Patrick J. Boyer, Esquire and Marie I. Crossley, Esquire, MacElree Harvey, Ltd., Centreville, Delaware for Respondent Below, Appellant Brad King.

          Judy M. Jones, Esquire, Parkowski, Guerke & Swayze, P.A., Wilmington, Delaware for Petitioner Below, Appellee Karen L. Howard.

          Before VALIHURA, VAUGHN, and SEITZ, Justices.

          SEITZ, Justice.

         Under Delaware law, property acquired after marriage but before divorce is marital property subject to equitable division in ancillary proceedings. In this appeal we review the Family Court's determination that only one-third of a substantial bonus paid to Wife after separation but before divorce qualified as marital property. According to the Family Court, because two-thirds of the bonus payment was subject to forfeiture after the couple's divorce, only one-third of the bonus was actually earned during the marriage and qualified as marital property.

         We reverse the Family Court's decision because the entire bonus was earned during the marriage and qualifies as marital property. Under Wife's Transaction Bonus Agreement ("TBA"), the company agreed to pay Wife a bonus at closing for her efforts to sell the company. Her efforts bore fruit, the company was sold, and Wife earned the transaction bonus which was paid before divorce. Although Wife's bonus might have been subject to forfeiture post-divorce, it was nonetheless earned under the TBA during the marriage. Thus, we remand to the Family Court to determine how to equitably divide the full bonus amount.

         I.

         Husband and Wife married on September 22, 2002. They had four children together. Wife started working for a local company during the first year of the marriage, eventually working her way up the corporate ranks to president. In September 2013, while the parties were married and together, Wife signed the TBA with the company.

         Subject to the terms of the TBA, if an "Exit Event" occurred, and Wife satisfied the conditions set forth in Section 3 of the TBA, Wife was "entitled to receive a bonus" upon closing of the Exit Event in an amount dependent on the purchase price of the company.[2] An Exit Event has a precise definition in the TBA, but can be described generally as a sale of the company within one year of signing the TBA. Section 3 of the TBA required Wife to "exercise all reasonable efforts" and to "cooperate with the Company to consummate the Exit Event."[3] It also required that she remain continuously employed by the company through the closing of the Exit Event or if her employment terminated sooner, her termination be without Cause or due to death or disability.[4] Wife was entitled to the bonus payment "at the closing of the Exit Event."[5]

         In Section 6 of the TBA, entitled "Forfeiture for Certain Early Terminations, " Wife and the company agreed that if the company terminated Wife for "Cause" or if Wife terminated her employment without "Good Reason"[6] then the bonus would be subject to reduction or repayment depending on when the termination occurred, summarized as follows:

After closing but prior to payment - amount payable reduced by two-thirds and further payment forfeited.
After receiving payment but within six months following closing - Wife must repay two-thirds of amounts already paid (including two-thirds of all amounts withheld for taxes) and further payments forfeited.
After receiving payment but more than six months after closing but before first anniversary of closing - Wife must repay one-third of amounts already paid (including one-third of all amounts withheld ...

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