|FROM:||The Legal Taxi|
|RE:||Enhanced Earning Capacity of Supported Spouse|
Enhanced Earning Capacity of Supported Spouse
Assess the value of “enhanced earning capacity” as a property interest for negotiating property settlement after divorce.
Husband (defendant) acquired a master degree during the subsistence of marriage and his earnings increased due to the investment made by his wife (plaintiff). Property Issue is whether the investing spouse shall be entitled to ‘Enhanced Earning Capacity’ of the enhanced spouse in the negotiations of property settlement during the divorce proceeding.
See the attached file for more details.
Originating Jurisdiction only
Standard Research Memo
Whether the investing spouse shall be entitled to ‘Enhanced Earning Capacity’ of the enhanced spouse in the negotiations of property settlement during the divorce proceeding.
Case laws and Statutes
Whether the ‘investing spouse’ (i.e. the plaintiff-wife) shall be entitled to a share in the ‘enhanced earning capacity’ of the ‘supported spouse’ (i.e. the defendant-husband) in the event of a divorce.
Listed below are the case laws which support the averment that a professional degree earned during marriage is a property interest and the same is liable for an equitable apportionment during the negotiations made as a consequence of the divorce proceedings between the couple. If the ‘supported spouse’ acquires any education or training, which subsequently results in an increased earning power of the said party, then the ‘investing spouse’ is entitled to an equitable distribution of the enhanced income.
In Arthur J. Hodge v. Patricia Hodg,337 Pa. Super. 151; 486 A.2d 951; 1984 Pa. Super. LEXIS 6757, court discussed in detail:
- Section 401(d)(4) provides that one of the factors to be considered in distributing marital property is "the contribution by one party to the education, training, or increased earning power of the other party"
- “The issue is what compensation, if any, by means of equitable distribution or alimony, Mrs. Hodge is entitled to, to compensate her for her investment, both financial and otherwise, in Dr. Hodge's medical education and license and the resultant increase in his earning capacity.”
- “Keeping in mind the purposes behind the Divorce Code of effectuating economic justice between the parties, and insuring a just settlement of property rights, the Code authorizes the court to enter an order ". . . determining and disposing of existing property rights and interests between the parties . . . ." 23 P.S. § 401(b) (emphasis added). The Code refers specifically to the division of property rights and interests, making clear the legislative intent that the court is to broadly determine the property interests of the parties, and is not limited to physical property, in its equitable distribution awards.
- Furthermore, in section 401(c), the court is granted the full power to do economic justice.
- (c) In all matrimonial causes, the court shall have full equity power and jurisdiction and may issue injunctions or other orders which are necessary to protect the interests of the parties or to effectuate the purposes of this act, and may grant such other relief or remedy as equity and justice require against either party or against any third person over whom the court has jurisdiction and who is involved in or concerned with the disposition of the cause.”
- “Section 401(d) specifically recognized the injustice [***23] inherent in the break-up of a marriage, whereby one spouse benefits by the joint efforts of both partners in the obtaining of a higher educational degree and it specifically ordered the court to consider such factors in formulating its equitable division of property:
- (d) In a proceeding for divorce or an-annulment, the court shall, upon request of either party, equitably divide, distribute or assign the marital property between the parties without regard to marital misconduct in such proportions [*167] as the court deems just after considering all relevant factors including:
- [**959] (4) The contribution by one party to the education, training, or increased earning power of the other party.
- The contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property, including the contribution of a party as homemaker."
- It is thus clear from a reading of the Divorce Code that the legislature intended, and the court is specifically empowered, to promote economic justice.”
- “The increased earning capacity of Dr. Hodge arising out of the efforts whereby he, jointly with his wife, attained the degree of education and specialization he now possesses, is no different in quality from the increased earning capacity which should have flowed from acquiring another asset, e.g., the apartment house already mentioned.
In Albert John Lehmicke v. Nancy Sipe Lehmicke, 339 Pa. Super. 559; 489 A.2d 782; 1985 Pa. Super. LEXIS 5669
- “It does not follow that a divorce court can ignore the investment which one spouse has made in the education or training of the other. The Divorce [***19] Code requires that a court which is called upon to divide marital property in an equitable manner shall consider "[t]he contribution by one party to the education, training, or increased earning power of the other party." Divorce Code of April 2, 1980, P.L. 63, § 401, 23 P.S. § 401(d)(4).”
In Pratt v. Pratt, 1982 Pa. Dist. & Cnty. Dec. LEXIS 392; 23 Pa. D. & C.3d 673
- The court is confronted with the difficult "career threshold" situation in which one spouse obtained a professional degree which was substantially financed through the contributions of the other spouse, and the parties separated prior to their receiving any of the benefits normally resulting from a professional degree.”
In Lundberg v. Lundberg, April 27, 1982, 8 FLR 2381, Wisconsin Supreme Court found that
- “Compensation for a person who supports his or her spouse while the spouse is in school can be achieved through both property division and maintenance payments. Thus the court was able to cure the no asset problem in "career threshold" situations by permitting compensation of the non-degreed spouse through maintenance payments.
- This decision is not based on the notion that the contributions constitute a commercial transaction, but is an attempt to do equity based on the contributions made by the parties during the marriage and their needs upon dissolution of that marriage. The ultimate [*15] goal being the mitigation of the harm, [**683] both emotional and financial, caused by the marital breakdown”
- “This ruling is entirely consistent with the Divorce Code Act of 1980. Section 501(b) indicates that the factors listed there under are to be considered in determining whether alimony is necessary, in what amount, and for how long. Among the factors listed under subsection (b) is "(6) the contribution by one party to the education, training or increased earning power of the other party." Thus an award of compensatory alimony does not exceed the court's authority under the Divorce Code, particularly in light of the necessity of such an award to insure an equitable result.”
Also, the below mention provision of the statues of the state of Pennsylvania concur the findings of the afore discussed case law thereby holding good the stand that an ‘investing spouse’ (i.e. the wife) shall be entitled to an equitable distribution of the enhanced earning capacity of the ‘supported spouse’ (i.e. the husband)
Laws and Provisions
Constitution of Pennsylvania; Part-23 Domestic Relations, § 3502 Equitable division of marital property: 1
- General rule: - “Upon the request of either party in an action for divorce or annulment, the court shall equitably divide, distribute or assign, in kind or otherwise, the marital property between the parties without regard to marital misconduct in such percentages and in such manner as the court deems just after considering all relevant factors. The court may consider each marital asset or group of assets independently and apply a different percentage to each marital asset or group of assets. Factors which are relevant to the equitable division of marital property include the following:
- a) The contribution by one party to the education, training or increased earning power of the other party.
- b) The opportunity of each party for future acquisitions of capital assets and income.
- c) The contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property, including the contribution of a party as homemaker.
- d) Whether the party will be serving as the custodian of any dependent minor children.
Pursuant to the language and intent of the statutes, which recognizes the increased earning capacity as a divisible asset, the necessary conclusion is that, under the Divorce Code, an equitable distribution of the intangible asset created by this joint effort of the parties should be deemed just and proper wherever the factual matrix of the case suggests so.
The discretionary power conferred on the Courts should be exercised to meet the end of justice and to avoid any “unjust enrichment” of the supported spouse attained by him/her due to the support, financial or otherwise, of the investing spouse.
Thank you for using The Legal Taxi. We hope that we that you will ask us to serve you again soon.
NEITHER MIND MERCHANTS, THE LEGAL TAXI, ANY OTHER SUBSIDIARY OF MIND MERCHANTS, OR ANY AGENTS OR VENDORS OF MIND MERCHANTS (TOGETHER, "MIND MERCHANTS"), NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, OR REPRESENTATIVES (TOGETHER, "PERSONNEL"), PROVIDES LEGAL SERVICES OR LEGAL ADVICE IN THE UNITED STATES, UNITED KINGDOM, OR INDIA. MIND MERCHANTS IS NOT A LAW FIRM, AND IT DOES NOT AND CANNOT RENDER LEGAL SERVICES OR LEGAL ADVICE TO THE GENERAL PUBLIC. MIND MERCHANTS IS NOT ENGAGED IN THE PRACTICE OF LAW, NOTWITHSTANDING ANY PERFORMANCE OR DELIVERY OF SERVICES BY LAWYERS WHO ARE OR MAY BE AUTHORIZED TO PRACTICE LAW IN THE UNITED STATES, UNITED KINGDOM, OR INDIA. THE SERVICES AND RELATED WORK PRODUCT PROVIDED BY MIND MERCHANTS AND ITS PERSONNEL ARE PERFORMED AND PROVIDED SOLELY AT THE REQUEST OF LAWYERS AND ARE BEING PROVIDED DIRECTLY TO THOSE LAWYERS, OR THEIR DESIGNEE(S), IN SUPPORT OF THE LEGAL SERVICES THAT THOSE LAWYERS ARE PERFORMING FOR THEIR CLIENTS.