Equity and Professional Degrees

By Attorney Gregg Herman
April 5, 2000

On February 22, 2000, the Supreme Court of Wisconsin granted review of the court of appeals decision in Meyer v. Meyer, 2000 WI App 12, 232 Wis. 2d 191, 606 N.W.2d 184 (1999). The case involves two issues of substantial importance in family law. One involves the issue of considering premarital cohabitation in a maintenance case — a topic dealt with in my previous article. This article will deal with the second issue: the treatment of professional degrees under Wisconsin family law.

In Meyer, prior to their marriage, but while cohabiting, Julia worked for an insurance agency while Joseph attended medical school. The parties married in the year preceding Joseph’s graduation from medical school. During Joseph’s residency program, Julia undertook primary responsibility for caring for their child while continuing to work in the insurance field.

The trial court did not make a specific ruling on Julia’s claim of unjust enrichment, but took her contribution to Joseph’s professional degree into account in reaching a maintenance award. The District IV Court of Appeals reversed and remanded with directions to the trial court to exclude in its maintenance determination the facts and circumstances preceding the marriage.

The appellate court nonetheless chose to address the issues of unjust enrichment and professional degrees. The court cited Dewitt v. Dewitt, 98 Wis. 2d 44, 53, 296 N.W.2d 761 (Ct. App. 1980), which held that a degree is not an asset for property division purposes. The Meyer court found that, as reasoned in Dewitt, placing a value on a professional degree was highly speculative. The court accepted Dewitt as controlling authority and held that Julia cannot state a claim based on unjust enrichment arising from her contributions to Joseph’s medical degree.

In a strong dissent, Justice Deininger asserted that he would have limited Dewitt to its facts and circumstances. He noted that Dewitt merely held that the degree itself was not an asset, but that the court did not preclude a trial court’s consideration of the wife’s contribution to her husband’s obtaining the degree. Therefore, he concluded, that the trial could properly compensate Julia for her contributions through a limited-term maintenance award.

As indicated earlier, in Dewitt, the Court of Appeals held that, while equity compels “some form of remuneration” for a spouse who contributes more to the marriage than the other spouse, valuing a professional degree is too speculative. In addition, the court noted that such a division entails a “division” of post-divorce earnings. Accordingly, the court held that trial courts in making property division and maintenance awards should consider contributions to a professional degree.

In 1982, the supreme court decided two professional degree cases. In Lundberg v. Lundberg, 107 Wis. 2d 1, 318 N.W.2d 918 and Roberto v. Brown, 107 Wis. 2d 17, 318 N.W.2d 358, the high court noted that Dewitt was decided prior to the 1977 Divorce Reform Act. Without explicitly overruling Dewitt, the court held that, while compensation for a spouse who contributed to the acquisition of professional degree can be done through property division or maintenance, where there is little property, maintenance is an appropriate means of compensation. The court noted that:

[M]aintenance payments are no longer limited to situations where the spouse is incapable of self-support. Instead, we view maintenance as a flexible tool available to the trial court to ensure a fair and equitable determination in each individual case.
Two years later, in Haugan v. Haugan, 117 Wis. 2d 200, 343 N.W.2d 796 (1984), the Supreme Court held that where a spouse works to enable the increased education of the other, but the marriage ends before the economic benefit is realized:

[I]t is unfair…to deny the supporting spouse a share in the anticipated enhanced earnings while the student spouse keeps the degree and all the financial rewards it promises.
The high court held that due to the difficulty of quantifying the value of a contribution during a marriage, it could not set a rigid formula. Rather, the court suggested several approaches and held that a trial court has discretion to choose among these approaches, or another approach which might fit the circumstances. Among the approaches a court might consider are a “cost value” approach, an “opportunity cost” approach, a “compensation” approach and a “labor theory of value” approach. A trial court may “use one or more of the above described approaches, as well as any other approach suitable for that case.”

While some states, such as New York, see O’Brien v. O’Brien, 66 N.Y.2d 576 (1985), have held that professional degrees can be considered assets for purposes of property division, as noted by Wisconsin courts as far back as Dewitt, valuation is highly speculative. After all, a degree cannot be sold as such. It has no market value in and of itself. The value is as ephemeral as Bill Gates’ brain or Julia Robert’s beauty. Both can be used to gain money, but physical asset itself is not transferable. Professional degrees are only as good as what the holder of the degree chooses to do with it. That choice then translates into income, which is available as maintenance.

To attach a value to an unsaleable entity would negate years of prior case law in Wisconsin which dictates the proper method of valuing property as “fair market value”. See Corliss v. Corliss, 107 Wis. 2d 338, 344-5, 320 N.W.2d 219 (1982); Schinner v. Schinner, 143 Wis. 2d 81, 98, 420 N.W.2d.381 (Ct. App. 1988); Liddle v. Liddle, 140 Wis. 2d 132, 138-9, 410 Wis. 2d 196 (Ct. App. 1987). “Fair Market Value” is the amount a willing buyer would pay a willing seller, both having knowledge of all relevant circumstances and neither under any compulsion to buy or sell. Under this definition, a degree which can only be used to secure future income, has no value.

Allowing the court to compensate the contributing spouse in the form of maintenance does not fully resolve the issue, either. In the stereotypical scenario, the wife works at a minimum wage job to put her husband through medical school. When the big money starts coming in, the marriage may crumble, for instance, due to the husband’s wandering eye. Then the court chooses to award compensation in the form of maintenance. As maintenance terminates upon the payee’s remarriage, the wife’s desire to actively make a new life for herself and remarry frustrates the court’s attempt at equity. Although the husband can keep his future income even after remarriage (except to the extent he shares it with his new wife), his former spouse must remain single to secure her share of the fruits of her years of labor.

Where there is a marital estate, the court can achieve some degree of equity through an unequal property division, as permitted by Wis. Stat. § 767.255(3)(f). Of course, as many of these cases have little or no property, this is not an effective solution in those cases.

As a result, the trial court must be left with discretion to fashion a remedy that will fit the individual circumstances of a particular case. That, of course, is exactly what the Supreme Court determined in Haugan 16 years ago. Such is what the trial court attempted to do in Meyer. Allowing the trial courts such flexibility remains the exclusive equitable method of resolving this genre of cases that possess such widely-varying facts and circumstances.

This article originally appeared in Wisconsin Opinions.

Attorney Gregg Herman is a founding partner of Loeb & Herman, LLC in Milwaukee, WI. He practices family law exclusively, and can be reached via e-mail or by calling (414) 272-5632.