On appeal from the Superior Court, Chancery Division, Middlesex County Reported at 175 N.J. Super. 443 (1980).
Matthews, Pressler and Petrella. The opinion of the court was delivered by Pressler, J.A.D.
This divorce action requires us to consider the financial consequences of a spouse's professional license or educational degree and the presumed enhanced earning capacity of that spouse attributable thereto. Two fundamental questions must be addressed. The first is whether either the license or degree itself or the consequent enhanced earning potential attributable thereto constitutes property subject to equitable distribution. If not, the second question is whether a spouse who has made a financial contribution to the other spouse's attainment of a license or degree is nevertheless, on any other legal or equitable basis, entitled on termination of the marriage to some other form of special monetary consideration on account of that contribution.
The parties here were married in Indiana in 1971. The husband, plaintiff Melvin Mahoney, was then a captain in the Air Force and had earned a degree in aeronautical engineering. The wife, defendant June Lee Mahoney, had a bachelor of science degree and was also employed. Both apparently contributed to their mutual support during the early years of the marriage. In the summer of 1975 the husband left military service and the parties moved to New Jersey. It was their mutual conclusion that the husband's prospects in aeronautical engineering were limited, and it was accordingly their agreement that their mutual interests would be best served if he pursued further education in order to obtain a master's degree in business administration. The husband enrolled in an M.B.A. program at the Wharton School in September 1975 and earned his M.B.A. degree in January, 1977, 16 months later. During this period the wife was employed as a medical technologist at an annual income of about $20,000.*fn1 The husband's total educational
expenses of about $6,500 were paid for by a combination of veteran's administration benefits and a lump sum payment of $1,000 he received from the Air Force, representing unused leave time. The parties were supported while the husband was at Wharton by the wife's earnings, supplemented by some $4,000 in savings accumulated by the parties jointly prior to the husband's enrollment at Wharton, and an additional $1,000 received by the husband by way of dividends on stock he had owned prior to the marriage and which were held for him by his mother.*fn2 It was the wife's testimony that during the 16-month period of the husband's M.B.A. study, she contributed about $24,000 to their support.
Early in 1977 the husband, after completing his degree, was employed by the Chase Manhattan Bank as a commercial lending officer at a salary roughly commensurate with his wife's. She continued working and had already begun a part-time graduate program at Rutgers University, paid for by her employer, which led to her attainment of a master's degree in microbiology in October 1979. Following the husband's employment by Chase Manhattan Bank, the parties remained together for about 20 months, each contributing equally to their joint household expenses. They separated in October 1978 and the husband sued for divorce by complaint filed in March 1979. The wife counterclaimed, and ultimately a dual divorce judgment was entered.
No children were born of the marriage, and by the time of trial in May 1980, the husband's annual income was $25,600 and the wife's was $21,000. No claim for alimony was made. The parties owned no real property and their modest accumulated personal property was divided between them by agreement. The only financial issue thus remaining at trial was the wife's entitlement to compensation for having supported the husband
in order to enable him to earn his M.B.A. degree and thereby to enhance his income potential. As she herself explained her claim,
I'm seeking 50 percent of the net total expenses for that time [the 16 months of the M.B.A. program], judging from the fact that I lived there too, so I figure I should pay 50 percent . . . So total net expenses, $24,119.98, plus tuition, $30,896.45, I want one-half of that in terms of compensation, with no taxes, $15,500.
The trial judge reasoned that
A working spouse who contributes to the education of another spouse does so certainly with the expectation that there will be in the future some benefit derived from such a sacrifice. The court is convinced that the facts of this case and the interrelationship of the parties mandate some credit to the working spouse by the spouse who pursued and achieved an education during the marriage. To ignore the contributions of the sacrificing spouse would be to work an injustice, an unfair advantage to the spouse who has gained the education and degree without obligation. There would be an unjust enrichment of the educated spouse. [175 N.J. Super. at 446]
He then concluded that the education and degree obtained by the husband under the circumstances of this case constituted a property right, the acquisition of which required him to pay the wife "some reasonable sum . . . on behalf of the maintenance of the household and the support of plaintiff during the educational period." The judge fixed $5,000 as such reasonable sum, payable to the wife in monthly installments of $100 each. The husband appeals on the ground that the award was without legal justification. The wife cross-appeals, claiming the amount awarded her was inadequate. We agree with the position taken by the husband.
We are constrained to make a preliminary observation. Despite the apparent "reimbursement" rationale of the provision of the judgment here appealed from, we are persuaded that we must nevertheless fully address the problem of the professional license and educational degree in the context of the spouses' respective financial rights attendant upon divorce. The essential character and nature of the license or degree in this context were clearly brought into focus by the trial court's opinion and
the authorities therein relied on.*fn3 Our analysis of the out-of-state judicial literature convinces us, moreover, of the necessity to draw clear distinctions between the question of the license or degree as constituting a distributable marital asset and the question of the availability of some other equitable remedy to the spouse who has financially contributed to the other spouse's attainment of the license or degree. Clearly, if the license or degree or the consequently enhanced income potential were to constitute equitably distributable property, the general rules applicable to equitable distribution would control and there would be no need to explore the availability of reimbursement or any other equitable remedy. It is thus only if the license or degree is not property for purposes of equitable distribution that consideration of alternative remedies becomes relevant. We make this observation because the out-of-state cases upon which the trial judge relied have afforded an essentially equitable rather than a property-division remedy to the contributing spouse, based, however, on the predicate that the license or degree is property. There is an analytical inconsistency inherent in such an approach, which in our view serves, at least in respect of this State's jurisprudence, to exacerbate rather than to clarify the conceptual difficulties of the problem.
In considering the question of whether the license or degree or its enhanced income potential constitutes distributable property, we are aware of ...