McSparron v. McSparron, 87 N.Y.2d 275 (1995)

The economic value of a professional license earned during marriage is a marital asset subject to equitable distribution, regardless of how long the license has been held or whether the licensee has already benefited from it; the concept of ‘merger’ of a license into a career is rejected.

Summary

In this divorce case, the New York Court of Appeals addressed the valuation of professional licenses as marital property. The husband, an attorney, argued that his law license had ‘merged’ into his career and should not be considered a separate asset. The wife, a doctor, argued that her medical license should not be included. The Court of Appeals rejected the ‘merger’ doctrine, holding that a professional license retains economic value subject to equitable distribution, even if the licensee has already benefited from it. The case was remitted for a new valuation of the husband’s law license, considering post-commencement events that affected its value.

Facts

The parties married in 1969. The husband obtained his law license in 1973 and worked as an attorney. The wife earned a master’s degree in psychology and later obtained a medical license in 1989, shortly before commencing the divorce action. During the marriage, the husband was the primary financial provider, while the wife pursued her education. The wife filed for divorce in 1989.

Procedural History

The Supreme Court initially included the value of both professional licenses in the marital estate. The Appellate Division modified, holding that the husband’s law license had merged into his career and should not be included. The Appellate Division also found the wife’s medical license had been overvalued. After a remand to the Supreme Court, the Appellate Division affirmed the redistribution of marital property. The wife appealed to the Court of Appeals.

Issue(s)

1. Whether a professional license that has been exploited to establish and maintain a career may be deemed to have ‘merged’ with the career and thereby lost its character as a separate distributable asset.
2. Whether the Appellate Division erred in treating the husband’s law license as having merged with his career.
3. Whether post-commencement events should be considered when valuing a professional license.

Holding

1. No, because the concept of ‘merger’ should be discarded. A professional license retains economic value independent of the licensee’s career.
2. Yes, because the license had a residual economic value independent of the husband’s career, making its exclusion from the marital estate erroneous.
3. Yes, because the trial court has discretion to consider post-commencement events that may have affected the value of the license.

Court’s Reasoning

The Court of Appeals rejected the ‘merger’ doctrine, which held that a professional license loses its value as a separate marital asset once it is used to establish a career. The Court reasoned that a valid professional license maintains its economic value throughout its existence. The Court criticized the merger doctrine as difficult to apply, inconsistent with the goal of equitable distribution, and favoring short-term marriages over long-term ones. The Court emphasized that the key is to value the license in a way that avoids duplicative awards. The Court stated, “O’Brien permits the court to include in the marital estate the present value of any increased earning capacity attributable to a professional license earned during the marriage. That increased earning capacity continues to exist, to a greater or lesser degree, throughout the life of the license.” The Court also held that while the valuation date is within the trial court’s discretion, post-commencement events, like the husband’s job loss, could be considered when valuing the license. The Court emphasized avoiding double-counting of assets and income in determining equitable distribution and maintenance.