Kristian Petri Talvitie v. Barbara Talvitie. ( 2024 )

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule
23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28,
as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties
and, therefore, may not fully address the facts of the case or the panel's
decisional rationale. Moreover, such decisions are not circulated to the entire
court and, therefore, represent only the views of the panel that decided the case.
A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25,
2008, may be cited for its persuasive value but, because of the limitations noted
above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260
n.4 (2008).
COMMONWEALTH OF MASSACHUSETTS
APPEALS COURT
23-P-917
KRISTIAN PETRI TALVITIE
vs.
BARBARA TALVITIE. 1
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
Kristian P. Talvitie (husband), the former spouse of
Barbara Clark (wife), appeals from a judgment entered by a judge
of the Probate and Family Court on the wife's complaint for
contempt. Although the husband was not found in contempt, he
was ordered to pay the wife $573,052 in alimony. The husband
claims that the judgment is based on an improper and incorrect
interpretation of the terms of the parties' separation
agreement. We disagree and, accordingly, we affirm.
Background. We summarize the relevant facts found by the
judge after trial, supplementing them with undisputed facts in
1As is our custom, we set forth the parties' names as they
appear in the complaint.
the record, and reserving other facts for later discussion. See
Pierce v. Pierce, 455 Mass. 286, 288 (2009).
The parties were married in 2002. 2 In December 2018, they
filed a joint petition for divorce. At that time, they signed a
separation agreement (agreement). The agreement provided, in
relevant part, that the husband would pay a percentage of his
"earned income" to the wife as alimony, according to a self-
executing formula with a sliding percentage scale based on the
amount of the husband's "earned income" in a given year. In
addition, income earned by the wife would result in a dollar-
for-dollar reduction in the husband's earned income for purposes
of calculating alimony. The agreement defined the term "earned
income" as follows.
"gross (i.e., pre-tax) income from . . . equity based
compensation (when income is actually realized or deferred
on a cash basis as opposed to merely a taxable event),
including gross pre-tax proceeds as a result of the release
of restricted stock (but only when cash is realized from
the event), the gross pre-tax proceeds from the exercise of
stock options which shall be assumed to take place upon the
vesting of same and following sales of resulting stock
shares, and the gross pre-tax proceeds of all other forms
of company ownership-based incentives from the employer,
exercised qualified and non-qualified stock options and
stock grants in the year income is recognized, deferred
compensation (qualified or non-qualified) when said income
is deferred." (emphasis added). 3
2 The parties had four children over the course of their
marriage.
3 The agreement's provisions pertaining to alimony merged
with the divorce judgment, rather than survived with independent
legal significance.
2
At the time of the divorce, the husband worked for a
privately held company that granted him restricted stock units
(RSUs) having no market value (unless a liquidity event occurred
that allowed him to exchange the shares for cash). In 2019, the
husband began working for a publicly traded company and
forfeited the RSUs granted by his prior employer. The equity
component of the husband's compensation package with his new
employer included RSUs and performance-based stock units (PSUs).
The husband's new employer routinely granted him bonuses in the
form of stock that instantly vested: the vested RSUs and PSUs,
which were released to the husband as common stock and deposited
in his E*TRADE account, 4 were reported on his W-2 as taxable
income. The husband's ability to sell this stock was limited by
both a holdback requirement (requiring him to maintain a balance
of shares equal to three times his base salary) and blackout
periods during which stock could not be sold (there were
approximately sixty to eighty days per year not subject to
blackout periods).
In February 2022, the wife filed a complaint for contempt
alleging that the husband owed her approximately $600,000 in
4 A portion was withheld and liquidated by the husband's
employer to cover the taxes on the vested stock.
3
alimony based on the husband's receipt of vested RSUs and PSUs
in 2019, 2020, and 2021. Following a three-day trial, the judge
found the husband not in contempt because, the judge reasoned,
the agreement's definition of earned income was ambiguous as
applied to the husband's RSUs and PSUs granted by his new
employer. As the judge explained, given the existence of a
genuine dispute regarding the definition of earned income, the
husband did not violate a clear and unequivocal order and,
accordingly, there was no basis for a judgment of contempt.
Jones v. Jones, 101 Mass. App. Ct. 673, 687 (2022). Applying
basic rules of construction, the judge then found that the
husband's vested RSUs and PSUs constituted earned income when
their release resulted in a taxable event (as reported on the
husband's W-2). The judge noted that the agreement made no
mention of holdback requirements or blackout dates and concluded
that such limitations placed on the husband's common stock did
not affect the calculation of the husband's earned income. The
judge concluded that the husband owed the wife $573,052 in
unpaid alimony (the majority of which was attributable to the
husband's receipt of over $6 million in vested RSUs in 2021).
This appeal followed.
Discussion. The interpretation of an agreement is a
question of law we review de novo. Colorio v. Marx, 72 Mass.
App. Ct. 382, 386 (2008). "We review the judge's interpretation
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of the merged agreement under traditional principles of contract
law. Although a merged provision does not survive the judgment
as a binding contract, we nevertheless will review the [judge's]
findings [and rulings] to determine whether the judge gave
appropriate consideration to the parties' intentions as
expressed in their written agreement" (quotations omitted).
Jones, 101 Mass. App. Ct. at 681, quoting Mandel v. Mandel, 74
Mass. App. Ct. 348, 351 (2009). "Whether a separation agreement
is ambiguous is [also] a question of law. If a separation
agreement 'is susceptible of more than one meaning and
reasonably intelligent persons would differ as to which meaning
is the proper one,' the language is ambiguous, and resort may be
made to extrinsic evidence." Jones, supra, quoting Bercume v.
Bercume, 428 Mass. 635, 641 (1999).
Here, the husband principally contends that the judge (1)
erroneously determined that the agreement was ambiguous; and (2)
failed to properly consider evidence of the parties' intent when
resolving the purported ambiguity. 5 We address his arguments in
turn.
The husband also contends that the judge erred in
5
subtracting the wife's income from his total income, rather than
from the first $330,000 of his income. The agreement required
the husband to pay alimony equivalent to 32.5 percent of his
income up to $330,000, with smaller percentages assigned to
three income tiers above $330,000. The agreement provided that
"the [w]ife's earned income shall reduce, dollar for dollar, the
amount [of] the [h]usband's 'Earned Income' (as set forth above)
5
1. Ambiguity. "Contract language is ambiguous 'where the
phraseology can support a reasonable difference of opinion as to
the meaning of the words employed and the obligations
undertaken'" (citation omitted). Bank v. Thermo Elemental Inc.,
451 Mass. 638, 648 (2008). "The mere existence of the parties'
disagreement does not make the language ambiguous." Browning-
Ferris Indus., Inc. v. Casella Waste Mgt. of Mass., Inc., 79
Mass. App. Ct. 300, 307 (2011). Rather, "[a]n ambiguity arises
from language susceptible of different meanings in the eyes of
reasonably intelligent persons." Id. "To answer the ambiguity
question, the court must first examine the language of the
contract by itself, independent of extrinsic evidence concerning
the drafting history or the intention of the parties." Bank,
supra. Accordingly, we turn first to the language of the
agreement.
The alimony provision required the husband to pay the wife
a percentage of his "earned income," which included "gross
prior to the calculation of the [h]usband's alimony amount." We
are unpersuaded, as was the judge below, by the husband's
assertion that the illustrative calculation set forth in the
agreement subtracting the wife's income from the husband's base
salary of $330,000 demonstrated the parties' intent that the
wife's income must always reduce the first $330,000 of the
husband's income, even when he earns more than that. The
agreement unambiguously required the wife's income to be
subtracted from the husband's total earned income (regardless of
the amount), before calculating his alimony obligation using the
percentages and income tiers set forth in the agreement.
6
(i.e., pre-tax) income from . . . equity based compensation
(when income is actually realized or deferred on a cash basis as
opposed to merely a taxable event), including gross pre-tax
proceeds as a result of the release of restricted stock (but
only when cash is realized from the event)" (emphasis added).
The parties' dispute centers on the meaning of the phrase "cash
is realized." The husband asserts that the phrase means vested
RSUs must be sold or liquidated to qualify as "earned income,"
whereas the wife asserts that the RSUs need only vest and be
released to the husband in a form that can be easily liquidated
and converted to cash to so qualify.
Neither "cash" nor "realized" are defined terms in the
agreement. Accordingly, "to ascertain possible relevant
meanings" for those terms, we look to other sources, including
"dictionary definitions." Dorchester Mut. Ins. Co. v. Krusell,
485 Mass. 431, 438 (2020). See Suffolk Constr. Co. v. Illinois
Union Ins. Co., 80 Mass. App. Ct. 90, 94 (2011) ("established
dictionaries can furnish the approved natural meaning of
disputed terms"). Black's Law Dictionary defines "cash" as
either (1) "[m]oney or its equivalent," or (2) "[c]urrency or
coins, negotiable checks, and balances in bank accounts."
Black's Law Dictionary (12th ed. 2024). The second definition
is self-explanatory; however, the first definition (i.e.,
"[m]oney or its equivalent") requires further examination.
7
Black's Law Dictionary sets forth several definitions for
"money," including (1) "[t]he medium of exchange authorized or
adopted by a government as part of its currency," and (2)
"[a]ssets that can be easily converted to cash." Black's Law
Dictionary (12th ed. 2024). 6 Like "cash," there is more than one
accepted definition for "realized": Black's Law Dictionary
defines "realization" (and the corresponding verb to "realize")
as either (1) "[c]onversion of noncash assets into cash assets,"
or (2) "[a]n event or transaction, such as the sale or exchange
of property, that substantially changes a taxpayer's economic
position so that income tax may be imposed or a tax allowance
granted." Black's Law Dictionary (12th ed. 2024).
As illustrated above, the phrase "cash is realized" is
susceptible to more than one meaning and here each party's
interpretation of that phrase is reasonable. Accordingly, the
judge correctly determined that the agreement was ambiguous with
respect to the RSU and PSU components of the husband's current
compensation package. See Browning-Ferris Indus., Inc., 79
Mass. App. Ct. at 307. The husband nevertheless asserts that
his interpretation is the only one supported by other language
in the alimony provision requiring income from equity based
6 The two other definitions for "money" are "[c]apital that
is invested or traded as a commodity," and "[f]unds; sums of
money." Black's Law Dictionary (12th ed. 2024).
8
compensation to be "actually realized . . . as opposed to merely
a taxable event" (emphasis added). He contends that this
language supports his position that the parties intended for
"cash is realized" to mean proceeds received from the sale or
liquidation of stock, rather than stock merely reported as
taxable income on a W-2.
The problem with the husband's position is that it is not
supported by other surrounding language in the agreement. See
General Convention of the New Jerusalem in the U.S. of Am., Inc.
v. MacKenzie, 449 Mass. 832, 835 (2007) ("The words of a
contract must be considered in the context of the entire
contract rather than in isolation"). The alimony provision
lists several types of "equity based compensation" that qualify
as "earned income," including RSUs and stock options. With
respect to the latter, the agreement provides that "the gross
pre-tax proceeds from the exercise of stock options" constitute
earned income "upon the vesting of same and following sales of
resulting stock shares" (emphasis added). Although the parties
specifically included language requiring the sale of exercised
stock options, they did not include similar language requiring
the sale of vested RSUs (instead they included language
requiring that "cash is realized"). Had the parties intended
for vested RSUs to qualify as "earned income" only if they are
liquidated or sold, they could have included language to that
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effect, but they did not. Cf. Computer Sys. of Am., Inc. v.
Western Reserve Life Assur. Co. of Ohio, 19 Mass. App. Ct. 430,
437 (1985) ("if the parties had intended at-will termination,
they could have said so . . . expressly" in lease agreement).
Moreover, requiring that vested RSUs be sold before treating
them as earned income would complicate the calculation of the
husband's income, in contravention of the parties' stated intent
for the agreement's alimony provision to be self-executing,
enabling them to calculate the husband's alimony obligation
without "the necessity of ongoing litigation."
2. Evidence of intent. "[W]here the separation agreement
is ambiguous, the governing consideration is the intent of the
parties to the separation agreement as determined by objective
evidence." Jones, 101 Mass. App. Ct. at 683. "Once a
contractual ambiguity emerges, the meaning of the uncertain
provision becomes a question of fact for the trier." Browning-
Ferris Indus., Inc., 79 Mass. App. Ct. at 307. "The fact finder
may then consult extrinsic evidence including the circumstances
of the formation of the agreement and the intentions and
objectives of the parties." Id. The husband asserts that the
judge failed to consider extrinsic evidence of the parties'
intent, instead impermissibly relying on the opinion of the
wife's expert. For the reasons that follow, we are not
persuaded.
10
To begin with, both parties employed experts to complete
alimony calculations for the years in question. Those
calculations were based on the party's interpretation of "earned
income" under the agreement. The judge found that the wife's
expert appropriately relied on the Black's Law Dictionary
definition of "realized" by including in his calculation of the
husband's "earned income" the vested RSUs reported as taxable
income on his W-2 for each year. The judge did not abuse his
discretion in accepting this testimony. See Jones, 101 Mass.
App. Ct. at 683.
Next, contrary to the husband's assertion, the judge did
not "fail[] to make any findings regarding the parties' intent
behind the purported ambiguities in the agreement." Rather, the
judge's findings demonstrate that he considered extrinsic
evidence consisting of the circumstances surrounding the
negotiation of the agreement and the husband's conduct following
its execution in determining the intent of the parties. The
judge found that the agreement was drafted at a time when the
husband worked for a privately held company and his compensation
package included RSUs that "had no inherent value as a liquidity
event was required prior to [the] [h]usband having the
opportunity to realize income from the grant of stock." The
judge found that "[u]nder those circumstances, it was reasonable
to include a limiting provision in the [a]greement that limited
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[the] [h]usband's obligation to pay alimony on RSUs to 'gross
pre-tax proceeds as a result of the release of restricted stock
(but only when cash is realized from the event),'" but that
"[r]eading the [a]greement as a whole, particularly in this
context, . . . the parties did not intend this limitation to
apply to [the] [h]usband's receipt of RSUs from a publicly held
company." The judge concluded that "[t]o do so would be
contrary to the provisions of the [a]greement that require
payments to be made 'in a timely manner and in good faith'" and
ensuring that the wife will "be able to rely upon a certain
level of support to meet her needs." The judge also
appropriately considered, consistent with G. L. c. 208, and the
case law interpreting that statute, that "the purpose of an
alimony obligation is for the payor spouse to provide support to
the recipient in order to enable [the recipient] to maintain the
marital lifestyle," which "purpose is thwarted if [the]
[h]usband is able to withhold payment on RSUs and PSUs for an
indefinite period." 7 See Jones, 101 Mass. App. Ct. at 683 (judge
interpreting merged agreement pertaining to alimony must
consider parties' intentions and decide case "in the context of
the governing statute, G. L. c. 208").
7 The judge found that the wife's ability to maintain the
marital lifestyle was impaired by the husband's refusal to treat
his vested RSUs as part of his earned income in 2021.
12
In addition to considering the circumstances described
above, the judge also considered the husband's performance of
his obligations under the agreement after it was signed. See
Brigade Leveraged Capital Structures Fund Ltd. v. PIMCO Income
Strategy Fund, 466 Mass. 368, 378 (2013) ("in interpreting [a]
contract, [the] conduct of the parties after the signing of the
agreements is . . . indicative of their intent," as "[t]here is
no surer way to find out what parties meant, than to see what
they have done" [quotations and citations omitted]). The judge
found that the husband calculated his alimony obligation for
2019 and 2020 using the "entirety of [his] W-2 income," which
included vested RSUs reported as taxable income on his W-2 for
each of those years. The husband testified that he treated the
vested RSUs reported on his W-2 as part of his earned income
when calculating his alimony obligation for 2019 and 2020,
despite that he was unable to immediately sell that stock
because of the holdback requirement. 8 The judge found that the
husband changed his position in 2021, by excluding from his
income the vested RSUs reported on his 2021 W-2 and instead
calculating his alimony obligation using only his base salary
8 The husband testified that, notwithstanding the holdback
requirement, he was able to pay his alimony obligation for both
years by taking out a mortgage in 2020, and by selling stock in
2021 "that had vested in the previous year."
13
for that year. 9 This change coincided with the receipt of over
$6 million in vested RSUs in 2021 (which were reported as
taxable income on his W-2 for that year).
The judge ultimately concluded that treating vested RSUs as
"earned income" once they are reported on the husband's W-2 was
consistent with the parties' intentions as expressed in their
agreement, and that the holdback requirement did not affect the
calculation of the husband's alimony obligation. As we have
discussed, in reaching this conclusion the judge considered (1)
the agreement as a whole, (2) extrinsic evidence of the parties'
intent (including the circumstances at the time of drafting the
agreement and the husband's subsequent performance of his
obligations), and (3) the purpose of alimony as set forth in
G. L. c. 208, and case law interpreting that statute. We
discern no error in the judge's analysis or in his
9 The husband testified that shortly before those RSUs
vested, he filed a complaint for modification seeking to reduce
his alimony obligation.
14
ultimate construction of the agreement. 10 Accordingly, we affirm
the judgment.
So ordered.
By the Court (Vuono, Rubin &
Walsh, JJ. 11),
Clerk
Entered: October 16, 2024.
10The husband contends that the judge erred in failing to
construe any ambiguities in the agreement against the wife,
because her attorney drafted the agreement. The judge rejected
this argument because although the husband was pro se during the
divorce proceedings, he had a level of financial sophistication
that "allowed him a greater understanding of the [a]greement
than [the] [w]ife" and that "giving effect to [the] [h]usband's
position would result in an unreasonable meaning." We discern
no error with respect to the judge's reasoning in this regard.
11 The panelists are listed in order of seniority.
15