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C. Miles v. W. Miles (8/2/91), 816 P 2d 129
Notice: This is subject to formal
correction before publication in the Pacific
Reporter. Readers are requested to bring
typographical or other formal errors to the
attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
CYNTHIA GEORGE MILES, )
) Supreme Court File No. S-3448
) Superior Court No.
Appellant, ) 3AN-88-8446 Civil
v. ) O P I N I O N
WILLIAM CHARLES MILES, )
) [No. 3729 - August 2, 1991]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage, Elaine M. Andrews, Judge pro tem.
Appearances: Sema E. Lederman, Law
Offices of Hansen & Lederman, Anchorage, for
Appellant. Jeffrey M. Feldman, Gilmore &
Feldman, Anchorage, for Appellee.
Before: Rabinowitz, Chief Justice,
Matthews, Compton and Moore, Justices.
[Burke, Justice, not participating]
RABINOWITZ, Chief Justice, dissenting in part.
This appeal arises from the superior court's division
of marital property in the divorce proceeding of Cynthia George
Miles and William Charles Miles. Cynthia contends that the
superior court abused its discretion by holding that William's
lobbying practice, Miles & Associates, had no goodwill value or
that any such goodwill would be unmarketable. Cynthia also
asserts that the superior court's equal division of marital
property was in error. Next, Cynthia argues that the superior
court erred in finding three Alaska properties (an Anchorage
duplex and four-plex and Caswell Lakes property) to be William's
separate property. She additionally claims that the court erred
in finding the down payment on the couple's Florida condominium
to be William's separate property. Finally, at oral argument,
Cynthia questioned the court's valuation of the marital estate.
She contends that capital gains taxes had been paid out of the
marital estate subsequent to the sale of William's separate
property; therefore, the capital gains payment should have been
factored into the valuation of the marital estate.
We affirm the superior court's property division and
its decision to divide the marital property equally.
I. THE MARKETABLE GOODWILL OF MILES & ASSOCIATES
In assessing the value of goodwill, the court must
determine the existence of goodwill and whether such goodwill
could actually be sold to a prospective buyer. Moffitt v.
Moffitt, 749 P.2d 343, 347 (Alaska 1988). If no goodwill exists,
or if it is unmarketable, then there should be no value
considered when dividing the marital assets. Id.
In this case, the trial court used an accepted method
of business valuation, capitalization of excess earnings, to
determine whether goodwill exists. Hunt v. Hunt, 698 P.2d 1168,
1170 n.1 (Alaska 1985). Based on the testimony of William's
expert witness, Ronald Griesen, the superior court found that
Miles & Associates possessed no goodwill value. Because Greisen
was qualified as an expert in business valuation, we find no
error in the court's acceptance of his testimony.1 We therefore
affirm the superior court's finding that the lobbying practice
possessed no goodwill value. As there was no goodwill, we do not
reach the issue of whether goodwill would have been marketable
had it existed.
II. THE EQUAL DIVISION OF THE MARITAL PROPERTY
In Merrill v. Merrill, 368 P.2d 546, 547 n.4 (Alaska
1962), we listed factors to be considered in dividing marital
property: earning ability of the parties, their station in life,
the circumstances and necessities of each, their physical
conditions and health, their financial circumstances including
the time and manner of acquisition of the property at issue, its
value at the time and any income producing capacity. The
equitable allocation of marital assets is left to the broad
discretion of the trial court and will not be disturbed on appeal
absent a showing of abuse of discretion. Hurn v. Hurn, 541 P.2d
360 (Alaska 1975).
The superior court found both parties to be well-
educated professionals capable of earning substantial incomes.
It therefore equally divided the marital property. Cynthia has
failed to show that this decision was clearly unjust. In the
absence of findings to warrant an unequal division, we have held
that an equal division of the marital estate is presumptively the
most equitable. Hayes v. Hayes, 756 P.2d 298, 300 (Alaska 1988).
We affirm the decision of the superior court with respect to the
equal division of the marital estate.
III. THE ALASKA PROPERTIES WERE WILLIAM'S SEPARATE PROPERTY
Before dividing marital assets, the trial court must
determine what property is available for equitable distribution;
the supreme court reviews this decision under an abuse of
discretion standard. Wanberg v. Wanberg, 664 P.2d 568, 570
(Alaska 1983). However, when examining the superior court's
decision, the supreme court may question whether the trial court
applied the correct legal standard when it exercised its
Anchorage Duplex and Anchorage Four-plex
Although the duplex and four-plex were William's
property prior to the marriage, Cynthia contends that the parties
treated these properties as joint holdings during the marriage
and that her active interest in maintenance and management showed
an intent to jointly hold them. However, the facts in this case
do not establish intent to hold these properties jointly.
Cynthia did not contribute to mortgage payments or reside on the
properties, cf. Burgess v. Burgess, 710 P.2d 417, 420 (Alaska
1985), nor did she assume any financial risk or work extensively
to maintain or manage them. Cf. Wanberg, 664 P.2d at 571-73.
The superior court found that Cynthia's efforts were de
minimis and did not constitute an active interest in either the
duplex or the four-plex, and her efforts did not contribute to
the active appreciation of the properties. However, the trial
court compensated Cynthia for her minimal contributions when it
held that $36,000 of the proceeds from the sale of the four-plex
was marital property. We find that the trial court did not abuse
its discretion by treating the Anchorage properties as William's
Caswell Lakes Property
The superior court found that the payments on the
Caswell Lakes property made during the marriage were de minimis.
As neither party was able to produce documentation of the actual
payments on the property, there is no reason to conclude that the
superior court's finding was clearly erroneous. See Moffitt, 749
P.2d at 348. A party who fails to present sufficient evidence at
trial should not be allowed to challenge the inadequacy of
evidence on appeal. Hartland v. Hartland, 777 P.2d 636, 640
(Alaska 1989). We therefore affirm the finding of the superior
court that the Caswell Lakes property was William's separate
IV. THE DOWN PAYMENT ON THE FLORIDA CONDOMINIUM WAS WILLIAM'S
William made a $19,773 down payment on the Florida
condominium with funds from his separate account containing the
sale proceeds from the Anchorage four-plex. The superior court
treated the condominium as a joint holding2 but determined that
the down payment remained William's separate property and not
part of the marital equity in the condominium.
In previous cases, we have held that where a property
distribution comes within the parameters of AS 25.24.160(a)(4),3
the distribution "will not be not be disturbed unless it is
clearly unjust." Wanberg, 664 P.2d at 570 (citations omitted).
It is within the trial court's discretion to find that premarital
assets have become part of the marital estate.4 However, we have
held that the act of comingling assets "does not automatically
establish intent to jointly hold property, and a court always
should consider the property's source when determining what
assets are available for distribution." Carlson v. Carlson, 722
P.2d 222, 224 (Alaska 1986). Thus, the trial court retains
discretion to decide whether a premarital asset remains separate
property even where the asset has been treated as joint property.
The trial court makes this determination in the context of an
equitable division of marital assets and its balancing of the
parties' situation under the Merrill factors. Merrill, 368 P.2d
at 547 n.4.
The trial court found that William had made the down
payment on the Florida condominium from premarital assets and
subsequently made all mortgage payments from his separate funds.5
We find that the court properly applied its discretion when it
determined that the down payment remained a premarital asset and
excluded it from the marital equity in the condominium.
V. CAPITAL GAINS TAXES
Cynthia argues that the marital estate paid capital
gains taxes on William's separate property6 and that this
circumstance should have been considered by the superior court in
making its determination of the value of the marital estate.7
William counters that the marital estate also paid capital gains
taxes on Cynthia's separate property and further contends that
his separate property provided tax benefits to the marital
estate.8 As these issues were not argued at trial nor briefed on
appeal, we will not consider them.9 Wetzler v. Wetzler, 570 P.2d
741, 742 n.2 (Alaska 1977).
RABINOWITZ, Chief Justice, dissenting in part.
I disagree with the court's determination in Part IV
that the down payment on the Florida condominium was William's
The key issue is whether the parties intended the
$19,773 to become joint marital property or to remain separate
property. Matson v. Lewis, 755 P.2d 1126, 1127 & n.2 (Alaska
1988); Moffitt v. Moffitt, 749 P.2d 343, 346-47 (Alaska 1988);
Burgess v. Burgess, 710 P.2d 417, 420 (Alaska 1985); Wanberg v.
Wanberg, 664 P.2d 568, 571-72 (Alaska 1983).
It is true that parties may, by their
actions during marriage, demonstrate intent
to treat specific property as joint holdings
even though they were acquired by one spouse
prior to marriage. Wanberg, 664 P.2d at 571.
Where such intent is established, usually
through joint management and control of the
property, a court will consider the property
to be a marital asset. Id. However, the act
of commingling, in itself, does not
automatically establish intent to jointly
hold property, and a court always should
consider the property's source when
determining what assets are available for
Carlson v. Carlson, 722 P.2d 222, 224 (Alaska 1986) (emphasis
Here, the record indicates that the parties intended
the $19,773 to be part of the marital estate. As the court
acknowledges, the superior court treated the condominium as a
joint holding, based on more than a commingling of assets: "The
record shows that the parties established an intent to hold the
property jointly. Cynthia and William held title to the
condominium and both were obligors on the note. During the
marriage, they visited the condominium several times each year
and both worked to repair and improve it." Slip Opinion, supra,
at 6 n.2.
In contrast to the court, I find Matson
indistinguishable. In both cases, the property was taken
jointly. The only distinguishing feature is that in Matson, the
monthly payments were clearly made from marital assets. This
distinction is not controlling; here, there simply is no explicit
evidence as to the source of the monthly payments.11 More
importantly, in Matson the lots were unimproved; there was no
indication that the parties worked together to improve them. Yet
here, both William and Cynthia made repairs and improvements to
the condominium. On this record, I would hold that the superior
court abused its discretion in "backing-down"the $19,773 down
payment and in failing to classify this amount as marital
1. The court relied on Greisen's method for selecting a
proper comparison group of lobbyists in order to determine
whether William's lobbying practice had goodwill value.
2. The record shows that the parties established an intent
to hold the Florida property jointly. Cynthia and William held
title to the condominium and both were obligors on the note.
During the marriage, they visited the condominium several times
each year, and both worked to repair and improve it.
3. AS 25.24.160(a)(4) gives the court discretion to invade
premarital assets and sets out the factors to be used in making
4. In Wanberg, this court found that the wife's
participation in financing, constructing, and maintaining a five-
plex manifested an intention to treat the property as a joint
holding even though the land itself had been the husband's
separate property prior to the marriage. 664 P.2d at 571-72. In
subsequent cases, we have upheld the invasion of premarital
assets when the parties demonstrated an intent to treat the
assets as joint property by virtue of both spouses taking an
active interest in its ongoing maintenance, management and
control. E.g., Burgess, 710 P.2d at 420; Moffitt, 749 P.2d at
5. The Miles' situation can be distinguished from Matson v.
Lewis, 755 P.2d 1126 (Alaska 1988), where we upheld a finding
that a down payment made from separate property had become a
marital asset. In Matson the parties made monthly payments from
marital assets and had evidenced an intent to convert the
premarital asset into marital property. Id. at 1128.
6. Cynthia states that the joint tax returns show $32,635
in capital gains taxes paid on the sale of William's separate
7. This issue was raised in Cynthia's proposal for
distribution of property and during oral argument before this
8. The couple's 1982 tax return shows $8,472 paid on the
sale of Cynthia's separate property. No figure is given for tax
benefits from William's separate property.
9. The capital gains issue presents a question of first
impression for this court. Had the issue been properly raised,
this court would have remanded it for recalculation of the value
of the marital estate considering (1) whether capital gains taxes
were paid out of marital assets on Cynthia's and William's
separate properties, and (2) to what extent depreciation and
other tax benefits from the separate properties added value to
the marital estate.
10. In Carlson, we found a four-plex purchased during the
marriage to be marital property, although the down payment came
from the husband's separate property. The parties lived in one
unit and the wife helped manage the rental units. Also, a lot
purchased before the marriage was considered marital property
because the wife had power of attorney to sign the purchase
papers and title was taken jointly. An improved lot in Michigan
was considered separate property, on the other hand, because the
husband bought it and improved it before the marriage. There was
no intent to jointly hold that property.
11. The majority opinion states, "The trial court found that
William had made the down payment on the Florida condominium from
premarital assets and subsequently made all mortgage payments
from his separate funds." Slip Opinion, supra, at 7. (Footnote
omitted.) However, on the question of the subsequent mortgage
payments, the superior court actually stated that "Bill paid all
of the holding costs associated with the Florida condominium from
the date of separation through the end of September 1988, at
which time he then begin [sic] to occupy the condominium." It
was Bill's Statement of the Evidence that indicated that he made
payments on that property every month. Yet, even his Statement
of the Evidence does not say when those payments began or from
which account those payments were drawn. Cynthia, in fact,
contends they both made payments. As to the downpayment itself,
Cynthia testified that she always considered that they had bought
the Florida condominium together; she never knew what source was
used for the down payment.
12. William claims that a reclassification will not make a
difference because the superior court deducted the $19,773 when
it awarded William his separate portion of the bank account from
which this money was drawn. He believes that under Cynthia's
formula, the superior court would have to deduct the down payment
from the marital portion of that account, leaving each party with
the same net proceeds. However, William overlooks the explicit
finding by the superior court that the down payment for the
condominium came out of his separate portion of the "four plex
account." Given the superior court's ruling that the down
payment came from William's separate funds, a correct
distribution would have made a difference. The court should have
divided the total equity in the condominium equally while still
deducting the down payment from William's separate property.