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C. Thomas v. L. Thomas (8/9/91), 815 P 2d 374
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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 RAE THOMAS, )
) Supreme Court File No. S-3336
) Superior Court No.
Appellant, ) 3AN-88-1188 Civil
)
v. ) O P I N I O N
)
LONNIE SAMUEL THOMAS, )
) [No. 3730 - August 9, 1991]
Appellee. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage, Karen L. Hunt, Judge.
Appearances: Kenneth P. Jacobus,
Anchorage, for Appellant. William T. Ford,
Anchorage, for Appellee.
Before: Rabinowitz, Chief Justice,
Matthews, Compton and Moore, Justices.
[Burke, Justice, not participating]
MOORE, Justice.
This appeal presents two issues pertaining to the
valuation of certain items of marital property. Cynthia Thomas
challenges the superior court's valuation of her non-vested
retirement benefits at the amount of her contributions. She also
contests the trial court's failure to account for appreciation in
its valuation of a purse seine limited entry permit. On the
record before us, we reverse and remand this case to the superior
court for new findings of fact or for clarification of its
previous findings of fact and conclusions of law so as to be
consistent with this opinion.
I. Facts and Proceedings
Cynthia and Lonnie Thomas were married on March 25,
1978 in Everett, Washington. The parties separated in December
1987 and Cynthia filed for divorce on February 1, 1988. Trial
was held from February 14-16, 1989. There were no children to
the marriage and the trial centered on the division of the
parties' real and personal property.
The court divided the $223,479 marital estate equally,
awarding $111,740 to Cynthia and $111,739 to Lonnie. Lonnie was
ordered to pay Cynthia $50,590 to buy her equity in the marital
assets he received. The payments were to be made through annual
installments of $15,000 plus interest, to be paid in full by
March 1992.
Cynthia filed a Motion for Reconsideration of the value
of certain items of marital property. Lonnie opposed her motion,
and it was denied on February 24, 1989. She then appealed the
trial court's valuation of her non-vested pension plan at
$25,542, the amount it determined to be her contributions during
the marriage, and of a limited entry purse seine permit which was
assigned to Lonnie with an offset to Cynthia of $8,750. Both
parties subsequently attempted to expand the scope of the appeal,
Cynthia by moving to amend her statement of points on appeal and
Lonnie by filing a belated cross-appeal. Their motions were
denied by order on October 8, 1990. The scope of this appeal is
limited to the two issues set forth in Cynthia's original
statement of points on appeal.
II. Property Valuation
A. Standard of Review
The issues presented in this case require review of the
value assigned by the trial court to particular marital assets.
A trial court's valuation of marital property is reviewed only
for clear error. Moffitt v. Moffitt, 749 P.2d 343, 346 (Alaska
1988). A decision is clearly erroneous where this court is left
with a definite and firm conviction on the entire record that a
mistake has been made. Martens v. Metzger, 591 P.2d 541, 544
(Alaska 1979).
B. Non-vested Pension
At the time of trial, Cynthia had nine years in an IBEW
pension fund and needed one additional year for it to vest.
Cynthia testified that she had six more years in which she could
perform the final year of service, but that she had been
attending the University of Alaska for the past three years and,
although she had been applying for jobs throughout that time, she
"[hadn't] had any bites." Although she hoped to be able to
finish the final year required to vest her pension, because of
the tight job market in her field, she thought it "highly
improbable"that she would be able to do so.
The trial court valued Cynthia's retirement plan at
$25,542, the amount of her contributions from January 1, 1978 to
December 31, 1985. Cynthia argues that the "value of
contributions"approach used by the trial court is inappropriate
and results in an excessive valuation. She asserts that non-
vested pensions should be valued according to the "reserved
jurisdiction"approach. See Laing v. Laing, 741 P.2d 649 (Alaska
1987).1
In Laing we stated our preference for reserving
jurisdiction as an alternative to valuing non-vested pensions at
the time of trial. Under this approach, a non-vested pension is
not considered when the trial court makes its initial property
division at the time of the divorce. Rather, the court reserves
jurisdiction and if the pension vests, the non-employee spouse
may seek an order dividing the pension, which will be done in the
same manner as it would have been if the pension was vested at
the time of the divorce.2 Id. at 658. However, our discussion
in Laing does not discuss the procedure to follow when it is
apparent at the time of trial that a non-vested pension will not
vest. In some such cases, although the pension benefits are
forfeited, the employee's contributions are returned. Where the
employee's contributions to the plan are refunded, the plan has
essentially functioned as a savings account; contributions made
during the course of the marriage would logically be marital
property. If it is apparent at the time of trial that vesting is
extremely unlikely then it would be inappropriate for the trial
court to needlessly delay the final resolution of a divorcing
couple's financial affairs. See Laing, 741 P.2d at 657.
The trial court's valuation implies that it found,
based on Cynthia's testimony that she cannot find employment in
her field, that Cynthia's pension will not vest and that it
assumed her contributions will be refunded at some point.
However, the trial court's findings of fact and conclusions of
law do not state any finding that the pension will not vest. Nor
is there any basis in the record upon which to determine whether
Cynthia's contributions will be refunded to her. Unless it is a
finding of the court that the pension will not vest, the court's
failure to follow Laing was clearly erroneous. In addition, even
if the court did find that Cynthia's pension will not vest, in
the absence of an evidentiary basis in the record to show that
her contributions will be refunded, it was clearly erroneous to
include the value of Cynthia's contributions in her portion of
the property distribution.
Therefore, we reverse the court's valuation of
Cynthia's pension and remand to the trial court to clarify its
previous findings or to make new findings of fact for the
following proceedings. If the court finds that the pension may
vest in the future, it is directed to retain jurisdiction and
follow the valuation procedure set forth in Laing. However, if
it finds that the pension will not vest, then an evidentiary
hearing must be held to determine whether Cynthia's contributions
will be refunded. If it is established that Cynthia's
contributions will be refunded, the trial court may then properly
value the pension at $25,652, the amount determined to be
Cynthia's contributions during the course of the marriage.
However, if it is shown that her contributions will not be
refunded, the proper valuation of the pension is zero, the
property distribution must be reassessed accordingly, and an
amended judgment must be entered.
C. Limited Entry Purse Seine Permit
In March 1978, the day after the parties were married,
they purchased a boat and an Alaska Power Troll Permit for
approximately $18,000. According to Cynthia's expert, Richard
Focht, Jr., research analyst for the Alaska Commercial Fisheries
Entry Commission, the estimated value of a troll permit during
the first quarter of 1978 was $12,341.
In mid-1978, Lonnie traded the troll permit to his
brother, Edward Thomas, in exchange for Edward's limited entry
purse seine permit. Focht estimated that the value of the purse
seine permit in December 1987, when the parties separated, was
approximately $42,750. At the time of trial, the purse seine
permit had a value of approximately $75,667 according to Focht.
Lonnie does not dispute Focht's valuations.
Throughout the proceedings Lonnie maintained that the
permit was his separate property. The trial court awarded the
purse seine permit to Lonnie; however, it refused to treat the
permit as a separate asset.3 Accordingly, it concluded that
Cynthia was entitled to an offsetting award equal to the value of
her half of the permit. The valuation it assigned to her was
$8,750.4
Cynthia now argues that the trial court's failure to
account for appreciation in its valuation of the permit was
clearly erroneous. We agree. We have stated that equity in a
marital asset which accumulates during a marriage is marital
property. Burgess v. Burgess, 710 P.2d 417, 420-21 (Alaska
1985). We have also ruled that in valuing a marital asset, "the
court should look to the asset's fair market value."5 Nelson v.
Jones, 781 P.2d 964, 970 (Alaska 1989) (citing Richmond v.
Richmond, 779 P.2d 1211, 1214-15 (Alaska 1989)).
Lonnie does not dispute Cynthia's claim that the trial
court erroneously failed to include appreciation in the valuation
of the purse seine permit. However, he proposes that the purse
seine permit should be valued at $42,750, its value as of
December 1987, when the parties separated rather than $75,667,
its value at the time of the trial.
In our recent decision, Ogard v. Ogard, 808 P.2d 815,
819 (Alaska 1991), we expressed a clear preference that property
should be valued for division purposes at the date of trial
rather than the date of separation. Despite this preference in
favor of valuation at the time of trial, there still may be
limited special circumstances where the trial court has
discretion to select an earlier date, such as when that date is
agreed to by the parties. The separation date may be used when
special circumstances of the case demonstrate that a truly fair
and appropriate property evaluation and division of assets cannot
otherwise be achieved. See Moffitt v. Moffitt, ___ P.2d ___, Op.
No. 3712 at 9-10 (Alaska, June 21, 1991); Dixon v. Dixon, 747
P.2d 1169, 1174 (Alaska 1987).
Since the trial court's findings of fact and
conclusions of law indicate that the valuations it assigned were
intended to reflect the value of marital property at the date of
separation rather than the date of trial, there is an implication
that the court found that special circumstances justified
valuation at the date of separation. However, the court did not
state the reasons for its selection of the separation date for
valuation or identify specific circumstances which require
valuation prior to the date of trial. Therefore, we remand to
the trial court to state the basis, if any, for its valuation of
the parties' property at the date of separation. In addition,
the court should identify any basis for valuing the permit on a
date other than the date of valuation for other property.
If the court can identify a strong basis for valuing
the permit at the date of separation, it should value the permit
at $42,750 and state its reasons for selecting the separation
date for the valuation. However, if the court cannot identify a
sufficiently compelling reason to override the Ogard presumption
in favor of the trial date, the court should value the permit at
$75,667. Finally, the court must amend its findings of fact and
conclusions of law in accordance with the considerations set
forth in this opinion, and enter an amended judgment.
REVERSED and REMANDED.
_______________________________
1. Cynthia alternatively argues that contributions from
January 1 to March 25, 1978 (the date the parties were married)
should be excluded. However, $25,542 is the figure Cynthia's
attorney gave the court when asked for the amount of marital
contributions. Furthermore, any injustice stemming from
inclusion of premarital contributions is balanced by the court's
failure to include marital contributions for the year 1986.
2. Once a pension is vested, the trial court may determine
its present value and award the non-employee spouse the
appropriate percentage of the fraction of the present value which
represents the marital contribution to the accrued pension
benefits. Laing, 741 P.2d at 657-58. Alternatively, to avoid
requiring the employee spouse to retire, it may retain
jurisdiction and allow the employee spouse to periodically pay
the non-employee spouse sums equal to the pension benefits which
would otherwise be received. Morlan v. Morlan, 720 P.2d 496, 497
(Alaska 1986).
3. Lonnie again opposes Cynthia's proposed valuation on the
ground that the permit was his separate property. Brooks v.
Brooks, 733 P.2d 1044, 1054 (Alaska 1987). However, Lonnie did
not appeal the trial court's treatment of the permit as marital
property. Therefore, this issue is not properly before us.
Alaska R. App. P. 204(a)(2).
4. The court did not explain this valuation. The parties
agree that this figure most likely represents half of the
estimated purchase price for the troll permit for which the purse
seine permit was traded ($17,500/2 = $8,750).
5. Lonnie argues that the sales value of the permit is
irrelevant because the permit could not be sold without depriving
him of his livelihood. We reject this argument. The permit is
analogous to a business with respect to its income-producing
potential. When a divorcing couple's marital property includes a
business which is "important, necessary and instrumental in [one
spouse's] continued employment,"the trial court may award that
property to the operating spouse. Lewis v. Lewis, 785 P.2d 550,
557 (Alaska 1990). However, since the business is marital
property, the other spouse must obviously be compensated for his
or her share of the value of the business.
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