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A. Chotiner v. J. Chotiner (4/3/92), 829 P 2d 829
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
ANDREW MORTEN CHOTINER, ) Supreme Court No. S-4219
Appellant, ) Trial Court No.
) 3AN-88-10317 Civil
) O P I N I O N
JENNIFER LYNN CHOTINER, )
Appellee. ) [No. 3827 - April 3, 1992]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Peter A. Michalski,
Appearances: William T. Ford,
Anchorage, for Appellant. Timothy M. Lynch,
David T. Mulholland, Law Offices of Timothy
M. Lynch, P.C., Anchorage, for Appellee.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
RABINOWITZ, Chief Justice, dissenting in part.
In this divorce case, Andrew Chotiner appeals the
superior court's division of property and award of attorney's
fees. The primary dispute is whether the court erred in treating
an annuity worth some $100,000 as marital property rather than as
the separate property of Andrew. We reverse, for the reasons
Andrew and Jennifer Chotiner were married on November
1, 1974. Two children were born of the marriage. Andrew filed
for divorce on October 19, 1988, and the decree of divorce was
granted on September 5, 1990. At the time of trial, Jennifer was
forty-three years old, five years younger than Andrew. She was
regularly employed by the Anchorage School District as a teacher
and earned over $40,000 per year. Andrew was also employed by
the School District, as a safety-security coordinator, earning
about $30,000 a year.
The trial court granted Jennifer custody of the
children. As for the distribution of property, the court found
that all of the parties' property was subject to division and
that it had a net worth of approximately $237,000, of which
Jennifer should receive net assets of approximately $120,000 and
Andrew net assets of approximately $117,000.1
Andrew challenges this division on appeal, contending
that the $100,000 annuity which he received as part of his
distribution should have been found to be separate property.
Andrew makes the same contention with respect to a mutual fund
worth about $1,500. Andrew raises a number of other distri
butional issues and also contends that the court's award of
$3,100 in attorney's fees and costs to Jennifer was an abuse of
Dividing property between divorcing spouses is largely
committed to the discretion of the trial court. Doyle v. Doyle,
815 P.2d 366, 368 (Alaska 1991). There is, however, a process
incorporating a number of statutory and common law principles
which should be followed.2 We have expressed the process as
involving three steps:
First, the trial court must determine
what specific property is available for
distribution. Second, the court must find
the value of this property. Third, it must
decide how an allocation can be made most
Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska 1983); Doyle, 815
P.2d at 368.
In the first step, determining what property is
available for distribution, the court is to identify what marital
property, as distinct from separate property, exists at the
distribution date. Wanberg, 664 P.2d at 571. Because separate
property may be invaded in making a property division when
equitably required, the division of property actually involves
more than three steps. The court must determine what marital
property is available for distribution, value that property, and
make an equitable division if possible. If an equitable
distribution is not possible, the court turns to the parties'
separate property. At that point, the court is addressing the
question of whether the balance of the equities between the
parties requires that separate property be invaded. If invasion
is required, the court should determine what separate property
the parties own, value it, and adjust the initial distribution as
needed. If invasion is not required, the initial division of
marital property becomes the final result.
A. The Annuity
The annuity was a single premium annuity purchased by
Andrew on July 11, 1977, for $30,000. Andrew was both the
annuitant and the owner of the annuity. Jennifer was a
beneficiary. Andrew claims that the funds used to purchase the
annuity were separate property, that he never intended to donate
the funds to the marital estate, and that he likewise never
intended to donate the annuity to the marital estate. Jennifer
contends that the annuity was marital because the parties agreed
that it was a joint investment and because part of the funds used
to purchase the annuity were marital. Even if separate, she
argues that the annuity had to be invaded to achieve an equitable
Funds from a savings account at Alaska USA Federal
Credit Union were used to purchase the annuity. Andrew had
opened the Alaska USA account prior to the marriage. In June of
1976, Jennifer's name was added to the account. Andrew testified
that Jennifer's name was put on the account "if it was necessary
to use it"but that she did not participate in the account until
it was converted into a joint checking account at the end of
1977. At the time the annuity was purchased, the account
consisted of funds deposited only by Andrew, including
inheritance money and $15,500 in military severance pay.
1. Military Severance Pay
The court found that the annuity was a marital asset.
Part of the basis for this was the court's finding that the money3
Andrew received at the termination of his military career was a
marital asset. This conclusion was in large part erroneous. In
May of 1976, Andrew was discharged from the Air Force after
twelve years of service. Military separation payments are
governed by 10 U.S.C. 687. The formula for their calculation
is years of service multiplied by monthly basic pay multiplied by
two (with various limits which are not applicable here). These
payments were part of Andrew's compensation package. They are
analogous to retirement pay which is marital property only to the
extent that it is attributable to work performed during the
marriage. Doyle v. Doyle, 815 P.2d 366, 370 (Alaska 1991). In
this case, Andrew earned almost eighty-seven percent (122 of 141
months in the service) while single. Thus $13,484 of the $15,584
payment should have been considered to be separate property,
unless Andrew conveyed it to the marital estate.
2. Inherited Funds
The other major source of funds in the account used to
pay for the annuity was Andrew's inheritance. The trial court
concluded that the $23,719 inheritance "must be invaded by the
court and distributed as a marital asset so as to provide an
equitable distribution between the parties." The court reasoned
that "[i]t would constitute an abuse of discretion to give to
Andrew an asset which was protected by the income producing
activities of Jennifer and by the use of other marital assets
. . . in failed investments."
The court's reasoning is mistaken. It treats the
inheritance Andrew received as an asset available for
distribution at the time of the divorce. However, in 1990 the
inheritance money had been spent. The relevant question was
whether the inherited funds used to purchase the annuity in 1977
were marital property then.
Inherited property is separate, even if received during
marriage. Julsen v. Julsen, 741 P.2d 642, 648 (Alaska 1987).
However, through various means, inherited property, like other
separate property, may be conveyed to the marital estate.
Whether such a conveyance occurred in this case is, as we discuss
below, an unresolved question.
3. Conveyance to the Marital Estate
Separate property can become marital property where
that is the intent of the owner and there is an act or acts which
demonstrate that intent.4 For example, separate real estate can
become marital where the owner permits the non-owner spouse to
lend her credit to improve the property, or to devote substantial
efforts to its management, maintenance or improvement, or where
the parties use the premises as their personal residence.5
Wanberg, 664 P.2d at 572; Burgess, 710 P.2d at 420. Similarly,
placing separate property in joint ownership is rebuttable
evidence that the owner intended the property to be marital.
Lewis v. Lewis, 785 P.2d 550, 555 (Alaska 1990); cf. Matson v.
Lewis, 755 P.2d 1126, 1127 (Alaska 1988) (intent rebutted where
owner of separate property consented to joint ownership for
convenience in case of her death; spouse acknowledged that
property was separate by conveying it back to owner prior to
divorce); Julsen, 741 P.2d at 646-7 (intent rebutted where
inherited stock placed in joint trading account only "as an
administrative convenience"; non-owner spouse did not participate
in the account). Likewise, agreements oral or written, may
demonstrate the owner's intent, or lack of intent, to convert
separate property to marital property. Rosson v. Rosson, 635
P.2d 469, 471 (Alaska 1981); Matson, 755 P.2d at 1128; Brooks v.
Brooks, 733 P.2d 1044, 1053-54 (Alaska 1987).
The trial court did not address the question whether
Andrew intended to transfer his separate funds to the marital
estate before he purchased the annuity. If the funds were
marital when the annuity was purchased it follows that the
annuity is marital despite the fact that the sole legal owner was
The trial court did conclude that "there is no evidence
that the parties intended to treat [the annuity] as being solely
for the benefit of one to the exclusion of the other." If this
means that there was no evidence that Andrew intended the annuity
to be separate property, it is inaccurate. Andrew testified that
"[t]here was never an intent on my part for [the annuity] to be
A remand is necessary so that the court may determine
whether Andrew intended to transfer the funds used to purchase
the annuity, or the annuity itself, to the marital estate. As
the evidence on both these points is sparse as well as
conflicting, the court, in its discretion, may take additional
evidence. In this as in all cases, we ask for "`sufficiently
detailed and explicit findings to give [this] court a clear
understanding of the basis of the trial court's decision.'"
Lewis, 785 P.2d at 552 (quoting Merrill v. Merrill, 368 P.2d 546,
547-48 (Alaska 1962)).
4. Invasion of the Annuity if it is
Jennifer suggests that even if the annuity is Andrew's
separate property, the court properly exercised its discretion
and invaded it. The court's conclusion that invasion of the
"inheritance" was warranted, rested primarily on two findings.
The first was that the parties made many joint investments
resulting in substantial losses. The court seems to suggest that
because the parties made bad joint investments, Andrew must
sacrifice his separate property. We see no reason why this
should be so. The second finding used to justify invasion was
that Andrew had decided to forgo lucrative employment for a job
that paid minimum wages, forcing Jennifer to become the primary
wage earner for two years. Though Jennifer's financial
contributions to the marriage were significant, they do not make
Andrew's separate property marital. Such a result would mean
that a non-working spouse would never be able to keep his or her
inherited property separate.
Jennifer argues that invasion was warranted because in
1988 the parties paid $10,000 from marital funds to a bank so
that the bank would non-judicially rather than judicially
foreclose a four-plex which had drastically declined in value. A
judicial foreclosure would have resulted in a large deficiency
judgment against the parties. Collection of the judgment could
have involved levies not only on the annuity, but on all their
assets and salaries. Thus, the $10,000 payment to the bank is
insufficiently related to the annuity to serve as a reason for
Our review of the record demonstrates no reason why
invasion of the annuity,6 if it is separate property, might be
required in this case.
B. Additional Distribution Issues
1. The Mutual Fund
In 1973, Andrew purchased 40.65 shares of USAA Capital
Growth Fund for $500. The stock earned dividends which were
reinvested in additional stock. By January 1989, the account
held 105.871 shares worth $1,486.42.
The trial court concluded that the shares "should be
distributed as a marital asset." It is unclear from the
conclusions of law whether the court found that the mutual fund
was marital property, or separate property warranting invasion.
However, the conclusion cannot be justified under either theory.
The mutual fund was acquired by Andrew with separate
funds before the marriage. It remained in his name throughout
the marriage. No additions were made to it from marital funds.
It paid dividends during the marriage, but these were reinvested
and did not become marital property.7 There is no evidence that
Andrew intended to treat the mutual fund as marital property.
Thus any finding that it was marital property would be clearly
Assuming that the court meant to treat the mutual fund
as separate property which should be invaded, the court abused
its discretion. As discussed above concerning the annuity, we
are unable to perceive of any reason why invasion would be
warranted in this case.
2. Alaska USA Account
In its property distribution, the court awarded Andrew
the Alaska USA accounts, valued at $1,450. Review of the record
demonstrates that Jennifer had emptied the Alaska USA accounts
prior to trial and that they were actually worth nothing. It was
error to place a value on them.
3. Valuation of Jennifer's Pension Fund
The record reveals that the court assessed Andrew's
retirement account as of August 1988 but adopted the June 1986
value of Jennifer's comparable account. The fact that the
valuation of Andrew's account reflects two additional years of
interest absent from Jennifer's account results in a relative
under-valuation of the latter.
4. Marital Debts
In its findings, the court acknowledged that the
parties owe an outstanding bill of $2,080 on one of their joint
investments, the Williwa IV Apartments. However, the court
failed to indicate who should pay the debt. On remand this point
should be clarified.
5. Failure to Credit Andrew for $10,000
Down Payment on Family Home
In 1974, the parties purchased a home as joint tenants.
The home was clearly marital property. Andrew paid $10,000 as a
down payment from his separate funds. He contends that the court
should have ordered reimbursement for this payment from the
We have recognized that one of the factors which may be
relevant to a particular division of property is "[a] spouse's
contribution of substantial separate property to the marriage."
Laing v. Laing, 741 P.2d 649, 654 (Alaska 1987); see also
Wanberg, 664 P.2d at 572 (less than equal share may be granted
where property was originally separate property of other spouse).8
However, we have not held that failing to make such an adjustment
is an abuse of discretion. See Matson, 755 P.2d at 1128; Moffitt
v. Moffitt, 749 P.2d 343, 347 (Alaska 1988). On the record
before us we are unable to conclude that the court abused its
discretion in failing to recognize the separate property
contribution of Andrew. Such recognition, however, remains an
option open to the court on remand.9
C. Attorney's Fees and Costs
The court awarded Jennifer $3,100 in attorney's fees
and costs without explanation. Since the court recognized that
both parties have comparable economic situations, the award was
not called for unless Andrew acted in bad faith or was guilty of
vexatious conduct. Mann v. Mann, 778 P.2d 590, 592 (Alaska
1989); Horton v. Hansen, 722 P.2d 211, 218 (Alaska 1986). Before
an award may be made for misconduct, the court "must make
explicit findings of bad faith or vexatious conduct." Kowalski
v. Kowalski, 806 P.2d 1368, 1373 (Alaska 1991). Further, if the
court concludes that the misconduct increased the costs of
litigation, it must "identify the nature and amount of these
increased costs." Id. (citing Richmond v. Richmond, 779 P.2d
1211, 1217 (Alaska 1989); Jones v. Jones, 666 P.2d 1031, 1035
(Alaska 1983)). Since the court failed to make any findings
regarding the award of fees and costs, the award must be
For the reasons discussed above, the superior court's
property distribution and award of attorney's fees and costs are
REVERSED. This case is REMANDED for further proceedings
consistent with this opinion.
RABINOWITZ, Chief Justice, dissenting in part.
I disagree with the majority's holding that the
superior court abused its discretion in invading the annuity and
distributing it as a marital asset. This court has held that
"[w]hether or not the equities require invasion of premarital
assets . . . lies within the broad discretion of the trial court
and will not be overturned absent a clear abuse of discretion."
Julsen v. Julsen, 741 P.2d 642, 647 n.4 (Alaska 1987) (citing
Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska 1983)). The
superior court's findings are not clearly erroneous and support
its conclusions that the parties' marital assets were used to
protect the annuity and that the annuity should be treated as
marital property. In regard to this issue, the superior
court made the following relevant findings of fact and
conclusions of law:
The Guaranteed Security Life
Insurance Company annuity is a marital asset
and should be distributed as such. The funds
for its acquisition cannot be distinguished
as being from any pre-marital funds which are
not subject to division. There is no
evidence that the parties intended to treat
this asset as being solely for the benefit of
one to the exclusion of the other. Finally,
the asset was protected and preserved by the
expenditure of other substantial marital
assets and the income producing activities of
The inheritance of $23,719.58 is a
pre-marital asset. However, it must be
invaded by the court and distributed as a
marital asset so as to provide an equitable
distribution between the parties. Julsen v.
Julsen, 741 P.2d 642, 648 (Alaska 1987). It
would constitute an abuse of discretion to
give to Andrew an asset which was protected
by the income producing activities of
Jennifer and by the use of other marital
assets in the above-referenced failed
Jennifer's domestic efforts and the
direct financial contributions resulting from
employment outside the home have economic
value. The parties' [sic] were able to
preserve the annuity by living frugally using
the income from both salaries and by
financing investments and losses through
their combined incomes and other savings.
In 1986 or 1987, the parties became
concerned about the possibility of a judicial
foreclosure on the Sharon Street four-plex.
They negotiated with the bank for a loan
forgiveness. Andrew specifically instructed
Jennifer not to inform the bank of the
existence of the annuity because he was
afraid the bank would not agree to a loan
forgiveness if they knew that the parties had
such a substantial, highly liquid asset. The
bank agreed to accept $10,000 from the
parties joint savings in consideration for
the loan forgiveness.
In Vanover v. Vanover, 496 P.2d 644, 648 (Alaska 1972),
we held that the equities support the invasion of premarital
assets where one spouse's contribution to the marital community,
pecuniary or otherwise, has benefited the other spouse's
premarital property. In this regard we said:
We believe that a balancing of the
equities required that the trial court invade
the separate property of Harold which he had
acquired prior to his marriage to Gladys.
From the record it is apparent that the
homestead lands to which Harold had managed
to obtain a patent prior to his marriage had
greatly appreciated in value during the 15
years that he was married to Gladys. In part
through the efforts of Gladys, by virtue of
her working for eight years during their 15-
year marriage and her contributions toward
payment of family expenses and taxes, Harold
was able to retain most of the homestead
lands he had brought into their marriage.
Id. at 647.
In the instant case, as in Vanover, I believe that the
equities require the invasion of the annuity because the annuity
was protected by the parties' marital assets, including
Jennifer's salary. Thus, I would hold that the superior court
did not abuse its discretion in invading the annuity after
concluding that the annuity was "protected and preserved by the
expenditure of other substantial marital assets and the income
producing activities of both parties."
1 The distribution of assets was set out in tabular form in
the decree as follows:
ITEM PLAINTIFF DEFENDANT
1983 Subaru $ 3,000
Remaining funds in NBA account $ 20,187
Teachers Retirement (TRS) $ 9,767
USAA Mutual Growth Fund $ 1,486
Personal Property $ 2,261 $ 2,868
PERS $ 12,152
Annuity $ 99,734
Alaska USA 72698 (S1) $ 1,115
Alaska USA 72698 (S7) $ 335
Alaska USA 386887 (S7) ________ ________
SUBTOTAL $117,083 $148,822
Debts on Residence ________ -28,817
(Mortgage and Home Equity Loan)
NET: $117,083 $120,005
2 The statutory principles are expressed in AS
(a) In a judgment in an action for
divorce . . . the court may provide
. . . .
(4) for the division between the
parties of their property, including
retirement benefits, whether joint or
separate, acquired only during marriage, in a
just manner and without regard to which of
the parties is in fault; however, the court,
in making the division, may invade the
property, including retirement benefits, of
either spouse acquired before marriage when
the balancing of the equities between the
parties requires it; . . . the division of
property must fairly allocate the economic
effect of divorce by being based on
consideration of the following factors:
(A) the length of the marriage and
station in life of the parties during the
(B) the age and health of the
(C) the earning capacity of the
parties, including their educational
backgrounds, training, employment skills,
work experiences, length of absence from the
job market, and custodial responsibilities
for children during the marriage;
(D) the financial condition of the
parties, including the availability and cost
of health insurance;
(E) the conduct of the parties,
including whether there has been unreasonable
depletion of marital assets;
(F) the desirability of awarding
the family home, or the right to live in it
for a reasonable period of time, to the party
who has primary physical custody of children;
(G) the circumstances and
necessities of each party;
(H) the time and manner of
acquisition of the property in question; and
(I) the income-producing capacity
of the property and the value of the property
at the time of division.
3 In its findings, the court refers to the "$15,000
readjustment pay." According to the record, Andrew actually
received $15,584.58. Andrew testified that the additional $584
represented residual money from a pay or leave account.
4 Where there is no intent on the part of the owner,
separate property can nonetheless be invaded when required for
equitable purposes. Burgess v. Burgess, 710 P.2d 417, 420 n.3
(Alaska 1985). This, however, is a discretionary step. (The
court must take into account marital property while it may invade
separate property.) Whether to invade separate property is thus
analytically different from deciding whether property is marital
5 However, in Carlson v. Carlson, 722 P.2d 222, 224 (Alaska
1986), the fact that the parties resided in the husband's
farmhouse for a short time after marriage, when some refinishing
work was done, was held insufficient to demonstrate an intent to
treat the property as marital.
6 We note that the annuity was a completely passive
investment. Only forbearance was required to preserve it. This
case is thus distinguishable from Vanover v. Vanover, 496 P.2d
644, 647 (Alaska 1972), where the husband's separate real estate
was invaded in part "because [the wife's] efforts helped to save
[the property]"apparently by contributing to marital income from
which taxes on the separate property were paid for some fifteen
7 "We have never held that a non-titled spouse is entitled
to share in the passive appreciation of separate property."
Brooks, 733 P.2d at 1054.
8 Miles v. Miles, 816 P.2d 129, 132 (Alaska 1991), may also
be explained under this rationale, although there we referred to
the down payment as retaining its pre-marital character.
9 Andrew sets out other claims of error which we find to be
clearly without merit.