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C. Cox v. V. Cox (9/9/94), 882 P 2d 909
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Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
CHARLES B. COX, )
) Supreme Court No. S-5449
Appellant, )
) Superior Court No.
v. ) 3AN-91-6765 CI
)
VICKI M. COX, ) O P I N I O N
)
Appellee. ) [No. 4118 - September 9, 1994]
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Peter A. Michalski,
Judge.
Appearances: Donna C. Willard, Law
Offices of Donna C. Willard, Anchorage, for
Appellant. R. Scott Taylor, Rice, Volland
and Gleason, P.C., Anchorage, for Appellee.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices,
and Bryner, Justice, pro tem.*
MOORE, Chief Justice.
I. INTRODUCTION
Appellant Charles B. Cox (C.B.) appeals from a final
decision of the superior court distributing marital property in
the course of divorce proceedings between C.B. and Vicki M. Cox
(Vicki). Findings of Fact and Conclusions of Law were issued
September 15, 1992. The final decree was signed October 23,
1992. C.B. raises 22 points on appeal. He essentially
makes two broad arguments. First, he asserts that the trial
court should have used a different method of distributing the
marital property. Second, he finds fault with the court's actual
distribution of the property under its chosen method. He claims
that the court erred in identifying marital versus separate
property, in valuing the assets, and in equitably dividing them
for distribution.
II. FACTS AND PROCEEDINGS
C.B. and Vicki Cox were married on February 23, 1985.
Six and one-half years later, on August 9, 1991, they permanently
separated. No children were born of this marriage, although
Vicki has custody of two daughters from her previous marriage.
Their divorce went to trial in September 1992, with property
division the only issue.
At the time of their marriage, each party was employed
and had a separate residence. C.B. was a computer programmer/
analyst for the State of Alaska and owned a house on Pokey Circle
in Anchorage. Vicki was a partner in a business called The Floor
Store and owned a house on Northern Lights Boulevard in
Anchorage. At the time of the marriage, C.B.'s net worth was
$141,502. This figure takes into account the mortgage balance of
$33,679 on the Pokey Circle property -- the only debt owed by
C.B. at that time.
Vicki's financial situation was much worse. Her only
asset was a heavily mortgaged home, with minimal equity. Vicki
had substantial debts from The Floor Store, the business in which
she and her previous husband had been partners and which she
continued to operate after her first divorce. The Floor Store
obligation had resulted in a second mortgage on the Northern
Lights home. In addition, Vicki was responsible for payment to
The Floor Store of $20,829, which she and her prior husband had
taken in draws. She met this obligation by working at The Floor
Store during the first year of her marriage to C.B. and having
the bulk of her compensation credited against the debt. As a
result, in 1985, she brought home only $12,600 from her full time
employment, while C.B. had to pay the couple's taxes on the
additional $20,829 debt that Vicki worked off, for which an IRS
Form 1099 was issued. The Floor Store business eventually
failed, resulting in Vicki filing personal bankruptcy in order to
discharge responsibility for the debts which she had guaranteed.
When the business closed, Vicki became personally liable on a
debt of $19,000 to the Internal Revenue Service.
Because of Vicki's financial circumstances, C.B. was
required to make the payments on all of the real property,
separate or marital. Substantial sums garnered from his
premarital assets were used in this endeavor. C.B. identified
$19,355 of premarital assets immediately dedicated to the
marriage.
Since Vicki's Northern Lights house was larger than
C.B.'s, he moved into that residence upon marriage and rented the
Pokey Circle house. One year later, when the Municipality of
Anchorage condemned the Northern Lights residence, the couple
purchased a larger home on Kingfisher Drive. While Vicki
maintains, and the trial court found in Finding No. 7,1 that this
house was purchased with funds from both premarital residences,
the refinancing of C.B.'s Pokey Circle property furnished the
bulk of the funds. C.B. was able to refinance the Pokey Circle
property for $66,850, of which he received $31,925.57 after
paying the original mortgage and the refinancing costs. With
these proceeds, $17,000 was used by C.B. as a down payment on the
Kingfisher home, $7,000 was invested in a real estate
partnership, $3,500 was used to purchase an airboat and $4,000
was placed in Individual Retirement Accounts, one for C.B. and
one for Vicki.
In contrast, Vicki had very little equity in her
premarital home. Of the $145,320 in condemnation proceeds, after
deducting the balances of her first and second mortgage and the
costs and fees incurred in the condemnation litigation, Vicki
received only $2,600. C.B. argues that this sum should be
characterized as child support, rather than Vicki's separate
property, since Vicki had taken equity in the residence in lieu
of four years of child support from her former husband.
Shortly after their separation, Vicki settled, for
$14,603, two personal injury causes of action which accrued
during marriage, without consultation with her husband and
without considering any of his potential claims. Vicki used
these funds to purchase a new house while the divorce was
pending. Despite Vicki's $3,000 monthly salary, $600 monthly
child support, the personal injury settlement and access to her
children's accounts (discussed infra at III.C.4), C.B. bore
nearly sole responsibility for all of the marital debts between
separation and trial. Thus, from August 9, 1991 to July 31, 1992
he paid, from his post-separation earnings, a total of $27,235
for the Kingfisher residence, the Deshka River recreational
property that the couple had acquired, airboat repairs and
marital accounts payable. Vicki only assisted during the month
of August 1992, when she paid that month's obligations from a
$4,666 income tax refund that the couple had received. In order
to keep the couple's credit in good standing and to timely pay
all of their obligations, C.B. borrowed $10,000 from Alaska
Employees Federal Credit Union and cashed in annual leave.
The trial court valued the net assets of the marriage
at over $227,000, including C.B.'s retirement benefits and
deferred compensation account totalling $154,378. See Findings
No. 8 & 9 in Addendum. The trial court awarded Vicki assets
with a total net value of $113,023.50, and awarded C.B. assets
totalling $114,588.50. See Finding No. 13 in Addendum. The only
debt attached to Vicki's assets was $12,450 on the Deshka
property, on which monthly payments of $250 are due. On the
other hand, imbedded in C.B.'s award were the following debts:
$137,200 on the Kingfisher mortgage; $10,000 on the loan to pay
post-separation expenses; and $62,047 on the Pokey Circle
mortgage.
III. DISCUSSION
A. Standard of Review
The trial court has broad discretion in fashioning a
property division in a divorce action. AS 25.24.160(a)(4);
Hartland v. Hartland, 777 P.2d 636, 639 (Alaska 1989). This
court reviews the trial court's determination of what property is
available for distribution under an abuse of discretion standard.
Jones v. Jones, 835 P.2d 1173, 1175 (Alaska 1992). If in the
course of determining what property is available the trial court
makes any legal determinations, such determinations are
reviewable under the "independent judgment"standard. Lewis v.
Lewis, 785 P.2d 550, 552 (Alaska 1990). All questions of law are
reviewed de novo with this court adopting the rule of law that is
most persuasive in light of precedent, reason and policy. Lantz
v. Lantz, 845 P.2d 429, 431 n.1 (Alaska 1993). However, the
trial court's findings that the parties intended to treat
property as marital are disturbed only if clearly erroneous.
Matson v. Lewis, 755 P.2d 1126, 1128 (Alaska 1988). The
valuation of available property is a factual determination that
should be reversed only if clearly erroneous. McDaniel v.
McDaniel, 829 P.2d 303, 305 (Alaska 1992). The equitable
allocation of property is reviewable under an abuse of discretion
standard and will not be reversed "unless it is clearly unjust."
Doyle v. Doyle, 815 P.2d 366, 368 (Alaska 1991) (citation
omitted).
B. Method of Property Distribution
1. Wanberg Method
A three-step process is used in Alaska to divide
marital assets. See, e.g., Jones, 835 P.2d at 1175. First, the
court determines what specific property is available for
distribution. Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska
1983). Second, the court values that property. Id. Finally,
the court equitably allocates it. Id. The trial court used this
method of distribution in this case.
2. Rose Method
This court has used an alternative approach for
marriages of short duration where there has been no significant
commingling of assets. Rose v. Rose, 755 P.2d 1121, 1125 (Alaska
1988). C.B. proposes that this rescission approach should have
been used in the present case. The trial court in this case
specifically found that "this marriage . . . is one in which the
commingling of assets was general." See Finding No. 6 in
Addendum.
The Coxes had a joint checking account. Before Vicki's
debt to the IRS arose, she deposited her paycheck into that
checking account. After they became aware of her debt to the
IRS, she removed her name from the joint checking account and
deposited her paychecks into a separate account from which the
IRS would be paid (the "IRS account"). However, she continued to
transfer money as needed to the checking account in C.B.'s name,
from which marital expenses were paid. She also paid for food
for the family out of the IRS account. In addition to his
paycheck, C.B. also transferred the rental income from the Pokey
Circle house into the family checking account. Thus, there is
sufficient evidence in the record of commingling so that the
trial court's finding regarding this aspect of the parties'
management of their property was not clearly erroneous, and
therefore C.B.'s argument that the Rose method is appropriate
must fail.
3. "Source of the Funds"Method
Alternatively, C.B. proposes that a third approach to
property division should have been used in this case. He argues
that this court should adopt the "source of the funds" rule.
Without fully defining this rule, he describes it as providing
that "the measure of compensation to each party is the base
amount of the marital contribution along with any appreciation or
depreciation, so that both parties receive a fair and
proportionate return on their investment."2 As C.B. points out,
in Zimin v. Zimin, 837 P.2d 118 (Alaska 1992), this court
affirmed the trial court's use of the source of funds approach:
"Although we do not adopt the source of funds rule per se, it is
not inconsistent with our statutes and caselaw." Id. at 122 n.6.
However, the circumstances under which the rule was
applied in Zimin differ from the instant case. In Zimin, the
trial court was essentially forced into a source of funds
approach because there was no evidence regarding the present
value of the disputed property. Id. at 122. Therefore, the
court valued the marital portion of the various assets based on
the debt payments made during the marriage. Id. The trial court
recognized that this method failed to take into account the post-
marital appreciation or depreciation of the property. Id. Our
holding was thus limited to the approval of the source of funds
approach in the limited context of determining current value in
the absence of any other evidence. Id. n.6. We recognized that
the trial court could have reached the same result under our
rules of equitable division and therefore it did not abuse its
discretion under the circumstances. Id.
To require the use of the source of funds rule in this
case would be an expansion of the Zimin holding. It is one thing
to hold that use of the source of funds rule in limited
circumstances is not an abuse of discretion; it would be quite a
leap from Zimin to hold that it must be applied in a given set of
circumstances as a matter of law. We are not satisfied that such
a leap would be appropriate. Therefore, we decline to depart
from the Wanberg method of property distribution.
C. Identification of Marital Property
C.B. maintains that the trial court's factual findings
reveal a failure to adequately distinguish between marital and
separate property. The only reference to the issue appears in
Finding No. 7, which states that "[t]he equity value of the
premarital residences of the parties were combined to purchase
the marital residence." See Addendum. This Finding is deficient
in several respects. First, Vicki did not contribute any equity
from her premarital home to the purchase of the Kingfisher house.
Second, the Finding implies that all of the equity from C.B.'s
premarital home went to purchase the new marital home. It simply
fails to classify the property purchased with the rest of the
funds from the refinancing of the Pokey Circle property. Third,
it fails to address other property which C.B. argues should be
classified as his separate property. A remand for further
findings is therefore warranted pursuant to Murray v. Murray, 788
P.2d 41, 42 (Alaska 1990), where we stated that "the superior
court's failure to distinguish separate from marital property, or
to enter any finding as to the necessity of [the] invasion [of
one spouse's separate premarital property], is reversible error."3
1. Equity of Premarital Residences
The only evidence in the record indicates that Vicki's
net proceeds from the condemnation of the Northern Lights home
did not exceed $2,600, and that this money was used for general
purposes. Thus, contrary to Finding No. 7, Vicki did not
contribute these funds to purchase the marital residence.
With respect to the proceeds of the Pokey Circle
refinancing, C.B. argues that the property purchased with these
funds should be treated as separate property. Of the $32,000 in
proceeds, $17,000 was used for the Kingfisher downpayment.
Nevertheless, C.B. argues that the equities in this case dictate
classifying this portion of the proceeds as separate property.4
In Miles v. Miles, 816 P.2d 129 (Alaska 1991), we
stated that
[i]t is within the trial court's
discretion to find that premarital assets
have become part of the marital estate.
However, we have held that the act of
commingling 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.
Id. at 132 (footnote omitted). While Miles makes it clear that
it is not an abuse of discretion to treat a premarital asset as
separate property under these circumstances, it does not state
that it would be an abuse of discretion not to treat the
premarital asset as separate property. To treat C.B.'s
contribution of premarital assets as marital property would not
ordinarily be an abuse of discretion if there is evidence that
C.B. intended the transmutation of separate property into marital
property and there are acts which demonstrate that intent. See
Chotiner v. Chotiner, 829 P.2d 829, 832-33 (Alaska 1992).
However, given the inaccuracies and the lack of detail in the
trial court's lone Finding on this subject, a remand is in order
in this case.
The trial court's Finding was also erroneous in the
respect that only $17,000 of the $32,000 Pokey Circle refinancing
proceeds were used for the down payment on the couple's
Kingfisher home. The remaining proceeds were used to purchase
the airboat, the real estate partnership investment, and IRA
accounts for both C.B. and Vicki. Both parties agree that
placing separate property in joint ownership is rebuttable
evidence that the owner intended the property to be marital.
See, e.g., Chotiner, 829 P.2d at 833. C.B. argues that no
presumption exists in this case regarding those assets which were
never in Vicki's name: C.B.'s IRA account, the airboat, and the
Parker Parsley real estate partnership investment. C.B. argues
that there was no other evidence suggesting that these assets
were converted to marital property, since no additions were made
to them from marital funds. Vicki offers no argument why they
should be treated as marital assets, other than her reliance on
the trial court's erroneous Finding No. 7. Because this Finding
does not address the classification of those assets, other than
the Kingfisher home, which were purchased using the equity value
of C.B.'s premarital residence, we remand for classification of
these assets.
2. The Pokey Circle Property
C.B. contends that the trial court, without any
explanation, designated the Pokey Circle property as marital in
nature. Separate property becomes marital only upon a showing
that the parties intended to treat the property as marital.
Chotiner, 829 P.2d at 832. The proper standards for determining
whether real property should be characterized as marital are set
forth in such cases as Chotiner and McDaniel v. McDaniel, 829
P.2d 303 (Alaska 1992). The relevant factors include: "(1) the
use of property as the parties' personal residence, and (2) the
ongoing maintenance and managing of the property by both
parties," McDaniel, 829 P.2d at 306 (citing Burgess v. Burgess,
710 P.2d 417, 420 (Alaska 1985)), as well as (3) placing the
title of the property in joint ownership and (4) using the credit
of the non-titled owner to improve the property. Chotiner, 829
P.2d at 833. C.B. maintains that Vicki never lived in the Pokey
Circle residence nor contributed to its maintenance and
management, that rents were sufficient to cover all expenses,
that there is no evidence of an intent to treat the property as
marital, and that it therefore should have been treated as
separate property.
Vicki points to contrary evidence in the record. The
loan documentation from the United States Department of Housing
and Urban Development for the Pokey Circle refinancing shows that
the property was titled in the names of both parties and both
were "sellers,"jointly liable on the loan. See, e.g., Rhodes v.
Rhodes, 867 P.2d 802, 805 (Alaska 1994) (co-signing of loan and
assumption of joint liability for its repayment are indicative of
intent to treat property as marital). The rental income was
deposited into the marital checking account, and all expenses
associated with the property were paid from that account. While
the rental income covered most of the expenses, for at least six
to eight months during the marriage the property was vacant.
Thus, Vicki maintains that she assumed a financial risk on the
refinancing and that she contributed to mortgage and maintenance
payments by depositing her income into the marital account from
which these expenses were paid. Because the trial court did not
make any finding regarding the parties' intentions to treat Pokey
Circle as marital property, we remand for further findings on
this issue.
3. Dean Witter Account
Aside from those assets purchased from the Pokey Circle
refinancing proceeds, and the Pokey Circle home itself, the only
other asset which C.B. identifies as being misclassified as
marital is his Dean Witter commodities trading account. As with
some of the assets purchased from the Pokey Circle refinancing
proceeds, this account is personal property which never bore
Vicki's name. However, there was evidence that C.B. invested
money into the account during the course of the marriage. Based
on the evidence in the record, it may not have been an abuse of
discretion to treat the account as marital property. However,
since the trial court made no separate finding that classified
this account as marital property, we remand for further findings.
4. Girls' Checking Accounts
As stated above, Vicki took the equity in her pre-
marital residence in lieu of four years of child support from her
previous husband. When Vicki's prior husband was once again
required to make child support payments, C.B. suggested that one-
half of each monthly payment of $300 per child be placed into an
account to be accumulated for the girls' higher education.
Thereafter, whenever possible, $150 a month was placed into an
account for each of the girls, leaving only $300 each month for
child support expenses, even though it was costing $1,000 to
$1,200 a month to support both children. The trial court found
these accounts to be property of the children and not marital
assets. See Finding No. 14 in Addendum.
C.B. alleges that the court erred in not treating these
accounts as marital assets. He points out that the dedicated use
of this money was not "sacrosanct." If funds were needed, it
was used for household expenses, although C.B. kept track of it
to ensure that it was replaced. If the family did not need it
one month, the entire $600 would be placed in the accounts.
However, if the budget did not balance, the child support was
freely used for expenditures both big and small. Thus, C.B.
contends that these savings accounts were to be used in the
marriage.
However, as Vicki points out, these were dedicated
accounts from which every withdrawal by the marriage was
documented and eventually replaced. We hold that the record
provides sufficient support so that the trial court's Finding
that the accounts were not marital property was not an abuse of
discretion and should thus be affirmed.
D. Valuation of Assets
1. Valuation Date
While the values of many of the assets were the subject
of stipulations, some of the most important assets were not
covered. The court chose August 1991, the date of separation, as
the date for valuing these assets. See Finding No. 4 in
Addendum. The court gave no reason for selecting this date. We
have held that while the date for classification of property is
that of separation, the proper date for valuation is one as close
as practicable to that of trial. Ogard v. Ogard, 808 P.2d 815,
819 & n.8 (Alaska 1991). While we recognized in Ogard that
there may be special situations in which the date of separation
is more appropriate, we held that the court must make specific
findings in such cases as to why the use of this date is proper.
Id. at 820; see also McDaniel, 829 P.2d at 307.
C.B. argues that the court erred in valuing the
parties' checking accounts at the date of separation, since after
the date of separation he used more than $4,000 of his money to
retire immediate obligations of the marriage. The court valued
his checking account at $2,555 -- the amount at the date of
separation -- and awarded this amount to Vicki. C.B. further
argues that this "asset"should not have been included at all
since it did not exist at the date of trial. Under Chotiner, 829
P.2d at 834, it is error to place a value on an account that has
been emptied prior to trial. We therefore remand for valuation
of the checking account at the time of trial, rather than at the
date of separation.5
2. Valuation of Pokey Circle Property
C.B. also alleges mistakes in the valuation of the
Pokey Circle property. The only current market value entered
into evidence was a 1992 tax assessment for $35,400. The only
other valuation was a November 1985 appraisal for $95,500. Yet,
the court valued the property at $62,500, despite the lack of any
evidence in the record that this was the market value. See
Finding No. 9 in Addendum. The debt on the Pokey Circle property
at the date of separation was $62,046.73. The trial court
assigned the property a $1.00 net value for distribution
purposes. See Finding No. 13 in Addendum. C.B. alleges that the
trial court should have instead used a negative value, offsetting
the debt against $35,400. Given the lack of any support in the
record for the trial court's valuation, we remand for further
proceedings as to the market value of the Pokey Circle property.
3. Valuation of the Kingfisher House
C.B. argues that the court erred in two respects in its
valuation of the Kingfisher house. First, while C.B. agrees that
the market value at the date of trial was approximately $145,000
and the debt $137,200, he argues that the court also should have
deducted selling costs. Thus, C.B.'s expert testified at trial
that a sale at that time would have resulted in a loss of $6,827
when closing costs were considered. However, the expert admitted
on cross-examination that this figure anticipated the seller
paying all closing costs, and that it would change if the buyer
shared the costs. Vicki proposed a negligible net value, and the
court agreed, using the $145,000 and $137,200 values but
assigning a nominal net value of $1. See Finding No. 13 in
Addendum. The court thus effectively deducted approximately
$7,800 for selling costs. The valuation of the property at $1
was not clearly erroneous, given the speculative nature of the
testimony regarding values and sales costs, and the lack of a
firm selling date.
C.B.'s second argument regarding the valuation of the
Kingfisher property is that, to the extent the debt against the
Pokey Circle property was directly caused by the refinancing to
purchase the Kingfisher home, this debt should be deducted from
the value of that home. C.B. does not provide any persuasive
legal basis for this argument. As Vicki points out, the Pokey
Circle mortgage is secured by the Pokey Circle property, not by
the Kingfisher property. All of this mortgage should be deducted
from the value of the Pokey Circle property, not from the
Kingfisher home. Thus, we affirm the trial court's valuation.
4. Personal Property
The final valuation issue raised concerns personal
property. C.B. presented evidence that Vicki removed $4,022 in
marital personalty while he was left with items worth $1,055.
The trial court placed no value whatsoever on the personal
property, but simply stated that "[t]he combination of that
division and that contained in [Finding No. 13] is an equitable
division." See Finding No. 15 in Addendum. The trial court must
make findings to give this court a means of evaluating whether an
equitable distribution has been achieved. Lang v. Lang, 741 P.2d
1193, 1195 (Alaska 1987) (citing Merrill v. Merrill, 368 P.2d
546, 547-48 (Alaska 1962)). The court's failure to make any
findings regarding the value of the personal property constitutes
reversible error, and we therefore remand for such findings.
E. Equitable Distribution
In making an equitable allocation of the marital
property between the parties, the trial court must consider the
Merrill factors, 368 P.2d at 548 n.4, as codified in AS
25.24.160(a)(4):
(A) the length of the marriage and
station in life of the parties during the
marriage;
(B) the age and health of the parties;
(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 the division.
The Merrill factors are not exclusive in determining an equitable
division; the trial court may consider other relevant factors.
Laing v. Laing, 741 P.2d 649, 652 (Alaska 1987).
The trial court's Findings did not state which of the
Merrill factors were considered. The only subjects mentioned
were valuation and the six and one-half years duration of the
marriage. See Finding No. 6 in Addendum. No apparent
consideration was given to the fact that C.B. is eight years
older than Vicki and is scheduled to retire in seven years. The
time and manner of acquisition of the property was also not
mentioned.6
1. Preservation of the Marital Estate
C.B. maintains that other factors should have been
considered, including the substantial sums which he expended in
order to preserve the marital estate. This court has "required
that trial courts consider payments made to maintain marital
property from post-separation income when dividing marital
property." Ramsey v. Ramsey, 834 P.2d 807, 809 (Alaska 1992).
"[T]he fact that one party has made payments from non-marital
income to preserve marital property should be considered as one
of the circumstances to be weighed by the trial court in dividing
the marital property." Id. The court's Findings show no
consideration of C.B.'s preservation of the marital estate from
post-marital earnings. Furthermore, as discussed supra, by
valuing the checking accounts at the date of separation, the
court failed to consider that C.B. used his account to pay post-
separation marital debts while Vicki used hers for her separate
expenses.
This court has "consistently . . . considered the
conduct of the parties with respect to the marital property and
debts after separation a relevant factor in determining a just
division." Oberhansly v. Oberhansly, 798 P.2d 883, 885 (Alaska
1990). For example, in Jones, 835 P.2d at 1177, the husband
argued that he should have been given credit for $6,889 in house
payments made from his own funds after separation. We remanded
to the trial court for further consideration of whether the
property distribution should have been adjusted accordingly.
Likewise, in Oberhansly, the court held that it was proper for
the superior court to consider one party's fault in allowing most
of the household debts to fall into default and in paying
personal debts out of marital assets. Oberhansly, 798 P.2d at
885. In the present case, we remand for the trial court to
determine whether C.B.'s payment of the marital debts from post-
separation earnings and his personal checking account, as well as
Vicki's expenditure of marital assets for post-separation
expenses, should cause a change in the property distribution.7
2. Vicki's Premarital Debt
Although the parties stipulated that the court could
consider that marital assets were used to pay Vicki's premarital
debt, Finding No. 12 held:
The court gives little weight to this.
The choice to use marital assets in payment
of premarital debt under the circumstances of
this case does not call for a substantial
shift in the distribution of the marital
estate upon divorce. The evidence does not
reflect over-reaching or fraud between
spouses on this issue and the decision to pay
one's debts rather than to purchase
additional things or savings does not
automatically call for rebalancing the
divorce equation.
C.B. argues that, in fact, the court gave no weight whatsoever to
this factor and shifted no money. However, the fact that no
credit was given does not mean that the trial court did not give
the matter adequate consideration. The decision not to adjust
the parties' accounts as a result of this factor is within the
discretion of the trial court and is therefore not reversible
error. Cf. Ramsey, 834 P.2d at 809 (court did not abuse its
discretion by failing to give credit for payments from non-
marital income to preserve marital property); Chotiner, 829 P.2d
at 834-35 (court did not abuse its discretion by failing to give
credit for separate property contribution of husband).
3. C.B.'s Support of Vicki's Children
C.B. also alleges that the trial court overlooked his
support of Vicki's children from a prior marriage. Alaska case
law has held that a trial court does not abuse its discretion in
considering this factor. See, e.g., Burcell v. Burcell, 713 P.2d
802, 805 (Alaska 1986). No case directly addresses whether it is
an abuse of discretion not to consider this factor. However,
given the controversy in this case over the establishment and
character of Vicki's daughters' bank accounts, C.B.'s support is
a relevant factor that the trial court should have considered in
making an equitable distribution. Therefore we remand to the
trial court for explicit consideration of this issue.
4. Social Security Benefits
C.B. also asks this court to declare, for the first
time, that Social Security benefits may be taken into account in
making an equitable distribution. We have held that the doctrine
of federal preemption prevents state courts from dividing Social
Security benefits. Mann v. Mann, 778 P.2d 590, 591 (Alaska
1989). C.B. does not dispute this holding; he proposes that the
possibility of Vicki receiving Social Security benefits merely be
taken into account in the distribution.
Unlike Alaska SBS benefits, to which an employee has a
specific entitlement, Social Security benefits are not deferred
compensation for services rendered but rather a governmental
safety net for the retired. The employee has no contractual
right to such benefits. Id. at 592. The sum of the Social
Security taxes paid from an employee's earnings are not a measure
of any potential Social Security benefits that the employee might
receive upon retirement. Nevertheless, C.B. cites to cases from
three different states which have held that Social Security
benefits are but one factor to be considered in the disposition
of the marital property, and that there is no federal prohibition
excluding their consideration in the divorce context. See, e.g.,
In re Marriage of Knipp, 809 P.2d 562, 564 (Kan. App. 1991);
Elliott v. Elliott, 274 N.W.2d 75, 78 (Minn. 1978); Hogan v.
Hogan, 796 S.W.2d 400, 407 (Mo. App. 1990). Given the
speculative nature of future Social Security benefits, we do not
consider this approach to be wise, and we affirm the trial
court's refusal to consider Vicki's Social Security benefits.
5. SBS Waiver
C.B. also argues that the court erred in dividing
C.B.'s SBS benefits evenly in light of Vicki's signed waiver of
her right to anything other than 25% of such benefits in the
event of C.B.'s death. C.B. states that Vicki should not be
given more in the divorce proceeding, at the expense of C.B.'s
heirs, than that to which she voluntarily limited herself. The
court correctly ruled that Vicki's waiver did not limit her to a
25% share of the benefits. Beneficiary designation is concerned
only with disposition of account benefits upon C.B.'s death; it
has no bearing on the valuation and division of this marital
asset upon divorce. This court has previously established that
SBS benefits earned during marriage are marital property subject
to equitable division upon divorce. Mann, 778 P.2d at 592.
Nevertheless, we have found that the court did not properly
address other significant aspects of the overall property
distribution. Therefore, on remand, we leave open the possibility
that, if the court finds that C.B. deserves more than 50% of the
marital property, the even division of the SBS benefits may
ultimately be inappropriate.
IV. CONCLUSION
The trial court's use of the Wanberg method is
AFFIRMED. As provided above, the court's findings regarding the
characterization of property, its valuations, and its equitable
distribution are AFFIRMED in part, REVERSED in part and REMANDED
for further proceedings consistent with this opinion.
ADDENDUM
Trial Court's Findings of Fact
1. The parties are residents of the State of Alaska;
2. The parties were married February 23, 1985, and
ever since that time have been husband and wife;
3. There are no children born of the marriage, no
children were adopted during the marriage, and plaintiff is not
now pregnant. The parties lived with and supported two (2)
children of the plaintiff's first marriage;
4. The parties separated in August 1991, and for the
purposes of choosing a date for valuing the marital estate that
date is the best for this case;
5. An incompatibility of temperament exists between
the parties which is irremediable;
6. The defendant has sought to have the court use an
unwinding procedure to cause the parties to be returned to status
quo ante but this marriage of 6 1/2 years (to separation) is one
in which the commingling of assets was general;
7. The equity value of the premarital residences of
the parties were combined to purchase the marital residence;
8. The parties have stipulated to the value of the
following:
Asset Market Value Less Liability Net
Value
Deshka Property $28,000 (12,450) $15,550
Airboat $6,000 $6,000
1989 Blazer $12,000 $12,000
Parker & Parsley $4,200 $4,200
C.B. PERS $48,982 $48,982
C.B. SBS $41,201 $41,201
C.B. Defer. Comp. $64,195 $64,195
C.B. IRA $6,000 $6,000
Vicki IRA $6,000 $6,000
Vicki 401K $15,200 $15,200
9. The court adopts the market value and debt of the
following which were not completely agreed to:
Asset Market Value Less Liability Net
Value
Pokey Circle $62,500 ($62,047)
2710 Kingfisher $145,000 ($137,200)
Dean Witter $1,000 $1,000
C.B. Checking $2,555 $2,555
Vicki Checking $288 $288
Personal Injury $1,648 $1,648
1991 Tax Refund $2,300 $2,300
10. The court finds that the PERS and SBS benefits
should be divided by QDRO. The applicable factor to be applied
is "1/2 x 77/total months in the program x any disbursal of the
program."
11. The court understands from the parties that the
deferred compensation portion is not subject to application of a
QDRO;
12. The parties stipulated that the court could
consider the existence and payment of premarital debt. The court
gives little weight to this. The choice to use marital assets in
payment of premarital debt under the circumstances of this case
does not call for a substantial shift in the distribution of the
marital estate upon divorce. The evidence did not reflect
overreaching or fraud between spouses on this issue and the
decision to pay one's debts rather than to purchase additional
things or savings does not automatically call for rebalancing the
divorce equation;
13. The court divides the parties' marital estate as
follows:
Asset To C.B. Cox To Vicki Cox
8260 Pokey Circle $1
2710 Kingfisher $1
Deshka Property $15,500
Airboat $6,000
1989 Blazer $12,000
Parker & Parsley $4,200
Dean Witter $1,000
C.B. Checking $2,555
Vicki's Checking $288
Personal Injury $1,648
C.B. Defer. Comp. $64,195
C.B. IRA $3,000 $3,000
Vicki IRA $6,000
Vicki 401K $15,200
1991 Tax Refund $2,300
Vicki Insurance $541
14. The court does not consider the various children's
accounts to be marital assets, but rather property of the
children.
15. In addition to 13, minor personal property has
already been divided. The combination of that division and that
contained in 13 is an equitable distribution.
IN THE SUPREME COURT OF THE STATE OF ALASKA
CHARLES B. COX, )
) Supreme Court No. S-5449
Appellant, )
) O R D E R
v. )
)
VICKI M. COX, )
)
Appellee. )
______________________________)
Superior Court No. 3AN-91-6765 Civil
Before: Moore, Chief Justice, Rabinowitz,
Matthews, and Compton, Justices, and Bryner,
Justice, pro tem.********
IT IS ORDERED:
1. Opinion No. 4112 published on August 19, 1994, is
WITHDRAWN.
2. Opinion No. 4118 is issued on this date in its
place.
Entered by direction of the Court at Anchorage, Alaska,
on September 9, 1994.
CLERK OF THE SUPREME COURT
__________________________
JAN HANSEN
_______________________________
* Sitting by assignment made pursuant to article IV,
section 16 of the Alaska Constitution.
1 See the attached Addendum for a complete list of the
trial court's Findings.
2 A leading treatise on equitable distribution defines
this rule as follows:
[T]he source of funds rule is a
combination of the mixed theory of property
and a payment-based definition of
acquisition. The net effect of this
combination is that property is classified
according to the classification of the funds
used to purchase it: property purchased with
marital property is marital, while property
purchased with separate property remains
separate. Where property is purchased with
mixed funds, the ratio between the marital
and the separate interests is the same as the
ratio between the marital and separate
contributions. Moreover, property purchased
on debt is classified according to the funds
used to pay off the debt and to the extent
the debt remains unpaid, the property has not
yet been acquired.
Brett R. Turner, Supplement to Lawrence J. Golden, Equitable
Distribution of Property 5.07A, at 81 (1993).
3 In reaching this conclusion we are not implying that
the Kingfisher house was not itself marital property. See
Chotiner v. Chotiner, 829 P.2d 829, 833 (Alaska 1992).
4 C.B. bases this argument in part on his contribution of
at least an additional $19,355 in fungible premarital assets to
support Vicki's children and to make payments on her premarital
residence as well as Kingfisher. C.B. alleges that it was an
abuse of discretion not to recognize such substantial
contributions of premarital property. While these are equitable
considerations in C.B.'s favor which may be factored into the
ultimate distribution, it was not an abuse of discretion to
ignore them at the property classification stage.
5 If assets no longer exist or are not owned by the
parties, they are not available for distribution. However, where
there is evidence that a marital asset was dissipated, wasted, or
converted to a non-marital form, the court can "recapture" the
asset by giving it an earlier valuation date and crediting all or
part of it to the account of the party who controlled the asset.
See Gallant v. Gallant, ___ P.2d ___, Op. No. 4098 at 6 n.5
(Alaska, July 1, 1994); Jones, 835 P.2d at 1175-76; Hartland, 777
P.2d at 642.
6 Vicki alleges that C.B. waived his right to seek an
adjustment based on the Merrill factors, since he did not raise
this argument before the trial court. C.B. counters that asking
for application of the Merrill factors is implicit in asking the
court to make an equitable distribution. Waiver is not
appropriate here, since application of the Merrill factors is
closely related to C.B.'s trial court theory, and since C.B.'s
reliance on them could have been gleaned from the pleadings.
See, e.g., Zeman v. Lufthansa German Airlines, 699 P.2d 1274,
1280 (Alaska 1985).
7 Indeed, in Vicki's settlement brief, she admits that
"C.B. is entitled to some consideration for the post-separation
payments that he has made to maintain the marital estate."
(citing Ramsey, 834 P.2d at 809).
********Sitting by assignment made pursuant to article IV,
section 16 of the Alaska Constitution.
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