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Hatten v. Hatten (5/31/96), 917 P 2d 667
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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; (907) 264-0607.
THE SUPREME COURT OF THE STATE OF ALASKA
MICHAEL C. HATTEN, )
) Supreme Court No. S-6183
Appellant, )
) Superior Court No.
v. ) 3KN-92-312 DR
)
BONITA A. HATTEN, ) O P I N I O N
)
Appellee. ) [No. 4354 - May 31, 1996]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Kenai,
Charles K. Cranston, Judge.
Appearances: Blaine D. Gilman and Patricia A.
Huna, Kenai, for Appellant. Patrick J. McKay,
Anchorage, for Appellee.
Before: Rabinowitz, Matthews, Compton, and
Eastaugh, Justices. [Moore, Chief Justice,
not participating.]
RABINOWITZ, Justice.
I. INTRODUCTION
In this appeal we are required to determine whether the
superior court properly characterized and apportioned tort
litigation proceeds in dividing a marital estate upon divorce. In
addition, this appeal involves an attorney's fees issue.
II. FACTS AND PROCEEDINGS
Michael and Bonita Hatten were married in 1980. They
separated in August 1990, and, after a brief attempt at
reconciliation, a Decree of Divorce was entered on December 2,
1992. A two-day trial was held in September 1993 for the purpose
of resolving property division issues. On appeal, Michael argues
that the superior court improperly included his separate property
in the marital estate. At issue are tort damages in two separate
cases, one pending and one completed.
The first case involved a wrongful termination action
brought by Michael against a former employer, Union Oil. Michael's
complaint included claims for both economic and non-economic
damages. This litigation was eventually settled with Michael
receiving $30,000 designated in the settlement agreement as damages
for mental duress. Notwithstanding the designation, the superior
court concluded that the settlement proceeds "were based more on
economic loss rather than emotional distress." Accordingly, it
held that the "settlement proceeds in that suit were marital
property, constituting recovery for loss of earning capacity."
Michael argues that the superior court's holding is flawed for two
reasons: (1) as a matter of law, the superior court is required to
accept the classification of damages provided for in a settlement
agreement; and (2) the superior court improperly took judicial
notice of Michael's deposition in the Union Oil wrongful
termination litigation.
The second case involves damages stemming from the Exxon
Valdez oil spill. As a commercial fisherman, Michael has pending
claims for damages relating to his past and future lost earnings.
Though counsel for both parties discussed this pending claim at
trial, the superior court failed to make any mention of the Exxon
suit in its Memorandum of Decision. Subsequently, on November 15,
1993 (EN1) -- forty-seven days after the superior court issued its
decision -- Bonita filed a motion for relief from judgment under
Civil Rule 60(b). On December 7, 1993, the superior court granted
Bonita's motion and issued an Addendum to its Memorandum of
Decision. In the addendum, the superior court concluded that
proceeds received from the Exxon Valdez oil spill are a marital
asset, and it apportioned the potential proceeds as of the date of
trial, September 1993. That is, the superior court held that any
damages received by Michael which reflect losses occurring prior to
September 1993 are marital property, but that any damages that
reflect losses accruing after September 1993 are Michael's separate
property. Michael argues that the superior court erred for two
reasons: (1) Bonita's Rule 60(b) motion should have been denied
since it reflects an otherwise untimely attempt on her part to file
either a motion for reconsideration or an appeal of the property
division; and (2) even if properly granted, the appropriate legal
date for dividing spill proceeds is August 1990, the date Michael
and Bonita first separated, not September 1993, the date of trial.
Michael's final point on appeal is that the superior
court erred in awarding Bonita $6,000 in attorney's fees.
III. DISCUSSION
A. Pending Exxon Valdez Tort Litigation Claims
1. The superior court did not err in granting Bonita's
Rule 60(b) motion.
Though the issue was raised at trial, the superior court
failed to address Michael's pending lawsuit against Exxon in its
Memorandum of Decision, dated September 29, 1993. On November 15,
1993, forty-seven days after the court entered its decision, Bonita
filed a Rule 60(b) motion for relief from judgment. (EN2) The
superior court subsequently granted her motion and entered an
Addendum to its Findings of Fact and Conclusions of Law, which
states that any damages recovered by Michael in the Exxon
litigation for wages lost prior to September 1993 are marital
property and "shall be equally divided between the parties."
Michael argues that since time had expired for the filing of either
a motion for reconsideration or a notice of appeal, and since the
court's omission was easily recognizable by Bonita, her Rule 60(b)
motion was improperly granted. (EN3)
In this instance, there can be no doubt that Michael's
pending litigation against Exxon was raised at trial. In fact,
while examining a witness, Michael's attorney effectively conceded
that a portion of the proceeds eventually received are a marital
asset:
[I]n fact, . . . it's our position that Mrs.
Hatten's entitled to 50% of the [Exxon] claims
up to the present, which would represent
damages which are reflected during the course
of the marriage.
Given the above, we conclude that the superior court did
not abuse its discretion in granting Bonita's Rule 60(b) motion.
By all indications, the superior court's omission was an
inadvertent factual mistake, not a mistake of law. (EN4)
Similarly, insofar as Bonita's motion was seventeen days tardy,
(EN5) Michael was not prejudiced since the superior court extended
the time in which he could timely appeal, and he took advantage of
this extension. (EN6)
This court has held that Rule 60(b)(1) motions based on
facts which are known to a party at a time when direct appeal is
possible must be brought within thirty days. Kenai Peninsula
Borough v. English Bay Village, 781 P.2d 6, 7 (Alaska 1989).
However, we take this occasion to disapprove of our decision in
Kenai Peninsula insofar as it would bar the Rule 60(b) motion in
the case at bar. (EN7) In short, we conclude that only Rule 60(b)
motions alleging a mistake of law need be filed within the time
frame applicable to an appeal. We have also held that a motion
"was sufficiently timely under Civil Rule 60(b)"if brought within
six weeks of the date of the final order, a time-frame comparable
with the instant case. (EN8) For all these reasons, we hold that
the superior court did not abuse its discretion in granting
Bonita's Rule 60(b) motion.
2. Michael waived any argument that proceeds from the
Exxon litigation should be divided as of the date
of the parties' separation.
Michael also argues that even if Bonita's Rule 60(b)
motion was properly granted, the superior court erred by using the
September 14, 1993 date of trial rather than August 1990, the date
of the parties' initial separation for purposes of dividing the
proceeds from Michael's lost earnings claim against Exxon. In
response, Bonita argues that Michael has waived this issue for
purposes of appeal since, at trial, his counsel impliedly accepted
the September 1993 trial date as the proper date of apportionment.
She also argues that the superior court's adoption of the date of
trial was not clearly unjust. (EN9)
We have said that although the date for valuation of
marital property should be as close as practical to the date of
trial, the date for segregating marital from post-marital property
is ordinarily the date of the functional termination of the
marriage. Hanlon v. Hanlon, 871 P.2d 229, 231 (Alaska 1994). This
date is "when the marriage has terminated as a joint enterprise"or
"when a married couple cease functioning economically as a single
unit." Hanlon, 871 P.2d at 231 (citations omitted). Often the
date of permanent separation is the date used for segregating
marital from post-marital property. Gallant v. Gallant, 882 P.2d
1252, 1255 (Alaska 1994).
In determining whether the superior court erred in using
the September 1993 date of trial as the date for distinguishing
marital from post-marital property and apportioning Michael's lost
earning damage proceeds, four dates are potentially relevant: (1)
August 1990, the date that the parties separated for the first
time; (2) March 1992, the date Bonita testified as being the date
of separation and the date Michael filed for divorce; (EN10) (3)
December 1992, the date the decree of divorce was issued; and (4)
September 1993, the date of trial.
In Schanck v. Schanck, 717 P.2d 1, 3 (Alaska 1986), we
stated:
As a general rule, we hold that property
accumulated with income earned after
separation that is intended to, and does in
fact, lead to a divorce is excluded from the
category of marital property, as long as it is
obtained without the invasion of any pre-
separation marital asset. We decline to
specify, as a matter of law, that the
effective date when such earnings become
severable from marital property is at
separation or at filing for divorce. Each
case must be judged on its facts to determine
when the marriage has terminated as a joint
enterprise.
Here the marriage had terminated as a joint enterprise no later
than March of 1992, the date when Michael filed for divorce and the
date that Bonita testified was the time of separation.
However, this court has also held that a spouse, based on
statements made at trial, may waive an otherwise valid argument
that the court improperly divided assets as of the date of trial:
As noted above, the superior court found from
the testimony of both parties, and the
statements of their respective counsel, that
the parties agreed Judy was entitled to one-
half of the value of Raymond's accumulated
pension. Study of the record shows that
Raymond considered the entire pension accrued
during the parties' cohabitation and marriage
to be part of the marital estate. At trial,
Raymond never differentiated the pension
contributions he made before the parties'
marriage or those made after the parties'
separation. In light of the superior court's
finding as to this issue, and its evidentiary
support in the record, we conclude that
Raymond waived any objection to the superior
court's division of pension benefits as of the
date of trial.
Bays, 807 P.2d at 486.
In the instant case, statements made by Michael's counsel
during direct examination of Robert Cowan, Michael's attorney in
the Exxon case, are of particular significance:
Q: [W]hen the . . . Alyeska and the
Exxon claims become settled and the
money is distributed, you'll be able
to tell, will you not, what
percentage of the claim is for
future . . . damages, using today's
date as a reference point?
September 13th, and what percentage
was damages which accrued from the
time of the Exxon spill to today's
date?
. . . .
Q: [O]ur problem is, is the damages are
going to be running from the Exxon
spill, past the present date, in
fact, and it's our position that
Mrs. Hatten's entitled to 50% of the
[Exxon] claims up to the present,
which would represent damages which
are reflected during the course of
the marriage. . . . But the future
damages would be solely Mr. Hatten's
property.
Given the above, we affirm the superior court's decision
to apportion the prospective proceeds from the Exxon litigation as
of the date of trial.
B. Michael's Wrongful Termination Lawsuit (EN11)
1. The designation of damages in a settlement
agreement does not control whether the proceeds are
separate or marital property.
In Bandow v. Bandow, 794 P.2d 1346 (Alaska 1990), this
court adopted the "analytic"approach for classifying tort damages
for purposes of dividing a marital estate:
Under this approach, the purpose for which the
recovery is received controls its
classification; a recovery, or portion
thereof, being classified as that which it is
intended to replace. To the extent the
recovery compensates for losses to the marital
estate, it is marital property. To the extent
the recovery compensates for losses to a
spouse's separate estate, it is his or her
separate property.
Id. at 1348 (citations omitted). Thus, insofar as Michael's
settlement reflects mental anguish, an element of non-economic
damage, the proceeds are his separate property.
Michael settled his wrongful termination claim against
Union Oil for $30,000 which was designated in the settlement
agreement as damages for mental distress. Notwithstanding the
settlement agreement, the superior court found that
[Michael's] claims in the suit, emphasized by
their continued reference in the Amended
Complaint, were based more on economic loss
rather than emotional distress. The Court
finds that the settlement proceeds in that
suit were marital property, constituting
recovery for loss of earning capacity.[ (EN12)]
Michael argues that under Bandow the superior court is
required to accept the classification of damages as contained in
the underlying settlement agreement. To hold otherwise, he claims,
is "bad policy"in that it causes unpredictable results and
promotes mini-trials.
Michael's argument is unpersuasive. The goal of the
"analytic"approach of classifying damages is to assure that any
division of tort proceeds reflects the underlying components of
damage. Bandow, 794 P.2d at 1348. To hold that the superior court
is precluded from reclassifying damages would be self-defeating;
that is, if the formal structuring of settlement proceeds
subsequently controlled their classification as either marital or
separate property, then the "analytic"approach would be
meaningless.
Since at times parties designate damages in tort
settlements in manners wholly unrelated to the underlying harm, a
particular classification of damages may have little basis in
reality. Consequently, though the labeling of Michael's damages as
"mental anguish"may carry evidentiary weight, it does not
dispositive of their true character. To hold otherwise elevates
form over substance and creates perverse incentives in structuring
settlements where one of the parties is involved in a divorce
proceeding, or anticipates such an eventuality. Thus, we conclude
under Bandow that the designation or structuring of damages in a
settlement agreement does not control whether the proceeds are
separate or marital property.
 2. The superior court's classification decision
regarding the character of the proceeds from the
settlement of the wrongful termination claim
against Union Oil requires a remand.
As noted previously, the superior court concluded that
the proceeds from Michael's wrongful termination suit settlement
"were based more on economic loss rather than emotional distress."
As a consequence, the superior court concluded that "the settlement
proceeds in that suit were marital property, constituting recovery
for loss of earning capacity."
We think the superior court's predicate finding for its
holding that the Union Oil settlement proceeds were marital
property is inherently ambiguous. Given that the superior court
did not find that settlement claims were based wholly on economic
loss, this issue must be remanded to the superior court for
additional proceedings to determine whether or not these proceeds
should be allocated as between marital and nonmarital property. (EN
13)
On remand, the superior court is authorized to take
additional evidence on this issue. More specifically, the
superior court should admit into evidence Michael's deposition
which was taken in the Union Oil litigation as well as any
additional relevant evidence the parties may offer on this issue.
The superior court should then enter further findings of fact and
conclusions of law regarding the nature of this property and its
proper distribution.
C. Attorney's Fees
Michael's final point on appeal is that the superior
court abused its discretion in awarding Bonita attorney's fees of
$6,000, the amount Bonita's counsel requested during closing
arguments. Counsel for Michael responded in part, "With respect to
attorney's fees, Your Honor, I would request that [counsel for
Bonita] file a motion at the end of this case and brief it to
provide an itemization of his attorney's fees. . . . [I]t's just
inappropriate to award fees unless there's an itemization." The
superior court impliedly decided that itemization was not necessary
and granted Bonita's request for attorney's fees in the amount of
$6,000.
AS 25.24.140(a) provides:
During the pendency of the action, a spouse
may, upon application and in appropriate
circumstances, be awarded expenses, including
(1) Attorney fees and costs that reasonably
approximate the actual fees and costs required
to prosecute or defend the action; . . . .
Given the provisions of AS 25.24.140(a)(1) and the fact that
Michael objected to Bonita's request for an award of $6,000 in
attorney's fees, we hold that the superior court erred in awarding
Bonita attorney's fees without requiring an itemization of Bonita's
actual attorney's fees. Therefore, we vacate the superior court's
award of attorney's fees, and remand the issue of attorney's fees
to the superior court.
IV. CONCLUSION
AFFIRMED in part, VACATED in part, and REMANDED for
further proceedings consistent with this opinion.
ENDNOTES:
1. Bonita's motion for Rule 60(b) relief is not included in the
record, but Bonita does not contest Michael's assertion that she
filed the motion on November 15, 1993.
2. Civil Rule 60(b) reads:
On motion and upon such terms as are just, the
court may relieve a party or a party's legal
representative from a final judgment, order,
or proceeding for the following reasons:
(1) mistake, inadvertence, surprise or
excusable neglect;
. . . .
The motion shall be made within a reasonable
time, and . . . not more than one year after
the date of notice of the judgment[.]
3. The rules governing relief from final judgments on grounds
such as mistake or fraud are applicable to property settlements in
divorce decrees. Larson v. Larson, 661 P.2d 626 (Alaska 1983).
Furthermore, relief from judgment is addressed to the sound
discretion of the trial court, and the court's ruling will not be
disturbed except upon a showing of abuse of discretion. Gravel v.
Alaskan Village, Inc., 423 P.2d 273 (Alaska 1967).
4. Rule 60(b) motions based on errors of law should be filed
within the same time period for the filing of a notice of appeal,
which is 30 days. Alaska Placer Co. v. Lee, 502 P.2d 128, 130
(Alaska 1972) (citing Alaska Truck Transport, Inc. v. Berman
Packing Co., 469 P.2d 697 (Alaska 1970)). But see Alaskan Village,
Inc. v. Smalley, 720 P.2d 945, 951 (Alaska 1986) (holding that
trial court had discretion to relax the thirty-day rule in the
interests of justice).
5. Bonita's Rule 60(b) motion was filed forty-seven days after
final judgment, whereas a timely notice of appeal must be filed
within 30 days. Alaska R. App. P. 204(a)(1).
6. "One factor the court may use to determine reasonableness is
whether there was prejudice to the other party caused by the
delay." Allen v. Allen, 645 P.2d 774, 777 n.7 (Alaska 1982)
(citation omitted).
7. As observed in one treatise, the federal courts seem to be
holding that a reasonable time for a Civil Rule 60(b) motion to
correct an error of law "may not exceed the time in which appeal
might have been taken if the error involved a fundamental
misconception of law, but that this limit does not apply if the
judicial error was a minor oversight." 11 Charles A. Wright et
al., Federal Practice and Procedure sec. 2866, at 389 (1995).
8. Wood v. Collins, 812 P.2d 951, 959 (Alaska 1991).
9. The superior court "has broad latitude in making its property
division." Bays v. Bays, 807 P.2d 482, 485 n.4 (Alaska 1991). We
will not disturb a property division absent a showing of abuse of
discretion, i.e., clear injustice. Id. However, whether the
superior court applied the appropriate legal standard in exercising
its broad discretion is a question of law. Id.
10. At trial Bonita testified:
To me I think my legal separation was March of
1992, because [until then] we were staying at
each other's house, we were still having
sexual intercourse, and . . . I was still
cooking meals for him and doing his dishes and
housework at his house and my house.
11. Whether the settlement proceeds from Michael's wrongful
termination lawsuit are marital or separate property "is in large
part a legal determination . . . ." Wanberg v. Wanberg, 664 P.2d
568, 570 (Alaska 1983). As such, this court's review of the legal
issues is based upon its independent judgment. Id. However, any
factual findings the superior court made in determining whether to
include the settlement proceeds in the marital estate "will not be
disturbed unless clearly erroneous." Bays, 807 P.2d at 485 n.4
(citations omitted).
12. In regard to the settlement, the superior court additionally
found that
a. Husband filed a FIRST AMENDED
COMPLAINT in Case No. 3KN-86-480 CI, MICHAEL
HATTEN vs. UNION OIL COMPANY OF CALIFORNIA,
INC., AND LARRY McCALLISTER. In that document
husband alleged in part that as a result of
Union Oil Company's termination his ability to
obtain comparable employment was substantially
impaired (Paragraph XX), that he suffered a
substantial impairment of future earning
capacity in an amount exceeding ONE HUNDRED
THOUSAND DOLLARS (Paragraph XXX), that the
termination substantially impaired his ability
to perform his trade as crane operator
(paragraph XXXV) and that he suffered damages
due to the infliction of emotional suffering
and distress in excess of ONE HUNDRED THOUSAND
DOLLARS (Paragraph XXXII).
b. Husband's deposition in the suit was
taken on June 5, 1987. Deposing counsel asked
husband questions concerning his claims for
loss of reputation and emotional distress.
Husband was unable to answer with any
specificity the nature of the loss or the
extent and type of distress other than
nightmares involving crane operation.
13. We recognize that an argument can be made that although the
superior court's statement that damages were based "more on
economic loss"implies there are both economic and emotional
distress damages, its use of "rather than emotional distress"
implies that it found that the claims were based on economic loss
and not on emotional distress. Nevertheless, we believe the better
approach is to remand this issue in order to obviate any latent
ambiguity in the superior court's findings relating to this issue.
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