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Notkin v. Notkin (7/26/96), 921 P 2d 1109
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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, phone (907) 264-0607, fax (907)
264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
JOSEPH NOTKIN, )
) Supreme Court No. S-7182
Appellant, )
) Superior Court No.
v. ) 4FA-94-679 Civ.
)
NITAYA B. NOTKIN, )
) O P I N I O N
Appellee. )
______________________________) [No. 4374 - July 26, 1996]
Appeal from the Superior Court of the State of
Alaska, Fourth Judicial District, Fairbanks,
Ralph R. Beistline and Jay Hodges, Judges.
Appearances: Dick L. Madson, Fairbanks, for
Appellant. Valerie M. Therrien, Fairbanks,
for Appellee.
Before: Compton, Chief Justice, Rabinowitz,
Matthews, Eastaugh, and Fabe, Justices.
COMPTON, Chief Justice.
I. INTRODUCTION
Joseph Notkin appeals, contending that the superior court
erred both in setting aside the Notkins' original property
settlement agreement and in its resolution of property and support
issues. We affirm.
II. FACTS AND PROCEEDINGS
Nitaya Notkin and Joseph Notkin were married in 1984.
Joseph works as an architect and earns approximately $56,000 a
year. Nitaya works as a hair stylist with an anticipated future
earning capacity of approximately $13,200 a year; she is also
raising and supporting a son from a prior relationship. At the
time of their divorce, it was unclear whether there was any
positive equity in the family home. The only marital property
available for division was two retirement accounts Joseph had
acquired with employers.
Nitaya filed for divorce in April 1994. The Notkins
reached a property settlement agreement, which was filed with the
superior court in November. Nitaya's lawyer stated that she
believed the settlement was unfair to her client, but she
nonetheless went ahead and drafted the settlement agreement and
signed it. An uncontested divorce hearing was scheduled for
December 13.
Nitaya soon had second thoughts about the property
settlement agreement. On December 9, she moved the court to set
aside the agreement and allow the divorce to proceed to trial as
originally scheduled. While the agreement had been filed with the
court the previous month, it had neither been approved by the
superior court nor incorporated into the terms of a divorce decree
at the time Nitaya moved to have it set aside.
The superior court granted Nitaya's motion to set aside
the settlement agreement. The case then proceeded to trial; the
superior court entered its judgment in May 1995. The court divided
the monies in Joseph's retirement accounts, and awarded Nitaya
reorientation alimony. Joseph appeals both the superior court's
decision to set aside the original settlement agreement and its
resolution of property and support issues.
III. DISCUSSION
A. The Superior Court Did Not Err in Setting Aside the
Notkins' Property Settlement Agreement.
In reviewing a superior court's decision to set aside a
property settlement agreement, or its refusal to do so, "[t]he
standard of review and the substantive issue are
intertwined . . . ." Murphy v. Murphy, 812 P.2d 960, 965 (Alaska
1991). "[A] court may accept as 'just' a divorce property
settlement entered into by parties represented by counsel."
Kerslake v. Kerslake, 609 P.2d 559, 560 (Alaska 1980) (footnote
omitted). "[I]nsofar as an agreement relates to the division of
property, 'the separation agreement should be controlling in the
absence of fraud, duress, concealment of assets or other facts
showing that the agreement was not made voluntarily and with full
understanding.'" Id. at 560, n.1 (quoting H. Clark, Law of
Domestic Relations  16.10, at 551 (1968)) (emphasis added).
As the superior court observed, "[t]he record indicates
that Nitaya is not sophisticated in matters relating to division of
property and financial obligations." Nitaya affied that "I did not
know what I was doing and I did not know how to communicate what I
needed to my attorney or the system. . . . I thought I knew, but
all I knew was that I needed money and I thought I could get some
money quick." Nitaya is originally from Thailand, and it is clear
from her transcribed testimony that she is not fully conversant in
English.
This evidence suggests that Nitaya lacked a full
understanding of the true nature and consequences of her actions at
the time she entered into this agreement. Nitaya did possess a
certain level of understanding as to what she was doing; she
testified later that she had understood at the time she signed the
agreement that:
It isn't fair. I need the money. I know it's
not fair. I want to get it done, over, get to
the part -- I don't want anything. I just
want to get it over.
Although this testimony suggests that Nitaya knew in a general way
that she was accepting an unfair arrangement in exchange for some
immediate cash and finality, the trial court did not err in setting
aside the property settlement. Nitaya's lack of familiarity with
financial and property matters and her difficulties in
communication support the conclusion that she lacked a full
understanding of what she was doing. We affirm the superior
court's order setting aside the property settlement agreement.
Our decision should not be misunderstood as signalling a
new level of heightened scrutiny for property settlements entered
into by parties to a divorce. It is still the case that
"'[s]tipulations and settlements are favored in law because they
simplify, shorten and settle litigation without taking up valuable
court resources,'"and that this principle applies in the context
of divorce property settlements. Murphy, 812 P.2d at 965 (quoting
Interior Credit Bureau, Inc. v. Bussing, 559 P.2d 104, 106 (Alaska
1977). It also remains the case that divorce property settlements
do not receive the same statutorily-mandated level of heightened
scrutiny that dissolution property agreements receive. (EN1) It is
equally the case, however, that even under the more relaxed
scrutiny afforded property settlements in divorce actions, courts
need not accept property settlements as controlling when the facts
indicate that an agreement was not made with full understanding.
See Kerslake, 609 P.2d at 560, n.1.
B. The Superior Court Did Not Err in Valuing Joseph's
Retirement Account.
Joseph argues that the superior court erred in valuing
his retirement account at Design Alaska, his employer at the time
of the divorce, because it did not reduce the value of this account
to reflect the debt on the account from loans taken out on it
during the marriage. Nitaya called Rebecca A. Jones, business
manager and human resources director for Design Alaska, as a
witness. Jones testified that the $30,000 valuation of the
retirement account took the loans into account. Because this
testimony provided ample support for the trial court's valuation,
this valuation is not clearly erroneous. See Rice v. Rice, 757
P.2d 60, 62 (Alaska 1988) (trial court's valuation of marital
property is a factual determination that will be set aside only if
clearly erroneous).
C. The Superior Court Did Not Abuse Its Discretion in
Awarding Nitaya Reorientation Alimony.
The superior court awarded Nitaya reorientation alimony
"to allow Ms. Notkin to establish herself as a single parent in the
community." This award consisted of three parts: (1) Joseph was
required to assume full responsibility for Nitaya's outstanding car
payments; (2) Joseph was required to assume responsibility for
Nitaya's student loan; (3) Nitaya was awarded an additional $5,500
in cash "to take care of all obligations, past, present, or
future."
Joseph appeals this award of reorientation alimony,
claiming that the award was based in part on a factor not
authorized by statute -- Nitaya's need to support her son, that the
cash award was unsupported by any evidence, and that the court
abused its discretion in ordering Joseph to assume responsibility
for the student loan and car payments.
"An award of alimony is within the trial court's
discretion and will be set aside only if it is unjust or
unnecessary." Richmond v. Richmond, 779 P.2d 1211, 1215 (Alaska
1989). "The purpose of reorientation alimony is to allow the
requesting spouse an opportunity to adjust to the changed financial
circumstances accompanying a divorce." Id. at 1215, n.6. The
superior court correctly identified Nitaya's situation as one
calling for reorientation alimony, given the dramatically reduced
income she would be living on after the divorce. Furthermore, none
of Joseph's specific objections to the alimony award has any merit.
1. Consideration of Nitaya's need to support her son
There was nothing inappropriate in the court considering
"Ms. Notkin's role as a mother and the need she has to raise and
support her son"in awarding reorientation alimony. Instead of
constituting a disguised child support award, as Joseph suggests it
does, the court's consideration of Nitaya's need to support her son
was essential if the reorientation alimony award were to serve its
purpose of helping Nitaya adjust to the changed financial
circumstances of the divorce.
2. The $5,500 cash award
Joseph argues that the $5,500 cash award to satisfy "any
and all obligations past, present, and future"was unsupported by
any evidence, since the court had already ordered Joseph to "pay
all Nitaya's existing debts or obligations which consisted of her
car loan and student loan." This argument is not supported by the
record. The trial court heard testimony regarding numerous other
obligations Nitaya had incurred: the cost of low income housing,
medical expenses, automobile insurance, telephone, electricity,
groceries, laundry, school lunches for her son, and gas. Nitaya
testified that
. . . I can't afford to pay -- I cannot live
on my own income. It's hard. I can't live
on. Is so hard for me. Just don't make it.
Every month just behind, behind.
These expenses are among the minimal obligations Nitaya will have
to meet in maintaining herself and her son. While the superior
court's one time only cash award may be an imprecise way of helping
Nitaya stabilize as to the expense of meeting these obligations,
there is no reason to assume that this award was in any way
duplicative of Joseph's assumption of Nitaya's obligations
regarding car payments and the student loan.
3. Student loan and automobile payment obligations
Joseph argues that the court "in effect, ordered a form
of after-the-fact rehabilitative alimony"when it required him to
assume responsibility for Nitaya's student loan. He also argues
that because Nitaya's car was purchased after the Notkins
separated, it was not marital property and the payments owed on it
are not a marital debt. The court might have constructed a more
conventional alimony award by requiring Joseph to make monthly
alimony payments that would be calculated to cover these
obligations. However, the award it did construct is nonetheless
well-tailored to fit the purposes of reorientation alimony. Joseph
is only responsible for obligations remaining as of May 1, 1995.
In other words, his payments on the loan and on the car are timed
to coincide with the period in which Nitaya is making the financial
adjustment to post-divorce life on a dramatically reduced income.
In order for a person to adjust to living on less than $15,000 a
year, this form of relief could be critical.
4. Preference for property division over alimony
Finally, Joseph argues that Nitaya could have paid the
balance on her student loan and car payments out of the property
division on the retirement account. "[R]eorientation alimony is
only appropriate when the property settlement will not adequately
meet the parties' reasonable needs." Richmond, 779 P.2d at 1215,
n.6. "Where property can provide support, alimony is neither just
nor necessary." Hilliker v. Hilliker, 755 P.2d 1111, 1112 (Alaska
1988).
One aspect of the superior court's alimony award may
violate the preference for property division over alimony. The
court ordered that the $5,500 in reorientation for "all
obligations, past, present, or future"be taken out of Joseph's
retirement account. Given the preference for property division,
the court might have awarded Nitaya a larger share of the
retirement account, instead of designating this additional share of
the Notkins' one item of divisible marital property as "alimony."
However, because this amount comes from the same source and is a
one time only payment, regardless of how it is labelled, any error
is harmless.
As to the car payment and student loan components of the
alimony award, these expenses could not have been paid for by
increasing Nitaya's share of the retirement accounts. The court
determined that the value of Joseph's retirement accounts was
$32,128, and awarded Nitaya $16,014 of this amount in the property
division, roughly half of the total. However, the court ordered
Joseph to pay the $5,500 for "obligations"and Nitaya's $5,000
attorney's fee award out of his share of the property division.
Furthermore, to help Nitaya cover the tax consequences and
penalties that would result from the early withdrawal of the
retirement monies, the court then decided to "round up the total
sum that Ms. Notkin shall withdraw from the [] account to $30,000."
This leaves only $2,128 in Joseph's share of the account monies,
far less than the $5,500 left to pay on Nitaya's student loan, not
to mention the payments on the car.
As to Joseph's assertion that Nitaya could have paid off
her student loan and car payment obligations out of her $16,014
from the property settlement, the superior court considered the
parties' earning capacities, educational backgrounds, employment
skills, work experiences, and custodial responsibilities,
acknowledged that reorientation alimony is only appropriate when
the property settlement will not adequately meet a party's needs,
and concluded that such alimony was appropriate. The court's
conclusion was not an abuse of discretion. The amount of property
that was available for division was small, Nitaya's earning
capacity is low, and a separate award of reorientation alimony in
addition to the property division seems to have been the only way
to adequately ensure that she would be able to meet her reasonable
needs.
D. The Award of Attorney's Fees to Nitaya Was Not Manifestly
Unreasonable.
The award of attorney's fees in a divorce action is
committed to the sound discretion of the trial court. Burrell v.
Burrell, 537 P.2d 1, 7 (Alaska 1975). "The trial court's
discretion in awarding attorney's fees will not be disturbed on
appeal unless it is 'arbitrary, capricious, manifestly
unreasonable, or stems from an improper motive.'" Zimin v. Zimin,
837 P.2d 118, 124 (Alaska 1992) (quoting Tobeluk v. Lind, 586 P.2d
873, 878 (Alaska 1979)).
Joseph argues that the superior court should not have
awarded Nitaya attorney's fees when "the decision to incur the
majority of the fees was totally due to Nitaya's bad faith in
refusing to honor the settlement agreement." However, the superior
court did not award Nitaya those attorney's fees accrued on the
motion to set aside the property settlement agreement. The court
instead awarded Nitaya partial attorney's fees of $5,000 when it
entered judgment.
In awarding attorney's fees in a divorce action, "[t]he
relevant considerations are the relative economic situation and
earning power of each party." Hartland v. Hartland, 777 P.2d 636,
644 (Alaska 1989). There was nothing so manifestly unreasonable
about Nitaya's attorney charging fees in a contested divorce
proceeding that would warrant dispensing with the usual relevant
considerations, simply because the divorce became contested only
after the settlement agreement was set aside. Given the disparity
in the Notkins' economic situation and earning power, the superior
court did not abuse its discretion in awarding Nitaya attorney's
fees.
IV. CONCLUSION
We AFFIRM the judgment of the superior court.
ENDNOTES:
1. AS 25.24.230(a) allows a court to grant a final decree of
dissolution only after finding that "the spouses understand fully
the nature and consequences of their action"and that "the written
agreements between the spouses concerning maintenance and tax
consequences, if any, division of property, including retirement
benefits, and allocation of obligations are fair and just[.]" In
contrast, with divorces there is no "affirmative duty on a trial
court to examine every property settlement reached by the parties
to determine if it is just." Kerslake, 609 P.2d at 560, n.1.
Furthermore, while AS 25.24.220(h) requires a court to "use a
heightened level of scrutiny"in reviewing a property agreement if
there is a minor child of the marriage or "a patently inequitable
division of the marital estate,"this statutory section applies
only to dissolutions and "afford[s] no additional protection for
divorce actions[.]" Murphy, 812 P.2d at 965, n.8. As we stated in
Murphy, "[t]he legislature may want to consider extending the
heightened level of scrutiny to divorces commenced under AS
25.24.010, for the need for heightened scrutiny is arguably as
great in a contested divorce which is ultimately settled." Id.
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