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Cox v. Cox (2/7/97), 931 P 2d 1041
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Notice: This opinion is subject to 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
CHARLES B. COX, )
) Supreme Court No. S-6912/6962
Appellant and )
Cross-Appellee, ) Superior Court No.
) 3AN-91-06765 CI
v. )
)
VICKI M. COX, ) O P I N I O N
)
Appellee and ) [No. 4475 - February 7, 1997]
Cross-Appellant. )
______________________________)
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 and Cross-Appellee. R. Scott
Taylor, Rice, Volland & Taylor, P.C., Anchorage, for Appellee
and Cross-Appellant.
Before: Compton, Chief Justice, Rabinowitz, Matthews,
Eastaugh, and Fabe, Justices.
MATTHEWS, Justice.
On remand from our first decision in this case, Cox v. Cox, 882 P.2d 909 (Alaska
1994) (Cox I), the superior court adhered to its view that an equal division of the parties' marital
property was appropriate, made certain adjustments in response to our decision, and divided
marital property as indicated in the following table:
Marital Market Less Net Value
Asset Value Liability To C.B. To Vicki
8260 Pokey Circle $ 36,000 ($ 62,047) ($26,000) (EN1)
2710 Kingfisher $145,000 ($144,999) (EN2) $ 1
Deshka Property $ 28,000 ($ 12,450) $ 15,000 (EN3)
PERS (marital share) $ 48,982 $ 24,491$ 24,491
SBS (marital share) $ 41,201 $ 20,600$ 20,600
Deferred Comp (mar sh) $ 64,195 $ 64,195
C.B. IRA $ 6,000 $ 3,000$ 3,000
1991 Tax Refund $ 2,300 $ 2,300
Airboat $ 6,000 $ 6,000
1989 Blazer $ 12,000 $ 12,000
Parker & Parsley Invest. $ 4,200 $ 4,200
Dean Witter Acct. $ 1,000 $ 1,000
Personal Property $ 3,500 $ 1,000$ 2,500
Vicki Checking Acct. $ 288 $ 288
Personal Injury $ 1,648 $ 1,648
Vicki IRA $ 6,000 $ 6,000
Vicki 401K $ 15,200 $ 15,200
Vicki Life Insurance $ 541 $ 541
_________ _________
$ 89,587$112,468
Judgment from Vicki to C.B. $ 11,440.50 ($11,440.50)
Final Asset Distribution $101,027.50 $101,027.50
From this amended judgment Charles B. Cox (C.B.) appeals and Vicki M. Cox cross-appeals.
The issues raised and our disposition concerning each are as follows.
The Appeal
1. C.B.'s Checking Account
At the first trial the court valued C.B.'s checking account at $2,555 and awarded
this sum to Vicki. This was the account's value when the parties separated. At the time of trial
there was no money in the account. In Cox I we ruled that this was error, stating:
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.
Id. at 918 n.5. Prior to our ruling, C.B. paid the awarded $2,555 plus interest to Vicki as
required by the judgment. On remand, the trial court properly valued C.B.'s checking account
at zero, but did not order Vicki to return the $2,555.
C.B. argues that the court erred in failing to require Vicki to reimburse C.B. for
the sum in question. Vicki's response is that "[t]o the extent that the trial court erred in failing
to order the return of this distributed asset"the error was harmless for the court made an
approximately equal and offsetting error concerning valuation of the airboat awarded to Vicki.
We conclude that the court should have given an effective remedy for the error
concerning the account. This error could have been corrected simply by valuing the checking
account at zero if Vicki had not already collected on the judgment. Given that she did collect,
what was required was an order requiring reimbursement. Vicki's argument concerning
valuation of the airboat is unavailing since, as we rule below, the airboat was the separate
property of C.B. and should not have been awarded to Vicki.
2. Classification of Property Purchased with Proceeds of Pokey Circle House
Refinancing
C.B. contends that the refinancing of the Pokey Circle house -- which was his
prior to the marriage -- resulted in cash which was his separate property. This was expended,
in part, to buy the investment partnership, the airboat, and the IRA for C.B. The trial court on
remand treated these properties as marital rather than separate property, reasoning that on
remand the parties had stipulated that they intended to treat Pokey Circle as marital property,
and that therefore the "refinancing debt"was marital and so, presumably, were the proceeds.
C.B. argues that although on remand he agreed that the Pokey Circle property
could be considered marital property, he did not agree that the proceeds of the refinancing were
marital property. He argues that the three items of property listed above were not jointly held
and that there is no evidence that the parties intended to transmute them from separate into
marital property. Vicki argues that the proceeds from the refinancing of the Pokey Circle
property were marital since the Pokey Circle property was stipulated to be marital.
In Cox I we assumed that the refinancing proceeds were the separate property of
C.B. Thus, concerning these proceeds we stated: "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." Id. at 916. We noted with respect to the three items in question
that there was no presumption that they had been transmuted from separate property into marital
property and remanded "for classification of these assets." Id. at 916.
Until the Pokey Circle property was refinanced it was the separate property of
C.B. For the first year of their marriage the parties occupied Vicki's house on Northern Lights
Boulevard. Id. at 912. They then moved into a house on Kingfisher Drive acquired in part with
a portion of the refinancing proceeds. Arguably the Pokey Circle house was transmuted from
separate to marital property when it was refinanced, for C.B. then transferred title to himself
and Vicki jointly, and both C.B. and Vicki became liable on the deed of trust note. Since it was
the refinancing which, at the earliest, effected the transmutation of the property, it does not
follow that the proceeds from the refinancing were marital in character. In essence, C.B. sold
the property to the marital estate, which paid him for it with the refinancing proceeds. The
proceeds thus remained the separate property of C.B. We conclude that C.B. is correct on this
issue and that the court erred in failing to classify C.B.'s IRA, the investment partnership, and
the airboat as separate property. (EN4)
3. Consideration of Equitable Factors
C.B. argues that the trial court failed to take into consideration as required by Cox
I the fact that marital funds were used to pay Vicki's premarital debt, the use of C.B.'s
premarital and post-separation funds for marital purposes, C.B.'s partial support of Vicki's
children, and Vicki's use of marital assets for post-separation expenses.
In Cox I we directed the court to consider on remand whether (1) "C.B.'s
payments of the marital debts from post-separation earnings and his personal checking account,"
and (2) "Vicki's expenditure of marital assets for post-separation expenses, should cause a
change in the property distribution." Id. at 919-20. In addition, we remanded for "explicit
consideration"of the question whether C.B.'s support of Vicki's children from a prior marriage
was a factor requiring an adjustment in the property division. Id. at 920. We did not require
the court to reconsider whether the use of marital property to pay Vicki's premarital debt was
a factor requiring an adjustment in the property distribution.
On remand the trial court complied with Cox I and considered the equitable
factors described above, finding that they did not reflect a need to deviate from the fifty/fifty
distribution of marital assets which the court had found to be fair. We thus conclude that C.B.'s
argument on this point lacks merit.
The Cross-Appeal
4. Valuation of the Pokey Circle House
At the first trial the court awarded the Pokey Circle property to C.B., valuing it
as of the time of trial at $62,500, less a mortgage debt of $62,047. In Cox I we ruled that the
court's valuation was unsupported by the evidence and remanded with directions to value this
property. On remand, the trial court adopted the valuation of an appraiser who testified on
behalf of C.B. that the Pokey Circle property as of the trial date had a fair market value of
$36,000. Since the mortgage debt was the same as previously found, Pokey Circle had a
negative value which the court calculated as $26,000.
Vicki argues that the appraisal on which the court relied had deducted $14,000
from fair value based on damage to the roof for which C.B. had received $6,000 from an
insurance company for repairs after the first trial but before the remand trial. She argues that
treating the $14,000 roof loss as marital but the $6,000 recovered from the insurance company
as separate property of C.B. was inconsistent. Vicki also argues that the court erred in valuing
Pokey Circle as of the 1992 trial date rather than as of the date of the remand trial. She
presented evidence that the fair market value at the latter date (December 1994) was
approximately $63,000. In response, C.B. argues that the trial court correctly decided to use
the date of the original trial rather than the date of the trial on remand for reasons of judicial
efficiency and because the Pokey Circle property was refinanced subsequent to the first trial,
removing Vicki from liability on the mortgage. C.B. does not comment on Vicki's argument
concerning the repair proceeds for the roof.
We conclude that the trial court did not err in using the date of the first trial as
the date of valuation for the Pokey Circle property. Given the general change in real estate
values in Anchorage, it might have been unjust to have revalued only one of the parties' prld
be time consuming and expensive. We observed in Moffitt v. Moffitt:
In some circumstances, it might be unjust to revalue only one asset
at the date of the new trial while maintaining old values on all
other assets which have been distributed. If so, judicial efficiency
might require that valuation take place as of the date of the
original trial.
813 P.2d 674, 678 (Alaska 1991). We agree with Vicki's argument concerning insurance
recovery for the roof repair. On remand the court is directed to add $6,000 to C.B.'s asset
column.
5. Award of Cash Judgment
The revaluation of the Pokey Circle property which resulted in a net negative
value in C.B.'s column of distributed property, resulted in a net distributional difference of
$22,881, which the court equalized by requiring Vicki to pay C.B. $11,440.50. Vicki argues
that the court should have made an in-kind reallocation from the marital assets rather than
requiring her to make a cash payment. She contends that transfer of title is the preferred method
for dividing marital property, citing Brett R. Turner, Equitable Distribution of Property sec.
9.02, at 623 (2d ed. 1994). This treatise states:
The most common method for actually dividing the marital
estate is by directly transferring title of assets from one party to
another. This is the preferred division method in cases where it
can be reasonably implemented.
Id. (footnote omitted). In response, C.B. argues that it was not error to make a monetary
allocation as part of a division of property, citing another section of the same text which states
that "it is not error per se to make an award greater than the payor's liquid assets where he or
she can sell property to meet the obligation." Turner, sec. 9.03 at 632. He argues that it would
work no hardship on Vicki to make the cash payment required by the judgment of the court.
We agree with both of the quoted sections of the Turner text. The preferred
method for dividing a marital estate is to transfer title where this can be reasonably
accomplished, but it is not error per se to make a cash award requiring one party to sell illiquid
assets (or make installment payments) where such an award causes no hardship. Here it does
not appear that the court addressed either the question whether equality could be reasonably
accomplished by title transfer or whether Vicki could, without hardship, make the cash payment
called for by the court's order. On remand the court should address these questions and make
such adjustments as may be appropriate.
Based on the present opinion, the marital asset division should be provisionally
adjusted as follows:
Net Value of Marital Assets
Amount per decision on remand
Airboat (deducted from Vicki's column but not added
to C.B.'s column since it was separate property)
Investment partnership (Vicki must transfer this to
C.B., but it is not added to C.B.'s column because it
is separate property)
C.B.'s IRA (Vicki must transfer the 1/2 she received
to C.B. and the 1/2 C.B. received is deducted from
his column as it was separate property)
Roof repair proceeds added to C.B.'s marital property
account
To C.B.
$ 89,587
$( 3,000)
$ 6,000
__________
$ 92,587To Vicki
$ 112,468
$( 6,000)
$( 4,200)
$( 3,000)
__________
$ 99,268
The court may equalize the difference between these columns either by a property transfer or
a cash or installment award in accordance with the views we have expressed on this subject.
In addition, Vicki must pay C.B. $2,550 plus interest representing the amount she
collected on the prior award regarding C.B.'s checking account and $3,500 plus interest,
representing the sum she received for the sale of the airboat to C.B.
REVERSED and REMANDED for entry of a revised property division and
judgment in accordance with this opinion.
ENDNOTES:
1. The court evidently treated ($47) as de minimis.
2. Representing the outstanding mortgage of $137,900, plus costs of sale.
3. Reflecting what may be a typographical error; the parties stipulated to a $15,500 value.
4. After the remand trial Vicki sold the airboat to C.B. for $3500. Since the airboat was
the separate property of C.B. and should not have been awarded to Vicki, she will have to return
the $3500 she received for it.
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