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Johns v. Johns (9/26/97), 945 P 2d 1222
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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) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
GREG R. JOHNS, JR., )
) Supreme Court No. S-7510
Appellant, )
) Superior Court No.
v. ) 1SI-94-197 CI
)
BETTY JO JOHNS, ) O P I N I O N
)
Appellee. ) [No. 4889 - September 26, 1997]
______________________________)
Appeal from the Superior Court of the State of
Alaska, First Judicial District, Sitka,
Larry C. Zervos, Judge.
Appearances: William T. Ford, Anchorage, for
Appellant. Brian E. Hanson, Pearson & Hanson, Sitka, for Appellee.
Before: Compton, Chief Justice, Matthews,
Eastaugh, Fabe, and Bryner, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
Greg Johns argues that the superior court erroneously
resolved property division issues in his divorce proceeding by: (1)
treating the F/V ANGIE LEE as marital property; (2) treating the
Individual Fishing Quotas (IFQs) as marital property; (3) retaining
jurisdiction over roe-on-kelp permits; (4) valuing the marital
residence; and (5) distributing the marital property on an equal
basis. We affirm.
II. FACTS AND PROCEEDINGS
Greg Johns and Betty Jo Johns were married in September
1984, and separated in October 1993. Betty Jo did secretarial work
during the marriage, and has been employed as a secretary with the
Sitka School District since 1989. Greg has fished since childhood,
and makes his living as a commercial fisher. When he married Betty
Jo, he owned a sixteen-foot skiff, a hand troll permit, a power
troll permit, and the F/V RADAR.
During the marriage, the parties purchased several
substantial assets, including the F/V ANGIE LEE to help expand
Greg's fishing business and a marital residence in Sitka. The
vessel was titled in both parties' names as joint tenants.
The parties were granted a divorce in January 1996. In
its written findings, the trial court awarded fifty percent of the
marital assets to each party. The court awarded to Betty Jo the
parties' marital residence subject to a $102,300 mortgage balance,
and awarded to Greg the assets of the fishing business, including
the F/V ANGIE LEE. The vessel was fully paid for at the time of
trial. The court determined that the net value of the assets
awarded to Betty Jo was $98,100 (representing a total value of
$200,400 minus the $102,300 mortgage balance). The assets awarded
to Greg were unencumbered; their value was $217,230. The trial
court offset this disparity in value of the assets awarded by
requiring Greg to pay approximately $60,000 to Betty Jo. [Fn. 1]
Greg appeals various aspects of the property division.
III. DISCUSSION
A. Standard of Review
Trial courts have broad discretion in dividing property
as part of divorce proceedings. See AS 25.24.160(a)(4); Doyle v.
Doyle, 815 P.2d 366, 368 (Alaska 1991). Property division in
divorce proceedings involves three steps: (1) determining what
property is available for distribution; (2) valuing that property;
and (3) allocating the property equitably. Lundquist v. Lundquist,
923 P.2d 42, 46-47 (Alaska 1996); Wanberg v. Wanberg, 664 P.2d 568,
570 (Alaska 1983).
The trial court may only divide property characterized as
"marital." The first step in any property division is, therefore,
determining whether property is marital or separate. See
Lundquist, 923 P.2d at 47. "The trial court's characterization of
property as marital or separate is reviewed for an abuse of
discretion." Id. However, when the court makes a legal
determination in the course of taking this step, that determination
is reviewed de novo. Cox v. Cox, 882 P.2d 909, 913 (Alaska 1994).
B. Treating the F/V ANGIE LEE as Wholly Marital Property
Greg contests the superior court's determination that the
F/V ANGIE LEE was marital property. Greg contends that any
contributions of premarital assets to the purchase of the vessel,
such as the proceeds from the sale of a home in Craig [Fn. 2] and
the sale of the F/V RADAR, [Fn. 3] should be credited to him and
the vessel itself should be considered his separate property.
With a few exceptions, all assets acquired by the parties
during their marriage are marital property. [Fn. 4] Lundquist, 923
P.2d at 47. In addition, "if the parties by their actions
demonstrate an intent to treat any separate property as a marital
holding,"it is treated as marital property. Id. In Rhodes v.
Rhodes, 867 P.2d 802, 805 (Alaska 1994), we held that a fishing
vessel acquired by the husband prior to marriage was properly
considered marital property where the parties during their marriage
had refinanced the vessel with a loan that was paid off with
marital earnings, and the wife had co-signed for the loan and
assumed joint and several liability.
In this case, the parties purchased the F/V ANGIE LEE
during their marriage, and took joint title to the vessel.
Although holding joint title is not determinative of intent to
treat property as marital, it creates "'rebuttable evidence that
the owner intended the property to be marital.'" Lundquist, 923
P.2d at 48 (citations omitted). Betty Jo's father co-signed for
the initial bank loan, and loaned the couple the initial down
payment for the vessel. Betty Jo and Greg were jointly and
severally liable for the initial loan. During their marriage, the
parties also modified or refinanced the loan, using joint funds
earned primarily from Greg's fishing business to repay the loan.
Greg argues that Betty Jo's name was placed on the title
solely because the bank required it. Nevertheless, he did not
object to Betty Jo's name being placed on the title. Betty Jo
argues that the parties always intended to treat the F/V ANGIE LEE
as joint property.
Based upon the foregoing, the trial court did not err in
finding that the F/V ANGIE LEE was a wholly marital asset.
C. Determining that the Individual Fishing Quotas (IFQs)
Were Marital Property Subject to Division
The qualifying years for the federal Individual Fishing
Quota (IFQ) program for halibut and black cod (sablefish) are 1988,
1989, and 1990. 50 C.F.R. sec. 676.20(a)(1)(i) (1994). As a
result
of Greg's participation in these fisheries during one of the
qualifying years, he was eligible under the IFQ program to apply
for "quota shares"to fish for both halibut and black cod. Under
the IFQ program, the initial quota shares of qualified fishers are
proportional to their historical landings on vessels owned or
leased during the "base years"of 1984 through 1990 for halibut,
and 1985 through 1990 for black cod. 50 C.F.R. sec. 676.20(b)
(1994).
Greg applied for IFQs in these species in October 1994; they were
issued to him in 1995. The IFQs are transferable, and Greg and
Betty Jo stipulated to their value.
Greg contends that the trial court erred in
characterizing the IFQs as divisible marital property. We have
previously determined that "[a]n IFQ creates a property interest
which, if marital, is subject to division." See Ferguson v.
Ferguson, 928 P.2d 597, 600 (Alaska 1996). In Ferguson, we held
that a spouse's interest in an IFQ is his or her separate property
to the extent that the size of the quota share is attributable to
labor performed prior to the marriage, and marital property to the
extent that it is attributable to labor performed during the
marriage. Id.
Although Greg applied for and received his IFQ shares
after the parties had separated, the parties remained married
during 1988, 1989, and 1990, the qualifying years for participation
in the IFQ program. See 50 C.F.R. sec. 676.20(a)(1)(i) (1994).
Furthermore, the parties were in a married state during 1984
through 1990, the years upon which the size of the "quota shares"
is based. See 50 C.F.R. sec. 676.20(b) (1994). Nevertheless,
while
Greg concedes that IFQs may be considered marital property, he
argues that the "marital character"of the IFQs should not be
determined simply based upon whether the parties were married
during the qualifying years. Greg's rationale is that his
participation as a commercial fisher is lifelong, extending before
his marriage to Betty Jo, and that Betty Jo reaped the benefits of
his fishing while the parties were married such that the IFQs do
not represent "any sort of marital gain or loss."
Greg's IFQ eligibility is based not upon his "lifelong
participation"in the halibut and sablefish fisheries, but upon the
work he performed during his marriage to Betty Jo. As the trial
court noted, in order to fish during the qualifying years for the
IFQs, Greg expended marital assets and effort, and Betty Jo is
entitled to share in the benefits received from these efforts.
Greg also contends that Ferguson should not control
because the court in Ferguson did not consider the "economic impact
[on the fisher] of a marital division"of IFQs. Greg contends that
the IFQ program acts as a legal disability to fishers, and that
quota shares are analogous to workers' compensation benefits or
early retirement benefits in that their transferability compensates
a fisher for lost future earnings which are not marital property.
See Miller v. Miller, 739 P.2d 163, 165-66 (Alaska 1987) (holding
that workers' compensation disability benefits received by disabled
spouse are marital property only to the extent that they compensate
for loss of earnings during the marriage); In re Frahm, 53 Cal.
Rptr. 2d 31, 37 (App. 1996) (holding that whether a spouse's
employment termination benefit is separate or marital property is
determined by whether the right to payment accrued during
marriage).
Unlike workers' compensation benefits, or early
retirement benefits, IFQs are not intended to compensate fishers
for lost future earnings, but to conserve the sablefish and halibut
fisheries. See Ferguson, 928 P.2d at 598. Greg's IFQs are marital
assets that he may transfer at any time, but they were not issued
as a substitute for lost future earnings. Fishers who transfer
their IFQ shares may engage in other employment. We conclude that
the trial court did not err in finding that Greg's IFQs are marital
property.
D. Retaining Jurisdiction over Greg's Herring Roe-on-kelp
Permits for Possible Future Division
During the marriage, Greg purchased interim roe-on-kelp
permits for herring roe harvests near Craig and near Hoonah. The
State has limited the issuance of interim permits and is expected
to eventually issue permanent limited entry permits for these
fisheries. Greg testified that he may be able to get permanent
roe-on-kelp permits based on his past participation in these
fisheries. The interim permits are not transferable and both
parties agreed at trial that they presently have no resale value.
Using the "jurisdiction-retaining"device espoused in Laing v.
Laing in context of non-vested pensions, the superior court
retained jurisdiction over Greg's interim permits in anticipation
of the possibility they might become permanent. See Laing v.
Laing, 741 P.2d 649, 657-58 (Alaska 1987) (holding that trial
courts may retain jurisdiction over non-vested pensions until the
pensions vest so that trial courts can then equitably divide the
marital portion of the pensions).
Greg contends that the superior court abused its
discretion in retaining jurisdiction over his interim permits. [Fn.
5] Greg argues only that since any regulatory scheme for the roe-
on-kelp permits will be similar or identical to the IFQ scheme, his
arguments regarding the IFQs apply to this issue as well. As we
noted above, IFQs are assets subject to property division.
The parties agreed that Greg's interim permits are
presently valueless. If permanent permits are issued they may be
marketable and transferrable. To the extent the parties were
married during the qualifying years for permanent permits,
permanent permits will have a marital component and will be subject
to property division. As with the IFQs, Greg may have expended
marital assets and effort in securing rights to receive permanent
permits. Thus, the superior court did not abuse its discretion in
retaining jurisdiction over Greg's interim herring roe-on-kelp
permits. [Fn. 6]
E. Valuing the Sitka Marital Residence
Greg and Betty Jo purchased a residence in Sitka in 1987
for $155,000. At the time of trial, Betty Jo continued to reside
in the house. The house has a small attached apartment that the
parties have previously rented. The parties stipulated that the
mortgage balance for the house was $102,300 at the time of trial.
Both parties presented expert testimony regarding the fair market
value of the house. Betty Jo's expert, a certified real estate
appraiser, valued the residence at $171,000 using the "sales
comparable"approach in which he relied on the history of prior
sales of properties in Sitka similar to the parties' residence.
Greg's expert, a licensed real estate broker, testified that she
would list the house at $195,000, and "hope to not have to take
anything under 185,000."
In valuing the residence at $171,000, the trial court
stated:
Two experts testified about the value of the
home at trial. Although both were convincing, the court believes
Betty's attorney best described the difference between the two
opinions. The broker's opinion represented the seller's hope while
the appraiser's opinion represented the most reasonable value based
on market data. While the court agrees that the Sitka market has
been strong, the appraiser's report took into account recent sales.
The broker, on the other hand, testified that if an offer was not
received at least close to $185,000, the house should not be sold.
The broker's opinion represents what the seller might try to demand
from the market not necessarily what a ready, willing, knowing and
reasonable seller and buyer would agree the house is worth.
Greg argues that the superior court erred in valuing the
residence at $171,000. A trial court's determinations of the value
of marital assets are factual decisions that will be reversed only
if clearly erroneous. See Cox, 882 P.2d at 913-14.
Greg first contends that the court erred in accepting the
appraiser's valuation of the marital residence because the
appraiser "admitted that [the $171,000 appraisal] was a low
appraisal and perhaps did not accurately reflect the market value."
The appraiser did testify that appraisers tend to be conservative
in their valuations, but also testified that he was not surprised
that the broker's valuation of the home was higher than his
appraisal because brokers are "going to look at trying to get the
highest dollar and expect to be negotiated down." The appraiser
stated that while he did not "claim that fair market value is what
. . . you can sell your house for,"his estimate was based on "the
most probable"selling price.
Greg also argues that in making its valuation the
superior court failed to consider that the property was
appreciating and income-producing. In its written findings, the
trial court noted that although "the Sitka market has been strong,"
the appraiser's estimate had included the rate of appreciation in
his appraisal. The trial court also addressed the income-producing
nature of the property in its findings. Considering the entire
record, we find the trial court did not err in its valuation of the
marital residence.
F. Distribution of the Property
The final step in the property division process is
determining whether an equitable property distribution is possible.
This court reviews the trial court's determination on the equitable
distribution of property under an abuse of discretion standard,
reversing its decision only if it is clearly unjust. Lundquist,
923 P.2d at 53 (citing Cox, 882 P.2d at 914).
Greg contends that the superior court's overall
distribution of the parties' property was inequitable. Greg first
claims that the superior court should have simply awarded the
marital residence to Betty Jo, and awarded him all of his fishing
assets without any offset to equalize the distribution. Greg also
challenges the value the court assigned to the Sitka residence, and
the court's determination that the F/V ANGIE LEE was marital
property. These arguments simply restate other issues appealed by
Greg and resolved above.
Furthermore, the trial court divided Greg and Betty Jo's
marital property on a fifty-fifty basis. We presume that a fifty-
fifty division of property is equitable. See Carlson v. Carlson,
722 P.2d 222, 225 (Alaska 1986). In making its property division,
the trial court also considered the equitable factors set forth in
Merrill v. Merrill, 368 P.2d 546, 547-48 n.4 (Alaska 1962). See
also AS 25.24.160(a)(4).
Greg asserts that the trial court erred in failing to
consider the economic hardship caused to him by its award of the
$60,000 cash judgment because he may have to sell the F/V ANGIE LEE
or his IFQs to pay the judgment. In Cox v. Cox, 931 P.2d 1041
(Alaska 1997), we reversed the superior court's award of an $11,000
cash judgment to equalize a property division. We noted that the
preferred method for dividing a marital estate is by title transfer
where this can be reasonably accomplished, but also observed that
it is not error per se for the trial court "to make a cash award
requiring one party to sell illiquid assets (or make installment
payments) where such an award causes no hardship." Id. at 1045.
The trial court did consider the hardship to Greg when it
awarded Betty Jo the $60,000 cash judgment. In its findings, the
trial court stated that it chose, in part, to award an equal
division of marital assets, rather than the unequal distribution
Betty Jo requested, because "Greg will be required to pay Betty for
her marital share of the IFQs and the permits. This may require
him to sell some of the assets or to take out a significant loan."
The trial court also suggested that its "first preference"was to
have Greg pay Betty Jo the full judgment within ninety days, but
stated that Greg could also give Betty Jo a secured note with the
"shortest pay-off possible." The trial court therefore did
consider possible hardship to Greg and suggested a means of
ameliorating it. Thus, we find that the superior court did not err
in its overall property distribution.
IV. CONCLUSION
AFFIRMED.
FOOTNOTES
Footnote 1:
The written findings issued by Judge Larry C. Zervos are
models of clarity. Copies of the Findings of Fact and Conclusions
of Law are available from the appellate court clerk's office upon
request.
Footnote 2:
In 1985 Greg's parents transferred a home located in Craig to
Greg and Betty Jo; the quitclaim deed transferred the home to Greg
and Betty Jo as husband and wife. The parties sold the home for
$30,000 in February 1985. Betty Jo testified that the transfer of
the home was necessary to facilitate the purchase of the F/V ANGIE
LEE. The parties disagree about the amount applied to the loan for
the F/V ANGIE LEE from the sale proceeds of the Craig home.
Footnote 3:
In May 1985 Greg sold the F/V RADAR for $8,000 and used $4,000
of the monies received to pay the loan for the F/V ANGIE LEE. The
remaining $4,000 was used for various expenses for the fishing
business.
Footnote 4:
Gifts or inheritances received by one spouse during marriage
are generally not considered marital property. See Bellanich v.
Bellanich, 936 P.2d 141, 144 (Alaska 1997); Lundquist v. Lundquist,
923 P.2d 42, 47 n.3 (Alaska 1996).
Footnote 5:
We review this ruling for abuse of discretion. Wainwright v.
Wainwright, 888 P.2d 762, 765 n.6 (Alaska 1995).
Footnote 6:
Because Greg testified he intends to continue participating in
these fisheries in the future, we need not consider whether a
failure by Greg to pay the annual permit fees or to apply for the
permits would violate the court's order.
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