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Berry v. Berry (4/16/99), 978 P 2d 93
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
LORA M. BERRY, )
) Supreme Court No. S-8258
Appellant, )
) Superior Court No.
v. ) 3AN-94-10664 CI
)
SAMUEL BERRY, ) O P I N I O N
)
Appellee. ) [No. 5105 - April 16, 1999]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Karen L. Hunt, Judge.
Appearances: John C. Pharr, Law Offices of
John C. Pharr, Anchorage, for Appellant. G.R.
Eschbacher, Law Office of G.R. Eschbacher,
Anchorage, for Appellee.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
EASTAUGH, Justice.
MATTHEWS, Chief Justice, concurring.
I. INTRODUCTION
Lora Berry claims she should have been awarded more of
her ex-husband's retirement pay to compensate for mortgage and
repair payments she made on the marital home after the parties
separated. Because the superior court made no findings on Lora's
request for a credit for those payments, and because the evidence
does not permit us to hold as a matter of law that Lora is not
entitled to a credit equal to her payments, we reverse the property
division and remand for findings. But we affirm the superior
court's decisions (1) not to require Samuel Berry to carry Lora on
his survivor benefit plan at his expense, and (2) to require Lora
to bear half the couple's tax debt for the seven years before they
separated.
II. FACTS AND PROCEEDINGS
Samuel and Lora Berry married in Georgia in March 1973.
Samuel joined the Army in May 1973 and retired in December 1993.
Samuel and Lora agree that they lived apart for much of Samuel's
military career. They moved to Alaska in 1975, but Samuel was
thereafter stationed at a variety of locations elsewhere, while
Lora remained in Alaska and lived in the family home. Samuel
appears to have visited Alaska and Lora for only about fifteen
weeks total between 1985 and December 1993, when the parties
separated. In November 1994 Samuel filed for divorce in Alaska.
Their children were adults when their divorce decree was entered in
1997.
The superior court held a hearing in January 1997 to
resolve date-of-separation and property-division issues. The court
concluded that the marriage ended as a joint enterprise in December
1993, when Samuel returned to Colorado. It awarded Lora the
marital home and the equity and debt associated with it. It also
awarded Lora her Individual Retirement Account, her profit sharing
plan and associated debt, the parties' vehicles, and twenty-five
percent of Samuel's gross military retirement pay effective
December 1993, when he retired from the military service. The court
awarded Samuel seventy-five percent of his gross military
retirement pay, and did not require him to carry Lora on the
survivor benefit plan. The court also ordered the parties to split
equally their tax refunds and tax debts from 1987 to 1993.
Finally, the court ordered the parties to bear their own costs and
fees, but ordered Lora to pay Samuel $1,102 for costs and fees
associated with paternity testing for a child born to Lora in 1994;
the court had previously found that the child was not Samuel's.
Lora moved for reconsideration, challenging the court's
treatment of Samuel's retirement pay, her request for a credit for
her post-separation mortgage payments and home repair expenses, the
survivor benefit plan, and the tax debt. The court denied the
motion.
Lora appeals.
III. DISCUSSION
A. Standards of Review
The superior court has broad discretion when dividing
property in a divorce action. [Fn. 1] When the parties have
commingled their assets in a marriage of long duration, property
division consists of three steps: "(1) determining what property is
available for distribution; (2) placing a value on that property;
and (3) allocating the property equitably."[Fn. 2]
We review a trial court's determination of the property
available for division for abuse of discretion. [Fn. 3] If the
superior court reaches any legal conclusions while determining
which property is available, we review those conclusions de novo.
[Fn. 4]
The valuation of available property is a factual
determination that should be reversed only if clearly erroneous.
[Fn. 5] The superior court's equitable allocation of property "is
reviewable under the abuse of discretion standard, and we will not
disturb the trial court's allocation 'unless it is clearly
unjust.'"[Fn. 6]
We review for abuse of discretion a superior court's
decision whether to give a credit to a spouse for payments made to
maintain marital property, such as the family home. [Fn. 7]
Whether it was error not to make fact findings on particular
disputes is a legal question which we review de novo. [Fn. 8]
B. Lora's Post-Separation Mortgage and Home-Repair Payments
and Samuel's Military Retirement Pay
Finding that Samuel's military retirement had a net
present value of $200,000 at the time of trial, and concluding that
all of the retirement benefit was marital property, the superior
court awarded seventy-five percent of the retirement benefit to
Samuel and twenty-five percent to Lora. In doing so, the court
came admirably close to achieving an equal division of marital
assets: it awarded Samuel marital property worth $150,000
(consisting exclusively of his share of the retirement benefit) and
it awarded Lora marital property worth $150,703. The marital
property awarded to Lora included the house (valued at the
difference between its market value at time of trial and the debt
then owing on it), twenty-five percent of Samuel's retirement
benefit, and other items.
Lora argues that it was error to award her less than
fifty percent of Samuel's retirement. She reasons that she paid
$58,000 on the mortgages and $8,000 for home repairs between the
time the parties separated and the time of trial, and that those
payments exceeded the $50,000 value of her twenty-five percent
share of Samuel's retirement. She asks for an award of fifty
percent of Samuel's retirement, or for remand for consideration of
the "weight"to be given to her mortgage and repair payments.
Although the parties' arguments focus on Samuel's
retirement, this is really a dispute about whether it was error not
to credit Lora for post-separation mortgage and repair payments.
Lora's claim that she should receive another twenty-five percent of
Samuel's retirement simply identifies the only marital asset whose
division would be affected if the credit were granted. [Fn. 9]
Samuel argues that the equal division of property is
presumptively fair. He contends that courts are not required to
give credit for post-separation payments to maintain marital
property; he says a court may consider factors such as "which party
benefitted from the use of the asset during the separation and
whether or not the asset was one capable of generating income." He
argues that Lora benefitted from the use of the home, that he was
effectively excluded from the home, and that the repairs and
maintenance payments of $8,000 may have been necessary due to
Lora's "neglect and failure to maintain the property."
Samuel also argues that reimbursing Lora for the payments
would award her more than fifty percent of the marital estate.
That consideration is irrelevant if the evidence justifies giving
a credit to Lora for her use of personal assets to preserve or
enhance the value of marital property.
An equal division of marital property is presumptively
just. [Fn. 10] An equal division is "the starting point for
application of the [AS 25.24.160] factors the court must consider."
[Fn. 11] However, "[a]n unequal division may be upheld 'when it is
justified by relevant factors identified in the findings of the
court.'"[Fn. 12]
Courts may give credit to one spouse for post-separation
payments made to preserve marital assets, but are not required to
do so. As we have explained:
[I]t is our view that no fixed rule requiring
credit in all cases should be imposed.
Instead, the 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.[[Fn. 13]]
We have required trial courts to make factual findings on whether
a credit is appropriate. [Fn. 14]
Although Lora testified about her post-separation
payments, the superior court did not expressly resolve the credit
issue in its oral findings and comments or in its written findings
of fact and conclusions of law. The court's property division
necessarily denied Lora's request for the credit, but no findings
explain why it was denied.
We must therefore determine whether the record supported
Lora's request for a credit. If it did, this issue cannot be
decided as a matter of law, and the failure to make fact findings
on the issue cannot be considered harmless.
We conclude that the record contains evidence sufficient
to create a genuine, material fact dispute, and that we cannot hold
as a matter of law that Lora was entitled to no credit. Lora
testified that she paid $58,000 on the home loans between the time
the parties separated and the time trial began, thirty-six months
later. Any benefit Lora received by living in the house may have
been offset by its poor condition. Lora testified that the house
was a "total wreck"in November 1993 when Sam left; that there was
water damage everywhere; and that it was "depressing"to enter the
house. She implied that, although the house was worth $149,000 at
the time of trial, no one would have rented it before she remodeled
and repaired it. Lora's testimony supported a finding that the
home's state of disrepair significantly depressed its rental value,
thus permitting (but not compelling) a finding that the mortgage
payments exceeded the value of the benefit Lora received from
living in the house. It therefore raised a genuine dispute about
whether Lora should have received a credit for her debt payments.
Lora's testimony that she paid for repairs was also
sufficient to create a genuine fact dispute about whether she
should be given a credit for those payments, because that evidence
supported a finding that she used her personal resources to
maintain marital assets. Even if the improvements enhanced the
rental value to the point that the benefit of living there was
equivalent to the debt payments, the use of non-marital assets to
enhance the rental value potentially justified a credit.
But there are many reasons why the court may have denied
the requested credit for the mortgage payments. For example, it
might have found that Lora's mortgage payments roughly equaled the
benefit she received from living in a three-bedroom home.
Further, some of Lora and Samuel's testimony seems to
imply that proceeds from a mortgage loan were used to pay for the
remodeling. If so, the court may have decided that it would be
inequitable to reimburse Lora for the remodeling expenses.
Alternatively, the court may have reasoned that repairs or
improvements did not substantially change the market value of the
house as of the time of trial -- or accepted Samuel's claim that
Lora failed to maintain the house during the marriage and wasted or
depleted marital assets.
But the evidence does not compel any of these findings,
and the absence of fact findings on the credit issue consigns us to
speculation and prevents us from applying the deferential "clearly
erroneous"standard of review. [Fn. 15] We therefore remand for
consideration of Lora's claim that she should receive credit for
these payments.
Samuel argues that Lora received the post-separation
benefit of claiming a deduction for the mortgage interest.
Although that circumstance might justify reducing or denying a
credit, it is a matter for the trial court to consider and explain.
That circumstance cannot justify affirmance absent any findings on
the issue.
C. Survivor Benefit Plan
Lora argues that the superior court erred by failing to
require Samuel to carry Lora, at his expense, on the survivor
benefit plan securing his military retirement benefit against the
risk of his death. She recognizes that, although the parties
agreed in the superior court that Lora would be carried on the
plan, they disagreed about who should pay.
Samuel objected in the superior court to paying to carry
Lora on the survivor benefit plan, but did not object to carrying
her on the plan if she paid the attendant expense. He argues on
appeal that he does not oppose awarding Lora an interest in the
plan, as long as her interest is limited to twenty-five percent and
she pays for it.
At the hearing, the superior court announced that
"[u]nder the circumstances established in this case no survivorship
benefit should be awarded to the defendant." This ruling
implicitly declined to make Samuel bear the cost of carrying Lora
on the survivor benefit plan, but did not prevent Lora from
accepting Samuel's offer to carry her on the plan at her expense.
The written conclusions of law state that Samuel "shall not be
required to carry [Lora] on the Survivor Benefit Plan."
We reject Lora's implicit argument that we should enforce
the parties' "agreement." The parties reached no agreement about
who should pay.
We also reject Lora's claim that because she was awarded
less than half of Samuel's retirement benefit, she should not have
to bear the premium expense. She does not state the cost of
covering her interest, or provide any other support for her
argument. Her unsupported assertion does not demonstrate an abuse
of discretion. Nor has she demonstrated any reason why Samuel
should pay the cost of securing her interest in the retirement
benefit. If Lora wants to be carried on the plan, she should bear
the expense of that protection. If on remand she agrees to bear
that expense, Samuel should be required to facilitate covering her
under the survivor benefit plan to the extent of her interest.
D. Tax Debt and Refund
Finally, Lora argues that the superior court erred in
requiring her to bear fifty percent of Samuel's tax debt for
calendar years 1987 through 1993. She contends that Samuel
committed an "economically senseless act"by amassing "an
unnecessary tax debt as a litigation strategy." She asserts that
Samuel filed separate returns in April 1994 for the six previous
years to support his superior court contention that the marriage
ended several years before December 1993. She implies that by
causing the parties to file separate returns, Samuel increased the
couple's tax liability and wasted marital assets.
Samuel argues that the parties had originally decided to
file joint returns, that he sent Lora his W-2 forms, and that she
failed to file on time. He maintains that he learned in August
1993 that Lora had not filed the returns and that he owed the IRS
$11,000 plus interest and penalties. He asserts that he filed
separately because Lora failed to file the joint returns.
The superior court refused to assign blame for the late
filing; it concluded that the tax debt and refund were "a
circumstance that [had] a monetary impact on the economic unit
while it functioned as a marriage,"and that they should be shared
equally.
Lora's arguments that Samuel committed an economically
senseless act or wasted marital assets are unconvincing. Her
acknowledgment that they had agreed to file jointly, that he sent
her his W-2 forms, and that she simply failed to file, undermines
her claim that Samuel engaged in a litigation strategy that
unreasonably depleted marital assets. Lora relies on Jones v.
Jones, [Fn. 16] but that case is distinguishable. The question in
Jones was whether the former husband's illegal gambling losses
wasted marital assets, and if so, how much value the trial court
should have added to the marital estate to compensate for the
misconduct. [Fn. 17] Samuel engaged in no comparable misconduct.
The superior court did not clearly err by finding that
the tax debt was a consequence of the marriage. The parties do not
dispute that the debt arose before December 1993, when the parties
separated. It was not an abuse of discretion to order each party
to bear half of a debt that arose during the marriage, especially
because the superior court decided that the debt was not the result
of party misconduct. The fairness of dividing the debt is
confirmed by the superior court's equal division of the entire
marital estate.
IV. CONCLUSION
Given the absence of any findings resolving Lora's claim
that she was entitled to a credit for her post-separation mortgage
and home repair payments, we REVERSE and REMAND for further
proceedings. We leave it to the discretion of the superior court
to decide whether to make those findings on the basis of the
evidence before it or to permit submission of additional evidence.
We AFFIRM as to the rulings on the survivor benefit plan and tax
debt.
MATTHEWS, Chief Justice, concurring.
While I fully agree with the majority opinion, I write
separately to make one additional observation.
Samuel argues that recognizing Lora's payments made from
her separate property to preserve the house after separation but
before the divorce would result in an unequal division of property.
This, he argues, would run counter to the rule that an equal
division of property is presumptively fair. I believe this
argument to be fundamentally flawed.
The rule that an equal division of assets of the marriage
is presumptively fair is more complicated than it sounds. Often
adjustments to value must be made before the rule can be applied.
Obvious examples are that the gross value of property must be
reduced for secured debt, and assets involving periodic payments
must be reduced to present value.
When marital property is wasted by one party after
separation but before divorce, the property can be "recaptured"by
giving it a pre-waste value and crediting that value to the award
to the wasting party. Once this adjustment is made, the whole of
the marital property can be divided in accordance with the usual
principles. See Hartland v. Hartland, 777 P.2d 636, 643 (Alaska
1989):
The trial court sought to compensate
Patricia for the dissipated assets by giving
her a larger percentage of the remaining
marital estate because it did not believe it
had the authority to recapture previously
dissipated assets. Because of this incorrect
conclusion, we reverse the court's property
division and remand the issue to allow the
trial court the opportunity to recapture any
dissipated assets and then determine the
appropriate division of property using the
Merrill factors.[ [Fn. 1]] In doing so, the
court should take care that it does not double
count, that is, recapture dissipated assets
and make a preferential award to Patricia
because assets have been dissipated.
Expenditures made from separate property to preserve
marital property are the other side of the "waste"coin. They can
be recognized by making deductions from the award to the party who
made the expenditures. The adjustment can be regarded as repre-
senting what the property on which the money was spent would be
worth if the expenditures had not been made. Once this adjustment
is made, all the marital property can be divided. And if the
division is equal after the adjustment is made, the rule of
presumptive fairness will be satisfied.
For this reason, giving recognition to Lora's
expenditures need not violate the equal division rule.
FOOTNOTES
Footnote 1:
See AS 25.24.160(a)(4); Cox v. Cox, 882 P.2d 909, 913 (Alaska
1994).
Footnote 2:
Doyle v. Doyle, 815 P.2d 366, 368 (Alaska 1991) (citing
Moffitt v. Moffitt, 749 P.2d 343, 346 (Alaska 1988)).
Footnote 3:
See Jones v. Jones, 835 P.2d 1173, 1175 (Alaska 1992).
Footnote 4:
See Cox, 882 P.2d at 913.
Footnote 5:
See id. at 913-14.
Footnote 6:
Doyle, 815 P.2d at 368 (quoting Moffitt, 749 P.2d at 346;
Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska 1983)).
Footnote 7:
See Rodriguez v. Rodriguez, 908 P.2d 1007, 1013 (Alaska 1995).
Footnote 8:
See Cox, 882 P.2d at 913.
Footnote 9:
It is undisputed that military retirement pay can be
considered marital property subject to equitable division in
divorce settlements. See Chase v. Chase, 662 P.2d 944, 946 (Alaska
1983); see also Doyle, 815 P.2d at 370 (upholding award to wife of
one-half of nineteen-twentieths of husband's military retirement
pay because the parties were married for about nineteen of
husband's twenty years of service).
Footnote 10:
See Brown v. Brown, 914 P.2d 206, 209 (Alaska 1996); Wanberg,
664 P.2d at 574-75.
Footnote 11:
Brown, 914 P.2d at 209.
Footnote 12:
Id. (quoting Hayes v. Hayes, 756 P.2d 298, 300 (Alaska 1988)).
Footnote 13:
Ramsey v. Ramsey, 834 P.2d 807, 809 (Alaska 1992).
Footnote 14:
Compare Brotherton v. Brotherton, 941 P.2d 1241, 1246 (Alaska
1997) (remanding for consideration of former husband's
"preservation of the marital estate by reduction of the marital
debt with post-separation income"), and Cox, 882 P.2d at 919-20
(noting absence of findings on whether post-separation payments of
marital expenses should change property distribution, and remanding
for such findings), with Harrelson v. Harrelson, 932 P.2d 247, 253
& n.7 (Alaska 1997) (affirming trial court's decision not to give
credit for post-separation house payments, where trial court
explicitly addressed issue in its findings of fact and in resolving
post-trial motions).
Footnote 15:
See Doyle, 815 P.2d at 368 ("[T]he trial court must render
findings of ultimate fact that support any decreed property
division; the findings must be explicit and sufficiently detailed
to give this court a clear understanding of the basis of the trial
court's decision.") (citations omitted).
Footnote 16:
942 P.2d 1133, 1138 (Alaska 1997).
Footnote 17:
See id. at 1140-41.
FOOTNOTES (Concurrence)
Footnote 1:
Merrill v. Merrill, 368 P.2d 546, 547 n.4 (Alaska 1962).
