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Sampson v. Sampson (12/15/00) sp-5345
Sampson v. Sampson (12/15/00) sp-5345
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
WILLIAM B. SAMPSON, )
) Supreme Court No. S-9088
Appellant, )
) Superior Court No.
v. ) 3KN-97-127 CI
)
SUSAN M. SAMPSON, ) O P I N I O N
)
Appellee. ) [No. 5345 - December 15, 2000]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Kenai,
Harold M. Brown, Judge.
Appearances: Peter F. Mysing, Kenai, for
Appellant. Allan Beiswenger, Robinson & Beiswenger, Soldotna, for
Appellee.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.
MATTHEWS, Chief Justice.
I. INTRODUCTION
As part of a property division following a divorce, the
trial court included William Sampson's inheritance from his mother
in the marital property. William contests the trial court's
conclusion that the inheritance was marital property. Because the
trial court erred in concluding that the inheritance was marital
property, we reverse and remand for a determination as to whether
invasion of the inheritance as separate property is justified.
II. FACTS AND PROCEEDINGS
A. Facts
Susan and William Sampson were married in 1981. They
separated on September 20, 1996. There were no children born of
the marriage.
During the first part of the marriage, the Sampsons
resided in California, where William worked in retail sales. From
1981 to 1989 Susan worked as a police officer in Stockton. Her
earnings exceeded William's. William had a child support
obligation from a prior marriage that was paid with marital income.
In 1989 Susan resigned her job as a police officer for
health reasons. She was unable to return to that job or find other
permanent employment. As a result, the Sampsons lost their house,
their car, and most of their possessions. They moved in with
Susan's mother in early 1989.
In 1989 the Sampsons borrowed $10,000 from Susan's
mother. In 1990 they moved to Anchor Point where they purchased a
home, and William began to work in sales for a lumber yard. He
remained at that job for the remainder of the marriage; Susan held
no permanent job but worked intermittently.
William inherited securities in 1989 or 1990, following
the death of his mother. William placed the securities, valued at
around $266,000, in an account at A.G. Edwards in Stockton. The
account was only in his name; Susan's name was never on the
account.
At trial, the parties disagreed as to whether William had
agreed to place Susan's name on the account and whether Susan was
involved in the management of the securities. Initially, Susan
told William that she did not want any part of the inheritance.
However, Susan contended that William urged her to consent to have
her name put on the account and that she resisted at first but
ultimately told him, "Okay, fine. Go ahead and put my name on it."
She further contended that he told her that he had put her name on
the account. William denied that he ever told Susan that he would
put her name on the account or that she told him he should put her
name on the account. Susan also contended that the Sampsons made
a joint decision about transferring money from one security to
another because one holding was doing poorly. William denied that
Susan had any involvement in any such transaction.
Periodically, William used income earned from the A.G.
Edwards account to contribute to the marriage. At the time of
trial, the account was worth approximately $312,000. The Sampsons
felt that they did not need to worry about having enough money for
their future, since William's inheritance was available. Although
Susan wanted to leave Anchor Point because she believed that she
could get a permanent job elsewhere, William resisted, in part
because the inheritance money was available so Susan did not need
to work.
In addition to the securities, William also inherited a
fifty percent interest in his mother's residence. In 1993 the
residence was sold to William's nephew for $80,000, and an escrow
was established with monthly payments of $374 due to William.
However, the nephew is in default and has made no payments for
several years. William has a mortgage on the house and could
foreclose but chooses not to do so. Susan was not involved with
the management of this property.
In 1994 Susan cashed in her retirement account from her
employment as a police officer. She testified that one of the
reasons she cashed in her retirement was that she knew that
William's inheritance would be available for their future needs.
She received approximately $29,000 from her police retirement
account. With that money, Susan purchased a vehicle, a boat, and
a trip to China with her sister. She also paid some bills and
normal living expenses.
After Susan and William separated, William continued to
live in the marital home until April of 1997, when he was diagnosed
with leukemia. William went to Seattle for treatment and underwent
ten months of chemotherapy. While he was gone, Susan sold most of
the marital possessions at a garage sale so that she would have
money to live on. She received $4,480 for these items and kept
that money. The marital residence was sold to a neighbor, and
William and Susan split the proceeds equally. Susan spent her
share of the money on daily living expenses. William added most of
his share to the A.G. Edwards account.
Susan was forty-one years old at the time of the hearing.
She lives with a friend who is a doctor and helps him with his
practice. Susan's medical condition keeps her from finding other
employment. She suffers from migraines and ulcers and her vision
and hearing are impaired to some degree. She has no retirement
benefits left from any source. The loan from her mother has not
been repaid.
William was fifty-two years old at the time of the
hearing. He lives in a small cabin outside of Homer, with no
running water in the winter. William's medical condition prevents
him from returning to work. His leukemia is in remission but he
has decreased lung capacity because of a lung infection he incurred
while hospitalized. William's expenses amount to approximately
$1100 or $1200 per month. He receives Social Security benefits of
approximately $965 per month.
B. Proceedings
Susan filed for divorce on February 19, 1997, and Judge
Harold M. Brown issued an opinion on November 12, 1998, following
a trial. Judge Brown concluded that "a balancing of equities
coupled with evidence of [William's] intent" to make the
inheritance a marital asset "requires the inclusion of [William's]
inheritance (including the Escrow account) in the marital estate."
Judge Brown then divided the estate, giving sixty percent to
William and forty percent to Susan.
William appeals.
III. STANDARDS OF REVIEW
The division of property in divorce cases is committed to
the discretion of the trial court. [Fn. 1] Property divisions
require a three-step process: (1) determining what property is
available for distribution as marital property, (2) valuing the
property, and (3) equitably allocating the property. [Fn. 2]
These steps are reviewed under the abuse of discretion standard,
and the division will not be disturbed unless it is clearly unjust.
[Fn. 3] A trial court's determination that the balance of equities
between the parties requires that one party's separate property
must be invaded is similarly reviewed for an abuse of discretion.
[Fn. 4]
IV. DISCUSSION
There is a strong presumption that inherited property is
separate property not to be included in the disposition of property
during a divorce. [Fn. 5] "Inherited property is separate, even if
received during marriage." [Fn. 6] However, inherited property may
be conveyed to the marital estate when that is the intent of the
owner and conduct demonstrates that intent. [Fn. 7] In addition,
separate property may be invaded where the balancing of equities
requires it. [Fn. 8]
William argues that the trial court abused its discretion
in treating the inheritance as marital property. He also contends
that invasion of his separate property was an abuse of discretion.
Susan defends the trial court's decision.
A. It Was Error to Find the Inheritance Was Converted to
Marital Property.
In Cox v. Cox [Fn. 9] we listed some of the circumstances
which can lead to a transmutation of separate property into marital
property. These included "(1) the use of property as the parties'
personal residence, and (2) the ongoing maintenance and managing of
the property by both parties, as well as (3) placing the title of
the property in joint ownership and (4) using the credit of the
non-titled owner to improve the property." [Fn. 10] Although the
first factor applies only to real property, the other factors,
where appropriate, can apply to both real and personal property.
[Fn. 11]
William argues that the trial court clearly erred in
finding that he intended to make the inheritance marital property.
William contests the court's factual findings that he led Susan to
believe the assets were hers by saying that they were available
during the marriage and that Susan expended her retirement in
reliance on William's inheritance. Each of these arguments is
discussed below.
1. William's belief and his representation to Susan
that the assets were available did not demonstrate an intent to
treat the inheritance as marital property.
Both Susan and William agree that they viewed the A.G.
Edwards account as a resource for their future. In Lundquist v.
Lundquist we reversed a trial court's determination that an
inheritance was marital property. [Fn. 12] The trial court found
that the inheritance was marital property because the owner
considered it to belong to both himself and his wife while they
were married. [Fn. 13] We concluded that "George's testimony that
he assumed that all property received during the marriage should be
shared is not sufficient to overcome the strong presumption that an
inheritance is separate property." [Fn. 14] William argues that
he, similarly, should not be faulted for assuming and acknowledging
during the marriage that his inheritance would benefit both of them
while they were married. Once divorced, William contends, Susan is
not entitled to the money.
Susan distinguishes Lundquist because in that case the
money was inherited less than two months prior to separation,
whereas William inherited the assets six years before their
separation. [Fn. 15] She contends that the existence of the
inheritance and William's representations that it would be
available affected her financial decisions.
William is correct that his belief and representation
that the inherited assets would be available to them during the
marriage do not suffice to warrant a finding that the assets were
converted to marital property. His statement that the inheritance
would be available to them must be understood as referring to the
period during which the parties remained married.
2. Susan's reliance on William's inheritance does not
prove that William intended to transmute the inheritance.
William argues that he never promised Susan that the
inheritance would be available as an incentive for her to cash in
her retirement. Susan argues that both parties viewed the
inheritance as a "hedge" against their old age, so she and William
jointly decided that it would not be a problem for her to cash in
her retirement. She also argues that the decision not to relocate
from Anchor Point was predicated upon the belief that Susan did not
need to work because the inheritance money was available.
The testimony shows that Susan believed that it was safe
to cash in her retirement because William's inheritance was there
and that when they discussed the matter, William told her she could
cash it in if she wanted, but made no promise regarding the
inheritance. Susan then elected to cash in the retirement.
William took no action demonstrating an intent to convert his
inheritance into marital property. William's general statements
that he viewed that money as a hedge for them for the future while
he and Susan were married were not evidence of an intent to
transmute.
The Sampsons decided not to relocate, in part, because
Susan did not need to work since there was income from the
inheritance. However, this does not establish that William
intended to transmute the inheritance. Rather, it is consistent
with William's belief that, while they were married, they would
enjoy the benefits of his inheritance, as in Lundquist. [Fn. 16]
Because William made no promises to Susan upon which she
relied, and because the decision to cash in her retirement was made
by Susan, the finding that William intended to transmute his
inheritance into marital property is clearly erroneous.
B. The Issue of Invasion of Separate Property Should Be
Determined on Remand.
An equal division of the marital property is presumed to
be equitable. [Fn. 17] However, if the trial court concludes that
equitable distribution is not possible using the marital property
alone, then it must determine whether it is necessary to invade
separate property to balance the equities. [Fn. 18]
The trial court said that "a balancing of the equities
coupled with evidence of [William's] intent requires the inclusion
of [William's] inheritance (including the Escrow account) in the
marital estate." This analysis runs together the doctrines of
transmutation of separate property into marital property and
invasion of separate property.
Transmutation considers whether there was an intent to
include the inheritance in the marital estate. Transmutation is
not based on equities, but on the intent of the owner of the
separate property, as demonstrated through his words and actions.
[Fn. 19] As explained above, William did not intend to include his
inheritance in the marital property. But invasion of separate
property considers whether "the balancing of the equities between
the parties requires" invasion. [Fn. 20] It is impossible on this
record to determine whether the trial court would have invaded
William's inheritance if it had correctly found that the
inheritance was separate property. A remand is therefore necessary
so that the court can determine whether on a balance of the
equities between the parties invasion of William's separate
property is required and, if so, the extent to which invasion is
required.
In making these determinations we have stated generally
that the factors governing the division of marital property
identified in Merrill v. Merrill apply. [Fn. 21] In deciding
whether separate property should be invaded, we have stated that
courts
should particularly consider factors such as
the duration of the marriage, the conduct of the parties during the
marriage, the manner of acquisition of the property, its value at
the time of acquisition and at the time of the property division,
and any other factors bearing on whether the equities dictate that
the other spouse is entitled to share in that property.[ [Fn. 22]]
Our case law also contains indications of at least two
things that courts should not do in making an invasion decision.
First, in Brown we indicated that it was error for the trial court
to begin with the presumption that an equal division of marital
property and of separate property is the most equitable solution.
[Fn. 23] Second, we have warned against an assumption that an
invasion of separate property is justified merely because the
spouse who does not own separate property has worked and thus
contributed to the marital estate. [Fn. 24]
In this case Susan features as reasons for invasion of
William's separate property her poor health, inability to work full
time, lack of substantial marital property or separate property
owned by her, and her claim that during the course of the marriage
the availability of William's inheritance caused the parties to
make decisions involving their marital assets and their financial
future which had a direct bearing on the relatively low value of
their marital estate. We consider that all of these factors are
appropriate for consideration by the trial court in deciding
whether the balancing of the equities between the parties requires
invasion of William's separate property and, if so, the extent to
which invasion is required.
V. CONCLUSION
It was an abuse of discretion to determine that William
intended to turn his separate property into marital property. We
therefore REVERSE this holding. Because the trial court did not
determine whether invasion is justified based on a balance of the
equities, we REMAND for such a determination. Further, if the
court finds that invasion of separate property is justified, the
court should divide the separate property in accordance with the
principles set forth in this opinion.
FOOTNOTES
Footnote 1:
See AS 25.24.160; Chotiner v. Chotiner, 829 P.2d 829, 831
(Alaska 1992).
Footnote 2:
See Chotiner, 829 P.2d at 831 (quoting Wanberg v. Wanberg, 664
P.2d 568, 570 (Alaska 1983)).
Footnote 3:
See Brown v. Brown, 947 P.2d 307, 308-09 (Alaska 1997).
Footnote 4:
See Ross v. Ross, 496 P.2d 662, 664 (Alaska 1972).
Footnote 5:
See Julsen v. Julsen, 741 P.2d 642, 646 (Alaska 1987).
Footnote 6:
Chotiner, 829 P.2d at 832 (citing Julsen, 741 P.2d at 648).
Footnote 7:
See Chotiner, 829 P.2d at 832.
Footnote 8:
See Burrell v. Burrell, 537 P.2d 1, 3 (Alaska 1975); AS
25.24.160(a)(4).
Footnote 9:
882 P.2d 909, 916 (Alaska 1994).
Footnote 10:
Id. (internal citations omitted).
Footnote 11:
See Rhodes v. Rhodes, 867 P.2d 802, 804 n.5 (Alaska 1994).
Footnote 12:
923 P.2d 42 (Alaska 1996).
Footnote 13:
See id. at 49.
Footnote 14:
Id.
Footnote 15:
See id.
Footnote 16:
See id.
Footnote 17:
See Nicholson v. Wolfe, 974 P.2d 417, 422 (Alaska 1999).
Footnote 18:
See Brown v. Brown, 947 P.2d 307 (Alaska 1997).
Footnote 19:
See Cox v. Cox, 882 P.2d 909, 916 (Alaska 1994).
Footnote 20:
AS 25.24.160(4).
Footnote 21:
368 P.2d 546, 547-48 n.4 (Alaska 1962). The factors include:
the ages of the parties, their earning
capacity, the duration of the marriage, the conduct of the parties
during marriage, their "station in life," the circumstances and
necessities of each, their health, their financial condition, the
time and manner of acquisition of the property in question, the
value of the property at the time of division, and the
income-producing capacity of the property.
Brown, 947 P.2d at 313 n.11; Vanover v. Vanover, 496 P.2d 644, 647-
48 (Alaska 1972).
Footnote 22:
Vanover, 496 P.2d at 648; Brown, 947 P.2d at 313.
Footnote 23:
947 P.2d at 314.
Footnote 24:
See id.
