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Leis v Hustad (05/18/2001) sp-5412
Leis v Hustad (05/18/2001) sp-5412
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
KAREN R. LEIS, )
) Supreme Court No. S-8775
Appellant, )
) Superior Court No.
v. ) 3AN-94-6898 CI
)
ROBERT H. HUSTAD, ) O P I N I O N
)
Appellee. ) [No. 5412 - May 18, 2001]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Michael L. Wolverton, Judge.
Appearances: Sarah J. Tugman, Anchorage, for
Appellant. Jody W. Sutherland, Law Office of Jody W. Sutherland,
Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
We address here property characterization and valuation
issues arising out of Karen Leis and Robert (Bob) Hustad's divorce
proceedings. We conclude that it was error to characterize the
Muntean Escrow as Bob's separate property, to value Bob's
retirement plan at the time of separation, and to find that the
loan from Karen's parents was not a marital liability. We
therefore reverse and remand for further proceedings. Because
correcting these errors may significantly alter the distribution of
assets, the superior court may, but is not required to, revisit the
apportionment issue on remand.
II. FACTS AND PROCEEDINGS
Karen Leis and Bob Hustad married in 1982, separated
economically while still sharing the marital residence in 1991, and
ceased sharing the marital residence in 1993. Following a three-
day divorce trial, the trial court divided the parties' assets in
October 1997.
Beginning in 1981 Karen and Bob cohabitated briefly in
Bob's Anchorage house on Holly Lane before they married. After
Karen purchased a condominium on Copperbush Court, the parties
moved into the condominium, married, and rented out Bob's Holly
Lane house. Karen's name was never placed on the title of the
Holly Lane house, although the parties made house payments from a
joint account, and deposited rental income from the house into a
joint account.
After they married, the parties agreed to sell their
houses and purchase a house at 1510 M Street. Karen's condominium
sold first and provided the money for the down payment on the M
Street home. Bob's house sold in late 1982, producing cash used
for marital purposes, and a receivable known as the "Muntean
Escrow." Karen and Bob were both on the escrow account. Money
from the escrow account was electronically deposited into a joint
savings account, and was frequently redeposited into a joint
checking account.
Bob worked for Reeve Aleutian Airways for 19.5 years,
beginning in 1977, and had a 401(k) account administered by
Principal Financial Group. Bob made no contributions to the
account from 1991 until the time of trial. The trial court found
that seventy-two percent of the 401(k) plan was earned during the
marriage, and awarded Karen fifty percent of the marital portion of
the plan. The trial court valued the marital portion of the plan
at $63,111.43 as of March 31, 1993, a date that is close to the May
1, 1993 date of separation. The court characterized the loan taken
against the plan in 1991 as a marital debt, and subtracted the
$24,010.94 balance due on the loan at separation from the marital
portion of the plan.
When they received $13,000 from Karen's parents in 1992,
Karen and Bob signed a note that structured the transfer as a debt
to be repaid with interest. Bob concedes that he signed the note.
Karen made payments to her mother totaling $6,800 after the
parties' economic separation.
Karen filed a complaint for divorce in August 1994. The
trial court entered a decree of divorce and distribution of marital
property in June 1998. Karen appeals the property distribution on
various grounds.
III. DISCUSSION
A. Standard of Review
We review the trial court's characterization of property
as marital or separate for abuse of discretion. [Fn. 1] Property
value determinations are factual decisions that we will overturn
only if there is clear error. [Fn. 2] We review the trial court's
equitable allocation of property for abuse of discretion and will
reverse only if the allocation is clearly unjust. [Fn. 3] Any
legal determinations made during this process are reviewed de novo.
[Fn. 4]
B. It Was Error to Classify the Muntean Escrow as Bob's
Separate Property.
Karen argues that the evidence does not support the
finding that the Muntean Escrow was Bob's separate property. We
agree.
Property that is acquired with separate property and kept
as separate property is categorized as separate property.
Determining whether property is marital or separate "'is in large
part a legal determination, involving the interpretation of AS
25.24.160(a)(4) and applying legal principles to the facts of the
case.'"
Bob argues that the Muntean Escrow is separate property
because it was the product of the sale of his Holly Lane house.
But separate property becomes marital "upon a showing that the
parties intended to treat the property as marital." The trial
court found that "[t]he proceeds from the sale were all directed to
Mr. Hustad and were treated as his separate property." These
findings are clearly erroneous.
The evidence establishes that the parties intended to
treat the Muntean Escrow as marital. Bob concedes in his brief
that "the parties agreed to sell their houses and to buy a home
. . . together." This agreement to combine the separate property
in essence transmuted the separate property into marital property.
The Muntean Escrow was listed in both Karen and Bob's names, and
"'placing separate property in joint ownership is rebuttable
evidence that the owner intended the property to be marital.'"
Additionally, it is undisputed that money from the escrow account
was electronically transferred to a joint savings account, and then
often transferred to a joint checking account.
Bob argues that the separate nature of the property is
evidenced by his testimony at trial and his post-separation actions
in depleting the account. This evidence is insufficient to
overcome the presumption of intent created by placing Karen's name
on the account. Bob's self-serving testimony at trial is entitled
to little weight because the parties' actions during the marriage
are better indicators of the parties' intent during the marriage.
Bob's unilateral actions in depleting the account after the parties
separated are also entitled to little weight -- the court's inquiry
should focus on the intent of the parties during the marriage.
Bob further argues that Karen's name was placed on the
Muntean Escrow "merely for administrative convenience." This
argument is belied by the fact that the money was transferred from
the escrow account into a joint savings account during the
marriage. It is therefore not sufficient to overcome the
presumption created by placing Karen's name on the escrow.
Bob also argues that Karen has not satisfied the factors
for determining whether real property is marital. But these
factors do not apply, because the Muntean Escrow account is no
longer real property. In a sense, the real property was exchanged
for a receivable debt, payable through the escrow account. The
parties' intent determines the status of the resulting property.
The evidence establishes as a matter of law that the parties
intended to transmute Bob's Holly Lane property into a joint asset.
C. It Was Error to Value Bob's 401(k) Plan at the Time of
Separation Rather than at the Time of Trial.
Karen argues that it was error to value Bob's 401(k) plan
at the time of separation rather than the time of trial. We agree.
We have held that "while the date for classification of
property is that of separation, the proper date for valuation is
one as close as practicable to that of trial." Pensions are valued
at the time of trial, although the marital share of the pension is
determined at the date of separation. The trial court's valuation
of the plan at the time of separation deprived Karen of the
interest earned on the marital share of the plan.
Bob cites several cases in which we have held that it was
not an abuse of discretion to value a pension at the date of
separation. But those cases involved circumstances absent here.
Bob made no contributions to the 401(k) plan between 1991 and the
time of trial. The trial court made no findings justifying a
deviation from the standard valuation-at-the-time-of-trial
principle. Deviation, absent a finding that deviation is
warranted, is error. "While we recognized in Ogard that there may
be special situations in which the date of separation is more
appropriate, we held that the court must make specific findings in
such cases as to why the use of this date is proper."
We hold that it was error to depart from the valuation-
at-the-time-of-trial principle in this case.
D. It Was Error to Find that the Loan from Karen's Parents
Was Not a Marital Obligation.
Karen next argues that it was error to find that the loan
from her parents was not a marital debt. We agree.
Bob asserts that the obligation was not a loan, but was
rather a pre-death distribution of Karen's inheritance. He also
states that it is unlikely that Karen's mother will require her to
repay the loan. But there was evidence at the trial that Karen has
already made payments on this loan, and that Karen's mother
expected the debt to be repaid. The trial court did not find that
this obligation was not a loan, and it treated it as a loan in its
findings. Bob did not offer evidence that Karen's mother is likely
to forgive the debt.
Absent a showing that Bob and Karen intended the debt to
be separate, "the trial court must presume that a debt incurred
during the marriage is marital and should consider it when dividing
the marital estate." The loan was evidenced by a promissory note,
signed by both parties. At trial Bob argued that the loan was not
used for marital purposes, and that $8,000 of the loan was placed
in Karen's retirement account. This use does not overcome the
marital presumption. Because Karen's retirement account was a
marital asset, contributions made to that account were a marital
use. Failure to treat this loan as a marital debt was error as a
matter of law.
E. The Court on Remand May, in Its Discretion, Revisit the
Apportionment Issue.
The trial court's overall allocation of debts and assets
was not 50/50, apparently to the great benefit of Karen. This
allocation of assets was within the trial court's discretion, and
it is not challenged here. But the corrections that will be
required on remand may skew the apportionment of resources beyond
the intentions of the trial court. The trial court may, in its
discretion, revisit the apportionment issue, but it is not required
to do so. In permitting the court to revisit this issue, we do not
mean to imply that the court should revisit the issue, or that it
should deviate from its original intentions.
IV. CONCLUSION
For these reasons, we REVERSE the characterization of the
Muntean Escrow as Bob's separate property. We REVERSE the
valuation of Bob's retirement account at the time of separation,
and REMAND for valuation at the time of trial. We REVERSE the
characterization of the loan from Karen's parents as separate debt,
and REMAND for further proceedings. The superior court on remand
may, but need not, revisit the apportionment issue.
FOOTNOTES
Footnote 1:
See Jones v. Jones, 835 P.2d 1173, 1175 (Alaska 1992)
(citation omitted).
Footnote 2:
See Doyle v. Doyle, 815 P.2d 366, 368 (Alaska 1991)
(citations omitted).
Footnote 3:
See Cox v. Cox, 882 P.2d 909, 914 (Alaska 1994) (citing Doyle,
815 P.2d at 368).
Footnote 4:
See id. at 913 (citing Lewis v. Lewis, 785 P.2d 550, 552
(Alaska 1990)).
Footnote 5:
See Lewis, 785 P.2d at 558.
[Fn. 5]
