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Green v Green (08/31/2001) sp-5461
Green v Green (08/31/2001) sp-5461
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
GARY D. GREEN, )
) Supreme Court No. S-9501
Appellant, )
) Superior Court No.
v. ) 3AN-98-3946 CI
)
NANCY GREEN, ) O P I N I O N
)
Appellee. ) [No. 5461 - August 31, 2001]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
John Reese, Judge.
Appearances: William T. Ford, Anchorage, for
Appellant. Karla F. Huntington, Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
FABE, Chief Justice.
I. INTRODUCTION
The divorce of Gary and Nancy Green required division of
marital assets that included land, cabins, and airplanes. The
trial court determined that all assets were marital property, even
those that had been brought into the marriage as separate property,
and that an equal division of assets was equitable. Gary
challenges the trial court's findings that he intended to transmute
his separate property into marital property. He also challenges
the trial court's valuation and division of the marital assets.
Because the trial court did not clearly err in its factual findings
of intent to transmute separate property into marital property, and
because the trial court's allocation of the marital estate is
presumptively valid, we affirm those decisions. However, we remand
for more specific findings on the valuation and distribution of the
parties' cash assets.
II. FACTS AND PROCEEDINGS
A. Facts
When Gary and Nancy Green met, Gary lived in McCarthy in
a log cabin that he had built on two-and-a-half acres of land.
Nancy began living with Gary in the fall of 1982. They married on
August 8, 1984. Their only son, Tyler, was born April 30, 1985.
During the time that Nancy and Gary lived together they expanded
the cabin to include a porch, an outhouse, and a two-story bedroom,
all built using their own labor, local logs, and other salvaged
materials.
Gary owned two airplanes before the marriage, a Cessna
180 and a Piper J-4E. He has been a commercial pilot since 1979.
Gary sold the Piper J-4E soon after he and Nancy married, and
purchased a Piper Super Cub in April 1985. The Super Cub and the
Cessna 180 have been used for personal and business flying.
In 1987 Gary and a partner began McCarthy Air, a flight-
seeing and air taxi service. The partnership dissolved in 1989,
and Nancy and Gary traded property with the former partner for full
interest in the business. McCarthy Air operates from buildings and
land owned by the Greens in the town of McCarthy. Gary has
conducted all of the flying for the business, while Nancy
participated by managing the office and performing other assorted
tasks.
It is undisputed that McCarthy Air was marital property.
The profits from the business provided the family income. The
business has expended significant funds to maintain and upgrade the
airplanes. For example, after a 1996 crash of the Cessna, McCarthy
Air spent $30,000 to repair the plane.
B. Proceedings Below
Nancy separated from Gary on September 27, 1997, and
filed for divorce in February 1998. Nancy and Gary settled child
custody issues in June 1999 and these are not before us in this
appeal.
Gary filed a motion for summary judgment in September
1999. He sought a ruling that the home, Cessna 180, and Super Cub
were his separate property and would not be invaded in the
distribution of assets. Superior Court Judge John Reese determined
that the property issues presented a factual dispute and denied
Gary's motion for summary judgment.
Judge Reese presided over a four-day bench trial
regarding division of the Greens' marital assets. The court heard
testimony of a real estate appraiser, an appraiser and auctioneer
of general merchandise, an appraiser of airplanes, an appraiser of
guns and knives, Nancy, her father, and Gary.
The trial court determined that none of the property
brought into the marriage by Gary or Nancy remained separate
property. It found no evidence of intent to keep separate the
cabin and real property, and therefore the court characterized all
property brought into the marriage as marital property. The trial
court concluded: "For a marriage of this length with unquestioned
mutual efforts expended on these assets, with no attempt to
segregate any premarital item from the common enterprise, the court
can only conclude that all the assets are marital assets. The law
allows no other conclusion."
The trial court valued the marital estate at $428,605 and
awarded each party one-half of the estate. The court did not
adjust the marital estate to account for premarital contributions
to the marriage. The superior court awarded two Cherokee airplanes
to Nancy and the rest of the assets not previously divided by the
parties to Gary. To even out the distribution, the superior court
ordered Gary to pay Nancy $105,562 by May 1, 2000. The court also
ordered that this debt would be secured by all the real property,
the Cessna 180, and the Super Cub. The superior court entered a
decree of divorce and a final distribution of property on December
7, 1999.
Gary appeals the property distribution.
III. DISCUSSION
A. Standard of Review
This court reviews the trial court's determination of
what property is available for distribution under the abuse of
discretion standard. [Fn. 1] This court uses its independent
judgment to review any legal determinations made by the trial court
in determining what property is available. [Fn. 2] Any findings
that the parties intended to transmute separate property into
marital property are disturbed only if clearly erroneous. [Fn. 3]
Valuation of available property requires factual determinations
that are reversed only if they are clearly erroneous. [Fn. 4]
Equitable allocation of property is reviewable under an abuse of
discretion standard and will not be reversed "unless it is clearly
unjust."[Fn. 5]
B. Identification of Marital Property
"Equitable division of marital assets by the superior
court involves a three-step procedure. First, the trial court must
determine what specific property is available for distribution.
Second, the court must find the value of this property. Third, it
must decide how an allocation can be made most equitably."[Fn. 6]
Alaska Statute 25.24.160(a)(4) provides that the court
may divide the parties' property "whether joint or separate,
acquired only during marriage." Therefore, the first step of
dividing property involves identifying all property acquired during
marriage as available for distribution. Marital property
identified in this first step is then valued and is divided.
Trial courts, in analyzing the property available for
distribution, may find that previously separate property has been
transmuted into marital property. [Fn. 7] Transmutation from
separate property into marital property is based upon "the intent
of the owner of the separate property, as demonstrated through . .
. words and actions."[Fn. 8] Once such property is shown to have
been transmuted into marital property, it is available for
distribution along with the rest of the marital estate.
On appeal, Gary challenges the superior court's inclusion
of the cabin site and its buildings, the Cessna 180, and the Super
Cub in the marital estate. The trial court found that "all assets
extant as of September 27, 1997 are marital assets. This finding
includes the Cabinsite land and buildings, Cessna 180, [and] Super
Cub . . . ." The trial court also found that "Mr. Green intended
to convert the Cabinsite, Cessna 180, Super Cub and any other
possible pre-marital assets into marital assets." It found "no
attempts by Mr. Green to segregate any pre-marital asset from the
common enterprise."
Moreover, the court found:
[T]he parties engaged in a joint economic
enterprise from the date of marriage onward and that each of them
pooled into that enterprise their time, talents and any premarital
assets that they had. The parties used these assets exclusively as
joint property throughout the marriage, never segregating the use,
profits or the expenses of any asset.
Because the analysis of intent is fact-specific, the cabin site,
Cessna 180, and Super Cub will be discussed in turn.
1. Cabin site and buildings
Because Gary acquired the cabin site before marrying
Nancy, the property itself is not property "acquired only during
marriage."[Fn. 9] Therefore, it can only be treated as marital
property if it was transmuted into such property through the
parties' intent and actions demonstrating that intent. [Fn. 10]
The trial court in this case found that Gary intended to
treat the cabin site as a joint holding. When determining whether
property is separate or marital, the trial court may not focus
solely on the parties' acts and disregard their intentions. [Fn.
11] We have identified standards for determining whether separate
real property has been transmuted into marital property, including:
(1) the use of property as the parties' personal residence; (2) the
ongoing maintenance and management of the property by both parties;
(3) placing title in joint ownership; and (4) using the credit of
the non-titled owner to improve the property. [Fn. 12]
Here, the Greens used the premises as their personal
residence. As we noted above, the trial court found that "each of
them pooled into [the joint economic] enterprise their time,
talents, and any premarital assets that they had." It also found
that "[b]y the time of separation, the primary cabin on the
Cabinsite was much larger and very different from what it had been
before the marriage. Every stick, rock, log, nail, shelf, window
was affected by one party or the other throughout the marital
years." The Greens paid all expenses for upkeep and improvement of
the land and buildings with proceeds from McCarthy Air, the family
business. The trial court's determination that the cabin became
part of the marital estate by virtue of marital effort and use was
not clearly erroneous.
Gary suggests on appeal that the trial court should not
have considered the passive appreciation in the cabin site land as
a marital asset. Because the trial court made no finding that the
Greens treated the land differently than they did the cabin, it did
not err by evaluating the cabin buildings and land as one unit.
2. Cessna 180
Gary bought the Cessna 180 in 1981, before he began his
relationship with Nancy. He used the plane to earn income by
hauling fish, flying adventurers into the mountains, and performing
search and rescue operations. This plane was used extensively
during the marriage for the family business. Gary estimates that
this plane provided $40,000 per year for McCarthy Air. In 1995
McCarthy Air paid for modifications to the plane so that it could
generate more income for the business. Because Gary and Nancy had
decided not to carry hull insurance for the plane, when it crashed
in 1996, McCarthy Air paid $30,000 for repairs.
The trial court found that Gary owned the plane prior to
the marriage and that he intended to convert it, along with other
pre-marital assets, to a marital asset. This finding was not in
error in light of the extensive use of the plane in the family
business and the substantial investment by the business in the
upkeep and upgrades of this plane. The trial court did not err in
finding that the use, upkeep, and improvements of the plane for the
common enterprise reflected intent to transmute the property into
marital property.
3. Super Cub
Unlike the cabin site and the Cessna 180, the Super Cub
was purchased during the marriage. The trial court made the
following finding regarding this plane:
A Piper Super Cub was purchased on April 30,
1985. Mr. Green claimed that it was purchased solely with pre-
marital funds and was therefor[e] his separate property. Ms. Green
disagreed. Conflicting and unclear evidence was offered on this
issue. The court does not need to reach that evidentiary issue,
because even if it was Mr. Green's separate property as of April
30, 1985, it became a marital asset during the marriage.
The trial court's findings of joint use and management and
intention to transmute are not clearly erroneous. We therefore
find no error in the trial court's inclusion of this plane in the
marital estate.
C. Valuation of Cash Assets
The trial court found that the parties had $27,000 cash
on hand and approximately $6,900 [Fn. 13] in bank accounts that
were divided at separation. The trial court included this money in
the pool of marital assets. It determined that Gary had received
the bank balances of approximately $6,900, as well as $20,000 of
the cash that the Greens kept under the bed, and that Nancy had
received $7,000 cash from under the bed.
We have held that "it is error to place a value on an
account that has been emptied prior to trial."[Fn. 14] It is also
error for a trial court to value assets at separation, rather than
at trial, unless it makes specific findings as to why the date of
separation is the more appropriate time for valuation. [Fn. 15]
Here, the trial court made no such findings. We therefore remand
to the trial court for findings on whether the Greens' marital cash
assets were still available at trial. The trial court should also
consider on remand whether evidence exists that the cash was
"dissipated, wasted, or converted to a non-marital form,"
warranting recapture of the marital asset by valuing the asset pre-
separation and crediting all or part of it to the account of the
party who controlled the asset. [Fn. 16]
D. Equitable Division of Marital Property
Gary challenges the trial court's division of the marital
property. The trial court found that "[t]he most equitable
distribution of this marital estate is to divide the assets and
liabilities of the marriage equally." It then awarded each party
$214,302.50 of the $428,605 marital estate.
Alaska Statute 25.24.160 requires the trial court to
"fairly allocate the economic effect of divorce." To do this, the
trial court must consider a number of specific factors when
dividing property. [Fn. 17] As we discussed above, the court has
available for distribution all assets acquired during marriage.
[Fn. 18] The court may, if equity requires, also invade the
separate property of either party. [Fn. 19]
Trial courts have broad discretion in dividing property
in divorce. [Fn. 20] An equal division of the marital property is
presumptively valid. [Fn. 21]
The trial court here considered the factors set forth in
AS 25.24.160 when dividing the property. The court specifically
"gave greatest consideration to the length of the marriage, the
contributions of the parties before and during the marriage, the
overwhelming evidence of joint enterprise throughout the marriage,
the income earning capacity of the assets awarded to Mr. Green, and
the parties['] relative financial situation."
Gary argues that the trial court erred because it did not
appropriately consider his premarital contributions to the marital
estate and that it also erred by requiring him to pay Nancy
$105,562.
The trial court explained its property division:
Considering the length of the marriage and the
negligible financial investment of either of the parties in their
premarital contributions, I am not making any adjustments to the
marital estate because of premarital contributions to the marriage.
We have recognized that premarital contributions to the marital
estate may be relevant to the equitable division, [Fn. 22] even
though this is not a factor specifically listed in AS
25.24.160(a)(4). [Fn. 23] Although a trial court has discretion to
credit one spouse for contributions made with separate property to
the marital property subject to division, [Fn. 24] we have not held
that failing to make such an adjustment is an abuse of the trial
court's discretion.
While the trial court's oral findings indicate that it
was focusing on the parties' "financial investment"in the
marriage, the court's written findings further clarify:
The court has considered Mr. Green's
contribution of pre-marital assets. Both parties contributed
significant time and effort into the marriage. In light of the
eventual value of the marital estate and the length of the
marriage, Mr. Green's premarital contribution was not sufficient to
warrant him receiving more than half of the marital estate.
The trial court's factual findings are not clearly erroneous and it
cannot be said that the trial court abused its discretion. We
therefore find no error.
Gary argues that the trial court's award of $105,562 to
Nancy, to be paid within six months, was "inequitable and
unrealistic." He contends that the trial court misinterpreted his
ability to pay such a judgment.
We have stated that "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."[Fn.
25] The trial court explained in this case that for Gary to pay
Nancy, "Mr. Green is free to encumber the property and borrow the
money to pay her off. He can sell things off to pay her off." It
also found that "clearly the economic enterprise in McCarthy was
generating more than a few hundred dollars a month, which was what
was indicated by Mr. Green's tax return." The trial court
apparently considered whether it would cause hardship for Gary to
fulfill the obligation imposed by the judgment and suggested
avenues available to Gary to meet the obligations. Given the trial
court's careful consideration of this issue, we find no error in
the distribution. [Fn. 26] We affirm the trial court's equal
allocation of the marital assets, and its ruling that Gary must pay
Nancy the amount that will equalize the distribution of assets, but
we remand for determination of the value of the marital cash
assets.
IV. CONCLUSION
The superior court's decision is AFFIRMED in part and
REMANDED for further proceedings in accordance with this opinion.
FOOTNOTES
Footnote 1:
See Cox v. Cox, 882 P.2d 909, 913 (Alaska 1994).
Footnote 2:
See id.
Footnote 3:
See id.
Footnote 4:
See id. at 913-14.
Footnote 5:
Id. at 914.
Footnote 6:
Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska 1983); see also
Murray v. Murray, 788 P.2d 41, 41-42 (Alaska 1990); Carlson v.
Carlson, 722 P.2d 222, 223-24 (Alaska 1986).
Footnote 7:
See Brown v. Brown, 947 P.2d 307, 309-11 (Alaska 1997).
Footnote 8:
Sampson v. Sampson, 14 P.3d 272, 277 (Alaska 2000).
Footnote 9:
AS 25.24.160(a)(4).
Footnote 10:
See Wanberg v. Wanberg, 664 P.2d 568, 571 (Alaska 1983);
Nicholson v. Wolfe, 974 P.2d 417, 423 (Alaska 1999).
Footnote 11:
See Nicholson, 974 P.2d at 423.
Footnote 12:
See Cox v. Cox, 882 P.2d 909, 916 (Alaska 1994), quoted in
Harrelson v. Harrelson, 932 P.2d 247, 251 (Alaska 1997) (citing
Chotiner v. Chotiner, 829 P.2d 829, 832-33 (Alaska 1992)); McDaniel
v. McDaniel, 829 P.2d 303, 306 (Alaska 1992); Burgess v. Burgess,
710 P.2d 417, 420 (Alaska 1985).
Footnote 13:
The oral and written findings contain a minor discrepancy as
to whether the bank accounts had a value of $6,906 or $6,907.
Footnote 14:
Cox v. Cox, 882 P.2d 909, 917 (Alaska 1994).
Footnote 15:
See Ogard v. Ogard, 808 P.2d 815, 820 (Alaska 1991).
Footnote 16:
Cox, 882 P.2d at 918 n.5; see also Berry v. Berry, 978 P.2d
93, 99 (Alaska 1999) (Matthews, C.J., concurring); Jones v. Jones,
835 P.2d 1173, 1175-76 (Alaska 1992); Hartland v. Hartland, 777
P.2d 636, 642-43 (Alaska 1989).
Footnote 17:
See AS 25.24.160(a)(4)(A)-(I) (also known as the "Merrill
factors"as listed in Merrill v. Merrill, 368 P.2d 546, 547 n.4
(Alaska 1962)). AS 25.24.160(a)(4) states in part:
[T]he division of property must fairly
allocate the economic effect of divorce by being based on
consideration of the following factors:
(A) the length of the marriage and
station in life of the parties during the marriage;
(B) the age and health of the parties;
(C) the earning capacity of the parties,
including their educational backgrounds, training, employment
skills, work experiences, length of absence from the job market,
and custodial responsibilities for children during the marriage;
(D) the financial condition of the
parties, including the availability and cost of health insurance;
(E) the conduct of the parties, including
whether there has been unreasonable depletion of marital assets;
(F) the desirability of awarding the
family home, or the right to live in it for a reasonable period of
time, to the party who has primary physical custody of children;
(G) the circumstances and necessities of
each party;
(H) the time and manner of acquisition of
the property in question; and
(I) the income-producing capacity of the
property and the value of the property at the time of division.
Footnote 18:
See AS 25.24.160(a)(4).
Footnote 19:
See id.
Footnote 20:
See Harrelson v. Harrelson, 932 P.2d 247, 253 (Alaska 1997).
Footnote 21:
See Brooks v. Brooks, 733 P.2d 1044, 1058 (Alaska 1987).
Footnote 22:
See Chotiner v. Chotiner, 829 P.2d 829, 835 (Alaska 1992);
Laing v. Laing, 741 P.2d 649, 654 (Alaska 1987) ("A spouse's
contribution of substantial separate property to the marriage may
be such a relevant factor.").
Footnote 23:
See Wanberg v. Wanberg, 664 P.2d 568, 575 n.22 (Alaska 1983)
("The criteria in Merrill are not exhaustive, and thus the trial
court is free to consider additional factors which may be relevant
in a particular case.").
Footnote 24:
See Laing v. Laing, 741 P.2d 649, 654 (Alaska 1987).
Footnote 25:
Cox v. Cox, 931 P.2d 1041, 1045 (Alaska 1997).
Footnote 26:
See Johns v. Johns, 945 P.2d 1222, 1228 (Alaska 1997) ("The
trial court therefore did consider possible hardship to [the party
upon whom the obligation was imposed] and suggested a means of
ameliorating it. Thus, we find that the superior court did not err
in its overall property distribution.").
