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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Fortson v. Fortson (02/17/2006) sp-5987
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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| BLANTON FORTSON, | ) |
| ) Supreme Court No. S- 11332/11341 | |
| Appellant/Cross-Appellee, | ) |
| ) Superior Court No. | |
| v. | ) 3AN-02-9193 CI |
| ) | |
| JAYNE FORTSON, | ) O P I N I O N |
| ) | |
| Appellee/Cross-Appellant. | ) [No. 5987 - February 17, 2006] |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sharon Gleason, Judge.
Appearances: Susan Orlansky, Feldman &
Orlansky, Anchorage, for Appellant/Cross-
Appellee. Bruce A. Bookman, Bookman & Helm,
LLP, Anchorage, for Appellee/Cross-Appellant.
Before: Bryner, Chief Justice, Matthews, and
Carpeneti, Justices. [Eastaugh and Fabe,
Justices, not participating.]
CARPENETI, Justice.
I. INTRODUCTION
Blanton and Jayne Fortson divorced after eighteen years
of marriage. In this property division case, both parties appeal
the superior courts decision to award sixty percent of the
marital estate to Jayne and forty percent to Blanton. Because
the court did not abuse its discretion in dividing the marital
estate, we affirm the sixty-forty division. The parties raise an
additional seven issues on appeal. For the reasons set out
below, we affirm the courts requirement of a cash payment to
Blanton, its treatment of capital gains taxes and selling costs
for marital land in Hawaii, its treatment of loans from Jaynes
parents, its valuation of the parties boat, and its treatment of
a capital loss carry forward. We reverse the courts
determination that excess profits earned by Jaynes medical clinic
during the parties separation are her separate property and its
holding that gifts given to one party by the other during the
marriage are invariably marital property. Finally, we decline to
consider whether the superior court erred in its treatment of
alleged gifts from Blanton to Jayne because Jayne has failed to
show that, if there was error, it was prejudicial.
II. FACTS AND PROCEEDINGS
Blanton and Jayne Fortson married in 1985 and separated
in October 2001 after sixteen years of marriage; Blanton filed a
complaint for divorce that month. The couple attempted to
reconcile following the separation, and the initial complaint for
divorce was withdrawn, but in July 2002 Jayne filed for divorce,
and the case eventually went to trial on property issues.
Throughout the marriage, the Fortsons enjoyed an affluent
lifestyle. The Fortsons have three children, but custody and
support of the children is not at issue in this appeal.
Jayne is a dermatologist with a successful clinic in
Anchorage. She is also a paraplegic and uses a wheelchair due to
a 1975 accident. Over the years she has experienced various
medical problems related to her condition, including a 1996 hip
accident that left her with significant pain and fatigue.
Because of her health, she works less than five days a week. She
will have significant medical expenses in the future and is at
high risk of suffering an accident that would end her ability to
work. Because of her medical condition, her remaining work life
is likely less than the sixteen to seventeen years generally
predicted for an educated forty-seven year old woman.
Blanton has a nursing degree and over the course of the
marriage worked as a nurse, a commercial fisherman, and a part-
time supervisor in Jaynes office. Blanton stopped working as a
nurse in 1989 and his nursing license has now lapsed. He last
worked as a fisherman in 1999. He also worked at the clinic;
from October 2001 until May 2002, Blanton was on its payroll and
was paid an annual salary of $65,000. He is deaf in one ear and
has a weakened back that limits him to light lifting.
Trial took place before Superior Court Judge Sharon
Gleason during a six-day period in May-June 2003. The parties
disputed several issues. These issues, and the facts relevant to
them, are set out briefly here.
(1) Division of the marital estate. The court
distributed the couples marital property on a 60/40 basis,
awarding the larger share to Jayne. Judge Gleason focused on the
parties long-term health prospects, commenting that:
[W]hen I am called here as a judge to apply
the Merrill factors its to . . . discern what
the future holds for each party. The
statistical odds for Mr. Fortson of major
complications in his health precluding him
from functioning in a society from working
are very low, and . . . those statistical
probabilities for Dr. Fortson are extremely
high. She faces major health complications
in her future because of her paraplegia, and
it is this factor to which Ive given greatest
weight in arriving at a division of the
parties estate, and . . . the related need
for additional funds to meet the health
related needs of . . . Dr. Fortson.
At trial one of Jaynes witnesses, a vocational
counselor, stated that Blanton was qualified for various nursing
or health management positions with salaries ranging from $30,600
to $79,000. Blanton offered the testimony of another counselor,
Marjorie Linder, who suggested a three-year program where Blanton
would return to school to become a vocational rehabilitation
counselor. The court, however, rejected Linders testimony
because she did not consider his current earning capacity and
only engaged in general career planning. The court held that
Blanton had an earning capacity of $50,000, and concluded that
neither rehabilitation spousal support nor reorientation alimony
were necessary in this case.
The court acknowledged that Jaynes earning capacity was
ten times Blantons, but observed that her health is very fragile
and her earning capacity could be reduced to zero at any moment
if she falls from her wheelchair. Judge Gleason continued that
Jaynes health problems are going to severely impact [her] long-
term earning capacity, and thus concluded that I recognize the
disparity in the parties earning capacities, but the issues
surrounding Jaynes health outweigh the disparity.
Both parties attack different aspects of this property
division. Blanton, relying primarily on Jaynes significantly
larger income earning capacity, argues that the superior court
abused its discretion in not awarding him a greater portion of
the marital estate. Jayne, pointing to large loans from her
parents that she alone repaid or remains responsible for
repaying, argues that she should have received greater
consideration from the court in its property division.
(2) Cash payments from Jayne to equalize the property
division. The court ordered Jayne to make cash payments totaling
$388,200 to Blanton to complete the division of property. Jayne
was ordered to make monthly payments of $3,500 to Blanton for
eighteen months, followed by a final lump sum payment for the
remaining balance. On reconsideration, the court ordered that
the principal should earn 3.75% interest during this interim
period. Jayne challenges the order, specifically arguing that
the superior court did not take into account the hardship that
she would face in financing the lump sum payment to Blanton.
(3) Excess profits from Jaynes dermatology clinic.
The parties disputed whether the clinic had any marketable
goodwill and whether it earned any income from activities other
than Jaynes work as a physician. In addition to dermatology
services, Jaynes clinic also offers non-medical therapies and
sells cosmetic and skin care products. In the five years
preceding the divorce, Jaynes yearly take-home income averaged
$550,000. Blantons expert, Donovan Rulien, opined that a
physician of Jaynes experience would earn a salary of $375,000
and thus concluded that Jayne earned excess profit over wages
totaling $272,800 during the period of separation. Jaynes
expert, Frederick Strand, disagreed. He testified that an
appropriate salary for someone of Jaynes experience would be
forty percent of the clinics billings, or $508,000, and that
given an average yearly cashflow of $455,000, there were no
excess profits. He also criticized Ruliens analysis, and
maintained that even assuming a $375,000 salary, no excess
profits were present.
The court rejected much of Ruliens analysis, finding it
not credible because [h]is results conflicted with his own
methodology, and he relied solely on national average
compensation figures that were not linked to conditions in
Anchorage, or even Alaska. Judge Gleason instead adopted a
modified version of Strands second analysis, which incorporated
the $375,000 salary figure; she noted that there could be roughly
$20,000 in excess earnings, but then concluded that the issue was
rendered moot by the clinics lack of marketable goodwill.
(4) Capital gains taxes and sales costs of Hawaii
property. The couple owned Hawaii property worth $1.5 million.
At trial, a Hawaii lawyer testified that sale costs would amount
to thirteen percent of the total value, leaving the owner with
$1.3 million in proceeds. The attorney testified that upon sale,
the capital gains tax on the property would amount to $120,800.
The couple also owns other real estate, including a Stuckagain
Heights property, the family home, and the medical condominium
that houses Jaynes clinic. The court awarded all of the couples
real estate to Jayne. The court declined to grant Jayne a credit
for capital gains taxes and sales costs on the sale of the Hawaii
property on the grounds that it did not order her to sell the
property.
(5) Loans from Jaynes parents. The couple received a
series of payments from Jaynes parents; at trial the parties
disputed whether they should be treated as loans or gifts. The
first payment was for $280,000 in 1986, and was used to purchase
the fishing boat Blanton used in the 1980s. Although the couple
made two payments on this sum, the bulk of it was repaid when
Jayne gave her parents investments originally purchased with the
money she received as part of her 1975 accident settlement.1
Jaynes parents also gave the couple $80,000 in 1990 and $150,000
in 1996. Both Jayne and Blanton signed the 1986 and 1990 notes,
but only Jayne signed the 1996 note. No payments have been made
or demanded on the 1990 or 1996 notes. The court held that Jayne
had not established that there was a legal obligation to repay
these loans. The court also declined to include Jaynes repayment
of the first loan in its tally of marital assets and debts. The
court gave limited weight to the contribution made by these
loans and extremely limited weight to the effect failure to repay
them may have on Jaynes inheritance from her parents.
(6) The Leah Maya. The parties own the Leah Maya, a
51-foot power boat. While the couple had used the boat for
hunting charters, it was mainly used for family pleasure.
Blanton estimated the boat was worth $200,000, and his expert,
Larry Westfall, estimated that the vessels fair market value was
$195,000. Based on Westfalls testimony, the superior court
valued the Leah Maya at $195,000 and awarded it to Blanton. The
superior court declined to allow Blanton a deduction for costs
associated with taking the boat to Seattle for sale because it
did not order him to sell the boat, noting that Blanton could use
the boat for charters in Alaska.
(7) Capital loss carry forward. Blanton suffered
substantial losses day-trading in the stock market. These losses
generated a capital loss carry forward, a tax offset that can be
applied to future income tax liabilities (including capital gains
taxes) of $519,500. The parties disputed to whom this carry
forward should be assigned. The court held that it should be
divided in the same proportion as the division of the marital
estate: sixty percent to Jayne and forty percent to Blanton.
(8) Gifts as separate property. The parties
identified personal items with a combined value of $5,540; Jayne
claimed these items were gifts to her from Blanton, while
Blanton denied that items totalling $4,250 in value were intended
as gifts. The superior court held that interspousal gifts are
marital property and divided them as part of the marital estate.
III. STANDARD OF REVIEW
Equitable division of marital assets is a three-step
process: determining what property is available for distribution,
assessing its value, and allocating it equitably.2 The trial
courts characterization of property as separate or marital is
reviewed for abuse of discretion.3 Whether the trial court
applied the correct legal rule in exercising its discretion is a
question of law that we examine de novo using our independent
judgment.4 The valuation of property is a question of fact and
is reviewed for clear error.5 A finding of fact is clearly
erroneous if, upon review of the entire record, we are left with
a firm and definite conviction that a mistake has been made.6
The superior courts ultimate distribution of assets is reviewed
for abuse of discretion, and will be reversed only if the
distribution is clearly unjust.7
IV. DISCUSSION
A. The Superior Court Did Not Abuse Its Discretion in
Dividing the Marital Estate.
Under AS 25.24.160, trial courts must consider specific
factors in dividing property.8 In making its division, the trial
court generally should begin with the presumption that an equal
division of marital property is most equitable.9
1. The superior court did not err in awarding Blanton
forty percent of the marital estate.
Blanton maintains that the superior court abused its
discretion in awarding him a less than equal share of the estate.
In Blantons favor are the facts that the parties were married for
many years, enjoyed an affluent lifestyle, and the courts finding
that Blanton contributed to the marriage. However, cutting
against him is the key fact that Jayne faces long-term medical
liabilities. Blanton argues that the superior courts
distribution represents an abuse of discretion because it
overcompensated for Jaynes health concerns, was based on various
factual errors, and was motivated by a desire to punish him for
his spendthrift ways.
We have recognized that [w]hen a couple has sufficient
assets, the spouse with the smaller earning capacity can and
should receive a larger share in the property distribution.10
Blanton posits that in light of the disparity between his earning
capacity of $50,000 a year and Jaynes $500,000 earning capacity,
a 60/40 award in Jaynes favor was an abuse of discretion.
However, the statutory factors for distribution include the
consideration of the age and health of the parties, the financial
condition of the parties, including the availability and cost of
health insurance, and the circumstances and necessities of each
party.11 Moreover, we look to see whether the property division
was adequate to meet the parties needs while they made the
transition into post-marital life.12 In this case Jayne will face
substantial healthcare costs that are likely to increase as she
gets older,13 her ability to earn income will likely fall as her
healthcare costs increase, and she is uniquely vulnerable to
injuries or accidents that would have immediate and catastrophic
effects on her ability to earn income. At the same time, Blanton
has a reasonable earning capacity and has received a portion of
the estate large enough to help him make the transition into post-
marital life. In light of these facts, a 60/40 property division
in favor of Jayne was well within the trial courts discretion.
Blanton also argues that the court abused its
discretion in failing to award him any of the couples real estate
or income producing assets.14 Judge Gleason emphasized that there
[are] lots of liquid funds that have been received by Mr. Fortson
and explained that I have looked at the fact of the liquid assets
that were placed into Mr. Fortsons control, the Leah Maya, the
hangar proceeds, the Cessna 206. That . . . comprises $400[,000]
to $500,000 of cash. Blanton maintains that the boat is not an
income generating asset because it was primarily used for family
activities. But it was also used for charters, remains equipped
for such work, and could be outfitted for commercial fishing.
Its ability to generate income is determined not by its past
usage, but by its future capabilities, and thus it is an income
generating asset. Accordingly, we reject Blantons suggestion
that he was not awarded any income generating assets. Moreover,
the fact that he was awarded liquid funds, many of which were
given to him while the parties were separated, undermines his
argument; cash can readily be used to purchase income generating
assets. While the superior court awarded Jayne most of the
income generating assets, this was not an abuse of discretion
given our overall conclusion that the court did not abuse its
discretion in awarding Jayne sixty percent of the marital estate.
Blanton also asserts that the trial court improperly
penalized him for what it viewed as his financially irresponsible
ways. He relies on the trial courts statement that if Mr.
Fortson . . . were accorded more than 50 percent of the marital
estate theres every indication that that would be spent solely on
extravagances. Had the court based its property distribution
award on a judgment about the propriety of his spending habits,
it would have abused its discretion.15 However, the courts
language is part of a larger discussion that contrasts Blantons
relatively minor future liabilities with Jaynes large impending
health costs. In the context of that discussion, the statement
is unobjectionable and to some extent superfluous; the rest of
the courts discussion, as well as its written findings of fact
and conclusions of law, demonstrate that the property
distribution was motivated not by a desire to punish Blanton but
by the realization that Jayne faced large, possibly catastrophic,
healthcare costs in the coming years. Given the extensive
evidence in support of this conclusion, we reject Blantons
suggestion that the distribution was designed to punish him.
In addition, Blanton maintains that the trial courts
finding that he has an earning capacity of $50,000 is clearly
erroneous. He challenges the testimony of Jill Friedman, Jaynes
vocational expert, that he would be eligible for various
supervisory nursing positions, arguing that he has back problems
and has not worked as a nurse in fourteen years. However,
Friedman explained that Blanton could regain his nursing license
in as little as nine weeks. She offered a list of possible
salary ranges for nurses in the Anchorage area; while she
mentioned some positions with salary ranges between $30,600 and
$56,000 per year, she also discussed a nurse supervisor position
which paid between $52,000 and $79,000 and noted that Blantons
resume stated that he had worked as a nurse supervisor at Jaynes
office. Moreover, the trial court found the testimony of
Blantons expert to be unpersuasive, viewing her as a general
career planner who failed to address his actual earning capacity,
and Blanton did not offer any other evidence on this issue.
While the trial courts finding that Blanton could earn $50,000
may assume that he can secure a more senior position, given that
it is within the range offered by the expert and below the
$57,000 mean wage for nurses in the Anchorage area, the finding
was not clearly erroneous.
Blanton also suggests that his lack of health
insurance supports a larger award, arguing that once his COBRA
insurance lapses, he will face uncertain insurance costs.
However, COBRA insurance lasts three years from the time of
divorce; during those three years, full coverage costs $556 per
month. Thus, even if the trial courts assumption that Blantons
insurance would be provided by his future employers turns out to
be false, he has access to alternative sources of insurance for a
reasonable amount of time. The mere possibility that he may have
to buy his health insurance in the future does not support
increasing his share of the marital estate.
In sum, we conclude that none of Blantons claims of
error have merit and that the superior court did not abuse its
discretion in allocating Blanton a forty percent share of the
marital estate.
2. The court did not err in awarding Jayne sixty
percent of the marital estate.
Jayne argues that the court erred in failing to give
appropriate weight to her use of separate funds to benefit the
marriage. Specifically, she argues that the trial court erred by
failing to grant sufficient weight to (1) her payment of roughly
$240,000 to her parents for the first loan, and (2) her $107,000
contribution towards the Stuckagain Heights property.
In distributing the marital property, the superior
court gave limited weight to the fact that roughly $600,000 was
contributed to the parties by Jaynes family allegedly as loans.
The court concluded that Jayne did not establish by a
preponderance of the evidence that these payments created any
legal obligation of repayment; accordingly, it concluded that no
adjustment is required based on these payments. Jayne argues
that the trial court erred by not separating out from this amount
the $240,000 Jayne contributed from her premarital funds to repay
her parents for their 1986 commercial fishing loan.16 Jayne
argues that the courts discussion of her payment was insufficient
and that the court was required to consider the fact that she
contributed separate funds to pay off this loan.
The superior court also accorded limited weight to
Jaynes use of her separate funds to purchase the Stuckagain
Heights property, concluding that she intended to transmute the
funds into marital property. Jayne argues that the courts
treatment of her separate contributions amounts to an abuse of
discretion.
We have held that contributions of separate property
may be relevant to equitable division.17 However, we have not
held that failure to make an adjustment for such contributions
constitutes an abuse of discretion.18 The superior court
considered the alleged loans and Jaynes contribution of
premarital funds into the Stuckagain Heights property, and
accorded these facts limited weight. Jaynes argument would
require us to conclude that the trial court should have
explicitly stated how much weight it was according to her use of
premarital assets to repay a portion of the loans, and to
quantify that declaration with precision. Because the court need
only take separate payments into account at its discretion, and
given that the court considered the general impact of the loans
and held that they were not marital debts, we conclude that it
did not abuse its discretion by refusing to give more weight to
Jaynes contributions. Jayne may disagree with the weight
accorded to these contributions, but that alone does not support
a conclusion that the trial court abused its discretion.
B. The Superior Court Did Not Err in Fashioning the Terms
of Jaynes Payment of a Cash Settlement to Blanton.
On cross-appeal, Jayne argues that the trial court
failed to make specific findings about the hardship imposed by
the cash award. Specifically, she contends that the court failed
to consider whether costs related to financing the large lump sum
payment would impose an undue hardship on her.
Cash awards are a permissible means of dividing
illiquid marital assets where they would not impose a hardship on
the paying party.19 In this case, the trial court considered the
effects of the cash award on Jaynes finances. First, in its oral
decision, the court noted that it was allowing Jayne eighteen
months to pay the lump sum in consideration of the fact that it
might take [Jayne] some time to reorganize finances, obtain any
refinancing on the Hawaii property, or undertake other financial
considerations of considerable priority. . . . Second, in
deciding Blantons motion for reconsideration, the court again
considered Jaynes health and granted Jayne the right to alter the
payment schedule if she could not comply due to changes in her
health or employment. Thus, the court carefully considered the
potential hardships of the award, giving Jayne time for financial
restructuring, taking into account her health concerns, and
allowing for necessary adjustments as time goes on. In light of
this record, we reject Jaynes contention that the court did not
consider the possible hardships of the payment plan.20
C. The Superior Court Erred in Treating Excess Profits
Earned by the Clinic During the Separation Period as
Jaynes Separate Property.
Marital property includes all property acquired during
the marriage, excepting only inherited property and property
acquired with separate property which is kept as separate
property. 21 The clinic was started during the marriage, and
Jaynes primary means of employment was her clinic work. The
parties do not dispute that the business was marital property.
However, spousal income earned after a final separation
leading to divorce is not marital property.22 Blanton accepts
this general principle but argues that some of the post-
separation profit that Jayne earned from the business was not her
separate income, but represented excess earnings or profits
stemming from the other clinic activities, such as the efforts of
various technicians and sales of speciality services and
cosmetics. He posits that these profits are marital property.23
Jayne responds that the superior court found that all of the
business profits were from her sole efforts and that there were
no excess profits.
We agree with Blanton that the court erred in declining
to consider the amount of separation period excess earnings. The
clinics unmarketability made it unnecessary to determine the
value of the clinics goodwill.24 But lack of goodwill does not
address and is irrelevant to the separate question of whether
there were profits from clinic activities other than Jaynes
efforts as a dermatologist during the separation period that
should be divided between the parties.25 Thus, because the court
relied on its resolution of the goodwill issue to avoid examining
the clinics excess profits, it erred.
Jayne relies on the language of the superior courts
written order, arguing that its statement that there may be
$20,000 in excess earnings and its failure to apportion any
earnings support the conclusion that there were no excess
profits. However, the courts oral decision and an exchange
between the court and Blantons counsel support Blantons argument
that the court did find there to be some excess profits. But the
court then declined to consider the source of this profit or its
value based on its conclusion, which was unrelated to the excess
profits issue, that the practice lacked marketable goodwill.26
Because the court acknowledged that some excess profits
existed, but then failed to identify the source of these profits
or quantify their value, we reverse its decision to treat excess
profits from the clinic as Jaynes separate property. On remand,
the court should determine what portion of the clinics post-
separation income involved excess profits stemming from clinic
activities above and beyond Jaynes work as a dermatologist and
then classify this sum as marital property.
D. The Superior Court Did Not Err in Refusing To Give
Jayne a Credit for the Capital Gains Taxes and Selling
Costs of the Hawaii Property.
Jayne argues that the superior court erred in refusing
to give her a credit for costs and capital gains taxes associated
with selling the Hawaii property. In Oberhansly v. Oberhansly,27
we held that trial courts are required to consider the tax
consequences of property division where there is proof of an
immediate and specific tax liability, but cautioned that [a]t the
same time, the court is not required to speculate on or to
consider tax consequences in the absence of proof that a taxable
event will occur in connection with the division of property.28
However, in Dodson v. Dodson29 we allowed trial courts to consider
tax liabilities regardless of whether the liabilities were
immediate and specific, recognizing that consideration of
possible tax consequences is within the trial courts discretion
when distributing property.30 Jayne maintains that the court
abused its discretion by refusing to grant her a credit for the
taxes and sale costs associated with selling the Hawaii property,
arguing that Dodson overruled Oberhansly and requires a credit
even where a sale is not immediate and regardless of why or when
[a party] chooses to sell the property. However, Jayne misreads
Dodson. While Dodson allows the superior court to consider tax
consequences to reach an equitable outcome, it does not mandate
the credit, and Oberhansly requires the credit only where the tax
effects are specific and immediate. Because the court did not
require Jayne to sell the property, the tax effects were not
specific and immediate, and the court did not abuse its
discretion in denying Jayne a credit for possible tax effects and
costs resulting from a sale.
We have also required courts to consider sales costs
where the division of property is premised on an economically
disadvantaged party being forced to sell a house.31 Where a court
order or external conditions force a party to sell, the court
must grant the party necessary costs because the courts failure
to make provision for the costs of repairs and sale of the real
property awarded . . . defeat[s] its stated goal of awarding [an
economically disadvantaged party] the greater share of the
marital estate.32 However, Jaynes financial circumstances do not
require that she sell the Hawaii property. She could not in any
sense be characterized as economically disadvantaged. In
addition, the court specifically allowed her eighteen months to
refinance the property. Because the sale is not inevitable, we
hold that the trial court did not abuse its discretion by
refusing to grant her the costs of selling the property.
E. The Superior Courts Finding that the Loans from Jaynes
Parents Were Not Legally Enforceable Is Not Clearly
Erroneous.
Jayne disputes the trial courts finding that the loans
from her parents were not legally enforceable marital
liabilities. Blanton responds that the court had sufficient
reason to doubt that they were bona fide debts, and thus that it
did not err in excluding them as marital debts.
The evidence supporting the validity of the loans is
equivocal. Factors such as Jaynes repayment of the fishing boat
loan, her sisters repayment of a similar loan, and the testimony
of Jayne and her father that they intended that the loans be
repaid support a finding that the loans were valid debts. But
several factors cut against the validity of the loans, including
Blantons failure to sign the 1996 notes, his testimony that he
did not regard the loans as legal debts, and Jaynes fathers
testimony that he never demanded payment and never received nor
asked for interest on the loans even though the demand notes
state an interest rate. This failure to demand payment or
interest on the loans is particularly probative given that it
likely renders at least the 1990 loans unenforceable; under
Alaska law, failure to demand payment, coupled with no payments
on the loan principal or interest for more than ten years,
triggers the statute of limitations.33 The trial court is the
factfinder, and given the evidence in the record supporting its
decision, we cannot say that its finding that the loans were not
marital debts was clearly erroneous.34
F. The Superior Courts Valuation of the Leah Maya Is Not
Clearly Erroneous.
Blanton argues that the court erred in valuing the Leah
Maya at $195,000. Blantons pre-trial property spreadsheet listed
the vessels value at $195,000, he testified that the vessel was
worth $200,000, and he and his expert, Larry Westfall, testified
that it had a fair market value of $195,000. However, Blanton
maintains that even though the court based its valuation on his
experts testimony, the court erred in relying on either his or
Westfalls opinions because he is a layperson and Westfall
qualified his opinion.35 This argument is unpersuasive. Having
presented substantial evidence on the point, Blanton now will not
be heard to argue that the trial court erred in accepting his
evidence.36
Because Blanton was personally familiar with the vessel
and Westfall was knowledgeable about the overall market for such
vessels, and because both reached a similar conclusion, the
superior court did not commit clear error by relying on their
testimony. Moreover, to the extent that the testimony was
deficient, Blanton must bear the consequences because parties
seeking to establish an items value must shoulder the burden of
producing supporting evidence.37 Blanton acknowledges that he
bore the burden for creating an evidentiary record on this issue,
but argues that his failure to offer better evidence should be
excused because he was not put on notice that the vessels value
would be an issue at trial. He also maintains that because
Jaynes original trial brief stated that the parties intended to
sell the Leah Maya and divide the proceeds, valued the ship at
$125,000, and stated that the court need not value the boat, she
should be estopped from disputing Blantons claim that the trial
courts finding was based on improper evidence. But a review of
the trial proceedings belies Blantons claims.
Jayne testified on May 22, the second day of trial,
that she did not intend to sell the boat and was unaware of any
plans to sell it with Blanton, and Blanton offered his testimony
about the boats value the next day. On May 23 the trial court
informed the parties that it was going to award the boat to one
of them, and on May 28, the fourth day of trial, Jayne submitted
an amended trial brief which stated that Dr. Fortson is agreeable
to allocating the Leah Maya to Mr. Fortson at whatever the court
decides is the appropriate value. Westfall testified later that
same day. This chronology belies Blantons argument that he
lacked notice about the need to present valuation evidence.
Jaynes testimony, as well as Judge Gleasons statement and Jaynes
amended trial brief, made it clear that the value of the boat
would be an issue at trial. Blanton was thus repeatedly put on
notice that the trial court was going to value the Leah Maya. If
he was concerned about the sufficiency of his evidence, he should
have requested a continuance so that he could secure a more
accurate valuation of the vessel. Because he chose to proceed
with trial, he cannot now claim that a finding based on his own
evidence is clearly erroneous.38 Accordingly, we conclude that
the superior court did not commit clear error in valuing the Leah
Maya.
G. The Superior Court Did Not Err in Allocating the
Capital Loss Carry Forward on a 60/40 Basis.
Jayne argues that the trial court abused its discretion
in failing to award her the entire amount of the capital loss
carry forward because she has the ability to immediately apply it
against capital gains taxes associated with selling the Hawaii
property.39 However, as Jayne concedes, Blanton could also use
the loss carry forward; $3,000 may be taken against ordinary
income each year. Although Jayne estimates that it may take
Blanton as long as eleven years to use his share of the loss
carry forward, he can still derive value from it, so long as he
has some taxable income. Thus, we conclude that the court did
not err in dividing the capital loss carry forward 60/40. Jayne
may be able to secure more immediate benefits from the capital
loss carry forward, but that does not mean that Blanton would not
also receive benefits from some share of the carry forward. The
court did not abuse its discretion in making its allocation of
the carry forward.
H. Because Jayne Has Failed To Show Prejudicial Error in
the Classification of Gifts, We Decline To Reach This
Issue.
At trial, Jayne claimed that various items of property
totaling $5,540 in value were gifts to her from Blanton, and were
therefore her separate property. Blanton testified that two of
the items, totaling $4,250 in value, were not gifts to her, but
were either purchased by both parties with the intent of
replacing an item in the household that had worn out (a Husqvarna
sewing machine valued at $3,500) or an item of clothing that
Jayne had purchased for herself (an otter parka valued at $750).
Blanton therefore argues that these items were marital property
that should be subject to division as to value. Judge Gleason
appears to have credited Blantons testimony.40 To the extent that
the property purchased with marital assets was not intended by
one spouse to be a gift to the other, it could not be found to be
separate property. Accordingly, at most only $1,290 in property
might arguably have been found to be Jaynes separate property.
This case involves a total marital estate valued at over $2.8
million. The gifts in dispute represent less than .05% of the
estate.
The process of classifying marital property in a
divorce is not an end in itself but simply serves to inform the
trial courts decision on the ultimate issue of what constitutes
an equitable distribution of the marital estate. Because the
trial court exercises broad discretion in making its final
equitable determination, a classification error will result in
prejudice only when it appears that the error probably had an
appreciable effect on the ultimate determination of equitable
distribution. Here, given the minor amount in controversy and
the size of the estate, any error in classifying the disputed
property would have at most a negligible effect on equitable
distribution. Therefore, Jayne has failed to carry her burden of
showing prejudicial error.
V. CONCLUSION
Because we hold that the trial court erred in declining
to consider the amount of any excess profits earned by Jaynes
clinic during the separation period, we REMAND for determination
of the size of this amount and its distribution. We AFFIRM the
trial courts decision in all other respects.
_______________________________
1 The investments exact value is unclear. Jaynes father
invested the settlement proceeds but did not keep any formal
records. He estimated they were worth something less than the
$245,000 remaining on the loan. Jayne testified that the
investments were worth roughly $240,000.
2 Martin v. Martin, 52 P.3d 724, 726 (Alaska 2002).
3 Id.
4 Id.
5 Id.
6 Schmitz v. Schmitz, 88 P.3d 1116, 1121 (Alaska 2004).
7 Martin, 53 P.3d at 726.
8 Alaska Statute 25.24.160(a)(4) states in relevant 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
marri
age
and
stati
on in
life
of
the
parti
es
durin
g the
marri
age;
(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.
These factors are commonly known as the Merrill factors, as
listed in Merrill v. Merrill, 368 P.2d 546, 547-48 n.4 (Alaska
1962).
9 Brown v. Brown, 947 P.2d 307, 313 (Alaska 1997)
(citation omitted); Wanberg v. Wanberg, 664 P.2d 568, 574-75
(Alaska 1983).
10 Dodson v. Dodson, 955 P.2d 902, 914 n.19 (Alaska 1998)
(quoting Dixon v. Dixon, 747 P.2d 1169, 1173 (Alaska 1987)).
11 AS 25.24.160(a)(4)(B), (D), & (G).
12 See Dixon, 747 P.2d at 1173 (property division should
consider transition needs of parties); cf. Hilliker v. Hilliker,
755 P.2d 1111, 1112 (Alaska 1988) (rehabilitation alimony
appropriate only where property division cannot meet reasonable
needs of party).
13 Jaynes expert predicted her future lifetime medical
expenses would range between $1.3 million and $3.3 million.
14 In addition to the medical practice and the medical
condominium, Blanton also classifies the Stuckagain Heights and
the Hawaii property as income producing because they can be sold
for more than their purchase price. The Hawaii property was
valued at $1.5 million, or $1,000,050 above its purchase price.
The Stuckagain Heights property saw minor appreciation, gaining
$3,000 in value since its purchase.
15 See Jones v. Jones, 942 P.2d 1133, 1139 (Alaska 1997)
(holding that courts may consider economic misconduct only when
it rises to level of unreasonable depletion of marital assets).
16 This first loan was used to benefit the marriage; the
parties used the funds to purchase the fishing boat used by
Blanton, the vessel generated marital income, and when they sold
the boat, the parties deposited the sale proceeds into a marital
account.
17 Green v. Green, 29 P.3d 854, 860 (Alaska 2001).
18 Id.; Chotiner v. Chotiner, 829 P.2d 829, 834-35 (Alaska
1992); cf. Ramsey v. Ramsey, 834 P.2d 807 (Alaska 1992) (no fixed
rule requiring credit for contributions from post-separation
property to maintain marital property).
19 See Green, 29 P.3d at 861; Johns v. Johns, 945 P.2d
1222, 1228 (Alaska 1997).
20 Jayne argues in the alternative that she should have
received a credit for any financing costs necessary for her to
obtain the cash. However, we have never held that financing
costs demand a credit, and indeed, implicit in the trial courts
decision is the fact that Jaynes income is sufficient to bear
refinancing costs without drawing on her share of the marital
estate. Thus, we reject Jaynes alternative argument.
21 Schmitz v. Schmitz, 88 P.3d 1116, 1125 (Alaska 2004)
(quoting Lewis v. Lewis, 785 P.2d 550, 558 (Alaska 1990)).
22 Schanck v. Schanck, 717 P.2d 1, 3 (Alaska 1986)
(property accumulated with income earned after a final separation
that is intended to, and does in fact, lead to a divorce is
excluded from the category of marital property, as long as it is
obtained without the invasion of any pre-separation marital
asset.).
23 This court has defined excess earnings as earnings
which remain after earnings on tangible assets and owners
compensation for services are deducted from total earnings.
Moffitt v. Moffitt, 813 P.2d 674, 676 n.3 (Alaska 1991).
24 See Moffitt v. Moffitt, 749 P.2d 343, 347 (Alaska 1988)
(If the trial court determines either that no good will exists or
that the good will is unmarketable, then no value for good will
should be considered in dividing the marital assets.).
25 Jayne suggests that Blanton cannot argue that any
profits resulted from activities other than her efforts because
he did not present sufficient evidence at trial. However,
Blanton questioned her about billing spreadsheets detailing
income based on the work of her employees and the trial court
admitted this evidence into the record.
26 The courts explanation of its calculations in the oral
hearing make it clear that the court found there to be some
excess profits. After discussing Strands figures and adopting
them subject to minor changes, the court noted that its analysis
result[ed] in excess income somewhere in the neighborhood of
$20,000 that could be attributable to the intangible components
of the business. Moreover, when Blantons counsel asked whether
the interim profits that Dr. Fortson earned from the business
during the separation period [were] not a marital asset, Judge
Gleason replied, I think thats implicit in my ruling . . . . [I]n
terms of her income . . . thats her income, and post-separation
earnings were not included in this division. In addition, the
superior court did not determine the source of these excess
profits, and simply noted that they were attributable to the
intangible component of the business.
27 798 P.2d 883 (Alaska 1990).
28 Id. at 887; accord Money v. Money, 852 P.2d 1158, 1163
(Alaska 1993).
29 955 P.2d 902 (Alaska 1998).
30 Id. at 909.
31 Beal v. Beal, 88 P.3d 104, 117 (Alaska 2004) (citing
Tollefson v. Tollefson, 981 P.2d 568, 571-72 (Alaska 1999)).
32 Tollefson, 981 P.2d at 572.
33 Alaska Statute 45.03.118(b) states in relevant part:
[I]f demand for payment is made to the maker
of a note payable on demand, an action to
enforce the obligation of a party to pay the
note must be commenced within six years after
the demand. If no demand for payment is made
to the maker, an action to enforce the note
is barred if neither principal nor interest
on the note has been paid for a continuous
period of 10 years.
34 See generally Charles C. Marvel, Annotation,
Unexplained Gratuitous Transfer of Property From One Relative to
Another As Raising Presumption of Gift, 94 A.L.R.3d 608 (1979)
(courts commonly view loans between family members with
suspicion, and thus apply rebuttable presumption that loans
between close relatives are not actual debts); 59 Am. Jur. 2d
Parent and Child 92 (2002) (same).
35 We have defined fair market value as [t]he amount at
which property would change hands, between a willing buyer and a
willing seller, neither being under compulsion to buy or sell and
both having reasonable knowledge of the relevant facts. Doyle v.
Doyle, 815 P.2d 366, 370 n.6 (Alaska 1991) (quoting Blacks Law
Dictionary 597 (6th ed. 1990)). Westfall noted that the $195,000
figure was not a reflection of what a buyer would pay, but was
instead a guess as to the value a surveyor would give to the
vessel. Blanton thus argues that Westfall did not actually
measure the vessels fair market value and that there was
insufficient evidence in the record to support the courts
valuation of the Leah Maya.
36 Cf. Koller v. Reft, 71 P.3d 800, 804 (Alaska 2003)
(trial court did not err in relying on income figures provided by
appellant).
37 See Brotherton v. Brotherton, 941 P.2d 1241, 1245
(Alaska 1997) ([This court has] previously held that it is the
duty of the parties, not the court, to ensure that all necessary
evidence is before the court in divorce proceedings and that a
party who fails to present sufficient evidence may not later
challenge the adequacy of the evidence on appeal.) (quoting Root
v. Root, 851 P.2d 67, 69 (Alaska 1993)); see also Hartland v.
Hartland, 777 P.2d 636, 640 (Alaska 1989) ([It] is the parties
obligation to present the court with sufficient evidence of the
value of the property. Reviewing courts cannot continue to
reverse and remand dissolution cases where the parties have had
an adequate opportunity to introduce evidence but have failed to
do so.) (quoting In re Marriage of Smith, 448 N.E.2d 545, 550
(Ill. App. 1983)).
38 Cf. Jenkins v. Handel, 10 P.3d 586, 592 (Alaska 2000)
(party waived claims regarding lack of notice about admitted
evidence where party found out evidence one day prior to hearing
and failed to request continuance or object during hearing).
39 Jayne calculates she would save roughly $31,170 if she
were allowed to apply Blantons forty percent share of the capital
loss carry forward towards capital gains taxes associated with
selling the Hawaii property.
40 I was talking more about the otter [parka] and the
various other items Mr. Fortson said he really didnt intend . . .
to be gifts, he meant those to be investments, and I gave him
credit for those various items.
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