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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Hopper v. Hopper (11/09/2007) sp-6192
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
| JAMES D. HOPPER, | ) | |
| ) Supreme Court Nos. S- 12411/12471 | ||
| Appellant, | ) (Consolidated | ) |
| ) | ||
| v. | ) Superior Court No. 3AN-02-10575 CI | |
| ) | ||
| LORETTA C. HOPPER, | ) | |
| ) | ||
| Appellee. | ) O P I N I O N | |
| ) | ||
) No. 6192 -
November 9, 2007
LORETTA C. HOPPER, )
)
Appellant, )
)
v. )
)
JAMES D. HOPPER, )
)
Appellee. )
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Peter A. Michalski, Judge.
Appearances: Robert C. Erwin, Palmier ~
Erwin, LLC, Anchorage, for James D. Hopper.
Ann DeArmond, Sterling & DeArmond, P.C.,
Wasilla, for Loretta C. Hopper.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Bryner,
Justice, not participating.]
FABE, Chief Justice.
I. INTRODUCTION
Before us are two appeals of a decision setting aside a
dissolution and dividing various pieces of property. The
parties, Loretta and James Hopper, originally entered into a
dissolution agreement which, among other things, awarded Loretta
money from the sale of the marital home and up to $1,200 a month
in spousal support, including a maximum of $600 for medical
prescriptions and $600 for maintenance. Approximately a year and
a half after the dissolution, Loretta filed an Alaska Civil Rule
60(b) motion to set aside the decree, arguing that she was
incapacitated at the time of the dissolution. The superior court
set aside the dissolution decree and ordered a new trial
concerning division of property and debt. Following a trial, the
superior court determined that four parcels of real property and
three bank accounts were marital property, despite their earlier
characterization during the dissolution as James's separate
property. The trial court then divided this property equally and
awarded Loretta prejudgment interest on the total amount owed to
her. James appeals the trial court's decision to grant the Rule
60(b) motion, as well as the trial court's classification of
various items of property and its award of attorney's fees and
prejudgment interest to Loretta. Loretta separately appeals the
trial court's ruling ending interim spousal support, and the two
appeals have been consolidated. Although we conclude that the
trial court erred in characterizing the Northrim bank account as
marital property and in awarding enhanced attorney's fees based
on a party's conduct outside of the litigation, we affirm the
trial court's decision in all other respects.
II. FACTS AND PROCEEDINGS
James and Loretta were married on October 17, 1994, and
they have no children together. The parties filed a petition for
dissolution of the marriage on September 3, 2002, proposing to
divide a variety of property owned by the parties. The
dissolution agreement provided that Loretta receive $65,000 from
the sale of the marital home and an additional cash payment of
$25,000. It also required that James pay Loretta $600 in spousal
support until December 1, 2005. The dissolution agreement
further provided that James assume certain debt, and perform a
variety of other tasks, including completion of the parties'
joint tax return for the year and payment of vehicle insurance
for Loretta's car for a year. The parties filed an amendment to
the agreement on November 7, 2002, extending the $600 spousal
support until December 1, 2007, and requiring James to pay for
Loretta's medical prescriptions, up to $600 per month, until
Loretta's death or until insurance became available to her.
Master Andrew M. Brown held the dissolution hearing on November
7, and Superior Court Judge Peter A. Michalski granted the
dissolution on November 12, 2002.
Approximately a year and a half later, on March 25,
2004, Loretta filed a motion under Rule 60(b) of the Alaska Rules
of Civil Procedure, seeking to set aside the dissolution decree.
Loretta claimed that at the time of the dissolution she was ill
and cognitively impaired due to her medical conditions and
medication she was taking. Loretta also argued that the
bargaining power of the parties was unequal, that James unfairly
received a much larger portion of the divorce settlement, and
that significant marital property had been mischaracterized as
separate property. Loretta also pointed out that while James's
attorney drafted the document, she did not have the benefit of
counsel before she signed the dissolution agreement. James
opposed the Rule 60(b) motion, arguing, among other things, that
Loretta was not cognitively impaired and that her claims were
time barred under Rule 60(b)'s one-year time limit.
Judge Michalski referred the case to Master Brown for a
hearing on whether the Rule 60(b) motion should be granted.
Master Brown heard evidence on the motion on April 1 and 15 of
2005 and found that "[t]he evidence is convincing that Ms. Hopper
did not have the mental ability in the summer of 2002 to
voluntarily and intelligently think about the terms of a petition
for dissolution of marriage." The master also determined that
the dissolution property division had omitted four marital
financial accounts. The master recommended that the property
division be set aside, with the exception of the monthly spousal
support and prescription payments. The master's report was
approved on June 1, 2005 by Judge Michalski, and a trial date was
set to determine a new property division.
Loretta moved for full attorney's fees under Rule 82 of
the Alaska Rules of Civil Procedure as the prevailing party on
her Rule 60(b) motion. At the same time, she requested $5,000 in
attorney's fees under AS 25.24.1401 so that she could pay for
representation during the property division trial. James
partially opposed the Rule 82 motion, arguing that while Rule 82
applies in this case, Loretta was entitled only to the thirty
percent provided by the rule and not full fees. James opposed the
request for attorney's fees to litigate the property division on
the basis that Loretta had adequate funds to pay for an attorney.
The issue was referred to Master Brown, who recommended that
James pay Loretta's full fees under Rule 82, or $15,679.96. The
master made this recommendation due to James's "bad faith
conduct" in taking advantage of Loretta's incapacity at the time
of the dissolution. The master also recommended that Loretta
receive the requested $5,000 in interim attorney's fees to
prepare for and conduct the property division trial because there
was no evidence that the financial status of the parties had
changed since the time of the master's report. James objected to
the master's recommendation concerning attorney's fees, arguing
that he had not acted in bad faith and that there was no evidence
that the parties' incomes were so disparate that an award of
interim attorney's fees was warranted. Judge Michalski approved
the master's recommendations on September 16, 2005.
The property trial was held before Judge Michalski on
March 23 and 24, 2006. At issue were four real properties and
various financial accounts. The parties stipulated during the
trial that Loretta received $126,362 in property in the
dissolution while James received $67,969. The trial court
determined that all of the real property at issue was marital
property because James bought and managed the properties during
the marriage. As for the financial accounts, while the trial
court recognized that James's First National Bank of Alaska
(FNBA) checking and savings accounts were opened before the
marriage, it nonetheless found that James had not met his burden
of "establishing adequate tracing" to exclude any of the accounts
from the marital estate. James also had a Northrim Bank account
into which his Social Security payments were deposited, but the
trial court held that because James did not demonstrate which
payments to that account were made during the marriage and which
were not, the entire account was marital. The trial court
determined that the Vanguard and Schwab accounts were premarital
accounts and therefore separate property. The court valued the
property at the time of the dissolution and concluded that the
total value of the marital assets at issue was $328,651. The
trial court then awarded half of that amount to Loretta and
interest on that amount from November 12, 2002, the date of the
original dissolution decree.
James filed a motion for reconsideration, arguing that
the order did not make any reference to the spousal support James
was paying Loretta, that the trial court had used the wrong
numbers for the mortgages on the property at the time of the
dissolution, and that the trial court had not taken into account
the settlement Loretta had received under the original
dissolution agreement. On reconsideration, the trial court
corrected the amounts of the mortgages owed on two of the lots at
the time of the dissolution, the value of which had been
stipulated to by the parties at trial. Although the trial court
adjusted its math calculations accordingly, it did not change any
other aspects of the decision.
On August 29, 2006, about two weeks after the trial
court's order on reconsideration, Loretta filed an expedited
motion because James had stopped paying the spousal support as of
July 1, 2006. James opposed the motion, arguing that the trial
court's division of property did not require James to pay spousal
support. The trial court's order stated: "Master Brown's
extension of the $600 per month spousal support beyond the
December 1, 2005 cutoff was an interim decision pending
resolution of the property division which had not been completed.
Now that the property division is complete the interim obligation
is complete."
James now appeals, challenging the trial court's
decision on the Rule 60(b) motion and the resulting property
division, along with the award of attorney's fees and prejudgment
interest. Loretta also appeals, challenging the superior court's
termination of interim spousal support.
III. STANDARD OF REVIEW
A trial court's grant of a Rule 60(b) motion is
reviewed for an abuse of discretion.2 We will find an abuse of
discretion only when we are "left with a definite and firm
conviction, after reviewing the whole record, that the trial
court erred in its ruling."3 Determining what property is
available for distribution in a divorce involves both factual and
legal issues.4 Legal decisions are reviewed de novo while
factual decisions will only be set aside if clearly erroneous.5
Awards of attorney's fees are reviewed for an abuse of
discretion.6 In a divorce, the trial court has broad discretion
in making an award of attorney's fees, and its award will only be
reversed if it is "arbitrary, capricious, or manifestly
unreasonable."7 Prejudgment interest in a divorce case is within
the broad discretion of the trial court and is reviewed for an
abuse of discretion.8 A spousal support award is reviewed for
abuse of discretion.9
IV. DISCUSSION
A. The Civil Rule 60(b) Motion
James argues that the Rule 60(b) motion was improperly
granted because it was not timely. He bases this argument on his
view that the motion should have been brought under subsections
(1)-(3) of the rule, all of which have a one-year time limit for
bringing claims. Loretta responds that her motion was timely and
properly granted under Rule 60(b)(6). Loretta also contends that
James's appeal of the trial court's grant of the Rule 60(b)
motion was untimely, having been filed nearly fifteen months
after the trial court's ruling on the motion.
1. James timely appealed the Rule 60(b) decision.
Under Alaska Rule of Appellate Procedure 204(a)(1), a
notice of appeal must be filed within thirty days of the
distribution of the judgment from which an appeal is taken. A
denial of a motion to set aside a judgment is a final judgment
for purposes of Appellate Rule 204(a)(1).10 But while a denial of
a Rule 60(b) motion effectively ends a case, the granting of a
Rule 60(b) motion will usually be followed by additional
proceedings. In this case, after Loretta's Rule 60(b) motion was
granted, the court conducted a new trial before issuing its
decision dividing the marital property. James properly waited
until after the property trial to appeal both the Rule 60(b)
ruling and the decision of the trial court regarding the property
division. James's appeal is therefore timely.
2. Loretta's Rule 60(b) motion was properly granted.
In her motion to set aside the dissolution, Loretta
argued that she was entitled to this relief under Rule 60(b)(6)
because of her cognitive impairment, lack of representation by
counsel, and her mistaken underlying assumption that all of the
property belonged to James and she therefore was not entitled to
any portion of it. James argues that Loretta filed her Rule
60(b) motion too late because her claims all fall within
subsections (1)-(3) of the rule, all of which require that claims
be brought within one year. Loretta argues that her motion was
properly brought under subsection (b)(6) and was therefore
timely.
Rule 60(b) provides, in relevant part:
On motion and upon such terms as are just,
the court may relieve a party or a party's
legal representative from a final judgment,
order, or proceeding for the following
reasons:
(1) mistake, inadvertence, surprise or
excusable neglect;
(2) newly discovered evidence which by
due diligence could not have been discovered
in time to move for a new trial under Rule
59(b);
(3) fraud (whether heretofore
denominated intrinsic or extrinsic),
misrepresentation, or other misconduct of an
adverse party;
(4) the judgment is void;
(5) the judgment has been satisfied,
released, or discharged, or a prior judgment
upon which it is based has been reversed or
otherwise vacated, or it is no longer
equitable that the judgment should have
prospective application; or
(6) any other reason justifying relief
from the operation of the judgment.
The motion shall be made within a
reasonable time, and for reasons (1), (2) and
(3) not more than one year after the date of
notice of the judgment or orders as defined
in Civil Rule 58.1(c).
James argues that Loretta's claims of cognitive
impairment, lack of representation by counsel, and mistaken
assumption regarding the property all fall within subsection
(1)'s provisions for mistake or excusable neglect. But we need
not address the questions of Loretta's cognitive impairment and
lack of representation, however, because the master also
concluded:
Mr. Hopper may have brought a significant
amount of business property into the
marriage. However, there is no evidence that
all the properties listed in the Petition -
or those not listed - that went to him were
pre-marital properties that were never
affected by either "transmutation" or "active
appreciation" during the marriage.
We have previously articulated four factors which
justify setting aside a property division under Rule 60(b)(6):
"(1) the fundamental, underlying assumption of the dissolution
agreement ha[s] been destroyed; (2) the parties' property
division was poorly thought out; (3) the property division was
reached without the benefit of counsel; and (4) the [property in
dispute] was the parties' principal asset."11 In Lacher v.
Lacher, we affirmed a decision to set aside a dissolution under
Rule 60(b)(6) on the ground that "the original property division
failed to dispose of substantial items of marital property."12
The dissolution agreement in this case left a significant amount
of real property out of the marital estate, despite the fact that
it was acquired during the marriage. In addition, the
dissolution agreement did not include James's FNBA, Northrim
Bank, Vanguard, or Schwab accounts. As the master noted in his
decision to recommend Rule 60(b) relief, James received property
with a total value of $1,455,080, while Loretta received only
$90,000 from the sale of one property, the marital home. Thus,
this case, like Lacher, involved a dissolution that omitted
"substantial items of marital property." And Lacher was decided
under Rule 60(b)(6), which is not subject to the one-year time
limit. As such, the decision of the trial court in this case to
set aside the dissolution agreement was not an abuse of
discretion.
B. Real Property
There are four pieces of real property at issue in this
case - two "Irey" lots and two "Fouts" lots. The trial court
determined that all four of the lots were marital and divided
them evenly between James and Loretta.
James and his first wife, Casey Hopper, had owned a
business that rented properties. As part of their divorce
agreement, they jointly owned and managed the four properties
together. James and Casey later entered into a post-decree
property settlement agreement under which James quitclaimed to
Casey all four lots - Irey Lots 20 and 21 and Fouts Lots 1 and 2
- on September 30, 1994.
At some point, Casey transferred her interest in Irey
Lot 20 to Kym Wolcott, her granddaughter. On October 16, 1997,
Wolcott transferred half of her interest in Irey Lot 20 to James,
but this was four years after his marriage to Loretta. Wolcott
then transferred her remaining half interest in the property to
James on April 9, 1999. James did not pay anything for the
remaining half interest. On the dissolution paperwork, James
indicated that Irey Lot 20 was valued at $145,000. At the time
of the dissolution, Irey Lot 20 had a remaining mortgage of
$45,010.38.
James lived in the house on Irey Lot 21 up until his
marriage to Loretta. After James moved out, he continued to
manage the property, including locating tenants, collecting rent,
keeping it in good repair, and paying the taxes. Casey sold Irey
Lot 21 back to James on August 13, 1998, again after his marriage
to Loretta. James paid Casey $55,000 for the property. At the
time of the dissolution, James estimated the property's worth at
$150,000, with a remaining mortgage of $40,557.81. James made
the payments on the property during the marriage using money from
the properties' rental income. Although James claimed not to
have used assets from the marital estate to make payments on the
properties, he worked as a property manager of the properties
throughout the marriage. James eventually sold Irey Lot 21 in
July of 2004 for $155,000.
James also managed the Fouts properties, even after
they were transferred to Casey. Fouts Lots 1 and 2 were
transferred from Casey to James on December 11, 1997. James paid
Casey $75,000 for the properties. The mortgage remaining on the
properties at the time of the dissolution was $64,905.88. James
made the payments from the rents collected from the tenants on
the properties. James sold the property during his marriage to
Loretta and received $89,506.22, which he placed into his FNBA
savings account.
James claimed that he did not put a lot of work into
managing the properties. He collected the rent, and if there was
a problem, he called someone to make repairs. James also
testified that Loretta did not actively participate in James's
business in any way. But the superior court reasoned that
because James repurchased the real property from his ex-wife
during his marriage to Loretta, paying for them through his work
as a property manager during the marriage, the properties were
part of the marital estate:
His [James's] familiarity with the properties
and the fact he once owned them has confused
him into the notion that they are "premarital
properties." They are marital properties due
to his purchases and management of them
during marriage. Because it is evident that
he was actively managing the properties
during the marriage they are "marital"
regardless of how "effortless" it may have
seemed to him. Clearly, he was doing
something his invalid prior wife was
incapable of doing. Thus, these were marital
properties and are to be included in the
marital estate for division.
The trial court valued the Irey lots based on the
values set out in the dissolution agreement and valued the Fouts
lots based on the amount that James earned from his sale of the
property during the marriage.
James argues that the properties are all separate
properties because there was never an intent to treat the
properties as marital, Loretta's name was never put on the title,
and Loretta did not assist in the maintenance and upkeep of the
properties. James also argues that there was no active
appreciation on the properties during the marriage because he did
not maintain the properties himself but contracted to have the
maintenance done by other individuals. He also argues that any
appreciation on the property during the marriage was the result
of the real estate market in Anchorage and not due to James's
efforts during the marriage. Loretta responds that rent earned
on the four parcels was attributable to James's labor and was
therefore marital in nature because it constituted income from
spousal efforts during the marriage.
All of James's activities during the marriage in
managing the property, finding renters, hiring people for
maintenance purposes, and paying the various bills and taxes,
generated rental income. Before James bought the properties back
from Casey, the income he received from the rents from the
properties was akin to a salary received for his property
management services. As we have recognized, "[a]ssets acquired
during marriage as compensation for marital services - most
commonly salaries earned by either spouse during marriage - are
considered marital assets."13
While "[p]roperty purchased during a marriage, yet paid
for out of one party's separate assets, may be considered a
premarital asset so long as the parties did not demonstrate an
intent to jointly hold the property,"14 here, James did not
purchase the property with separate assets. James received half
of the rental proceeds for his management of the property and
then used those rental proceeds to pay the mortgage after he
bought the properties back from Casey. Therefore, the trial
court properly determined the real property to be marital in
character.
C. Financial Accounts
1. FNBA savings and checking accounts
James opened his FNBA savings account on January 11,
1984. James deposited the proceeds from the sale of the Fouts
lots into this account. The trial court valued the savings
account at $19,313.
James opened his FNBA checking account on June 1, 1994.
The amount in the account at the time of the dissolution was
$6,858.00. James sometimes referred to this account as the
"business account," and he paid the bills from and deposited the
rent into that account.
Because the rental proceeds from the real property were
marital property, James was therefore depositing marital income
into what were otherwise his premarital bank accounts. In
Schmitz v. Schmitz, we reviewed a decision of the trial court
classifying various bank accounts as separate property.15 As bank
accounts are a secondary asset, the court must first identify the
asset from which it was derived and determine whether that asset
was marital or separate property.16 The party seeking to prove
that the bank account is separate property has the burden of
proof, and the bank account is presumed to be marital property if
it is not possible to determine whether the account was funded
through primarily separate or marital property.17 If it is known
that a bank account contains both separate and marital funds but
the amount from each source cannot be determined, then "[t]he
unknown amount contributed from the separate source transmutes by
commingling and becomes marital property."18
James did not make any attempt at trial to show what
money in his checking account was derived from rents from the
disputed four parcels of property and his other properties. The
record does not contain any information regarding the checking
account, other than James's testimony that he deposited rental
proceeds and paid property bills out of this account. James
testified that he deposited the proceeds from the sale of the
Fouts lots into his personal savings account. There was no
evidence as to what other money was placed into this account,
including whether any money from the rental proceeds of the Irey
and Fouts lots was placed into this account. James is the party
with the burden to establish that these accounts were not
marital, and he has not presented adequate evidence to support
such a finding. Thus, the trial court properly concluded that
both the checking and savings accounts were marital property.
2. Northrim Social Security account
James instructed that his Social Security payments be
directly deposited into his Northrim account, and he testified
that this was the only source of funds deposited into this
account. Loretta offered no evidence to challenge this
testimony. James receives $894 per month from Social Security.
A bank statement covering the period from November 1-29, 2002
showed a starting balance of $4,467.92 and an ending balance of
$4,961.92. In the trial court's final order regarding the
property division, the court stated:
The deposits to the Northrim Bank were
established to be Social Security payments
only. Only the Social Security payments
received during the marriage would have taken
on a marital quality. The plaintiff [James]
did not adequately show the change, if any in
the account, to exclude any of the balance.
Thus the account is marital.
The trial court therefore valued the Northrim account at $4,468,
the amount that was closest to the amount in the account at the
time of the dissolution.
We have recognized that "[t]he doctrine of federal
preemption prevents state courts from dividing [S]ocial
[S]ecurity benefits."19 Thus, even when the Social Security
benefits were deposited during the marriage, they remained
James's separate property.
James testified at trial that only his Social Security
benefits are paid into the Northrim account. The account summary
submitted as an exhibit at trial also shows only a deposit from
the "US TREASURY - SOC SEC." Once James established that the
account included only Social Security payments, the burden
shifted to Loretta to show that James had improperly mixed the
account with marital money, thereby turning the account into
marital property. As Loretta presented no evidence regarding any
payments into the account besides Social Security, she has not
met her burden. As James's Social Security benefits cannot be
divided, it was error to determine that the account was marital
property. The trial court's determination that this account was
marital is therefore reversed.
D. Attorney's Fees and Prejudgment Interest
1. Attorney's fees
There are two separate fee awards at issue in this
appeal. The first is the award of actual attorney's fees under
Rule 82 to Loretta in the amount of $15,679.96 for prevailing on
the Rule 60(b) motion. The second is the court's award of $5,000
to Loretta in interim fees in order to litigate the property and
debt distribution.
In his recommendation concerning attorney's fees,
Master Brown stated that James had taken advantage of Loretta's
mental incompetence and physical disabilities and used her son in
order to get her signature on a dissolution petition that was
"greatly and inequitably weighted" in James's favor. The master
found that James took advantage of his skills as a "successful
businessman" and Loretta's incapacity in formulating the
dissolution petition and concluded that James's actions amounted
to "bad faith conduct" under Rule 82(b)(3)(G). The master
therefore recommended that Loretta receive full actual reasonable
attorney's fees under Rule 82. The superior court approved this
recommendation.
We have previously held that Rule 82 can be used to
award attorney's fees to the prevailing party in a Rule 60(b)(6)
motion to modify a divorce decree and that the divorce exception
to Rule 82 is inapplicable to post-judgment modification and
enforcement motions.20 Thus, the only question is whether the
trial court abused its discretion in awarding Loretta enhanced
attorney's fees based on its finding that James had acted in bad
faith.
James argues that he did not act in bad faith "during
the course of the present proceedings" and that his actions
during the litigation did not meet the standard for bad faith or
vexatious conduct required for enhanced fees under Rule
82(b)(3)(G). (Emphasis omitted.) He also maintains that bad
faith conduct justifying an enhanced fee award must occur during
the litigation and not during the underlying transaction.
Loretta responds that James did act in bad faith because he did
not disclose major assets on the dissolution petition and used
Loretta's son to help prepare the petition and get Loretta to
sign it. Loretta also claims that James acted in bad faith in
litigating a "patently incorrect claim" that all the property was
his separate property.
The master's report found bad faith related to James's
actions surrounding the drafting of the dissolution agreement and
did not make any findings regarding any bad faith or vexatious
actions taken by James during the litigation itself. In Cole v.
Bartels, we noted that "the bad faith conduct warranting an
enhanced fee award under Rule 82(b)(3)(G) occurs during the
litigation, not during the underlying transaction that is the
subject of the litigation."21 As there were no findings that
James acted in bad faith during the litigation, but only during
the drafting of the underlying dissolution agreement, it was an
abuse of discretion to award enhanced attorney's fees based on a
finding of bad faith. Thus, the award of $15,679.96 in Rule 82
attorney's fees is reversed and remanded to the superior court.
When the master recommended that Loretta receive full
Rule 82 attorney's fees, he also recommended that Loretta receive
$5,000 in interim attorney's fees to litigate the remaining
property and debt issues. The master noted that there was no
evidence that the parties' relative financial situations were any
different than at the time of the dissolution. The master stated
that Loretta's gross annual income was only $22,020.78, including
the monthly spousal support and prescription payments she
received from James, while James's annual income was $124,879.86.
The master determined that due to the parties' vastly disparate
incomes and the fact that Loretta's financial situation was "the
fruit of an inequitable agreement," Loretta should be awarded
interim attorney's fees. Judge Michalski approved this
recommendation. We conclude that it was not an abuse of
discretion to award the attorney's fees based on the significant
difference in the parties' incomes, and we therefore affirm the
interim fee award.
2. Prejudgment interest
In the final property division order, the trial court
awarded Loretta $164,325.50 with prejudgment interest from the
date of the dissolution. James argues that it was error to award
Loretta prejudgment interest on the property division. James
contends that although a court may award prejudgment interest in
a divorce case, it must balance a number of factors which were
never taken into account by the superior court in this case.
Loretta responds that the award of prejudgment interest was well
within the discretion of the trial court because she was denied
use of the property award for a period of almost four years and
the award was therefore necessary to make her whole.
In Morris v. Morris, we recognized that a trial court
has broad discretion to award prejudgment interest in a divorce
case but that interest should not be awarded if it "would do an
injustice."22 As Loretta points out, she was denied the money and
any interest on the money for the four years between the
dissolution and the final property judgment. It is not apparent
that the award would work "an injustice" on James; it was
therefore not an abuse of discretion to award prejudgment
interest in this case.
E. Spousal Support
In the original dissolution agreement, James agreed to
pay Loretta $600 per month in spousal support until December 1,
2005. At the dissolution hearing, the parties filed an amendment
to the agreement, whereby the obligation of $600 per month in
spousal support was extended to December 1, 2007, and James
agreed to pay Loretta up to an additional $600 per month for
medical prescriptions for the rest of Loretta's life or until
government programs were available to cover the prescriptions.
In the master's report following the hearing on the
Rule 60(b) motion, the master stated:
It is therefore recommended that the division
of property and debts under the November 12,
2002 Decree of Dissolution of Marriage be
vacated, except that Mr. Hopper be required
to continue paying the $600.00 per month
spousal maintenance and up to $600.00 per
month for Ms. Hopper's medical prescriptions,
as she needs these payments to continue and
he can afford to pay them. (Emphasis
omitted.)
Judge Michalski approved the master's report and for the interim
ordered: "The division of property and debts under the November
12, 2002 Decree of Dissolution of Marriage is vacated, except
that Mr. Hopper shall continue to pay Ms. Hopper $600.00 per
month in spousal maintenance and up to $600.00 per month for her
medical prescriptions."
But the final order on the property division dated June
14, 2006 did not contain any mention of the spousal support.
James filed for reconsideration of the final property division
order, arguing that the order did not refer "to either the
continuation, termination or enforcement" of the spousal support.
However, the superior court's order on reconsideration did not
mention the spousal support payments.
On August 29, 2006, about two weeks after the court's
order on reconsideration, Loretta filed an expedited motion to
show cause because James had stopped paying spousal support.23
James opposed the motion, arguing that the final decision of the
trial court regarding marital property did not require him to pay
spousal support. The court's order regarding spousal support
stated: "Master Brown's extension of the $600 per month spousal
support beyond the December 1, 2005 cutoff was an interim
decision pending resolution of the property division which had
not been completed. Now that the property division is complete
the interim obligation is complete."
Loretta argues that when the superior court vacated the
original dissolution, it vacated the property and debt division,
but did not vacate the part of the dissolution agreement
requiring the spousal support payments. Loretta also notes that
the trial concerned the "division of property and debts" and did
not mention spousal support. Loretta states that spousal support
was not contested during trial, although James did briefly
testify about Loretta qualifying for Medicare. In her appeal,
Loretta argues that the original spousal support order was never
rescinded and therefore remained in effect even after the court's
final property decision.
But as James notes, the trial court's act in vacating
the dissolution decree and its property division in fact vacated
the entire agreement, and not just certain parts. James is
correct in pointing out that the final property division did not
require the spousal support payments to continue, and the trial
court therefore properly ordered that they were not required.
James maintains that due to the amount of property Loretta
received in the revised property division, there is no equitable
reason to require spousal support to continue.
As we have stated in the past, the trial court should
attempt "to resolve the financial concerns arising from a divorce
by means of the property division," but spousal support may be
awarded if it is "just and necessary."24 In this case, the
superior court divided the property between the parties and
determined it was not necessary for James to pay Loretta spousal
support after she received her portion of the property division.
And it was Loretta who moved to set aside the dissolution
agreement under Rule 60(b). Once that motion was granted, the
entire dissolution agreement and property division was set aside,
not just pieces of it. While the trial court chose to award
interim spousal support to Loretta until the final property
division was concluded, it was not an abuse of discretion for the
trial court to determine that Loretta was no longer entitled to
spousal support following the property division.
V. CONCLUSION
The superior court's determination that the Northrim
bank account containing Social Security payments was marital
property was incorrect, and therefore the trial court is REVERSED
on that issue. The award of enhanced attorney's fees under Rule
82 is also REVERSED because it was based on conduct falling
outside the litigation. All other decisions by the trial court
are AFFIRMED, and the case is REMANDED for proceedings consistent
with this opinion.
_______________________________
1 AS 25.24.140 provides, in relevant part:
(a) During the pendency of the
action, a spouse may, upon application and in
appropriate circumstances, be awarded
expenses, including
(1) attorney fees and costs
that reasonably approximate the actual fees
and costs required to prosecute or defend the
action; in applying this paragraph, the court
shall take appropriate steps to ensure that
the award of attorney fees does not
contribute to an unnecessary escalation in
the litigation . . . .
2 McGee v. McGee, 974 P.2d 983, 987 (Alaska 1999).
3 Id. (quoting Buster v. Gale, 866 P.2d 837, 841 n.9
(Alaska 1994)).
4 McGee, 974 P.2d at 987.
5 Id.
6 Id. at 987-88.
7 Schmitz v. Schmitz, 88 P.3d 1116, 1122 (Alaska 2004).
8 Ogard v. Ogard, 808 P.2d 815, 817 (Alaska 1991).
9 Silvan v. Alcina, 105 P.3d 117, 120 (Alaska 2005).
10 Calhoun v. Greening, 636 P.2d 69, 72 n.4 (Alaska 1981).
11 Lacher v. Lacher, 993 P.2d 413, 419 (Alaska 1999)
(quoting Schofield v. Schofield, 777 P.2d 197, 202 (Alaska
1989)).
12 Lacher, 993 P.2d at 419-20.
13 Schmitz v. Schmitz, 88 P.3d 1116, 1124 (Alaska 2004)
(internal quotations omitted).
14 Lowdermilk v. Lowdermilk, 825 P.2d 874, 878 (Alaska
1992).
15 88 P.3d at 1127.
16 Id. at 1127-28.
17 Id. at 1128.
18 Id. at 1128-29 (quoting Brett R. Turner, Equitable
Distribution of Property 5.23, at 268 (2d ed. 1994)).
19 Mann v. Mann, 778 P.2d 590, 591 (Alaska 1989).
20 McGee v. McGee, 974 P.2d 983, 992 (Alaska 1999).
21 4 P.3d 956, 961 n.24 (Alaska 2000); see also Alderman
v. Iditarod Props., Inc., 104 P.3d 136, 145 (Alaska 2004)
(stating that "conduct undertaken in `bad faith' for the purposes
of Rule 82 must relate to conduct during the litigation, and not
to actions taken during the underlying transaction").
22 724 P.2d 527, 530 (Alaska 1986) (internal quotations
omitted).
23 Loretta's motion to show cause does not indicate
whether James had stopped paying just the $600 in spousal support
or whether he had also stopped making the medical prescription
payments. It is unclear from the briefing of the parties whether
James is still paying Loretta's prescription costs.
24 Fernau v. Rowdon, 42 P.3d 1047, 1058 (Alaska 2002).
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