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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Day v. Williams (9/7/2012) sp-6704
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, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
CAROLYN VIEVE DAY, )
) Supreme Court No. S-13423/13433
Appellant and )
Cross-Appellee, )
) Superior Court No. 1JU-07-00916 CI
v. )
) O P I N I O N
CHARLIE T. WILLIAMS, )
) No. 6704 - September 7, 2012
Appellee and )
Cross-Appellant. )
)
Appeal from the Superior Court of the State of Alaska, First
Judicial District, Juneau, Patricia A. Collins, Judge.
Appearances: Michael Gershel, Anchorage, for Appellant.
James W. McGowan, Sitka, for Appellee.
Before: Carpeneti, Chief Justice, Fabe, Winfree, and
Stowers, Justices. [Christen, Justice, not participating.]
STOWERS, Justice.
I. INTRODUCTION
In this appeal we review the superior court's valuation and distribution of
marital property in the divorce of Carolyn Vieve Day and Charlie T. Williams. Day
appeals on three grounds: first, she contends that the superior court erred when it found
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her to be employable; second, she argues that the facts and equities of this case do not
support a 50-50 property division; and third, she argues that the superior court should not
have included in the marital estate funds that had already been spent by the date of trial.
We remand for additional findings on the superior court's 50-50 property division
because the court did not make sufficient findings to explain why an equal distribution
was justified in the presence of facts that appear to favor a greater distribution to Day.
Because we are remanding for further findings as discussed below, the court will have
the opportunity to reexamine its findings on Day's employability. Finally, we conclude
that it was error for the superior court to include in the marital estate funds that had
already been spent by the time of trial.
Williams cross-appeals on three grounds: first, that the superior court erred
when it revalued the parties' duplex after divorce; second, that the court should not have
applied the active appreciation theory when valuing the land on which the parties' paint
business was situated; and third, that the court should not have awarded attorney's fees
to Day. We agree with Williams that revaluing the duplex would have been improper,
but because it is not clear whether the superior court actually revalued the duplex, we
vacate the order to sell the duplex and remand for reconsideration and clarification. We
also hold that it was error for the superior court to award Day the duplex without
considering whether she would be able to afford to keep or sell the property. As to
Williams's remaining two claims, we affirm the superior court's decisions.
II. FACTS AND PROCEEDINGS
A. Facts
Day and Williams were married in May 1993 and permanently separated
in April 2007. They have no children.
Prior to marriage the couple signed a prenuptial agreement. The prenuptial
agreement stated that in the event of divorce, Williams would receive $250,000, Day
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would receive $15,000, and all other property would be divided equally. The agreement
also provided that it would last for only ten years, but if "either party has filed for
divorce or dissolution on or before ten years from the date of the execution of this
agreement, it shall continue in effect." Day filed for divorce in 2002, less than ten years
after the agreement was made, but quickly dismissed the action.
During the marriage, Williams's primary source of income was Valley Paint
Center, a business in which he was a majority partner at the time of the marriage and of
which he became the sole owner during the marriage. In the years immediately prior to
the couple's separation, the business consistently had annual sales receipts between $1.6
and $1.7 million, and was largely responsible for the couple having adjusted gross
incomes ranging between $183,520 and $287,963 from 2004-2006.
Although she has an associate's degree in health information management,
Day's primary source of income during the marriage was from working in retail: she
worked at General Nutrition Center (GNC) for five years and worked for short periods
of time at other retail establishments. In 2007, the year the couple separated, Day's
adjusted gross income was $22,929 and Williams's was $203,802.
Day began to suffer from medical problems towards the end of the
marriage. In 2007 she underwent successful back surgery to correct herniated discs and
osteophytes (bone spurs). She also suffered from serious eye problems and underwent
a corneal transplant in her right eye prior to trial in 2008. Dr. Harry Geggel, who
performed the transplant, testified at trial that "normally it takes up to a year and a half
after [a corneal transplant] . . . for patients to get some visual usefulness out of the eye."
He testified that Day will likely need a corneal transplant in her left eye once the right
fully heals.
After the parties separated in 2007, Day remained in the couple's duplex
for several months, moving out in September 2007. She then lived with her mother
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before moving into her own apartment, from which public transportation was not
accessible. Day withdrew over $30,000 from a joint account after separation to pay for
living expenses, and also withdrew money from the couple's health savings account to
pay for medical expenses.
B. Proceedings
In October 2007 Day filed for divorce, asking the superior court to divide
the parties' property "in a just and equitable manner." The superior court conducted a
bench trial in September 2008, and issued its findings and conclusions and a divorce
decree in October 2008.
The court found that because Day initially "filed for divorce prior to the 10-
year marriage mark, the prenuptial agreement continued according to [its] terms. . . ."
But the court concluded:
[T]he equities of this case do not warrant strict application of
the prenuptial agreement . . . . The agreement was . . . made
at a time when both parties agreed that they were each of
sound health, approximately the same age and had sufficient
job skills to support themselves. While [this was] likely true
at the time of marriage, [Day's] current vision issues, which
will continue for approximately 18 months to two years, were
not foreseen when the agreement was made. Under these
circumstances, the agreement is accorded some probative
value as to intent but will not be strictly enforced in this
[1]
case.
The superior court found that when the couple first married, the Valley
Paint Center business was worth $32,400, the real property on which the business was
located was worth $118,000, and the total value of the asset was $151,000. The court
found that at the time of trial the business was worth $170,087, the real property was
1 Neither party appeals this ruling.
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worth $180,245, and the total value of the asset was $350,332. Applying "active
appreciation" analysis, the superior court concluded that $151,000 of the total value of
the asset was Williams's separate property and that $199,332, the amount by which the
value of the asset increased during the marriage, was marital property.
The court found that most of the parties' other assets were marital property
and it divided them equally between Day and Williams. Among the assets Day received
were the parties' duplex and the money she withdrew from the joint account after
separation. The court stated "that a 50-50 distribution of the marital estate . . . [was] fair
given all of the circumstances of this case."
The court also determined that Day was not entitled to spousal support,
noting that Day had "been living well beyond her reasonable financial needs and
resources" and had "not meaningfully pursue[d] reasonable employment." The court
found that "[w]hile [Day's] eye condition will limit her job opportunities, this court is
not satisfied that she is unemployable," citing the fact that "she is well-educated and
articulate." The court found that Day suffered from medical problems, but noted that she
was able to go on a recent scuba diving trip and stated that it was "likely that the stress
of the divorce [had] exacerbated [her] health problems."
Day filed a motion for reconsideration alleging several errors in the superior
court's findings and conclusions. Williams then filed his own motion for
reconsideration. On November 24 the superior court granted both motions in part. It
also awarded Day one-half of her attorney's fees, which amounted to $10,406, noting
that "Day's current income-producing capabilities are significantly less than [those] of
. . . Williams." In January 2009, the superior court issued its order upon reconsideration
of the case. In it the court ordered, among other things, that Day attempt to refinance the
duplex so that she was the sole owner, but noted that "the realities of current economic
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conditions suggest that refinancing of the home into . . . Day's sole ownership may be
problematic." The court ordered Day to sell the duplex if refinancing was not possible.
Day appeals the finding that she was employable, the equal division of the
marital estate, and the inclusion of the funds she spent after separation in her share of the
marital estate. Williams cross-appeals, challenging the terms of the order of the
conditional sale of the duplex, the use of active appreciation analysis on the real estate
portion of the Valley Paint Center asset, and the award of attorney's fees.
III. STANDARD OF REVIEW
We review the superior court's finding that Day was employable for clear
error. Factual findings are upheld unless they are clearly erroneous,2 and we grant
"particular deference to the trial court's factual findings when they are based primarily
on oral testimony, because the trial court, not this court, performs the function of judging
the credibility of witnesses and weighing conflicting evidence."3
We review the superior court's property division for abuse of discretion
because "[t]rial courts have broad discretion in fashioning property divisions . . . . [and]
we reverse such awards only if they are clearly unjust."4 While trial courts have broad
discretion in matters of property division, "[a]n order of recapture is . . . not justified
without findings of fact that the assets in question were actually wasted, dissipated, or
converted to non-marital form. These findings cannot be merely conclusory, but must
2 In re Protective Proceedings of W.A. , 193 P.3d 743, 748 (Alaska 2008).
3 Millette v. Millette , 177 P.3d 258, 261 (Alaska 2008) (quoting Ebertz v.
Ebertz , 113 P.3d 643, 646 (Alaska 2005)) (internal quotation marks omitted).
4 Barnett v. Barnett , 238 P.3d 594, 597 (Alaska 2010) (internal citations and
quotation marks omitted).
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be based on evidence."5 A superior court errs when it recaptures property without
making specific findings of fact as to waste or dissipation.6
We review the superior court's decision to reconsider and revalue the
duplex for abuse of discretion.7 Whether active appreciation is the appropriate legal
theory to use is reviewed de novo.8 The valuation of the property itself is a factual
determination and is reviewed for clear error.9 A finding is clearly erroneous if we are
"left with a definite and firm conviction based on the entire record that a mistake has
been made."10
Finally, we review the superior court's award of attorney's fees for abuse
of discretion.11
IV. DISCUSSION
A. We Vacate And Remand The Property Division Because We Cannot
Determine The Basis For The Superior Court's Decision.
Alaska Statute 25.24.160(a)(4) provides that "division of property must
fairly allocate the economic effect of divorce . . . based on consideration of the following
factors":
5 Ethelbah v. Walker , 225 P.3d 1082, 1090-91 (Alaska 2009) (internal
citations omitted).
6 Id .
7 See Barnett, 238 P.3d at 597 (internal citations omitted).
8 See Schmitz v. Schmitz, 88 P.3d 1116, 1122 (Alaska 2004).
9 Id .
10 Farmer v. Farmer , 230 P.3d 689, 693 (Alaska 2010) (quoting Casey v.
Semco Energy, Inc., 92 P.3d 379, 382 (Alaska 2004)).
11 Wagner v. Wagner, 183 P.3d 1265, 1266 (Alaska 2008).
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(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.[12]
We have explained that, in general, "[t]he law presumes that an equal
division of property is equitable"13 and "the party seeking deviation from the norm[]
12 See also Merrill v. Merrill , 368 P.2d 546, 547-48 n.4 (Alaska 1962) (listing
similar factors the court must consider in dividing marital property).
13 Miller v. Miller , 105 P.3d 1136, 1140 (Alaska 2005) (citing Lundquist v.
Lundquist , 923 P.2d 42, 53 (Alaska 1996)); see also Heustess v. Kelley-Heustess, 158
P.3d 827, 833 (Alaska 2007) ("When dividing a marital estate, 'the trial court generally
should begin with the presumption that an equal division of marital property is most
equitable.' " (quoting Fortson v. Fortson , 131 P.3d 451, 456 (Alaska 2006))).
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bears the burden of showing that the property division is clearly unjust."14 But we have
also stated 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 to aid him or
her in this transition."15 We have explained that one consideration in reviewing marital
property divisions is "whether the property division was adequate to meet the parties'
needs while they made the transition into post-marital life."16
The superior court determined "that a 50-50 distribution of the marital
estate . . . is fair given all of the circumstances of this case." The court explained that the
equal division would meet Day's needs in her transition into post-marital life, noting that
she "will receive a net estate value of over $400,000." But the court made no findings
under AS 25.24.160(a)(4) or Merrill , nor did it otherwise explain its reasoning in
dividing the marital estate equally.
Day argues that the superior court's decision to divide the marital estate
equally was an abuse of discretion, contending that "[e]ach of the factors applicable to
this case supports an unequal division of the marital estate." Day's arguments are largely
based on her health problems and lesser earning capacity: she argues that (1) the age and
health of the parties17 supports an unequal division, citing her eye and back problems;
14 Brandal v. Shangin , 36 P.3d 1188, 1194 (Alaska 2001) (citing Julsen v.
Julsen , 741 P.2d 642, 645 (Alaska 1987)).
15 Tollefsen v. Tollefsen, 981 P.2d 568, 570 (Alaska 1999) (alteration in
original) (quoting Dixon v. Dixon , 747 P.2d 1169, 1173 (Alaska 1987)).
16 Fortson , 131 P.3d at 457 (citing Dixon , 747 P.2d at 1173).
17 AS 25.24.160(a)(4)(B).
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(2) the relative earning capacities and financial conditions of the parties,18 including the
availability of health care, supports an unequal division, citing Williams's superior
19
earning capacity; (3) the time and manner of acquisition of the property supports an
unequal division, citing Williams's greater pre-marital assets; (4) the income-producing
20
capacity of the property and the value of the property at the time of division supports
an unequal division, because "Williams received all of the income producing property";
and (5) the need for spousal support supports an unequal division, again citing her health
problems and inferior earning capacity. Williams counters that the superior court's equal
division of the marital estate should be affirmed because it was a decision within the
court's broad discretion.
We are unable to determine how the superior court reached its conclusion
that an equal division was just and equitable given the facts and circumstances of the
case and the court's rather cursory explanation. Looking at the statutory factors listed
above, we observe that the duration of the marriage was approximately 14 years, a
substantial length of time. Williams, who was 48 years of age at the time of separation,
had no evident health issues while Day, who was 44 at separation, had comparatively
worse health due especially to her recent and continuing eye problems. Williams had a
much higher earning capacity than Day, even when Day was employed in retail and
before she experienced her eye problems. In finding that spousal support was not
warranted, the superior court acknowledged that Day's "income has been and will be
18 AS 25.24.160(a)(4)(C).
19 AS 25.24.160(a)(4)(H).
20 AS 25.24.160(a)(4)(I).
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dramatically reduced from that enjoyed during marriage," demonstrating that it
understood that Day's income would be less than Williams's going forward.21
The superior court did not make a specific finding regarding the parties'
health insurance, although the issue was addressed at trial. The presence or absence of
health insurance is particularly relevant here, given Day's substantial health care
concerns and the superior court's acknowledgment that it was concerned Day may not
be able to afford to keep the duplex. Day testified that she pays nearly $500 a month for
private health insurance. At trial, Day was recovering from corneal surgery on one eye
and she expected to have a similar surgery on the other. Thus, it was apparent that she
had incurred and would likely continue to incur significant health care expenses. The
superior court did not make any specific findings as to either party's health care expenses
and health insurance costs, or the impact of their health care costs on their financial
conditions. Alaska Statute 25.24.160(a)(4)(D) specifies that cost of health insurance is
an element of the parties' financial condition, and the superior court therefore should
have made such findings under the circumstances of this case.
21 We note that we are troubled by the superior court's findings with respect
to Day's employability. In addition to the court's observation that Day's income had
been and will be dramatically reduced, when considering Day's employability, the court
found that Day's corneal transplant "has limited and will limit [Day's] vision for
approximately one year [to] 18 months, after which a second corneal transplant on her
other eye will occur, with another year [to] 18 months with limited vision." The court
also acknowledged that Day "does not currently drive due to her eye condition." The
court nevertheless determined that Day was not "making meaningful efforts to secure
employment." Because the superior court did not explore the degree to which Day's
employment opportunities would be affected by her serious vision impairment after
corneal surgery, we invite the court to reevaluate this issue on remand. Because we are
remanding this case on other issues and because facts may have changed since the
superior court last considered this case, the superior court in its discretion may wish to
take additional evidence as it reexamines Day's employability and other factors on
remand.
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As noted, the superior court acknowledged that Day's "income has been
and will be dramatically reduced from that enjoyed during marriage," but this comment
was made in the context of determining spousal support, which the court declined to
award, and not in the context of property division. With respect to the income-producing
capacity of the properties and their values at the time of division, it was clear that
Williams's paint shop business had a history of substantial income production. The court
observed in its order on the motions for reconsideration that Day's duplex was not then
making money, "and that 'the unprecedented economic downturn that has occurred since
trial . . . has likely impacted the value of virtually all of the parties' assets.' " But the
court did not make any finding regarding how these and other factors affected the
equitable distribution of the marital property.
It may be that the court simply relied on that general presumption that an
equal distribution of property is fair and equitable; but the presumption must be balanced
against countervailing considerations, such as fairly allocating the economic effect of
divorce and ensuring the property division is adequate to meet both parties' needs while
transitioning into post-marital life.22 Unfortunately, we cannot determine how the court
reached its decision. When even a superficial examination and balancing of the statutory
factors appear to weigh in favor of the spouse who earns substantially less than the other
spouse, a conclusory statement that "a 50-50 distribution of the marital estate is fair
given all of the circumstances" does not provide sufficient information to permit
meaningful review.23
22 See Fortson v. Fortson, 131 P.3d 451, 457 (Alaska 2006).
23 Cf. Dragseth v. Dragseth, 210 P.3d 1206, 1208, 1210 (Alaska 2009)
(noting, with respect to child custody determinations, that "[t]he court's findings should
give us a clear indication of the factors which the superior court considered important in
(continued...)
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We therefore vacate the superior court's property distribution and remand
for additional findings. If the court in its discretion determines that it is necessary,
additional evidence may be taken.
B. It Was Error To Distribute Money That Had Been Spent Before Trial.
Between the date of separation and the date of trial, Day withdrew $33,548
from a joint checking account and used the money for her living expenses. Also in this
time period, Williams paid $7,893 for some of Day's expenses. In its property
distribution, the superior court distributed $33,548 to Day as part of her share of the
marital estate and credited Williams with $7,893.
Day argues that the superior court erred by including money spent before
trial in the final property division. She argues the money "should have been treated . . .
as interim spousal support" and not offset against the final property division. She also
argues that even if the superior court was permitted to offset the money against the final
division, it was required to value the funds "as close as possible to the time of trial." In
other words, Day argues that the "value" of those funds at the time of the trial, and
consequently the amount that should have been offset against the final division, if
anything, was zero, because the funds had already been spent.
Williams argues that it was appropriate for the superior court to offset the
money against the final property division because it was not court-ordered interim
support, noting that Day never requested an interim support order. He also argues that
"a rule that interim expenditures . . . should not count against the ultimate distribution
of the marital estate" would encourage parties to "go[] on spending sprees" and "engage
in irresponsible interim spending."
23(...continued)
exercising its discretion or allow us to glean from the record what considerations were
involved") (internal quotation marks and citations omitted).
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Day cites cases that support the proposition that interim support should not
be offset against a final property division.24 But she cites no authority for the notion that
unilateral expenditures of marital funds, where the party does not request an interim
support order, should be treated as interim support. The superior court did not abuse its
discretion by not treating the funds as interim support.
It was error, however, for the superior court to value the funds as of the date
of separation and recapture them for purposes of including them in its final property
distribution absent specific findings that Day wasted or otherwise improperly used the
funds. We have "consistently held . . . that property should be valued as close as
possible to the date of trial."25 We have noted that "[a] valuation date should be chosen
which will provide the most current and accurate information possible and which avoids
inequitable results,"26 but "[d]issipation of marital assets justifies a valuation at the time
of separation."27 We have also held, however, that the "recapture" of an asset, by valuing
24 See Korn v. Korn, 46 P.3d 1021, 1022-23 (Alaska 2002); Jones v. Jones ,
835 P.2d 1173, 1177 (Alaska 1992).
25 Miller v. Miller , 105 P.3d 1136, 1143 (Alaska 2005) (citing Leis v. Hustad ,
22 P.3d 885, 888 (Alaska 2001)); see also Ogard v. Ogard, 808 P.2d 815, 819 (Alaska
1991) (establishing that the date of trial is a proper time for valuation of marital
property).
26 Ogard, 808 P.2d at 819 (quoting L. GOLDEN , EQUITABLE DISTRIBUTION OF
PROPERTY § 7.01, at 207 (1983)).
27 Miller , 105 P.3d at 1144; see also Cox v. Cox, 882 P.2d 909, 918 n.5
(Alaska 1994) ("If assets no longer exist or are not owned by the parties, they are not
available for distribution. However, where there is evidence that a marital asset was
dissipated, wasted, or converted to a non-marital form, the court can 'recapture' the asset
by giving it an earlier valuation date and crediting all or part of it to the account of the
party who controlled the asset.") (citing Gallant v. Gallant, 882 P.2d 1252, 1255 n.5
(Alaska 1994)).
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it at the time of separation rather than trial, is "not justified without findings of fact that
the asset[] in question [was] actually wasted, dissipated, or converted to non-marital
form."28 "Marital assets that are spent after separation for marital purposes or normal
living expenses are not typically taken into account in the final property division."29
Here the superior court made no finding that Day wasted or dissipated the
funds and did not use them for normal living expenses. It did find that Day had "been
living well beyond her reasonable financial needs and resources," and it remarked that
it was "not reasonable [for Day] to assume that without working [she would] continue
to have an income of $5,370.00 a month, which is the average that's been going on for
this last 18 months." While these findings may justify not awarding spousal support,
they are insufficient to justify recapture of the money that was expended by or on behalf
of Day to meet her post-separation living expenses. The distribution of $33,548 to Day
and the credit of $7,893 to Williams are reversed. On remand, the court shall make these
adjustments, which will also affect its equitable distribution of the marital estate.
C. We Remand The Court's Order On Reconsideration To Clarify
Whether It Revalued The Duplex And To Consider Whether Day
Can Afford To Maintain That Property.
In its initial property division, the superior court awarded the parties'
duplex and the attendant mortgage to Day.30 Day filed a motion for reconsideration,
arguing that she did not receive sufficient liquid assets to keep the duplex. The superior
28 Ethelbah v. Walker , 225 P.3d 1082, 1090 (Alaska 2009) (citing Korn , 46
P.3d at 1023).
29 Partridge v. Partridge , 239 P.3d 680, 692 (Alaska 2010) (citing Jones v.
Jones , 942 P.2d 1133, 1139 (Alaska 1997)).
30 The court valued the home at $565,000, and the debt on the home at
$247,092, producing a net value of the asset of $317,908.
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court initially granted her motion to reconsider, stating that it would "reconsider whether
to award the marital home to . . . Williams and/or to direct that the home be sold, with
half the net proceeds going to each party." But in its order on reconsideration, the court
declined to amend its award of the duplex to Day.
Instead, the court ordered Day to "make her best efforts to refinance the
home such that she is the sole owner," but noted "the realities of [the] current economic
conditions" suggested that refinancing of the home into Day's sole ownership might be
problematic. Therefore, the court ordered a contingent sale of the home: if Day was
unable to refinance the home, the home was to be sold "at a mutually agreeable sum."31
In the case of a sale, the court ordered the net value of the home to be adjusted to account
for realtor and closing costs and any payments by Williams towards the maintenance of
the home to be credited to him. Finally, the court stated that "[s]ale proceeds shall be
allocated by the parties in such a way as to achieve the 50-50 distribution initially
ordered by this court."
Williams argues the court's order on reconsideration was an abuse of
discretion because it improperly revalued the duplex after the court's valuation of
property at the end of trial. Day argues that the superior court "did not revalue the
duplex on reconsideration," contending instead that the superior court "reapportioned the
risk of loss related to the duplex" and "contingently directed that the market value of the
duplex [for the purposes of the division] would be determined by the market itself [at the
time of a sale]."
On the record before us, it is unclear whether the superior court revalued
the duplex on reconsideration. The order that "[s]ale proceeds . . . be allocated by the
parties in such a way as to achieve the 50-50 distribution initially ordered by the court"
31 Day claims in her appeal brief that she was unable to refinance the duplex.
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is ambiguous. It could mean that proceeds from a sale would go entirely to Day, because
she received the duplex in the "distribution initially ordered by the court." But it may
also mean that sale proceeds were to be split and the estate reallocated (or Williams's
equalization payment adjusted) to achieve the equal nature of the "distribution initially
ordered by the court."
Additionally, there is a more fundamental problem with the superior court's
award of the duplex to Day - the court initially awarded her the home without
considering whether she would have sufficient funds to maintain the property and, on
reconsideration, ordered a contingent sale of the property without explaining how the
parties should divide the costs and proceeds from the sale to maintain the court's initial
goal of a 50-50 property division.
Day moved for reconsideration arguing that the net result of the court's
division was that she had "no funds to protect the assets awarded to her from foreclosure
or repossession." She argued the order guaranteed that she would have to sell the
duplex, and that she would incur approximately $35,000 to $40,000 in realtor fees and
closing costs. She asserted that the court's award made it financially impossible for her
to keep the house because the record showed that the mortgage exceeded the rental
income, and she had no additional funds or source of income to pay for the excess
mortgage. She concluded that if she were forced to sell the duplex, it would be sold at
below market value, and she would bear the costs of the sale, thus ensuring she would
end up with less than 50% of the value of the marital estate. Day requested that the court
restructure its property division, relying on Tollefsen v. Tollefsen.32
32 981 P.2d 568 (Alaska 1999).
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In Tollefsen, the superior court awarded the former wife assets with a net
equity of 52.6 percent of the marital estate.33 The former wife moved for reconsideration
arguing that the court had awarded a collection of property and support which ensured
that she would be completely unable to support herself.34 She argued that such an award
was clearly unjust because the court failed to consider how its findings related to her
short-term needs and expenses.35 The trial court had found that she was clearly the
economically disadvantaged party and that the economic effects of the divorce had fallen
more heavily on her than the former husband.36 The former wife argued that the court
did not account for how she was to make the monthly mortgage payments or prepare the
house for sale.37 On appeal we concluded that the trial court, in deciding to award over
50 percent of the marital property to the former wife, sought to achieve an equitable
distribution and account for her needs. But we held that:
While the trial court had considerable discretion over how to
carry out its findings in the property distribution, its failure to
make any provision for the costs of repair and sale prevented
the property division from meeting the court's stated goal of
an unequal property split in [the former wife's] favor.[38]
33 Id. at 569.
34 Id.
35
Id. at 570.
36 Id.
37 Id. at 571.
38 Id .
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We explained that the court's property distribution actually left the former wife with less
than half of the marital estate, despite the fact that its stated intent was that she should
receive a larger share of the estate.39 We concluded:
Ordinarily, the trial court need not consider the factors of sale
costs and commissions for real property awarded to one party
because both parties will encounter such expenses in any
sales of real property awarded to them, thus balancing out
their net awards. Here, however, the trial court premised its
division of marital property on [the former wife's] sale of the
real property awarded to her, while no finding contemplated
that [the former husband] would have to sell the real property
awarded [to] him. . . .
In summary, although the superior court expressly found that
[the former wife] was the economically disadvantaged party,
the court's failure to make provision for the costs of repairs
and sale of the real property awarded to [her] defeated its
stated goal of awarding her the greater share of the marital
estate.[40]
Our holding in Tollefsen is applicable to the superior court's property
division in this case, and to the court's order on reconsideration. Although the superior
court made no findings on the statutory equitable division factors, we infer that the court
concluded a 50-50 division would be sufficient to meet Day's needs, including her need
to pay the mortgage and expenses to keep the duplex.41 On reconsideration, the court
declined to restructure the property division, but was troubled by Day's uncertain
financial means, stating that "the realities of the current economic conditions suggest that
39 Id. at 571-72.
40 Id. at 572.
41 In its order on reconsideration, the court stated that "[w]hile the duplex is
not currently making money for [Day], it could be the best long-term investment she
could make with her share of the marital estate."
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refinancing of the home into [Day's] sole ownership may be problematic, thus effectively
forcing a sale and related realtor/closing costs." So the court put in place a contingent
order: if Day could not refinance the mortgage within 60 days, she was to sell the
duplex. But the court's order is unclear as to how Day and Williams were to divide the
costs and proceeds of the sale, or to actually achieve the 50-50 division of assets
originally contemplated by the court.
It is possible to read the court's order as requiring the parties to share the
realtor's fees and closing costs, but it is unclear if that adjustment alone would effectuate
a 50-50 division of the property. Given the possibility that the duplex will sell (if at all)
for less than its value at the time of trial, did the court intend that Williams's equalizing
payment be increased to effectuate an equal division of the marital estate? This, too, is
unclear. And under a Tollefsen analysis, it is questionable whether the proceeds Day will
receive - whether the duplex is sold or not - and the other property awarded to her
will accomplish the court's goal of arriving at a fair and just distribution sufficient to
meet Day's needs.
Because the court is required on remand to make additional findings and
to correct its award as described above in this opinion, the court will necessarily have to
reconsider its reconsideration order and specifically explain its intentions and the
procedure the parties must follow in selling the duplex if a sale is to be ordered. We thus
vacate the order on reconsideration and remand for further proceedings.
D. The Superior Court Did Not Err In Valuing The Business.
Applying "active appreciation" analysis, the superior court concluded that
$151,000 of the total value of the Value Paint Center asset was Williams's separate
property and that $199,332, the amount by which the value of the asset increased during
the marriage, was marital property. Williams argues that applying active appreciation
analysis to the portion of the asset attributable to the real estate component of the
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business was erroneous, asserting that the superior court did not make the requisite
findings.42
"Active appreciation occurs when marital funds or marital efforts cause a
spouse's separate property to increase in value during the marriage."43 In order to apply
active appreciation analysis to an asset, a court must make three findings:
First, it must find that the separate property in question
appreciated during the marriage. Second, it must find that the
parties made marital contributions to the property. Finally,
the court must find a causal connection between the marital
contributions and at least part of the appreciation.[44]
The superior court found that the Valley Paint Center asset, including the
real estate, appreciated during the marriage. The superior court also found that "[t]he
increased value of the business [was] almost certainly due to marital efforts . . . ."
Specifically, Day allowed Williams to "work[] at the business all the time and the
business prospered because of his commitment to it and his customers." Williams argues
that these findings support the application of active appreciation analysis only to the
business, not the real estate.
But the superior court also determined that it was "not clearly possible to
separate the business . . . from the land and building associated with the business." It
found that "the land [had] been refinanced over the years to accommodate the business."
42 Williams does not contest the superior court's active appreciation valuation
of the business component, however.
43 Schmitz v. Schmitz, 88 P.3d 1116, 1125 (Alaska 2004) (quoting Harrower
v. Harrower , 71 P.3d 854, 857-58 (Alaska 2003)).
44 Harrower , 71 P.3d at 858 (quoting BRETT R. TURNER , EQUITABLE
DISTRIBUTION OF PROPERTY § 5.22, at 236 (2d ed. 1994)).
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These two findings, neither of which Williams directly challenges,45 and which we
review for clear error,46 support the superior court's consideration of the "land and
business as a single entity." A finding is clearly erroneous if this court is "left with a
definite and firm conviction based on the entire record that a mistake has been made."47
Given that the record supports the court's findings, we cannot say that the superior court
clearly erred in finding that both the business and the real property on which it sits
actively appreciated in value during the marriage. We therefore affirm the superior
court's valuation.
E. The Superior Court Did Not Abuse Its Discretion By Awarding
Attorney's Fees To Day.
Finally, the superior court awarded Day one-half of her attorney's fees, or
$10,406, noting that "Ms. Day's current income-producing capabilities are significantly
less than [those] of Mr. Williams." Williams argues that the award of attorney's fees was
an abuse of discretion because the size of Day's share of the marital assets negated any
possible need for attorney's fees. He also draws our attention to the superior court's
remark that "both parties litigated [the case] . . . on a fairly equal plane. . . . likely due to
the significant interim payments made by Mr. Williams for and to Ms. Day." He then
argues that the attorney's fee award was, in essence, a requirement that he "pay [Day's]
attorney's fees a second time."
45 He argues that most of the significant structural improvement occurred
before the marriage. But that observation is not inconsistent with the superior court's
findings.
46 Schmitz, 88 P.3d at 1122.
47 Farmer v. Farmer , 230 P.3d 689, 693 (Alaska 2010) (quoting Casey v.
Semco Energy, Inc., 92 P.3d 379, 382 (Alaska 2004)).
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The award of attorney's fees in a divorce action rests within the broad
discretion of the trial court, and we will not disturb an award on appeal unless it is
"clearly unjust."48 "In Alaska, 'cost and fee awards in a divorce are not to be based on
the prevailing party concept, but primarily on the relative economic situations and
earning powers of the parties.' "49 The rationale is that "in divorce actions[,] 'the
purpose of awarding attorney's fees is to assure that both spouses have the proper means
to litigate the divorce action on a fairly equal plane.' "50 Here, the superior court
appropriately based the attorney's fee award on the relative earning powers of the parties.
It is undisputed that Day earned substantially less than Williams, and the fact that
Williams made payments for Day's living expenses does not undermine the rationale
behind the superior court's decision to award Day one-half of her attorney's fees. We
find no abuse of discretion in the superior court's award of attorney's fees to Day.51
V. CONCLUSION
We AFFIRM in part, REVERSE in part, VACATE in part, and REMAND
for further proceedings consistent with this opinion. We do not retain jurisdiction.
48 Ethelbah v. Walker , 225 P.3d 1082, 1086 (Alaska 2009) (citing Brotherton
v. Brotherton , 941 P.2d 1241, 1244 (Alaska 1997)).
49 Rodvik v. Rodvik , 151 P.3d 338, 351 (Alaska 2006) (quoting Lone Wolf v.
Lone Wolf , 741 P.2d 1187, 1192 (Alaska 1987)).
50 Id. (quoting Lone Wolf , 741 P.2d at 1192).
51 However, the court may reconsider its attorney's fee award if after
reconsidering its property distribution it determines that its fee award should be adjusted.
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