Opinion ID: 2638530
Heading Depth: 3
Heading Rank: 2

Heading: The Superior Court's Treatment of the Master's Factual Findings

Text: The superior court specifically requested the master to report on the identity and value of marital property and debts and to recommend a distribution. Troy objected to several of the master's findings prior to their adoption by the superior court. Alaska Civil Rule 53(d)(2) requires the court to accept the master's findings unless clearly erroneous. Judge Savell adopted all of the master's findings but one, deeming them not to be clearly erroneous. We address the contested factual findings in turn.
The master described Troy as 37 years old and in poor health. He has psoriatic arthritis, a progressive disease. The medications that work effectively are not yet covered by insurance and are very expensive. His doctor testified that he could be totally disabled within four years. With respect to his earning capacity, the master found: [Troy] has a greater earning capacity than [Lucy]. However, [Troy] has a progressive illness that will cause him to have high medical costs and he will become physically disabled as early as four years from now unless new experimental drugs are approved. His earning capacity will not decrease immediately where he is a co-owner and shareholder and will not become involuntarily underemployed when he is no longer able to perform physical labor. Troy argues that the court erred in concluding that his physical condition would not immediately affect his earning potential. Troy relies on the testimony of Dr. Carpenter, Clyde Waller, and Ray Keturi at trial to support his position that his condition is rapidly deteriorating and that it has already begun to affect his ability to work. He explains that he will only be able to continue taking steroids for a short period of time due to their potential side effects, that there are days when he is unable to get out of bed at all, and that he has experienced signs of depression as a result of his condition. Troy maintains that the court erred in two respects in determining that his illness would not affect his earning capacity: first, by failing to account for the fact that he will need to hire someone else to perform the physical work he is now unable to perform himself, and second, by neglecting to consider the impact of his diminished energy level and depression on his ability to work. Lucy responds that while she has never disputed that Troy's physical ability to work has been limited, the trial court did not err in finding that his condition would not necessarily affect his income, given his part ownership of Ray Electric and his ability to focus on the managerial side of the business. She argues that because Troy and his partner determine their own jobs, there is no reason Troy cannot continue to receive a share of the profits as a manager. Given his position, Troy retains the ability to simply assign himself duties that do not require physical labor. Troy admitted that he has been able to do some of the company's bidding and to supervise other employees, and that he is sometimes able to walk around and supervise. However, he also argues that the amount of non-physical labor he is able to do does not justify his receiving a salary equivalent to Clyde's. Clyde's testimony corroborates Troy's statements that he is physically unable to do what he was previously able to, that other employees have had to pick up the slack for Troy, and that Troy has not been able to work as many hours as Clyde in the three years prior to trial. However, the master did not find that Troy's condition was not serious, but only that should the business continue to do well, Mr. Keturi will still receive his share of the profits and can earn wages as a manager. Based on Troy's ability to collect a share of the profits, his history of receiving in kind income from the business regardless of how many hours he works, and his testimony that he remains able to perform certain work-related tasks, we do not believe the trial court's conclusion was clearly erroneous.
With respect to Troy's income, one of the master's factual findings was clearly erroneous. The master's report states that Troy's 1997 income was $192,826. However, no evidence supports that figure. Troy testified at trial that he earned approximately $52,000 in 1997. At one point Troy was asked whether 1997 was the year in which he received a $60,000 bonus, and he responded affirmatively, but later changed that testimony to indicate that 1998 was the year he had received the bonus. Even had he received such a bonus in 1997which he ultimately clarified that he had nothis income would have been $112,000, not $192,826. Because Troy's testimony was the only evidence offered to the court with respect to his income in 1997, and because that evidence did not support the finding that his 1997 income was $192,826, we remand this issue to the superior court for correction of the error [16] and modification of Troy's child support obligation.
Troy also contests Master Bachelder's finding that the $88,832.67 check written from Ray Electric's account, which was used to purchase the duplex, was a bonus rather than a loan. Troy argues that all of the evidence supports a finding that the money was a loan and not a bonus, and that therefore the master's contrary finding must have been clearly erroneous. During the trial there was a wealth of testimony regarding an incident in 1998 in which Troy and Clyde gave themselves bonuses of $60,000 each, but failed to pay taxes on the bonuses within three days as required by the IRS. In order to avoid paying penalties on top of the taxes, Troy and Clyde called the bonuses loans for accounting purposes. The following year, they added $60,000 to their calculated salaries, and promptly each paid $60,000 back to the company to repay the loan of the prior year. From that incident, the master reasoned that the money used to purchase the duplex could have similarly been designated a loan after the fact to avoid liability in the divorce settlement. According to the master, [g]iven this one proven incident of classifying a bonus as a loan, the court finds it more likely than not that the duplex was purchased by the husband with marital wages, or a bonus, and that there is no outstanding debt on the property. The only proof that the husband produced to show that he has a debt to pay on the duplex was a company check showing a payment of $88,832.67 to First National Bank of Anchorage. The court does not find this to be sufficient evidence of a debt. Troy contests this classification, explaining that there is no evidence the money used to purchase the duplex was a bonus and not a loan. In the past, he argues, when he has taken a bonus, Clyde has received an identical bonus, and the two have declared the amount on their W-2s and paid the required taxes. Because he and Clyde were partners, he did not feel he needed a loan agreement at the time the money was removed from the business. Clyde testified that Troy asked if he could borrow money from the company to purchase the duplex. According to Clyde, [Troy] said he would pay it back with interest and we agreed upon something like 6 percent or something like that. When asked whether he had any documentation of the loan, Clyde referred to the check written out by Troy to First National Bank of Anchorage in the amount of $88,832.67 and explained that the check plus a handshake iswith my partneris a binding deal. When asked whether Troy had paid any of the money back, Clyde said he had not checked and could not remember since it had occurred over two years ago. While Troy has conceded that he has in the past purchased supplies and machinery for his personal use on the business account which were neither classified as loans nor mirrored by Clyde, he argued that Clyde would usually do the same, such that their acquisitions would be about equal. Since Clyde did not spend a comparable amount of Ray Electric funds that year, Troy argues that the money used to purchase the duplex should not be considered a bonus. There was ample testimony at trial regarding Troy's ability to classify distributions to himself and his partner as he wanted and to use company equipment for personal benefit without payment to Ray Electric. There was also testimony on the lack of documentation, payment book, or proof of repayments or attempts to repay the money. The record supports the master's finding that the duplex was purchased with a bonus from Ray Electric and not a loan, and that it therefore carries no outstanding debt. This finding is not clearly erroneous.