Opinion ID: 2572748
Heading Depth: 3
Heading Rank: 4

Heading: Annette's Motions for Credits for Claims Involving the Parties' Property and Marital Debts

Text: Annette claims that the superior court erred in finding that David had pieces of art by Miro and Zirul in his office that were part of the marital estate while failing to value or award the artwork. Annette should have been credited for fifty-five percent of the value of any marital art in accordance with the overall property division. David does not object to giving Annette her requested $1,925 credit for the Zirul, but contends that he does not possess the Miro. The superior court erred in failing to value or award the Miro after finding that it was marital property. On remand the superior court must credit Annette for the Zirul. It also must determine the value of the Miro and award it to one of the parties, though it is free to reexamine whether there was a sufficient factual basis for finding that the Miro was still part of the marital estate at the time of divorce.
Annette claims that the superior court erred in awarding David a painting of their daughter Nicole commissioned by the parties at a cost of roughly $20,000. The superior court awarded the painting to David for sentimental reasons because his relationship with Nicole was strained. Annette first argues that the painting was a gift to Nicole and is therefore Nicole's separate property. She argues in the alternative that the painting is marital property and that she should therefore be credited with her share of its value. There is no indication in the record that the painting is Nicole's separate property. Nor is there any record evidence of the painting's fair market value. It was well within the superior court's discretion to award a painting of almost entirely sentimental value to the spouse who does not receive primary physical custody of the child.
Annette contends that she should be credited for any appreciation in value of David's pre-marital artwork. The parties' prenuptial agreement provided that the appreciation of separate property would be considered a marital asset. The superior court found that David's pre-marital artwork appreciated $63,788 over the course of their marriage but did not account for this appreciation in its property division. David suggests the superior court failed to include the appreciation in its division of the marital estate because it implicitly agreed with his earlier claim that the appraisal was incorrect, and the true amount of appreciation was de minimis. This assertion is unsupported in the record. Because the prenuptial agreement specifically mandates that appreciation of separate property be treated as a marital asset, the superior court erred in failing to account for significant appreciation of pre-marital artwork in the property division. We remand this issue to the superior court so that it may credit Annette for the appreciation of David's separate artwork.
Annette claims that the superior court incorrectly included the separate property of the parties and their children in the marital estate. The superior court found that such separate property existed and that it was identified by the initials of the property owners in the exhibits presented at trial. All of this separate property was awarded to Annette and credited against her in the property division, mistakenly raising the value of the property awarded to her in that division. David concedes that the superior court included the separate property in the marital estate, but argues that the children's property should be characterized as Annette's because she has custody of the children. This argument is without merit because David has not alleged that Annette violated her duties as trustee of the children's separate property by misusing or misappropriating the property. [31] The custodial parent should not have the children's separate property credited against his or her share of the marital estate because that parent is under a duty to use that property for the children's benefit or allow the children to use it for their own benefit. Therefore, we remand this issue to the superior court to reduce its valuation of the portion of the marital estate awarded to Annette by the value of the parties' and their children's separate property. David also claims that the superior court did not err in failing to credit Annette for the value of his separate property because she has not returned many of the items from the 11th Avenue house and that the few items returned were damaged. The superior court did not make any findings on whether Annette had returned David's separate property. We remand the question of whether Annette complied with the property division by returning David's separate property.
Annette claims that the superior court erred in characterizing as David's separate property a reimbursement from a payment made during the marriage to settle a medical malpractice claim against David. She argues that the payment was made from joint household funds and should therefore be characterized as marital property. David responds that the money for the settlement came from his medical practice and was therefore his separate property under the prenuptial agreement. Property is considered part of the marital estate if it is treated as a joint holding by the parties. [32] But the parties here did not treat the reimbursement as a joint holding. The money for the settlement apparently came from David's Pacific Northern Academy bonds, which were purchased with David's separate funds, although the proceeds from the bonds were channeled through the parties' joint account. Other than movement of the funds through a joint account, the settlement money clearly appears to have been David's separate property. The superior court did not abuse its discretion by classifying the malpractice reimbursement as David's separate property.
Annette claims that the superior court erred by failing to assign the debts accumulated by the parties during their marriage. Annette claims that she paid $11,087.62 in marital debt and that three bills remain outstanding. David asserts that the debts in question should be considered Annette's personal debts, and could have been covered by the interim support payments she received from David. The facts are unclear. We have previously held that the superior court must consider whether one spouse is entitled to credits for his or her payment of marital debt with post-separation income in order to preserve the marital estate. [33] We now hold that the superior court must consider any payment of debts accrued during marriage out of post-separation income, regardless of whether the payments preserve the marital estate, because such liabilities are as much a part of the marital estate as marital assets. Therefore, we remand this issue to the superior court to determine whether the debts alleged by Annette existed and whether any such debts are separate or marital property. The superior court should apportion any such debts between the parties in accordance with their status as separate or marital property.
Annette claims that she should be reimbursed for the children's educational expenses during the pendency of the divorce because they are marital debts. In the August 2000 trial the superior court determined that any future educational expenses would be taken from the children's substantial funds. The superior court did not err by declining to award Annette credit for similar post-separation educational expenses because the expenses could have been paid with the children's funds. E. The Superior Court Did Not Err in Awarding Annette $131,000 To Pursue Her Education and Refusing To Force David To Pay the Support Without Proof that Annette Was Enrolled Full-time. Annette claims that the award of $131,000 for her education did not include $50,000 for tuition costs. Under the parties' prenuptial agreement David is responsible for Annette's tuition, books, other educational expenses, and reasonable support at a law school [34] of her choice. The superior court found that this provision entitled Annette to the above support for one year of preparatory classes at UAA and the two-year Master's of Business Administration program at the University of Washington. Annette argues that the award of the total sum of $131,000 does not include her tuition costs. But the superior court clearly considered both tuition and living expenses in finding that tuition, books, and fees for the three years of schooling would cost roughly $50,000 and that reasonable support for the rehabilitative period was somewhere between the $15,168 per month requested by Annette and the $1,500 per month offered by David. It concluded by finding that a reasonable amount of support for David to pay Annette to complete her MBA degree is the total sum of $131,000. This award clearly included Annette's tuition costs and cannot reasonably be interpreted to provide Annette with an additional $50,000 of tuition. We reject Annette's argument that tuition was not included in the superior court's award. Annette also claims that the trial court erred in estimating her reasonable living expenses in arriving at its $131,000 award. She argues that the court both underestimated the cost of her education and awarded her far less than the amount necessary for her reasonable support. The superior court thoroughly analyzed the cost of Annette's education, and did not abuse its discretion in awarding $50,000 for educational expenses. As for living expenses, we find no abuse of discretion in the award of $81,000 for three years, post-divorce. Therefore, we hold that the superior court did not abuse its discretion by awarding Annette the total of $131,000 in rehabilitative support. Annette further claims that the superior court erred in denying her motion for educational support for her year of preparatory classes on the grounds that she was not enrolled at UAA. Annette apparently took two summer classes but did not register for fall classes, allegedly because David had not made the educational alimony payments from March through July 2001. The superior court refused to compel David to pay the ordered educational support because Annette did not provide any proof that she has been or is enrolled as a full-time student in a university pursuing her educational goals. Annette argues that the superior court's order that she be enrolled full-time adds a new term to the March 7, 2001 award and removes a needed degree of flexibility in determining her course load. Though we are sympathetic to providing custodial parents with flexibility in pursuing rehabilitative education, there was no error here: Annette requested and received support for one year of preparatory classes at UAA. The superior court did not abuse its discretion by forcing her to abide by the award. F. The Superior Court Did Not Err in Finding that the Real Property Placed in Annette's Name Was Marital Property. Annette claims that the superior court erred in classifying property given to her by David as marital property. David transferred a number of pieces of real property to Annette over the course of their marriage. One of these properties was sold in order to acquire the 11th Avenue home, which was held in Annette's name. The parties' prenuptial agreement provided that gifts become the separate property of the recipient. Annette argues that the property transfers were gifts from David to her and are therefore her separate property. David responds that the properties were only placed in Annette's name to ensure that they would not be lost in possible medical malpractice judgments against David. We have held that the relevant factors in determining whether property should be characterized as marital are ... `(1) the use of property as the parties' personal residence ..., (2) the ongoing maintenance and managing of the property by both parties,' [35] (3) placing the title of the property in joint ownership and (4) using the credit of the non-titled owner to improve the property. [36] The superior court specifically found that the first, second, and third factors were present in this case. Additionally, the superior court based its finding that the properties were marital property on the testimony of a number of the parties' friends, who supported David's claim that the properties were placed in Annette's name to guard against medical malpractice claims rather than as gifts. The superior court's extensive factual findings on the parties' intent in transferring the property to Annette are sufficient to support its finding that the property placed in Annette's name was marital property. The superior court did not abuse its discretion in finding that the property was marital property. G. The Superior Court Did Not Err in Denying Annette's Motion for Attorney's Fees. Annette argues that the superior court abused its discretion by declining to award her attorney's fees. She claims that her litigation costs were driven up by David's noncompliance with court orders and refusal to produce discovery materials in a timely fashion. David responds that Annette has failed to demonstrate that the superior court abused its discretion in denying fees for Annette's aggressive litigation of this case. We have mandated a two-step process for determining whether attorney's fees should be awarded under AS 25.24.140(a) [37] for vexatious conduct by a party in a divorce proceeding. [38] The superior court must first determine whether fees are appropriate under the general rule looking to the parties' economic situations; it may then increase any award based on misconduct by one of the parties. [39] The superior court denied Annette's request for attorney's fees based on our decision in Beard v. Beard, [40] which recognized that awards of attorney's fees under AS 25.24.140(a) are based on the relative economic situations and earning powers of the parties [41] and should ensure that both spouses have the proper means to litigate the divorce action on a fairly equal plane. [42] The superior court found that the property division compensated for the disparity in the parties' earning capacity and left them with comparable ability to litigate the action. It further found that both parties had needlessly increased litigation costs and been completely uncooperative throughout the divorce, and held that neither party had clean hands to request fees for vexatious conduct. Because these factual findings are sufficient to support a denial of attorney's fees under AS 25.24.140(a), we uphold the superior court's denial of Annette's motion for attorney's fees. H. The Superior Court Erred in Summarily Refusing David's Claims for Credits Arising After the March 7, 2001 Order. 1. The superior court erred in failing to make factual findings on whether the parties' property was divided in accordance with its order. David claims that Annette controlled the court-ordered division of the parties' art, jewelry, and precious stones in a manner that left him with $175,000 less than the $430,453.50 of such property he was awarded. Annette argues that David personally and willingly divided the property. Her only support for this contention is the affidavit of a paralegal at her attorney's firm who was present at the time. The superior court denied David's motions for credit for Annette's alleged violation of the property division without a hearing and did not otherwise address the claim. We have previously held that a superior court's denial of a credit should be reversed and remanded if the record shows a genuine dispute regarding the requested credit and the superior court failed to make factual findings on the issue. [43] In this case the record provides some support for David's claim of an unequal property division, presenting a genuine issue of material fact. Therefore, we remand for factual findings the issue whether David should be credited for Annette's alleged violation of the court-ordered property division. 2. The superior court erred in failing to make any findings on David's request for credits that he allegedly became aware of after the court divided the marital estate. David claims that he should receive credits for (1) property tax payments that were allegedly misappropriated by Annette, (2) a $12,413 account awarded to him but allegedly emptied by Annette, and (3) a gun that the court found was David's separate property but that Annette did not return to him. He contends that he only became aware of his right to these alleged credits after the divorce trial. David claims that he gave Annette money to pay property taxes and seeks credit for this money. Annette responds that the appeal should be denied because the issue was not raised at the trial and the appeal was not filed in a timely manner. David responds that Annette's alleged misuse of this payment was not raised at the trial because he did not discover it until after the conclusion of the trial. Alaska Civil Rule 60(b)(2) allows a court to relieve a party from a final judgment if he or she presents newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b). [44] Because the timing of David's discovery of the alleged conversion is a factual issue, we remand the question whether David exercised due diligence in presenting his request for a credit. If David brought this claim in a timely manner, the superior court should determine whether he is entitled to credit for the allegedly misused property tax payments. David argues that he should receive credit for a $12,413 account awarded to him in the superior court's property division, because it was emptied by Annette, and for his gun, which was retained by Annette. Annette responds that David's appeal must be rejected because he failed to raise the issue at the trial level. She also argues that this court does not have jurisdiction under AS 22.05.010(a) [45] because the superior court has not ruled on the issues. That statute is inapplicable to this appeal because the superior court's general denial of an offset credit in this case appears to apply to David's request for credits for, or the return of, his alleged separate property. David claims that he only became aware of the missing money after trial and promptly presented the issue to the trial court in his November 5, 2001 motion for credits in response to Annette's motion for judgment for support arrearages. The above analysis of David's request for a property tax credit applies with equal weight to these issues. We therefore remand for a determination whether David acted with due diligence. If the superior court finds that David brought these requests for credits in a timely manner, it should make factual findings as to whether he deserves an offset credit or the return of the property.