Opinion ID: 1161647
Heading Depth: 3
Heading Rank: 4

Heading: The Trial Court Erred in Dividing the Property upon Redistribution.

Text: We now turn to the trial court's valuation and division of Bob and Tarie's marital property in its modification order. [24] Property division in Alaska consists of three steps: determining what property is available for distribution, placing a value on that property, and allocating the property equitably. [25]
When dividing property between divorcing parties, the trial court must distribute all assets acquired during marriage. [26] The proper date for distinguishing marital from post-marital assets is the date when the marriage has terminated as a joint enterprise or when a married couple cease functioning economically as a single unit. [27] Although assets acquired by an unmarried couple during a period of cohabitation are distributed according to a different method [28] and the parties in this case were no longer married after their 1992 dissolution, they stipulated to a June 1995 date of economic separation and agreed that the trial court should consider as marital property all assets accumulated as of that date. Tarie challenges the trial court's characterization of certain items of property as marital. Tarie first argues that the trial court should not have classified the entire Fairview Loop property as a marital asset because Bob's mother, Barbara Lacher, owned half of that property. Prior to dissolution, Bob purchased a one-half interest in the Fairview Loop property with marital funds. Because he used joint funds, the one-half interest was indeed marital property. [29] Bob testified that after the dissolution, he transferred the parties' interest in the property to his mother but that she agreed to transfer the entire property back to him to help settle the lawsuit. Upon redistribution, the trial court awarded to Tarie the value of the entire Fairview Loop property, including the one half of the value owned by ... the mother of the petitioner. But Bob's mother's one-half interest in the property was never marital property and thus was not available for distribution. Moreover, forcing Tarie to take unwanted non-marital property belonging to a third party in lieu of the cash or other marital property necessary to achieve an equitable distribution unfairly benefits Bob. Thus, the trial court erred in including Bob's mother's interest in the Fairview Loop property in its distribution of marital property. Tarie next contends that the trial court erred in considering her entire settlement as marital property. Although both the sexual harassment of which Tarie complained and the filing of her lawsuit occurred during the period that she and Bob were living together and functioning as an economic unit, we agree with Tarie that the entire settlement should not necessarily be classified as marital property. In Bandow v. Bandow, [30] we concluded that the purpose for which the [tort] recovery is received controls its classification. [31] If the recovery compensates for losses to the marital estate, the settlement proceeds should be classified as marital property. [32] But to the extent the recovery compensates for lost post-marital earning, post-marital medical expenses, and [her] pain and suffering (both during and after marriage), the award should be classified as her separate property. [33] Tarie testified that only $5,000 of the settlement was to compensate for lost earnings while the remaining $45,000 was for her personal pain and suffering. Bob presented no controverting evidence. Accordingly, only $5,000 qualifies as a marital asset available for distribution. Moreover, Tarie claims that by the time of trial, the settlement proceeds had been spent on such expenses as child care, clothes for the children, food, house maintenance, and utility expenses, as well as attorney's fees. Thus, the marital portion of the settlement proceeds may have been expended for the benefit of both Bob and Tarie by the time of trial and thus would be unavailable for division. On remand, the trial court should determine whether the $5,000 marital portion of Tarie's settlement remained available for distribution.
Tarie also challenges the trial court's valuation of the marital home, the Snodgrass lots included in the Lacher, Inc. assets, and the marital portion of the Fairview Loop property. First, Tarie disputes the trial court's valuation of the marital home at $126,000, when the parties stipulated to a value of $136,200 at trial. In fact, Bob did stipulate to a fair market value of $170,000 for the home and a mortgage of $33,800. The trial court did not give any reasons for arriving at a fair market value for the marital home of $126,000, rather than the agreed upon $136,200. Thus, the trial court's valuation of the home was clearly erroneous. Second, Tarie contends that the Snodgrass lots have a value of $23,000-$25,000, rather than the trial court's determined value of $49,500. While her expert testified that the lots might take a year or longer to sell unless reduced to $23,000-$25,000, Tarie's expert also calculated a fair market value of $49,000 at the time of trial. Bob's expert similarly stated that the fair market value was $49,500. Given that both experts' current valuations of the lots support the court's valuation, the trial court's valuation of the Snodgrass lots at $49,500 was not clearly erroneous. Third, Tarie maintains that the trial court erred in valuing the Fairview Loop property at $91,200. While Tarie admits that her attorney stipulated to a value of $45,600, she asserts that this amount represents the value of the entire property, not just the marital one-half interest. In fact, Bob did take inconsistent positions on this issue: In his motion to set aside the dissolution decree, he estimated the value of the parties' partial interest in the Fairview Loop property to be $25,000, but at trial, he maintained that the stipulated value of $45,600 applied to that one-half marital interest rather than the entire property. The stipulation of property values filed by the parties before trial did not specify whether $45,600 represented the partial or full value of the Fairview Loop property. Because of this discrepancy and the trial court's failure to resolve it, the trial court must reconsider its valuation of the marital portion of the Fairview Loop property on remand.
Relying on the parties' educational backgrounds and relative financial situations, the court awarded the marital home to Bob and other valuable properties to Tarie, resulting in a 60/40 final distribution in Tarie's favor. Tarie argues that the distribution is inequitable, primarily because the trial court did not award her the marital home and instead required her to take the entire Fairview Loop property. The trial court based its decision to award the home to Bob on Tarie's strained relations with her former mother-in-law, who lives next door. Concerned that placing Tarie and Bob's mother in close proximity could cause problems for the children, it reasoned that it could not in [good] conscience even consider awarding the family home to [Tarie] because of her poor relationship with her former in-laws and that its award of the entire Fairview Loop property to Tarie was the only way to balance the issue of the home. Because we have reversed the award of the entire Fairview Loop property to Tarie and have identified other errors in the identification and valuation of property, the trial court will need to adjust its overall distribution of property. Given its concerns about the poor relationship between Tarie and her former mother-in-law, the trial court may wish to reconsider awarding Tarie the marital interest in the Fairview Loop property, because to do so would place Tarie and Bob's mother in co-ownerhip.