Opinion ID: 2546062
Heading Depth: 4
Heading Rank: 4

Heading: Identification and valuation of marital property

Text: The first item of property that the superior court dealt with was a set net permit, which allows the holder to catch salmon in Cook Inlet. The permit was in Duane's name. The court analyzed the permit in this way: the set net permit was acquired by [Duane] prior to marriage and[,] despite its use during marriage as a source of income[,] there is little credible evidence that [Duane] intended that the permit would become a part of the marital estate. The set net permit will be treated as a premarital asset of [Duane] that is not subject to distribution. Tammi argues that this was erroneous. She states that the permit was of negligible value when issued in 1975 and its function was simply as an item that permitted Mrs. Edelman and Mr. Edelman to work and develop their fishing business during the eighteen years of their marriage. The set net permit should have been viewed as part of the marital estate. Tammi does not point to any evidence in the record to support her contentions. Tammi and Duane both correctly rely on Wanberg for the test to determine when invasion of a spouse's property acquired before marriage is appropriate. As Duane notes, Tammi apparently does not dispute that the permit was Duane's separate property, acquired before marriage. The Wanberg court held: In limited circumstances invasion of one spouse's property acquired before coverture may be required as a matter of law. One such circumstance is where the parties, by their actions during marriage, demonstrate their intention to treat specific items of property as joint holdings, even though the properties were separately held by one or another spouse prior to coverture. Such intention is manifest when both spouses can be shown to have taken an active interest in the ongoing maintenance, management, and control of specific assets. Where such circumstances exist, basic fairness requires that property treated by the spouses as jointly held be available for equitable division under [former] AS 09.55.210(6). [10] Duane testified that, despite the fact that he and Tammi shared the proceeds generated from the permit, he never considered it something that he would share with Tammi. Rather, he planned to assign it to his son J.E. when J.E. began fishing the permit. Further, as Duane cogently points out, Tammi and Duane fished the permit together to produce income, but all the required management and maintenance of the permit itself was performed by Duane, alone, who completed and filed all the required paperwork and paid all the necessary fees. [11] This case therefore differs markedly from Wanberg, where one spouse had performed a great deal of work in maintaining, improving, and managing two rental properties. [12] Duane correctly concedes that the proceeds from the couple's joint fishing enterprise are marital, having consistently been shared by the parties during their marriage. However, the record does not show that Tammi ever took any action to maintain, manage or control the permit itself. Therefore, the superior court's finding that the set net permit was Duane's separate property and not part of the marital estate was not clearly erroneous. [13] , [14]
Next, the superior court addressed the parties' marital residence. The court identified this asset as consisting of approximately [8.79] acres including outbuildings located thereon. The court valued this property at $202,500 and found that it was subject to a mortgage of approximately $52,000, [15] deriving a net value of $150,000. Finally, it found that Tammi has continued to reside in the marital home since separation, divorce and remarriage.... This residence and the real property upon which it sits are awarded to [Tammi] who will be solely responsible for the payment of the mortgage and any other indebtedness incurred in relation to the property. Tammi contests the court's valuation of this property. She asserts that the superior court's use of the $202,500 figure as the value of the property was incorrect. Her first argument is that this valuation arose from the court's incorrect treatment of the 8.79 acre property as though it were subdivided into five lotsa subdivision which never, in fact, occurred. Tammi asserts that [t]he residential property awarded Mrs. Edelman consists of one lot and has never been treated by either party as more than one lot. She would have the court use $165,000 as the starting point in valuating the property instead. Tammi cites a September 1994 appraisal for this figure. The appraiser estimated the market value of the house and the lot on which it sits at $165,000. The lot for the purposes of this appraisal was the entire 8.79 acres. The parties appear to be in basic agreement that this appraisal was correct. The superior court's valuation seems to stem from a second appraisal, also conducted in September 1994. This appraisal recapped the original appraisal of $165,000, but also summarized the market value of the property based on a preliminary plat reflecting a subdivision of the lot into five smaller lots. [16] The appraiser stated that the value of the entire property, if it were subdivided, would be $202,500. [17] Tammi contendsand Duane does not disputethat the property was never subdivided. Tammi further asserts that various steps would have to be taken before the subdivision plat could become a reality, including providing for roads, utilities, surveys, and Borough approval of the plan. Duane does not refute these contentions either. The record does not show whether all of Tammi's arguments in this regard are true. However, at least as to the road, the appraiser's diagram of the property supports her argument. The diagram shows the five proposed lots with a cul-de-sac from the main road providing access to each. Tammi's unchallenged testimony was that this cul-de-sac was never built. Further, examination of the SubdivisionFinal Plat chapter of the Kenai Peninsula Borough Code shows that a number of specific requirementssome involving considerable potential expensemust be satisfied before the Borough grants final approval to any subdivision plan. [18] Thus, the superior court should not have used the subdivided $202,500 figure to arrive at the value of the property; rather, it should have used the unsubdivided $165,000, a figure with which both parties agreed. To use the former was clearly erroneous. Tammi's argument goes even further, however. She argues that even this $165,000 figure overstates the house's value, citing statements by Duane in bankruptcy and an alleged valuation by the Kenai Peninsula Borough as of the date of trial. [19] As noted above, however, the trial court record shows that both Tammi and Duane agreed that the $165,000 appraisal was an appropriate valuation of the property. Tammi herself specifically agreed, when asked at trial, that the $165,000 was a fair value for the property indicated in the appraisal. Duane's counsel also indicated that he and Duane were willing to go with the $160,000 something appraisal. Further, in response to Duane's counsel's statement that he didn't think it's necessary to have up-to-date appraisals on the house, if nobody does, so I don't think there's a problem there, Tammi's counsel responded Okay. Therefore, both Tammi and Duane are precluded from now arguing that this appraisal was incorrect. Tammi's final argument regarding the value of the residence goes to the issue of debt. She agrees that the mortgage on the property was approximately $52,000 at the time of trial. However, Tammi contends that this figure reflects post-separation payments made by her. Tammi argues that these post-separation payments are her separate property, and that they increased the equity of the residence. Without explicitly saying so, she in effect argues that she should be credited, in the eventual equitable division, for these expenditures on behalf of the marital property. It appears that Tammi made these payments. At trial, she testified that she had made all of the mortgage payments since she filed for divorce. This has not been disputed by Duane, and the record reflects that payments on the mortgage were made in 1993. Tammi's legal contentions find some support in our decisions. We have repeatedly observed: This court has required that trial courts consider payments made to maintain marital property from post-separation income when dividing marital property. The fact that one party has made payments from non-marital income to preserve marital property should be considered as one of the circumstances to be weighed by the trial court in dividing the marital property. [20] We have declined, however, to fashion an absolute rule that the spouse who makes such payments must be credited for them in the final property division. [21] We have previously stated that no fixed rule requiring credit in all cases should be imposed. Instead, the fact that one party has made payments from non-marital income to preserve marital property should be considered as one of the circumstances to be weighed by the trial court in dividing the marital property. [22] Since we cannot tell from the record whether the trial court considered this issue, we must remand for findings from that court as to whether Tammy should receive credit for post-separation payments made on the mortgage of the marital residence. [23]
The next items of property at issue are Duane's claims in the litigation arising from the Exxon Valdez disaster, which released 11 million gallons of North Slope crude into Prince William Sound. The superior court dealt with these claims as follows: the Exxon Valdez claims are a marital asset, but the value of the claims [is] speculative. [Tammi] state[s that] the claims are presently known but does not, understandably, elaborate as to their value. The parties['] interest in the Exxon Valdez claims, whatever that is, is awarded to [Duane].... Tammi argues that this allocation was in error, and that she should receive fifty percent of the value of these claims. Tammi correctly cites our Lundquist [24] decision as controlling of this issue. That case presented facts very similar to this case. One spouse, George, had claims against Exxon for damages resulting from the same disaster. [25] George and his wife Jean divorced; George argued that these claims were his separate property, while Jean argued that they were marital property. [26] The Lundquist court tied compensatory awards to the type of compensation involved: In Alaska, a tort recovery is classified according to what it is intended to replace.... When an award compensates for losses to the marital estate it is marital property. To the extent the recovery compensates for losses to a spouse's separate estate, it is his or her separate property. [27] Regarding George's expected award of punitive damages, we held that punitive damages can be partially marital and partially separate, or even entirely one or the other, depending on the facts. An award of punitive damages should be apportioned in the same manner as the underlying compensatory damages award. [28] We decided that the compensatory damages in Lundquist were marital property because they were to compensate for George's fishing losses, not for any loss in the value of his permit. [29] Because the award replaced lost fishing income during a period when the parties were married, we held that the trial court had correctly characterized it as marital property. [30] Accordingly, we upheld the superior court's characterization of the punitive damages award as marital as well.
Here Duane had asserted two compensatory claims, a tender [31] claim, and a set net claim. In the tender claim, Duane expressly states that he is seeking damages for lost income from herring and salmon hauling for 1989. Because these damages occurred during the marriage, any recovery for them is marital property. In the set net claim, Duane alleges two types of damages: (1) compensatory damages for loss of revenue in 1989-91 due to the drop in price of sockeye salmon, and (2) damages for devaluation of his set net permit. Any damages award for lost income, like that in Lundquist, would be marital propertyDuane is seeking to replace lost fishing income during a period when the parties were married. [32] Any damages award for devaluation of the permit, however, would be meant to replace the lost value of Duane's permit. As discussed above, the permit is Duane's separate property; therefore, under Lundquist, this latter type of recovery would be Duane's separate property as well.
The Exxon Valdez plaintiffs were awarded more than $4.786 billion in punitive damages. This award has been appealed to the Ninth Circuit Court of Appeals. Accordingly, it is not known how much will be collected or even if the plaintiffs will ever actually collect this award. This uncertainty appears to have affected the superior court's decision, though it need not have. Under Lundquist, punitive damages are to be allocated in exactly the same way that compensatory damages are. [33] Therefore, any punitive damages that are eventually awarded to Duane should be allocated in accordance with the above characterizations of the compensatory awards.
Finally, Tammi contests the superior court's allocation of Duane's entire pension fund to him. The court dealt with the valuation and allocation of Duane's pension fund in this way: The total contributions during marriage on behalf of [Duane] are approximately... $31,475.68.... [Duane]'s pension contributions earned during marriage are awarded to [Duane]. The court did not state whether it considered the fund to be separate or marital property. This court has held that [t]o the extent that a party earns retirement benefits during marriage, the benefits are marital assets and are subject to equitable division. [34] Therefore, Tammi is entitled to a share of the marital portion of the fund, or at least to a portion of another part of the marital estate equal to her share of the fund. [35] For the court to award the entire fund to Duane without accounting for Tammi's share of the marital portion was erroneous as a matter of law. [36] Further, the superior court's valuation of the fund was problematic. The court appears to have correctly calculated the amount contributed to the fund during the couple's marriage. [37] However, this figure does not accurately state the value of Duane's vested pension benefits. [38] The court understated the value by not including Duane's employer's contribution nor any interest or investment return that has been and will be generated by the fund. This should be corrected on remand. [39] Here, the court did not use either of the two approved methods of distributing pension benefits (i.e., a QDRO or lump-sum payout). [40] Its valuation probably understates the actual value of the pension fund; Duane presumably stands to collect more than was contributed due to interest that has accrued and will continue to accrue on the funds. In any event, these are issues for the trial court to determine on remand, as discussed above.