Court Opinion

ID: 4195360
Source: CourtListenerOpinion
Date Created: 2017-08-11 17:03:12.763494+00
Date Added: 2024-06-11T07:47:27.690367
License: Public Domain

Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
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               THE SUPREME COURT OF THE STATE OF ALASKA

MELVIN B. GROVE JR.,                               )
                                                   )    Supreme Court Nos. S-16056/16075
                      Appellant and                )
                      Cross-Appellee,              )    Superior Court No. 3AN-13-05282 CI
                                                   )
      v.                                           )    OPINION
                                                   )
CHERYL M. GROVE,                                   )    No. 7189 – August 11, 2017
                                                   )
                      Appellee and                 )
                      Cross-Appellant.             )
                                                   )

              Appeal from the Superior Court of the State of Alaska, Third
              Judicial District, Anchorage, William F. Morse, Judge.

              Appearances: John C. Pharr, Law Offices of John C. Pharr,
              P.C., Anchorage, for Appellant/Cross-Appellee. Kara A.
              Nyquist, Nyquist Law Group, Anchorage, for
              Appellee/Cross-Appellant.

              Before: Stowers, Chief Justice, Winfree, Maassen, Bolger,
              and Carney, Justices.

              WINFREE, Justice.

I.    INTRODUCTION
              Parties in a divorce and property division trial disputed the value of the
husband’s post-retirement military medical benefits. The superior court determined that
the benefits were a marital asset, but declined to value them or account for their value
when dividing the marital estate. The court instead ordered the husband to pay for
comparable medical benefits for the wife for the rest of her life. The court also
determined that most of the wife’s student loans were marital debt and allocated that debt
to her. Both parties appeal the superior court’s decision regarding the husband’s medical
benefits; the husband also appeals the superior court’s characterization of the student
loans as marital debt. We affirm the superior court’s characterization of the wife’s
student loans as marital debt, but we reverse and remand for the superior court to assign
a value to the husband’s post-retirement military medical benefits and to finalize an
equitable distribution of the marital estate.
II.       FACTS AND PROCEEDINGS
              Cheryl and Melvin Grove married in 1986 and separated in 2011; Cheryl
filed for divorce in 2013. They had no minor children at the time of separation. Melvin
entered the military six months before the marriage and retired in 2005. He has a
military pension and lifetime military medical benefits through TRICARE. From 2009
to 2012 Cheryl pursued a master’s degree, incurring substantial student loan debt.
              Trial was held over three days in 2014; the primary asset in dispute for the
marital property division was Melvin’s post-retirement medical benefits. Both Cheryl
and Melvin presented expert testimony valuing his benefits. Cheryl’s expert provided
three values ranging from $239,000 to $284,000; Melvin’s expert provided a value of
$124,400. The parties also provided testimony about Cheryl’s student loan debt. In a
March 2015 order the superior court granted the divorce and distributed the marital
estate.
              The superior court characterized all of Melvin’s medical benefits as marital
but declined to assign a cash value, seeking instead to give Cheryl “half of what Melvin
has . . . but not something different.” The court ordered “Melvin to pay Cheryl an
amount of money over time that will enable her to purchase a reasonably equivalent”
medical insurance policy, “leav[ing] the selection of that policy to the parties to work out

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if they can.” Melvin was directed “to deposit the monthly premium into an account
controlled by Cheryl.” The court ordered that Cheryl use the money only to pay for
medical insurance premiums “unless the parties, with the approval of the Court, agree
to an alternate use.”
              The superior court characterized most of Cheryl’s student loans as marital.
The court credited Cheryl’s testimony that about $50,000 of her nearly $60,000 debt was
incurred before separation and that some loan proceeds were used to pay living expenses.
The court allocated that marital debt to Cheryl in the property division.
              Cheryl moved for reconsideration, arguing that the superior court had erred
by failing to assign a value to Melvin’s medical benefits and to take that value into
account in the property division. Cheryl alternatively requested clarification of the
court’s order, raising concerns about fluctuation of premiums and the timing and
duration of Melvin’s payments. In response Melvin disputed the court’s factual finding
that the medical benefits were 100% marital, noting that he had entered the military prior
to marrying. And although Melvin stated that the court’s method of distribution for the
medical benefits was “reasonable,” he sought to ensure that Cheryl did not receive more
comprehensive medical insurance than his TRICARE coverage. Melvin also disputed
the court’s finding that Cheryl’s student loans were marital debt, asserting that no portion
of the loans was used for living expenses.
              On reconsideration the superior court refused to change its distribution of
the medical benefits or its characterization of nearly $50,000 in student loans as marital
debt. The court “declined to put a fair market value on the [medical] benefits because
of the awkward impact of valuation of this somewhat contingent asset” and because “it
cannot be easily translated to a liquid value.” The court instead described its order as an
alternative and more appropriate valuation of Melvin’s medical benefits. The court
clarified, however, that “Melvin must provide the coverage for Cheryl until she dies,

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even if he predeceases her,” and that Melvin’s payments must track any fluctuations in
Cheryl’s insurance premiums. The court rejected Melvin’s assertion that Cheryl’s
student loans were separate debt, noting that he was merely repeating or supplementing
what he said at trial.
              Melvin appeals the superior court’s characterization of Cheryl’s student
loans as marital debt, and both parties appeal the court’s method of valuation and
allocation of Melvin’s medical benefits.
III.   STANDARD OF REVIEW
              Equitable property distribution on divorce is a three-step process.
“[C]haracterizing property as either marital or separate,”1 the first step, “may involve
both legal and factual questions.”2 “Underlying factual findings as to the parties’ intent,
actions, and contributions to the marital estate are factual questions.”3 “Findings of fact
are reviewed for clear error, but whether the trial court applied the correct legal rule . . .
is a question of law that we review de novo using our independent judgment.”4 “Second,
the trial court must place a value on the property, a ruling which is a factual
determination reviewed for clear error. To reverse for clear error, we must be left with
a definite and firm conviction on the entire record that a mistake has been made.”5 A

       1
              Beals v. Beals, 303 P.3d 453, 458 (Alaska 2013).
       2
              Id. at 459 (quoting Odom v. Odom, 141 P.3d 324, 330 (Alaska 2006)).
       3
            Id. (citing Odom, 141 P.3d at 330; Doyle v. Doyle, 815 P.2d 366, 368
(Alaska 1991)).
       4
              Id. (quoting Hanson v. Hanson, 125 P.3d 299, 304 (Alaska 2005)).
       5
               Hansen v. Hansen, 119 P.3d 1005, 1009 (Alaska 2005) (footnote omitted)
(first citing Moffitt v. Moffitt, 749 P.2d 343, 346 (Alaska 1988); then citing Martens v.
Metzgar, 591 P.2d 541, 544 (Alaska 1979)).

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court’s decision whether to value personal property, however, is a legal question that we
review de novo.6 We review the third step, the equitable allocation of property, for an
abuse of discretion, reversing only if it is “clearly unjust.”7
IV.	   DISCUSSION
       A.	    Characterizing $50,000 Of Cheryl’s Student Loans As Marital Was
              Not Erroneous.
              Melvin disputes the superior court’s determination that all but $10,000 of
Cheryl’s student loans was marital debt, arguing that the loans all should be
characterized as separate property. We have held that “there is a presumption that debts
incurred during the marriage are to be treated as marital.”8 That presumption applies to
student loan debt; in Veselsky v. Veselsky we determined that absent “evidence showing
that the parties intended the debt to be separate,” a student loan “obtained during the
marriage” was properly characterized as marital property.9 In McDougall v. Lumpkin we
similarly held that student loans should be treated as marital debt, especially in light of
unrebutted evidence that the spouse pursuing higher education did so with the other

       6
              See Mellard v. Mellard, 168 P.3d 483, 486 (Alaska 2007) (holding that “it
was error to fail to value” a marital asset); Cox v. Cox, 882 P.2d 909, 918 (Alaska 1994)
(“The court’s failure to make any findings regarding the value of personal property
constitutes reversible error . . . .”).
       7
              Hansen, 119 P.3d at 1009 (citing Moffitt, 749 P.2d at 346).
       8
              Veselsky v.Veselsky, 113 P.3d 629, 636 (Alaska 2005).
       9
              Id.; see also Wagner v. Wagner, 386 P.3d 1249, 1252-53 (Alaska 2017)
(holding post-marriage consolidated student loan, including one pre-marriage loan, was
all marital debt absent evidence of intent to keep loans separate).

                                            -5-	                                     7189

spouse’s support, and that “they had sometimes used the student loans to pay living
expenses and non-education debts.”10
              The superior court made the following factual findings when characterizing
the loans: (1) “[t]he debt at the time of the first day of trial (January 2014) was [about
$60,000]”; (2) “roughly $10,000 of that total was incurred after separation”; (3) “[a]
portion of the loans was paid directly to the college for tuition and housing”; and (4) “[a]
portion went directly to [Cheryl] for living expenses.” Based on those findings the court
determined that nearly $50,000 of Cheryl’s student loans was marital debt.
              Melvin asserts that “the loans were used exclusively for tuition and no part
of the student loan funds were used for living expenses” and “the parties agreed that the
loans would be separate and that [Cheryl] would be responsible for repaying them.” But
Melvin has not shown that the court’s factual findings are clearly erroneous or that he
rebutted the presumption that the loans were marital debt. “[I]t is the function of the trial
court, not of this court, to judge witnesses’ credibility and to weigh conflicting
evidence.”11 Cheryl testified that her loans paid for tuition, housing, and living expenses,
that about $10,000 of the debt was incurred after separation, and that Melvin had been
supportive of her educational endeavors. The court credited Cheryl’s testimony, “and
we will not re-weigh evidence when the record provides clear support for the trial court’s
ruling.”12 The court’s underlying and ultimate factual findings characterizing $50,000
of the student loans as marital are not clearly erroneous.

       10
             11 P.3d 990, 994 (Alaska 2000) (holding superior court should have treated
student loans as marital debt).
       11
             Fink v. Municipality of Anchorage, 379 P.3d 183, 192 (Alaska 2016)
(quoting In re Adoption of S.K.L.H., 204 P.3d 320, 325 (Alaska 2009)).
       12
              Id. (quoting In re Adoption of S.K.L.H., 204 P.3d at 325).

                                            -6-                                        7189

             Based on the law and the facts we affirm the superior court’s
characterization of about $50,000 of Cheryl’s student loan debt as marital.
      B.	    Not Valuing Melvin’s Post-Retirement Medical Benefits And Not
             Accounting For That Value In Distributing The Marital Estate Was
             Error.
             Both Melvin and Cheryl appeal the superior court’s treatment of Melvin’s
post-retirement medical benefits. Cheryl argues that the court erred by failing to assign
a value to the benefits, and she requests that the court be directed to value them and
consequently “rebalance the distribution of the marital estate.” Melvin argues that the
benefits should not be considered marital, and that his TRICARE benefits cannot be
given an accurate cash value based on the trial testimony and our decision in Hansen v.
Hansen.13 But Melvin also posits that “a fair cash payment” — rather than a lifetime
stream of payments for medical insurance premiums — would be the more appropriate
method of equalizing the marital estate distribution.
             Melvin’s argument that his post-retirement medical benefits are not marital
property is unpersuasive: “Health insurance benefits earned during the marriage are a
marital asset of the insured spouse.”14 In Burts v. Burts we specifically analyzed
TRICARE benefits earned during the marriage and concluded that they properly were

      13
             119 P.3d 1005, 1016 (Alaska 2005) (holding that to calculate the post-
retirement medical benefits’ value, “the superior court should look to the amount of the
premium subsidy provided by the employer, rather than to either the proceeds or the cost
of procuring comparable insurance”).
      14
             Id. at 1015 (citing Kinnard v. Kinnard, 43 P.3d 150, 156 (Alaska 2002));
see also Dundas v. Dundas, 362 P.3d 468, 474-75 (Alaska 2015) (remanding for court
to address “apparent oversight” in failing to make findings about “potential PERS
retirement health benefit”).

                                           -7-	                                    7189

considered marital.15 But characterizing all of Melvin’s TRICARE benefits as marital
was clearly erroneous. The court found that “[a]ll of Melvin’s retirement medical
benefits are marital” because Melvin “entered the military after marrying and left before
separation.” But, as Cheryl acknowledges, Melvin entered the military six months before
the marriage. On remand the court should recalculate the portion of Melvin’s TRICARE
benefits earned during the marriage.16 Apart from that error the court correctly
characterized Melvin’s post-retirement medical benefits as marital.
              Characterizing the benefits was the first step in the equitable division
process.17 Cheryl argues that the superior court failed to complete the second step when
it did not value Melvin’s post-retirement medical benefits for purposes of an equitable
division and distribution of the marital estate. We agree.
              The superior court ordered Melvin to pay Cheryl’s lifetime health insurance
premiums as an alternative valuation of Melvin’s post-retirement medical benefits. But
the court also expressly “declined to put a fair market value on the benefits.” The court’s
order that Melvin “pay Cheryl an amount of money over time that will enable her to
purchase a reasonably equivalent policy” does not qualify as a valuation under the

       15
             266 P.3d 337, 341-46 (Alaska 2011); see also Horning v. Horning, 389
P.3d 61, 64 (Alaska 2017) (reaffirming Burts and holding spouse’s TRICARE benefit
was marital property to the extent earned during the marriage).
       16
             See Hansen, 119 P.3d at 1015 (“The court should determine the percentage
of the benefits that is marital by calculating the ‘coverture fraction.’ This fraction is
calculated by dividing the number of years worked during the period of coverture by the
total number of years worked.” (footnote omitted) (quoting BRETT R. TURNER,
EQUITABLE DISTRIBUTION OF PROPERTY § 6.10 (2d ed. 1994))).
       17
             See Beals v. Beals, 303 P.3d 453, 458 (Alaska 2013) (first citing Doyle v.
Doyle, 815 P.2d 366, 368 (Alaska 1991); then citing Wanberg v. Wanberg, 664 P.2d 568,
570 (Alaska 1983)).

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second step and cannot substitute for an appropriate equitable distribution of the marital
estate.
               Without findings about the value of marital property, we have no “means
of evaluating whether an equitable distribution has been achieved”; not making such
findings “constitutes reversible error.”18 In Mellard v. Mellard, for example, we held that
it was error to distribute a retirement account before assigning it a value.19 In that case
the wife did not provide evidence of her retirement account’s present value; the court
distributed the estate and ordered an equalization payment after assigning a value only
to the husband’s retirement account.20 We reversed, holding “it was error to fail to value
[the wife’s] account and to assign [it] a zero value.”21 Here the superior court did not
assign a value to Melvin’s post-retirement benefits despite testimony by two experts, yet
the court then ordered an equalization payment without accounting for the value of those
benefits. Under Mellard failure to value the benefits before finalizing an equitable
division of the marital estate was erroneous.22
               The nature of Melvin’s post-retirement medical benefits does not relieve
the superior court of responsibility for determining their value. Hansen is the controlling
case on valuing post-retirement medical benefits,23 and neither party asked us to overrule
that case. In Hansen we held that “the superior court should look to the amount of the

          18
            Cox v. Cox, 882 P.2d 909, 918 (Alaska 1994) (citing Lang v. Lang, 741
P.2d 1193, 1195 (Alaska 1987)).
          19
               168 P.3d 483, 486 (Alaska 2007).
          20
               Id. at 484.
          21
               Id. at 486.
          22
               Id.
          23
               See 119 P.3d 1005, 1016 (Alaska 2005).

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premium subsidy provided by the employer, rather than to either the proceeds or the cost
of procuring comparable insurance.”24 We acknowledged the “inherent difficulties in
attempting to calculate the value of” these benefits;25 we also explained that even a non­
transferrable marital asset has value, and “the court should have determined this value.”26
The superior court expressed some concern about the fairness of assigning a cash value
to Melvin’s non-transferrable benefits, noting that — unlike other marital assets —
health insurance cannot be sold and “symmetry is absent if Cheryl gets cash and Melvin
gets medical coverage.” But under Hansen the court must determine the value of non­
transferrable benefits regardless of their nature.27
              We also explained in Hansen how to value post-retirement medical
benefits,28 and it was possible for the superior court to do so here. Melvin argues that
TRICARE cannot be valued consistent with Hansen’s requirement because the benefits
“have no employer subsidy to the recipient employee” and are “provided free by the
government.” He further argues that both his own expert witness and Cheryl’s violated
Hansen by valuing his benefits based on “the cost of procuring comparable insurance.”29
Melvin argues that Burts, in which we determined that TRICARE benefits were marital
and could be valued, does not apply here because “the potential violation of Hansen does
not appear to have been an issue” in that case.

       24
           Id. at 1016 (citing BRETT R. TURNER, EQUITABLE DISTRIBUTION                  OF
PROPERTY § 6.26 (2d ed. Supp. 2004)).
       25
              Id.
       26
              Id. at 1015.
       27
              See id. at 1015-16.
       28
              See id. at 1016.
       29
              Id. (citing TURNER, supra note 24, § 6.26).

                                           -10-                                      7189

              Melvin’s arguments are not persuasive. We held in Burts that “TRICARE
benefit[s] can be objectively valued” and cited sources explaining how to do so.30 The
experts at trial did not impermissibly rely on the cost of replacement insurance to value
Melvin’s TRICARE benefits. Both experts testified that applying Hansen to TRICARE
is difficult because the government is self-insured and there is no published value for the
premium subsidy. But both experts estimated Melvin’s TRICARE benefits’ premium
subsidy value by reference to analogous plans, a method that does not violate Hansen’s
mandate. We see no reason the superior court cannot on remand rely on the expert
testimony to make a valuation consistent with Hansen.
              We do agree with Melvin’s alternative position that the superior court’s
chosen method “bears the strong potential for disputes.” We have a “strong policy”
favoring reducing financial entanglement after divorce,31 and requiring Melvin to pay
Cheryl’s monthly insurance premiums for her lifetime only increases the likelihood of
future financial disputes.32 The court left “selection of that policy to the parties to work
out if they can” and, as Melvin observed, if and when they cannot the court would once
again become involved in the property division. Under the court’s order such conflict
could continue even after Melvin’s death. Valuing Melvin’s post-retirement medical
benefits and equitably dividing and distributing the marital estate avoids those pitfalls.

       30
           266 P.3d 337, 343 (Alaska 2011) (first citing TRACY FOOTE, MILITARY
DIVORCE TIPS 17 (2010); then citing MARK E. SULLIVAN, THE MILITARY DIVORCE
HANDBOOK 522 (Am. Bar Ass’n 2006)).
       31
            Ethelbah v. Walker, 225 P.3d 1082, 1095 (Alaska 2009) (quoting Musgrove
v. Musgrove, 821 P.2d 1366, 1370 n.7 (Alaska 1991)).
       32
              See 2 BRETT R. TURNER, EQUITABLE DISTRIBUTION OF PROPERTY § 6.31,
at 193 (3d ed. 2005) (“Divorced parties are notoriously willing to pursue litigation
against each other, and future court actions are therefore a significant possibility as long
as any issues remain outstanding.”).

                                           -11-                                       7189

             We note finally that valuation of Melvin’s medical benefits will affect the
marital estate’s overall value. Once valuation is complete the superior court “may revisit
the larger question of how best to equitably divide the estate,”33 while considering “the
financial condition of the parties, including the availability and cost of health
insurance.”34 The court retains discretion to divide and distribute the estate equitably,
including ordering an equalization payment on reasonable terms.35
V.    CONCLUSION
             We AFFIRM the superior court’s characterization of a portion of Cheryl’s
student loans as marital. We REVERSE the superior court’s decision about Melvin’s
post-retirement medical benefits and REMAND for the superior court to value those
benefits and equitably divide and distribute the marital estate.

      33
            Hanson v. Hanson, 125 P.3d 299, 306 n.22 (Alaska 2005) (citing Harrower
v. Harrower, 71 P.3d 854, 860 n.17 (Alaska 2003)).
      34
             AS 25.24.160(a)(4)(D).
      35
              See Pfeil v. Lock, 311 P.3d 649, 655 (Alaska 2013) (noting that on remand
“if the court engages in an equitable distribution of all of the parties’ marital . . .
property, it may reallocate the property or order an equalization payment to achieve an
equitable distribution”).

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