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A. Ogard v. L. Ogard (4/5/91), 808 P 2d 815
Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
ALTON M. OGARD, )
) Supreme Court No. S-3225
) Trial Court No.
v. ) 3AN-87-8316 Civ.
LEE ANN OGARD, ) O P I N I O N
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Karen L. Hunt, Judge.
Appearances: Helen L. Simpson,
Anchorage, for appellant. Robert C. Ely,
Wade & De Young, Anchorage, for appellee.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
This appeal challenges several interim and final
rulings of the superior court in a divorce action between Lee Ann
Ogard and Alton Ogard.
I. Interim Child Support Award
Alton challenges a March 25, 1988 trial court order
which required him to pay $900 per month in interim child
support. The obligation was made retroactive to the parties'
date of separation, April 1, 1986, and was to continue until
final resolution of the case.
While Alton clearly owed some amount of child support
beginning with the date of separation, we are unable to determine
whether the $900 per month award is appropriate because the court
has not made findings of fact and conclusions of law in support
of the award. Civil Rule 52(a).
It is also uncertain whether Alton was given credit for
the amount he spent to support the children after the separation.
Alton kept records which indicate that he gave Lee Ann $830 in
cash, and spent several thousand dollars directly on the children
for food, clothes and medical care. He claims he is entitled to
a setoff of between $8,640 and $14,400 against the retroactive
award.1 The trial court's order does not indicate how much, if
any, of this was deducted from Alton's child support obligation.
Our decision in Young v. Williams, 583 P.2d 201 (Alaska
1978) does not preclude a reduction in Alton's obligations in
this case. In Young we found that as a general rule
when a defendant husband is required by
a divorce decree to pay to the plaintiff
money for the support of the children and the
unpaid and accrued installments become
judgments in favor of the plaintiff, he
cannot, as a matter of law, claim credit on
account of payments voluntarily made
directly to the children . . . .
Id. at 203 (quoting Briggs v. Briggs, 165 P.2d 772, 777 (Or.
1946)). The Young rule does not apply where, as in the present
case, no child support order exists and the parties have not
independently reached a clear agreement as to custody and their
respective support obligations.
On remand the trial court should specify whether and to
what extent it credited Alton for his expenditures and, if it
failed to do so, the court should adjust the retroactive award in
such amount as it finds appropriate.
II. Interim Child Support Arrearages
In its final decree, the trial court ordered Alton to
pay Lee Ann $275 per month for interim child support arrearages
which had accumulated from April 1, 1986 until the date of trial.
The court found that Alton had not made any payments and that an
arrearage existed in the amount of $26,100. To this, the court
added $3,654 in prejudgment interest (12% per year) pursuant to
AS 47.23.025,2 for a total child support arrearage of $29,754.
The court then assessed postjudgment interest at 12% per year
pursuant to AS 47.23.025. Alton challenges the interest
In Morris v. Morris, 724 P.2d 527, 530 (Alaska 1986),
we held that prejudgment interest may be awarded in divorce
proceedings. The recognized purposes of awarding prejudgment
interest are to compensate the successful party for lost use of
the money and prevent unjust enrichment of the unsuccessful party
who had use of the money. Id. at 529-30. The decision whether
to award prejudgment interest in a particular divorce action is
within the discretion of the trial court. Id. at 530. We find
that the trial court did not abuse its discretion by awarding it
in this case.
The trial court, however, erred with respect to the
rate of prejudgment interest. Alaska Statute 47.23.025 allows
for 12% interest per year on "child support payments." In
context, this is limited to payments under a support order for
which the statute requires notice that "child support payments
are 10 or more days overdue . . . ." AS 25.27.020(a)(2)(C).
Here the trial court awarded 12% interest on the entire amount,
without distinguishing the portion of the award representing
Alton's reimbursement for the debt he incurred by not paying his
fair share of child support expenses following the separation but
before entry of the interim award. See Matthews v. Matthews, 739
P.2d 1298 (Alaska 1987). The award for that period is not a
child support payment within the meaning of AS 47.23.025, and 12%
interest should not have been added to it. Instead, interest
should have been assessed at 10.5% pursuant to AS 09.30.070.3
The award of postjudgment interest should have been
similarly split. Only arrearages accrued after the interim award
can be considered "child support payments"and hence subject to
12% interest through AS 47.23.025. The arrearages based on the
retroactive portion of the award should have been treated as a
debt and subject to postjudgment interest at a rate of 10.5%.
III. Ongoing Child Support
In addition to the $275 per month award for child
support arrearages, the trial court ordered Alton to pay Lee Ann
$1,100 per month in ongoing support until the older of their two
children turns eighteen. At that time Alton's payments will be
reduced to $815 per month until the younger child turns eighteen.
The amounts were calculated using Civil Rule 90.3.
On appeal, Alton argued that the trial court erred by
denying him an offset pursuant to the shared custody provisions
of Rule 90.3(b) and (f). Rule 90.3(a) provides that when "one
parent is awarded sole or primary physical custody" the child
support award is computed as a percentage of the noncustodial
spouse's "adjusted annual income." If the parents have shared
physical custody, child support is calculated by making a
determination using Rule 90.3(a) of what each parent would pay if
the other parent had primary custody, multiplying this amount by
the percentage of time the other parent will have physical
custody of the children, and awarding the spouse with the lower
resulting figure the difference. Rule 90.3(b). According to the
version of Rule 90.3(f) in effect at relevant times, "[a] parent
has shared or joint physical custody of children for purposes of
this rule if the children reside with the parent for a specified
period of at least 25% of the year."4
According to the visitation schedule, the children
spend enough time with Alton to require a finding of shared
custody.5 On remand the court should calculate Alton's child
support obligation pursuant to Rule 90.3(b).
Alton also alleged that the trial court miscalculated
his adjusted annual income for Rule 90.3(a) purposes. The rule
does not explicitly address how adjusted annual income should be
calculated for a sole proprietor such as Alton. He argued that
in determining his adjusted annual income, the court should have
deducted the "legitimate business expenses"incorporated in his
tax records, and payments of principal toward the purchase of a
piece of business equipment (a grader). Lee Ann responded that
tax write-offs frequently do not reflect economic reality and
that allowing capital expenditures gives the obligor too much
discretion with which to diminish a child support obligation.
The trial court rejected use of tax records and chose
instead to start with gross receipts and deduct eight specific
expenses: rent, utilities, equipment maintenance, income tax,
social security, medical insurance, payments into a retirement
plan, and debt servicing costs on equipment that existed at the
time of separation. The court included as income $6,000
representing the rent Alton would have had to pay to live in one
unit of a four-plex that he owned.
We find that the trial court erred in a number of
respects regarding the calculation of Alton's income. First, it
was a mistake to include as income the $6,000 the court estimated
to be the imputed benefit to Alton of living in the four-plex.
As owner of the property he should not be required, in effect, to
pay to live there. Imputing rental income raises difficult
valuation problems. D. Posin, Federal Income Taxation of
Individuals, p. 16 n.17 (1983). It is not called for in Rule
90.3 nor is it suggested by the committee commentary to the rule.
In unusual cases special circumstances may justify imputing
rental income under the good cause exception set out in
subparagraph (c) of the rule.6
Furthermore, while we acknowledge the court's concerns
regarding the accuracy of an income tax return as a reflection of
true income, the technique the court employed did not allow
sufficient recognition of appropriate business expenses.
Although the committee commentary to Rule 90.3 states that there
should be no deduction for accelerated depreciation, see Rule
90.3 Comment III. B., there is no similar suggestion with respect
to straight-line depreciation of business equipment.
Depreciation is a means of reflecting on an annual basis the
costs of capital equipment. Such costs are real and should not
be disregarded unless it appears that equipment was acquired in
order to avoid or reduce the obligor's child support obligation.
Unless that is the case here, on remand, the court should allow a
realistic deduction for depreciation.7
IV. Property Division
Alton alleged errors with respect to the trial court's
division of the parties' property. His first contention is that
the date for valuation of marital assets should not have been the
date on which the parties ceased to function as a single economic
unit, but, rather, the date of the divorce decree. His reasoning
is that the spouse awarded the property, in this case a four-plex
co-owned by Lee Ann and Alton, should not have to bear the entire
loss caused by falling real estate prices. Because the four-plex
was worth more in April 1986, the date the court determined the
economic entity to have been severed, than in December 1988, the
date of the divorce, Alton had to cash Lee Ann out at a higher
We have not previously expressed a general preference
between date of separation and date of trial for valuation of
property. Ordinarily, however, the date of valuation, which may
be distinct from the date employed to distinguish marital from
post-marital property,8 should be as close as practicable to the
date of trial. The choice of the later date is well supported by
authority from other jurisdictions and advances the interests of
accuracy and fairness. See L. Golden, Equitable Distribution of
Property 7.01 at 207 (1983); Cohen & Hennessey, Valuation of
Property in Marital Dissolution, 23 Fam. L.Q. 339, 344-45 (1989).
As Mr. Golden explains:
A valuation date should be chosen
which will provide the most current and
accurate information possible and which
avoids inequitable results. It is distinct
from the date marking the termination point
for inclusion of property within equitable
distribution. The latter date marks the end
of the marital team effort. Since this date
may be well in advance of the dissolution
proceedings, a valuation date linked to it
may result in stale financial information.
L. Golden, supra, at 7.01 (citations and footnotes omitted).
In Nelson v. Nelson, 736 P.2d 1145, 1147 (Alaska 1987),
we held that when "the parties had not co-mingled their financial
affairs since their separation[, t]he separation was . . . a
convenient and appropriate time at which to value the marital
property for division." In so stating we misused the word
"value,"for there was no issue of valuation in Nelson. A more
appropriate word would have been "determine." The question in
Nelson was whether some $17,000 which the parties had on the date
of separation and which Mrs. Nelson subsequently spent before the
trial should have been counted as part of the property division
made to her. The trial court so concluded, and we affirmed.
In Lang v. Lang, 741 P.2d 1193, 1196 n.8 (Alaska 1987),
we directed that valuation take place as of the date of
separation. Again, as in Nelson, the parties raised no issue as
to valuation. The question was whether property acquired by Mrs.
Lang after the separation should have been subject to division in
the divorce. To the extent that our directive in Lang was
intended to fix the valuation date rather than the date for
determination of what property should be divided it seems
difficult to justify unless, as Mrs. Lang claimed, the increase
in value was due to her effort. Otherwise, there was no reason
why the assets of the parties should be given dated and
As noted, there may be special situations in which the
date of separation is more appropriate. Where, for example, "one
of the spouses dissipates assets or deliberately allows their
value to decline following separation, or the value of marital
property increases due to the efforts of one of the spouses,"use
of the separation date may be warranted. L. Golden, Equitable
Distribution of Property 7.02 at 208 (1983). In that event,
there should be specific findings as to why the date of
separation is the more appropriate choice for valuation. On
remand, the court should value the marital property as of the
time of the divorce decree unless it specifically finds that a
special situation necessitating a different valuation date has
Alton also argued that the trial court's valuation of
the grader was inaccurate. The trial court based its decision on
appraisal testimony as to the fair market value for that machine.
Consequently, we find no abuse of discretion in its finding.
V. Attorney's Fees
Alton alleged that the trial court erred in awarding
Lee Ann $2,500 in interim attorney's fees. The award, however,
was omitted from the judgment, and so the claim is moot.
The judgment is VACATED and the case REMANDED to the
superior court for further proceedings as required herein.
1 By "retroactive"we refer to the period between the date
of separation, April 1, 1986, and the interim award, March 25,
1988. The award is reimbursement for the debt incurred by Alton
when he did not pay his fair share of child care expenses after
the parties separated. Matthews v. Matthews, 739 P.2d 1298
2 AS 47.23.025 was renumbered in 1990 and can now be found
at AS 25.27.025. It cross-references AS 47.23.020(a)(2)(C) (now
AS 25.27.020(a)(2)(C)) which provides for imposition of interest
on arrearages for child support payments and AS 43.05.225 which
specifies a rate of 12% per year.
3 AS 09.30.070 provides:
The rate of interest on judgments and
decrees for the payment of money is 10.5
percent a year . . . .
4 Commentary to the current version of Rule 90.3 indicates
that residency is evaluated by counting the number of times the
children spend the night with the parent. Rule 90.3 Commentary V.
5 Alton was awarded visitation as follows: every other
weekend from Friday afternoon until Sunday evening; every
Wednesday from 3:30 p.m. to 8:00 p.m; every other holiday
(holidays include Thanksgiving, Christmas and spring break); two
four-consecutive week periods each year; and Father's Day.
Without holidays this comes to approximately 108 overnights which
is clearly in excess of the 91 nights required (25% of 365 days)
for a finding of shared custody.
6 One such case would be where an obligor parent has reduced
his or her income by liquidating income-producing assets and
applying the proceeds to the mortgage on his or her dwelling.
7 Alton's argument that he should be able to deduct
depreciation expenses and principal payments on a grader would
give him a double deduction and thus lacks merit.
8 Hunt v. Hunt, 698 P.2d 1168 (Alaska 1985), is an example
of a case where a separation date was properly used to
distinguish marital from post-marital property.