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Miller v. Miller (01/28/2005) sp-5863
Miller v. Miller (01/28/2005) sp-5863
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
LORNE C. MILLER, )
) Supreme Court No. S-11122
Appellant, )
) Superior Court No.
v. ) 3AN-01-7297 CI
)
VIOLETA E. MILLER, ) O P I N I O N
)
Appellee. ) No. 5863 - January 28, 2005
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Morgan Christen, Judge.
Appearances: William T. Ford, Anchorage, for
Appellant. Allison E. Mendel, Mendel &
Associates, Anchorage, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
Lorne C. (Chad) and Violeta Miller were divorced in
2003 after fifteen years of marriage. Chad Miller appeals the
superior courts property division and its award of attorneys
fees. He argues that the court made insufficient findings to
support its decision, that it incorrectly classified as marital
property the family home and a cash gift to Chad, that it
overvalued the marital estate, and that it required him to pay
excessive attorneys fees. Because the trial courts findings are
sufficient and supported by the record, we affirm the courts
classification of the marital home and cash gift as marital
property and its attorneys fees award. Because Chad has not
demonstrated that the courts valuation of the marital estate was
clearly erroneous, we affirm the superior court in this regard as
well.
II. FACTS AND PROCEEDINGS
Chad and Violeta Miller were married in May 1988 and
permanently separated in March 2001. Chad filed for divorce in
May 2001. Two children were born of the marriage, in 1989 and
1990.1 Violeta was a mother and homemaker during much of the
marriage, and Chad worked as an electrician and occasionally for
his familys business.
During the marriage, the family lived in a home given
to Chad by his mother, Molly Miller, one week before his marriage
to Violeta. The parties lived in this home until they separated
in March 2001. In 1998 Molly Miller also gave a large cash gift
to Chad. Although Chad initially placed this money in an
investment account bearing his name alone, he later transferred
the funds to a joint account bearing both his and Violetas names.
At a bench trial held in March 2003 to resolve disputes about
property division, Violeta testified that she believed that these
funds were marital property because her name was on the account.
Chad testified that he considered the funds to be separate
property and that he added Violetas name to the account strictly
for probate purposes.
The investment account grew from an initial investment
of $230,000 in 1998 to $290,000 in 2000, but the balance had
dropped to $173,729 by the time the parties separated in March
2001. Chad testified that this decline was due to market losses.
After the parties separated, however, Chad began to spend vast
sums of money on personal items, living expenses, gifts, and
internet gambling, depleting the account by more than $94,000 by
the end of May 2001, the month he filed for divorce. By October
31, 2001 this account had a zero balance, despite a pretrial
order issued on May 16, 2001 enjoining the parties from using
marital property for any purpose other than personal and
necessary expenses. Chad Miller testified that he spent the
money because his investments were declining in value and he
wanted to use the money himself rather than lose it in the stock
market. He claimed that he saw nothing wrong with spending this
money after separation because he thought the money was his
separate property and no one had informed him that it was
inappropriate to do so if he was contemplating a divorce.
The superior court issued a decision on June 6, 2003
holding that the marital home, though originally Chads separate
property, was transmuted into marital property over the thirteen
years the parties lived there together. The court also found
that the cash gift from Chads mother was transmuted into marital
property when Chad intentionally placed the funds into a joint
account and used the account for marital purposes. The court
divided the marital property equally pursuant to a property
valuation proposed by Violeta and ordered Chad to make a cash
payment to Violeta in the amount of $123,269. The court had
earlier ordered Chad to pay $10,000 for Violetas attorneys fees
and, following entry of judgment, it ordered Chad to pay an
additional $10,000 toward Violetas fees.
Chad appeals.
III. STANDARDS OF REVIEW
The division of property in a divorce action is a
matter committed to the discretion of the trial court.2 Property
division entails a three-step process: (1) determination of what
property is marital and available for distribution, (2) valuation
of the property, and (3) equitable distribution of the property.3
The courts application of this three-step process will be
reviewed under the abuse of discretion standard and its rulings
will not be overturned unless clearly unjust.4 The law presumes
that an equal division of property is equitable.5 A trial courts
determination that the parties intended to treat property as
marital is reviewed for clear error, as is the courts valuation
of marital property.6 Whether the courts findings are
sufficiently clear is a matter of law which we review de novo.7
IV. DISCUSSION
A. The Superior Court Did Not Err in Adopting Violetas
Findings of Fact and Conclusions of Law.
Chad argues that the superior court erred by adopting
Violetas proposed findings of fact and conclusions of law without
making any independent findings to justify its decision. He
claims that the courts failure to make independent findings
violates Alaska Civil Rule 52(a)8 as we construed it in Fairbanks
Builders, Inc. v. Morton DeLima, Inc.,9 because there is no basis
upon which to identify the courts independent view of the
evidence. This argument is without merit.
A superior court has an obligation to make clear and
explicit findings to support its decisions.10 In Fairbanks
Builders, we noted that the trial courts adoption of counsels
findings, which did not provide any justification for its award
of damages, was tantamount to an improper delegation of the trial
judges primary duty under Civil Rule 52 of finding the facts
specially.11 But a trial court can adopt findings and conclusions
prepared by counsel so long as they reflect the courts
independent view of the evidence.12 We are convinced that the
trial court in this case adopted Violetas proposed findings
because it agreed with them in toto.
The findings clearly and explicitly articulated the
grounds upon which the court identified the property available
for distribution, the value it placed on that property, and the
division it found most equitable. The findings are thus
sufficiently detailed to permit appellate review. It appears
that Chad attacks not the adequacy of the findings, but the
courts characterization of the marital home and the cash gift
from Molly Miller as marital property and its valuation of that
property. But whether the trial courts findings were erroneous
is a different matter altogether from whether they were
sufficiently clear and explicit to permit appellate review, which
is what is required by Alaska Civil Rule 52(a).13
B. The Superior Court Correctly Classified the Marital
Home and a Cash Gift to Chad Miller as Marital
Property.
1. Marital Home
Chad Miller argues that the superior court erred in
classifying the family home as marital property subject to
equitable distribution. While he acknowledges that a premarital
home owned by one spouse can transmute into marital property if
it is used as the primary marital residence,14 he claims that the
home remains his separate property because the parties always
viewed it as such. Alternatively, he argued below that if any
portion of the homes value was marital property, it would be only
that amount by which the home appreciated in value during the
marriage. On appeal, he advances a different alternative
argument: that the superior court abused its discretion by
failing to apply the Merrill factors.15 Chads principal argument
is not supported by the record. His first alternative argument
is incorrect as a matter of law, while the second was waived by
failure to present it to the superior court.
Property owned by one party as separate property
becomes marital property if the parties demonstrate an intent to
treat the property as marital.16 In determining whether a home
should be treated as marital property, a court will consider
factors such as: (1) use of the property as the parties personal
residence, (2) both parties participation in ongoing maintenance
and management, (3) placing title in joint ownership, and (4)
using the credit of the non-titled party to improve the property.17
The superior court found that although the home was
originally a gift to Chad from Molly Miller prior to his marriage
to Violeta, the residence was transmuted from separate to marital
property by the actions of the parties over the thirteen years
that they lived there together. The court found that taxes,
insurance, and maintenance expenses were paid from marital
property; that Violeta cleaned and maintained the house during
the marriage; and that Chad made no attempts to maintain the
separate character of this property. These factual findings are
supported by the record. The parties lived together in the home
for a substantial period of time and both of them contributed
toward maintenance and upkeep. The superior courts determination
that the parties intended to treat the home as marital property
was not clearly erroneous.
Chad also argued before the superior court that, if any
portion of the home is marital property, it would be only that
portion representing its appreciation in value during the time
the parties lived together. He claimed that the court should at
most award Violeta only one-half of the increased value rather
than one-half of the total value of the home. This argument
ignores the differences between the theories of transmutation and
active appreciation. While separate property can become marital
property under either theory, transmutation converts an asset
entirely from separate to marital, while active appreciation
converts to marital property only the increase in an assets value
due to a contribution of marital funds or efforts.18 These
theories are mutually exclusive, and we have previously held that
if separate property is transmuted into marital property, the
trial court must allocate the entire equity in the property
rather than just the appreciation in value.19 The parties
stipulated that the home was worth $144,000. The house was
unencumbered through March 2001 when the parties separated, and
thus the superior court correctly determined that the full equity
value was marital property.20
Perhaps recognizing that the active appreciation
argument he made below was inconsistent with transmutation, Chad
argues on appeal that his contention before the superior court
that Violeta should be awarded one-half the amount by which the
house appreciated during the marriage was only a short-hand
method of backing out the premarital value of the home, believing
that an equitable division of this asset should weigh heavily in
his favor because it was [a] gift from his family. Chad then
argues that the superior court erred in not applying the Merrill
factors to the home to determine an appropriate division.
Because Chad did not make this argument to the superior court,
arguing only an active appreciation theory to that court (as an
alternative to his principal argument that the house was his
separate property), we decline to address it here.21
2. Investment Account
Chad also argues that the court erred in classifying as
marital property an investment account opened with funds given to
him by his mother. He claims that this gift was an advancement
on his inheritance that remained his separate property throughout
the marriage. The superior court found that these funds were
transmuted into marital property when Chad transferred them from
an account in his name alone into an account in the parties joint
names. This finding is not clearly erroneous.
Molly Miller gifted Chad $230,000 in 1998. With these
funds he opened an investment account in his own name at Morgan
Stanley Dean Witter, listing Violeta and his children as
beneficiaries of equal shares in the event of his death.
Approximately one year later, these funds were transferred to a
joint account in the names of both Chad and Violeta. Under this
account the parties were joint tenants with rights of
survivorship, so if one party died before the other, the
surviving spouse would receive the entire account balance. At
trial Chad testified that he transferred the funds to a joint
account so that if he died before Violeta the funds would
transfer to her without going through probate, but that he was
fully in control of the account because it was his inheritance.
Inherited property is separate, even if received during
marriage, though it can be transmuted into marital property where
that is the intent of the owner.22 There is a strong presumption
that placing separate property into a joint account demonstrates
an intent to treat the property as marital.23 Thus, absent
evidence to the contrary, Chads decision to move the funds into a
joint account will be viewed as a demonstration of his intent to
treat the property as marital.24 Chad argues that this
presumption is rebutted by Violetas testimony that she never
tried to access the funds and by Chads testimony that the joint
account was created strictly for probate purposes.
While Violeta testified that she never attempted to
access funds from the joint account, she also stated that she
considered the account to be marital property because her name
was on it, and that the parties used these funds for ongoing
household expenses such as taxes. The trial court found that the
fact that Violeta never made withdrawals from the account was
insignificant given Chads general unwillingness to allow Violeta
to participate in major decisions or to exercise control over the
familys finances.
Furthermore, the evidence does not support Chads claim
that account ownership was changed solely for probate purposes.
At trial Chad testified that he put the account in joint
ownership in 1999 on the recommendation of his mother because of
the delays and costs the family experienced dealing with the
probate process after the death of Chads father. Chad claimed
that joint ownership would ensure that Violeta got the funds
automatically upon his death. But earlier he also testified that
the house was put into his name alone based upon the advice of
his mother because she knows about probate and it would be best
if [the house] was in my name free and clear, before I get
married, so that if something did go wrong later with the
marriage, that [Violeta] couldnt try to take the whole thing. It
appears that Chads father died in the early 1980s, well before
Mollys gift of the Anchorage home in 1988 and her subsequent cash
gift in 1998. If the ownership decisions were made to avoid
problems with probate, it would make little sense to maintain
sole title to the home while placing the investment account in
joint ownership.
The trial courts finding that the investment account
transmuted to marital property was not clearly erroneous.
C. The Superior Courts Valuation of the Marital Estate Was
Not Clearly Erroneous.
Chad also argues that the superior court erred in
valuing the investment account and numerous items purchased with
funds from that account. He claims that although an annuity
listed as marital property was cashed in and the funds spent
shortly after the parties separated, the trial court nonetheless
counted as part of the marital estate the value of the annuity
and the items purchased after it was cashed in, thus double-
counting the annuity. He also claims that the trial court erred
by failing to conduct an independent valuation of the property he
purchased shortly after the parties separated. Because Chad has
failed to demonstrate that the courts valuation of the marital
estate was clearly erroneous, we affirm that part of its decision
as well.
At trial Violetas counsel argued that the marital
estate included the $173,729.45 value of the Morgan Stanley Dean
Witter account as of the date of separation. Chad acknowledged
that this account had a balance of $173,000 when the parties
separated, though, as discussed above, he argued that this was
his separate property. Although these funds had been spent by
the time of trial, Violetas counsel argued that any property
purchased from this account should be valued at its purchase
price since Chad was not authorized to convert the cash into
assets that depreciate rapidly. Violetas proposed property
distribution, which was adopted by the superior court, was based
in large part upon information provided by Chad prior to trial,
including his initial disclosures and a summary of the property
he purchased after the parties separated. The parties stipulated
to the value of the marital home and Chads pension, and the
vehicles were appraised. The values for almost all additional
marital property were based upon information provided by Chad.
The court valued the marital estate at $432,22625 and ordered Chad
to make a cash payment to Violeta in the amount of $123,269.
This court has consistently held that the date for
classification of property is that of separation, but that
property should be valued as close as possible to the date of
trial.26 The findings adopted by the superior court indicate that
the parties separated on May 16, 2002 when Chad Miller filed this
action. This is apparently a typographical error since Chad
filed for divorce on May 16, 2001 and the parties agreed before
trial that the date of separation was March 25, 2001. As of that
date, the Morgan Stanley Dean Witter account had a cash balance
of at least $173,729.45,27 an amount corroborated by account
records and Chads trial testimony. Included in this sum was an
annuity valued at approximately $101,000, which was later cashed
in.
In the weeks after separation, Chad spent an enormous
amount of money, depleting the account by $68,503.49 in the month
of April 2001 alone. He used the funds on items such as an
$18,000 all-terrain vehicle, a $32,000 custom-made travel
trailer, an $11,750 emerald ring for Violeta, and thousands of
dollars of internet gambling. Chad also testified that he took
the children out to dinner nightly, spending at least $100 each
night.
There is no merit to Chads claim that the property
distribution overstated the available property by the entire
value of the annuity. While the property distribution adopted by
the court includes an annuity valued at $101,000, Violetas
counsel explained that this item was incorrectly labeled and that
this sum represented the account balance after Chad cashed in the
annuity in March 2001. Financial records from this account show
that there was a balance of $105,225.9628 on April 30, 2001 after
Chad spent nearly $70,000 on the travel trailer, emerald ring,
and other property that month. The courts distribution included
cash and personal property in Chads possession at the time of
separation valued at $188,487.29 While the property distribution
incorrectly classified cash as an annuity, there is no evidence
that the annuity was double-counted.
Chad also argues that the court erred in valuing the
property he purchased from this account at its purchase price
rather than its fair market value at the time of trial. As
Violetas counsel noted at trial, much of this property is of a
type that depreciates rapidly, such as tools, electronic
equipment, recreational vehicles, camping gear, exercise
equipment, and automobile upgrades. While a trial court should
normally value property at the time of trial it can, in special
circumstances, value the property at the time of separation, so
long as the court makes specific findings regarding why the
earlier date is proper.30 Dissipation of marital assets justifies
a valuation at the time of separation.31 The courts findings
specifically note that Chad rapidly dissipated the investment
account after separation. Furthermore, Chad has alleged no
specific error in the courts valuation of any property. Nearly
all property was valued by stipulation, appraisal, or from
information provided by Chad himself. Chads appeal does not
identify any property that was overvalued, nor could his counsel
identify any such property at oral argument. Accordingly, Chad
has failed to demonstrate clear error in the courts valuation of
the marital estate.
D. The Superior Court Did Not Err in Awarding Attorneys
Fees.
Finally, Chad argues that the court abused its
discretion by ordering him to pay $20,000 of Violetas attorneys
fees, and that it erred by failing to credit him for an interim
award he had already paid. There is no evidence that the trial
court abused its discretion in making this award.
An award of attorneys fees in a divorce action should
be based upon the relative economic situations and earning powers
of the parties.32 A trial court has broad discretion to award
attorneys fees in a divorce action, and we will not overturn such
an award unless it is arbitrary, capricious, or manifestly
unreasonable.33 The trial court entered an interim award in April
2002 ordering Chad to pay Violeta $10,000 toward her attorneys
fees. The court indicated that this amount was an advance
against the ultimate fee award entered in the action. In
September 2003, three months after entry of decision regarding
the property distribution, the court awarded Violeta an
additional $10,000, noting that this sum was in addition to the
interim fees already awarded.34 The court justified the total
award of $20,000, which represented approximately two-thirds of
Violetas total fees,35 solely on the basis of Chads superior
economic position, though it noted that the record would support
a finding that Chad had engaged in vexatious conduct throughout
the litigation.
Chad claims that the total award was too high since the
court ordered an equal division of marital property. But the
courts order specifically noted that Violetas fees were higher
than normal because her counsel had to reconstruct the value of
assets that Chad dissipated after separation, a process made even
more difficult because Chad was not fully cooperative. Violeta
incurred these fees while establishing the value of the marital
estate and her right to an equal share. The court did not abuse
its discretion in its fee award.
V. CONCLUSION
For the foregoing reasons we AFFIRM the decision of the
superior court in all respects.
_______________________________
1 No custody or support issues are before us on appeal.
2 See AS 25.24.160(a); Sampson v. Sampson, 14 P.3d 272,
275 (Alaska 2000).
3 Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska 1983).
4 Sampson, 14 P.3d at 275.
5 Lundquist v. Lundquist, 923 P.2d 42, 53 (Alaska 1996).
6 Cox v. Cox, 882 P.2d 909, 913-14 (Alaska 1994).
7 Rausch v. Devine, 80 P.3d 733, 737 (Alaska 2003)
(questions of law are reviewed de novo). The adequacy of a
courts findings is a matter of procedural law. Fairbanks
Builders, Inc. v. Morton DeLima, Inc., 483 P.2d 194, 196-97
(Alaska 1971).
8 This rule states, in relevant part: In all actions
tried upon the facts without a jury or with an advisory jury, the
court shall find the facts specially and state separately its
conclusions of law thereon . . . .
9 483 P.2d 194 (Alaska 1971).
10 See, e.g., Mapco Express, Inc. v. Faulk, 24 P.3d 531,
543 (Alaska 2001).
11 Fairbanks Builders, 483 P.2d at 196-97. We nonetheless
declined to vacate the award because Fairbanks Builders failed to
argue that the award itself was erroneous. Id. at 197-98.
12 Indust. Indem. Co. v. Wick Const. Co., 680 P.2d 1100,
1108 (Alaska 1984).
13 See Sullivan v. Subramanian, 2 P.3d 66, 69 (Alaska
2000) (findings and conclusions should be so clear and explicit
as to give supreme court clear understanding of basis for
decision).
14 See, e.g., Chotiner v. Chotiner, 829 P.2d 829, 832
(Alaska 1992).
15 Merrill v. Merrill, 368 P.2d 546, 547 n.4 (Alaska
1962).
16 Cox v. Cox, 882 P.2d 909, 916 (Alaska 1994).
17 Id.
18 See, e.g., Harrower v. Harrower, 71 P.3d 854, 857-58
(Alaska 2003) (discussing differences between transmutation and
active appreciation).
19 Compton v. Compton, 902 P.2d 805, 812 (Alaska 1995).
20 While Chad took out a loan against the property in
2002, ostensibly to pay expenses related to this litigation, it
would be improper to reduce the equity value of the marital home
based upon debt incurred after separation and the filing of
divorce, particularly where, as here, a party has spent an
immense sum of money on discretionary expenses shortly after
separation. See Dodson v. Dodson, 955 P.2d 902, 910 (Alaska
1998) (debt acquired after physical separation was separate
property); Foster v. Foster, 883 P.2d 397, 399 (Alaska 1994)
(date marriage ceases to function as single economic unit,
typically date of separation, is time after which newly-acquired
property is non-marital). The revolving line of credit secured
against the Anchorage home is Chads separate property.
21 See Hoffman Constr. Co. v. U.S. Fabrication & Erection,
Inc., 32 P.3d 346, 355 (Alaska 2001) (As a general rule, we will
not consider arguments for the first time on appeal.).
22 Sampson v. Sampson, 14 P.3d 272, 276 (Alaska 2000);
Chotiner v. Chotiner, 829 P.2d 829, 832 (Alaska 1992).
23 Brown v. Brown, 947 P.2d 307, 311 (Alaska 1997)
(quoting Chotiner, 829 P.2d at 833).
24 Lewis v. Lewis, 785 P.2d 550, 555 (Alaska 1990).
25 The home, pension, and vehicles were valued at
$243,739. The balance of $188,487 was comprised of personal
property and cash in Chads investment account at the time of
separation.
26 See, e.g., Leis v. Hustad, 22 P.3d 885, 888 (Alaska
2001).
27 The account balance on March 31, 2001 was $173,729.45.
Because there is no evidence that funds were deposited into this
account after separation, we assume that the balance on March
25, 2001 was at least $173,729.45.
28 Violetas counsel explains that the account balance was
incorrectly listed as $101,000 rather than $105,000, but that
this discrepancy works to Chads benefit.
29 See supra note 25. The difference between this sum and
the $173,729 cash balance at separation represents the value of
marital property already in Chads sole possession at separation.
30 Cox v. Cox, 882 P.2d 909, 917 (Alaska 1994).
31 Id. at 918 n.5. To recapture dissipated funds, the
court gives the property an earlier valuation date and credits
all or part of that valuation to the party that controlled the
asset. Foster v. Foster, 883 P.2d 397, 399 (Alaska 1994).
32 Kowalski v. Kowalski, 806 P.2d 1368, 1372 (Alaska
1991).
33 Sloane v. Sloane, 18 P.3d 60, 64 (Alaska 2001).
34 Because this award was entered after Chad appealed to
this court and Chad never amended his appeal to include this
order, Violeta argues that Chad has waived the right to contest
the award of fees. But Chads points on appeal claimed error in
the courts award of attorneys fees, so Violeta was on notice that
this issue would be contested, and the issue was adequately
briefed. Accordingly, Chad preserved the right to appeal the
fee award. See Winn v. Mannhalter, 708 P.2d 444, 449 (Alaska
1985) (issue preserved if raised at trial, adequately briefed on
appeal, and opposing counsel sufficiently apprised of issue
presented).
35 Violetas total attorneys fees were $34,860.19, while
Chads total fees were approximately $10,000.
