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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Watega v. Watega (09/08/2006) sp-6041

Watega v. Watega (09/08/2006) sp-6041, 143 P3d 658

     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

LESLEY J. WATEGA, )
) Supreme Court No. S- 11652
Appellant,)
) Superior Court No.
v. ) 3PA-02-86 CI
)
CRAIG T. WATEGA, DAVID ) O P I N I O N
DRUMM, and KRISTY DRUMM,)
)
Appellees. ) No. 6041 - September 8, 2006
)
          Appeal  from the Superior Court of the  State
          of  Alaska, Third Judicial District,  Palmer,
          Beverly W. Cutler, Judge.

          Appearances:   David  A.  Golter,  Golter   &
          Logsdon,   P.C.,   Palmer,   for   Appellant.
          Michael Jungreis, Bethany A. Pribila,  Hartig
          Rhodes  Hoge  &  Lekisch, PC, Anchorage,  for
          Appellees Kristy and David Drumm.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          MATTHEWS, Justice.


I.   INTRODUCTION
          At  issue  in  this case is whether the superior  court
erred when it authorized the sale of a divorcing couples home  on
motion  of  one  party and over the objection of the  other.   We
conclude  that while courts do have the authority to  permit  the
sale  of property despite the objection of a party when a divorce
is pending, that authority should be exercised sparingly and only
for  pressing reasons.  Here, because no pressing reason existed,
the  superior  court abused its discretion when it permitted  the
sale.
II.  FACTS AND PROCEEDINGS
          Lesley  and  Craig Watega married in 1994.  Four  years
later,  the  couple built the house that is the subject  of  this
dispute.  The title to and the deed of trust on the house were in
both Lesley and Craigs names.
          Craig  filed for divorce in January 2002.  The superior
court,  in  an interim order, gave Craig possession of the  house
for  the  duration of the divorce proceedings.   The  court  also
required  Craig to pay the existing deed of trust note arrearages
and to make all future payments on it.  Despite the courts order,
Craig  did  not  make  any payments, and the  Wategas  fell  even
further behind in their deed of trust note payment obligations.
          Because  none  of the 2002 deed of trust  payments  had
been  made,  the  holder of the deed of trust  began  threatening
foreclosure.   At the end of May 2002, worried about  foreclosure
and with his divorce still pending, Craig petitioned the court to
compel  the  sale of the property.  Craig explained that  he  had
found purchasers, David and Kristy Drumm, who were willing to pay
$147,100  for  the house, which Craig described as  a  break-even
price.  Craig knew David Drumm from their employment together  in
the Alaska National Guard.
          Lesley opposed the compelled sale.  In response,  Craig
explained  to  the  court that the sale price would  actually  be
closer to $153,000 because the Drumms would pay the approximately
$6,000 of payments in arrears.  In addition, the Drumms would pay
all of the closing costs.  Craig also informed the court that the
Drumms  wanted  until December 2003 to secure  financing.   Until
they  obtained financing, the Drumms would lease the property  at
the amount of the monthly payment plus dues.
          Craig submitted to the court a copy of an agreement the
Drumms  had  signed.   The Drumms had experience  in  buying  and
selling real estate, and it was they who provided Craig with  the
form  agreement,  which was entitled Earnest  Money  Receipt  and
Agreement  to  Purchase (EMA).  David Drumm  drafted  and  Kristy
Drumm  handwrote additional terms and conditions, which  read  as
follows:
               (1)  Buyer  will pay arrears of  current
          mortgage[;] (2) Buyer will lease property for
          at   least  18  months  in  order  to  obtain
          financing[;]  (3) Lease will  be  at  current
          mortgage  rate per month plus annual  dues[;]
          (4)  if financing is unattainable buyer  will
          be   reimbursed  for  arrears  payment  made,
          including  any  additional payments  made  to
          principal[;] (5) if financing is unattainable
          buyer will be reimbursed for any improvements
          made that increase the property value[,] i.e.
          fences, paving or additional building[;]  (6)
          Buyer  will  pay all closing cost  as  stated
          above in costs.
          
          Without conducting a hearing, the court granted  Craigs
motion for a proposed sale.  The Drumms moved into the home  very
soon  after the court issued its order.  Before the Drumms  moved
in,  but possibly after the Drumms had paid the arrearages, Craig
warned David that Lesley would likely continue fighting the  sale
in court.
          Lesley  filed a motion for reconsideration, arguing  in
part  that  the  court should at least have conducted  a  hearing
prior to allowing the property to be sold.  The court conducted a
hearing  in  response to Lesleys motion for reconsideration.   At
the  hearing, the court explained that it believed a  foreclosure
would  be  bad for Lesleys financial future, given that  she  had
declared bankruptcy in the past.  The court refused to change its
decision  to permit the sale, in part because the sale alleviated
the  burden  of  imminent foreclosure, and in  part  because  the
Drumms had relied on the courts decision when they moved into the
home.
          Lesley  alleges that sometime after the hearing,  Craig
changed  his  mind about selling the property to the  Drumms  and
destroyed  the  EMA,  which  he had  never  signed.   Craig  also
allegedly  quitclaimed his interest in the  property  to  Lesley.
Craig  argues  that his execution of the quitclaim deed  was  the
result of duress.
          After  Lesley asked the court to award her the property
based on the quitclaim, the court allowed the Drumms to intervene
in  the  Wategas  divorce proceeding.   In  their  first  act  as
intervenors,  the  Drumms filed a motion  for  summary  judgment,
asking  that the court declare them the equitable owners  of  the
property  and order specific performance of the EMA.   The  court
granted  the  Drumms  motion for summary  judgment.   Instead  of
declaring  the  Drumms  the equitable  owners  of  the  property,
however,  the  court deemed them to be bona fide  purchasers  for
value.
          After the Drumms received a preliminary credit approval
for  a loan on January 5, 2004 (which was five days after the EMA
stated that the sale needed to be recorded), they asked Lesley to
provide  a  deed  to  the house so that they could  close.   When
Lesleys  attorney responded by demanding that the  Drumms  vacate
the  property  because they had defaulted on the  agreement,  the
Drumms  filed  a motion for final judgment asking  the  court  to
direct  Lesley to execute a deed conveying the property to  them.
Lesley  responded with a motion for possession of real  property.
After  a  hearing,  the superior court issued  a  final  judgment
pursuant  to  Civil  Rule  54(b).  In  the  judgment,  the  court
declared  the  Drumms to have a valid and enforceable  possessory
interest in the property and outlined the process they needed  to
follow in order to close on the house.
          Lesley appeals.
III. DISCUSSION
     A.   The  Superior  Court  Abused  Its  Discretion  when  It
          Permitted Craig To Sell the Home.
          
          1.   Courts do have the authority to permit the sale of
               property while a divorce is pending.
               
        Lesley argues that the superior court had no authority
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           to order the sale of the couples property before the divorce
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           trial took place.  The Drumms respond by saying that AS
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           25.24.140(b)(6) permitted the court to allow Craig to sell
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           marital property over Lesleys objections.
          Alaska  Statute  25.24.140  governs  orders  issued  by
superior  courts  during  divorce  and  annulment  actions.   The
statute mentions the sale of marital property during the pendency
of a divorce, stating in relevant part:
               (b) During the pendency of the [divorce]
          action,   upon  application,  a   spouse   is
          entitled  to  necessary  protective   orders,
          including orders . . .
          
               (6)  prohibiting a spouse
               from  disposing  of   the
               property of either spouse
               or    marital    property
               without the permission of
               the  other  spouse  or  a
               court order.[1]
               
          We  apply  our  independent judgment  to  questions  of
statutory interpretation.2
          As  Lesley points out, AS 25.24.140(b)(6) is couched in
terms  of  protective  orders  that  preserve  assets  for  later
division.   However, the statute does envision two exceptions  to
the prohibition on sale.  If one spouse has obtained a protective
order  to preserve property, the other spouse may still sell  the
property  in  two  circumstances:  if  the  first  spouse  grants
permission  or if the court issues a subsequent order  permitting
the sale.  Because the language about court-ordered sales appears
in  the  exception, AS 25.24.140(b)(6) may not amount to explicit
statutory authorization for courts to issue orders for  the  sale
of  property.  Nevertheless, the language of the statute  clearly
presumes court authority to permit sales.
          We  have  not previously addressed the issue of whether
superior  courts  have the power to authorize sales  of  property
pending  a divorce, but we have responded to an argument  that  a
superior  court  failed to properly account for the  proceeds  of
such a sale.  In Ogden v. Ogden the superior court permitted  the
wife  to sell marital assets in order to pay living expenses  and
marital  debts.3   Later,  when the superior  court  divided  the
couples  property, it did not credit the wife with  the  proceeds
from  the  sale.4  While we did not directly address the superior
courts  authority to permit the sale, we expressed no hesitations
about  the  validity of the underlying sale when  we  upheld  the
superior courts treatment of the proceeds.5
          Lesley  cites  a  California  appellate  case,  Lee  v.
Superior Court,6 to support her argument that the superior  court
in  this  case  did  not have the authority to permit  the  sale.
California,  like  Alaska,  possesses  a  statute  that   permits
superior  courts to issue orders to prohibit the sale of property
during  the pendency of a divorce.7  In Lee, the appellate  court
          concluded that the statute
          is  intended  to  apply  only  to  prevent  a
          transfer   to  maintain the status  quo   and
          does  not authorize the trial court, ex parte
          or  otherwise,  to change the status  quo  by
          authorizing the sale of property involved  in
          a  dissolution proceeding and the transfer of
          the  proceeds  to one of the parties  without
          adequate safeguards for the other.[8]
          
          However, as Lesley acknowledges, the California statute
being interpreted in Lee, unlike AS 25.24.140, only allows courts
to  issue  restraining orders; it did not contain a court-ordered
sale  exception.9   As a result, the California appellate  courts
interpretation  of  the statute in Lee is inapposite  to  whether
Alaska courts have the authority to permit sales.
          Randazzo  v.  Randazzo,10 a case in which  the  Supreme
Court  of  New  Jersey recently addressed the  issue  of  whether
courts  have  the  equitable power to order  the  disposition  of
property  prior  to  the  divorce of the parties,  is  much  more
helpful.   The  spouse opposed the sale of property  in  Randazzo
and,  like  Lesley  here,  argued that the  court  only  had  the
authority  to  distribute  marital assets  at  the  time  of  the
divorce,  not  before.11  The supreme court concluded  otherwise,
holding  that the courts have the equitable power to order  sales
pending divorce.12
          The   Randazzo  court  reached  this  conclusion  after
analyzing  New  Jerseys  statutes and  court  rules.   Unlike  in
Alaska, where orders during the pendency of a divorce action  are
governed by one statute, AS 25.24.140, and the equitable division
of  property  in  a divorce judgment is governed by  another,  AS
25.24.160, in New Jersey, both aspects of the divorce process are
controlled by just one statute.  The relevant New Jersey  statute
states that
          [p]ending any matrimonial action .  .  .  the
          court  may make such order as to the  alimony
          or maintenance of the parties, and also as to
          the  care, custody, education and maintenance
          of  the  children, . . . as the circumstances
          of  the  parties and the nature of  the  case
          shall  render fit, reasonable, and just  .  .
          . .[13]
          
          The  statute then goes on to authorize courts  where  a
judgment  of  divorce . . . is entered [to] make  such  award  or
awards   to  the  parties  .  .  .  to  effectuate  an  equitable
distribution of the [marital] property, both real and personal  .
.  . .14  The statute nowhere specifically mentions court-ordered
sales of property.  However, a New Jersey court rule does provide
that  courts  can  direct  the  parties  to  sell,  mortgage,  or
otherwise  encumber or pledge marital assets to  the  extent  the
court  deems  necessary  to  permit  both  parties  to  fund  the
litigation.15
          The Randazzo court first determined that the portion of
          N.J. Stat. Ann.  2A:34-23 allowing courts to make orders
necessary  for  maintenance limits the  portion  of  the  statute
instructing that equitable distribution occur at the time of  the
divorce  judgment.16   The  court  then  concluded  that  it  was
consistent  with  the statute and the rule for  trial  courts  to
exercise [their] discretion to order the sale of marital assets.17
          Since  AS 25.24.140(b)(6) explicitly contemplates court
authority  to  order sales of property while divorce  proceedings
are  ongoing, we believe that the existence of such authority  is
even clearer here than it is in New Jersey.
          Because  there  is  no  specific language  about  court
orders in the New Jersey statute, the Randazzo court locates  New
Jersey  courts authority to issue such orders in their  authority
to  provide  for the parties maintenance.  The New  Jersey  court
resultantly  analyzed the issue of whether the  trial  court  had
abused  its discretion by asking whether the sale of the property
in  the Randazzo case was necessary for the financial maintenance
of  the  parties.18  Lesley argues that this court should take  a
similar  approach.  According to Lesley, if AS 25.24.140 provides
superior courts with any authority to permit sales, it only  does
so  if  such a sale is necessary to enforce a support order.   In
other   words,   Lesley  argues  that  we  should  interpret   AS
25.24.140(b), which addresses court orders, through the  lens  of
AS  25.24.140(a), which permits courts to award spouses expenses,
including   reasonable  spousal  maintenance.    Alaska   Statute
25.24.140  provides  no indication that the legislature  intended
for  the separate sections of the statute to be read together  in
the way suggested by Lesley.  Since AS 25.24.140(b) independently
mentions court authority to order sales, we do not need to follow
the  New  Jersey approach and extrapolate such authority from  AS
25.24.140(a).   That  is  not to say that  superior  courts  have
unlimited  authority  to permit the sale  of  property  during  a
divorce,  however.  We address limitations on such sales  in  the
next section.
          2.   Courts may only exercise their authority to  order
               sales in exceptional circumstances not present  in
               this case.
               
          In   addition   to  questioning  the  superior   courts
authority  to  order the sale, Lesley argues  that  the  superior
court  abused its discretion when it granted Craig permission  to
sell the property.
          We  review  a  superior  courts issuance  of  an  order
permitting  the  sale  of  property  using  the  same  abuse   of
discretion standard that we employ when reviewing other  superior
court orders.19  We find an abuse of discretion when we are  left
with  a  definite and firm conviction, after reviewing the  whole
record, that the trial court erred in its ruling.20
          The  New  Jersey Supreme Court, in Randazzo, did  limit
the  circumstances in which courts may permit  sales  of  marital
property  pending  divorce.  As previously described,  the  court
located  the  authority to permit sales in a  statute  permitting
maintenance  prior  to a divorce.21  The court imported  language
from  that statute into its guidance for trial courts, explaining
          that courts may exercise [their] discretion to order the sale of
marital assets and the utilization of the proceeds, but only in a
manner  as  the case shall render fit, reasonable, and  just.  22
Having  made that comment, the court explained it would leave  to
the  discretion of the trial court the varying circumstances that
may justify the sale of the marital assets and the utilization of
the  proceeds  prior to the divorce judgment.23   When  assessing
whether  the  trial  court had abused its  discretion  given  the
specific  facts of the Randazzo case, the supreme court concluded
that  it had not, since the sale of one piece of marital property
was   necessary  to  generate  money  needed  to  meet  financial
obligations on the couples other properties.24
          While   AS   26.24.140(b)(6)  does  not   provide   any
limitation  on  a  courts ability to permit  a  sale  of  marital
property,  we  agree with the Randazzo court that courts  do  not
have  unlimited discretion to permit the sale of marital property
prior  to  the  division of the property in a  divorce  judgment.
Instead,  courts  should  permit sales  sparingly  and  only  for
pressing reasons, such as for the prevention of waste of  marital
assets that justified the sale in the Randazzo case.
          The superior court, when it decided to permit Craig  to
sell  the house, suggested that a similar pressing reason existed
in  this case.  When Craig filed his motion for a compelled  sale
in  late  May  2002,  he  indicated his  understanding  that  the
mortgage  company was going to begin foreclosure  proceedings  at
the  end  of  the month.  When the superior court  later  held  a
hearing  on  Lesleys motion to reconsider the sale, it  indicated
that  the  imminent foreclosure had partly motivated its decision
to grant Craigs motion.  According to the court,
          When  I made the order that said that [Craig]
          could  go  ahead  and sell  [the  house],  it
          really  seemed  like the best  thing  overall
          considering all the options.  Including  that
          often  by  the  time we get  to  the  divorce
          trial, everyones wishing that we had sold  it
          during the interim because its gotten so much
          worse  and  especially if there is an  actual
          foreclosure,   and  youve   already   had   a
          bankruptcy in 95.  Thats much worse for  your
          future  really than losing a couple  thousand
          here or there.
          
          Yet  unlike in Randazzo, sale of the property  in  this
case did not preserve the assets of the marital estate.  For  one
thing,  since  the sale of the house was for the  amount  of  the
loan,  it  failed to result in any gain to the estate.  Moreover,
at the time that the court granted Craigs motion, the foreclosure
proceedings  apparently  had yet to begin.   While  the  mortgage
company  had  notified the Wategas that they were in default,  it
seems  not  to  have  recorded a notice of default.25   Once  the
mortgage company recorded the notice of default, it would have to
have  waited at least three months before selling the property.26
At  any point prior to the sale, the Wategas would have been able
to  stop  the  foreclosure  process by  bringing  their  payments
          current.27  Furthermore, because the mortgage company appeared to
be threatening a non-judicial foreclosure, no deficiency judgment
could  be  entered  against the Wategas if the  mortgage  company
received  less than the amount of the outstanding debt  from  its
sale  of  the property.28  As for the superior courts explanation
that  it  was  attempting to protect Lesleys credit  by  averting
foreclosure, Lesley, since she objected to the proposed sale, was
clearly willing to take the risk that her credit would be harmed.
          Since  the sale of the property did nothing to increase
or   preserve  the  assets  of  the  marital  estate,  and  since
protection of Lesleys credit is not a sufficiently strong  reason
to  justify  a  court-authorized sale over Lesleys objection,  we
conclude  that the superior court abused its discretion  when  it
granted Craigs motion.29
     B.   The  Sale  of  the  Property to the  Drumms  Should  Be
          Rescinded.
          1.   The  Drumms do not qualify as bona fide purchasers
               for value.
          When  the superior court granted the Drumms motion  for
summary judgment and ordered specific performance of the EMA, the
court  declared the Drumms to be bona fide purchasers  for  value
(BFPs).  Later, when considering Lesleys motion for possession of
real property, the court reiterated its description of the Drumms
as  BFPs.  The court never explained exactly why it believed  the
Drumms to be BFPs.
          The  Drumms contend that the superior court was correct
in  declaring them BFPs of the property.  They argue  that  their
status  as BFPs should cut off any rights that Lesley has to  the
property,  since they relied on the validity of the  court  order
when  they  proceeded  with  their obligations  to  purchase  the
property,  beginning with their immediate payment of over  $7,000
to cover the mortgage default.
          Lesley  argues  in response that the Drumms  cannot  be
BFPs  because they knew about her interest in the property before
they entered into agreement with Craig.
          Whether or not the Drumms qualify as BFPs is a question
of law30 to which we apply a de novo standard of review.31
          As   the  Drumms  point  out,  BFPs  frequently  obtain
protections as a result of their status.  For instance, if a  BFP
purchases  property at a voidable foreclosure sale,  the  trustor
cannot later set aside the sale.32  If, by contrast, the sale was
void  rather than voidable, BFP status is unavailable  to  confer
protection.33  Because we conclude, for reasons explained  below,
that  the  Drumms  do not qualify as BFPs,  we  do  not  have  to
determine whether the transaction in this case is more akin to  a
voidable or a void foreclosure sale.
          In order to be a BFP, one claiming the status must have
acquired  title  without  notice,  actual  or  constructive,   of
anothers  rights  and also must have paid value for  the  same.34
Here, the Drumms cannot qualify as BFPs because they possibly had
actual  notice and certainly had constructive notice  of  Lesleys
right  to  the property at the time that they paid money  towards
fulfilling their EMA commitment.
          Whether  the Drumms had sufficient actual knowledge  of
          Lesleys rights to the property is somewhat unclear from the
record.  Both Craig Watega and David Drumm acknowledge that Craig
warned  David that Lesley would continue to assert her rights  in
the property.  However, while this warning gave the Drumms notice
of  Lesleys rights, they may not have received that notice  until
after  they had already paid the mortgage arrearage.  David Drumm
states  that  Craig told him about Lesleys threats of litigation,
but  not  until  later  on  the day that  he  paid  the  mortgage
arrearage.   Craig  explains that he warned David  prior  to  the
Drumms  moving  into the house, but says nothing about  when  the
warning  occurred  in  relation to  the  Drumms  payment  to  the
mortgage company.
          However,  even if the Drumms received actual notice  of
Lesleys  rights  only  after they had  paid  some  money  towards
satisfying  the  EMA,  they  certainly  had  constructive  notice
beforehand  of  Lesleys claim to the property.  The  Drumms  knew
before they entered into the agreement that Craig needed to  sell
the  house because he was getting divorced.  They also knew  that
Craig  needed to get permission from the court prior  to  selling
the  property.   As  a result, the Drumms are  charged  with  the
knowledge  of the documents contained in the public file  of  the
Wategas  divorce  case.35   The  file,  which  contained  Lesleys
opposition to the sale of the property, provided the Drumms  with
at  least constructive knowledge that Lesley opposed the sale and
might exercise her right to challenge it on appeal.
          To  summarize, the superior court was incorrect when it
declared  the Drumms to be BFPs.  As a result, the Drumms  cannot
assert BFP status in an attempt to cut off Lesleys rights to  the
property.
          2.   What a rescission remedy entails in this case.
          Lesley  argues  that if this court concludes  that  the
superior court did not have the authority to permit the  sale  in
this  case, she is entitled to immediate return of her  property.
We  agree that the transaction between Craig and the Drumms  must
be  rescinded.  Rescission is an equitable remedy that abrogates,
annuls,  or  unmakes  a  contract entered into  through  mistake,
fraud,  or  duress.36   Here,  Craig and  the  Drumms  mistakenly
believed  that  the sale was valid based on the decision  of  the
superior court.  Our decision holds that the courts decision  was
an  abuse  of discretion.  Therefore the sale was not  valid  and
rescission is required.
          Before  the  superior court, upon remand, rescinds  the
transaction,  it  will  need to determine  whether  the  property
should  be returned just to Lesley or to both Wategas.  Following
Craigs  transaction with the Drumms, he signed a  quitclaim  deed
purporting  to transfer his interest in the property  to  Lesley.
Based on this transaction, it would seem that Craig no longer has
any  interest  in the property and that it should resultantly  be
returned  to Lesley.  However, Craig later argued that he  signed
the  quitclaim deed as the result of duress.  The  issue  of  the
validity  of  the  quitclaim may need to be resolved  before  the
superior court can know to whom to return the property.   Whoever
receives  the  property will be responsible for  reimbursing  the
Drumms as outlined below.
          When  the  superior court rescinds the transaction,  it
should  keep  in  mind  that rescission  involves  restoring  the
parties to their pre-contract position[s], at least as far as [it
is] possible to do so.37  As the Iowa Supreme Court has explained,
rescission calls for a return of the land to the seller, with the
buyer  given  judgment for payments made under the contract  plus
the  value of improvements, less reasonable rental value for  the
period during which the buyer was in possession.38  In this case,
restoring the parties to their pre-contract positions will entail
returning  the  property to either Lesley or  both  Wategas.   In
exchange,  the recipient of the property will need to return  the
payments  made by the Drumms, as adjusted for the Drumms  use  of
the property, plus the reasonable value of any improvements.
          To  adjust for the Drumms use of the property, the  EMA
is  a  reasonable  starting point.  It  contains  a  formula  for
reimbursing  the Drumms in the event that the sale could  not  be
finalized.  The relevant terms of the EMA provide that:
          (3)  Lease  will be at current mortgage  rate
          per   month  plus  annual  dues[;]   (4)   if
          financing  is  unattainable  buyer  will   be
          reimbursed   for   arrears   payment    made,
          including  any  additional payments  made  to
          principal[;] (5) if financing is unattainable
          buyer will be reimbursed for any improvements
          made that increase the property value[,] i.e.
          fences, paving or additional building . . . .
          
Under  the  EMA,  since the lease payments equaled  the  mortgage
payments  plus  the annual dues, the recipient  of  the  property
would  need to return to the Drumms the arrears payment plus  the
reasonable  cost  of  improvements they made that  increased  the
value of the property.
          Lesley,  of course, was not a party to the EMA and  she
is  not  therefore bound by its terms, including  the  rescission
formula  that it contains.  But the EMA at least sets  out  terms
that  Craig  Watega  and  the  Drumms  found  to  be  acceptable.
Further,  the rescission terms appear to be facially  reasonable.
On  remand  Lesley is entitled to argue that a different  formula
should  be  employed,  but  absent a persuasive  showing  to  the
contrary, the court may choose to follow the EMA.
IV.  CONCLUSION
          For  the  above reasons we REVERSE the grant of  Craigs
motion for compelled sale of the couples marital home.  We REMAND
the case so that the superior court can enter an order rescinding
the sale of the property, conditioned on the reimbursement of the
Drumms.   The  superior  court must give  the  recipient  of  the
property  reasonable time, to be not less than ninety days  after
the  issuance  of  the  order setting the  reimbursement  amount,
within which to reimburse the Drumms.
_______________________________
     1     The portions of AS 25.24.140 related to party expenses
and superior court orders read as follows:

               (a) During the pendency of the action, a
          spouse   may,   upon   application   and   in
          appropriate   circumstances,    be    awarded
          expenses,  including (1)  attorney  fees  and
          costs  that reasonably approximate the actual
          fees  and  costs  required  to  prosecute  or
          defend   the   action;   in   applying   this
          paragraph,  the court shall take  appropriate
          steps  to  ensure that the award of  attorney
          fees  does  not contribute to an  unnecessary
          escalation  in the litigation; (2) reasonable
          spousal    maintenance,   including   medical
          expenses;  and   (3) reasonable  support  for
          minor children in the care of the spouse  and
          reasonable  support for unmarried 18-year-old
          children  of  the marriage who  are  actively
          pursuing   a  high  school  diploma   or   an
          equivalent  level of technical or  vocational
          training  and living as dependents  with  the
          spouse or designee of the spouse, if there is
          a  legal  obligation of the other  spouse  to
          provide  support.    (b) During the  pendency
          of  the action, upon application, a spouse is
          entitled  to  necessary  protective   orders,
          including  orders     (1) providing  for  the
          freedom  of  each spouse from the control  of
          the  other spouse;   (2) for protection under
          AS  18.66.100 -- 18.66.180;    (3)  directing
          one spouse to vacate the marital residence or
          the home of the other spouse; (4) restraining
          a   spouse  from  communicating  directly  or
          indirectly   with  the  other  spouse;    (5)
          restraining   a   spouse  from   entering   a
          propelled  vehicle in the  possession  of  or
          occupied  by  the  other  spouse;  and    (6)
          prohibiting  a spouse from disposing  of  the
          property of either spouse or marital property
          without the permission of the other spouse or
          a court order.
          
     2    State v. Dupier, 118 P.3d 1039, 1044 (Alaska 2005).

     3    39 P.3d 513, 521 (Alaska 2001).

     4    Id.

     5    Id. at 521-22.

     6    63 Cal. App. 3d 705 (1976).

     7    Cal. Civ. Code  4359, quoted in Lee, 63 Cal. App. 3d at
709-10.

     8    Lee, 63 Cal. App. 3d at 710.

     9    Cal. Civ. Code  4359, quoted in Lee, 63 Cal. App. 3d at
709-10.

     10    875 A.2d 916 (N.J. 2005).

     11    Id. at 921.

     12    Id. at 917.

     13    N.J. Stat. Ann.  2A:34-23, quoted in Randazzo, 875 A.2d
at 921 (alteration in case).

     14     N.J. Stat. Ann.  2A:34-23(h), quoted in Randazzo, 875
A.2d at 921 (alteration in case).

     15     N.J. Chancery Div. Family Part Rule  5:3-5(c), quoted
in Randazzo, 875 A.2d at 923.

     16    Randazzo, 875 A.2d at 924.

     17    Id.

     18    Id.

     19     See, e.g., Fuller v. City of Homer, 113 P.3d 659, 662
(Alaska   2005)  (reviewing  discovery  orders   for   abuse   of
discretion);  Caldwell v. State, 105 P.3d 570, 573 (Alaska  2005)
(determining  whether  the superior court abused  its  discretion
when  issuing a child support order); Beal v. Beal, 88 P.3d  104,
111  (Alaska  2004) (applying an abuse of discretion analysis  to
orders  that  merely  enforce  a  property  division  or  divorce
decree).

     20     Peter Pan Seafoods, Inc. v. Stepanoff, 650 P.2d  375,
378-79 (Alaska 1982).

     21    Randazzo, 875 A.2d at 924.

     22    Id., (quoting N.J. Stat. Ann.  2A:34-23(h)).

     23    Id.

     24    Id.

     25    AS 34.20.070(b) (requiring a trustee of a deed of trust
to record a notice of default prior to selling trust property).

     26    Id.

     27    Id.

     28    AS 34.20.100.

     29     Lesley also argues that the superior court abused its
discretion because it failed to impose any conditions to  protect
her interests when it permitted the sale.  Since we conclude that
the  lack of a sufficient justification for the sale in this case
precluded the court from ordering the sale, we do not address the
way in which sales pending divorce would need to be structured in
the future in order to be permissible.

          Our  conclusion  that  the superior  court  abused  its
discretion when ordering this sale also means that we do not need
to  reach  Lesleys alternative arguments on appeal,  namely:  (1)
that  the  superior  court violated her right to  procedural  due
process;  (2)  that  disputed issues of  material  fact  existed,
precluding the superior court from granting the Drumms motion for
summary  judgment; (3) that the Drumms breached the EMA,  thereby
excusing Lesley from performing; and (4) that the superior  court
misinterpreted the EMA.

     30      K&L  Distribs., Inc. v. Kelly Elec., Inc., 908  P.2d
429, 431, 433 (Alaska 1995).

     31     Varilek v. City of Houston, 104 P.3d 849, 851 (Alaska
2004).

     32    Rosenberg v. Smidt, 727 P.2d 778, 784 (Alaska 1986).

     33    Id. at 783.

     34     James v. McCombs, 936 P.2d 520, 525 n.9 (Alaska 1997)
(quoting State v. 18,018 Square Feet, More or Less, 621 P.2d 887,
890 n.5 (Alaska 1980)).

     35     Cf. Stratman v. Leisnoi, Inc., 969 P.2d 1139, 1142-43
(Alaska  1998)  (explaining that the lis pendens statute  .  .  .
simply  provides  a  convenient method  for  giving  constructive
notice  to  subsequent  purchasers and encumbrancers  that  their
interests may be affected by a pending action. ) (quoting Leisnoi
v. Stratman, 835 P.2d 1202, 1210 n.17 (Alaska 1992)); Kordecki v.
Rizzo,  317 N.W.2d 479, 483-84 (Wis. 1982) (Refusing a  purchaser
of  property purchaser in good faith status because the  property
record contained a lis pendens.  According to the court, the  lis
pendens  in  the  record should have led  the  purchaser  to  the
document  contained  within the court  file  of  the  proceedings
described by the lis pendens.).

     36     McKeown  v.  Kinney Shoe Corp., 820 P.2d  1068,  1071
(Alaska 1991).

     37     1  Dan  B. Dobbs, Law of Remedies  4.8,  at  676  (2d
ed.1993).

     38    Potter v. Oster, 426 N.W.2d 148, 151 (Iowa 1988).

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