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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Walker v. Walker (01/26/2007) sp-6095

Walker v. Walker (01/26/2007) sp-6095, 151 P3d 444

     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

JOHN WALKER, )
) Supreme Court No. S- 11526
Appellant, )
) Superior Court No. 2KB-02-105 CI
v. )
) O P I N I O N
SUSAN WALKER, )
) No. 6095 - January 26, 2007
Appellee. )
)
Appeal    from     the
          Superior Court of the State of Alaska, Second
          Judicial   District,  Kotzebue,  Richard   H.
          Erlich, Judge.

          Appearances: Dan OPhelan, Hilo,  Hawaii,  and
          Robert D. Lewis, Lewis & Thomas, P.C.,  Nome,
          for Appellant.  Jamy Patterson and Russell A.
          LaVigne,  Jr.,  Alaska Legal Services  Corp.,
          Kotzebue, for Appellee.

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

          BRYNER, Chief Justice.

I.   INTRODUCTION
          John  Walker  filed for divorce from  Susan  Walker  in
2002.   The superior court issued an order dividing their marital
property in March 2004.  John appeals on several grounds.  First,
he  argues  that  the court undervalued a family business,  Inuit
Travel,  and  determined  its value based  on  the  trial  judges
personal  experience with travel agencies in  Kotzebue.   Second,
John argues that the court erred in rejecting late-filed evidence
concerning  two  tax  debts.   Last,  he  challenges  the  courts
decision  to award almost sixty percent of the marital estate  to
Susan  without  making specific findings to justify  the  unequal
division.1  We see no clear error in valuing Inuit Travel and  no
          abuse of discretion in rejecting Johns late filings.  But since
an  unequal  property division must be supported by findings,  we
remand  for  further  consideration of  the  order  dividing  the
marital estate.
II.  FACTS AND PROCEEDINGS
          John  and Susan Walker separated in February 2002 after
over  twelve years of marriage.  John filed for divorce in  April
2002.   They  own two businesses in Kotzebue with similar  names:
Inuit Travel and Inuit Air.
          The  superior court held a trial on the property issues
on September 16-17, 2003.  It issued a proposed property division
on  November 18, 2003, along with an order directing the  parties
to submit any proposed changes by November 26.  John responded on
November  30  with  his  Notice to  Court  on  Proposed  Property
Schedules and Miscellaneous Items.  In this filing, John gave  no
reason for his late submission and did not even acknowledge  that
his  filing  was late.  In addition to suggesting adjustments  to
the   courts  proposed  property  division  table,  Johns  Notice
informed  the court that the table would need to include  payroll
taxes   for  Inuit  Air,  stating  that  John  was  waiting   for
documentation of these taxes from his accountant.
          On  January 7, 2004, John moved to include his own  tax
debt  of  $19,213 from 2001 in the marital estate.2  John claimed
to  have  learned of this debt via mail over the  holidays.   The
superior  court denied Johns motion in early February, explaining
that  Johns  request was untimely because he filed it  after  the
November 26 deadline even though he apparently had known  of  the
debt  before the September trial:  as Susan pointed  out  in  her
opposition to Johns motion, the date imprinted by the fax machine
on the papers John sent to his attorney was May 25, 2003.
          John  filed  a  Motion to Clarify Tax Debt;  Notice  of
Payroll  Tax  Debt, and Request for Hearing in late  January,  in
which  he  again  stated his request that the court  include  his
$19,213 personal tax debt in the property division and sought  to
include  the  Inuit Air tax debt he had first identified  in  his
late-filed  response  to the courts proposed  property  division.
The  superior court eventually denied Johns motion to include the
Inuit Air payroll taxes.  It reiterated its stance from the order
denying  Johns untimely motion to include his personal  tax  debt
that Johns failure to comply with the courts timeline barred  him
from  offering  evidence of various tax liabilities.   The  court
granted Johns request for a status hearing.
          At  the  March  24, 2004, status hearing, the  superior
court  divided  the Walkers property by an oral judgment  on  the
record.   John  moved  for reconsideration  on  May  3,  but  the
superior  court  did not rule on the motion,  so  it  was  deemed
denied after thirty days according to Alaska Civil Rule 77(k)(4).
John appealed.
III. DISCUSSION
     A.   Standard of Review
          In  property division cases, we review the trial courts
judgment for abuse of discretion.3
          The  division of property by the trial  court
          is    a   three-step   process:   Step    one
          determining  what property is  available  for
          distribution  is reviewed under the abuse  of
          discretion standard, although it may  involve
          legal  determinations  to  which  this  court
          applies its independent judgment.  The second
          step   placing a value on the property  is  a
          factual determination that will be upset only
          if   there   is  clear  error.   Step   three
          allocating   the   property   equitably    is
          reviewed purely under the abuse of discretion
          standard and will not be disturbed unless  it
          is clearly unjust.[4]
          
          A  finding is clearly erroneous if it leaves us with  a
definite and firm conviction on the entire record that a  mistake
has  been made.5  We review the trial courts procedural decisions
for abuse of discretion.6
     B.   Valuation of Inuit Travel
          The  superior court valued Inuit Travel by summing  its
various  assets and liabilities without accounting  for  business
goodwill,  assigning  the business a value of  $34,141.78.   John
objects  to  this  valuation  and argues  that  Inuit  Travel  is
actually  worth  $374,204.  John argues that the court  erred  in
three  ways:  first, by failing to account for Susans dissipation
of  the  value  of the business; second, by relying  on  its  own
knowledge of the Kotzebue travel market to find there  to  be  no
marketable  goodwill in the business; and third,  by  subtracting
from the value of the business a $25,000 line of credit based  on
Susans  testimony.   We review the superior courts  valuation  of
this marital asset for clear error.7
          1.   Dissipation of Inuit Travels value
          John  argues that the superior court should have valued
Inuit  Travel at the time the parties separated, rather  than  at
the time of trial.  He maintains that Susan dissipated the assets
of  Inuit Travel during the course of the litigation.  In support
of  this  argument,  John  cites Susans testimony  that  she  was
earning approximately $1,300 per month in September 2003 and that
she had earned approximately $3,000 per month in 2001.
          The  date  on  which  the trial  court  values  marital
property generally should be as close as practicable to the  date
of  trial, but in special situations the court may value property
as  of  the  date  the  parties  separated.8   In  those  special
situations, the court must make specific findings as to  why  the
date of separation is the more appropriate choice for valuation.9
John  implies  that Susan was responsible for  the  drop  in  her
income  between 2001 and 2003 but does not explain why  the  drop
should  be attributed to Susans conduct, rather than to a general
slowdown in business or other neutral factors.  John argues  that
          the trial court failed to make the requisite findings regarding
.  .  .  dissipation  but does not point to evidence  that  would
support  such  findings.  Valuation at the time of trial  is  the
norm;  the trial court is only required to make specific findings
when  it  decides that the date of separation is more appropriate
for  valuation than the date of trial.10  The trial court did not
err  in  following the standard procedure of valuing Inuit Travel
at the time of trial.
          2.   Goodwill calculation
          John  argues  that the superior court  improperly  took
judicial notice of information available only to the trial  court
regarding  Inuit  Travels goodwill value.   In  support  of  this
argument, John refers to this observation by the court at trial:
               THE COURT:  Hold on folks.  Look, what I
          heard  so far is that the [Airlines Reporting
          Corporation (ARC)  accreditation] certificate
          is  the  asset.  And thats the value  of  the
          business.  I mean thats [what] let[]s  [them]
          do business.  So the question . . . .
          
               MR.  OPHELAN:  And  the  contract,  Your
          Honor, a contract thats very, very lucrative.
          Its $300,000 a year.
          
               THE  COURT:  The contract is very,  very
          lucrative, weve heard testimony that maybe in
          the  next  two months they might quit  it  or
          they  might  not.  I understand the  contract
          stuff.   Theres  a whole bunch   and  let  me
          explain,  that I used to be the attorney  for
          the  competing  travel agency when  it  first
          started.   So  maybe  the  issues  might   be
          understanding   something   about   the   ARC
          certificate.  Because thats really the  thing
          that gets you to the contract.  So . . . .
          
          John  appears to challenge the courts observation  that
the    Airlines   Reporting   Corporation   (ARC)   accreditation
certificate  is central to the value of the travel  agency.   But
just  before the court made this observation, Susan had testified
that her ARC certificate was the most important attribute of  her
business.   Susan  explained  that an  ARC  certificate  requires
training  and that if someone were to take over the business  who
was  not  qualified to operate the certificate,  the  certificate
would  be worthless because the person would not be able  to  get
any  contracts  for  reservation systems or to  procure  tickets.
Susan  also  testified  that the travel market  in  Kotzebue  was
small.   Susan  was a full-time nursing student at  the  time  of
trial  and planned to leave the travel business.  Furthermore,  a
contract  with  Maniilaq  made up almost  all  of  Inuit  Travels
business,  and that contract was at-will so it could not  support
the  value  John  gave  to the business.   Susans  testimony  was
uncontroverted; John did not offer a business appraisal or  other
evidence  to  contest this point at trial.  The  court  therefore
could  rely on Susans testimony in finding that Inuit Travel  had
          no marketable goodwill value.
          John  fails to describe any evidence in the record that
supports  his theory that the business had a marketable  goodwill
value.  Indeed, the record indicates that John had offered to buy
the  business from Susan for only $20,000  a mere fraction of its
supposed  goodwill value.  Accordingly, John has failed  to  meet
his  burden of showing prejudice: any reference by Judge  Richard
Erlich  to  his own experience with the Kotzebue travel  industry
would  seem  harmless  in  light of the substantial  and  largely
undisputed evidence supporting the courts determination of  Inuit
Travels value.
           In establishing the value of business goodwill, if the
trial court determines either that no [goodwill] exists, or  that
the  [goodwill]  is  unmarketable, then no value  for  [goodwill]
should be considered in dividing the marital assets.  Conversely,
the [goodwill] should be considered if the evidence suggests that
it has value and is marketable.11  When it valued Inuit Travel at
the   post-trial  status  hearing,  the  court  addressed   Johns
arguments  for assigning a high value to Inuit Travel  and  found
Johns  valuation  to be speculative.  Based on the  evidence  and
testimony  presented  at the trial, the court  found  that  Inuit
Travel  was  closing up.  It also cited Johns offer  to  purchase
Inuit  Travel for $20,000 as an indication that the near-$400,000
figure  was  inaccurate.   The court  found  that  the  testimony
demonstrates,  given  the history of that  kind  of  business  in
Kotzebue,  the  nature  of the market, that  really  as  a  going
concern  it  really doesnt have  it has a negligible value.   The
court  did  not  clearly  err in valuing  Inuit  Travel  with  no
goodwill.
          3.   Inuit Travels $25,000 line of credit
          The  superior court calculated Inuit Travels  value  by
subtracting a $25,000  debt on a line of credit without requiring
Susan  to document the credit lines existing status.  John argues
that  this  was  clear  error.  Susan provided  no  documentation
concerning  the  credit  line at trial  but  testified  that  the
building that houses Inuit Travel was collateral for this $25,000
debt.    The   trial  court  had  discretion  to  assess   Susans
credibility and accept her testimony  without documentation  that
this  $25,000  credit line existed.  John points out  that  Susan
described the $25,000 as available credit but never indicated  at
trial how much was actually owed on this line of credit.  But  in
her affidavit supporting her opposition to Johns January 7 motion
to include his $19,213 tax debt, Susan indicated that the balance
on  the line of credit to Inuit Travel was $25,000. This evidence
clarifies any ambiguity in Susans testimony.  The trial court did
not  clearly err in subtracting $25,000 from the value  of  Inuit
Travel based on Susans testimony and affidavit.
     C.   Refusal of Late Filings from John
          
          After the September 2003 trial, the superior court  set
a  deadline  of November 26, 2003, for the parties  to  file  any
corrections or additions to the property schedules it proposed to
use to value and divide the marital estate.  John argues that the
court should have relaxed that deadline and accepted his untimely
          motions regarding his $19,213 tax debt and Inuit Airs payroll tax
debt of almost $30,000.  We review the superior courts procedural
decisions for abuse of discretion.12
          1.   Inuit Air payroll tax
          The  superior court issued a proposed property division
order  on  November 18, 2003, and directed the parties to  submit
any proposed changes to the court by November 26.  John responded
on  November 30 and notified the court that he wished to  include
Inuit  Airs payroll tax debt in the marital estate but was  still
waiting   to  receive  documentation  of  this  debt   from   his
accountant.   John gave no explanation for responding  after  the
November  26 deadline.  Two months later, John filed a Notice  of
Payroll  Tax  Debt  in which he stated that  his  accountant  had
informed him that Inuit Air had as much as $30,000 in payroll tax
debt, but that he still had no concrete figures or documentation.
The  superior court denied Johns motion to include the Inuit  Air
payroll tax debt in the property division, ruling that the motion
was  late  because John had first notified the court of the  debt
after the November 26 deadline.
          The  record fails to establish that the superior  court
abused  its discretion in refusing Johns late request to  include
the  Inuit  Air  tax debt in its calculations.   Milton  Johnson,
Johns  accountant,  had  testified at the September  trial  about
Inuit  Airs tax situation and never mentioned any potential  debt
that  the  court  might need to consider in  valuing  Inuit  Air.
Johns  November  30 submission mentioned the potential  debt  and
stated  that  his accountant would provide further documentation.
But  in his January motion, John still offered nothing more  than
an  estimate of the size of the debt and no evidence  to  support
his  claim other than his own affidavit stating that he also  may
be  liable for as much as $30,000 in payroll taxes for Inuit Air.
In  sum, John did not meet the courts initial deadline and failed
to  show  good  cause  for the late filing; offered  no  concrete
evidence to support his claim that the debt existed; and did  not
specify  when  he would actually receive the information.   Given
these  circumstances, the superior court did not err in  refusing
to factor this payroll tax into its valuation of Inuit Air.
          2.    Johns $19,213 tax debt
          In  January  2004 John moved to include a tax  debt  of
$19,213 in the property settlement.  John claimed to have learned
of  this debt over the holidays.  The superior court denied Johns
motion, noting that John evidently had been aware of the tax debt
in  May 2003, but had failed to present evidence before or during
trial.   The court emphasized that it had ordered the parties  to
submit  their proposed valuations and distributions of any assets
not already in the courts proposed distribution table by November
26, 2003.
          Although the superior courts finding that John knew  of
his  tax  debt  in May 2003 might be debatable, evidence  in  the
record  supports the conclusion that John was aware of  the  debt
before  November 26, and well before January 7.13  The  IRS  form
John  offered  as  evidence of his tax debt is dated  August  11,
2003.   And  the letter from the IRS that John submitted  to  the
court  is  dated  November  10,  still  before  the  November  26
          deadline.  The alleged debt was over one year old at the time of
trial.   John  cursorily argued that he did not actually  receive
notice  of it until December of 2003.  But he offered no evidence
to  support this claim.  John failed to show either that  he  was
actually  unaware of the debt before trial or that he  could  not
have  discovered it through reasonable pretrial inquiry.   Absent
an  affirmative showing of good cause, it was not an abuse of the
superior  courts  discretion to deny Johns late-filed  motion  to
include his tax debt in the division of the marital estate.
     D.   Lack of Findings To Support Unequal Property Division
          The  superior  court  divided the marital  property  by
giving  Susans business (Inuit Travel) and the couples  house  to
Susan,  Johns business (Inuit Air) and a vacant lot to John,  and
allowing  the  parties  to divide the personal  property  between
themselves.  The  court  initially believed  that  this  approach
resulted  in  an  approximately equal  division  of  the  marital
estate.14   But  during the status hearing,  the  superior  court
discovered  that it had erred in valuing Inuit Air by counting  a
$23,198.41 debt as a credit.  The court corrected its mistake  by
subtracting the $23,198.41 credit and adding the $23,198.41  debt
to the value of Inuit Air; this reduced the value of Inuit Air by
$46,396.82  from $104,937.91 to $58,541.09.  The court recognized
that the error resulted in an unequal property division.  But  in
spite of its original intent to divide the property equally,  the
court did not alter its distribution to correct the inequality or
make  findings to support an unequal division.  John argues  that
the  superior court erred in awarding more than fifty percent  of
the  marital estate to Susan without making findings  to  support
that  award.  We review the courts overall property division  for
abuse  of discretion and will not disturb it unless it is clearly
unjust.15
          When  dividing marital property, the trial  court  must
consider the Merrill factors codified in AS 25.24.160.16  In  the
absence  of  findings to warrant an unequal  division,  an  equal
division  of  the  marital  estate  is  presumptively  the   most
equitable.17   Here,  the superior court  did  not  make  Merrill
findings, but awarded approximately sixty percent of the  marital
estate  to Susan.18  Having discovered during the course  of  the
status hearing that the division it intended to be equal actually
tilted  in  Susans favor, the court should have made findings  to
justify  the inequality or reallocated the property equally.   In
the absence of findings, the uneven division amounted to an abuse
of  discretion.  We therefore vacate the courts overall  property
division  and  remand for findings or adjustments to  correct  or
justify the inequality.
IV.  CONCLUSION
          We AFFIRM the superior courts valuation of Inuit Travel
and   its   refusal  to  consider  Johns  late-filed   tax   debt
information.  We VACATE the overall property division and  REMAND
to  the  superior  court  to  reconsider  the  overall  equitable
distribution  of  the marital estate and enter  express  findings
consistent with the Merrill factors codified in AS 25.24.160.
_______________________________
     1     John  originally raised a number of other  points  but
withdrew them in his reply brief.

     2     John  characterizes this as a corporate tax  debt  for
Inuit Air. But the IRS made the changes that resulted in the debt
to  Johns personal tax return, rather than the corporate  return.
We  treat  the  $19,213 debt as Johns individual debt,  albeit  a
marital one, because that is how the IRS characterized it.

     3    Moffitt v. Moffitt, 749 P.2d 343, 346 (Alaska 1988).

     4    Id. (citations omitted).

     5     Hallam  v.  Alaska Airlines, Inc., 91  P.3d  279,  283
(Alaska 2004) (quotation omitted).

     6     Dougan v. Aurora Elec. Inc., 50 P.3d 789, 793  (Alaska
2002).

     7    See Moffitt, 749 P.2d at 347.

     8    Doyle v. Doyle, 815 P.2d 366, 369 (Alaska 1991).

     9    Id.

     10    Id.

     11    Moffitt, 749 P.2d at 347.

     12    Dougan, 50 P.3d at 793.

     13    The court relied on the May 25, 2003 date stamp at the
top of the faxed copy of the IRS statement John submitted to find
that John had notice of the debt since May 2003, rather than,  as
John  claimed,  December 2003.  But the May 2003 date  stamp  was
incorrect.  A clean copy of the document submitted by  John  with
his  January 29 motion to clarify the tax debt issue  shows  that
the  form is dated August 11, 2003; this date was covered by  the
fax machine date stamp on the copy of the document John submitted
to  Susan  and  the court with his initial January  7  motion  to
include the tax debt.

     14    The courts initial calculations resulted in each party
receiving approximately $140,000 plus the personal property  they
divided  between  themselves.  Susan received  the  house,  worth
$108,051.94, and Inuit Travel, worth $34,141.78, for a  total  of
$142,193.72.   John received the vacant lot, worth  $35,000,  and
Inuit   Air,  originally  thought  by  the  court  to  be   worth
$104,937.91, for a total of $139,937.91.

     15    Moffitt, 749 P.2d at 346.

     16     Tybus v. Holland, 989 P.2d 1281, 1286 (Alaska  1999).
The  Merrill  factors  include the  financial  condition  of  the
parties  and  the circumstances and necessities  of  each  party.
Veselsky  v.  Veselsky, 113 P.3d 629, 637 (Alaska  2005)  (citing
AS 25.24.160(a)(4)).

     17    See Veselsky, 113 P.3d at 637.

     18     The  courts recalculations resulted in  an  award  of
$142,193.72 to Susan but only $93,541.09 to John.

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