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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Burns v. Burns (05/11/2007) sp-6123
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
| TROY R. BURNS, | ) |
| ) Supreme Court No. S- 12154 | |
| Appellant, | ) |
| ) Superior Court No. | |
| v. | ) 4FA-04-01631 CI |
| ) | |
| HALYA P. BURNS, | ) O P I N I O N |
| ) | |
| Appellee. | ) No. 6123 - May 11, 2007 |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Fairbanks, Mark I. Wood, Judge.
Appearances: Christopher E. Zimmerman,
McConahy, Zimmerman & Wallace, Fairbanks, for
Appellant. Daniel L. Callahan, Callahan Law
Office, Fairbanks, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
FABE, Chief Justice.
I. INTRODUCTION
Troy Burns appeals from an order enforcing the
settlement agreement between himself and his former wife, Halya
Burns. The superior court determined that Troy is required to
pay Halya spousal support in the amount of thirty-five percent of
his yearly dental income, whether or not he continues to work as
a dentist. Troy argues that the superior court incorrectly
interpreted the terms of the settlement agreement in a manner
contrary to the agreements plain language, which is an
impermissible modification of the settlement agreement. Because
the superior courts interpretation of the settlement agreement
was correct, we affirm its decision.
II. FACTS AND PROCEEDINGS
Troy and Halya Burns were married on June 16, 1985.
They have two children, ages fifteen and nineteen. Troy is a
dentist with a practice in North Pole, while Halya is a
homemaker, who at the time of the hearing did not work outside
the home. The couple separated in late May or early June of
2004, and Troy filed for divorce in July 2004. On August 31,
2004, Troy and Halya entered into an agreement settling child
custody, support, and property issues. The agreement was filed
with the court on September 2.
The parties do not dispute the agreements requirement
that Troy pay a fixed sum of $2,500 per month child support for
the two children, an amount that was to be reduced to $1,800 per
month when the eldest child reached the age of eighteen. Nor do
they contest the agreements requirement that Troy pay eighty
percent of the childrens uninsured health care expenses, one-half
of their college expenses, and all travel expenses involved in
visiting Troy. The issue raised in this appeal is the amount of
spousal support Troy is to provide to Halya.
Under the settlement agreement, most of the marital
property was divided equally among the parties. Troy was
allocated the marital residence, business, and commercial
properties, and was required to pay Halya a sum of $158,831.68
over seven years to equalize the property division. But a major
asset of the marriage, the dentistry practice, was not divided
equally. Troy retained the interest in the dental practice and
in return was required to pay spousal support to Halya in the
amount of thirty-five percent of his previous years dental
salary, reduced by the amount Troy paid as child support for the
minor children. The agreement provided that Troy would pay the
spousal support until he retired from his dentistry practice,
with a five-year minimum for said payments. The agreement also
provided that if Troy elected to sell the dentistry practice
within nine years of the execution of the agreement, Halya would
receive thirty percent of the proceeds from the sale. The
superior court incorporated the child custody, support, and
property settlement agreement into the parties decree of divorce.
In April 2005, about eight months after the divorce was
final, Halya filed a motion to enforce the settlement agreement.
In this motion she requested that Troy be ordered to (1) provide
his 2004 income tax return to calculate the spousal support due
in 2005; (2) execute the necessary promissory note and deed of
trust to secure the property settlement obligation as provided by
the settlement agreement; (3) provide the details of any sale of
the dental practice; and (4) provide security for the spousal
support obligation in light of [Troys] apparent intention to
retire from the practice of dentistry. The first three issues
were resolved and are not pertinent to this appeal.
In her affidavit in support of the motion to enforce
the settlement agreement, Halya explained that when she entered
into the agreement, she certainly assumed that Troy would remain
in dentistry as his career. Halya expressed her concern that if
Troy were to retire and apply to medical school (as he apparently
plans) he would make very little money and the spousal support
would be sharply reduced. In her affidavit, Halya explained that
the only reason she agreed to a fifty-fifty division of the other
marital property was her anticipated receipt of spousal support
based on a percentage of Troys dental income for at least five
years. Thus, Halya argues, Troys retirement from his practice
strikes at the heart of the . . . agreement and may be grounds to
set aside the entire agreement. Halyas request for additional
security was aimed at ensuring that she would receive the same
level of support as if Troy remained working as a dentist at the
same salary he made in 2004 for the remainder of the five-year
period provided for in the settlement agreement.
Troy opposed Halyas motion for additional security,
arguing that nothing in the settlement agreement required him to
remain employed as a dentist or to pay to Halya thirty-five
percent of a hypothetical dentists salary for five years. Troy
further argued that if the superior court were to modify this
aspect of the parties agreement, in all fairness, the entire
agreement for those issues should be set aside and . . . the
issue of spousal support (if any) and property settlement
[should] be litigated with all the property, debts, and payments
made to date being considered and accounted for.
After a hearing on the motion to enforce the agreement
and consideration of supplemental briefing on the meaning of the
paragraph of the settlement agreement governing spousal support,
the superior court determined that the reasonable expectation of
the parties at the time of entering into the agreement was that
Troys spousal support to Halya would be based on his dental
income for a five-year minimum period.
III. STANDARD OF REVIEW
We apply basic contract interpretation principles to
the interpretation of a property division agreement incorporated
into a divorce decree.1 We review the interpretation of a
contract de novo, with any inferences that the superior court has
drawn from extrinsic evidence being reviewed for support[] by
substantial evidence.2
IV. DISCUSSION
Troy claims that the superior court erred in its
interpretation of the agreement and that its interpretation had
the effect of modifying the agreement to such an extent that the
property division and the support provisions must be relitigated.
The superior court has the authority to interpret the agreement
and determine the parties reasonable expectations at the time of
contract.3 Our inquiry therefore focuses on the superior courts
interpretation of the agreement.
Troy argues that the language of the settlement
agreement is unambiguous and should have been enforced as
written. Halya agrees that the language is unambiguous, but
disagrees with Troys interpretation. Halya additionally argues
that even if this court finds ambiguity in the language, the
reasonable expectations of the parties at the time of contract
support her position.
The dispute in the case centers on paragraph 20 of the
Settlement Agreement. Paragraph 20 provides in full:
Troy will pay [Halya] spousal support in
monthly payments equal to 35% of his income
from the prior calendar year (gross income as
would be reflected on Section A of the Civil
Rule 90.3 Child Support Guidelines
Affidavit). The spousal support shall be
reduced by the amount Troy is paying as child
support during the minor childrens minority.
The spousal support shall be paid until Troy
retires from dentistry, with a five-year
minimum for said payments. Troy will
maintain a disability insurance policy to
insure he will have income in the event of
disability. This spousal support provision
is integral to the property settlement in
this agreement. Halyas remarriage would not
constitute grounds to modify the spousal
support. The spousal support shall be paid
commencing September 15, 2004, and on the
fifteenth of each month thereafter.
Troy argues that the plain language of this provision merely
requires him to pay thirty-five percent of his total income,
whatever its source, and does not require that he remain a
dentist or pay spousal support at a level commensurate with a
dentists income. Halya responds that this provision establishes
that Troy must pay her spousal support based on a dentists income
for a minimum of five years.
Troy first argues that the term income, as used in
paragraph 20, includes income from any and all sources, but is
not defined to require him to maintain his employment as a
dentist. Troy further contends that the agreement contemplates
that he may retire from dentistry and sell his practice. He
points to paragraph 13 of the agreement, which provides that [i]f
Troy elects to sell his dental practice within 9 years of
execution of this agreement, he will pay [Halya] 30% of the net
proceeds from such sale. Troy also maintains that the agreement
would be unconstitutional if it required him to remain a dentist
for five years. But as Halya agreed at oral argument, Troy need
not remain a dentist as long as he pays spousal support based on
a percentage of imputed income based on his past earnings as a
dentist.
Halya responds to Troys arguments by focusing on the
language of paragraph 20, noting the key passage that provides
that spousal support shall be paid until Troy retires from
dentistry, with a five-year minimum for said payments. As Halya
points out, the term said payments refers back to the spousal
support payments based on Troys income until he retires from
dentistry. We agree with Halya that, read in context, this
sentence indicates that payments based on an income from
dentistry are required until Troy retires from dentistry but in
any event for a minimum of five years.
Halyas position that Troy must pay spousal support
based on a dentists income for a minimum of five years is
supported not only by the language of paragraph 20, but also by
the extrinsic evidence presented to the trial court. Halya
argues that viewed in the context of the entire property
settlement and the parties relative economic positions and
earning power, an equal division of marital assets without
significant spousal support would have been unconscionable.
Troys income for 2003, for example, was over $380,000 while
Halyas was less than $11,000. Halya was not employed at the time
of divorce and was hoping to return to school to train as a
dental hygienist. Under these circumstances, the property
division would ordinarily have been weighted heavily in Halyas
favor.4 Halya also relies on paragraph 20s statement that [t]his
spousal support provision is integral to the property settlement
in this agreement to support her argument that the spousal
support provision and the property division are interdependent,
and that a large support payment was required to balance the
relatively small distribution of marital assets to Halya.
Halya also explained that the five-year minimum period
for significant spousal support served a specific purpose because
the youngest child of the marriage will have turned eighteen by
the end of the five-year period. According to Halya, the parties
intended the spousal support to maintain a secure income for
Halya while the children were still in the home as well as allow
her to retrain to start a career. As Halya points out, paragraph
20 requires Troy to maintain disability insurance to ensure that
he will continue to receive his dentists income even if a
disability prevented him from working as a dentist. The
agreements further requirement that Troys life insurance policy
be transferred to Halya to secure payment of spousal support also
supports the agreements fundamental assumption that Troy pay
support in an amount equal to thirty-five percent of his dental
income, whether or not he remains a dentist.
In light of the extrinsic evidence particularly the
equal division of marital assets despite the unequal earning
power of the parties the terms of the settlement agreement are
not reasonably subject to differing interpretations. Troy has
pointed to no extrinsic evidence supporting the likelihood that
Halya would have agreed to an equal division of assets without
receipt of substantial spousal support.5 And if we were to
accept Troys argument that the provision adopting a five-year
minimum for said payments of spousal support was not tied to his
dental income, then Troy would be free to quit dentistry
immediately, cease working for pay (as he presumably would have
by going to medical school), and owe no further payments. In
other words, Troys interpretation of the agreement would leave
him free to avoid the contracts express provision requiring at
least five years of payments. Because this interpretation would
enable Troy to nullify a clearly expressed minimum payment
requirement, it is reasonable to infer that the spousal support
was meant to refer to Troys dental earnings and not just whatever
income he might make, or not make, doing something else. As the
superior court noted, the principles of good faith and fair
dealing must be taken into consideration in the interpretation of
contracts. Allowing Troy the unilateral power to reduce the
support he owed would violate those principles, particularly in
light of the balance struck in the property distribution between
the parties.
We conclude that the agreement terms support the
superior courts interpretation of the agreement. The extrinsic
evidence presented by Halya supports a definition of the term
income in paragraph 20 as an amount comparable to Troys usual
dentistry salary. Therefore, the superior courts conclusion that
Troys spousal support to Halya would be based on his dental
income for a five-year minimum period is affirmed.6
V. CONCLUSION
The superior courts decision is AFFIRMED.
_______________________________
1 Williams v. Crawford, 982 P.2d 250, 253 (Alaska 1999).
2 Wahl v. Wahl, 945 P.2d 1229, 1231 n.2, 1232 n.3 (Alaska
1997).
3 Knutson v. Knutson, 973 P.2d 596, 600 (Alaska 1999).
4 See, e.g., Dixon v. Dixon, 747 P.2d 1169, 1173 (Alaska
1987) (When a couple has sufficient assets, the spouse with the
smaller earning capacity can and should receive a larger share in
the property division to aid him or her in the transition.).
5 Although paragraph 13 also provides that Halya will
receive thirty percent of the proceeds of any sale of the dental
practice within nine years, this does not conflict with paragraph
20.
6 Because we affirm the superior courts interpretation of
the agreement, we need not address Troys argument that the
superior courts decision was an impermissible modification of the
settlement agreement, requiring that the entire agreement be set
aside and the property division and spousal support relitigated.
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