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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

Burns v. Burns (05/11/2007) sp-6123, 157 P3d 1037

     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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