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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Laughlin v. Laughlin (4/30/2010) sp-6472

Laughlin v. Laughlin (4/30/2010) sp-6472, 229 P3d 1002

     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

KAREN LAUGHLIN, )
) Supreme Court No. S- 13313
Appellant,)
) Superior Court No. 3PA-05- 01818 CI
v. )
) O P I N I O N
BRIAN LAUGHLIN, )
) No. 6472 - April 30, 2010
Appellee.)
)
          Appeal  from the Superior Court of the  State
          of  Alaska, Third Judicial District,  Palmer,
          Vanessa White, Judge.

          Appearances:   Robert  C.  Erwin,  Robert  C.
          Erwin,   LLC,   Anchorage,   for   Appellant.
          Appellee not participating.

          Before:   Carpeneti,  Chief  Justice,   Fabe,
          Winfree,  and Christen, Justices.  [Eastaugh,
          Justice, not participating.]

          CHRISTEN, Justice.

I.   INTRODUCTION
          Karen  and  Brian  Laughlin divorced in  October  2008.
Before  trial,  the parties agreed to establish a childrens  fund
from  which they would pay certain childrens expenses in lieu  of
child support.  The superior court conducted a bench trial on the
issues  the  parties were unable to resolve and incorporated  the
childrens  fund  agreement into its final order.   Karen  appeals
restrictions  the court placed on the use of the childrens  fund.
She  also appeals the superior courts allocation of dependent tax
credits  and its determination of the reasonable rental value  of
the  parties  marital residence.  We reverse the superior  courts
decision to approve the creation of the  childrens fund  in  lieu
of  child  support  and remand for calculation of  child  support
consistent with Alaska Rule of Civil Procedure 90.3.  Because the
agreement  to  establish a childrens fund was the basis  for  the
superior courts decision to allocate a dependent tax deduction to
Brian,  we  also  vacate that decision.  We affirm  the  superior
courts  determination  of  the reasonable  rental  value  of  the
parties marital residence.
II.  FACTS AND PROCEEDINGS
          Karen and Brian Laughlin were married in Palmer, Alaska
in  1982  and  have four children.  Brian filed a  complaint  for
divorce in 2005.
          Karen and Brian reached settlement on most issues prior
to  trial, including child custody, child support, and a majority
of  the  disputes  over property distribution.    Superior  Court
Judge   Vanessa   White  read  the  parties  partial   settlement
agreements  into the record on April 23, 2007 and June  8,  2007.
In  lieu of monthly child support payments, the parties agreed to
set  up  a bank account (the childrens fund) to pay some  of  the
childrens  expenses.   The childrens fund was  set  up  to  cover
specified  expenses only, including uncovered  medical  expenses,
school  activity  fees, and the parties life insurance  premiums.
To  establish  the  fund,  the parties agreed  that  Karen  would
contribute approximately $19,000 from her Morgan Stanley  account
and that they would jointly contribute approximately $12,000 from
a  joint  Scudder money market account.  The parties also  agreed
that  Brian  would  not make ongoing child  support  payments  to
Karen,  and that Karens $12,000 child support arrearage would  be
forgiven.   In addition to the expenses covered by the  childrens
fund,  both  parents agreed to be responsible for  the  childrens
discretionary expenses incurred during the time each had physical
custody.   Karen had physical custody 70% of the time; Brian  had
physical custody 30% of the time.
          The  superior  court  addressed the remaining  disputes
over  custody,  property, and tax considerations  at  trial,  and
issued  findings of fact and conclusions of law on May 29,  2008.
The court incorporated  the parties partial settlement agreements
into its final order.  Both parties moved for reconsideration and
the court issued an order on September 24, 2008 adopting some  of
the  suggestions  from  both parties.1   A  divorce   decree  was
entered  on September 11, 2008, although its effective  date  was
December 11, 2007.
          On  appeal, Karen argues that the superior court  erred
by:  (1)  restricting  the  use of the childrens  fund;  (2)  not
considering  appropriate  tax  implications  resulting  from  the
transfer  of  assets to the childrens fund and  the  division  of
shares  that were marital property; (3) granting a dependent  tax
deduction to Brian, who had custody only 30% of the time; and (4)
setting the rental value of the marital home at $1,000 per month.
Brian filed a notice of non-participation in the appeal.
III. STANDARD OF REVIEW
          Superior  courts have broad discretion  in  determining
child custody issues2 and in fashioning a property division in  a
divorce  action.3  We use our independent judgment when reviewing
the  legal  interpretation  of  property  settlements  and  child
custody  agreements that are incorporated into  divorce  decrees.
          But when the trial court looks to extrinsic evidence to interpret
an  agreement,  we  review its factual determinations  under  the
clearly erroneous standard and will reverse only if the facts  do
not  support  the  trial courts interpretation.4   Child  support
awards  are reviewed for abuse of discretion and will not be  set
aside  unless a review of the record as a whole leaves us with  a
definite and firm conviction that a mistake has been made.5
          The  valuation  of  available  property  is  a  factual
determination that should be reversed only if clearly erroneous.6
IV.  DISCUSSION
     A.   The Childrens Fund Is Invalid Under Rule 90.3.
          Karen  argues  on  appeal  that  it  was  an  abuse  of
discretion  for  the superior court to restrict the  use  of  the
childrens fund.  She does not question whether the childrens fund
itself  is  permissible under Rule 90.3.7  But in Cox v.  Cox  we
held  that [p]arents may not make a child support agreement which
is  not subject to [Rule 90.3].8  We observed that the guidelines
[in  Rule 90.3] reflect a paternalistic view toward child support
agreements which conflicts with the freedom of contract9  and  we
concluded that [t]he presumption imposed by [Rule 90.3]  is  that
the  guidelines are applicable and may be departed from only  for
good  cause.10   In  Nix v. Nix we reiterated that  a  court  may
deviate from the Rule 90.3 child support schedule only upon  good
cause   and  clarified that a court is not required to find  that
good  cause  existed merely because the parties  had  reached  an
agreement. 11  Nix reaffirmed that no parental agreement regarding
child  support is valid until it receives judicial scrutiny under
Rule  90.3.12  Given this case law, we must address  whether  the
agreement to create a childrens fund in lieu of child support  is
permissible  before considering Karens argument  that  the  court
should have allowed broader use of the fund.
          The permissibility of the childrens fund  was discussed
at length at oral argument before our court.  After the argument,
we issued an order inviting both parties to address whether their
agreement  is permissible under Civil Rule 90.3 and  this  courts
precedent  including  Cox  v. Cox and its  progeny.   Only  Karen
responded to the order.
          We  review matters that were not raised below  and  not
listed  in  a  statement of points on appeal for  plain  error.13
Plain  error exists where an obvious mistake has been made  which
creates a high likelihood that injustice has resulted.14
          Rule 90.3(c) states that a superior court may vary  the
child  support award as calculated under the other provisions  of
this  rule  for  good  cause upon proof by clear  and  convincing
evidence  that  manifest injustice would result  if  the  support
award  were  not  varied.  The superior  court  must  specify  in
writing the reason for the variation, the amount of support which
would have been required but for the variation, and the estimated
value of any property conveyed instead of support.15  Rule 90.3(c)
explains  that the good cause requirement may include  a  finding
that  unusual circumstances exist which require variation of  the
award  in  order to award an amount of support which is just  and
proper  for  the  parties to contribute toward  the  nurture  and
education of their children.
          The superior court partially addressed the requirements
of  Rule 90.3(c) when it approved the parties agreement to create
the  childrens fund.  After hearing the contours of the  proposed
childrens  fund,  the  court  asked  the  parties  if  they  were
suggesting   to   the   court   that  there   are   extraordinary
circumstances here that justify a zero child support  obligation,
to  which  counsel for both parties responded,  yes.   After  the
settlement agreement was read into the record, the court stated:
          The    parties   agree   that    there    are
          extraordinary circumstances in this  case  in
          that,  number 1, at the present time  mom  is
          earning at a higher rate than dad, and she is
          the  primary custodian.  Second, the  parties
          have  each have substantial separate estates.
          And  finally, the parties marital  estate  is
          fairly   substantial.   And  all   of   these
          circumstances together, the parties stipulate
          and agree, create extraordinary circumstances
          which  justify deviating from Alaska Rule  of
          Civil  Procedure 90.3.  And they both believe
          that  manifest  injustice would  occur  if  a
          standard 90.3 child support calculation  were
          accomplished.  The parties agree that by  mom
          by forgiving the existing arrearages that mom
          owes based on prior orders [in the amount  of
          approximately  $12,000],  and   taking   into
          account  all  of  these other  circumstances,
          that the childrens needs are best going to be
          met by the arrangement they have made whereby
          henceforth, meaning beginning May 1,  neither
          party will owe child support to the other.

The court also stated:

          I   find   that   there   are   extraordinary
          circumstances  that  justify  deviating  from
          Alaska Rule of Civil Procedure 90.3, and that
          manifest injustice would occur if the parties
          were  required  to  calculate  child  support
          pursuant to 90.3, and therefore the agreement
          that  they have as to the expungement of  the
          arrears and that neither party will pay child
          support going forward adequately meets all of
          the childrens financial needs.

The  courts  written  findings of fact  and  conclusions  of  law
include the courts finding that:
          .   .   .  requiring  a  rote  child  support
          obligation,  in  addition  to  the  financial
          arrangements  the parties[] agreed  upon,  is
          both  unnecessary  and likely  to  result  in
          manifest injustice.  Because the parties have
          made   alternative  arrangements  for   child
          support,  no final child support order  shall
          issue in this matter.

          Based  upon these statements and a full examination  of
the  record,  it  is  clear  that the agreement  to  establish  a
childrens  fund  in  lieu  of child support  does  not  meet  the
requirements of Rule 90.3 or our case law.  Most prominently, the
record  does not include a written calculation of  the amount  of
support which would have been required but for the variation,16 as
required by the rule.  In the absence of such a calculation,  the
superior  courts approval of the childrens fund in lieu of  child
support  constitutes  plain  error.   The  order  approving   the
childrens fund must be reversed for this reason.
          A  second  problem  with the parties agreement  is  the
absence  of good cause to vary the application of Rule 90.3.   As
Rule   90.3(c)   explains,  good  cause   may   include   unusual
circumstances which justify varying the award, but  parties  must
prove  by  clear and convincing evidence that manifest  injustice
would result if the support award were not varied.  Children have
an  interest  in  adequate support independent of either  parents
interest,  and  it  is  in this light that  trial  courts  should
consider whether the facts of a case warrant a finding of unusual
circumstances.
          The   superior   court  identified  the   extraordinary
circumstances  that justify deviating from Alaska Rule  of  Civil
Procedure  90.3 as: (1) the mother has a higher income  than  the
father and is the primary caretaker;17 (2) the parties each  have
substantial  separate estates; (3) the parties have a substantial
marital  estate;  and (4) the father is willing  to  forgive  the
mothers child support arrearage in consideration of the agreement
to  establish a childrens fund in lieu of child support.   It  is
not  unusual  for  one spouse to have a greater income  than  the
other.   Nor is the fact that each parent has independent  assets
extraordinary.   And  while the Laughlins  separate  and  marital
assets  are not insubstantial, neither are they unusually  large.
A  child support arrearage, even one of approximately $12,000, is
not  unusual  nor is it a reason to deviate from  the  rule.   In
short,  none  of the extraordinary circumstances  of  this  case,
viewed  independently  or  together,  support  the  finding  that
manifest injustice would result if the Rule 90.3 guidelines  were
followed.
          We  reverse  the  superior courts  decision  permitting
Karen  and Brian to establish a childrens fund in lieu  of  child
support  and  remand for calculation of child support  consistent
with  Rule  90.3.  On remand, the superior court  should  conduct
further  proceedings  as  necessary to  ensure  that  each  party
receives credit for all payments made to the childrens fund.18
     B.   We  Do  Not Decide Whether the Superior Court Erred  in
          Permitting Brian to Claim a Dependent Tax Deduction.
          
          Karen  argues  that  the superior court  violated  Rule
90.3(k) by permitting Brian, who has custody of the children  30%
of  the  time, to claim a dependent tax deduction.  The  superior
court  concluded  that the parties special financial  arrangement
for  the  childrens  support justifies allowing  each  parent  to
          receive some of the tax benefit associated with claiming one or
more  of  the  qualifying  children  as  his  or  her  dependent.
Because  we  reverse  the decision to adopt  the  childrens  fund
agreement  which was the basis for the superior courts allocation
of  dependent tax deductions  we must also vacate the  allocation
of  these tax deductions and remand for reconsideration  of  this
issue.

     C.   The   Superior  Court  Did  Not  Err  in  Setting   the
          Reasonable Rental Value of the Marital Home  at  $1,000
          Per Month.
          
          Brian  received a pre-trial benefit by having exclusive
use  of the marital residence with no mortgage obligation.  Karen
argues  that the superior courts determination of the  reasonable
rental value of the marital residence was clearly erroneous.
          At trial, Karen introduced an appraisal which estimated
the rental value of the property to be $1,700-$2,700 per month if
its  fixed up.  Brian estimated that given the poor condition  of
the  house,  the rental value was less than $500 per month.   The
superior  court considered this evidence and determined that  the
reasonable  rental value of the residence during  separation  was
$1,000  per  month.   Karen argues that  this  determination  was
simply unsupported by the evidence.  We disagree.
          The  rental  appraisal provided by Karen  included  the
substantial   caveat  that  it  was  BASED  ON  A  [HYPOTHETICAL]
CONDITION  THAT  THE  SUBJECT  IS  IN  LIVABLE,  MARKETABLE   AND
[RENTABLE]  CONDITION, WHICH IS NOT THE CASE AT THIS  TIME.   The
superior  court acknowledged this caveat when it found  that  the
facts  adduced at trial established that this home could  not  be
marketed  for  rent  at an amount close to its reasonable  rental
value  if it were in good condition.  While recognizing that  the
residence  sits  on a large parcel of land, and  has  many  other
attractive features, the superior court found that its  state  of
disrepair  and  the  deferred  maintenance  would  make   it   an
unattractive prospect for any prospective tenant.  The court also
found that at the time of separation [s]ignificant repairs,  such
as  replacement  of a window, were needed.  The  superior  courts
finding  regarding the rental value of the marital  residence  is
well supported by the evidence; it is not clearly erroneous.19
V.   CONCLUSION
          We  REVERSE  the  superior courts  decision  permitting
Karen  and Brian to establish a childrens fund in lieu  of  child
support and REMAND for the superior court to calculate and  award
child support consistent with Rule 90.3.  On remand, the superior
court  should  also conduct further proceedings as  necessary  to
give  each  party  credit  for  the  contributions  made  to  the
childrens fund.
          We   VACATE  the  superior  courts  decision  regarding
allocation of the dependent tax deductions and REMAND for further
proceedings consistent with this opinion.
          We   AFFIRM  the  superior  courts  valuation  of   the
reasonable rental value of the parties marital residence.
_______________________________
     1     The superior court did not permit Karen to deduct  the
taxes  that  resulted  from the transfer of  her  Morgan  Stanley
account  to  the childrens fund, did permit Brian to  deduct  the
taxes  that accrued from transferring the Scudder account to  the
childrens  fund, amended its decision to state that the childrens
income  tax  obligations  would  be  paid  out  of  their  annual
Permanent  Fund Dividends rather than out of the childrens  fund,
did  not accept Karens request to eliminate the requirement  that
the parents agree on written criteria for periodic accounting  of
the  childrens fund, and agreed that Karens payment to Brian  for
his  share of their CompuShare account should be reduced  by  the
tax obligations associated with the distribution.

     2    Barrett v. Alguire, 35 P.3d 1, 5 (Alaska 2001).

     3    Cox v. Cox, 882 P.2d 909, 913 (Alaska 1994).

     4     Brown  v.  Brown,  983 P.2d 1264, 1267  (Alaska  1999)
(citations omitted).

     5     Harvey  v.  Cook,  172  P.3d 794,  797  (Alaska  2007)
(citations omitted).

     6    Cox,  882 P.2d at 913-14.

     7     At  oral  argument  before our court,  Karens  counsel
clarified  that  Karen does not challenge  the  validity  of  the
childrens fund agreement.

     8    776 P.2d 1045, 1048 (1989).

     9    Id. at 1048.

     10    Id. at 1049.

     11     855  P.2d 1332, 1333 (Alaska 1993) (quoting Cox,  776
P.2d at 1049).

     12    Id. at 1334.

     13     In  re  Estate of Fields, 219 P.3d 995, 1011  (Alaska
2009).

     14     Id.  (quoting  Miller v. Sears, 636 P.2d  1183,  1189
(Alaska 1981)).

     15    Alaska R. Civ. P. 90.3(c).

     16     Alaska R. Civ. P. 90.3(c)(1).  At oral argument, when
asked whether child support had been calculated according to Rule
90.3, Karens counsel responded, It has not been computed anywhere
I could find.

     17    At the time of trial, Karen was employed at the Mat-Su
Regional  Medical  Center  and her 2006  gross  wage  income  was
$67,178.  Brian was employed as a bus driver for Laidlaw and  his
2006 gross wage income was $32,294.

     18     Because  we  reverse  the  superior  courts  decision
relating  to the childrens fund, we do not address Karens  appeal
of  the  restrictions placed on the use of the fund or her appeal
of  the  tax considerations the superior court took into  account
when establishing the fund.

     19    We do not address Karens appeal of the superior courts
refusal to credit her in the distribution of marital property for
her  appraisal  costs because this argument  is absent  from  her
points  on appeal.  See, e.g., Wetzler v. Wetzler, 570 P.2d  741,
742  n.2  (Alaska  1977) ([W]e will not treat  issues  that  were
argued  in  the  brief  but  not set  forth  in  the  Points  [on
Appeal].).

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