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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Gottstein v. Kraft (4/13/2012) sp-6664

Gottstein v. Kraft (4/13/2012) sp-6664

        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, email 

        corrections@appellate.courts.state.ak.us. 



                THE SUPREME COURT OF THE STATE OF ALASKA 



JAMES B. GOTTSTEIN,                            ) 

                                               )      Supreme Court No. S-14106 

                       Appellant,              ) 

                                               )      Superior Court No. 3AN-08-11401 CI 

        v.                                     ) 

                                               )      O P I N I O N 

BRIAN W. KRAFT and SERENA                      ) 

KRAFT, WELLS FARGO BANK,                       )      No. 6664 - April 13, 2012 

N.A., STEWART TITLE COMPANY, )
 

and TERRIE G. GOTTSTEIN,                       )
 

                                               )
 

                       Appellees.              )
 

                                               )
 



                Appeal from the Superior Court of the State of Alaska, Third 

                Judicial District, Anchorage, Sen K. Tan, Judge. 



                Appearances:     Sarah J. Tugman, Anchorage, for Appellant 

                James B. Gottstein.   Chris D. Gronning, Bankston Gronning 

                O'Hara, P.C., Anchorage, for Appellees Krafts.            Bruce A. 

                Bookman, Bookman & Helm, LLP, Anchorage, for Appellee 

                Terrie G. Gottstein.     Todd J. Timmermans, Hartig Rhodes 

                Hoge & Lekisch, P.C., Anchorage, for Appellee Wells Fargo 

                Bank, N.A.     Notice of non-participation filed by James M. 

                Gorski, Hughes Gorski Seedorf Odsen & Tervooren, LLC, 

                Anchorage, for Appellee Stewart Title Company. 



                Before:     Carpeneti,     Chief   Justice,   Fabe,   Winfree,    and 

                Stowers, Justices. [Christen, Justice, not participating.] 



                FABE, Justice. 


----------------------- Page 2-----------------------

I.      INTRODUCTION 



                This case concerns the ownership of James "Jim" and Terrie Gottstein's 



former marital home.        Jim paid for the property, but Terrie's name alone was on the 



deed.    The   Gottsteins   lived   in   the   home   for   15   years   before   moving   out;   they   later 



separated.  Terrie entered into a deal to sell the property to another couple, the Krafts, for 



significantly less than its appraised value, and Jim objected.  One month before closing, 



Jim recorded a notice of interest under AS 34.15.010, which forbids a spouse   from 



selling "the family home or homestead" without the consent of the other spouse.  Neither 



the   Krafts   nor   Terrie   knew   about   the   notice   of   interest,   and   the   sale   went   ahead   as 



planned. 



                Following the sale, Jim filed suit against the Krafts, requesting that the 



superior   court   recognize   his   ownership   interest   in   the   property.  The   superior   court 



granted summary judgment in favor of the Krafts.               It was undisputed that the property 



was not the Gottsteins' residence at the time of the sale and thus the superior court 



concluded that it was not "the family home or homestead," rendering Jim's notice of 



interest   under   AS   34.15.010   ineffectual.      Jim   appeals,   arguing:   (1)   that   the   statute 



protected his interest in the property; (2) that the Krafts had constructive notice of his 



interest and therefore were not bona fide purchasers; and (3) that Jim has an equitable 



interest in the property and the superior court was mistaken in not granting his request 



for an equitable remedy. 



                We     conclude     that   the  phrase    "the   family    home    or   homestead"      in 



AS 34.15.010 refers to a family's residence.   Because the disputed property was vacant, 



and the couple had moved to another home at the time of sale, it did not fall under the 



spousal consent requirement of AS 34.15.010(b).                Jim thus did not put the Krafts on 



notice of any legally valid claim to the property.           The superior court was correct in its 



assessment that Jim's equitable claims would be more appropriately raised in the context 



                                                   -2-                                             6664
 


----------------------- Page 3-----------------------

of the couple's divorce proceeding.     We therefore affirm the superior court's grant of 



summary judgment to the Krafts, Terrie Gottstein, and Wells Fargo Bank. 



II.    FACTS AND PROCEEDINGS 



       A.     Facts 



              Jim and Terrie Gottstein were married on October 10, 1982.         Eight years 



later, in 1990, Jim used his separate funds to buy a large home on Lot 4 of the Alpine 



Woods subdivision in Anchorage. Terrie asked to be the sole grantee out of concern that 



Jim's involvement as an attorney representing clients in high-profile litigation might put 



the property at risk of potential lawsuits against Jim personally.  Terrie was accordingly 



named as sole grantee.  A few months after Jim and Terrie moved into the house on Lot 



4, they acquired the neighboring Lot 5 in exchange for property owned by Jim. 



              Jim and Terrie set up reciprocal revocable trusts in 1995 as part of their 



estate planning process.    The couple decided that in order for both trusts to contain a 



substantial amount of assets, the Alpine Woods property would be placed in Terrie's 



trust. Therefore, in 1999, Terrie conveyed Lot 4 to the Terrie G. Gottstein Revocable 



Trust.  Jim conveyed his interests in Lot 5 to Terrie through a warranty deed, and Terrie 



conveyed Lot 5 to her trust.  According to Terrie, each spouse maintained control of the 



property in their respective trusts.  The terms of both trusts specified that the controlling 



spouse would have the power to "sell . . . any and all real or personal property or interest 



therein . . . in any manner . . . for any purpose, upon any terms, credits and conditions, 



the trustee may deem desirable." The trust terms also stated that the trustee could "freely 



act under all or any of the powers by [the] agreement given to the trustee[] . . . without 



the necessity of obtaining the consent or permission of any person interested therein." 



In 2007 Terrie amended her trust to change the successor trustee from Jim to a friend. 



Her amendment states that she did so because she wanted to ensure that the trust assets 



were preserved. 



                                             -3-                                        6664
 


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                Terrie's trust bought a new family home on P Street in Anchorage in 2006. 



Jim, Terrie, and their children moved out of the Alpine Woods property and into the 



P Street home.     In order to finance the purchase and remodel of the P Street residence, 



Terrie's trust took out a line of credit from Wells Fargo Bank secured by a deed of trust 



on the Alpine Woods property.  Jim maintains that he verbally objected to Terrie using 



the Alpine Woods property as collateral, although Terrie disputes this. According to Jim, 



he wanted her to take out a traditional mortgage on the new home instead. 



                In order to pay off the loan, Terrie put the Alpine Woods property on the 



market in 2006.       For the next two years, according to her affidavit, Terrie made efforts 



to sell the property. She met with ten real estate agents before settling on one, performed 



repairs and maintenance, hired a professional stager, and held open houses. The property 



was the subject of a feature article in the Anchorage Daily News .              Nonetheless, despite 



reducing the price several times from its starting point of $1,399,000, Terrie received no 



offers for almost two years.   Jim did not participate in the marketing process, and during 



this time Jim and Terrie separated.   Jim moved to a triplex, Terrie stayed in the P Street 



home, and the Alpine Woods property remained vacant. 



                In July 2008   Terrie received an $800,000 offer from Brian and Serena 



Kraft, a married couple looking for a family home.  A 2008 assessment valued Lot 4 at 



$1,000,000 and Lot 5 at $95,100.  Needing to make payments to the bank on her loan, 



Terrie decided to accept the Krafts' offer.   Jim's complaint states that he told Terrie the 



price was too low, that he owned "at least half" of the property, that he was "entitled to 



at   least   half"   of   the   proceeds,   and   that   he   "would   not   join   in   a   deed   to   convey   the 



property for such a price." 



                On July 24, 2008, Jim signed and recorded a document entitled "Notice of 



Interest   (AS   34.15.010(d)(2))."      Alaska   Statute   34.15.010   provides   generally   that   a 



titleholder may convey land to another by deed, but if a titled spouse conveys "the family 



                                                   -4-                                             6664
 


----------------------- Page 5-----------------------

home       or   homestead,"       the   other    spouse     must     join   in   the    deed.      Alaska 



Statute   34.15.010(d)(2)   requires   that   to   preserve   an   interest   in   the   family   home   or 



homestead, the untitled spouse must "record, within one year [of the conveyance] . . . a 



notice of an interest in the property."         Jim's notice of interest read (aside from a brief 



description of the property):         "Pursuant to AS 34.15.010(d)(2), the   undersigned . . . 



hereby provides notice that he has an interest in [the Alpine Woods property]."  Terrie's 



title company, Stewart Title, admitted during discovery that it did not disclose Jim's 



notice of interest to Terrie or to the Krafts. 



                 Terrie emailed Jim two days later - without knowing of the notice of 



interest - to tell him that she was going to place the sale proceeds in a separate interest- 



bearing account and that Jim would not have to waive any claims regarding the sale.  Jim 



did not respond.  The sale closed on August 18 and was recorded two days later.  Terrie 



emailed Jim with the news on the day the sale closed and confirmed that she had placed 



the proceeds in a separate interest-bearing account.             Jim responded in part: 



                 Congratulations on the house.          I know it is a weight off of 

                 you.   .   .   .   I   am   fairly   surprised   that   it   closed   without   my 

                participation, and as far as I can tell the buyers don't have 

                 good title. That makes me wonder about whether you agreed 

                 to indemnify   the title company.         Presumably it will all be 

                 sorted out as we go through the process. 



On    August     22  Jim   sent   Terrie   another   email   with    his   notice   of   interest   attached, 



suggesting she give a copy to her attorney.   This was the first Terrie knew of the notice. 



                 Jim also sent a letter to the Krafts with his notice of interest attached on 



September 11, 2008.  The letter informed the Krafts of Jim's claim to own "at least half" 



of the property and again categorized his claim as one under AS 34.15.010.  Perhaps not 



yet knowing that the property had been appraised in August, Jim asked for the Krafts' 



permission to have the property appraised.             He wrote that if the property "isn't worth 



                                                    -5-                                              6664
 


----------------------- Page 6-----------------------

more than you paid for it, then I think the disposition of the proceeds will be determined 



in   the   divorce   or   dissolution."  Jim   concluded   that   unless   he   was   wrong   about   his 



ownership interest or about the value of the property, he intended to file a lawsuit. 



        B.      Proceedings 



                Jim   filed   suit   against   the   Krafts,   Wells   Fargo   Bank,   and   Stewart   Title 



Company on October 24, 2008. In his complaint, Jim sought a declaratory judgment that 



he owned the Alpine Woods property in fee simple and was entitled to possession.  In 



the alternative, he claimed that he owned one-half of the property as a tenant in common 

with the Krafts and was entitled to half the proceeds from a forced sale.1 



                On June 19, 2009, Jim moved for summary judgment on the basis that he 



had "the right to recover" the property.  He requested that the deed of sale to the Krafts 



be declared "void and set aside."          In the accompanying memorandum, Jim argued first 



that the conveyance to the Krafts was void under AS 34.15.010(b)-(d), and that the deed 



to the Krafts (and to Wells Fargo, their lender) was void because they had record notice 



of Jim's notice of interest and were not bona fide purchasers. 



                The Krafts filed an answer and a third-party complaint against Terrie on 



June 25, 2009.      Terrie, in turn, filed a complaint against Stewart Title and against Jim. 



She   filed   a   cross-motion   for   summary   judgment   against   Jim   on   October   22,   2009, 



arguing that the Alpine Woods property did not fall under AS 34.15.010(b) because it 



was not the family home or homestead. Alternatively, she argued that even if the Alpine 



Woods property qualified as a family home or homestead, Jim had waived his homestead 



right by not objecting to the transfer of the property to Terrie's trust in 1999 within the 



statutorily required one-year period.           The Krafts and Wells Fargo   joined in Terrie's 



        1       Jim also sought the rental value of the property from the closing date to the 



date of the court's verdict. 



                                                   -6-                                                6664 


----------------------- Page 7-----------------------

motion for summary judgment against Jim.                The Krafts' memorandum incorporated 



Terrie's arguments and also maintained that the notice of interest was insufficient to 



provide the Krafts with notice of any interest in non-homestead property. 



                In his response to Terrie and the Krafts, Jim for the first time contended that 



he had a protected equitable interest in the property under the doctrines of constructive 



trust,   resulting   trust,   and   fraudulent   conveyance,   or   according   to   general   equitable 



principles. 



                Superior Court Judge Sen K. Tan granted summary judgment in favor of 



the Krafts, Terrie, and Wells Fargo on June 18, 2010.                The superior court ruled that 



"[a]ccording to the undisputed facts," the property was not the Gottsteins' "family home 



or homestead" because it was not their residence at the time of sale.  The superior court 



characterized the dispute as "whether AS 34.15.010 has been interpreted to protect an 



interest broader than 'the family home or homestead' " and whether a spouse's interest 



in "marital property" is sufficient to assert a claim under the statute.   The superior court 



concluded through an analysis of the statute and case law that only "the homestead and 



the family home [are] protected."  The superior court also noted that Jim failed to object 



to the transfer to Terrie's trust in 1999 and that the trust unquestionably held title to the 



property.  Finally, the superior court declined to enforce any equitable interest of Jim's. 



The superior court concluded that any constructive or resulting trust claims should have 



been pleaded against Terrie and not the Krafts and that they would be best resolved 



within the context of the Gottsteins' divorce case. The superior court also noted that Jim 



failed to raise questions of fact that would support a claim for fraudulent conveyance. 



                Jim filed a motion for reconsideration on the ground that the court was 



legally mistaken in ruling that Jim had no constructive trust action against the Krafts.  In 



opposition to Jim's motion, Terrie, joined by the Krafts, maintained that Jim's equitable 



claims   were   properly   pleaded   against   Terrie,   not   the   Krafts,   because   there   was   no 



                                                   -7-                                             6664
 


----------------------- Page 8-----------------------

allegation that the Krafts obtained the property "by unjust, unconscionable, or unlawful 



means" as required for the operation of a constructive trust.             The superior court denied 



Jim's   motion   for   reconsideration   for   the   reasons   stated   in   Terrie's   opposition.  The 



superior court entered a final judgment against Jim on November 4, 2010, ruling that the 



Krafts, Wells Fargo, and Terrie (as fourth-party   plaintiff) were entitled to costs and 

attorney's fees.2 



III.    STANDARD OF REVIEW 



                We review a grant of summary judgment de novo, "draw[ing] all factual 



inferences in favor of, and view[ing] the facts in the light most favorable to, the party 

against whom summary judgment was granted."3                 "We will affirm a grant of summary 



judgment if there are no genuine issues of material fact and the prevailing party was 

entitled to judgment as a matter of law."4 



                Questions of law and questions of statutory interpretation are reviewed de 



novo, "adopting the rule of law that is most persuasive in light of precedent, reason, and 

policy."5   We will interpret the meaning of a statute such as AS 34.15.010 "according to 



        2       On November 4, 2010, all parties entered into a stipulation for dismissal 



without prejudice of the Krafts' third-party complaint against Terrie and Terrie's fourth- 

party complaint against Jim and Stewart Title Company. 



        3       Interior   Cabaret,   Hotel,   Rest.   &   Retailers   Ass'n   v.   Fairbanks   N.   Star 



Borough , 135 P.3d 1000, 1002 (Alaska 2006) (internal footnotes omitted). 



        4        Cragle   v.   Gray,   206   P.3d   446,   449   (Alaska   2009)   (internal   footnotes 



omitted). 



        5       Kohlhaas   v.   State,   Office   of   Lieutenant   Governor ,   147   P.3d   714,   717 



(Alaska 2006) (citing Alaska Action Ctr., Inc. v. Municipality of Anchorage , 84 P.3d 989, 

991 (Alaska 2004)). 



                                                   -8-                                             6664
 


----------------------- Page 9-----------------------

reason,    practicality,  and   common      sense,   considering    the  meaning    of  the  statute's 

language, its legislative history, and its purpose."6 



IV.	    DISCUSSION 



        A.	     Alaska Statute 34.15.010 Did Not Grant Jim An Interest In The Alpine 

                Woods Property. 



                Jim asserted his interest in the Alpine Woods property under AS 34.15.010. 



That statute provides that a conveyance of land can generally be made by deed "without 

any other act or ceremony whatever."7          There is, however, an exception:        "In a deed or 



conveyance of the family home or homestead by a married man or a married woman, the 

husband and wife shall join in the deed or conveyance."8                The statute notes that the 



requirement that "a spouse . . . join in a deed or conveyance of the family home or 



homestead does not create a proprietary right, title, or interest in the spouse not otherwise 

vested in the spouse."9    In other words, the joinder requirement does not give a non-titled 



spouse "any interest" in the family home or homestead that the non-titled spouse "did not 

previously   have."10    Finally,   the   statute   provides   that   if   a   titled   spouse   conveys   the 



property without joining the non-titled spouse in the deed, the deed is nonetheless valid 



unless, within a year of conveyance, the non-titled spouse files a lawsuit or records a 



        6       Lot 04B & 5C, Block 83 Townsite v. Fairbanks N. Star Borough , 208 P.3d 



188, 191 (Alaska 2009) (internal footnotes omitted). 



        7       AS 34.15.010(a). 



        8       AS 34.15.010(b). 



        9       AS 34.15.010(c). 



        10      Nat'l Bank of Alaska v. Ketzler , 71 P.3d 333, 335 (Alaska 2003). 



                                                 -9-	                                           6664
 


----------------------- Page 10-----------------------

notice   of   interest   in   the   property.11 Jim   filed   his   notice   of   interest   under   that   final 



provision. 



                Under the terms of the statute, the only type of property to fall under the 



joinder requirement of section (b) is "the family home or homestead."                  Terrie and the 



Krafts maintain that "the family home or homestead" refers to a family's residence at the 



time of sale, and that the Alpine Woods property, having been vacant for some time, 



does not qualify.  Jim contends that we should interpret the phrase to refer to all marital 



real estate, "at least in so far as the real estate in question is a home."          It is undisputed 



that the Alpine Woods property was not the Gottsteins' residence at the time of sale and 



that it had been vacant since 2006. 



                We have not directly interpreted the terms "family home" and "homestead" 



in the context of AS 34.15.010, but we have noted that the statute's joinder requirement 

applies to "the property used as the family home,"12  implying that a family's use of a 



property determines its status as a family home or homestead. 



                The terms "family home" and "homestead" are generally defined in legal 



settings as a family's actual residence.   Black's Law Dictionary defines "homestead" as 



"[t]he house, outbuildings, and adjoining land owned and occupied by a person or family 

as a residence."13     "Family home" is defined as "[a] house that was purchased during 



        11      AS 34.15.010(d). 



        12      Ketzler , 71 P.3d at 335 (emphasis added). 



        13      BLACK 'S LAW DICTIONARY  802 (9th ed. 2009) (emphasis added). 



                                                  -10                                              6664 


----------------------- Page 11-----------------------

marriage and that the family has resided in, esp[ecially] before a divorce."14                Courts in 



other states have also defined a "homestead" as "where a family resides."15 



                Although there is little significant legislative history for AS 34.15.010,16 



Alaska had an "almost identical" statute before statehood.17              In the case of Spracher v. 



Spracher, which applied that statute, the territorial court held that the "homestead right 



was created to protect the family from total loss of  its abode  due   to judgments and 



executions on unsatisfied debts.  It was not enacted, as it clearly states, to create any new 



right, title or interest other than the right of occupancy in property used as a homestead 

by members of the family."18          That language suggests that statutory protection of the 



homestead was meant to protect a non-titled spouse from losing his or her residence due 



to unwise conveyances by the other spouse. 



                A provision for protection of the homestead elsewhere in Alaska law has 



a similar purpose.        The Alaska Exemptions Act (AEA) includes a "homestead [tax] 



        14      Id. at 680. 



        15      Yeager v. Lucy, 998 So. 2d 460, 464 (Ala. 2008) ("the home or house where 



a family resides, where the head of the family dwells, and any adjoining or appurtenant 

land used for the family's comfort and sustenance") (internal citations omitted); see also 

Gowens v. Goss, 561 So. 2d 519, 521 (Ala. 1990) ("actual place of residence") (internal 

citations omitted); Snoddy v. Snoddy, 791 So. 2d 333, 341 (Miss. App. 2001) ("actual 

occupation and use of the premises as a home for the family"). 



        16      See   Ketzler,   71   P.3d   at   335   n.6   ("Our   search   of   the   legislative   history 



uncovered nothing that assists interpretation of the statute . . . . The statute as originally 

codified in  22-3-1 ACLA 1949 consisted of one paragraph containing the provisions 

now codified as AS 34.15.010(a)-(b). The legislature amended the statute in 1953 to add 

the text now codified as AS 34.15.010(c)-(d)."). 



        17      Id. at 336. 



        18       17 Alaska 698, 705 (D. Alaska 1958) (emphasis added). 



                                                  -11-                                             6664
 


----------------------- Page 12-----------------------

exemption" intended to "protect property that supplies the basic necessities of life."19 



That exemption defines an individual's "homestead" as "the principal residence of the 

individual or the dependents of the individual."20         "Principal residence" is in turn defined 



for   the   purpose    of   the  AEA     as  "the   actual   dwelling    place   of  an   individual    or 

dependents."21 



                Jim    argues    that  there   are  "numerous      definitions"    of  the   concept    of 



"homestead,"   but   he   does   not   cite   a   case   or   statute   from   any   jurisdiction   defining 



"homestead" as anything other than a family's actual residence.                  In light of accepted 



legal   definitions   of   the   family   home   and   homestead,   and   considering   the   purpose 



underlying AS 34.15.010's predecessor statute and the AEA's homestead exemption, we 



conclude that the phrase "family home or homestead" refers to a home in which the 



family resides and does not apply to a vacant property.                Because the Alpine Woods 



property was not the Gottsteins' residence at the time of sale, its conveyance does not fall 



under the joinder requirement of AS 34.15.010(b). 



                Jim asserts that he had a "marital property" interest in the Alpine Woods 



property that was sufficient to assert a claim under AS 34.15.010.  But the assertion of 



such an independent interest is only relevant insofar as it occurs within one year of the 

conveyance   of   the   family   home   or   homestead.22      We   recognized   in  Ketzler  that   the 



requirements of AS 34.15.010 itself do not give a spouse "any interest in the property 



        19      In re Shell , 295 B.R. 129, 134 (Bankr. D. Alaska 2003). 



        20      AS 09.38.010(a). 



        21      AS 09.38.500(12). 



        22      AS 34.15.010(b)-(d); see also Ketzler, 71 P.3d at 336. 



                                                  -12-                                             6664
 


----------------------- Page 13-----------------------

that   the   spouse   did   not   previously   have."23     Alaska   Statute   34.15.010   establishes   a 



general rule that a property owner can transfer title and creates only one exception to that 

rule, for a spouse's transfer of the family home or homestead.24                      Because the Alpine 



Woods   property   did   not   fall   within   the   statutory   exception,   Jim's   assertion          of   an 



                                                                                                , 

independent "marital property" interest under AS 34.15.010 is irrelevant.25                       26 



         23      71 P.3d at 335. 



         24      AS 34.15.010(a)-(b). 



         25      We note also Jim's argument that "marital property" is an independent 



ownership interest under AS 34.15.010 is not supported by our decision in Ketzler .  In 

Ketzler , we stated in dicta that " '[m]arital property' is not a species of ownership but it 

arguably represents a sufficient interest to receive protection under [AS 34.15.010]. This 

question is not presented in this case and we do not resolve it here."  71 P.3d at 336 n.11. 

But we also noted that the property at issue in that case would only "be considered 

'marital property' . . . because a divorce was pending and as such would be subject to 

division in the divorce even though held only in the name of the husband." Id. (emphasis 

added).     No divorce was pending when Jim filed his notice nor when the sale closed. 

Ketzler  did not suggest that a marital property interest could arise separately from a 

divorce action, let alone that such an interest would be protected under AS 34.15.010. 



         26      Jim also asks that we adopt the Uniform Marital Property Act's recognition 



of an ownership interest in marital property during the duration of a marriage. See UNIF . 

MARITAL  PROP . ACT  4 (amended 1998).                  We see no reason to judicially adopt that 

section   of   the   UMPA   and   substantially   modify   Alaska's   separate   property   system, 

wherein marital property exists only within the equitable distribution context of a divorce 

action.  As the UMPA itself states, its creation of a "present equal undivided interest for 

each spouse" during marriage represents "a distinct departure from existing versions of 

'marital property' arising out of equitable distribution   developments in family law." 

UNIF . MARITAL PROP . ACT   4 cmt. The Present Interest (amended 1998).  The UMPA 

notes   that   "family-law   interests   set   forth   in   marital   property   definitions   in   equitable 

distribution statutes are delayed-action in nature and come to maturity only during the 

dissolution process."  Id.        The Alaska legislature chose to create just such an equitable 

distribution system in AS 25.24.010.             Equitable distribution during a divorce involves 

three steps:     first, identifying the property as marital or separate; second, valuing the 

                                                                                              (continued...) 



                                                     -13-                                                6664
 


----------------------- Page 14-----------------------

                 Jim argues that transferring the Alpine Woods property to Terrie's trust was 



"part of [the couple's] estate planning," and that he "did not then and does not now 



believe [it] divested him of his interest in the property."            But the terms of the trust did 



divest Jim of his ownership interest, as they authorized Terrie to sell "any and all real . . . 



property or interest therein . . . in any manner, at any time . . . for any purpose, upon any 



terms, credit and conditions, the trustee may deem desirable" without "obtaining the 



consent or permission of any person interested therein."               To conclude that those terms 



were any less binding because the transfer was made for the purpose of "estate planning" 



would be contrary to public policy and common sense, as well as the plain language of 



the trust instrument. 



                 Jim also contends that the Krafts were not bona fide purchasers because 



they had notice of his alleged interest in the property.  "It is a settled rule of property that 



circumstances . . . [suggesting] outstanding equities in third parties[] impose a duty upon 

the purchaser to make a reasonable investigation into the existence of a claim."27                     But 



even if such circumstances exist, the buyer is only charged with "constructive notice of 



        26(...continued) 



property;     and   third,  allocating    it  between    spouses    according     to  equitable    factors. 

Wanberg   v.   Wanberg,   664   P.2d   568,   570,   574   (Alaska   1983).         Jim   contends   that 

recognizing   marital   property   only   at   divorce   could   create   an   incentive   for   the   titled 

spouse to sell property to avoid its distribution to the other spouse.                 Under equitable 

distribution, however, courts can and do take into account situations where one spouse 

has acted in bad faith. Alaska law instructs courts to consider "the conduct of the parties, 

including      whether     there    has   been    unreasonable       depletion     of   marital    assets." 

AS 25.24.160(a)(2)(E); see also Forshee v. Forshee , 145 P.3d 492, 501 (Alaska 2006) 

("A spouse who engage[d] in economic misconduct which has unreasonably depleted 

marital   assets   can   be   credited   with   the   assets   that   he   or   she   dissipated.")   (internal 

quotation marks omitted).           We decline to create a present spousal interest in marital 

property through judicial adoption of the UMPA. 



        27      Modrok v. Marshall , 523 P.2d 172, 174 (Alaska 1974). 



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all the facts which he might have learned by means of a due and reasonable inquiry,"28 



and a recorded notice of interest gives the buyers constructive notice of "the contents of 

the document."29      The Krafts therefore had constructive notice of the contents of Jim's 



notice of interest, as they admit.   But they would only have learned that Jim asserted an 



interest under AS 34.15.010, which, as we conclude above, was ineffective.  Even if the 



Krafts are tasked with the knowledge of all of the facts of this case, they were not on 



notice of any valid claim to the property. 



        B.	     Jim's     Equitable     Claims     Are   Properly     Determined       In   A   Divorce 

                Context. 



                Jim did not request an equitable remedy in his original complaint.                  In a 



reply brief filed with the superior court, however, he argued that even if AS 34.15.010 



did not protect his interest, he had a "protectable equitable interest" in the Alpine Woods 



property.  He suggested that the transfer to the Krafts could be set aside through one of 



a   number   of   theories:   constructive   trust,   resulting   trust,   fraudulent   conveyance,   or 



through "general equitable principles."           The superior court declined to grant Jim an 



equitable remedy, and   on appeal Jim argues that "[i]t was error for the trial court to 



refuse Jim such a necessary and proper remedy." 



                Jim contends that Terrie sold the property to the Krafts with "awareness that 



Jim did not agree" and "for significantly less than the property was worth."                 But Jim's 



complaint did not raise this claim against Terrie, and Jim has not explained how the 



        28      Methonen   v.   Stone ,   941   P.2d   1248,   1252   n.5   (Alaska   1997)   (quoting 



Petrain v. Kiernan , 32 P. 158, 159 (Or. 1893)). 



        29      AS 40.17.080(a). 



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Krafts themselves might have acted unjustly or in bad faith.            Indeed, Jim refers to the 

Krafts as "third parties" in discussing his equitable claims.30 



                We agree with the superior court that whichever spouse is favored by the 



balance of equities, a divorce proceeding is the most appropriate setting to adjudicate the 



issue.  The trial judge in the divorce case will be able to assess a number of factors in 



deciding whether to categorize the Alpine Woods property as marital or separate and in 

distributing the proceeds from the sale equitably.31         If Jim maintains that the purchase 



price was unreasonable, he can argue that an "unreasonable depletion of marital assets" 

took place.32   It was therefore appropriate for the superior court to decline to adjudicate 



Jim's equitable claims in the context of his action against the Krafts. 



V.      CONCLUSION 



                For   the   foregoing   reasons,   we   AFFIRM   the   superior   court's   grant   of 



summary judgment to the Krafts, Terrie Gottstein, and Wells Fargo Bank. 



        30      Cf. Modrok, 523 P.2d at 175 ("If . . . the quitclaim deed was obtained 'as 



a result of fraud and misrepresentation' on the part of [Modrok's] former wife, his claim 

must be against her and not against [the third-party buyers].") (internal citation omitted). 



        31      Sparks v. Sparks, 233 P.3d 1091, 1094 (Alaska 2010) ("The division of 



marital property requires that property first be characterized as marital or separate, then 

that the property be valued, and finally that it be distributed equally.") (citing Odom v. 

Odom, 141 P.3d 324, 330 (Alaska 2006)). 



        32      AS 25.24.160(a)(2)(E). 



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