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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Engstrom v. Engstrom (5/15/2015) sp-7006

Engstrom v. Engstrom (5/15/2015) sp-7006

         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  



ANDREW ENGSTROM,                                     )  

                                                     )        Supreme Court No. S-14752  

                           Appellant,                )  

                                                     )        Superior Court No. 1JU-10-01052 CI  

                  v.                                 )  

                                                     )        O P I N I O N  

BECKY JO ENGSTROM,                                   )  

                                                     )        No. 7006 - May 15, 2015  

                           Appellee.                 )  

                                                     )  



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

                                                                                  

                  Judicial District, Juneau, Philip M. Pallenberg, Judge.  



                  Appearances: Kara A. Nyquist, Anchorage, for Appellant.  

                  Blaine H. Hollis, Juneau, for Appellee.  



                  Before:  Fabe, Chief Justice,  Stowers, Maassen, and Bolger,  

                                                                      

                  Justices.   



                  MAASSEN, Justice.  

                  WINFREE, Justice, dissenting.  



I.       INTRODUCTION  



                  In this divorce case, the husband appeals from a superior court decision  



dividing the marital property.  He raises two issues with regard to his wife's retirement  

                                                                     



health insurance benefits:  he argues first that the superior court erred in determining the  

                                                                                     



marital portion of those benefits, and second that the superior court erred in the rate it  

                                                                                                       


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

selected for valuing those benefits.  We hold that the superior court's resolution of these  



issues was consistent with our prior cases and therefore affirm it.   



                           

                   The husband also challenges the superior court's award to the wife of a  



                                                                                           

larger share of the marital property, which the court justified on grounds that (1) the wife  



                                      

would have primary care of the couple's child, and (2) the husband was receiving two  



                                                                 

income-producing businesses created during the marriage.  We hold that it was an abuse  



                                                                                           

of discretion to rely on these two justifications for an unequal division and remand for  



the superior court's further consideration of the equitable division.   



                   Finally, we affirm the superior court's valuation of the husband's 2010  



income tax liability, because its finding is supported by the estimates given at trial and  



                                                                             

it was not required to revise the finding based on the husband's later submission of his  



actual return.  



II.       FACTS AND PROCEEDINGS  



          A.       Facts  



                   Andrew (Andy) and Becky Engstrom were married in 1998.  Becky had  



been  teaching  in  the  public  schools  since  1997  and  continued  to  do  so  during  the  



                                                

marriage. In 1998 Andy started a window-cleaning business, Capital City Windows, and  



                                                                                                         

he worked primarily as a window washer.  He started an online business in 2002 called  



Volitar  Industries,  which  he  used  to  sell  his  music,  self-produced  kits  for  window- 



                                                                                                           

cleaning businesses, and instructional videos.   In 2003 the couple had a child.  They  



separated in the fall of 2010.   



                                                            -2-                                                      7006
  


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

          B.        Proceedings  



                                                                                                                    

                    The superior court held a trial on issues of property division and child  



              

custody and then issued a written decision.  The court awarded sole legal and primary  



physical custody of the couple's child to Becky; custody is not at issue in this appeal,  



                          

which concerns only the identification, valuation, and division of the marital property.  



                                                                                              

                    One significant property issue involved Becky's health insurance benefits  



                                                                            

from the Teachers' Retirement System (TRS), in which she enrolled when she started  



                                                  

teaching in 1997.  It was during her marriage to Andy that Becky completed the eight- 



                                 

year  vesting  period,  making  her  eligible  for  a  health  insurance  subsidy  upon  her  



                                                                                                               

retirement.  At trial, through the testimony of expert witnesses, the parties disputed how  



to identify the marital portion of these benefits.  Andy contended that the benefits were  



                                                                              1 

marital to the extent they vested during the marriage,  whereas Becky contended that the 

                                                                                              



marital portion should be based on her years of marriage as a fraction of her total years  

                                                                                                              



                         2  

of  employment.     The  parties  also  disputed  the  value  of  the  subsidy;  Andy  urged  

                                                        



adoption of a composite rate that assumed Becky was likely to remarry, whereas Becky  



argued that her individual circumstances justified applying a lower, individual rate.  The  

                                                                                           



superior court adopted Becky's arguments on these two issues.  



                    After  identifying  and  valuing  the  marital  property,  the  superior  court  



divided  it  pursuant  to  AS  25.24.160(a)(4),  allocating  58.4  percent  to  Becky  and  



                                                                                                 

41.6 percent to Andy.  The court justified the unequal division on two grounds:  first, that  



                                                                                

Andy was receiving income-producing properties in Volitar Industries and Capital City  



          1         Andy contended that this result was dictated by our decision in Sparks v.  



Sparks, 233 P.3d 1091, 1096-97 (Alaska 2010).  



          2         Becky's argument relied on our decision in Hansen v. Hansen , 119 P.3d   



1005, 1015-16 (Alaska 2005).  



                                                               -3-                                                         7006
  


----------------------- Page 4-----------------------

Windows; and second, that Becky would likely have care and custody of their child for  



the foreseeable future, as well as the marital home.  



                   Andy moved for reconsideration on several issues, submitting a revised  



                     

expert report on the valuation of Becky's TRS benefits and evidence of his 2010 income  



                                      

tax liability showing that it was substantially greater than the estimates he had given at  



trial.  The superior court declined to consider the new evidence and ultimately denied  



reconsideration.    Andy  filed  this  appeal,  contending  that  the  superior  court  erred  in  



                         

deciding (1) the marital portion of Becky's retirement health insurance benefits, (2) the  



rate used to determine the value of the TRS subsidy for those benefits, (3) the factors  



                                                       

used  to  justify  an  unequal  division  of  the  marital  property,  and  (4)  his  income  tax  



liability.  



III.      STANDARDS OF REVIEW  



                                                                                                                

                    "There are three basic steps in the equitable division of marital assets:  (1)  



                                                                                                              

deciding what specific property is available for distribution, (2) finding the value of the  



                                                                          3  

property, and (3) dividing the property equitably."   All three steps are relevant to this  



case.  "In the first step, '[t]he characterization of property as separate or marital may  



                                                                 

involve  both  legal  and  factual  questions'  ";  we  review  the  superior  court's  legal  

                                                                                    4  "Clear error exists when we  

conclusions de novo and its factual findings for clear error. 



are  'left  with  a  definite  and  firm  conviction  that  the  superior  court  has  made  a  

                          

mistake.' "5  In the second step, the valuation of assets "is a factual determination that we  

                                                                      



          3        Beals v. Beals , 303 P.3d 453, 458 (Alaska 2013).  



          4        Id. at 458-59 (citations omitted) (quoting  Odom v. Odom, 141 P.3d 324,  



330 (Alaska 2006)).  



          5        Ethelbah v. Walker , 225 P.3d 1082, 1086 (Alaska 2009) (quoting Josephine  



B. v. State, Dep't of Health & Soc. Servs., Office of Children's Servs., 174 P.3d 217, 220  

                                                                                                     

                                                                                                           (continued...)  



                                                             -4-                                                       7006
  


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

                                 6  

                                    

review for clear error."            "We review the trial court's third step, the equitable allocation  



                                                           7  

of property, for an abuse of discretion."   "An abuse of discretion occurs if the court  



considers  improper  factors,  fails  to  consider  relevant  statutory  factors,  or  assigns  

disproportionate weight to some factors while ignoring others."8  



                                             

                   A superior court "has broad discretion to provide for the equitable division  



                                                                    

of property between the parties in a divorce," and we "will reverse only if the division  



                               9  

[was] clearly unjust."   We review the denial of a motion for reconsideration for abuse  



                   10  

                                                                                            

of discretion.         Finally, "[w]e review questions of law de novo, adopting the rule of law  

that is most persuasive in light of precedent, reason, and policy."11  



IV.	      DISCUSSION  



          A.	      The  Superior  Court  Did  Not  Err  In  Identifying  And  Valuing  The  

                   Marital Portion Of Becky's Retirement Health Insurance Benefits.  



                                                                       

                   Andy argues that the superior court made two errors with regard to Becky's  



retirement health insurance benefits:  it applied the wrong fraction for determining the  



          5(...continued)  



(Alaska 2007)).  



          6        Beals , 303 P.3d at 459.  



          7        Id.  



          8        Hansen v. Hansen , 119 P.3d 1005, 1009 (Alaska 2005).  



          9        Ethelbah , 225 P.3d at 1086.  



          10       Neal & Co. v. Ass'n of  Vill.  Council  Presidents  Reg'l  Hous. Auth. , 895 P.2d  



497, 506 (Alaska 1995).  



          11       Ethelbah , 225 P.3d at 1086.  



                                                             -5-	                                                     7006
  


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

                                                                           

portion of the benefits that were earned during the marriage, and it used the wrong rate  

for estimating the benefits' value.  We conclude that the superior court did not err.12  



                                                                                                             

                    1.	      The  superior  court  used  the  correct  coverture  fraction  to  

                             calculate  the  marital  portion  of  Becky's  retirement  health  

                             insurance benefits.  



                                                                                 

                    In Hansen v. Hansen , we addressed how courts should determine whether  



one spouse's retirement health insurance benefits are marital or nonmarital property and,  



                                                                 13  

                                                                                                 

if both, how to determine the marital portion.                       We explained that unlike pre-retirement  



                                                                              

health insurance benefits, which "are compensation for contemporaneously performed  



                                                    

work," post-retirement benefits are earned throughout the employee's work-life and may  



                                                                                                                 14  

                                                                                                                     To the  

well be the product of work performed before, during, and after a marriage. 



                                                                                                         15 

                                                                                                             Determining  

extent the benefits are earned during marriage, they are marital property. 



          12        Andy's argument rests in part on evidence he submitted on reconsideration,  



including an "Engstrom Post-Decision Expert Report" with attachments explaining the  

TRS health benefit system, his expert's revised version of a marital probability table  

                   

originally prepared by Becky's expert, and a study of marriage trends from the Centers  

                                                                                

for Disease Control and Prevention. The superior court did not abuse its discretion when  

                                                                                            

it declined to consider this evidence.  See Neal & Co., 895 P.2d at 506 ("We refuse to  

                                                                                                

allow a motion for reconsideration to be used as a means to seek an extension of time for  

the presentation of additional evidence on the merits of the claim.").  In any event, both  

                                                                              

parties discuss the evidence on appeal, and we conclude that it would not change the  

                                                                                                                

result.  



          13	       119 P.3d at 1014-16.  



          14  

                                                                 

                   Id. at 1015.  In Hansen , work performed before the marriage was treated  

as having been performed during the marriage because the couple used marital funds to  

buy back benefits that had been cashed out before they were married.  



          15       Id. ("Health insurance benefits earned during the marriage are a marital  



asset of the insured spouse.").  



                                                             -6-	                                                       7006
  


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

                                                                                                                        16  

the benefits' marital portion requires calculation of the "coverture fraction."                                             "This  



fraction  is  calculated  by  dividing  the  number  of  years  worked  during  the  period  of  



                                                                             17  

                                                                                 Our focus in Hansen was on the  

coverture by the total number of years worked." 



coverture fraction's numerator - the number of years worked during the marriage.  As  

                                                                        



for the fraction's denominator - "the total number of years worked" - in Hansen we  

                                                                                 



noted the difficulty of determining this number when it remains uncertain how long the  

                                                                          

earning spouse will continue to work after divorce.18  



                     It is the denominator that is at issue in this case.  Andy argues it should be  

                                                                                                                    



the eight years during which Becky's benefits vested, and that the coverture fraction is  

                        



                                          19  

thus as high as 95 percent.                   Becky argues that the proper denominator is the same as  

                              

that used in Hansen :  "the total number of years worked,"20 a number that includes her  

                                   

employment to date and projected into the future.21  



                     To decide this contested issue, the superior court compared our decision in  

                                                                          



Hansen with our later decision in Sparks v. Sparks, in which we affirmed a finding that  

                                                                                



          16        Id.  



          17        Id.  (citing  BRETT  R.   TURNER ,   EQUITABLE   DISTRIBUTION  OF  PROPERTY  



 6.10 (2d ed. 1994)).  



          18        Id. at 1015-16.  



          19         Andy's expert testified at trial that the coverture fraction was 85 percent if         



limited to the period Andy and Becky were married and 95 percent if it included their  

pre-marriage period of cohabitation.   



          20         119 P.3d at 1015.  



          21         See id. at 1016.  



                                                                -7-                                                          7006
  


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

                                                      22  

retirement benefits were not marital.                     In Sparks, the wife's lifetime health insurance   

benefits with the Public Employee Retirement System had fully vested before marriage.23  



At  trial  she  presented  expert  testimony  that  the  monthly  premium  contributions  she  



continued to make during marriage went entirely to that month's coverage, and that  



                                                                                           

nothing she did during marriage added value to the amount of the subsidy the State  

                                                                                                                     24   We  

                                                                                                                         

would eventually pay for her continued health insurance benefits after retirement. 



affirmed  the  superior  court's  conclusion  in  Sparks  that  the  retirement  benefits  were  



separate property because its "factual finding that all of the value of [the wife's] post- 



retirement health benefits were earned before marriage is supported by the record and  



                                 25  

not clearly erroneous."                  



                   In this case, the parties' experts did not dispute the facts but rather how the  

                                                                                                                    



facts should be interpreted given Hansen and Sparks.  Both experts agreed that Becky's  



                                                         

employer contributes an amount equal to 16 percent of an employee's salary to the TRS  



                                                                                               

retirement health benefit plan for every pay period regardless of whether the employee  



                                                                

has vested.   They agreed that the employer becomes responsible for the future retiree's  



health benefit subsidy once vesting occurs and that the value of that future benefit is  



                                                                                     

known at the time of vesting. The employer's contribution to retirement health insurance  



benefits, calculated as a portion of the employee's compensation, is thus continuous  



throughout  the  employee's  employment  regardless  of  when  she  vests;  and  vested  



employees thus continue to share in the cost of retirement health insurance benefits to  



                                                                                                              

the same extent as non-vested employees.  The superior court concluded that "to the  



          22       233 P.3d 1091, 1096-97 (Alaska 2010).  



          23       Id. at 1093.  



          24       Id. at 1097.  



          25       Id.  



                                                             -8-                                                       7006
  


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

extent that the post-retirement health benefit is a part of the compensation paid to                                                      all  



employees, I do not find that it would be fair to allocate that benefit only prior to the date   



                   26  

of vesting."            The superior court therefore applied the coverture fraction from Hansen ,  



as Becky's expert testified was appropriate, without regard to when vesting occurred.  



                                                                  

                      Andy argues that the case should be governed instead by Sparks, which he  



                                                                                                                               

contends stands for the proposition that "[r]etiree health benefits under [TRS] are valued  



                                                                                                                

based on the first 8 years of service, the vesting period," regardless of when the benefit  



     

is funded.  In other words, an eight-year vesting period that falls entirely within a ten- 



                                                                                           

year marriage would mean that the value of retirement benefits is entirely marital, even  



if  the  earning  spouse  works  for  another  20  years  after  divorce  and  the  employer  



continues to contribute to the fund from which the benefits will be paid.   



                                               

                      We conclude, however, that the earning spouse continues to pay for even  



fully-vested  retirement  benefits  while  she  continues  to  work,  both  through  her  



                                                                 

employer's contributions and through her acceptance of a lower salary than she might  



                                                                                    

otherwise receive.  As explained by Brett Turner, a recognized authority on the equitable  



division of marital property, "[e]mployers simply do not make gratuitous transfers to  

                                                                                         27  We agree with Turner's further  

their employees without expecting anything in return."                                        



observations  that  "[i]f  the  employer  did  not  make  contributions  to  his  employee's  



               

pension plan, it would have to pay its employees a higher salary in order to retain them,"  



                                                 

and "[t]he employer's direct contributions are therefore just as much a product of the  



           26         (Emphasis in original).  



           27         2  BRETT R. TURNER ,E               QUITABLE DISTRIBUTION OF PROPERTY  6:22, at 141  



(3d ed. 2005).  



                                                                     -9-                                                               7006
  


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

marital partnership as the employee's direct contributions. . . ."                              28   In other words, even  

                                                                                                    



though an employee could stop teaching after eight years and be entitled to full medical  

                                                                               



benefits upon retirement, the employee continues to pay for those benefits as long as she   



continues  to  work.    We  overrule  Sparks  to   the  extent  it  is  inconsistent  with  this  



conclusion.  



          2.	       The superior court correctly applied the individual rate rather than  

                    the composite rate to calculate the value of Becky's retirement medical       

                    benefits.  



                    The second benefits-related issue on appeal is whether the superior court  

                                                                              



used the correct rate for calculating the value of Becky's retirement medical benefits.  

               

There are several options, including the individual rate and the composite rate.29                                           The  

                                                         



individual rate, which Becky advances, is the amount the employee would pay if she  

                  



                                                                                                30  

were required to pay her own premiums to insure only herself.                                        The composite rate,  



advanced by Andy, is the average premium cost of all employees; as such it takes into  

                                                                                                                  



account  the  differences  in  the  entire  pool,  including  the  fact  that  some  employee- 



participants have covered spouses and dependents or are likely to acquire them in the  



          31  

              The composite rate is accordingly about 50 percent higher than the individual  

future.                                                                                      



       32  

rate.      The superior court chose the individual rate, finding that it best reflected the  

                                          



          28        Id. ; Laing v. Laing ,  741 P.2d 649, 656 n.19 (Alaska 1987) (observing that  



employer contributions, "to the extent they were made during marriage, ought to be  

considered a marital asset").  



          29        See Ethelbah v. Walker, 225 P.3d 1082, 1089 (Alaska 2009).  



          30        Id.  



          31        Id. at 1089-90.  



          32        Id. at 1089.  



                                                              -10-	                                                        7006
  


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

reality of Becky's situation - primarily the relatively low likelihood that she would  



remarry.   



                   We addressed this issue in Ethelbah v. Walker , in which we affirmed the  



                                                                   

superior court's use of the individual rate for valuing the wife's post-retirement health  



            33  

benefits.        We were persuaded that the composite rate would likely overstate the value  



of the wife's coverage because "[t]he assumptions inherent in the composite rate, for  



                                                                                                           

dealing with unknown future familial status, [were] not applicable to [her].  It was known  



                                                                                                    

that [she] was sixty-four years old and had breast cancer, making her less likely than the  



                                                                                                        34  

average  insured  to  remarry  or  acquire  additional  dependent  children."                                  Use  of  the  



                                                                                                        

individual rate in Ethelbah was thus clearly based on the superior court's factual findings  



                                         

about the covered spouse's circumstances.  We concluded that the superior court "did  



not  err  as  a  matter  of  law  or  make  any  erroneous  factual  findings  in  adopting  the  

individual rate calculation to value this asset."35  



                   Andy argues that Ethelbah  is distinguishable because Becky is younger,  



healthier, and therefore more likely to remarry than the wife in that case, making the  



                                                36  

                                                                                      

composite rate more appropriate.                   Andy's expert testified that it would be appropriate  



to use the composite rate for a woman with "a greater than 50 percent probability of  



remarriage" and that Becky was in that category.  Becky's expert did not dispute the  



                                                                                               

50 percent figure but focused his testimony on the probability  that Becky would be  



          33       Id. at 1090.  



          34       Id.  



          35       Id.  ("As  the  trial  court  concluded,  the  individual   rate  'most  closely  



approximates the likely p   remium rat              e charged b   y t  he State for estimated costs of claims,  

given [the former wife's] life expectancy and personal circumstances.' ").  



          36       At the time of trial Becky was 47                years ol    d and in good health; her minor  



child was unlikely to still be a dependent when Becky reached retirement age.   



                                                            -11-                                                      7006
  


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

remarried  in  any  given  year  after  retirement.    He  presented  a  1995  study  from  the  



National Center for Health Statistics accounting for rates of marriage and divorce, which     



he adapted into a table.   According to the table, there was no future year in which Becky                        



was more likely than not to be remarried; the highest likelihood of remarriage in any   



given year was 28.8 percent.  



                                                                          

                     Andy relies on his own expert's testimony that Becky had a greater than  



                                                                                                                           

50  percent  chance  of  remarrying;  but  as  the  superior  court  pointed  out  in  its  order,  



Andy's expert "could cite no studies and no specific figures" in support of her  estimate.  



The  superior  court  found  the  estimate  of  Becky's  expert,  on  the  other  hand,  to  be  



                                                 

"specific and credible."  Andy contends that Becky's expert improperly expanded on his  



                                                                                                             

conclusions on the last day of trial, giving Andy's expert no chance to respond.   Andy  



                                       

presented  an  amended  expert  report  in  his  motion  for  reconsideration,  attaching  a  



government study which, according to Andy, shows that 58 percent of white women  



                                                             

remarry within five years of divorce.  Even if the superior court had been required to  



consider the late-submitted evidence, however, it would not have undercut its conclusion.  



                                                                                                  

The study is based on women ages 15 to 44, a range that does not include Becky.  There  



is no clear error in the superior court's acceptance of the estimate of Becky's expert  



                                                                                                                

regarding her likelihood of remarriage.  And the court did not err in its legal conclusion  



                                                                                      

- that "[t]he individual rate, therefore, would seem to come closer to Becky's likely  



situation."  



                                                                 -12-                                                            7006
  


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

          B.	      Reliance On Andy's Receipt Of Income-Producing Businesses And  

                    The Costs Of Child Care To Justify An Unequal Property Division  

                                                                   

                   Was An Abuse Of Discretion.  



                   "Although  an  equal  division  of  property  is  presumed  to  be  the  most  

                                                                                                                 



                                                                                                                    37  

equitable, the trial court has broad discretion to deviate from absolute equality."                                     "An  

                                     



abuse  of  discretion  occurs  if  the  court  considers  improper  factors,  fails  to  consider  



                            

relevant  statutory  factors,  or  assigns  disproportionate  weight  to  some  factors  while  

                         38  Here, the superior court awarded 58.4 percent of the marital property  

ignoring others."                          



to Becky and 41.6 percent to Andy.  It found that Becky's education, job skills, and  



                                  

employment "may cut slightly" toward a division that favored Andy, whose work history  



was less consistent; that most other relevant factors were "essentially a 'wash' "; but that  



two factors favored an unequal distribution in Becky's favor.  The first of these was "that  



the property allocated to Andrew will be income-producing property (Volitar and Capital  



                                                                                                    

City Windows)."  The second was that Becky "is likely to have care and custody of [the  



                                                                              

couple's child] for 'some time to come,' . . . will be receiving the marital home in this  



                                                                                                     

order, and will need to maintain a home for [the child]."  Andy argues that the court gave  



                                                 

disproportionate weight to these two factors, and that the unequal division that resulted  



                                                                                

did   not      fairly    allocate      the    economic         effects   of   the       divorce       as   required   by  



AS 25.24.160(a)(4).  We agree that this issue requires remand.  



          37        Veselsky v. Veselsky, 113 P.3d 629, 637 (Alaska 2005) (quoting Ulsher v.  



Ulsher, 867 P.2d 819, 822 (Alaska 1994)).  



          38       Hansen v. Hansen , 119 P.3d 1005, 1009 (Alaska 2005).  



                                                            -13-	                                                      7006
  


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

                    1.	      It  was  an  abuse  of  discretion  to  use  the  income-producing  

                             capacity  of  Volitar  Industries  and  Capital  City  Windows  to  

                             justify  an  unequal  division  of  marital  property  where  the  

                             parties' situations were not otherwise equal.  



                    The superior court correctly observed that AS 25.24.160(a)(4)(I) requires  



                                                                                                             

it to consider, among other factors, "the income-producing capacity of the property and  



                                                                          

the value of the property at the time of division."  The superior court adopted the "Rule  



                                             

of Thumb" method proposed by Becky's expert to value the two marital businesses.  



This method considered the businesses' income-producing capacity by averaging five  



years of annual sales, then applied formulas from an industry-specific reference guide  



that presume a small business can be sold at a certain percentage of its average annual  



                                                                                               

sales.  Andy does not challenge the resulting valuations.  But the superior court, having  



                        

valued the two businesses and allocated their value to Andy, considered their income- 



                 

producing capacity again when deciding that there should be an unequal division of  



                                       39  

                                            Andy argues that "[t]he court double charged [him] for  

property in Becky's favor.                                                                                       



these marital assets by placing the value of the businesses under his column as an asset  

                                                                                                                    



in the property chart and using the same information to support an unequal division of  

                                                             



property."  



                           

                    The superior court's consideration of the businesses' income-producing  



                                                      

capacity in the valuation stage does not preclude later consideration of the same factor  



when the court is deciding how the property should be equitably divided.  As noted  



                                                                                                           

above, AS 25.24.160(a)(4)(I) expressly requires it.  In Brooks v. Brooks we concluded  



                                                                                                        

that  a  remand  was  necessary  in  part  because  the  superior  court  had  awarded  rental  



          39        "Property division consists of three steps:  (1) assessing the nature of the  



property (marital or nonmarital); (2) valuing the property; and (3) equitably allocating  

                                                                                       

the property."  Brandal v. Shangin , 36 P.3d 1188, 1191 (Alaska 2001).  



                                                            -14-	                                                      7006
  


----------------------- Page 15-----------------------

property  to  one  spouse  without  explicitly  considering  that  it  would  likely  generate  

significant income for her.40  



                   However, we find merit in Andy's argument that the superior court gave  



                                                                                                                

the businesses' income-producing capacity disproportionate weight when it used that  



factor as one of two that justified an unequal division in Becky's favor.  On this issue,  



                                                                                

too, we agree with a relevant observation from Turner's treatise: "If all other factors are  



                               

equal, a spouse who receives property with a greater income capacity should receive a  

                                              41  Here, although Andy received the income-producing  

                                                           

smaller share of the total estate." 



marital  property,  all  other  factors  were  not  equal.    As  a  teacher,  Becky  earned  



approximately $61,000 a year plus benefits; but setting aside the businesses, Andy had  



                                              

no regular income.  Awarding Andy the income-producing property was necessary in  



                                                                                         42  

order to roughly equalize the financial effects of the divorce.                              We conclude that the  



"income-producing capacity"of property under AS 25.24.160(a)(4)(I) generally supports  



                                                                               

an unequal distribution only when the property  will  provide a substantial economic  



                                                                                            

advantage to the party who receives it  - not when, as here, the property only levels the  



                        43  

parties' burdens.           It was an abuse of discretion to reduce Andy's share of the marital  



                                                                                                         

estate on grounds that he was allocated income-producing property that simply allows  



him to achieve an income on par with Becky's.     



          40       677 P.2d 1230, 1233-34 (Alaska 1984).  



          41       TURNER ,  supra note  27,    8:32, at 937 (emphasis added).  



          42       The two businesses together earned approximately $75,000 in 2010.   



          43       AS 25.24.160(a)(4) ("[T]he division of property must fairly allocate the  



economic effect of divorce . . . .").  



                                                           -15-                                                      7006
  


----------------------- Page 16-----------------------

                   2.	       It was an abuse of discretion to consider child-raising costs in  

                                                                                

                             the property division without first finding that child support  

                             was inadequate to meet the child's needs.  



                   For the other of the two reasons for unequal division of marital property in  

                                                                                                

                           



Becky's  favor,  the  superior  court  observed  that  Becky  was  "likely  to  have  primary  



physical custody [of the parties' child] for the foreseeable future" and that she "will be  



                                                                                                     

receiving the marital home . . . and will need to maintain [it] for [the  child]."    We  



conclude that reliance on this justification was also an abuse of discretion.  



                                                                                                                 

                   We addressed this issue most recently in Rodvik v. Rodvik , in which the  



                                

former  husband  had  a  history  of  domestic  violence,  some  of  it  directed  against  the  



             44  

children.        The superior court determined that "the property division, while weighted  



                                  

slightly in [the wife's] favor, is equitable given the fact that [the wife] will be caring for  



                                                                                 

the parties' children in the future and the children will likely need counseling for years  



              45  

to come."    We held this was error.  We cited Turner's treatise for the proposition that  



                          

"the needs of the children should generally not be a factor in determining the amount of  

                                                              46  We noted Turner's supporting citation of  

marital property assigned to each spouse."                                                      

                                                            47 in which we held that "[f]or a trial court to  

our own decision in Brandal v. Shangin ,  



award one spouse a greater share of the marital property simply to ease his or her burden  



                                                                    48  

of  child  support  constitutes  reversible  error."                      And  we  favorably  quoted  Turner's  



          44        151 P.3d 338, 341 (Alaska 2006).  



          45       Id. at 347.  



          46       Id. (quoting  TURNER ,  supra note 27,  8.22).  



          47        36 P.3d 1188 (Alaska 2001).  



          48       Rodvik ,  151  P.3d  at  347  (quoting  Brandal ,  36  P.3d  at  1194)  (internal  



quotation marks omitted).   



                                                            -16-	                                                      7006
  


----------------------- Page 17-----------------------

                                                                

suggestion that "property division should be used to meet the needs of the children only  



                                                                                                          

                                                                                                                        

in the presence of a specific reason why this goal cannot be met with an award of child  



                        49  

                            Applying these principles in Rodvik , we concluded that before the  

support alone."                              



superior court could make an unequal division of the marital property to help account for  



                                                                 

the children's counseling needs, "it must first determine whether the child support is  



                                                                                              

adequate to meet [those] needs," and we remanded the case for additional findings on the  

subject.50  



                                                                                        

                    In this case, the superior court did not make findings about whether child  



support was inadequate to meet the child's needs.  In the absence of such findings, an  



                                                                                                      

unequal property division that rested in part on Becky's child-care responsibilities was  



                                           

error.  We remand for the superior  court to reconsider the equitable division of the  



marital property.  



                                                                    

          C.	       The Superior Court Did Not Clearly Err In Valuing Andy's 2010 Tax  

                    Liability.  



                                                                                     

                    Andy argues that the superior court erred in its valuation of his 2010 tax  



liability when it relied on his trial estimates instead of his actual return, which he did not  



                                                         

prepare until after trial and did not present to the court until he filed his motion for  



                        51  

                                                            

reconsideration.             The superior court reasoned that "it was [Andy's] choice to delay  



                          

filing his taxes.  Even if he wished to delay filing his taxes, he could have calculated his  



                                                                 

liability  without  actually  filing  a  return,  and  presented  that  evidence  at  trial.    The  



information needed to calculate his tax liability was entirely within his control."  



          49        Id.  (quoting TURNER ,  supra note 27,  8.22).  



          50        Id .  



          51        Trial was  in August  2011;  the  court  issued its written decision on March 9,  



2012;  and Andy filed his motion for reconsideration ten days later on March 19, seven  

months after trial.  



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----------------------- Page 18-----------------------

                       The superior  court did not abuse its discretion in declining to consider  



                                              52  

                                                                                                 

Andy's late-filed evidence.                       And based on the evidence presented at trial, the superior  



court's estimate of Andy's 2010 tax liability was not clearly erroneous.  



V.         CONCLUSION  



                      We  REVERSE  the  superior  court's  equitable  division  of  the  marital  



property and remand for further proceedings consistent with this opinion.  In all other  



respects we AFFIRM the decision of the superior court.  



           52         Neal & Co. v. Ass'n of Vill. Council Presidents Reg'l Hous. Auth.                                           , 895 P.2d  



497, 506 (Alaska 1995) ("We refuse to allow a motion for reconsideration to be used as                                        

a means to seek an extension of time for the presentation of additional evidence on the                                                 

merits of the claim.").  



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----------------------- Page 19-----------------------

WINFREE, Justice, dissenting in part.  



                                                                                       

                    I respectfully disagree with the court's new framework for identifying the  



                                                                                         

marital portion of a retirement benefit that is completely earned in a finite period of  



                                 

service time and that has a value not dependant on (1) any future financial contributions  



                                                                                                        

from the employee, or (2) the employee's continued employment.  I would follow, not  



                                                                                1  

reverse, our very recent decision in Sparks v. Sparks.  



                    The retirement benefit in this case was a contractual right Becky Engstrom  

                                                                        



earned by working for a required number of years.   The court's quotation from Brett  

                                                                                        



Turner that employers don't make gratuitous transfers to employees without expecting  

                                            



anything in return must be read in context and does not support the court's position.  The  

                                                                                                    



quotation is taken from a section where Turner explains that retirement benefits are  



                                                 2  

property rights based in contract.   Distinguishing retirement benefits from professional  



degrees and inheritances and articulating why retirement benefits are property, Turner  



emphasizes that:  (1) "[r]etirement benefits are contractual rights"; (2) once benefits have  

                                                                     



been earned the employee "has a legally enforceable right to receive" them in the future;  



          1         233 P.3d 1091, 1097 (Alaska 2010) (concluding that post-retirement health  



benefits were separate property when the entire value of the benefits was "earned before  

                                                                        

marriage").  



          2         2  BRETT R. TURNER , EQUITABLE  DISTRIBUTION OF PROPERTY  6.22 at 131- 



32, (3d ed. 2005) ("There are two substantial questions which arise when courts use their  

                                                                                                                       

equitable  distribution  statute  to  classify  retirement  benefits.    First,  the  court  must  

determine whether the benefits meet the definition of property ; and second, the court  

                                                               

must  determine  which  benefits  were  acquired  during  the  marriage .    This  section  

considers the first of these questions." (Emphasis in original.)).  



                                                              -19-                                                         7006
  


----------------------- Page 20-----------------------

and (3) employers "frequently use lucrative retirement packages in lieu of additional   



                                                                          3  

salary to attract and retain desirable employees."    



                    Turner then explains why it does not matter whether a retirement benefit  



                                                          

arises from employee contributions, employer contributions, or both, stating that the  



notion that employee contributions are necessary to create property does not make sense  



                                                                                                                                   4  

                                                                  

because the employer contributions were  made as part of the employment contract. 



                                                                                               

Within this context Turner states:  "Employers simply do not make gratuitous transfers  



                                                                                       5  

to their employees without expecting anything in return."   But in this section Turner is  

notably  silent  on  when  an  employee's  retirement  benefits  are  acquired  or  funded,6  



leaving that issue to other sections.7  



                    Here the contract was simple:  work a certain number of years and earn a  



defined retirement health benefit.  Becky worked those years and acquired the future  



                                                                               

benefit; she did not get something for nothing.  No matter how the benefit ultimately is  



                                                                     

funded, Becky fully performed her part of the bargain, and her employer received the full  



bargained-for consideration.  Becky had no obligation to work more years to receive the  



              

benefit, and she had no obligation to pay anything for the benefit during or after the  



                                                                                               

vesting period.  The fact that the benefit is funded with a legal Ponzi-like scheme, using  



                                                                               

current health care premiums to fund both current employees' and retired employees'  



health  benefits  and  leaving  any  day  of  reckoning  to  the  Alaska  Legislature,  cannot  



          3         Id. at 132-33.  



          4         Id. at 140-41.  



          5         Id. at 141.  



          6         See id. at 131-42.  



          7         See id.  6:24-25, at 142-49.  



                                                               -20-                                                         7006
  


----------------------- Page 21-----------------------

                                                                                                              

change the fact that Becky earned the retirement benefit the day she completed  the  



                                    8  

                                                                                                 

required service period.   No part of the retirement benefit was earned or acquired after  



                                                                          9  

the day Becky reached her service requirement.   In my view the number of years of  



marriage during the required service period must be the numerator and the number of  

years of the service requirement must be the denominator in the coverture fraction.10  



          8         In Hanson v. Hanson we noted:  "[P]ost-divorce,   pre-retirement health  



insurance benefits are compensation for contemporaneously performed work and are  

therefore  separate  property,  whereas  post-retirement  health  insurance  benefits  are  

compensation for work previously performed."  119 P.3d 1005, 1015 (Alaska 2005)  

(citing TURNER  6.26 (2d ed. Supp. 2004)).  It appears to me that along with expressly  

                                                                                               

overruling Sparks v. Sparks, 233 P.3d 1091 (Alaska 2010), the court implicitly overrules  

                                                                                          

this portion of Hanson as well.  



          9  

                                                                                                                      

                     Cf. Young v. Kelly, 334 P.3d 158-59 (Alaska 2014) (stating that "we deem  

                                                                             

[retirement benefits] acquired during marriage to the extent the working spouse earns  

                                                                        

them during the marriage"); Sparks, 233 P.3d at 1097 (stating retirement benefits "are  

                                                                                                                  

usually designated as partly marital and partly separate based on which portion was  

                             

earned during the marriage").  Again, no portion of the retirement benefit was earned  

after Becky fully vested.  



          10        See TURNER ,  supra note 2,  6.25, at 149-50 (stating coverture formula as  



"creditable time during the marriage" divided by "total creditable time" and noting the  

                                                                                                      

denominator "must match exactly the period of time over which the employee acquired  

                                                                     

the benefit" (emphasis in original)).  Here Becky acquired the benefit at vesting, and the  

                                                                 

only relevant creditable time was the vesting period.  



                    It  is  true  that  in  Hanson  the  court  stated  that  the  coverture  fraction  

                                     

denominator should be the total number of years worked.  119 P.3d at 1015.  But the  

                                                   

focus of the decision was on the numerator, and no facts about the denominator factors  

                                                                               

were before the court, or at least were not discussed in the opinion.  If post-retirement  

                                                                                           

health insurance benefits were continuing to be earned post-divorce throughout the work  

                                                                

life, Hanson 's statement about the denominator was entirely correct; but, again, that was  

                                                

not the focus of that decision.  



                                                               -21-                                                         7006
  

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