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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Wiegers v. Richards-Wiegers (5/11/2018) sp-7244

Wiegers v. Richards-Wiegers (5/11/2018) sp-7244

          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@akcourts.us.  



                      THE SUPREME COURT OF THE STATE OF ALASKA                                    



CHARLES  WIEGERS,                                             )  

                                                              )     Supreme  Court  No.  S-16406  

                               Appellant,                     )  

                                                                                                                           

                                                              )     Superior Court No. 4FA-14-01739 CI  

          v.                                                  )  

                                                                                       

                                                              )    O P I N I O N  

           

AMY RICHARDS-WIEGERS,                                         )  

                                                                                                     

                                                              )    No. 7244 - May 11, 2018  

                               Appellee.                      )  

                                                              )  



                                                                                                      

                                  

                     Appeal  from  the  Superior  Court  of  the  State  of  Alaska,  

                                                                                                         

                     FourthJudicialDistrict, Fairbanks, Bethany Harbison, Judge.  



                                                                                                            

                     Appearances:              Mary-Ellen   Meddleton,   Anchorage,   for  

                                                                                                      

                     Appellant.           Daniel  L.  Callahan,  Callahan  Law  Office,  

                                            

                     Fairbanks, for Appellee.  



                                                                                                            

                     Before:        Stowers,  Chief  Justice,  Winfree,  Maassen,  and  

                                                                                  

                     Bolger, Justices.  [Carney, Justice, not participating.]  



                                         

                     WINFREE, Justice.  



I.        INTRODUCTION  



                                                                                                                          

                     A couple divorced after nearly 30 years of marriage.  The former husband  



                                                                                                                                    

appeals the superior court's valuation of his corporate stock and its characterization of  



                                                                                                                                  

the former wife's retirement health benefits as non-marital property.   We affirm the  



                                                                                                                             

court's stock  valuation, but we reverse its  characterization of the retirement health  



                                                                                                                                 

benefits as non-marital.  We therefore remand for valuation of the health benefits and  



                                                                                            

reconsideration of the equitable distribution of the marital estate.  


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

                                 

II.       FACTS AND PROCEEDINGS
  



          A.        Facts  



                                                                                                                           

                    Amy  Richards-Wiegers  and  Charles  Wiegers  married  in  1987;  they  



                                                                                                                              

separated in 2014, and their divorce was finalized in 2016.  Two assets important to the  



                                                                                            

equitable division of their marital estate are the focus of this appeal.  



                                                                                                 

                    1.        Charles's A & A Roofing Company, Inc. stock  



                                                                                                                                

                    In the early 1990s Charles became an officer and shareholder of A & A  



                                                                                                                              

Roofing Company, Inc., a closely held corporation selling and installing commercial and  



                                                                                                                             

residential roofing.   At separation Charles was the president of A & A Roofing and  



                                                                                                         

owned 7,652 shares, about 47% of the company's outstanding stock.  



                                                                                                                    

                    A & A Roofing's shareholders have a Shareholders' Agreement restricting  



                                                                                                                             

the transferability of and setting the price for its stock. The price may be modified at any  



                                                                                                                        

time by a vote of shareholders holding 75% of the voting shares "to reflect any amount  



                                                                                                                    

they  agree  to  be  the  then  current  fair  market  value  of  the  [s]tock."                             No  particular  



                                                                                                                  

valuation method is identified, but in 1983 the company adopted a valuation calculation  



                                                                                      

referred to as "Method 2," a liquidation calculation first used in the 1970s by its then- 



                                                                                                                             

existing  sole  shareholder  for  estate  planning  purposes.                           Although  Method  2  is  not  



                                                                                                                          

dictated by the Shareholders' Agreement, it has been used for about 35 years to value  



                            

A & A Roofing's stock.  



                                                                                                                             

                    Since 2010 Method 2 has been used to value A & A Roofing's stock four  



                                                                                                                          

times:  $211/share effective January 1, 2010; $220/share effective December 31, 2010,  



                                                                                                                          

in anticipation of a shareholder's  retirement; $184/share effective January 1, 2013,  



                                                                                                                   

following a distribution of cash and assets to facilitate the prior shareholder's retirement;  



                                                                                                                       

and, most recently, $179/share effective January 1, 2015, just before Charles's divorce  



                                                                                                                

trial.  On June 11, 2015, the three then-existing shareholders signed an "Unanimous  



                                                                                                                            

Written Consent in Lie[u] of Special Meeting by Shareholders" "determin[ing] the 'Fair  



                                                               -2-                                                        7244
  


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

Market Value' of A & A Roofing Co., Inc. as of January 1, 2015 [to be] $179/share."                                                                                                                                                                                                 



The $179/share value                                                was recorded in the corporate minutes on December 9, 2015, about                                                                                                                            



the time the divorce trial started.                                             



                                          2.                   Amy's retirement health benefits                                                     



                                          Amy began working for the University of Alaska in 1979, with a brief                                                                                                                                                   



break in service in 1980.                                                        Her position was covered by the Alaska Public Employees'                                                                           



Retirement System (PERS).                                                                  Amy's PERS Tier 1 retirement health benefits vested in                                                                                                                          



 1985 after five years of employment, before the marriage.                                                                                                                              Amy continued working for                                                       



the University until January 1999, 18.7 total years of PERS service, accruing 11.7 years                                                                                                                                                                         



during the marriage. Amy was eligible to retire and access her retirement health benefits                                                                                                                                                                



in July 2016 at age 55, and indicated at trial she would do so.                                                                                                                          



                     B.                   Proceedings  



                                          The divorce trial took place over four days between December 2015 and  

                                                                                                                                                                                                                                                                      



May 2016.                           A & A Roofing's certified public accountant testified to the company's use                                                                                                                                                         



of Method 2 for stock valuation and other aspects of A & A Roofing's business.  Amy  

                                                                                                                                                                                                                                                                



called a certified public accountant, who is also a business valuation expert, to testify  

                                                                                                                                                                                                                                                             



about businessvaluationmethods other than Method 2. Neither provided anindependent  

                                                                                                                                                                                                                                           



valuation of A & A Roofing stock.  

                                                                                           



                                          The superior court issued a March 2016 order that Amy's PERS retirement  

                                                                                                                                                                                                                                                  



health benefits were a premarital asset as a matter of law because they were fully vested  

                                                                                                                                                                                                                                                             



prior to the marriage.  In June the court determined, among other things, that Charles's  

                                                                                                                                                                                                                                                   



A & A Roofing stock value was $217/share under the "true asset approach as described  

                                                                                                                                                                                                                                                   



in [Amy's expert's] testimony."  The court's division of the marital estate incorporated  

                                                                                                                                                                                                                                         



these determinations.  

                  



                                          Charles appeals.  

                                                                                                



                                                                                                                                    -3-                                                                                                                           7244
  


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

III.         STANDARD 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                                                                        



                                                                                                           1  

the property, and (3) dividing the property equitably."                                                       The first step, characterizing       



                                                                                                                                                           

property as marital or non-marital, involves mixed questions of law and fact; "we review  



                                                                                                                                                                      2  

                                                                                                                                                                         

the superior court's legal conclusions de novo and its factual findings for clear error." 



                                                                                                                                                              

The second step, factual determination of property value, is also reviewed for clear  



           3  

                                                                                                                                                                  

error.         "Clear error exists when we are 'left with a definite and firm conviction that the  



                                                                       4  

                                                                                                                                                                     

superior court has made a mistake.' "                                      The third step, equitable property distribution, is  

                                                               5  and "we will not disturb the result unless it is clearly  

                                                                                                                                                           

reviewed for abuse of discretion 

unjust."6  



IV.          DISCUSSION  



                                                                                                                                                                   

                          Charles briefed two issues on appeal:  whether the superior court erred by  



                                                                                                                                                                

(1)  finding  the  value  of  Charles's  A  &  A  Roofing  stock  to  be  $217/share,  and  



                                                                                                                                                   

(2) determining Amy's PERS retirement health benefits were non-marital.  



             1            Engstrom  v.  Engstrom,  350  P.3d  766,  769  (Alaska  2015)  (quoting  Beals  v.  



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



             2            Id.  (citing  Beals,  303  P.3d  at  458-59).  



             3            Beals,  303  P.3d  at  459.  



             4            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  

(Alaska  2007)).  



             5            Id.  

                                 



             6            Cartee  v.  Cartee,  239  P.3d  707,  712  (Alaska  2010)  (citing  Walker v.  

                                                                                                                                                                    

 Walker, 151 P.3d 444, 447 (Alaska 2007)).  

                                                                      



                                                                                 -4-                                                                          7244
  


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

                            A.	                          The Superior Court Did Not Clearly Err By Valuing Charles's A                                                                                                                                                                                                                                    &  A  

                                                         Roofing Stock At $217/Share.                                                   



                                                         Charles   argues the superior court's valuation of his corporate stock is                                                                                                                                                                                                                                  



clearly erroneous because the court relied upon unsupported expert testimony to reach                                                                                                                                                                                                                                                                 



it.    Charles contends the correct fair market value, as determined by the company's                                                                                                                                                                                                                                        



Method 2 valuation formula, is $179/share. Amy supports the court's valuation, arguing                                                                                                                                                                                                                                                       



that Method 2 is not an appropriate calculation of fair market value and that her business                                                                                                                                                                                                                                               



valuation expert testified in support of the court's valuation.                                                                                                                                                                                                  



                                                         1.	                         The superior court's reliance on Amy's expert's "true asset"                                                                                                                                                                                                

                                                                                     valuation is supported by the record.                                                                                                                                   



                                                         The superior court found that "the most reliable way to value the A & A                                                                                                                                                                                                                                     



 stock for purposes of effecting an equitable division of the marital estate would be to use                                                                                                                                                                                                                                                                   



a true asset approach as described in [Amy's expert's] testimony.                                                                                                                                                                                                                        [On that basis], the                                                   



court value[d] the A & A business at $217 per share."                                                                                                                                                                                 



                                                         Qualified expert witness testimony provides an adequate basis for a court's                                                                                                                                                                                                        



                                                                                                                 7  

business valuation finding.                                                                                                                                                                                                                                                                                                                        

                                                                                                                         Amy's expert, the only qualified business valuation expert  



                                                                                                                                                                                                                                                                                                                                                        

to testify, explained that business valuators are "mandated to comply" with one of three  



                                                                                                                                                                                                                                                                                                                                                       

"main" accepted methodologies when valuing a company:   income approach, asset  



                                                                                                                                                                                                                                                                                                                                                                   

approach, or market approach.  Method 2 is indisputably a liquidation approach, not an  



                                                                                                                                                                                                                                                                                                                                     

accepted methodology, and Amy's expert concluded it was not an accepted valuation  



                                                                                                                                                                                                                                                                                                                                                                

methodology regardless of its historic use by A & A Roofing.  The record supports the  



                                                                                                                                                                                                                                                                                                                                                                 

 superior court's determination that Method 2 was not "the most reliable way to value the  



                                                                                                                                                                                                                                                                                                                                                           

A & A stock for purposes of effecting an equitable division of the marital estate."  



                            7                           See Miles v. Miles, 816 P.2d 129, 131 (Alaska 1991) (holding "no error"   



in accepting expert's testimony providing method for determining whether business had                                                                                                                                                                                                                                                                         

goodwill value because expert "was qualified as an expert in business valuation").                                                                                                                                                                                                                       



                                                                                                                                                                                 -5-	                                                                                                                                                                    7244
  


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

                                           Amy'sexperttestified that theasset approach                                                                                                  providesabaselinevaluation.                                                                     



The expert explained that A & A Roofing's Method 2 valuations state the assets and                                                                                                                                                                                       



liabilities necessary for an asset approach, but unnecessarily and improperly include sale                                                                                                                                                                               



costs and tax deductions. In response to the superior court's inquiry of how to "convert"                                                                                                                                                             



Method   2   to   a   "true"   asset  approach,  the   expert   explained   the   tax   and   sale   costs  



deductions in the Method 2 worksheet should be removed, thus preserving only the                                                                                                                                                                                           



valuation of assets and liabilities.                                       



                                           Charles argues it was error to rely on Amy's expert's conversion of A & A                                                                                                                                                            



Roofing's Method 2 worksheets to a "true" asset method "because he was not hired to                                                                                                                                                                                            



provide a business valuation and had not gathered any data."                                                                                                                                                  But Charles disputes   



neither that the asset approach is a valid valuation method nor that the expert explained                                                                                                                                                             



how   an   asset   approach   (what   the   court   called   a   "true   asset   approach")  involves  

calculating "the value of [a company's] net assets."                                                                                                                 8  



                                           Because Amy's  expert  provided  an  adequate basis for  using  the asset  

                                                                                                                                                                                                                                                                    

                                                                                                                                                                                                                                                                       9  the  

approach to value A & A Roofing and because it is a recognized valuation method,   

                                                                                                                                                                                                                                             



record supports the superior court's determination that "the most reliable way to value  

                                                                                                                                                                                                                                                                    



the A & A stock for purposes of effecting an equitable division of the marital estate  

                                                                                                                                                                                                                                                                  



would be to use a true asset approach as described in [Amy's expert's] testimony."  

                                                                                                                                                                                                                                                                            



                                           2.	                  The superior court's "true asset" valuation of A & A Roofing  

                                                                                                                                                                                                                                                         

                                                                stock at $217/share is not clearly erroneous.  

                                                                                                                                                                                                                        



                                           Charles argues the superior court did not have sufficient expert testimony  

                                                                                                                                                                                                                                                      



before it to value A & A Roofing using an asset approach because Amy's expert did not  

                                                                                                                                                                                                                                                                           



                      8                    See Manelick v. Manelick                                                         , 59 P.3d 259, 261, 265 (Alaska 2002) (accepting                                                                        



expert's   definition   of   net   assets   as   total   assets   minus   total   liabilities   and   holding  

business's fair market value was value of its net assets).                                                                                                  



                      9                    See id. at 261, 265.  

                                                                                          



                                                                                                                                      -6-	                                                                                                                            7244
  


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

                                                                                                                          

independently calculate or verify the company's assets and liabilities.  Amy's expert  



                                                                                                                               

testified that his application of the asset approach was premised on the validity of the  



                                                                                                                            

data A & A Roofing provided in its Method 2 valuation.  He explained that an asset  



                                                                                                                   

approach  relies  on  all  the  accounts  receivable,  accounts  payable,  and  contingent  



                                                                                                                               

liabilities being accounted for.  When the court inquired whether the net value of the  



                                                                                                                          

assets from the most recent Method 2 worksheet would provide an accurate or "true"  



                                                                                                                               

asset valuation, the expert qualified his affirmation with the assumption that all the  



                                                                                                        

payables and crude liabilities were accounted for in the worksheet.  



                                                                                                                             

                    Amy's expert did not provide his own valuation, explaining it would have  



                                                                                                                      

taken 60 to 70 hours to confirm that "all the receivables are recorded and payables  



                                                                                                                                  

recorded to get a fair market value."  Instead, he reviewed A & A Roofing's Method 2  



                                                                                                                           

valuation worksheets, income statements, and balance sheets from 2010 through 2015,  



                                                                                                                    

created by and testified to by A & A Roofing's accountant. A & A Roofing's accountant  



                                                                                                                                 

also testified that he or his partner performed yearly independent reviews of A & A  



                                                                         

Roofing's financial statements for many years.  



                                                                                                                    

                    Amy's expert's testimony was premised primarily on A & A Roofing's  



                                                                                                                               

2015  year-end  Method  2  valuation  worksheet,  which  he  reorganized  to  make  his  



                                                                                                                                

testimony more understandable.   His main critique of the Method 2 analysis was its  



                                                                                                                   

deduction of sale costs and taxes, a liquidation approach that depressed the company's  



                                                                                                                              

value.  Amy's expert's reorganized worksheet separated out the assets, liabilities and  



                                                                                                                            

equity, sale costs, and taxes.  He termed his net asset calculation A & A Roofing's "Fair  



                                                                                                                              

Market Value Equity."  The difference between this "Fair Market Value Equity" and  



                                                                                                                          

A & A Roofing's Method 2 "Agreed Value," the respective fair market valuation figures  



                                                                                                                               

for A & A Roofing, are Method 2's deduction of sale costs and taxes. In response to the  



                                                                                                                            

superior court's questioning, Amy's expert confirmed the court could arrive at a "true  



                                                                                                                         

asset" valuation by taking the "fair market value equity, . . . not reduce it by selling  



                                                               -7-                                                         7244
  


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

expenses or taxes, [and] divide [that number] by the outstanding shares."                                                                                                                                                                                  As Amy   



argues, "[u]nder [her expert's] guidance, the court simply declined to deduct speculative                                                                                                                                                             



costs of sale and taxes from the asset value determined by A & A [Roofing] itself."                                                                                                                                                                                              



                                            Charles   did   not   object   to   Amy's   expert's   characterization   of   A   &   A  



Roofing's finances in his reorganized worksheet or his testimony arriving at the "true                                                                                                                                                                                    



asset" result. Charles also chose not to cross-examine Amy's expert after his discussion                                                                                                                                                                



about application of the "true asset" method with the court.  Charles does not argue in  



his briefing that the reorganized worksheet is inaccurate. Charles instead argues that the                                                                                                                                                                                       



superior court lacked sufficient expert testimony to render an asset valuation because                                                                                                                                                                          



Amy's expert relied on data provided by A & A Roofing's accountant. But Charles does                                                                                                                                                                                        



not argue in his briefing that the underlying data is incorrect.                                                                                                                                         



                                            We   have   found   clear  error  where   "no   reliable   evidence   in   the   record  



supports the court's [business] valuation" because the parties' valuations were based on                                                                                                                                                                                          

                                                                                  10      Amy's expert admitted that his reorganized worksheet was  

speculative assumptions.                                                                                                                                                                                                                                                     



premised on A & A Roofing's Method 2 valuation and that his review of A & A Roofing  

                                                                                                                                                                                                                                                                



was limited to the Method 2 valuations and company financial and income statements.  

                                                                                                                                                                                                                                                                                              



But his characterization and application of the asset method to the Method 2-based  

                                                                                                                                                                                                                                   



streamlined worksheet did not erroneously rely on speculative assumptions because  

                                                                                                                                                                                                                                                               



A  &  A  Roofing's  accountant  testified  that  the  company's  financial  statements  are  

                                                                                                                                                                                                                                                                               



independently verifiedeach year, lendingcredibility and reliabilityto thedataunderlying  

                                                                                                                                                                                                                                                       



A & A Roofing's Method 2 worksheet and Amy's expert's streamlined version.  

                                                                                                                                                                                                                                                                         



                                            When the record is viewed as a whole, we are not left with a definite and  

                                                                                                                                                                                                                                                                              



firm conviction that the superior court made a mistake by valuing the stock at $217/share  

                                                                                                                                                                                                                                                       



under the chosen valuation method.  

                                                                                          



                      10                   Krize  v.  Krize,   145  P.3d  481,  488  (Alaska  2006).  



                                                                                                                                         -8-                                                                                                                                            7244  


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

                           3.           Charles's other arguments are unavailing.                           



                           Charles argues that the shareholder agreement is a buy-sell agreement and                                                                    



that its implicit adoption of Method 2 is the best indicator of the A & A Roofing shares'                                                                       



fair market value.   But we repeatedly have held that the superior court is not bound by                                                                    



                                                              11  

a buy-sell agreement                      valuation.                                                                                                        

                                                                  Becausetherecord supports thecourt's stock valuation  



                                                                                                                                                               

at $217/share under the true asset method, the court did not err by applying a method  



                                                                                                                                                               

other than Method 2 derived fromthe shareholder agreement to value the A & A Roofing  



shares.  



                                                                                                                                                                       

                           Charles argues the superior court abused its discretion by removing the sale  



                                                                                                                                                                     

costs and taxes included in its application of the true asset method.  But the court need  



                                                                                                                                                                        

not consider sale costs or taxes in a property division if a sale or taxable event is not  



                     12  

                                                                                                                                                                     

inevitable.               The court allotted Charles all of his A & A Roofing shares, awarding Amy  



                                                                                                                                                              

half of the value of those shares to be distributed by an equalization payment.  Because  



                                                                                                                                                                 

Charles failed to present proof that the equalization payment to Amy will cause a forced  



                                                                                                                                          13  

                                                                                                                                                                        

sale of his shares or result in an "immediate and specific tax liability,"                                                                   the court did not  



                                                                                                                                                              14  

                                                                                                                                          

abuse its discretion by excluding tax or sale costs from its true asset valuation. 



              11           See Sloan v. Sloan                    , 18 P.3d 60, 64 (Alaska 2001);                                  Money v. Money                    , 852   



Pl2d 1158, 1161 (Alaska 1993).                      



              12           Fortson v. Fortson, 131 P.3d 451, 461 (Alaska 2006).  

                                                                                                                           



              13           See Dundas v. Dundas, 362 P.3d 468, 477-78 (Alaska 2015) ("The party  

                                                                                                         

seeking to equitably allocate the tax consequences must present 'proof that a taxable  

                                                                                                                                                               

event will occur in connection with the division of property.' " (quoting Oberhansly v.  

                                                                                                                                                                           

Oberhansly, 798 P.2d  883, 887 (Alaska 1990))).  

                                                                                   



              14           See Fortson, 131 P.3d at 461 ("Because the court did not require [the party]  

                                                                                                                                                                   

to sell the property, the tax effects were not specific and immediate, and the court did not  

                                                                                                                                                                         

abuse its discretion in denying [the party] a credit for possible tax effects and costs  

                                                                                                                                                                    

                                                                                                                                                   (continued...)  



                                                                                    -9-                                                                             7244
  


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

                               Charles next argues the superior court erred by failing to apply a minority                                                                           



shareholder discount in valuing his stock, contending the marketability of his shares is                                                                                                              



limited because his 46.94% ownership of A & A Roofing stock is not a controlling                                                                                                



interest. But Charles failed to provide a suggested minority shareholder discount at trial.                                                                                                                 

                                                                                                                                                                         15  and Charles  

Because the superior court was not required to apply a minority discount                                                                                                                



failed to establish a need for or provide a suggested calculation of such a discount, the  

                                                                                                                                                                                                   



record supports the superior court's decision not to apply a minority discount.  

                                                                                                                                                                                         



                               Charles  finally  argues  the  superior  court  erred  by  failing  to  adjust  its  

                                                                                                                                                                                                    



valuation to take into consideration "the stock sale restrictions of the Shareholders'  

                                                                                                                                                                         



Agreement." Charles explains that the Shareholders' Agreement restricts stock sales by  

                                                                                                                                                                                                     



requiring two years' notice of a shareholder's intent to retire to receive full value for a  

                                                                                                                                                                                                       



shareholder's stock.  Thus, "at the time of trial, [Charles] could only sell his shares of  

                                                                                                                                                                                    

stock for $179 per share, and then only if he were to retire or die."16  This argument is  

                                                                                                                                                                 



unavailing; even if the shares could not be sold under any circumstances, they still  

                                                                                                                                                                                                 

                                                                                          17     For example, about a year before the parties  

represent significant value to Charles.                                                                                                                                                   

                                                                      



separated, Charles purchased 2,001 shares from a prior shareholder for $220/share.  

                                                                                                                                                                                                            



Because unmarketability does not preclude the court "from determining what price a  

                                                                                                                                                                                                       



                14             (...continued)  



                                      

resulting from a sale.").  



                15             See Hanson v. Hanson                                  , 125 P.3d 299, 308 (Alaska 2005) (holding court                                                         



may consider minority discount, but does not have to apply discount in all instances).                                                                                         



                16             A & A Roofing will buy back a shareholder's shares for their full value, as  

                                                                                                                                                                                                      

set in the Shareholders' Agreement, only in the circumstances of retirement or death; a  

                                                                                                                                                                                                        

shareholder who quits or becomes disabled will receive only a percentage of the shares'  

                                                                                                                                                                                          

value.  



                17             See Martin v. Martin, 52 P.3d 724, 731 (Alaska 2002) ("[A]n asset need not  

                                                                                                                                                                                                   

be marketable if the court can objectively determine that it has value to its owner.").  

                                                                                                                                                                                                      



                                                                                                -10-                                                                                          7244
  


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

buyer would pay," the superior court did not clearly err in its fair market valuation of                                                                                      



                                                                                                                                   18  

Charles's A & A Roofing shares under the "true asset" method.                                                                            



                                                                                                                                                         

              B.	           Concluding  As  A  Matter  Of  Law  That  Amy's  PERS  Retirement  

                                                                                                                                                      

                            Health Benefits Were A Non-Marital Asset Was Error.  



                                                                                                                                                                           

                           Amy's PERS retirement benefits vested before she married Charles, and  



                                                                                                                                                                                    

Amy continued working for the University for nearly 12 years during the marriage.  



                                                             19  

                                                                                                                                                                    

Relying on Sparks v. Sparks,                                     the superior court ruled as a matter of law that Amy's  



                                                                                                                                                                         

PERS retirement health benefits were a premarital asset because vestment occurred prior  



                                                                                                                                                 20  

                                                                                                                                                       

to marriage.  We review the superior court's legal conclusion de novo. 



                                                                                                                                                                  

                            Charles argues the superior court's ruling is "legally erroneous" because  



                                                                                               21  

                                                                                                                                                                          

we overruled Sparks in Engstrom v. Engstrom.                                                        Because we said in Engstrom that "the  



                                                                                                                                                                           

earning spouse continues to pay for even fully-vested retirement benefits while she  



                                         22  

                                                                                                                                                                                

continues to work,"                          Charles contends the superior court should have characterized a  



                                                                                                                                                            

portion of Amy's PERS retirement health benefits as a marital asset.  Amy argues that  



                                                                                                                                

because the Engstrom facts significantly differ from those in Sparks and at issue here,  



                                                                                                                                    

the court was correct in applying Sparks rather than Engstrom.  



                                                                                                                                                                  

                           We calculate the marital portion of a benefit using the coverture fraction  



                                                                                                                                                                     

introduced in Hansen v. Hansen :  the numerator is "the number of years worked during  



              18           See id.         



              19            233 P.3d 1091, 1096-97 (Alaska 2010).                                



              20           See Engstrom v. Engstrom                               , 350 P.3d 766, 769 (Alaska 2015).                                        



              21           See id.        at 771.   



              22           Id.  



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

                                                                                                                                                 23  

the period of coverture" and the denominator is "the total number of years worked."                                                                   



                                                                                                                                      

"Only the marital portion of the retirement health insurance benefit is divisible" between  



                                                                                                                                            

spouses          because           "post-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  

                                        24   The number of years the spouse in Hansen worked included  

                                                                                                                                      

previously performed." 



years worked prior to marriage because the spouse had "used marital funds to buy back  

                                                                                                                                            

health benefits for work performed before the parties began living together."25  

                                                                                                                                       



                       Sparks addressedthefactuallysimilarsituation ofawife'sPERSretirement  

                                                                                                                                   

benefits plan that had vested prior to marriage.26                                 In that case an expert witness testified  

                                                                                                                                       



that premium payments made during the marriage contributed no value to the wife's  

                                                                                                                                         



post-retirement benefit, and the wife's work during the marriage added nothing to the  

                                                                                                                                               

subsidy the State paid at the age of retirement.27                                 The superior court held the retirement  

                                                                                                                                   



health benefits were non-marital because "the evidence showed that none of [the wife]'s  

                                                                                                                                        

                                                                                                                                         28   We  

work during the marriage increased or contributed to the value of the . . . benefits."                                                         

                                                                                                                           



affirmed  the  superior  court's  conclusion  that  the  benefits  were  separate  property  

                                                                                                                                     



"[b]ecause the factual finding that all of the value of [the] post-retirement health benefits  

                                                                                                                                       



           23          119  P.3d  1005,  1015  (Alaska  2005)  (citing  BRETT  R.  TURNER,  EQUITABLE  



DISTRIBUTION OF  PROPERTY     6.10  (2d  ed.   1994)).  



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



  6.26  (2d  ed.  Supp.  2004)).  



           25          Id.   



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



           27          Id.  at   1097.  



           28          Id.  



                                                                      -12-                                                                 7244
  


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

                                                                                                                                                         29  

[was] earned before marriage is supported by the record and not clearly erroneous."                                                                           



                                                                                                                                              

Sparks did not explicitly apply the coverture fraction; however the coverture fraction  



                                                                                                                                                       

implicitly applied was years the benefit vested during marriage divided by total years for  

vestment.30  



                        In Engstrom theemployeebenefit analysis shifted fromearningthebenefits  

                                                                                                                                              

to funding the benefits.31   We stated "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."32   We overruled Sparks to the extent it was inconsistent with this holding.33   In  

                                                                                                                                                         



other words, under Engstrom the coverture fraction is the years during the marriage the  

                                                                                                                                                       



earning spouse contributed to funding the retirement benefit divided by the total years  

                             



worked;under Sparks thecoverturefractionwasyears thebenefit vested during marriage  

                                                                                                                                             



over total years for vestment.  

                                    



                        This case fits squarely under Engstrom.  Amy's PERS Tier 1 retirement  

                                                                                                                                         



health benefits vested in 1985. Amy and Charles were married in 1987. Amy continued  

                                                                                                                                           



working for the University and accrued 11.7 years of PERS service during the marriage.  

                                                                                                                                                              



Under Engstrom Amy continued funding her fully vested retirement benefits during the  

                                                                                                                                                       

marriage, and the benefits funded during those years must be characterized as marital.34  

                                                                                                                                                              



            29          Id.  



            30          Id.   



            31          Engstrom v. Engstrom                     , 350 P.3d 766, 771 (Alaska 2015).                  



            32          Id.  



            33          Id.  



            34          See id.   



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

                                                                                                                                                                      

                           Because Engstrom controls, applying Sparks todetermineasamatteroflaw  



                                                                                                                                                            

that Amy's entire retirement benefit is non-marital was error.  We reverse the decision  



                                                                                                                                                                   

characterizingAmy'sretirement healthbenefitsasnon-marital and remand to valuethose  



                                                                                                                                                                   

benefits.  Because this changes the composition of the marital estate, the superior court  



                                                                   

may also reconsider its equitable division.  



V.           CONCLUSION  



                           We   AFFIRM   the   valuation   of   Charles's   A   &   A   Roofing   stock   at  



$217/share.   We REVERSE the characterization of Amy's retirement health benefits as                                                                                     



entirely non-marital and REMAND for valuation of those benefits and for a renewed                                                                          



                                                                                                                 

consideration of the equitable distribution of the marital estate.  



                                                                                  -14-                                                                            7244
  

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