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Jones v. Jones (7/25/97), 942 P 2d 1133
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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.
THE SUPREME COURT OF THE STATE OF ALASKA
JOHNIE JONES, )
) Supreme Court No. S-7245
Appellant, )
) Superior Court No.
v. ) 3AN-94-2562 CI
)
MARIAN R. JONES, ) O P I N I O N
)
Appellee. ) [No. 4858 - July 25, 1997]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Rene Gonzalez, Judge.
Appearances: Barbara A. Norris, Law Offices
of Barbara A. Norris, Anchorage, for Appellant. Moshe Calberg
Zorea, Anchorage, for Appellee.
Before: Matthews, Eastaugh, and Fabe,
Justices. [Compton, Chief Justice, and Rabinowitz, Justice, not
participating.]
MATTHEWS, Justice.
I. INTRODUCTION
In this divorce case the superior court divided the
property of Johnie and Marian Jones. Johnie appeals, arguing that
the court erred in failing to identify certain property as being a
part of the marital estate, in failing to properly value certain
marital assets and debts, and in awarding the bulk of the couple's
property to Marian. For the reasons that follow, we reverse and
remand.
II. FACTS AND PROCEEDINGS
Johnie and Marian Jones were married on May 1, 1963. A
decree of divorce was entered ending their marriage on June 30,
1995. Johnie worked for the federal civil service in a supply
warehouse at Fort Richardson from 1974 until arthritis and knee
problems forced him to retire in 1992. Marian was also a federal
civil service employee throughout the marriage and remained so
employed at the time of trial. [Fn. 1]
The parties separated in December 1991. Marian filed a
complaint for legal separation and separate maintenance on March
25, 1994. Johnie counterclaimed for divorce. Johnie obtained a
refund of his contributions to his retirement account, totaling
$42,454.37, and deposited these funds into the court registry. The
only issue for trial was the division of the marital property. At
the conclusion of the trial the superior court entered findings of
fact and conclusions of law.
The court found that during the course of the marriage
Johnie "was involved in illegal gambling activities which resulted
at times in significant losses of money." The court also found
that "[s]ince on or about March, 1979, Marian has been making all
of the monthly mortgage payments of $785.00 on the family residence
and monthly payments on the marital debt with no contribution from
Johnie Jones." The court found that the couple had marital
property with a total equity value of $88,600, not including the
parties' retirement accounts. No value was placed on Marian's
retirement account. In dividing these assets the court found that
through his illegal gambling, Johnie Jones has
caused waste of marital assets and his contribution to preserving
and maintaining the marital home has been minimal particularly
since 1979. The equities in this case favor a distribution of the
marital estate which awards Marian Jones more than 50% of the
marital assets.
The court awarded Marian the family residence, with a
court-valued equity of $80,900; a 1989 Volvo automobile with equity
of $5000; all of the household furniture and appliances, which were
valued at $2000; and all of her retirement benefits. She was also
given sole responsibility for a debt incurred in the purchase of a
refrigerator. Johnie was awarded the entire amount of his
retirement fund. He was also required to pay a $100 credit card
debt; debts owed to physicians; and federal income taxes owing from
prior to 1992.
III. STANDARD OF REVIEW
We review questions of law based upon our independent
judgment. "Our duty is to adopt the rule of law that is most
persuasive in light of precedent, reason, and policy." Guinn v.
Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979). Findings of fact may
not be set aside unless they are clearly erroneous. Alaska R. Civ.
P. 52(a). Findings as to the value of marital assets are subject
to this standard. The trial court's determination of the proper
division of marital property is reviewed under the abuse of
discretion standard. McDaniel v. McDaniel, 829 P.2d 303, 305
(Alaska 1992). A division must be clearly unjust to amount to an
abuse of discretion. Malone v. Malone, 587 P.2d 1167 (Alaska
1978); AS 25.24.160(a)(4). A property division which is based on
a clearly erroneous factual finding or on an error of law must be
set aside. Wanberg v. Wanberg, 664 P.2d 568 (Alaska 1983).
IV. DISCUSSION
The proper procedure for a trial court to follow in
making an equitable division of marital property pursuant to AS
25.24.160(a)(4) involves three steps: (1) the determination of what
property is available for distribution; (2) the determination of
the value of that property; and (3) the making of an equitable
division. Wanberg, 664 P.2d at 574.
A. Failure to Identify Property
Johnie first argues that the trial court failed to
identify a $15,000 savings account as marital property. At trial,
it was shown that Marian built this account by depositing the
Permanent Fund Dividends she received over the course of the
marriage. Johnie testified that his own Permanent Fund checks were
deposited in the joint marital account and subsequently used for
household expenses.
The court did not address the savings account when it
divided the Joneses' property. This savings account was clearly
property that was acquired during the course of the marriage. The
court erred in failing to include it as marital property. On
remand the court should equitably divide the account.
Johnie also points out that, although it was included in
the trial court's listing of the marital assets, the court failed
to award the couple's 1977 Plymouth to either of the parties. As
marital property, the automobile should have been awarded to one of
the parties. On remand the court should direct the disposition of
the Plymouth.
B. The Valuation of Assets
Johnie next argues that the trial court erred in its
valuation of certain marital assets. The court found that there
was $52,000 owing on the family residence. However, Marian stated
at her deposition and in response to an interrogatory that the
mortgage balance was approximately $46,000 at the time of trial.
We have previously held, generally, that the date of valuation for
property in a divorce proceeding should be as close as practicable
to the time of trial, Ogard v. Ogard, 808 P.2d 815, 819 (Alaska
1991), and the amount of debt owed on a piece of marital property
must be taken into account when determining its value. Mack v.
Mack, 816 P.2d 197, 199 (Alaska 1991).
When a trial court chooses to value property at an
earlier date, "there should be specific findings . . . why the date
. . . is the more appropriate choice for valuation." Doyle v.
Doyle, 815 P.2d 366, 369 (Alaska 1991) (quoting Ogard, 808 P.2d at
820). In this case, there were no such findings. Although the
trial court found that the parties "stopped functioning as an
economic unit"in December 1991, it is unclear as to how the trial
court reached its conclusion regarding the value of the marital
home. The possibility of undervaluation of the property coupled
with the lack of any finding regarding the propriety of some
earlier date of valuation amounts to clear error and must be
remedied on remand.
The trial court also erred in failing to value Marian's
vested retirement benefits. Retirement benefits earned during a
marriage are a marital asset and are subject to equitable division.
Wainwright v. Wainwright, 888 P.2d 762 (Alaska 1995). On remand
these benefits must be valued and taken into account in the overall
property division.
We also note that, although the trial court placed
responsibility on Johnie for a federal income tax debt incurred
prior to 1992, it failed to include any of that debt in its listing
of marital assets and liabilities. On remand the trial court
should quantify the debt, allocate it, and take it into account.
Lastly, the trial court made Johnie responsible for the
payment of certain bills for the services of doctors rendered to
him during the course of the marriage. Doctor's fees, incurred
during the marriage, are marital debts which must be included in
the marital estate and divided like any other marital property.
See Lynch v. Lynch, 411 N.W.2d 263 (Minn. App. 1987). The trial
court failed to quantify those debts before placing responsibility
for them on Johnie. On remand the trial court should value the
debts, allocate them, and take them into account in the property
division.
C. The Division of Property
Johnie alleges error in the overall division of the
marital property. The court awarded Marian $87,900 in marital
assets and required her to pay a $500 debt. [Fn. 2] She was also
awarded her unvalued retirement account. Johnie was awarded his
$42,500 in retirement funds, and was required to pay the
unquantified federal tax debt and doctor's bills, and the $100
credit card debt.
It is presumed that an equal division is equitable.
Wanberg v. Wanberg, 664 P.2d 568, 574-75 (Alaska 1983). Sometimes,
however, this is not the case and an unequal division may be
required to achieve equity. In dividing property, either equally
or unequally, trial courts should be guided by the factors laid out
by this court in Merrill v. Merrill, 368 P.2d 546 (Alaska 1962),
which were later codified in AS 25.24.160(a)(4). The factors which
should be considered are (1) the length of the marriage and the
station in life of the parties during the marriage; (2) the age and
health of the parties; (3) the earning capacity of the parties,
including their educational backgrounds, training, employment
skills, work experiences, length of absence from the job market,
and custodial responsibilities for children during the marriage;
(4) the financial condition of the parties, including the
availability and cost of health insurance; (5) the conduct of the
parties, including whether there has been unreasonable depletion of
marital assets; (6) the desirability of awarding the family home,
or the right to live in it for a reasonable period of time, to the
party who has primary physical custody of children; (7) the
circumstances and necessities of each party; (8) the time and
manner of acquisition of the property in question; and (9) the
income-producing capacity of the property and the value of the
property at the time of division. [Fn. 3]
In its findings of fact and conclusions of law, the trial
court refers to only one of these Merrill factors as the basis for
the unequal division -- the conduct of Johnie. It found that
Johnie's "contribution to preserving and maintaining the marital
home has been minimal particularly since 1979." It also found,
"through his illegal gambling, Johnie Jones has caused waste of
marital assets."
Johnie challenges as clearly erroneous the trial court's
characterization of his contribution to the family as minimal since
1979. He argues: "Nothing in the record supports that. Mrs.
Jones did not say it, and Mrs. Jones' attorney did not even argue
it. The tax returns don't support it, and the lifestyle does not
reflect it." Regarding the parties' lifestyle, Johnie argues:
During the period from 1979 to 1991, as Mr.
Jones pointed out, the parties lived together, furnished the house,
bought a Volvo and a pickup truck, financed their child's college
education, traveled to Europe together nine times, and maintained
house payments . . . . This simply could not have been done on
Mrs. Jones' salary alone. They filed joint tax returns every year,
and it is obvious that the household was being run off of two
incomes.
To support their arguments, both Johnie and Marian refer
to portions of Marian's testimony in which she explained Johnie's
history of contributing his paycheck to the parties' joint account.
Although Marian testified that between March and December of 1979,
Johnie did not provide her with any income or support, she conceded
that they subsequently opened a joint bank account to which Johnie
contributed his paycheck until September 1982. According to
Marian, Johnie again deposited his paychecks starting in January
1983 "for maybe three months,"but after that he "would go right
into [his employer's] finance office and take his checks." As a
result, Marian testified, she would "write the bills and the checks
would bounce." When asked how often the checks for paying various
bills had bounced, she responded, "This would have happened maybe
20 times."
Fully crediting Marian's testimony, it does not support
the generalization made by the court that Johnie's contribution
since 1979 was "minimal." While Marian's testimony can be read to
suggest that Johnie failed to deposit his paycheck on more than the
twenty occasions on which checks bounced, it does not clearly
indicate how often Johnie refrained from depositing his paycheck
after January 1983. Moreover, as indicated above, Marian conceded
that Johnie deposited his paycheck into the parties' joint account
from December 1979 until September 1982. Thus, the trial court's
conclusion that Johnie made little or no contribution to the
marital estate after 1979 is based upon evidence that is too
limited in scope to support it. [Fn. 4] Because the property
division was based, at least in part, upon this erroneous finding,
the property division must be set aside.
As stated, the trial court also ruled that Johnie had
committed waste of marital assets through his gambling losses. At
trial, there was evidence of $8,800 lost over the course of the
marriage. [Fn. 5] $5,800 of this amount was shown to have been
incurred in 1990. There was also testimony that this amount had
been offset by Johnie's winnings and was not a net loss figure.
However, discounting the latter testimony and assuming that there
were no winnings to offset the gambling losses, the evidence as to
losses does not support the disparate division of property ordered
here.
Johnie argues that his gambling losses incurred prior to
the separation were merely a form of recreational expense which
cannot be used to justify the one-sided property disposition
ordered by the court. Johnie argues:
There is no evidence that Mr. Jones was
addicted to gambling or that the amount he gambled increased over
time. For him, gambling over an occasional card game was
recreation and his only social outlet that he did on his own, other
than the religious activities organized by Mrs. Jones.
Mr. Jones' family did not want for
anything. There was nothing intrinsically more damaging to the
marital finances about Mr. Jones' gambling than many other forms of
recreation, or hobbies. Had he spent money on pull tabs or in
bingo parlors, or on trips to Las Vegas, any losses would have been
"legitimate." There is no evidence in the record of "waste"of
marital assets in any determinable dollar amount, and certainly
insufficient evidence to justify giving Mrs. Jones $103,100.00 in
the property division and Mr. Jones nothing. The parties reported
giving away more money to the Catholic church than Mr. Jones lost
gambling in 1990, even ignoring his offsetting winnings.
The gambling issue must be viewed in
context with Mr. Jones' steady employment over a thirty year
marriage bringing income into the home, clearing the land,
supporting the house, expensive furniture, interior design, Mrs.
Jones having all of the clothes she wanted, a Volvo, annual trips
to Europe, raising a son and sending him to Oxford, attending
church, making close to $80,000 worth of charitable contributions
to the church, and so forth. It is as if the court said, none of
this upstanding life means anything, because you played cards and
gambled from time to time.
Other than reiterating the court's finding that Johnie
caused waste of marital assets through his gambling, Marian makes
no response to Johnie's arguments.
Typically the question of wasted marital assets arises
when a marital asset is lost or diminished after separation but
before the time of trial. When a marital asset is sold after
separation and the sale proceeds are spent for marital purposes or
normal living expenses, then the expended marital asset is not
taken into account in the final property division. When, however,
there is evidence that the expended marital asset was wasted, or
converted to a nonmarital form, the trial court may "'recapture'
the asset by giving it an earlier valuation date and crediting all
or part of it to the account of the party who controlled the
asset." Foster v. Foster, 883 P.2d 397, 400 (Alaska 1994).
The alleged wastage of marital assets which was found to
have occurred here is not of the typical type described above for
the gambling losses occurred prior to the parties' separation.
Instead, Johnie's illegal gambling is governed by the Merrill
factors, specifically the factor which requires consideration of
"the conduct of the parties, including whether there has been
unreasonable depletion of marital assets." AS 25.24.160(a)(2)(E).
We generally share the concern reflected in Johnie's
argument that value judgments concerning the nature of
discretionary spending during a marriage should be avoided. What
seems wasteful to one party may be a treasured source of solace to
another, and it should generally not be for a judge to say which is
which.
Under AS 25.24.160(a)(4) property is to be divided
"without regard to which of the parties is in fault." However, as
noted, subpart (E) of the same section mandates consideration of
the conduct of the parties, including whether there has been
unreasonable depletion of marital assets. There is an obvious
tension between these two provisions. This tension is best
resolved by construing "fault"in AS 25.24.160(a)(4) to refer to
moral or legal misconduct which has led to the failure of the
marriage, but not to economic misconduct which has unreasonably
depleted marital assets. See Hartland v. Hartland, 777 P.2d 636,
642 (Alaska 1989) (stating that under AS 25.24.160, a "court cannot
rely on one party's fault in ending the marriage to justify[]
awarding a greater portion of the marital property to the other
spouse"). The concept of economic misconduct is broad enough to
include social or moral misconduct which leads to an unreasonable
depletion of marital assets, such as domestic violence. See Brett
R. Turner, Equitable Distribution of Property sec. 8.09, at 600 (2d
ed. 1994). [Fn. 6] Therefore, a court may take into account
economic misconduct under subpart (E), but it may not consider a
party's moral or legal marital failings which do not amount to
economic misconduct.
According to one commentator, the following language from
an intermediate appellate court in Wisconsin summarizes the
prevailing legal principles on this point:
The prohibition against considering marital
misconduct does not prevent consideration of a party's depletion of
the marital assets. Martial misconduct, ordinarily consisting of
adultery or abandonment, was previously a factor that the court
could consider in dividing the marital assets. Under the current
statute, misconduct that caused the failure of the marriage is not
a factor to be considered in dividing the marital estate. We
conclude, however, that the court's authority to consider the
contribution of each party to the marriage allows it to consider
destruction or waste of the marital assets by either party.
Anstutz v. Anstutz, 331 N.W.2d 844 (Wis. App. 1983) (quoted in John
DeWitt Gregory, The Law of Equitable Distribution  9.03[1], at 9-
13 (1989)).
Thus AS 25.24.160(a)(4) prohibits the superior court from
considering Johnie's gambling to the extent that this conduct may
have caused the failure of the marriage. Further, the fact that
Johnie's gambling was illegal -- card games -- rather than legal --
for example, bingo -- is not of central importance. But this
leaves unresolved the question as to whether his gambling was
economic misconduct or, to use the terms of the statute, an
unreasonable depletion of marital assets.
Professor Gregory, surveying states with a statutory
structure similar to Alaska (with the exception that the term
"dissipation of marital assets"rather than "unreasonable depletion
of marital assets"is used), observes that the most frequently
mentioned elements of unreasonable depletion are (1) use of
personal property for the spouse's own benefit, (2) at a time when
the marriage is breaking down (either before or after separation),
(3) with an intent to deprive the other spouse of the other's share
of the marital property:
The Illinois courts and those in other
states suggest with some frequency that for dissipation of assets
to be considered as a factor in property distribution, a spouse
must use personal property for his or her own benefit at the time
when the marriage is breaking down. On occasion, however, courts
have departed from both of these requirements.
. . . .
Although the most common definition of
dissipation makes no reference to intent to dissipate assets, a
requirement of such intent is often implied or mentioned explicitly
in judicial opinions on the subject. In In re Marriage of
Drummond, [509 N.E.2d 707 (Ill. App. 1987),] for example, the
Appellate Court of Illinois noted not only that the husband's
losing investments in commodities trading occurred at an early
point in the marriage before there was evidence of discord, but
also that "there was no evidence of intent to wilfully dissipate
marital assets." [Id. at 715.] Again, in Robinette v. Robinette,
[736 S.W.2d 351 (Ky. App. 1987),] the Court of Appeals of Kentucky
stated:
We believe the concept of
dissipation, that is, spending funds for a nonmarital purpose, is
an appropriate one for the court to consider when the property is
expended (1) during a period when there is a separation or
dissolution impending, and (2) where there is a clear showing of
intent to deprive one's spouse of his or her proportionate share of
marital property. [Id. at 354.]
Decisions in Missouri reflect a similar
approach. In Calia v. Calia, [624 S.W.2d 870 (Mo. App. 1981)] the
Missouri Court of Appeals observed: "If one spouse secretes or
squanders marital property in anticipation of divorce, the court
may order reimbursement." [Id. at 872.]
Gregory, supra,  9.02[2], at 9-4 - 9-6.
It is possible that the trial court's conclusion that
Johnie should be penalized for wasting marital assets because of
his gambling can be reconciled with the above authorities. [Fn. 7]
Assuming that to be so, the court nonetheless unduly sanctioned
Johnie for gambling. The proper method for dealing with an
unreasonable depletion of marital assets would be for the trial
court to recapture the proven losses by adding their value to the
marital estate before making the equitable division and then
crediting that part of the value to the account of the party
responsible for the unreasonable depletion. See, e.g., Foster, 883
P.2d at 400; Cox v. Cox, 882 P.2d 909, 918 n.5 (Alaska 1994);
Gregory, supra,  9.02[4], at 9-9 - 9-11.
The court's failure to follow this methodology is another
reason requiring that the property division be set aside. [Fn. 8]
On remand the trial court should be on guard not to "double count."
That is, it should not recapture the gambling losses and credit
them to Johnie's account and then also make a preferential division
of the marital property in favor of Marian because of any waste of
assets that it found. Hartland, 777 P.2d at 643.
V. CONCLUSION
In sum, we hold that the trial court erred in failing to
identify certain marital property and in failing to properly value
certain other property; and that its overall division of the
marital estate must be set aside because it is based on legal and
factual errors. The decision of the trial court is REVERSED and
REMANDED for division of the marital estate in accordance with the
foregoing. [Fn. 9]
FOOTNOTES
Footnote 1:
In 1992 Marian's gross wages were $34,608. The parties filed
joint income tax returns through 1991. The parties' combined gross
income from wages in the 1991 return is listed as $74,051, thus
suggesting that Johnie's earnings were somewhat higher than
Marian's.
Footnote 2:
We note that, given that the equity in the house may have been
undervalued, that the $15,000 savings account seems to have
remained in Marian's possession, and that Marian received her
unvalued retirement benefits, the value of her award may be
substantially greater than the expressed amount.
Footnote 3:
Not every listed factor is relevant to every case, and non-
listed factors may be relevant to a particular case.
Footnote 4:
The evidence shows, further, that some of the occasions when
Johnie kept his paycheck out of the marital checking account were
periods during which the couple was separated and the funds were
used by Johnie for living expenses while apart from his wife. In
Streb v. Streb, 774 P.2d 798 (Alaska 1989), we held it to be an
abuse of discretion for a trial court to order a party to reimburse
the marital estate for reasonable living expenses incurred during
a temporary separation of the couple. Id. at 802. Though, here,
the trial judge did not directly order Johnie to reimburse the
marital estate, the unequal property division has the same effect.
Footnote 5:
It might be inferred from trial testimony that there were more
than $8,800 in losses.
Footnote 6:
Other jurisdictions employ a similar definition of "economic
misconduct." For example, in In re Coomer, 622 N.E.2d 1315, 1319-
20 (Ind. App. 1993), the court upheld an uneven property division
where a husband's physical abuse of his wife caused health problems
for her that created a substantial likelihood of future medical
expenses. The court noted that "while a party's conduct or fault
in the breakup of the marriage is not a proper ground for an
unequal division of marital property, a party's conduct during the
marriage 'as related to the disposition or dissipation of their
property' is." Id. at 1319 (citation omitted). It concluded that
the trial court did not abuse its discretion in awarding the wife
more of the marital property because "a good share of her income
will be devoted to her medical care"as a result of the husband's
conduct during the marriage. Id. at 1320.
Footnote 7:
We note that all three of the identified elements are not
necessarily present in every case.
Footnote 8:
In view of our reversal on this point, we believe the trial
court should also reconsider whether Johnie's gambling amounted to
an unreasonable depletion of marital assets in light of the
discussion contained in this opinion.
Footnote 9:
The court is authorized to conduct a supplemental evidentiary
hearing.
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