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Frost v. Spencer

Supreme Court of Alaska

October 16, 2009

Cathy M. FROST, Appellant/Cross-Appellee,
v.
John S. SPENCER, Appellee/Cross-Appellant.

Michael A. Grisham, Allen Clendaniel, Dorsey & Whitney LLP, Anchorage, for Appellant/Cross-Appellee.

Robert C. Erwin, Palmier & Erwin, LLC, Anchorage, for Appellee/Cross-Appellant.

Page 679

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, CARPENETI, and WINFREE, Justices.

OPINION

PER CURIAM.

I. INTRODUCTION

Cathy Frost and John Spencer, friends who were at times romantically involved, ran a business together from the late 1980s to the early 2000s. When their working relationship deteriorated, Spencer sued for division of the partnership property under the law of domestic relations. Frost agreed to a dissolution of their business partnership under a framework for the " equitable distribution" of assets and liabilities. But after trial the superior court declared that it was bound instead to resolve the case under partnership law. The court permitted the parties to submit written responses to its ruling but declined to hold another evidentiary hearing Before issuing a final decision. Frost appeals on several grounds. Because Frost should have had the opportunity to present evidence after the court announced that different law governed the case, we reverse the superior court's denial of Frost's request for a supplemental evidentiary hearing and remand for further proceedings.

II. FACTS AND PROCEEDINGS

Cathy Frost and John Spencer, friends since high school, started a business together in 1988 or 1989. That business, called Footloose Alaska, initially provided guided hunting expeditions and then expanded to offer catered events, including weddings. Frost and Spencer acquired real property in Girdwood, the Raven Glacier Lodge, as a location to house clients Before flying them to remote areas for hunting trips and for use as the site of their catered events. That property was titled in Spencer's name because of residual financial complications from a prior business in which Frost had been a partner with her deceased husband, but the parties agree that they purchased the lodge together. Frost and Spencer also purchased Farewell Lake Lodge from Frost's parents. The two partners had different roles in running Footloose Alaska: Spencer " did all the flying and bush logistics and guiding, the carpentry, architectural work, landscaping, aircraft repair and maintenance," and Frost " did the marketing, the food service, [and] the public relations." The record does not indicate that they had a written partnership agreement.

Before and at the beginning of the business partnership, Frost and Spencer were " sporadically" romantically involved. There is no evidence in the record, nor does either party now assert, that they ever lived together.

By 2003 Frost and Spencer no longer had a functioning professional relationship.[1] In February 2005 Spencer filed a complaint against Frost requesting a " dissolution of the parties' partnership interests" and a " division of their jointly acquired real and personal properties." The complaint stated that " [i]n 1985, the parties entered into a personal relationship and during the course of same, acquired, as partners, real property, personalty and incurred certain indebtedness," but now " [t]he parties' personal relationship has terminated." In response, the superior court served the parties with a domestic relations procedural order. The case proceeded as though it concerned a domestic partnership, at first because the court apparently thought Spencer had properly characterized it as such, [2] and later because the parties agreed to treat it as some kind of domestic relations case even after the court recognized the error. That agreement was explicit: during trial, Spencer's attorney noted on the record

Page 680

that he would not present evidence to prove that the partnership was domestic because Frost had accepted that classification in her amended trial brief; that brief expressly adopts Spencer's description of the matter by stating that " Mr. Spencer has asked for an equitable dissolution and Ms. Frost agrees." [3]

In May 2006, after preliminary proceedings largely regarding the liability insurance on and possession and maintenance of Raven Glacier Lodge, the case went to trial. The court informed the parties that each side would have three hours and forty-five minutes total to present its case. As the case progressed, the court clerk kept track of time, and at several breaks the court reported to the parties how many of their allotted minutes they had used. Frost made motions for more time during and after the trial, which the superior court denied, and at other points Frost and her attorney noted that the time was insufficient to present all the evidence they wanted to put Before the court.

Spencer served as the main witness on his own behalf. After answering preliminary questions about his personal background, he described the acquisition and maintenance of several planes that he believed were his property but Frost argued were partnership assets. He answered questions about the purchase of the real property Footloose Alaska used, as well as loans he and Frost had received from the bank and family members to begin the business. He also testified to small expenditures he had made out of personal funds for the benefit of Footloose Alaska. Frost's attorney asked Spencer on cross-examination about his work for the business, tax refunds he received in years Footloose Alaska lost money, and the status of the title to Raven Glacier Lodge.

Spencer's attorney called several additional witnesses. Four appraisers testified to the values of Farewell Lake Lodge, Raven Glacier Lodge, personalty at Raven Glacier Lodge, and airplanes Spencer owned while Footloose Alaska was in operation. David William Spencer, John Spencer's younger brother, testified that Spencer put significant effort into Footloose Alaska and that David had made loans totaling approximately $15,000 to Spencer and $25,000 to Footloose Alaska, none of which had been repaid.

Frost also put on witnesses. A seasonal employee at Raven Glacier Lodge testified about the amount of work Frost and Spencer put into Footloose Alaska while he worked there, describing the shifting focus of the business toward weddings rather than guiding hunts, as well as Spencer's decreasing involvement in the early 2000s. Frost's mother took the stand to state that she and her husband had sold Farewell Lake Lodge to Frost and Spencer at a $270,000 discount and they considered that amount part of their daughter's inheritance. Frost also testified; she described financial benefits Spencer received from Footloose Alaska, such as money for repairs to his planes, and claimed to have invested her Permanent Fund Dividends into Footloose Alaska. She also talked about Spencer's decreasing involvement in the business. Her direct examination ended, though she stated that " we have more witnesses" and " there's so much I haven't been able to say," because her attorney decided to reserve the remaining ten minutes the court allotted to make a closing statement.

Frost's attorney argued in closing that the parties' behavior-in particular, Spencer's benefiting financially from owning Footloose Alaska despite having ceased to contribute labor and Frost's continuing to work tirelessly to host weddings at the lodge-indicated that their arrangement was for Frost to work toward full ownership of Raven Glacier Lodge. Spencer's attorney spoke in closing about the values of the partnership property, arguing that certain ...


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