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Ethelbah v. Walker

Supreme Court of Alaska

November 13, 2009

Lawrence J. ETHELBAH, Appellant and Cross-Appellee,
v.
Mary Sue WALKER f/k/a Ethelbah, Appellee and Cross-Appellant.

As Corrected on Rehearing March 26, 2010.

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Gregory W. Lessmeier, Lessmeier & Winters, Juneau, for Appellant and Cross-Appellee.

Chrystal Sommers Brand, Family Lawyer (An Alaska Corp.), Juneau, for Appellee and Cross-Appellant.

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

OPINION

CARPENETI, Justice.

I. INTRODUCTION

A husband appeals the property division in his divorce. He argues that the trial court erred in distributing a retirement survivorship benefit by present value instead of by a qualified domestic relations order; in valuing a retirement health insurance benefit, an excavator machine, and two trucks; and in ordering recapture of marital income earned from his pension during the period of separation. The wife cross-appeals, arguing that the court erred in depriving her of the right to devise a pension survivorship benefit and in valuing a marital escrow account. We affirm the superior court's decision in all respects except its order that pension income paid to the husband during the separation period should be recaptured.

II. FACTS AND PROCEEDINGS

A. Facts

Lawrence Ethelbah and Mary Sue Walker married in Arizona in 1966. They divorced in October 2007. At the time of divorce, Lawrence was sixty-eight years old and Mary Sue was sixty-four. They had one adult son. During the marriage, Mary Sue worked for the Alaska Department of Education and for Alaska school districts. Lawrence worked for the United States Bureau of Indian Affairs. Lawrence retired from the federal government in 1994 and Mary Sue retired from state service in 1998. The Ethelbahs lived summers in Alaska and winters in a home in Pinetop, Arizona on an Apache Indian reservation. During retirement, the parties started two businesses that bought, sold, and leased machinery. Mary Sue was the corporate officer of both corporations.

On January 10, 2007, Mary Sue was diagnosed with breast cancer and underwent surgery and chemotherapy. The parties permanently separated on or about January 12, 2007. The separation was not amicable. Each party accused the other of stealing personal property from the estate. Lawrence filed an action in an Arizona tribal court seeking to have Mary Sue arrested for these alleged thefts. Mary Sue offered testimony (which the court called " believable" ) that she fled the Arizona home after Lawrence threatened her with a gun.

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B. Proceedings

The divorce trial was held October 11-12, 2007. Superior Court Judge Patricia A. Collins ordered the sale of several items of real and personal marital property, with the proceeds to be divided equally. Other property items were allocated to the parties, with the distribution to be balanced later by an equalizing payment. These included a number of vehicles, boats, trailers, pieces of heavy machinery, halibut fishing quotas, and other items. The court found that Lawrence had received but not shared certain marital funds during the period between separation and trial, including pension income, proceeds from halibut fishing quotas, income from rental properties, and proceeds from selling a Linkbelt excavator machine. The court placed these funds on Lawrence's side of the marital property ledger so they would be factored later into an equalizing payment.

At the time of the divorce, each party was receiving a defined benefit retirement pension. Mary Sue's was from the Teachers' Retirement System (TRS) and Lawrence's was a federal civil service pension. The trial court ordered that the marital portion of each party's pension benefits be divided equally by qualified domestic relations order (QDRO) or Court Order Acceptable for Processing (COAP).[1] Each party was also awarded survivorship benefits associated with the other spouse's pension, and they were to share the costs of the survivorship benefits.

Mary Sue also had a medical insurance retirement policy from TRS that the court determined to have a present value of $111,821. This policy provided a survivorship benefit to Lawrence in the form of lifetime medical coverage should he survive Mary Sue, which the court estimated had a present value to him of $45,064. Rather than distribute the TRS medical survivorship benefits by QDRO, the court used the present value estimates, placing $45,064 on Lawrence's side of the ledger in the tabulation of marital assets, and $111,821 on Mary Sue's side.

The court ordered that bank accounts, which likely contained more than $400,000, be divided equally after tracing by a jointly-selected CPA. The court prepared a property distribution table dividing the assets fifty-fifty " as closely as possible." An equalizing payment would be calculated after the CPA completed the tracing of the assets in the marital bank accounts. Later, however, the parties stipulated that there would be no tracing and that monies withdrawn from these accounts by the parties during the separation were used for reasonable living expenses.

III. STANDARD OF REVIEW

A trial court has broad discretion to provide for the equitable division of property between the parties in a divorce. [2] We review the trial court's equitable distribution under an abuse of discretion standard, and will reverse only if the division is clearly unjust. [3] We review a trial court's decision to classify property as marital for abuse of discretion, and review the court's underlying factual findings on classification and valuation of marital property for clear error.[4] Clear error exists when we are " left with a definite and firm conviction that the superior court has made a mistake." [5] We review questions of law de novo, adopting the rule of law that is most persuasive in light of precedent, reason, and policy.[6]

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IV. DISCUSSION

A. The Superior Court Did Not Err in Assigning a Present Value to Lawrence's Survivorship Interest in Mary Sue's Retirement Health Insurance, Rather than Distributing It Through Qualified Domestic Relations Order.

Lawrence objects to the way the court distributed the health insurance survivorship benefit that he was entitled to under Mary Sue's retirement plan. He argues that the law prohibits distributing a survivorship benefit according to an estimate of present value, that doing so was unfair, and that it should have been distributed by QDRO instead. While we ordinarily prefer the QDRO method for distributing pension benefits,[7] the trial court retains discretion to use a present value distribution for vested pension benefits,[8] including survivorship benefits, where justified by the circumstances and the need for an equitable distribution.[9] We find the trial court did not abuse its discretion in this case.

An expert witness testified that Mary Sue's post-retirement medical insurance benefit had a present value of $111,821 to her, based on actuarial calculations given her age and history of cancer. The expert similarly estimated Lawrence's survivorship benefit from that insurance to have a present value worth of $45,064 to him. The court accepted these valuations and treated these amounts as marital property possessed by each party in its tabulation for the equitable division of property.

Lawrence argues that assigning a present value to the survivorship benefit places an unfair risk on him by crediting him with possession of $45,064 in marital property, even though he will receive this benefit only if he outlives Mary Sue and enjoys the benefit for the amount of time the expert predicted. He calls the benefit " speculative" and " highly contingent." Lawrence points out that the other survivorship benefits in this case were not assigned present values. Citing Tanghe v. Tanghe[10] and Nicholson v. Wolfe,[11] he says that it was error to capitalize this survivorship benefit because " doing so placed an unfair risk on the non-employee[ ] spouse and was inconsistent with the wait and see approach underlying the ...


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