Appeal
from the Superior Court No. 3KO-12-00458 CI of the State of
Alaska, Third Judicial District, Kodiak, Steve W. Cole,
Judge.
Herbert M. Pearce, Law Office of Herbert M. Pearce,
Anchorage, for Appellant.
No
appearance by Appellee Janet Hockema.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and
Carney, Justices.
OPINION
CARNEY, Justice.
I.
INTRODUCTION
In 2012
John "Scott" Hockema filed for divorce from his
wife, Janet Hockema. The superior court divided the marital
estate equally and awarded Janet, who had been a homemaker
throughout most of the marriage, spousal support for six
years. Scott appeals the superior court's award of
spousal support, its valuation of several pieces of marital
property and a retirement account, the denial of an offset
for certain mortgage payments made on the marital home, the
denial of an offset for interim spousal support paid, and the
calculation of tax payments made on certain marital property.
We affirm the superior court's valuation of the marital
property and its decision not to offset the interim spousal
support payments, but we conclude that the value of the
retirement account and the amount of property taxes paid were
calculated incorrectly. We also conclude that the court did
not make sufficient findings regarding its award of spousal
support, and we remand for further consideration of the
necessity, amount, and duration of spousal support.
II.
FACTS AND PROCEEDINGS
Scott
and Janet Hockema married in 1987 and separated in November
2012. Scott filed for divorce the same month. In September
2013 the superior court ordered Scott to pay Janet $5, 000
per month in interim spousal support, effective the preceding
April, pending completion of the divorce proceedings. Because
Janet was living in the marital home, the court granted Scott
credit for the associated mortgage payments, which he was
making. He was therefore required to pay Janet only the
difference between the $5, 000 spousal support obligation and
the mortgage amount. When Janet moved out of the residence in
September 2014, Scott continued to make mortgage payments on
the home; he moved into the home the following month but
continued to make reduced interim spousal support payments to
Janet.
The
divorce proceedings took place between May and December 2014.
Both Janet and Scott offered extensive testimony about their
respective incomes and the value of the marital assets. They
both presented appraisals of their marital home in Kodiak.
Janet's real estate agent appraised the home at $295,
000, while Scott's real estate agent appraised it at
$283, 000. The home's septic system needed repair, and a
local excavation company estimated the repairs would cost
$19, 500. The court had ordered Scott to repair it in January
2014; Scott failed to comply with the court order. The court
therefore adopted the lower appraisal of $283, 000 but
declined to offset the value of the home by an additional
$19, 500 due to Scott's failure to obey its order.
Scott
and Janet had also placed a down payment on a plot of land
adjacent to the marital home. During the divorce proceedings
and without prior approval from the court, Janet relinquished
the option to purchase the land and received a refund of the
$ 10, 000 down payment. The court counted the $ 10, 000
refund against Janet's balance of marital assets.
In
addition to their Kodiak property, Scott and Janet owned a
six-plex apartment building in Coos Bay, Oregon, and six
acres of land in Seven Devils, Oregon. The court found that
Janet had constructive possession of the six-plex for a time
but relinquished it to Scott in September 2014 because she
was unable to keep up with the maintenance expenses. Janet
admitted to collecting $3, 580 in rent from the
building's tenants without paying the building's
mortgage or maintenance costs; the court allocated that
amount of the marital assets to her.
Scott
and Janet agreed at trial that the Seven Devils property was
worth $60, 000 and should go to Janet. But in August 2015
Janet disclosed that she had sold the property in June for
$35, 000, in violation of the court's order not to
dispose of marital assets. The court assigned the property to
her at its full value of $60, 000 in the property
distribution.
Two
witnesses testified about Janet and Scott's excavation
equipment. Michael Tope, a certified equipment appraiser with
30 years of experience in the construction equipment
industry, evaluated the equipment twice based on photographs,
information provided at different times by Scott and Janet,
and visual inspection of the equipment. Tope did not start or
operate the equipment or observe it in use. He determined
that the equipment was in "fair" condition and
valued it accordingly. He explained that "fair"
meant the equipment "may require overhaul soon [and] may
be old or [have] suffered hard use." His first appraisal
was based on information provided by Scott. He valued the
parties' dump truck at $10, 000, their excavator at $20,
000, and their backhoe at $14, 000. After receiving more
information from Janet and conducting an inspection, he
increased the respective valuations to $15, 000, $25, 000,
and $17, 500, largely based on the presence of "valuable
accessories" that Scott had not informed him were
present on the equipment.
Around
the time of Tope's second evaluation, Scott also hired
Patrick Anderson, a certified diesel and auto mechanic with
extensive experience working on and operating heavy
machinery, to repair the equipment and estimate the cost of
further necessary repairs. Anderson performed $2, 298.33 in
repairs to the dump truck and estimated that it needed
another $4, 459.46 in repairs. He testified that it could not
be moved from the property because it did not meet Department
of Transportation (DOT) standards. Anderson performed repairs
worth $194.90 on the excavator. He testified that it was not
safe for use and would require $37, 761.23 in further repairs
to be safely operational. He also performed $323.29 in
repairs on the backhoe and estimated it would require an
additional $5, 429 in repairs.
The
court adopted Tope's revised valuations of the equipment
at $15, 000, $25, 000, and $17, 500, but it credited Scott
for Anderson's repair work, which the court found had
contributed to the increase in the equipment's value.
Scott
and Janet agreed in court that Scott had one retirement
account (IRA) with a value of $6, 350. However, in reviewing
the evidence, the court discovered two conflicting exhibits
about the IRA: Scott's Exhibit 33 showed an account at
U.S. Bank with a balance of $6, 600 on January 8, 2014, while
Janet's Exhibit P showed an account at Wells Fargo bank
with a balance of $6, 350 on March 31, 2014. The court
concluded that, because the parties had failed to explain
this discrepancy, it had "little choice but to find
there are two IRA's in Scott's name, totaling $12,
950." (Emphasis omitted.)
After
valuing the marital property, the court addressed credits due
to Scott since the parties' separation. In addition to
other credits not at issue on appeal, the court granted Scott
a credit of $5, 274 for plumbing and heating repairs to the
marital home, $3, 880 for repairs to the home's flooring,
$570 for electrical maintenance on the home, and $1, 537 for
painting the home's interior. It found that Scott had
paid $3, 400 in property taxes on their Oregon property and
determined that he was entitled to an offset for that amount.
Scott
requested an offset of $69, 715.20 for interim spousal
support payments he had made. The court rejected his request
because "allowing such an offset would result in
completely negating the whole point of ordering interim
spousal support here in the first place" and granting
Scott a credit for these payments "in addition to the
tax write-off he already received would be
double-dipping."
Scott
also requested a credit for the $29, 004.55 he had paid
toward the marital home's mortgage since the parties'
separation. The court determined that granting Scott a credit
for mortgage payments made before Scott was ordered to pay
spousal support would be inequitable given that Scott's
income was approximately ten times Janet's. When Janet
was living in the home after the court ordered interim
spousal support, Scott had been allowed to deduct the
mortgage payments from his $5, 000 monthly support
obligation. The court determined that granting him a credit
for those payments "would essentially be a
double-credit, and not one the court is inclined to
award." Finally, when Scott was living in the marital
home after Janet moved out, the court concluded that granting
credit for the mortgage payments would be "the
equivalent of letting him stay in the home free." The
court therefore declined to grant Scott an offset for any of
the mortgage payments.
After
valuing the marital assets available for distribution, the
court divided the marital estate and awarded Janet spousal
support in accordance with the Merrill factors,
which guide trial courts in equitably allocating the economic
effects of a divorce.[1]
The
court found that Scott, who worked as a commercial fisherman
and heavy equipment owner and operator, was the sole source
of income during the marriage. After the parties'
separation Scott also had access to the majority of their
cash and liquid assets. Janet had a high school education,
and her primary occupation during the marriage was
"running the household, managing some aspects of the
parties' businesses, and caring for the children."
Since the parties separated, Janet had worked at four
different jobs, earning between $8.40 and $ 11 an hour. In
her most recent employment she was earning $9.25 an hour. She
submitted an exhibit showing that her average monthly
expenses were approximately $3, 450, and she testified that
she spent "about the amount that [she] get[s]... between
[her] work and [her] spousal support." Janet had
received $35, 000 from the sale of the Seven Devils property,
but the court noted that the money would likely be used to
pay attorney's and expert fees and to pay off personal
debt of $23, 000 that she had accrued since the parties'
separation.
Janet
insisted that she would prefer an award of spousal support to
a disproportionate share of the marital assets. She testified
that she would be unable to sell either the excavation
equipment or the Oregon six-plex, and she would not be able
to afford the maintenance costs on the Oregon six-plex or
obtain a loan to re-mortgage the property in her name. Janet
also indicated that it would be difficult for her to sell the
Kodiak home because she did not have the money to repair the
septic system or perform any other necessary repairs. Given
the financial difficulty she would face if she were awarded
the larger pieces of property, she requested an award of
spousal support "or a cash judgment."
Janet's
expert witness, certified public accountant Lisa Rogers,
testified about Janet's expected income and costs. She
calculated that approximately twelve years of spousal support
at $60, 000 per year would enable Janet to meet her living
expenses through the average life expectancy. If Janet were
awarded nearly all the marital property, Rogers estimated
that Janet would still require approximately nine years of
spousal support at $60, 000 per year to retire securely. She
did not assess Scott's ability to pay spousal support.
The
court considered the parties' conduct and depletion of
marital assets. It found that Janet's termination of the
option to purchase the lot next to the marital home and her
sale of the Seven Devils property for significantly less than
the stipulated value were "serious violations" of
court orders and unreasonable depletions of marital assets.
The court found that Scott had also violated court orders and
contributed to the depletion of marital assets by
consistently failing to make timely spousal support payments,
making "rude and crude comments" to Janet in his
electronic transfers, and emptying their joint bank accounts
of over $30, 000 immediately after the parties'
separation in November 2012.
Taking
into consideration Janet's desire to receive support
rather than a larger share of the marital estate, the court
divided the marital property equally. It awarded Janet the
stipulated $60, 000 value of the Seven Devils property, a
cargo trailer in Oregon, her vehicle, $1, 100 from a
"vacation account, " five guns, her jewelry, the
rental payments she collected from the six-plex, and the $10,
000 she received from the lot adjacent to the marital home.
It also placed on her the obligation to repay a $24, 500 debt
owed to a family member. The court awarded all other marital
assets and debts to Scott and ordered him to pay Janet an
$87, 434 cash equalization payment.
In
deciding to award Janet future spousal support, the court
noted that she had been "adamant" in preferring to
receive spousal support over additional property. The court
also considered that most of the larger and more valuable
assets were in Kodiak and that Janet did "not want the
hassle and expense of being a landlord for their six-plex in
Oregon."
Based
on the evidence presented, the court determined that
Scott's adjusted gross income for 2014 was $ 124, 984,
and his adjusted gross income for 2015 would be $ 107, 900.
It concluded that $216, 000 in spousal support to be paid
over a period of six years would provide both Janet and Scott
with "sufficient funds to make investments, prepare for
the future, and ease into retirement when that time
comes." The court ordered Scott to pay $4, 000 per month
for two years beginning on September 1, 2015; $3, 000 per
month for the next two years; and $2, 000 per month for the
final two years. In addition to the spousal support, the
court established a two-year payment schedule for the $87,
434 cash equalization payment and $35, 898 in past due
interim spousal support that was incurred largely because of
the mortgage payment deductions Scott had continued applying
to Janet's interim spousal support after she had vacated
the marital home.
Following
post-trial briefing and additional hearings on the issue of
spousal support, the court entered a final decree of divorce
in September 2015. Scott appeals the award of future spousal
support; the valuation of the home, excavation equipment, and
IRA; the denial of an offset for mortgage payments made on
the marital home; the denial of an offset for interim spousal
support paid; and the calculation of the tax payments made on
the parties' Oregon properties.
III.
STANDARD OF REVIEW
A trial court's division of marital assets comprises
three steps:
(1) determining what property is available for distribution,
(2) finding the value of the property, and (3) dividing the
property equitably. Under the first step, we review the
"[u]nderlying factual findings as to the parties'
intent, actions, and contributions to the marital
estate" for clear error. Whether "the trial court
applied the correct legal rule in exercising its discretion
is a question of law that we review de novo using our
independent judgment." The second step, the valuation of
property, is a factual determination that we review for clear
error.[2]
"Clear
error is found 'only when we are left with a definite and
firm conviction based on the entire record that a mistake has
been made.' "[3] "We review the trial court's
third step, the equitable allocation of property, for abuse
of discretion."[4]
"Trial
courts' . . . awards of spousal support are reviewed for
abuse of discretion; we reverse such awards only if they are
clearly unjust."[5]
IV.
DISCUSSION
A.
Legal Background
Alaska
Statute 25.24.160(a)(4) governs the division of property in
divorce. It requires property division to be made "in a
just manner and without regard to which of the parties is in
fault."[6] In dividing marital property, a trial
court must consider the Merrill
factors.[7] These factors are not exhaustive, and
the court is not required to enter findings on each factor;
the court's findings regarding the division of property
need only be sufficient to indicate the basis of the
court's conclusion.[8] The trial court has broad latitude
in dividing marital property, [9] and "we generally
will not reevaluate the merits of the property
division."[10]
Courts
may award spousal support pursuant to AS 25.24.160(a)(2). In
doing so, courts must consider nearly identical factors to
those weighed in dividing marital property, although property
division and spousal support "serve distinct purposes
and are not interchangeable."[11] Spousal support is
ordinarily disfavored, "because it is generally
undesirable to require one person to support another on a
long-term basis in the absence of an existing legal
relationship."[12] We have therefore required that
trial courts should, where possible, address spouses'
financial needs through property distribution, rather than
through awards of spousal support.[13] To accomplish this,
courts should award a disproportionate share of the marital
property instead of awarding spousal support.[14]
If
necessary to address a disparity in the parties'
financial needs and earning power, the court may award
spousal support for a limited duration; this support is
generally classified as either reorientation alimony or
rehabilitative alimony.[15]Rehabilitative alimony is
"intended to further one spouse's 'job training
or other means directly related to entry or advancement
within the work force' " and need not be predicated
on a finding that the party's reasonable needs cannot be
met through property division.[16] Reorientation alimony
is intended to provide the lower-earning spouse "an
opportunity to adjust to the changed financial circumstances
accompanying a divorce" and should be awarded only where
unequal property division cannot adequately meet the
spouse's reasonable needs.[17] It may be appropriate,
for instance, where one spouse requires time to organize or
sell non-liquid property or to obtain a job appropriate to
his or her skills.[18] Because reorientation alimony is
meant to be "transitional, "[19] we have noted
that "it is difficult to imagine circumstances under
which an award of reorientation alimony extending for longer
than one year would be justified."[20]
A
spouse seeking spousal support must present specific evidence
establishing the need for that support, and the trial court
must make specific findings regarding that spouse's
financial needs and the court's reasons for determining
that the award was just and necessary.[21] The court should
also enter findings on the higher-earning spouse's
ability to pay spousal support and "the impact that the
...