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Hockema v. Hockema

Supreme Court of Alaska

August 25, 2017

JOHN SCOTT HOCKEMA, Appellant,
v.
JANET HOCKEMA, Appellee.

         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 ...


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