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Dunmore v. Dunmore

Supreme Court of Alaska

May 11, 2018

GLORIA DUNMORE, Appellant,
v.
RICHARD DUNMORE, Appellee.

          Appeal from the Superior Court of the State of Alaska, Third Judicial District, No. 3 AN-15-08222 CI, Anchorage, Mark Rindner, Judge.

          Gloria Dunmore, pro se, Manning, South Carolina, Appellant.

          Kenneth P. Jacobus, Kenneth P. Jacobus, P.C., Anchorage, for Appellee.

          Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.

          OPINION

          MAASSEN, JUSTICE.

         I. INTRODUCTION

         A husband and wife divorced after 40 years of marriage. The wife appeals the superior court's decision to equally divide their marital property, which consisted primarily of retirement benefits and debt. The superior court declined to consider how the couple's Social Security benefits affected a fair distribution, believing that our case law precluded it from doing so. But we hold that although federal law prohibited any allocation of the parties' Social Security benefits, the court could consider them as evidence of the parties' financial condition in crafting an equitable division of the marital property.

         The wife raises a number of other challenges to the property division, but we conclude they lack merit. We vacate the order dividing the marital property and remand for further consideration in light of the parties' Social Security benefits.

         II. FACTS AND PROCEEDINGS

         Gloria and Richard Dunmore were married in 1975 and separated in July 2007.[1] It was eight years later - in July 2015 - that Richard filed a complaint for divorce. Trial on the division of their property took place in April 2016, when Gloria was 61 years old and Richard was about to turn 64. Following trial the superior court issued written findings of fact and conclusions of law, entered the divorce decree, and issued orders dividing the parties' pensions.

         During the marriage Richard had spent three years working for the military, 16 years working for what his testimony describes as the "State of Alaska Housing Authority, "[2] and 13 years in the federal civil service. He retired in 2012. He received Veterans Administration (VA) disability benefits of $133 per month, Social Security disability benefits of $2, 081 per month, and a Federal Employees Retirement System (FERS) pension benefit of approximately $360 per month.

         Gloria had worked for the State of Alaska for approximately 35 years before retiring in 2009. She received a monthly benefit from the Public Employees Retirement System (PERS) in the gross amount of $5, 762. She testified that she would become eligible for Social Security when she turned 62 the next year, though her benefits would be higher if she waited until she was 66 to receive them. She could only estimate how much she would eventually receive from Social Security; her eligibility was based on a low-paying job she had held many years before. She had no plans to seek eligibility based on her marriage to Richard.

         During the parties' separation, Richard had cashed out a Thrift Savings Plan totaling $4, 471 and accepted a voluntary separation incentive payout from the military in the amount of $25, 000. He did not share any of these funds, or the money from his FERS pension, with Gloria. Nor did Gloria share her pension benefits with Richard. But at trial Richard expressly disavowed any claim to the PERS benefits Gloria received during the separation, even though they amounted to several hundred thousand dollars.

         Gloria and Richard had two significant marital debts. One, to the IRS, stemmed from their 2006 federal taxes. The superior court found that the outstanding balance at the time of trial was $13, 172.30. Gloria testified that she was unaware of this debt and admitted that she had made no payments on it.

         The other debt involved a "parent-student loan" in the amount of $32, 000 taken out in 1999 for the benefit of the parties' daughter. Richard testified he was unaware of this debt. Neither party had made any payments on it, and it appeared to have grown over the years to nearly $70, 000.

         In its written findings and conclusions, the superior court stated that it had considered all relevant factors and determined "that an equal distribution of property [wa]s appropriate." It therefore divided the parties' pensions equally, and it issued orders that equally divided Gloria's PERS and Richard's FERS benefits attributable to the period between the date of their marriage in September 1975 and the date of their separation in July 2007. The court also equally divided the liability for the marital debt, though it observed that the parent-student loan should be their child's responsibility "in the first instance."

         The court observed that its division of the marital property did not take into account the parties' Social Security benefits and that this result was unfair. Gloria's "relatively large retirement" was shared equally with Richard, Richard's "small civil service retirement" was shared equally with Gloria, and Richard's concurrent receipt of Social Security and VA benefits - which the court by law could not divide - meant that Richard was receiving significantly more each month than Gloria despite the 50/50 split, at least until Gloria began receiving Social Security benefits. But the court believed this result was mandated by our case law, and in a later order it encouraged Gloria to appeal the issue and seek a change in the law.

         Gloria appeals, raising the Social Security issue and several others related to the division of the marital estate.[3]

         III. STANDARDS OF REVIEW

         "A trial court's 'equitable division of marital assets involves three steps: (1) determining what property is available for distribution, (2) finding the value of the property, and (3) dividing the property equitably.' "[4] "We review the first and second steps, which involve factual findings 'as to the parties' intent, actions, and contributions to the marital estate' and the 'valuation of property, ' for clear error."[5] We find clear error "if, upon review of the entire record, we are left with a firm and definite conviction that a mistake has been made."[6] "We review the third step, 'the equitable allocation of property, ' for abuse of discretion."[7] "A property division is an abuse of discretion if it is clearly unjust; it will also be set aside if it is based on a clearly erroneous factual finding or mistake of law."[8] "[W]hether 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."[9]

         IV. DISCUSSION

         A. The Parties' Social Security Benefits May Be Considered In The Division Of Their Marital Property As Evidence Of Their Financial Condition.

         As the superior court summarized its property division, Gloria had "a relatively large retirement which was equally divided" (her PERS pension); Richard had "a small civil service retirement which was equally divided" (his FERS pension); and Richard also received "[S]ocial [S]ecurity and VA disability payments which by law the court cannot divide." Because the court believed it could not even consider the existence of the parties' Social Security benefits, the effect of its property division was that - despite the 50/50 split - Richard received a considerably greater monthly income than Gloria, at least until she began receiving Social Security herself. Gloria argues that it was error not to consider the effect of Social Security benefits in the property division.[10]

         It was undisputed that at the time of trial Richard was already receiving Social Security disability benefits, which would convert to retirement benefits when he reached full retirement age, and that Gloria anticipated receiving Social Security benefits a few years later. The superior court expressly stated that it would have liked to factor these benefits into its property distribution but believed it was constrained from considering even "the existence of such benefits" because of our decision in Cox v. Cox.[11]

         The superior court was correct that it could not lawfully divide the Social Security benefits of either party.[12] And courts may not evade the federal prohibition by offsetting the Social Security benefits with a larger award of marital property to the other spouse.[13] But it is a separate question whether the court may consider Social Security benefits as one of the factors relevant to a fair allocation of the marital estate.

         To answer this question we first address our opinion in Cox. In Cox we affirmed a superior court's decision not to consider a divorcing couple's future Social Security benefits when dividing their marital property.[14] We noted that "[t]he employee has no contractual right to [Social Security] benefits" and that "[t]he sum of the Social Security taxes paid from an employee's earnings are not a measure of any potential Social Security benefits that the employee might receive upon retirement."[15] While acknowledging that some states "have held that Social Security benefits are but one factor to be considered in the disposition of the marital property, and that there is no federal prohibition excluding their consideration in the divorce context, " we rejected this approach as unwise "[g]iven the speculative nature of future Social Security benefits."[16]

         We recognize that Cox can be read as holding that Social Security benefits will always be too speculative to be considered because of their gratuitous and noncontractual nature. We reject that implication, however; that a retiree will receive some amount in Social Security benefits is at least as predictable as the retiree's receipt of other pension and retiree medical benefits that our courts are routinely called upon to prospectively divide.[17] But the Social Security benefits at issue in Cox were speculative in amount because the parties' entitlement to them was still years in the future.[18] We do not read Cox as precluding the consideration of Social Security benefits when they can be valued more readily and accurately - as here, where a party is already receiving them.

         We turn to the question of how a trial court goes about considering Social Security benefits in this context while still respecting the bounds of federal preemption. A minority of jurisdictions hold that Social Security benefits may not be considered at all in marital property divisions; these courts "generally have concluded that no principled line can be drawn between considering the existence or absence of anticipated Social Security benefits as factors in effecting an equitable division of marital property and making a prohibited offset of the value of such benefits against the value of other assets."[19] A majority of jurisdictions, however, allow Social Security benefits to be considered as one of many factors necessary to ensuring a "just division that takes into account all 'relevant factors.' "[20]

         We conclude that the latter approach is more consistent with the theory of equitable division on which Alaska's law of property division is based.[21] Among the Merrill factors a court must consider, as stated in the governing statute, is "the financial condition of the parties."[22] As a general matter, "[t]he size of each spouse's nonmarital estate is clearly relevant to division of property, " as "[a] spouse with more nonmarital property is in better financial condition" than the other.[23] And few couples are likely to plan financially for their retirement without taking Social Security into account; courts should not be expected to ...


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