Appeal
from the Superior Court No. 3AN-10-09931 CI of the State of
Alaska, Third Judicial District, Anchorage, Herman G. Walker,
Jr., Judge.
Robert
C. Erwin, Robert C. Erwin LLC, Anchorage, for Appellant and
Cross-Appellee.
Douglas C. Perkins, Hartig Rhodes LLC, Anchorage, for
Appellee and Cross-Appellant.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and
Carney, Justices.
OPINION
CARNEY, Justice.
I.
INTRODUCTION
The
superior court awarded one of the husband's investment
accounts to the wife in a divorce. Before transferring the
account to the wife, the husband transferred shares of three
mutual funds from that account to a separate investment
account. The wife asked the court to order him to account for
the missing shares. The court ultimately ordered the husband
to pay the wife the value of the shares on the date of the
transfer and he did so. The parties contested the value of
the income earned by the improperly transferred shares.
Following lengthy litigation of this issue the court awarded
the wife enhanced attorney's fees.
The
wife appeals the valuation of the earned income of the
shares. The husband cross-appeals the valuation of the earned
income on the shares and the award of attorney's fees. We
find that the superior court appropriately awarded the wife
prejudgment interest instead of damages as well as enhanced
attorney's fees.
II.
FACTS AND PROCEEDINGS
A.
Facts
Sheila
Erwin and William Mendenhall married in Anchorage in June
1994. Erwin moved out of the marital home in February 2005
and filed for divorce in August 2010. Trial was held in
December 2012.
In its
June 2013 findings of fact and conclusions of law the
superior court found that a 50/50 split of property would be
equitable. The court awarded Erwin the entirety of a
UnionBanc retirement account in Mendenhall's name
(Account) with any gains or losses before distribution. The
Account consisted of shares of seven mutual funds. On
February 11, 2014 Mendenhall transferred the shares for three
of the mutual funds from the Account to one of his other
accounts. At the time of this transfer the value of these
shares was $ 164, 757.43. On February 13, 2014 the superior
court issued a final judgment and decree of divorce.
In
April 2014 Mendenhall prepared a letter of authorization
asking UnionBanc to liquidate the assets in the Account and
to transfer the value to Erwin. He instructed UnionBanc not
to allow Erwin access to any information about the Account.
Erwin sent a copy of the divorce order to UnionBanc to
effectuate the transfer; UnionBanc transferred the balance of
the Account to her without liquidating the shares. Erwin
received shares of four mutual funds.
B.
Proceedings
In May
2014 Erwin filed a motion asking the court to order
Mendenhall to account for the missing mutual fund shares. On
September 23 the court ordered Mendenhall to provide an
accounting for the missing shares within ten days. On
September 30 Mendenhall's attorney asked for an extension
from Erwin's attorney until October 31, although he
apparently never formally filed for an extension from the
court, nor did the court grant one. On October 31 Mendenhall
emailed Erwin's attorney stating that he had not had time
to look for any alleged missing funds but that he would
transfer "the share amount" to Erwin if she gave
him an account number.
In
December 2014 Erwin filed a notice to the court that
Mendenhall had failed to comply with the court's order to
account for the missing investments. Mendenhall responded
that he had mistakenly transferred the shares to his
children's college account but was willing to transfer
the shares to Erwin. Erwin argued that Mendenhall's offer
was unsatisfactory because he had never provided an
accounting of the shares and did not guarantee that the
transfer would protect the tax-deferred status of the funds.
In
February 2015 Mendenhall's attorney suggested a
settlement: Mendenhall would pay Erwin $ 15 8, 000 if Erwin
would withdraw her May 2014 motion. Mendenhall offered to
transfer the money to Erwin's UnionBanc account. Erwin
did not accept this offer.
In June
2015 Erwin filed a motion to enforce the final judgment and
decree of divorce. She asked the court to award her the value
of the shares of the three mutual funds at the time of
transfer plus any earnings and distributions on the shares
since the transfer. Mendenhall filed a partial opposition,
claiming that he had attempted to transfer Erwin the shares
but that she had not provided him with her account number.
The
court held a hearing on these motions in December 2015. It
ordered Mendenhall to determine the value of the three mutual
funds on the date of the transfer and to transfer that amount
to Erwin. The court held that Erwin was "entitled to any
earnings that she would have been entitled to on those mutual
funds" and instructed the parties to file briefs
calculating the value of those earnings and providing a clear
methodology for their calculations and authority for adopting
the methodology. Mendenhall transferred Erwin $164, 757.43 in
cash, which she received on January 5, 2016. In an order
clarifying scheduling, the court stated that it was satisfied
with the $164, 757.43 value at the time of the transfer and
considered the issue resolved.
Erwin
then filed a brief on the lost investment earnings from the
mutual fund shares. She proposed calculating the earnings by
multiplying total distributions per share by the number of
shares in the account at the time of the transfer. She based
the total distributions per share on information from
websites of the mutual funds and from
Morningstar.[1] Erwin calculated that Mendenhall had
received a total of $41, 920.88 in investment earnings on
these three funds over the relevant time period.
Mendenhall
disputed Erwin's calculations and argued that the mutual
fund shares had actually lost value during this time period.
He argued that, because the funds had lost value, Erwin
should reimburse him $17, 616.61. Mendenhall argued that the
value of the shares of each of the mutual funds at the date
of transfer should be multiplied by the change in value
during the relevant time period to adjust the value of the
shares. Erwin filed a reply, arguing for the first time that
Mendenhall tortiously converted the shares of the mutual
funds.
The
superior court held oral argument in July 2016. Erwin and
Mendenhall presented the same proposed methodologies and
values that they had argued in their briefs. The court found
that neither proposed method of calculating the earnings was
reliable because they were not based on any authority. It
awarded Erwin prejudgment interest on the principal from the
date of the transfer (February 11, 2014) until the date Erwin
received the money (January 5, 2016) as a
substitute.[2] It accepted Erwin's calculation of the
interest and ordered Mendenhall to pay Erwin $11, 730.47 in
prejudgment interest.
Erwin
moved for reconsideration, arguing that she was entitled to
the earnings under the judgment of divorce, that prejudgment
interest was not an adequate substitute for the shares that
would have been purchased with the earned income on the
shares, and that the court had not indicated that it wanted
expert testimony or an evidentiary hearing. ...