Memorandum decisions of this court do not create legal precedent. A party wishing to cite such a decision in a brief or at oral argument should review Alaska Appellate Rule 214(d).
Laura and Jeremy Novak divorced in 2014. They have one son; Laura was awarded primary physical custody. Both are employed, but Jeremy earns a substantially larger income. Laura was awarded the family home and temporary spousal support. Jeremy was ordered to pay child support pursuant to Alaska Civil Rule 90.3, child care expenses, and $10,000 of Laura's attorney's fees. Jeremy appeals the property division, spousal support, child care, and attorney's fees decisions. We conclude that it was improper to require Jeremy to pay certain child care expenses in addition to child support and that a post-separation loan was incorrectly classified as a marital debt. We also conclude that the superior court must clarify the balance of the mortgage on the marital home. We affirm the judgment in all other respects.
Laura Novak and Jeremy Novak were married in November 2006 and separated in August 2011. They have one son. Laura was 45 at the time of trial and Jeremy was 37. Laura filed for divorce in December 2012. Both parties were represented by counsel. Laura requested primary physical custody of their son, $2,000 monthly in reorientation spousal support for two years, and $5,000 in attorney's fees. Laura requested a 70-30 division of the other property in her favor, which she asserted was fair and equitable due to the large income disparity and because she is eight years older than Jeremy and has health issues that could affect her future earning capacity.
When the parties separated the marital home was in Jeremy's name, but Laura was living there and sought to have it transferred into her name. The home needed significant repairs and was worth about as much as the mortgage. Laura requested "that she be granted two years to relieve [Jeremy] of the current mortgage encumbering the home." Alternatively she requested that Jeremy continue to pay the mortgage and all other expenses on the home until it could be sold, and that he take any loss on the sale. Jeremy requested that each party pay their own costs and attorney's fees. He proposed a roughly equal property division and requested that Laura refinance the home in her name within 120 days. He did not respond to Laura's request for spousal support.
Trial began in September 2013. Laura testified that she was employed by the U.S. Postal Service and that her take-home pay was about $3,500 monthly with variations due to overtime. Jeremy testified that he was employed by Alaska Power and Communications on the North Slope and had a gross income of about $10,000 per month.
Laura testified that she has a work-related hip injury and had a hip reconstruction in 2011. She expects to need a full hip replacement at some point. She stated that her hip injury sometimes causes her to miss work and work slower in the winter because she has difficulty walking on ice. She also testified that she was involved in a car accident in 2012 which resulted in back and neck injuries and that she has a history of malignant melanoma.
The parties also testified about their retirement accounts. The only issue relevant to this appeal pertains to Laura's Thrift Savings Plan (TSP). Laura testified that there was one loan on the TSP with a balance of $3,892 from 2010 that was used to pay off credit cards and buy "some things for the house."
Jeremy testified that he was willing to complete up to $10,000 worth of repairs so Laura could refinance the marital home in her name. The court continued the property trial so the parties could investigate how much it would cost to repair the home and whether Laura could get a loan. Less than a month later, Jeremy had completed most of the repairs and Laura had been pre-approved for a mortgage. Jeremy ultimately spent $11,087 on repairs. At a status hearing in November, it was discussed that Laura would take out a second loan from her TSP account in order to make the down payment on the home. She eventually took out an $18,800 loan.
Later that month the parties stipulated that Laura would receive the marital home at a value of $196,963. The stipulation specified that the values in the stipulation "shall be deemed final" and "[t]he value of the home will not be hereinafter adjusted should the home fall in value or increase in value prior to the court entering a final property division order in this case."
The superior court held a hearing in February 2014 to discuss the parties' agreements concerning the property division. There was some discussion about the valuation of the home; it appears the parties were still using a spreadsheet listing the mortgage balance as $204,454. Jeremy testified on direct examination by his attorney:
Additionally Laura testified that she had recently been diagnosed with two work-related tears in her shoulder. She was scheduled to have surgery requiring three months of leave from work followed by six months of light duty. Laura reiterated her request for $2,000 monthly in spousal support for two years. Jeremy testified that he did not want to pay spousal support or attorney's fees, because he "fe[lt] [he'd] supported her long enough" during the separation.
Child care costs were addressed at trial and Jeremy testified that:
The superior court made oral findings later in February and entered the divorce decree, written findings of fact and conclusion of law, and a child support order in March. Laura received primary physical custody of their son. Laura was awarded the home. After refinancing, the mortgage was $187,115. And after the repairs, the assessed value of the home at the time of trial was $255,000. In its written findings, the superior court awarded the home to Laura at the stipulated value of $196,963, but noted that "on paper the home's value does assist [Laura's] overall financial position." On the attached property division spreadsheet, however, the superior court listed the value of the home as $195,210 with a mortgage balance of $204,494.
Laura was awarded an Edward Jones Investment account worth $4,435, her Roth IRA worth $1,434, and her TSP account valued at $49,178.
The superior court found that Jeremy's gross income in 2013 was $137,775 and Laura's was $54,628. The superior court stated:
The superior court ordered Jeremy to pay child support pursuant to Alaska Civil Rule 90.3 beginning in March 2014. He was not assessed retroactive child support because he "paid a substantial portion" of the post-separation expenses, "including the mortgage payments, various utilities, cell phone bills, and all of the daycare for the child and similar expenses." Jeremy was also ordered to pay child care expenses in addition to child support payments.
The superior court found that "[Laura] will have some temporary decrease in her earning[s] as a result of [her] upcoming surgery and subsequent rehabilitative period," and "[spousal] support is necessary to assist [Laura] in an anticipated reduction for a temporary period of time." The superior court identified "allowing [Laura] to re-budget family expenses without [Jeremy's] assistance in the future" as another reason for the spousal support award. Laura was to receive $2,000 monthly from March-May 2014, $1,000 monthly from June-August 2014, and $500 monthly from September-December 2014. Support would terminate at the end of December 2014. The superior court added: "[T]he court is presuming that [Laura] will be receiving Worker's Compensation during the time that she is off of work. If this is not correct . . ., then [Laura] may ask the court to reconsider a temporary award of spousal support." The superior court's findings did not mention any of Laura's other health problems. And the superior court specifically found that "rehabilitative support is [not] necessary in that [Laura] is currently employed at a long term job with benefits."
Laura incurred an estimated $11,730 in attorney's fees. Until November 2013 Jeremy's union paid 75% of his attorney's fees. He estimated the union paid approximately $4,000 and he personally paid $4,000. The superior court ordered Jeremy to pay $10,000 of Laura's attorney's fees. The court stated it "believes that [Jeremy] does not have that amount[,] which is understandable. However, after a short period of catching up, [Jeremy] will have a greater ability to make the attorney['s] fees payment." Jeremy was to pay $5,000 by August 2014 and $5,000 by December 2014.
Jeremy asked the court to reconsider the property division, spousal support, and attorney's fees awards in April 2014. His motion was denied.
Jeremy appeals.
"The 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."
"[A]wards of spousal support are reviewed for abuse of discretion," and we will reverse "only if they are clearly unjust."
"The trial court has broad discretion in awarding attorney's fees in divorce actions."
Jeremy challenges all three steps of the property division. First he argues that the superior court inaccurately classified marital debts. Second he contests the valuation of the home. Third he asserts that the overall division of property was unfair.
Jeremy argues that the superior court improperly characterized his home repair expenditures as a marital debt, a factual finding reviewed for clear error.
The superior court classified Laura's two TSP loans as marital debts and assigned them to her. Jeremy argues these loans were post-separation and should not have been included in the property division. The first loan's balance was $3,892; the uncontradicted testimony at trial was that this loan was taken out in 2010 to buy household items and pay off credit card debt. Because Jeremy points to no evidence in the record suggesting this loan was post-separation, we conclude the superior court did not clearly err in classifying this loan as a marital debt.
The second TSP loan was a post-separation $18,800 loan Laura took out for a down payment to refinance the marital home. Laura does not dispute that the debt was incurred post-separation, but she states that the superior court treated the loan properly because it was part of the agreement to refinance the home. The stipulation provides that Laura "shall secure new financing" but it does not specifically mention a TSP loan. Laura has not pointed to any evidence in the record suggesting that the parties agreed this loan was to be treated as marital debt or any other reason why it should be classified as marital. We therefore vacate the finding that this post-separation loan was a marital debt.
Jeremy challenges the valuation of the home and the mortgage debt, which are factual determinations reviewed for clear error.
Jeremy asserts that the superior court erred by not considering the newly appraised $255,000 value of the home. But Jeremy advances no argument for valuing the home at an amount different than the stipulated value, and we see no justification for disregarding the stipulation.
We next consider the mortgage valuation. At the first stage of the trial in September, Jeremy submitted evidence that the mortgage balance was $195,211. Laura's trial brief, submitted that same month, stated the mortgage balance was $204,454. In November the parties stipulated the mortgage balance was $196,963. When the trial continued in February, the parties agreed that the post-refinancing mortgage balance was $187,115, and the court referred to this balance in its findings of fact. But the court's findings do not specify the balance of the marital obligation at the time Laura refinanced. And the accompanying property division spreadsheet lists a mortgage balance of $204,454. As mentioned above, the superior court did not state it was relying on the spreadsheet's real property values, but we note this additional discrepancy. Because we cannot ascertain with certainty the superior court's valuation of the marital mortgage debt, we remand this question so the court may specify the correct amount.
Equitable distribution of assets is reviewed for abuse of discretion and is overturned only if clearly unjust.
Jeremy appears to argue that the superior court should have applied the Rose v. Rose rescission approach to the property division because he and Laura separated after less than five years of marriage.
Jeremy also argues that when evaluating the relative economic strength of the parties, the superior court failed to adequately consider the increase in home equity Laura received. But Jeremy and Laura had already stipulated to the value of the home and agreed that the stipulated value would be used in the property division; the court was not required to consider the higher value suggested by the appraisal that was completed pursuant to Laura's refinancing of the home. And there is insufficient evidence to suggest that the overall property division was unfair, particularly given the lack of evidence concerning Jeremy's pension plans. Although the superior court may need to adjust the property division in light of the classification and valuation errors discussed above, we see no other error regarding the equitable property division.
Alaska's divorce statute provides for spousal support "as may be just and necessary . . . [to] fairly allocate the economic effect of divorce."
Jeremy argues that the superior court abused its discretion by awarding Laura spousal support because spousal support was not necessary to "fairly allocate the economic effect of divorce."
Laura replies that she did not actually receive worker's compensation for her shoulder injury and that, even if she had, the compensation would have been only "75% of her gross pay, with no Cost of Living Adjustment or health benefits." Jeremy points out that this compensation is non-taxable, so her take-home pay would not be reduced by the full 25%. Laura also argues that her shoulder injury was not post-separation but "had occurred `over time' due to repetitive use, but had only recently been diagnosed." And she contends that the superior court did consider the appropriate statutory factors and did not consider the improper factor of her car accident injury.
Jeremy's arguments are unpersuasive. First there is no indication the superior court considered Laura's injuries from the car accident in determining the spousal support award. Although Laura testified to these injuries at trial, they are not mentioned in the superior court's oral or written findings. Thus Jeremy's arguments about why it is an error of law to require a "former, innocent spouse to compensate the other spouse for an injury" caused by a third-party in a car accident are irrelevant. FECA's exclusivity provision is also irrelevant because it relates only to claims against the federal government;
Jeremy appeals the order that he pay child care expenses on the grounds that he "only agreed to pay child care expenses if the payment was in lieu of paying spousal support." Jeremy's position is that this agreement was nullified by the superior court's decision to award spousal support. Consequently he argues that the superior court's factual finding "that Jeremy agreed to pay child care expenses over and above his child support" was clearly erroneous. He also argues that the superior court failed to consider that he may have a right under Rule 90.3(a)(1)(E) to deduct child care expenses "to the extent they were paid to allow him to work and would have the right to a credit on his child support to the extent the expenses were paid on Laura's behalf."
The finding that Jeremy agreed to pay child care expenses in addition to child support was clearly erroneous because Jeremy offered to pay child care expenses only if he was not assessed spousal support. The superior court did not address this qualification on Jeremy's offer. Because Jeremy did not agree to pay child care expenses if he was assessed spousal support, requiring him to pay child care expenses in addition to child support was an abuse of discretion. We need not address Jeremy's arguments pertaining to credits or deductions because, although a custodial parent is entitled to a deduction for child care expenses that are necessary to allow the parent to work,
"[C]ost and fee awards in a divorce action are not to be based on the prevailing party concept, but primarily on the relative economic situations and earning powers of the parties."
Jeremy asserts that the superior court abused its discretion by awarding Laura attorney's fees because it "failed to consider the fact that [the] property award and Jeremy's willingness to come forward and pay expenses while the parties litigated . . . placed Laura in a much better economic position th[a]n that of Jeremy." Jeremy argues that the superior court should have considered that he continued to pay post-separation expenses while Laura was living in the home. Laura responds that Jeremy should not be excused from paying attorney's fees because he paid household expenses post-separation; he did this instead of paying child or spousal support, not gratuitously. And the superior court gave him credit for these contributions when it decided not to award retroactive child or spousal support.
Jeremy's assertion that Laura is "in a superior economic position" is unpersuasive. Jeremy's income is substantially higher than Laura's, and Laura is anticipating a temporary income shortfall due to her surgery. Laura did not receive liquid assets she could readily use to pay her attorney's fees. And the superior court took Jeremy's economic situation into account when it gave him additional time to pay the attorney's fees in two installments. The superior court did not abuse its discretion by awarding Laura attorney's fees.
We REVERSE the superior court's order concerning payment of child care expenses. We VACATE the superior court's finding that the post-separation TSP loan was a marital debt as well as its valuation of the mortgage debt associated with the marital home. We REMAND with instructions to clearly indicate the balance of the mortgage assigned to Laura. We AFFIRM in all other respects. The superior court may adjust the property division in light of the foregoing mandates.
AS 25.24.160(a)(4); Merrill v. Merrill, 368 P.2d 546, 547 n.4 (Alaska 1962).
AS 25.24.160(a)(2).
