JOHNSON v. JOHNSON, S-12891 (Alaska 3-4-2009)


Supreme Court No. S-12891.Supreme Court of Alaska.
March 4, 2009.

Memorandum decisions of this court do not create legal precedent. See Alaska Appellate Rule 214(d). Accordingly, this memorandum decision may not be cited for any proposition of law or as an example of the proper resolution of any issue.

Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Peter A. Michalski, Judge., Superior Court No. 3AN-05-14155 CI.

Appearances: Robert C. Erwin, Robert C. Erwin, LLC, Anchorage, for Appellant.

Allison E. Mendel, Mendel Associates, Anchorage, for Appellee.

Before: Fabe, Chief Justice, Matthews, Eastaugh, Carpeneti, and Winfree, Justices.

MEMORANDUM OPINION AND JUDGMENT[fn*][fn*] Entered pursuant to Appellate Rule 214.


Sam and Kathleen Johnson divorced after twenty-five years of marriage. Sam appeals aspects of the property division. He argues that the trial court erred by double-counting the value of a vehicle in Sam’s marital share, declining to consider tax consequences of transferring property from Sam’s corporation to Kathleen, failing toPage 2
credit Sam for payments he made to preserve marital property, and refusing to reimburse him for property tax payments that were allegedly Kathleen’s responsibility. Because the trial court did not abuse its discretion by declining to consider tax implications for the transfer of corporate property or by refusing to reimburse Sam’s property tax payments on the marital home, we affirm as to those issues. But because it was legal error not to correct the double-counting, and because we cannot determine why Sam was not granted several of the credits he sought, we reverse in part and remand.


Sam and Kathleen Johnson married in June 1972. They separated in December 2005, and Kathleen filed for divorce that same month.[fn1]

The parties had acquired a marital estate worth more than two million dollars. The estate included three parcels of real property: (1) the marital residence in Anchorage (“Azalea property”); (2) property near the Kenai River (“Kenai property”); and (3) property at 100 Mile Glenn Highway in Palmer (“Glacier property”).

In December 2005 the superior court issued an interim order that required Sam to provide Kathleen spousal support by depositing $3,000 a month into the joint bank account “from which the family bills have been paid.” That paragraph of the order also required Kathleen, who was occupying the Azalea property during the divorce proceedings, to pay on that property “the mortgage payments, utility payments, and other regular expenses related to the house.”

The superior court conducted a four-day trial in May 2007. Sam submitted a proposed property division spreadsheet before trial and a revised version of the samePage 3
table at the close of trial. Relying in part on Sam’s spreadsheets, the court divided the entire estate on what it called “approximately a 50/50 basis.” Sam’s net award was actually slightly greater, by $1,365, than Kathleen’s.[fn2]

The court awarded Sam the Kenai property and awarded Kathleen the Glacier property.[fn3] The court ordered the Azalea property to be sold and the proceeds to be split. When the Azalea property was sold in July 2007, unpaid property taxes of $13,112.96 on that property were paid from the sale proceeds, reducing each party’s sale proceeds by approximately $6,556.

Sam filed a post-division “Motion for Clarification,” contending that the court had overlooked or misconceived material facts in dividing the marital estate. He made three arguments pertinent here. First, he asked the court to correct the property division because the value of a Ford truck had been twice allocated to Sam. Second, he asked the court to reconsider its award to Kathleen of two pieces of heavy equipment owned by Eagle Consultant Group Corporation, a company Sam solely owned. He alternatively asked the court to recalculate the property division, taking into account the tax consequences to the corporation resulting from transferring corporate assets (the heavy equipment) to Kathleen. Third, Sam argued that Kathleen should have paid the Azalea property taxes from his interim spousal support payments, and that he should therefore recover from her that portion of the Azalea property tax payment that wasPage 4
deducted from Sam’s Azalea sale proceeds. The proposed order Sam filed with his motion contained only two proposed changes relevant to this appeal: one awarding him the heavy equipment, and the other awarding him $16,112.96 from Kathleen’s portion of the Azalea sale proceeds. Sam also filed a four-page reply after Kathleen opposed his clarification motion. The trial court denied Sam’s motion. Sam appeals.

A. Standard of Review

We review the equitable allocation of property under the abuse of discretion standard; we will not reverse an allocation “unless it is clearly unjust.”[fn4] We likewise review for abuse of discretion a decision whether to grant credit for expenses to preserve marital property.[fn5] Whether the trial court issued sufficient factual findings for informed appellate review is a question of law to which we apply our independent judgment.[fn6] The legal effect of a court order is a question of law that we review de novo.[fn7] FactualPage 5
findings are reviewed for clear error.[fn8] We apply our independent judgment in deciding whether an appellant has preserved an argument for appeal.[fn9]
B. It Was Error Not To Correct the Property Division forDouble-Counting the Ford Truck.

Sam argues that the superior court erred by twice crediting his marital share with the value of a particular 2003 Ford truck. Sam alleges that the error inflated his share by more than $25,000 and undermined the court’s professed goal of a fifty-fifty property division. Both parties agreed in oral argument before us that the trial court credited the truck twice to Sam in its property division table, once for $25,500 under the “vehicles” section of that table, and a second time for $28,000 as part of the personalty at the Glacier property (where the truck was situated). We must therefore consider whether it was error not to correct the mistake after it was brought to the superior court’s attention. We hold that it was.

Double-counting the truck resulted in an order that did not reflect what the court had previously determined would be an equitable division of property. We agree with Kathleen that the mistake was “invited” by Sam, who submitted the valuation spreadsheets adopted by the court. Sam’s pre-trial spreadsheet double-counted the truck. So did the property list he submitted at the close of trial. Nonetheless, Sam identified the error when he sought correction of the double award in his clarification motion. Kathleen’s opposition to Sam’s clarification motion tacitly acknowledged that the truck was included twice, but argued that, because the court only intended to approximate aPage 6
fifty-fifty split, no adjustment was necessary. The order denying Sam’s motion did not identify any circumstance justifying the double award or a deviation from the intended ratio.

We also note that Kathleen submitted a revised personal property spreadsheet over a month before the post-trial findings were entered. Her spreadsheet explained that her estimation of the Glacier property’s value had been reduced to “eliminate duplication of assets” and “to reflect duplication of truck.” Kathleen has not articulated on appeal any persuasive justification for the double award.[fn10] Her lawyer recognized at oral argument on appeal that the court had double-counted the truck, and that this was an error. She also indicated that she had “no issue” with correcting the error.

Sam may not have maximized his opportunity to draw the issue to the trial court’s attention: his reply memo contained only vague mention of the issue, and his proposed clarification order entirely failed to address it. We are sympathetic to trial courts in such situations, where the error originates in the appellant’s own evidence and the appellant may not have done everything possible to bring the error to the trial court’s attention. Nonetheless, Sam’s spreadsheet error was both financially significant and obvious once revealed, and we are obliged to hold that it was error not to correct the double award once the mistake was raised in the clarification motion. We thereforePage 7
remand so that the error can be corrected and so that, if the court on remand deems it necessary, the property distribution can be adjusted.[fn11]
C. The Trial Court Did Not Err by Declining To Account for UnprovedTax Consequences of Transferring Corporate Assets to Kathleen.

Sam argues that the trial court erred in awarding to Kathleen two pieces of heavy equipment — a Case backhoe and a Caterpillar bulldozer — owned by his corporation without first accounting for the tax liability that allegedly resulted from the transfer. Because he contends on appeal that the depreciated value of the equipment was significantly less than the fair market value when the equipment was awarded to Kathleen, Sam argues that his corporation will have to pay taxes on depreciation recaptured upon transfer. He also contends that the trial court’s failure to consider this tax consequence resulted in a “less than 50/50 division of marital property.”

Courts are required to “consider the immediate and specific tax consequences of [their] division[s] of property.”[fn12] But we have also noted that courts arePage 8
“not required to speculate on or to consider tax consequences in the absence of proof that a taxable event will occur in connection with the division of property.”[fn13]

Sam provided no evidence at trial that his corporation would suffer an “immediate and specific” tax consequence as a result of the award to Kathleen. Sam testified that his corporation had previously claimed on its tax returns that this equipment had a combined depreciated value of, at most, negative $3,000. But he introduced no evidence to support his post-trial assertion that the transfer of property would impose tax liability on his corporation. Although his post-trial clarification motion claimed that he would incur a liability of $17,494 “to recapture the depreciation on his 2007 tax return,” he provided no legal or evidentiary support for that alleged liability. His reply memorandum asserted that Kathleen’s counsel had made “a substantial argument regarding tax implications on the division of these assets.”

On appeal Sam asserts that he preserved the issue. But his trial evidence did not discuss the topic of recapture and he did not, even in moving for clarification, refer the trial court to evidence or argument raising the issue; nor did he ever refer the court to the authorities and Internal Revenue Code provision he now cites, for the first time, on appeal.

We conclude that the trial court did not abuse its discretion by not accepting Sam’s reconsideration argument when he failed to provide any evidence to support it. The trial court did not err in declining to consider the alleged tax consequences of transferring the equipment to Kathleen.Page 9
D. The Trial Court Did Not Err in Declining To Require Reimbursementof Taxes Paid out of Sam’s Share of the Azalea Sale Proceeds.

Sam argues that the trial court erred by denying his post-trial clarification motion that asked the court to order Kathleen to reimburse Sam for the portion of overdue Azalea property taxes satisfied from his share of the Azalea sale proceeds. He bases this argument on the paragraph of the interim order that awarded Kathleen monthly spousal support of $3,000 and obligated her to “make the mortgage payments, utility payments, and other regular expenses related to” the Azalea property. Sam asserts that the $3,000 was supposed to help cover upkeep and taxes on the Azalea property and that, because the taxes were instead paid out of the sale proceeds, Kathleen received a “double dip.” Sam implicitly contends that it was Kathleen’s sole responsibility to pay the property taxes for the Azalea property after separation.

The interim order did not expressly make Kathleen solely responsible for paying the taxes on the Azalea property. Nor did it clearly do so by implication. It did not state or imply that tax payments were “regular expenses,” or that Kathleen was to pay property taxes from Sam’s interim spousal support payments. The order did not even mention taxes. Also, the parties were aware that the property tax payments were not bundled with the mortgage payments.[fn14]

On the other hand, the interim order did not specify that the property taxes were a joint responsibility. Its description of Kathleen’s payment responsibilities could reasonably have been interpreted as including paying property taxes on the Azalea property.Page 10

Notwithstanding the potential uncertainty about what the interim order required in this regard, the superior court, as the author of the interim order, was in the best position to decide what it had intended when it entered the interim order. Its interpretation is clear from its denial of Sam’s post-trial clarification motion. Its interpretation is a logical and permissible reading of the interim order.[fn15] And had the interim order originally and explicitly declined to require Kathleen to pay the taxes from Sam’s monthly spousal support payments, that would have been a choice within the court’s discretion.

The superior court had already concluded in its findings of fact and conclusions of law that the party awarded particular real property should have the accompanying tax obligations. Because the court ordered the proceeds of the anticipated sale of the Azalea property to be split equally between the parties, it was not error to make Sam responsible for half the Azalea property tax payments. The superior court did not abuse its discretion in concluding that this was an equitable division. We accordingly hold that the court did not err in declining to order Kathleen to reimburse Sam for his share of the overdue tax payments on the Azalea property.

E. Remand Is Necessary for Consideration Whether To Credit Sam forSeveral Post-Separation Payments He Made To Maintain Marital Property.

Sam asserts that the trial court abused its discretion by declining to award him credit for “in excess of $10,000” he claims he spent from non-marital income to preserve marital property by making various post-separation maintenance, utility, andPage 11
property tax payments. According to Sam the court failed to consider his claims for these credits and “ignored” the issue again when Sam moved for clarification.

Kathleen responds that there was insufficient proof to support the credits Sam was claiming. She argues that Sam cited no documents but instead relied on his own “extremely vague” testimony to support his reimbursement argument, and that the court considered the credits Sam claimed but ultimately declined to grant them. She concludes that because Sam has failed to identify how the court’s decision was an abuse of discretion, the judgment should not be disturbed.

Trial courts may give credit to one spouse for post-separation payments made to preserve marital assets, but are not required to do so.[fn16] We have held that it is not an abuse of discretion to decline to award a credit if a trial court finds either that the party seeking the credit has failed to submit evidence specifying the costs incurred, [fn17] or that a credit is unnecessary given disparity in the parties’ incomes.[fn18] We have similarly held that it is not error to deny a party credit for post-separation mortgage payments when the trial court reasons that any benefit imparted to the marital estate was offset by the benefit the party received from the estate by living rent-free.[fn19]Page 12

Nevertheless, even though we have declined to impose a fixed rule regarding credit for post-separation payments, we do require that trial courts at a minimum: (1) consider whether a party should be reimbursed for post-separation costs incurred to preserve the marital property, [fn20] and (2) make factual findings on whether a credit is appropriate.[fn21] We have held that a trial court’s factual findings “must be explicit and sufficiently detailed to give this court a clear understanding of the basis of the trial court’s decision.”[fn22]

Sam asserts on appeal that he should have been credited more than $10,000 for ten listed expense items that he contends were “simply ignored” by the trial court and given “no consideration at all.” Sam’s brief also asserts that there was “uncontested trial testimony of Sam Johnson as to each item.” These arguments incorrectly characterize both the record and the trial court’s findings.

Sam’s brief fails to reveal that, during his examination at trial, either he or his attorney expressly waived his credit claim as to four of the ten items listed in hisPage 13
appellate brief.[fn23] Nor does it note that Sam’s credit claim as to an additional expenditure — for repairing the heavy equipment — was not included in the revised property division chart he submitted at the close of trial as ordered by the court. This claim was therefore waived. Sam’s list of ten expenditures also includes the Azalea property tax payment that he addresses separately in another section of his brief and that we discussed in Part III.D.

The record establishes that, notwithstanding the contention in Sam’s brief that ten different post-separation expenditures were in dispute, there were at most only four disputed expenditures (apart from the unpaid Azalea property taxes). Those contested items were: (1) $2,476 Sam testified he paid in property taxes on the Kenai property, (2) $1,947 Sam testified he paid in property taxes on the Glacier property, (3) $5,668 Sam testified he paid for maintenance at the Glacier property, and (4) $512 Sam testified he paid for utilities at the Kenai property. In total Sam claimed he had spent $10,603 on these four items. He argued that Kathleen should be required to reimburse him for half that amount.

Although Sam argues that the court failed to consider these expenditures, it is inaccurate to say the court “simply ignored” these items, “simply gave them no consideration at all,” and “made no findings concerning them.” On the contrary, the court made actual findings as to these items. The court addressed them in its order asPage 14
“debts,” which was how Sam had characterized them in his trial court brief and his attached property division chart. In denying Sam’s credit request, the trial court referred to the numbered list of ten items for which Sam was requesting credit and stated that “[t]he proof on these items at trial seems insufficient.” The court noted that for “some property” it was unclear if it was marital, and that it was also unclear whether “some” of the debts “are currently debts.” It further ruled that property tax and utility obligations would “simply go with their respective properties,” but that “[l]acking sufficient proof of the status of these items,” the court did not include them in its tables. It also found that they were “of a de minimis value in relation to the total estate.”

The court’s finding of insufficient proof potentially applies to all ten expenditures, including the five that were preserved for appeal. This finding seems particularly apt as to Sam’s evidence about what he claims he spent maintaining the Glacier property. Sam’s testimony concerning his Glacier maintenance expenditures was extremely general:

A: I had to spend $1,000.00 on the water softener system, had to have it rebeaded and they installed another filter because it was getting a lot of sediment in the water. I’ve had broken water lines in the house recently and had those repairs. I’ve had — I actually have all the original documents but there’s just been a lot of little repairs that had to be made. I don’t remember them all off the top of my head.

Q: Did you make a list and is this the number that you got from the list?

A: Yes sir, it is. And like I said, I have the original documents.

Sam’s testimony was unsupported by the “original documents” that Sam claimed he had in his possession. Of the $5,668 Sam said he spent maintaining the Glacier propertyPage 15
post-separation, his testimony identified only one expenditure by amount and subject: the $1,000 allegedly spent on the property’s water softener system. Sam presented no evidence whether rebeading the water softener system was a capital expenditure or routine maintenance. The court’s characterization of the evidence regarding the credit claims as “insufficient” accurately describes Sam’s limited testimony on the Glacier property maintenance item. As to this item, the court permissibly denied Sam’s credit claim.

Three of his credit claims cannot be so easily resolved, despite the deficiencies in Sam’s opening brief in seeking these credits and his failure to include in the appellate excerpt the revised property division list he submitted at the close of trial by order of the superior court.[fn24] It seems to be undisputed that Sam paid the 2006 property tax for the Kenai property, the 2006 property tax for the Glacier property, and the electric utility expense for the Kenai property. These three credit items total approximately $2,500.

The superior court may have thought that these three items concerned disputed, continuing obligations, rather than credit claims for payments Sam alleged he had already made. But it seems clear enough from the record that Sam was seeking credit for payments he had already made to preserve marital property. Because we cannot tell whether the court considered Sam’s claims for these three items, we must remand so the court can consider whether Sam should be given credit for the post-separation payments he allegedly made for these three items.Page 16


The superior court’s property division is AFFIRMED in part and REVERSED in part. We REMAND for further proceedings in accordance with this opinion.

[fn1] Sam and Kathleen have four children together, one of whom was still a minor when the parties separated. The minor child’s custody and support are not at issue here.

[fn2] The superior court concluded that, in addition to their share of the marital home (the Azalea property), the net awards to Kathleen and Sam were $714,975 and $713,610 respectively. But the court seems to have inadvertently switched the net awards. As the court’s property division calculations show, Sam received $714,975 ($763,017 of assets less $48,042 in debts) and Kathleen received $713,610 ($781,813 of assets less $68,203 in debts).

[fn3] The superior court’s opinion lists the Kenai property as the “Oehler Road” property and the Glacier property as the “Mile 100” property.

[fn4] Cox v. Cox, 882 P.2d 909, 914 (Alaska 1994) (quoting Doyle v.Doyle, 815 P.2d 366, 368 (Alaska 1991)) (internal quotation marks omitted).

[fn5] Berry v. Berry, 978 P.2d 93, 95 (Alaska 1999) (“We review for abuse of discretion a superior court’s decision whether to give a credit to a spouse for payments made to maintain marital property.”).

[fn6] Hooper v. Hooper, 188 P.3d 681, 685 (Alaska 2008) (holding that findings of fact discussing relevant property division factors were sufficient to support award of nearly sixty-seven percent of main marital estate to wife).

[fn7] State, Dep’t of Revenue, Child Support Enforcement Div. v.Wetherelt, 931 P.2d 383, 387 n. 4 (Alaska 1997) (citing Wright v.Black, 856 P.2d 477, 479 (Alaska 1993)).

[fn8] Hooper, 188 P.3d at 687.

[fn9] Cf. Wilkerson v. State, Dep’t of Health Soc. Servs., Div. ofFamily Youth Servs., 993 P.2d 1018, 1021 (Alaska 1999) (citing Cameronv. Hughes, 825 P.2d 882, 884 n. 2 (Alaska 1992)) (concluding that independent judgment is appropriate when reviewing intermediate appellate court’s finding of waiver due to inadequate briefing).

[fn10] Her lawyer hypothesized at oral argument on appeal that the court might have thought the effect of the double counting was de minimis in light of ambiguous property values and the court’s intent only to approximate a fifty-fifty division. But the error was certainly not de minimis. Nor is there any indication that the court wished to deviate from the approximately equal division or that it specifically intended to award the value of the truck twice to Sam.

[fn11] Kathleen implicitly argues that on remand the superior court should be able to offset the difference by correcting other “minor errors” in the property valuation. In responding to Sam’s clarification motion, Kathleen did not identify any other alleged errors that needed correction. And she did not cross-appeal on this ground or identify any specific alleged offsetting errors in her appellee’s brief. Kathleen’s setoff argument has therefore been waived. Peterson v. Ek, 93 P.3d 458,467 (Alaska 2004) (holding that failure to file cross-appeal waives right to contest rulings below). No alleged offsetting errors need to be addressed on remand.

[fn12] Oberhansly v. Oberhansly, 798 P.2d 883, 887 (Alaska 1990) (holding that trial court should have considered tax consequences resulting from distributing funds from husband’s retirement account when parties agreed that distribution would have tax consequences).

[fn13] Id. at 887.

[fn14] Sam testified that the monthly house payment of $1,100 included both principal and interest but “did not include taxes.” His clarification motion stated that when the home was purchased, the parties elected to pay property taxes directly.

[fn15] Gallant v. Gallant, 945 P.2d 795, 802 (Alaska 1997) (concluding that superior court’s decision on remand to award additional expenses to party in accordance with earlier order was not clearly erroneous because court’s interpretation of order was reasonable).

[fn16] Berry v. Berry, 978 P.2d 93, 96 (Alaska 1999).

[fn17] Nicholson v. Wolfe, 974 P.2d 417, 424 (Alaska 1999) (concluding that court did not abuse its discretion either by crediting wife for repair payments to motor home or by declining to award husband for alleged insurance costs).

[fn18] Conner v. Conner, 68 P.3d 1232, 1238 (Alaska 2003) (concluding that trial court did not err by failing to credit party for post-separation house payments because trial court found that payments were fair given parties’ disparate incomes).

[fn19] Rodriguez v. Rodriguez, 908 P.2d 1007, 1013 (Alaska 1995) (concluding that trial court did not err in declining to credit party for post-separation mortgage payment because party resided in marital home after separation).

[fn20] Haines v. Cox, 182 P.3d 1140, 1145 (Alaska 2008) (remanding for consideration whether to grant credit for post-separation insurance payments when trial court denied credit because it believed it had no discretion to grant such credits); Ramsey v. Ramsey, 834 P.2d 807, 809
(Alaska 1992) (citing Doyle v. Doyle, 815 P.2d 366, 369 n. 5 (Alaska 1991)) (“We have required that trial courts consider payments to maintain marital property from post-separation income when dividing marital property.”).

[fn21] Berry, 978 P.2d at 96 (citing Brotherton v. Brotherton,941 P.2d 1241, 1246 (Alaska 1997); Harrelson v. Harrelson, 932 P.2d 247, 253
n. 7 (Alaska 1997); Cox v. Cox, 882 P.2d 909, 919-20 (Alaska 1994)).

[fn22] Id. at 97 n. 15 (quoting Doyle, 815 P.2d at 368) (remanding because trial court failed to indicate reason for denying requested credit for mortgage payments despite having had many possible justifications for doing so); see also Edelman v. Edelman, 3 P.3d 348, 354 (Alaska 2000) (remanding for findings as to whether party should receive credit for post-separation mortgage payments when it was unclear from record whether court had considered issue).

[fn23] At trial Sam indicated that he was no longer seeking contribution for the money he spent maintaining the Ford truck, and paying for two different utilities at the Glacier property, where he agreed he resided post-separation. Sam also testified that he could not remember why one expenditure to Cascade Services for “Glacier repair” was made. Sam’s attorney then stated that he would then “eliminate” that item from the list. These four waivers were made on the record at transcript pages expressly cited by Sam’s brief to support his appellate contention that there was “uncontested” testimony as to “each item.”

[fn24] See Alaska R. App. P. 210(c)(2)(A)(v) (requiring appellants to include in their excerpts of the record the “relevant portions of briefs, memoranda, and documents filed in support of and in opposition to the motion”).