Opinion
Supreme Court Nos. S-11395 / S-11425.
November 2, 2005.
Appeal from the Superior Court of the State of Alaska, Fourth Judicial District, Fairbanks, Richard D. Savell, Judge, Superior Court No. 4FA-02-1620 Civil.
Christopher E. Zimmerman, McConahy, Zimmerman Wallace, Fairbanks, for Appellant/Cross-Appellee.
Rita T. Allee, Law Office of Rita T. Allee, P.C., Fairbanks, for Appellee/Cross-Appellant.
Before: Bryner, Chief Justice, Matthews, Eastaugh, Fabe, and Carpeneti, Justices.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
Barbara and John Gaston split up after many years of cohabitation. The Gastons were once married, but divorced in 1975. They resumed their relationship in 1977 and lived together for the following twenty-five years. This is the appeal from the order dividing their property.
I. The Saw Business
John first argues that proceeds from the recent sale of a saw blade-making and sharpening business should have been deemed his separate property, rather than treated as the couple's joint property. "[P]roperty accumulated during a period of cohabitation should be divided according to the parties' intent." Applying this standard, the superior court said the saw business was not intended to be separate because (1) it was created using funds from a joint account, (2) several early agreements refer to the couple's jointly owned corporation, Industrial Machine, suggesting that the business was initially understood as an extension of Industrial Machine, (3) some stock in trade of the business was purchased by Industrial Machine, (4) some saw business sales were counted as Industrial Machine revenue, and (5) when the saw business was sold, some Industrial Machine property was "given" to the buyers as part of the deal.
Tolan v. Kimball, 33 P.3d 1152, 1154 (Alaska 2001).
Our review is for clear error. John points out, and Barbara agrees, that the superior court was wrong to suppose that the funds used to set up the saw business were joint funds; in fact the money came from John's separate account. Yet it is clear that revenue generated by the saw business went into the Industrial Machine till, that John used corporate funds to purchase stock in trade, that a corporate van was used to house the saw business equipment, and that if John reimbursed the corporation for the van or the stock in trade it did not happen until after the couple began to prepare for litigation. John's own testimony also appeared to establish that some of the saw business equipment was (for a time) physically commingled with Industrial Machine's tools and equipment. Although John points out that Industrial Machine lost nothing and perhaps "benefitted" by its affiliation with the saw business, these factors still suggest that the saw business was understood by the couple as joint property.
See Gurney v. Gurney, 80 P.3d 223, 224 n. 2 (Alaska 2003); Cox v. Cox, 882 P.2d 909, 913 (Alaska 1994) ("the trial court's findings that the parties intended to treat property as marital are disturbed only if clearly erroneous."). But see Beal v. Beal, 88 P.3d 104, 121 (Alaska 2004) (applying abuse of discretion standard).
Moreover, the saw business was not a passive investment. John apparently came up with the idea as a project for an Industrial Machine employee, and then built the business himself at a time when the couple was still together and Barbara appears to have been contributing all of her efforts to the relationship and to Industrial Machine. Here an analogy can be made to property owned separately by a spouse, but that appreciates as a result of that spouse's activity during the marriage. This appreciation is classified as marital property — because the marriage is thought to be entitled to all marital efforts, including sweat equity put into a property or business by either spouse during the marriage. Of course a marital and a non-marital relationship are different, which suggests that the presumption should not be as strong that an unmarried couple intends to contribute all their efforts during the relationship. Yet it still seems fair to conclude, given the evidence in Barbara's favor on this point and the absence of clear evidence of a contrary intent, that in this long, quasi-marital relationship John and Barbara understood their efforts were to be devoted to activities benefitting the both of them, at least until the relationship began to break down in 2001 and 2002. And since these efforts include those of John starting the saw business in 2000, we count them as another factor justifying Judge Savell's decision to treat that business as joint property.
Barbara testified: "[T]he way I understood it, we [were] always going to have [the saw business] as part of Industrial Machine like we did everything else." She also testified that she contributed her salary to supporting the family and her spare time to doing work for Industrial Machine, and that excess money held by both John and Barbara were contributed to Industrial Machine as "advances." The practice of loaning rather than giving money to the business might suggest an intent to preserve some separate property, except that in this case there is no evidence that these advances ever were (or will be) repaid.
See Harrower v. Harrower, 71 P.3d 854, 858 (Alaska 2003).
In sum, the business was created by John's efforts, efforts Barbara fairly understood as "owned" in common, and was for a time indistinguishable from the couple's joint business in terms of outflows and inflows of property and cash. This being the case, we think Judge Savell's conclusion that the saw business was joint property was sound, notwithstanding his mistaken assumption that the business was initially funded from a joint account.
II. The Apartment
John next argues that the superior court erred in its treatment of John's use of the couple's apartment. The superior court concluded that Barbara and John were effectively co-tenants of the apartment, that John had exclusive use of the apartment in the period between the breakup and the trial, and that the property division should therefore reflect a charge to John for Barbara's half of the rental value of the property over this period. In this the superior court appeared to be following Wood v. Collins, which holds that unmarried co-habitants who split up should be treated as co-tenants of their joint real property, with the co-habitant in exclusive possession being liable for half the rental value of the property under the traditional co-tenancy rule.
John suggests that he was charged the full rental value of the apartment. This is incorrect. The superior court said the full rental value of the apartment was $8,400, and counted this as a joint asset. Given the 50-50 split of joint assets, this decision had the effect of awarding Barbara half the rental value of the apartment.
812 P.2d 951, 957-58 (Alaska 1991).
John argues the superior court's decision was inconsistent with one of our recent divorce cases, Korn v. Korn. In Korn we held that it was error to summarily charge the wife rent for the period when she had exclusive use of the marital home; we allowed that such charges could be made but only as an "equitable" adjustment, accompanied by "careful explanation." John correctly points out that Judge Savell did not follow Korn in treating the rental value issue as a discretionary, equitable decision; instead Judge Savell appears to have followed Wood and made the award as a matter of course.
46 P.3d 1021 (Alaska 2002).
Id. at 1024 (vacating property division decree for further proceedings on whether unrealized rent adjustment was warranted).
The answer to John's argument is that Korn gives the rule in divorce cases, whereas Wood gives the rule in cases (like this one) between unmarried co-habitants. The superior court was therefore required to follow Wood in awarding rent to Barbara, without considering any of the equitable factors raised by John. And since John has not briefed the question or even asked us to reconsider Wood, we will decline to decide whether and how Wood and Korn ought to be harmonized (i.e., whether or not there should be one rule on unrealized rent for both marital and non-marital relationships). We find no error in the superior court's treatment of the rent issue.
These include John's serving as a watchman over the equipment in the area surrounding the residence. John does not explain why he, rather than Barbara, was the only person fit to stay in the apartment to do this.
III. Attorney's Fees
Barbara's cross-appeal argues that the superior court erred in requiring the parties to bear their own attorney's fees. In divorces and other disputes growing out of the dissolution of domestic partnerships, fees and costs are not allocated under Rule 82, but "based on the relative economic situations and earning powers of the parties," so as to assure that both parties have the means "to litigate on a fairly equal plane." An additional factor is that the trial court may "increase any award based on misconduct by one of the parties." The superior court found that the couple's resources were approximately equal, and that "neither party is blameless in increasing the cost of this litigation." We review challenges to this finding for abuse of discretion.
Koller v. Reft, 71 P.3d 800, 808 (Alaska 2003) (internal quotation marks and ellipses omitted). See also AS 25.24.140.
Id. at 809 (internal quotation marks omitted).
Beal v. Beal, 88 P.3d 104, 122 (Alaska 2004).
Koller, 71 P.3d at 808.
Barbara argues that she is entitled to a fee award because "John had sole possession and control of all the parties' corporate and domestic partnership property for over two years prior to trial." But this is not an argument that Barbara lacked "the proper means to litigate the . . . action on a fairly equal plane" with John, and our review of the record persuades us that the facts would not support such an argument if it had been made. Barbara also argues that John's failure to prepare for trial or respond to discovery amounted to misconduct sufficient to justify an award of fees. John acknowledges that the superior court identified some of these failures, but points out that Judge Savell also pronounced himself "flabbergasted" to discover that Barbara's attorney had prepared too many trial exhibits and had included dozens and dozens if not hundreds of picayune items (e.g., a brass tire gauge tied to a yellow cord) on the asset list. We agree with John that this conduct justified Judge Savell in his conclusion that "neither party is blameless in increasing the cost of this litigation." We therefore affirm the superior court's rulings on fees.
Barbara does not cite any evidence of John's superior resources but there is evidence that she had sufficient prospective liquidity to try the case with some zeal. Throughout the divorce she kept her job with the federal government, which paid somewhat more than $35,000. At the end of the trial, she also got a judgment entitling her to a cash payment of over $100,000, in addition to securities accounts worth more than $80,000, whereas the property awarded to John was mostly illiquid. See also Beal, 88 P.3d at 122 (superior court properly found that "the property division compensated for the disparity in the parties' earning capacity and left them with comparable ability to litigate the action").
IV. Conclusion
We AFFIRM the decision of the superior court.