B.M. v. R.C.
| Docket Number | S-18138,2008 |
| Decision Date | 24 January 2024 |
| Parties | B.M., Appellant, v. R.C., Appellee. |
| Court | Alaska Supreme Court |
1
B.M., Appellant,
v.
R.C., Appellee.
No. S-18138
No. 2008
Supreme Court of Alaska
January 24, 2024
UNPUBLISHED See Alaska Appellate Rule 214(d)
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Dani R. Crosby, Judge. Superior Court No. 3AN-16-06857 CI
Lynda A. Limon and Randi R. Vickers, Limon Law Firm, Anchorage, for Appellant.
R.C., pro se, Anchorage, Appellee.
Before: Maassen, Chief Justice, Carney, Borghesan, and Henderson, Justices. [Pate, Justice, not participating.]
MEMORANDUM OPINION AND JUDGMENT ON REHEARING [*]
I. INTRODUCTION
A divorcing couple had accumulated a substantial marital estate over their 20-year marriage. Following a lengthy trial and a series of reconsideration motions, the superior court divided the marital estate 57/43 in favor of the wife, ordered the wife to pay the husband an equalization payment, and ordered the husband to pay attorney's fees the wife incurred in an Internal Revenue Service (IRS) proceeding, as well as a significant portion of the fees she incurred in the divorce litigation itself.
The husband appeals the property division and fee awards. He challenges the court's valuation of his business; its allocation of a family cabin to the wife without according him a right of first refusal should she decide to sell it; its valuation of a jointly owned investment account and its recapture of some post-separation expenditures from that account; its allocation of a substantial tax debt; its consideration of the husband's historic underreporting of income, leading to the tax debt, as economic misconduct in the property division; its award to the wife of attorney's fees incurred in preparing her own defense to IRS collection proceedings; its overall division of the marital estate; and its award to the wife of attorney's fees incurred in the divorce litigation.
We affirm most aspects of the property division and the wife's award of attorney's fees for the IRS proceedings. We remand on one issue: whether an attorney's fees award for the divorce litigation was necessary to level the playing field in light of both parties' significant assets.
II. FACTS AND PROCEEDINGS
A. General Background
B.M. and R.C.[1] separated in 2016 after 20 years of marriage. R.C. filed for divorce that May. The ensuing years of litigation focused primarily on the division of the large marital estate.
R.C. worked in oilfield services before the marriage and during its first eight years, earning over $100,000 every full year she worked. In 2003 she resigned to care for the family.
At that point the couple's main source of income was a steel fabrication business B.M. founded in 1990, before the marriage. At the time of trial he still ran the business and owned 100% of its stock. The couple's reported income in 2012, 2013, and 2015 ranged from just shy of $250,000 to over $280,000 (in 2014 they reported a significant net loss). At the time of trial they also owned various residential properties,
including the marital home in Anchorage, condos in Anchorage, Girdwood, and Hawaii, and a house and cabin in Kenai. They jointly owned a number of bank, retirement, and investment accounts.
B. The Property Distribution Order
A 20-day trial on the parties' property issues was held intermittently over nearly two years. In January 2020 the court issued a property spreadsheet showing its intended valuation and allocation of the property, at the same time putting on the record an oral explanation of its findings and conclusions and inviting the parties to move for reconsideration of any aspect of the tentative decision with which they disagreed.
The court decided a series of reconsideration motions, then issued its final judgment and a corrected and updated property spreadsheet in June 2021. The court's final division of the marital estate was 57/43 in R.C.'s favor, giving her approximately $3.8 million and B.M. approximately $2.9 million. R.C. was required to pay B.M. a roughly $214,000 equalization payment. The court also ordered B.M. to pay approximately $340,000 of R.C.'s attorney's fees, reasoning that her economic position was inferior to B.M.'s as a result of having to sell assets during the litigation to pay her attorney's fees and costs. When the equalization payment R.C. owed to B.M. was set off against the attorney's fees award he owed to R.C., B.M. owed R.C. $124,789.
B.M. appeals.
III. STANDARD OF REVIEW
"The division of property in a divorce action is a matter committed to the discretion of the trial court."[2] "A trial court has broad discretion to provide for the equitable division of property between the parties in a divorce."[3] The equitable division process involves three steps: "(1) deciding what specific property is available for
distribution, (2) finding the value of the property, and (3) dividing the property equitably."[4] "[T]he first step, '[t]he characterization of property as separate or marital[,] may involve both legal and factual questions.' "[5] The second step, "[v]aluation of assets[,] 'is a factual determination.' "[6] "[W]e review the superior court's legal conclusions de novo and its factual findings for clear error."[7] Clear error exists "only when we are left with a definite and firm conviction based on the entire record that a mistake has been made."[8]
"We review the trial court's third step, the equitable allocation of property, for an abuse of discretion."[9] We may find that the trial court "abuses its discretion if it 'considers improper factors, fails to consider statutorily mandated factors, or gives too much weight to some factors.' "[10]
"A trial court has broad discretion to award attorney's fees in a divorce action, and we will not overturn such an award unless it is arbitrary, capricious, or manifestly unreasonable."[11] We review awards of attorney's fees made under Alaska Civil Rule 82 for abuse of discretion.[12] "[A]n award constitutes an abuse of discretion
only when it is manifestly unreasonable."[13] "The court enjoys 'broad discretion to award fees and to alter the amount it intends to award.' "[14] However, "[w]hether the court applied the proper legal analysis to calculate attorney's fees is a question of law we review de novo."[15] "When a[] [fee] award or enhancement 'calls into question [a party's] litigation conduct and the potential merits of [the party's] underlying . . . motions, we assess de novo the legal and factual viability of [the] motions and review relevant findings of fact for clear error.' "[16]
IV. DISCUSSION
A. The Superior Court Did Not Clearly Err By Averaging High and Low Estimates To Reach The Steel Company's Value.
R.C. retained a business valuator and financial forensics accountant to calculate the value of the steel fabrication company and testify about it at trial. The accountant performed a "calculation of value" and provided the company's "going[-]concern value,"[17] calculated as of October 31, 2017. He identified the high-end value as $1,753,261 and the low-end value as $824,679, for an average of $1,245,897. He testified that providing a range of values was "more appropriate [than
providing a single value] because there are some issues with the underlying data."[18] He described using the "calculation of value" approach as resulting in "a value that's more approximately right than precisely wrong."
For its initial property division spreadsheet, the court valued the steel company at the accountant's high-end going-concern value, $1,753,261. The court declined to order the business's dissolution, as B.M. had urged, reasoning that to do so would "severely reduce the value of the asset, and it would be . . . very detrimental to the marital estate."
B.M. moved for reconsideration, arguing that using the high-end going-concern value did not fairly take into account the economic effect of the divorce because it would force him to work past retirement age - unlike R.C., who could earn passive income by renting out the properties she was allocated in the divorce. The court agreed and decided instead to assign the business the average going-concern value, $1,245,897. The court allocated the business to B.M.
On appeal B.M. argues that the court erred by choosing the average value. For support he cites Lundquist v. Lundquist, in which divorcing spouses gave fishing gear values of $5,000 and zero, respectively, and the superior court averaged the two to reach a value of $2,500.[19] We held that this was an abuse of discretion because an average had no rational basis; the high estimate actually valued the gear whereas the zero estimate was based on the assumption that the gear's value was included in the
appraisal of a vessel and therefore should not be considered separately.[20] Relying on Lundquist, B.M. asks us to "reject [the expert's] range value because it lacks a rational basis and [the expert] himself admits that he does not know the 'bullseye' figure."
But Lundquist does not require a "bullseye figure," nor does it foreclose averaging valuations in every case. Indeed, we explained in Lundquist that "[w]hen, for example, the parties obtain divergent appraisals of a piece of property, it may be appropriate to average those valuations."[21] R.C.'s forensic accountant testified specifically that the right answer was unknowable but fell somewhere in the range between high- and low-end going-concern values. The court's decision to select the average thus has a rational basis in the expert testimony and is not clearly erroneous.
B.M. also argues that the superior court failed to follow the prescribed method for valuing goodwill in a property division because it included the value of the steel company's goodwill in its overall valuation of the business without first determining whether that goodwill was marketable. [22] But B.M. did not raise this issue in the...
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