Cox v. Cox

• Decision Date: 09 September 1994
• Docket Number: No. S-5449,S-5449
• Citation: 882 P.2d 909
• Parties: Charles B. COX, Appellant, v. Vicki M. COX, Appellee.
• Court: Alaska Supreme Court

Page 909

882 P.2d 909

Charles B. COX, Appellant, v. Vicki M. COX, Appellee.

No. S-5449.

Supreme Court of Alaska.

Sept. 9, 1994.

Donna C. Willard, Law Offices of Donna C. Willard, Anchorage, for appellant.

R. Scott Taylor, Rice, Volland and Gleason, P.C., Anchorage, for appellee.

Before MOORE, C.J., RABINOWITZ, MATTHEWS and COMPTON, JJ., and BRYNER, J., Pro Tem. ^*

OPINION

MOORE, Chief Justice.

I. INTRODUCTION

Appellant Charles B. Cox (C.B.) appeals from a final decision of the superior court distributing marital property in the course of divorce proceedings between C.B. and Vicki M. Cox (Vicki). Findings of Fact and Conclusions of Law were issued September 15, 1992. The final decree was signed October 23, 1992.

C.B. raises 22 points on appeal. He essentially makes two broad arguments. First, he asserts that the trial court should have used a different method of distributing the marital property. Second, he finds fault with the court's actual distribution of the property under its chosen method. He claims that the court erred in identifying marital versus separate property, in valuing the assets, and in equitably dividing them for distribution.

II. FACTS AND PROCEEDINGS

C.B. and Vicki Cox were married on February 23, 1985. Six and one-half years later, on August 9, 1991, they permanently separated. No children were born of this marriage, although Vicki has custody of two daughters from her previous marriage. Their divorce went to trial in September 1992, with property division the only issue.

At the time of their marriage, each party was employed and had a separate residence. C.B. was a computer programmer/analyst for the State of Alaska and owned a house on Pokey Circle in Anchorage. Vicki was a partner in a business called The Floor Store and owned a house on Northern Lights Boulevard in Anchorage. At the time of the marriage, C.B.'s net worth was $141,502. This figure takes into account the mortgage balance of $33,679 on the Pokey Circle property--the only debt owed by C.B. at that time.

Vicki's financial situation was much worse. Her only asset was a heavily mortgaged home, with minimal equity. Vicki had substantial debts from The Floor Store, the business in which she and her previous husband had been partners and which she continued to operate after her first divorce. The Floor Store obligation had resulted in a second mortgage on the Northern Lights home. In addition, Vicki was responsible for payment to The Floor Store of $20,829, which she and her prior husband had taken in draws. She met this obligation by working at The Floor Store during the first year of her marriage to C.B. and having the bulk of her compensation credited against the debt. As a result, in 1985, she brought home only $12,600 from her full time employment, while C.B. had to pay the couple's taxes on the additional $20,829 debt that Vicki worked off, for which an IRS Form 1099 was issued. The Floor Store business eventually failed, resulting in Vicki filing personal bankruptcy in order to discharge responsibility for the debts which she had guaranteed. When the business closed, Vicki became personally liable on a debt of $19,000 to the Internal Revenue Service.

Because of Vicki's financial circumstances, C.B. was required to make the payments on all of the real property, separate or marital. Substantial sums garnered from his premarital assets were used in this endeavor. C.B. identified $19,355 of premarital assets immediately dedicated to the marriage.

Since Vicki's Northern Lights house was larger than C.B.'s, he moved into that residence upon marriage and rented the Pokey Circle house. One year later, when the Municipality of Anchorage condemned the Northern Lights residence, the couple purchased a larger home on Kingfisher Drive. While Vicki maintains, and the trial court found in Finding No. 7, ¹ that this house was purchased with funds from both premarital residences, the refinancing of C.B.'s Pokey Circle property furnished the bulk of the funds. C.B. was able to refinance the Pokey Circle property for $66,850, of which he received $31,925.57 after paying the original mortgage and the refinancing costs. With these proceeds, $17,000 was used by C.B. as a down payment on the Kingfisher home, $7,000 was invested in a real estate partnership, $3,500 was used to purchase an airboat and $4,000 was placed in Individual Retirement Accounts, one for C.B. and one for Vicki.

In contrast, Vicki had very little equity in her premarital home. Of the $145,320 in condemnation proceeds, after deducting the balances of her first and second mortgage and the costs and fees incurred in the condemnation litigation, Vicki received only $2,600. C.B. argues that this sum should be characterized as child support, rather than Vicki's separate property, since Vicki had taken equity in the residence in lieu of four years of child support from her former husband.

Shortly after their separation, Vicki settled, for $14,603, two personal injury causes of action which accrued during marriage, without consultation with her husband and without considering any of his potential claims. Vicki used these funds to purchase a new house while the divorce was pending. Despite Vicki's $3,000 monthly salary, $600 monthly child support, the personal injury settlement and access to her children's accounts (discussed infra at § III.C.4), C.B. bore nearly sole responsibility for all of the marital debts between separation and trial. Thus, from August 9, 1991 to July 31, 1992 he paid, from his post-separation earnings, a total of $27,235 for the Kingfisher residence, the Deshka River recreational property that the couple had acquired, airboat repairs and marital accounts payable. Vicki only assisted during the month of August 1992, when she paid that month's obligations from a $4,666 income tax refund that the couple had received. In order to keep the couple's credit in good standing and to timely pay all of their obligations, C.B. borrowed $10,000 from Alaska Employees Federal Credit Union and cashed in annual leave.

The trial court valued the net assets of the marriage at over $227,000, including C.B.'s retirement benefits and deferred compensation account totalling $154,378. See Findings No. 8 & 9 in Addendum. The trial court awarded Vicki assets with a total net value of $113,023.50, and awarded C.B. assets totalling $114,588.50. See Finding No. 13 in Addendum. The only debt attached to Vicki's assets was $12,450 on the Deshka property, on which monthly payments of $250 are due. On the other hand, imbedded in C.B.'s award were the following debts: $137,200 on the Kingfisher mortgage; $10,000 on the loan to pay post-separation expenses; and $62,047 on the Pokey Circle mortgage.

III. DISCUSSION

A. Standard of Review

The trial court has broad discretion in fashioning a property division in a divorce action. AS 25.24.160(a)(4); Hartland v. Hartland, 777 P.2d 636, 639 (Alaska 1989). This court reviews the trial court's determination of what property is available for distribution under an abuse of discretion standard. Jones v. Jones, 835 P.2d 1173, 1175 (Alaska 1992). If in the course of determining what property is available the trial court makes any legal determinations, such determinations are reviewable under the "independent judgment" standard. Lewis v. Lewis, 785 P.2d 550, 552 (Alaska 1990). All questions of law are reviewed de novo with this court adopting the rule of law that is most persuasive in light of precedent, reason and policy. Lantz v. Lantz, 845 P.2d 429, 431 n. 1 (Alaska 1993). However, the trial court's findings that the parties intended to treat property as marital are disturbed only if clearly erroneous. Matson v. Lewis, 755 P.2d 1126, 1128 (Alaska 1988). The valuation of available property is a factual determination that should be reversed only if clearly erroneous. McDaniel v. McDaniel, 829 P.2d 303, 305 (Alaska 1992). The equitable allocation of property is reviewable under an abuse of discretion standard and will not be reversed "unless it is clearly unjust." Doyle v. Doyle, 815 P.2d 366, 368 (Alaska 1991) (citation omitted).

B. Method of Property Distribution

1. Wanberg Method

A three-step process is used in Alaska to divide marital assets. See, e.g., Jones, 835 P.2d at 1175. First, the court determines what specific property is available for distribution. Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska 1983). Second, the court values that property. Id. Finally, the court equitably allocates it. Id. The trial court used this method of distribution in this case.

2. Rose Method

This court has used an alternative approach for marriages of short duration where there has been no significant commingling of assets. Rose v. Rose, 755 P.2d 1121, 1125 (Alaska 1988). C.B. proposes that this rescission approach should have been used in the present case. The trial court in this case specifically found that "this marriage ... is one in which the commingling of assets was general." See Finding No. 6 in Addendum.

The Coxes had a joint checking account. Before Vicki's debt to the IRS arose, she deposited her paycheck into that checking account. After they became aware of her debt to the IRS, she removed her name from the joint checking account and deposited her paychecks into a separate account from which the IRS would be paid (the "IRS account"). However, she continued to transfer money as needed to the checking account in C.B.'s name, from which marital expenses were paid. She also paid for food for the family out of the IRS account. In addition to his paycheck, C.B. also transferred the rental income from the Pokey Circle house into the family checking account. Thus, there is sufficient evidence in the record of commingling so that the trial court's finding regarding this aspect of the parties' management of their property was not clearly erroneous, and therefore C.B.'s argument that the Rose method is appropriate must fail.

3. "Source of...