Jordan v. Jordan
| Citation | 480 P.3d 626 |
| Decision Date | 12 February 2021 |
| Docket Number | Supreme Court No. S-17490 |
| Parties | Thomas E. JORDAN, Appellant, v. Cheryl A. JORDAN, Appellee. |
| Court | Alaska Supreme Court |
Rhonda Butterfield and Douglas Ryan, Wyatt & Butterfield LLC, Anchorage, for Appellant.
Steven Pradell, Steven Pradell & Associates, Anchorage, for Appellee.
Before: Bolger, Chief Justice, Winfree, Maassen, Carney, and Borghesan, Justices.
Following a divorce trial the superior court unevenly divided a marital estate. The smaller share recipient appeals several points related to findings about alleged marital waste, calculations concerning the parties’ future earning capacities, and consideration of federal disability benefits. We affirm the court's marital waste ruling, but we remand for further proceedings addressing its calculation of the parties’ earning capacities and its consideration of federal disability benefits.
Thomas and Cheryl Jordan married in 1993. Thomas worked as a dentist; through a military commission, he began working for the federal Public Health Service in 1988. He retired in 2015 with a military pension and veteran (VA) disability benefits. He also had accumulated about $582,000 in retirement accounts by 2017. Cheryl worked as an administrative assistant before leaving employment in 2006. She had accumulated about $655,000 in retirement accounts by 2017.
In 2004 they purchased a home in Sitka; in 2006 they purchased a second home in Sitka to use as their residence and began using the first home as a rental property. Cheryl also began operating a bed and breakfast (B&B) business on the lower floor of their residence. They purchased a duplex in Ketchikan in 2014, reserving one unit for occasional personal use and renting out the other unit.
In September 2017 Cheryl moved to the Ketchikan duplex, and she filed for divorce in October. In January 2018 Cheryl sought interim relief. She requested, among other things, possession of the Ketchikan duplex. Thomas did not oppose her request, but he argued that Cheryl had committed marital waste by abandoning the B&B. Cheryl replied that she felt she had no choice but to leave Sitka because she feared for her life. Arguing that Thomas had "[u]nilaterally closed ... down" the B&B and that he should not have done so "without [her] approval," she then asked the court to award her interim possession of their Sitka residence so she could operate the B&B. At a May evidentiary hearing the court said that Cheryl could "shut down" the B&B because "she will not be operating it this year." The court granted interim possession of the Ketchikan duplex to Cheryl and the Sitka residence to Thomas, along with other interim relief.
Trial was held over three days in August. The parties stipulated to value the Sitka properties at $750,000 for the residence and $430,000 for the rental. The superior court adopted the stipulated values, noting that the residence's property value was separate from the B&B's business value.
Cheryl requested a 60/40 marital asset division. Cheryl testified that she believed Thomas could continue working; she contended that he is "young" and "healthy," that he provided no documentation indicating he is unable to work, and that he could "probably do administrative work ... as well." Thomas contended there was no reason to depart from a 50/50 division. He argued that Cheryl could work another 5 to 15 years in an office or running a B&B. Thomas stressed that the most relevant factors for the court's consideration were income-producing property, age, health, and Cheryl's unreasonable depletion of marital assets. He contended that earning capacity was not as significant a factor because his capacity was "coming to a close" due to his health issues.
Relevant to this appeal, trial issues included the parties’ future earning capacities, the Ketchikan duplex's value, the B&B's business value and operation, and the reasons Cheryl left Sitka.
Thomas was 56 years old at the time of the trial; he testified that he had worked for the federal Public Health Service as a dentist from 1988 until retiring in November 2015 and that he then had taken a different full-time dentist job. Thomas described a number of his health issues, including arthritis
in his hands, vision problems, fainting spells, and "lower back problems," including "compressed" discs from "sitting and twisting and turning, doing dentistry for 30 years." When asked whether he could continue working in "administrative functions" as he gets older, Thomas said he could not. Thomas stated that he "would love to retire," that he "plan[s] on retiring very soon," and that he was working at the time of trial only to avoid wasting marital assets. He explained that he receives federal military retirement benefits of $9,430.13 monthly, including $1,686.13 in VA disability pay.
Cheryl was 55 years old at the time of the trial; she testified that she had not worked since she left Sitka in September 2017 and that she was in good health. She stated that she had operated the B&B since 2006 and that its income fluctuated annually. She described her work history, including her work as an administrative assistant. Cheryl testified that she had not worked outside the home since 2006 but could easily obtain an entry-level office job.
Each party had an appraiser value the Ketchikan duplex. Cheryl's appraiser valued it at $385,000. Thomas's appraiser valued it at $455,000. Neither appraiser conducted a formal review of the other appraiser's report. Cheryl's attorney indicated concern because Thomas's appraiser had purchased a property that Cheryl's appraiser had used for a comparable. The court indicated that it would not exclude Thomas's appraiser but would take the information "into [the court's] weight."
Thomas did not present an expert valuation for the B&B, but he placed the business's value at $431,607.60. Thomas testified that he had never operated the B&B but that he had helped with limited tasks on an "emergency basis." Thomas contended that Cheryl had been the "sole proprietor" and operator of the B&B and that its value should be held against her because she unreasonably depleted a marital asset when she left Sitka.
Cheryl's expert valued the B&B at $224,000, factoring in an $18,000 annual allocation for a third-party manager. Cheryl challenged Thomas's waste theory, stating that she was not motivated by a desire to deprive him of marital property. She maintained that it had not been her intent to "abandon the business," that she had hoped it "would at least still be running until we decided what was going to happen," but that Thomas had closed it down when she left. Cheryl asked the court to assign Thomas the B&B's $224,000 value.
In January 2019 the superior court issued its findings of fact and conclusions of law. The court addressed the nine statutory factors for consideration in division of a marital estate.1
The court noted that the parties were married for over 24 years and that Thomas at 56 and Cheryl at 55 were in "overall good health with no special needs." Finding that each was "near the end of their working life," the court placed Thomas's earning capacity at $200,000 annually, but "limit[ed] his work life as a dentist until 60 years of age due to changes in his eyesight, fine motor skills, lower back pain[,] and occasional fainting spells." The court placed Cheryl's earning capacity at $50,000 annually until age 65, noting her office and hospitality service experience. The court characterized their financial condition as "very strong" and noted each had available low-cost health insurance.
Addressing the parties’ conduct, including Thomas's alleged marital waste, the superior court stated:
[Cheryl] argues that she had to leave the home for her safety and that [Thomas] wasted marital income by not continuing to run the [B&B] from their home. These arguments have no support in the evidence. [Cheryl's safety] arguments ... are speculative at best .... The [B&B] was [Cheryl's] business; once she left the home, there was no one who could reasonably manage that business.
The court valued the B&B at zero and did not assign it to either party.
The court awarded Thomas the Sitka residence and awarded Cheryl the Sitka rental. It awarded Cheryl the Ketchikan duplex, using her $385,000 appraisal value. The court unevenly divided the parties’ bank accounts and retirement accounts. The court awarded Cheryl 37.64% of Thomas's divisible military retirement pay, or 50% of the marital portion of the divisible retirement pay, i.e., the coverture fraction.2
The court determined that, apart from Thomas's "greater earning potential over the next four years," there was "little reason" to depart from an even division. The court reasoned: The court accordingly awarded Cheryl an additional $175,000 to account for the income disparity over their remaining working careers.
The court noted that although it had no "jurisdiction to divide" Thomas's VA disability pay, it could consider the "additional income [Thomas] will enjoy over his lifetime and make other adjustments to ensure a fair and equitable distribution." Projecting that Thomas would receive $1,686.13 monthly over the expected 24 years of his lifetime for a total of $485,605.44 in disability pay, the court awarded Cheryl an additional 37.64% of that total, or $182,781.88. The court explained that adjusting Thomas's income over his remaining career and life span was equitable because Cheryl had "no reasonable ability to earn the additional income she enjoyed during" the marriage.
Thomas sought...
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