Layton v. O’Dea

FAMILY LAW

Supreme Court of Alaska

Anighya H.D. Crocker

In Layton v. O’Dea, 515 P.3d 92 (Alaska 2022), the supreme court held that the lower court erred when it (1) declined to consider whether a wife’s separate property transmuted to marital property through contract; and (2) found that no portion of a wife’s earnings on separate investments was marital when the taxes on those earnings were paid with marital funds. (Id. at 97). A husband appealed the superior court’s order dividing property upon divorce from his wife of 38 years. (Id.). The husband contended that he paid the taxes on the earnings from two investment accounts that his wife had opened with money inherited during the marriage, but the wife contested that claim. (Id. at 99). Following a lengthy divorce proceeding, the trial judge issued a 50/50 split of the marital estate, but ruled that the wife’s investment accounts were her separate property and dismissed the husband’s argument that the investments accounts had been transmuted to marital property by contract. (Id. at 100). Further, the court found no active appreciation in the investment accounts, despite finding that the husband had paid taxes on the accounts. (Id.). The husband appealed, challenging both the court’s refusal to apply a contract analysis to determine whether the inheritance had transmuted to marital property and the finding that there had been no active appreciation in the investment accounts. (Id. at 100). The supreme court held that under Alaska law, a spouse’s separate property may transmute to marital property if the owner acts by express or implied contract to transmute the property. (Id. at 105). The nature of the transaction depends on the facts; thus, the trial court erred when it failed to evaluate the facts of the alleged contract. (Id.). Next, the supreme court held that separate property can become marital property through active appreciation. (Id. at 106). For the doctrine of active appreciation to apply, a party must show (1) appreciation of the separate property during the marriage, (2) marital contributions to the property, and (3) a causal connection between the marital contributions and the appreciation. (Id.). The parties agreed that the value of the accounts appreciated during the marriage, and the supreme court held that the trial court erred when it found no causal connection between the husband’s payment of taxes and the account’s appreciation. (Id.). Because the trial court recognized the husband’s past payment of taxes, the husband deserved a presumption that his contribution caused the appreciation. (Id. at 107). Reversing and remanding, the supreme court held that the lower court erred when it (1) declined to consider whether a wife’s separate property transmuted to marital property through contract; and (2) found that no portion of a wife’s earnings on separate investments was marital when the taxes on those earnings were paid with marital funds. (Id. at 97).

Layton v. O’Dea

FAMILY LAW

Supreme Court of Alaska

Anighya H.D. Crocker

In Layton v. O’Dea, 515 P.3d 92 (Alaska 2022), the supreme court held that the lower court erred when it (1) declined to consider whether a wife’s separate property transmuted to marital property through contract; and (2) found that no portion of a wife’s earnings on separate investments was marital when the taxes on those earnings were paid with marital funds. (Id. at 97). A husband appealed the superior court’s order dividing property upon divorce from his wife of 38 years. (Id.). The husband contended that he paid the taxes on the earnings from two investment accounts that his wife had opened with money inherited during the marriage, but the wife contested that claim. (Id. at 99). Following a lengthy divorce proceeding, the trial judge issued a 50/50 split of the marital estate, but ruled that the wife’s investment accounts were her separate property and dismissed the husband’s argument that the investments accounts had been transmuted to marital property by contract. (Id. at 100). Further, the court found no active appreciation in the investment accounts, despite finding that the husband had paid taxes on the accounts. (Id.). The husband appealed, challenging both the court’s refusal to apply a contract analysis to determine whether the inheritance had transmuted to marital property and the finding that there had been no active appreciation in the investment accounts. (Id. at 100). The supreme court held that under Alaska law, a spouse’s separate property may transmute to marital property if the owner acts by express or implied contract to transmute the property. (Id. at 105). The nature of the transaction depends on the facts; thus, the trial court erred when it failed to evaluate the facts of the alleged contract. (Id.). Next, the supreme court held that separate property can become marital property through active appreciation. (Id. at 106). For the doctrine of active appreciation to apply, a party must show (1) appreciation of the separate property during the marriage, (2) marital contributions to the property, and (3) a causal connection between the marital contributions and the appreciation. (Id.). The parties agreed that the value of the accounts appreciated during the marriage, and the supreme court held that the trial court erred when it found no causal connection between the husband’s payment of taxes and the account’s appreciation. (Id.). Because the trial court recognized the husband’s past payment of taxes, the husband deserved a presumption that his contribution caused the appreciation. (Id. at 107). Reversing and remanding, the supreme court held that the lower court erred when it (1) declined to consider whether a wife’s separate property transmuted to marital property through contract; and (2) found that no portion of a wife’s earnings on separate investments was marital when the taxes on those earnings were paid with marital funds. (Id. at 97).