Mahan v. Mahan

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THE SUPREME COURT OF THE STATE OF ALASKA
MORRILL MAHAN, )
) Supreme Court No. S-15456
Appellant, )
) Superior Court No. 3KN-11-00497 CI
v. )
) OPINION
JESSICA MAHAN, )
) No. 6991 – March 27, 2015
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Kenai, Anna Moran, Judge.
Appearances: Richard W. Postma, Jr., Law Offices of
Mitchell K. Wyatt, Anchorage, for Appellant. Shana Theiler,
Walton, Theiler & Winegarden, LLC, Kenai, for Appellee.
Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
Bolger, Justices.
FABE, Chief Justice.
I. INTRODUCTION
A husband and wife obtained a marriage dissolution that included a
provision to split the “profits . . . after the cost of fuel and can[ne]ry dues” from their
jointly owned commercial fishing boat. The ex-spouses dispute the meaning of the term
“profits.” Each party maintains that the other owes a large sum of money pursuant to the
agreement. The superior court approved a standing master’s recommendation that
interpreted “profits” to mean “payment from the cannery, less deductions for fuel, dues
and other advancements.” Because the superior court’s findings regarding the parties’
reasonable expectations at the time of the dissolution agreement are not clearly
erroneous, and because the superior court’s interpretation of the provision accurately
reflects those expectations, we affirm.
II. FACTS AND PROCEEDINGS
Morrill and Jessica Mahan married in 2004 and dissolved their marriage in
June 2011. During their marriage, the couple had one medically fragile child. Morrill
was the primary wage-earner for the family. As reported in their petition for dissolution,
Morrill’s total gross wages for 2010 were $137,362.81 while Jessica’s total gross wages
were $16,716.21. In addition, the petition indicated that Morrill and Jessica had each
received $31,292.14 in gross income in 2010 from their commercial fishing business.
The petition for dissolution included an addendum providing for the
temporary maintenance of joint interests in the marital home and commercial fishing
business. The parties agreed to maintain joint ownership of the marital residence and to
split the profits from the commercial fishing business until October 2012, at which point
Jessica was to take sole title to the home and Morrill was to take sole title to the
commercial fishing boat and permit:
The house and property will be owned jointly until
10/1/2012. The mortgage and utilities will be paid 50% by
husband and wife. On 10/1/2012 the house will be paid by
wife 100% and the house and property will be then turned
over to the wife. The title will be solely in the wife’s name.
Household furnishings, everything in it will belong to wife.
The commercial fishing boat will be owned jointly until
10/1/2012 and operated by the husband. The profits will be
split equal between husband and wife after the cost of fuel
and can[ne]ry dues. On 10/1/2012 the commercial fishing
boat and permit will be then turned over to the husband. The
title will be solely in the husband’s name.
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A. The Initial Dissolution Hearing
In June 2011 Magistrate Judge Jennifer Wells, serving as a standing master
for the superior court, heard testimony from Morrill and Jessica before recommending
that the superior court approve their dissolution. Morrill’s and Jessica’s testimony
emphasized the connection between specific provisions of the agreement and the best
interests of their child in light of her medical condition. Morrill and Jessica planned to
rotate in and out of the marital home every two weeks so that their daughter would not
need to travel back and forth between two homes. Morrill also agreed to remain named
on the home mortgage even after the transfer of title to Jessica because she would be
unable to obtain a low interest rate for the mortgage if she were to refinance on her own.
Morrill testified that he intended to stay on the mortgage because “three percent
interest . . . [is] hard to beat for [Jessica] and my daughter needs a place to live . . . .”
Magistrate Judge Wells found that the dissolution agreement was fair and that Morrill
and Jessica entered into the agreement freely and voluntarily. The superior court
promptly approved the master’s report and granted the dissolution.
B. Jessica’s Motion To Enforce
Despite the amicable dissolution proceeding, Morrill and Jessica’s post-
dissolution relationship soon became more adversarial. In October 2011 Jessica filed her
first motion for an order enforcing the dissolution decree. The motion alleged that
Morrill was impermissibly removing from the home property that belonged to Jessica
under the terms of the dissolution agreement. At the evidentiary hearing related to her
motion to enforce, Jessica also alleged that Morrill had not paid her the 50% share of the
2011 commercial fishing profits to which he had agreed. The standing master’s report
concluded that Morrill was obligated to pay Jessica half of the 2011 commercial fishing
income from the cannery, less fuel and dues, immediately.
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Morrill immediately objected to the master’s report, arguing that the word
“profit” meant “the positive income left after subtracting expenses from revenue,” and
that he was not afforded an opportunity to subtract his expenses other than fuel and
cannery dues. He asserted that typical additional expenses included “pay[ing]
deckhands,” as well as “supplies, gear, bait, etc.,” and that he typically spends
“thousands of dollars in preseason costs . . . out of pocket before the boat even gets in
the water.”
Superior Court Judge Anna Moran conducted a de novo review and
approved the master’s report. Addressing Morrill’s objection, the superior court found
“that Master Wells reasonably concluded Mrs. Mahan was to receive 50% of 2011
income from cannery income less deductions for fuel, dues and other advancements” and
ordered payment of that amount. Following the order, Morrill made a one-time $15,000
payment to Jessica. But Morrill now characterizes this payment as an “advance” that did
not “account[] for Jessica[’s] share of expenses.”
C. Jessica’s Motion To Show Cause And Morrill’s Cross-Motion For
Money Judgment
In July 2013 Jessica filed a motion to show cause alleging, among other
grievances, that Morrill had “failed to pay any funds towards the 2012 fishing money
owed or demonstrate [that] he fully paid her portion of 2011 funds.” In opposition,
Morrill filed a cross-motion for money judgment and asserted for the first time that the
total fishing losses in 2011 and 2012 amounted to $96,826. He requested a judgment in
the amount of $48,413 — half of the total losses. Jessica responded that Morrill in fact
owed her $49,079 as her share of the 2011 and 2012 fishing profits.
After hearing additional testimony from Morrill and Jessica, Magistrate
Judge Wells issued another report, which noted that the term “profits” already had been
defined in her previous report and had been reviewed de novo by the superior court
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following Morrill’s objection in 2012. Nevertheless, Magistrate Judge Wells held an
additional evidentiary hearing and issued a new series of findings in a master’s report,
which concluded that “[t]here is virtually nothing in the contract’s purpose, the extrinsic
evidence, or the contract’s written terms, to support Mr. Mahan’s interpretation.” The
report recommended that the superior court “continue to use its prior definition of this
term.” In January 2014 the superior court approved the master’s report and ordered that
the term “profits” continue to be defined as “payment from the cannery, less deductions
for fuel, dues and other advancements.” Morrill appeals.
III. STANDARD OF REVIEW
“Contract principles govern the interpretation of property settlement
agreements incorporated in dissolution decrees. When interpreting any contract, the goal
is to give effect to the reasonable expectations of the parties. We review the
interpretation of a contract de novo. Where the superior court considers extrinsic
evidence in interpreting contract terms, however, we will review the superior court’s
factual determinations for clear error and inferences drawn from that extrinsic evidence
for support by substantial evidence.”1
IV. DISCUSSION
The sole issue on appeal is the superior court’s interpretation of “profits”
to mean “payment from the cannery, less deductions for fuel, dues and other
advancements.” Morrill contends that the definition of “profits” is unambiguous and
means “net profits,” or “the excess of revenues over expenditures.” He argues that the
superior court erred by failing to apply this definition when it approved the standing
master’s report. Morrill also alleges that Jessica was a partner in the commercial fishing
1
Villars v. Villars, 277 P.3d 763, 768 (Alaska 2012) (internal quotation
marks and citations omitted).
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business. Citing his 2011 and 2012 federal income tax returns, Morrill asserts that the
commercial fishing business operated at a loss, and he argues that Alaska partnership law
requires Jessica to pay a 50% share of the business’s alleged losses in 2011 and 2012.2
In the alternative, Morrill argues that even if the definition of “profits” is
ambiguous, AS 25.24.220(g) “prohibited [the trial] court from using principles of
contract interpretation to modify a dissolution agreement” without the consent of both
ex-spouses. Finally, Morrill argues that even if the fishing profits provision is
ambiguous and the superior court had authority to resolve that ambiguity, it erred by
relying on impermissible self-serving testimony from Jessica about her subjective intent
as extrinsic evidence. He asserts that the superior court should have instead resolved any
ambiguity in favor of his definition. But as Magistrate Judge Wells concluded, “[t]here
is virtually nothing in the contract’s purpose, the extrinsic evidence, or the contract’s
written terms to support Mr. Mahan’s interpretation.”
A. The Definition Of “Profits” In The Context Of The Commercial
Fishing Provision Of The Dissolution Agreement Is Unambiguous.
“We examine ‘both the language of the [agreement] and extrinsic evidence
to determine if the wording of the [agreement] is ambiguous.’ ”3 Although Morrill
argues that extrinsic evidence may only be considered if the plain language of an
2
While Morrill argued below that the commercial fishing business operated
as a partnership, he did not raise this argument on appeal until his reply brief. It is well
established that “issues not argued in opening appellate briefs are waived.” See Hymes v.
DeRamus, 222 P.3d 874, 887 (Alaska 2010). Even if Morrill’s partnership argument was
not waived, it would not succeed because the only evidence supporting the existence of
a partnership was the joint ownership of the fishing boat. AS 32.06.202(c)(1) provides
that joint ownership of an asset “does not by itself establish a partnership, even if the co­
owners share profits made by the use of the property.”
3
Villars, 277 P.3d at 768 (alteration in original) (quoting N. Pac. Processors,
Inc. v. City & Borough of Yakutat, 113 P.3d 575, 579 (Alaska 2005)).
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agreement reveals ambiguity, that is not the law in Alaska.4 Rather, “[e]xtrinsic evidence
may always be received on the question of meaning.”5
Morrill argues that the term “profit” is so well defined, in both ordinary and
technical usage, as “total revenue minus total expenditures” that no other definition could
possibly reflect the reasonable expectations of the parties. But while total revenue minus
total expenditures may be a common meaning of the term “profit,” it is by no means the
only definition. Moreover, interpretation of a contract term does not take place in a
vacuum, but rather requires consideration of the provision and agreement as a whole.6
With that principle in mind, our starting place is the commercial fishing provision of the
dissolution agreement, which provides:
The commercial fishing boat will be owned jointly until
10/1/2012 and operated by the husband. The profits will be
split equal between husband and wife after the cost of fuel
and can[ne]ry dues. On 10/1/2012 the commercial fishing
boat and permit will be then turned over to the husband. The
title will be solely in the husband’s name.
Read as a whole, the commercial fishing provision undermines Morrill’s
position. If the term “profit” already contemplated subtraction of all expenditures, then
4
See Alyeska Pipeline Serv. Co. v. O’Kelley, 645 P.2d 767, 771 n.1 (Alaska
1982) (rejecting a two-step approach to plain language and extrinsic evidence in contract
interpretation and noting that its application was “artificial and unduly cumbersome,”
and “that it offers no advantage over [an approach] which initially turns to extrinsic
evidence for such light as it may shed on the reasonable expectations of the parties”).
5
Alaska Diversified Contractors, Inc. v. Lower Kuskokwim Sch. Dist., 778
P.2d 581, 584 (Alaska 1989) (citing Alyeska Pipeline, 645 P.2d at 771 n.1).
6
See Fairbanks N. Star Borough v. Tundra Tours, Inc., 719 P.2d 1020, 1024
(Alaska 1986) (“The parties’ reasonable expectations are assessed through resort to the
language of the disputed provision and other provisions of the contract . . . .” (citing
Peterson v. Wirum, 625 P.2d 866, 872 n.10 (Alaska 1981))).
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there would be no reason to specify that specific expenses such as fuel costs and cannery
dues were to be subtracted. The maxim of construction expressio unius est exclusio
alterius applies when “parties list specific items in a document” and instructs that “any
item not so listed is typically thought to be excluded.”7 This principle suggests that
expenditures other than fuel and cannery dues were not intended to be included because
the parties did not list them. Our “preferred method of interpreting contracts is to
reconcile conflicting terms in a way that gives effect to them all,”8 and it is the superior
court’s interpretation of “profits” — not Morrill’s — that best achieves this end.
The interpretation of “profits” to mean fishing income finds substantial
support in the extrinsic evidence findings made by Magistrate Judge Wells and relied
upon by the superior court. The relevant findings are as follows:
7. . . . [Ms. Mahan] argues that this agreement was
designed to give her extra income flow in the short term,
recognizing the income disparity between the parties.
....
11. . . . [A]t the time of the dissolution, Mr. Mahan
reported an adjusted annual income of $129,649. Ms. Mahan
reported an adjusted annual income of $47,432. In the
petition, each party reported that they received $31,292 in
fishing income.
12. This income disparity has widened. Mr. Mahan
continues to commercial fish and work lucrative jobs with
employers such as Conoco Phillips and Chugach Electric.
Ms. Mahan no longer receives commercial fishing income,
and does not enjoy lucrative employment.
7
Tesoro Alaska Co. v. Union Oil Co. of California, 305 P.3d 329, 334
(Alaska 2013) (quoting Bentley Mall Assocs. v. ADC Distrib. Corp., Mem. Op. & J.
No. 865, 1997 WL 33812770, at *1 (Alaska Oct. 15, 1997)).
8
Hussein-Scott v. Scott, 298 P.3d 179, 182 (Alaska 2013).
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13. The parties’ tax returns[] regarding the fishing
business show the following:
Year Loss Profit
2012 $78,462
2011 $18,364
2010 $3,874
2009 $24,933
2008 $33,724
2007 $36,251
2006 $28,255
2005 $32,847
14. Ms. Mahan argues that the parties historically used the
fishing business as a tax shelter. The reported profit and
losses tend to corroborate this testimony.
15. Given the parties’ disparate incomes, cooperative
agreements, and desire to work together for [their daughter’s]
ongoing security and stability, it is hard to imagine that they
intended Ms. Mahan to pay Mr. Mahan 50% of whatever loss
he reported on his tax return. . . .
16. . . . [T]he dissolution petition reflected more than
$32,000 in actual income to each party from the 2010 fishing
business — yet the tax return reported a $3,874 . . . profit.
This difference suggests that the parties had a shared view of
the [business] as an income [tax] shelter, and the check from
the cannery as income.
....
18. . . . This particular contract seems clear. The parties
stated “profit.” They did not, either in writing or at the
hearing, state that they intended to share “profit and loss.”
Additionally, they did not reference the tax returns. Instead,
their language references the cost of fuel and cannery dues
which is consistent with the fact that, at the end of the fishing
season, the cannery writes a check to a fisherman less these
amounts.
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19. There is virtually nothing in the contract’s purpose, the
extrinsic evidence, or the contract’s written terms, to support
Mr. Mahan’s interpretation.
There is ample evidence to support these findings, and the findings reinforce the
conclusion that the parties intended to split the income derived from Morrill’s
commercial fishing less costs for fuel and cannery dues. Morrill and Jessica entered into
other cooperative agreements to provide for their daughter at the time of the dissolution,
which supports the inference that two years of shared fishing money was designed to
provide temporary support to Jessica in her role as their daughter’s primary caregiver and
not designed to create a financial business-focused burden both parties knew Jessica
would be unable to repay. Elsewhere in the dissolution agreement the parties asserted
that the fishing business provided $31,292 in income to Jessica in 2010, and nowhere in
the agreement do the parties refer to the tax returns indicating a history of commercial
fishing losses. Instead, the dissolution agreement acknowledges only the positive income
provided by the commercial fishing.
Finally, our inquiry seeks “to give effect to the reasonable expectations of
the parties” at the time of the agreement.9 With this in mind, it is noteworthy that Morrill
did not assert his belief that the agreement was intended to provide for the sharing of
both losses and profits until two years after the agreement was entered.
Morrill suggests that the magistrate judge and the superior court made
inappropriate use of Jessica’s testimony in their findings. He alleges that “both
[Magistrate Judge Wells and Judge Moran] relied entirely upon Jessica’s self-serving
testimony” in their respective analyses. But a party may “testify[] about its
understanding in objective terms . . . sufficiently detailed to enable [the] trier of fact to
9
Villars v. Villars, 277 P.3d 763, 768 (Alaska 2012).
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form its own judgment as to the reasonableness of the party’s understanding and the
likelihood that the other party would have the same understanding.”10
Here, the language of the findings makes clear that Magistrate Judge Wells
did not rely solely on Jessica’s testimony. For example, Magistrate Judge Wells’s
finding of an income disparity between the parties was based on details recorded in the
dissolution agreement itself. And the parties’ 2011 and 2012 tax returns corroborate the
testimony from both parties at the initial dissolution proceeding that providing short-term
financial support for Jessica was in the best interests of their child. Moreover, it was not
unreasonable for Magistrate Judge Wells to draw an inference from the consistent tax
losses recorded in Morrill and Jessica’s pre-dissolution tax returns that the commercial
fishing business was used as a tax shelter. Magistrate Judge Wells’s inference that it is
unlikely that the parties “intended Ms. Mahan to pay Mr. Mahan 50% of whatever loss
he reported on his tax return” is supported by both Morrill’s and Jessica’s testimony at
the initial dissolution hearing in 2011 — testimony that provides the best window into
the parties’ understanding of the agreement at the time it went into effect. The findings
also rely on undisputed testimony from Jessica regarding how the cannery typically paid
fishermen.
Contrary to Morrill’s alternative argument that the superior court
improperly modified the terms of the dissolution agreement, “interpret[ing] a property
10
Nautilus Marine Enters., Inc. v. Exxon Mobil Corp., 305 P.3d 309, 317
(Alaska 2013) (second alteration in original) (quoting Alaska Tae Woong Venture, Inc.
v. Westward Seafoods, Inc., 963 P.2d 1055, 1067 (Alaska 1998)); see also Norville v.
Carr-Gottstein Foods Co., 84 P.3d 996, 1003 (Alaska 2004) (“Testimony of a party as
to his subjective intentions concerning the meaning of a particular clause in a contract
is not probative unless the party in some way expressed or manifested his understanding
at the time of contract formation.”).
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agreement’s provisions to clarify confusing language and resolve ambiguity”11 is not
only appropriate, but “required under our case law”12 because “[an] agreement entered
into in connection with a dissolution proceeding is a contract subject to interpretation
under contract principles.”13 Thus, in our independent judgment, the plain text of the
dissolution agreement’s commercial fishing provision and the extrinsic evidence both
support the conclusion reached by the superior court.
Because the superior court’s factual findings are not clearly erroneous and
its inferences drawn from extrinsic evidence are otherwise supported by substantial
evidence, and because the plain text of the dissolution agreement supports the superior
court’s interpretation, we affirm the superior court’s interpretation of the contract terms.
V. CONCLUSION
We AFFIRM the superior court’s order interpreting “profits” to mean
“payment from the cannery, less deductions for fuel, dues and other advancements.”
11
Song v. Song, 972 P.2d 589, 593 (Alaska 1999).
12
McCarter v. McCarter, 303 P.3d 509, 514 (Alaska 2013).
13
Knutson v. Knutson, 973 P.2d 596, 600 (Alaska 1999).
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