- [Bailiff] The Honorable Justices of the Supreme Court
of the State of Alaska.
- [Chief Justice Carney] Good morning.
You may be seated.
- The Supreme Court is now in session.
- We are now on the record in the case
of Thomas Murray v. Kathy Murray.
Ms. Limón, you will be...
I understand you're arguing for Mr. Murray.
- [Ms. Limón] I am, Your Honor.
- And Ms. Rogers,
you will be for Ms. Murray.
- [Ms. Rogers] Yes, Your Honor.
- Ms. Limón, you may begin.
- Okay.
Good morning, Justices.
May it please the court.
My name is Lynda Limón, and along with my co-counsel,
Randi Vickers, we are the attorneys
for Thomas Murray today.
I will be using Tom and Kathy's
first name for this argument.
It's a bit easier.
I'd like to start by presenting to the court that when
we started this divorce case many, many years ago,
there was already a plan in place.
I didn't have that plan.
Kathy didn't have that plan.
The attorneys didn't.
Tom had a plan.
He had a plan because he wanted
to give away to his ministries.
He had this plan long before he met Kathy.
He is a devout member of his religious faith since 1975
and has been engaged in ministry work and giving
since that time.
Tom had this plan with his late wife,
Denise, of 27 years.
Since Tom founded Alaska Aerofuel in 1982,
Alaska Aerofuel tithed to ministries and missions.
Twenty-five to 30% of their net
profits they donated to ministries.
When Kathy and Tom married in 2008,
Tom's plan was in place.
It was being executed.
Nothing changed when Kathy came into the picture.
Tom took concrete action and steps to implement
his plan of giving prior to Kathy and after his
marriage to Kathy.
Now, in 2018, this court issued the Kessler opinion.
This court...
- It may not have clarified things as much
as we were under the impression it did.
- Yes.
This court clarified the law in Alaska on transmutation
by implied interspousal gift in the Kessler case.
Question one, whether the owning spouse, not Kathy,
Tom, in this case, whether the owning spouse,
not the married couple, intended to make a gift.
Question two, was the owner spouse, again, Tom,
was it his intent to treat the separate property
as marital property,
or was the intent to make the property marital,
in other words, donate the
property to the marital estate?
This intent must be shown that the owning spouse,
that his separate property, Tom's separate property,
be treated as marital property for the purpose of
dividing the property in the event of a divorce.
- And the very next sentence says,
"And this idea is better captured by framing the
inquiry as an intent to donate or convey the separate
property to the marital unit or the marital estate."
Aren't those two sentences somewhat different?
Isn't the second one perhaps
a wee bit easier to understand?
- It is easier to understand,
and the question on the table with the second
sentence is, is the owner...spouse,
want to donate their property or convey their property
to the marital estate, versus using your property,
sharing your property during the marriage.
Because often, spouses that come into a marriage
absolutely share their property during the marriage.
- By doing things like putting all
the money in a joint account.
- Absolutely, by putting things in a joint account,
by listing their spouse on insurance policies
as beneficiaries, by sometimes putting your spouse
on a stock certificate, in this particular case,
that happened, on a stock certificate
so that in the event you died,
your spouse would receive your assets.
Because you're in an intact marriage,
you want to make sure that your spouse is
taken care of.
- And that's a key.
It seems to me that you're in an intact marriage idea,
I think, is part of the confusion that comes from the
first sentence we were just discussing, right?
It's as if you're looking forward and imagining a
disastrous end to a marriage that you don't want to end
at all, right?
And it seems to me most people don't do that.
They're not looking at, like,
"How are we going to tally this up when
we get divorced?"
Because they're not thinking about getting divorced.
- Justice Carney, I would absolutely agree with you.
That is, in most cases,
we have those conversations with our clients that,
of course, you're in an intact marriage,
you're happily married,
you want to make sure that
your spouse is taken care of.
But that does not mean that you intend to donate your
separate property to the marital estate for the purpose
of dividing it in a divorce.
For example, I'll address
Eternal Holdings Corporation, EHC, first.
Eternal Holdings Corporation, EHC,
Tom did not intend to donate EHC to the marital estate.
That asset was spun off of Alaska Aerofuel,
which the court, the trial court,
found that Alaska Aerofuel
was a separate asset.
It did not transmute.
I'll be specific, the business.
Because the judge did find...
- Because the proceeds did.
- Correct.
The judge did find, which we disagree with,
and we've raised that in our brief.
But the judge did find that...
- [Justice Oravec] We could also argue that
EHC is a separate legal entity,
which means it's a separate legal entity
that came into being during the marriage.
- It came into being during the marriage,
and there was significant testimony on this.
I'll use the word somewhat loosely.
It was spun off from Alaska Aerofuel,
because Tom was doing...pre-planning,
he knew he was going to sell his company,
and he wanted to continue to support his ministries
as Alaska Aerofuel had done for so many years.
So they created, and I can't think of it off the top of
my head, another company, which then became...
- Alaska Aerofuel Holding Company.
- Thank you.
Which then became Alaska
Eternal Holdings Corporation, EHC.
So it was spun off of a separate asset,
and it was funded with assets from Alaska Aerofuel,
separate asset, for the sole purpose
of continuing to give to the ministries.
- [Justice Pate] Counsel Limón,
could you verify for me what the ownership was of EHC
at the time of divorce?
Was there a...?
Who were the owners?
- Thank you.
It was a corporation.
Tom owned 80% approximately of the shares.
I can look for the exact amount.
I think it was 80% or 81.4%.
- Eighty-one.
- Eighty-one.
And Paul Gibson, who also worked for Alaska Aerofuel,
owned the remaining shares.
- When the court divided it at the time,
did it take into account Mr. Gibson's ownership
in there, or how was that dealt with?
- Yes, my recollection is we actually had to file a
motion for clerical error because they included 100%
of the shares.
The court agreed that was an error, and they fixed it.
So they were only talking about the 81% of the shares.
So Eternal Holdings Corporation,
there was several things,
several actions that Tom did that showed the court that
there was evidence that he did not intend to make
Eternal Holdings as marital asset.
He did not transmute it.
And even if you were to accept Kathy's view that she
has substantial impact and import on EHC,
you can't get past the Brennan case,
which happened after Kessler.
The trial court considered
Kathy's contribution significant.
However, the trial court did not consider whether
Kathy's contribution specifically evidences an intent
on Tom's part
to convey EHC to the marriage.
- [Justice Henderson] Isn't it relevant, though?
I mean...
- Kathy...go ahead.
- His decision to have her participate
in significant ways in this separate entity,
isn't that relevant to what he intended?
- I will respond...I will answer that two ways.
What she did, her significant work,
has nothing to do with the intent because the intent is
Tom's intent, number one.
- Did he understand and/or ask her
to be participating in this way?
- There was testimony that she wanted to participate,
and he said, "Sure, I want my wife to participate."
- In our joint ministries, in part, right?
- And certainly, they were doing joint ministries.
I mean, they met, they were both doing...
- They're both on a mission trip to Costa Rica, right?
- Absolutely, they were both.
And when I said prior, you know,
except the fact that she did
significant work, like Brennan.
Because in Brennan, Rachael,
the wife in that case, did significant work.
But our position certainly is
she did not do significant work.
This was volunteer.
This was...EHC was set up
to run out of money.
It was a going concern to
give money away to the ministries.
- But that doesn't mean it wasn't a joint marital
enterprise, and it doesn't mean necessarily that it
wasn't using transmuted funds to do that.
- I would push back, Justice Carney,
that it wasn't a joint enterprise.
This item, Eternal Holdings Corporation,
was started and spun off of Alaska Aerofuel for the
sole purpose of ministries
that Tom was doing well before.
This wasn't a joint enterprise
that they came up with or anything.
These were assets...
- And it happened during the marriage.
- It absolutely happened during the marriage.
- She was an officer.
- She was an officer for 15 months.
- She was an officer.
- She was an officer.
She was an officer, and there
was testimony of what she did.
But just being an officer is
not intent to transmute EHC.
- It's not automatically.
- It's not automatic.
- It may be in a particular case.
- It may be in a particular case,
but I would push back and say it's not in this
particular case, especially since, I go back, yes,
it was started during the marriage,
but it was created long before
that. The reason...
- The idea was, you're saying, before that.
It was created during the marriage.
- It was created during the marriage,
and it was created with separate assets
from a separate business.
And the court found that
Alaska Aerofuel was a separate business.
- Right.
But not the proceeds of its sale.
- But not the proceeds, which I'm watching my time,
and I've saved seven minutes.
I will address briefly regarding Alaska Aerofuel and
the proceeds, and we briefed this extensively in our
brief that those proceeds went into a master account.
It was called a master account.
It was a joint account.
But our position is, certainly,
there were some of those proceeds that were intended
to convey to the marriage.
And then there were other proceeds from
that $13 million sale that was used for other items,
such as the Zepp stock and the life insurance,
which were earmarked for separate issues, if you will,
separate property that was not
part of the marital estate.
He had a plan,
and he executed his plan.
He certainly shared a significant portion
of the Alaska Aerofuel proceeds to the marriage.
But his intent was not to share his entire life's work
since 1982 when he started the business.
I will reserve the additional time.
Thank you.
- Thank you.
Ms. Rogers.
- Good morning. May it please the court.
My name is Margaret Rogers.
I am counsel for Kathy Murray in this matter.
And like Ms. Limón, I'll refer to them
as Tom and Kathy just for ease.
From our position, Judge Lyle's ruling,
reaffirmed by Judge Haines, is correct in all aspects.
This is, and I agree with
Ms. Limón, Tom had a plan.
When he met Kathy, she shared that plan.
Together, they engaged in ministry work.
Together, they decided what would happen with the
proceeds from Alaska Aerofuel when he sold the company.
Together, they decided that it would be
deposited into their master account,
from where they made joint decisions every day.
They spent those funds on groceries.
They spent those funds on heating fuel.
They spent those funds on
investments that my client chose.
And they spent those funds on Zepp stock,
among other things.
The argument of Mr. Murray, or Tom,
that he did not intend to donate either the
Alaska Aerofuel proceeds or EHC to the marital estate
is based only on what Tom wants.
And that is not the intent of Kessler.
When I read Kessler, it basically says,
"Okay, we start with...
We're going to clear this up,
and we're going to start with donative intent."
So, did the owning spouse actually intend to donate
their property to the marriage in the event
of a divorce?
And I stand by the statement that I've made several
times, is that no one in the intent of a divorce is
going to come in and say, "Hey,
I meant to give this to you in the marriage."
No one is going to say that.
So you don't stop at,
"What was your intent as of the date of divorce?"
You look at, "What did you do with that?
What did you do to show as your intent?"
And Ms. Limón has argued that Judge Lyle
or the Superior Court relied too heavily
on former Cox factors in looking at only
the fact that Tom placed the property in joint title.
But that's not what the Superior Court looked at.
The Superior Court looked at the whole conduct
by Tom and the conduct by Kathy.
Putting those funds, particularly Alaska Aerofuel,
and I'll talk about EHC secondly or next,
but putting the Alaska Aerofuel sale proceeds into
that master account is classic transmutation.
What he did with that and what they did
from that point forward, that course of conduct,
supports that.
They used those things as marital funds,
and there was no question about those marital funds.
I know there's an argument specifically with respect
to Zepp stock, but when you look at the Zepp stock,
the original purchase of the Zepp stock was made
by Kathy Murray's separate funds.
They agreed she would use her former retirement funds
to purchase that initial Zepp stock that Tom
wanted to buy.
From that point forward,
all of the Zepp stock that they purchased was titled
in joint name and remained in joint name,
because they both shared an interest in the Zepp stock.
This is the same thing that
happened with, basically, their investments.
They both wanted to invest moving forward.
They both believed in charitable giving.
Kathy is one of the major investment accounts
that Kathy found was an American funds account
for charitable giving,
a $1.4 million fund for charitable giving.
Kathy shared Tom's goal in that respect.
This is not something where just Tom had a plan,
and I think if you look at it in that vision,
we would then be
misapplying Kessler.
Once you put an asset in joint property,
the burden shifts to the owning spouse to show that his
intent was not to devote it to the marriage
or to convey it to the marriage.
And I don't believe that Tom can do that
in this instance, at least with respect to the
Alaska Aerofuel proceeds.
With respect to Eternal Holdings Corporation,
I agree with Ms. Limón
that this was opened or founded from separate
funds, not from the Alaska Aerofuel proceeds.
I agree with that.
Once EHC was founded and the corporation was formed
with the shareholders of Tom Murray and Paul Gibson,
in the percentages that we discussed previously,
once that happened, I would agree,
Kathy did not have a claim to that.
I would agree that the statement made
to her by Tom that, "If, you know,
we need money or if we need something,
we can always go to EHC," is not evidence
of donative intent.
I would agree that that's not enough.
Where I disagree with Ms. Limón and where I agree
with the Superior Court is that Tom's actions
in adding Kathy to the board of directors
and then Tom's actions
in allowing her to not just have
signing power for him but to actually have the ability
to make her own decisions in that role changes
the framework from, "Is she just there in name,
or is she actively involved?"
such that then her role would lend itself to Tom
actually transmuting EHC to the marriage.
And I guess, from there,
I would look at what she did when she was on the board.
She was on the board for 15 months
as the secretary and the treasurer.
While she was there, she didn't just sign minutes.
She drafted minutes.
While she was there,
she met with a life insurance agent to talk
about possible investments that EHC could make.
She did that on her own without Tom or Paul with her.
She went to the bank.
She came up with lower loan rates.
She provided those to Tom and Paul.
And they adopted her suggestions.
She was instrumental in this company,
and Tom testified at trial that he wanted her to do
those things because he didn't want to be
bothered with those daily things.
He wanted to do other things.
- [Justice Borghesan] What's a little unique, I guess,
about this corporation is that nonprofit aspect,
and not just nonprofit,
but it's really a noncompensation structure.
I think in a more typical scenario,
a person would be compensated for their work, right?
And so I don't recall in the Brennan case if, you know,
the wife in that case was paid a salary,
but she benefited.
That income that was produced by the fishing business
benefited the marriage, and they enjoyed that income.
And so there was compensation for her, and I think,
in some ways, that helped to reinforce the idea that
there was not an intent to donate.
Here, I think, you know,
there was no compensation for her work,
but at the same time, like,
the point of the enterprise was not to create
compensation for that.
So, can you just explain how that...?
I think it's a unique scenario in how, like,
we should situate that in our case file.
- Sorry. And the way that I look at that
is that no one was compensated.
So really, Tom and Paul
didn't receive a salary either.
They did take annual owner draws in respect to the
percentage to their ownership in the company,
but they did that...
There was no guarantee that that was going to happen,
and when they did that...
- I guess, maybe a different way of putting my question
is, if the object of EHC was not to create value
for themselves or compensation for themselves
but to do charitable works, what would be the point
of giving her half of that?
- Well, EHC itself is not...
There are assets in EHC.
There is a building.
Tom's portion of the building,
which was awarded to Tom, is $110,000.
And then there are cash assets
in the different investment accounts.
And there's gold and silver and gems that are
available, and the Zepp stock.
So the benefit to dividing at least Tom's ownership of
that is that there are liquid assets there.
And so, Kathy would be entitled to those liquid assets,
just as Tom would be entitled, as would Paul.
So I think that it's not a company where you can expect
return on your stock investment or you can expect
return on, you know, the sale of something,
but you can divide the assets themselves.
And I think that that was what the Superior Court is
intending to do.
- But isn't Eternal Holdings a separate legal entity?
- So that was never argued at the Superior Court level.
That was argued only in a late-raised motion to
intervene, which was denied.
And I would note that, at least from my perspective,
an issue not argued in the trial court cannot be raised
for the first time on appeal,
and it was not raised in the trial court until...I
believe the motion to intervene was
filed in February of 2024.
Judge Lyle's decision came in June of 2023.
And Judge Haines left an avenue for EHC in her denial
of that motion, saying they could file an amicus if
they wanted to at this court, which they did not do,
but that any arguments that they wanted to make would
be reserved based on arguments
that Tom previously made.
And he did not raise that argument.
Even if the court...
- Now, what if we review it for plain error?
- Even if the court wants to look at this as plain
error, I suppose the Superior Court could have said,
"I can't look at this EHC as a separate entity.
I need to figure out what to do with that to decide."
But if this court...and I don't believe that
that was the case, if that is the case,
Tom should have raised that issue.
And he did not.
However, if this court is looking for that as plain
error, what I would look at is the discussion that
Judge Lyle had with counsel when he was discussing
whether or not EHC was a marital business.
And he was basically thinking it out loud with counsel.
We had a discussion because we were talking about
whether or not EHC was marital,
what to do with the assets, in particular, building.
And at that point in time,
Ms. Limón suggested,
"If it's marital,
we want you to look at shares and not assets."
Judge Lyle followed that by saying, "If it's marital,
I'm not going to do that.
I'm going to look at assets."
Because keeping the company together,
the whole company, all the assets together,
and just dividing shares would actually force
Tom and Kathy to continue to work together,
which is not a possibility.
They cannot do that.
They cannot get along.
And really, the shares don't have...
- And it's basically counter to
the underlying idea of a divorce, right?
- Exactly.
I believe...
- You don't want to continue to
entangle people in financial decisions.
- Exactly.
And I believe just...
- Doesn't that discussion show
that they're ignoring Paul?
- I don't believe so.
- Because if you're going to divide assets,
Paul's got 19%, your client has 40.5%,
and her client has 40.5%.
So Paul gets liquidated too.
- I don't believe he would have to,
and that was the discussion actually with the
Superior Court, is that Paul's assets
wouldn't need to be touched.
Paul, in time, can continue to run EHC in whatever
fashion they want, with the 60% of the assets
that are there.
And actually, Paul's interests arguably become stronger
at that point because they have...
I mean, if you take out Kathy's 40%,
Tom has 40%, Paul has 20%.
But Kathy doesn't want to be involved in EHC.
So basically, we're just removing
her 40% of the assets.
And then EHC has less assets,
but it doesn't mean that Paul's interests have been
changed at all, I don't think.
Does that answer your question?
- Oh, I see what you're saying.
- Okay. Okay.
And then, does that answer your question, Justice Pate?
So I think, with respect, again,
just staying with EHC and whether or not it is marital,
I think that the Superior Court made the correct
decision by looking at what Tom did,
not what Tom wanted at the time of the divorce,
but what he did during the marriage that would allow
Kathy to believe that EHC had transmuted.
She was a vital participant in that company.
It's different from Brennan,
and I think it's different from Brennan in large
part because, in that case,
there was no testimony from the husband, in that case,
that he believed that Rachael, I believe was her name,
had actually done anything to benefit the business.
He said she worked there
sometimes, she did a little bit of stuff,
but he didn't believe she'd
done anything to benefit anything.
In Tom's own testimony, in this case,
he indicated that Kathy did contribute
to Eternal Holdings,
that she did things he didn't want to do,
and that those investment suggestions and other changes
or other things that she did in the company actually
led to benefits for the company
and increased funds for the company.
So I think that's different from Brennan.
- I might be splitting hairs here.
So, is there a difference between saying whether or not
EHC transmuted and whether or not Tom's interest
in EHC transmuted?
I think we're talking about the corporate form.
- Sure.
And that's a good question.
And I think, in large part, with the...
and I wanted to correct something that Ms. Limón said,
some of the original assets in the decision
from Judge Lyle were divided on that 81%, 19%.
He specifically divided the building in that fashion.
I think there were just two accounts
that he awarded the whole account.
And the scrivener's error motion corrected that.
So Judge Haines corrected the distribution of assets so
that the percentages were appropriately referenced.
I think it is better.
It's cleaner to say that
Tom's interest in EHC transmuted.
I think it's cleaner.
I think the reason that the Superior Court said EHC
itself transmuted is that Tom didn't argue it was
a separate entity.
So there would have been no reason for Judge Lyle
to look at it in a separate fashion.
- Did the judge or the trial court, at any point,
order EHC to be dissolved,
or did it require any specific sale of the corporate
property apart from just removal of value?
Was there any kind of poking at it?
- No. And I think that that's because
of the property that we're looking at.
It was investment accounts.
It was gold and silver.
It was things that could easily be divided without
actually dismantling the corporation itself,
if that makes sense.
So I think that the Superior Court's intent was to do
as clean of a division of the assets as possible
without actually having to dismantle the company.
I think that that was an appropriate
read of what was out there.
And then, with respect to the life insurance policies,
before I lose my place,
with respect to the life insurance policies,
it is not as simple as saying that Tom intended the
life insurance policies to be for his children.
It's not that simple,
and that's actually not what happened.
The parties each had life insurance policies that they
got through New York Life with Linda Hulbert.
Kathy always had Tom as
the beneficiary of her policies.
Tom had Kathy as the beneficiary of
his when he felt like it.
Then he changed it and had the kids as beneficiaries
when he felt like it.
Then he put Kathy back on.
Then he took some kids off and some kids on.
And it's one of those situations where if someone
upset him, he would take them off of his
life insurance policy.
If someone made him happy, he would put them back on.
Judge Lyle ordered him during the divorce to put Kathy
back on as the beneficiary of those policies.
We're not arguing and we did not argue at trial that
the life insurance policies themselves are marital.
We argued that the value of those life insurance
policies, so the whole life policies,
had value that should have
been viewed as marital property.
The premium payments for the life insurance policies
for Tom came from his owner draws from EHC.
When he took owner draws from EHC,
he took in excess of what the life insurance premium
policies would be.
He put those owner draws into the master account,
and he then paid life insurance premiums
from those owner draws.
He also used those funds to pay for other things
that he felt like paying for.
But the premium funds came from EHC income,
which then was placed in the marital account.
So, notwithstanding the intent of the life insurance
policies to name Kathy beneficiary and the
kids beneficiary, and then, conversely,
for Tom to be the beneficiary.
Kathy's policy, which came from
the master funds, notwithstanding that,
the income used to pay the premiums on those policies
came from marital income from EHC.
So I think that those policies,
the premiums or the whole life value of those policies
absolutely are marital policies.
The beneficiaries moving forward can be whoever Tom
wants them to be, but the value of the policies at the
time of the divorce needs to
be viewed as marital property.
And Kathy's was, very clearly,
so Tom's should be as well.
So I think the court was correct on that point.
I do have a little more time left,
but seeing any other questions,
I don't believe I have anything further.
- Any questions before we let
Ms. Rogers sit down?
You're welcome to sum up and then take your seat.
- Thank you.
From Kathy Murray's perspective,
I believe that the Superior Court's decision was
correct in all parts.
With respect to the transmutation of AAI funds,
those were put in the master account.
Those were used for everyday purchases.
Those were used by both parties
to support their daily life.
They were used for investment purposes moving forward.
And Tom intended to donate them to the marriage.
He intended to donate them in the event of a divorce
based on his course of conduct.
I think Kessler supports that.
Kessler's progeny supports that.
With respect to EHC, as I argued previously,
Tom's decision to place Kathy in a role in that company
that allowed her to take active interest in that
company and make decisions moving forward as if she was
also a formative member of that
company showed his donative intent.
And I think the testimony of several people that
Judge Lyle heard, the Superior Court heard.
The facts that were presented by Tom, Kathy,
Paul Gibson, and their CPA,
and Linda Hulbert show that the intent of Tom was for
Kathy and Tom to run EHC together with Paul.
Paul's testimony supported that.
Tom's testimony supported that.
Kathy's testimony supported that.
The CPA's testimony supported that.
Linda Hulbert's testimony supported that.
And the Superior Court is the judge of credibility.
The Superior Court is the person who decides the facts.
Tom's coming in here,
asking this court in some way to retry the case,
that's not this court's job.
Judge Lyle weighed the credibility
of everyone that appeared before him,
and Judge Haines reaffirmed that in her denial
of the motion for reconsideration.
We would ask that this court do
the same and affirm on all respects.
Thank you.
- Thank you.
Ms. Limón.
- Thank you.
Understanding that I have seven minutes,
I'm going to circle back to EHC briefly.
Kathy didn't run the company.
EHC was set up several years before...we've briefed
this, how it came from Alaska Aerofuel.
They set up the company or Tom set up the company for
the purpose of giving after Alaska Aerofuel sold.
That company had money.
It owns buildings.
And at that point, the company
was actually a going concern.
It collected rent from Alaska Aerofuel because it owned
the company, and it did all kinds of things,
and there were employees.
Once Alaska Aerofuel was sold,
and probably prior to that, I'm trying to recall,
Tom started buying out
the shareholders of EHC.
The only one left that really believed what
Tom believed in terms of giving was Paul.
So Paul retained his approximately 18%,
and Tom had the rest.
At this point in time, the buildings are sold back,
if I remember, to allow building Alaska Aerofuel
because the buyers wanted the building.
Now, EHC got a whole bunch of cash,
plus the one building they still have,
and that money goes in a pot.
And now we have this big pile of money
that we're going to invest so we could give it away.
- From the master account.
- No. No, not from the master account,
Your Honor Justice Carney.
This came from Alaska Aerofuel to EHC.
No money from the master account went in there.
Apologies.
And now we have this pile of money,
and we're going to invest it so that we can
give it away.
That's the whole plan.
We are giving the money away.
That was the plan also, to purchase the Zepp shares,
and hopes that Zepp would hit it big and there'd be
more money to give to the ministries.
So Kathy did not do...she did volunteer work.
Yes, she was married to Tom.
They said at the...
- Well, back to Justice Borghesan's point,
everybody was doing...I mean,
we're all doing volunteer work.
- Everybody was doing...
Right, they were all doing...
- That's the point of charitable giving, right?
- Absolutely.
That was the point of charitable giving.
She wanted to be part of it.
Tom had no problem.
And in fact, my attorney to my left,
Attorney Rogers, I agree with her.
He even testified, "I didn't want to do that work,
and she liked doing that work."
- And it was significant.
- And that's where I disagree.
It wasn't significant.
She found some investments.
One of those investments, Justice Carney, Tom found.
She followed up, did all the paperwork,
but she found investments to put the money in so they
could give it away.
- Did they jointly discuss whether
to make particular investments?
- All three of them did.
- All three of them.
- All three of them did and made decisions.
- I'm not saying it has to be evidence of an intent
to confer an ownership share, but could that be?
You know, it will be one thing to say,
"Okay, do the legwork.
Give me a memo on these companies.
And then Paul and I will make the decision
because we're the shareholders."
But if, you know, it was actually a discussion
of all three of them, that's potentially...
Why would it not be evidence of an intent
to share actual ownership of those funds?
- Well, two reasons.
One, of course, they all talked.
That was his wife.
They share it.
As soon as they got married,
he put her name on everything because
they were married.
That is not intent to donate.
He didn't donate the shares.
The shares were in his name.
- And you wrote that in your brief,
but you know, if the title, right,
you could say the same thing
about a house, right, or a condo.
Well, her name isn't on the condo, so therefore...
I mean, the transmutation doctrine sort of applies
precisely when the other spouse's name is not on the
title of the asset.
- Well, that's what happened in Kessler, too, right?
It was a condominium, was the issue in Kessler.
So he did not give her any shares.
It was clear from all the other testimony
what the intent of the business was.
The intent of the business
was to give away the assets.
So, a couple more things
to address with EHC.
- I guess, last question on this point.
I don't want to take too much from your rebuttal.
- No, please.
- But is it plausible to think
the intent was to give it all away?
And part of that is I want to allow you
some ownership to give away.
And the fact that we all discuss together where
these assets are being given supports that
understanding of intent.
- If that was the case,
Tom would have provided her shares.
Because you know, he did other things and put her name
on other items, but he did not give her shares.
And the issue that was raised,
and I believe it's in our brief at pages 8 and 9,
I think, in our reply brief...yes, the reply brief,
section 2, page 8 through 10, we do address.
I asked Judge Lyle multiple times, the trial court,
that if you do find that EHC has transmuted,
then the only asset available
to distribute are the shares.
Given the type of company this is,
you can't liquidate it.
And that's basically what he did.
Justice Pate, you asked about liquidation.
Judge Lyle didn't liquidate it, but that's the result.
If you're going to split the assets...
- Is it liquidated now?
- It's not.
It's still there.
But that would be the result.
You would have to liquidate 40% to Kathy and the same
amount to Paul, because if you give one shareholder,
you have to give the other shareholder.
So you have to do equal distribution.
So you are going to liquidate a business
that was meant for charitable giving.
That's what the business was set up for,
from assets from Alaska Aerofuel.
- But Tom could keep his portion in the corporation,
as could Paul, correct?
- My understanding, because of the type of corporation
it is, you have to treat all the shareholders the same.
- Are you talking about for tax purposes?
- Yes. Yes, Justice, yes.
- These details weren't argued below, obviously, right?
- No, because the position that we took at court
is...the position we took in the lower court is if you
do make the decision that it's been transmuted,
you can only split the shares.
- Given that detail,
the tax code that you're talking about,
is that error obvious?
- Yes. Yes.
- Why wasn't it further discussed then?
It just seems like if this is something obvious
that the court should have picked up on,
everyone should have been talking about it,
regardless of sort of the upfront positions related
to the nature of the property,
whether it was transmuted or not.
- Because the position in the lower court,
our position in the lower court,
was you can only divide the shares.
You can't do anything else with this corporation.
You can divide the shares.
- No further discussion?
- And there was no further discussion,
to my recollection, that you need to divide the shares
if you find that EHC has been transmuted.
And my time is up.
I would just like to make a brief closing,
unless the justices have any questions for me.
- We'll take a moment.
- All right. I started with, and I will end with,
Tom had a plan way before Kathy.
He instituted the plan.
It was a concrete plan,
and he continued with that plan throughout his life,
throughout his marriage with his late wife, Denise,
and continued that plan with Kathy.
And Kathy did receive the benefits.
She came into the marriage with nothing,
and they were married,
and she received the benefit of that plan as well.
She also wanted to give.
They had a significant estate.
And the remaining estate if you pull out EHC,
both of them received significant assets.
We are asking the court that, under Kessler,
under Brennan, we believe the only decision for the
court is to remand back to the lower court,
with instruction that EHC is not marital.
It's pulled off the 90.1 table.
And we also addressed the Zepp
shares and the life insurance.
I didn't have time to address both of those
thoroughly today, but they are briefed,
and it's remanded to the lower court with that
direction, and the remainder of the marital estate on
the 90.1 table is divided 50-50.
Thank you.
- Thank you, both, for your briefs
and arguments in this unusual case.
As you know, we will take this under advisement
and issue a written opinion at a later date.
We are in recess for now
until our 11:00 oral argument.
- Thank you.
- Thank you.