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Pasley v. Pasley

Supreme Court of Alaska

June 7, 2019

DAVID SEAN PASLEY, Appellant,
v.
CYNTHIA DENEEN PASLEY, Appellee.

          Appeal from the Superior Court No. 4FA-14-01549 CI of the State of Alaska, Fourth Judicial District, Fairbanks, Bethany Harbison, Judge.

          Kristin J. Farleigh, Gazewood& Weiner, P.C., Fairbanks, for Appellant.

          Margaret O'Toole Rogers, Foster & Rogers, LLC, Fairbanks, for Appellee.

          Before: Stowers, Chief Justice, Winfree, Maassen, and Bolger, Justices. [Carney, Justice, not participating.]

          OPINION

          STOWERS, Chief Justice.

         I. INTRODUCTION

         A husband appeals multiple aspects of a divorce order. He argues that his wife's bank accounts, personal leave from her job, and house should be treated as marital property; that he should be reimbursed for damage his wife allegedly caused to his separate property and to marital property he received (which he also alleges the superior court over-valued); that he and his wife should share legal and physical custody of their children; and that the conditions placed on his unsupervised visitation with the children were unwarranted. We affirm the court's decisions for the most part; however, we vacate and remand on the classification of the wife's bank accounts and the valuation of the husband's damaged property.

         II. FACTS AND PROCEEDINGS

         A. Background Facts

         Cynthia Deneen Pasley (Cindy) and David Sean Pasley (Sean) married in August 2005. They separated in February 2014 and Cindy filed for divorce in March. A divorce trial was held across 11 days spanning May through October 2016. The superior court issued an order after trial in December 2016 and an order after a motion for reconsideration in January 2017. Sean appeals multiple aspects of the court's decision, which are summarized in the next section. Part IV presents additional facts relevant to his appeal in further detail.

         B. Summary Of Sean's Arguments

         1. Cindy's bank accounts

         Cindy had a checking account which existed prior to the marriage. During the marriage Cindy deposited her paychecks in the checking account. Sean cashed his paychecks and provided cash to Cindy. Cindy deposited these funds in her checking account, and she paid the marital bills from this account. Cindy testified that, out of a balance of over $ 15, 000, $2, 000 belonged to her adult son, Robert, and another $ 10, 000 consisted of child support payments held for her adult children.[1]

         Cindy also had a savings account with a balance of about $22, 000 at the time of separation. Cindy claimed that $10, 000 in that account belonged to Robert and the remainder was comprised of child support payments held for her children.

         The superior court valued the marital portion of the checking account at $3, 559.33. It valued the marital portion of the savings account at $11, 652.60. The court's only finding with respect to Cindy's bank accounts was that "$12, 000 of the ... accounts belongs to Cindy's son, Robert, and therefore the value of those accounts is reduced."

         Sean argues that both accounts should be viewed as entirely marital.

         2. Cindy's personal leave

         From prior to the marriage until March 2013, Cindy accrued personal leave through her employer. When Cindy married Sean, she had 483 hours of accrued leave.[2] Her "balance" of hours available changed as she earned and expended leave during the marriage, never falling below 43 8 hours. When the parties separated in February 2014, Cindy had 534 hours of leave available. She "cashed out" these hours in June 2014.

         The parties disagreed over how to "trace" this asset. Sean proposed a first-in, first-out method while Cindy argued for a last-in, first out approach. Under Sean's proposal, Cindy consumed all her premarital leave hours, and her entire balance at separation was marital property. Using Cindy's approach, leave earned during the marriage was used whenever it was available, preserving most of her premarital leave as separate property. The superior court rejected Sean's first-in, first-out method and equally divided the small portion of Cindy's leave that it designated as marital property.

         On appeal Sean recapitulates his argument for first-in, first-out tracing.

         3. Cindy's house

         Cindy owned a house prior to the marriage, which she and Sean used as the marital home. Cindy retained exclusive title to the house throughout the marriage, including when she refinanced it. Cindy asserted that Sean's credit was not used to improve the property. Sean testified he remodeled parts of the house, but Cindy maintained she paid him for this work. The superior court found Cindy more credible on this point and found Sean did not conduct ongoing maintenance of the property.

         Sean gave Cindy part of his paychecks in cash, which she then deposited in the bank account that she used to pay the mortgage on the house; Sean testified he believed he was contributing to the mortgage, but Cindy maintained she alone paid that expense. Sean argued that Cindy's house had transmuted into marital property, but the court found that the house remained Cindy's separate property.

         Sean appeals this finding.

         4. Sean's possessions

         Sean was arrested on February 13, 2014, for fourth-degree assault, and on February 14 Cindy filed for and received an ex parte domestic violence protective order. Under the protective order's terms Sean did not have access to the marital home throughout the divorce case.

         In April Sean obtained a writ of assistance to retrieve his possessions from the home. Cindy had packed his belongings and left them either in the front yard or in Sean's van, which had been parked on the premises. Sean was only allowed a limited amount of time to retrieve his possessions, and he ended up leaving with some possessions still in the yard and without his van. A few weeks later a mutual friend of Sean's and Cindy's retrieved the van. Sean's possessions left in the yard remained there until September, when a moving company retrieved them for Sean.

         Sean alleged that many of his possessions were ruined either because Cindy damaged them while packing or because they remained outside for so long. He also claimed that Cindy was responsible for his delay in retrieving the possessions that had been left outside. Cindy countered that Sean's possessions were damaged before they separated, and she introduced photographs showing the general state of Sean's possessions during the marriage. She testified she exercised reasonable care in packing them and Sean was responsible for the delays in retrieving his possessions.

         Sean also argued that the damaged items should be valued at replacement cost and these amounts should be assigned to Cindy because she damaged them. On his property spreadsheet Sean listed his estimates of replacement costs for the damaged items. In the alternative, he requested that the property be valued at zero.

         The court awarded the items to Sean and assigned non-zero values for this property. Sean appeals, arguing both that Cindy's conduct was not reasonable and that the court over-valued the damaged items.

         C. The Children

         Sean and Cindy have two boys. Both are in elementary school and have special needs. Cindy requested sole legal and primary physical custody, while Sean requested joint legal and shared physical custody.

         The superior court found that Sean had a history of perpetrating domestic violence against Cindy. This was apparently based on a separate domestic violence protective order that concluded Sean committed two or more acts of domestic violence against Cindy.[3] Sean completed an intervention program for batterers.[4]

         Both parties used illegal drugs in the past. During an altercation shortly before the parties separated, Sean told Cindy that he was using methamphetamine. He testified he believed she was using methamphetamine and he wanted her to admit it. Both parties testified they found what they believed to be methamphetamine in the house and they believed the other party was using it. Cindy introduced into evidence photographs of what she believed to be drugs and drug paraphernalia. In results submitted to the court, both parties' hair samples tested negative for all drugs.

         The court heard testimony from three individuals regarding the parties' emotional and psychological profiles. Kevin Lankford completed psychological evaluations for both Sean and Cindy. Lankford had no concerns about Cindy's test results, but he diagnosed Sean with unspecified personality disorder with paranoid and narcissistic tendencies. He recommended that Cindy be given final authority regarding the children's mental and academic needs. He also recommended that both Sean and

         Cindy participate in therapy.

         Sean's counselor, David Bates, disagreed with Lankford and did not believe that Sean had a personality disorder. On cross-examination, he conceded he relied almost solely on Sean's self-reporting for the assessment.

         Jocelyn Bowman was appointed as child custody investigator for the case. Bowman's report noted that the children were reluctant to separate from Cindy, and Bowman ascribed this to their shared trauma. She said that Sean lacked self-awareness about how his emotional outbursts affected his family and he had not been accountable for the distress he caused. But she wrote that the children value their relationship with Sean and want to "experience his positive attention" for more than four hours of weekly, supervised visitation. Bowman recommended that Cindy receive sole legal and physical custody of the children. Shared legal custody would be proper if Sean could overcome the domestic-violence presumption barring custody, and Bowman suggested that shared physical custody might be appropriate if Sean could additionally demonstrate he was drug-free and otherwise fit. Bowman recommended that Cindy retain final decision-making authority if custody were shared.

         The superior court awarded Cindy sole legal and primary physical custody, relying mainly on the testimony of Lankford and Bowman. It allowed Sean unsupervised visitation as long as a list of conditions were met. Among these were that Sean would obtain a hair follicle test for controlled substances every week for six months following the court's final custody order. And if Sean's latest substance abuse evaluation was completed more than six months before the order, he would have to obtain an updated substance abuse evaluation.

         Sean moved for reconsideration, arguing that the requirements of weekly testing and a new substance abuse evaluation were unduly burdensome. He explained that each hair follicle test costs $230 and his most recent substance abuse evaluation was one week too old, requiring a new one. Cindy responded by recommending that the number of drug tests be reduced to one per month, and the court adopted Cindy's recommendation in its order on reconsideration.

         Sean appeals both the superior court's custody award and these two visitation conditions.

         III. STANDARD OF REVIEW

         "There are three basic steps in the equitable division of marital assets: (1) deciding what specific property is available for distribution, (2) finding the value of the property, and (3) dividing the property equitably."[5] The first step - characterizing property as either marital or separate-" 'may involve both legal and factual questions.' Underlying factual findings as to the parties' intent, actions, and contributions to the marital estate are factual questions."[6] We review factual findings for clear error, which exists "only when we are left with a definite and firm conviction based on the entire record that a mistake has been made."[7] "[W]hether the trial court applied the correct legal rule ... is a question of law that we review de novo using our independent judgment."[8] "The second step, the valuation of property, is a factual determination that we review for clear error."[9] "We review the third step, the equitable allocation of property, for an abuse of discretion, reversing only if it is 'clearly unjust.' "[10]

         "The superior court has broad discretion in child custody determinations."[11]Custody and visitation decisions "will be set aside only if 'the record shows that [the] controlling findings of fact are clearly erroneous or the court abused its discretion.' "[12]"An abuse of discretion is found 'if the superior court's decision is clearly unreasonable under the totality of the circumstances' or 'if the superior court considered improper factors in making its custody determination, failed to consider statutorily mandated factors, or assigned disproportionate weight to particular factors while ignoring others.' "[13]

         IV. DISCUSSION

         A. Cindy's Bank Accounts

         1. The law of classification of secondary assets

         In order to review the superior court's classification of Cindy's bank accounts, we must first describe the process of tracing a secondary asset.

         a. Tracing generally

         "Assets acquired during marriage 'as compensation formarital services' - most commonly salaries earned by either spouse during marriage - are considered primary marital assets."[14] Assets acquired by one spouse before marriage, property acquired by gift, and property acquired by inheritance are primary separate assets.[15] Assets acquired "through exchange, appreciation, or income" are secondary assets, and their classification as marital or separate depends on their source asset.[16]

         Tracing is the process of classifying a secondary asset by identifying its source asset.[17] If a source asset is primary marital property, then the secondary asset is secondary marital property, while a source asset that is a primary separate asset yields a secondary separate asset.[18] However,

if the source asset itself is secondary property, tracing continues until either a primary separate or primary marital source asset is found. "The process of tracing can therefore be simply described as a search of sources backward through time until every asset is linked to primary marital or primary separate property. "[19]

         Because a secondary asset can have more than one primary asset, it is possible to have mixed secondary assets.[20] To characterize a mixed secondary asset,

the superior court must know the character of each source feeding into the mixed asset and the amount of value each source contributed to the mixed whole. The court can then determine the ratio between the sources. "The marital and separate interests in a mixed secondary asset are ordinarily in the same ratio as the marital and separate contributions used to acquire the asset."[21]

         The tracing process stops once it is not possible to further trace a secondary asset back to its primary sources.[22] Because the party seeking to establish that property is separate bears the burden of proof, untraceable assets are marital property. Furthermore, an asset is marital even if its sources are known but the ratio of marital to separate property in the source is unknown.[23] In such a case, the unknown contribution from the separate source is said to transmute by commingling to become marital property.[24]

         b. Multiple destination tracing

         If the source of a secondary asset is some, but not all, of a mixed asset, tracing becomes more complicated. The secondary asset that is being traced could be a marital asset if it came from the marital portion of the source asset, a separate asset if it came from the separate portion, or a mixed asset if it came from both marital and separate portions of the source asset.[25] This also affects the classification of the source asset: deductions of marital or separate property may change the ratio of marital to separate property remaining in the asset.[26] The process of determining the final ratio in these situations is called "multiple destination tracing."[27]

         If funds were withdrawn from a mixed secondary asset and "sufficient marital and separate funds were available [in that asset] to cover [the] withdrawal, the classification of the funds withdrawn depends upon the intent of the spouse who made the withdrawal, determined as of the time the withdrawal was made."[28] In making this determination, the following principles should guide the court.

         "The most powerful type of evidence used to show the contemporaneous intent of the withdrawing spouse is a close equivalence between the amounts of specific withdrawals and deposits."[29] In these situations, "[t]he commingled account is being used as a mere conduit to move separate funds from one place to another."[30] Strong evidence for this are transactions with an "exact equivalence in amounts and [a] close equivalence in time."[31] "If the original deposit is proven to consist of separate funds, the withdrawal would likewise be separate."[32]

         Contemporaneous records may also support a finding of intent behind withdrawals of funds.[33] "If the records were prepared at the time when the various deposits and withdrawals were made, and if the records are generally found credible by the trial court, the court is permitted to accept the accuracy of the records."[34]

         When determining the intent of the transferring spouse, "[i]t is essential to understand . .. that there is a major distinction between the contemporaneous intent of the spouse who made the withdrawal and that spouse's trial testimony. The relevant issue is intent at the time of the withdrawal, not intent at the time of the divorce trial."[35]The inquiry into a spouse's contemporaneous intent presents the same type of problem as contract interpretation: "While we are endeavoring to give effect to the intention of the parties, looking to their testimony as to their subjective intentions or understandings will normally accomplish no more than a restatement of their conflicting positions."[36]A court must instead try to determine the reasonable expectation or understanding of the relevant party.[37] Because a spouse's actual intent at the time of the withdrawal may conflict with the spouse's interests at the time of the divorce trial, [38] "the trial testimony of the parties must be viewed with careful skepticism."[39]

         c. Evidence to establish tracing generally

         Because of the need for such "careful skepticism," a party attempting to trace property has the burden of proving specific facts to establish each link in the tracing chain.[40] If a party attempts to prove a link in the chain solely through testimony, the superior court should generally ask three questions.[41] First, with what degree of specificity would the party ordinarily be expected to remember such a transaction? What documentation of such a transaction would ordinarily be available to the party attempting to prove its existence? Finally, is the testimony neutral or self-serving? In answering these questions, courts must take the parties - and the available evidence-as they are:

While . . . precise requirements for non-marital asset tracing may be appropriate for skilled business persons who maintain comprehensive records of their financial affairs, such may not be appropriate for persons of lesser business skills or persons who are imprecise in their record-keeping abilities. This problem is compounded in a marital union where one spouse is the recorder of financial detail and the other is essentially indifferent to such matters. Moreover, such a requirement may promote marital disharmony by placing a premium on the careful maintenance of separate estates.[42] Ultimately, whether each link in the tracing chain has been established is a question of fact best left to the superior court.[43]

         2. The findings with respect to Cindy's bank accounts are insufficient for appellate review.

         A trial court is required "to articulate the reasons for its holding where those reasons are not apparent from the record."[44] "[T]he trial court must provide' [a]dequate findings of fact... so that a reviewing court may clearly understand the grounds on which the lower court reached its decision.' "[45] Otherwise, "the order becomes essentially unreviewable by this court."[46] "Whether there ...


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