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 ...