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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Harrower v. Harrower (6/13/2003) sp-5700

Harrower v. Harrower (6/13/2003) sp-5700

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


JAMES HARROWER,               )
                              )    Supreme Court No. S-9629/10359
     Appellant/Cross-Appellee,     )
                              )    Superior Court No.
     v.                       )    3AN-98-11476 CI
      Appellee/Cross-Appellant.     )    [No. 5700   -  June  13,

          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, John E. Reese, Judge.

          Appearances:  Robert H. Wagstaff, Law Offices
          of   Robert   H.  Wagstaff,  Anchorage,   for
          Appellant/Cross-Appellee.   Robert  C.  Erwin
          and  Roberta  C. Erwin, Erwin &  Erwin,  LLC,
          Anchorage, for Appellee/Cross-Appellant.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          BRYNER, Justice.


           James  and  Dolores Harrower both appeal the  superior

court's  order  dividing  the marital property in  their  divorce

proceeding.   James contends that the court erred in ruling  that

his premarital stock was marital property and in its valuation of

certain  marital  assets.   We find no error  in  the  challenged

valuations  but  remand  for further proceedings  concerning  the

premarital  stock.   Dolores challenges the court's  decision  to

allow   James   credit   for   certain  post-separation   marital

expenditures,  its failure to distribute several marital  assets,

and  its  refusal to grant Dolores's motion for attorney's  fees.

Although  some  of these points may warrant further consideration

by the trial court if it revises the property division on remand,

we find no error on the current record.


           James  and Dolores Harrower were married in 1968.   In

the  mid-seventies, they built the Stony River  Lodge,  a  remote

lodge  west of Merrill Pass that is accessible only by  airplane.

In  connection with the lodge, the couple ran a flying,  guiding,

and   outdoor   recreation  business  called   Northward   Bound.

Throughout  the  remainder of the marriage, both  worked  at  the

venture.  James guided big game hunting trips from the lodge  and

Dolores  provided  a  variety  of services  -  from  cooking  and

cleaning  at the lodge to meeting guests and purchasing  supplies

in  Anchorage.   In addition to their work for the  lodge,  James

worked  part-time as a dentist in Anchorage, and  Dolores  was  a


           In the late seventies or early eighties, the Harrowers

purchased  ten  subdivided lots on the Kenai peninsula.   And  in

1984  they acquired a long-term lease on state property  on  Lake

Hood  to use in connection with their business at the Stony River


           Several years before marrying Dolores, James purchased

shares  in  the  Great Consolidated Wrangell  Mining  Company,  a

corporation  formed  by  James and  several  other  investors  to

acquire  the  historic Kennicott mine and town site in  hopes  of

reselling  the property.  James inherited some additional  shares

in  the  company from his mother after the parties married.   The

stock  remained in James's name throughout the marriage.  In  the

mid-seventies, the company decided to subdivide a portion of  the

Kennicott  property and sell off the lots.  The  subdivision  met

with  little success.  In 1986 or 1987 the shareholders abandoned

the  effort  and decided to attempt to sell the entire  Kennicott

holding.   In  1987 James entered into a marketing contract  with

the  other  shareholders, agreeing to  locate  a  buyer  for  the

Kennicott  holdings in return for a six-percent sales commission.

The original contract was renewed a number of times over the next

decade.   The  Kennicott property finally sold  in  1998  to  the

National  Park  Service.   Upon completion  of  the  sale,  James

received  a commission of $203,400 under the marketing  agreement

and $572,299.84 for his company shares.

           In  1998,  after thirty years of marriage,  James  and

Dolores  separated  and Dolores filed for divorce.   The  parties

settled  some  of  the  property issues and tried  the  contested

issues  in  February 2000.  The primary points in  contention  at

trial  included  whether the proceeds from the  sale  of  James's

Kennicott stock were marital property and how to correctly  value

the Stony River Lodge, the Kenai lots, and the Lake Hood lease.

          After trial, the superior court entered its decision on

the record.  The court found that the Kennicott stock was marital

property;  the  fair market value of the Stony  River  Lodge  was

$450,000;  the Kenai lots had values between $8,700 and  $15,400,

as  reflected by their tax assessments; and the Lake  Hood  lease

was  worth  $135,000.  The court then divided the marital  estate

evenly.   After  making  some adjustments on  reconsideration  to

account for post-separation marital expenses, the court entered a

written decision adopting its oral findings.

           James  appeals, arguing that the trial court erred  in

characterizing   his  Kennicott  shares  as   marital   property.

Additionally, he challenges the court's valuation  of  the  Stony

River  Lodge,  the Kenai lots, and the Lake Hood lease.   Dolores

cross-appeals,  challenging the trial court's decision  to  allow

James  credit  for certain post-separation marital  expenditures,

its failure to distribute several marital assets, and its refusal

to grant her motion for attorney's fees.


          A.   James's Appeal

                    1.   The Kennicott stock

            The  parties  agree  that  the  Kennicott  stock  was

originally  James's  separate property and  that  the  commission

James  received  for  selling the Kennicott holdings  is  marital

property.  But they dispute whether James's stock became  marital

property  during the marriage and whether the funds  he  received

for  his  shares could properly be divided as part of the marital


            We   have   previously  recognized  that  a  spouse's

premarital  property can become marital through transmutation  or

active  appreciation.2  Transmutation occurs when married parties

intend  to  make a spouse's separate property marital  and  their

conduct  during  marriage  demonstrates  that  intent.3    Active

appreciation occurs when marital funds or marital efforts cause a

spouse's  separate  property  to increase  in  value  during  the

marriage.4  In contrast to transmutation, which converts an asset

completely   from   separate  to  marital,  active   appreciation

recognizes  that  a separate asset can become partly  marital  by

growing  in  value  during the course of a marriage.   Under  the

latter theory, the asset's value at the inception of the marriage

retains  its  separate character, but any subsequent increase  in

value  is  treated  as marital property to  the  extent  that  it

results  from active marital conduct: "Appreciation  in  separate

property is marital if it was caused by marital funds or  marital

efforts; otherwise it remains separate."5

           As can be seen, then, the essential elements of active

appreciation  differ significantly from those  of  transmutation.

While  transmutation requires an intent to change the  property's

separate  character and conduct corresponding with  that  intent,

active    appreciation   requires   increased   value,    marital

contribution, and a causal link connecting the two:

                In order to find active appreciation in
          separate property, the court must make  three
          subsidiary  findings.  First,  it  must  find
          that   the   separate  property  in  question
          appreciated during the marriage.  Second,  it
          must  find  that  the  parties  made  marital
          contributions to the property.  Finally,  the
          court  must find a causal connection  between
          the  marital contributions and at least  part
          of the appreciation.[6]
          In the present case, the trial court's findings blurred

the  distinction  between transmutation and active  appreciation.

Although at trial it was undisputed that James acquired his stock

in  the  Kennicott  holdings as separate  property  -  partly  by

purchasing  it  before he married Dolores  and  partly  by  later

inheritance  from  his mother - the court found  that  his  stock

became marital property in its entirety during the marriage;  the

court therefore distributed the net proceeds from the stock  sale

as  part of the marital estate.  Yet the court's findings fail to

mention  the necessary elements of transmutation; the  court  did

not  expressly  find either that the parties  intended  to  treat

James's  stock  as marital property or that they engaged  in  any

conduct demonstrating their intent.

            Nor   could   the  record  sustain   a   finding   of

transmutation.  Dolores did express her belief that the Kennicott

holdings  would  be  part of the couple's  retirement.   But  she

acknowledged  that  James never told her that  the  property  was

partly hers.  Her subjective belief does not establish "an intent

to  operate  jointly."7  In Green v. Green, we gave  examples  of

conduct   that  demonstrates  an  intent  to  transmute  separate

property: the property's use as a marital residence; its  ongoing

maintenance  and management by the parties; the  listing  of  its

title  in  joint ownership; or the use of the non-owner  spouse's

credit  to improve the property.8  Here, the parties did not  use

James's stock for any marital purpose; James continued to hold it

in  his  own  name throughout the marriage; and Dolores  did  not

contribute  money,  credit,  or  any  appreciable  time  to   the

Kennicott holdings.  Although James devoted considerable time  to

his  Kennicott holdings, his efforts, standing alone,  would  not

demonstrate  an  intent to transmute the property.   As  we  have

emphasized  on other occasions, a finding of transmutation  based

on  management  and  maintenance of  separate  property  requires

significant involvement by both spouses.9

            Instead   of   finding  that  the  parties'   conduct

demonstrated their intent to transmute James's stock into marital

property,  the court based its ruling on grounds that  seem  more

akin  to  the theory of active appreciation.  Pointing to James's

testimony  acknowledging  that he  had  put  his  life  into  the

Kennicott project, the court concluded, "I think under just about

any analysis an asset that had been actively pursued with so much

marital effort throughout the period of marriage would have to be

considered as part of the marital estate."  But under the  active

appreciation theory, this conclusion is problematic.  The court's

express  finding that James contributed active marital effort  to

the Kennicott project squarely addresses the theory's requirement

of  a  marital  contribution to separate property; but  it  loses

sight   of  the  two  other  necessary  elements  of  the  active

appreciation  theory:  appreciation and causation.   In  context,

these  elements  would have required the court to  determine  how

much  James's  stock increased in value during the  marriage  and

what part of that increase resulted from active marital efforts.10

Yet  the  court failed to address either of these two  additional


           To  prevail  under  the  active  appreciation  theory,

Dolores  bore  the burden of proof on the first  two  elements  -

marital contribution and appreciation.11  Cases divide as to  who

bears  the burden on the third element, causation.  The  majority

view would assign it to James, requiring him to prove the absence

of  a  causal  link between his efforts to market  the  Kennicott

holdings  and any appreciation in his stock that occurred  during

the  marriage.12  Since "the majority rule is almost overwhelming

among those cases which consider the issue expressly,"13 since it

"places the burden of proof on the person with the best access to

the  relevant  evidence,"14 and since it allocates  the  risk  of

failure  of  proof  in  a  way  that  accurately  reflects   "the

probabilities  of  the  situation,"15 we  choose  to  follow  the

majority rule.

           Here,  the  record supports the trial court's  express

finding that James contributed significant marital effort to  the

Kennicott property.  Thus, Dolores met her burden of proof as  to

the  first element of active appreciation.  But Dolores  did  not

attempt  to establish the extent of any marital increase  in  the

value  of  James's Kennicott stock.  The record fails to disclose

the  fair  market value of James's premarital shares at the  time

that  he  married Dolores or the value of his mother's shares  at

the time he inherited them; and the trial court's findings do not

address  the  issue.   Nevertheless, the record  would  permit  a

reasonable   inference   that   James's   stock   experienced   a

considerable increase in value during the course of  the  thirty-

year  marriage.  Thus, Dolores arguably met her burden as to  the

second  element of active appreciation by making  a  prima  facie

showing  that  at least some appreciation occurred.   As  to  the

third  element of active appreciation, causation, the  record  is

almost completely silent.  James did not attempt to establish the

lack of a causal link between his marketing efforts and the price

ultimately  paid for the Kennicott holdings; and the trial  court

failed to address the point in its findings and conclusions.16

           In summary, then, although the record does not support

the  trial  court's  conclusion  that  James's  interest  in  the

Kennicott holdings transmuted entirely into marital property, the

evidence could conceivably support a narrower finding that a part

of the sale proceeds was marital because it reflected an increase

in  value  resulting from James's contribution of active  marital

effort, as opposed to any increase in value that was passive - in

other  words,  appreciation that was not the  result  of  James's

marital  efforts.  But neither the trial court  nor  the  parties

addressed  all of the elements necessary to support a finding  of

active  appreciation.  Accordingly, we must  vacate  the  court's

conclusion that the sale proceeds were marital property in  their

entirety  and remand for additional proceedings on the  issue  of

active appreciation.17

                    2.   The Stony River Lodge

           The  trial  court  valued the  Stony  River  Lodge  at

$450,000.   This  was the value attributed to  the  lodge  in  an

appraisal that James received approximately a year before Dolores

filed  for  divorce.  The appraisal had been prepared at  James's

request  by  an acquaintance, Rick Richter, for use in connection

with  a  bankruptcy  proceeding.   In  the  divorce  proceedings,

Dolores  relied  on Richter's appraised value; but  James  called

Richter  as a witness to establish that the lodge's actual  value

was  lower  than  that stated in his earlier appraisal.   Richter

confirmed  the appraisal's estimate that the lodge had a  "market

value"  of  $450,000.  But he attempted to qualify this estimate,

testifying  that  the  appraisal's reference  to  "market  value"

indicated  a  value  based  on  the  customary  financing   terms

prevalent  in the rural Alaskan real estate market  -  a  ten  to

twenty percent down payment with seller financing.  To arrive  at

the  lodge's present cash value, Richter explained, it  would  be

necessary to deduct an additional forty to sixty percent from the

"market value" stated in his original appraisal.  Using this cash

discount  theory, Richter estimated the lodge's present value  at

forty to sixty percent of  $450,000.

          The superior court rejected this testimony, finding the

lodge's  value  to  be $450,000, as stated in Richter's  original

appraisal.  On appeal James contends that this finding is clearly

erroneous.18  He argues that "market value" is a term of art  and

that  the  trial court improperly disregarded Richter's unrefuted

expert  testimony  concerning its  meaning.   Citing  McQuery  v.

McQuery  for  the proposition that "proper valuation  of  marital

assets  requires the reduction of streams of future  payments  to

present value,"19 James maintains that the trial court should have

assigned  a present cash value to the lodge by applying Richter's

cash discount method.

           Yet  the record establishes that the trial court fully

considered  Richter's  testimony.  Although  accepting  Richter's

premise  that  it  needed to determine the lodge's  present  cash

value, the court rejected his proposed method of calculating that

value.  In the court's view, Richter's original appraisal already

incorporated  adjustments  to  reflect  present  cash  value  and

therefore  required  no  further  reduction.   While  the   court

recognized  that  Richter  disagreed  with  this  conclusion,  it

expressly  found  that he was not a credible witness,  describing

his  testimony as that of  "an advocate choosing arguments for  a

preconceived result, not an objective expert."20  Furthermore, the

court  noted, Richter's trial testimony concerning an  additional

discount "was completely contradicted by the very words that  Mr.

Richter put in the appraisal itself."

           The  record  supports this finding  of  contradiction.

While  Richter insisted at trial that an additional  discount  of

forty  to  sixty  percent would be needed to  make  his  original

appraisal's  estimate  of  "market  value"  reflect  the  lodge's

present  cash  value,  the  appraisal  itself  expressly  defined

"market  value" as a term that reflected a sale occurring  "under

conditions whereby . . . payment is made in terms of cash in U.S.

dollars,   or  in  terms  of  financial  arrangements  comparable

thereto."21  Richter did not attempt to reconcile this definition

with  his  apparently contradictory position at  trial  that  the

appraisal's use of "market value" reflected a value based on long-

term seller financing.

           Because "[i]t is the function of the trial court,  not

of  this  court,  to judge witnesses' credibility  and  to  weigh

conflicting  evidence,"22  we have consistently  recognized  that

appellate  review  of  trial court rulings based  on  testimonial

credibility  must  give  "due regard to the  opportunity  of  the

trial court to judge the credibility of the witnesses."23  Having

reviewed the record with due regard for the trial court's  unique

ability to assess the credibility of testimony, we hold that  the

court's  valuation  of  the Stony River  Lodge  was  not  clearly


                    3.   The Kenai lots

          James also relied on Richter to testify about the value

of  the  parties' Kenai lots.  Recent tax assessments had  valued

the  ten  lots at between $8,700 and $15,400.  Richter  estimated

their value at $7,000 to $16,000 but qualified these estimates by

stating  that,  because of their rural recreational  nature,  the

lots would have to be sold on terms and could not be expected  to

sell  all in one year.  Accordingly, Richter maintained,  it  was

necessary to perform a discounted cash flow analysis; he  did  so

using two different discount rates, both resulting in substantial

decreases in value.  The trial court rejected Richter's testimony

and adopted the lots' assessed values.  On appeal, James contends

that  the  superior court erred in relying on the tax  appraisals

and in rejecting Richter's discounted cash analysis.

           In  other procedural contexts, we have made  it  clear

that "[t]ax appraisals do not reliably measure true value."24  But

here,  the  parties  did  not dispute the  accuracy  of  the  tax

appraisals  as  a  starting point for valuation;  the  only  real

dispute  was  whether the assessed value needed to be discounted.

In  her  trial brief, Dolores offered the tax assessments as  her

evidence establishing the value of the Kenai lots.  James did not

object to the admissibility of the assessments and did not  offer

alternative  values for the lots or any values, for that  matter,

in  his  trial  brief.   And at trial, James's  expert,  Richter,

adopted similar values as his starting point for calculating  the

lots'  discounted  values.   If any appreciable  error  occurred,

then,  it  arose  not from the court's acceptance  of  the  lots'

assessed values but from its rejection of Richter's cash discount


          As with the Stony River Lodge, however, the trial court

found  Richter's testimony incredible.  Thus, our review  of  the

court's  findings concerning the Kenai lots is  governed  by  the

same  narrow  test  we applied in reviewing the court's  findings

concerning the Stony River Lodge.  Because neither party objected

to  the  admission  of  the tax assessments to  establish  value,

because the court's credibility determination is supported by the

record, and because the value assigned to the lots is within  the

range of evidence presented at trial,25 we conclude that the trial

court's valuation of the Kenai lots is not clearly erroneous.

                    4.   The Lake Hood lease

          The thirty-three-year Lake Hood lease was purchased for

$100,000  in 1984.  It had seventeen years remaining at the  time

of  trial  but  was  renewable subject to  certain  improvements.

During his pretrial deposition, James agreed that $135,000 was  a

fair  value  for  the  lease.   At  trial,  James  admitted   his

deposition  valuation but testified that he valued the  lease  at

only  $66,000  by  prorating  its  total  value  to  reflect  the

unexpired  term.  No other evidence was presented  regarding  the

lease's  value.   The trial court valued the lease  at  $135,000,

stating that James had not "challenge[d] the $135,000 full  lease


           James  argues that this finding is clearly  erroneous,

but his argument lacks merit.  Throughout the divorce proceedings

Dolores  listed  the  lease as having  a  fair  market  value  of

$135,000;  James never contested these listings and  provided  no

alternative value until he testified at trial.  Moreover, in  his

pretrial deposition, James acknowledged that $135,000 was a  fair

value for the lease.  Furthermore, the trial court could properly

view  James's  trial testimony, which attempted  to  reduce  that

value,  as self-serving, since, by the time of trial, James  knew

that  the  lease would be awarded to him and was therefore  aware

that  he stood to gain by obtaining a low valuation.  We find  no

clear error.

          B.   Dolores's Cross-Appeal

          1.   Failure to distribute marital assets

           In  her  cross-appeal, Dolores asserts  that  a  Helio

airplane engine, a Chevrolet van, and a Saab vehicle retained  by

James were erroneously unaccounted for by the trial court in  the

property  division.  James responds that Dolores failed to  raise

this issue below.

           The  record  supports James's position.  None  of  the

disputed items appeared among the marital assets listed in either

Dolores's  pretrial  financial declaration or  her  trial  brief.

Furthermore, in her closing argument Dolores stated that she  was

not  contesting various items of personal property that James was


           Dolores did make some note of the three disputed items

in  attachments to her responses to James's post-trial motion for

relief  from judgment.  But she listed the items only to  support

her  position  that  the court should refrain from  altering  its

original distribution.  Indeed, Dolores expressly maintained that

the  only additional asset the court should consider was a recent

$30,000  payment that the parties had received from the  sale  of

some real property.

           We  have  previously recognized that all  the  marital

property to be divided in a divorce proceeding must be called  to

the trial court's attention.26  Because Dolores failed to identify

the  Helio  engine,  Chevrolet van, or  Saab  as  marital  assets

subject  to division by the superior court, we conclude that  she

has  not  preserved  her claims to those items  for  purposes  of


          2.   Post-separation expenditures of Kennicott proceeds

           After  concluding  that James's  Kennicott  stock  was

marital,  the  trial court calculated the net proceeds  from  the

stock's  sale and awarded them to Dolores as part of her half  of

the  marital property.  By the time the court entered  its  final

order,  James  had already paid Dolores $353,000  from  the  sale

proceeds; deducting that payment from the total net proceeds, the

court  found  that James owed Dolores an additional $206,604  and

ordered him to pay her that sum.

           James  moved for reconsideration and relief  from  the

judgment,  claiming  that the remaining sale proceeds  no  longer

existed  because he had used them to pay marital  expenses  after

the  couple's separation.  The trial court reopened the evidence,

asked  for  an  additional deposition  of  James,  and  held  two

evidentiary   hearings  concerning  the  alleged  post-separation

expenditures.   After  considering the new  evidence,  the  court

amended   its  original  distribution  to  conform   to   James's

accounting  -  essentially finding that  James's  post-separation

payments   of  marital  expenses  had  exhausted  his   remaining

Kennicott  proceeds,  leaving  nothing  to  divide  between   the

parties.   After adjusting for some smaller errors and  omissions

that  are  irrelevant  here,  the court  recalculated  the  total

marital estate and redivided it evenly.

           Dolores now challenges the court's characterization of

James's  post-separation  expenditures as  payments  for  marital

expenses,  insisting that James spent most of the disputed  funds

for  non-marital  purposes.  But as the superior court  correctly

recognized,   Dolores  did  not  challenge   James's   deposition

testimony  concerning the amounts or purposes of  his  post-trial

expenses.   Accordingly, the record supports the court's  finding

in this regard.

            Dolores  alternatively  asserts  that  James's  post-

separation expenses should not be treated as having been paid out

of   marital   funds.   Instead,  she  maintains,  the   parties'

separation  date  should be used to classify these  expenditures,

since  James had complete control over all the property and money

after separation and could do whatever he wanted with both.

          But our case law establishes that marital assets should

usually be valued as of the date of trial and that "neither party

is charged for loss in the value of marital property occurring in

the interim between separation and trial."28  We have held that in

special  circumstances, "[w]here there is evidence that a marital

asset was dissipated, wasted, or converted to a non-marital form,

the  court  can  `recapture' the asset by giving  it  an  earlier

valuation date and crediting all or part of it to the account  of

the  party who controlled the asset."29  Yet the record  in  this

case reveals no obvious dissipation, waste, or conversion of  any

marital assets by James.

           Dolores  nonetheless argues that James  expended  some

$200,000  of the Kennicott proceeds on the Stony River Lodge  and

its  related guiding business, knowing that these marital  assets

would  ultimately  be  awarded to him.30  In  effect,  then,  she

reasons,  the court allowed James to convert marital  property  -

the  Kennicott  proceeds - to separate property without  charging

him for the conversion.

           But  the  record  establishes  that  Dolores  did  not

specifically argue this theory of recapture below, and the  trial

court  had  no  occasion  to consider  it.   Moreover,  Dolores's

recapture  argument  presumes that the Kennicott  stock  proceeds

were  marital property.  In light of our decision to  remand  for

reconsideration  of the court's finding that  the  proceeds  were

marital,  the recapture issue may ultimately prove academic.   In

any  event,  Dolores will now be able to advance  her  theory  of

recapture to the trial court on remand.31  Accordingly, we find no

need to resolve the recapture issue here.

                    3.   Attorney's fees

           Dolores's last argument is that the trial court abused

its  discretion  by refusing to award her attorney's  fees.   She

points  out  that  she  is  in poor health  and  has  no  earning

capacity,  while  James is in good health and has  several  ready

sources of income.

           Attorney's fees in divorce proceedings are governed by

AS  25.24.140,32 which requires the trial court to base its award

"primarily on the relative economic situations and earning powers

of  the parties."33  Because this provision is designed to  allow

divorcing  parties to litigate on an equal plane,34 we have  held

that  an  award of fees will generally be required "only  to  the

economically    disadvantaged    divorce    litigant."35     More

specifically,  we  have  held that a  trial  court  may  properly

decline  to  award fees even when one spouse earns  significantly

less  than  the  other, as long as both parties'  "resources  are

sufficient for the superior court to reasonably expect [them]  to

pay [their] own fees."36

           Here,  the trial court found that its overall property

distribution left James and Dolores in relatively equal  economic

situations with respect to their ability to pay their  own  fees.

More  particularly, the superior court reasoned that an award  of

fees  was unnecessary because the estate was large, both  parties

had received income-producing properties, and each had sufficient

liquidity.   The  record supports these findings and  establishes

that  the  court's  ruling fell within the bounds  of  its  broad



           For  the foregoing reasons, we AFFIRM IN PART, REVERSE

IN  PART, and REMAND for further proceedings consistent with this


1We  review the superior court's characterization of property for
abuse of discretion, but whether the trial court used the correct
legal rule in exercising its discretion is a question of law that
we  review de novo.  Martin v. Martin, 52 P. 3d 724, 726  (Alaska
2Id. at 726-27.
3Sampson  v.  Sampson, 14 P.3d 272, 277 (Alaska 2000);  see  also
Martin,  52 P.3d at 727; Green v. Green, 29 P.3d 854, 857 (Alaska
4Martin, 52 P.3d at 727 n.10; Lowdermilk v. Lowdermilk, 825  P.2d
874,  877-78  (Alaska  1992); accord Brett R.  Turner,  Equitable
Distribution of Property  5.22, at 230 (2d ed. 1994).
5Turner,  Equitable  Distribution  of  Property   5.22,  at  230.
James  suggests that separate property can become marital through
active  appreciation only when the non-owning spouse  contributes
marital  funds or marital effort.  But we find no merit  to  this
position.    The   majority  of  courts   applying   the   active
appreciation theory hold that marital contributions may be  based
on  either  the  owning or non-owning spouse's efforts,  provided
that  those  efforts are causally connected  to  an  increase  in
value.  Id. at 240.  And on at least two prior occasions we  have
implicitly  followed  the majority rule by  recognizing  that  an
owning  spouse's contributions of marital funds or efforts  would
support a finding of active appreciation.  See Martin, 52 P.3d at
728; Lowdermilk, 825 P.2d at 877-78.
6Turner,  Equitable Distribution of Property  5.22, at  236;  see
also Martin, 52 P.3d at 728; Sampson, 14 P.3d at 277.
7McDaniel v. McDaniel, 829 P.2d 303, 306 (Alaska 1992).
829 P.3d at 858.
9McDaniel, 829 P.2d at 306 ("Participation by both spouses in the
management and maintenance of the property will not automatically
transform   pre-marital  into  marital  property.   Rather,   the
participation  must  be  significant and evidence  an  intent  to
operate jointly.").
10Turner, Equitable Distribution of Property  5.22, at  236;  cf.
Lowdermilk, 825 P.2d at 877-78 (finding that spouse should not be
allowed  to keep contributions of time and effort out of  marital
estate  by  rolling  them  into  a  separately  owned  premarital
11Turner,  Equitable  Distribution  of  Property   5.22,  at  236
("There  is general agreement that the burden of proving  marital
contributions and the burden of proving an increase in value  are
on the spouse who seeks to classify appreciation as active.").
12Id.   ("[A] majority of states place the burden on  the  owning
spouse to prove that the marital contributions did not cause  the
increase in value.").
14Id. at 237.
152  John W. Strong, McCormick on Evidence  337, at 413 (5th  ed.
1999).   As  McCormick warns, a party's control  over  the  facts
regarding the disputed issue "should not be overemphasized" as  a
consideration in allocating the burden of proof.  Id. "Perhaps  a
more  frequently significant consideration in the fixing  of  the
burdens of proof is the judicial estimate of the probabilities of
the  situation.  The risk of failure of proof may be placed  upon
the party who contends that the more unusual event has occurred."
Id.    Once  the  proponent  of  an  active  appreciation   claim
establishes  marital appreciation and a contribution  of  marital
funds or effort, we think that the absence of a causal link would
be "the more unusual event."
16The  record  does  show  that James received  a  commission  of
$203,400  under  the  terms of his marketing  agreement  for  his
efforts in selling the property; James did not dispute the  trial
court's treatment of these funds as marital property.  The  trial
court  expressly concluded that this commission had no effect  on
the  marital  status of James's Kennicott stock.  We  agree  with
this aspect of the trial court's ruling.  As Turner explains,

          Under   equitable   distribution   law,   all
          appreciation  created by marital  efforts  is
          marital  property.  Where the  value  of  the
          resulting  appreciation is greater  than  the
          value  of  the  efforts which  were  used  to
          create  it, the appreciation should still  be
          marital   property.   Thus,  in   determining
          issues  of  active appreciation,  the  courts
          should generally attach no importance to  the
          size  of  the  owning spouse's  salary.   The
          marital  estate is entitled to  actual  value
          created, and not merely to the value  of  the
          efforts spent.
Turner, Equitable Distribution of Property  5.22, at 259 (2d  ed.
Supp. 2002).

17If the superior court's reexamination of this issue leads it to
conclude  that  the  marital portion  of  the  sale  proceeds  is
appreciably less than the full value of the sale proceeds,  which
the court originally found to be marital property, the court will
have  discretion  to  reopen  the  broader  question  of  how  to
equitably  divide the value of the marital estate as redetermined
on  remand; and in exercising this discretion, the court will  be
authorized  to consider whether invasion of separate property  is
necessary  to  ensure  a  fair and equitable  distribution.   See
Merrill v. Merrill, 368 P.2d 546, 547 n.4 (Alaska 1962).
18Whether the court correctly valued the assets to be divided is a
question  of  fact  that we review for clear  error.   Martin  v.
Martin, 52 P.3d, 724, 726 (Alaska 2002).
19902 P.2d 1326, 1327 (Alaska 1995).
20In  finding Richter's trial testimony to be reflective of bias,
the  court emphasized that Richter and James had known each other
for  at  least  fifteen years and that James's  interest  in  the
lodge's  appraised value differed markedly in the current divorce
case,  where  he  would benefit from a low  appraisal,  from  his
interest  in  the  bankruptcy proceeding for which  the  original
appraisal  was  prepared, where he would have benefitted  from  a
high appraisal.
21Richter's original appraisal contains the following definition:

                "Market  Value" means the most probable
          price  which  a property should  bring  in  a
          competitive   and  open  market   under   all
          conditions requisite to a fair sale . .  .  .
          Implicit  in this definition is  .  .  .  the
          passing  of title from seller to buyer  under
          conditions whereby:
               1.   buyer and seller are typically motivated;

               . . . .

                              4.   payment is made
                    in   terms  of  cash  in  U.S.
                    dollars,   or  in   terms   of
                    financial         arrangements
                    comparable thereto; and
                                5.     the   price
                    represents     the      normal
                    consideration for the property
                    sold . . . .
(Emphasis added.)

22Davila  v. Davila, 876 P.2d 1089, 1092 (Alaska 1994)  (citation
23Alaska R. Civ. P. 52(a); see also Berg v. Berg, 983 P.2d  1244,
1248 (Alaska 1999); Moffitt v. Moffitt, 749 P.2d 343, 348 (Alaska
24Bennett  v. Artus, 20 P.3d 560, 565 (Alaska 2001) (disapproving
assumption  that appreciation can be accurately measured  by  the
difference  between  two  tax  appraisals);  accord  Zerbetz   v.
Municipality  of  Anchorage,  856 P.2d  777,  783  (Alaska  1993)
(rejecting reliance on tax appraisals to show diminished value in
inverse  condemnation proceeding); State v.  45,621  Sq.  Ft.  of
Land,   475  P.2d  553,  557-58  (Alaska  1970)  (tax  appraisals
inadmissible   to   prove  fair  market  value  in   condemnation
25See  Berg, 983 P.2d at 1249 (valuation of automobile  and  snow
plow  was not clearly erroneous where valuation fell within range
of valuation evidence presented by both former husband and wife).
26See  Faulkner  v.  Goldfuss, 46 P.3d 993,  1004  (Alaska  2002)
(stating  valuation argument was not preserved because  wife  did
not  seek such valuation at trial); Brotherton v. Brotherton, 941
P.2d  1241, 1245 (Alaska 1997) (citing well-established rule that
it  is  the duty of parties to ensure that all necessary evidence
is presented in divorce proceedings).
27See  Gates  v.  City of Tenakee Springs, 822 P.2d  455,  460-61
(Alaska 1991) (stating that new matters raised for the first time
on  appeal  will  not be considered); Zeman v.  Lufthansa  German
Airlines, 699 P.2d 1274, 1280 (Alaska 1985) (noting general  rule
that  parties  may  not  raise new issues  on  appeal  to  obtain
reversal).   Dolores  also  contends  that  the  superior   court
mistakenly overstated the amount of attorney's fees paid by James
in  connection with the Kennicott sale.  We need not consider the
issue,  since the trial court corrected the mistake in its  final
28Ogden v. Ogden, 39 P.3d 513, 521 (Alaska 2002); see also Brandal
v. Shangin, 36 P.3d 1188, 1194 (Alaska 2002) ("Normally, an asset
that  no longer exists at the time of trial is not available  for
29Foster  v.  Foster, 883 P.2d 397, 400 (Alaska 1994);  see  also
Brandal,  36  P.3d at 1194 (stating that asset may be  recaptured
for "dissipation, waste, or conversion with the intent to deprive
the  marital  estate");  Ogard v. Ogard,  808  P.2d  815,  819-20
(Alaska 1991) (explaining that special situations may require use
of  valuation  date other than date of trial).  The  trial  court
must  make specific findings as to why an earlier valuation  date
is more appropriate.  See, e.g., Green v. Green, 29 P.3d 854, 859
(Alaska 2001).
30The  record  does support Dolores's assertion  that  James  was
assured  of  receiving the Stony River Lodge  so  that  he  could
continue  to  operate the business, since Dolores indicated  that
she did not want the lodge.
31In  this  regard,  we  note  that our  decision  remanding  for
redetermination of the character of the Kennicott stock  proceeds
has   no  effect  on  the  court's  characterization  of  James's
marketing commission as marital property.  Assuming that  Dolores
raises the issue on remand, we do not preclude the superior court
from  considering whether recapture of any part of the commission
is  warranted, regardless of whether the court finds James's  net
sale proceeds to be separate property.
32AS 25.24.140 provides in part:

          (a)   During  the pendency of the  action,  a
          spouse   may,   upon   application   and   in
          appropriate   circumstances,    be    awarded
          expenses, including
            (1) attorney fees and costs that reasonably
          approximate   the  actual  fees   and   costs
          required to prosecute or defend the action  .
          . . .
33Edelman v. Edelman, 3 P.3d 348, 359 (Alaska 2000) (quoting Beard
v. Beard, 947 P.2d 831, 833 (Alaska 1997)).
34Broadribb v. Broadribb, 956 P.2d 1222, 1229 (Alaska 1998).
35Nicholson v. Wolfe, 974 P.2d 417, 427 (Alaska 1999).
36Davila v. Davila, 908 P.2d 1027, 1035 (Alaska 1995).
37However,  because our holding requiring the superior  court  to
reexamine  its  ruling on the marital character of the  Kennicott
stock  may  significantly alter the overall marital distribution,
the  court will have broad discretion on remand to reconsider its
attorney's fee ruling if it finds any significant change  in  the
relevant circumstances.