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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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
JAMES HARROWER, )
) Supreme Court No. S-9629/10359
Appellant/Cross-Appellee, )
) Superior Court No.
v. ) 3AN-98-11476 CI
)
DOLORES HARROWER, ) O P I N I O N
)
Appellee/Cross-Appellant. ) [No. 5700 - June 13,
2003]
)
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.
I. INTRODUCTION
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.
II. FACTS AND PROCEEDINGS
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
homemaker.
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
Lodge.
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.
III. DISCUSSION
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
estate.1
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
elements.
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
erroneous.
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
analysis.
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
value."
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
keeping.
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
appeal.27
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
discretion.37
IV. CONCLUSION
For the foregoing reasons, we AFFIRM IN PART, REVERSE
IN PART, and REMAND for further proceedings consistent with this
opinion.
_______________________________
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
2002).
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
2001).
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
business).
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.").
13Id.
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
omitted).
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
1988).
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
proceedings).
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
judgment.
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
distribution.").
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.
