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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Bilbao v. Bilbao (04/17/2009) sp-6361
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
| PEDRO BILBAO, | ) |
| ) Supreme Court No. S- 12546 | |
| Appellant, | ) |
| ) Superior Court No. | |
| v. | ) 3AN-05-13498 CI |
| ) | |
| ANNETTE K. BILBAO n/k/a | ) |
| JOHNSON, | ) O P I N I O N |
| ) | |
| Appellee. | ) No. 6361 - April 17, 2009 |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sen K. Tan, Judge.
Appearances: Robert C. Erwin, LLC, Anchorage,
for Appellant. Peggy A. Roston, Law Office
of Peggy A. Roston, Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Carpeneti, and Winfree, Justices.
CARPENETI, Justice.
I. INTRODUCTION
I. In a divorce proceeding the trial court divided the
marital property of the parties evenly, distributing half to
each. Because at the time of divorce the husband possessed more
of the marital assets than the wife, the court ordered him to
make an equalizing payment of $202,962 to her. In calculating
the amount of this equalizing payment, the court considered as
marital property $50,500 that the husband had recently withdrawn
from some certificates of deposit. The husband argues that the
court erred in characterizing these funds as marital property
because they originated in separate property such as pension
payments and a workers compensation award. The wife argues that
the husband failed to meet his burden of proving that the
certificates were separate property through tracing. Because the
husband had the burden of tracing these assets and failed to do
so, the trial court correctly found them to be marital property.
Accordingly, we affirm.
II. FACTS AND PROCEEDINGS
Pedro and Annette Bilbao married in 1982. At the time,
Pedro worked as a diesel mechanic for Sealand, and he retired in
2002. Annette filed for divorce in November 2005. At the time
of the divorce trial, Pedro was sixty-two years old, and Annette
was fifty-three. The Bilbaos have two adult children.
The case was tried in July 2006. Superior Court Judge
Sen K. Tan determined that the marital property should be divided
equally, and the parties assented to this. After characterizing
the separate and marital assets, the court tallied the total
value of the marital assets at $1,553,063. Of this total, the
court found Pedro to be in possession of $979,493 worth of
marital assets, and found Annette to hold $573,569. Therefore,
Judge Tan ordered Pedro to make an equalizing payment of
$202,962, to Annette. We will describe some particular assets
further here because their characterization or disposition has
been disputed.
A. Local 302 Pension
A. Upon Pedros retirement from Sealand, he began receiving a
$3,722 monthly pension from the Operating Engineers Union Local
302 (Local 302 pension). The court heard expert testimony and
valued the marital portion of it at $104,905. The parties agreed
that Pedro should continue to receive the full monthly pension
payment, and increase the equalizing payment to Annette to
reflect her share of the present value of the portion of the
entire pension that was marital property.
B. Workers Compensation Payments
In 2002 Pedro received a workers compensation award of
$26,550 for shoulder injuries. He also testified that he
received an additional $8,000 in workers compensation for a knee
injury, but provided no documentation of this. He stated that
his workers compensation payments were deposited into his account
at Denali Alaskan Federal Credit Union.
C. Denali Alaskan Federal Credit Union Accounts
Pedro had an account in his name at the Denali Alaskan
Federal Credit Union. There were several sub-accounts. He had a
savings account at the credit union with an account number of S1
containing $8,121 as of December 1, 2005, and a money market
savings account numbered S10 containing $1,086 as of that date.
He had certificates of deposit numbered I5 and I5.1, that he
purchased in October 2005 for $20,000 and $4,500, respectively.
He also had certificates of deposit numbered I5.2 and I5.3 that
he purchased in November 2005 for $5,500 and $20,500,
respectively.
Pedro cashed out these certificates of deposit on
December 2, 2005, for $50,500. Pedro testified that he cashed
out this sum to protect from Annette his non-marital assets,
namely his workers compensation money and proceeds from his Local
302 pension. Pedro claimed that he used these funds to pay taxes
of $26,000 and to pay marital expenses, and transferred the rest
of the money to accounts earning higher interest rates.
Judge Tan concluded that the Denali credit union
account was marital property, because marital funds were
deposited into the account, including Pedros wages, and a pension
from the Alaska Teamsters Employer Pension Trust that Pedro
conceded to be marital property. The court rejected Pedros
contention that the $50,500 from the certificates was his
separate property. The court held that a party seeking to
establish a bank account as separate property bears the burden of
proof to trace the source of the asset, and that Pedro failed to
meet this burden because he presented no tracing of assets. The
trial court also described Pedros account of what he did with the
various funds he withdrew from bank accounts after the separation
as very suspect, and said Pedro was hiding money. The court
added the $50,500 from the certificates to its calculation of the
marital property then in Pedros possession, and in turn factored
that into the calculation of the equalization payment of $202,962
that Pedro was ordered to pay Annette.
III. STANDARD OF REVIEW
A trial courts characterization of property as separate
or marital may involve disputed facts and questions of law. We
review findings of fact under the clearly erroneous standard, and
we review questions of law de novo using our independent
judgment.1
IV. DISCUSSION
I. Pedro listed four issues in his appeal: (1) the trial courts
holding that Annette was entitled to an equalization payment of
$202,962; (2) the courts holding Pedro in contempt of court
without a hearing; (3) the courts determination of the value of
the Local 302 pension; and (4) the courts treatment of the Denali
Alaskan Federal Credit Union account in distributing the marital
estate. However, Pedro did not provide any briefing on the
second and third of these issues in his brief or reply brief.
Therefore we consider those issues abandoned.2
This leaves the first and fourth issues listed by
Pedros appeal. These really constitute only one issue: whether
the court erred in characterizing the $50,500 worth of credit
union certificates of deposit that Pedro cashed in as marital
property. Pedro contends that because these certificates were
his separate property, the court erred in calculating the
$202,962 equalization payment. We conclude that the court did
not err and properly considered the $50,500 to be marital
property.
A. The Trial Court Did Not Err in Holding that Pedro Bore the
Burden of Tracing the Assets in the Denali Alaskan Federal Credit
Union Accounts To Show that They Were Separate Property.
Pedro argues that monies he withdrew from the credit
union account were separate property because the account was in
his name alone and because he deposited separate property funds
into the account. He denies that he bears the burden of proving
through tracing that the assets in question are separate
property, stating that it is only when the accounts source cannot
be proven, and it is impossible to determine whether it is
marital or separate, then a party seeking to establish the
property as separate bears the burden of proof or the untraceable
asset is marital property. Pedro is mistaken: The superior court
properly found that he bore the burden of showing that these
assets were separate property.
Separate property includes property acquired by one
spouse before marriage, property acquired by gift, and property
acquired by inheritance.3 Assets acquired during marriage such
as the salary of a spouse are considered primary marital assets.4
Assets such as bank accounts whose characterization depends on
the classification of other assets are known as secondary assets.5
To classify a secondary asset, a trial court must first
identify and then classify the source asset from which it was
derived.6 This process is referred to as tracing.7
When the source asset is primary marital
property, the secondary asset is secondary
marital property. Likewise, when the source
asset is primary separate property, the
secondary asset is secondary separate
property. However, if the source asset
itself is secondary property, tracing
continues until either a primary separate or
primary marital source asset is found.[8]
A secondary asset such as a bank account derived from both
marital and separate property sources is sometimes called a mixed
secondary asset.9 We have noted that [t]o 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.10 The trial court can
then determine the ratio between the sources, and divide the
mixed secondary asset into marital and separate property
according to that ratio.11
The party seeking to establish that a secondary asset
is separate property always bears [the] burden of proof; thus
untraceable assets are marital property.12 Thus, even when it is
known that a mixed secondary asset derived partly from a separate
source, if the amount contributed from that source cannot be
determined, then the asset cannot be traced and [t]he unknown
amount contributed from the separate source transmutes by
commingling and becomes marital property. 13
Having testified that the funds originated in separate
property, Pedro denies that he bears the burden of proving
through tracing that the property in question was separate
property, and points out that Annette did not prove that these
funds were transmuted into martial property. He cites Abood v.
Abood,14 in which we held that mere commingling of separate
property with marital property does not automatically lead to a
finding of transmutation into marital property.15 However, Abood
followed this courts holding in Schmitz v. Schmitz16 that a
presumption of transmutation nevertheless arises when a party
commingles separate and marital funds.17 Pedro misstates the
Schmitz holding when he asserts that [i]t is only when the
accounts source cannot be proven, and it is impossible to
determine whether it is marital or separate, then a party seeking
to establish the property as separate bears the burden of proof
or the untraceable asset is marital property. In fact, Schmitz
makes clear that the party seeking to establish that a secondary
asset is separate property always bears [the] burden of proof;
thus untraceable assets are marital property.18 The trial court
thus did not err in assigning to Pedro the burden of proving
through tracing that the $50,500 had its source in separate
property.
B. The Trial Court Did Not Err in Concluding that the Funds
Pedro Withdrew from the Denali Alaskan Federal Credit Union
Accounts Were Marital Property.
Pedro argues that he in fact did prove the disputed
funds originated in separate property sources. He asserts the
trial court simply ignored the source of the funds[:] retirement,
social security and workers compensation. However, the record
shows that Pedro did not attempt to trace these funds.
Furthermore, such tracing would not have been possible using
solely the evidence in the record.
It is true that Pedro did provide evidence that he
deposited separate property monies into an account at the credit
union. Bank records show a monthly $3,722 deposit of his Local
302 pension payment into the savings account numbered S1,
beginning in February 2003. As already noted, the trial court
characterized most of the Local 302 pension as Pedros separate
property. Pedro also claims that separate property from workers
compensation and social security went into the Denali Alaskan
Federal Credit Union. Pedro documented a 2002 workers
compensation award for $26,550, and testified that he deposited
it at the credit union. However, the record only contains
statements from the credit union dating back to the start of
2003, so the record does not indicate into which of his accounts
he might have put the workers compensation payment. As for
social security, the Denali credit union statements provided in
the record, which cover January 2003 through June 2006, show no
social security deposits before the date that Pedro cashed out
the disputed certificates of deposit. The first time a social
security deposit into his Denali credit union account shows up in
the record is in March 2006.
Although separate property assets apparently went into
the S1 account, those deposits were commingled in that account
with marital property such as the deposits from the Alaska
Teamsters Pension Trust. Therefore if tracing had been
attempted, this S1 account would have been characterized as a
mixed secondary asset. Pedro might have (but did not) attempt to
trace his separate property deposits and claim a proportionate
share of this S1 savings account as separate property. The court
valued this savings account at $8,121.
Even if Pedro had been able to trace the sources of the
S1 account, the issue in this appeal is the $50,500 from
certificates of deposit at the same credit union. But there is
no link in the evidence (or in Pedros briefing) between the
purchase of these certificates and the S1 account, and therefore
no link between the certificates and Pedros alleged separate
property from the Local 302 pension.
The testimony and account statements from the credit
union in the record are not sufficient to make this link. On the
dates Pedro purchased these certificates, October 15, 19, and 29,
and November 1 and 3, there were no corresponding withdrawals or
transfers out of the S1 account. The source of the funds used to
purchase the certificates cannot be deduced from the bank
statements, and Pedros testimony provides no additional
information that would help on this question. Pedros briefing
does not even suggest how this link would be established. In
addition, Pedro at many times withdrew funds from his credit
union savings accounts, and the trial court did not credit Pedros
testimony regarding how he used the funds he withdrew, calling
his testimony very suspect.
V. CONCLUSION
Because Pedro did not meet his burden of proof through
tracing that the certificates of deposit he cashed out were
separate property, we AFFIRM the trial courts determination that
these secondary assets were marital property and the courts order
that Pedro should pay Annette an equalizing payment of $202,962.
_______________________________
1 See Schmitz v. Schmitz, 88 P.3d 1116, 1122 (Alaska
2004).
2 See Kodiak Elec. Assn v. DeLaval Turbine, 694 P.2d 150,
153 n.4 (Alaska 1984); Vezey v. State, 798 P.2d 327, 336 (Alaska
1990).
3 Schmitz, 88 P.3d at 1127.
4 Id.
5 Id. at 1127-28.
6 Id. at 1127.
7 Id.
8 Id. at 1128.
9 Id. (citing Brett R. Turner, Equitable Distribution of
Property 5.23, at 266 (2d ed. 1994)).
10 Id.
11 Id.
12 Id.
13 Id. at 1128-29 (quoting Turner, supra note 9, 5.23, at
268).
14 119 P.3d 980 (Alaska 2005).
15 Id. at 984.
16 88 P.3d 1116, 1122 (Alaska 2004).
17 Aboood, 119 P.3d at 985.
18 Schmitz, 88 P.3d at 1128 (emphasis added).
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