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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Abood v. Abood (09/02/2005) sp-5937

Abood v. Abood (09/02/2005) sp-5937

     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,


) Supreme Court Nos. S- 11154/11173
Appellant/Cross-Appellee, )
) Superior Court No. 3AN-02-7310 CI
v. )
) O P I N I O N
KIMBERLY I. FARNSWORTH, ) [No. 5937 - September 2, 2005]
Appellee/Cross-Appellant. )

          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Mark Rindner, Judge.

          Appearances:  Janet D. Platt, Law Offices  of
          Janet     D.     Platt,    Anchorage,     for
          Appellant/Cross-Appellee.   R. Scott  Taylor,
          Sonosky,  Chambers, Sachse, Miller &  Munson,
          LLP, Anchorage, for Appellee/Cross-Appellant.

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

          EASTAUGH, Justice.
          MATTHEWS,  Justice, with whom FABE,  Justice,
          joins, concurring.

          Patrick and Kimberly Abood both appeal aspects  of  the
property  division accompanying their divorce.   We  affirm.   We
conclude  that the superior court did not clearly err in  finding
that settlement proceeds paid to Kimberly during the marriage for
personal  injuries  she  received about  five  years  before  the
marriage  were  not  transmuted into marital property.   We  also
conclude  that the superior court did not clearly err in  finding
that  the marital home was transmuted into marital property  even
though  Kimberly was not on the title and Patrick  had  purchased
the  home  before  they married.  We conclude that  the  superior
court  did not clearly err in finding that the $174,814  increase
in value of Patricks street sweeping business was marital because
it  was the result of active appreciation.  We conclude that  the
superior  court  did  not  abuse its discretion  in  assigning  a
recapture value of a marital vehicle Kimberly sold before  trial,
or by not dividing the value of a set of tires and rims from that
vehicle.   We  also  conclude that the court did  not  abuse  its
discretion  in characterizing the 2001 federal income tax  refund
as Patricks separate property.
          Kimberly and Patrick married in 1994.  They neither had
nor  adopted  children.   Kimberly  and  Patrick  separated,  and
Patrick  petitioned for divorce in 2002.  At the time  of  trial,
Kimberly  was forty years old and one semester away from  earning
her  second masters degree.  Patrick was forty-six and owned  and
operated  a  successful street-sweeping business, Knik  Sweeping.
The  superior  court  granted  the divorce  and  distributed  the
property.   Patrick  and  Kimberly both  appeal  aspects  of  the
property division.
          One   dispute   concerns  personal  injury   settlement
proceeds Kimberly received during the marriage to compensate  her
for injuries she received before the marriage.  Kimberly had been
the  victim  of a 1989 vehicular accident in which she  sustained
serious  injuries  that continue to plague her  and  may  require
further  surgery.  She sued General Motors for her  injuries  and
settled  with GM in 1999, receiving net proceeds of $1.6 million.
This  money  was  deposited into Patricks business  and  personal
checking  account.  Two months later the parties placed the  $1.6
million,  along with another $300,000 in marital funds,  in  five
Merrill  Lynch joint Cash Management Accounts (CMAs) with  rights
of survivorship.  The superior court found that the proceeds from
the settlement remained Kimberlys separate property, but that the
$300,000 contribution was marital.
          Another   dispute   concerns   the   superior    courts
characterization  of  the  home as  marital  property.   In  1993
Patrick bought the house that the couple shared before and during
the marriage.  Several improvements were made to the house before
and during the marriage.  The parties stipulated to its value but
disputed  whether  it  should be categorized  as  marital  or  as
Patricks  separate property.  The superior court found  that  the
house had been transmuted into marital property.
          The  parties dispute the division of Patricks business,
Knik  Sweeping.   At  the  time of trial, Patrick  operated  Knik
Sweeping  as a sole proprietorship and used the business checking
account   as  his  all-purpose  business  and  personal  account.
Patrick  purchased equipment during the marriage with funds  from
that  checking  account.   The  superior  court  found  that  the
equipment acquired during the marriage was marital property  and,
alternatively, that the businesss increase in value  was  marital
property through active appreciation.
          After  the  parties separated, Kimberly traded  in  her
Mercedes-Benz for a new Jeep.  Kimberly agrees that the Mercedes-
Benz  was  marital property and that she received less than  fair
market  value  for it, but the parties dispute the amount  to  be
recaptured.  The superior court did not rule on Patricks  request
that  it charge Kimberly with the value of a set of Mercedes-Benz
rims  and tires that she traded for an extended warranty  on  the
          Patrick and Kimberly filed a joint tax return in  2001,
the  last  full year of their marriage.  After they made payments
from marital funds, Patrick used his post-separation earnings  to
make  a  Simplified Employee Pension Plan (SEP) contribution  for
2001,  reducing  the couples tax liability for  that  year.   The
superior  court found that the resulting tax refund was  Patricks
separate property.
     A.   Standard of Review
          The  equitable  division of marital assets  involves  a
three-step  procedure. First, the superior court  must  determine
what specific property is available for distribution.1  Next,  it
must  find  the  value  of  this  property.2   Finally,  it  must
determine how an allocation can be made most equitably.3
          The  superior court has broad discretion in  fashioning
the property division in a divorce case.4  We review the superior
courts   determination  of  the  availability  of  property   for
distribution  for abuse of discretion.5  We review  the  superior
courts  factual findings for clear error.6  Likewise,  a  finding
that  the parties intended to treat property as marital  will  be
disturbed only if it is clearly erroneous.7  A finding of fact is
clearly  erroneous  when  the reviewing  court  is  left  with  a
definite  and  firm conviction that the trial court  has  made  a
     B.   The Product Liability Settlement Proceeds
          Kimberly  received  $1.6 million in a  1999  settlement
with  General  Motors  following the 1989 vehicular  accident  in
which  she  suffered serious, long-term injuries.   The  superior
court found that the settlement funds remained Kimberlys separate
property.    Patrick  argues  that  the  settlement  funds   were
transmuted  into marital property when they were  deposited  into
jointly  owned brokerage accounts.  Because we discern  no  clear
error in the superior courts finding, we affirm.
          Transmutation  is  the  process by  which  one  spouses
separate  property becomes marital property, and  occurs  when  a
married  couple demonstrates an intent, by virtue of their  words
and  actions  during  marriage, to  treat  one  spouses  separate
property  as  marital property.9  Commingling  separate  property
with marital property does not automatically lead to a finding of
transmutation.10  But placing property in joint  title  raises  a
presumption of transmutation.11  Patrick argues that although the
funds  were  initially Kimberlys separate property, a presumption
of transmutation arose when she commingled the funds with marital
property  in  Patricks business checking account and then  placed
them into the jointly held Merrill Lynch CMAs.
          Kimberly  testified  that  the  parties  chose  not  to
          segregate the settlement proceeds from other funds within the
CMAs  for  administrative convenience,  to  obtain  better  money
managers,  and to receive better brokerage rates.  The  rationale
of  better  brokerage rates was disputed at trial, but there  was
evidence that the Aboods were able to obtain money management for
the  marital  funds  that  would have  been  unavailable  without
combining them with Kimberlys settlement proceeds.12
          We   have   held   that   evidence  of   administrative
convenience  may  rebut the presumption of  transmutation.13   In
anticipation  of  the  personal  injury  settlement,  the  Aboods
consulted  their  neighbor, broker Margaret Price,  but  did  not
ultimately fund an account with her, choosing instead  to  invest
through  Merrill Lynch.  Price testified that the  Aboods  wanted
the  money  to be invested and to grow in value for  the  future.
Price  also testified that Kimberly spoke to her about a separate
account  and  that they decided to create a joint  account  as  a
matter  of convenience, and that they thought that it would  just
be  easier  to  do the investments together, rather  than  to  do
separate  pots  of  money.  Kenneth Jones, the couples  financial
advisor  at  Merrill Lynch, similarly testified that  the  Aboods
wanted to save their money for the long term.
          The  nature of the personal injury settlement  is  also
relevant.   We  have held that the purpose for which  the  [tort]
recovery  is  received  controls its  classification.14   If  the
recovery is compensation for non-economic damages, the settlement
is  separate  property of the claimant spouse.15  This  principle
recognizes  the  intensely  personal nature  of  these  sorts  of
injuries,16 and suggests that courts should be hesitant  to  find
that  a  recipient intended to donate to the marriage  the  funds
that  she  received  in compensation for her injuries.   Kimberly
testified that the settlement was intended to compensate her  for
her  physical injuries, which were described in detail in General
Motors  Corp. v. Farnsworth.17  Thus, the personal nature of  the
settlement  funds  supports the superior courts  conclusion  that
Kimberly  did not intend to donate her personal property  to  the
          Kimberly  testified  that the funds  were  invested  to
provide for her future medical needs.  This testimony reflects an
intent  to retain the funds as separate property.  Patrick argues
that  setting  aside money for Kimberlys future medical  expenses
was  an  investment for a marital purpose and indicates an intent
to  treat  the  funds as marital property.  But this  contention,
absent  evidence of an intent to benefit the marriage, is not  so
persuasive that the superior court was obliged to accept it.  The
potential  for future medical expenses results from the discrete,
premarital  event  for  which Kimberly  received  the  settlement
money.   Because  Kimberly  will incur  future  medical  expenses
attributable  to  the accident regardless of her marital  status,
the  superior  court  could properly find a  lack  of  intent  by
Kimberly   to  donate  the  settlement  funds  to  the  marriage.
Kimberlys medical expenses not covered by insurance were paid out
of  marital funds and were not reimbursed with settlement  funds.
But  the  use  of marital funds to pay a spouses ongoing  medical
expenses  does not compel a finding that the spouse  intended  to
          donate to the marriage the separate settlement proceeds the
receiving  spouse  testifies were set aside  to  pay  for  future
medical expense attributable to the premarital injury.
          Patrick  argues  that  the  superior  court  erred   in
according  weight to Kimberlys trial testimony that she  intended
to  preserve the settlement funds as separate property  and  that
she  assumed Patrick knew of this intent.  We have said that,  in
attempting  to  give  effect  to the intention  of  the  parties,
looking  to their testimony as to their subjective intentions  or
understandings   will  normally  accomplish  no   more   than   a
restatement of their conflicting positions.18  Thus, self-serving
testimony  is  ordinarily  not  probative.19   But  we  have  not
foreclosed  the  consideration  of  trial  testimony   of   prior
intentions  in  all  circumstances.  Here, the circumstances  and
purposes  of  the  settlement  corroborate  Kimberlys  testimony.
Furthermore, [i]t is the function of the trial court, not of this
court,  to  judge witnesses credibility and to weigh  conflicting
evidence.20   It was not error for the superior court  to  credit
this testimony.
          Patrick also argues that withdrawals from the CMAs  for
marital purposes and the use of the CMAs to secure a margin  loan
that  was  used  for marital purposes demonstrate  that  Kimberly
intended  to treat the settlement funds as marital.  The superior
court found that the withdrawal came out of the remaining portion
of  the  $300,000  marital fund contribution  to  the  CMAs,  and
declined  to find that the use of the CMAs to secure  the  margin
loans converted the settlement funds into marital property.
          The  superior courts finding that the withdrawals  came
from marital funds was the logical result of the finding that the
CMAs contained both marital and separate funds.  Withdrawals  for
marital  purposes  from  accounts that contain  funds  from  both
separate  and  marital  sources are  not  inconsistent  with  the
continued existence of both separate and marital property in  the
accounts.21  The superior courts finding that the withdrawals came
out of marital funds was not clearly erroneous.22
          We  considered the effect of using separate property to
secure  margin loans for marital purposes in Gardner v. Harris.23
We  held there that this use did not automatically transmute  the
separate  property into marital property.24  Patrick argues  that
Gardner  is  inapposite here because the property in Gardner  was
bonds,  whereas  here  the  property  is  fungible  money.   This
argument  is without merit.  As we will see below, funds  in  the
CMAs  are  traceable  to  Kimberlys  separate  settlement  funds.
Because  a fact finder can distinguish between funds attributable
to  the  settlement proceeds and funds from other sources  within
the  jointly  held  CMAs,  we discern no  meaningful  distinction
between  the  funds in this case and the corpus of the  bonds  in
          Nor   did  Patricks  participation  in  research   into
investment options and limited direction of investments compel  a
finding  that Kimberly intended to treat the settlement funds  as
marital  property.  Rather,  Patricks  participation in  meetings
with  financial advisors after the funds were invested at Merrill
Lynch demonstrates an appropriate involvement in the oversight of
          the marital funds.
            In  Gardner,  the non-owning spouse had more  control
over  the funds than Patrick could exercise here.25  Furthermore,
Kenneth   Jones  testified  that  he  would  regularly  recommend
strategies that Kimberly and Patrick would then approve.  This is
not  active management by Patrick that would compel a finding  of
transmutation.26  We therefore cannot say that the superior courts
finding  that  Kimberly did not intend to  treat  the  settlement
funds as marital property was clearly erroneous.
          But  even  property that the owner intended  to  remain
separate  may  be  marital if it is inextricably commingled  with
marital  property.27   We must therefore  determine  whether  the
disputed  Merrill  Lynch funds were traceable to  the  settlement
check.   When  classifying secondary assets,  courts  must  first
identify the specific asset from which it was derived (the source
asset),  and then determine the classification of that asset.  28
When  the  source  asset  is  also  secondary  property,  tracing
continues  until  either a separate or a marital  primary  source
asset  is  found.29  Separate property may be  traceable  to  its
separate source despite being mixed with marital property in  the
same secondary asset.30  To characterize a mixed secondary asset,
the  superior court must determine the character of  each  source
asset  and  the  amount of value each source contributed  to  the
mixed  whole.31  The marital and separate interests  in  a  mixed
secondary  asset are ordinarily in the same ratio as the  marital
and separate contributions used to acquire the asset.32
          The funds in the Merrill Lynch CMAs were deposited in a
single  transaction from Patricks checking account.  The checking
account  was a mixed asset, containing both the settlement  funds
and  marital  proceeds  from  Knik Sweeping.   The  $1.9  million
transferred  from the checking account to the CMAs  consisted  of
$1.6 million from Kimberlys settlement check from GM and $300,000
in  marital funds already in the checking account.  The funds  in
the  Merrill  Lynch  CMAs  were therefore  readily  traceable  to
primary  separate  and marital sources.  The  contribution  ratio
dictates  that  16/19  of  the CMA funds are  Kimberlys  separate
property and 3/19 of the CMA funds are marital property.
          Patrick  argues in passing that $76,000 of the $300,000
transferred  from  the  Knik Sweeping  checking  account  to  the
Merrill  Lynch  CMAs is his separate property.  The  $76,000  was
transferred  into  the  Knik Sweeping  checking  account  shortly
before  the  $1.9  million was transferred to the  Merrill  Lynch
CMAs.  Patrick testified that the $76,000 was attributable to his
separate  property, but did not demonstrate that it was deposited
in  the  CMAs  or  that he intended to maintain  it  as  separate
property after placing it under joint title.  The superior  court
therefore  did not clearly err in finding the entire $300,000  to
be marital property.
          Likewise,  the  superior court did not clearly  err  in
finding  that Kimberly did not intend to transmute the settlement
proceeds into marital property.  We therefore affirm its  finding
that the settlement funds remained Kimberlys separate property.
     C.   The Marital Home
          Patrick  bought  the marital home before  the  marriage
          without any contribution from Kimberly, and made several
improvements.   The  superior court  found  that  the  house  was
transmuted  into  marital  property.   Patrick  argues  that  the
superior  court erred in finding that he intended to  donate  the
home to the marriage.
          We have enunciated four factors for determining whether
real property is transmuted into marital property:
          (1)  the  use of the property as the  parties
          personal  residence,  and  (2)  the   ongoing
          maintenance  and managing of the property  by
          both  parties,  as well as  (3)  placing  the
          title of the property in joint ownership  and
          (4)  using the credit of the non-titled owner
          to improve the property.[33]
            Kimberly  does not contend that the house  title  was
placed  in  joint ownership.  Nor was her credit used to  improve
it.   But the first factor is satisfied because the property  was
used  as  the  couples home both before and during the  marriage.
          so  long  as the parties do marry, the  trial
          court  is free to consider the parties entire
          relationship,  including  any  period(s)   of
          premarital   cohabitation,  in   making   its
          property  division under AS  25.24.160(a)(4),
          so long as the court observes the distinction
          which AS 25.24.160(a)(4) draws between assets
          acquired prior to and during coverture.[34]
Thus,  as  long as the trial court recognized that the  home  was
originally  Patricks separate property and  that  the  period  of
premarital  cohabitation is relevant only to Patricks  intent  to
treat  the property as marital, it could have properly considered
this period of time in determining Patricks intent to donate  the
home to the marriage.
          We  next  consider  the  second factor.   To  establish
ongoing   management  and  maintenance,  the  non-owning  spouses
participation  must  be  significant and evidence  an  intent  to
operate  jointly.35   Participation in  limited  maintenance  and
management  tasks  is  insufficient,36 as are  minor  efforts  at
remodeling.37  Past cases have held that transmutation occurs when
the  non-owning spouse takes an active role in the  operation  of
the property as a business.38  But the test is applied differently
in  different circumstances,39 and where the property at issue is
the marital home, different management and maintenance activities
may demonstrate an intent to hold the property jointly.40
          Here,  there  was  evidence of ongoing  management  and
maintenance by both parties.  Kimberly testified that  after  the
marriage  we  basically tore up the floor boards, tore  down  the
ceilings,  did everything from [s]heetrock to Corian counters  to
new  tile  in the entryway, new carpeting, paint, new appliances,
new lighting fixtures.  She also testified that they put in a new
shower,  windows, and closed the sunroom windows,  and  that  she
participated  in  these improvements.  Cleaning  and  maintenance
          were also her responsibility.  Patrick testified that they made
considerable  improvements while living in  the  house  and  that
marital  improvements  included  carpet,  paint,  sheetrock,  and
landscaping.  As noted above, if parties later marry, a  superior
court  may  consider  periods  of  premarital  cohabitation  when
dividing the home.41  Patricks appellate characterization of these
efforts  as  periodic  repairs and maintenance  is  unconvincing.
These  projects amount to more than minor efforts at  remodeling,
and are consistent with an intent to hold the home jointly.
          In  arguing  that these improvements do not  evince  an
intent  to hold the home jointly, Patrick points to the  lack  of
added  value to the home above normal market appreciation.   This
focus  would be more appropriate if Kimberly were relying on  the
doctrine  of  active  appreciation.42   But  especially   for   a
residence, added value is not a requisite for finding  an  intent
to  hold the property jointly.  Because the superior court  could
properly  find  that the house was used as the marital  home  and
that Kimberlys participation in maintaining and managing the home
demonstrated an intent to hold the property jointly, its  finding
that  the  home  was  transmuted into marital  property  was  not
clearly erroneous.
          The  concurrence argues that the court should  adopt  a
rebuttable  presumption  that  a  separately  titled   house   is
transmuted from separate property to marital property when it  is
used for a substantial period of time as the marital residence.43
It  is not necessary to reach that issue in this case because  we
affirm  the superior courts finding of transmutation.   Moreover,
the  parties have not argued that we should or should  not  adopt
such  a  presumption for Alaska and the superior  court  did  not
apply  any such presumption.  Because we have not had the benefit
of  briefing on the issue, the court declines to reach the  issue
in this case.
     D.   The Assets of Knik Sweeping
          The  superior court found that the equipment  purchased
during  the  marriage, valued at trial at $176,925,  was  marital
property.  Patrick argues that the equipment is not a stand-alone
asset,  but  is part and parcel of Knik Sweeping.   He  therefore
argues  that  it  was error to characterize that portion  of  the
equipment  purchased during the marriage with  marital  funds  as
marital  property.   Kimberly argues  that  the  superior  courts
finding rests on a straightforward reading of AS 25.24.160(a)(4).
Because  we  affirm  on the alternative grounds  adopted  by  the
superior  court,  with a virtually identical result,  we  do  not
address either partys arguments on this point.
          The   superior  court  alternatively  found  that   the
$174,814  increase in Knik Sweepings value during the  course  of
the  marriage  was  marital property.   The  doctrine  of  active
appreciation states that when the separate property of one spouse
increases in value due to marital effort, the increase  in  value
is marital property.44  Active appreciation requires findings that
(1)  the  separate property appreciated during the marriage,  (2)
the  parties made marital contributions to the property, and  (3)
there was a causal connection between the marital efforts and the
appreciation.45  The non-owning party bears the burden of proving
          the first two elements.46  If the non-owning party meets its
burden, the spouse owning the separate property bears the  burden
of  showing  a  lack  of causal connection  between  the  marital
contributions and the propertys increased value.47
          Patrick  argues  that Kimberly failed  to  marshal  any
evidence  to  demonstrate  the value  of  Knik  Sweeping  at  the
inception  of  the marriage or the value at the time  of  marital
separation and that she thus failed to meet her burden  of  proof
to  support a finding of active appreciation during the marriage.
But  Patrick offered evidence of appreciation during the marriage
through  his  business  valuation  expert  Ronald  Greisen,   who
testified  that Knik Sweeping was worth $129,485 at the beginning
of  the marriage and $304,299 at separation.  Patrick worked  for
Knik  Sweeping  during the marriage.  Furthermore, marital  funds
were  used  to  purchase sweeping equipment during the  marriage.
Both  the  time  and  funds  are  marital  contributions  to  the
property, satisfying Kimberlys burden.48  Because Patrick does not
argue  that  there was no causal connection between  the  marital
efforts  and  the  increase in value, the  superior  court  could
properly  find  active appreciation in the  amount  of  $174,814.
This  is  substantially identical to the amount  awarded  by  the
superior court.
     E.   The 2001 Mercedes-Benz
          After the couple separated, Kimberly traded in her 2001
Mercedes-Benz  for  a  2003 Jeep.  She received  less  than  fair
market  value for the Mercedes-Benz, which the parties agree  was
marital  property.  The superior court assigned the Mercedes-Benz
its  Kelley Blue Book value as of the trial date.  Patrick argues
that  this  was  error, and that the superior court  should  have
assigned the Mercedes-Benz its value as of September 12, 2002,  a
date near the trade-in date.
          Property  generally should be valued as  close  to  the
trial  date as possible.49  Recapture is appropriate if a  spouse
has  dissipated or wasted marital property between separation and
trial.50  Recapture is an equitable doctrine, designed to put the
parties  in the positions they would have been in had  the  waste
not  occurred.51  Kimberly agrees that recapture of some  of  the
Mercedes-Benzs value to the marital estate was appropriate.
          Patrick argues that when recapturing the Mercedes-Benzs
value, the superior court should have valued the property  as  of
the date of waste.52  But in this case the Blue Book provides  an
accurate means of determining the fair market value of dissipated
property at the time of trial, when the Mercedes-Benz would  have
been  valued  had Kimberly not exchanged it.53   Using  the  2003
valuation leaves Patrick in the same position he would have  been
in had Kimberly not traded in the Mercedes-Benz.
          The  superior court did not clearly err in valuing  the
Mercedes-Benz as of the date of trial rather than as of September
12, 2002.
     F.   The Mercedes-Benz Rims and Tires
          Patrick  argues that the superior court  erred  in  not
assigning  a value to the extra tires and rims for the  Mercedes-
Benz.   Kimberly testified that she traded them for  an  extended
warranty on her new Jeep after separation and before trial.
          Due  to  a  lack of evidence, the court was  without  a
reliable   method  of  valuing  the  tires  and  rims.   Kimberly
testified  that the warranty that she received for the  rims  and
tires  was worth between $1,000 and $1,200, but her testimony  on
this  point appears to have been very uncertain.  Patrick  argues
that  a  dealer invoice establishes that the rims and tires  were
worth  $3,180  as  of September 12, 2002.  But the  invoice  date
suggests  that the invoice may not be for the tires and  rims  in
dispute here.  There was no indication that the tires and rims in
question  were  in  the  same condition as  the  tires  and  rims
documented  in  the invoice.  Patrick offered no testimony  about
the  invoice  or  the  value of the rims and  tires.   Any  value
assigned to the tires and rims would be speculative.
          A  party  who fails to produce sufficient evidence  may
not challenge the inadequacy of evidence on appeal.54  In Miles v.
Miles,  we  held  that  when neither party was  able  to  produce
documentation of the actual payments on the property, there is no
reason  to  conclude that the superior courts finding  [that  the
payments at issue held a de minimis value] was clearly erroneous.55
Patrick  produced only an invoice that may not reflect the  value
of  the  disputed  rims  and tires.  We therefore  conclude  that
Patrick  has not demonstrated that the superior court  erred,  or
that any error harmed him here.  We also note that the value  was
relatively small in comparison with the other assets at issue  in
this case.56
     G.   The 2001 Income Tax Refund
          Patrick and Kimberly separated on April 11, 2002.  They
made  payments  on their 2001 income tax liability  from  marital
funds,  and ultimately filed a joint income tax return in October
2002.   After  the separation but before filing the  tax  return,
Patrick  contributed  post-separation funds  to  a  personal  SEP
account.   Although he made the contribution in 2002, he  applied
the  deduction to the parties 2001 tax liability.  The IRS issued
a  tax  refund of $8,753, which the superior court  found  to  be
Patricks separate property.
           Kimberly argues in her cross-appeal that the refund is
the  result  of  payments  and  deductions  attributable  to  the
parties,  and that no one factor can be said to have  caused  the
refund, which is therefore marital property.  This may be true as
a  general proposition,57 but may not always be the case  in  the
divorce context.
          Because   marital  contributions  were  inadequate   to
eliminate liability, the parties still owed federal income tax at
the  time  of separation.  Patricks efforts came after separation
and  supplemented the marital resources used to satisfy  the  tax
obligation.   The reduction in tax liability due to Patricks  SEP
contribution eliminated the need for further marital payments and
caused payments to exceed liability, resulting in the refund.  In
these   circumstances,  we  cannot  say  that  the  chronological
causation methodology applied by the superior court was an  abuse
of its discretion.
          We  also note that Patricks SEP contribution benefitted
Kimberly  by eliminating the marital tax liability.  In  dividing
marital  property, courts must consider expenditures of  separate
          property to obtain and preserve marital property.58  Courts have
discretion to credit the contributing spouse.59  Thus, even if the
refund  should  have been characterized as marital property,  the
superior  court  could have properly credited  Patrick  with  the
refund  in light of the benefit Kimberly received.  That Kimberly
did  not  reap the full benefit of this use of Patricks  property
does   not   render  the  superior  courts  characterization   so
inequitable as to warrant reversal.  The superior court  did  not
err  in  characterizing the 2001 federal  income  tax  refund  as
Patricks separate property.
          For the foregoing reasons we AFFIRM with respect to the
settlement funds, the marital home, the Mercedes-Benz, the  tires
and  rims, and the 2001 tax refund.  We also AFFIRM the  superior
courts finding concerning Knik Sweeping.
MATTHEWS, Justice, with whom FABE, Justice, joins, concurring.
          I  write separately because I believe this court should
hold that there is a rebuttable presumption that transmutation of
a  separately titled house into marital property occurs when  the
house  is  used for a substantial period of time as  the  marital
residence.   We  implied such a result in Chotiner  v.  Chotiner,
where  we  gave as an example of an act or acts which demonstrate
[a  transmutative]  intent the act of the parties  in  using  the
premises  as  their  personal residence.1   Further,  immediately
after  we  gave  the personal residence example in  Chotiner,  we
stated:   Similarly, placing separate property in joint ownership
is rebuttable evidence that the owner intended the property to be
marital.2  The upshot of these statements is that the  use  of  a
house  as a marital residence presumptively shows that the owner-
spouse  intends to donate it to the marital estate, in  much  the
same  way  as  placing property in joint ownership  presumptively
shows  that the owner-spouse intends that the property so  placed
will  be  marital in character.  I think that we should recognize
this link in the present case.
          Most  common law presumptions are created because proof
of  the basic fact establishes the existence of the presumed fact
to  a sufficiently high degree of probability that it is fair and
expedient to assume the existence of the presumed fact:
          Most  presumptions have come  into  existence
          primarily  because the judges  have  believed
          that proof of fact B renders the inference of
          the  existence of fact A so probable that  it
          is  sensible  and timesaving  to  assume  the
          truth of fact A until the adversary disproves
          The  connection between using a separately titled house
as  a  marital  residence for a substantial period of  time,  the
basic fact, and transmutation of the house into marital property,
the presumed fact, is very close.  We recognized this in Chotiner
in  the  language which I quoted above.  Further,  our  decisions
subsequent  to  Chotiner  involving  marital  home  transmutation
claims  have  consistently found that transmutation took  place.4
Transmutation  can  be either the product of the  intent  of  the
owner-spouse  or  of  the use of marital  funds  and  efforts  to
maintain  the property in question.  Often, an owner-spouse  will
intend   transmutation  when  a  house  is  used  for  a  marital
residence.   But  even  where  this  is  not  the  case,  marital
residences   are  almost  always  maintained  (including   making
mortgage  payments) with marital funds and efforts.   Creating  a
presumption  recognizing this connection will tend to  streamline
divorce  proceedings by eliminating much wasted effort by counsel
and  the  courts.  Further, the existence of such  a  presumption
will  demonstrate that it is only rarely that a marital residence
is  not  transmuted and thus highlight the need to  take  special
steps  (such  as  pre-nuptial agreements or  maintenance  of  the
residence with separate property) in cases where the owner-spouse
wishes to avoid transmutation.
     1    Green v. Green, 29 P.3d 854, 857 (Alaska 2001) (quoting
Wanberg v. Wanberg, 664 P.2d 568, 570 (Alaska 1983)).

     2    Id.

     3    Id.

     4    Cox v. Cox, 882 P.2d 909, 913 (Alaska 1994).

     5    Green, 29 P.3d at 857.

     6     See,  e.g., Leis v. Hustad, 22 P.3d 885,  887  (Alaska
2001)  (Property value determinations are factual decisions  that
we will overturn only if there is clear error.).

     7    Cox, 882 P.2d at 913.

     8    Dingeman v. Dingeman, 865 P.2d 94, 96 (Alaska 1993).

     9     Schmitz v. Schmitz, 88 P.3d 1116, 1125 (Alaska  2004);
see  also  Brett  R. Turner, Equitable Distribution  of  Property
5.24, at 277 (2d ed. 1994).

     10    Brown v. Brown, 947 P.2d 307, 311 (Alaska 1997).

     11    Leis, 22 P.3d at 888 (quoting Chotiner v. Chotiner, 829
P.2d 829, 833 (Alaska 1992)).

     12     Cf.  Gardner  v. Harris, 923 P.2d 96, 99-100  (Alaska
1996)  (approving separate characterization of bonds  transferred
to  marital  account for joint account and used to obtain  better
financing for marital property).

     13     See  Julsen  v. Julsen, 741 P.2d 642, 646-47  (Alaska
1987) (holding that inherited stock remained separate because  it
was  placed  in  joint trading account only as an  administrative
convenience and non-owner spouse did not participate  in  account

     14    Bandow v. Bandow, 794 P.2d 1346, 1348 (Alaska 1990).

     15    See id. at 1349.

     16    Id.

     17     Gen. Motors Corp. v. Farnsworth, 965 P.2d 1209,  1212
(Alaska 1998).

     18     Day  v. A & G Constr. Co., 528 P.2d 440, 444  (Alaska
1974) (emphasis added).

     19    Peterson v. Wirum, 625 P.2d 866, 870 (Alaska 1981).

     20     Knutson  v.  Knutson, 973 P.2d 596,  599-600  (Alaska

     21     Compare  Gardner v. Harris, 923 P.2d 96,  97  (Alaska
1996)  (The parties there both made credit card transactions  and
wrote  checks  against the account; they each  contributed  their
paychecks  to  the account; and they applied the  bonds  interest
income . . . toward joint expenses. ).

     22     See Turner, supra note 9,  5.23, at 271 (If the funds
were  used to purchase an asset for a marital or family  purpose,
they  probably  came  from  the  marital  portion  of  the  mixed

     23    Gardner v. Harris, 923 P.2d 96, 97 (Alaska 1996).

     24     Id.  at  100  (Until the credit was  used  the  bonds
remained Harriss separate property.  When the bonds were  called,
however, the portion that was used for credit was lost,  and  the
remaining proceeds remained Harriss separate property.).

     25     Gardner,  923  P.2d at 97 (both  [parties]  possessed
independent  authority over [the] account,  including  individual
discretion  over  whether to trade or cash in  the  VMT  bonds.).
Here,  however,  the  permission of both spouses  was  needed  to
withdraw funds from the CMAs.

     26    See id. at 99.

     27     Schmitz v. Schmitz, 88 P.3d 1116, 1128 (Alaska  2004)
([U]ntraceable  assets  are  marital property.)  (citing  Turner,
supra note 9,  5.23, at 266).

     28    Id. at 1127-28 (quoting Turner, supra note 9,  5.23, at

     29    Id. at 1128.

     30    Id.

     31    Id.

     32    Id. (internal quotation omitted).

     33     Cox v. Cox, 882 P.2d 990, 916 (Alaska 1994) (internal
citations and quotation marks omitted).

     34     Murray  v.  Murray,  788 P.2d 41,  42  (Alaska  1990)
(internal citation omitted).

     35     Keturi  v.  Keturi, 84 P.3d 408,  417  (Alaska  2004)
(quoting McDaniel v. McDaniel, 829 P.2d 303, 306 (Alaska 1992)).

     36    Brooks v. Brooks, 733 P.2d 1044, 1054 (Alaska 1987).

     37     Wanberg v. Wanberg, 664 P.2d 568, 573 & n.19  (Alaska
1983)  (finding testimony that [t]he only thing I had to do  with
that, basically, was the remodeling of the Cosmetic Company,  and
.  .  .  [c]ollecting [rents] insufficient to  establish  ongoing
management and maintenance).

     38      See  Keturi,  84  P.3d  at  417  (non-owning  spouse
contributed   by  collecting  rent,  cleaning  between   renters,
assisting  in finding renters, maintaining coin-operated  laundry
room,  partially landscaping property, and borrowing  money  from
parents  for  mortgage payment); Wanberg, 664 P.2d at  572  (non-
owning    spouse   contributed   by   remodeling,   redecorating,
entertaining   tenants,   helping   with   general   maintenance,
collecting  rents  and  accounts payable, paying  bills,  keeping
business  records,  preparing information  for  accountants,  and
doing bookkeeping).

     39    Keturi, 84 P.3d at 417.

     40     See  Harrelson  v. Harrelson, 932  P.2d  247,  251-52
(Alaska 1997) (finding intent to hold jointly when wifes name not
on  title,  but she contributed financially to [the condominiums]
construction  and acted as [husbands] agent for the  building  of
the  condominium,  making all interior decorating  decisions  and
generally supervising the construction).

     41    See Murray, 788 P.2d at 42.

     42     See  Harrower v. Harrower, 71 P.3d 854,  858  (Alaska
2003)  (stating  that increase in value of separate  property  is
marital  under  active  appreciation  theory  if  resulting  from
marital efforts).  See discussion infra Part III.D.

     43    Concurrence at 1.

     44    Harrower, 71 P.3d at 858.

     45    Id.

     46    Id. at 859.

     47    Id.

     48    Schmitz, 88 P.3d at 1125 (noting that  time and energy
of  both  spouses  during the marriage is  to  be  considered  in
dividing  marital  property   and holding  that  neither   spouse
should   be  able to erase his or her contributions of  time  and
energy  from  the  marital estate by rolling  them  back  into  a
business   which  he  began  before  the  marriage.  )   (quoting
Lowdermilk v. Lowdermilk, 825 P.2d 874, 877-78 (Alaska 1992)).

     49     See  Ogden v. Ogden, 39 P.3d 513, 521 (Alaska  2001);
Ogard v. Ogard, 808 P.2d 815, 819 (Alaska 1991).

     50    Foster v. Foster, 883 P.2d 397, 400 (Alaska 1994).

     51     See Ramsey v. Ramsey, 834 P.2d 807, 809 (Alaska 1992)
(A  valuation date should be chosen which will provide  the  most
current  and  accurate  information  possible  and  which  avoids
inequitable results.).

     52    See Foster, 883 P.2d at 400 ([T]he 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

     53    See also Ramsey, 834 P.2d at 809 (stating that date of
valuation should be as close as practicable to date of trial).

     54    Hartland v. Hartland, 777 P.2d 636, 640 (Alaska 1989).

     55    Miles v. Miles, 816 P.2d 129, 132 (Alaska 1991).

     56     See Gilstrap v. Intl Contractors Inc., 857 P.2d 1182,
1185  (Alaska  1993)  (Burke,  J.,  dissenting)  ([T]he  relative
insignificance  of  the claim when compared to  the  costs  of  a
remand  should  spur  this court to avoid  a  remand  if  at  all

     57     See  Phillips v. Phillips, 351 S.E.2d 178, 180  (S.C.
App. 1986) (An income tax refund is nothing more than a return of
income.  The returned income here is clearly marital property and
the   wife  should  have  been  awarded  her  equitable   portion

     58    Ramsey, 834 P.2d at 809.

     59    Id.

     1    829 P.2d 829, 832-33 (Alaska 1992).

     2    Id. at 833 (emphasis added).

     3     2  McCormick on Evidence  343, at 438 (John W. Strong,
ed., 5th ed. 1999).

     4     See  e.g.,  Miller v. Miller, 105  P.3d  1136  (Alaska
2005);  Keturi  v. Keturi, 84 P.3d 408 (Alaska  2004);  Green  v.
Green, 29 P.3d 854 (Alaska 2001).