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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Hopper v. Hopper (11/09/2007) sp-6192

Hopper v. Hopper (11/09/2007) sp-6192, 171 p3d 124

     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 D. HOPPER, )
) Supreme Court Nos. S- 12411/12471
Appellant, ) (Consolidated)
)
v. ) Superior Court No. 3AN-02-10575 CI
)
LORETTA C. HOPPER, )
)
Appellee. ) O P I N I O N
)
) No. 6192 -
November 9, 2007
LORETTA C. HOPPER,            )
                              )
               Appellant,          )
                              )
     v.                       )
                              )
JAMES D. HOPPER,              )
                              )
               Appellee.      )
                              )



          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Peter A. Michalski, Judge.

          Appearances:   Robert  C.  Erwin,  Palmier  ~
          Erwin,  LLC, Anchorage, for James D.  Hopper.
          Ann  DeArmond,  Sterling  &  DeArmond,  P.C.,
          Wasilla, for Loretta C. Hopper.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, and Carpeneti, Justices.   [Bryner,
          Justice, not participating.]

          FABE, Chief Justice.

I.   INTRODUCTION
          Before us are two appeals of a decision setting aside a
dissolution  and  dividing  various  pieces  of  property.    The
parties,  Loretta  and James Hopper, originally  entered  into  a
dissolution agreement which, among other things, awarded  Loretta
money  from the sale of the marital home and up to $1,200 a month
in  spousal  support,  including a maximum of  $600  for  medical
prescriptions and $600 for maintenance.  Approximately a year and
a  half after the dissolution, Loretta filed an Alaska Civil Rule
60(b)  motion  to  set  aside the decree, arguing  that  she  was
incapacitated at the time of the dissolution.  The superior court
set  aside  the  dissolution  decree  and  ordered  a  new  trial
concerning division of property and debt.  Following a trial, the
superior court determined that four parcels of real property  and
three  bank accounts were marital property, despite their earlier
characterization  during  the  dissolution  as  James's  separate
property.  The trial court then divided this property equally and
awarded Loretta prejudgment interest on the total amount owed  to
her.   James appeals the trial court's decision to grant the Rule
60(b)  motion,  as  well as the trial court's  classification  of
various  items of property and its award of attorney's  fees  and
prejudgment interest to Loretta.  Loretta separately appeals  the
trial court's ruling ending interim spousal support, and the  two
appeals  have been consolidated.  Although we conclude  that  the
trial court erred in characterizing the Northrim bank account  as
marital  property and in awarding enhanced attorney's fees  based
on  a  party's conduct outside of the litigation, we  affirm  the
trial court's decision in all other respects.
II.  FACTS AND PROCEEDINGS
          James and Loretta were married on October 17, 1994, and
they have no children together.  The parties filed a petition for
dissolution  of the marriage on September 3, 2002,  proposing  to
divide  a  variety  of  property  owned  by  the  parties.    The
dissolution agreement provided that Loretta receive $65,000  from
the  sale  of the marital home and an additional cash payment  of
$25,000.  It also required that James pay Loretta $600 in spousal
support  until  December  1,  2005.   The  dissolution  agreement
further  provided that James assume certain debt, and  perform  a
variety  of  other tasks, including completion  of  the  parties'
joint  tax  return for the year and payment of vehicle  insurance
for Loretta's car for a year.  The parties filed an amendment  to
the  agreement  on November 7, 2002, extending the  $600  spousal
support  until December 1, 2007, and requiring James to  pay  for
Loretta's  medical  prescriptions, up to $600  per  month,  until
Loretta's  death  or  until insurance became  available  to  her.
Master  Andrew M. Brown held the dissolution hearing on  November
7,  and  Superior  Court  Judge Peter A.  Michalski  granted  the
dissolution on November 12, 2002.
          Approximately  a year and a half later,  on  March  25,
2004, Loretta filed a motion under Rule 60(b) of the Alaska Rules
of  Civil Procedure, seeking to set aside the dissolution decree.
Loretta  claimed that at the time of the dissolution she was  ill
and  cognitively  impaired  due to  her  medical  conditions  and
medication  she  was  taking.   Loretta  also  argued  that   the
bargaining power of the parties was unequal, that James  unfairly
received  a  much  larger portion of the divorce settlement,  and
that  significant  marital property had been mischaracterized  as
separate  property.  Loretta also pointed out that while  James's
attorney  drafted the document, she did not have the  benefit  of
counsel  before  she  signed  the dissolution  agreement.   James
opposed the Rule 60(b) motion, arguing, among other things,  that
Loretta  was  not cognitively impaired and that her  claims  were
time barred under Rule 60(b)'s one-year time limit.
          Judge Michalski referred the case to Master Brown for a
hearing  on  whether  the Rule 60(b) motion  should  be  granted.
Master  Brown heard evidence on the motion on April 1 and  15  of
2005 and found that "[t]he evidence is convincing that Ms. Hopper
did  not  have  the  mental ability in  the  summer  of  2002  to
voluntarily and intelligently think about the terms of a petition
for  dissolution  of marriage."  The master also determined  that
the  dissolution  property  division  had  omitted  four  marital
financial  accounts.  The master recommended  that  the  property
division be set aside, with the exception of the monthly  spousal
support  and  prescription payments.   The  master's  report  was
approved on June 1, 2005 by Judge Michalski, and a trial date was
set to determine a new property division.
          Loretta moved for full attorney's fees under Rule 82 of
the  Alaska Rules of Civil Procedure as the prevailing  party  on
her Rule 60(b) motion.  At the same time, she requested $5,000 in
attorney's  fees under AS 25.24.1401 so that she  could  pay  for
representation  during  the  property  division   trial.    James
partially opposed the Rule 82 motion, arguing that while Rule  82
applies  in  this case, Loretta was entitled only to  the  thirty
percent provided by the rule and not full fees. James opposed the
request for attorney's fees to litigate the property division  on
the basis that Loretta had adequate funds to pay for an attorney.
The  issue  was  referred to Master Brown, who  recommended  that
James pay Loretta's full fees under Rule 82, or $15,679.96.   The
master  made  this  recommendation  due  to  James's  "bad  faith
conduct" in taking advantage of Loretta's incapacity at the  time
of  the  dissolution.  The master also recommended  that  Loretta
receive  the  requested  $5,000 in  interim  attorney's  fees  to
prepare for and conduct the property division trial because there
was  no  evidence  that the financial status of the  parties  had
changed since the time of the master's report.  James objected to
the  master's recommendation concerning attorney's fees,  arguing
that he had not acted in bad faith and that there was no evidence
that  the  parties' incomes were so disparate that  an  award  of
interim  attorney's fees was warranted.  Judge Michalski approved
the master's recommendations on September 16, 2005.
          The  property trial was held before Judge Michalski  on
March  23  and 24, 2006.  At issue were four real properties  and
various  financial  accounts. The parties stipulated  during  the
trial   that  Loretta  received  $126,362  in  property  in   the
dissolution  while  James  received  $67,969.   The  trial  court
determined  that  all of the real property at issue  was  marital
property  because James bought and managed the properties  during
          the marriage.  As for the financial accounts, while the trial
court  recognized  that  James's First National  Bank  of  Alaska
(FNBA)  checking  and  savings accounts were  opened  before  the
marriage, it nonetheless found that James had not met his  burden
of "establishing adequate tracing" to exclude any of the accounts
from  the marital estate.  James also had a Northrim Bank account
into  which his Social Security payments were deposited, but  the
trial  court  held  that because James did not demonstrate  which
payments to that account were made during the marriage and  which
were  not,  the  entire  account was marital.   The  trial  court
determined  that the Vanguard and Schwab accounts were premarital
accounts  and therefore separate property.  The court valued  the
property  at the time of the dissolution and concluded  that  the
total  value  of the marital assets at issue was  $328,651.   The
trial  court  then  awarded half of that amount  to  Loretta  and
interest on that amount from November 12, 2002, the date  of  the
original dissolution decree.
          James filed a motion for reconsideration, arguing  that
the order did not make any reference to the spousal support James
was  paying  Loretta, that the trial court  had  used  the  wrong
numbers  for  the mortgages on the property at the  time  of  the
dissolution, and that the trial court had not taken into  account
the   settlement   Loretta  had  received  under   the   original
dissolution  agreement.   On  reconsideration,  the  trial  court
corrected the amounts of the mortgages owed on two of the lots at
the  time  of  the  dissolution, the  value  of  which  had  been
stipulated to by the parties at trial.  Although the trial  court
adjusted its math calculations accordingly, it did not change any
other aspects of the decision.
          On  August  29, 2006, about two weeks after  the  trial
court's  order  on  reconsideration, Loretta filed  an  expedited
motion because James had stopped paying the spousal support as of
July  1, 2006.  James opposed the motion, arguing that the  trial
court's division of property did not require James to pay spousal
support.   The  trial  court's  order  stated:  "Master   Brown's
extension  of  the  $600  per month spousal  support  beyond  the
December   1,  2005  cutoff  was  an  interim  decision   pending
resolution of the property division which had not been completed.
Now that the property division is complete the interim obligation
is complete."
          James   now  appeals,  challenging  the  trial  court's
decision  on  the  Rule 60(b) motion and the  resulting  property
division, along with the award of attorney's fees and prejudgment
interest.  Loretta also appeals, challenging the superior court's
termination of interim spousal support.
III. STANDARD OF REVIEW
          A  trial  court's  grant  of a  Rule  60(b)  motion  is
reviewed  for an abuse of discretion.2  We will find an abuse  of
discretion  only  when  we are "left with  a  definite  and  firm
conviction,  after  reviewing the whole record,  that  the  trial
court  erred  in  its  ruling."3  Determining  what  property  is
available for distribution in a divorce involves both factual and
legal  issues.4   Legal  decisions are  reviewed  de  novo  while
factual  decisions will only be set aside if clearly  erroneous.5
          Awards of attorney's fees are reviewed for an abuse  of
discretion.6  In a divorce, the trial court has broad  discretion
in making an award of attorney's fees, and its award will only be
reversed   if   it  is  "arbitrary,  capricious,  or   manifestly
unreasonable."7  Prejudgment interest in a divorce case is within
the  broad discretion of the trial court and is reviewed  for  an
abuse  of  discretion.8  A spousal support award is reviewed  for
abuse of discretion.9
IV.  DISCUSSION
     A.   The Civil Rule 60(b) Motion
          James  argues that the Rule 60(b) motion was improperly
granted because it was not timely.  He bases this argument on his
view  that  the motion should have been brought under subsections
(1)-(3) of the rule, all of which have a one-year time limit  for
bringing claims.  Loretta responds that her motion was timely and
properly granted under Rule 60(b)(6).  Loretta also contends that
James's  appeal  of  the trial court's grant of  the  Rule  60(b)
motion  was  untimely,  having been filed nearly  fifteen  months
after the trial court's ruling on the motion.
          1.   James timely appealed the Rule 60(b) decision.
          Under  Alaska Rule of Appellate Procedure 204(a)(1),  a
notice  of  appeal  must  be  filed within  thirty  days  of  the
distribution of the judgment from which an appeal  is  taken.   A
denial  of  a motion to set aside a judgment is a final  judgment
for purposes of Appellate Rule 204(a)(1).10  But while a denial of
a  Rule 60(b) motion effectively ends a case, the granting  of  a
Rule   60(b)  motion  will  usually  be  followed  by  additional
proceedings.  In this case, after Loretta's Rule 60(b) motion was
granted,  the  court  conducted a new trial  before  issuing  its
decision  dividing the marital property.  James  properly  waited
until  after  the property trial to appeal both  the  Rule  60(b)
ruling and the decision of the trial court regarding the property
division.  James's appeal is therefore timely.
          2.   Loretta's Rule 60(b) motion was properly granted.
          In  her  motion  to set aside the dissolution,  Loretta
argued  that she was entitled to this relief under Rule  60(b)(6)
because  of  her cognitive impairment, lack of representation  by
counsel, and her mistaken underlying assumption that all  of  the
property belonged to James and she therefore was not entitled  to
any  portion  of  it.  James argues that Loretta filed  her  Rule
60(b)  motion  too  late  because  her  claims  all  fall  within
subsections (1)-(3) of the rule, all of which require that claims
be  brought within one year.  Loretta argues that her motion  was
properly  brought  under  subsection  (b)(6)  and  was  therefore
timely.
          Rule 60(b) provides, in relevant part:
          On  motion  and upon such terms as are  just,
          the  court  may relieve a party or a  party's
          legal  representative from a final  judgment,
          order,   or   proceeding  for  the  following
          reasons:
          
               (1)  mistake, inadvertence, surprise  or
          excusable neglect;
          
               (2)  newly discovered evidence which  by
          due  diligence could not have been discovered
          in  time  to move for a new trial under  Rule
          59(b);
          
               (3)      fraud    (whether    heretofore
          denominated    intrinsic    or    extrinsic),
          misrepresentation, or other misconduct of  an
          adverse party;
          
               (4)  the judgment is void;
          
               (5)   the  judgment has been  satisfied,
          released, or discharged, or a prior  judgment
          upon  which it is based has been reversed  or
          otherwise   vacated,  or  it  is  no   longer
          equitable  that  the  judgment  should   have
          prospective application; or
          
               (6)   any other reason justifying relief
          from the operation of the judgment.
          
               The  motion  shall  be  made  within   a
          reasonable time, and for reasons (1), (2) and
          (3) not more than one year after the date  of
          notice  of the judgment or orders as  defined
          in Civil Rule 58.1(c).
          
          James   argues  that  Loretta's  claims  of   cognitive
impairment,  lack  of  representation by  counsel,  and  mistaken
assumption  regarding  the property all  fall  within  subsection
(1)'s  provisions for mistake or excusable neglect.  But we  need
not  address the questions of Loretta's cognitive impairment  and
lack   of  representation,  however,  because  the  master   also
concluded:
          Mr.  Hopper  may have brought  a  significant
          amount   of   business  property   into   the
          marriage.  However, there is no evidence that
          all  the properties listed in the Petition  -
          or  those not listed - that went to him  were
          pre-marital   properties  that   were   never
          affected by either "transmutation" or "active
          appreciation" during the marriage.
          
          We  have  previously  articulated  four  factors  which
justify  setting aside a property division under  Rule  60(b)(6):
"(1)  the  fundamental, underlying assumption of the  dissolution
agreement  ha[s]  been  destroyed;  (2)  the  parties'   property
division  was  poorly thought out; (3) the property division  was
reached without the benefit of counsel; and (4) the [property  in
dispute]  was  the  parties' principal asset."11   In  Lacher  v.
Lacher,  we affirmed a decision to set aside a dissolution  under
Rule  60(b)(6) on the ground that "the original property division
failed  to  dispose of substantial items of marital  property."12
The  dissolution agreement in this case left a significant amount
of real property out of the marital estate, despite the fact that
          it  was acquired during the marriage.  In addition, the
dissolution  agreement  did not include  James's  FNBA,  Northrim
Bank,  Vanguard, or Schwab accounts.  As the master noted in  his
decision  to recommend Rule 60(b) relief, James received property
with  a  total  value of $1,455,080, while Loretta received  only
$90,000  from the sale of one property, the marital home.   Thus,
this  case,  like  Lacher,  involved a dissolution  that  omitted
"substantial items of marital property."  And Lacher was  decided
under  Rule  60(b)(6), which is not subject to the one-year  time
limit.  As such, the decision of the trial court in this case  to
set  aside  the  dissolution  agreement  was  not  an  abuse   of
discretion.
     B.   Real Property
          There are four pieces of real property at issue in this
case  -  two  "Irey" lots and two "Fouts" lots.  The trial  court
determined  that  all four of the lots were marital  and  divided
them evenly between James and Loretta.
          James  and  his first wife, Casey Hopper, had  owned  a
business  that  rented  properties.  As  part  of  their  divorce
agreement,  they  jointly owned and managed the  four  properties
together.   James  and  Casey later entered  into  a  post-decree
property  settlement agreement under which James  quitclaimed  to
Casey all four lots - Irey Lots 20 and 21 and Fouts Lots 1 and  2
- on September 30, 1994.
          At  some point, Casey transferred her interest in  Irey
Lot  20 to Kym Wolcott, her granddaughter.  On October 16,  1997,
Wolcott transferred half of her interest in Irey Lot 20 to James,
but  this was four years after his marriage to Loretta.   Wolcott
then  transferred her remaining half interest in the property  to
James  on  April  9, 1999.  James did not pay  anything  for  the
remaining  half  interest.  On the dissolution  paperwork,  James
indicated that Irey Lot 20 was valued at $145,000.  At  the  time
of  the  dissolution,  Irey Lot 20 had a  remaining  mortgage  of
$45,010.38.
          James  lived in the house on Irey Lot 21 up  until  his
marriage  to  Loretta.  After James moved out,  he  continued  to
manage the property, including locating tenants, collecting rent,
keeping it in good repair, and paying the taxes.  Casey sold Irey
Lot 21 back to James on August 13, 1998, again after his marriage
to  Loretta. James paid Casey $55,000 for the property.   At  the
time of the dissolution, James estimated the property's worth  at
$150,000,  with a remaining mortgage of $40,557.81.   James  made
the payments on the property during the marriage using money from
the  properties' rental income.  Although James  claimed  not  to
have used assets from the marital estate to make payments on  the
properties,  he  worked as a property manager of  the  properties
throughout the marriage.  James eventually sold Irey  Lot  21  in
July of 2004 for $155,000.
          James  also  managed the Fouts properties,  even  after
they  were  transferred  to Casey.   Fouts  Lots  1  and  2  were
transferred from Casey to James on December 11, 1997.  James paid
Casey  $75,000 for the properties. The mortgage remaining on  the
properties at the time of the dissolution was $64,905.88.   James
made  the  payments from the rents collected from the tenants  on
the  properties.  James sold the property during his marriage  to
Loretta  and received $89,506.22, which he placed into  his  FNBA
savings account.
          James  claimed that he did not put a lot of  work  into
managing the properties.  He collected the rent, and if there was
a  problem,  he  called  someone to  make  repairs.   James  also
testified  that Loretta did not actively participate  in  James's
business  in  any  way.   But the superior  court  reasoned  that
because  James  repurchased the real property  from  his  ex-wife
during his marriage to Loretta, paying for them through his  work
as  a  property manager during the marriage, the properties  were
part of the marital estate:
          His [James's] familiarity with the properties
          and  the fact he once owned them has confused
          him into the notion that they are "premarital
          properties."  They are marital properties due
          to  his  purchases  and  management  of  them
          during marriage.  Because it is evident  that
          he   was  actively  managing  the  properties
          during   the  marriage  they  are   "marital"
          regardless  of how "effortless" it  may  have
          seemed   to  him.   Clearly,  he  was   doing
          something   his   invalid  prior   wife   was
          incapable of doing.  Thus, these were marital
          properties  and  are to be  included  in  the
          marital estate for division.
          
          The  trial  court  valued the Irey lots  based  on  the
values set out in the dissolution agreement and valued the  Fouts
lots  based on the amount that James earned from his sale of  the
property during the marriage.
          James  argues  that  the properties  are  all  separate
properties  because  there  was never  an  intent  to  treat  the
properties as marital, Loretta's name was never put on the title,
and  Loretta did not assist in the maintenance and upkeep of  the
properties.   James  also  argues  that  there  was   no   active
appreciation on the properties during the marriage because he did
not  maintain the properties himself but contracted to  have  the
maintenance done by other individuals.  He also argues  that  any
appreciation on the property during the marriage was  the  result
of  the  real estate market in Anchorage and not due  to  James's
efforts  during the marriage.  Loretta responds that rent  earned
on  the  four parcels was attributable to James's labor  and  was
therefore  marital in nature because it constituted  income  from
spousal efforts during the marriage.
          All  of  James's  activities  during  the  marriage  in
managing  the  property,  finding  renters,  hiring  people   for
maintenance  purposes, and paying the various  bills  and  taxes,
generated rental income.  Before James bought the properties back
from  Casey,  the  income he received from  the  rents  from  the
properties  was  akin  to  a  salary received  for  his  property
management  services.  As we have recognized, "[a]ssets  acquired
during  marriage  as  compensation for marital  services  -  most
commonly salaries earned by either spouse during marriage  -  are
considered marital assets."13
          While "[p]roperty purchased during a marriage, yet paid
for  out  of  one  party's separate assets, may be  considered  a
premarital  asset so long as the parties did not  demonstrate  an
intent  to  jointly  hold the property,"14 here,  James  did  not
purchase the property with separate assets.  James received  half
of  the  rental proceeds for his management of the  property  and
then  used  those  rental proceeds to pay the mortgage  after  he
bought  the  properties back from Casey.   Therefore,  the  trial
court  properly  determined the real property to  be  marital  in
character.
     C.   Financial Accounts
          1.   FNBA savings and checking accounts
          James  opened his FNBA savings account on  January  11,
1984.   James deposited the proceeds from the sale of  the  Fouts
lots  into  this  account.  The trial court  valued  the  savings
account at $19,313.
          James opened his FNBA checking account on June 1, 1994.
The  amount  in  the account at the time of the  dissolution  was
$6,858.00.   James  sometimes referred to  this  account  as  the
"business account," and he paid the bills from and deposited  the
rent into that account.
          Because the rental proceeds from the real property were
marital  property, James was therefore depositing marital  income
into  what  were  otherwise  his premarital  bank  accounts.   In
Schmitz  v.  Schmitz, we reviewed a decision of the  trial  court
classifying various bank accounts as separate property.15  As bank
accounts are a secondary asset, the court must first identify the
asset  from which it was derived and determine whether that asset
was  marital or separate property.16  The party seeking to  prove
that  the  bank  account is separate property has the  burden  of
proof, and the bank account is presumed to be marital property if
it  is  not possible to determine whether the account was  funded
through primarily separate or marital property.17  If it is known
that a bank account contains both separate and marital funds  but
the  amount  from each source cannot be determined,  then  "[t]he
unknown amount contributed from the separate source transmutes by
commingling and becomes marital property."18
           James  did not make any attempt at trial to show  what
money  in  his checking account was derived from rents  from  the
disputed four parcels of property and his other properties.   The
record  does  not contain any information regarding the  checking
account,  other  than James's testimony that he deposited  rental
proceeds  and  paid  property bills out of this  account.   James
testified  that he deposited the proceeds from the  sale  of  the
Fouts  lots  into  his personal savings account.   There  was  no
evidence  as  to what other money was placed into  this  account,
including whether any money from the rental proceeds of the  Irey
and  Fouts lots was placed into this account.  James is the party
with  the  burden  to  establish that  these  accounts  were  not
marital,  and he has not presented adequate evidence  to  support
such  a  finding.  Thus, the trial court properly concluded  that
both the checking and savings accounts were marital property.
          2.   Northrim Social Security account
          James  instructed that his Social Security payments  be
directly  deposited into his Northrim account, and  he  testified
that  this  was  the  only source of funds  deposited  into  this
account.    Loretta  offered  no  evidence  to   challenge   this
testimony.   James receives $894 per month from Social  Security.
A  bank  statement covering the period from November  1-29,  2002
showed  a starting balance of $4,467.92 and an ending balance  of
$4,961.92.   In  the  trial  court's final  order  regarding  the
property division, the court stated:
          The   deposits  to  the  Northrim  Bank  were
          established  to  be Social Security  payments
          only.   Only  the  Social  Security  payments
          received during the marriage would have taken
          on  a marital quality.  The plaintiff [James]
          did not adequately show the change, if any in
          the  account, to exclude any of the  balance.
          Thus the account is marital.
          
The  trial court therefore valued the Northrim account at $4,468,
the  amount that was closest to the amount in the account at  the
time of the dissolution.
          We  have  recognized  that "[t]he doctrine  of  federal
preemption   prevents   state  courts  from   dividing   [S]ocial
[S]ecurity  benefits."19   Thus, even when  the  Social  Security
benefits  were  deposited  during  the  marriage,  they  remained
James's separate property.
          James  testified at trial that only his Social Security
benefits are paid into the Northrim account.  The account summary
submitted  as an exhibit at trial also shows only a deposit  from
the  "US  TREASURY - SOC SEC."  Once James established  that  the
account  included  only  Social  Security  payments,  the  burden
shifted  to Loretta to show that James had improperly  mixed  the
account  with  marital money, thereby turning  the  account  into
marital property.  As Loretta presented no evidence regarding any
payments  into the account besides Social Security, she  has  not
met  her  burden.  As James's Social Security benefits cannot  be
divided,  it was error to determine that the account was  marital
property.  The trial court's determination that this account  was
marital is therefore reversed.
     D.   Attorney's Fees and Prejudgment Interest
          1.   Attorney's fees
          There  are  two  separate fee awards at issue  in  this
appeal.   The first is the award of actual attorney's fees  under
Rule 82 to Loretta in the amount of $15,679.96 for prevailing  on
the Rule 60(b) motion.  The second is the court's award of $5,000
to  Loretta in interim fees in order to litigate the property and
debt distribution.
          In   his  recommendation  concerning  attorney's  fees,
Master  Brown stated that James had taken advantage of  Loretta's
mental incompetence and physical disabilities and used her son in
order  to  get her signature on a dissolution petition  that  was
"greatly and inequitably weighted" in James's favor.  The  master
found  that  James took advantage of his skills as a  "successful
businessman"   and  Loretta's  incapacity  in   formulating   the
          dissolution petition and concluded that James's actions amounted
to  "bad  faith  conduct"  under Rule  82(b)(3)(G).   The  master
therefore recommended that Loretta receive full actual reasonable
attorney's fees under Rule 82.  The superior court approved  this
recommendation.
          We  have  previously held that Rule 82 can be  used  to
award  attorney's fees to the prevailing party in a Rule 60(b)(6)
motion  to modify a divorce decree and that the divorce exception
to  Rule  82  is  inapplicable to post-judgment modification  and
enforcement  motions.20  Thus, the only question is  whether  the
trial  court  abused its discretion in awarding Loretta  enhanced
attorney's fees based on its finding that James had acted in  bad
faith.
          James  argues that he did not act in bad faith  "during
the  course  of  the present proceedings" and  that  his  actions
during the litigation did not meet the standard for bad faith  or
vexatious   conduct  required  for  enhanced  fees   under   Rule
82(b)(3)(G).  (Emphasis  omitted.)  He also  maintains  that  bad
faith  conduct justifying an enhanced fee award must occur during
the   litigation  and  not  during  the  underlying  transaction.
Loretta responds that James did act in bad faith because  he  did
not  disclose major assets on the dissolution petition  and  used
Loretta's  son  to help prepare the petition and get  Loretta  to
sign  it.   Loretta also claims that James acted in bad faith  in
litigating a "patently incorrect claim" that all the property was
his separate property.
          The  master's report found bad faith related to James's
actions surrounding the drafting of the dissolution agreement and
did  not  make any findings regarding any bad faith or  vexatious
actions taken by James during the litigation itself.  In Cole  v.
Bartels,  we  noted  that "the bad faith  conduct  warranting  an
enhanced  fee  award  under Rule 82(b)(3)(G)  occurs  during  the
litigation,  not during the underlying transaction  that  is  the
subject  of  the litigation."21  As there were no  findings  that
James  acted in bad faith during the litigation, but only  during
the  drafting of the underlying dissolution agreement, it was  an
abuse of discretion to award enhanced attorney's fees based on  a
finding  of bad faith.  Thus, the award of $15,679.96 in Rule  82
attorney's fees is reversed and remanded to the superior court.
          When  the master recommended that Loretta receive  full
Rule 82 attorney's fees, he also recommended that Loretta receive
$5,000  in  interim  attorney's fees to  litigate  the  remaining
property  and  debt issues.  The master noted that there  was  no
evidence that the parties' relative financial situations were any
different than at the time of the dissolution.  The master stated
that Loretta's gross annual income was only $22,020.78, including
the   monthly  spousal  support  and  prescription  payments  she
received from James, while James's annual income was $124,879.86.
The  master determined that due to the parties' vastly  disparate
incomes and the fact that Loretta's financial situation was  "the
fruit  of  an inequitable agreement," Loretta should  be  awarded
interim   attorney's   fees.   Judge  Michalski   approved   this
recommendation.   We  conclude  that  it  was  not  an  abuse  of
discretion  to award the attorney's fees based on the significant
          difference in the parties' incomes, and we therefore affirm the
interim fee award.
          2.   Prejudgment interest
          In  the final property division order, the trial  court
awarded  Loretta $164,325.50 with prejudgment interest  from  the
date of the dissolution.  James argues that it was error to award
Loretta  prejudgment  interest on the property  division.   James
contends that although a court may award prejudgment interest  in
a  divorce  case, it must balance a number of factors which  were
never  taken  into account by the superior court  in  this  case.
Loretta responds that the award of prejudgment interest was  well
within  the discretion of the trial court because she was  denied
use  of the property award for a period of almost four years  and
the award was therefore necessary to make her whole.
          In  Morris v. Morris, we recognized that a trial  court
has  broad discretion to award prejudgment interest in a  divorce
case  but that interest should not be awarded if it "would do  an
injustice."22  As Loretta points out, she was denied the money and
any  interest  on  the  money  for the  four  years  between  the
dissolution and the final property judgment.  It is not  apparent
that  the  award  would  work "an injustice"  on  James;  it  was
therefore  not  an  abuse  of  discretion  to  award  prejudgment
interest in this case.
     E.   Spousal Support
          In  the original dissolution agreement, James agreed to
pay  Loretta $600 per month in spousal support until December  1,
2005.  At the dissolution hearing, the parties filed an amendment
to  the  agreement, whereby the obligation of $600 per  month  in
spousal  support  was extended to December  1,  2007,  and  James
agreed  to  pay  Loretta up to an additional $600 per  month  for
medical  prescriptions for the rest of Loretta's  life  or  until
government programs were available to cover the prescriptions.
          In  the  master's report following the hearing  on  the
Rule 60(b) motion, the master stated:
          It is therefore recommended that the division
          of  property and debts under the November 12,
          2002  Decree  of Dissolution of  Marriage  be
          vacated,  except that Mr. Hopper be  required
          to  continue  paying the  $600.00  per  month
          spousal  maintenance and up  to  $600.00  per
          month for Ms. Hopper's medical prescriptions,
          as  she needs these payments to continue  and
          he   can   afford  to  pay  them.   (Emphasis
          omitted.)
          
Judge  Michalski approved the master's report and for the interim
ordered:  "The division of property and debts under the  November
12,  2002  Decree  of Dissolution of Marriage is vacated,  except
that  Mr.  Hopper  shall continue to pay Ms. Hopper  $600.00  per
month in spousal maintenance and up to $600.00 per month for  her
medical prescriptions."
          But the final order on the property division dated June
14,  2006  did  not  contain any mention of the spousal  support.
James  filed  for reconsideration of the final property  division
          order, arguing that the order did not refer "to either the
continuation, termination or enforcement" of the spousal support.
However,  the superior court's order on reconsideration  did  not
mention the spousal support payments.
          On  August 29, 2006, about two weeks after the  court's
order  on  reconsideration, Loretta filed an expedited motion  to
show  cause  because James had stopped paying spousal  support.23
James opposed the motion, arguing that the final decision of  the
trial court regarding marital property did not require him to pay
spousal  support.   The court's order regarding  spousal  support
stated:  "Master Brown's extension of the $600 per month  spousal
support  beyond  the  December 1,  2005  cutoff  was  an  interim
decision  pending resolution of the property division  which  had
not  been  completed.  Now that the property division is complete
the interim obligation is complete."
          Loretta argues that when the superior court vacated the
original  dissolution, it vacated the property and debt division,
but  did  not  vacate  the  part  of  the  dissolution  agreement
requiring the spousal support payments.  Loretta also notes  that
the  trial concerned the "division of property and debts" and did
not mention spousal support.  Loretta states that spousal support
was  not  contested  during  trial, although  James  did  briefly
testify  about Loretta qualifying for Medicare.  In  her  appeal,
Loretta argues that the original spousal support order was  never
rescinded and therefore remained in effect even after the court's
final property decision.
          But  as  James notes, the trial court's act in vacating
the  dissolution decree and its property division in fact vacated
the  entire  agreement,  and not just  certain  parts.  James  is
correct in pointing out that the final property division did  not
require  the spousal support payments to continue, and the  trial
court  therefore  properly ordered that they were  not  required.
James  maintains  that  due  to the amount  of  property  Loretta
received  in the revised property division, there is no equitable
reason to require spousal support to continue.
          As  we  have stated in the past, the trial court should
attempt "to resolve the financial concerns arising from a divorce
by  means of the property division," but spousal support  may  be
awarded  if  it  is "just and necessary."24  In  this  case,  the
superior  court  divided  the property between  the  parties  and
determined it was not necessary for James to pay Loretta  spousal
support  after she received her portion of the property division.
And  it  was  Loretta  who  moved to set  aside  the  dissolution
agreement  under Rule 60(b).  Once that motion was  granted,  the
entire dissolution agreement and property division was set aside,
not  just  pieces of it.  While the trial court  chose  to  award
interim  spousal  support  to Loretta until  the  final  property
division was concluded, it was not an abuse of discretion for the
trial  court to determine that Loretta was no longer entitled  to
spousal support following the property division.
V.   CONCLUSION
          The  superior  court's determination that the  Northrim
bank  account  containing Social Security  payments  was  marital
property was incorrect, and therefore the trial court is REVERSED
          on that issue.  The award of enhanced attorney's fees under Rule
82  is  also  REVERSED because it was based  on  conduct  falling
outside  the litigation.  All other decisions by the trial  court
are AFFIRMED, and the case is REMANDED for proceedings consistent
with this opinion.
_______________________________
     1    AS 25.24.140 provides, in relevant 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; in applying this paragraph, the court
          shall  take appropriate steps to ensure  that
          the   award   of  attorney  fees   does   not
          contribute  to  an unnecessary escalation  in
          the litigation . . . .
          
     2    McGee v. McGee, 974 P.2d 983, 987 (Alaska 1999).

     3     Id.  (quoting Buster v. Gale, 866 P.2d  837,  841  n.9
(Alaska 1994)).

     4    McGee, 974 P.2d at 987.

     5    Id.

     6    Id. at 987-88.

     7    Schmitz v. Schmitz, 88 P.3d 1116, 1122 (Alaska 2004).

     8    Ogard v. Ogard, 808 P.2d 815, 817 (Alaska 1991).

     9    Silvan v. Alcina, 105 P.3d 117, 120 (Alaska 2005).

     10    Calhoun v. Greening, 636 P.2d 69, 72 n.4 (Alaska 1981).

     11     Lacher  v.  Lacher, 993 P.2d 413, 419  (Alaska  1999)
(quoting  Schofield  v.  Schofield, 777  P.2d  197,  202  (Alaska
1989)).

     12    Lacher, 993 P.2d at 419-20.

     13     Schmitz v. Schmitz, 88 P.3d 1116, 1124 (Alaska  2004)
(internal quotations omitted).

     14     Lowdermilk v. Lowdermilk, 825 P.2d 874,  878  (Alaska
1992).

     15    88 P.3d at 1127.

     16    Id. at 1127-28.

     17    Id. at 1128.

     18     Id.  at  1128-29 (quoting Brett R. Turner,  Equitable
Distribution of Property  5.23, at 268 (2d ed. 1994)).

     19    Mann v. Mann, 778 P.2d 590, 591 (Alaska 1989).

     20    McGee v. McGee, 974 P.2d 983, 992 (Alaska 1999).

     21     4 P.3d 956, 961 n.24 (Alaska 2000); see also Alderman
v.  Iditarod  Props.,  Inc.,  104 P.3d  136,  145  (Alaska  2004)
(stating that "conduct undertaken in `bad faith' for the purposes
of  Rule 82 must relate to conduct during the litigation, and not
to actions taken during the underlying transaction").

     22     724  P.2d 527, 530 (Alaska 1986) (internal quotations
omitted).

     23     Loretta's  motion  to show cause  does  not  indicate
whether James had stopped paying just the $600 in spousal support
or  whether  he had also stopped making the medical  prescription
payments.  It is unclear from the briefing of the parties whether
James is still paying Loretta's prescription costs.

     24    Fernau v. Rowdon, 42 P.3d 1047, 1058 (Alaska 2002).

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