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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

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marital  property $50,500 that the husband had recently withdrawn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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