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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Dragseth v. Dragseth (07/10/2009) sp-6384

Dragseth v. Dragseth (07/10/2009) sp-6384

     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 No. S- 13168
) Superior Court No. 3KN-07- 699 CI
v. )
) O P I N I O N
JOSEPH DRAGSETH, ) No. 6384 - July 10, 2009
          Appeal  from the Superior Court of the  State
          of  Alaska,  Third Judicial District,  Kenai,
          Carl Bauman, Judge.

          Appearances:  Allan Beiswenger, Law Office of
          Allan  Beiswenger, Anchorage, for  Appellant.
          Steven  Pradell, Steven Pradell & Associates,
          Anchorage,  for Appellee.

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

          WINFREE, Justice.

          Following  divorce proceedings, Gina  Dragseth  appeals
the  trial  courts  award  of child custody,  determination  that
certain promissory notes were Joseph Dragseths separate property,
and  decision  allowing Joseph to pay a portion of  an  attorneys
fees  award with certain property rather than cash.  Because  the
custody  decision  does  not adequately reflect  that  the  court
considered  relevant statutory factors and the best interests  of
the children, we vacate the physical and legal custody awards and
remand  for  further proceedings.  Because the  promissory  notes
were not presented or analyzed under the correct legal framework,
we  vacate the determination that the notes were Josephs separate
property  and remand for further proceedings.  In light of  these
rulings,  we vacate the order for attorneys fees and  remand  for
renewed consideration at the conclusion of the proceedings.
          Gina  and Joseph Dragseth married in March 1993.   They
have  two  minor children:  a son born in May 1995 and a daughter
born in June 1997.
          Joseph  attended  junior  college  and  has  vocational
certificates  and  experience as an  oilfield  operator.   He  is
employed  on  the  North Slope and typically has  a  three-weeks-
on/three-weeks-off schedule, meaning he is unavailable for three-
week  periods  while he is working.  He generally is  allowed  to
take  summers off for commercial fishing.  Gina has a high school
diploma and a pharmacy technician degree, and before the marriage
was employed as a head pharmacy technician.  However Gina was the
childrens primary caregiver and was not employed outside the home
for roughly the last ten years of the marriage.
          Relevant   to  this  appeal  are  two  income-producing
promissory  notes  in  favor of Taku  Marine.   Taku  Marine  was
originally  established  as  a  fifty-fifty  partnership  between
Joseph and his parents.  Joseph purchased his parents partnership
interest  in  1998, after which Joseph continued to operate  Taku
Marine as a sole proprietorship.  Also relevant to this appeal is
a  marine engine (with an agreed value of $5,000) included in the
parties lists of marital assets.
          Gina  filed  for  divorce in  August  2007.   After  an
evidentiary  hearing  an  interim order  for  child  custody  and
visitation,  child  and spousal support, and attorneys  fees  was
entered  in December 2007.  Trial took place in early  May  2008,
and  the  trial court issued its findings of fact and conclusions
of law on May 13, 2008.  Gina filed a motion for reconsideration,
but  it was denied under Civil Rule 77(k)(4) when the trial court
did not rule on it.
          Gina appeals.
          The  trial  court has broad discretion  in  determining
child  custody,1  and  we  will not set  aside  a  child  custody
determination  unless  the  lower  courts  factual  findings  are
clearly   erroneous  or  unless  the  lower  court   abused   its
discretion.2   A  court  abuses its discretion  if  it  issues  a
custody  decision  without considering all  statutorily  mandated
factors  that  are  relevant to the case at  hand.3   The  courts
findings  should give us a clear indication of the factors  which
the   superior  court  considered  important  in  exercising  its
discretion   or   allow  us  to  glean  from  the   record   what
considerations  were  involved.4  We will set  aside  the  courts
factual  findings  as clearly erroneous only  if  review  of  the
entire record leaves us with a definite and firm conviction . . .
that a mistake has been made. 5

          The   equitable  allocation  of  marital  property   is
          reviewed for abuse of discretion, as is the characterization of
property  as  marital  or  separate.6  Whether  the  trial  court
applied  the  correct legal rules in the process  of  classifying
property is reviewed de novo.7
     A.   Child Custody
          Under  AS  25.24.150(c)  the trial  court  shall  award
custody  in the best interests of the child.  In determining  the
childs best interests, it shall consider nine factors:
          (1)    the   physical,   emotional,   mental,
          religious, and social needs of the child;
          (2)  the capability and desire of each parent
          to meet these needs;
          (3) the childs preference if the child is  of
          sufficient  age  and  capacity  to   form   a
          (4)  the  love and affection existing between
          the child and each parent;
          (5) the length of time the child has lived in
          a  stable, satisfactory environment  and  the
          desirability of maintaining continuity;
          (6)  the  willingness  and  ability  of  each
          parent  to facilitate and encourage  a  close
          and continuing relationship between the other
          parent and the child . . . ;
          (7)  any evidence of domestic violence, child
          abuse, or child neglect . . . or a history of
          violence between the parents;
          (8)  evidence  [of] substance  abuse  .  .  .
          directly affect[ing] the child; [and]
          (9)  other  factors that the court  considers
          Gina   claimed   at   trial  that  Josephs   discipline
techniques  amounted  to  a history of  domestic  violence.   She
requested  sole  legal  custody of the children  and  asked  that
Joseph  be  allowed  only supervised physical  custody  until  he
received  evaluation  and treatment.  The  trial  court  rejected
Ginas  request,  calling her accusations  frivolous  and  without
merit  and concluding that Gina likely raised her claims  against
[Joseph]  to influence the [custody] investigator and  the  court
regarding custody and child support.
          The  custody  investigator found  no  reportable  child
abuse,  but  recommended  awarding Gina sole  legal  and  primary
physical custody.  The trial court rejected that recommendation.9
          The  trial  court awarded joint legal custody,  finding
that  Joseph  and Gina were able to have constructive discussions
about  major parental decisions10 and finding that there  was  no
other  evidence joint legal custody would be inappropriate.   The
trial court also awarded joint physical custody and continued the
interim visitation framework that accommodated both Josephs  work
schedule  and Ginas ability to have overnights with the  children
during the weeks Joseph did not work.
          Gina  argues  with respect to the award of joint  legal
          custody that the trial court erroneously found the parties could
reach agreement on major parental decisions.  Gina does not offer
any  specific evidence that she and Joseph differ on major issues
such  as  the  childrens  social or religious  upbringing.   Gina
instead points to reluctant compromises she and Joseph have  made
regarding child custody during the separation.
          This  court  will not disturb the trial courts  factual
findings  unless  review of the entire record leaves  us  with  a
definite and firm conviction . . . that a mistake has been made. 11
Our review of the record reveals sufficient grounds for the trial
courts determination that Gina and Joseph are able to communicate
effectively  when  necessary.  Although the custody  investigator
testified  that  there had been a breakdown in their  ability  to
communicate, Gina admitted that she and Joseph had been  able  to
agree  on  a  visitation schedule that was simpler than  the  one
provided  by the trial courts interim order.  Joseph agreed  that
he  and  Gina had essentially devised their own custody  schedule
and  had  traded  days  of  custody without  problems.   He  also
testified that he and Gina were able to work things out regarding
day-to-day affairs.  The trial court found no evidence that  Gina
and  Joseph  would  have difficulty agreeing on  decisions  about
schooling, religious practice, or extracurricular activities.  We
are  not  left  with  the impression that  the  trial  court  was
mistaken  in  finding  that the parties are able  to  communicate
effectively enough to share legal custody.  We therefore conclude
that this finding is not clearly erroneous.
          Gina also argues that the trial court did not make  any
explicit findings regarding the childrens best interests for  its
legal   and   physical  custody  determinations.    The   custody
investigators  assessment methodically  addressed  the  statutory
factors  underlying  the best-interests  analysis.   The  custody
investigator noted that Joseph relies on his parents  to  perform
many  day-to-day tasks, such as cooking and cleaning,  making  it
difficult  to  assess his ability to maintain a household  if  he
moves  out  of  his parents house.  She noted that both  children
expressed a preference for spending most of their time with their
mother.  She also noted that both children voiced dissatisfaction
with  the interim custody arrangement  which was adopted  without
alteration  by  the trial court as the final custody  arrangement
apparently  finding  it disruptive.  As the custody  investigator
put it, [t]he current schedule, while on paper seems equitable to
the  adults, has dramatically changed the childrens lives and  it
is  something that neither of them [is] liking or wanting to have
          The trial court is under no obligation to make specific
findings  regarding [a custody investigators] report as  long  as
the court considers the appropriate statutory factors when making
custody  determinations.12   But the trial  courts  eighteen-page
decision  does not contain the phrase the best interests  of  the
children,  and  the trial court failed to address, explicitly  or
implicitly,   the  relevant  statutory  factors   including   the
childrens  custody  preference, the relative  bonds  between  the
children and each parent, and the childrens need for stability.13
Even  after  Gina pointed out this deficiency in her  motion  for
          reconsideration, the trial court failed to present best interests
findings  in  support  of the custody award.   The  trial  courts
decision  does not give us the required clear indication  of  the
factors  which the . . . court considered important in exercising
its discretion.14
          Joseph  argues  that  the trial courts  best  interests
findings  in  the  December 2007 interim custody  and  visitation
order  are  sufficient to support the trial courts custody  award
after  trial.  After an evidentiary hearing on December 19, 2007,
the trial court noted in its order only that it found both of the
parties are fit parents and that [it] is in the best interests of
the  children to have substantial quality time with each  parent.
Joseph  argues  this finding implicitly reflects that  the  trial
court  considered AS 25.24.150(c)(1)-(2) (needs of  the  children
and capability and desire of parents to meet childrens needs), AS
25.24.150(c)(4)    (stability    and    continuity),    and    AS
24.25.150(c)(6) (parents willingness to facilitate and  encourage
relationships between the children and the other parent).
          We  disagree with Joseph.  He reads much into a  single
conclusory  statement  in  an  interim  order  entered  after  an
abbreviated evidentiary hearing, and we note that the trial court
did not incorporate its interim order into the final findings and
conclusions.   The brief mention of the childrens best  interests
in  the  December  2007  interim order cannot  be  considered  an
acceptable  substitute for appropriate findings on the  statutory
best-interests factors after the full trial on the merits of  the
custody dispute.
          Generally  the remedy for failing to consider statutory
custody  factors  is  a remand to the trial  court  for  specific
findings  on  relevant  factors.15  Gina asserts  she  should  be
awarded  legal and physical custody as a matter of law.  Although
Gina  argues  that  the  facts relevant  to  the  childrens  best
interests   are   not   in  dispute,  we   disagree   with   this
characterization of the evidence and decline Ginas invitation  to
make a custody determination as a matter of law.
          We  vacate  the legal and physical custody  awards  and
remand  for  specific findings on the best-interests factors  set
out  in  AS 25.24.150(c).  Because new findings will be  made  on
remand, the parties should be allowed to present the trial  court
with updated factual evidence bearing on these factors.
     B.   Taku Marine Promissory Notes
          When  dividing  the parties marital  assets  the  court
considered  the factors specified in AS 25.24.160 to determine  a
fair and equitable division.16  Because of Josephs higher earning
capacity and other differences in financial status between Joseph
and  Gina, the court found that a fifty-five/forty-five  division
of the marital assets in Ginas favor would be fair and equitable.
Neither party appeals this determination.
          The  character of the Taku Marine promissory notes  was
disputed  at trial:  Gina claimed they were marital property  and
Joseph claimed they were his separate property.  The trial  court
found that Taku Marine had been a fifty-fifty partnership between
Joe  and his parents, that Joe had purchased his parents interest
and  continued to operate the business as a sole proprietor,  and
          that the two promissory notes arose not from loans of marital
funds, but from Taku Marine business operations.  The trial court
found  that Joe passed fifty percent of the note payments to  his
parents  under  an oral agreement with them, and  that  the  note
proceeds  that  Joe  kept  and placed in  joint  accounts  became
marital  property.  The court concluded that the notes themselves
were Joes separate property.
     This  analysis was misplaced.  Instead of focusing  narrowly
on  the  notes, the parties and the trial court should have  been
looking at Taku Marine itself and whether Josephs interest in the
business  was marital or separate.17  This gives rise to  certain
          First, Joseph was a partner in Taku Marine beginning in
1980 and continuing after the 1993 marriage until the purchase of
his  parents  interest in Taku Marine in 1998.  Assuming  Josephs
partnership  interest in Taku Marine remained  separate  property
from 1993 through 1998, any demonstrated increase in the value of
that interest from the date of the marriage until the purchase of
his parents interest would be marital property.18  Assuming Joseph
thereafter  maintained  Taku Marine  as  separate  property,  any
demonstrated  increase  in the value of  the  business  from  the
purchase of his parents interest until the parties separated also
would  be marital property.19  The burden of persuasion  on  such
increases in value rests on Gina.20
          Second,  property obtained during marriage  is  marital
unless it can be traced to a source considered separate property.21
The  party  seeking  to establish that the property  is  separate
always  bears that burden of proof; thus untraceable  assets  are
marital property.22  Joseph acquired his parents interest in Taku
Marine  during  the  marriage,  and  unless  Joseph  can  provide
persuasive evidence that the funds for the acquisition came  from
a  separate property source, the fifty-percent interest  in  Taku
Marine acquired in 1998 would be marital property.
          Third,  evidence and arguments relied  upon  by  Joseph
suggest  that even if Taku Marine had been his separate  property
in whole or in part after 1998, the entire business may have been
transmuted   into  marital  property.   [A]  spouses   premarital
separate property can become marital through transmutation . .  .
.  Transmutation  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.23
Despite  claiming to have purchased his parents interest in  Taku
Marine and operating it as a sole proprietorship, Joe claims that
he  had  an  agreement with his parents that they still  were  to
receive fifty percent of the note proceeds.24  He also claims the
Taku  Marine payments to his parents were gifts, that  Gina  knew
the  Taku  Marine  payments to his parents were gifts,  and  that
Gina, a signer on the Taku account, wrote checks for some of  the
gifts  because annual gift limits under federal tax law precluded
him  from  giving enough to his parents to get their  half.   But
Gina  could  only  make  personal gifts of Taku  Marine  business
assets if those assets were hers, and so the Taku Marine business
may have been treated as  and thus may have become  jointly owned
          marital property.
          Because  neither  the  parties  nor  the  trial   court
addressed  Taku Marine itself, the present record is insufficient
for  a  determination  of  whether Taku Marine  was  separate  or
marital   property.   We  therefore  vacate  the   trial   courts
determination that the notes were Josephs separate  property  and
remand  for  further property division proceedings, and  specific
findings and conclusions, regarding the Taku Marine business.
     C.   Attorneys Fees
          The  December 2007 interim order required Joseph to pay
Gina  $5,000 for attorneys fees.  In light of that award and  the
division  of  marital  assets in Ginas  favor,  the  trial  court
awarded Gina an additional $2,000 in attorneys fees after  trial.
The  trial court offered Joseph the option of delivering a marine
engine  valued by both Gina and Joseph at $5,000 to  a  place  of
Ginas choosing in lieu of paying cash.
          Gina  argues that giving Joseph the option to pay  Gina
with a boat engine instead of cash was gratuitous, inappropriate,
and  an  intended  sanction  of Gina that  was  unwarranted,  and
constitutes  an  abuse of discretion.  Gina  contends  the  trial
court  was  trying  to  punish her for  her  claims  of  domestic
violence,  but  Joseph points out that the  trial  court  had  no
obligation to award Gina additional attorneys fees in  the  first
          The  purpose  of  awarding attorneys  fees  in  divorce
proceedings  is  to level the playing field, which  means  taking
into  account not only earning capacities and separate resources,
but  also the distribution of marital assets itself.25   We  have
noted  that a party who receives a property settlement sufficient
to  cover . . . attorneys fees should not expect an attorneys fee
award.26  By reversing the trial courts characterization  of  the
Taku  Marine  promissory notes as Josephs separate  property,  we
increase the value of the marital estate and the assets that will
be  distributed  to Gina.  On remand the award of attorneys  fees
should therefore be reconsidered.
          The  trial court did not explain why it chose the  boat
engine  as a cash substitute for part of the attorneys fee award.
Absent  a  dispute about the ability of one party to convert  the
property into cash, we see no problem per se in awarding property
as  a  substitute for the cash value of an attorneys  fee  award.
But  when one party raises concerns about the ability to  convert
that  property to cash, as Gina has here, the trial court  should
make  findings to justify that aspect of its award.  If on remand
the  trial court reinstates the specifics of its award, it should
address  Ginas  arguments and explain its  reasons  for  allowing
Joseph to pay attorneys fees with the boat engine.
          We  AFFIRM  the trial courts factual finding  that  the
parties  are  able to communicate sufficiently  for  joint  legal
custody,  but  we VACATE the trial courts child custody  decision
and  REMAND  for specific findings and conclusions on  the  best-
interests factors of AS 25.24.150(c).
          We  VACATE the trial courts determination that the Taku
Marine  promissory  notes are separate property  and  REMAND  for
          further property division proceedings regarding the Taku Marine
          We  VACATE and REMAND the issue of attorneys  fees  for
renewed consideration at the conclusion of the proceedings.
     1     Blanton v. Yourkowski, 180 P.3d 948, 951 (Alaska 2008)
(citing  Borchgrevink v. Borchgrevink, 941 P.2d 132, 134  (Alaska

     2    Id.

     3    Park v. Park, 986 P.2d 205, 206 (Alaska 1999).

     4     Smith  v.  Weekley, 73 P.3d 1219, 1226  (Alaska  2003)
(quoting  Borchgrevink, 941 P.2d at 139-40)  (internal  quotation
marks omitted).

     5     Id.  at 1222 (quoting Duffus v. Duffus, 932 P.2d  777,
779 (Alaska 1997)).

     6     Fortson  v. Fortson, 131 P.3d 451, 456 (Alaska  2006);
Leis v. Hustad, 22 P.3d 885, 887 (Alaska 2001).

     7     Leis, 22 P.3d at 887 (citing Cox v. Cox, 882 P.2d 909,
913 (Alaska 1994)).

     8      AS  25.24.150(c)(1)-(9).  If there is  a  finding  of
domestic violence, the court must consider AS 25.24.105(g), which
creates  a  rebuttable presumption that sole or  joint  legal  or
physical custody should not be awarded to a parent with a history
of perpetrating domestic violence.  Puddicombe v. Dreka, 167 P.3d
73, 77 (Alaska 2007).

     9     The  trial court is not obligated to adopt  a  custody
investigators  recommendations.  See, e.g., Chase v.  Chase,  109
P.3d   942,   945-46  (Alaska  2005)  (noting  that   a   custody
investigators  report  is  just one of many  pieces  of  evidence
available  for  the  trial  courts resolution  of  child  custody

     10     See  Bird v. Starkey, 914 P.2d 1246, 1250 n.6 (Alaska
1996) (Joint legal custody is predicated upon the parents ability
to  reach  ultimate agreement on the important decisions involved
in child rearing.).

     11     Smith  v.  Weekley, 73 P.3d 1219, 1222 (Alaska  2003)
(quoting Duffus v. Duffus, 932 P.2d 777, 779 (Alaska 1997)).

     12    Chase, 109 P.3d at 946.

     13      The   trial   court   did  implicitly   address   AS
25.24.150(c)(7), the factor concerning domestic violence, when it
rejected   Ginas   characterization   of   Josephs   disciplinary
techniques as domestic violence.

     14     Smith,  73  P.3d  at  1226 (quoting  Borchgrevink  v.
Borchgrevink,  941  P.2d  132, 139-40  (Alaska  1997))  (internal
quotation marks omitted).

     15    See id. at 1227.

     16     AS  25.24.160(a)(4) specifies that  the  division  of
property  must  fairly allocate the economic effect  of  divorce,
based on consideration of several factors including the length of
the  marriage  as  well  as  the parties  ages,  health,  earning
capacities, financial condition, and needs.

     17    See, e.g., 2 Brett R. Turner, Equitable Distribution of
Property   6:71  (3d ed. 2005) (There is broad general  agreement
that  a business . . . as an entity constitutes property.  It  is
therefore  marital property to the extent that  it  was  acquired
during the marriage.).  (Emphasis in original.)

     18     See,  e.g.,  Hanson v. Hanson, 125 P.3d  299,  304-06
(Alaska  2005)  (holding increase in value  of  husbands  ongoing
business  which  was  attributable to  his  marital  efforts  was
marital property); Schmitz v. Schmitz, 88 P.3d 1116, 1125 (Alaska
2004)  (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)); Abood v. Abood,  119  P.3d  980,  989-90
(Alaska 2005) (holding that time the husband spent working for  a
business   he  ran  as  a  sole  proprietorship  was  a   marital
contribution to the property).

     19     Hanson, 125 P.3d at 304-06; Schmitz, 88 P.3d at 1125;
Abood, 119 P.3d at 989-90.

     20    Hanson, 125 P.3d at 304.

     21    Schmitz, 88 P.3d at 1128.

     22    Id. at 1128 (internal citation omitted).

     23     Id. at 1125 (citing inter alia, Harrower v. Harrower,
71 P.3d 854, 857 (Alaska 2003)).

     24    Joe also inconsistently claims that his agreement with
his parents is that they still own half of Taku Marine and always

     25     See,  e.g.,  Tybus v. Holland, 989  P.2d  1281,  1289
(Alaska 1999); Money v. Money, 852 P.2d 1158, 1165 (Alaska 1993);
Siggelkow v. Siggelkow, 643 P.2d 985, 989 (Alaska 1982).

     26    Tybus, 989 P.2d at 1289.

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