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Abood v. Abood9/2/2005
or 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 court's 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. The superior court's finding that the withdrawals came out of marital funds was not clearly erroneous.
We considered the effect of using separate property to secure margin loans for marital purposes in Gardner v. Harris. We held there that this use did not automatically transmute the separate property into marital property. 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 Kimberly's 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 Gardner.
Nor did Patrick's 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, Patrick's 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. 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. We therefore cannot say that the superior court's 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. 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.' " When the source asset is also secondary property, tracing continues until either a separate or a marital primary source asset is found. Separate property may be traceable to its separate source despite being mixed with marital property in the same secondary asset. 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. "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."
The funds in the Merrill
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