Court Opinion

ID: 4214015
Source: CourtListenerOpinion
Date Created: 2017-10-23 19:24:21.860854+00
Date Added: 2024-06-11T14:14:59.073157
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 In re:                                                No. 74977-3-1

 NANCY WASHBURN,                                       DIVISION ONE

                        Appellant,
                                                                                        7--7-
            and                                                                         -4

                                                                                   CO
 MATTHEW DAVIS,                                        UNPUBLISHED

                        Respondent.                    FILED: October 23, 2017

          Cox, J. — Nancy Washburn appeals the trial court's rulings following a

bench trial on her petition for dissolution of a committed intimate relationship

(CIR) with Matthew Davis. The trial court properly characterized most of the

property of the parties. The characterization of one parcel of property as "quasi-

community property subject to a 15 [percent] separate lien" was harmless error.

The findings of fact were supported by substantial evidence and support the

conclusions of law. And the division of the property of the parties was just and

equitable. We affirm.

          Washburn and Davis moved in together in October 1996. At that time,

Washburn was 39, Davis was 26. They each earned less than $30,000 per year.
No. 74977-3-1/2

       Davis began working for T-Mobile in 2000, and his income has increased

each year. With bonuses, he earned over $400,000 in 2013. Davis is likely to

continue to earn at least $100,000 even if he loses his current position. In June

2013, Davis was awarded 15,078 restricted stock units(RSUs) when T-Mobile

went public.

       Washburn, on the other hand, had to stop working in 2004 due to bilateral

tendonitis, a work-related disability. She also has an incurable, progressive

autoimmune disease, dermatomyocitis, which requires costly treatments and

medication. She is on permanent disability, and receives a monthly income of

$3,518.28 from a combination of disability, social security, and a small pension

from her late husband.

       When the parties moved in together, Davis moved into the home

Washburn owned at 32612 SE 108th Street in Issaquah (32612). Together with

her late husband, she had purchased 32612 approximately three years earlier for

$152,000, incurring debt of approximately $136,000. They had also purchased

an adjoining separate lot, Lot 12, for $2,000 because it provided access to 32612

which was otherwise landlocked.

       While living together, Washburn and Davis deposited all of their earnings

into a joint bank account and paid all of their expenses out of that account. This

included the debt secured by the mortgage, property taxes on 32612, and the

costs of extensive repairs and remodeling. Davis rented, then sold, his home in

Burien and deposited the $49,000 proceeds into this joint account.

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No. 74977-3-1/3

       In 1997, the parties borrowed $25,000, which was secured by a second

mortgage on 32612 to begin some needed repairs. Washburn quit-claimed to

Davis a one percent interest in 32612, putting him on the title in order to get the

loan. In 2002, the parties refinanced the debt and borrowed $145,000, which

was secured by a mortgage. In 2008, Davis used a work bonus of $82,000 to

satisfy this loan and release the security. The security instrument then reflected

both parties' names.

       In 2003, the parties purchased the rental property next door to 32612 at

32611 108th Street(32611)for $175,000. In 2010, they purchased at a

foreclosure sale a second rental property adjacent to 32611 at 32607 108th

Street(32607)for $224,000. All three properties on SE 108th are landlocked

and can only be reached via Lot 12.

       Davis moved out of 32612 in October 2013. Washburn commenced this

proceeding on March 18, 2014.

       Following a week-long bench trial, the trial court entered its findings of fact

and conclusions of law, but not its final orders. Davis moved for reconsideration,

largely focused on Lot 12 issues. The trial court resolved these issues and

entered its final order on division of property. Washburn moved for

reconsideration and to set aside the judgment, which the trial court denied.

       Washburn appeals.

             CHARACTERIZATION AND DISTRIBUTION OF 32612

       Washburn first argues that the trial court incorrectly characterized 32612

as "quasi-community property subject to a 15[percent] separate lien." Based on

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No. 74977-3-1/4

the trial court's alternative ruling characterizing 32612 as Washburn's "separate

property subject to an 85 percent community lien" that initial characterization is

harmless error.

       It is undisputed that the parties were in a CIR.1 A CIR is "a stable, marital-

like relationship" where the parties cohabitate knowing they are not legally

married.2

       Once the trial court finds the existence of a CIR, it evaluates the interest of

each party in the property acquired during the relationship and then makes a just

and equitable division of that property.3 In Connell v. Francisco, the supreme

court observed that, while "laws involving the distribution of marital property do

not directly apply to the division of property following a [UR],]Washington courts

may look toward those laws for guidance." The court then held that, upon

dissolution of a CIR, the trial court may only distribute property that would be

considered community property in a marriage.5 Separate property is not subject

to distribution.6 The character of property, whether separate or community, or in

the case of a CIR, quasi-community, is determined at the time of acquisition.7

       1 Olver v. Fowler, 161 Wn.2d 655,657 n.1, 168 P.3d 348 (2007).
       2 Connell   v. Francisco, 127 Wn.2d 339, 346, 898 P.2d 831 (1995).
       3 Id. at 351

       4   127 Wn.2d 339, 349, 898 P.2d 831 (1995).

       5 Id. at 349-50.

       6   Id.
       7 Beam    v. Beam, 18 Wn. App. 444, 452, 569 P.2d 719 (1977).

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No. 74977-3-1/5

Moreover, the presumption that separate property remains separate is only

rebutted by evidence showing that the owner intended to change its character to

quasi-community property.8

       We review de novo whether property is separate or quasi-community as a

question of law.9 We review findings of fact for whether they are supported by

substantial evidence.19 Evidence is substantial if it is sufficient "to persuade a

fair-minded person of the truth of the declared premise."11 Whether the trial

court's distribution of the quasi-community property is just and equitable is

reviewed for abuse of discretion.12

       Here, the trial court erred in characterizing 32612 as quasi-community

property subject to a 15 percent separate lien. It was Washburn's separate

property because she owned it prior to the relationship with Davis. It is

undisputed that she and her late husband purchased the property, and it

remained her separate property.

       The trial court found that "all of the parties' actions at all relevant times

were consistent with treating the property as if it were a jointly owned asset," but

     8 In re Estate of Borghi, 167 Wn.2d 480, 484-85, 219 P.3d 932(2009);
Beam, 18 Wn. App. at 453.
       9   In re Marriage of Griswold, 112 Wn. App. 333, 339, 48 P.3d 1018 (2002)..
       10 Soltero v. Wimer, 159 Wn.2d 428, 433, 150 P.3d 552(2007).

       11   In re Marriage of Burrill, 113 Wn. App. 863, 868, 56 P.3d 993(2002).
                          at 433; see In re Sutton and Widner, 85 Wn. App.
       12 Soltero, 159 Wn.2d
487,491, 933 P.2d 1069(1997).

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No. 74977-3-1/6

that is not enough to treat the property as jointly owned.13 There was no

evidence showing that Washburn intended to change the character of 32612 to

quasi-community property, and the trial court made no such finding as to

Washburn's intent

       Nevertheless, the trial court alternatively characterized this property as

"separate property subject to an 85[percent] community lien" and only awarded

85 percent of the value of 32612 to the quasi-community.14 Accordingly, the

other characterization was harmless error.15

       When separate property is brought into a CIR and quasi-community funds

are used to make payments on the underlying obligation or to improve the

separate property, the quasi-community has a right of reimbursement or an

equitable lien.16

       Here, the trial court's finding of an 85 percent quasi-community lien on

32612 was supported by testimony and documentary evidence of quasi-

community labor and money devoted to making significant improvements to

32612 while the parties were living together. They installed a new deck, new

laundry room, new roof and gutters, cedar siding, custom garage doors, new

windows, new fireplaces, a retaining wall, and river rock walkway. Davis devoted

       13 Clerk's   Papers at 52.
       14   Id.

            Wallace Real Estate Inv., Inc. v. Groves, 72 Wn. App. 759, 771,
       15 See
868 P.2d 149, aff'd, 124 Wn.2d 881 (1994).
       16   Connell, 127 Wn.2d at 351.

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No. 74977-3-1/7

thousands of hours of physical labor, spending weekends and paid vacation time

working on 32612.

       Moreover, quasi-community funds were used to pay the obligation

secured by the mortgage and the property taxes, and to finance the repairs and •

remodeling. Using receipts, Davis calculated he spent $128,000 from the shared

account on remodeling since 2005. He did not have receipts for pre-2005

expenditures, but estimated that he spent a total of $223,461 beyond the costs of

the mortgage and property tax.

       Washburn argues that the trial court erred in imposing the quasi-

community lien. She notes that, in addition to working on 32612, Davis spent a

lot of time mountain climbing, and that his various climbing trips were very

expensive. She also claims that some of Davis' work was substandard and

argues that necessary work remains unfinished. These arguments essentially

disagree with the court's view of the evidence. We reject them in light of the

substantial evidence that supports the trial court's findings and its award of a

quasi-community lien.17

       Washburn also argues that the trial court's determination of the 85 percent

quasi-community ratio and the dollar value increase due to quasi-community

efforts are not supported by evidence in the record. She claims that Davis failed

to submit any evidence that quasi-community expenditures or labor actually

increased the value of 32612.

       17 See In re Marriage of Short, 125 Wn.2d 865, 874, 890 P.2d 12(1995);
In re Marriage of Rich, 80 Wn. App. 252, 259, 907 P.2d 1234 (1996).

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No. 74977-3-1/8

       This court affirmed the trial court's determinations of an increase in value

and percent of a quasi-community lien based on similar evidence in In re

Marriage of Lindemann.19 David Lindemann had an auto body repair business

when he began living with Kim.19 They lived together for 10 years, and Kim

sought an equitable share of the value added to the repair shop during the

relationship.29 The trial court had found that the shop's value at the beginning of

the relationship was "no more than $10,000" based upon evidence that David

could not afford tools, he owed back taxes, and he relied on his parents' home as

security for an $11,000 loan.21 It concluded that the net increase by the time of

separation was $218,725, which was supported by a business evaluation.22 On

appeal, David objected to this valuation, but this court disagreed in light of his

failure to present "authority or argument to show why the court's. . . evaluation

was unjustified "23

       Here, evidence showed that Washburn had purchased 32612 for

$152,000, obtained loans and a bank mortgage totaling approximately $136,000

to finance the purchase, and made mortgage payments for three years. 32612

was appraised at $480,000 at the time of trial.

       18 92 Wn. App. 64, 68-74, 960 P.2d    966 (1998).
       18   Id. at 68.
       28   Id. at 68-69.
       21   Id. at 71.
       22   Id.

       23   Id.

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No. 74977-3-1/9

       While it is not clear from the record exactly how the trial court arrived at

the percentage of a quasi-community lien in this case, as in Lindemann,

Washburn has failed to show why the trial court's evaluation was unjustified.

Based on the evidence presented, the court could reasonably find that 85

percent of the $300,000 increase in value was due to the significant

improvements made by the parties with quasi-community funds and labor.

       Washburn cites to In re Marriage of Elam, as support for her contention

that Davis failed to establish the dollar amount of the increase in value.24 In that

case, the trial court used a mathematical formula to determine what percentage

of the increase in price was due to inflation and what percentage was due to

improvements funded in part by the community.25 But Washburn has failed to

show that any such formula is mandated, especially in light of the significant

amount of quasi-community funds and efforts in this case.

       Finally, Washburn contends that, at a minimum, the increase in land value

was her separate property. But she cites to no case law where the value of the

underlying land was bifurcated from the value of the property as a whole. We

reject this unsupported argument.26

       24 97 Wn.2d    811, 650 P.2d 213(1982).
       25   Id. at 817.
     26 See King Aircraft Sales, Inc. v. Lane, 68 Wn. App. 706, 717, 846 P.2d
550(1993).

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No. 74977-3-1/10

                             OFFSET AND BENEFITS

       Washburn argues that the quasi-community's right to reimbursement for

its expenditures and efforts should be offset by the benefits received in living in

32612 for 17 years, rent-free. We disagree.

       The court is not required to offset any quasi-community contribution with

quasi-community benefits in determining whether a lien should be established.

Instead, the trial court may offset with benefits received.27 We review the trial

court's decision to deny an offset for abuse of discretion.28

       In In re Marriage of Miracle, the trial court determined that offset was

proper because the community efforts were significantly less than the benefits

received by the community.28 In that case, community funds were used to make.

monthly payments of $124 to $151 on the family residence, which was the wife's

separate property.3° The parties were married for seven years and during that

time, the husband provided no personal services and the parties made no

improvements to the home.31 The trial court determined that a reasonable rental.

value during that time would have been $250 to $300 per month.32 Given that

the rental value exceeded the community payments made, the trial court denied

       27   In re Marriage of Miracle, 101 Wn.2d 137, 139, 675 P.2d 1229(1984).
       28   Id.
       29   101 Wn.2d 137, 138-39, 675 P.2d 1229(1984).
       30   Id. at 138.
       31   Id.
       32   Id.

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No. 74977-3-1/11

the husband's request to award a community lien for the cost of the payments

made.33 The supreme court agreed in light of the trial court's finding that "the

community had been adequately compensated for its expenditures by its

beneficial use of the premises."34

       Here, the facts are quite different. The testimony established the fair

rental value of 32612 to be between $2,000 and $3,000 per month. But the

quasi-community funds expended on 32612 far exceeded the rental value.

Washburn claims that there was no basis for a quasi-community lien because

Davis spent a substantial amount of quasi-community funds on his separate

hobbies and purchases. We disagree because any such expenses and

purchases were quasi-community expenses and quasi-community property,

presumably incurred with the community's agreement.35

       Given the evidence showing that the parties used quasi-community funds

to pay off the loan secured by the mortgage and made "extreme" contributions by

investing labor and funds to improve 32612, the trial court did not abuse its

discretion by refusing to offset the quasi-community lien by benefits received.

                     PARTITION AND ALLOCATION OF LOT 12

       Washburn contends that the trial court erred in awarding a portion of Lot

12, which she claims is her separate property, to Davis based on his post-trial

actions. She also claims that the trial court's award of that portion improperly

       33 Id.

       34   Id. at 139.
       35 Connell, 127 Wn.2d at 351.

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No. 74977-3-1/12

increased the value of Davis' share because the trial court did not take this

ownership into account when valuing and then apportioning the parties' assets.

We disagree with both arguments.

       Only Washburn's name was on the title to Lot 12 prior to this CIR. But she

sold a portion of that property to the owners of 32607 in 2003, and signed a quit-

claim deed. Because the portion of Lot 12 conveyed by Washburn was

repurchased by these parties in 2010 when they purchased 32607, it was

purchased with quasi-community funds. Thus, it is quasi-community property. In

short, this lot is no longer her separate property.

       Moreover, the trial court's award to Davis of a portion of Lot 12 did not

improperly increase the value of his share of the quasi-community assets. Lot 12

has no value except as a means of access to the three SE 108th street

properties. When the trial court initially awarded 32607 to Davis, it assumed that

he would be able to obtain access to his property, ostensibly by an easement

across Lot 12. The value of 32607 is the same whether Davis owns a portion of

Lot 12 or just an easement across it.

       Finally, Washburn claims that the trial court abused its discretion in

considering evidence from a real estate attorney relating to ownership of Lot 12.

She claims that she was denied the opportunity for legal argument or discovery.

Washburn is incorrect.

       On February 24, 2016, the trial court entered an order inviting her to file

any response to the post-trial evidence on Lot 12 and to provide any supporting

documentation. She responded and restated her arguments in her motion to

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No. 74977-3-1/13

reconsider and motion for relief from judgment. In sum, this argument is

unpersuasive.

                           RESTRICTED STOCK UNITS

        Washburn claims that the trial court erred by failing to distribute all of the

RSUs as quasi-community property because under Connell, all such property

"acquired" during the relationship is quasi-community property. We hold that the

court correctly distributed this property.

       In June 2013, Davis was awarded 15,078 RSUs when T-Mobile went

public and granted RSUs to all its employees. The RSUs would vest over a

period of three years with the first group vesting on February 25, 2015, the next

third on February 25, 2016, and the final third on February 25, 2017. In order to

receive the RSUs, the employee had to still be employed by the company on the

day that group vested.

       T-Mobile granted the RSUs four months before the parties separated, but

they did not start to vest until 20 months later. Because the RSUs would only

vest if Davis was employed with T-Mobile on the vesting date, and that date was

after the relationship ended, the trial court had to determine what portion of the

RSUs could be attributed to quasi-community efforts. In other words, what

portion was earned before the parties separated. In making that determination, •

the trial court applied the time rule analysis set forth in In re Marriage of Short.36

       At trial, Davis' accounting expert, Steven Kessler testified that 13.28

percent of the first group of RSUs,667 shares, were quasi-community property,

       36   125 Wn.2d 865, 890 P.2d 12(1995).

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No. 74977-3-1/14

and the court adopted that determination. Kessler arrived at this figure using the -

formula set forth in Short: the time of grant to time of separation as the numerator

and the time of grant to time of vesting as the denominator.37

       Washburn claims that Short is not applicable because that case concerns

stock options, not RSUs. She argues that a stock option requires an employee

to pay money to obtain the stock in the future while a restricted stock unit allows

the employee to receive the stock in the future without making a payment. This

distinction is irrelevant when applying the time rule.

       Although an employee has to purchase the stock to take advantage of a

stock option, the purchase or "strike" price is often at a significant discount,

rendering the benefit very similar to an RSU. For example, in Short, the

employee's stock option gave him the right to purchase Microsoft shares at $23

per share.38 He purchased 7,000 shares at that price, sold some of those shares.

the same day at $64.75/share and the remainder five days later for $71.50/share,

and made a before tax profit of around $500,000.38 An RSU can be considered

as a stock option with a $0 strike price.

       Significantly, Kessler testified that RSUs and options are often treated the

same for purposes of bookkeeping. We see no reason to depart from this

approach in this case.

       37   Id. at 872, 875.
       38   Id. at 868-69.
       39   Id. at 869.

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No. 74977-3-1/15

       In sum, the Short analysis and formula applies to RSUs as well as stock

options. Both provide a future benefit contingent on continued employment.40

The trial court properly applied the time formula set forth in Short to the first

group of RSUs to vest.

                      JUST AND EQUITABLE DISTRIBUTION

       Washburn claims that the trial court's decision to award her 51 percent of

the quasi-community assets was inequitable "given the wide disparity in their

earnings and [her] permanent disability."41 We hold that the distribution was just

and equitable, as the law requires.

       In claiming that the trial court erred because it did not consider that, due to

her health problems, her future financial needs would be greater than Davis',

Washburn only cites to cases concerning the dissolution of a marriage.42 At the

dissolution of a CIR, the trial court may only distribute the quasi-community

assets regardless of the post-separation economic circumstances.43 Citation to

dissolution cases is not persuasive because of the differences between the

circumstances.

       Here, the trial court noted that Washburn is 13 years older than Davis, in

poor health, and earning substantially less. It also noted that Washburn's income

     40 See In re Marriage of Langham & Kolde, 153 Wn.2d 553, 564, 106 P.3d
212(2005).
       41   Appellant's Opening Brief at 2.
       42 See, e.g., In   re Marriage of Davison, 112 Wn. App. 251, 258-59, 48
P.3d 358(2002).
       43 Cf. Soltero, 159 Wn.2d    at 431-35.

                                              15
No. 74977-3-1/16

was unlikely to change while Davis' is more volatile. Washburn was awarded her

mortgage free home, 32611, which is currently rented for more than the debt

secured by the mortgage, a $100,000 cash transfer from Davis, and

approximately half of the couples' remaining joint assets.

       In the case of a non-marital dissolution, the division of the property must

be equitable but not equal. As long as there is a rational basis for the trial court's

decision, it will not be overturned." We conclude that the trial court did not

abuse its discretion in distributing the parties' assets because there is a rational

basis for the trial court's decision. The division was just and equitable.

                                 ATTORNEY FEES

       Finally, Washburn has requested an award of attorney fees. Because

Washburn has failed to cite to any law entitling her to an award of fees on appeal

and we are unaware of any such law, we reject this request.

       She sought fees below based on Davis' alleged discovery abuse and

intransigence pursuant to CR 11. A trial court's decision on discovery sanctions

is reviewed for abuse of discretion.45

       The trial court considered Washburn's CR 11 claim and denied her

request because there was no misconduct warranting such an award. On

       44   In re Sutton, 85 Wn. App. at 491-92.
      45 Wash. State Physicians Ins. Exch. & Ass'n v. Fisons Corp., 122 Wn.2d
299, 338-39, 858 P.2d 1054 (1993).

                                             16
No. 74977-3-1/17

appeal, Washburn has failed to demonstrate that the trial court abused its

discretion in denying her request below for attorney fees as a sanction.46

        Davis has also requested attorney fees based on the prolonged

procedural history of this case. We deny his request because there is no

showing of harm due to such delay.47

        The orders on appeal are affirmed, and we deny the requests for attorney

fees.
                                                            i_c7( ,S
WE CONCUR:

        46   Id. at 339.
        47   RAP 18.9(a).

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