Court Opinion

ID: 4204488
Source: CourtListenerOpinion
Date Created: 2017-09-19 17:20:22.881765+00
Date Added: 2024-06-11T14:41:12.407623
License: Public Domain

Filed
                                                                                       Washington State
                                                                                       Court of Appeals
                                                                                        Division Two

                                                                                      September 19, 2017

       IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                           DIVISION II
    In re the Marriage of:
                                                                    No. 49393-4-II
    STEVEN D. WAZNY,

                             Respondent,
                                                              UNPUBLISHED OPINION
           and

    SHANTEL P. WAZNY,

                             Appellant.

          MAXA, A.C.J. – Shantel Wazny appeals the trial court’s denial of her postjudgment

motions regarding the dissolution decree that terminated her marriage to Steven Wazny. The

decree incorporated a CR 2A settlement agreement that allocated community property and debts

between the parties.

          Steven1 was the director of operations of and had an ownership interest in two companies

that owned and operated fast food restaurants: AJP Enterprises LLC and NHG Enterprises LLC.

The CR 2A agreement and dissolution decree allocated the interest in AJP to Steven and did not

reference NHG, which an expert had stated had no value.

          Shantel filed two motions regarding the dissolution decree and the CR2A agreement: a

CR 60(b) motion to vacate the property and debt distribution portions of the dissolution decree

1
  To avoid confusion, first names are used to identify Shantel and Steven. No disrespect is
intended.
No. 49393-4-II

and a motion to divide equally between the parties certain property that was undisclosed and

undivided in the CR 2A agreement. The motions included various claims, but Shantel’s primary

allegation was that $300,000 in loans Steven received from the primary owner of AJP in fact

were profits from AJP that Steven had concealed from her. The trial court denied both motions.

A court commissioner also denied Shantel’s motion to clarify that she was not responsible for the

second mortgage on the community home that was awarded to her and denied her request for

reasonable attorney fees.

       We affirm the trial court and the court commissioner in all respects with two exceptions.

First, we hold that the trial court erred by applying a clear, cogent, and convincing evidence

standard rather than a preponderance of the evidence standard for Shantel’s undisclosed property

motion. We reverse the trial court’s denial of Shantel’s undisclosed property motion on one

issue: her allegation that Steven concealed $300,000 of AJP profits and that those profits

constituted undisclosed property under the CR 2A agreement. Second, and consistent with this

ruling, we also vacate the trial court’s award of reasonable attorney fees to Steven as the

prevailing party under the CR 2A.

       We remand for the trial court to consider, using the preponderance of the evidence

burden of proof, Shantel’s claim that Steven concealed $300,000 of AJP profits and that the

$300,000 was undisclosed property under the CR 2A agreement.

                                              FACTS

       Steven and Shantel were married in 1997 and separated on October 23, 2011. Steven

subsequently filed a dissolution petition.

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No. 49393-4-II

       At mediation on September 4, 2013, Steven and Shantel reached a settlement and signed a

CR 2A agreement that memorialized the settlement terms. On November 21, the trial court entered

a decree of dissolution and findings of fact and conclusions of law. Both pleadings incorporated

the CR 2A agreement.

Business Assets

       Steven paid $75,000 for the 10 percent equity interest in AJP, which was formed in

September 2010. AJP’s primary owner was Ajay Chopra. Steven was the director of

operations/operating partner and was entitled to receive guaranteed payments as well as five

percent of the company’s net cash flow. AJP owned a number of fast food restaurants.

       Steven also owned a 10 percent interest in the equity and profits of NHG. Chopra also

was the primary owner of this company. As of December 31, 2012, NHG owned a single fast

food restaurant that had opened on December 17, 2012. The record is unclear when NHG was

formed, but the evidence suggests a formation date of around October 2012.

       Before entering into the settlement, Steven and Shantel jointly retained a CPA to perform

business valuations of AJP and NHG. The CPA prepared reports on these valuations in July

2013. He estimated that Steven’s interest in AJP was worth between $150,000 and $300,000 on

December 31, 2012. He estimated that Steven’s interest in NHG had little or no current value on

December 31, 2012 because its recently opened restaurant was operating at a loss and the

company had approximately $400,000 of debt.

       The parties did not ask the CPA to update his valuations before the mediation.

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No. 49393-4-II

CR 2A Agreement and Dissolution

        The CR 2A agreement incorporated a worksheet showing the property and debt allocation

between Steven and Shantel. The property division showed that Shantel would receive the

family home. A handwritten interlineation added that “wife takes 1st and 2nd” mortgage.

Steven, Steven’s attorney, and Shantel’s attorney all initialed the interlineation, but Shantel did

not. The 10 percent interest in AJP was valued at $44,500 after loan repayment and was

allocated to Steven. NHG was not listed on the property worksheet.

        The debt division showed that “B of A Equity Line of Credit for Buy-in to AJP” in the

amount of $42,319 was allocated to Steven. Clerk’s Papers (CP) at 7. Steven also was assigned

debts in the amount of $25,000 for a loan from AJP, the balances on three credit cards, $18,000

for a loan on a boat, and $19,000 for a loan on a car.

        The CR 2A agreement included an undisclosed property provision that stated, “Any

undisclosed property shall remain 50% each to the parties as tenants in common and may be

brought back to Court. Prevailing party entitled to attorney fees and costs on court ruling.” CP

at 3.

        The trial court’s findings of fact entered with the dissolution decree incorporated the CR

2A agreement by reference. The findings also provided a list of the parties’ real and personal

community property, which did not include NHG.

        The dissolution decree sections for property and liabilities allocated to the two parties all

stated, “See CR 2A Agreement on file and incorporated herein by this reference.” CP at 707.

However, the section on liabilities to be paid by Shantel also stated, “Wife shall be responsible

for payment of . . . the 1st and 2nd mortgages on the family home awarded to her.” CP at 707.

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Motion to Vacate and Post Decree Motions

       On February 17, 2016 Shantel filed two related motions regarding the dissolution decree

that had been entered over two years earlier. First, she filed a motion to vacate the portions of

the CR 2A agreement and dissolution decree relating to the valuation of AJP and the distribution

of debt. This motion to vacate was brought under CR 60(b) based on Steven’s alleged fraud in

(1) concealing more than $300,000 in profits from AJP, resulting in a low valuation of the

interest in AJP allocated to him; and (2) claiming as community debts allocated to him certain

sham debts and the second mortgage that he later claimed Shantel was responsible for, resulting

in a disproportionate debt distribution.

       Second, Shantel filed “post decree motions” on various issues. She alleged that the

following property was “undisclosed” in the CR 2A agreement: (1) $300,000 in concealed profits

from AJP, (2) a $31,733.33 distribution from NHG, and (3) the value of Steven’s interest in

NHG.2 Shantel claimed that she was entitled to 50 percent of this property under the undisclosed

property provision of the CR 2A agreement. Shantel also requested that the trial court rule that

she was not responsible for the second mortgage on the family home that had been awarded to

her.3 She noted in a declaration that the second mortgage was the same debt that had been

allocated to Steven as an equity line of credit in the CR 2A agreement.

2
 Shantel also argued that Steven misrepresented that NHG had no value and should have
updated Deaton’s valuation before the mediation.
3
 Shantel’s motion also raised other issues regarding enforcement of the dissolution decree that
are not at issue on appeal.

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No. 49393-4-II

       The trial court heard argument on the motions and made an oral ruling on April 22. The

court ruled that Shantel had failed to show by clear, cogent, and convincing evidence that Steven

committed fraud or misrepresentation to warrant redistributing AJP’s profits or reallocating the

community debt. The trial court sent for consideration by a trial court commissioner the issue of

whether Shantel was responsible for the second mortgage on the community home under the

terms of the CR 2A agreement and other issues regarding enforcement of the dissolution decree

provisions not at issue in this appeal. The trial court deferred consideration of attorney fees until

after the commissioner ruled on the other issues.

       On June 28, the commissioner heard arguments and ruled that “[t]he CR2A is clarified to

state that the wife is responsible for the Bank of America Equity Loan line of credit on the family

residence.” CP at 1017. The commissioner ruled in favor of Shantel on her other claims,

including Steven’s obligation to execute a quit claim deed for the community home, to pay for

the replacement of a deck on the home, and pay certain pre-dissolution household expenses.

However, the commissioner declined to award Shantel attorney fees.

Motion for Reconsideration

       On May 19, Shantel filed a motion for reconsideration, arguing that the trial court’s

ruling had addressed only her motion to vacate and not her undisclosed property motion. She

emphasized that the court’s application of the clear, cogent, and convincing standard applied

only to the motion to vacate and not to her motion on undisclosed property under the CR 2A

agreement, for which a preponderance of the evidence standard applied. On July 1, the trial

court heard argument on Shantel’s motion for reconsideration. In an oral ruling, the trial court

denied reconsideration and declined to clarify its ruling. The court emphasized that the clear,

                                                  6
No. 49393-4-II

cogent, and convincing standard was proper for all of Shantel’s motions. The court entered

findings of fact and conclusions of law regarding Shantel’s motion to vacate and undisclosed

property motion and the motion for reconsideration.

       The trial court subsequently awarded Steven reasonable attorney fees based on the

attorney fee clause in the “undisclosed property” provision of the CR 2A agreement.

       Shantel appeals the trial court’s denial of her motion to vacate, undisclosed property

motion, and motion for reconsideration, and the award of attorney fees to Steven.

                                           ANALYSIS

A.     MOTION TO VACATE

       Shantel argues that the trial court erred by denying her CR 60(b) motion to vacate the

AJP valuation and division and the distribution of debt. We disagree.

       1.   Legal Principles

       CR 60(b)(4) authorizes a trial court to vacate a judgment for “[f]raud . . . ,

misrepresentation, or other misconduct of an adverse party.” The rule is aimed at judgments that

were unfairly obtained. Dalton v. State, 130 Wash. App. 653, 668, 124 P.3d 305 (2005). A party

seeking relief under CR 60(b)(4) must show fraud, misrepresentation, or misconduct by clear,

cogent, and convincing evidence. Id. at 665.

       The decision to grant or deny a motion to vacate a judgment under CR 60(b) is within the

trial court’s discretion. Jones v. City of Seattle, 179 Wash. 2d 322, 360, 314 P.3d 380 (2013).

Therefore, we review CR 60(b) orders for abuse of discretion. Tamosaitis v. Bechtel Nat’l, Inc.,

182 Wash. App. 241, 254, 327 P.3d 1309 (2014). A trial court abuses its discretion if its decision

is based on untenable grounds or reasons. Id.

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No. 49393-4-II

       2.   Analysis

            a.   $300,000 of Concealed AJP Profits

       Shantel argues that Steven fraudulently concealed $300,000 of AJP profit distributions,

and that the CPA would have given a significantly higher valuation of Steven’s interest in AJP if

he had known that AJP had those additional profits. She asserts that AJP must be revalued and

that community property must be reallocated to reflect the higher value going to Steven.

       Shantel argued in the trial court that Steven concealed the $300,000 in AJP profits by

having Chopra hold the money in his account and transfer it to Steven after the dissolution. She

claimed that the $300,000 represented a profit distribution and not a loan. Her position was

based on an analysis of amounts Chopra received from AJP and of AJP’s profits compared with

distributions to Steven during 2012 and 2013.

       However, Chopra stated in a declaration that the $300,000 he gave Steven was a loan, not

Steven’s income from AJP. Further, the trial court found that the evidence Shantel presented did

not explain why Steven was entitled to more money from AJP than he received. Therefore, the

trial court concluded that there was not clear, cogent, and convincing evidence that Steven had

concealed $300,000 of AJP profits. Substantial evidence supports that finding.

       Shantel also argues that Steven’s “transfer” of $300,000 to Chopra before that amount

was returned to him as a loan was fraudulent under the Uniform Fraudulent Transfer Act

(UFTA), chapter 19.40 RCW, and as a result she met her burden to prove clear, cogent, and

convincing evidence of fraud.4 Under the UFTA, a creditor can avoid a property transfer

4
 Shantel argued for the first time on reconsideration in the trial court that the court should have
applied a presumptive fraud standard based on the UFTA instead of requiring clear, cogent, and
convincing evidence of fraud.

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No. 49393-4-II

deemed to be fraudulent to the extent necessary to satisfy the creditor’s claim. RCW

19.40.071(a)(1). The creditor also may have a cause of action against a person accepting a

fraudulent transfer. RCW 19.40.081(b)(1); see generally Thompson v. Hanson, 168 Wash. 2d 738,

744-45, 239 P.3d 537 (2009). The UFTA provides that certain types of property transfers are

deemed fraudulent. RCW 19.40.041(a)(1); RCW 19.40.041(a)(2)(ii); RCW 19.40.051(a).

       However, Shantel did not assert a claim under the UFTA to avoid the transfer or to

recover from Chopra; she moved to vacate a judgment under CR 60(b). Shantel does not present

any authority that supports the application of the UFTA standards in the context of a CR 60(b)(4)

motion to vacate for fraud. In the absence of such authority, we decline to apply UFTA

standards and presumptions in addressing the trial court’s CR 60(b)(4) ruling.

       Properly applying the clear, cogent, and convincing standard, the trial court concluded

that Shantel did not establish that Steven fraudulently concealed $300,000 of AJP income.

Accordingly, we hold that the trial court did not abuse its discretion in denying Shantel’s CR

60(b) motion to vacate the AJP valuation and distribution.

            b.    Sham Debts

       Shantel characterizes four of the community debts allocated to Steven in the dissolution

decree as sham debts: (1) a $25,000 loan from AJP that Steven did not repay, (2) the balances on

three credit cards that AJP must have paid, (3) a loan on a boat that either did not exist or Steven

was not making payments on, and (4) a car loan that AJP must have paid.5

5
 Shantel also places in this category the second mortgage/equity line of credit allocated to
Steven in the CR 2A worksheet that he later claimed was Shantel’s debt. But she does not argue
on appeal that the second mortgage allocation entitles her to relief under CR 60(b)(4). Instead,
she argues (as discussed below) that she should not be responsible for the second mortgage.

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No. 49393-4-II

       The trial court noted that the only evidence Shantel presented to show that Steven was

not liable for the debts was her inability to find payments on the debts in Steven’s bank

statements. In addition, the court found that Shantel had not presented evidence that someone

other than Steven was responsible for payment of the debts. The court also relied on In re

Marriage of Maddix, 41 Wash. App. 248, 703 P.2d 1062 (1985), to conclude that Shantel had an

obligation to resolve her disagreement about the amount of the debts before entering into the CR

2A agreement.6 Therefore, the court concluded that Shantel had not shown by clear, cogent, and

convincing evidence that Steven committed fraud or misrepresentation regarding the community

debts allocated to him. Substantial evidence supports that finding.

       Shantel also argues that Steven had the burden of proving good faith regarding the

community debt allocate to him. She points out that he failed to produce proof of the credit card

payments, the boat loan, or the car loan. But in a CR 60(b) motion, the moving party has the

burden of proof. Dalton, 130 Wash. App. at 665. The trial court found that Shantel did not meet

her burden.

       Accordingly, we hold that the trial court did not abuse its discretion in denying Shantel’s

CR 60(b) motion to vacate the distribution of community debt.

B.     MOTION ON UNDISCLOSED PROPERTY

       As noted above, the CR 2A agreement provided that each party would own 50 percent of

“[a]ny undisclosed property.” CP at 3. Shantel identifies certain property as “undisclosed”: (1)

6
  In Maddix, the court stated that when a party has sufficient notice to protect his or her interests,
it is incumbent upon a party to examine the value of a business before proceeding with the
dissolution. 41 Wash. App. at 253. The court stated that a party “should not be allowed to return
to court to do what should have been done prior to entry of the final decree.” Id.

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No. 49393-4-II

the $300,000 in allegedly concealed profits from AJP, (2) a $31,733.33 distribution from NHG

that Steven received shortly after the dissolution, and (3) the value of Steven’s interest in NHG.

She argues that the trial court improperly applied a clear, cogent, and convincing evidence

standard rather than a preponderance of the evidence standard for the undisclosed property

motion.

       We agree that the trial court erred in applying a clear, cogent, and convincing evidence

standard when addressing Shantel’s undisclosed property claims. However, we reverse only the

denial of Shantel’s motion regarding the $300,000 in allegedly concealed AJP profits. The other

two claims have no merit regardless of the evidence standard applied.

       1.   Alleged $300,000 in AJP Profits

       Shantel argues that the trial court erred by applying the CR 60(b)(4) clear, cogent, and

convincing burden of proof to the claims brought in her undisclosed property motion. She

asserts that her burden should have been to show undisclosed property by a preponderance of the

evidence. We review the applicable burden of proof de novo. In re Marriage of Wehr, 165 Wn.

App. 610, 613, 267 P.3d 1045 (2011).

       Shantel does not dispute that the trial court properly applied the clear, cogent, and

convincing standard of proof to her CR 60(b) motion. But her undisclosed property claims were

not based on CR 60(b)(4); they were based on the “undisclosed property” provision in the CR 2A

agreement. Shantel’s claims presented a factual issue based on the contract language – whether

certain property was undisclosed and therefore subject to the CR 2A provision requiring joint

ownership of that property.

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No. 49393-4-II

       “[T]he preponderance of the evidence standard generally applies in civil cases.” Dep’t of

Labor & Indus. v. Rowley, 185 Wash. 2d 186, 208, 378 P.3d 139 (2016); see also Nguyen v. Dept.

of Health, 144 Wash. 2d 516, 524, 29 P.3d 689 (2001) (stating that the preponderance standard

generally applies in civil cases involving monetary disputes between private parties). Steven

does not cite any authority supporting the application of a clear, cogent, and convincing evidence

standard to these contract-based claims, and in fact he does not even address this issue.

       In its April 22, 2016 oral ruling on all of Shantel’s postjudgment motions, the trial court

focused primarily on the CR 60(b)(4) motion. The court engaged in a lengthy analysis of

Shantel’s argument that the $300,000 in purported loans were concealed profits, and concluded

that the evidence did not support a finding that Steven was hiding community profits or

committed fraud or misrepresentation. The court expressly applied the clear, cogent, and

convincing evidence standard in making these conclusions. The trial court addressed Shantel’s

undisclosed property claim in one sentence and did not expressly state whether it was applying

the clear, cogent, and convincing standard or the preponderance standard in making this ruling.

       On reconsideration, Shantel argued that the trial court’s application of the clear, cogent,

and convincing standard applied only to the motion to vacate and not to her motion on

undisclosed property under the CR 2A agreement, for which a preponderance of the evidence

standard applied.

       In response, the trial court made it very clear that it was applying a clear, cogent, and

convincing standard to all of Shantel’s motions. The trial court stated,

       I’m going to deny your motion for reconsideration. I don’t think I need to clarify
       my ruling, I think it was unambiguous. I ruled that the standard was clear, cogent,
       and convincing evidence. I didn’t find there was that standard. I also did not have
       to find that there was a standard by the preponderance of the evidence because that

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No. 49393-4-II

       is not the appropriate standard I had to abide. I found Ms. Wazny’s evidence to be
       insufficient in every respect, and I found that the standard was appropriate of clear,
       cogent, and convincing evidence.

CP at 1067.

       The trial court should have applied a preponderance of the evidence standard to Shantel’s

claim that the $300,000 Steven received was undisclosed property under the CR 2A agreement.

But the trial court made it clear that it applied the clear, cogent, and convincing evidence

standard to that claim. Therefore, we hold that the trial court erred in applying the wrong burden

of proof. And because we cannot determine if the trial court would have made the same ruling

if it had applied the proper standard, we must remand for the trial court to consider this claim

based on a preponderance of the evidence standard.

       2.     NHG Distribution

       Steven apparently received his 2013 profit distribution from NHG in the amount of

$31,733.33 in December 2013, shortly after the dissolution was finalized. Shantel argues that

she is entitled to half of the NHG distribution because it was undisclosed

       Steven does not directly address this argument, but apparently does not dispute that this

distribution was undisclosed at the time of the settlement. However, the CR 2A agreement

expressly provides that each party “will keep his/her post separation acquisitions.” CP at 2. The

parties separated on October 23, 2011. There is no question that Steven’s entitlement to profits

from NHG earned in 2013 constituted a post-separation acquisition of property. Accordingly,

we hold that the trial court did not err in denying Shantel’s motion to divide Steven’s $31,733.33

profit distribution from NHG for 2013.

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No. 49393-4-II

       3.   Value of Steven’s Interest in NHG

       Shantel argues that she is entitled to 50 percent of Steven’s interest in NHG under the CR

2A agreement. However, the trial court made a specific finding of fact that NHG was fully

disclosed before the parties signed the CR 2A agreement and the dissolution decree. Shantel

does not appear to dispute this fact, and she cannot deny that the parties jointly retained an expert

to value NHG long before the settlement.

       Instead, Shantel focuses on the fact that NHG was undivided in the CR 2A agreement.

She claims that “[t]he parties contracted in their CR2A [sic] agreement to split undivided

property 50-50.” Br. of Appellant at 24-25. But Shantel’s claim is incorrect. The CR 2A

agreement clearly states that the parties will jointly own undisclosed property, not undivided

property. Any claim to undivided property must be addressed under the common law (discussed

below), not under terms of the CR 2A agreement.

       There is no dispute that Steven’s interest in NHG was disclosed at the time of the parties’

settlement. Accordingly, we hold that the trial court did not err in denying Shantel’s motion to

divide that interest under the undisclosed property provision of the CR 2A agreement.

C.     ENTITLEMENT TO INTEREST IN NHG AS UNDIVIDED PROPERTY

       As discussed above, Shantel appears to argue on appeal that she is entitled to divide

Steven’s interest in NHG under the common law because it was community property and was

not divided in the CR 2A agreement or the dissolution decree.7 We disagree that Shantel has

shown that Steven’s interest in NHG was community property.

7
  Shantel did not rely on the common law in her original motion, referencing only her entitlement
to divide NHG under the CR 2A agreement. But she did briefly make this argument before the
commissioner, and on reconsideration.

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No. 49393-4-II

        Shantel is correct that community property not disposed of in a dissolution is owned

thereafter by the former spouses as tenants in common. Yeats v. Estate of Yeats, 90 Wash. 2d 201,

203, 580 P.2d 617 (1978). And property acquired during a marriage is presumed to be

community property. In re Marriage of Schwarz, 192 Wash. App. 180, 189, 368 P.3d 173 (2016).

However, property acquired after spouses separate is the separate property of each, not

community property. RCW 26.16.140; Schwarz, 192 Wash. App. at 188-89. This rule is reflected

in the CR 2A agreement, which provides that each party “will keep his/her post separation

acquisitions.” CP at 2. The issue here is whether Steven acquired his interest in NHG before or

after the parties separated.

        Shantel states without citation to the record that NHG was formed during the marriage.

But she does not state whether or not NHG was formed before the separation. Steven relies on

the clause in the CR 2A agreement stating that each party would keep property acquired after

separation, and implies that his interest in NHG was acquired after the separation. But he does

not cite to the record to show when he acquired his interest in NHG. The trial court did not

address or make any finding of fact on this issue, probably because Shantel did not make this

argument in her original motion.

        The record shows that NHG opened an operating account on October 1, 2012, almost a

year after the date of the separation. The CPA’s report on NHG states that NHG’s first

restaurant opened on December 17, 2012. And the financial records indicate that the restaurant

was likely purchased in November 2012 because there was a large initial deposit of $275,540

that month from an account owned by Chopra followed three days later by a withdrawal for

$197,545, which is consistent with purchasing a restaurant. The December statement shows 18

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No. 49393-4-II

deposits over the course of the month totaling $185,714, which is consistent with opening the

restaurant.

       This evidence is consistent with NHG being formed around October 2012 for the purpose

of purchasing a fast food restaurant. This timing of NHG’s formation also is consistent with the

CR 2A agreement and the dissolution findings of fact, neither of which list NHG as community

property. Shantel identifies no evidence or even a reasonable inference showing that NHG was

formed before the parties separated in October 2011.

       Shantel seems to argue that the fact that Deaton made a valuation of NHG indicates that it

was community property. But the fact that Deaton prepared a valuation calculation for NHG

does not establish that NHG was formed before the separation.

       The only reasonable inference from the evidence presented is that NHG was formed

around October 2012, a year after the parties separated. As a result, we cannot apply the

presumption that Steven’s interest in NHG was community property that the parties jointly

owned. Accordingly, we hold that the trial court did not err in denying Shantel’s motion to

divide Steven’s interest in NHG.

D.     RESPONSIBILITY FOR SECOND MORTGAGE

       Shantel argues that the trial court commissioner erred in finding that she agreed to pay

the second mortgage because she did not initial the handwritten interlineation on the CR 2A

agreement. We disagree.

       Shantel argues that the division sheet included with the CR 2A agreement is not

enforceable with respect to the handwritten interlineation indicating that she takes the second

mortgage. She argues that the CR 2A agreement and division sheets do not clearly show that she

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No. 49393-4-II

in fact agreed to take responsibility for paying the second mortgage because (1) she did not

initial the handwritten interlineation, (2) the numbers on the division sheet showing the home

value less the first mortgage were not corrected to reflect her assumption of the second mortgage,

and (3) the debt division sheet still listed the equity line of credit as Steven’s responsibility.

        However, Shantel ignores the fact that the CR 2A agreement was incorporated into the

dissolution decree. Generally, when the dissolution decree incorporates by reference a

separation agreement, the agreement merges into the decree. In re Marriage of Yearout, 41 Wn.

App. 897, 900, 707 P.2d 1367 (1985). In addition, “[w]here a property settlement agreement is

approved by a divorce decree, the rights of the parties rest upon the decree rather than the

property settlement.” Mickens v. Mickens, 62 Wash. 2d 876, 881, 385 P.2d 14 (1963).

        Here, the dissolution decree expressly addressed the second mortgage. Regarding

Shantel’s liabilities, the decree referred to the CR 2A agreement, but then further stated, “Wife

shall be responsible for payment of . . . 1st and 2nd mortgages on the family home awarded to

her.” CP at 707. This provision clarified any ambiguity in the CR 2A agreement and

unequivocally allocated the second mortgage to Shantel.

        Accordingly, we hold that the commissioner did not err in ruling that Shantel was

responsible for the second mortgage.

E.      SHANTEL’S REQUEST FOR ATTORNEY FEES

        Shantel argues that the trial court commissioner erred in denying her request for attorney

fees under RCW 26.09.140. We disagree.

        Under RCW 26.09.140, a trial court in a dissolution action “after considering the

financial resources of both parties may order a party to pay a reasonable amount for the cost to

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No. 49393-4-II

the other party of maintaining or defending any proceeding under this chapter.” A trial court has

discretion whether to award attorney fees to a party under RCW 26.09.140. In re Marriage of

Kim, 179 Wash. App. 232, 256, 317 P.3d 555 (2014).

       We have reviewed the record, and we hold that the commissioner did not abuse its

discretion in declining to award Shantel attorney fees under RCW 26.09.140.

F.     TRIAL COURT’S AWARD OF ATTORNEY FEES TO STEVEN

       The CR 2A agreement’s “undisclosed property” provision stated: “Any undisclosed

property shall remain 50% each to the parties as tenants in common and may be brought back to

Court. Prevailing party entitled to attorney fees and costs on court ruling.” CP at 3. The trial

court awarded attorney fees to Steven based on the CR 2A agreement provision. And the court

awarded Steven the full amount of the attorney fees he incurred, less certain deductions, without

segregating the fees among Shantel’s various claims.

       Shantel challenges the amount of attorney fees the trial court awarded to Steven on

various grounds. But we need not address these claims because we are reversing on Shantel’s

primary claim under the CR 2A agreement. Therefore, at this point Steven no longer is the

prevailing party. Accordingly, we vacate the award of attorney fees to Steven, subject to further

consideration on remand.

G.     ATTORNEY FEES ON APPEAL

       Shantel argues that we should award her attorney fees either under the CR 2A agreement

or under RCW 26.09.140. Although we are remanding the primary undisclosed property issue

that would be subject to the CR 2A agreement’s attorney fee clause, the prevailing party on that

issue is not yet known. And Shantel is not the prevailing party on any of the other issues on

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No. 49393-4-II

appeal. Therefore, she is not entitled to recover attorney fees on appeal under the CR 2A

agreement. And we decline to award Shantel attorney fees under RCW 26.09.140.

       Steven argues that we should award him attorney fees under the CR 2A agreement or

under RAP 18.9(a) for defending against frivolous arguments. Because we are remanding

Shantel’s primary undisclosed property claim, the prevailing party on that issue is not yet known.

Steven is the prevailing party on all other issues, but most of them do not involve the CR 2A

agreement and we decline to award attorney fees on those issues. And we decline to award

attorney fees under RAP 18.9(a) because Shantel’s arguments were not frivolous.

                                         CONCLUSION

       We affirm the trial court and the court commissioner in all respects except that (1) we

reverse the trial court’s denial of Shantel’s undisclosed property motion regarding her allegation

that Steven concealed $300,000 of AJP profits and that those profits constituted undisclosed

property under the CR 2A agreement, and (2) we vacate the trial court’s award of reasonable

attorney fees to Steven as the prevailing party under the CR 2A agreement. We remand for the

trial court to consider, using the preponderance of the evidence burden of proof, Shantel’s claim

that Steven concealed $300,000 of AJP profits and that the $300,000 was undisclosed property

under the CR 2A agreement.

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No. 49393-4-II

        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW

2.06.040, it is so ordered.

                                                      MAXA, A.C.J.

 We concur:

 JOHANSON, J.

 LEE, J.

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