Court Opinion

ID: 9898123
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:28:37.362758+00
Date Added: 2024-06-11T09:16:10.343704
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 In the Matter of the Marriage of:
                                                 DIVISION ONE
 RYNELLE ANNE MINKLEY,
                                                 No. 83636-6-I
        Respondent/Cross Appellant,
                                                 UNPUBLISHED OPINION
               v.

 JAMES DONALD MINKLEY,

        Appellant/Cross Respondent.

       DWYER, J. — James Minkley challenges the superior court’s distribution of

property in the dissolution of his marriage to Rynelle Minkley. James asserts that

the superior court erred by characterizing as community property two duplexes

purchased by the parties during their marriage and a financial account that, he

contends, contains proceeds from postseparation stock market trading. James

additionally contends that, if the duplexes were properly characterized as

community property, he is entitled to an equitable lien for his purported separate

contribution. Finding no error, we affirm.

                                          I

       James and Rynelle Minkley were married on March 25, 2011 and became

separated on November 18, 2019. On November 10, 2021, following a six-day

trial, their marriage was dissolved. The parties have two children, who were

seven and nine years old at the time of trial.
No. 83636-6-I/2

      When the parties married, James owned a condominium on Mercer Island

that he had purchased in 1993. The record indicates that, at the time of the

parties’ marriage, the condominium had equity of approximately $19,500, and

James owed over $190,500 on the property. Although Rynelle had previously

sold her own real property, she had other assets at the time, including savings,

investments, and a Microsoft 401(k) plan.

      Just prior to their marriage, Rynelle and James made an offer on a

property in Sammamish where they intended to, and subsequently did, build their

family residence. The purchase closed in June 2011, less than three months

after the parties were married. They obtained the Sammamish property for

$670,000 with a down payment of approximately $79,000. Rynelle paid

approximately $37,000 from her premarital funds, including proceeds from the

sale of Microsoft stock, toward the down payment.

      The Mercer Island condominium became a rental property when Rynelle

and James married and was consistently rented through the end of a lease term

in June 2016. Evidence introduced at trial indicated that the monthly expenses

for the condominium, including first and second mortgages and homeowner

association dues, exceeded $1,850 during this time. James testified that the

monthly rent received was initially $1,300 but was increased to $1,400. Thus, at

the time, monthly expenses for the condominium exceeded the monthly income

obtained therefrom. Rynelle testified that the expenses for the Mercer Island

property were paid from a joint personal account. She further testified that the

parties’ finances, including those pertaining to the condominium, were “very

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No. 83636-6-I/3

much” intermingled. According to Rynelle, James had made no attempt to

segregate monies related to the Mercer Island property from the parties’ other

marital finances.

       In 2014, James and Rynelle made a “joint decision to refinance the Mercer

Island property into both of [their] names and . . . merge the first and the second

loan so [they] could get a better interest rate and . . . have a more positive cash

flow.” The parties were listed on the refinanced loan as co-borrowers, and

Rynelle’s name was added to the title of the property. The refinance reduced the

monthly mortgage payment to $900. According to James, the rental proceeds

exceeded the costs of the condominium following the refinance. Rental

payments were deposited into the parties’ joint personal account.

       In December 2016, Rynelle and James sold the Mercer Island

condominium for $309,000, netting a profit of $115,000 from the sale. The

parties engaged in a “1031 tax exchange,” which enabled them to use the

proceeds from the condominium sale to directly purchase other property without

being subject to a capital gains tax. Thus, in March 2017, Rynelle and James

purchased a duplex in Renton, referred to by the parties as the “Ferndale

duplex.” Two months later, in May 2017, they additionally purchased a duplex in

Auburn.

       James and Rynelle purchased the Ferndale duplex for $240,500, using

proceeds from the condominium sale for a $61,403 down payment. The parties

used their joint credit to finance approximately $171,000 of the purchase price,

and they titled the duplex in both of their names as “community property.”

                                         3
No. 83636-6-I/4

Rynelle and James renovated the Ferndale duplex immediately after its

purchase, financing the renovation with a home equity line of credit against their

Sammamish home of approximately $35,000.

      The parties purchased the Auburn duplex for $312,800. Financial

documents indicate that the down payment was financed using approximately

$53,000 from the condominium sale proceeds and approximately $29,000 from a

joint account. James and Rynelle obtained a $234,000 loan to finance the

remainder of the purchase price. The Auburn duplex, too, was titled in both of

their names. Although James was listed as a co-borrower, the loan was based

solely on Rynelle’s income. The parties renovated the Auburn duplex using

approximately $23,000 from joint accounts.

      Two and a half years later, on November 20, 2019, Rynelle filed a petition

for dissolution of the parties’ marriage. A six-day trial commenced. James

testified at trial that, because the proceeds of the Mercer Island condominium

sale were used to finance down payments for the Ferndale and Auburn duplexes,

he believed those properties to be entirely his separate property. He stated that

he had “opened separate checking accounts . . . for each property” and, thus,

that the funds were not commingled—an assertion disputed by Rynelle. James

additionally testified regarding a TD Ameritrade account, referred to by the

parties as the “New Life Financial #2187” account. According to James, the

account was opened in August 2020, after the parties had separated. He

testified at trial that the money in the account, totaling $41,943.37, was “money

made in stock market trading” and “money that [he] borrowed on lines of credit.”

                                         4
No. 83636-6-I/5

       In an oral ruling made on September 3, 2021, the superior court

characterized as community property each of the three parcels of real property in

question—the Sammamish family residence, the Ferndale duplex, and the

Auburn duplex. The court ruled that the properties “in almost every way” had

“the hallmarks of community property.” Because their property was “so

commingled,” the court rejected both parties’ assertions of a separate property

interest in the real property—Rynelle’s in the Sammamish home and James’s in

the Ferndale and Auburn duplexes.

       On November 10, 2021, the superior court entered findings and

conclusions consistent with its oral ruling. The court found that the Sammamish

home and the Ferndale and Auburn duplexes were acquired during the parties’

marriage. The court noted that “[b]oth parties claimed to have retained some or

all of the property in the form of a separate interest.” However, the court found

that each parcel is properly characterized as community property, concluding that

“[n]either party established that they used separate funds such that they could

overcome the presumption that property acquired during the marriage is

community property.” The superior court also determined that the “New Life

Financial #2187” account is community property. The court equally divided

between the parties the property characterized as community, requiring an

equalization payment of over $390,000 from Rynelle to James. The court found

this property distribution to be “just and equitable” as required by law.

       James thereafter filed a motion for reconsideration in which, among other

assertions, he contended that the superior court erroneously characterized the

                                          5
No. 83636-6-I/6

“New Life Financial #2187” account as community property. On reconsideration,

James asserted a source for the funds in the account that was different from the

source that he had described at trial; he contended that Rod Addicks, a prior

business partner who had since died, had “funded the money to let him do

trading.” According to James’s argument on reconsideration, the money in the

account was “the money that he managed for Rod Addicks.”

        In response, Rynelle argued that James’s assertion conflicted with a

financial affidavit filed just before trial, in which James had stated that his only

income resulted from spousal maintenance and rents from the parties’ duplexes.

Thus, Rynelle asserted that the source of the money in the purportedly separate

account must have been from community funds. The superior court rejected

James’s contention that the “New Life Financial #2187” account was separate

property, ruling that James had not established at trial that Rod Addicks had

funded the account.

        James appeals.1

                                                II

        James first contends that the superior court erroneously characterized the

Ferndale and Auburn duplexes as community property. We disagree. The

Ferndale and Auburn duplexes were acquired during Rynelle’s and James’s

marriage. Accordingly, they are presumed to be community property. To rebut

this presumption, James was required to demonstrate by clear and convincing

        1 Rynelle conditionally cross appeals, asserting that the superior court erroneously

concluded that she has no separate property interest in the Sammamish family residence.
Because we affirm the superior court’s order, we need not address the conditional cross appeal.

                                                6
No. 83636-6-I/7

evidence that the duplexes are instead his separate property. Because he failed

to do so, the superior court properly characterized the duplexes as community

property.

      A trial court’s characterization of property in a dissolution action presents a

mixed question of law and fact. In re Marriage of Watanabe, 199 Wn.2d 342,

348, 506 P.3d 630 (2022). “Factual findings, including time of acquisition,

method of acquisition, and intent of the donor, supporting the characterization are

reviewed for substantial evidence.” Watanabe, 199 Wn.2d at 348. Whether “a

rebuttable presumption of community or separate character is overcome is a

question of fact.” In re Marriage of Schwarz, 192 Wn. App. 180, 192, 368 P.3d

173 (2016). “The characterization of property is reviewed de novo as a question

of law.” Watanabe, 199 Wn.2d at 348-49.

      “The character of property, whether separate or community, is determined

at the time of acquisition.” Schwarz, 192 Wn. App. at 189. Property acquired

during marriage is presumptively community property. Watanabe, 199 Wn.2d at

351. This is a true presumption, meaning that, “in the absence of evidence

sufficient to rebut [the] presumption, the court must determine the character of

property according to the weight of the presumption.” In re Est. of Borghi, 167

Wn.2d 480, 484, 219 P.3d 932 (2009). A party may rebut the community

property presumption “by offering clear and convincing evidence that the property

was acquired with separate funds.” Schwarz, 192 Wn. App. at 189. When

property was previously characterized as separate property, “‘[c]ommingling’ of

                                         7
No. 83636-6-I/8

separate and community funds may give rise to a presumption that all are

community property.” Schwarz, 192 Wn. App. at 190.

        James asserts that the superior court erred by characterizing the Ferndale

and Auburn duplexes as community property. This is so, he asserts, because

the proceeds from the sale of the Mercer Island condominium, which he owned

prior to the parties’ marriage, were used to fund down payments for the

duplexes.2 Thus, according to James, Rynelle was required to overcome the

separate property presumption in order for the duplexes to be properly

characterized as community property. We disagree.

        James misapprehends the matter before the superior court and, thus,

mistakes the applicable legal presumption. He asserts that the superior court

was required to apply the separate property presumption because he acquired

the Mercer Island condominium prior to his marriage to Rynelle. Indeed,

“presumptions play a significant role in determining the character of property as

separate or community.” Borghi, 167 Wn.2d at 483. “Once separate property is

established, a presumption arises that such property remains separate property

absent direct and positive evidence of intent to convert [it] to community

property.” Watanabe, 199 Wn.2d at 351. Notably, however, the superior court

was not called upon to characterize the Mercer Island property, which was sold

        2 James’s argument is premised on his contention that the Mercer Island condominium

remained his separate property prior to its sale during the parties’ marriage, which Rynelle
disputes. However, as discussed herein, it is the characterization of the Ferndale and Auburn
duplexes that is at issue. Thus, James has the burden of demonstrating that the duplexes, which
were acquired during the parties’ marriage, are not community property. He has not done so.
The superior court did not err in determining that James had not rebutted the community property
presumption, and the characterization of the Mercer Island condominium is not at issue.

                                               8
No. 83636-6-I/9

prior to the dissolution of the parties’ marriage. Rather, it is the characterization

of the Ferndale and Auburn duplexes that is at issue. Thus, contrary to James’s

assertion, it is the community property presumption—not the separate property

presumption—that applies to the characterization of the duplexes.

       “[T]he character of property as separate or community property is

determined at the date of acquisition.” Borghi, 167 Wn.2d at 484. “Property

acquired during marriage is presumptively community property. A party may

rebut this presumption by offering clear and convincing evidence that the

property was acquired with separate funds.” Schwarz, 192 Wn. App. at 189.

Rynelle and James acquired the Ferndale and Auburn duplexes during their

marriage. Accordingly, the duplexes are presumed to be community property.

Thus, to demonstrate that the duplexes should be characterized as his separate

property, James was required to demonstrate by clear and convincing evidence

that he acquired the properties with his separate funds. See Schwarz, 192 Wn.

App. at 189. He did not do so.

       James’s assertion that the duplexes are his separate property because

their purchase was funded by proceeds from the Mercer Island condominium

sale is unavailing. The record indicates that the condominium sale proceeds

funded $61,403 of the $240,500 purchase price of the Ferndale duplex and

approximately $53,000 of the $312,800 purchase price of the Auburn duplex.

Both Rynelle’s testimony and financial documents entered into evidence indicate

that the parties used joint assets to fund the majority of the purchase prices and

renovation costs of the duplexes. Although James testified that the funds for the

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No. 83636-6-I/10

duplexes were not commingled with the parties’ joint assets, both Rynelle’s

testimony and financial documents submitted by the parties contradict that

assertion. Significantly, the superior court found that, although James’s

testimony at trial was largely credible, some of his testimony relating to the

parties’ finances was not.

        Because the Ferndale and Auburn duplexes were acquired during the

parties’ marriage, they are presumptively community property. Watanabe, 199

Wn.2d at 351. The superior court found that neither party had established that

they used separate funds such that they could overcome that presumption.

Whether a presumption regarding the characterization of property has been

overcome is a factual question that we review for substantial evidence. Schwarz,

192 Wn. App. at 192. James provided no evidence to rebut the community

property presumption other than his own testimony that the parties’ finances

were not commingled—testimony found by the superior court to be not entirely

credible. Instead, the court found that the parties’ property was extensively

commingled.3 Because James did not rebut the community property

presumption, the superior court did not err by characterizing the Ferndale and

Auburn duplexes as community property.

                                                III

        James next asserts that, if the duplexes were properly characterized as

community property, he is entitled to a separate property lien in the amount that

        3 Substantial evidence, in the form of both Rynelle’s testimony and financial documents

entered into evidence, supports this finding.

                                                10
No. 83636-6-I/11

was contributed toward the duplex purchases from the proceeds of the Mercer

Island condominium sale. Again, we disagree. Such liens are an equitable

remedy that may be granted within the trial court’s discretion in order to prevent

injustice. Here, the court found that equally dividing the parties’ community

property, requiring an equalization payment of over $390,000 from Rynelle to

James, was a just and equitable property distribution. The court did not abuse its

discretion by not additionally granting an equitable lien to James.

       An equitable lien is a remedy employed either to carry out the intentions of

the parties or to prevent injustice regardless of the parties’ intent. Sorenson v.

Pyeatt, 158 Wn.2d 523, 530 n.9, 146 P.3d 1172 (2006); see also Seattle Mortg.

Co. v. Unknown Heirs of Gray, 133 Wn. App. 479, 499, 136 P.3d 776 (2006)

(“The court will create a lien in equity where there is no valid lien at law but such

a lien is needed to prevent injustice.”). Such a lien “‘will be enforced in equity

against specific property, though there is no valid lien at law.’” Sorenson, 158

Wn.2d at 530 n.9 (quoting Henry L. McClintock, HANDBOOK OF THE PRINCIPLES OF

EQUITY § 118, at 319 (2d ed.1948)). “In a dissolution proceeding, the trial court is

required to ‘do equity.’” In re Marriage of Miracle, 101 Wn.2d 137, 139, 675 P.2d

1229 (1984). After “tak[ing] into account all the circumstances,” the trial court

“may impose an equitable lien to protect the reimbursement right when the

circumstances require it.” Miracle, 101 Wn.2d at 139. “We review the trial

court’s decision [whether to impose an equitable lien] only for abuse of

discretion.” Miracle, 101 Wn.2d at 139.

                                          11
No. 83636-6-I/12

       Here, James asserts that he “must be given” a separate property lien

against the Ferndale and Auburn duplexes in the amount of the contribution

toward the duplex purchases made from the proceeds of the condominium sale. 4

We disagree. After hearing six days of testimony and reviewing voluminous

financial documents, the superior court found that all of the parties’ real property

had, “in almost every way,” “the hallmarks of community property.” The court

determined that neither of the parties had established that they used separate

funds such that they could overcome the community property presumption with

regard to their real property. The court determined that it was just and equitable

to divide the community property equally between the parties, which required an

equalization payment from Rynelle to James of over $390,000.

       Simply put, James has demonstrated no injustice warranting the grant of

an equitable lien. Accordingly, the superior court was well within its discretion in

declining to grant such a lien. We find no error.

                                         IV

       James additionally asserts that the superior court erred by characterizing

the “New Life Financial #2187” account as community property. According to

James, the account is his separate property because it was opened subsequent

to the parties’ separation. We disagree. Substantial evidence supports the

superior court’s finding that the source of the funds in the account was not

established at trial. Accordingly, the court did not err by characterizing the “New

Life Financial #2187” account as community property.

       4 Br. of Appellant at 32.

                                         12
No. 83636-6-I/13

       RCW 26.16.140 provides that “[w]hen spouses or domestic partners are

living separate and apart, their respective earnings and accumulations shall be

the separate property of each.” Based on this statutory provision, James

contends that the superior court erred by charactering the “New Life Financial

#2187” account as community property. He asserts that this account was

opened in August 2020, subsequent to the parties’ November 2019 separation,

and, thus, that it is his separate property. We disagree.

       James provided conflicting explanations at trial and on reconsideration

regarding the source of the funds in the account. At trial, he asserted that the

funds in the account were “made in stock market trading” and “money that [he]

borrowed on lines of credit.” On reconsideration, James contended that Rod

Addicks, a previous business partner who had since died, had “funded the

money to let him do trading.” The money in the account, James asserted on

reconsideration, is “the money that he managed for Rod Addicks.” Rynelle

asserted that she was unaware of the account until after the issuance of a

subpoena, as James had not revealed the existence of the account in discovery.

She additionally argued that James’s assertion conflicted with his financial

affidavit filed shortly before trial, which indicated that his only income was from

spousal maintenance and rents from the parties’ duplexes. Thus, Rynelle

asserted, the source of the funds in the account were obtained from community

assets.

       The superior court—which, significantly, is tasked with making both

credibility determinations and findings of fact—found that the source of the funds

                                         13
No. 83636-6-I/14

in the contested account had not been established at trial. Substantial evidence

supports this finding. James provided inconsistent accounts regarding the

source of the funds and brought to the superior court’s attention no financial

documentation to demonstrate that source. Thus, James failed to show that the

funds in the “New Life Financial #2187” account were his “earnings and

accumulations.” See RCW 26.16.140. The superior court did not err by

characterizing the account as community property. Nor did the court err by

declining to recharacterize the account on reconsideration.

                                         V

      James requests an award of attorney fees on appeal pursuant to RCW

26.09.140, which authorizes such an award in a dissolution action “after

considering the financial resources of both parties.” He additionally requests that

we “require Rynelle to pay [his] attorney fees and costs at trial.”5 James has

neither demonstrated the requisite financial need nor presented meritorious legal

arguments on appeal. Accordingly, we decline to grant the requested award.

      In dissolution proceedings,

             [t]he court from time to time after considering the financial
      resources of both parties may order a party to pay a reasonable
      amount for the cost to the other party of maintaining or defending
      any proceeding under this chapter and for reasonable attorneys’
      fees or other professional fees in connection therewith . . . .
             Upon any appeal, the appellate court may, in its discretion,
      order a party to pay for the cost to the other party of maintaining the
      appeal and attorneys’ fees in addition to statutory costs.

RCW 26.09.140. In determining whether a fee award is appropriate pursuant to

      5 Br. of Appellant at 36.

                                        14
No. 83636-6-I/15

the statute, we consider both the parties’ relative ability to pay and the arguable

merit of the issues raised on appeal. In re Marriage of Leslie, 90 Wn. App. 796,

807, 954 P.2d 330 (1998) (granting an award of fees to wife when husband was

in a “much better financial position” and wife presented meritorious legal

arguments on appeal).

       Here, the superior court found, in an unchallenged finding, that James

“has had the ability to pay his own attorney fees throughout this proceeding.”

The court’s findings and conclusions indicate that James was awarded over $1.3

million in the dissolution action. In addition, James’s affidavit of financial need

indicates that his monthly net income substantially exceeds his monthly

household expenses. Significantly, James’s claims of error on appeal are

unmeritorious. For these reasons, we decline to grant the requested award.

       Affirmed.

WE CONCUR:

                                          15