Opinion
No. 36599-5-II.
March 17, 2009.
Appeal from a judgment of the Superior Court for Pierce County, No. 99-3-02637-2, Lisa R. Worswick, J., entered June 22, 2007.
Affirmed in part, reversed in part, and remanded by unpublished opinion per Armstrong, J., concurred in by Houghton and Hunt, JJ.
UNPUBLISHED OPINION
Irl Davis appeals the trial court's denial of his motion to terminate his spousal maintenance and mortgage obligations on the basis of a substantial change in circumstances and contractual impossibility. He also asserts that the trial court erred by granting Susan Davis attorney fees. Because the maintenance and mortgage obligations are not modifiable, the trial court did not err in denying Irl's motion. We grant Susan attorney fees on appeal, but we reverse the trial court's attorney fee award because it did not explain the basis of the award.
We refer to the parties by their first names for the sake of convenience.
We remand for the trial court to reconsider the award.
FACTS
On May 16, 2001, Susan and Irl Davis dissolved their 23-year marriage. At the time of dissolution, the couple owned 80 percent of A/D Electronics, a company Irl founded and for which he was the chief executive officer. They also owned a home. The majority of the couple's debt was tied to A/D Electronics, which the parties valued at $2 million.
During the dissolution, the parties negotiated a separation agreement while represented by counsel. Irl's attorney prepared the final decree, which incorporated the agreement terms. The agreement awarded Irl 65 percent of their interest in A/D Electronics; Susan retained 15 percent. The agreement awarded the family home to Susan and required Irl to pay the property tax, insurance, and mortgage. These payments would cease if Susan sold the home or died. The parties further agreed that Irl would pay Susan $3,000 in maintenance per month for 10 years. The maintenance obligation expressly states that it "shall not be modified or modifiable," continuing after Irl's death or Susan's remarriage. Clerk's Papers (CP) at 16. Irl's total payment due to Susan each month is about $7,500. Irl's A/D Electronics stock secured both obligations so that his payment could be made through the stock pledge in the event that he died and his life insurance policy would not cover his obligations to Susan. Susan was to retain the stock and "not less than annually" release a pro rata share to Irl as his payments reduced his obligations. CP at 16. Irl paid the amount due for almost six years.
In February 2007, Irl moved to terminate his maintenance and mortgage obligations. He asserted that A/D Electronics was facing bankruptcy because it could not secure the credit it needed to function. He maintained that he could not pay his obligations to Susan because 95 percent of his income was from A/D Electronics, which was unable to do business without the credit. He stated that in 2005, the company lost $396,251 and that its sales dropped by $1 million. Irl provided an account of the 2000 profit and losses and an April 2007 letter noting a balance of $330,000 owed to Key Bank. He submitted a declaration from A/D Electronics' financial manager confirming that as of January 1, 2007, Irl received no compensation from the company. Susan responded that from 2003 through 2005, Irl earned an average of $340,000 per year and that A/D Electronics was actually taking in significant gross receipts. The record does not include Irl's personal tax records.
A Pierce County commissioner denied Irl's motion to terminate his maintenance and mortgage obligations and awarded Susan attorney fees. The commissioner stated, "[H]ow could it be modified?" and "[T]he legal issues are such that . . . my hands are tied." Report of Proceedings (RP) (Mar. 21, 2007) at 3, 10. Irl moved for reconsideration. The superior court denied Irl's motion and awarded Susan another $1,500 in attorney fees.
ANALYSIS I. Motion to Terminate Maintenance and Mortgage Obligations
Our standard of review for a trial court's ruling on a motion to modify a dissolution decree depends on the basis of the ruling. See In re Marriage of Hulscher, 143 Wn. App. 708, 713-14, 180 P.3d 199 (2008). If the ruling is based on the evidence presented, we ask whether substantial evidence supports the trial court's findings. Hulscher, 143 Wn. App. at 713-14. If the ruling is based on a question of law, we review the trial court's legal conclusions de novo. State v. Womac, 160 Wn.2d 643, 649, 160 P.3d 40 (2007) (citing State v. Johnson, 128 Wn.2d 431, 909 P.2d 293 (1996)).
Generally, agreements as to maintenance obligations and property divisions are binding on the parties and not modifiable unless the court finds that the "separation contract was unfair at the time of its execution." RCW 26.09.070(3). Here, both parties were represented by counsel at the time they entered the agreement and neither party argues that the contract was unfair at the time it was made. Thus, the agreement is enforceable. RCW 26.09.070(6).
A. Maintenance Obligation
Irl asserts that a substantial change in circumstances required the trial court to terminate his maintenance obligation. Maintenance generally may be modified due to a substantial change in circumstances unforeseeable at the time of dissolution. RCW 26.09.170(1)(b). But "[w]hen the separation contract so provides, the decree may expressly preclude or limit modification of any provision for maintenance set forth in the decree." RCW 26.09.070(7). A court may exercise its equitable powers and adjust the schedule of non-modifiable maintenance payments as set forth in a separation agreement when the obligor has a significant change in circumstances. In re Marriage of Glass, 67 Wn. App. 378, 391, 835 P.2d 1054 (1992) (emphasis added). Even if a court adjusts the payment schedule, reducing the amount or duration of the agreed on maintenance is error. Glass, 67 Wn. App. at 391. But here, Irl sought termination of, not an adjustment of, his maintenance obligation.
RAP 12.1(a) permits us, with limited exceptions, to decide a case "only on the basis of issues set forth by the parties in their briefs." Although during the motion hearing Irl orally requested to "cease" payment, he also requested temporary relief from house payments and that the maintenance "be stayed" or reduced until he finds a job. He does not raise these issues on appeal. Thus, we need not address whether the trial court should have adjusted the maintenance payment schedule.
We recently revisited the question of whether a party can modify a spousal maintenance provision that the parties had agreed would not be modifiable. See Hulscher, 143 Wn. App. 708. In Hulscher, the parties had expressly agreed that "the spousal maintenance is not modifiable." Hulscher, 143 Wn. App. at 711. The Hulscher agreement was not significantly different from Irl and Susan's agreement, and we held that the trial court erred in granting a modification. Hulscher, 143 Wn. App. at 716.
Irl's assertion that a court can modify separation agreements under Wagner v. Wagner, 95 Wn.2d 94, 621 P.2d 1279 (1980), is wrong. Unlike the agreement here, the maintenance agreement in Wagner contained an express provision permitting "modification from time to time by the court, as the conditions of the parties may warrant." Wagner, 95 Wn.2d at 96. Wagner does not help Irl here.
We affirm the trial court's denial of Irl's motion to terminate his maintenance obligation.
B. Mortgage Obligation
Irl also argues that the trial court should have terminated his agreement to pay the home mortgage. He reasons that both parties depended on the success of A/D Electronics and that a substantial change in circumstances warrants terminating his mortgage obligation. We disagree. Under RCW 26.09.170(1), "[t]he provisions as to property disposition may not be revoked or modified, unless the court finds the existence of conditions that justify the reopening of a judgment under the laws of this state." CR 60 permits relief from judgment under circumstances such as mistake, inadvertence, excusable neglect, newly discovered evidence, fraud, and "[a]ny other reason justifying relief from the operation of the judgment." CR 60(11). The catch-all provision requires unusual circumstances and must be brought within a reasonable time. In re Marriage of Thurston, 92 Wn. App. 494, 499-500, 963 P.2d 947 (1998) (citations omitted).
Even if Irl had sought relief under CR 60, his claimed change in financial circumstances would not "justify[] relief from the operation of the judgment." CR 60(11); see In re Marriage of Irwin, 64 Wn. App. 38, 64, 822 P.2d 797 (1992) (recognizing that changed financial circumstances is an insufficient reason to grant a CR 60(b)(11) motion in a dissolution matter); In re Marriage of Yearout, 41 Wn. App. 897, 898, 902, 707 P.2d 1367 (1985) (finding no unusual circumstances warranting relief from judgment when moving party alleged that the dissolution decree was unfair, that he had an unstable emotional condition, and that his salary made it impossible for him to meet his obligations). The trial court did not err in denying Irl relief from paying the mortgage.
C. Impossibility Defense to Obligations
Irl next maintains that the trial court erred in failing to consider that it is impossible for him to pay his maintenance and mortgage obligations. He asserts that he has "made diligent efforts to obtain employment through various employment agencies," Br. of Appellant at 5, and has "diligently sought work in other field[s] and in other companies" but has not been able to obtain work. CP at 21. He states that he was discharged from A/D Electronics and has no other occupation, explaining that there are "very few employment opportunities for a 58 year old entrepreneur[]" that will pay him enough to meet the obligations. Br. of Appellant at 6. Yet, he failed to provide the court with his personal tax records or other form of income verification.
Irl has not cited, and we have not found, a case where the court has applied contract impossibility in a dissolution matter. Even if we considered impossibility a defense to separation agreement obligations, contract impossibility excuses performance only by "a showing of 'extreme and unreasonable difficulty, expense or injury.'" Tacoma Northpark, LLC v. NW, LLC, 123 Wn. App. 73, 81, 96 P.3d 454 (2004) (quoting Pub. Util. Dist. No. 1 of Lewis County v. Wash. Pub. Power Supply Sys., 104 Wn.2d 353, 364, 705 P.2d 1195 (1985)). A party's financial inability to pay is "not the legal equivalent of inability to perform," even when payment has become more difficult. Pub. Util., 104 Wn.2d at 364. Although the agreement here conditions Irl's mortgage obligation on various events, it does not condition payment on the success of the business, the business's ability to obtain credit, Irl's income, or his ability to pay. Because financial inability does not excuse Irl's performance, the trial court did not err in rejecting the argument.
The trial court recognized the negative ramifications of applying a financial impossibility defense to separation agreements and that ruling in Irl's favor would mean that "anybody who runs up a credit card debt and couldn't pay it would . . . get out of that contract." RP (June 22, 2007) at 14.
The agreement states that Irl's obligation would terminate if the home is sold or if Susan dies.
D. Stock Security
Irl also stresses that Susan "should be required to utilize the security instrument" provided in the separation agreement and that she must exercise the release of shares before pursuing him personally. Br. of Appellant at 7.
A party to a property distribution agreement may seek "all remedies available for the enforcement of a judgment. . . ." RCW 26.09.070(6). Contrary to Irl's assertion, nothing in the agreement limits Susan's remedy. Rather, the security provision gives an additional or secondary remedy by securing collateral in the stock in the event Irl fails to pay. It explains that the stock is to be utilized if, after Irl's death, his life insurance policy does not cover the remaining debt. The trial court did not err in rejecting this argument.
II. Attorney Fees at Trial
Lastly, Irl maintains that the trial court erred in granting Susan attorney fees for defending against his motion because she did not prove need and his ability to pay. Susan requested attorney fees for defending Irl's motion under RCW 26.09.140, RCW 4.84.185, and CR 11.
We review a trial court's award of attorney fees for an abuse of discretion. Chuong Van Pham v. Seattle City Light, 159 Wn.2d 527, 538, 151 P.3d 976 (2007) (citations omitted). A court abuses its discretion when it awards fees "on untenable grounds or for untenable reasons." Choung, 159 Wn.2d at 538 (citing State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482 P.2d 775 (1971)).
RCW 26.09.140 requires a trial court to balance the requesting party's need against the other's ability to pay before awarding attorney fees. If the trial court grants attorney fees under RCW 26.09.140, it must state on the record the method it used to calculate the award. In re Marriage of Knight, 75 Wn. App. 721, 729, 880 P.2d 71 (1994) (citing In re Marriage of Sanbon, 55 Wn. App. 124, 130, 777 P.2d 4 (1989)). Here, Susan's attorney stated that "[m]y client can't afford to continue to pay," RP (June 22, 2007) at 14, and Susan claimed that she makes $50,000 per year and that Irl makes $340,000. But the trial court did not balance on the record Susan's need against Irl's ability to pay.
A court may also award attorney fees under RCW 4.84.185 if the requesting party can prove the other party's intransigence that "made trial more difficult and increased legal costs, like repeatedly filing unnecessary motions or forcing court hearings for matters that should have been handled without litigation." In re Marriage of Pennamen, 135 Wn. App. 790, 807, 146 P.3d 466 (2006). This statute requires a trial court to specify why a claim is frivolous before awarding attorney fees for maintaining a defense. N. Coast Elec. Co. v. Selig, 136 Wn. App. 636, 650, 151 P.3d 211 (2007) (citations omitted). Susan asserts that the trial court awarded her fees because Irl's motion was meritless. But the record is unclear as to whether the trial court found Irl's motion meritless. It commented, "[H]ow could it be modified?" RP (Mar. 21, 2007) at 3-4, and "the legal issues are such that . . . my hands are tied," RP (Mar. 21, 2007) at 10. These comments fall short of telling us that the trial court found Irl's motion frivolous. Thus, we cannot justify the award under RCW 4.84.185. Because the record does not clearly provide the basis for the trial court's attorney fees award, we must vacate the award. RCW 26.09.140.
III. Attorney Fees on Appeal
Susan requests attorney fees on appeal under RAP 18.1, RCW 26.09.140, and RAP 18.9(a), arguing that she has the need for the award, that Irl has the ability to pay, and that his appeal lacks merit.
RAP 18.9(a) authorizes sanctions against a party who "files a frivolous appeal." An appeal is frivolous if there are no debatable issues on which reasonable minds can differ and is so totally devoid of merit that there was no reasonable possibility of reversal. In re Recall Charges Against Feetham, 149 Wn.2d 860, 872, 72 P.3d 741 (2003) (citations omitted). We resolve all doubts against finding an appeal frivolous and the court considers the record as a whole. Delany v. Canning, 84 Wn. App. 498, 510, 929 P.2d 475 (1997). We do not find Irl's appeal frivolous because the trial court did not properly award attorney fees.
But RCW 26.09.140 authorizes us to exercise our discretion in a dissolution matter to "order a party to pay for the cost to the other party of maintaining the appeal and attorney's fees in addition to statutory costs." "A party relying on RCW 26.09.140 'must make a showing of need and of the other's ability to pay fees in order to prevail.'" In re Marriage of Hoseth, 115 Wn. App. 563, 575, 63 P.3d 164 (2003) (quoting Kirshenbaum v. Kirshenbaum, 84 Wn. App. 798, 808, 929 P.2d 1204 (1997)).
Appellate courts have granted attorney fees under RCW 26.09.140 when one party provided an affidavit of need as RAP 18.1 requires and the other party did not submit a contravening affidavit or challenge the amount requested. See In re Marriage of Ambrose, 67 Wn. App. 103, 110, 834 P.2d 101 (1992); In re Marriage of Fox, 58 Wn. App. 935, 940, 795 P.2d 1170 (1990); Sanborn, 55 Wn. App. at 130-31. When a party does not contend that his or her financial circumstances have changed since trial, we look to the party's financial circumstance at trial to determine whether to grant attorney fees on appeal. See In re Marriage of Combs, 105 Wn. App. 168, 177, 19 P.3d 469 (2001) (accepting the trial court's determination that each party should bear his or her own costs and fees when the party requesting fees on appeal did not contend a change in financial circumstances since trial).
As of January 1, 2007, Irl received no compensation from A/D Electronics. The record does not reflect whether Irl has since found other employment. Susan's affidavit states that she receives $3,650 per month plus realty commissions as a branch manager for Windermere Realty. Almost a year-and-a-half ago, Susan alleged that she made $50,000 per year and that Irl makes $340,000. Thus, it appears from the record that Irl has traditionally made more money than Susan. We find that Susan's affidavit adequately shows her need, and given that Irl did not contest her affidavit or file his own financial declaration, the record shows that he has the ability to pay. Thus, we award attorney fees in the amount to be determined by a commissioner of this court under RAP 18.1(f), provided that Susan complies with RAP 18.1(d).
We affirm the trial court's order denying Irl's motion to modify the maintenance and mortgage obligations. We vacate the attorney fee award to Susan and remand to the trial court.
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 pursuant to RCW 2.06.040, it is so ordered.
HOUGHTON, P.J. and HUNT, J., concur.