Opinion
No. 35734-8-II.
July 1, 2008.
Appeal from a judgment of the Superior Court for Pierce County, No. 05-3-03835-6, Bryan E. Chushcoff, J., entered December 8, 2006.
Affirmed by unpublished opinion per Penoyar, A.C.J., concurred in by Houghton and Hunt, JJ.
George Greenland appeals the trial court's division of assets from dissolution proceedings with his former wife, Cheryl Greenland. George asserts that the trial court erred in (1) characterizing the family home as community property; (2) awarding a $51,034.89 lien to Cheryl; (3) failing to characterize money borrowed from his mother as a community liability; and (4) failing to divide the property fairly and equitably. We affirm the trial court's division of assets and award Cheryl her attorney fees.
To avoid confusion, we refer to the parties by their first names. We intend no disrespect.
FACTS
George and Cheryl Greenland married on July 4, 1997. During the course of their marriage, they both worked outside the home and maintained separate bank accounts. They shared a home (Laguna Lane) that George brought into the marriage as his separate property.
George purchased Laguna Lane in 1994, with his mother, Betty Watson. The pair paid $96,500 for the home, and Watson gifted $25,000 for the down payment. George and Watson owned Laguna Lane as co-tenants, but Watson later quitclaimed the house to George. George and Cheryl refinanced Laguna Lane, and George transferred the property to the community by quitclaim deed. In completing this transaction, George and Cheryl pledged their community credit for the mortgage payment. During their marriage, both parties made payments on the mortgage.
Cheryl filed for dissolution of marriage on November 10, 2005. Trial was held on October 26 and 30, 2006. The trial court issued its oral ruling on November 1, 2006. On December 8, 2006, the trial court entered findings of fact, conclusions of law, and a dissolution decree.
In its findings, the trial court characterized Laguna Lane as community property and awarded it to George. To compensate Cheryl for her share of the home's equity, the trial court awarded her a $51,034.89 lien, with seven percent interest, to be paid by George in monthly installments over 10 years, secured by a deed of trust. Additionally, the trial court ruled that money given to George by his mother over the course of his marriage did not create a community debt. The trial court reduced previously unpaid attorney fees to a judgment in Cheryl's favor, but it otherwise denied Cheryl's request for attorney fees.
George appeals.
ANALYSIS
I. Standard of Review
Under RCW 26.09.080, trial courts have broad discretion in the distribution of property and liabilities in marriage dissolution proceedings. The trial court must make a "just and equitable" distribution of the marital property. RCW 26.09.080. We will disturb a distribution of property only if the trial court manifestly abuses its discretion. In re Marriage of Brewer, 137 Wn.2d 756, 769, 976 P.2d 102 (1999). All of the parties' property, both community property and separate, is before the trial court for distribution. In re Marriage of Olivares, 69 Wn. App. 324, 328, 848 P.2d 1281 (1993). Factors for the trial court to consider are: (1) the nature and extent of the community property; (2) the nature and extent of the separate property; (3) the duration of the marriage; and (4) the economic circumstances of the parties. RCW 26.09.080. In applying these factors, the trial court first must characterize the marital property as either separate or community. Olivares, 69 Wn. App. at 329.
We review a trial court's characterization of property de novo. In re Marriage of Griswold, 112 Wn. App. 333, 339, 48 P.3d 1018 (2002). We will reverse the underlying factual findings only if substantial evidence does not support them. Griswold, 112 Wn. App. at 339. "Substantial evidence exists if the record contains evidence of sufficient quantity to persuade a fair-minded, rational person of the truth of the declared premise." Bering v. SHARE, 106 Wn.2d 212, 220, 721 P.2d 918 (1986) (citing In re Welfare of Snyder, 85 Wn.2d 182, 185-86, 532 P.2d 278 (1975)).
Property retains its character as either separate or community unless the parties change its character. In re Marriage of Shannon, 55 Wn. App. 137, 140, 777 P.2d 8 (1989); In re Estate of Madsen, 48 Wn.2d 675, 676-77, 296 P.2d 518 (1956). A spouse's separate property is that property owned before marriage or acquired during marriage by gift, bequest, devise, or inheritance, together with the "rents, issues and profits thereof." RCW 26.16.010; RCW 26.16.020; see Enrich v. Barton, 2 Wn. App. 954, 959, 471 P.2d 700 (1970). However, property purchased during marriage is presumed to be community property. Estate of Madsen v. Comm'r of Internal Revenue, 97 Wn.2d 792, 796, 650 P.2d 196 (1982). In fact, courts presume that all assets acquired during a marriage are community property. In re Marriage of Short, 125 Wn.2d 865, 870, 890 P.2d 12 (1995). A party may rebut this presumption by showing that he acquired the assets as separate property. Short, 125 Wn.2d at 870.
II. Character of Laguna Lane
George assigns error to the trial court's characterization of Laguna Lane as community property. He asserts that even though he signed a quitclaim deed to the marital community, the trial court should have found it to be his separate property. He argues that because the transfer was made without adequate consideration and without counsel, the trial court should not have considered the quitclaim deed. The trial court properly characterized Laguna Lane.
"It is well settled, that the nature of separate property may be changed to that of community property by the voluntary act of the spouse owning it." In re Estate of Shea, 60 Wn.2d 810, 816, 376 P.2d 147 (1962). When an interspousal transaction occurs such that the property's character changes, the transaction is not presumptively fraudulent. Jones v. Jones, 56 Wn.2d 328, 337, 353 P.2d 441 (1960). If a party challenges the good faith underlying a transaction, however, the party asserting good faith has the burden of proof. RCW 26.16.210.
George does not claim that the transaction was not made in good faith; rather, he asserts that he simply did not intend to transfer the property. At trial, George testified that his mother encouraged him to place Cheryl on the deed and that he did not realize what he was signing as the deed was among the many papers the loan officer placed in front of him. Inadvertence in this case is not believable as George described how his mother quitclaim deeded the property to him. George knew what a quitclaim deed was and it is unlikely that he would not know that signing a quitclaim deed would give the property to the marital community. Beyond this, George does not allege fraud, deceit, or absence of good faith in the transfer. Without allegations of wrongdoing or some obvious flaw in transfer process, we must respect the quitclaim deed and find Laguna Lane to be community property. The trial court noted that "it was clear that Mr. Greenland knew that he was conveying a half interest," and we agree. Report of Proceedings (RP) (Nov.1, 2006) at 13.
George also testified about the practicality of having Cheryl on the deed: "Mom quit claimed the home to me and, for legal purposes, she wanted another name on there in case I got hit by a truck or something, and so it was logical to add Cheryl's name in her place." RP (Oct. 30, 2006) at 140.
George argues that per Yeager v. Yeager, a 1914 appeal, the conveyance should be voided as there was not adequate compensation for the transfer and he was not represented by a lawyer when he made the conveyance. 82 Wash. 271, 144 P. 22 (1914). In Yeager, a wife conveyed property to her husband post-separation. The husband set up a meeting with the wife (who had just returned from a stay at a sanitarium) at his attorney's office. The wife did not have a lawyer with her at the meeting. The purpose of the meeting was reconciliation of the parties. At that time, the wife conveyed to the husband the deed to the couple's home, in its entirety, for $15 dollars per month "so long as she conducted herself with propriety and remained his wife." Yeager, 82 Wash. at 272. Immediately after she executed the deed to the husband, he commenced an action of divorce against her. On appeal, the trial court's determination that the conveyance was improper was upheld. The Yeager court cited the "inconsiderable sum" the wife received for the conveyance along with the fact that they "[could not] believe that the effort at reconciliation was made in good faith." Yeager, 82 Wash. at 273.
There is little similarity between Yeager and the case at bar. Here, there are no allegations of fraud or deceit. There are no claims that Cheryl tricked George out of Laguna Lane or that she encouraged him to sign the property over. Instead, there is a quitclaim deed, George voluntarily signed, conveying the property to the community in the first years of their marriage as part of a refinancing. Though he claims he did not receive adequate compensation for the transfer, it is clear that by gifting Laguna Lane to the community, George received some benefit as Cheryl became equally responsible and liable for the property.
George cites no authority that a completely voluntary gift to the community requires consideration.
Lastly, George would like to extend Yeager to require counsel to be present whenever an interspousal transfer of property occurs. He cites to several cases that seem to imply that counsel should be present to advise a spouse when signing over community property rights, but he cites none holding that the same rule applies when a spouse voluntarily gifts separate property to the community. See In re Marriage of Marzetta, 129 Wn. App. 607, 120 P.3d 75 (2005). There is nothing in this case to suggest that the transfer of property from George to the community was not made freely or was not "fair and just." Yeager, 82 Wash. at 274. Without some evidence of wrongdoing or impropriety, it would be improper for us to remedy George's regret. The trial court properly characterized Laguna Lane as community property.
III. Award of Lien
George argues that the trial court's award to Cheryl of a $51,034.89 lien was improper. We review a trial court's imposition of a lien for abuse of discretion. Baker v. Baker, 80 Wn.2d 736, 747, 498 P.2d 315 (1972). In this case, the trial court did not abuse its discretion in awarding the lien.
Throughout his brief, George describes the lien the trial court imposed as an "equitable" lien. Appellant's Br. at 24. Courts may assess an "equitable lien" as reimbursement when community labor or funds of one character have enhanced the property of another. See Jones v. Davis, 15 Wn.2d 567, 131 P.2d 433 (1942). Given that the trial court correctly characterized Laguna Lane as community property and, as the trial court noted, the lien was awarded to equalize "the division of property given that [the] husband gets the house . . .," it is impossible that the trial court ordered an "equitable lien." RP (Nov. 1, 2006) at 5. The trial court did not award the lien to reimburse Cheryl's contribution of separate property to a community asset — as George suggests — but rather to secure her share of the net community assets.
IV. Treatment of Money from George's Family
A. $71,500 from Betty Watson
George argues that the trial court erred in failing to include as a community liability $71,500 he obtained from his mother, Watson. George characterizes this money as a loan to the community. Cheryl argues that the trial court's ruling was proper and that the money George received was an advance on his inheritance and not a loan to the community. We review the trial court's characterization de novo. In re Marriage of Chumbley, 150 Wn.2d 1, 5, 74 P.3d 129 (2003).
The trial court did not characterize the money as debt; rather it determined that George's 1/8 share of his mother's estate was his separate property.
We must decide whether the $71,500 was a loan or an advance on George's inheritance. A loan is "presumptively for the benefit of the marital community, and presumptively is a community obligation." In re Marriage of Hurd, 69 Wn. App. 38, 54, 848 P.2d 185 (1993) (quoting Nat'l Bank of Commerce v. Green, 1 Wn. App. 713, 717, 463 P.2d 187 (1969)). In contrast, inheritance is separate property. See Estate of Madsen v. Comm'r of Internal Revenue, 97 Wn.2d 792, 796, 650 P.2d 196 (1982). The evidence presented at trial did not persuade the trial court that the money from George's mother constituted a loan and, after review, we are similarly unpersuaded.
A "loan" is "an advancement of money or other personal property to a person, under a contract or stipulation, express or implied, whereby the person to whom the advancement is made binds himself to repay it at some future time, together with such other sum as may be agreed upon for the use of the money or thing advanced." Hafer v. Spaeth, 22 Wn.2d 378, 384, 156 P.2d 408 (1945), overruled, in part, on other grounds, Whitaker v. Spiegel Inc., 95 Wn.2d 661, 623 P.2d 1147 (1981). At trial, George failed to provide any evidence of a promise he or Cheryl made to repay Watson with any agreed sum for using the money. There were many checks written to George from his mother over the course of several years, but there was not a single promissory note indicating an understanding that the money was to be repaid. The only written indication that the money may not have been a gift is presence of the word "loan" in the subject line on each check. Each check was made out to only George, and George deposited the checks into his checking account. Cheryl and George maintained separate bank accounts and neither were signatories on the other's account. George testified that if he does not repay the money, it will be "subtracted from [his] inheritance." RP (Oct. 30, 2006) at 74. As evidence that the money was not a gift, George cites that he repaid his mother $12,000.
Cheryl testified at trial that she was aware of money coming from George's mother but that she was not aware that it was a loan. Rather, Cheryl testified that George told her the money was being deducted from his inheritance "every time he received a check from his mother." RP (Oct. 26, 2006) at 61. Cheryl further testified that she never actually saw a check from George's mother and never had access to the funds. She noted that in addition to paying separate property obligations, such as George's child support (from previous relationships) and his car payments, he used some of the money to pay community bills.
George's mother changed her last will and testament just before her death to confer absolute discretion on the executrix of the estate to distribute funds to George. She did not mention any debt George owed to her estate. As the trial court noted, it is not clear that George must actually repay the money to his mother's estate:
We don't really know if he is going to lose anything. The executrix has a power to restrict him. She may not do so. Even assuming that she does so, this is not a whole lot different from the case, as I asked you actually about yesterday, which is, what if mom had died before they had broken up, that he had gotten $71,000 . . . before they had split up and spent the money, just commingle it, put it in a joint account, and they spent it on whatever they spent it on? Another year after all of the money is gone, they [break up], and he says, "Why shouldn't I get my $71,000 back?" Wouldn't you more ordinarily say something like, "Well, no. That's how you chose to spend your money?"
RP (Nov. 1, 2006) at 13-14.
We agree with the trial court that George failed to show that the money he received from his mother was a loan. The gift, or advance, may have been structured like a loan, but since there is no evidence that George has to repay the money, the trial court properly refused to view it as a community liability.
B. $8,500 from Trudy Greenland
George also maintains that the trial court erred in characterizing an $8,500 debt to his sister as his separate property. It is George that is in error as the trial court characterized $8,500 owed to Trudy Greenland as a community liability. George incurred a separate debt to Trudy Greenland after the date of separation and thus, the trial court properly characterized that debt as his separate liability. We affirm the trial court's ruling.
V. Distribution of Property and Debts
George argues, assuming the trial court's mischaracterization of Laguna Lane and that he must pay back $71,000 to his mother's estate, that the trial court's overall distribution of property is neither fair nor equitable. Since we have affirmed the trial court's characterization of Laguna Lane as community property and refuse to consider the monies from George's mother a community debt, our review of the allocation of property differs greatly from George's. We affirm the trial court's distribution of assets.
After awarding the lien to Cheryl, the trial court divided the net community assets 50-50 between the parties. The trial court noted that George sought to have a disproportionate division of property because he brought Laguna Lane into the marriage. After consideration, the trial court declined to make the allocation George sought, citing its responsibility to consider how the division of property leaves the parties. In re Marriage of Dessauer, 97 Wn.2d 831, 839, 650 P.2d 1099 (1982). The trial court determined that:
Per In re Marriage of Nuss, 65 Wn. App. 334, 341, 828 P.2d 627 (1992), it is appropriate for the trial court to review the origin of the community property when making a distribution of property. At the same time, RCW 26.09.080 does not mandate this. In this case, the trial court considered that George brought Laguna Lane into the marriage in making its property distribution, but it found that this fact should not affect the asset distribution, in light of other more important factors.
[George] is better educated and better able than [Cheryl] to obtain a higher level of income from employment. Indeed, he has been able to do so in the past. . . . [George] has previously had income greater than $4K/month and can do so again. This factor weighs against a disproportionate division of property in favor of [George].
Clerk's Papers (CP) at 114.
In total, the trial court determined the couple's assets equal $217,400. The trial court deducted from that amount the couple's total debts of $123,364.22, leaving net community assets of $94,035.78 for distribution. The trial court awarded Laguna Lane to George. With $86,000 still owing on the mortgage, the community equity in the home was $121,000. This left George with $98,052.78 (104.27 percent) of the community assets, while Cheryl received-$4,017.00 (-4.27 percent). To balance this division, the trial court awarded a lien to Cheryl in the amount of $51,034.89, secured by a deed of trust in Laguna Lane. After this allocation, the couple each received equal amounts of the net community assets, $47,017.89. Nothing in the record shows this equal division is unfair.
VI. Attorney Fees
Both parties request attorney fees on appeal. In a dissolution action under RCW 26.09.140, "[u]pon 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 attorney's fees in addition to statutory costs." Under RAP 18.1, an award of attorney fees is appropriate where a party has substantially prevailed on appeal. George has not substantially prevailed on appeal, and thus he is not entitled to attorney fees. Cheryl has substantially prevailed, however. We award Cheryl attorney fees and costs on appeal because she has substantially prevailed; the commissioner of this court is to set the amount upon compliance with RAP 18.1.
We affirm trial court's division of assets and award Cheryl attorney fees.
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, J. and HUNT, J., concur.