Opinion
No. 28183-3-III.
Filed: August 31, 2010. UNPUBLISHED OPINION.
Appeal from a judgment of the Superior Court for Spokane County, No. 08-3-00055-7, Linda G. Tompkins, J., entered May 22, 2009.
Affirmed in part and reversed in part by unpublished opinion per Siddoway, J., concurred in by Kulik, C.J., and Korsmo, J.
Steven Egland appeals the property division ordered by the trial court in the dissolution of his marriage to Jaynan Egland. Real estate constituted a substantial part of the community assets, and accounted for a majority in value of the property awarded to both spouses. The issues raised are whether the trial court abused its discretion in ordering Mr. Egland to sell the principal property awarded him in order to contribute $40,000 of the proceeds to the Egland children's postsecondary education expenses, and whether the trial court substantially overvalued two time-share properties awarded to him, thereby resulting in a patent disparity in his and his wife's economic circumstances. While we affirm the trial court's division of property, we agree that the court abused its discretion in ordering a sale of Mr. Egland's property in anticipation of a postsecondary support obligation, and without having considered factors required by RCW 26.19.090(2). We reverse that part of the decree of dissolution.
I. FACTS AND PROCEDURAL HISTORY
Steven and Jaynan Egland were married for over twenty years and have four children. Ms. Egland filed for dissolution in 2008. The dissolution trial was bifurcated, with parenting issues resolved first, through an order of child support entered on March 31, 2009. Child support was ordered for the three children identified as dependent based upon the parties' net income, Ms. Egland's being the higher of the two. The order of child support provided that postsecondary support was expected for the children and "[t]he right to petition for post secondary support is reserved, provided that the right is exercised before support terminates as set forth in paragraph 3.13." Clerk's Papers (CP) at 36. Paragraph 3.13 provided for termination of support at "the age of 18, or as long as the children remain(s) enrolled in high school, whichever occurs last." CP at 35. Property distribution issues were addressed thereafter in a two-day trial in May 2009.
Among relief requested by Ms. Egland in the property distribution trial was that the couple's unimproved property near Bonners Ferry, Idaho be placed in a trust for the children rather than awarded to either spouse. She testified that the property was purchased using community and separate assets the couple was able to spare only because they anticipated, and ultimately received, financial support from her parents. She also testified that she and Mr. Egland had intended for the children to have the property. Mr. Egland denied that the Bonners Ferry property had been purchased with, or in reliance on, substantial gifts from his in-laws and contends that the record supports at most a $15,000 gift toward the purchase from Ms. Egland's parents and $5,000 from his own parents. These amounts were deposited to the Eglands' household account and were used with their community funds to purchase the property in both parties' names. Mr. Egland acknowledged other and later gifts from his wife's parents, but testified that the gifts helped cover living expenses during periods when Ms. Egland was not working outside the home or was working only part-time, or to cover travel and vacations they could not otherwise afford. Mr. Egland testified that the Bonners Ferry property was intended for the children only in the general sense that everything the couple did was with the children in mind; he testified he was not in a position to make a present gift of the property to his children given his income and resources, but they would be free to use the property if it were distributed to him.
The parties disagreed whether a request for postsecondary support was before the court in the two-day property distribution trial. Mr. Egland's counsel contended it was not. II Report of Proceedings (RP) at 328. Ms. Egland's counsel contended that it was, at least as to the second oldest child, Augustus, who would graduate from high school in 2009. II RP at 354-55. The parties appear to agree that no issue of postsecondary support for their oldest son, Colton, was before the trial court or is before us on appeal. Evidence before the court as to Augustus's interest, aptitude, or opportunity for college was limited to his imminent graduation from high school and a general desire by both parents that their children have a four-year college education. Evidence as to financial need or resources for college costs was limited to testimony, in the property division context, of mutual fund accounts established for each of the children and a life insurance policy purchased by Ms. Egland's parents that could be used as a resource for education expenses. But there was no testimony as to what education needs these might meet or what expenses were anticipated.
Colton graduated from high school in 2007 and was not identified as dependent by the petition or the order of child support. CP at 3, 6, 33-35. There was testimony in passing in the property distribution trial that Colton was working some, had started college the prior year, and was being helped with expenses by Ms. Egland, who was claiming him as a dependent and taking education tax credits, but the attorneys appear to agree that no issue of postsecondary support for Colton was before the trial court or is before this court. II RP at 328, 354-55; Br. of Resp't at 2, 5-6.
Implicit in the parties' briefing is possible disagreement over whether Ms. Egland had timely or properly petitioned for postsecondary education support for Augustus. The record is inadequate for us to have a view on this issue. By addressing the evidence presented as to Augustus, we do not intend to express one.
Turning to the second issue on appeal, among relief requested by Mr. Egland during the property distribution trial was that vacation time-shares owned by the couple in Mexico and Canada not be sold or awarded to either, because they were poor investments, had little or no value, and could be sold at best for only a few thousand dollars. He suggested that the couple continue to hold them and take turns using them, or that they be sold. Ms. Egland testified that the couple had paid $32,265 and $10,000 for the respective time-shares and asked that they be awarded to Mr. Egland at that value.
The trial court ultimately valued and distributed all of the property, awarding Ms. Egland community property valued at a total of $412,184 and confirming property valued at $24,591 as her separate property. It awarded Mr. Egland community property valued at a total of $416,498. The community property allocated to Mr. Egland included the two time-shares at values equal to their original purchase price. It also included the Bonners Ferry property, but with a directive that Mr. Egland immediately place the property on the market for sale at his expense, and that he transfer $40,000 of the proceeds to accounts for the children's postsecondary education expenses. In announcing the requirement for this sale and transfer, the trial judge commented not only on a need to fund education costs, but also on the $40,000 figure representing half of Ms. Egland's parents' gifts to the couple over the years, stating that there had been "a very considerable amount of separate property invested, although no tracing." II RP at 365. Nonetheless, the court's findings of fact and conclusions of law entered thereafter found the Bonners Ferry property to be community property, not separate property. CP at 9-10.
Mr. Egland appeals.
II. ANALYSIS
"A trial court has broad discretion to order a divorced parent to pay postsecondary education expenses." In re Marriage of Newell, 117 Wn. App. 711, 718, 72 P.3d 1130 (2003); RCW 26.19.090(2). Discretion is abused if it is exercised on untenable grounds for untenable reasons. A court's decision is based on untenable reasons if it is based on an incorrect standard or the facts do not meet the requirements of the correct standard. In re Marriage of Littlefield, 133 Wn.2d 39, 47, 940 P.2d 1362 (1997).
The valuation of property awarded in a marital dissolution is a material and ultimate fact, which is reviewed for substantial evidence. In re Marriage of Crosetto, 101 Wn. App. 89, 96, 1 P.3d 1180 (2000); In re Marriage of Eklund, 143 Wn. App. 207, 212, 177 P.3d 189 (2008). Substantial evidence exists if the record contains evidence of a sufficient quantity to persuade a fair-minded, rational person of the truth of the declared premise. In re Marriage of Griswold, 112 Wn. App. 333, 339, 48 P.3d 1018 (2002), review denied, 148 Wn.2d 1023 (2003). All that is required is that the court's valuation findings are within the range of credible evidence. In re Marriage of Sedlock, 69 Wn. App. 484, 490, 849 P.2d 1243 (citing Worthington v. Worthington, 73 Wn.2d 759, 764-65, 440 P.2d 478 (1968)), review denied, 122 Wn.2d 1014 (1993). Our role is to determine whether substantial evidence supports the findings and whether the findings support the trial court's conclusions of law. In re Marriage of Greene, 97 Wn. App. 708, 714, 986 P.2d 144 (1999). We do not substitute our judgment for that of the trial court on a disputed factual issue such as the valuation of property or adjudge witness credibility. Id.; In re Marriage of DewBerry, 115 Wn. App. 351, 362, 62 P.3d 525, review denied, 150 Wn.2d 1006 (2003).
The trial court has broad discretion in distributing marital property and its decision will be reversed only if there is a manifest abuse of discretion. Griswold, 112 Wn. App. at 339. A manifest abuse of discretion occurs when the court's discretion is exercised on untenable grounds. In re Marriage of Muhammad, 153 Wn.2d 795, 803, 108 P.3d 779 (2005). If the decree results in a patent disparity in the parties' economic circumstances, a manifest abuse of discretion has occurred. In re Marriage of Pea, 17 Wn. App. 728, 731, 566 P.2d 212 (1977).
A court is required to make a "just" and "equitable" disposition of the parties' property. RCW 26.09.080. Ultimately, "[t]he trial court is in the best position to assess the assets and liabilities of the parties and determine what is `fair, just and equitable under all the circumstances.'" In re Marriage of Brewer, 137 Wn.2d 756, 769, 976 P.2d 102 (1999) (quoting In re Marriage of Hadley, 88 Wn.2d 649, 656, 565 P.2d 790 (1977)).
A. Did the trial court abuse its discretion in ordering Mr. Egland to sell property and devote $40,000 of the proceeds to finance postsecondary education?
1. Findings reviewed
The parties argue conflicting grounds for the trial court's disposition of the Bonners Ferry property, so we first address the findings of the trial court that we review. In announcing her decision as to the Bonners Ferry property, the trial judge touched on three rationales: that given the history of the property, the children were enmeshed in the property issue (II RP at 363-64); that the parties' investment in real estate did not provide the liquidity needed to finance college (II RP at 365-66, 369); and that gifts by Ms. Egland's parents represented a considerable amount of separate property even though the gifts, most of which were made in later years, could not be traced to the Bonners Ferry property (II RP at 365-66). Ms. Egland urges us to consider the children's attachment to the property and the grandparents' gifts, despite the tracing problems and the absence of authority in the court to award property to children. See In re Marriage of Donovan, 25 Wn. App. 691, 698, 612 P.2d 387 (1980).
"A trial court's oral ruling `has no final or binding effect unless formally incorporated into the findings, conclusions, and judgment.'" State v. Bryant, 78 Wn. App. 805, 812, 901 P.2d 1046 (1995) (quoting State v. Mallory, 69 Wn.2d 532, 533-34, 419 P.2d 324 (1966)). In her written findings and conclusions, the trial judge found that the Bonners Ferry property was community, not separate property, to be awarded to Mr. Egland, and that the $40,000 he was directed to obtain through sale of the property was to be deposited in accounts "for children's education." CP at 9. It is these operative findings and conclusions, not the trial court's oral decision, that we review.
2. The trial court abused its discretion in ordering sale of the Bonners Ferry property in order to fund postsecondary education accounts
In Arneson v. Arneson, 38 Wn.2d 99, 101, 227 P.2d 1016 (1951) the Supreme Court distinguished dissolution proceedings from proceedings such as probate, bankruptcy, and receiverships, in which courts are given authority over an owner's property vis-à-vis third parties; in dissolution, by contrast, the trial court determines the couple's interests in property as between themselves but is not otherwise authorized to interfere with their property rights. A few decisions have affirmed court-ordered sales under special circumstances; most commonly, where sale of some marital property is necessary to achieve a timely and equitable division of the marital assets. See Sedlock, 69 Wn. App. 484. Generally, however, for courts to order the sale of a principal asset by a particular date is "frowned upon." Byrne v. Ackerlund, 108 Wn.2d 445, 451, 739 P.2d 1138 (1987).
In this case, the trial court's order that Mr. Egland sell the Bonners Ferry property was not necessary to achieve an equitable division of assets: given the values assigned, the division was already roughly equal. Rather, the trial court's objective was to create a postsecondary education fund for one or more of the Egland children.
RCW 26.09.100 provides that where there are dependent children, the court shall order either or both of the parents to provide child support. RCW 26.19.090(2) provides that when considering whether to order support for postsecondary education expenses, the court shall determine whether a child is in fact dependent and is relying upon the parents for the reasonable necessities of life and, if the child is dependent, the court shall exercise its discretion whether and for how long to award support based upon consideration of a number of nonexclusive factors, including:
Age of the child; the child's needs; the of the parties for their children the parents were together; the child's, desires, aptitudes, abilities or; the nature of the postsecondary sought; and the parents' level of, standard of living, and current and resources. Also to be considered are the and type of support that the child would been afforded if the parents had stayed.
The use of the word "shall" in a statute ordinarily means that some action is mandatory. Kabbae v. Dep't of Soc. Health Servs., 144 Wn. App. 432, 442, 192 P.3d 903 (2008).
As long as the court considers all the relevant factors set forth in RCW 26.19.090(2) in determining postsecondary support, it does not abuse its discretion. In re Parentage of Goude, 152 Wn. App. 784, 791, 219 P.3d 717 (2009) (citing In re Marriage of Kelly, 85 Wn. App. 785, 792-93, 934 P.2d 1218, review denied, 133 Wn.2d 1014 (1997)), review denied, 168 Wn.2d 1024 (2010). Here, however, the trial court was presented with no evidence as to most of the statutory factors; it therefore could not and did not consider them. Nor did the trial court undertake to equitably apportion the obligation for postsecondary education support between the parents, as required. RCW 26.19.001; In re Marriage of Daubert, 124 Wn. App. 483, 502, 99 P.3d 401 (2004), overruled on other grounds by In re Marriage of McCausland, 159 Wn.2d 607, 152 P.3d 1013 (2007).
The trial court abused its discretion by ordering support for postsecondary education expenses without making the determinations and considering the factors required by RCW 26.19.090, and in ordering a sale of the property awarded Mr. Egland for a purpose not falling within its authority to achieve an equitable division of the marital property.
B. Did the trial court abuse its discretion in valuing the properties?
Mr. Egland contends the trial court's valuation of the two time-share properties at their purchase cost was outside the scope of credible evidence, and argues that because the time-shares have little value, the court's property division resulted in a "greatly disproportionate" award in favor of Ms. Egland who, by virtue of her higher income, was the economically advantaged spouse. Br. of Appellant at 16. He contends this disproportionate division is an abuse of discretion.
Neither party offered expert testimony as to the value of the time-shares or evidence of comparable sales. Ms. Egland testified that the purchase price of the time-share in Mexico was $32,265 and the approximate purchase price of the time-share in Canada was $10,000, and that the rights associated with the time-share in Mexico included stays at other properties and the option to apply the purchase price to the cost of a condominium. I RP at 72-74. Mr. Egland did not challenge his wife's testimony as to the purchase prices or the character of the time-share interests, but expressed his opinion that the time-shares had little value and testified that they could not be sold on the open market.
When parties offer conflicting evidence in valuation of property, a trial court considering a property division may adopt the value asserted by either party or any value between the two. In re Marriage of Rockwell, 141 Wn. App. 235, 250, 170 P.3d 572 (2007), review denied, 163 Wn.2d 1055 (2008). A trial court's finding of fact will be upheld if supported by evidence sufficient to persuade a rational fair-minded person that the premise is true.
We accept the proposition that the purchase price of an asset has no necessary relationship to its market value at a later time. But Ms. Egland's undisputed testimony that the price paid for the time-share in Mexico (the costlier of the two) could be applied to the purchase of a condominium gives the purchase cost relevance it might not otherwise have. And where Mr. Egland offered nothing more than his own opinion as to value and conclusion that there was no market for the time-shares, argument that his evidence is credible, and Ms. Egland's is not, is not compelling.
Mr. Egland's contention that the trial court's decision resulted in a patent disparity between his and his wife's economic circumstances also hinged on the combined effect of the requirement that he sell the Bonners Ferry property and devote $40,000 in proceeds to postsecondary education expenses, that he bear all costs of the property sale, and that he receive the two time-shares at an aggregate value of $43,265. Br. of Appellant at 3. We reverse the trial court's requirement that he sell the Bonners Ferry property and create an education fund, and in the process eliminate costs of sale as an expense he must bear. With the alleged overstated time-share values as his only remaining complaint, the disparity he contends for is that a distribution of the community property that appears from the decree to be 50.3 percent to 49.7 percent in Mr. Egland's favor is, in fact, 47.8 percent to 52.2 percent in favor of Ms. Egland. We would not find an abuse of discretion on the basis of patent disparity even at the lower time-share values contended for by Mr. Egland. And it was clear from the trial court's oral ruling that her decision to distribute the time-shares to Mr. Egland was not based on her conviction that they represented the full $43,265 in value, but rather her belief that, given Mr. Egland's profession as a financial advisor, the time-shares would have more value in his hands. II RP at 370.
If we reduce the aggregate value of the time-shares from $43,265 to the "couple thousand dollars each" testified to by Mr. Egland (II RP at 270), his share is reduced from $416,498 ÷ $828,682 to ($416,498 — $39,265) ÷ ($828,682 — $39,265).
As Mr. Egland concedes, the court is not required to distribute assets equally. Here, the trial court considered the evidence of value offered by both parties. Given the potential for applying the price paid for the time-share in Mexico to a future real estate purchase and the limited evidence offered by Mr. Egland, we conclude that sufficient evidence supports the court's findings on the time-share values. Moreover, in light of our reversal of the required property sale and education funding, the decree does not result in any event in a significant disparity in award, or in the condition in which the parties will be left.
We reverse that part of the decree that requires that Mr. Egland sell the Bonners Ferry property and transfer $40,000 of the proceeds to a fund to provide for the children's education, and otherwise affirm the final decree.
A majority of the panel has determined that this opinion will not be printed in the Washington Appellate Reports but it will be filed for public record pursuant to RCW 2.06.040.
KULIK, C.J., KORSMO, J., concur.