In the Matter of the Marriage of: Mary Alice Carlson & Hugh David Carlson ( 2019 )

FILED
MAY 30, 2019
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
IN THE MATTER OF THE MARRIAGE )
OF ) No. 34443-6-III
)
MARY ALICE CARLSON, )
)
Respondent, )
) UNPUBLISHED OPINION
and )
)
HUGH DAVID CARLSON, )
)
Appellant. )
FEARING, J. — Hugh David Carlson (David) and Mary Carlson, spouses of a
dissolved marriage, cross-appeal numerous discretionary rulings of the dissolution court
dividing property and liabilities, awarding spousal maintenance, and awarding attorney
fees. Arguments from both parties that the trial court’s rulings erroneously benefitted the
other party suggest wise rulings by the dissolution court. Nevertheless, we independently
review the record cited by the parties to determine if the dissolution court abused its
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discretion. We hold the trial court did not abuse its discretion and affirm the rulings,
except that we agree with David that the trial court may have performed a mathematical
error, and we remand for clarification.
In a consolidated action, a limited partnership formed by David Carlson appeals
the trial court’s dismissal, based on the statute of limitations, of a suit to collect loans that
the partnership extended to the marital couple. The partnership also appeals the trial
court’s dismissal, due to the statute of limitations, of a claim against Mary Carlson for
alleged breach of a fiduciary duty. We affirm the dismissals.
FACTS
David and Mary Carlson married in May 1989, when David was age 46 and Mary
age 34. A perceptive dissolution court described the couple’s relationship, at least in
recent years, as more of a business association than a romantic bond. The couple bore no
children together, but generated children during earlier marriages. The couple separated
in July 2012. This appeal primarily concerns the division of property on dissolution.
During their marriage, David and Mary Carlson toiled as orchardists. The couple
grew tree fruit on multiple properties in the Yakima Valley through the entities Carlson
Orchards, Inc., South 80 Orchards Limited Partnership, and Carlson Agribusiness, LLC.
The Carlsons also operated two other entities: HMD, LLP, formed by David and his
father in 1999, and RMT Holdings, LLC, formed by Mary in 2005. The dissolution court
needed to divide the entities and assets of the various entities between David and Mary.
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David Carlson managed the orchard growing, packing, and marketing operations,
and Mary oversaw the orchard finances. David also served as the salaried chair of the
Washington State Apple Commission from 2003 to 2008 and, at the time of the marital
dissolution, earned $6,500 per month as a consultant to Borton Fruit, a grower, packer,
and shipper of fruits in the Yakima Valley.
David Carlson incorporated Carlson Orchards in 1971 or 1972 with sixty-eight
orchard acres. Eventually Carlson Orchards farmed 1,900 acres of apples, cherries,
apricots, peaches, and nectarines on orchards in Mattawa, Selah, Terrace Heights,
Wapato, and Sunnyside. In addition to owning some of the orchard land, Carlson
Orchards leased land from other entities, including the Bureau of Indian Affairs (BIA),
the State Department of Natural Resources, and the Carlson owned company of South 80
Orchards. David Carlson formed South 80 Orchards between 1997 and 1999.
David Carlson and his father, Hugh Carlson, formed HMD, LLP in 1999, with the
father and son as general partners and with four members of the family of Marla Contini,
David’s sister, as limited partners. The limited partnership engaged in acquiring, leasing,
selling, and developing real estate and personal property, including farm, ranch, and
commercial property. Management and control of the partnership rested exclusively with
the general partners.
In 1999, Carlson Orchards’ young, productive orchard in Mattawa suffered a
financial loss due to a fire and spray used by government workers to douse the fire. The
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spraying caused damage to fruit trees and buds. The loss limited Carlson Orchards’
ability to repay loans.
After Hugh Carlson died in 2000 and after the commencement of the financial loss
to Carlson Orchards, HMD amended its partnership agreement to designate three general
partners: the estate of Hugh Carlson, with David as personal representative; Mary
Carlson, as her separate estate; and Marla Contini. The amended agreement listed
Mary’s percentage of interest as a 2.5 percent general partner and a 4.0 percent limited
partner. The agreement listed Hugh Carlson’s estate’s interest as a 2.5 percent general
partner and an 80 percent limited partner. At the time of the 2015 Carlson marital
dissolution trial, HMD owned assets worth $1 million.
In 2001, Carlson Orchards entered receivership due to unpaid bank loans, and
David Carlson eventually liquidated the company. The lenders waived rights to the
lessee’s interest in BIA leases and allowed the Carlsons to use working capital needed to
continue operation of the leased properties. David Carlson had personally guaranteed
Carlson Orchards’ bank loans. When one bank garnished his wages from the Apple
Commission, David declared personal bankruptcy.
Because of the bankruptcy of Carlson Orchards, the limited partnership South 80
Orchards began its own grow operations in 2002 and eventually farmed 400 acres of
orchards. David Carlson held no partnership interest in South 80 Orchards. Mary
Carlson, who owned 65.4 percent of South 80 Orchards, was the general partner and
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David’s son, Nicholas, who owned a 27.5 percent interest, was one of three limited
partners.
Mary Carlson suffered serious injuries in an automobile accident in 2002. At the
time of the 2016 dissolution trial, Mary continued to suffer disability from the injuries,
although the disability did not prevent her from work duties.
In 2005, Mary Carlson received $500,000 in life insurance proceeds from one of
her son’s death. Mary then formed the company, RMT Holdings, LLC to hold the
insurance proceeds. RMT Holdings stands for Robert, Mary, and Tracy. Robert and
Tracy are Mary’s two other sons. On August 25, 2006, RMT Holdings purchased a lot
on Scenic Loop in Yakima for $70,000.
Mary Carlson maintained the bookkeeping records for the limited partnership
HMD and paid debts for the partnership through 2011. In 2003 and 2007, Mary wrote
checks on HMD’s account totaling $153,400 to South 80 Orchards to cover shortages in
the latter’s operating funds. South 80 Orchards signed no promissory note.
During trial, David Carlson submitted a purported July 11, 2008 addendum to the
HMD limited partnership agreement that announced that Mary Carlson and Marla
Contini had withdrawn as general partners, that David was now the sole general partner,
and that Mary’s percentage interest in the partnership was only one percent as a limited
partner. At trial, a forensic document examiner declared that someone copied signatures,
including Mary’s signature, from earlier documents, and pasted the signatures on the
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purported 2008 addendum.
In 2009, Mary wrote three checks totaling $165,000 on HMD’s account to South
80 Orchards as working capital for the orchard. The 2009 checks contain the
abbreviation “N/P S-80,” which may be shorthand for “note payable South 80.” Clerk’s
Papers (CP) at 292. None of the 2003, 2007, and 2009 debts owed by South 80 Orchards
to HMD had been repaid by the time of the dissolution trial.
Beginning in 2002, South 80 Orchards sold fruit to the warehouses, Borton &
Sons, Inc. and Zirkle Fruit Co. In 2009, David Carlson directed the fruit warehouses to
issue payment in the name of David Carlson and Carlson Agribusiness instead of South
80 Orchards.
In 2012 and early 2013, HMD loaned a total of $400,000 to David Carlson for
farming operations. David memorialized the $400,000 loan with promissory notes that
established the terms, including interest. David repaid $221,850 of the 2012-13 debt.
On January 1, 2011, David Carlson commenced conducting orchard business
under the name of Carlson Agribusiness LLC rather than South 80 Orchards. David
transferred a grower account that South 80 Orchards maintained with Tree Top Company
to the name of Carlson Agribusiness. The grower account still remains in the name of
Carlson Agribusiness. Throughout 2011, David also moved working capital funds from
South 80 Orchards bank accounts to Carlson Agribusiness bank accounts. Mary, general
partner of South 80 Orchards, did not authorize the transfer of the Tree Top account to
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Carlson Agribusiness or the transfer of funds between bank accounts. Mary claims she
objected to any name change in the orchard business and contends that David, who was
not a general partner in South 80 Orchards, possessed no authority to transfer a grower
account from South 80 Orchards to Carlson Agribusiness. During trial, when asked if he
informed Mary of the formation of the new company, Carlson Agribusiness, David
responded: “I believe so, but I’m not sure.” Report of Proceedings (RP) (June 17, 2015)
at 587. When asked if Mary participated in the “transition from the bookkeeping at South
80 Orchards to Carlson Agribusiness,” David answered: “I believe so.” RP (June 17,
2015) at 588.
RMT Holdings opened two bank accounts. In January through December 2009,
RMT Holdings deposited $80,225 of David Carlson’s consulting fees into one of its
accounts. In his appeal brief, David cites his testimony for the factual proposition that
Mary placed farming income into the RMT Holdings accounts. Nevertheless, David
testified that he lacked knowledge as to whether anyone deposited fruit sales income into
the accounts.
Mary and David Carlson separated in July 2012, and Mary vacated the family
home in September 2012. In turn, Mary filed a petition for legal separation in June 2013.
During the years of the formal separation, David managed the orchard operations. Mary
later converted the separation action into this marital dissolution action.
On November 19, 2013, Mary Carlson withdrew $226,485.05 from the HMD bank
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account, and she closed the account. In February 2014, the trial court found Mary in
contempt for withdrawing the funds, ordered her to place the withdrawn money into the
registry of the court pending trial, and ordered her to pay David $500 to purge the
contempt order. The money remained in the registry of the court at the time of trial.
Remember that, beginning in 2009, David Carlson directed Borton & Sons, Inc.
and Zirkle Fruit Co. warehouses to issue fruit payments to Carlson Agribusiness rather
than South 80 Orchards. In December 2013, South 80 Orchards filed suit against David
Carlson and Carlson Agribusiness for conversion of income and tortious interference
with business relationships. In response, David and Carlson Agribusiness filed
counterclaims against South 80 Orchards for breach of contract, unjust enrichment,
conversion, violation of the computer fraud and abuse act, aiding and abetting the
violation of a restraining order, violation of a court-ordered confidentiality agreement,
tortious interference, and breach of fiduciary duty. The counterclaims related in part to
the 2003, 2007, and 2009 loans from HMD to South 80.
In the lawsuit initiated by South 80 Orchards, HMD filed an intervenor complaint
in March 2014 against South 80 Orchards and Mary Carlson. HMD alleged that South 80
Orchards breached contracts by refusing to repay the 2003, 2007, and 2009 loans from
HMD. HMD claimed that Mary breached the HMD partnership agreement and her
fiduciary duty by withdrawing $226,485.05 from the HMD bank account in November
2013. HMD did not allege that Mary violated a fiduciary duty by distributing HMD
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funds to South 80 Orchards or by asserting the statute of limitations on any debt owed by
South 80 Orchards. HMD requested a judicial order removing Mary from HMD.
The intervenor complaint read in part:
11. On or about November 19, 2013, Mary withdrew $226,485.05
from bank account 0109024540 at Yakima· Federal Savings & Loan
Association (the “Withdrawn Funds.”)
12. The Withdrawn Funds are the property of HMD.
13. Judge Elofson ordered Mary to pay the Withdrawn Funds into
the Court’s registry on January 7, 2014.
....
IV. FIRST CAUSE OF ACTION- CONVERSION AGAINST MARY
18. HMD here incorporates all prior allegations in this Complaint in
Intervention.
19. Mary willfully took possession of the Withdrawn Funds.
20. The withdrawal was without lawful justification.
21. The withdrawal deprived, and continues to deprive, HMD of
possession.
22. Mary’s actions damaged, and continue to damage, HMD.
V. SECOND CAUSE OF ACTION- BREACH OF PARTNERSHIP
AGREEMENT AND BREACH OF FIDUCIARY DUTY AGAINST
MARY
23. HMD here incorporates all prior allegations in this Complaint in
Intervention.
24. By withdrawing funds in excess of her right to do so, Mary
violated the HMD partnership agreements.
25. Mary has a fiduciary duty to HMD and her other partners
pursuant to the HMD partnership agreements and RCW 25.05.165.
26. By acting in excess of her authority in such a way that damaged
HMD, Mary breached that fiduciary duty.
27. Mary’s violation of the partnership agreement and breach of
fiduciary damaged, and continues to damage, HMD, for which it is entitle
to recover.
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CP at 1643-45 (boldface omitted).
In February 2014, the superior court entered an Order re: Interim Farming
Operations. The order listed eleven properties being farmed by Carlson Agribusiness and
managed by David Carlson, and the order approved a farming budget prepared by David.
The order precluded David from disbursing funds from the Carlson Agribusiness bank
account except for reasonable business expenses within the limitations of the budget.
David could solely sign checks written on the Carlson Agribusiness account in an amount
equal to or less than $2,000. Kathy Nicoloff, the Carlson Agribusiness office manager,
needed to co-sign checks exceeding $2,000, and Nicoloff could sign checks only for
“legitimate office expense[s].” CP at 79. The February 2014 order also directed Carlson
Agribusiness to send a monthly statement of account activities to the company’s
accountant, who was to assess the reasonableness of business expenses. During trial, the
Carlson Agribusiness accountant admitted that he never saw a co-signed check, and he
never reviewed a statement of account.
David Carlson wrote a check from the Carlson Agribusiness business account for
$50,000 to his attorneys. David used funds from the Carlson Agribusiness bank account
to, without Mary Carlson’s approval, develop a new orchard, the New Snow Valley
Ranch.
The February 2014 order regarding interim farming operations recognized that
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David would manage the couple’s orchards during the pendency of the dissolution action.
The order also read:
10. For the period of the approved Budget, no salary shall be paid to
Hugh David Carlson, but within the constraints of the Budget, a reasonable
salary may be accrued and paid, except upon order of this court upon the
court’s approval of a motion duly made, noted, and heard.
CP at 79.
This appeal in part concerns the community or separate property character of
subaccounts at Solarity Credit Union. In his appellant’s brief, David Carlson writes that,
from the time of separation in 2012, he primarily used Solarity Credit Union subaccounts
for deposit of his salary, Social Security benefits, and other postseparation income.
David further writes that he used funds from the Solarity accounts to pay Mary support
before she filed for separation in June 2013 and thereafter to pay temporary maintenance.
In support of these facts, David cites a January 8, 2016, letter from his counsel asserting
such facts. He further cites to a January 31, 2015, Solarity Credit Union statement for
account number 248246, a different bank account number. The credit union statement
lists David Carlson as the account holder and references four subaccounts: a primary
savings account with $25 therein, a checking account with $66,058.86 therein, a money
market account with $3,996.17 therein, and an individual retirement account with
$9,361.29 therein. The total sum is $79,441.32. The bottom of the statement lists
deposits and withdrawals from dividend checking with a balance of $4,300.26 in this
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subaccount. This subaccount received deposits of $2,245.00 in Social Security payments.
One check for the sum of $3,000.00 is consistent with the maintenance amount paid by
David to Mary, but the statement does not identify the payee of the check.
In support of his factual statement concerning the Solarity Credit Union
subaccounts, David Carlson also cites a trial court exhibit that constitutes a summary of
bank account activity for checking account #0000248246 at the credit union. The
summary does not identify the account holder. The summary shows deposits during 2015
from an unidentified person’s payments from Social Security and the State of
Washington. The summary also evidences deposits into the account from payments from
Borton & Sons and Carlson Agribusiness. During 2015, withdrawals from the account
exceeded the deposits. The summary does not identify the purpose of the withdrawals.
At the end of 2015, the account, according to the summary, held $2,741.13.
During trial, Mary Carlson testified that Solarity Credit Union subaccounts
belonged to David. Nevertheless, she claimed the subaccounts were a mixture of
separate property and community property. She explained:
Q The Solarity bank account, the [2]48246.
A Yes, that’s Dave’s account.
Q All right. Do you have or did you have signature access on that
account?
A No, we have never had an account together.
Q All right. And what’s your—can you tell the Court what your
position is on the character of the funds in this account whether they’re
community or separate?
A It’s a combination. There’s also a matter of the money that he had
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the checks changed to his name clear back in 2009.
....
Q What deposits were made in that account, from what sources?
A His Apple Commission checks were direct deposits. His Social
Security is direct deposit and retirement is direct deposit. And then there
was a lot of fruit proceeds that went in there, several million.
Q All right. And where were those fruit proceeds grown?
A Pardon.
Q The fruit proceeds that went into that account, what farms were
they grown on?
A They were grown on all of the farms, the 901, the 902, the 903,
and 1941 were 90 percent of it. And then there’s Parker Heights, West 50
and Snow Valley and the house.
RP (June 10, 2015) at 205-06.
David Carlson, in his own name or in the name of one of his entities, opened an
account at Central Valley Bank, known as the 4610 account or court ordered account. In
his appeal brief, David Carlson writes that “[u]nder the farming orders,” he deposited all
proceeds from the orchard operations into the Central Valley Bank account and paid all
orchard expenses from the account. Br. of Appellant at 20 n.25. He also writes that the
dissolution court directed all farm working capital to be confined to the Central Valley
Bank account. David further writes that he never placed proceeds from the orchard
operations into the Solarity Credit Union subaccounts. He cites RP (June 17, 2015) at
615-16 for these facts. On those pages, David Carlson testified:
Q Now that is not the Court appointed report directed to the trust
account, correct?
A No.
Q That was the 610 account.
A That’s correct, finally. Initially it was the one we used for the
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Court.
Q Okay, and we saw from Mr. Petersen that checks were deposited
into the 405 account and then immediately, same day, a check was
deposited into the 610 account, that is the court directed account, correct?
A Most of the time, yes.
In June 2014, based on an agreement of the parties, the trial court consolidated all
claims, counterclaims, and intervenor claims among South 80 Orchards, HMD, Carlson
Agribusiness, David Carlson, and Mary Carlson with this marital dissolution action. The
dissolution trial included trial on these commercial claims.
In June 2015, David Carlson purportedly sent notice of a HMD partnership special
meeting to the partnership’s limited and general partners. Mary Carlson, general and
limited partner, never received notice of the meeting. David, his sister Marla Contini,
and his sister’s husband attended the partnership meeting. The attending partners
removed Mary as a general partner, on the assumption that she remained a general
partner. Remember a purported 2008 HMD amendment to the limited partnership
agreement stated that Mary Carlson had withdrawn as a partner.
During the pendency of this dissolution proceeding and in 2014, David Carlson
developed a new property, Snow Valley North Ranch. The property consisted of a lease
from the Bureau of Indian Affairs commencing in 2014. David diverted assets from
other community operations to fund the planting of trees and the extension of irrigation,
among other development expenses. David also used community funds to pay for labor
on the orchard. David did not inform Mary about the development. Mary testified that
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David took $433,592.95 from Central Valley Bank account 4610 and $281,738.63 from
bank account 4933 for Snow Valley North Ranch, for a total sum of $715,331.58. David
testified he invested between $210,000 and $220,000 in funds into the new orchard.
By the time of the June 2015 trial, Mary Carlson had last worked in late 2014 as a
bookkeeper for Topp Creek Farms. Mary earned $25 per hour. Depending on her hours
of work, she garnered between $500 and $800 per month. She did not seek other
employment because of the time she spent reviewing records for purposes of this
dissolution proceeding. She rented a single room as her residence.
Because of injury to her back, Mary cannot sit for lengthy periods. On July 31,
2013, the Department of Labor & Industries closed Mary’s worker compensation claim
such that she no longer receives worker compensation benefits. She applied for Social
Security disability benefits, but the government denied the application. During the
pending of the dissolution, Carlson Agribusiness paid for Mary’s medical insurance, but
Mary feared that, at the conclusion of the proceeding, she would need to pay her own
medical insurance premium at a cost of $850 per month. At trial, Mary had $21,700 in
credit card debt.
The trial court ordered David Carlson to pay $3,000 in maintenance to Mary
during the pending of the dissolution proceeding. As of trial, she could not pay all of her
debts on that sum.
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TRIAL
After filing for dissolution, Mary Carlson hired forensic accountant, Matt
Peterson, to review records for the Solarity Credit Union and Central Valley Bank
accounts and deposits and grower account records from Borton Fruit, Zirkle Fruit, and
Treetop. The review of the bank account records would determine whether David
Carlson obeyed the February 2014 order to obtain the signature of Kathy Nicoloff of all
checks exceeding $2,000 and to only write checks for legitimate expenses. David failed
to timely produce business records such that Peterson could not determine whether
orchard expenses incurred justified the issuance of the checks from the bank accounts.
Peterson’s review of the records showed an unusual number of checks issued for the sum
of $2,000. Writing checks for that sum would allow David to avoid the 2014 court order
to obtain approval of checks exceeding $2,000. Thus, Peterson concluded David
structured payments in order to avoid the court order. Peterson also found that David
often overpaid accounts so that the records would appear he garnered less income.
Finally, Peterson found that David failed to cash over $449,808.82 in checks from Borton
Fruit in order to hide income. Peterson testified to his findings during trial.
Mary Carlson also hired James Tarver, a forensic document examiner. Mary’s
counsel sent Tarver numerous documents, with signatures thereon, for review. Tarver
concluded that someone copied the signature of Mary Carlson from one document and
posted that signature on the July 11, 2008, addendum to the partnership agreement of
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HMD, which addendum removed Mary as a partner in the limited partnership. That same
person also pasted from other documents onto the addendum the signatures of Nicholas
Carlson, Anthony Contini, Marla Contini, and Tanya Contini. In other words, the
signatures on the addendum were not genuine. Tarver testified at trial by videotape
deposition.
The superior court conducted a trial beginning in June 2015. During trial
testimony, David Carlson remarked about the 2003 and 2009 loans from HMD to Carlson
Agribusiness:
Q Now, we’ve looked at the 2003 and 4 [sic] loans or amounts paid
to the—(inaudible—coughing) from—to the working capital, if you will,
from HMD, correct?
A I didn't hear the first part of the question.
Q We’ve looked at the checks that we were arguing over which are
now, based on your testimony, not 160,400, but 153,400, correct?
A Correct.
Q And then we have the 165,000 in 2009, correct?
A Correct.
Q And we have some 180,000, just talking principal, all of which
has come out of HMD into the family working capital, correct?
A Correct.
Q Now as you sit here today, chief executive of Carlson
Agribusiness, you acknowledge that those amounts are still owing to HMD.
A Correct.
Q You’re acknowledging the debt right here, right now, correct?
A Correct.
RP (June 17, 2015) at 566.
The dissolution court announced oral findings and an oral ruling in September
2015. Custom demands that the dissolution court enter findings of fact and conclusions
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of law on a constructed form, and the form constrains the court from entering thorough
and creative findings. Thus, we rely more on the dissolution court’s oral announcement
of its decision rather than the written findings.
David and Mary Carlson disputed the community or separate property nature of
two Carlson entities, South 80 Orchards Limited Partnership and HMD, LLP. During its
September 2015 oral ruling, the dissolution court found that the Carlson marital couple
operated Carlson Orchards, South 80 Orchards, and Carlson Agribusiness “very loosely,”
with “very little attention or respect paid to the various corporate entities.” CP at 289.
According to the court, outsiders viewed the corporate entities as separate, but David and
Mary moved funds and debts among the entities as needed to run their orchards. The
court remarked:
I think the other reality is, is I don’t know how to describe it other
than that they seemed to operate South 80, Carlson Orchards, Carlson
Agribusiness, all of the entities, each in the same way, each entity very
loosely, very little attention or respect paid to the various corporate entities.
They were really almost outward shells so that outsiders would see that
these were corporate entities, but they, they moved in and out of them with
kind of a personal flavor to it.
CP at 289-90.
During the oral ruling, the dissolution court noted that David Carlson disavowed
any interest in South 80 Orchards when he filed bankruptcy. Nevertheless, the parties
always commingled funds in South 80 Orchards with the other Carlson entities.
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Therefore, against Mary’s contention, the court found South 80 Orchards to be
community property. The court remarked:
[T]hey together began the migration of assets from South 80 into
their various other business entities. The assets weren’t dissipated. They
weren’t concealed. They weren’t sequestered for any one individual’s
benefit over the other. They were moved for their mutual benefit.
Consequently, I would find that South 80 has been commingled and is now
community property.
CP at 290.
The dissolution court found HMD, LLP, unlike South 80 Orchards and Carlson
Agribusiness, to remain the separate property of David Carlson. David and his father
formed the partnership with the father owning nearly all of the entity. The court found
evidence of only a single payment from community orchard operations to HMD, which
the court deemed appropriate probably because of loans issued by HMD.
After the trial court characterized South 80 Orchards, Carlson Agribusiness, and
HMD as either community property or separate property, the court awarded Mary
Carlson fifty-five percent and David Carlson forty-five percent of the “property.” CP at
296. The court qualified its ruling by commenting that the percentages might change.
The court commented:
I’m allocating the property overall 55/45, 55% in favor of Mrs.
Carlson, and I will readily admit these numbers may change, but that’s the
overall perspective.
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CP at 296. The court did not expressly limit this percentage allocation to community
property, although the court’s other comments and the court’s distribution of separate
property suggests the court intended to limit the percentage split to community property.
The dissolution court valued the HMD limited partnership at $1 million.
Consistent with the court’s ruling that HMD remained separate property, the court
declared David’s interest in HMD, which interest he primarily held as the personal
representative of his father’s estate, to be David’s separate property. He awarded the
entire interest in HMD to David. Nevertheless, the court found that Mary Carlson held a
6.5 percent interest in HMD. The addendum allegedly removing Mary’s interest in the
limited partnership was fraudulent. The court characterized Mary’s interest as a
community property interest. The value of Mary’s interest amounted to $65,000.
The court characterized the Solarity Credit Union subaccounts as community
property. The court included the amounts in the account in the percentage division of
community property, but reserved until later a determination of the amounts in the
account because of further business operations affecting the amount.
When allocating the orchard properties between David and Mary Carlson, the
dissolution court endeavored to divide the orchards fifty-five percent to forty-five percent
in line with its previous comments and to allow both parties to continue farming. The
court awarded the 901 Ranch lease to David Carlson, even though South 80 Orchards
was the lessee of the United States Department of Interior. The dissolution court also
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awarded Homeplace Orchard and Snow Valley Orchards to David. A house and shop
needed for farming lies on Homeplace Orchard. Snow Valley Orchards has a two-
bedroom residence. The court also allocated to David the West 50 orchard property. In
turn, the dissolution court awarded Mary the Davenport lot and three leased farming
properties, referred to as the 902, 903, and 1941 orchards. None of the leased properties
awarded Mary included a residence or a shop building for storing and maintaining farm
equipment.
The dissolution court characterized the Scenic Loop lot to be the separate property
of Mary Carlson, and the court awarded her the lot.
During the September 2015 oral ruling, the dissolution court performed a tentative
calculation of the respective allocations of assets. When doing so, the court awarded
David Carlson some $25,000 for three years for managing Mary’s share of the
community property during the pendency of the dissolution proceeding. The court, after
performing the calculation, ordered a transfer payment to Mary of $180,740.
The leases, I’ve described how those would be allocated and, again,
that’s 902, 903 and 1941 to Mrs. Carlson, and that generated roughly 225
acres to her, the home place, New Snow Valley, Snow Valley, West 50,
901 to Mr. Carlson for 210 acres.
The value of the trees is, I don’t have a value of that, but I do have
wind machines that have been valued and allocated per property, and
looking at the figures that were given to me—902, 903, and 1941 all going
to Mrs. Carlson, came to $259,500.00. 902 was $91,000.00. 903—
$89,000.00. 1941—$79,500.00.
The properties allocated to Mr. Carlson and the value of the wind
machine is 901 as $71,000.00, the home property ten, west 50—
21
No. 34443-6-III
In re Marriage of Carlson
$52,000.00, and the New Snow Valley wind machines are encompassed in
the value awarded to Mr. Carlson when I gave him the $300,000.00 asset,
so that would total for him $133,000.00 and, again, the HMD, I said that in
the beginning, the six and a half interest, percent interest goes to Mrs.
Carlson, $65,000.00.
My calculations show, and again, I haven’t counted the bank
accounts or the fruit proceeds, but come to $947,137.00 to Mr. Carlson,
$399,500.00 to Mrs. Carlson and, again, what I allocated to Mr. Carlson
was the home property, the New Snow Valley, the Bayliner, the life
insurance, wind machines, came to $947,137.00.
I’ve allocated to Mrs. Carlson, her total is $399,500.00, made up of
the Davenport lot, the HMD money of $65,000.00, and the wind machines
of $259,500.00. Total—$399,500.00.
I’ve also subtracted the debt owing to HMD. I found that to be a
valid debt, and that is $216,654.00, that’s assigned to Mr. Carlson, and that
left, and also subtracting—Mr. Carlson had asked for a wage in the sum of,
I believe, $80,000.00 or $85,000.00, rather, for the last three years, and it’s
been almost exactly three years. I looked at that. Part of what he’s, what
he’s really done is he’s managed his own property, for which he should not
receive a salary, but he’s also managed Mrs. Carlson’s property, and what
I’ve done is given it an allocation of $25,000.00 a year, for a total of
$75,000.00, so the net, after the—the assets were $947,147.00. I subtracted
the debt of $216,654.00, and I subtract $75,000.00, representing his wage.
That yielded a total of $655,483.00 to Mr. Carlson, and $399,500.00 to
Mrs. Carlson. With a 55/45 transfer, that would generate a $180,740.00
transfer to equalize that division equitably.
CP at 300-03.
The dissolution court found that David Carlson signed notes evidencing the
remaining loans from HMD in 2012-2013 and that the parties intended the loans to
benefit the marital community’s business interests. Accordingly, the trial court
characterized the remaining $216,654 balance on the 2012-2013 debt as community debt,
and the court assigned liability for the debt solely to David.
22
No. 34443-6-III
In re Marriage of Carlson
The court found that Mary Carlson withdrew funds from HMD’s account in
November 2013 in order to protect herself and not due to malice. Therefore, the trial
court dismissed David’s and Carlson Agribusiness’ claims against Mary related to the
withdrawal of funds. The superior court ordered Mary to pay interest for the period of
time between withdrawal of the funds from the HMD account on November 19, 2013,
and the deposit of the funds into the court registry on January 7, 2014. The amount of
interest accrued was $3,648.56. The court found that after January 7, the funds were
unavailable to either party due to court-ordered sequestration to protect the status quo,
and thus the court did not compel Mary to pay interest after January 7, 2014.
Remember that the court ruled that Mary Carlson held a 6.5 percent interest in
HMD. Mary’s interest was valued at $65,000 since the value of HMD was $1 million.
To facilitate the payment of the interest owed on the HMD withdrawn funds, to facilitate
the termination of Mary’s interest in HMD, to facilitate the payment to Mary of her
retired interest in HMD, and to facilitate the withdrawal of the HMD funds on deposit
with the court, the dissolution court held that the $3,648.56 in accrued interest be
deducted from $65,000. In turn, the dissolution court directed that the clerk release
$61,351.88 of the funds to Mary and the remaining funds to HMD.
During the September 2015 oral ruling, the dissolution court ordered David
Carlson to pay Mary $3,000 per month spousal maintenance for three years in part
because of her limited disability and to give her a chance to develop her orchard
23
No. 34443-6-III
In re Marriage of Carlson
operation and to become self-sufficient. The court directed Mary to pay $1,000 of that
amount as the monthly premium on David’s life insurance, with Mary as beneficiary.
The court ordered David to maintain the policies. The court commented:
Spousal maintenance—Mr. Carlson is 72, Mrs. Carlson is 60. The,
each has described their health histories as being somewhat tenuous. Mr.
Carlson frankly portrays as a very vibrant 72-year-old who, I don’t think he
knows the meaning of not working, and, certainly, you’ve gotta, whether
you like my decision or not, that’s a compliment, but the length of the
marriage has some factor here, but I think Mrs. Carlson has demonstrated
that she has a need, but what’s interesting, as I said earlier, I thought this
was going to be more of a spousal maintenance case than it was. She has
represented herself to be competent and capable. She can make it on her
own, and on the flip side she’s described these serious health issues that
she’s dealt with over the last number of years. There are certain emotional
issues that were, became rather apparent and that simply just affect how
you get through life. The loss of a child. So I was somewhat surprised, but
I have to respect that.
CP at 304-05.
The trial court dismissed South 80 Orchards’ claims for conversion and tortious
interference against Carlson Agribusiness and David Carlson as unsupported by the
evidence. The court dismissed HMD’s claims for repayment of the loans made to South
80 Orchards in 2003, 2007, and 2009 as untimely under the three-year statute of
limitations. During the September 15 oral ruling, the trial court commented about the
loans:
Next, there are loans from HMD to Dave Carlson and Carlson
Orchards, and it’s, they are broken into two categories. One is, the first
category is June of 2003 to March of 2007. The transfers were
approximately $153,400.00. They had been originally asserted at
24
No. 34443-6-III
In re Marriage of Carlson
$160,400.00, but Mr. Johnston indicated there’d been a $7,000.00 check
located. These are transfers of money. There are no promises to pay, no
terms indicated in any of the documents, other than some comments by Mr.
Carlson offered well after the events. No interest is described. I find that
the statute of limitation is three years. The three years has expired. The
obligation is extinguished to that extent.
There are another series of loans. July of 2009 to September of
2009. There are three transfers totaling $165,000.00. The only notations
that were provided were N/P S-80. I presumed that that meant, and I
believe the testimony would confirm, note payable South 80. There are no
other entries, no other terms described, no promises to pay. I find that the
three-year statute of limitations applies.
CP at 292. The trial court noted that both Mary and David made withdrawals from HMD
for their corporate and mutual interests.
When recognizing that HMD argued that Mary was acting as a fiduciary of HMD
when she issued the checks to South 80 Orchards, the court found that David was fully
aware of the transfer of HMD’s money to the family business and was mutually
responsible. The trial court also found that David presented no credible evidence that
HMD’s loans to South 80 Orchards in 2003, 2007, and 2009 were made without the
knowledge of the other partners, his sister, and the sister’s family.
When dismissing the claim of HMD against South 80 Orchards and Mary Carlson,
the dissolution court also commented:
So, again, on the HMD checks, I just make it clear, I guess, if, it’s
either bound by the statute of limitations or I would treat it as a, I can go
either way, treat it as a fiduciary obligation and the community is obligated,
but I would assign, because of the unique nature of Mr. Carlson’s
relationship with HMD, the, those debts and I would not count that in the
calculation.
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No. 34443-6-III
In re Marriage of Carlson
CP at 310.
Mary Carlson requested attorney and expert fees due to David’s intransigence.
The trial court found that David, through forged documents, fraudulently removed Mary
as a partner in HMD and that Mary needed to hire and pay an expert to expose the fraud.
The court also found that $400,000 in fruit proceeds from the Borton warehouse
mysteriously disappeared during David’s orchard management. The court found that
David arranged for Borton & Sons to hold $400,000 and pay the money to David after
the completion of the dissolution. The trial court also found that David
uncharacteristically “pre-paid” Zirkle Fruit warehouse’s packing charge in order to
reduce his assets for purposes of the dissolution proceeding. Mary needed the services of
an accountant to expose the hiding of income and reduction of income by prepaid
expenses. The court found David to be intransigent.
David Carlson argued that Mary’s forensic accountant and attorneys performed
deficiently when investigating the missing funds such that he should not need to pay the
expert fees. The dissolution court disagreed with David’s “interesting” argument of
deflecting blame on others.
Mary Carlson requested $186,363.47, including $28,151.90 for the expert services
of accountant Matt Peterson and document examiner James Tarver. On the basis of the
finding of intransigence and also based on Mary’s need for payment and David’s ability
26
No. 34443-6-III
In re Marriage of Carlson
to pay, the dissolution court ordered David to pay Mary $50,000 in attorney fees. The
court commented during the September 2015 ruling:
Attorney’s fees. Mr. Carlson has suggested that each bear their own
fees. Mary Carlson has asked for an award. The elimination of Mary
Carlson from HMD by, I guess, the forged documents and the investigation
that went with it. This was a case that was kind of smothered in what I call
high-octane gasoline or high octane emotion, and something happened.
The suggestion was that maybe it was Mary Carlson or someone else. I
don’t find that. I think the only person that had any interest in this and was
clearly at odds with Mary was Mr. Carlson. The fact that it was such a
highly emotional issue, the fact that he was in control of the various assets,
the operations, the money, and when you’re, I think it’s fair to say ‘cause
I’m in that age group, that as you get older you become more vulnerable
and alert to your resources and their, their potential elimination. It, it put
Mrs. Carlson in an extremely emotion—or vulnerable position, and it was
already an emotional and combative case. I think that is a factor that I think
was unnecessary, and I think Mr. Carlson was clearly the force behind it.
The missing fruit proceeds at Borton was an interesting issue.
Again, that was an evolving issue throughout this case. Mr. Carlson’s
deposition was taken. Mr. Peterson was retained. The amount that was
taken was just shy of $400,000.00. There was some criticism offered of
Mr. Carlson, or of Mr. Peterson and of Mrs. Carlson’s attorneys for not
doing a better job in investigating the records and the missing money. They
didn’t make the records incomplete, they didn’t make the money go
missing, and it’s hard to track down what someone else has done. I thought
that interestingly the records were all maintained by, created, rather, and
maintained by either Mr., created by Mr. Carlson and either maintained by
him or third parties. They were always going to be incomplete records
because they weren’t created by Mrs. Carlson. These are his records, and
they are only as available as he had made them.
It was interesting, Mr. Peterson’s, the criticism of his work, I don’t
think, was accurate. It was Mr. Peterson who brought to light the issue.
Had he not brought to light this issue, $400,000.00 would have remained
missing, and it would have been simply a question. The fact that through
efforts that counsel was able to discover the missing money doesn’t change
the fact that it was missing.
....
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No. 34443-6-III
In re Marriage of Carlson
He [David Carlson] describes himself as a very highly-qualified
farmer and orchardist.
CP at 305-08.
David Carlson claimed that Mary Carlson was intransigent and sought an award of
attorney fees against her or at least sought to use her intransigence to preclude an award
against him for his behavior. The court found Mary not to be intransigent.
After the September 2015 oral ruling, Mary Carlson submitted a five-page
summary of activity in the Solarity Credit Union subaccounts during 2015. The
summaries showed the total funds in the subaccounts, presumably at the end of 2015, as
$16,680.39. Nevertheless, at the time of the March 2016 written decree of dissolution
and final division of property, the six Solarity subaccounts included the following sums:
i. 8426-00 $ 25.00
ii. 8426-09 $ 5,923.79
iii. 8426-10 $ 89,458.37
iv. 8426-17 $ 3,995.83
v, vi. 8426-71, 72 $ 9,359.83
CP at 1313. The accounts then totaled $108,762.82.
The dissolution court entered a written order in March 2016 that dissolved David
and Mary Carlson’s marriage, determined the legal and property rights of the parties, and
distributed the property. Findings of fact and conclusions of law accompanied the March
2016 order.
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No. 34443-6-III
In re Marriage of Carlson
LAW AND ANALYSIS
David Carlson, Mary Carlson, and HMD appeal or cross-appeal rulings of the
superior court. We organize the assignments of error presented by the parties based on
the party asserting the error, beginning with David’s assignments.
We politely scold David Carlson for the content and nature of his appeal brief.
RAP 10.3(a) addresses the content of the appellant’s opening brief. Subsection 5 of the
rule directs the writing of a statement of the case and the subsection declares:
Statement of the Case. A fair statement of the facts and procedure
relevant to the issues presented for review, without argument. Reference to
the record must be included for each factual statement.
Instead of following the rule, David, with few citations to the record, presents argument
in his statement of the case as to why the trial court inequitably divided the property. He
contends that the trial court cast a concrete division of the property into a fifty-five
percent to forty-five percent split, when the court stated the numbers may change. David
then presents numerous hypothetical calculations in an attempt to show the trial court
committed arithmetical error.
Compliance with RAP 10.3(a)(5) permits this reviewing court to readily discern
the important facts and confirm those facts from the record. In turn, the rule facilitates an
orderly and learned decision from this court. David Carlson’s statement of the case
impedes rather than assists this court in reviewing the trial court’s rulings.
29
No. 34443-6-III
In re Marriage of Carlson
David Carlson Appeal
Issue 1: Whether the dissolution court mischaracterized the Solarity Credit Union
account as community property rather than David Carlson’s separate property?
Answer 1: No. At least, we cannot determine by the facts forwarded by David
Carlson that the trial court committed error.
David Carlson challenges the dissolution court’s division of the marital couple’s
property. We first address David’s assignments of error as to discrete factors influencing
the property division. We later address the overall question of whether the trial court
equitably divided the property and liabilities.
David Carlson assigns error to two of the dissolution court’s characterizations of
assets. He contends the court mischaracterized the Solarity Credit Union bank
subaccounts as community property and the Scenic Loop lot as the separate property of
Mary. As to the bank subaccounts, according to David and with the dissolution court
awarding Mary fifty-five percent of the community property, he lost fifty-five percent of
the savings he accumulated in his separate property subaccounts during the marital
separation because of the classification of the Solarity funds as community property.
RCW 26.09.080 controls a dissolution court’s division of the marital couple’s
assets and liabilities. The statute directs the court to reach a just and equitable division of
all of the couple’s property and liabilities, whether community or separate, after
considering all relevant factors. These factors include, but are not limited to:
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No. 34443-6-III
In re Marriage of Carlson
(1) The nature and extent of the community property;
(2) The nature and extent of the separate property;
(3) The duration of the marriage or domestic partnership; and
(4) The economic circumstances of each spouse or domestic partner
at the time the division of property is to become effective, including the
desirability of awarding the family home or the right to live therein for
reasonable periods to a spouse or domestic partner with whom the children
reside the majority of the time.
RCW 26.09.080.
To make a fair and equitable division of the property and liabilities in a marriage
dissolution, the court must first characterize each asset owned by one or both parties as
either community or separate. In re Marriage of Kile, 186 Wash. App. 864, 875, 347 P.3d
894 (2015). Regardless of the characterization, all property, whether community or
separate, is before the court for distribution. In re Marriage of Neumiller, 183 Wash. App.
914, 920, 335 P.3d 1019 (2014).
Community property generally consists of property acquired during a marriage by
either spouse or both spouses. RCW 26.16.030. Separate property is property owned by
a spouse before marriage, or acquired by him or her during marriage by gift, bequest,
devise, descent, or inheritance. RCW 26.16.010.
In Washington, the law determines each item of property’s character as either
separate or community property at the date of its acquisition. In re Estate of Borghi, 167
Wash. 2d 480, 484, 219 P.3d 932 (2009). The separate property character of fungible
assets, such as money or stocks, may be destroyed through comingling. In re Marriage
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No. 34443-6-III
In re Marriage of Carlson
of Schwarz, 192 Wash. App. 180, 190, 368 P.3d 173 (2016).
To aide in determining an asset’s character, Washington courts deploy several
presumptions. 19 SCOTT J. HORENSTEIN, WASHINGTON PRACTICE: FAMILY AND
COMMUNITY PROPERTY LAW § 10.1, at 189. (2d ed. 2015). The strongest presumption is
that the marital community owns property acquired during a marriage. In re Marriage of
Skarbeck, 100 Wash. App. 444, 449, 997 P.2d 447 (2000); HORENSTEIN § 10.2, at 190.
The party claiming an asset acquired during the marriage as separate property bears the
burden of proof. In re Marriage of Skarbeck, 100 Wash. App. at 449. The claimant
overcomes the marital property presumption when offering clear and convincing
evidence that the property was acquired with separate funds. In re Marriage of Schwarz,
192 Wash. App. at 189.
In his appeal brief, David Carlson alleges various facts and impliedly contends
that, based on those facts, the undisputed evidence established that neither party
deposited community funds into the Solarity Credit Union subaccounts. David writes
that the trial court ordered all community farming income to be deposited into an account
other than the Solarity Credit Union accounts and that he obeyed the order. He writes
that Mary agreed that the Solarity subaccounts constituted his sole property and that
Mary submitted no evidence to the contrary. David also pens that Mary’s forensic
accountant testified that David deposited his Social Security and pension payments into
the Solarity Credit Union subaccounts.
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No. 34443-6-III
In re Marriage of Carlson
David Carlson does not bespeak the entire truth. Mary also testified that David
deposited farm income or fruit proceeds and his wages from the Apple Commission into
the Solarity Credit Union subaccounts. In support of his factual allegation regarding
Mary’s accountant’s testimony, David cites CP at 251, which constitutes a summary of
deposits and withdrawals in 2015 from a subaccount at Solarity Credit Union. The
summary lists deposits from the Washington State Treasurer and from Social Security.
But the summary also documents deposits from Borton and from or to Carlson
Agribusiness, which would involve orchard operations. These deposits could confirm
Mary’s testimony of the deposition of farming income into the Solarity Credit Union
accounts.
This reviewing court will not disturb decisions or findings made by the trial court
when they fall within the scope of the evidence presented. In re Marriage of Mathews,
70 Wash. App. 116, 122, 853 P.2d 462 (1993). The dissolution court solely determines the
weight that evidence receives. In re Marriage of Clark, 13 Wash. App. 805, 810, 538 P.2d
145 (1975). This court defers to the trial court on issues of credibility. In re Marriage of
Rideout, 150 Wash. 2d 337, 350-52, 77 P.3d 1174 (2003). Substantial evidence supported
the trial court’s conclusion that the Solarity Credit Union accounts constituted
community property.
David also maintains that, because of deposits of his Social Security payments into
a Solarity Credit Union subaccount, the dissolution court effectively treated his Social
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No. 34443-6-III
In re Marriage of Carlson
Security deposits as community property, in violation of 42 U.S.C. § 407(a) of the Social
Security Act. This section forbids transfer or reassignment of “‘[t]he right of any person
to any future payment under this subchapter.’” 42 U.S.C. § 407(a); In re Marriage of
Zahm, 138 Wash. 2d 213, 219, 978 P.2d 498 (1999).
In Marriage of Zahm, the trial court characterized one party’s monthly Social
Security payment as community property, but never assigned nor calculated a future
value of this payment as part of the distribution of property. The Washington Supreme
Court held that, although the trial court mischaracterized the Social Security payment as
community property, the error was harmless because the trial court did not award a party
an offset based on future benefits. Zahm adopted the analysis of the Court of Appeals,
which approved consideration of Social Security benefits in determining the parties’
relative economic circumstances at dissolution: “‘A trial court could not properly
evaluate the economic circumstances of the spouses unless it could also consider the
amount of Social Security benefits currently received.’” In re Marriage of Zahm 138
Wash. 2d at 223 (quoting In re Marriage of Zahm, 91 Wash. App. 78, 85, 955 P.2d 412
(1998)).
Marriage of Zahm is both distinguishable and instructive. The Carlsons’
dissolution court did not characterize David’s monthly Social Security payments as
community property and did not assign any future benefits to Mary. Although evidence
showed that David deposited the Social Security payments in a Solarity Credit Union
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No. 34443-6-III
In re Marriage of Carlson
subaccount, David presented no evidence that any certain sum of those benefits existed in
the account at the time of distribution.
David Carlson’s insistence that the Solarity Credit Union accounts be categorized
as his separate property assumes that he would necessarily be awarded the entire amount
in the accounts without any offset in assets to Mary. Since the trial court may award one
spouse the separate property of the other spouse and since the trial court should equitably
distribute all assets, with the separate or community nature of each asset being only one
consideration, we reject this assumption. Nevertheless, since the trial court did not abuse
its discretion in classifying the accounts as community property, we need not discuss
David’s presumption.
In the body of his brief, David Carlson challenges the value assigned by the
dissolution court to one of the five Solarity Credit Union subaccounts. Nevertheless,
David never assigned error to the valuation of any of the subaccounts. This court will not
review a claimed error unless the appellant assigns error to the ruling. BC Tire Corp. v.
GTE Directories Corp., 46 Wash. App. 351, 355, 730 P.2d 726 (1986); RAP 10.3(a)(5),
10.3(g).
Issue 2: Whether the dissolution court mischaracterized the Scenic Loop lot as
Mary Carlson’s separate property rather than community property?
Answer 2: No.
David Carlson next argues that the court should have characterized the Scenic
35
No. 34443-6-III
In re Marriage of Carlson
Loop lot as community property. David asserts that the lot presumptively constituted
community property, although he does not explain why. He writes that accounts, in
which the parties commingled community funds, paid for some of the expenses of the lot,
presumably after its initial purchase. David probably contends that payment of the
expenses by community funds necessarily transformed the lot into community property.
But he cites no case law or statute in support of his contention. The law disagrees.
Therefore, we affirm the dissolution court’s characterization of the lot as Mary’s separate
property.
In Washington, the law determines each item of property’s character as either
separate or community property at the date of its acquisition. In re Estate of Borghi, 167
Wash. 2d at 484 (2009). Once the separate character of property is established, a
presumption arises that the asset remained separate property in the absence of sufficient
evidence to show an intent to transmute the property from separate to community
property. In re Estate of Borghi, 167 Wash. 2d at 484. Significantly, the evidence must
show the intent of the spouse owning the separate property to change its character from
separate to community property. In re Estate of Borghi, 167 Wash. 2d at 484-85. The law
generally demands an acknowledged writing when changing the nature of real property.
In re Estate of Borghi, 167 Wash. 2d at 485. Assuming the community pays for expenses
on one spouse’s separate property, the property does not metamorphose to community
property, but the community may obtain reimbursement for the contributions. In re
36
No. 34443-6-III
In re Marriage of Carlson
Hickman’s Estate, 41 Wash. 2d 519, 526, 250 P.2d 524 (1952).
Evidence shows that Mary Carlson, in 2006, purchased the Scenic Loop lot from
proceeds from insurance benefits on her son’s life, which benefits she deposited into an
RMT Holdings bank account. David adduced evidence that Mary deposited community
funds in the bank account, but only after 2006. David presents no law that imposes
community property status on an asset purchased from death benefits resulting from only
one spouse’s child. Therefore, we assume the lot gained separate property status when
purchased.
David presents no evidence of Mary deeding the Scenic Loop lot to the marital
community, let alone any intent to donate the asset to the community. Therefore, the
Scenic Loop lot always retained its separate property status. The community may be
entitled to reimbursement for expenses paid, but David never sought reimbursement for
the community.
Issue 3: Whether the dissolution court failed to consider a required factor when
dividing the couples’ property?
Answer 3: No.
David Carlson contends the trial court failed to consider all factors in RCW
26.09.080, including the parties’ resulting economic circumstances, when it distributed
the parties’ assets. David emphasizes that the trial court gave Mary more property. He
received only forty-five percent of the community assets and alleges he received less than
37
No. 34443-6-III
In re Marriage of Carlson
forty-five percent of the community’s net working capital. He characterizes the award as
dooming him to bankruptcy, particularly because he must also pay Mary spousal
maintenance and some attorney fees. David emphasizes that he is of advanced age. He
criticizes the award as inequitable particularly when he managed the community’s assets
during the pending of the dissolution at compensation below the minimum wage.
We review the dissolution court’s distribution of property and debts for abuse of
discretion. In re Marriage of Muhammad, 153 Wash. 2d 795, 803, 108 P.3d 779 (2005); In
re Marriage of Neumiller, 183 Wash. App. at 920 (2014). Discretion is abused if exercised
for untenable reasons or if the court uses an incorrect legal standard. In re Marriage of
Neumiller, 183 Wash. App. at 920. We hold that the dissolution court did not abuse its
discretion when allocating the parties’ property.
As already noted, when dividing marital property, RCW 26.09.080 directs the trial
court to reach a just and equitable division of the couple’s property and liabilities,
whether community or separate, after considering all relevant factors. These factors
include, but are not limited to:
(1) The nature and extent of the community property;
(2) The nature and extent of the separate property;
(3) The duration of the marriage or domestic partnership; and
(4) The economic circumstances of each spouse or domestic partner
at the time the division of property is to become effective, including the
desirability of awarding the family home or the right to live therein for
reasonable periods to a spouse or domestic partner with whom the children
reside the majority of the time.
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No. 34443-6-III
In re Marriage of Carlson
No single factor holds greater weight than another, but the economic circumstances of
each spouse on dissolution loom paramount. In re Marriage of Olivares, 69 Wash. App.
324, 330, 848 P.2d 1281 (1993). The property division need not be equal or
mathematically precise, but must be fair. In re Marriage of Doneen, 197 Wash. App. 941,
949, 391 P.3d 594, review denied, 188 Wash. 2d 1018, 396 P.3d 337 (2017). To reach that
goal, the court must consider all the circumstances of the marriage and exercise its
discretion rather than apply inflexible rules.
In a long-term marriage, the trial court generally tries to place the parties in
roughly equal financial positions for the rest of their lives. In re Marriage of Rockwell,
141 Wash. App. 235, 243, 170 P.3d 572 (2007). Still and perhaps contrary to the previous
sentence, the longer the marriage, the more likely a court will make a disproportionate
distribution of the community property. In re Marriage of Rockwell, 141 Wash. App. at
243. When one spouse is older, semiretired, and dealing with ill health, and the other
spouse is employable, the court does not abuse its discretion in ordering an unequal
division of community property. In re Marriage of Schweitzer, 81 Wash. App. 589, 596,
915 P.2d 575 (1996), remanded on other grounds by 132 Wash. 2d 318, 937 P.2d 1062
(1997). Nevertheless, an obvious disparity in the economic condition of the parties after
the award may show an abuse of the court’s discretion. In re Marriage of Kim, 179 Wn.
App. 232, 253, 317 P.3d 555 (2014).
David Carlson proclaims that the property award relegates him to bankruptcy,
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No. 34443-6-III
In re Marriage of Carlson
particularly because he must also pay Mary spousal maintenance and some attorney fees.
Nevertheless, he provided the dissolution court no analysis to verify a forty-five percent
to fifty-five percent split doomsday result. On appeal, David does not identify what split
he would consider equitable, but presumably he seeks an equal split. David fails to
answer how a forty-five percent share of the community assets consigns him to business
failure, but a fifty percent share of assets would guarantee success.
David Carlson criticizes the dissolution court for failure to consider his advanced
age. RCW 26.09.080 does not expressly direct the trial court to contemplate the spouse’s
respective ages. Nevertheless, we recognize that the court should evaluate how the age
may impact the parties’ long-term financial conditions.
During the September 2015 oral ruling, the dissolution court specifically
mentioned David Carlson’s age as seventy-two and Mary Carlson’s age as sixty when
awarding spousal maintenance. We reasonably conclude that the trial court also had
those ages in mind when allocating the community property owned by the couple. The
dissolution court also considered David Carlson’s strong work ethic as a factor in the
court’s expectation that David will continue to operate orchards in the future despite his
age.
David admits that this court may rely on the trial court’s oral ruling when
assessing whether the dissolution court considered all factors. In re Marriage of
Steadman, 63 Wash. App. 523, 526, 821 P.2d 59 (1991). The dissolution court need not
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enter formal findings of fact on each factor. In re Marriage of Steadman, 63 Wash. App. at
526.
David Carlson fails to recognize numerous factors that render equitable the
dissolution court’s forty-five percent to fifty-five percent division of community
property. Mary Carlson has a limited disability. The trial court awarded David all
interest in HMD, valued at $1 million, minus a payment of $65,000 to Mary for her
terminated interest and the repayment of a debt. The court awarded David orchard
property that already had homes and sheds. The court also awarded David other separate
property. Unlike Mary, David garnered, in 2015, a separate wage of $6,500 per month as
an orchard consultant.
The dissolution court likely would not have abused its discretion if it awarded
Mary Carlson a higher percentage of the couple’s community property. In In re
Marriage of Kim, 179 Wash. App. at 253-54 (2014), this court affirmed an award to the
wife of sixty percent of community property. In In re Marriage of Rockwell, 141 Wn.
App. at 243 (2007), this court affirmed a similar split of property.
Issue 4: Whether the dissolution court erred in its award to David of a salary for
farm management?
Answer 4: We do not know and remand for clarification by the dissolution court.
David Carlson also assigns error to the trial court’s award to him of only $13,750
per year for managing the couple’s orchard property during the pending dissolution
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action. We find no abuse of discretion in the dissolution court’s determination of a
reasonable salary, but we note a probable arithmetic error of $33,750 that likely resulted
in David receiving less salary than the court intended. We remand so the trial court can
determine whether it wishes to amend the judgment.
To repeat, the February 2014 order regarding interim farming operations read:
10. For the period of the approved Budget, no salary shall be paid to
Hugh David Carlson, but within the constraints of the Budget, a reasonable
salary may be accrued and paid, except upon order of this court upon the
court’s approval of a motion duly made, noted, and heard.
CP at 79. The dissolution court did not approve a salary amount for David until the
conclusion of trial, when it calculated an equalizing payment that David would pay to
Mary.
David testified during the trial that a reasonable annual salary for his services
would be $140,000, “but in the interest of getting things resolved, I’m willing to take
85,000.” RP (June 19, 2015) at 653. In announcing its oral decision, the court provided
the following explanation of the salary it intended to award:
[David] had asked for a wage in the sum of, I believe, $80,000.00 or
$85,000.00, rather, for the last three years, and it’s been almost exactly
three years. I looked at that. Part of what he’s, what he’s really done is
he’s managed his own property, for which he should not receive a salary,
but he’s also managed Mrs. Carlson’s property, and what I’ve done is given
it an allocation of $25,000.00 a year, for a total of $75,000.00.
CP at 302. David concedes on appeal that the trial court’s comments reflect a finding
that a reasonable salary for managing the community farming business “was in the
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neighborhood of $50,000 [annually], allocat[ing] approximately one half, or $25,000, of
that to [David] for managing his share of the farms and conclud[ing] that $25,000 would
be the fair salary for managing [Mary’s] share.” Br. of Appellant at 12. We agree.
David contends on appeal that “[t]here is no evidence in the record to support a
reduction of the fair salary of $140,000 per year . . . down to $50,000 per year.” Id.
Nevertheless, in addition to David’s agreement that he would accept $85,000 a year,
evidence emphasized by Mary showed that David lived in the family home and used the
farming account to pay many personal living expenses and some business expenses
incurred in connection with his separate property. The salary amount ordered by the
dissolution court fell within the range of the evidence presented.
David also contends that the trial court’s method for effectuating Mary’s payment
of a share of his salary contained an arithmetical flaw. We agree and attribute the error to
the trial court first giving David the benefit of entitlement to only one-half of the fair
salary but then inconsistently treating that amount as if it must be shared with Mary.
In dividing the couple’s assets and liabilities, the dissolution court allocated some,
mostly nonliquid assets, one hundred percent to one spouse or the other. Because the
court allocated David a net value of $730,483 of those assets and liabilities and Mary
received only $399,500 in value, the court entered a judgment in favor of Mary so that
she would receive 55 percent in value of the total assets and David would receive 45
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percent in value. The court referred to the award to Mary as an “equalizing” payment
even though the court arrived at something other than a 50/50 allocation.
Before calculating the equalizing payment, the court reduced the value of the
assets David received by the “$75,000.00 representing his wage.” RP (June 10, 2015) at
302. This likely constituted error. It was a legitimate way to account for the wage in the
sense that David would actually receive $730,483.00 in value of the assets, but would be
treated, in calculating the equalizing payment, as if he received only $655,483.00. Yet,
by subtracting only half of David’s wage before calculating the equalizing payment, the
court likely required him to share a wage already reduced to $75,000.00.
We illustrate this potential error by comparing the judgment amount arrived at by
the dissolution court with the judgment amount reached if we first calculated an
equalizing payment without adjusting for Mary’s half of the wages owed and then adjust
for her $75,000 liability for her share of David’s wage.
The court made the following calculation.
H (Husband’s assets’ value) + W1 (Wife’s assets’ value) = T (total assets)
.55T = W2 (Wife’s intended value allocation)
W2 – W1 = E (equalizing payment)
Applying the numbers used by the court, this was
$655,483.00 + $399,500.00 = $1,054,983.00
$1,054,983.00 x 55% = $580,240.65
$580,240.65 - $ 399,500.00 = $180,740.65 equalizing payment, which (rounded)
was used as the judgment amount.
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Had the trial court first determined the equalizing payment and then adjusted the
payment by the $75,000 of David’s salary owed by Mary, the equalizing payment would
have been calculated as follows:
$730,483.00 + $399,500.00 = $1,129,983.00
$1,129,983.00 x 55% = $621,490.65
$621,490.65 - $399,500.00 = $221,990.65 equalizing payment.
This would not be the judgment amount. Instead, to arrive at the judgment
amount, the equalizing payment would be reduced by the $75,000.00 share of
David’s salary that was owed by Mary. The equalizing payment of $221,990.65
to Mary, less the $75,000.00 share of David’s wage owed by her, produces a
judgment amount for Mary of $146,990.65 ($221,990.65 - $75,000.00).
As further evidence that the trial court treated the $75,000.00 David should receive
from Mary as an amount she is permitted to share with him, one can look at the
difference between the trial court’s approach and our own and consider what explains the
difference. The difference between what would have been the trial court’s unrounded
judgment in Mary’s favor of $180,740.65 and our calculation of a judgment amount of
$146,990.65 is $33,750.00 ($180,740.65 - $146,990.65). $33,750.00 is 45 percent
(rounded) of $75,000.00. Again, this probably results from the trial court’s method of
calculation requiring David to share 45 percent of the one-half of his salary owed by
Mary.
Even if the dissolution court committed an arithmetic error, the court need not
amend the judgment if satisfied that its disposition of the parties’ assets remains just and
equitable. RCW 26.09.080. Nevertheless, we wish to acknowledge for David that the
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trial court’s calculation of the equalizing payment likely deprived him of the salary
amount the trial court intended to award him. Therefore, we remand for the dissolution
court to consider this anomaly and amend the judgment if deemed suitable.
Issue 5: Whether the trial court awarded Mary Carlson excessive spousal
maintenance from David Carlson?
Answer 5: We decline to address this error since David provided no citation to
authorities in his brief’s argument with regard to this assignment of error.
David Carlson asserts that the dissolution court granted excessive maintenance to
Mary. Nevertheless, David does not expressly assign error to some award. Thus, we
assume he only argues that the amount should be decreased rather than vacated entirely.
David identifies no amount of maintenance that he would consider reasonable.
David Carlson presented a two-page argument in his opening brief in support of
his contention that spousal maintenance exceeded a reasonable sum. Nevertheless, the
argument contained no citation to legal authorities as to factors a court should consider
when assessing spousal maintenance. This court does not review errors alleged but not
argued, briefed, or supported with citation to authority. RAP 10.3; Valente v. Bailey, 74
Wash. 2d at 858; Avellaneda v. State, 167 Wash. App. at 485 n.5.
Issue 6: Whether the trial court erred when solely assigning the 2012-2013 debt
owed to HMD to David Carlson?
Answer 6: We decline to address this error since David provided no citation to
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authorities in his brief’s argument with regard to this assignment of error.
The dissolution court granted David Carlson all interest in HMD. The court also
assigned to David all debt owed by the marital couple to HMD. David assigns error to
this ruling. Nevertheless, in the argument section of his brief, he presents only a one-
page analysis without any citation to legal authority. This court does not review errors
alleged but not argued, briefed, or supported with citation to authority. RAP 10.3;
Valente v. Bailey, 74 Wash. 2d at 858 (1968); Avellaneda v. State, 167 Wash. App. at 485 n.5
(2012).
Issue 7: Whether the trial court awarded Mary Carlson reasonable attorney fees
and costs disproportionately to David Carlson’s intransigence?
Answer 7: No.
David Carlson next assigns error to the amount of attorney fees and costs the
dissolution court ordered him to pay to Mary for his intransigence as being
disproportionate to his misconduct. In the assignment of error, he does not expressly
state that he engaged in no intransigence or that the dissolution court should not have
awarded any fees. Nevertheless, in the body of his argument, he challenges the finding of
intransigence. Unlike some other assignments of error, David presents legal authority in
support of his argument of disproportionality.
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RCW 26.09.140 declares, in part:
The 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, including sums for legal services rendered and costs
incurred prior to the commencement of the proceeding or enforcement or
modification proceedings after entry of judgment.
A trial court has discretion to award attorney fees in a dissolution action after considering
the financial resources of both parties and determining that one party has a need and the
other party has the ability to pay. In re Marriage of Buchanan, 150 Wash. App. 730, 739,
207 P.3d 478 (2009). When considering an award of attorney fees under this statute, the
trial court generally must balance the needs of the party requesting the fees against the
ability of the opposing party to pay the fees. Bay v. Jensen, 147 Wash. App. 641, 660, 196
P.3d 753 (2008).
The dissolution court need not balance needs and ability of the spouses if the court
finds one party to be intransigent. In re Marriage of Foley, 84 Wash. App. 839, 846, 930
P.2d 929 (1997); Bay v. Jensen, 147 Wash. App. at 660. Intransigence, in this context,
includes foot dragging, obstruction, filing repeated, frivolous, or unnecessary motions,
noncompliance with discovery requests, or making the trial unduly difficult and costly by
one’s actions. Wixom v. Wixom, 190 Wash. App. 719, 725, 360 P.3d 960 (2015); Bay v.
Jensen, 147 Wash. App. at 660. Fees incurred due to intransigence should be segregated
from the rest of the fees. In re Marriage of Crosetto, 82 Wash. App. 545, 565, 918 P.2d
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954 (1996).
Determining intransigence is necessarily factual. Wixom v. Wixom, 190 Wash. App.
at 725. We review attorney fee awards based on intransigence for an abuse of discretion.
Wixom v. Wixom, 190 Wash. App. at 725. Discretion is abused when the court’s decision is
outside the range of acceptable choices or based on untenable grounds or untenable
reasons. In re Marriage of Littlefield, 133 Wash. 2d 39, 47, 940 P.2d 1362 (1997).
The evidence amply supports the trial court’s finding of intransigence by David
Carlson. A handwriting expert opined that David forged documents purporting to
remove Mary as general partner of HMD. David developed a new orchard in violation of
the interim farming order and diverted $300,000 in community funds into that project.
David made unusual prepayments of $221,350 for packing expenses in an attempt to
conceal proceeds. David hid income received from fruit packers.
Our review of the amount of the attorney fees award is also for abuse of discretion.
See In re Marriage of Kaplan, 4 Wash. App. 2d 466, 488, 421 P.3d 1046, review denied,
191 Wash. 2d 1025, 428 P.3d 1184 (2018). The trial court awarded only $50,000 of the
$183,363.47 requested by Mary. Of the fees and costs requested, $33,929.55 were
charges of Matt Peterson and James Tarver, respectively the forensic accountant and the
document expert. We agree that the costs were reasonably incurred as a result of the
intransigence of David. That leaves $16,070.45 of costs and fees awarded by the trial
court. Mary fails to isolate for this court the amount of reasonable attorney fees incurred
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because of intransigence. Therefore, we would remand for a further determination of
fees if the court based the award of fees only on intransigence.
The dissolution court also awarded reasonable attorney fees and costs of $50,000
partially based on Mary’s needs and David’s abilities. David fails to recognize this
alternative basis for the award. As already analyzed when discussing the separate
property awarded to David and the current needs of Mary, David had more ability and
Mary more need. The trial court did not abuse its discretion when awarding Mary an
additional $16,070.45 because of her needs.
David Carlson contends Mary incurred attorney fees and costs primarily due to her
own unreasonable and vexatious multiplication of proceedings. He contends the trial
court, during its September 2015 oral ruling, stated that Mary also engaged in conduct
that could be called intransigent. Nevertheless, the dissolution court made no such
finding. The court mentioned that Mary annoyed and frustrated David, but the court
never blamed Mary for this frustration and annoyance. A husband typically grows
irritated with the conduct of a divorcing wife without her engaging in any blameworthy
conduct.
Mary Carlson Appeal
Issue 8: Whether the dissolution court abused its discretion by awarding Mary
Carlson only $3,000 per month in spousal maintenance?
Answer 8: No.
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We previously declined to address David Carlson’s assignment of error that the
trial court abused its discretion when awarding Mary $3,000 in monthly spousal
maintenance for three years. David failed to provide any legal citations supporting his
assignment. We now address the flip side of David’s assignment of error. Mary assigns
error to the ostensible low amount and the purported short length of the maintenance.
Mary argues that the dissolution court failed to consider the twenty-three-year
length of the marriage and her needs when it set monthly maintenance at $3,000 for only
three years and required her to pay $1,000 per month in premiums for David’s life
insurance. Because of the premium payment, Mary receives net maintenance of $2,000
per month, but will reap only fifty percent of the insurance death benefit. According to
Mary, the court should have awarded no less than $3,000 per month until at least her
retirement. She contrasts David’s monthly income, including $6,500 as a consultant,
$2,400 from Social Security, $1,200 in retirement benefits, and farming income of at
least $1,237.90. Of course, David contends the dissolution court should not have
awarded any sum.
RCW 26.09.090 controls an award of spousal maintenance and declares:
(1) In a proceeding for dissolution of marriage . . . , the court may
grant a maintenance order for either spouse. . . . The maintenance order
shall be in such amounts and for such periods of time as the court deems
just, without regard to misconduct, after considering all relevant factors
including but not limited to:
(a) The financial resources of the party seeking maintenance,
including separate or community property apportioned to him or her, and
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his or her ability to meet his or her needs independently, including the
extent to which a provision for support of a child living with the party
includes a sum for that party;
(b) The time necessary to acquire sufficient education or training to
enable the party seeking maintenance to find employment appropriate to his
or her skill, interests, style of life, and other attendant circumstances;
(c) The standard of living established during the marriage or
domestic partnership;
(d) The duration of the marriage or domestic partnership;
(e) The age, physical and emotional condition, and financial
obligations of the spouse or domestic partner seeking maintenance; and
(f) The ability of the spouse or domestic partner from whom
maintenance is sought to meet his or her needs and financial obligations
while meeting those of the spouse or domestic partner seeking
maintenance.
A just award, in light of the statutory factors, poses the only limitation on the amount and
duration of maintenance. In re Marriage of Bulicek, 59 Wash. App. 630, 633, 800 P.2d 394
(1990). We rarely change on appeal trial court decisions in marital dissolution
proceedings. In re Marriage of Stenshoel, 72 Wash. App. 800, 803, 866 P.2d 635 (1993).
The party who challenges a maintenance award must demonstrate that the trial court
manifestly abused its discretion. In re Marriage of Washburn, 101 Wash. 2d 168, 179, 677
P.2d 152 (1984).
We adopt Mary’s argument that she only receives $2,000 per month for three
years because she must monthly pay $1,000 for an insurance premium on David’s life.
Still, the dissolution court did not abuse its discretion when awarding this alternative
amount. In addition to maintenance, Mary received a substantial transfer payment. The
court ordered David Carlson to pay Mary $180,740, with $100,000 of that amount to be
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paid within months of the dissolution decree. This payment would allow Mary to pay her
nominal expenses for years. In addition, Mary received income producing property. She
represented to the court her competence and an ability to “make it on her own.” CP at
304.
Mary Carlson cites In re Marriage of Bulicek, 59 Wash. App. 630 (1990) and In re
Marriage of Williams, 84 Wash. App. 263, 927 P.2d 679 (1996), wherein the dissolution
court awarded the wife maintenance until the age of retirement. Nevertheless, neither
decision compels a trial court to award maintenance until the wife’s retirement. We hold
that the trial court did not abuse its discretion when awarding the amount and length of
spousal maintenance.
Issue 9: Whether the dissolution court abused its discretion by awarding Mary
Carlson only $50,000 in attorney fees and costs?
Answer 9: No.
We address the opposite side of the coin to David Carlson’s contention that the
dissolution court erred when granting Mary an award of $50,000 in fees and costs. Mary
sought recovery of $186,363.47 in reasonable attorney fees and costs. She contends the
trial court abused its discretion by awarding her less than one-third of the requested
amount of attorney fees. She posits that she faced an extraordinary burden to protect her
right to a fair division of property because of David’s foot-dragging, fraudulent
preparation of a document, concealment of fruit proceeds, duplicitous diversion of funds,
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and prepayment of expenses. Since David contends the trial court should have denied
Mary any fees, he agrees that the court reasonably limited the amount to $50,000.
We already outlined the law when we addressed David’s appeal. A trial court has
discretion to award attorney fees in a dissolution action after considering the financial
resources of both parties and determining that one party has a need and the other party
has the ability to pay. In re Marriage of Buchanan, 150 Wash. App. at 739 (2009). When
considering an award of attorney fees under this statute, the trial court generally must
balance the needs of the party requesting the fees against the ability of the opposing party
to pay the fees. Bay v. Jensen, 147 Wash. App. at 660 (2008).
The dissolution court need not balance needs and ability if the court finds one
party to be intransigent. In re Marriage of Foley, 84 Wash. App. at 846 (1997); Bay v.
Jensen, 147 Wash. App. at 660. Intransigence, in this context, includes foot dragging,
obstruction, filing repeated, frivolous, or unnecessary motions, noncompliance with
discovery requests, or otherwise making the trial unduly difficult and costly by one’s
actions. Wixom v. Wixom, 190 Wash. App. at 725 (2015); Bay v. Jensen, 147 Wash. App. at
660. Fees incurred due to intransigence should be segregated from the rest of the fees. In
re Marriage of Crosetto, 82 Wash. App. at 565 (1996). We note review of the amount of
the attorney fees award is also for abuse of discretion. See In re Marriage of Kaplan, 4
Wash. App. 2d at 488 (2018).
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As already discussed, ample evidence supports the dissolution court’s finding of
intransigence on the part of David Carlson. As a result, the dissolution court ordered
David to pay an amount that included at least the expert witness fees incurred by Mary.
The court awarded an additional sum of $21,848.10 beyond the expert fees, which
amount we attribute to attorney fees rather than costs. Mary asked for $158,211.57 in
counsel fees. Mary fails to direct us to any portion of the record where she segregated the
amount of attorney fees incurred as a result of the intransigence of David. Therefore, we
cannot conclude that the court failed to include a reasonable sum for intransigence. We
also note that we find no decision that requires the trial court to award the opposing party
an award for all fees and costs directly resulting from intransigence.
The trial court also granted Mary Carlson reasonable attorney fees and costs on the
basis of RCW 26.09.140 in that Mary had some need for financial assistance and David
had a greater ability to pay. Despite this finding, we reason that the trial court could
have, within its discretion, denied any award to Mary based on need. To repeat our
comments regarding the award of spousal maintenance, Mary received a substantial
transfer payment. Mary received income producing property. She represented to the
court her competence and an ability to support herself. If the dissolution court possessed
discretion to deny fees altogether because of an alleged need, the court did not abuse its
discretion when awarding only $21,848.10 in fees based on this reason.
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Issue 10: Whether the dissolution court abused its discretion when treating HMD
as separate property of David Carlson?
Answer 10: No.
In its distribution of the marital property, the trial court awarded all interest in
HMD, valued at $1 million, to David, less the $65,000 awarded to Mary and $216,654
owed to HMD. The court noted that Mary held a 6.5 percent interest in HMD such that
the court added the sum of $65,000 for David to pay Mary as part of the transfer
payment.
Mary complains that the dissolution court characterized her 6.5 percent interest in
HMD as community property and David’s interest in HMD as separate property. Mary
considers these differing characterizations as inconsistent and thus an abuse of discretion.
Mary also complains that the dissolution court inconsistently characterized the parties’
interest in South 80 Orchards as community property while primarily designating the
interest in HMD as David’s separate property.
We question the relevance of the characterization of the parties’ respective
interests since the trial court equitably awarded the spouses’ assets among them. Again,
the nature of the property is only one factor to be weighed by the trial court.
Nevertheless, to the extent that the trial court deemed David’s interest in HMD to be
separate property and Mary’s interest in the limited partnership to be community
property, we find no error.
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The only law cited by Mary for this assignment of error is the general proposition
that a trial court abuses its discretion if its decision is manifestly unreasonable or based
on untenable grounds or untenable reasons. In re Marriage of Littlefield, 133 Wash. 2d at
46-47 (1997). In turn, Mary argues no legitimate reason justified the dissolution court
treating the respective spouses’ interest in HMD differently.
Mary Carlson’s analysis fails to note the history of HMD. The partnership began
primarily as the entity of Hugh Carlson, David’s father. When the partnership
commenced in 1999, Hugh owned a 98 percent interest in the partnership. Thereafter,
Hugh serially transferred limited percentages in HMD to David and David’s sister. The
trial court could reasonably conclude, based in part of partnership agreement addenda,
that the transfers were gifts from a parent to a child and thus separate property of David.
Separate property is property owned by a spouse before marriage, or acquired by him or
her during marriage by gift, bequest, devise, descent, or inheritance. RCW 26.16.010.
Once Hugh died, David inherited the remaining interest of his father in the partnership,
and David would also hold these shares as separate property.
After Hugh’s death in 2000, HMD drafted another addendum that gave the Estate
of Hugh a 2.5 percent share as a general partner and an 80 percent share as a limited
partner; Mary Carlson, as her separate estate, a 2.5 percent share as a general partner;
Marla Contini a 2.5 percent as a general partner; and the remaining 12.5 percent share as
a limited partner interest in Marla’s family and David’s son, Nicholas. Thus, by 2000,
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David, in his capacity as personal representative of his father’s estate, controlled an 82.5
percent share in HMD.
The history behind HMD shows that David received most, if not all, of his interest
in the limited partnership as a gift from his father or through an inheritance from his
father. Thus, the dissolution court characterized the interest as David’s separate property.
See In re Marriage of Urbana, 147 Wash. App. 1, 11, 195 P.3d 959 (2008).
We note that the HMD partnership agreement addendum listed Mary’s share in the
partnership as her separate property. Nevertheless, the trial court was not bound by the
document’s characterization of ownership. The trial court was free on its own to decide
the character of the ownership interest and could characterize Mary’s interest as
community property since she received the interest during the marriage. Mary does not
argue to the contrary.
The dissolution court also did not abuse its discretion when treating South 80
Orchards as community property and HMD as primarily David’s separate property.
Evidence supported the court’s finding that Mary commingled South 80 Orchards’ assets
with assets of community property. In turn, evidence supported the trial court’s finding
that David did not commingle HMD assets with community property assets.
Issue 11: Whether the dissolution court abused its discretion when treating the
postseparation debt owed to HMD as a community liability rather than David’s separate
debt?
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Answer 11: No.
Mary next assigns error to the dissolution court’s ruling that postseparation debt to
HMD constituted a community liability for both spouses. She emphasizes that David
prepared and signed the notes as both maker and payor. She never agreed to the loans.
According to Mary, the trial court should have characterized the debt as David’s separate
liability and should not have deducted the loan amount of $216,654 against the total
value of the community property for purposes of dividing the assets between the spouses
in the 55 percent to 45 percent split.
Mary Carlson cites RCW 26.16.140 to support this assignment of error. The first
sentence of the statute reads:
When spouses or domestic partners are living separate and apart,
their respective earnings and accumulations shall be the separate property
of each.
We conclude that the statute does not apply since the statute refers only to earnings and
accumulations, not debts or liabilities. We refuse to apply the statute by analogy to debts
in this instance because of the unique circumstances involved. An interim court order
directed David Carlson to manage all of the farm community property. Evidence
supports a finding that the debt to HMD incurred after separation assisted in the
community orchard operations.
The presumption of community liability for debts incurred during the marriage
may be overcome in circumstances before a dissolution decree when the couple live
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separate and apart. Oil Heat Co. of Port Angeles v. Sweeney, 26 Wash. App. 351, 353-54,
613 P.2d 169 (1980). Whereas, David and Mary Carlson lived apart from each other,
Mary did not overcome the presumption of community liability when David managed the
community orchards. Therefore, the trial court did not abuse its discretion when
attributing the debt to the community.
Issue 12: Whether the dissolution court abused its discretion when assessing
interest on the funds Mary withdrew from the HMD bank account and later placed in the
court registry?
Answer 12: No.
The trial court assessed interest at twelve percent per annum on the $226,485.05
Mary Carlson withdrew from the HMD bank account on November 19, 2013 and placed
into the registry of the court on January 7, 2014. The amount of interest accrued was
$3,648.56.
Mary Carlson contends the HMD funds that the trial court ordered deposited with
the registry of the court were not liquidated until the court determined the value of
Mary’s 6.5 percent interest in HMD. Therefore, according to Mary, prejudgment interest
was not appropriate. We disagree. The dissolution court did not impose interest on the
value of Mary’s share of ownership of HMD. The court assessed interest on the money
withdrawn from the HMD bank account. That amount was readily known and thus
liquidated.
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Generally, a prevailing party is entitled to prejudgment interest if the amount
claimed is liquidated. In re Marriage of Rockwell, 157 Wash. App. 449, 454, 238 P.3d
1184 (2010). A claim is liquidated if data in the evidence makes it possible to compute
the amount with exactness, without reliance on opinion or discretion. In re Marriage of
Rockwell, 157 Wash. App. at 454. Prejudgment interest is compensation for the loss of the
use of those funds. In re Marriage of Rockwell, 157 Wash. App. at 454.
Issue 13: Whether the dissolution court abused its discretion when awarding
David Carlson all of the parties’ non-leased real property, residences, and shops?
Answer 13: No.
Mary observes that the dissolution court intended to divide the couple’s orchard
properties so that both parties could continue to farm. Nevertheless, the court granted to
David all of the couple’s orchard land owned outright and assigned her the three leased
Native American trust properties. The court also denied her a useable residence and a
shop for farm equipment. From these observations, Mary contends the dissolution court
failed to properly consider the economic circumstances of the parties. Mary requests an
award of the HomePlace property so she has a residence and a shop in which to store all
of her farm equipment.
When previously addressing David’s challenge to the property division, we reviewed the
factors a court considers when allocating the marital couple’s property. As stated, our
review of the trial court’s distribution of property is for abuse of discretion. In re
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Marriage of Muhammad, 153 Wash. 2d at 803 (2005). An obvious disparity in the
economic condition of the parties after the award may show an abuse of the court’s
discretion. In re Marriage of Kim, 179 Wash. App. at 253 (2014).
We know of no rule that requires the court, in a situation the same or similar to the
economic conditions of the Carlsons, to award each party at least some of the fee land, a
residence, and a large shop. Therefore, we find no abuse of discretion by the trial court
for many reasons. Mary received 225 acres of orchard to David’s 210 acres of orchard.
The value of the wind machines on her leased land exceeded the value of the wind
machines on David’s land. She received an equalization payment from David such that
she received 55 percent of the community property. She also receives spousal
maintenance.
HMD Appeal
Issue 14: Whether David’s trial testimony affirming responsibility for loans
purportedly issued by HMD to Carlson Agribusiness in 2003, 2007, and 2009 precludes
application of a three-year statute of limitations to HMD’s debt collection action against
South 80 Orchards?
Answer 14: No.
We move to HMD’s assignments of error. In December 2013, HMD sued South
80 Orchards to collect on the loans issued in 2003, 2007, and 2009. In 2003 and 2007,
Mary Carlson wrote checks on HMD’s account totaling $153,400 to South 80 Orchards
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to cover shortages in the latter’s operating funds. South 80 Orchards signed no
promissory note. In 2009, Mary wrote three checks totaling $165,000 on HMD’s account
to South 80 Orchards as working capital for the orchard. The 2009 checks contain the
abbreviation “N/P S-80,” which may be shorthand for “note payable South 80.” CP at
292.
In the dissolution court’s oral ruling, the court mentioned that David Carlson and
Carlson Agribusiness, not South 80 Orchards, borrowed the HMD funds in 2003 and
2007. Nevertheless, Mary testified that HMD loaned the money to South 80 Orchards,
not David or Carlson Agribusiness. David cites no evidence contradicting Mary’s
testimony identifying the borrower. David presumably would rather the loans be
assessed to South 80 Orchards, than him personally. Thus, we proceed on the
supposition that South 80 Orchards was the sole borrower in 2003 and 2007. HMD sues
South 80 Orchards, not David Carlson or Carlson Agribusiness, for the debt. The trial
court concluded that South 80 Orchards borrowed the 2009 funds.
No attorney has appeared for South 80 Orchards in this appeal to argue against
enforcement of the debt. We suspect that HMD seeks to impact Mary more than it seeks
to impact South 80 Orchards by its collection efforts, since its appeal argument focuses
on Mary. In fact, HMD wrongly contends that the trial court pierced South 80 Orchards’
corporate veil so as to impose individual liability for the debt on Mary and the
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community. Mary seeks to defeat the debt collection suit. Still neither David nor Mary
Carlson guaranteed the 2003, 2007, or 2009 debt.
We question the utility of any suit to collect the loans. Assuming Mary is
indirectly obligated to pay any of the debt owed to HMD, David holds the same liability,
since the trial court ruled that South 80 Orchards constitutes community property. As
part of the dissolution action, the trial court could assign the entire debt to be paid by
David, who owns and controls HMD. Or the dissolution court could impose the debt in
part on Mary, but increase her portion of the property division or increase her spousal
maintenance in order to assist her in retiring the debt. In its oral ruling, the dissolution
court suggested that, assuming the court enforced the debt, it would impose the debt on
David without offsetting the property award to Mary.
The trial court held the three-year statute of limitations barred HMD’s debt
collection or breach of contract claim against South 80 Orchards. We agree.
A suit on a written contract generally must be commenced within six years.
RCW 4.16.040(1). A three-year limitation period applies to a contract not in writing.
RCW 4.16.080(3). When a claimant must rely on parol evidence to establish any
material element of a contract, the law deems the contract an oral agreement and subject
to the three-year statute of limitations. Barnes v. McLendon, 128 Wash. 2d 563, 570, 910
P.2d 469 (1996). An account does not satisfy the writing requirement of the statute.
Hamlin v. Flick, 130 Wash. 126, 130, 226 P. 484 (1924).
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No writing confirms the 2003 and 2007 loans to South 80 Orchards. HMD does
not contend that the notation on the 2009 checks removes the claim on the 2009 loans
from the three-year limitation period.
HMD claims the three-year limitation period does not bar its suit because David
Carlson, one of the general partners in South 80 Orchards, acknowledged the debt during
his trial testimony. We disagree for numerous reasons.
First, we repeat David Carlson’s trial acknowledgment of debt:
Q Now as you sit here today, chief executive of Carlson
Agribusiness, you acknowledge that those amounts are still owing to HMD.
A Correct.
Q You’re acknowledging the debt right here, right now, correct?
A Correct.
RP (June 17, 2015) at 566. Any admission of David on behalf of Carlson Agribusiness
has no binding effect on South 80 Orchards. HMD cites no testimony of David whereby
he conceded a debt owed by South 80 Orchards.
Second, under Washington statute any new promise to pay a debt must be in
writing and signed by the debtor. RCW 4.16.280 declares:
No acknowledgement or promise shall be sufficient evidence of a
new or continuing contract whereby to take the case out of the operation of
this chapter, unless it is contained in some writing signed by the party to be
charged thereby.
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HMD contends David’s testimony in court satisfied the writing requirement of RCW
4.16.280. Nevertheless, assuming trial testimony may be deemed a “writing,” David has
never signed the testimony.
Third, in support of its argument that David’s trial testimony satisfies the writing
requirement, HMD cites Powers v. Hastings, 20 Wash. App. 837, 846, 582 P.2d 897
(1978), aff’d on other grounds, 93 Wash. 2d 709, 612 P.2d 371 (1980). Powers, however,
held that trial testimony could remove an oral lease and option to purchase real property
from the statute of frauds, not the operation of a statute of limitations. HMD cites no law
that establishes that trial testimony fulfills the written and signed acknowledgment
statute. In Miwon, U.S.A., Inc. v. Crawford, 629 F. Supp. 153, 156 (S.D.N.Y. 1985), the
federal court ruled that trial testimony did not meet the requirements of the New York
statute that also required a signed writing to avoid the statute of limitations.
Fourth, HMD sued South 80 Orchards on the original debt, not on David Carlson’s
acknowledgment of the debt. When a debt is acknowledged before the statutory period,
the resulting legal action must be on the original debt or on the paper evidencing it. In re
Receivership of Tragopan Properties, LLC, 164 Wash. App. 268, 273, 263 P.3d 613
(2011). When a debt is acknowledged after the statute of limitations has run, the action
must be on the new agreement. In re Receivership of Tragopan Properties, LLC, 164
Wash. App. at 274. To collect on David Carlson’s renewed promise, HMD needed to file a
new suit or amend its intervention complaint against South 80 Orchards to seek payment
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on the new pledge.
Fifth, David acknowledged the debt but never renewed a pledge to pay the loan.
Washington cases conflict on whether the debtor must go beyond an acknowledgment
and also pledge to pay the amount of the loan. Most cases hold that the debtor must
renew the promise to pay. Dolby v. Fisher, 1 Wash. 2d 181, 95 P.2d 369 (1939); Addison v.
Stafford, 183 Wash. 313, 48 P.2d 202 (1935); Beckman v. Alaska Dredging Co., 180
Wash. 321, 40 P.2d 117 (1935); Temirecoeff v. American Express Co., 172 Wash. 409, 20
P.2d 23 (1933); Tucker v. Guerrier, 170 Wash. 165, 15 P.2d 936 (1932); In re
Receivership of Tragopan Properties, LLC, 164 Wash. App. at 273-74. One case to the
contrary is Cannavina v. Poston, 13 Wash. 2d 182, 124 P.2d 787 (1942).
Sixth, David Carlson acknowledged the debt not in order to require South 80
Orchards to pay, but in an attempt to impose the debt on Mary. As a general rule an
acknowledgment or part payment by a joint debtor does not suspend the statute of
limitations as to the other debtor, unless he or she authorizes or ratifies the payment or
acknowledgment. Matson v. Weidenkopf, 101 Wash. App. 472, 479, 3 P.3d 805 (2000). In
accordance with this principle, one spouse’s acknowledgment of the debt cannot bind the
other spouse unless the latter gives authority to the former to speak on behalf of the
community. Matson v. Weidenkopf, 101 Wash. App. at 480-81.
Issue 15: Whether the statute of limitations bars HMD’s suit against Mary for
breach of a fiduciary duty when distributing HMD money to South 80 Orchards and
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In re Marriage of Carlson
when asserting the statute of limitations?
Answer 15: We decline to address this question because HMD did not plead a
cause of action against Mary Carlson based on her distributing the loan funds and her
assertion of the statute of limitations.
On appeal, HMD argues that Mary Carlson breached her fiduciary duty by using
HMD’s money for her own profit in 2003, 2007, and 2009 by converting money to South
80 Orchards without disclosure to the other partners, the Contini family. HMD further
contends that Mary’s failure to disclose the loans to the Continis tolls the running of the
statute of limitations from accruing on HMD’s claims against her or against South 80
Orchards.
We note that David, who has inherited nearly the entire ownership in HMD, does
not personally contend that he lacked knowledge of the loans. He benefitted from the
loans as much as Mary did since the loans paid orchard expenses. We also note that the
Continis, David’s sister and her family, do not complain about the unpaid loans issued by
HMD to South 80 Orchards. The Contini family also inherited an interest in HMD
through Hugh Carlson, and the family also likely would have wished David’s orchard
operation to be successful.
HMD seeks to impose sole fiduciary responsibility on Mary by quoting testimony
that she controlled South 80 Orchards. Remarkably, David then claims that he, by his
testimony can bind South 80 Orchards because he was also a general partner in the entity.
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Finally, we note that David fraudulently sought to erase Mary’s interest in HMD, but now
he claims that Mary owed a fiduciary duty to HMD. We question the cleanliness of
David’s, and, in turn, his company HMD’s, hands.
We decline to address HMD’s arguments to impose fiduciary responsibilities on
Mary because of the loans to South 80 Orchards because HMD did not plead this claim.
In the intervenor action, HMD complained that Mary violated her fiduciary duty but only
alleged as a factual basis the withdrawal of funds from the HMD bank account in
November 2013.
Although courts generally construe pleadings liberally, the civil rules require that a
party’s pleadings give notice that advises the other party of the event being sued upon.
North Coast Enterprises, Inc. v. Factoria Partnership, 94 Wash. App. 855, 861, 974 P.2d
1257 (1999). HMD gave no notice that it sued based on the events of failing to notify the
Contini family of the loans and asserting the statute of limitations.
HMD may contend that, despite it not pleading these additional claims of breach
of fiduciary duty, the trial court entertained the claims, and, thus, this court should
address the claims on review. We recognize that the court impliedly ruled that Mary
breached no fiduciary duty in addition to the ruling that the statute of limitations bars any
suit for a breach. We further recognize that the trial court can amend a party’s pleading
to conform to the evidence. At the discretion of the trial court, the pleadings may be
amended to conform to the evidence at any stage in the action, including at the
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No. 34443-6-III
In re Marriage of Carlson
conclusion of a trial, and even after judgment. CR 15(b); Green v. Hooper, 149 Wn.
App. 627, 636, 205 P.3d 134 (2009). Nevertheless, an amendment under CR 15(b)
cannot be allowed if actual notice of the unpleaded issue is not given, if there is no
adequate opportunity to cure surprise that might result from the change in the pleadings,
or if the issues have not in fact been litigated with the consent of the parties. Harding v.
Will, 81 Wash. 2d 132, 137, 500 P.2d 91 (1972); Mukilteo Retirement Apartments, LLC v.
Mukilteo Investors LP, 176 Wash. App. 244, 256-57, 310 P.3d 814 (2013).
HMD cites to no portion in the trial record whereat the trial court deemed the
intervenor complaint amended to include additional claims against Mary Carlson for
breach of fiduciary duty. HMD cites to no law and provides no analysis for this court as
to why the court should deem the complaint amended to include a claim for breach of
fiduciary duty based on the failure to inform the Continis of the loans to South 80
Orchards and the assertion of the statute of limitations. HMD does not even reference
CR 15(b) in its briefing.
Issue 16: Whether the trial court should have ordered Mary to pay interest on the
HMD funds deposited in the registry of the court during the time that the funds reposed in
the registry?
Answer 16: No.
In January 2014, the dissolution court ordered Mary Carlson to deposit into the
court registry the $226,485.05 that she withdrew from HMD. As part of the dissolution
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No. 34443-6-III
In re Marriage of Carlson
decree, the trial court ordered Mary to pay interest on the $226,485.05 amount from the
date she withdrew the funds from the bank account to the date she placed the funds in the
court registry. Nevertheless, the court refused to require Mary to pay interest on the sum
during the time the large amount sat in the court registry. HMD argues that, by
placement of the money in the registry, Mary wrongly denied HMD use of the money for
months and thus she should pay interest on the sum until the court ordered return of the
money to HMD. The amount of interest due on the distrained funds at twelve percent
interest from January 8, 2014 to September 25, 2015 is $46,538.02.
A party is entitled to prejudgment interest on liquidated claims to compensate
them for loss of use on money that is wrongfully withheld by another party. Mall Tool
Co. v. Far West Equip. Co., 45 Wash. 2d 158, 169, 273 P.2d 652 (1954); TJ Landco, LLC v.
Harley C. Douglass, Inc., 186 Wash. App. 249, 256, 346 P.3d 777 (2015). A court may
award prejudgment interest when the claimed amount is “liquidated.” Liquidated means,
in this context, the amount can be computed with exactness from the evidence, without
reliance on an opinion or discretion. Forbes v. American Building Maintenance West,
170 Wash. 2d 157, 166, 240 P.3d 790 (2010).
We agree with HMD that the sum was liquidated. We disagree that HMD was
entitled to prejudgment interest. The trial court did not find that Mary Carlson wrongly
withheld the funds from HMD after the deposit of the funds into the court registry.
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No. 34443-6-III
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Issue 17: Whether this court should grant Mary reasonable attorney fees and costs
on appeal.
Answer 17: Yes, but only as to fees and costs incurred by reason of David’s
intransigence.
Mary Carlson requests reasonable attorney fees and costs under RCW 26.09.140
and RAP 18.1 based on her need and David’s ability to pay as well as David’s continued
intransigence. RAP 18.1. This court also has discretion to award fees and costs on
appeal based on a showing of intransigence or need. In re Marriage of Buchanan, 150
Wash. App. at 740 (2009).
Because Mary’s request for fees based on her need and David’s ability requires
consideration of the financial resources of the parties, she must have filed an affidavit of
need no later than 10 days before oral argument. RAP 18.1(c). She failed to do so.
Therefore, we deny any award under RCW 26.09.140.
We grant Mary Carlson reasonable attorney fees and costs on appeal to the extent
the fees were incurred were related to the forms of intransigence found by the dissolution
court. In filing her application for fees, Mary shall hold the burden of isolating those fees
related to the intransigence.
CONCLUSION
We compliment the dissolution court on its handling of this difficult dissolution
proceeding consolidated with commercial litigation. We affirm all rulings of the
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No. 34443-6-III
In re Marriage of Carlson
dissolution court, except as to the calculation of salary to be credited to David Carlson.
We remand to the trial court to review the potential calculation error. We grant Mary
Carlson reasonable attorney fees and costs on appeal to the extent she attributes the
expenses to the intransigence found by the dissolution court.
A majority of the panel has determined 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.
Fe~i;:y
WE CONCUR:
Q_
Pennell, A.CJ.
73