Joseph M. Zajac v. Susan Pike Zajac ( 2020 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
JOSEPH MICHAEL ZAJAC, ) No. 79938-0-I
)
Appellant, ) DIVISION ONE
)
v. ) UNPUBLISHED OPINION
)
SUSAN PIKE ZAJAC, )
)
Respondent. )
)
HAZELRIGG, J. — Joseph Zajac seeks reversal of final orders concerning the
division of property in a dissolution action. He alleges that the fragmented trial
violated his due process rights, disputes the trial court’s characterization and
valuation of various assets, and argues that the court erred in awarding attorney
fees to his former spouse, Susan Pike, based on his intransigence. Because he
has not shown that the trial schedule was a manifest error affecting his
constitutional rights, we decline to review this issue for the first time on appeal.
Substantial evidence supports the trial court’s factual findings, and the court did
not abuse its discretion to execute a just and equitable division of property and
award Pike attorney fees incurred because of Zajac’s intransigence. We affirm.
FACTS
Joseph Zajac and Susan Pike (formerly Susan Zajac) married in 1980.
They have four adult children, three of whom are triplets. The couple moved to
Citations and pinpoint citations are based on the Westlaw online version of the cited material.
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Seattle because Zajac took a job with Boeing. Since the early 1990s, he has been
self-employed as a trader of futures and options. In addition to his trading, Zajac
started a mead-brewing and distribution business called BeeHaven Beverage in
2011. For most of the marriage, Pike worked in the healthcare field as a nurse
and as an infection control and epidemiology professional. She stopped working
in October 2014 due to extreme pain from a degenerative spinal disease.
Zajac and Pike separated on September 29, 2017 and began divorce
proceedings. Temporary orders were entered on October 16, 2017 allowing Zajac
to continue to invest and trade in their RJ O’Brien (RJO) investment account and
pull cash from the account for his monthly expenses, provided that he give Pike
updates on and access to the account. Amended orders entered on December 1,
2017 allowed his trading to “continue as it has in the past[,] which serves to
maintain the status quo.”
On September 29, 2017, the date of separation, the combined net liquidated
value of the RJO accounts was $885,163. The accounts decreased in value
somewhat during the rest of 2017, ending the year with a net liquidated value of
$742,095. From November 30, 2017 to January 23, 2018, RJO notified Zajac
twelve times that his investment position exceeded RJO’s risk requirements. Zajac
did not appear to take any significant action to reduce his risk in response to these
notifications and at one point increased his exposure. In late January, RJO notified
Zajac that they would be doubling his margin requirement in response to his risky
position. Zajac cut and pasted Pike’s electronic signature to authorize moving the
funds to another brokerage firm, Straits Financial, which had more lenient risk
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policies and margin requirements. On January 31, 2018, the combined net
liquidated value of the accounts was $515,456 after a market loss of $211,639 in
one month. On February 5, 2018, the accounts lost 133.64 percent of their net
liquidated value, extinguishing the value entirely and putting the parties in debt to
Straits.
In the spring of 2018, Zajac and Pike sold the marital home on Mercer Island
and agreed to deposit the net sale proceeds of $2,402,203.59 into a blocked
account. On May 21, 2018, the parties stipulated and agreed to the disbursal of
funds from the blocked account as follows:
1. Cashier Check made payable to Susan Zajac in the sum of
$20,000;
2. Cashier Check made payable to Janet L. Comin in the sum of
$42,798.14;
3. Cashier Check made payable to Joseph Zajac in the sum of
$20,000;
4. Cashier Check made payable to Philip Shucklin in the sum of
$30,000[.]
They stipulated that the $20,000 distributed to each of them should be considered
a pre-distribution of community assets and the money paid to their attorneys was
paid from community assets.
On August 28, 2018, the parties entered into a second stipulation and
agreed order regarding the sale proceeds of the Mercer Island home. They agreed
that they should each “receive $75,000 from the blocked Chase account as a
predistribution [sic] of community assets to be charged against the parties in the
final division of property in this divorce.” The distributions were to be in the form
of a “$75,000 cashier’s check payable to Janet L. Comin for the benefit of Susan
Zajac,” and a “$75,000 cashier’s check payable to Joseph Zajac.”
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The trial focused on the division of assets between the parties. It took place
over seven days scattered throughout approximately one month due to scheduling
conflicts between the parties and the court.
Pike testified that Zajac had purchased a condominium in Seattle without
Pike’s involvement in 2011. He told her that it would be a good investment property
to rent out. When Pike inquired about the condo occasionally, Zajac told her that
it was rented to a couple who were paying $1,500 per month in rent. In September
2017, Pike began to suspect that Zajac was not being honest with her and asked
to see records of the rent payments. He showed her a document that “was clearly
a fake bank statement.” Pike then combed through all of their bank accounts
dating back to 2011 and found no sign of any rental income from the condo.
Allison Cyr testified that she lived in the Zajac’s Seattle townhome from
early 2012 until November 2017. She met Zajac in 2011 when she responded to
an ad that he placed about starting a meadery. Zajac paid Cyr a salary of $1,500
per month for her work at BeeHaven and allowed her to live in the townhouse rent-
free. Cyr did not receive paychecks; the money was transferred directly into her
account. She never received a W-2 or 1099 while working at BeeHaven and did
not file a federal tax return for the monies received from BeeHaven or rent in lieu
of wages. Cyr and Zajac ran BeeHaven out of the townhome until early 2015,
when they moved the business into a Tukwila warehouse. Cyr understood her
informal agreement with Zajac to be that the “sweat equity” that she put into the
business would give her ownership of BeeHaven and Zajac would eventually turn
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the business over to her. She also admitted that they had an occasional sexual
relationship.
Zajac testified that BeeHaven might have made a small profit one year, but
it otherwise operated at a loss. He also testified that he did not believe his trading
at RJO to be particularly risky and thought RJO issued the warnings primarily
because of his withdrawals from the account and RJO’s assessment of its own
risk. Zajac believed he was justified in using Pike’s signature when moving the
brokerage account funds because he had power of attorney. In early February,
after the move to Straits, he tried to place “stop orders” in response to higher
market volatility that would have mitigated some of the risk, but the orders were
rejected by Straits’ online system.
The court also heard testimony from Kerry Campbell, an expert in risk
management, financial market analysis, trading analysis, investment and
securities analysis, investment liability and damages, financial planning, and
fiduciary duty analysis in investing. Campbell testified regarding losses sustained
by Zajac and Pike’s brokerage accounts after their separation. He analyzed
account statements from the parties’ RJO investment accounts, RJO risk reports,
transcripts of Zajac’s phone conversations with RJO, account statements from the
parties’ Straits Financial investment accounts, Zajac’s phone conversations with
Straits, and Zajac’s deposition.
Campbell testified that trading in futures is inherently very risky. He opined
that Zajac’s management of the accounts from September 29, 2017 through the
end of February 2018 was “imprudent fiscally” and carried risk that was excessive
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for people in their 60s. He also characterized Zajac’s decision to move to Straits
without familiarizing himself with the trading platform and after being warned by
RJO of the excessive risk was “reckless” and constituted “gross negligence” and
“a breach of his fiduciary duty.” He stated that Zajac’s trading strategy was
irrelevant to these conclusions because the documents showed “that the accounts
had tremendous risk[,] that they were losing money consistently the entire period
of time[,] and then had a catastrophic loss in the February period.”
The court entered extensive findings of fact and conclusions of law. The
court found that Zajac “was generally not a credible witness” and that Cyr’s
testimony also “lacked credibility in many respects.” These credibility findings
preceded comments about the court’s characterization of BeeHaven:
Mr. Zajac’s testimony regarding his failure to maintain accounting
records and to pay employment taxes either evidences that
BeeHaven was no more than a hobby in[to] which he poured a huge
amount of community assets [ ] without regard for the community or
that he was willing to ignore his legal obligations with respect to filing
taxes year after year. The Court, after reviewing the monetary
investment into BeeHaven and its profits over the years,
characterizes BeeHaven as a hobby; nonetheless, Mr. Zajac had
obligations with respect to employment tax that he failed to shoulder.
This failure—and his claimed ignorance—is surprising given that Mr.
Zajac has a Master[s] in Business Administration.
Relatedly, the court found Cyr “credible when she testified that she did some
work for BeeHaven,” but did not credit the testimony that she worked full-time. The
court found it reasonable that Cyr was compensated $1,500 per month for her part-
time work at BeeHaven but found the additional compensation in the form of free
rent at the Seattle townhouse unreasonable.
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The court did not find Zajac’s testimony regarding his management of the
brokerage account credible. However, the court found Campbell, Pike’s expert
witness, “well-qualified and credible.” The court found that Zajac’s trading practice
carried “tremendous inherent risk,” which he failed to mitigate. The court found his
conduct “reckless, grossly negligent, fiscally imprudent, and a violation of his
fiduciary duties to the community and to the Trust.” The court also found that
Zajac’s conduct in falsifying Pike’s signature on the documents approving the
transfer of funds from RJO to Straits was a direct cause of the community’s losses.
The court ascribed sole responsibility to Zajac for the community’s $932,981 loss.
Zajac’s conduct was made “a more egregious form of recklessness and
imprudence” due to the parties’ age and nearness to retirement.
The court also found that the forgone rental income for the Seattle condo
should be treated as a pre-distribution of community funds to Zajac because he
allowed Cyr to live in the property rent-free despite knowing that this arrangement
would not benefit the marital community and he deceived Pike about the rent. The
court credited the testimony of Pike’s expert in the valuation of real estate and
found that the fair rental value of the townhouse since 2012 was $103,500.
The court found that Zajac “should pay $141,316.75 of the fees and costs
[Pike] has incurred through December 31, 2018” because of his intransigence in
the proceeding and violations of temporary orders. The court stated that it had
reviewed the affidavit of counsel and found that the type of work and hourly wage
reported were fair and reasonable.
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The court ordered a nearly equal division of property between the parties.
Zajac appealed.
ANALYSIS
I. Due Process
Zajac first argues that the “disjointed and truncated presentation of
witnesses at trial, as dictated by counsel and the court’s schedule on other matters,
violated the Fourteenth Amendment’s guarantee of due process.” He
acknowledges that he did not object to the shortened time to present witnesses at
trial but argues that he may raise this issue for the first time on appeal because it
was a manifest error affecting a constitutional right. See RAP 2.5(a). We review
constitutional arguments de novo. In re Welfare of A.W., 182 Wash. 2d 689, 701, 344
P.3d 1186 (2015).
Manifest errors affecting a constitutional right may be raised for the first time
on appeal provided that the record is adequate to permit review. RAP 2.5(a); In re
Marriage of Akon, 160 Wash. App. 48, 59, 248 P.3d 94 (2011). To show that an error
is “manifest”—that is, truly of constitutional magnitude—an appellant must show
how the alleged error actually affected the appellant’s rights in the context of the
trial. State v. McFarland, 127 Wash. 2d 322, 333, 899 P.2d 1251 (1995). This
showing of actual prejudice allows for appellate review. Id.
Zajac does not identify any additional evidence that he would have offered
had his trial presentation not been cut short. Instead, he argues that “error arises
not from the quality or quantity of the evidence excluded, but the lack of opportunity
to present the evidence at all when one has a right to do so,” citing Smith v. Fourre,
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71 Wash. App. 304, 308–09, 858 P.2d 276 (1993). In Smith, the defendant moved
for a directed verdict after the second day of trial even though the plaintiff had not
yet presented the entirety of her case in chief. Id. at 306. The trial judge granted
the motion and dismissed the case over Smith’s objection that she had not rested.
Id. Division Two of this court reversed, stating that “every litigant is entitled to be
heard before his or her case is dismissed” and therefore “a plaintiff must be given
the opportunity to present not just part, but all, of his or her evidence before the
trial court rules on the sufficiency of that evidence.” Id. at 306–07.
Unlike Smith, Zajac did not raise an objection to any abbreviation of his
presentation of evidence in the trial court. Neither did Zajac ever indicate to the
court that he had additional evidence to present. Smith does not excuse Zajac
from making a showing of actual prejudice to allow for our review. Because he
has not done so, we decline to consider this alleged error raised for the first time
on appeal.
II. Property Distribution
In a dissolution action, the trial court is required by statute to divide the
property and liabilities of divorcing parties “as shall appear just and equitable after
considering all relevant factors” but without regard for misconduct. RCW
26.09.080. Relevant factors include, but are not limited to, the nature and extent
of community and separate property, the duration of the marriage, and the
economic circumstances of each spouse at the time the division of property is to
become effective. Id.
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The trial court has broad discretion to determine what constitutes a just and
equitable division of property. In re Marriage of Larson & Calhoun, 178 Wash. App.
133, 138, 313 P.3d 1228 (2013). The court is not required to distribute the property
equally but rather to make a fair division based on “a consideration of all the
circumstances of the marriage, both past and present, and an evaluation of the
future needs of parties.” Id. (internal quotation marks omitted) (quoting In re
Marriage of Crosetto, 82 Wash. App. 545, 556, 918 P.2d 954 (1996)). “The trial court
is in the best position to decide issues of fairness.” Id. Therefore, a property
division entered in a dissolution action will be reversed only if there is a manifest
abuse of discretion. In re Marriage of Rockwell, 141 Wash. App. 235, 242–43, 170
P.3d 572 (2007). The court abuses its discretion when the decision is manifestly
unreasonable or based on untenable grounds or reasons. In re Marriage of
Muhammad, 153 Wash. 2d 795, 803, 108 P.3d 779 (2005).
Factual issues will not be retried on appeal. In re Marriage of Thomas, 63
Wash. App. 658, 660, 821 P.2d 1227 (1991). We accept the trial court’s factual
findings as true provided they are supported by substantial evidence in the record.
Id. Substantial evidence is a quantum of evidence sufficient to persuade a
reasonable person that the premise is true. Wenatchee Sportsmen Ass’n v.
Chelan County, 141 Wash. 2d 169, 176, 4 P.3d 123 (2000). The court’s credibility
findings are not subject to review. DewBerry v. George, 115 Wash. App. 351, 362,
62 P.3d 525 (2003).
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A. Forgone Rental Income
Zajac argues that the court abused its discretion in treating the forgone
rental income from the Seattle townhouse as a pre-distribution to Zajac in the
amount of $103,500. He contends that the trial court “ignored the true nature of
the property” and that it was, “at all pertinent times, used for [BeeHaven]
purposes.”
Either spouse may manage and control community property. RCW
26.16.030. “A disposition of community funds is within the scope of authority of
the acting spouse so long as he or she is acting ‘in the community interest.’”
Schweitzer v. Schweitzer, 81 Wash. App. 589, 597, 915 P.2d 575 (1996) (quoting
Hanley v. Most, 9 Wash. 2d 429, 461, 115 P.2d 933 (1941)).
The court found it appropriate to treat the forgone rental income as a pre-
distribution to Zajac because he did not prove that he had a reasonable
expectation that the community estate would receive a benefit from allowing Cyr
to live there rent free and because he fraudulently deceived Pike in all respects
regarding his management of this significant community asset. Substantial
evidence supports these factual findings. Pike testified that Zajac represented the
townhouse to her as an investment property from which they could collect rental
income. He falsely informed her that the townhouse was rented and that the
marital community was receiving rental income from the property. In fact, the
townhouse was being used for the benefit of Cyr and of Zajac’s hobby business,
which, the record shows, was not profitable. The court did not abuse its discretion
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in treating the forgone rental income as a pre-disposition of community property to
Zajac.
B. Characterization of Assets
Zajac also contends that the trial court erred in characterizing several assets
awarded to him.
1. $75,000 Pre-Distribution
Zajac argues that the trial court improperly characterized the $75,000 pre-
distribution that he received from the sale proceeds of the Mercer Island home as
community property and double-counted the funds when dividing the assets. Pike
responds that the pre-distributions were accounted for by the court when it reduced
the balance of attorney fees that Zajac owed to Pike.
The parties stipulated that the $75,000 payments disbursed to each of them
from the blocked account should be treated as a pre-distribution of community
assets. Pike’s pre-distribution was paid directly to her attorney. Zajac testified that
he deposited the $75,000 pre-distribution into his checking account. He also
testified that he subsequently paid about $57,000 of attorney fees out of his
checking account. Zajac requested that the court subtract the amount he had paid
for attorney fees from its valuation of his Chase checking account. In the version
of Pike’s proposed property report that was discussed at length during the trial, the
value of Zajac’s Chase account is listed as $29,732 as of June 22, 2018. The
proposed report contains a separate line item for the $75,000 pre-distribution to
Zajac.
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In Zajac’s proposed property report submitted with his closing argument, he
asked that the court find that his checking account had a balance of $51,710 on
September 26, 2018. The comment next to this entry stated, “The 10/11/18
balance of $76,710 should be reduced by $25,000 per Joe’s testimony re
attorney’s fees paid from this account prior to trial.” Pike submitted a revised
version of her proposed report, requesting that the court value Zajac’s checking
account at $84,174 as of September 26, 2018. Neither of the proposed reports
listed Zajac’s $75,000 pre-distribution as a separate item.
The court ordered that Zajac “should pay any and all attorney’s fees and
costs he has incurred over and above the amounts withdrawn from community
assets for fees and costs pursuant to those temporary orders [entered on October
16, 2017 and December 1, 2017] and $30,000 paid to Philip Shucklin pursuant to
the Stipulation and Order entered May 21, 2018.” The property report initially
entered by the court valued Zajac’s checking account at $29,935 as of September
26, 2018 and characterized it as community property awarded to Zajac.
Pike moved for correction of errors, clarification, and/or reconsideration,
requesting, among other things, that the valuation of Zajac’s account be changed
to $84,174 “in order to effectuate the Court’s findings with respect to the husband’s
responsibility for payment of his own attorney’s fees for trial.” She argued that
reducing the value of Zajac’s checking account, into which he had deposited the
$75,000 pre-distribution of community funds, resulted in the community indirectly
paying his attorney fees. She also pointed out that the court’s calculation of
attorney fees owed to her treated the money she had already paid to her attorney,
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including the $75,000 pre-distribution, as community funds and credited Zajac for
half of this payment.
The court granted Pike’s motion and found that “[t]he value of the Husband’s
Chase #9307 bank account balance should be changed from $29,935 as set forth
in Exhibit A to $84,174, the balance that is consistent with the Court’s [findings of
fact].” The amended property report listed the value of Zajac’s checking account
as $84,174 and characterized it as community property awarded to Zajac. The
amended property report entered by the court did not include a separate line item
for the $75,000 pre-distribution to Zajac.
The parties stipulated that the pre-distributions would be considered as
community property, and the record shows that the court treated the pre-
distributions to both parties as community funds. Although Zajac states that the
court double-counted his pre-distribution because “the pre-distribution was already
included in Mr. Zajac’s share of the marital assets,” the court’s order does not
appear to include the pre-distribution anywhere other than Zajac’s Chase account.
Zajac has not demonstrated that the court erred in any respect.
2. BeeHaven’s Assets
Zajac also argues that the trial court erred in its treatment of monies
invested by Cyr in BeeHaven. He contends that, “by allocating the funds to Mr.
Zajac alone, the court ignored the fact that the investments benefitted both Mr.
Zajac and Respondent.”
The court found that BeeHaven should be sold in an arm’s length
transaction rather than assigned a value that would be “too speculative.” The court
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found that there was evidence that Cyr had given Zajac a check for $12,000 but
there was no evidence that the check had been deposited into any bank account.
Therefore, the court concluded that the check was cashed rather than deposited
and “that the cash exists but has not been accounted for by Mr. Zajac.” Zajac was
awarded this $12,000 as part of BeeHaven’s hard assets.
Zajac argues that, “[b]ecause these funds benefitted both parties, they must
be treated as marital property and not counted against Mr. Zajac in any manner.”
Again, Zajac’s argument does not reflect the court’s findings. The amended
property report lists “Beehaven LLC – Equipment and Missing $12,000” as
community property awarded to Zajac. He has not demonstrated that the court
erred.
Zajac argues in the alternative that the court erred in awarding him
BeeHaven’s assets without considering Cyr’s role at BeeHaven. The court found
that BeeHaven had value as a going concern but explicitly declined to speculate
as to the value of intangibles such as “the expected continued patronage of its
customer, the proprietary recipes for the mead, and the goodwill value associated
with its brand and name.” It treated BeeHaven as community property, ordering it
to be sold with any proceeds to be divided equally between the parties, and
awarded Zajac its tangible assets: a checking account with a balance of $4,345
and the unaccounted-for $12,000 investment from Cyr.
Zajac contends that the court should have either subtracted back wages
owed to Cyr as an employee or determined her ownership interest in BeeHaven
“for the business to be properly valuated.” The court did not assign a value to
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BeeHaven. Presumably, its value will be determined by the sale. Zajac has not
demonstrated any error.
Zajac also contends that the court failed to treat the BeeHaven checking
account as community property. As recognized above, the court found the
BeeHaven checking account to be community property and awarded the account
to Zajac. Zajac does not identify an error.
C. Valuation of Assets
Zajac argues that the court erred in several of its valuation decisions.
Valuation decisions are questions of fact that we review for substantial evidence.
In re Marriage of Hall, 103 Wash. 2d 236, 246, 692 P.2d 175 (1984).
1. The Brokerage Account
Zajac contends that the trial court erred in its valuation of the RJO account.
He challenges the court’s findings blaming his aggressive investment strategy for
the account’s losses. Even if his investment plan was unwarranted, Zajac argues
that the court should have considered which losses were caused by his strategy
and which were caused by normal market fluctuations.
As noted above, the court determined that Zajac’s testimony was not
credible. However, the court found Campbell, Pike’s expert witness, “well-qualified
and credible.” Based on Campbell’s testimony, the court found that Zajac’s actions
and refusals to act regarding the brokerage account were the sole cause of the
community’s $932,981 loss. The court found that Zajac’s trading strategy carried
“tremendous inherent risk” and Zajac ignored RJO’s risk warnings, refused to de-
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risk his positions, and dramatically increased risk by moving the brokerage
accounts to a firm with more lenient risk requirements. The court specifically found
that, “[w]hen a substantial percentage of an estate that took 40 years to
accumulate can be lost in two or three days, and losses are of the magnitude
sustained in this case, the positions in the portfolio are fiscally imprudent and have
excessive risk.”
These findings are all supported by Campbell’s testimony and conclusion
that the use of any investment strategy carrying this degree of risk for parties
nearing retirement age was grossly negligent and reckless. Therefore, there is
substantial evidence in the record for the findings. We do not review the court’s
credibility determinations or reweigh the evidence on appeal. Rockwell, 141 Wn.
App. at 242.
2. Personal Property
Zajac also argues that the trial court improperly valued certain items of
personal property. “An owner may testify as to the value of his property and the
weight to be given to it is left to the trier of fact.” Worthington v. Worthington, 73
Wash. 2d 759, 763, 440 P.2d 478 (1968). When the parties present conflicting
evidence of valuation, the court may adopt the value asserted by either party or
any value between the two. Rockwell, 141 Wash. App. at 250.
He first contends that the court’s finding about the value of BeeHaven’s
equipment was unsupported because “[n]o evidence was presented regarding the
value of the business equipment.” The value of BeeHaven’s equipment was
merged with the “missing $12,000” and valued at $12,000. There was substantial
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evidence that Zajac had received the $12,000 check from Cyr. Therefore, the
value assigned to BeeHaven’s equipment was $0. Because no evidence of
equipment value was presented, this valuation is supported by the record.
Zajac also objects to the valuation of a jet ski, a piano, and other personal
property. Pike valued the jet ski at $7,000 in her proposed property report. Zajac
testified that he had sold the jet ski for $4,900. In his proposed property report, he
listed a value of $0, commenting that he had sold the jet ski but provided no
documentation of net proceeds from the sale. The court adopted Pike’s valuation
of $7,000, finding that Zajac had possession or control of evidence that could have
established the sales proceeds he received for the jet ski but failed to produce it at
trial. Substantial evidence in the record supports this finding, and the court did not
abuse its discretion in adopting the value asserted by Pike.
The court noted that it found both Zajac and Pike’s testimony regarding the
piano and other personal property that Zajac removed from the home only partially
credible. Zajac valued the items at $0 in his proposed property report. Pike
proposed a value of $5,000. The court valued the piano and other personal
property at $2,500. This valuation is within the range supported by the record.
III. Attorney Fees for Intransigence
Finally, Zajac argues that the trial court erred in awarding Pike her attorney
fees as a sanction against him for intransigence. He contends that the court’s
failure to make specific findings supporting the award necessitates reversal.
A court may award attorney fees in a civil action if the award is authorized
by statute, by agreement of the parties, or on a recognized equitable ground. In
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re Marriage of Greenlee, 65 Wash. App. 703, 707, 829 P.2d 1120 (1992). “[A]ttorney
fees based on intransigence are an equitable remedy.” Mattson v. Mattson, 95
Wash. App. 592, 604, 976 P.2d 157 (1999). Trial courts have broad discretion to
fashion equitable remedies, and we review the court’s decision to award attorney
fees for an abuse of discretion. Niemann v. Vaughn Cmty. Church, 154 Wash. 2d
365, 374, 113 P.3d 463 (2005); Crosetto, 82 Wash. App. at 563. Intransigence may
be found when, for example, a party engages in “‘foot-dragging’ and ‘obstruction,’”
files repeated unnecessary motions, or simply makes the trial unduly difficult and
increases legal costs by those actions. Greenlee, 65 Wash. App. at 708 (quoting
Eide v. Eide, 1 Wash. App. 440, 445, 462 P.2d 562 (1969)).
Zajac argues that attorney fees based on intransigence were not warranted
because “[t]he court did not make any specific findings that Mr. Zajac hid assets,
refused discovery requests, or engaged in any other bad behavior.” The trial
court’s findings of fact include a four-page section with the heading, “Attorney’s
Fees Awarded for Respondent’s Intransigence and Violations of Court Orders.”
This section contains a litany of findings detailing Zajac’s “bad behavior” and the
consequences to Pike:
Mr. Zajac never informed Ms. Zajac of his massive losses in
the brokerage accounts, and claimed her actions and those of her
attorney were the cause of the losses. She had to subpoena, review,
and analyze thousands of documents and emails, and many hours
of audio recordings to uncover the truth. She had to retain a financial
securities expert at a cost of more than $25,000 to review and
analyze Mr. Zajac’s options and futures trading activities and testify
regarding the manner in which those activities caused over $932,000
in losses.
....
The closing had to be delayed once and the home sale almost
fell through because, until the 11th hour, Mr. Zajac refused to agree
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to the establishment of a standard interest-bearing bank account into
which escrow would deposit the sale proceeds. Ms. Zajac and her
attorney spent many hours trying to get Mr. Zajac to simply sign
closing papers, all of which was an unnecessary waste of time and
effort, and, of course, a great deal of money was spent unnecessarily
on attorney’s fees.
The Court finds that discovery was also made unduly difficult
by Mr. Zajac. To obtain answers to discovery requests, a Motion to
Compel was filed. A judgment was entered against Mr. Zajac for
$1,000 of those fees and costs, and he has refused to pay it.
Based on these and other findings, the court found and concluded that
Zajac’s conduct constituted intransigence that had caused Pike to incur substantial
additional attorney fees. Each of the court’s findings are supported by Pike’s
testimony. The court found Pike to be a largely credible witness. Substantial
evidence supports the court’s decision.
Zajac also contends that the court failed to determine “what, if any, portion
of any alleged trial delay could be attributed to Mr. Zajac.” An award of attorney
fees based on intransigence is generally limited to the additional fees incurred
because of the intransigence. See In re Marriage of Lilly, 75 Wash. App. 715, 720,
880 P.2d 40 (1994). “Where a party’s bad acts permeate the entire proceedings,
the court need not segregate which fees were incurred as a result of intransigence
and which were not.” Burrill v. Burrill, 113 Wash. App. 863, 873, 56 P.3d 993 (2002).
The record demonstrates that the court appropriately segregated the
attorney fees. The court found that “a portion of the attorney’s fees incurred by
Petitioner as a result of the Respondent’s intransigence and willful violation of the
court’s order should be paid by Respondent.” The court found that Zajac should
pay $141,316.75 of the reasonable fees and costs that Pike incurred as a result of
Zajac’s intransigence during the trial and violation of the temporary orders entered
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No. 79938-0-I/21
on October 16, 2017 and December 1, 2017. The court did not abuse its discretion
in awarding Pike attorney fees based on Zajac’s intransigence.1
IV. Attorney Fees and Costs on Appeal
Pike requests an award of her attorney fees and costs on appeal. She
argues that she is entitled to an award of fees under RAP 18.1 and RCW
26.09.140, given her need and Zajac’s ability to pay, and under RAP 18.9 “because
this brief is frivolous and the appeal another instance of intransigence.” In family
law cases, courts may order a party to pay another party’s reasonable attorney
fees after considering the financial resources of both parties. RCW 26.09.140. We
may also grant a party attorney fees on appeal if the appeal is frivolous. RAP
18.9(a). An appeal is frivolous if it presents no reasonably debatable issues and
is so devoid of merit that no reasonable possibility of reversal exists. Greenlee, 65
Wash. App. at 710.
“Intransigence is a basis for awarding fees on appeal, separate from RCW
26.09.140 (financial need) or RAP 18.9 (frivolous appeals).” Mattson, 95 Wash. App.
at 605-6. We need not consider the parties’ financial resources when
intransigence has been established. Id. “[A] party’s intransigence in the trial court
can also support an award of attorney fees on appeal.” Id.
1 Zajac also argues that the court erred in entering an attorney lien because he did not win
a judgment in this case. Pike responds that this issue has no bearing on her and is not properly
before this court because Zajac did not identify the lien as a subject of this appeal, attach a copy
of the lien to the notice of appeal, or designate the documents pertinent to this issue. Generally,
we review only the decision or parts of the decision designated in the notice of appeal. RAP 2.4(a).
Because Zajac did not designate this decision for review in his notice of appeal and the record does
not appear to contain the relevant decision, we decline to review this issue.
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No. 79938-0-I/22
Zajac received two extensions totaling 90 days for filing his opening brief in
this court. We indicated that no further extensions would be granted without
sanctions being imposed. On the day the brief was due, Zajac’s counsel withdrew
and substitute counsel requested a 60-day extension to file the brief. Substitute
counsel withdrew one day after filing the opening brief and Zajac’s original counsel
reappeared. Additionally, although Zajac’s appeal is not entirely frivolous, a
number of his arguments on appeal appear to be based on a misreading of the
court’s orders. In light of the trial court’s extensive findings of intransigence below,
these considerations support an award of attorney fees on appeal.
Affirmed.
WE CONCUR:
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