In the Matter of the Marriage Of: Sarah L. S. Ream & Patrick A. Ream ( 2021 )

FILED
JULY 29, 2021
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 re the Matter of the Marriage of )
) No. 36900-5-III
SARAH L. S. REAM )
)
Respondent, )
)
and ) UNPUBLISHED OPINION
)
PATRICK A. REAM, )
)
Appellant. )
FEARING, J. — Patrick Ream appeals various rulings of the trial court in his marital
dissolution action. We reject all but one assignment of error. We agree that substantial
evidence does not support the trial court’s calculation of income of spouse Sarah Ream.
At least, we are unable to determine if substantial evidence supports the calculation. We
remand for reassessment of Sarah’s income and redetermination of spousal maintenance
since the maintenance award was based in part on the computation of her income.
FACTS
Patrick Ream and Sarah Ream married on June 30, 2001, in Spokane. The couple
separated on May 7, 2017. Patrick and Sarah beget twin boys, who were fourteen years
old at the time of the marital dissolution trial.
Patrick Ream, beginning in 2008, worked as a sales executive for FISERV, a
technology firm that provides software to financial service companies. In 2003, Patrick
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and Sarah Ream collectively decided that Sarah would maintain the couple’s household
and raise their children in lieu of pursing a career. Accordingly, Sarah, a full-time school
teacher, reduced her work hours and substitute taught, working one to two days per week.
When hired at FISERV, Patrick Ream earned a base annual salary of $128,000
with additional compensation in commissions. In 2017, while a director for FISERV,
Patrick garnered $751,450. In the same calendar year, Sarah Ream earned $20,000 as a
substitute teacher. Because of Patrick’s income, the parties lived lavishly. They
purchased luxury vehicles, collected expensive artwork, including Salvador Dali and
Pablo Picasso paintings, and enjoyed luxury vacations.
Much of Patrick Ream’s earnings derive from sale commissions. Pursuant to
FISERV’s policies, the employee must satisfy two milestones when selling a software
product in order to reap a commission. First, the customer must sign a contract. On the
signing of the sales contract, the salesperson garners fifty percent of his or her
commission. The salesperson earns the second half of the commission when the software
FISERV sold “goes live,” which entails the installation and full operation of the software,
at which time the customer’s system begins generating revenue for FISERV. Report of
Proceedings (RP) at 295. Patrick testified that FISERV remunerates salespeople with
commissions for three reasons:
I believe there is the ability to reward high performing individuals.
The second is to attract new talent, also trying to improve the talent that
you have so you can achieve the stated goals of the company and we
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promote through sales that drives [sic] the stock price and then finally
would be retention of high performing individuals.
RP at 343.
In April 2016 before the couple’s separation, Patrick Ream approached BMO
Harris Bank (BMO) to sell it FISERV software. On March 24, 2017, two months before
the separation, Patrick sent BMO a draft contract to purchase FISERV software. On
September 8, 2017, four months after Patrick and Sarah Ream’s separation, FISERV and
BMO signed the contract. Patrick received the first half of his BMO commission before
trial on October 31, 2017. By trial in November 2018, the second half of Patrick’s BMO
commission remained unpaid as BMO had yet to implement FISERV’s software.
During the marriage, Patrick and Sarah Ream acquired six tracts of Spokane
residential real estate. The family home is located on E. 45th Avenue, and the other five
properties, utilized as rental properties, are scattered nearby. Before trial, the parties
stipulated to awarding Patrick one of the rentals and Sarah the family home on 45th
Avenue and the remaining four rental residences.
Some of the trial testimony concerned the income Sarah Ream received from the
four rentals. At trial, Sarah submitted financial declarations that listed her net monthly
rental income as $1,000. She testified that she personally paid for rental housing
expenses, including $500 for insurance, $737 in property taxes, $660 in a home equity
line of credit, and $977 for the mortgage on one of the properties.
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Patrick Ream calculated Sarah Ream’s monthly rental housing gross income at
$4,950.00. Patrick found that Sarah’s monthly profit from the four rental properties was
$3,379.40, by subtracting $1,570.60 in monthly payments for mortgages, repairs,
insurance, and taxes.
On the couple’s separation, Sarah Ream returned to the teaching profession full
time. Sarah secured a new, full-time position for the 2018-2019 school year, though she
held no contract for this position at the time of trial in November 2018. She anticipated
receiving a contract from the school district shortly after trial and expected that the
contract would continue for additional years.
An October 2018 letter from the school district listed Sarah Ream’s gross annual
earnings at $72,525.00 for the 2018-2019 school year. $72,525.00 equates to a pretax
monthly income of $6,043.75. In her proposed child support worksheet, Sarah provided
for deductions for taxes, union dues, and retirement contributions. Sarah also provided
pay stubs to reflect past deductions. Accounting for her deductions, Sarah estimated her
net monthly income from teaching at $3,910.05 for the 2018-2019 academic year.
Nevertheless, one of the financial records shows Sarah’s deductions to be $1,119.36 for
taxes and $341.71 for teacher retirement systems contributions. With gross monthly
income of $6,043.75, Sarah, based on these deductions, would garner $4,582.68 in net
monthly wages.
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Patrick Ream disagreed with Sarah Ream’s calculation of her net monthly income
from teaching. Patrick calculated the net wages to be $5,741.32. Patrick emphasized that
Sarah’s September 2018 pay stub listed her gross monthly income as $6,834.21, not
$6,043.75 as contended by Sarah. An unsigned and undated financial declaration of
Sarah pegs her gross monthly income at $6,834.21. Another document showed Sarah to
earn $6,634.31 in gross monthly wages. Patrick highlighted that Sarah’s child support
worksheets also indicated that her monthly gross income was $6,834.21. Patrick disputed
Sarah’s claimed federal tax deduction of $2,356.63 based on her teaching salary and
rental income.
Patrick Ream computed Sarah Ream’s net monthly income, when adding the
rental income with the teaching wages, but excluding spousal maintenance, as $9,120.72.
Sarah Ream paid pretrial attorney fees of $44,354.24 by using her savings and
credit cards. At trial, she testified that, after the filing of the marital dissolution petition,
she reduced her living expenses, including ending cable television, to meet her
postseparation and pretrial income. She formerly paid in full her monthly credit card
invoices, but, after separation, she could no longer do so. At the time of trial, three credit
cards had balances of around $1,000 each and a fourth credit card carried a balance of
$800. She estimated that she would owe an additional $30,000 in attorney fees for trial.
Before trial, Patrick and Sarah Ream owed a 2017 tax obligation of $70,683.
Because trial was set for after the tax-filing deadline, the dissolution court ordered that
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the couple to pay the debt via a joint account. The trial court reserved the character of the
tax debt for trial.
PROCEDURE
On June 12, 2017, Sarah Ream filed a petition for dissolution of marriage. On
November 5, 2018, the petition proceeded to trial.
At trial, Patrick and Sarah Ream presented expert testimony to calculate the
percentage of the first half of the BMO commission that should be deemed community
property, since Patrick obtained the first payment postseparation. Patrick requested the
application of the time rule to the first half of the BMO commission. Patrick ’s expert
witness, Scott Martin, a certified public accountant, characterized the time rule formula,
utilized in In re Marriage of Short, 125 Wn.2d 865, 872, 890 P.2d 12 (1995), as a
formula for allocating stock options according to the employment services performed
prior to and after the date the parties lived separate and apart. Martin characterized 75.19
percent of the first half of the BMO commission as community property and 24.08
percent of the payment as Patrick’s separate property. Sarah’s expert witness, Todd
Carlson, agreed to this percentage as complying with the time rule.
During trial, Patrick Ream argued that the second half of the BMO commission
should not be characterized as property distributed between the parties because he
possessed no enforceable right to the commission at the time of trial. He lacked any
entitlement to the second half of the commission because he could die, he could cease
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working for FISERV, BMO could be acquired, or the contract with BMO could terminate
before FISERV owed the compensation. Patrick further argued that, assuming the
dissolution court deemed the second half of the income to be a distributable asset, the
commission was entirely his separate property, because he performed all of the labor
necessary to earn the second payment after he and Sarah separated. This labor included
oversight of the installation of the software.
Despite Patrick Ream’s legal contention, his expert, Scott Martin, conceded that
Patrick would likely receive the second half commission. The value of the second BMO
commission installment totaled $316,557.
During trial, Patrick Ream, despite the court’s previous order reserving the
character determination of the parties’ 2017 tax liability, contended that, because the
couple already satisfied their tax obligation by paying the IRS, the trial court did not need
to decide whether the payment retired a community or separate debt. Thus, he argued
that the trial court should not consider the payment when distributing the couple’s
property.
The dissolution court determined Sarah Ream’s net monthly income, for purposes
of child support and spousal maintenance, to be $6,540. This figure included the spousal
maintenance of $2,500 per month that the court ultimately awarded Sarah. Thus, the
dissolution court concluded that Sarah garnered net income from teaching and rentals as
$4,040 each month.
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The dissolution court totaled Patrick Ream’s gross monthly income at $29,000 and
net monthly income at $21,750. The court did not disclose its computation of either
Sarah’s or Patrick’s net monthly income other than to comment that it performed its own
calculation based on the parties’ financial declarations rather than accept either parties’
calculation.
The trial court awarded Sarah Ream two years’ spousal maintenance at $2,500 per
month. In so ruling, the dissolution court considered the factors listed in RCW
26.09.090(1). The court, in its oral ruling, commented:
The Court was mindful of the factors contained in 26.09.090
regarding maintenance. I reviewed all those factors. The Court has
certainly considered the financial resource of the party seeking maintenance
including any separate property. I also included and certainly considered
the time necessary to acquire sufficient education and training. Sounds like
you’re [Sarah Ream is] off on your next career and that you have a healthy
career ahead of you as a teacher. The Court heavily considered the
standard of living established during the marriage and is mindful going
forward that there would be some disparity there, and the Court doesn’t
want to create a major discrepancy between the households. The Court also
took into account the length of the marriage, the fact this was a 16-year
marriage which is a healthy substantial, intermediate marriage. The Court
also considered your age, your physical/emotional conditions, and your
financial, and the financial obligations of yourself, the petitioner, and the
Court certainly considered Mr. Ream’s ability to pay.
I’m ordering maintenance in the amount of $2,500 for a period of
two years going forward. That number is reflected in the net income that
I’ve made for purposes of child support. I believe that that will take care of
the needs, and I believe that given the resources and the money that has
been provided to you in this decision that will take care of your needs
adequately and the needs of your children.
RP at 842-43.
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In a finding of fact, the dissolution court wrote, in part:
The court finds this is a long-intermediate marriage. During the 16-
year marriage, the parties each substantially relied on the marital
community. Petitioner [Sarah Ream] altered her career path to raise a
family. Petitioner’s alteration of her career path was a joint decision of the
parties.
Respondent’s career was enhanced by the contribution of the
Petitioner as the primary caregiver.
....
The court considered the factors contained in RCW 26.09.090
regarding maintenance. The court considered the financial resources of the
party seeking maintenance including any separate property. The court
considered the time necessary to acquire sufficient education and training.
The court heavily considered the standard of living established during the
marriage and the disparity in the standard of living post-dissolution. The
court took into account the length of the marriage, a healthy, substantial
intermediate marriage. The court considered the age, physical/emotional
conditions, financial condition, and financial obligations of both the
Petitioner and the Respondent.
....
Conclusion: Spousal support should be ordered based upon the
Petitioner’s financial resources, Petitioner’s age and physical and emotional
condition, Respondent’s significant earning capacity, Respondent’s ability
to meet his needs and obligations, and the standard of living during the
marriage.
Clerk’s Papers (CP) at 178.
In finding of fact 1.22, the trial court declined to apply the time rule formula,
utilized in In re Marriage of Short, when adjudging the character of both installments of
the BMO commission as either community property or separate property. The
dissolution court explained:
The Court reviewed In Re Marriage of Short. After review of lay
and expert testimony and the case precedent the court declined to apply the
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Short analysis, finding the facts at issue in this case distinguished from
those in Short. In reviewing the facts at hand in relation to Short, the court
looked to the nature of the transaction between FISERV and the client.
Unlike the stocks in Short, the court found the facts clearly established the
construct of apportioning two separate commissions overtime was to ensure
that the client [BMO] received the bargained for product (as distinguished
from the line of thought in Short which concerned stock options that were
purely for the purpose of employee retention).
CP at 172. The court characterized each installment of the BMO commission as fifty-
percent community, because the labor expended in earning each half of the commission
was “predominantly done during marriage.” CP at 172.
The dissolution court analyzed the characterization of the parties’ 2017 tax
obligation, which the court earlier reserved for trial. Presumably the payment came from
a bank account, whose deposits constituted community property. Of the $70,683 tax bill,
the court concluded that Sarah Ream should be responsible for $10,000 and Patrick Ream
$60,683 of the amount. Accordingly, the trial court ordered that Patrick reimburse Sarah
$50,683.
The dissolution court disproportionately divided the parties’ assets in favor of
Sarah Ream. When declaring that the division was just and equitable, the court added
that “‘[e]ven if the court erred on any characterization, such misclassification would not
have affected [the court’s] final distribution decision.’” RP at 926. The court reasoned:
The parties substantially relied on the marital community. During
the marriage, the Respondent earned a lucrative professional career with the
assistance and professional sacrifice of the Petitioner. Respondent has an
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enormous earning potential and there has been a lifestyle throughout
marriage to which Petitioner contributed.
CP at 177.
The dissolution court awarded Sarah Ream assets valued at $1,812,024.11 and
Patrick Ream assets valued at $1,595,417.73. The court, per the parties’ stipulation,
awarded Patrick the 14th Avenue property and Sarah the 45th Avenue property and the
remaining four rental properties. Sarah received more than half of her assets in real
property. The trial court imposed $117,239.01 and $339,752.91 in liabilities respectively
on Sarah and Patrick.
Finally, the dissolution court awarded Sarah Ream $50,000 in attorney fees, based
on the financial needs of Sarah and the ability of Patrick Ream to pay. When awarding
this sum, the dissolution court relied on “the nature and extent of discovery requests,
supplemental requests, efforts of counsel, and work performed by experts.” CP at 175.
After entry of the dissolution decree, Sarah Ream filed a motion to enforce the
decree. The dissolution court thereafter amended its final ruling, thereby increasing
Sarah’s award. In its February 18, 2020 ruling, the trial court stated:
The court previously found and continues to find this is [a] fair just
and equitable distribution as it gives security to the petitioner and serves as
a guarantee of value to the Petitioner who has far less earning capacity than
that of Respondent.
CP at 246 (emphasis added).
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LAW AND ANALYSIS
Patrick Ream assigns error to the dissolution court’s calculation of Sarah Ream’s
net monthly income, the amount of spousal maintenance awarded Sarah, the finding that
the second half of the BMO commission was property to be divided, the ruling
characterizing half of each half of the BMO commission to be community property, the
equity of the property division, and the attorney fee award of $50,000 to Sarah Ream.
Patrick Ream assigns no error to the amount of child support ordered.
Calculation of Sarah Ream’s Income
When challenging the dissolution court’s computation of Sarah Ream’s net
monthly income at $6,540, Patrick Ream contends that the dissolution court failed to
identify the evidence on which it relied in making the calculation or its method of
calculation. In turn, Patrick contends substantial evidence does not support the court’s
calculation after considering Sarah’s teaching income, spousal support, rental housing
income, and eligible deductions.
Patrick Ream cites RCW 26.19.071, the lengthy statute that lists the forms of
income that the dissolution court totals when calculating income for purposes of child
support. The statute does not indicate that it also controls income included or excluded
when assessing a spouse’s income for purposes of spousal maintenance. Nevertheless,
both parties assume that the statute controls any award of maintenance. RCW
26.19.071(3) directs the court to include salaries, wages, commissions, rents, and
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maintenance actually received. Patrick does not assign error to the dissolution court’s
imposition of child support despite the calculation of Sarah’s income being a factor in
assessing the amount of support.
Both parties presented the dissolution court disparate calculations of Sarah Ream’s
income. Sarah testified she garnered net monthly housing rental income of $1,000 and
net monthly income from teaching of $3,910.05, for a total of $4,910.05. Patrick Ream
testified and presented exhibits supporting a conclusion that Sarah’s monthly income,
excluding spousal maintenance, amounted to be $9,120.72. This figure included
$5,741.32 in teaching salary and $3,379.40 in housing rental. Patrick’s calculation
appears more comprehensive and accurate, but our role is not one of finder of fact.
The dissolution court determined Sarah Ream’s net monthly income, for purposes
of child support and spousal maintenance, to be $6,540. This figure included the spousal
maintenance that the court ultimately awarded Sarah of $2,500 per month. Thus, the
income from housing rentals and teaching, according to the trial court, amounted only to
$4,040. This figure deceeds the amount Sarah claimed she earned by $870. The trial
court did not disclose how it arrived at its figure. The court, however, observed that it
performed its own calculation based on the parties’ financial declarations rather than
accept either parties’ calculation.
This court reviews factual findings for substantial evidence. In re Marriage of
Stachofsky, 90 Wn. App. 135, 144, 951 P.2d 346 (1998). In determining whether
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substantial evidence exists to support a court’s finding of fact, the record is reviewed in
the light most favorable to the party in whose favor the findings were entered. In re
Marriage of Gillespie, 89 Wn. App. 390, 404, 948 P.2d 1338 (1997). We rely on the
principle that findings of fact are supported by substantial evidence if, from the evidence
preserved in the record, the reviewing court can discern a rational premise for those
findings. In re Worker’s Compensation Claim of Morris, 403 P.3d 980, 986 (Wyo.
2017).
Sarah Ream argues that the trial court was within its authority to discount the
alleged rental income to near zero or discount her teaching income given the absence of a
contract. Discounting Sarah’s teaching income somewhat may be justified, given that she
lacked a contract. Nevertheless, even when considering the risks and expenses associated
with the rental properties, discounting Sarah’s rental income to near zero is unreasonable.
More importantly, from the record we cannot determine if the trial court decided to
discount rental income, teaching wages, or both.
Because the trial court failed to explain how it determined Sarah Ream’s net
monthly income and because the trial court’s calculation is even lower than the
calculation of Sarah, we are unable to determine if substantial evidence supports the trial
court’s finding. Therefore, we remand to the trial court to enter findings supporting its
computation of Sarah’s income or to perform a new calculation.
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Spousal Maintenance
On appeal, Patrick Ream challenges the dissolution court’s award of spousal
maintenance to his former wife. He contends Sarah Ream lacks financial need for any
support. Patrick highlights Sarah’s net monthly income and her significant distribution of
over $1.8 million in assets. Sarah responds that Patrick mistakenly focuses only on her
financial need when need is only one factor the trial court must consider before awarding
maintenance. Sarah maintains that her sacrifice of her career to support the parties’ home
and children, Patrick’s high earning potential, the parties’ lavish lifestyle during
marriage, and the length of the parties’ marriage justified her maintenance award.
We decline to address whether the trial court abused its wide discretion when
awarding spousal maintenance. Because we remand to the trial court to explain its
computation of Sarah Ream’s income or to recalculate the income and because Sarah’s
income serves as an important factor in assessing spousal maintenance, we also remand
for the dissolution court to consider anew the award of spousal maintenance. The court
may entertain the parties’ arguments and impose a new or same amount of spousal
maintenance after reassessing Sarah’s amount of income.
Unpreserved Challenge to Finding 1.22
On appeal, Patrick Ream challenges the dissolution court’s finding of fact 1.22.
Sarah Ream argues that Patrick failed to challenge the trial court’s finding 1.22, and thus
the finding becomes a verity on appeal. Patrick’s challenge relates to the characterization
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of the first half of the BMO commission. We question the importance of the finding of
fact to our decision, but address the challenge and Sarah’s objection to the challenge
anyway.
Most of finding of fact 1.22 constitutes conclusions of law or a skiff of legal
analysis. That portion of the finding that pertains to facts reads:
Unlike the stocks in Short, the court found the facts clearly
established the construct of apportioning two separate commissions
overtime was to ensure that the client [BMO] received the bargained for
product (as distinguished from the line of thought in Short which concerned
stock options that were purely for the purpose of employee retention).
CP at 172. The dissolution court discerned the reason behind FISERV splitting sales
commissions in half and then employed this reason to apportion the commission between
separate property and community property. Sarah Ream may wish to preclude Patrick
Ream from challenging the apportionment of the BMO commission by her claiming that
this finding of fact, that underlies the dissolution court’s apportionment ruling, is a verity
on appeal.
RAP 10.3(g) requires separate assignments of error for each challenged finding
and further requires that each assignment include reference to the finding by number.
RAP 10.4(c) requires a party to quote the material portions of the challenged finding in
its brief or an appendix thereto. Patrick Ream did not include a separate assignment of
error to finding of fact 1.22 in his opening brief, let alone expressly assign error to the
finding of fact as part of another assignment of error. Nevertheless, in his opening brief,
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in parentheses next to assignment of error 2, he wrote “CP 172 at sections 1.22.” Br. of
Appellant at i. Finding of fact 1.22 is found on CP at 172.
In response to Sarah Ream’s contention that Patrick Ream failed to preserve his
assignment of error to finding of fact 1.22, Patrick emphasizes that his opening brief
disputed the finding. As a precaution, Patrick listed two additional assignments of error
in his reply brief:
A. The trial court erred in finding that most of the work that went
into securing the payment of first and second BMO commissions was for
past or present services, (“. . . occurred during the marital community. . .”
RP 833.
B. The trial court erred in finding that the purpose of paying the
BMO commissions in two installments was to ensure that the client
receives what it bargained for. RP 833.
Reply Br. of Appellant at 3.
This court need not strictly follow RAP 10.3(g) and 10.4(c). RAP 1.2 declares:
These rules will be liberally interpreted to promote justice and
facilitate the decision of cases on the merits. Cases and issues will not be
determined on the basis of compliance or noncompliance with these rules
except in compelling circumstances where justice demands, subject to the
restrictions in rule 18.8(b).
In In re Marriage of Stern, 57 Wn. App. 707, 710, 789 P.2d 807 (1990), the appellant
forgot to quote a challenged finding of fact, but he cured this defect in his reply brief. In
its discretion, this court proceeded to address the merits of the appeal and deemed
sanctions inappropriate. The court could still expeditiously review the challenge to the
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finding, and the respondent suffered no prejudice by the failure to cite the challenged
finding in the opening brief.
Because Patrick Ream referenced the challenged finding of fact in his assignments
of error in his opening brief, because Patrick specifically assigned error to finding of fact
1.22 in his reply brief, because this court is not hampered by the lack of strict compliance
with RAP 10.3(g) and 10.4(c), and because Sarah Ream suffers no prejudice by any
violation of the rules, we proceed as if Patrick Ream properly preserved error in his
appeal brief.
First Half BMO Commission
Patrick Ream argues that the trial court erred by failing to apply the time rule
formula, utilized in In re Marriage of Short, 125 Wn.2d 865 (1995), when the trial court
characterized the first half of his BMO commission as fifty percent community property.
Patrick asserts that, if the trial court applied the formula, the first half of the commission
would have been subject to a significantly smaller community apportionment, resulting in
more of the commission’s proceeds being Patrick Ream’s separate property. He argues
that, given the similarities between commissions, bonuses, and stocks, the time rule
should apply to commissions. Marriage of Short dealt with stock options given the
husband as part of his remuneration for employment.
At the time of dissolution, all property comes before the court for a “just and
equitable” distribution. RCW 26.09.080; In re Marriage of Farmer, 172 Wn.2d 616,
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625, 259 P.3d 256 (2011). Before distributing property, a trial court must characterize
each piece of property as either community or separate or allocate a percentage of the
asset that constitutes separate property and community property. In re Marriage of
Gillespie, 89 Wn. App. 390, 399 (1997). Separate property is acquired either before or
after marriage by gift, bequest, devise or descent. RCW 26.16.010; In re Marriage of
Short, 125 Wn.2d 865, 870-71 (1995). Separate property includes a spouse’s earnings
“while living separate and apart.” In re Marriage of Short, 125 Wn.2d at 871.
On appeal, Patrick Ream does not seek remand for recharacterization of the first
BMO payment. Patrick also does not indicate what percentage of the first half of the
BMO commission should be separate versus community property. Patrick, however,
admits that some of the payment should be community property.
We decline to address Patrick Ream’s request to apply the time rule to the first
BMO payment because Patrick fails to specify the increase in percentage of his separate
property share that he seeks. Nor does he request a remand for the dissolution court to
reallocate the percentage. This court will not entertain an assignment of error that lacks
any practical effect on the outcome of the appeal. Daines v. Spokane County, 111 Wn.
App. 342, 350, 44 P.3d 909 (2002), overruled on other grounds by Neighborhood
Alliance of Spokane County v. Spokane County, 172 Wn.2d 702, 261 P.3d 119 (2011).
We also observe that the dissolution court’s characterization of the first BMO
payment as only fifty percent community property benefitted Patrick Ream, because both
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parties’ experts agreed that seventy-five percent of the payment should be deemed
community property. A party should not be heard complaining that the dissolution court
issued a ruling more favorable to the party than the party’s expert opinion. Presenting
expert testimony that benefits the party less than the trial court’s ruling is akin to invited
error.
Second Half BMO Commission as Distributable Asset
Patrick Ream next argues that the trial court improperly distributed the second half
of the BMO commission because the payment did not constitute property and was not a
distributable asset. Patrick emphasizes that he had not earned the second half of the
BMO commission by trial. He characterizes his interest in the second BMO installment
as merely an expectancy at trial and not an asset to be distributed. Sarah Ream responds
that, because there was little to no threat of the second BMO commission installment not
being paid to Patrick, the payment was properly before the court for distribution. Sarah
maintains that Patrick performed services before or at the time of the parties’ separation
that led to the right to receive the second half.
At the time of dissolution, the dissolution court shall dispose of “the property” of
the parties. RCW 26.09.080. Under the statute, “all property” comes before the court for
a “‘just and equitable’” distribution. In re Marriage of Farmer, 172 Wn.2d 616, 625
(2011).
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RCW 26.09.080 does not define the term “property.” For purposes of Washington
dissolution actions, property can be tangible or intangible, but it must be something to
which there is a right. In re Marriage of Harrington, 85 Wn. App. 613, 624, 935 P.2d
1357 (1997). On the one hand, a mere expectancy is not a right and as such is not
property. In re Marriage of Harrington, 85 Wn. App. 613, 624. On the other hand,
“property” is a term of broad significance, embracing everything that has exchangeable
value and every interest or estate which the law regards of sufficient value for judicial
recognition. York v. Stone, 178 Wash. 280, 285, 34 P.2d 911 (1934); In re Marriage of
Harrington, 85 Wn. App. at 624. An enforceable contract right is property. Freeburn v.
Freeburn, 107 Wash. 646, 650, 182 P. 620 (1919); In re Marriage of Estes, 84 Wn. App.
586, 590, 929 P.2d 500 (1997). A contingent future interest is also property. In re
Marriage of Estes, 84 Wn. App. 586, 590 (1997); In re Marriage of Leland, 69 Wn. App.
57, 71, 847 P.2d 518 (1993). The proceeds of a contract obtained during the marriage in
the conduct of the community’s business may be awarded to both parties and divided
between them when received. Freeburn v. Freeburn, 107 Wash. 646, 650 (1919); In re
Marriage of Estes, 84 Wn. App. at 590-91.
We deem Marriage of Estes, 84 Wn. App. 586 (1997) persuasive, if not
controlling. The divorcing husband was an attorney who garnered some of his income
from contingency fees. At the time of separation, the husband had pending five
contingent fee cases. At trial, the husband argued that the contingency fee cases lacked
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any value because of the uncertainty of the outcome of any case. The trial court agreed
with the husband and awarded him any income that would accrue in the future from the
cases.
This court, in Marriage of Estes, reversed the trial court. The court reasoned that
any difficulty in valuation did not prevent dividing property. The husband signed the
contracts for the contingency fees before the separation. The husband possessed a right
to enforce the contract on the fulfillment of conditions. The trial court could rule that the
fees be divided on collection.
Patrick Ream possessed a right to payment of the second half of the commission
on the condition that the FISERV software operated within BMO’s financial system. The
possibility that those conditions might not be fulfilled does not preclude the dissolution
court from dividing the commission as marital property. The chances of the absence of
the contingencies fulfilled were slim, so valuation of the right to the commission would
not be difficult. The dissolution court did not err when deeming the second half of the
commission an asset to be distributed.
Allocation of Second Half of BMO Commission
On the contingency that this court affirms the dissolution court’s characterization
of the commission’s second half, Patrick Ream contends that the entirety of the second
commission payment must be deemed his separate property. He bases this argument on
the false assumption that he earned the second half remuneration solely from his post-
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separation efforts. The record does not reflect this claimed fact. Although Patrick
assisted in the installation of the FISERV software into BMO’s operations after the
separation, his agreement with FISERV did not state that payment of the second half was
contingent on his participation in the installment. Work performed by Patrick before the
couple’s separation also led to the collection of the remaining half of the commission.
As already mentioned, before dividing the property, the trial court must determine
the nature and extent of the community property and the separate property of the parties.
RCW 26.09.080(1)-(4); In re Marriage of Gillespie, 89 Wn. App. 390, 399 (1997).
Assets acquired during marriage are presumptively community property. In re Marriage
of Short, 125 Wn.2d 865, 870, (1995). A party may rebut the community property
presumption by presenting clear and convincing evidence that the disputed property is
separate property. In re Marriage of Chumbley, 150 Wn.2d 1, 5, 74 P.3d 129 (2003).
Separate property is acquired either before or after marriage by gift, bequest, devise or
descent. RCW 26.16.010; In re Marriage of Short, 125 Wn.2d 865, 870-71 (1995).
Separate property includes a spouse’s earnings “while living separate and apart.” In re
Marriage of Short, 125 Wn.2d at 871.
Patrick Ream contends that the application of the time rule formula would have
resulted in the second half of the commission being characterized entirely as his separate
property. In In re Marriage of Short, 125 Wn.2d 865, 874 (1995), the Supreme Court
adopted the time rule formula to assess what percentage of a stock option constituted
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separate property and what percentage constituted community property. The option
resulted from the husband’s labor before and after the couple’s separation.
Patrick Ream limits his argument to the entirety of the second half of the
commission being separate property such that the time formula lacks any application.
Ream does not contend that, assuming the dissolution court finds some of the second half
to be community property, the court allocated an erroneous percentage to the community
property.
We reject Patrick Ream’s contention. Patrick relies on the assumption that the
BMO commission is two, different sets of commissions. FISERV’s policies indicate that,
when an employee sells FISERV software, they receive a commission after achieving
two milestones. The second half of the BMO commission is not a separate commission,
but rather one half of the same commission, even though the dissolution court referred
once to the existence of two separate commissions. Both halves were earned in part
before the separation of the parties. The sale of the FISERV software was a singular sale.
The trial court found that both parts of the commission were earned for past, present, and
future services.
Prepaid Taxes
By agreed order, the marital couple satisfied its 2017 community tax liability
before trial. Patrick Ream assigns error to the trial court’s consideration of the
community’s prepayment of taxes for 2017 as an item of property to be distributed.
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Alternatively, he argues that, if the parties’ 2017 community prepaid tax liability existed
at trial for distribution, the court erred by assigning him ninety percent of the
responsibility to pay the tax and Sarah only ten percent. Of the $70,683 liability, the
court imposed $10,000 of the responsibility on Sarah and $60,683 on Patrick.
Accordingly, the trial court ordered that Patrick reimburse Sarah $50,683.
Sarah Ream responds that, under the agreed order, the trial court reserved the
character of the tax liability for trial. Sarah argues that the trial court justly and equitably
distributed the parties’ 2017 tax liability. In reply, Patrick Ream acknowledges that the
pretrial order reserved the community tax debt’s characterization for trial, but the order
did not reserve a reallocation of payment between the parties. Thus, by ordering
redistribution of the tax liability, the community essentially paid the debt twice.
At the time of dissolution, all property is brought before the court for a “‘just and
equitable’” distribution. RCW 26.09.080; In re Marriage of Farmer, 172 Wn.2d 616,
625 (2011). If one or both parties disposed of an asset before trial, the court lacks
authority to distribute the asset at trial. In re Marriage of White, 105 Wn. App. 545, 549,
20 P.3d 481 (2001).
Patrick Ream cites to In re Marriage of White to support the conclusion that assets
not before the court may not be distributed. In 1993, Carol White inherited money from
her father. Later in 1993, she used $4,000 of her inheritance to retire the debt owed on
the family vehicle. In 1994, she used $26,511 of her inheritance to retire the mortgage on
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the family home. Carol petitioned for dissolution in 1997. At trial, she requested that the
$30,511 she used to pay off the home and car be deemed her separate property. The trial
court obliged, reasoning that Carol’s inheritance had not become community property.
On appeal in Marriage of White, this court held that the trial court erroneously
reasoned that Carol White’s inheritance was an asset before the court for distribution
since the inheritance ceased being property after being spent. This court further held that
the trial court should have characterized White’s inheritance as community property.
Regardless, this court determined that the trial court possessed the discretion to distribute
the parties’ property in the manner it did. In re Marriage of White, 105 Wn. App. at 554.
Still this court remanded because it could not discern from the record whether the trial
court would have distributed the parties’ property differently had the dissolution court
properly characterized the inheritance.
Patrick Ream also relies on In re Marriage of Kaseburg, 126 Wn. App. 546, 108
P.3d 1278 (2005). The trial court awarded $150,000 to Rochelle Kaseburg for her
community interest in her and Kenneth Kaseburg’s former family home, despite the
lender foreclosing on the home before trial. The trial court justified the award on
Kenneth committing fraud, waste, and other financial misconduct. On appeal, this court
held that the trial court properly considered Kenneth’s fraud and waste of community
assets. Nevertheless, this court concluded that the trial court abused its discretion by
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allowing Rochelle a distribution when considering the home to be before the trial court
for distribution.
In re Marriage of White is distinguishable. First, while White explained that an
asset already spent does not exist for distribution at trial, the primary issue was an asset’s
characterization. Second, White did not involve a court-ordered predistribution or a
character determination reservation. Finally, the White court found the trial court’s
distribution just and equitable and remanded only for clarification that its distribution
would remain unchanged if it had properly characterized Carol White’s inheritance. As
Sarah Ream underscores, her dissolution court expressed that its award would remain
unchanged regardless of any mischaracterizations. In re Marriage of Kaseburg is
similarly inapposite. The case did not deal with a predistribution order or a reservation of
the characterization of an asset or liability for trial.
The trial court specifically ordered the parties to satisfy their 2017 tax liability
pretrial. The court expressly reserved the debt’s characterization for trial. Accordingly,
we hold that the liability was before the trial court for distribution.
Patrick Ream next argues that, because the pretrial order only reserved the
character determination, not the payment, of the 2017 community tax liability for trial,
the trial court erred by redistributing the asset. Patrick contends that, as the liability had
already been satisfied, the trial court essentially required that the community pay the tax
liability again. We disagree.
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By reserving the debt’s characterization for trial, the trial court retained the
authority to redistribute the parties’ responsibility for the debt. There may have been no
purpose of reserving the characterization for trial, if the court did not intend to allocate
responsibility for the debt. The trial court did not order that the parties pay the IRS a
second time. Rather, it allocated responsibility for the liability between the parties.
Furthermore, because a majority of the tax liability stemmed from Patrick Ream’s
income, the dissolution court’s imposing major responsibility on Patrick Ream is logical.
Therefore, the trial court did not abuse its discretion by allocating a majority of the
responsibility for the 2017 community prepaid tax liability to Patrick Ream.
Property Distribution
Patrick Ream argues that, even if the dissolution court properly characterized the
nature of the BMO commission, the court’s division of property was not fair.
At the time of dissolution, all property comes before the court for a “‘just and
equitable’” distribution. RCW 26.09.080; In re Marriage of Farmer, 172 Wn.2d 616,
625 (2011). A just and equitable distribution need not be an equal distribution, but rather
requires fairness based on a consideration of all the circumstances of the marriage, both
past and present, and an evaluation of the future needs of the parties. In re Marriage of
Larson, 178 Wn. App. 133, 138, 313 P.3d 1228 (2013). In crafting a just and equitable
distribution plan, the trial court shall consider the nonexclusive factors listed in RCW
26.09.080:
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(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.
Although the trial court usually awards separate property to its owner, the trial
court may award separate property to the other spouse when just and equitable. In re
Marriage of Larson, 178 Wn. App. 133, 138 (2013). Even if the trial court
mischaracterizes the parties’ property, this court will not disturb the distribution of the
assets if in our judgment that distribution is otherwise fair, just and equitable. In re
Marriage of Brady, 50 Wn. App. 728, 732, 750 P.2d 654 (1988).
This court will reverse a trial court’s property distribution in a marriage
dissolution only when the trial court abuses its discretion. In re Marriage of Zier, 136
Wn. App. 40, 45, 147 P.3d 624 (2006). A trial court abuses its discretion when it
exercises it on untenable grounds or in an unreasonable manner, “namely, when the court
‘relies on unsupported facts, takes a view that no reasonable person would take, applies
the wrong legal standard, or bases its ruling on an erroneous view of the law.’” Kelley v.
Centennial Contractors Enterprises, Inc., 169 Wn.2d 381, 386, 236 P.3d 197 (2010). A
trial court’s characterization of property is a question of law. In re Marriage of Skarbek,
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100 Wn. App. 444, 447, 997 P.2d 447 (2000). This court reviews questions of law de
novo. In re Marriage of Herridge, 169 Wn. App. 290, 297, 279 P.3d 956 (2012).
The dissolution court awarded Sarah Ream assets valued at $1,812,024.11 and
Patrick Ream assets valued at $1,595,417.73. Sarah Ream thereby received 53 percent of
the assets, and Patrick Ream received 47 percent of the property. The dissolution court
did not abuse its discretion, when considering the nature of the property, the length of the
marriage, and the needs of the spouses, awarding a near equal allocation of the property.
Additionally, Patrick Ream challenges the trial court’s posttrial ruling on Sarah
Ream’s motion to enforce the court’s distribution decree. On February 18, 2020, the trial
court amended its final ruling, resulting in a higher award to Sarah. Patrick Ream argues
that the trial court failed to reiterate that its revised distribution was fair and equitable.
Patrick Ream’s argument is incorrect. In its February 18, 2020 ruling, the trial
court stated:
The court previously found and continues to find this is [a] fair just
and equitable distribution as it gives security to the petitioner and serves as
a guarantee of value to the Petitioner who has far less earning capacity than
that of Respondent.
CP at 246 (emphasis added).
Attorney Fees at Dissolution Court
Patrick Ream contends that the dissolution court erred by awarding Sarah Ream
any attorney fees for legal assistance before the superior court, since Sarah received a
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majority of the parties’ assets and possessed the financial ability to pay her fees. He
further challenges the $50,000 sum awarded as unreasonable and highlights the trial court
failed to make any findings confirming the award’s reasonableness. Sarah responds that
the dissolution court properly awarded attorney fees, even after Patrick received less of
the community assets and the court ordered him to pay maintenance, because of Patrick’s
high earnings.
RCW 26.09.140 authorizes the trial court to award attorney fees in dissolution
actions. The first sentence of the statute declares:
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.
Before awarding attorney fees, the trial court must balance the needs of the spouse
requesting them with the ability of the other spouse to pay. In re Marriage of Morrow,
53 Wn. App. 579, 590, 770 P.2d 197 (1989). The statute suggests the financial resources
of the parties are the only factors for the dissolution court to consider.
A spouse’s receipt of substantial property or maintenance does not preclude the
spouse from also receiving an award of attorney fees and costs when the other spouse
remains in a much better position to pay. In re Marriage of Morrow, 53 Wn. App. 579,
590 (1989). Nevertheless, reviewing courts have declared awards of fees an abuse of
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discretion when the benefitted spouse received a majority of the parties’ total assets, the
same spouse has a better financial situation, and the other spouse already has an onerous
financial burden. In re Marriage of Nicholson, 17 Wn. App. 110, 120, 561 P.2d 1116(1977).
Sarah Ream paid her pretrial attorney fees, in the amount of $44,354.24, by using
her savings and credit cards. While Sarah attempts to pay her credit cards on time, after
the separation, she could not retire the debt in full every month. At the time of trial, she
had balances on her credit cards totaling $3,800. She incurred an additional $30,000 in
attorney fees for trial.
The trial court awarded Sarah Ream $1,812,024.11 of the assets and $117,239.01
of the liabilities and Patrick Ream $1,595,417.73 of the assets and $339,752.91 of the
liabilities. Thus, Sarah Ream $439,121.01 more net assets than Patrick Ream.
Nevertheless, a majority of the value of Sarah’s awarded assets was real property, an
asset difficult to liquidate and an asset the parties purchased for income. The trial court
also awarded Sarah two years’ spousal maintenance at $2,500 per month.
Patrick Ream relies on In re Marriage of Nicholson, 17 Wn. App. 110, 120
(1977), in which this court reversed the dissolution court’s award of reasonable attorney
fees and costs to the wife. Gwendoline Nicholson received more than half of the parties’
property and cash assets and the record established that she had the ability to pay her
attorney fees.
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We find Nicholson distinguishable. As the court, in In re Marriage of Morrow, 53
Wn. App. 579 (1989), observed, a court abuses its discretion when awarding attorney
fees if the paying spouse already has an onerous financial burden. In Nicholson, the
husband, John Nicholson, earned a net monthly income of $1,116, while Gwendoline
Nicholson earned $187 per month. The trial court ordered John to pay Gwendoline $400
per month in spousal maintenance for ten years, as well as $175 per month in child
support. Thus, John would pay more than half of his net monthly income in support.
Patrick Ream’s net monthly income is $21,750. He is ordered to provide Sarah
Ream two years’ spousal maintenance at $2,500 per month, less than twelve percent of
his net income. Even pursuant to Patrick’s calculation of Sarah’s net monthly income,
$9,120.72, Patrick earns significantly more money than Sarah. Thus, unlike John
Nicholson, Patrick suffers no onerous financial burden by being compelled to pay Sarah’s
fees.
Patrick Ream next asserts that the trial court’s attorney fee award to Sarah Ream
was unreasonable, and that the court should have used the lodestar method in calculating
its award. If a court grants attorney fees under RCW 26.09.140, the court must state on
the record the method used to calculate the award. In re Marriage of Obaidi, 154 Wn.
App. 609, 617, 226 P.3d 787 (2010). This court, in In re Marriage of Van Camp, 82 Wn.
App. 339, 340, 918 P.2d 509 (1996), held that the lodestar method is not required to
calculate attorney fees in dissolution actions.
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In In re Marriage of Obaidi, 154 Wn. App. 609, 618 (2010), the trial court
awarded the wife, Husna Obaidi, attorney fees, stating:
Now as to the issue of attorneys’ fees—clearly the wife has a need;
clearly the husband has an ability to pay. I hereby order that he pay her
$8,500—flat fee—toward her costs and fees. She has the ability to pay
some, she makes about $15,000 a year; he makes about a hundred grand a
year. It doesn’t take rocket scientists to figure out where I’m coming from
on the proration there.
On appeal, the husband, Khalid Qayoum, argued that the trial court erred by failing to
state any method used to calculate the attorney fees. This court held: “[a]lthough the trial
court’s method is not completely transparent, we cannot say that the court abused its
discretion in setting attorney fees.” In re Marriage of Obaidi, 154 Wn. App. at 618.
Patrick Ream’s dissolution court awarded Sarah Ream $50,000 of her attorney
fees. This amount is lower than the fees Sarah incurred. Contrary to Patrick’s argument,
the trial court entered a reasonableness finding. The trial court commented that the
important evidence included “the nature and extent of discovery requests, supplemental
requests, efforts of counsel, and work performed by experts.” CP at 175. The trial
court’s findings sufficiently confirm the reasonableness of the award.
Attorney Fees on Appeal
Sarah Ream requests an award of reasonable attorney fees on appeal pursuant to
RCW 26.09.140, for the same reasons she received her attorney fee award at trial. The
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second sentence of RCW 26.09.140 authorizes this court to award attorney fees on
appeal:
Upon any appeal, the appellate court may, in its discretion, order a
party to pay for the cost to the other party of maintaining the appeal and
attorneys’ fees in addition to statutory costs.
“Determining whether a fee award is appropriate requires the court to consider the
parties’ relative ability to pay. The court should also examine the arguable merit of the
issues raised on appeal.” In re Marriage of Leslie, 90 Wn. App. 796, 807, 954 P.2d 330(1998) (internal citation omitted).
Some of Patrick Ream’s assignments of error hold merit, while others did not.
More importantly, based on his high income, Patrick Ream remains in a significantly
better financial position than Sarah Ream to pay current expenses. Thus, we grant Sarah
Ream’s request for attorney fees on appeal.
CONCLUSIONS
We remand this marital dissolution proceeding to the superior court for the
identification of the method of calculating net income of Sarah Ream or for a
recalculation of the income. In turn, we direct the dissolution court to review again the
amount of spousal maintenance based on the parties’ respective incomes. Otherwise, we
affirm the dissolution court’s rulings. We award Sarah reasonable attorney fees and costs
on appeal.
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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.
_________________________________
Fearing, J.
WE CONCUR:
______________________________ _________________________________
Pennell, C.J. Staab, J.
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