In Re The Marriage Of: Gabriel Lee, App/cross-res. And Carol Kennard, Res/cross-app.

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
In the Matter of the Marriage of
No. 71714-6-1
GABRIEL Y. LEE, (consolidated with
No. 71715-4-1)
Appellant/Cross Respondent,
DIVISION ONE
v.
UNPUBLISHED OPINIONS
CAROL ANN KENNARD,
Respondent/Cross Appellant. FILED: June 29, 2015
Appelwick, J. — Lee appeals from the trial court's order on remand finding that
the separation agreement, which had been incorporated into the decree of dissolution,
was enforceable. In addition, Lee appeals the prospective enforcement of the
maintenance escalator and the award of attorney fees to Kennard. Kennard also appeals,
challenging the application of laches to the enforcement of the maintenance escalator.
Lee's unconscionability challenge to the validity of the separation agreement was
untimely and should not have been considered. However, the trial court properly
concluded that the agreement was enforceable. The trial court did not abuse its discretion
when it determined that retroactive enforcement of the maintenance escalator was barred
by laches or when it calculated the prospective application of the maintenance escalator.
Attorney fees were properly awarded below. We affirm.
FACTS
This is the second appeal before this court involving the separation agreement
between Gabriel Lee and Carol Kennard. See In re Marriage of Lee, 176 Wash. App. 678,
310 P.3d 845 (2013) (Lee I). The details and terms of the parties' separation are set forth
No. 71714-6-1 (consolidated with No. 71715-4-l)/2
in our previous opinion. See id. at 682-84. Only those relevant to this appeal are repeated
here.
The separation agreement awarded Kennard monthly spousal maintenance, the
amount of which to "'be adjusted every three years based upon the cost of living index.'"
Id. at 682. The agreement was incorporated into a decree of dissolution, and the decree
and child support order were entered ex parte on February 11, 2000.
Kennard did not seek to enforce the escalator until 2011, when she moved for past
due maintenance based on Lee's failure to pay cost of living increases since 2000. See
id. at 683-84. Lee sought to have the maintenance escalation clause declared void,
because it was tied solely to the consumer price index (CPI). ]d_. at 684. The trial court
held that the escalator was unenforceable. ]d Kennard appealed. ]d.
We reversed, reasoning that, while the court cannot impose a CPI escalator, the
parties can agree to such a provision:
Lee and Kennard agreed to an automatic, nonmodifiable spousal
maintenance escalation clause based on the cost of living index. Unless it
is found unfair at the time of execution, the court must enforce that
agreement according to its terms. Below, Lee did not allege that the
agreement was unfair at the time it was entered into, and the trial court
made no such finding. The argument instead focused on whether the
escalator was unenforceable as a matter of law. Therefore, we hold that
the trial court erred as a matter of law in holding that the spousal
maintenance escalation clause was void and unenforceable.
Id. at 687-88. We remanded the issue of the maintenance escalator to the trial court. Id.
at 693. We further directed, "Unless the separation agreement is set aside, Kennard is
entitled to an award of reasonable attorney fees incurred related solely to the
maintenance issue, in the prior proceeding below, on appeal, and on remand." jd.
No. 71714-6-1 (consolidated with No. 71715-4-l)/3
On remand, Lee moved for summary judgment, arguing that the separation
agreement was unconscionable and thus unenforceable. Lee further asserted that, under
the equitable doctrine of laches, Kennard was barred from enforcing the escalator.
Kennard opposed Lee's motion and moved for judgment for past due maintenance and
for attorney fees.
The trial court interpreted our decision as "mandating the trial court to make a
determination whether the settlement agreement was unfair at the time of execution."
Although the trial court found that the agreement was substantively unfair, it found that
the agreement was procedurally fair and thus enforceable. The court further concluded
that retroactive application of the escalator was barred by laches, reasoning that it was
"fundamentally unfair for [Kennard] to strategically sit on her rights while accruing 12%
interest while [Lee] has abided by the terms of the agreement and would be financially
prejudiced by the retroactive application of the [CPI] escalation clause." Accordingly, the
court held that "the escalation clause shall apply to current maintenance from the time
[Kennard] filed this action on October 18, 2011." It awarded attorney fees to Kennard.
Both parties appeal.1
DISCUSSION
Lee asserts that substantive unconscionability was sufficient to render the
separation agreement unenforceable. He also argues that, even if the agreement is
enforceable, the trial court erred in calculating the amount of prospective maintenance
based on the CPI increase, because the court used the wrong base year in making its
11n addition, both parties moved this court to strike portions of the other's briefing.
We deny both motions.
No. 71714-6-1 (consolidated with No. 71715-4-l)/4
calculation. He further asserts that the trial court erred in awarding Kennard attorney fees
as the prevailing party. Kennard cross appeals, challenging the trial court's application
of Lee's laches defense to bar retroactive enforcement of the maintenance escalator.
I. Maintenance Escalation Clause
Lee argues that the trial court should not have enforced the maintenance escalator,
because substantive unconscionability alone can support a finding of unconscionability.
We do not reach this argument, however, because Lee's unfairness challenge to the
separation agreement is time-barred.
Under RCW 26.09.070(3), if one or both parties to a separation contract petition
for dissolution of their marriage, the contract "shall be binding upon the court unless it
finds, after considering the economic circumstances of the parties and any other relevant
evidence produced by the parties . . . that the separation contract was unfair at the time
of its execution." The parties' separation agreement was incorporated into a decree of
dissolution, which became a final order in 2000. Prior to entry of the dissolution decree,
the court did not find that the agreement was unfair.2
We have previously recognized this constraint on challenges to the fairness of
separation contracts. See In re Marriage of Glass. 67 Wash. App. 378, 390, 835 P.2d 1054
(1992); see also In re Marriage of Hulscher, 143 Wash. App. 708, 717,180 P.3d 199 (2008).
In Glass, we stated that any challenge to a separation contract's unfairness "must be
2 We recognize Lee's assertion that the court commissioner who entered the
parties' decree did not affirmatively determine whether the separation agreement was fair.
However, Lee did not raise this issue below. His lawyer advised him that the agreement
was unfair and withdrew representation when Lee nonetheless chose to enter into the
agreement. Lee establishes no facts surrounding the agreement's presentation that
would give rise to a collateral attack on the order.
No. 71714-6-1 (consolidated with No. 71715-4-l)/5
made prior to the entry of the decree by which the separation contract is approved by the
court." 67 Wash. App. at 390. This principle was reiterated in Hulscher:
Martin did not claim that the spousal maintenance provision was unfair until
nearly a year after the trial court approved and entered the decree. But a
party must make such a challenge before the trial court's approval and entry
of the decree. RCW 26.09.070(3), (7); Glass, 67 Wash. App. at 390. As the
Glass court astutely observed, "[i]f such a challenge were to be allowed
years later, at the time of a modification proceeding, the provisions of RCW
26.09.070(3) and (7) would be rendered meaningless." Glass, 67 Wash. App.
at 390. Consequently, Martin's claim that the spousal maintenance
provision was unfair at the time of execution is thus time-barred.
143 Wash. App. at 717.
Lee attempts to distinguish Glass and Hulscher, arguing that he relies on RCW
26.09.070(6), while those cases looked to RCW 26.09.070(3) and (7).3 Under subsection
(6), the terms of a separation agreement remain enforceable as contract terms despite
being merged into a decree. This permits parties to raise contract defenses to the
agreement, such as Lee's laches defense. However, subsection (3) informs the reading
of subsection (6), excluding unconscionability from the available contract defenses.
Otherwise, subsection (3) "would be rendered meaningless." Glass, 67 Wash. App. at 390.
Lee also cites several cases for the proposition that a trial court has the authority
to refuse to enforce a maintenance agreement that it finds substantively unfair. But, the
cases he cites are inapposite: none involve a challenge to a separation agreement that
has been incorporated into a final decree. See In re P'ship of Rhone, 140 Wash. App. 600,
3 RCW 26.09.070(7) provides:
When the separation contract so provides, the decree may expressly
preclude or limit modification of any provision for maintenance set forth in
the decree. Terms of a separation contract pertaining to a parenting plan
for the children and, in the absence of express provision to the contrary,
terms providing for maintenance set forth or incorporated by reference in
the decree are automatically modified by modification of the decree.
No. 71714-6-1 (consolidated with No. 71715-4-l)/6
604-05, 166 P.3d 1230 (2007) (trial court made equitable amendment to order under its
continuing jurisdiction); In re Marriage of Hansen, 24 Wn. App 578, 579, 602 P.2d 369
(1979) (trial court refused to incorporate unfair separation agreement into dissolution
decree); In re Marriage of Qlsen. 24 Wash. App. 292, 298, 600 P.2d 690 (1979) (separation
agreement and decree were not merged).
Lee further maintains that, under the law of this case, the trial court was required
to consider the fairness of the separation agreement. This is a misreading of our previous
opinion. In Lee I, we held that In re Marriage of Covle, 61 Wash. App. 653, 811 P.2d 244
(1991) did not preclude the parties from agreeing to a CPI-based maintenance escalator.
See 176 Wash. App. at 686-88. In reaching this conclusion, we stated the general principle
that "[u]nless [a separation agreement] is found unfair at the time of execution, the court
must enforce that agreement according to its terms." |d_, at 687. We did not command
the trial court to determine the fairness of the separation agreement. And, as we stated
in our order denying Kennard's motion to recall the mandate, we did not intend to imply
disagreement with Hulscher. We were merely acknowledging that, unless there was
some basis—other than the CPI escalator clause—on which to set aside the agreement,
Kennard would prevail. We did not mean to say that such a basis existed. Regardless,
as RCW 26.09.070(3) makes clear, the time for challenging fairness is at the time of entry
of the decree.
Lee's unfairness challenge is time-barred. The trial court properly deemed the
escalation clause enforceable.
No. 71714-6-1 (consolidated with No. 71715-4-l)/7
II. Laches Defense
Kennard argues that the trial court erred in applying Lee's laches defense to bar
the retroactive enforcement of the maintenance escalator. "A person defensively
asserting laches must establish (1) the claimant had knowledge of the facts constituting
the cause of action or a reasonable opportunity to discover such facts; (2) unreasonable
delay on the part of the claimant in commencing the action; and (3) damage to the person
asserting laches." In re Marriage of Dicus, 110 Wash. App. 347, 357, 40 P.3d 1185 (2002).
Laches is an equitable remedy, the application of which we generally review for an
abuse of discretion. See In re Marriage of Capetillo, 85 Wn. App. 311,319, 932 P.2d 691
(1997). However, Lee raised his laches defense in his summary judgment motion on
remand.4 We review de novo all rulings made in conjunction with a summary judgment
motion. Folsom v. Burger King, 135 Wash. 2d 658, 663, 958 P.2d 301 (1998). Summary
judgment is appropriate where there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. CR 56(c); Peterson v. Groves,
111 Wash. App. 306, 310, 44 P.3d 894 (2002). When considering the evidence, we draw
reasonable inferences in the light most favorable to the nonmoving party. Schaaf v.
Highfield, 127Wn.2d 17, 21, 896 P.2d 665 (1995).
First, Kennard asserts that the laches defense was beyond the scope of this court's
mandate on remand. This argument is meritless. See In re Marriage of Rockwell, 157
Wash. App. 449, 453, 238 P.3d 1184 (2010) (on remand, the trial court should "exercise its
discretion to decide any issue necessary to resolve the case").
4 Kennard complains that the trial court mischaracterized her motion below as a
summary judgment motion. However, she does not articulate prejudice suffered as a
result of this characterization.
No. 71714-6-1 (consolidated with No. 71715-4-l)/8
Second, Kennard asserts that the merger doctrine precluded the trial court from
applying laches. Under the merger doctrine, "[w]here a property settlement agreement is
approved by a divorce decree, the rights of the parties rest upon the decree rather than
the property settlement." See Mickens v. Mickens, 62 Wash. 2d 876, 881-82, 385 P.2d 14
(1963). However, under RCW 26.09.070(6), when a separation agreement has been
incorporated into a dissolution decree, the agreement's terms remain enforceable as
contract terms. Moreover, laches is an available defense against an obligation contained
in a final decree. See, e.g., In re Marriage of Watkins, 42 Wash. App. 371, 372, 374-75,
710 P.2d 819 (1985) (applying laches to bar enforcement of child support obligation under
dissolution decree). Merger has no bearing on Lee's ability to raise his defense of laches.
Third, Kennard asserts that there were genuine issues of material fact as to the
reasonableness of her delay to seek enforcement of the escalation clause. Specifically,
there are two potential reasons for Kennard's delay.
Kennard submitted a declaration in which she stated that "every time I attempted
to address [the maintenance escalator] with [Lee], he would claim he was always 'too
broke' to abide by the terms of the agreement." Kennard cites In re Marriage of Hunter,
52 Wash. App. 265, 270-71, 758 P.2d 1019 (1988), to assert that Lee's inability to pay
justified her delay in seeking enforcement. In Hunter, the husband had not paid child
support for seven years, which he admitted was due to his lack of income, jd. at 271.
Accordingly, the wife's lawyer "advised her that it would not be fruitful" to take legal action.
Id. The court held that, under these circumstances, the wife's delay in seeking past due
child support was reasonable. ]d. Unlike the husband in Hunter, Lee continued to make
child support payments that exceeded his obligation, as well as maintenance payments
8
No. 71714-6-1 (consolidated with No. 71715-4-l)/9
at the original level. Lee I, 176 Wash. App. at 683. Kennard does not show that it would
have been fruitless to pursue legal action due to Lee's alleged inability to pay. This was
not a reasonable justification for Kennard's delay.
Kennard also cites Capetillo, 85 Wash. App. at 317-18, where the wife was reluctant
to pursue past due support because she did not want the husband to enforce his visitation
rights. The court found that this reluctance did "not appear unreasonable, considering
her testimony that he could be abusive to the children." Id, at 317-18. There is no similarly
compelling rationale here. Lee was paying his child support and more. IfKennard's delay
was to avoid litigating and adjusting or modifying child support, the trial court did not err
in finding her delay unreasonable.
Fourth, Kennard asserts that Lee's laches motion failed to include an
accompanying financial declaration. Under King County Family Law Rule (KCFLR)
10(a)(1)(B), financial information is required for any motion concerning spousal
maintenance. However, the trial court has the inherent authority to waive its rules.
Raymond v. Ingram, 47 Wash. App. 781, 784, 737 P.2d 314 (1987). Unless the record
shows that an injustice has been done, we will presume that the trial court disregarded
the rule for sufficient cause. Id.; Snyder v. State, 19 Wash. App. 631, 637, 577 P.2d 160
(1978).
Here, the record shows no injustice. Under KCFLR 10(a)(2), a party may use a
previously prepared financial declaration if all information in that declaration remains
accurate. Lee submitted a financial declaration in October 2011. This declaration
provided the information relevant to his motion, because his laches defense applied only
retroactively—i.e., until 2011. Moreover, in conjunction with his laches motion, Lee
No. 71714-6-1 (consolidated with No. 71715-4-l)/10
submitted a detailed declaration regarding the choices he made based on Kennard's
delay in enforcing the CPI increase and the hardship it would cause him to pay the
retroactive increase.
Fifth, Kennard asserts that the reliance element of laches was not satisfied.5 But,
Lee submitted a declaration stating that
I balanced what I thought to be my family's present needs based on
[Kennard]'s agreement not to enforce the [cost of living adjustments
(COLAs)] in exchange for post-secondary family support accommodations
I made to her. I thought the retirement investments I chose then were
adequate. Had I known I would lose almost all of my 401K after 2011, I
would have saved more Also, had I known then that Carol would renege
on our mutual accommodation; I would have paid the COLA increase rather
than incur 12% per year interest on the increasing debt.
This shows that Lee detrimentally relied on Kennard's previous decision not to enforce
the escalator.
Finally, Kennard asserts that the damages element was not satisfied. Regarding
damages, the trial court found that Kennard's delay in enforcing the escalator caused an
"irrevocable and detrimental change of [Lee's] financial position." Specifically, the trial
court noted that Lee
no longer has the ability to modify child support or educations [sic] costs
already paid. At this point, [Lee] could not recoup or terminate the $1750
per month pre-majority child support transfer payment that he paid when
the standard calculation was less than $700/ month. Similarly, [Lee] cannot
recoup the educational support he has funded to his children.
5 Lee argues that reliance is not an element of laches. Capetillo and Hunter
indicate that reliance or a change in position is required. 85 Wash. App. at 318; 52 Wn.
App. at 271. Regardless, we conclude that reliance is present here.
10
No. 71714-6-1 (consolidated with No. 71715-4-l)/11
Kennard asserts that there was no evidence Lee would have sought modification
of his obligations or succeeded had he done so. But, in 2007, Lee specifically told
Kennard that, regarding their son's education costs,
I looked at the record of the [Guaranteed Education Tuition] payment
history, it turned out that I had actually paid the entire amount (short of the
original application fee), which means I had paid for his entire tuition. By
my calculation, based on the arrangement that I paid full child support in
lieu of [the CPI adjustment] and that we shared college expenses evenly, I
will have actually overpaid you by about $1500 at the end of the summer
quarter.
Starting this September, I plan on paying Chris directly the child support
amount for his living expenses off campus as well as other educational
expenses. As long as I paid [sic] that amount to him, I do not feel that I
should pay the [CPI increase] at the same time to you. If you insist on me
paying you the [CPI increase], then you need to pay Chris the proportional
amount for living/educational expenses based on the formula of sharing
evenly.
This demonstrates that Lee would have sought to reduce his obligations and enforce
Kennard's obligations had Kennard sought to enforce the escalator. And, had Lee sought
relief, the evidence demonstrates that he would have been successful. For example, their
daughter resided with Lee during her senior year of high school, and Lee did not pursue
child support from Kennard for that period.
Kennard further argues that the loss from paying what one owes is not a damage
for purposes of laches. However, the maintenance escalator was not self-executing and
thus ineffective without a court order. See In re Marriage of Kahle, 134 Wash. App. 155,
160-61, 138 P.3d 1129 (2006). Therefore, until Kennard sought to enforce the escalator,
Lee was not legally obligated to pay the CPI increase. Lee made financial choices based
on Kennard's agreement not to seek enforcement. The damages element is satisfied
here.
11
No. 71714-6-1 (consolidated with No. 71715-4-l)/12
The trial court properly granted summary judgment on Lee's laches defense.
III. Amount of Prospective Maintenance
Lee asserts that the trial court erred in adjusting the prospective amount of
maintenance, because it applied the CPI increase since 2000—the year the parties
signed the separation agreement. The separation agreement provided that maintenance
be adjusted every three years. Accordingly, Lee maintains, the proper base year for the
CPI increase was 2008—three years prior to Kennard's 2011 request for enforcement.
An award of maintenance lies within the discretion of the trial court. In re Marriage
of Bulicek, 59 Wash. App. 630, 633, 800 P.2d 394 (1990). Regarding the amount of
maintenance, the only limitation is that, in light of the relevant factors, the award must be
just. ]d.
Here, the parties' agreement does not compel the result Lee seeks. The
adjustment provision stated that maintenance "shall be adjusted every three years based
upon the cost of living index." This places a three-year limitation on the frequency of
adjustments. This implicitly limits the amount of the adjustment, but only ifthe adjustment
in fact occurs every three years.
Quoting the order on cross motions for summary judgment, Lee asserts that it
would be unfair to give Kennard "the benefit of the percentage increase in the CPI during
the 8 years she 'unfairly]' and 'strategically' 's[a]t on her rights.'" This rationale supports
the application of laches as to Lee's payment of escalated maintenance in the years he
relied on Kennard's choice not to invoke the escalator. But, once Kennard invoked the
escalator in 2011, this rationale no longer applied. Going forward, it was not unjust to set
12
No. 71714-6-1 (consolidated with No. 71715-4-l)/13
maintenance at the rate it would have been had Kennard routinely invoked the escalator
as she was entitled to do.
The trial court did not abuse its discretion in calculating the prospective amount of
maintenance.
IV. Attorney Fees
Lee asserts that the trial court erred in awarding attorney fees to Kennard as the
prevailing party. Lee argues that, because the trial court rejected Kennard's request for
retroactive enforcement of the escalator, Kennard did not substantially prevail.
We generally review a trial court's award of attorney fees for an abuse of discretion.
Clausen v. Icicle Seafoods, Inc.. 174 Wash. 2d 70, 81, 272 P.3d 827 (2012). However, a
trial court's decision on statutory entitlement to fees and costs is a question of law
reviewed de novo. Mehlenbacherv. DeMont, 103Wn. App. 240, 244,11 P.3d 871 (2000).
Under RCW 26.18.160, in "any action to enforce a support or maintenance order
under this chapter, the prevailing party is entitled to a recovery of costs, including an
award for reasonable attorney fees." Generally, a prevailing party6 is one who receives
an affirmative judgment in its favor. Cornish College of the Arts v. 1000 Virginia Ltd.
P'ship, 158 Wash. App. 203, 231, 242 P.3d 1 (2010). A defendant can also recover as a
prevailing party for successfully defending against the plaintiff's claims. ]d. at 231-32. If
"both parties prevail on major issues, neither is a 'prevailing party' entitled to attorney
fees." In re Marriage of Nelson, 62 Wash. App. 515, 519, 814 P.2d 1208 (1991).
6 Although our case law does not provide a further definition of "prevailing party"
under RCW 26.18.160, we will look to other statutes governing attorney fees as
persuasive authority. See, e.g., In re Marriage of Nelson, 62 Wash. App. 515, 519, 814
P.2d 1208(1991).
13
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In Nelson, the couple's two dependent children initially resided with the mother,
and the father paid child support. ]d at 516. When the son moved in with the father, the
father ceased paying child support. Id One year later, the mother petitioned for
modification of child support and moved for entry of judgment for past due support. ]d at
517. The father agreed that modification was proper, but maintained that he did not owe
past due support based on an agreement between the parties. See id at 517, 520.
The commissioner awarded the mother future support payments for the daughter.
]d at 518. The commissioner also awarded the mother past due support, the amount of
which was offset based on the son's residency with the father during the delinquency
period. \jL The commissioner did not award attorney fees to either party, finding that
both had prevailed on major issues. ]d
We reversed, finding that the mother was entitled to fees. Id. at 520. We reasoned
that the commissioner awarded the mother a money judgment which was offset only to
account for the son's living arrangement. ]d And, we noted that the commissioner
rejected the father's defense concerning an agreement between the parties. \&.
Therefore, we concluded, the mother was the only party to prevail on a major issue. Id-
Nelson supports the trial court's award of fees in this case. Like the mother in
Nelson, Kennard sought affirmative relief and was awarded a money judgment. Like the
father in Nelson, Lee defended against the money judgment but sought no affirmative
relief of his own. And, like the equitable offset for the Nelson son's living arrangement,
the retroactive application of Lee's laches defense did not constitute "prevailing] on [a]
major issue." See id at 519. Rather, it merely reduced the amount Kennard was owed
in prevailing on her major issue: enforcement of the escalator.
14
No. 71714-6-1 (consolidated with No. 71715-4-IV15
Moreover, as in Nelson, this conclusion is "bolstered by the language of the statute
itself which prohibits an obligor... from being 'considered a prevailing party under [RCW
26.18.160] unless the obligee has acted in bad faith.'" ]d at 520 (alteration in original)
(quoting RCW 26.18.160). Lee argues that the trial court's finding that Kennard's delay
was unreasonable and strategic is "tantamount to a finding of bad faith." But, "in the
absence of an express finding, we will not assume that the judge found bad faith, even
where the record would support such a finding." State v. S.H., 102 Wash. App. 468, 479, 8
P.3d 1058 (2000). We affirm the trial court's award of attorney fees to Kennard.
Kennard requests fees on appeal "consistent with the mandate in this matter, and
pursuant to RCW 26.18.160." Kennard has again prevailed on her claim to enforce
maintenance and is entitled to reasonable attorney fees incurred on appeal solely with
respect to the maintenance issue.
We affirm.
WE CONCUR:
UJ, f %^cK&^
15