In re the Marriage of Judy Ruth Swanson and Chester James Morrison

HAR -1 lUll
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
In re the Marriage of: )
) No. 30228-8-111
JUDY RUTH SWANSON, )
) ORDER GRANTING MOTION
Respondent, ) FOR RECONSIDERATION IN
) PART and DENYING IN PART;
and ) AND ORDER AMENDING
) OPINION
CHESTER JAMES MORRISON, )
)
Appellant. )
THE COURT has considered the respondent's motion for reconsideration and is of the
opinion the motion should be granted in part to address the proper standard of review and denied
in part to the extent it requests reversal of this court's decision. Therefore,
IT IS ORDERED the motion for reconsideration of this court's decision of January 10,
2013, is hereby granted in part and denied in part.
IT IS ALSO ORDERED the court's opinion of January 10,2013, is amended as follows:
On pages 4 and 5, the following paragraph is deleted in its entirety:
Article XII of the separation contract dictates that Washington law
governs its interpretation. In Washington, interpretation of a separation contract
presents a question of law that this court reviews de novo. In re Marriage of
Gimleff,95 Wn.2d 699, 704-05, 619 P.2d 450 (1981). The intent of the parties is
controlling and is to be determined by examining their objective manifestations,
No.30228-8-III
In re Marriage of Swanson & Morrison
including both the written agreement and the context within which it was
executed. In re Marriage a/Boisen, 87 Wn. App. 912, 920-21,943 P.2d 682(1997). Furthermore, contracts between spouses are interpreted under the same
rules for interpreting any other contract. In re Estates a/Wahl, 31 Wn. App. 815,
818,644 P.2d 1215 (1982), ajJ'd, 99 Wn.2d 828, 664 P.2d 1250 (1983).
Ambiguities in a contract are interpreted against the drafter. Lamar Outdoor
Adver. v. Harwood, 162 Wn. App. 385,395,254 P.2d 208 (2011). In addition,
courts must also consider that spouses "do not deal with each other at arm's
length," Friedlander v. Friedlander, 80 Wn.2d 293, 301, 494 P .2d 208 (1972),
and as such owe each other "the highest fiduciary duties." Peters v. Skalman, 27
Wn. App. 247, 251,617 P.2d 448 (1980).
and the following paragraph shall be inserted in its place:
Article XII of the separation contract dictates that Washington law
governs its interpretation. In Washington, the determination of whether a contract
contains an ambiguity is a question oflaw, which this court reviews de novo.
Syrovy v. Alpine Res., Inc., 122 Wn.2d 544, 551 n.7, 859 P.2d 51 (1993). "A
contract is ambiguous when it is '[c ]apable of being understood in either of two or
more possible senses.'" Id. (alteration in original) (quoting Ladum v. Util.
Cartage, Inc., 68 Wn.2d 109, 116,441 P.2d 868 (1966)). If two or more
reasonable meanings exist, then Washington follows an objective manifestation
test looking to the objective acts or manifestations of the parties rather than the
unexpressed SUbjective intent of any party. Wilson Court Ltd. P'ship v. Tony
Maroni's, Inc., 134 Wn.2d 692, 699, 952 P.2d 590 (1998). The parties' objective
intent is a question of fact that this court reviews for substantial evidence. Kenney
v. Read, 100 Wn. App. 467, 475, 997 P.2d 455, 4 P.3d 861 (2000). However, if
no objective manifestation of intent can be discerned from the facts presented,
then the ambiguity is interpreted against the drafter. Wash. Pro!'l Real Estate
LLC v. Young, 163 Wn. App. 800,260 P.3d 991 (2011), review denied, 173
Wn.2d 1017 (2012). Furthermore, contracts between spouses are interpreted
under the same rules for interpreting any other contract. In re Estates 0/ Wahl, 31
Wn. App. 815, 818,644 P.2d 1215 (1982), ajJ'd, 99 Wn.2d 828, 664 P.2d 1250(1983). Ambiguities in a contract are interpreted against the drafter. Lamar
Outdoor Adver. v. Harwood, 162 Wn.2d 385,395,254 P.3d 208 (2011). In
addition, courts must also consider that spouses "do not deal with each other at
arm's length," Friedlander v. Friedlander, 80 Wn.2d 293,301,494 P.2d 208(1972), and as such "owe each other the 'highest fiduciary duties.'" In re
Marriage a/Lutz, 74 Wn. App. 356, 369, 873 P.2d 566 (1994) (quoting Peters v.
Skalman, 27 Wn. App. 247, 251, 617 P.2d 448 (1980)).
IT IS ALSO ORDERED the court's opinion of January 10,2013, is amended as follows:
2
No. 30228-8-III
In re Marriage of Swanson & Morrison
On page 6, after the second full paragraph and before the paragraph that begins "The
Supreme Court provided", insert the following paragraph:
Thus, an ambiguity exists which this court must resolve in accordance
with the parties' objective intent. While the trial court resolved this ambiguity in
Ms. Swanson's favor, it did so without reference to the parties' objective
manifestations. This is because both the separation contract and the trial court
record lack any evidence of the parties' objective intent regarding disposition of
the cattle. But based on prior case law it appears the proper unit of distribution
should be viewed as the business itself, and not the individual assets that make up
the business.
DATED: March 7, 2013
FOR THE COURT:
kdNIN)l.KORSMo, Chief Judge
3
FILED
January 10,2013
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 Marriage of: )
) No. 30228-8-III
JUDy RUTH SWANSON, )
)
Respondent, )
)
and )
)
CHESTER JAMES MORRISON, ) UNPUBLISHED OPINION
)
Appellant. )
KORSMO, CJ. - Judy Swanson and Chester Morrison divorced after 23 years of
marriage. Prior to the dissolution, the parties disposed of their property through a
separation contract. RCW 26.09.070(3) requires adherence to the separation contract in
all judicial proceedings. Because the trial court went outside of the separation contract in
granting Ms. Swanson a right of reimbursement, we reverse.
No.30228-8-III
In re Marriage ofSwanson
FACTS
Mr. Morrison and Ms. Swanson married in 1987. Both came to the marriage
owning substantial separate property. To protect the character of that separate property,
the two entered into a separate property contract when they married.
As the years passed, the two largely maintained their prior separate lives. Mr.
Morrison operated the cattle ranch that had been in his family for over 100 years and Ms.
Swanson maintained other employment. The two never commingled their income or
assets, or shared in each other's debts and liabilities. About the only thing that the record
shows that they ever did together was live in Ms. Swanson's house. Ms. Swanson did the
cooking and maintained the house while Mr. Morrison regularly paid the utilities.
In 2010, the two decided to dissolve their marriage. To dispose of their property,
Ms. Swanson hired an attorney to draft a separation contract. Mr. Morrison was advised
to retain counsel and given the opportunity to do so. Forgoing this advice, Mr. Morrison
signed the separation contract pro se.
Three months after the contract was signed, Ms. Swanson went to court seeking
division of property allegedly left out of the separation contract. Specifically, she
claimed that the parties failed to dispose of Mr. Morrison's cattle herd in the separation
contract. It does not mention the cattle herd by name in any of its provisions. The
contract required that any omitted property would be divided equally.
2
No. 30228·8·III
In re Marriage ofSwanson
The case proceeded to trial seven months later with Mr. Morrison represented by
counsel. He argued that the contract had not omitted the cattle because they were a part
of the ranch which the contract granted to him as his separate property acquired prior to
marriage. Ms. Swanson argued that she had a right of reimbursement in the amount of
one-half of the value of the herd due to the labor she expended as a homemaker, which in
tum freed up Mr. Morrison to work the ranch. At the conclusion of the trial, the court
accepted Ms. Swanson's argument and granted her a right of reimbursement for one-half
of the herd's value due to her homemaking. Mr. Morrison then timely appealed.
ANALYSIS
Mr. Morrison challenges various aspects of the trial court's ruling, but we find the
contract dispositive and do not address his other arguments. Under the terms of the
contract, the cattle are included in the ranch awarded to Mr. Morrison and Ms. Swanson
waived any claim for reimbursement for her community efforts. l
I We further note that the efforts of one spouse to maintain a home do not give rise
to a right of reimbursement. In re Marriage ofJohnson, 28 Wn. App. 574, 579,625 P.2d
720 (1981). On appeal, Ms. Swanson tries to defend the award on the basis that Mr.
Morrison's separate property increased in value due to her homemaking efforts. This
argument fails due to the fact that no evidence was adduced that showed the separate
property increased in value during the marriage. Given evidence of the ranch's annual
losses and the fact that the herd was significantly smaller by the end of the marriage, it is
unlikely that the ranch increased in value during the marriage. Moreover, a lien for one­
half of the value of the cattle is not the same as a lien for one-half of the increase in the
cattle's value.
3
NO.30228-8-III
In re Marriage ofSwanson
Well-settled principles govern resolution of this appeal. "[A separation 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 on
their own motion or on request of the court, that the separation contract was unfair at the
time of its execution." RCW 26.09.070(3). When a marriage dissolves, the trial court
typically has wide discretion in making ajust and equitable distribution of the community
and separate property. RCW 26.09.080. But when the parties chose to enter into a
separation contract, RCW 26.09.070(3) takes away that discretion and turns the property
distribution into a case of contract interpretation. In re the Marriage ofShaffer, 47 Wn.
App. 189, 193-94,733 P.2d 1013 (1987).
Article XII of the separation contract dictates that Washington law governs its
interpretation. In Washington, interpretation of a separation contract presents a question
of law that this court reviews de novo. In re Marriage ofGimlett, 95 Wn.2d 699, 704-05,
629 P .2d 450 (1981). The intent of the parties is controlling and is to be determined by
examining their objective manifestations, including both the written agreement and the
context within which it was executed. In re Marriage ofBoisen, 87 Wn. App. 912,920­
21,943 P.2d 682 (1997). Furthermore, contracts between spouses are interpreted under
the same rules for interpreting any other contract. In re Estates of Wahl, 31 Wn. App.
815,818,644 P.2d 1215 (1982), aff'd, 99 Wn.2d 828, 664 P.2d 1250 (1983).
Ambiguities in a contract are interpreted against the drafter. Lamar Outdoor Advertising
4
No. 30228~8-III
In re Marriage ofSwanson
v. Harwood, 162 Wn. App. 385, 395, 254 P.3d 208 (2011). In addition, courts must also
consider that spouses "do not deal with each other at arm's length," Friedlander v.
Friedlander, 80 Wn.2d 293,301,494 P.2d 208 (1972), and as such owe each other "the
highest fiduciary duties." Peters v. Skalman, 27 Wn. App. 247, 251, 617 P.2d 448(1980).
Because the parties entered into a separation contract and because the record lacks
any evidence of its unfairness, the trial court was not free to vary from the tenns of that
agreement. The first issue is who has rights to the cattle under the separation contract.
Two provisions of the contract are particularly important to the resolution of the
cattle issue. The first provision is Article V, which controls the disposition of omitted
assets. Under this provision, any property not set forth in Articles XIV or XV of the
contract must be divided equally. Article XV sets forth Ms. Swanson's property. Article
XIV does not address property; it instead declares that the contract conveyed any interest
one spouse may have had in property that was now the other spouse's personal property.
Article XVI, however, sets forth Mr. Morrison's property. The reference in Article V to
Article XIV appears to be a scrivener's error, which we interpret to mean Article XVI. 2
It is well settled that courts may reform a contract to correct a scrivener's error. See, e.g.,
2 If the contract was interpreted literally, then Mr. Morrison's property would be
beyond the reach of the omitted property clause and Ms. SWanson would have no claim at
all to any omitted property. .
5
No. 30228-8-111
In re Marriage ofSwanson
Snyder v. Peterson, 62 Wn. App. 522,526-27, 814 P.2d 1204 (1991). Thus, if Ms.
Swanson is to prevail this court must find that the cattle were not contemplated in Article
XVI.
Article XVI states that "Husband shall be granted and conveyed the following real
and personal property, which is equivalent to Husband's separate property and one-half
the community property free and clear of any right, title or interest of Wife therein."
Clerk's Papers (CP) at 17. The provision then goes on to list various tangible and
intangible assets. Nowhere in the list are the cattle specifically mentioned.
Mr. Morrison argues that the cattle were granted to him under Article XVI, ~ B, as
"Any and all property owned prior to marriage." CP at 18. At trial, Ms. Swanson
responded by noting that the cattle that are on the ranch today are not the same cattle that
Mr. Morrison owned prior to marriage 23 years ago. In rebuttal, Mr. Morrison argued
that the cattle are the ranch and that separating the two would be absurd because it would
in effect grant Ms. Swanson an interest in Mr. Morrison's ranch, which he owned prior to
marriage. Both interpretations are plausible depending on whether the proper unit of
distribution is viewed as the business itself or the individual assets that make up the
business.
The Supreme Court provided some guidance on this issue in Wolfisberg v.
Wolfisberg, 51 Wn.2d 103, 316 P.2d 114 (1957). There it was the wife who came to the
marriage owning a substantial number of cattle and who was awarded the cattle when the
6
No. 30228-8-III
In re Marriage ofSwanson
marriage ended. Id. at 104-05. Notably, the court did not speak of the cattle in terms of
being a separate asset: "The trial court ... emphasized the fact that the wife's farm
(separate property at marriage), as a going business, was in the nature of a capital
investment." Id. at 107. The cattle, machinery, and other equipment were all enrolled
into the dairy farm operation and it was the operation and not its individual components
that were at issue. Id. at 105-06. The cattle were considered the wife's separate property
despite the fact that the cattle on the farm at the time of divorce could not have been the
same cattle that she had when she married. Wolfisberg stands for the proposition that
livestock in a dissolution case should not be viewed individually when they are the stock-
in-trade of a spouse's business. Thus, it is the business itself that is the proper unit of
distribution, not the components that make up the business.
Wolfisberg supports Mr. Morrison's argument that the cattle are the ranch
operation. By removing the cattle from the business, there is no business left to operate.
No one disputes that the ranch is Mr. Morrison's separate property under the separation
contract. But to remove the cattle from that business would in effect also remove the
business from the separation contract.
The same reasoning holds true in another spouse-owned business case. In re
Marriage ofBrooks, 51 Wn. App. 882, 756 P.2d 161 (1988). There the wife disagreed
with the characterization of the good will of the husband's law practice as community
property. She instead sought re-characterization of the whole law practice as community
7
No. 30228-8-III
In re Marriage ofSwanson
property. Id. at 889. The court held that the law practice was the husband's separate
property because he acquired it prior to marriage. Id. It is very doubtful that the
husband's book of business after 13 years of marriage was the same as when he married.
Yet, the court did not treat any changes in his book of business during marriage as being
a separate asset capable of characterization. Although the business's value changed due
to community efforts, the business as a whole (clients-included) was still the lawyer
spouse's separate property acquired prior to marriage.
Thus, under Wolfisberg and Brooks, we interpret Article XVI to include the cattle
as an inseparable component of the ranch. Furthermore, Ms. Swanson, as the drafter's
principal, was in the best position to avoid the ambiguity caused by not specifying what
property Mr. Morrison owned prior to marriage. Combined with the fact that spouses do
not act at arm's length and because Ms. Swanson owed Mr. Morrison the highest of
fiduciary duties, we further interpret any ambiguity in Article XVI against Ms. Swanson.
The cattle were Mr. Morrison's separate property under the contract and were not subject
to distribution under the omitted property clause.
The contract likewise disposes of Ms. Swanson's argument that she was entitled to
a lien for any increase in Mr. Morrison's separate property resulting from his efforts
during the marriage. 3 Article XXI, entitled Finality, states that the agreement
Mr. Morrison has not asserted a community lien interest in any increase in Ms.
3
Swanson's separate property resulting from her efforts during the marriage.
8
No.30228-8-II1
In re Marriage ofSwanson
shall constitute a full and complete settlement of all their property rights
and obligations, and, neither party will claim, assert, or demand of or
against the other any relief different than is embodied in this agreement,
and will not assert or demand that it is inconsistent or contrary to the terms
embodied herein.
CP at 20.
Having disposed of all of the property and recognizing that the agreement was
designed to settle all matters under the contract, Ms. Swanson was not able to argue that
she was entitled to a lien for any increase in the value of Mr. Morrison's separate
property resulting from his efforts on behalf of their community. The "full and complete
settlement of all their property rights" precludes a claim for a community lien under
Article XXI. The only avenue for additional relief under the contract was Article V
addressing omitted property. However, it does not speak to potential community liens on
the parties' respective property.
Ms. Swanson waived any claim she might have had for a community lien under
the Finality clause of the contract. The trial court erred in awarding her a lien for her
homemaking services.
We reverse and remand with instructions to enter judgment in favor of Mr.
Morrison.
9
No.3022S-S-II1
In re Marriage ofSwanson
A majority of the panel has determined that this opinion will not be printed in the
Washington Appellate Reports but it will be filed for public record pursuant to RCW
2.06.040.
Korsmo, C.J.
Sid~f)1,
10