Opinion
No. 25360-1-III.
November 20, 2007.
Appeal from a judgment of the Superior Court for Spokane County, No. 05-3-00954-1, Michael P. Price, J., entered June 13, 2006.
Reversed and remanded by unpublished opinion per Schultheis, J., concurred in by Sweeney, C.J., and Stephens, J.
In the midst of dissolution proceedings, Jeffrey Funk signed a note he left for his estranged wife, Jodi Funk, which read: "Jodi: You Win: Enjoy the spoils of our marriage. Good Bye, Jeff." Clerk's Papers (CP) at 90. Along with the note, he left his passport and the keys to the community-owned apartment building. He left a handwritten sign on the door of the community's business stating that it was under new ownership and provided Jodi's name and phone number. He returned a week later. The trial court enforced the note as an offer for a unilateral property settlement contract, which included all debt and assets of the 24-year marriage and concluded that the wife accepted the contract by assuming control. We conclude that there was no settlement agreement between the parties. We also conclude that the trial court erred in ordering attorney fees based on Jeffrey's intransigence. Therefore, we reverse and remand for further proceedings.
The parties' first names are used here for clarity.
FACTS
Jodi and Jeffrey Funk were married for 24 years when the parties separated in April 2005 and Jodi petitioned for dissolution in May 2005. They had one child, Spencer, who was 17 years old at the time of filing.
Jodi is a dentist with a sole practice in Spokane. At the time of the petition, Jodi's monthly gross income was $11,000. In addition to the dental practice, the parties owned a sole proprietorship antique business, an apartment building, a vacant lot, a number of vehicles, a 401K plan and IRA through Jodi's practice, and proceeds from the sale of a Deer Lake cabin. Jeffrey managed the apartment building and the antique business, which rented booths to vendors. Jeffrey claimed his monthly net income was $1,250. Jeffrey estimated that the community assets had an approximate value of $1,368,079 and debts of an approximate value of $74,500.
Jodi disputes this figure, but did not assign a firm value to the parties' assets and liabilities. Nor did the court find a value.
On December 6, 2005, Jeffrey left a note at Jodi's dental office stating, "Jodi: You Win: Enjoy the spoils of our marriage. Good Bye, Jeff." CP at 90. The note was left in a box containing Jeffrey's passport, a remote key entry to his vehicle, and the apartment building keys.
Believing that Jeffrey may have committed suicide, Jodi contacted police, who helped her open Jeffrey's leased vehicle, which was parked at the antique business, and found the keys to the antique business inside the car. A door on the antique shop read, "Under New Ownership Contact Jodi Funk" and set forth her dental office and home telephone numbers. CP at 72. Officers searched Jeffrey's apartment, which appeared to have been vacated.
Jodi then took immediate action to resume operation of the antique business and apartment complex, dealing with disgruntled vendors, accounts payable and past due, and an empty business bank account. She took out $30,000 in signature loans as operating capital, obtained a new business license and bank accounts, and took over management of the businesses.
Jeffrey returned on December 14. He claimed to have been depressed and took a bus to Southern California where he stayed in a shelter and obtained counseling. He stated that his apartment was burglarized. He acknowledged that the business was failing, which along with his failing marriage contributed to his depression.
On the day of his return, Jodi filed a motion to enforce the note as a settlement agreement pursuant to CR 2A. The trial court held:
In this case, Mr. Funk did the following: He made an offer. He knew from the circumstances surrounding this case that his wife would have to act on this offer in some capacity. Her name is on the lease to the antique mall. This is a community property state. Mr. Funk strikes me as an intelligent and knowledgeable individual. It's reasonable to follow the mindset that if Dr. Funk didn't pick up the ball, and if she didn't run with it, it's certainly reasonable to assume that there would be financial havoc that would be wreaked on her and what was left of the marital community. She had to do something about it, and it's reasonable to assume that Mr. Funk knew that.
Mr. Funk made an offer to his wife. She accepted that offer. Of course, in contract, we have to have consideration. Was there consideration here? Well, the offer was to take the business and the apartment and the practice. Okay. There was and seems to be a significant amount of debt. I'm going to say the debt is frankly extraordinary. The house had previously been quitclaimed by Mr. Funk, it's the Court's understanding reviewing the file. There is consideration in that Ms. Funk is taking on all of the debt, not [to] mention the fact she's taking on all the responsibilities to run a business or businesses in addition to responsibilities that she already has. Mr. Funk is left with none of the responsibilities. That's significant consideration in the Court's mind.
Report of Proceedings (RP) (Jan. 20, 2006) at 37-38.
Therefore, the court ordered that Jodi be awarded all of the assets of the marriage together with the debt associated with the assets. Jeffrey's motion for reconsideration was denied. No child support issues were resolved; Spencer was 18 when the decree was entered.
The trial court also affirmed a commissioner's decision on revision that ordered the attorney fees and costs incurred after December 6, 2005 would not be awarded based on Jeffrey's intransigence.
Settlement Agreement
We apply a de novo standard because determining whether a contract exists is a strict issue of law. Syrovy v. Alpine Res., Inc., 68 Wn. App. 35, 841 P.2d 1279 (1992), aff'd, 122 Wn.2d 544, 859 P.2d 51 (1993). Jodi has the burden of showing that there is no material dispute regarding the agreement's terms or existence. In re Marriage of Langham, 153 Wn.2d 553, 561, 106 P.3d 212 (2005) (citing In re Marriage of Ferree, 71 Wn. App. 35, 41, 856 P.2d 706 (1993)). We hold that Jodi did not meet her burden.
"Principles of contract law control the formation of a settlement agreement." Pietz v. Indermuehle, 89 Wn. App. 503, 519, 949 P.2d 449 (1998) (citing Morris v. Maks, 69 Wn. App. 865, 868, 850 P.2d 1357 (1993)). The agreements are subject to judicial interpretation in light of their language and the circumstances surrounding their making. Stottlemyre v. Reed, 35 Wn. App. 169, 171, 665 P.2d 1383 (1983).
As with any contract, the court's role is to ascertain the objectively manifested intention of the parties. Berg v. Hudesman, 115 Wn.2d 657, 663, 801 P.2d 222 (1990). The parties' subjective intentions are irrelevant. City of Everett v. Estate of Sumstad, 95 Wn.2d 853, 855, 631 P.2d 366 (1981). Thus, here, we do not consider Jeffrey's subjective intent in writing the note, or Jodi's subjective view of what Jeffrey offered, but whether a reasonable person would have understood Jeffrey's note as a unilateral contract offer. Barnes v. Treece, 15 Wn. App. 437, 440, 549 P.2d 1152 (1976).
We also apply the context rule. Berg, 115 Wn.2d at 667. As such, intent may be discerned from the actual language of the agreement, the subject matter and objective of the contract, all the circumstances surrounding the making of the contract, the subsequent acts and conduct of the parties to the contract, and the reasonableness of respective interpretations advocated by the parties. Tanner Elec. Coop. v. Puget Sound Power Light, 128 Wn.2d 656, 674, 911 P.2d 1301 (1996).
Jodi asserts the existence of a unilateral contract: a promise to perform that is conditioned upon and accepted by actual performance by the promissee. Multicare Med. Ctr. v. Dep't of Soc. Health Servs., 114 Wn.2d 572, 583, 790 P.2d 124 (1990). A contract exists as the result of an informal writing if the parties' intention is clear and they have agreed upon the terms of a contract. Pietz, 89 Wn. App. at 519. This requires a consideration of whether (1) the subject matter has been agreed upon, (2) all of the terms are stated in writing, and (3) the parties intended a binding agreement prior to the time the contract was made. Morris, 69 Wn. App. at 869 (citing Loewi v. Long, 76 Wash. 480, 484, 136 P. 673 (1913)).
Here, the writing said, "Jodi: You Win: Enjoy the spoils of our marriage. Good Bye, Jeff." CP at 90. Jeffrey left his passport and keys. Jeffrey argues that none of the Morris factors are present here. We agree.
In her declaration, Jodi claimed that when Jeffrey was in California, "All who spoke with him reported that he claimed to have no intentions of returning." CP at 74. This hearsay evidence may not be considered. Ebel v. Fairwood Park II Homeowners' Ass'n, 136 Wn. App. 787, 790, 150 P.3d 1163 (2007) (citing Dunlap v. Wayne, 105 Wn.2d 529, 535, 716 P.2d 842 (1986)).
As to the subject matter and terms, Jodi argues that Jeffrey's note and actions were an offer to settle all of the parties' property and liabilities. The offer on a unilateral contract must set forth definite terms. See Multicare, 114 Wn.2d at 588. An objective, reasonable person would not have understood Jeffrey's note that mentioned no specific assets actually conveyed all assets. If a settlement agreement is so vague and indefinite that it is not possible to discern from it the intention of the parties, it is without effect because the court cannot make a contract for the parties. Wagner v. Wagner, 95 Wn.2d 94, 104, 621 P.2d 1279 (1980). That is what occurred here.
Jodi argues that "[t]he terms 'you win,' and 'good bye,' coupled with the abandonment of property and leaving town in the face of obligations reasonably indicated that the husband relinquished all property and transferred all debt," leaving "the entire mess, and its resultant 'spoils' to the wife." Resp't's Br. at 17, 14.
"We generally give words in a contract their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent." Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 504, 115 P.3d 262 (2005). The term "spoils" has been defined as meaning "the plunder taken in war: material, land, or property seized or confiscated by the victor of an armed aggression." Webster's Third New International Dictionary 2203 (1993). As a colloquial phrase, it is difficult to impute a definition. In light of the surrounding circumstances, the most reasonable interpretation would be that the phrase "the spoils" is a sarcastic reference to the management of the failing business and the run-down apartment building. And although Jeffrey may have been offering Jodi an opportunity to enjoy the "spoils" of the marriage on a temporary basis, it is not reasonable to infer permanency from the term "good bye." Also, by leaving his passport, a reasonable person would assume that he was not leaving the country.
Jodi suggested in her declaration that she had heard that Jeffrey intended to go to Costa Rica. Again, this hearsay evidence should not be considered. Ebel, 136 Wn. App. at 790. And because he had no passport, this is not a reasonable belief.
It is not reasonable to conclude that Jeffrey was bargaining his freedom from his business responsibilities in exchange for complete relinquishment of the right, title, and interest to the marital estate, which was accumulated over 24 years.
Moreover, in a unilateral contract, "'[t]he promisee is not bound to perform the requested act or forbearance but if he does perform the act or forbearance, the contract comes into existence and binds the promisor.'" Multicare Med. Ctr., 114 Wn.2d at 584 n. 18 (quoting W. Clark, Jr., Handbook of the Law of Contracts § 10 (1931)). The consideration is the offeree's performance of the terms of the offer. Id. at 584. But "an offeree's performance of a preexisting legal obligation is not valid consideration." Id. at 584-85.
The management and control of community property belongs to both spouses. RCW 26.16.030. Each spouse stands in a relationship of trust to the other and, even after separation, owes a fiduciary duty to manage and preserve the community assets for the benefit of the community. Peters v. Skalman, 27 Wn. App. 247, 251, 617 P.2d 448 (1980). The duty to act for the benefit of the community continues until the marriage is defunct by decree or similar circumstances. Id. at 252; Harry M. Cross, The Community Property Law in Washington, 61 Wash. L.Rev. 13, 142 (1986) (citing Graham v. Radford, 71 Wn.2d 752, 755, 431 P.2d 193 (1967)).
In a unilateral contract, the promisee is generally free to accept the offer by performance or reject it by doing nothing. But here, Jodi was bound to take over the management of the businesses to preserve assets of the marital estate. Regardless of what Jeffrey may have intended by his note and hasty departure, the property still belonged to the community pending the resolution of the dissolution proceedings. See RCW 26.09.080 (requiring the court in a dissolution proceeding to make "such disposition of the property and the liabilities of the parties, either community or separate, as shall appear just and equitable"); Shaffer v. Shaffer, 43 Wn.2d 629, 630, 262 P.2d 763 (1953) (noting the court's duty to dispose of all the property of the parties before it).
If, upon distribution of the marital estate, the court were to find that Jeffrey's conduct resulted in a dissipation of assets, the court would be free to take that into account upon the fair and equitable distribution of assets and allocation of liabilities. See In re Marriage of Clark, 13 Wn. App. 805, 808-09, 538 P.2d 145 (1975) (taking account of how labor or negatively productive conduct created or dissipated certain marital assets is appropriate); In re Marriage of Williams, 84 Wn. App. 263, 270, 927 P.2d 679 (1996) (noting that each party's responsibility for creating or dissipating marital assets is a relevant consideration to the just and equitable distribution of property). But given Jodi's independent responsibility to protect the marital estate, her labors toward that end do not constitute consideration for a unilateral settlement agreement.
In summary, Jeffrey did not knowingly make a valid settlement offer to Jodi and her actions to preserve the marital assets did not constitute acceptance. We conclude that no settlement agreement was formed.
Because we conclude that no settlement agreement was formed, we need not address the parties' CR 2A arguments regarding the enforcement of the agreement.
Attorney Fees
This court reviews a trial court's decision on attorney fees for abuse of discretion. In re Marriage of Burke, 96 Wn. App. 474, 476, 980 P.2d 265 (1999). The party challenging the decision must demonstrate that the trial court exercised its discretion in a manner that was "'clearly untenable or manifestly unreasonable.'" In re Marriage of Crosetto, 82 Wn. App. 545, 563, 918 P.2d 954 (1996) (quoting In re Marriage of Knight, 75 Wn. App. 721, 729, 880 P.2d 71 (1994)).
A trial court may award fees based on the intransigence of a party, without regard to the parties' financial resources. Crosetto, 82 Wn. App. at 564. Intransigence may be evidenced in "litigious behavior, bringing excessive motions, or discovery abuses." In re Marriage of Wallace, 111 Wn. App. 697, 710, 45 P.3d 1131 (2002). Such was the case in Eide v. Eide, 1 Wn. App. 440, 445-46, 462 P.2d 562 (1969), where intransigence was found when the husband's recalcitrant, foot-dragging, obstructionist attitude increased the cost of litigation to his former wife.
In Crosetto, an attorney fee award was justified for intransigence due to the wife's continual pattern of obstructionist tactics. That conduct included her refusal to cooperate with the guardian ad litem, her refusal to allow visitation, her interference with court-ordered visitation, her threatened administrative action against witnesses, and her unfounded allegation that the husband sexually abused their daughter. Crosetto, 82 Wn. App. at 550, 564. A court commissioner noted that the wife's conduct did not "'outright flaunt? court orders'" but that she did "'indirectly what she [could not] do directly.'" Id. at 564 n. 5.
In Wallace, intransigence was established by the husband's deliberate failure to provide financial information; fraudulent transfer of money, stock, and property to family members; deliberate waste of community assets; and fraudulent consent to an adverse judgment. Wallace, 111 Wn. App. at 702-03. Such awards have also been made when the husband refused to attend trial despite repeated demands that he testify, and then he filed a meritless appeal to cause his former wife as much expense and delay as possible. Gamache v. Gamache, 66 Wn.2d 822, 829-30, 409 P.2d 859 (1965).
In this case, the trial court cited Jeffrey's e-mails from September 20 through November 11, 2005, which Jodi used to obtain a restraining order on November 18. Probably the worst e-mail was the first, which relevantly stated:
Just received my latest attorney's bill, and you know who is going to be paying for them. Yours must be astronomical! The problem. . . . it will get a lot worse because your [sic] a stubborn person with no hope of any significant gain on prolonging this course of action. Wake up and smell the roses babe. The money we spend on attorneys fees could helped [sic] Spencer's education cost instead of just wasting the time and money. Note: If close [sic] my business now guess who they will come for the balance of the lease? The one with the money, and it's not me. Just one of the many options still open to me at this point. All of which benefit me and will cost you!! Just a warning Apply any pressure and you will be the one hemorrhaging.
CP at 39 (Sept. 20, 2005).
In other e-mails, Jeffrey: (1) complained about Jodi's request for mutual restraints and threatened to schedule court appearances on days other than Friday, which she had stated were most convenient for her; (2) boasted that his birthday plans involved an extravagant evening with "[t]wo beautiful 24 year old tall Swedish blondes" who would be "paying for it all" (CP at 34); and (3) complained that Jodi was dragging her feet in discovery, asked her to provide documents so that he could dispute a tax issue on old family business, and stated that it was futile to try to block his e-mails as he knew a way around it.
Significantly, nothing in the record shows that Jeffrey carried through with any threat. At first blush, it might appear as though Jeffrey acted on a threat — which was made almost three months earlier — to close down the business and leave Jodi responsible for the lease. But that is not what he did. He left all the things necessary for the management of the business with his estranged wife. And Jodi concedes that the temporary orders did not set forth which party was responsible for the management of the company business.
As to other subjects covered in the e-mails, Jeffrey did not set the matters on the docket; his attorney did. And the record shows that counsel agreed to continue and re-set matters for one another when a conflict arose. None of the court filings were frivolous, although Jodi's motions seem rather inconsistent. For example, while she filed a motion to enforce the settlement, she also filed a motion to find Jeffrey in contempt for violating the restraints by leaving the purported settlement offer.
The trial court found:
I don't think the Court needs to find that Mr. Funk either filed repeated motions or that he foot-dragged. I know those terms are reflected in some of the case law regarding intransigence, but I don't think the Court needs to make a specific finding that he did those things in order to make a finding of intransigence. . . . Mr. Funk, in this case, from this Court's perspective took voluntary and mindful steps to do one thing or a conglomeration of things, that being to enflame this litigation, and it seems to me his actions were intended to intimidate and threaten the petitioner.
I'm confident that it was then necessary for her to react in terms of motions and discovery and such that she had to undertake with her lawyer's assistance.
This excerpt is a portion of the hearing transcript, which was incorporated into the order on revision.
RP (Mar. 23, 2006) at 71.
The court's reasoning is not supported in the record. There is nothing to show that Jodi's counsel undertook any extraordinary effort in response to the e-mails, except to move for a restraining order, which is hardly a remarkable event in a dissolution matter. And Jodi did not seek a restraining order after the first (and arguably worst) e-mail; she waited almost 2 months, until she received the fourth e-mail.
Jodi's claim that a settlement agreement was made is a creative legal argument. And her efforts were successful on the trial level. But one could argue that the tenacity with which she pursued the enforcement of the purported agreement enflamed the litigation and incurred, by far, the majority of attorney fees. There was no intransigence here.
CONCLUSION
We conclude that there was no lawful settlement agreement to enforce in this case, and that the attorney fee award based on intransigence is not factually supportable and manifestly unreasonable. Accordingly, we reverse the trial court's order enforcing the purported settlement agreement and the order regarding attorney fees for intransigence and remand for a just and equitable disposition of the parties' property and liabilities consistent with RCW 26.09.080.
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.
WE CONCUR:
Sweeney, C.J.
Stephens, J.