Opinion
No. 29289-1-II
May 3, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of Pierce County. Docket No: 98-3-03834-8. Judgment or order under review. Date filed: 08/02/2002. Judge signing: Hon. Vicki Hogan.
Counsel for Appellant(s), Boyd Scott Wiley, Campbell Dille Barnett Smith Wiley, 317 S Meridian, PO Box 488, Puyallup, WA 98371-0164.
Counsel for Respondent(s), Larry Jerome Couture, Attorney at Law, 1457 S Union Ave, Tacoma, WA 98405-1951.
David Eugene Farnsworth appeals the property division and award of maintenance and fees in his legal separation from Margaret Farnsworth. He argues that the trial court abused its discretion by (1) awarding a disproportionate share of the property to Margaret; (2) assigning value to his life insurance policies for which Margaret is the irrevocable beneficiary; (3) awarding maintenance to Margaret without considering statutory requirements; (4) awarding a portion of his future state pension to Margaret while he is still working and the community portion cannot yet be calculated; and (5) awarding costs and attorney fees to Margaret.
We use the parties' first names for ease of reference and intend no disrespect.
We hold that the trial court did not abuse its discretion by ruling that the property should be distributed 60 percent to Margaret and 40 percent to David but, owing to errors, its orders failed to effect that distribution. Instead, it distributed 77 percent of the assets to Margaret and only 23 percent to David. We vacate the property distribution order and remand to the trial court to correct the mathematical error and clarify or reevaluate its ruling regarding the life insurance policies. Also, we hold that the trial court did not abuse its discretion in awarding Margaret 30 percent of David's pension and we affirm the trial court's maintenance and attorney fee awards.
The actual percentages argued are the result of the different methods of calculation and inclusion/exclusion of various properties. Margaret's percentage might be much higher when the life insurance is properly valued.
FACTS
David and Margaret were married in May 1972. They informally separated in November 1998 and legally separated in 2002. They have two adult sons: Jason, who is emancipated, and Jonathan (Margaret's son from a previous marriage), who is substantially disabled and dependent and lives with Margaret. On August 2, 2002, after a trial, the superior court entered a decree of legal separation.
The parties stipulated that the 'Legal Separation will not be converted to a Dissolution of Marriage any sooner than the right of Margaret to obtain Medicaid benefits.' Clerk's Papers (CP) at 15. They chose a legal separation so that Margaret and Jonathan could continue to receive military dependent rights and medical benefits under David's health insurance through his employment.
Employment History
David served in the military from 1963 until 1984, when he retired as a chief warrant officer with a 30 percent partial disability rating. He then worked until 1989 for a private company named COBRO. In 1991, he began working for the Washington State Department of Transportation, where he was still employed at the time of trial.
Margaret worked first for a bank and then for a telephone company until she married and moved with David to Germany for his military assignments. Thereafter, she worked in part-time positions until 1978. Since then, she has worked for herself part-time in the craft business. The trial court found Margaret to be effectively unemployable for the remainder of her life.
The trial court found:
Considering [Margaret's] age, health, work history, occupational skills and inability to be retrained, she is unemployable and will be for the remainder of her life. These conditions will also affect her ability to adequately attend to the regular maintenance of the family home.
CP at 12-13.
Income
The trial court found David's monthly income and expenses to be as follows:
[David] earns, from the State of Washington, a monthly gross salary of $6,644. Additionally, he receives about $343 a month from his non-taxable VA disability and $1,473 from his military pension. After taxes and deductions he has $6,900 a month in net income. His monthly expenses, at the actual and expected rate are about $3,500, leaving excess monthly income of $3,400.00.
Clerk's Papers (CP) at 13. On average, Margaret earns $2,300 per year ($200 per month) from her part-time craft business; she is essentially unemployable due to debilitating medical conditions.
The court allocated the couple's monthly income, including maintenance, as follows:
David Margaret
VA Disability 343 Salary 6,644 Military 1,031 442 Retirement Craft Business 200 Dev. Disability 737 Maintenance (2,000) 2,000 Total Income 6,018 3,379
Maintenance
At the time of trial, David was 57 and Margaret was 60. Because of Margaret's medical conditions, age, unemployability, and low earnings, especially relative to David's, the trial court ordered David to pay maintenance of $2,000 per month.
The trial court further provided that David's obligation to pay spousal maintenance to Margaret (1) would terminate on death of either party or Margaret's remarriage and (2) be reviewable only . . . upon the involuntary termination of Mr. Farnsworth from his employment [with the Department of Transportation] or upon his retirement. It shall not be reviewable as a result of inheritance received by either party in the future or by any increase or decrease in military retirement.
CP at 22.
Insurance
The parties own three life insurance policies on David's life listing Margaret as the beneficiary. According to David, two of the policies have a face value of $50,000, one has a face value of $10,000, and the three policies together have a 'total cash surrender value of approximately $40,000.' CP at 35. Margaret has no life insurance.
The trial court ordered as follows:
David Farnsworth shall maintain all existing life insurance, or replacement insurance at his choice, including the Dept. of Transportation policy, provided that the face amount maintained shall be equal to the face values as they existed on June 1, 2002 and any borrowings from any whole life policies are permitted so long as they do not decrease the face amount that will be given to the beneficiary. Margaret Farnsworth shall be the irrevocable beneficiary on all those insurance policies. These policy face amounts are not to be diminished in the future for any reason except the death of Margaret Farnsworth if that event occurs prior to the death of David Farnsworth.
CP at 23. The trial court entered this order because '[t]here are no survivor benefits eligible to Margaret in the event that David predeceases her.' 3 Report of Proceedings (RP) at 353.
Under the decree, David must also pay Margaret's $53 monthly medical insurance premium.
Property Distribution
In its written Findings of Fact and Conclusions of Law, the trial court listed the parties' separate properties and their community property. It characterized 56 percent of David's military retirement and all his Washington State PERS II retirement as community property as of the date of legal separation. It characterized the other 44 percent of David's military retirement and all of his military veteran's administration (VA) disability as his separate property. The trial court also found that Margaret 'has no retirement benefits independent of David,' who was the prime wage earner while Margaret was the homemaker. 3 RP at 356.
The trial court distributed the property as follows (state and military pensions emphasized):
Property Status Awarded to Awarded to David Margaret Net Value Net Value Residence Community 88,500 1998 Voyager Community --0-- 1995 Dodge Community 8,000 Dakota 1996 Dodge Neon Community 8,300 PERS II Community 70% at 30% at Retirement Retirement Retirement Seafirst IRA Community 28,260 Columbia Bank Community 9,089 CD
USAA Savings Community 1,777 Market Rate Community 1,872 Savings WSECU Community 5,274 Ft. Lewis C.U. Community 281 N.Y. Life Ins. Community 22,639 (2) Equitable Life Community 6,949 Ins. Household goods Community 1,000 6,400 Hummel Community 2,500 Bells/Plates Coin Collection Community 3,500 Military 56% Community 70% of Benefit 30% of Benefit Pension Columbia Bank Community 824 Accts
Computer System Separate--David --0-- Jeep Cherokee Separate--David --0-- Replaced Dodge Dakota
TCF Nat'l Separate-- 4,200 Savings Margaret ATT Stock Separate-- 4,697 Margaret Bell South Separate-- 33,932 Stock Margaret Lucent Stock Separate-- 4,596 Margaret Collectibles Separate-- 500 Margaret Mtn. Bell C.U. Separate-- 500 Margaret TCF CD Separate-- 5,000 Margaret
Equalizing 30,000 Payment Margaret's Atty (11,500) Fees VISA (3,300) IRS (1,500) Chiropractor (700) Attorney Fees (3,500)
The trial court made this 'equalizing payment,' with 8 percent interest from June 1, 2002, payable three years from the date of the decree of legal separation.
Totals 258,090 81,941 176,149 Without Life 228,502 52,353 176,149 Ins.
David appeals the property distribution, the maintenance award, and Margaret's attorney fee award.
ANALYSIS
A trial court has broad discretion to distribute property in a dissolution or, as here, a legal separation pending dissolution. In exercising its discretion, the trial court need not divide community property equally, and it need not award separate property to its owner. Instead, the trial court must 'make such disposition of the property and the liabilities of the parties, either community or separate, as shall appear just and equitable after considering all relevant factors.' RCW 26.09.080; In re Marriage of White, 105 Wn. App. 545, 549, 20 P.3d 481 (2001).
These relevant factors include:
(1) The nature and extent of the community property;
(2) The nature and extent of the separate property;
(3) The duration of the marriage; and
(4) The economic circumstances of each spouse 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 with whom the children reside the majority of the time.
After considering these factors and awarding the parties their respective separate properties, the trial court stated its intention to award Margaret 60 percent of the parties' community assets. David proposed that Margaret receive 60 percent of their assets. He objects not to the court's departure from a 50/50 split but to the differential that results, probably unintentionally, from the trial court's property distribution orders.
Because David proposed and does not now dispute the reasonableness of a 60/40 split of assets, we need not determine whether a 60/40 distribution was just and equitable. It clearly was. The issue before us is whether the trial court's order actually distributed the property 60/40. It did not.
Margaret's property settlement award included a $30,000 'equalization' judgment against David. The trial court's stated purpose in entering the $30,000 judgment was 'to make equitable the property division.' CP at 21. But it failed to subtract the $30,000 obligation from David's award and thereby failed to distribute the property 60/40. In addition, by including the cash value of his life insurance policies as his asset while at the same time precluding him from borrowing on the policy if to do so would reduce the policy death benefit, it caused further disparity.
Property Distribution 60/40 Split of Community Property
David argues that the trial court's property distribution was inequitable because (1) it gave 85 percent of the assets to Margaret, excluding the life insurance, which, because he cannot borrow on its cash value, benefits Margaret, not him; and (2) even taking into account the life insurance distributed to him, it gave him only 23 percent of the assets. Although David confuses the calculations somewhat by including the value of separate property, he is correct. By failing to credit David's account with the loss of the equalization payment and by including the cash value of the life insurance policies while prohibiting him from borrowing the sums, the trial court failed to distribute the property 60/40 as it apparently intended.
Of $235,365 in community assets, the trial court purported to allocate $93,441 to David and $141,924 to Margaret, including a $30,000 equalization payment/judgment from David to Margaret, in lieu of dividing assets it distributed to David. But these figures fail to credit David with the $30,000 loss due to the equalization payment. Thus, the court allocated David $63,441, not $93,441 as the court believed it had. This miscalculation resulted in a 77/23 split; not 60/40. Correcting this error by vacating the equalization payment, however, would result in David receiving 45 percent of the assets rather than the 40 percent the court intended. Thus, we must remand to the trial court to conform its order to its stated intentions.
The trial court did not, however, subtract this $30,000 equalization payment from its distribution to David. Apparently the court expected him to pay it out of his future earnings; it also gave him the option of rolling over his IRA (included in his community property distribution) to Margaret to avoid tax consequences.
We note, however, that on this record, the trial court had discretion to distribute 60 percent of the property to Margaret and 40 percent to David and we do not disrupt the trial court's decision to so distribute the property. We note only that its order failed to do so and so we vacate and remand to correct the error.
David raises several other issues. We address them because they may arise on remand.
PERS II Retirement
David also argues that (1) the trial court erred in awarding Margaret 30 percent of his future PERS II pension because the amount of this pension will not be known until he retires; and (2) the trial court should have used the formula set out in In re Marriage of Bulicek, 59 Wn. App. 630, 800 P.2d 394 (1990). He argues that under the Bulicek formula, if he retired at age 65 rather than 62, Margaret would be entitled to only 22 percent of his PERS II pension.
The Bulicek formula multiplies the number of months of service during the marriage times one-half, divides that amount by the total number of months of service at retirement, and multiplies that times the monthly retirement benefit. The formula is:
.5 × Months of Service During Marriage Total Months of Service × Monthly Retirement Benefit
David does not similarly calculate the percentage if he were to retire at age 62.
In Bulicek, the court noted, 'Pension benefits constitute property rights in the nature of deferred compensation, even if benefits are not presently available. See Farver v. Dep't of Ret. Sys., 29 Wn. App. 138, 141, 629 P.2d 903 (1981), aff'd, 97 Wn.2d 344 (1982).' 59 Wn. App. at 636. But the court did not prescribe any set formula that the trial court must use in distributing this asset. Rather, the appellate court described various methods of allocating future pension benefits, including (1) the 'percentage allocation method,' for which it used a method of calculation but did not mandate its use; and (2) awarding the 'entire pension to one of the parties . . . and to award to the other, in lieu of participation in the pension, a sum certain, which may, or may not, be payable over a specified time period.' Bulicek, 59 Wn. App. at 637 (quoting DeRevere v. DeRevere, 5 Wn. App. 741, 746, 491 P.2d 249 (1971)).
In exercising its discretion to allocate 30 percent of David's PERS II retirement benefits to Margaret, the trial court stated that it wanted to apply the same formula as it had for the military pension, which was 30 percent. We note that the percentage of community contribution to David's military pension was ascertainable at the time of trial, while such percentage for the PERS II pension was not. Nonetheless, such uncertainty is not dispositive.
In Bulicek, for example, the appellate court encouraged the percentage-based approach because it 'avoids difficult valuation problems, shares the risks inherent in deferred receipt of the income, and provides a source of income to both spouses at a time when there will likely be greater need for it.' 59 Wn. App. at 638. Moreover, the court reasoned that any promotion or longevity-based increase in the pension's value resulted, in part, from the community contribution and, thus, the other spouse should share in any increased benefit. Bulicek, 59 Wn. App. at 639.
Applying the Bulicek principles here, we hold that David has failed to show that the trial court abused its discretion. First, as we noted earlier, it is not mandatory to apply the precise formula used in Bulicek. Second, David has not shown that allocating 30 percent to Margaret is an unjustifiably significant departure from his calculation of a fair 22 percent if he retires at age 65, with presumably a higher percentage going to Margaret if he retires sooner at age 62, which was uncertain at the time of trial. See also In re Marriage of Jennings, 138 Wn.2d 612, 980 P.2d 1248 (1999) (affirming award to wife of 50 percent of husband's military retirement benefits after his disability portion increased).
The record contains conflicting testimony about David's retirement plans. He testified at trial that he expected to be fired, but if not, to retire at 62. In his brief, he argues that he plans to retire at 65.
As the Bulicek court aptly noted,
The postdissolution economic position of the parties 'is a paramount concern in determining issues of property division and maintenance.' In re Marriage of Morrow, 53 Wn. App. 579, 586, 770 P.2d 197 (1989) (quoting In re Marriage of Washburn, 101 Wn.2d [168, 181, 677 P.2d 152 (1984)]).
59 Wn. App. at 635. Here, we could substitute the parties' names for those in Bulicek as follows:
[W]e focus on the post-dissolution relative economic positions of the parties. Here, [David] will be in a position to support a lifestyle more comparable to the lifestyle enjoyed by the couple during marriage than will [Margaret], given their relative earning powers. The trial court correctly perceived that [Margaret] would be in need of more than temporary support. The court provided a thoughtful resolution of the maintenance and pension issues that allows [Margaret] a continuous stream of income.
We hold that David has failed to show that no reasonable trial court judge would have similarly exercised its discretion in awarding Margaret 30 percent of David's future PERS II retirement benefits. In re Marriage of Landry, 103 Wn.2d 807, 809-10, 699 P.2d 214 (1985).
Life Insurance
The trial court accepted David's assertion that his three life insurance policies had a total cash surrender value of $40,000. As he requested, the trial court awarded him the three insurance policies. He argues, however, that the trial court erred in assigning value to these policies and then listing them as his assets because (1) the court required him to maintain the policies' face values while keeping Margaret as the irrevocable beneficiary; and (2) consequently, these policies have no benefit to him.
David asserted that the policies' respective values were $22,714, $9,849, and $7,500. Therefore, the trial court did not make an independent determination of their actual value as awarded to David.
These life insurance policies provide $110,000 in death benefits to Margaret if she survives him. The trial court's ruling allows David to purchase replacement insurance, such as term insurance. If he does this, the existing policies and their cash value, less the cost of replacement insurance, could become an available asset. The trial court also allowed David to borrow against the cash value of the policies as long as he maintained the same death benefits for Margaret. But the record does not reflect the cost or availability of replacement insurance. And as David cannot borrow against the cash value of the policies without decreasing the policies' death benefit, the $40,000 cash value is a restricted asset, not currently available to David, and only available if Margaret predeceases him. On remand, the court should either consider the cost of replacement insurance in valuing these policies or assign them no value at all.
Maintenance
David next argues that the $2,000 monthly maintenance to Margaret is inequitable because the trial court awarded Margaret 85 percent of the parties' assets. As we are remanding this case for a proper calculation of a 60/40 property distribution, we need not address this argument. But David also argues that the trial court failed to consider the following required statutory factors before setting the maintenance amount: (1) Margaret has $1,379 per month to meet her needs even without maintenance; (2) he pays for her health care insurance; (3) she has assets from which to produce income; (4) the findings of fact do not address whether she needs additional income to maintain her lifestyle; (5) the court did not analyze whether Margaret could meet her needs independently; (6) the court wrongly characterized his 'excess monthly income;' and (7) the court declared the maintenance nonrevocable unless he retires or she remarries. We disagree.
We review a trial court's maintenance award for an abuse of discretion. In re Marriage of Zahm, 138 Wn.2d 213, 226-27, 978 P.2d 498 (1999). In awarding maintenance, the trial court considered the statutory factors set out in RCW 26.09.090: (1) the parties' financial resources, including the parties' assets and their relative monthly incomes and expenses; (2) Margaret's employability; (3) their standard of living during the marriage; (4) their long-term marriage; (5) Margaret's age, physical and emotional condition, and financial obligations; and (6) David's ability to meet his needs and financial obligations while paying maintenance income well above his monthly expenses (the so called 'excess') such that he can reasonably pay maintenance to Margaret as long as he continued to work. In addition to these statutory factors, the trial court considered that Margaret had given up her career to allow David to pursue his.
Although the trial court did not articulate what lifestyle Margaret would have enjoyed had the marriage continued, it is clear that the court sought to maintain a moderate, yet comfortable lifestyle for her following the legal separation. The court awarded her the family home, offset costs of needed repairs, provided medical coverage until she qualified for Medicare, and covered Margaret's expected monthly living expenses. We find no abuse of discretion in the trial court's maintenance award to Margaret.
David neither assigns error nor cites any law in support of his argument that the trial court improperly limited the circumstances under which maintenance could be reviewed, contrary to RAP 10.3(a)(3) and (a)(5), respectively. Accordingly, we do not consider this argument further. Lassila v. City of Wenatchee, 89 Wn.2d 804, 809-10, 576 P.2d 54 (1978).
We do note that the trial court provided for review of maintenance 'upon the involuntary termination of Mr. Farnsworth from his employment [with the Department of Transportation] or upon his retirement.' CP at 22.
Attorney Fees At Trial
Citing In re Marriage of Young, 18 Wn. App. 462, 466, 569 P.2d 70 (1977), David argues the trial court erred in requiring him to pay a portion of Margaret's attorney fees in light of her disproportionate award of the assets. The trial court noted:
The wife has the need for payment of fees and costs and other spouse has ability to pay these fees and costs. The wife has incurred reasonable attorney's fees and costs in excess of $16,500.00.
. . . .
Mr. Farnsworth has net income of $6,900 per month with total monthly obligations of around $3,500.00 per month. He is well able to afford to assist in the payment of Margaret Farnsworth's attorney fees and costs.
CP at 13-14. The trial court ordered David to pay $11,500 of Margaret's $16,500 incurred at the time the decree was entered.
RCW 26.09.140 requires that the trial court consider the parties' financial resources in deciding whether to award attorney fees and costs to a party in a dissolution proceeding. Here, the trial court had before it complete financial declarations from both parties and, thus, was well aware of the parties' financial resources, relative abilities to pay, and need for an award to Margaret. David has not shown that the trial court strayed from the dictates of RCW 26.09.140 or abused its discretion in considering Margaret's need and David's ability to pay in ordering him to pay part of her attorney fees.
On Appeal
Margaret has filed a declaration of financial need in support of her request for an award of attorney fees on appeal. And she has complied with RAP 18.1 by devoting a section of her brief to this request. But in light of our decision that the trial court's orders failed to effect the just 60/40 distribution of property it intended, we award no fees for this appeal.
Vacated and remanded for correction and clarification in accord with this opinion.
A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
MORGAN, J., Concur.
I concur in most of the majority's analysis of the trial court's property distribution and the decision to remand to the trial court to subtract the $30,000 equalization payment to Margaret from David's list of assets awarded to him. But I disagree that the trial court also needs to reconsider on remand its valuation and distribution of the life insurance policies. Therefore, I dissent in part.
The trial court accepted David's assertion that his three life insurance policies had a total cash surrender value of $40,000. And, as David requested, the trial court awarded him those policies. The trial court's purpose in requiring David to maintain the death benefit irrevocably was to provide maintenance for Margaret should David predecease her. The court's order allowed David to take the cash value of these policies if he purchased replacement insurance with the same death benefit.
David presented no evidence to the trial court that its valuation was improper. He did not show that the cost of replacement insurance would significantly diminish the value of this asset. And he presented no evidence that the cost of replacement insurance would exceed the cost of maintaining the current policies. Under these circumstances, we cannot fault the trial court for simply accepting these values that David provided and listing them as his awarded assets in those amounts. Under these circumstances, the trial court acted reasonably.
In spite of David's representations of the insurance policies' values below and the lack of evidence to the contrary, the majority assumes, without factual support, that the policies have lower values. This assumption, although perhaps anecdotally credible, is not based on the record before us; rather, such assertion improperly invades the special fact-finding province of the trial court. In my view, there is no basis for the majority's finding that the trial court abused its broad discretion to distribute equitably the parties' assets, especially in light of the parties' relatively unequal economic and health situations.