IN RE MARRIAGE OF McCARTY, 28939-3-II (Wash.App. 12-23-2003)

No. 28939-3-IIThe Court of Appeals of Washington, Division Two.
Filed: December 23, 2003 UNPUBLISHED OPINION

Appeal from Superior Court of Kitsap County. Docket No: 01-3-00777-2. Judgment or order under review. Date filed: 05/09/2002.

Counsel for Appellant(s), Terrance Wayne Oostenbrug, Attorney at Law, 4102 NW Anderson Hill Rd, Silverdale, WA 98383-9407.

Counsel for Respondent(s), Gregory P. Norbut, Attorney at Law, 18890 8th Ave NE, Poulsbo, WA 98370-8770.

HOUGHTON, J.

Charles McCarty appeals the trial court’s property division entered after it declared his two and one-half year marriage to Elena McCarty invalid. He argues that the trial court erred in not finding that he and Elena entered into a meretricious relationship and erred in making an inequitable property distribution. We affirm.

FACTS
Charles and Elena[1] met on the Island of Cyprus in 1998. Charles is a retired United States Navy Captain who has also worked as a nuclear engineer for the Saudi government. Elena is a Russian `migr` who has interior design, English history, and literature degrees.

They married on November 27, 1998.[2] They separated on July 15, 2001, while residing in Washington.

When they married, each had separate real and personal property. Charles had United States dollar and Cypriot pound accounts at the Bank of Cyprus, a Hellenic Bank of Cyprus account, and a Kitsap Federal Community Credit Union (KFCCU) account. He owned a home on Cyprus called Nea Dimeta;[3] a waterfront lot in Seabeck, Washington; and other personal property including two sailboats, a 1952 MG sports car, and a 1966 Mercedes Benz automobile. He also received social security and naval retirement payments.

Elena owned a villa and a condominium on Cyprus, a Moscow apartment that she leased, two automobiles, and family heirlooms. Elena received a quarterly $7,000 from an investment with her former fianc`. She also had bank accounts.

Elena and Charles lived in Nea Dimeta after they married. Also, after they married, they opened a joint Bank of Cyprus dollar and pound account. Elena contributed $26,000 to remodeling and furnishing Nea Dimeta. In September 2000, shortly before selling the property, Charles added Elena’s name to the Nea Dimeta deed.[4] They sold the property and furnishings for $356,000 in December 2000.[5]

In 1999, Elena sold her villa for $130,000 and also she sold her condominium, netting $40,000. She also sold her two vehicles. Between May 1999, and June 2001, the parties deposited more than $600,000 into a joint KFCCU account. The parties purchased a joint $300,000 KFCCU Certificate of Deposit (CD) from this account.

After selling their properties, the parties traveled. In March 2000, they moved to Kitsap County to supervise the construction of a home on Charles’s Seabeck property. They lived on one of Charles’s sailboats during the home construction.[6] They repaired and eventually sold the sailboat for $85,000, applying some of the proceeds to the house construction.

The parties completed the house in December 2000. At trial, the parties’ appraisers valued the home at either $700,000 or $635,000. The parties retained a $170,000 mortgage on the home.

Charles and Elena lived together in the Seabeck house until Elena filed a petition to dissolve their marriage on July 17, 2001. Elena later converted her pleadings into a petition for declaration regarding marriage validity, based on Charles being legally married to another when he wed her.

Despite mutual restraining orders, Elena removed most of the home’s furnishings, many of its fixtures, and some of the landscaping. She replaced a few of the items with inferior and/or used pieces.

In her petition, Elena sought a fair and equitable division of the parties’ property and debt. Charles asked the trial court to: determine the nature of the parties’ relationship; declare the marriage invalid; and make an appropriate property and debt division.

The court held a six-day bench trial, hearing 15 witnesses, and reviewing almost 200 documents. Charles called Certified Public Accountant (CPA) Bradford Buskirk as his expert and Elena called CPA Edward Ahrens as hers.

The CPAs reviewed Charles’s and Elena’s individual and joint bank account statements and the parties’ correspondence with their banks, their overseas and KFCCU wire transfer statements, their investment and business documents and contracts, and their family correspondence. The CPAs gave conflicting testimony on the source and use of the funds. For example, they disagreed about Charles’s $24,975 separate account withdrawal and later KFCCU joint account deposit, whether $52,000 was deposited into Elena’s account from Charles’s account, and whether Elena sent her former fianc` $64,000 or $30,000 from the joint KFCCU account. At trial, Elena argued that Charles’s bigamous marriage constituted fraud, requiring restitution of her property.[7] Charles argued that: they had a meretricious relationship; their commingled separate assets could be traced; and their property should be restored to its pre-relationship status and then divided.

At the conclusion of trial, the court characterized the Seabeck property and its debt as community. It valued the property at $495,000 ($665,000 less a $170,000 mortgage). And it determined that the parties had $808,927.07 net community and personal property.[8] It allocated Charles a $495,752.08 net value and Elena a $313,174.99 net value.[9]
The trial court also found that Elena knew that Charles was married to another when he married her. The trial court then declared Charles and Elena’s marriage invalid[10] under RCW 26.09.040.

Both parties moved for reconsideration. Charles asked the court to assign a value to his separate property that Elena took or sold and award it to him. He also asked the court to distribute additional interest accrued on the CD. He further argued that the trial court erred in equally dividing the Nea Dimeta proceeds. And finally, he argued that the trial court mischaracterized some of his separate property.

Elena asked the court to distribute the CD tax consequences, which it had not done. She also sought the court’s assistance in removing a lien from the CD.

On reconsideration, the trial court determined that the CD it awarded to Elena secured one of Charles’s obligations. As a result, KFCCU would not release the CD to Elena without the security being removed. The trial court also determined that the CD had accrued an additional $4,729 in interest and that the court had not divided the CD tax consequences between the parties.

The trial court then (1) awarded $12,000 of the CD income and its resulting tax consequences to Charles; (2) applied Charles’s $12,000 to his obligation secured by the CD and ordered him to pay it;[11] (3) awarded the remaining $300,729 CD value and its resulting tax consequences to Elena; (4) determined that Elena took $2,225 of Charles’s personal property; and (5) readjusted the personal property allocation to reflect $2,225 as belonging to Charles.

After finding that `substantial justice was not done, and the Court may have abused its discretion in applying a 50/50 split of all the property and debts,’ it redistributed the Nea Dimeta proceeds, giving two-thirds to Charles and one-third to Elena.[12] As a result, the trial court altered the CD value allocation, giving Charles a $208,486 interest in it and giving Elena a $104,243 interest in it. The court gave Charles his $9,182 in personal property and Elena her $18,637 in personal property.

The trial court further found that the community property and debt, exclusive of the CD, totaled $503,619, allocating $251,809 to Charles and $251,810 to Elena. Finally, after reconsideration, the trial court gave a net $477,295 award to Charles and a net $365,053 award to Elena. That distribution left Elena with a $52,887 lien on the Seabeck property, secured by a promissory note. It otherwise denied the parties’ motions for reconsideration. Charles filed a second motion for reconsideration, arguing that the court had mischaracterized $2,225 worth of property as community and had erred in awarding Elena more than one-third of the CD interest income.[13]

In its second order on reconsideration, the court determined that it had mischaracterized some of Charles’s personal property and deleted $2,225 from the community property total. It further distributed $1,113.65 from Elena’s award to Charles based on its property mischaracterization. It otherwise refused to reconsider the CD interest issue.

After its final readjustments on reconsideration, the trial court awarded the Seabeck house and mortgage to Charles[14] and the $300,729 CD to Elena. In total, Charles received $477,295 of property and Elena received $365,053 of property. Charles appeals.

ANALYSIS
Charles first contends that the trial court erred in not finding a meretricious relationship. And because it failed to do so, Charles asserts that the trial court improperly distributed the parties’ assets and debts. He relies on Connell v. Francisco, 127 Wn.2d 339, 349, 898 P.2d 831 (1995), arguing that the trial court could not distribute property acquired by each party before their meretricious relationship. His argument is misplaced.

Although Connell held that `property owned by each party prior to the relationship should not be before the court for distribution at the end of the relationship,’ it further held the court may distribute property `that would have been characterized as community property had the parties been married.’ 127 Wn.2d at 349-50. Thus here, if the trial court properly characterized the parties’ community property, which we hold that it did, it makes no difference to our analysis whether the relationship was meretricious or the marriage invalid.

Here, the trial court declared the marriage invalid and distributed the parties’ property according to RCW 26.09.080.[15] We begin by noting that RCW 26.09.080 governs not only marriage dissolution, but also marriage invalidity. Therefore, we may base our analysis on dissolution case law concerning property characterization and distribution.

In making its property distribution, the trial court entered findings of fact and conclusions of law. We review whether substantial evidence supports the findings and in turn, whether the findings support the trial court’s conclusions of law. Scott v. Trans-System, Inc., 148 Wn.2d 701, 707-08, 64 P.3d 1 (2003).

Substantial evidence is that sufficient to persuade a fair minded person of the finding’s truth. City of Tacoma v. William Rogers Co., 148 Wn.2d 169, 191, 60 P.3d 79 (2002). Substantial evidence may support findings of fact even if the evidence is susceptible to more than one reasonable interpretation. Sherrell v. Selfors, 73 Wn. App. 596, 600-01, 871 P.2d 168, review denied, 125 Wn.2d 1002 (1994).

In a dissolution action, the parties place all of their property before the court for distribution, which the court must dispose of in a just and equitable manner. In the Matter of the Marriage of Olivares, 69 Wn. App. 324, 328-29, 848 P.2d 1281, review denied, 122 Wn.2d 1009
(1993). The trial court must characterize the parties’ property as either community or separate. Olivares, 69 Wn. App. at 329. We review a trial court’s property characterization de novo. In the Matter of the Marriage of Chumbley, 150 Wn.2d 1, 5, 74 P.3d 129 (2003).

A court presumes property acquired during marriage is community. Dean v. Lehman, 143 Wn.2d 12, 19, 18 P.3d 523 (2001). `In disputed cases, the question of whether property is community or separate is retrospectively determined by its character at the date the property was acquired.’ In the Matter of the Marriage of Zahm, 138 Wn.2d 213, 223, 978 P.2d 498
(1999).

RCW 26.16.010 and .020 define separate property as that acquired before marriage or acquired after marriage by gift, bequest, devise, or descent. Separate property remains separate if it remains traceable and identifiable. Chumbley, 150 Wn.2d at 5. But commingled property that cannot be apportioned or distinguished becomes community property. Chumbley, 150 Wn.2d at 5-6.

We also note that absent any other explanation, if a spouse uses his or her separate funds to purchase property in the name of the other spouse, a presumption arises that the intention was for the property to be a gift. In the Matter of the Marriage of Hurd, 69 Wn. App. 38, 51, 848 P.2d 185, review denied, 122 Wn.2d 1020 (1993). But this presumption is rebuttable with clear and convincing contradictory evidence. In the Matter of the Marriage of Pennington, 142 Wn.2d 592, 602, 14 P.3d 764
(2000); Zahm, 138 Wn.2d at 223.

Finally, we do not disturb a trial court’s property distribution absent an abuse of the court’s broad discretion. In the Matter of the Marriage of Konzen, 103 Wn.2d 470, 478, 693 P.2d 97 (1985). The court abuses its discretion when it bases its decision on untenable grounds or reasons. In the Matter of the Marriage of Tower, 55 Wn. App. 697, 700, 780 P.2d 863
(1989), review denied, 114 Wn.2d 1002 (1990).

Charles asserts that the trial court incorrectly characterized four pieces of his separate property as community. Therefore, he asserts, the trial court improperly distributed: proceeds from selling Nea Dimeta; his Seabeck lot and the home on it; proceeds from selling his sailboat; and the $22,000 debt to his former wife.

Charles bought Nea Dimeta for $149,800 in 1993. He owned the property free and clear when he married Elena. In September 2000, Charles added Elena’s name to the title. At trial, he testified that he added her name because local law required it. When they sold the property in 2000, they netted $356,000, which they deposited in the Hellenic Bank of Cyprus. They later converted it into a CD in preparation for their move to Washington. The trial court characterized the Nea Dimeta sale proceeds as community property, apparently presuming that Charles intended a gift to the community when he added Elena’s name to the deed.[16] The trial court initially divided the property equally. But on reconsideration, it reapportioned two-thirds of the property to Charles and one-third to Elena. Charles bought the waterfront Seabeck lot for $185,000 in 1992. He made some improvements to it. Charles added Elena’s name to the deed in September 1999, before beginning construction.

Elena deposited the proceeds from her Cyprus property sales into the joint KFCCU account. The parties used these and other funds to construct the Seabeck house. Charles also put $30,000 from selling his sailboat into the property.

The trial court characterized the Seabeck residence as community because Charles added Elena’s name to the deed and because they both contributed separate funds to constructing the residence. The trial court found that the parties made no effort to segregate their contributions to the community, either in their Cypriot or KFCCU transactions and thereby commingled the funds.[17]

Charles owned a 47-foot sailboat before his marriage to Elena. He sold it for $85,000 after the marriage. He used $30,000 of the proceeds to make a construction loan down payment for the Seabeck home. He deposited the remainder in the joint KFCCU account.

The trial court characterized Charles’s proceeds from the sailboat as separate property at the time the boat was sold. But the court re-characterized the proceeds as community property because when he deposited the funds into the joint account, he commingled the funds with the couple’s other liquid assets.

Charles paid his former wife Kathryn’s $22,000 lien from the joint KFCCU account. Charles testified that he transferred funds from his Hellenic Bank of Cyprus account into his Bank of Cyprus account and then into the joint account in order to pay Kathryn. He asserts that he adequately traced these funds.

The record shows a $22,000 debit from the joint KFCCU account on June 28, 1999, which is the amount of Charles’s debt to Kathryn. CPA Buskirk, who examined bank records and individual wire transfers, testified that Charles deposited $24,975 into the KFCCU account from his separate account, but it is unclear when he made this deposit.[18]

Here, the trial court found that the $22,000 represented Charles’s separate debt, which he paid from community funds. Charles argues that he directed the $24,975 transfer to cover his debt payment to Kathryn. There is evidence in the record that Charles paid Kathryn on June 28, 1999, from the KFCCU account. But the record does not show proof of the $24,975 deposit or any evidence establishing exhaustive tracing to establish the separate funds’ character.

Our review of the record discloses substantial evidence supporting the trial court’s findings that the parties commingled funds and expended them on the community’s behalf. The findings, in turn, support the trial court’s property characterization. Finally, the trial court made a just and equitable distribution in awarding Charles 57 percent and Elena 43 percent of the parties’ community property. It did not abuse its discretion in doing so and we affirm its award.

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.

SEINFELD, J. and HUNT, C.J., concur.