John Gregory v. Jennifer Gregory ( 2017 )

•
APPE,Ac `-/ T
STATE OF WASHU-!1.3.T011
fl JUL
2017 I7 9: 20
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
In the Matter of the Marriage of
No. 75155-7-1
JOHN GREGORY,
DIVISION ONE
Appellant, )
)
and ) UNPUBLISHED OPINION
)
JENNIFER GREGORY, )
)
Respondent. ) FILED: July 17, 2017
)
LEACH, J. — John Gregory appeals the decree of dissolution dissolving his
marriage to Jennifer Gregory. He challenges the court's division of assets,
claiming that it misread the parties' prenuptial agreement when characterizing
their property as separate or community. Because the trial court correctly
interpreted the prenuptial agreement, we affirm.
Background
John Gregory began working for Google in 2001. As part of his initial
compensation, he received stock options that vested over four years. He
exercised these options before Google went public in 2004. The Google IPO
(initial public offering) made John a wealthy man.
John and Jennifer Gregory executed a prenuptial agreement
("Agreement") on September 6, 2005. The Agreement states that they had lived
No. 75155-7-1 / 2
together for the past three years. They married seven days later on September
13, 2005. The couple had one daughter. They separated on December 30,
2014, when John filed for dissolution.
The parties agreed on a parenting plan but were unable to resolve the
financial matters. After a trial, the trial court entered a decree of dissolution
approving the parties' agreed parenting plan and distributing property in accord
with its interpretation of the parties' Agreement.
John appeals.
Analysis
John challenges the trial court's interpretation of two provisions of the
parties' Agreement, one providing for the conversion of separate property to
community property and one addressing the payment of living expenses. Neither
party challenges the enforceability of the Agreement.
Interpretation of a contract is a mixed question of law and fact. When the
trial court's interpretation depends on the credibility of conflicting evidence, this
court upholds the trial court's factual findings when substantial evidence in the
record supports them.1 But the question of whether a contract is ambiguous is a
legal question for the court that an appellate court reviews de novo.2
1 Berg v. Hudesman, 115 Wn.2d 657, 667-68, 801 P.2d 222 (1990)
(adopting RESTATEMENT(SECOND)OF CONTRACTS § 212(Am. LAW. INST. 1981)).
2 GMAC v. Everett Chevrolet, 179 Wn. App. 126, 135, 317 P.3d 1074(2014).
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No. 75155-7-1 /3
Property Conversion
The Agreement included provisions converting the parties' separate
property to community property in increments over fifteen years, beginning on the
fifth anniversary of their marriage. John challenges the trial court's decision that
the property conversion provisions continued to convert separate property until
the time of trial. He contends that they became inoperative when the marriage
became defunct upon his filing this dissolution action.
The Agreement property conversion provisions state,
(d) Conversion of Separate Property to Community Property.
On the fifth anniversary of the Marriage, twenty percent (20%) of
each party's remaining separate property shall be converted to
community property. Beginning on the sixth anniversary of their
Marriage, ten percent (10%) of each party's separate property,
including associated separate property obligations, shall be
converted to community property each year. More specifically, this
shall be accomplished in the following manner.
i. On the sixth anniversary of the Marriage, one-
tenth (1/10) of each party's remaining separate property shall be
converted to community property;
ii. On the seventh anniversary of the Marriage,
one-ninth (1/9) of each party's remaining separate property shall be
converted to community property;
iii. On the eighth anniversary of the Marriage,
one-eight (1/8) of each party's remaining separate property shall be
converted to community property;
iv. On the ninth anniversary of the Marriage, one-
seventh (1/7) of each party's remaining separate property shall be
converted to community property;
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No. 75155-7-1/ 4
v. On the tenth anniversary of the Marriage, one-
sixth (1/6) of each party's remaining separate property shall be
converted to community property;
vi On the eleventh anniversary of the Marriage,
one-fifth(1/5)of each party's remaining separate property shall be
converted to community property;
vii. On the twelfth anniversary of the Marriage,
one-fourth (1/4) of each party's remaining separate property shall
be converted to community property;
viii. On the thirteenth anniversary of Marriage, one-
third (1/3) of each party's remaining separate property shall be
converted to community property;
ix. On the fourteenth anniversary of Marriage,
one-half (1/2) of each party's remaining separate property shall be
converted to community property; and
x. On the fifteenth anniversary of Marriage, all of
each party's remaining separate property shall be converted to
community property.
If an actual redesignation of title is not accomplished to implement
• these conversions, the marital community shall have a community
property lien on the party's separate property (which shall include
increases and decreases in the value of the assets) until the
appropriate changes in title are completed. Following the first day
of the fifteenth year of the Marriage, all property of the parties,
whether acquired by gift, inheritance, testamentary transfer or
otherwise, shall be community property.
The trial court decided that the Agreement was not ambiguous, that
marriage anniversaries continued to occur until the marriage was dissolved, and
that the final property conversion happened on the tenth marriage anniversary,
September 13, 2015. John disagrees. He contends that for purposes of the
Agreement, marriage anniversaries stopped occurring when he filed his
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No. 75155-7-1 / 5
dissolution petition because the marriage became defunct then. Thus, he claims
that the last conversion occurred on the ninth marriage anniversary, September
13, 2014.
John cites Seizer v Sessions3 as support for his position. But we readily
distinguish the issue decided in Seizer. There, the court considered the
application of Washington's separate and apart statute, RCW 26.16.140,4 under
a set of extreme facts. A man who was never divorced from his mentally
incompetent first wife married a second and third time.6 While he was married to
his third wife, he won a substantial sum from the lottery.6 The first wife, through
her guardian, and the third wife made competing claims to these winnings.7 In
this context, the court held that the separate and apart statute required mutuality
on the part of the spouses and thus would not apply where an abandoned
spouse is mentally ill or incompetent during the separation.8
But here the trial court did not apply a statute to determine the status of
the parties' property. It interpreted their voluntary agreement about status. In
3 132 Wn.2d 642, 940 P.2d 261 (1997).
4 Former RCW 26.16.140 (1978) provided,"When a husband and wife are
living separate and apart, their respective earnings and accumulations shall be
the separate property of each." RCW 26.16.140 was amended in 2008 to
change "husband and wife" to "spouses or domestic partners" but otherwise
remained the same. LAWS OF 2008, ch. 6,§ 613.
5 Seizer, 132 Wn.2d at 646-47.
6 Seizer, 132 Wn.2d at 647.
7 Seizer, 132 Wn.2d at 647-48.
8 Seizer, 132 Wn.2d at 659.
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No. 75155-7-1 /6
paragraph 9 of the Agreement, John and Jennifer acknowledged discussing with
their respective counsel a spouse's property rights under Washington law and
the fact that the Agreement operated to waive those rights. Thus, Seizer's
statutory construction provides no guidance to the meaning of the Agreement.
The Agreement plainly states that on each anniversary after the fifth one,
part of the party's separate property shall be converted to community property.
The parties were still married on September 13, 2015, the tenth anniversary of
their marriage. The applicable Agreement provision provided for conversion of
separate property on this date without any limiting qualification about the status
of the parties' relationship beyond the fact that they were married. Other
provisions of the Agreement show that the parties knew how to include further
limitations when they intended them.
The provisions of the Agreement addressing a dissolution occurring within
the first five years of marriage provide an example. Those provisions require
John to contribute separate property to a community account with the amount
calculated based on the date of separation "with the intention that the separation
be permanent."
John offers no persuasive reason why the trial court should have implied a
similar provision in the disputed provision when the parties did not include it. In
the absence of fraud, accident, or mistake, a court will not add, modify, or
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No. 75155-7-1 / 7
contradict the terms of a written contract.9 As our Supreme Court noted in In re
Marriage of Schweitzer,19 lit] is the duty of the court to declare the meaning of
what is written, and not what was intended to be written." This duty applies
equally to what a party later wishes had been written.
In re Estate of Bachmeierl 1 supports the trial court's decision There, a
husband and wife signed a community property agreement declaring that all their
property was community property and, upon the death of either, making the
survivor the owner of that property.12 When the husband filed for legal
separation, the wife changed her will, disinheriting him and leaving her property
to her daughter.13 Soon after, the wife died. When the daughter sought to
probate the will, the husband objected, claiming the wife's estate under the
community property agreement.14 The court rejected the daughter's invitation to
imply a provision in the agreement terminating it upon the parties' separation.15
Division 11 of this court reached a similar result in In re Estate of Catto.16
There, the court rejected the argument that a community property agreement
9 In re Marriage of Schweitzer, 132 Wn.2d 318, 327, 937 P.2d 1062(1997).
10 132 Wn.2d 318, 327, 937 P.2d 1062 (1997) (alteration in original)
(internal quotation marks omitted)(quoting Berg, 115 Wn.2d at 669).
11 147 Wn.2d 60, 52 P.3d 22(2002).
12 Bachmeier, 147 Wn.2d at 62-63.
13 Bachmeier, 147 Wn.2d at 63.
14 Bachmeier, 147 Wn.2d at 63.
15 Bachmeier, 147 Wn.2d at 68-69.
16 88 Wn. App. 522, 944 P.2d 1052(1997).
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No. 75155-7-1 / 8
contained an implied termination provision that became effective when the
parties' marriage became defunct.17 As Bachmeier states, filing a dissolution
proceeding is "'not the same as an intention to immediately effect an ex parte
abandonment of a valuable contractual right."18
A Connecticut case, Peterson v. Sykes-Peterson," provides persuasive
support. There, the parties signed a prenuptial agreement which contained a
sunset clause, terminating the agreement on their seventh anniversary.20 The
seventh anniversary occurred after the husband had filed for divorce but before
the divorce became final. As John does, the husband in Peterson argued that
the provision would apply only if they were still happily married and celebrating
their seventh anniversary.21 The court disagreed, holding that the language was
clear and that had the parties desired a different result, they could have included
language that did so. The court offered the example that "the agreement would
become unenforceable on the parties' seventh wedding anniversary provided
that the parties remained married and living together and there was no pending
separation or divorce action."22 Similarly, here, the trial court could not imply a
17 Catto, 88 Wn. App. at 529.
18 Bachmeier, 147 Wn.2d at 64 (quoting In re Estate of Lyman, 7 Wn. App.
945, 951, 503 P.2d 1127(1972)).
19 133 Conn. App. 660, 37 A.3d 173(2012).
20 Peterson, 37 A.3d at 175.
21 Peterson, 37 A.3d at 176.
22 Peterson, 37 A.3d at 177.
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No. 75155-7-1/ 9
provision terminating the property conversion terms of the Agreement on
separation.
We reject John's assertion that this result will encourage a party to stall
the dissolution process in order to have more property convert to community
property. The trial court found no evidence of such a delay on Jennifer's part and
noted that if such a scenario had occurred, then John would have been able to
assert equitable defenses to Jennifer's effort to specifically enforce the
Agreement.
Community Expenses
We turn now to the second issue presented. John claims that the trial
court should have reduced the amount of his separate property converted to
community property by the amount of community expenses he paid from his
separate property.
The Agreement did not require that the parties implement the conversion
of their separate property to community on each anniversary. And they did not.
Paragraph 1(d) of the Agreement anticipated this circumstance and provided that
"[i]f an actual redesignation of title is not accomplished to implement these
conversions, the marital community shall have a community property lien on the
party's separate property (which shall include increases and decreases in the
value of the assets) until the appropriate changes in title are completed."
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No. 75155-7-1 / 10
John paid a significant portion of John and Jennifer's living expenses by
contributing money from his separate account to a community joint account. The
trial court decided that the Agreement made these payments gifts to the
community. It relied on paragraph 3 of the Agreement:
During Marriage, all ordinary and necessary living
expenses . . . shall be paid out of a community property joint
account. In the event that there are insufficient funds in the
community joint accounts to cover such living expenses, then each
party shall contribute to the community joint accounts an amount
necessary to pay such expenses, in proportion to each party's
respective separate income from all sources. If either party so uses
separate property to pay for ordinary and necessary living
expenses of the community incurred during Marriage, such
separate property payment will be treated as a gift to the
community and the contributing Spouse will not have any rights as
a lien holder against the community.
(Emphasis added.)
John does not dispute that the parties paid community expenses from joint
accounts held in both of their names since January 2012. Rather, John argues
that payments from his separate account into that community account come from
the annual conversions of his separate property to community property. At trial,
however, during John's cross-examination, the following exchange occurred:
Q. Okay. So since the assets were primarily under your control
during the marriage, why didn't you segregate them or
convert them on the deadlines as stated in the prenuptial
agreement?
A. Never came up.
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No. 75155-7-1 / 11
Q. So with all—
A. 1 was never asked by Jennifer. It never was brought to my
attention. I never considered it.
Q. Okay. Did you—then when you were providing Jennifer
funds, when you were putting money in her account, was
there any kind of support or information regarding what
money she was getting? Or did you just—
A. 1 just provided her funds. 1 didn't categorize them.
Thus, John clearly never intended to make a contemporaneous conversion. He
cannot now recharacterize _those transfers as something other than payments
from his separate account.
Because no conversions occurred, the prenuptial agreement provided the
marital community with a lien on John's separate property.23 And his payments
for community expenses from his separate account did not reduce the amount of
the lien the marital community had on his separate property because the
Agreement made those payments gifts to the community. We find John's
argument that the trial court erred in declining to deduct 2010 through 2011
community expenditures from the community lien similarly unpersuasive.
Jennifer's Request for Attorney Fees
RCW 26.09.140 provides that a court "may" award costs and attorney fees
for a party's appeal in a dissolution case "after considering the financial
23 See paragraph 1(d) of the Agreement: "[The marital community shall
have a community property lien on the party's separate property ... until the
appropriate changes in title are completed."
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resources of both parties." After reviewing the parties' financial declarations, we
exercise our discretion to deny Jennifer's request for fees.
Affirmed.
WE CONCUR:
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