§ 65.04 APPELLATE REVIEW IN PRACTICE
This section sets out how the appellate courts have applied the standards of review in particular substantive areas subject to appeal in family law cases. In each substantive practice area, examples of how the courts have addressed the issue are provided after a general review of the relevant principles.
[1] Characterization of Property
The characterization of property as separate or community is one of the few family law issues subject to de novo review. Characterization of property as a viable issue on appeal is militated by three discretionary, fact-based considerations:
First, characterization is often dependent upon facts about timing and nature of acquisition that are subject to the substantial evidence test. Schwarz v. Schwarz, 192 Wn. App. 180, 368 P.3d 173 (2016).
Second, separate property is subject to no special consideration or privilege in the division of the marital estate, in which all property of the parties, community and separate, is before the court under RCW 26.09.080. In re Marriage of Larson & Calhoun, 178 Wn. App. 133, 313 P.3d 1228 (2013), review denied, 180 Wn.2d 1011 (2014).
Third, the trial court's division of property will be affirmed if it is clear that the trial court would have reached the same result regardless of the character of the property. In re Marriage of Shannon, 55 Wn. App. 137, 777 P.2d 8 (1989).
The following cases reflect these principles:
IN RE ESTATE OF BORGHI, 167 Wn.2d 480, 219 P.3d 932 (2009). A divided Supreme Court reversed the trial court's characterization of real property as community. Wife had purchased the real property on contract approximately nine years before marrying husband. Within three months after their marriage, the contract was fulfilled, and a deed was issued conveying the property to both husband and wife. Husband and wife resided on the property as their primary residence for 15 years. After wife died intestate, a dispute arose between husband and wife's son from a prior marriage as to the character of the real property. The probate court ruled that the real property was community property, which would pass to husband under intestate succession.
In reversing the probate court, the majority opinion rejected the "gift presumption" articulated 17 years earlier in In re Marriage of Hurd, 69 Wn. App. 38, 848 P.2d 185, review denied, 122 Wn.2d 1020 (1993), stating that it was "adher[ing] to the well-settled rule that no presumption arises from the names on a deed or title." Because no presumption arose from the manner in which the real property was titled, the court held that the real property was wife's separate property because it was acquired before the parties married.
SCHWARZ V. SCHWARZ, 192 Wn. App. 180, 368 P.3d 173 (2016). Division III affirmed in part and reversed in part the trial court's characterization of property. When the parties married, they each separately owned substantial property. Both parties intended to keep their assets and finances separate during the marriage, but they failed to keep detailed records of the segregation of their community earnings from their separate assets.
One of the assets at issue was an IRA in husband's name. Husband was unable to provide records of the IRA prior to marriage, but testified that it had been opened prior to marriage and presented evidence that there had been only four post-marriage contributions to the IRA. The trial court found that 86 percent of the IRA was husband's separate property, and 14 percent of the IRA was community property.
The parties also disputed the character of two IRAs and one investment account in wife's name. The trial court found that wife had failed to rebut the presumption that the IRAs were community property. It also found that the investment account had been so hopelessly commingled with community property that the entire account was community property.
In affirming the trial court's characterization of the IRA in husband's name, the court held that there is a presumption that an asset possessed by a married person is community property if there is no evidence to establish the particular date of acquisition. The court described this presumption as "not a very strong presumption and is one that may be easily overcome." The court thus held that the presumption that the IRA possessed by husband during the marriage was community property was "weak" and that he overcame the presumption by testifying credibly that it was started before marriage.
With regard to the characterization of wife's assets, the court reversed the trial court's determination that the IRAs in wife's name were community property. The court noted that the trial court's decision was premised on its finding that wife's tracing was "convoluted or confusing." But it concluded, based on evidence that was largely undisputed, that despite an "extraordinary amount of evidence" to sift through, wife had traced the IRAs to her separate property and, thus, rebutted the presumption that they were community property.
The court also reversed the trial court's characterization of wife's investment account as entirely community based on the trial court's conclusion that it had been commingled with community property. The court held that wife's burden did not require her to provide exhaustive records showing every deposit and withdrawal into the multiple bank and stock brokerage accounts. The standard of "clear and convincing" evidence never requires irrefutable evidence; it does not even require proof beyond a reasonable doubt. It does require positive evidence, direct or circumstantial, that makes a proposition highly probable.
The court thus held that, based again on evidence that was largely undisputed, wife had met her burden of tracing a portion of the investment account to her separate property. Although the court recognized that the tracing may not have permitted an exact apportionment "to the penny" between separate and community property, this was not an excuse for the trial court to not apportion it. The court held, "any reasonable approach to apportioning is acceptable and in arriving at final figures, the benefit of the doubt can be given to the community." Because the court reversed the trial court's characterization of three of the assets, the court remanded for the trial court to modify its characterization and revisit its property distribution.
BYERLEY V. CAIL, 183 Wn. App. 677, 334 P.3d 108 (2014). Division II reversed the characterization of a house owned by the parties. Prior to the parties' moving in together and marrying, husband purchased a home as a "single person." During their cohabitation, wife contributed labor and funds toward the home. The trial court found the home to be "community-like," based on its determination that the parties had been in a committed intimate relationship prior to marriage, and awarded the home to husband.
The appellate court reversed because the undisputed evidence proved that the home was acquired prior to the parties' cohabitation. The court held that the character of property is determined at the date of acquisition and, regardless of the parties' dating relationship, a committed intimate relationship cannot commence prior to the date the parties begin living together. The court recognized that although the mischaracterization of the house did not necessarily require remand, because the trial court divided only the community and community-like assets equally, it was unclear whether the trial court would have made the same distribution had it properly concluded that the house was separate property.
IN RE MARRIAGE OF KILE & KENDALL, 186 Wn. App. 864, 347 P.3d 894 (2015). Division III reversed the trial court's characterization of certain property owned by the parties as separate property. During the parties' 28-year marriage, husband had farmed 1,517 acres pursuant to market-rate leases with wife's father—property that, at the father's insistence, had been leased or titled in wife's name as her separate property. Shortly after wife filed for divorce, her father terminated the farm lease agreement and directed wife to turn over the farming operation to the parties' son.
The court reversed the trial court's characterization of the farming operations, equipment, and property acquired through the farm operation as wife's separate property, noting that wife did not have separate property that could be used to capitalize a farming operation and that her interest had not pre-dated the marriage. Wife's evidence did not overcome the presumptively community character of the farm and equipment lease and operation managed by husband or of property acquired during the marriage with farm revenues. The trial court had, however, correctly characterized forgiveness of balances due under an equipment lease by wife's father as a separate gift for which wife was entitled to be reimbursed. Noting that the trial court might not have awarded 80 percent of the community property to husband had it properly characterized all the property, the court remanded for reconsideration of the property division in light of the properties' correct characterization and for reconsideration of husband's maintenance request in light of the ultimate distribution of property.
[2] Valuation of Property
Valuation, unlike characterization, is subject to a substantial evidence standard. As long as there is any evidence in the record to support the trial court's valuation, it will be affirmed. For instance, in In re Marriage of Wright, 179 Wn. App. 257, 319 P.3d 45 (2013), review denied, 180 Wn.2d 1016 (2014), the husband challenged the trial court's valuation of the husband's goodwill in his surgical practice because it was located in Alaska and not "saleable" under Alaska law. After holding that the trial court did not abuse its discretion in finding that Washington law should apply, Division I affirmed the trial court's valuation, as it was premised on evidence...
