In re Marriage of Ream

In re the Matter of the Marriage of SARAH L. S. REAM Respondent, and PATRICK A. REAM, Appellant.

No. 36900-5-III

Court of Appeals of Washington, Division 3

July 29, 2021

UNPUBLISHED OPINION

Fearing, J.

Patrick Ream appeals various rulings of the trial court in his marital dissolution action. We reject all but one assignment of error. We agree that substantial evidence does not support the trial court's calculation of income of spouse Sarah Ream. At least, we are unable to determine if substantial evidence supports the calculation. We remand for reassessment of Sarah's income and redetermination of spousal maintenance since the maintenance award was based in part on the computation of her income.

FACTS

Patrick Ream and Sarah Ream married on June 30, 2001, in Spokane. The couple separated on May 7, 2017. Patrick and Sarah beget twin boys, who were fourteen years old at the time of the marital dissolution trial.

Patrick Ream, beginning in 2008, worked as a sales executive for FISERV, a technology firm that provides software to financial service companies. In 2003, Patrick and Sarah Ream collectively decided that Sarah would maintain the couple's household and raise their children in lieu of pursing a career. Accordingly, Sarah, a full-time school teacher, reduced her work hours and substitute taught working one to two days per week.

When hired at FISERV, Patrick Ream earned a base annual salary of $128, 000 with additional compensation in commissions. In 2017, while a director for FISERV, Patrick garnered $751 450. In the same calendar year, Sarah Ream earned $20, 000 as a substitute teacher. Because of Patrick's income, the parties lived lavishly. They purchased luxury vehicles collected expensive artwork, including Salvador Dali and Pablo Picasso paintings, and enjoyed luxury vacations.

Much of Patrick Ream's earnings derive from sale commissions. Pursuant to FISERV's policies, the employee must satisfy two milestones when selling a software product in order to reap a commission. First, the customer must sign a contract. On the signing of the sales contract, the salesperson garners fifty percent of his or her commission. The salesperson earns the second half of the commission when the software FISERV sold "goes live," which entails the installation and full operation of the software, at which time the customer's system begins generating revenue for FISERV. Report of Proceedings (RP) at 295. Patrick testified that FISERV remunerates salespeople with commissions for three reasons:

I believe there is the ability to reward high performing individuals. The second is to attract new talent, also trying to improve the talent that you have so you can achieve the stated goals of the company and we promote through sales that drives [sic] the stock price and then finally would be retention of high performing individuals.

RP at 343.

In April 2016 before the couple's separation, Patrick Ream approached BMO Harris Bank (BMO) to sell it FISERV software. On March 24, 2017, two months before the separation, Patrick sent BMO a draft contract to purchase FISERV software. On September 8, 2017, four months after Patrick and Sarah Ream's separation, FISERV and BMO signed the contract. Patrick received the first half of his BMO commission before trial on October 31, 2017. By trial in November 2018, the second half of Patrick's BMO commission remained unpaid as BMO had yet to implement FISERV's software.

During the marriage, Patrick and Sarah Ream acquired six tracts of Spokane residential real estate. The family home is located on E. 45th Avenue, and the other five properties, utilized as rental properties, are scattered nearby. Before trial, the parties stipulated to awarding Patrick one of the rentals and Sarah the family home on 45th Avenue and the remaining four rental residences.

Some of the trial testimony concerned the income Sarah Ream received from the four rentals. At trial, Sarah submitted financial declarations that listed her net monthly rental income as $1 000. She testified that she personally paid for rental housing expenses, including $500 for insurance, $737 in property taxes, $660 in a home equity line of credit, and $977 for the mortgage on one of the properties.

Patrick Ream calculated Sarah Ream's monthly rental housing gross income at $4, 950.00. Patrick found that Sarah's monthly profit from the four rental properties was $3, 379.40, by subtracting $1, 570.60 in monthly payments for mortgages, repairs, insurance, and taxes.

On the couple's separation, Sarah Ream returned to the teaching profession full time. Sarah secured a new, full-time position for the 2018-2019 school year, though she held no contract for this position at the time of trial in November 2018. She anticipated receiving a contract from the school district shortly after trial and expected that the contract would continue for additional years.

An October 2018 letter from the school district listed Sarah Ream's gross annual earnings at $72, 525.00 for the 2018-2019 school year. $72, 525.00 equates to a pretax monthly income of $6, 043.75. In her proposed child support worksheet, Sarah provided for deductions for taxes, union dues, and retirement contributions. Sarah also provided pay stubs to reflect past deductions. Accounting for her deductions, Sarah estimated her net monthly income from teaching at $3, 910.05 for the 2018-2019 academic year. Nevertheless, one of the financial records shows Sarah's deductions to be $1, 119.36 for taxes and $341.71 for teacher retirement systems contributions. With gross monthly income of $6, 043.75, Sarah, based on these deductions, would garner $4, 582.68 in net monthly wages.

Patrick Ream disagreed with Sarah Ream's calculation of her net monthly income from teaching. Patrick calculated the net wages to be $5, 741.32. Patrick emphasized that Sarah's September 2018 pay stub listed her gross monthly income as $6, 834.21, not $6, 043.75 as contended by Sarah. An unsigned and undated financial declaration of Sarah pegs her gross monthly income at $6, 834.21. Another document showed Sarah to earn $6, 634.31 in gross monthly wages. Patrick highlighted that Sarah's child support worksheets also indicated that her monthly gross income was $6, 834.21. Patrick disputed Sarah's claimed federal tax deduction of $2, 356.63 based on her teaching salary and rental income.

Patrick Ream computed Sarah Ream's net monthly income, when adding the rental income with the teaching wages, but excluding spousal maintenance, as $9, 120.72.

Sarah Ream paid pretrial attorney fees of $44, 354.24 by using her savings and credit cards. At trial, she testified that, after the filing of the marital dissolution petition, she reduced her living expenses, including ending cable television, to meet her postseparation and pretrial income. She formerly paid in full her monthly credit card invoices, but, after separation, she could no longer do so. At the time of trial, three credit cards had balances of around $1, 000 each and a fourth credit card carried a balance of $800. She estimated that she would owe an additional $30, 000 in attorney fees for trial.

Before trial, Patrick and Sarah Ream owed a 2017 tax obligation of $70, 683. Because trial was set for after the tax-filing deadline, the dissolution court ordered that the couple to pay the debt via a joint account. The trial court reserved the character of the tax debt for trial.

PROCEDURE

On June 12, 2017, Sarah Ream filed a petition for dissolution of marriage. On November 5, 2018, the petition proceeded to trial.

At trial, Patrick and Sarah Ream presented expert testimony to calculate the percentage of the first half of the BMO commission that should be deemed community property, since Patrick obtained the first payment postseparation. Patrick requested the application of the time rule to the first half of the BMO commission. Patrick 's expert witness, Scott Martin, a certified public accountant, characterized the time rule formula, utilized in In re Marriage of Short 125 Wn.2d 865, 872, 890 P.2d 12 (1995), as a formula for allocating stock options according to the employment services performed prior to and after the date the parties lived separate and apart. Martin characterized 75.19 percent of the first half of the BMO commission as community property and 24.08 percent of the payment as Patrick's separate property. Sarah's expert witness, Todd Carlson, agreed to this percentage as complying with the time rule.

During trial, Patrick Ream argued that the second half of the BMO commission should not be characterized as property distributed between the parties because he possessed no enforceable right to the commission at the time of trial. He lacked any entitlement to the second half of the commission because he could die, he could cease working for FISERV, BMO could be acquired, or the contract with BMO could terminate before FISERV owed the compensation. Patrick further argued that, assuming the dissolution court deemed the second half of the income to be a distributable asset, the commission was entirely his separate property, because he performed all of the labor necessary to earn the second payment after he and Sarah separated. This labor included oversight of the installation of the software.

Despite Patrick Ream's legal contention, his expert, Scott Martin, conceded that Patrick would likely receive the second half commission. The value of the second BMO commission installment totaled $316, 557.

During trial, Patrick Ream, despite the court's previous order reserving the character determination of the parties' 2017 tax liability, contended that, because the couple already satisfied their tax obligation by paying the IRS, the trial court did not need to decide...