Dewberry v. George

• Decision Date: 03 February 2003
• Docket Number: No. 50884-9-I.,50884-9-I.
• Citation: 62 P.3d 525,115 Wash.App. 351
• Parties: In re the Marriage of Carla M. DEWBERRY, Respondent, v. Emanuel E. GEORGE, Jr., Appellant.
• Court: Washington Court of Appeals

62 P.3d 525

115 Wash.App. 351

In re the Marriage of Carla M. DEWBERRY, Respondent, v. Emanuel E. GEORGE, Jr., Appellant.

No. 50884-9-I.

Court of Appeals of Washington, Division 1.

February 3, 2003.

Reconsideration Denied March 5, 2003.

Kenneth Master, Charles Wiggins, Wiggins Law Office, Bainbridge Island, WA, for Appellant.

Catherine Smith, Brendan Patrick, Edwards Sieh Smith and Goodfriend, Seattle, WA, for Respondent.

COLEMAN, J.

At issue in this dissolution case is whether an oral prenuptial agreement to treat income earned during marriage as separate property is enforceable. Because the trial court found by clear, cogent, and convincing evidence supported by the record that the parties fully performed their separate property agreement during their marriage, we conclude that their oral prenuptial agreement is enforceable. The trial court did not err when it characterized the parties' property acquired during marriage as separate property in accordance with the agreement. In addition, we conclude that the trial court did not abuse its discretion by allocating the parties' separate property to the spouse who acquired it. Accordingly, we affirm the trial court's property division. We also affirm the order of child support.

FACTS

Emanuel George, Jr. and Carla DewBerry started dating in 1980 while they were both living in California. DewBerry had just graduated from Boalt Hall School of Law and was working toward becoming a CPA at Arthur Andersen. George was a college-educated music industry executive.

In 1981, the parties were discussing marriage and George told DewBerry that, because a friend had been wronged in a divorce settlement and lost his house, he insisted on the following conditions of marriage: (1) DewBerry would always be fully employed; (2) each party's income and property would be treated as separate property; (3) each party would own a home to return to if the marriage failed; and (4) DewBerry would not get fat. DewBerry agreed to these conditions. This discussion took place in California, a community property state. Neither party was particularly wealthy at the beginning of their relationship. George and DewBerry married in 1986.

Between 1981 and 2000, George and DewBerry continually affirmed this agreement through words and actions. The record reflects painstaking and meticulous effort to maintain separate finances and property. During their marriage, DewBerry and George deposited their incomes into separate accounts which they used for their personal expenses and investments. In 1990, after the birth of their first child, they opened a joint checking account in order to handle certain agreed household expenses. George and DewBerry deposited a specified amount to the joint account, and they reimbursed their personal accounts from the joint account if they happened to use personal funds for household expenses. They took turns managing that account. By 2000, when George and DewBerry separated, they had accumulated minimal community property in the form of joint accounts and jointly purchased possessions. They held numerous investment, bank, and retirement accounts as individuals, and the spouse who had created and contributed to those accounts was considered the sole owner and manager of the assets in those accounts. The primary beneficiaries of their individual accounts were the parties' children, or alternatively, the estate of the spouse who funded them.

During their relationship, DewBerry purchased three houses as her separate property, securing financing separately in all instances by signing promissory notes or asking her sister to co-sign. The first house that she bought was a duplex in Oakland, which she purchased in 1982 in order to fulfill the third condition of the prenuptial agreement. The latter two houses, both located in Seattle, served as the family's primary residences. In accordance with the parties' agreement, DewBerry treated these houses as her separate property by paying for maintenance, improvements, and the down payment and mortgage with funds from her separate accounts. George paid DewBerry a set amount each month toward living expenses, such as utilities, and DewBerry repaid George for any maintenance costs he incurred. The only involvement George had with these properties was to sign documents at various times indicating either that he had no interest in the properties (the Oakland duplex and the first family home), or, in the case of the parties' most recent residence (the Thorndyke house), that he consented to being listed on the purchase documents as husband and wife per the bank's requirements. There was no intent that George be personally liable, however, for any of the indebtedness on the properties. George already owned real property in Texas and California that he had acquired before their marriage.

In 1985, DewBerry left Arthur Andersen to become an associate in a Seattle law firm. Meanwhile, George worked in sales and marketing in the entertainment and hospitality industries, and his salary was comparable to DewBerry's initial law firm salary, around $40,000 to $50,000 per year. By the 1990s, however, after DewBerry became a partner at her law firm, her annual salary increased rapidly, totaling over $1 million in 2000. Meanwhile, George's salary remained constant in the $40,000 to $50,000 range. Both parties worked full-time while sharing parenting responsibilities for their two children.

The trial court entered detailed findings of fact and conclusions of law regarding the parties' property and oral prenuptial agreement. Specifically, the trial court found by clear, cogent, and convincing evidence that the parties had entered into an oral prenuptial agreement, despite George's denial of the agreement's existence. The trial court also found that there had been "complete performance" of that agreement during the parties' marriage and, thus, the parties' property consisted primarily of separate property. The trial court ordered that the parties' property be divided roughly in accordance with its status as separate or community property. It awarded DewBerry $2.3 million, or approximately 82 percent of the parties' property, which consisted almost entirely of real and personal property that DewBerry had acquired during the marriage, as well as her pre-marriage separate property. George received property worth $600,000, consisting of his real and personal separate property from before and during the marriage, the bulk of the parties' community property, plus $300,000 cash from DewBerry's separate accounts. Part of the trial court's award to George consisted of a cash equivalent of 11 percent of the Thorndyke house value, or $74,250, based upon evidence of some commingling of property interests in the Thorndyke house (i.e., George's possible liability on the mortgage, his reliance on the house as a primary residence, and traceable community funds used for the down payment). The trial court also found that George was voluntarily underemployed because he had not worked full-time hours from January 2000 through September 2001, the time of trial. After he was laid off from Eddie Bauer in 1999, George began working the early morning shift from 4 A.M. to 7 P.M. at UPS because it provided steady income and benefits. It also allowed him flexibility to pursue a career as a longshoreman and spend time with his children. The longshoring work was assigned on a daily basis at a dispatch hall, but because George lacked union membership and senior status, he worked only one to two shifts per week. The trial court ordered George to pay child support based upon imputed income of $48,000, which is more than he currently makes in his part-time jobs, but which is less than his salary at Eddie Bauer. George appeals the trial court's property division and the order of child support.

DECISION

George argues that the trial court erred when it found by clear, cogent, and convincing evidence that an oral separate property agreement had been made by the parties prior to marriage and that it had been fully performed during their marriage, making it an enforceable agreement. He claims that such an agreement is void under Washington's community property laws and the statute of frauds. He also disagrees with the trial court's conclusion that "almost all of the property the parties own is separate property and it should be awarded to the person who obtained it." We find no error and affirm.

There is nothing in Washington law that prohibits parties from entering into prenuptial agreements that alter the status of community property. Furthermore, there is substantial evidence to support the trial court's findings and conclusions regarding the existence and complete performance of the parties' oral prenuptial agreement. Thus, the part performance exception to the statute of frauds applies and the parties' oral agreement is enforceable.

Oral separate property agreements made after marriage have consistently been enforced by Washington courts when clear and convincing evidence shows both the existence of the agreement and mutual observance of the agreement. See, e.g., Gage v. Gage, 78 Wash. 262, 138 P. 886 (1914) (holding that wife could pursue her wage claim as her separate property); Union Sec. Co. v. Smith, 93 Wash. 115, 160 P. 304 (1916) (insulating wife's separate earnings from husband's creditor); In re Estate of Janssen, 56 Wash.2d 150, 351 P.2d 510 (1960) and Togliatti v. Robertson, 29 Wash.2d 844, 190 P.2d 575 (1948). See also In re Estate of Martin, 127 Wash. 44, 49, 219 P. 838 (1923) (noting enforceability of oral separate property agreements made between spouses).

But Washington courts have not yet addressed a situation where parties have orally agreed prior to marriage to have a separate property agreement during their marriage. Accordingly, this is a matter of first impression, and we address both the statute of frauds and Washington law concerning prenuptial...