In re Bresnahan

• Decision Date: 15 March 2022
• Docket Number: 53695-1-II
• Citation: 21 Wash.App.2d 385,505 P.3d 1218
• Parties: In the Matter of the Marriage of Maurice J. BRESNAHAN, III, Appellant, and Kathleen M. BRESNAHAN, Respondent.
• Court: Washington Court of Appeals

21 Wash.App.2d 385

505 P.3d 1218

In the Matter of the Marriage of Maurice J. BRESNAHAN, III, Appellant,

and

Kathleen M. BRESNAHAN, Respondent.

No. 53695-1-II

Court of Appeals of Washington, Division 2.

Filed March 15, 2022

Kevin Hochhalter, Olympic Appeals PLLC, 4570 Avery Ln Se #c-217, Lacey, WA, 98503, for Appellant.

Gary Manca, Philip Albert Talmadge, Talmadge/Fitzpatrick, 2775 Harbor Ave. Sw, Third Floor, Suite C, Seattle, WA, 98126, Chris D. Maharry, Harbor Family Law Group, P.O. Box 2416, Gig Harbor, WA, 98335-4416, for Respondent.

PUBLISHED OPINION

Glasgow, A.C.J. ¶ 1 Kathleen M. and Maurice J. Bresnahan III¹ married in 1992 and separated in 2014. In 2015, the trial court entered a decree dissolving their marriage, and the parties divided their property by settlement agreement, which the trial court adopted. In 2017, the parties reached another agreement and entered a stipulation to distribute funds Maurice had failed to previously disclose.

¶ 2 In 2018, Kathleen moved to vacate the decree and the 2017 stipulation after discovering three additional accounts worth over $300,000 that were not disclosed during the parties’ settlement negotiations. The trial court found that Maurice had misrepresented his assets and engaged in misconduct, and it ultimately vacated both the property distribution in the dissolution decree and the 2017 stipulation under CR 60(b)(4) and (11). The trial court awarded Kathleen attorney fees incurred in litigating this motion to vacate based on Maurice's intransigence.

¶ 3 Maurice appeals, arguing the trial court abused its discretion and applied an incorrect legal standard when it concluded that he had a duty of disclosure and failed to recognize that Kathleen had a concomitant duty of due diligence. Spouses have a fiduciary duty to disclose the existence of all their assets prior to dissolution. The scope of that duty is not determined by the other spouse's diligence. We therefore hold the trial court did not abuse its discretion. We also hold the trial court properly awarded Kathleen reasonable attorney fees.

¶ 4 We affirm and award Kathleen attorney fees on appeal.

FACTS²

I. SETTLEMENT NEGOTIATIONS AND PROPERTY DIVISION

¶ 5 During their 23-year marriage, Kathleen raised the couple's two children while Maurice worked in public media. The parties moved multiple times for Maurice's job, including to Illinois and South Carolina. After the parties separated, Maurice moved from Washington back to Illinois. Kathleen later followed so that the children could be closer to Maurice.

¶ 6 During the dissolution settlement negotiations, Maurice e-mailed Kathleen information about their financial assets. On September 3, 2014, he offered to "review with [her] all of [their] accounts" and to send "a list with recent balances." Clerk's Papers (CP) at 311. On September 21, 2014, Maurice again said, "I'll send you a rundown of all our assets." CP at 314. He told Kathleen, "We're not wealthy, but I hope there's more there than you expect." Id.

¶ 7 On October 4, 2014, Maurice said, "Attached is our financial info. Retirement accounts, bank[ ] accounts, mutual funds, etc." CP at 316. The attached list referenced an "SC 401k" account, presumably a retirement account from the parties’ time in South Carolina. CP at 317. It did not reference any Illinois retirement accounts or other South Carolina retirement accounts. The same is true of lists that Maurice's counsel provided. An April 2015 e-mail from Maurice's counsel says Maurice "advise[d] that [Kathleen] was given a list of all assets." CP at 323.

¶ 8 Maurice proposed a settlement that excluded the "value of any Illinois retirement contributed by [Maurice] since his arrival there," presumably meaning any retirement contributed since Maurice returned to Illinois after the parties’ separation. CP at 335. In an offer sent in August 2015, two weeks before the scheduled trial, Maurice again mentioned a South Carolina 401(k) account but did not mention any specific retirement account from Illinois, a second South Carolina retirement account, or a Heartland Funds account. Maurice's only reference to an Illinois account was a sentence indicating that Maurice "would receive the entirety of his retirement funds at his current employment in Illinois." Id.

¶ 9 The trial court entered findings of fact and conclusions of law listing the parties’ community property and separate property. A tax deferred account from the "[South Carolina] Retirement System" worth approximately $116,000 was listed as community property. CP at 32. All of the corresponding documents suggested that this South Carolina account was a 401(k) account. Maurice's separate property was described as "[a]ny property acquired by him since the date of the parties’ separation including any interest in State of Illinois SERS [State Employees’ Retirement System] pension account and Busey Bank account in Illinois with a balance of approximately $3,800 as of the date of trial." Id.

¶ 10 In the division of property, Maurice was awarded the Busey Bank account, Illinois SERS pension account, and South Carolina Retirement System account, among other accounts. Kathleen was otherwise awarded 57 percent of the marital property. Maurice's counsel read the settlement agreement into the record, and the parties ratified it. Kathleen indicated she believed it was a fair agreement. The trial court applied the parties’ agreement when it distributed property in the dissolution decree.

II. 2016 MOTION TO VACATE AND 2017 STIPULATION

¶ 11 In January 2016, Kathleen received mail from Busey Bank addressed to Maurice Bresnahan. Because her son shares a name with Maurice, and Maurice no longer resided at that address, Kathleen assumed that the mail related to her son's account with Busey Bank and opened it. She saw that the December 2015 account balance was nearly $144,000 and soon realized that this statement was for her ex-husband's account. Because the balance of this account had increased by roughly $140,000 between when the parties reached a settlement agreement in August 2015 and when they signed the final papers in December 2015, Kathleen moved to vacate the dissolution decree.

¶ 12 Kathleen subpoenaed Busey Bank and learned that approximately $56,000 of this money had been in a cashier's check from an undisclosed bank account that Maurice had opened with TCF Bank. According to Kathleen, Maurice used the undisclosed TCF account "to deposit and accumulate community property" during the dissolution proceedings. CP at 238. He then closed out the TCF Bank account on August 10, 2015, approximately one week before the scheduled trial, with a cashier's check for the total balance of the account, and he held this cashier's check during the settlement negotiations. He then deposited the funds in the Busey Bank account, which he had opened on August 3, 2015. Kathleen said that Maurice described this error as "a miscommunication, misunderstanding, and/or oversight." CP at 57.

¶ 13 The trial court found there was sufficient evidence to warrant an evidentiary hearing to determine where the additional Busey Bank account funds came from and "whether Mr. Bresnahan misrepresented his assets." Suppl. Clerk's Papers (SCP) at 930. The trial court ordered an evidentiary hearing "to determine whether [Maurice] had unclean hands or if there was a legitimate explanation," but this hearing never occurred. CP at 411.

¶ 14 In 2017, the parties entered a stipulation whereby Maurice would pay Kathleen $48,000 "as full settlement for previously undisclosed funds that existed at the time of dissolution held in the TCF account and subsequently deposited into the Busey Account." CP at 44. Part of this settlement amount, $10,000, had been awarded to Kathleen in the dissolution decree but had not yet been transferred. The agreed amount was also intended to cover some of Kathleen's costs and attorney fees associated with her motion to vacate.

¶ 15 The 2017 stipulation included a provision stating, "In the event that any previously undisclosed or omitted assets are discovered, those funds shall also be divided 57% to [Kathleen] and 43% to [Maurice]," which was duplicated verbatim in the order. CP at 45, 47. Both parties acknowledged that the agreement was "not intended to address the transfer of retirement/investment accounts as set forth in the Decree of Dissolution." CP at 45. The trial court signed the agreed order attached to the stipulation. Kathleen entered the 2017 stipulation believing that any other failures to disclose were inadvertent.

III. 2018 MOTION TO VACATE AND CURRENT PROCEEDINGS

A. Discovery of Additional Previously Undisclosed Accounts

¶ 16 After moving to Illinois, Kathleen filed a petition for disabled adult support. As part of the discovery process for this petition, Kathleen received a statement for an Illinois State Universities Retirement System account, or SURS account. A subpoena revealed that the SURS account in Maurice's name had been certified in 1992, during the parties’ marriage, and that it was worth nearly $125,000 in 2015. Kathleen claimed she was not previously aware of this account because Maurice had never disclosed its existence.

¶ 17 The dissolution decree had awarded Maurice an Illinois SERS account, or State Employees’ Retirement System account. After discovering the SURS account, Kathleen was unsure whether Maurice actually had a SERS account, or whether that designation in the dissolution decree was erroneous. When Kathleen asked Maurice about the discrepancy, he "claimed that the decree intended to award him the SURS account, but that it was ‘misspelled due to a scrivener's error.’ " CP at 58. During the dissolution negotiations, however, Maurice had represented that the only retirement account he had in Illinois was from a job that he began after the parties separated, and while the SURS account accrued during the marriage, the decree identified the SERS account as postseparation property. Additionally, "SERS and SURS...