In re Marriage of Sevigny
| Decision Date | 16 June 2020 |
| Docket Number | 36393-7-III |
| Court | Washington Court of Appeals |
| Parties | In the Matter of the Marriage of BEVERLY SEVIGNY, Respondent/Cross Appellant, and MICHAEL G. SEVIGNY, Appellant/Cross Respondent. |
Respondent Beverly Sevigny, filed a motion for reconsideration on May 11, 2020 of the opinion filed in the above matter on April 21, 2020. Appellant, Michael Sevigny, has filed a response to respondent's motion. The court has determined that respondent's motion for reconsideration should be granted, the opinion should be withdrawn and a substitute opinion be filed. Now, therefore, it is hereby
ORDERED that respondent's motion for reconsideration is granted. It is further
ORDERED that the opinion filed on April 21, 2020, is withdrawn and a substitute opinion be filed.
After 33 years of marriage, Beverly and Michael Sevigny separated and two years later, Beverly[1] filed for divorce. The trial court awarded Michael the marital community's interest in two ongoing businesses, a construction company and a real estate investment limited liability company (the "LLC"), that Michael and his oldest son started during the marriage and continued to manage after the parties' separation. Michael challenges the trial court's valuation of the LLC, arguing it was inappropriate to include real estate investments the LLC acquired after separation. Michael contends this error led to an excessive transfer payment of $707, 485 to Beverly, an amount he argues is an unfair and inequitable distribution of community and separate property. Finally, Michael maintains that, in light of the large property award Beverly received the trial court abused its discretion in ordering him to pay her maintenance of $6, 500 a month for 10 years. Beverly cross appeals the trial court's determination that her judgment against Michael will accrue interest at 4 percent.
We affirm the trial court's characterization of the couple's property, the property distribution, and the post-judgment interest rate. We reverse the award of maintenance and remand for reconsideration of the amount awarded.
Michael and Beverly married in 1979. Beverly briefly worked in retail before becoming a full-time, stay-at-home mother after their first child was born. In 1995, when their youngest child was in first grade, Beverly became a part-time substitute teacher, and five years later, she began working as a full-time paraprofessional, helping in the classroom with students. She also worked as a secretary for the school district.
Michael worked construction in his father's business until 2007, when he and his oldest son, Matthew, started their own construction company, M. Sevigny Construction Inc. In mid-2012, Michael and Matthew formed 16th Avenue Properties LLC (the "LLC") as equal partners and began acquiring income-producing real estate.
Michael and Beverly separated in February 2013, and Beverly filed for divorce in 2015. After a bench trial, the trial court divided $2.1 million in net assets as follows: Beverly received the family home in Zillah, a Hawaii timeshare, a vehicle, specific household goods, various bank accounts, deferred compensation accounts, and the parties' IRA accounts and life insurance policies. The trial court valued these assets at $572, 911.
Michael received the community's 50 percent interest in M. Sevigny Construction, valued at $775, 000, and its 50 percent interest in the LLC, valued at $341, 332. Michael also received the family's vacation cabin in Yakima, valued at $200, 000. Finally, the court deemed two distributions Michael had received from the LLC in 2016 and 2017, totaling $240, 000 after taxes, as predistributions of community assets. The total value of these assets was $1, 561, 082.
The trial court adopted Michael's recommended asset split of 60/40, favoring Beverly. The result was a final distribution to Michael of $853, 597 and to Beverly of $1, 280, 396. To effectuate this division of assets, the court required Michael to make a transfer payment of $707, 485 to Beverly. The trial court entered a judgment against Michael for this amount, plus an additional $10, 000 in fees awarded to Beverly, and set the interest rate on the judgment at 4 percent per annum. In addition, the court awarded Beverly spousal maintenance of $6, 500 a month until her 70th birthday.
Michael appeals, raising three main challenges to the trial court's division of assets. First, he argues the trial court erred in characterizing the LLC and the income-producing real estate the LLC purchased after the parties' separation as community property. He further argues the trial court erred in awarding Beverly any portion of the LLC's post-separation acquisitions. Second, he maintains the trial court erred in valuing the LLC as of the date of trial, rather than the date of separation. Finally, he contends the maintenance award is unjust and inequitable in light of the large transfer payment and the fact that Beverly received all the liquid assets in the divorce. He asserts that he is unable to pay Beverly $6, 500 each month, fulfill his own obligations, and satisfy the money judgment.
Michael assigns error to the trial court's characterization of the LLC as community property. Because Michael formed and capitalized the LLC before the couple separated, the trial court did not err in concluding Michael's interest in the LLC was community property.
Under RCW 26.09.080, in any dissolution proceeding, the court must dispose of the parties' property and liabilities, whether community or separate, as is just and equitable. In performing its obligation to make a just and equitable distribution of property, the trial court must characterize the property as either community or separate. In re Marriage of Kile, 186 Wn.App. 864, 875, 347 P.3d 894 (2015).
"Property is characterized as of the date of its acquisition." In re Marriage of Sedlock, 69 Wn.App. 484, 506, 849 P.2d 1243 (1993). "The test of character is 'whether it was acquired by community funds and community credit, or separate funds and the issues and profits thereof" Id. (internal quotation marks omitted) (quoting Katterhagen v. Meister, 75 Wash. 112, 115, 134 P 673 (1913)). "A trial court's characterization of property as separate or community presents a mixed question of law and fact." Kile, 186 Wn.App. at 876. The time and method of acquisition are questions for the trier of fact. Id. We review the factual findings supporting a trial court's characterization for substantial evidence. Id. '"Substantial evidence exists if the record contains evidence of sufficient quantity to persuade a fair-minded, rational person of the truth of the declared premise.'" In re Marriage of Griswold, 112 Wn.App. 333, 339, 48 P.3d 1018 (2002) (quoting Bering v. SHARE, 106 Wn.2d 212, 220, 721 P.2d 918 (1986)). The ultimate characterization of the property as community or separate based on the trial court's findings of fact is a question of law that we review de novo. Kile, 186 Wn.App. at 876.
The LLC was formed and capitalized during the marriage. Michael testified he and Matthew started the LLC sometime in 2012 and each owns a 50 percent share of that entity. The 2012 tax return for the LLC identified the date of business formation as June 26, 2012. The LLC's assets on the date of formation were a commercial building located at 1212 N. 16th Avenue, in Yakima, Washington[2] with a cost basis of $544, 250, and a separate parcel of land valued at $429, 660. There is no evidence in the record as to the source of funds Michael and Matthew used to capitalize the LLC or to purchase these two initial assets.
The LLC then acquired a parcel in Yakima with three rental houses located at 1607, 1611, and 1703 River Road on December 11, 2012.[3] The LLC's 2013 tax return identified the cost basis of this parcel as $378, 744. This acquisition also occurred during the marriage. Again, Michael presented no evidence as to the source of funds he and Matthew used to make this acquisition.
Finally, Michael admitted Beverly had a 25 percent ownership interest in the LLC, stating, "I've never disputed that." Beverly testified she and Michael planned to use the purchase of these properties as their retirement plan to compensate them over and above their wages. She also testified that she was asked to sign sale documents every time the LLC purchased or changed properties because she was part of that company. This evidence supports the trial court's conclusion that the marital community's 50 percent interest in the LLC was community property.
Michael next argues the trial court erred in valuing the LLC as of the date of trial, rather than the date of separation. He contends the LLC acquired several parcels of real estate after the couple's separation, emphasizing the trial court's finding that "the parties stopped acquiring community property and incurring community debt" when they separated in February 2013. He maintains the appreciation in the LLC's value should have been characterized as his separate property under RCW 26.16.140. We reject this argument because Michael did not prove he used separate property to enhance the value of the LLC.
All property acquired during marriage is presumptively community property. RCW 26.16.030; Kile, 186 Wn.App. at 876. "The burden of rebutting this presumption is on the party challenging the asset's community property status and [the presumption] 'can be overcome only by clear and convincing proof that the transaction...
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