In re Marriage of Griswold

• Decision Date: 27 June 2002
• Docket Number: No. 19896-1-III.,19896-1-III.
• Court: Washington Court of Appeals
• Parties: In re the MARRIAGE OF Helen J. GRISWOLD, Appellant, and Michael T. Griswold, Respondent and Cross-Appellant.

48 P.3d 1018

112 Wash.App. 333

In re the MARRIAGE OF Helen J. GRISWOLD, Appellant, and

Michael T. Griswold, Respondent and Cross-Appellant.

No. 19896-1-III.

Court of Appeals of Washington, Division 3, Panel Seven.

June 27, 2002.

Reconsideration Denied July 26, 2002.

Martin L. Salina, Salina, Sanger & Gauper, Spokane, for Appellant.

Mary E. Schultz, Amy L. Robinson, Spokane, for Respondent.

KATO, A.C.J.

Both parties to this marital dissolution action are appealing the superior court's distribution of property. The primary issues involve the court's characterization of an employment bonus and lawsuit settlement proceeds that the husband received after the parties separated. The husband also contends the property distribution was inequitable. The wife raises eight other miscellaneous issues involving the court's distribution. We affirm.

Helen J. Griswold and Michael T. Griswold were married in 1983. Mr. Griswold earned a bachelor's degree in accounting and a master's degree in business administration after the parties married. Ms. Griswold worked throughout the marriage. By the 1990s, she was operating a small business, from which she earned about $12,000 per year.

Mr. Griswold began working for Washington Water Power Company as a financial analyst in 1989. In the years 1992 to 1996, Mr. Griswold's wages, including bonuses, ranged from about $42,000 to about $62,000. In 1997, he began working as an energy trader with Avista Energy, with an annual salary of $75,000. He became the senior power trader in 1998, and his earnings increased to $219,000, consisting of $120,000 in salary and the rest in bonuses.

The parties separated on November 2, 1998. Ms. Griswold filed this action, and the court conducted a trial in October and December 2000. The court entered a decree of dissolution and other related documents in January 2001. In its initial findings of fact and conclusions of law, the court awarded each party all of his or her separate property and half of the community property. On reconsideration, the court awarded to Ms. Griswold $138,000 of Mr. Griswold's separate property. Both parties appeal the court's distribution of the marital property.

We first consider the trial court's characterization of an employment bonus Mr. Griswold received in 1999. Pursuant to an incentive plan that Avista Energy implemented in 1998, Mr. Griswold received a bonus of $980,772 in March 1999, just a few months after the parties separated. This amount was comprised of several elements: (1) $32,358 was based on the company's total performance during 1998; (2) $35,035 was called "holdback and discretionary," which was a reserved amount to be paid out at year's end based on nonquantitative employee criteria; (3) $5,372 was called a "Q4 bonus," which was an amount awarded to traders involved in long-term contracts; (4) $848,006 was called the "super trader award" or "special trader award," which was based on the value of an individual trader's "book";¹ (5) $60,000 was to mitigate Mr. Griswold's concerns about being shorted by the bonus plan and to give him an incentive to remain at Avista Energy. To be eligible for a bonus under Avista Energy's plan, a trader was required to remain employed at the time the bonus is paid.

Mr. Griswold's bonus thus was based primarily on the value of his book. Because electricity prices fluctuated dramatically,² the resulting value of his book also fluctuated dramatically. Mr. Griswold testified that the base figure for the "super trader award" increased by $620,000 from November 2, 1998, when the Griswolds separated, to the end of the 1998 calendar year, when the bonus amounts were calculated. He testified that he completed 1,200 to 1,500 trades during that two-month period. One of those was the so-called "Enron sale" of electricity that he had purchased in October 1998, yielding a profit of $4.2 million.

In characterizing the Griswolds' property, the trial court held that the bonus would be calculated on a pro rata basis from January 1, 1998, through November 2, 1998 (the date of separation). The court thus concluded that 84 percent of the bonus was community property and 16 percent was Mr. Griswold's separate property. The court awarded to Mr. Griswold all of his separate portion of the bonus and half of his community portion.

Both parties are appealing the court's characterization of the bonus.

In a dissolution action, the court must make a "just and equitable" distribution of the marital property. RCW 26.09.080. A trial court has broad discretion in distributing the marital property, and its decision will be reversed only if there is a manifest abuse of discretion. In re Marriage of Kraft, 119 Wash.2d 438, 450, 832 P.2d 871 (1992). All of the parties' property, both community and separate, is before the court for distribution. In re Marriage of Olivares, 69 Wash.App. 324, 328, 848 P.2d 1281, review denied, 122 Wash.2d 1009, 863 P.2d 72 (1993). Factors to be considered are: (1) the nature and extent of the community property; (2) the nature and extent of the separate property; (3) the duration of the marriage; and (4) the economic circumstances of the parties. RCW 26.09.080. In applying these factors, the court first must characterize the marital property as either separate or community. Olivares, 69 Wash.App. at 329, 848 P.2d 1281.

A court's characterization of property as either separate or community is a question of law subject to de novo review. In re Marriage of Skarbek, 100 Wash.App. 444, 447, 997 P.2d 447 (2000). However, factual findings upon which the court's characterization is based may be reversed only if they are not supported by 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." Bering v. SHARE, 106 Wash.2d 212, 220, 721 P.2d 918 (1986),cert. dismissed, 479 U.S. 1050, 107 S.Ct. 940, 93 L.Ed.2d 990 (1987).

Assets acquired during a marriage are presumed to be community property. In re Marriage of Short, 125 Wash.2d 865, 870, 890 P.2d 12 (1995). This presumption may be rebutted by showing the assets were acquired as separate property. Id. Spouses' earnings and accumulations during a permanent separation are considered separate property. Id. at 871, 890 P.2d 12; RCW 26.16.140.

In Short, our Supreme Court addressed the question whether employee stock options, which were unvested during the spouses' marriage but became vested during their separation, should be characterized as separate or community. The court applied the so-called "time rule":

To determine how unvested employee stock options are characterized under RCW 26.16, a trial court must first ascertain whether the stock options were granted to compensate the employee for past, present, or future employment services. This involves a specific fact-finding inquiry in every case to evaluate the circumstances surrounding the grant of the employee stock options. Unvested employee stock options granted during marriage for present employment services, assuming the parties were not "living separate and apart" under RCW 26.16.140 when the stock options were granted, are acquired when granted. Unvested employee stock options granted for future employment services are acquired over time as the stock options vest. See In re Estate of Binge, 5 Wash.2d 446, 484, 105 P.2d 689 (1940).

Short, 125 Wash.2d at 873, 890 P.2d 12.³

Mr. Griswold contends the bonus is his separate property because he received it after the separation. He presents essentially two arguments for why the time rule should not apply here. First, he contends his book had no inherent value because of the market volatility and the need for discretionary decisions by the trader. But the fluctuating value of property and the continued need for discretionary decisions do not render the property valueless. As even Mr. Griswold recognizes, the book had a specific, though fluctuating, value on specific dates.

Second, Mr. Griswold contends the bonus had no value when the parties separated (or even, presumably, at the end of the calendar year) because his receipt depended on satisfaction of the requirement that he remain employed at the time the bonus was paid. But the unvested stock options in Short, to which the court applied the "time rule," also were contingent on continued employment. Short, 125 Wash.2d at 871, 890 P.2d 12; see also In re Marriage of Stachofsky, 90 Wash. App. 135, 145, 951 P.2d 346,

review denied, 136 Wash.2d 1010, 966 P.2d 904 (1998). This requirement alone does not preclude application of the "time rule."

The "time rule" requires a trial court to determine, as a matter of fact, whether the benefit is conferred for past, present, or future services. Short, 125 Wash.2d at 873, 890 P.2d 12. Here, the court impliedly found Mr. Griswold's bonus was compensation for his services during 1998, and this finding is supported by substantial evidence.⁴ Mr. Griswold likens the bonus to severance pay, which "carries with it no contractual right to a payment that arises after a certain number of years of employment and which will definitely be paid in the future." In re Marriage of Bishop, 46 Wash.App. 198, 201, 729 P.2d 647 (1986). In Bishop, the court held that severance pay received after the marriage was the separate property of the receiving spouse, recognizing that "[i]t is something of value over and above the community's contribution, and cannot truly be considered as having been onerously traded by the community." Id. at 203, 729 P.2d 647. Here, by contrast, the trial court impliedly found that Mr. Griswold's bonus was compensation for his services in 1998. His services thus were "onerously traded" by the community during the period when the community existed. Bishop's reasoning does not apply.

Mr. Griswold's arguments have no merit.

Ms. Griswold, too, objects to the court's application of the "time rule."...