In re Marriage of Mueller

• Court: Washington Court of Appeals
• Writing for the Court: Cox
• Citation: In re Marriage of Mueller, 167 P.3d 568, 140 Wn. App. 498 (Wash. App. 2007)
• Decision Date: 11 June 2007
• Docket Number: No. 57592-9-I.
• Parties: In re the MARRIAGE OF John E. MUELLER, Respondent, and Shauna W. Mueller, Appellant.

167 P.3d 568

140 Wn. App. 498

In re the MARRIAGE OF John E. MUELLER, Respondent, and Shauna W. Mueller, Appellant.

No. 57592-9-I.

Court of Appeals of Washington, Division 1.

June 11, 2007.

Publication Ordered September 17, 2007.

Catherine Wright Smith, Valerie A. Villacin, Edwards Sieh Smith & Goodfriend PS, Gordon Wilson Wilcox, Attorney at Law, Seattle, WA, for Appellant/Cross-Respondent.

William Lay Kinzel, Kinzel, Allen, Skone and Searing, Inc. P, Bellevue, WA, Charles Kenneth Wiggins, Shelby R. Frost Lemmel, Wiggins & Masters PLLC, Bainbridge Island, WA, for Respondent/Cross-Appellant.

COX, J.

¶ 1 In Washington, all property acquired during marriage is presumptively community property.¹ Spouses may by contractual agreement change their community property into separate property.² However, to recognize any such agreement, our courts have required clear and convincing evidence to overcome the heavy presumption of its character as community property.³ The name under which the property is held does not determine whether the property is community or separate.⁴ Moreover, and subject to limited statutory exceptions, either spouse may manage and control community property with a like power of disposition as the acting spouse has over his or her separate property.⁵ A spouse seeking to enforce an agreement that purports to convert community property into separate property must establish with clear and convincing evidence both (1) the existence of the agreement and (2) that the parties mutually observed the terms of the agreement throughout their marriage.⁶

¶ 2 Here, John Mueller fails to overcome the presumption that all property acquired during the marriage to Shauna Mueller is community property. We reverse and remand for further proceedings.

¶ 3 Shauna and John Mueller married in 1983 while both were living in Brazil. At the time, they both held full-time jobs. Although John earned more than Shauna, there was not a wide disparity in their incomes.⁷

¶ 4 In 1985, their only child, Mark, was born. Shauna took a leave of absence from her job with Citibank to care for their son. It is undisputed, and the trial court found, that in 1986, following the commencement of Shauna's leave of absence, the parties reached an oral agreement "to divide the remainder of [John's] income after the payment of joint expenses."⁸

¶ 5 The parties dispute the exact circumstances of this discussion. For example, they dispute where the conversation took place, whether Shauna was nursing their son during the conversation, who did what proportion of the talking, and exactly what was said. It is undisputed that they never put the agreement in writing.

¶ 6 Thereafter, the parties abided by the alleged oral agreement to varying degrees of consistency. The trial court noted in its findings specifically how they observed their oral agreement with respect to division of John's income after payment of joint expenses and Shauna's treatment of charitable donations.

¶ 7 After 19 years of marriage, and just after retiring, John commenced this dissolution proceeding. He took the position in this proceeding that the 1986 oral agreement in Brazil converted what was presumptively community property to separate property of each party.⁹ Shauna disagreed, arguing that the agreement did not have that effect.

¶ 8 Following a bench trial, the court concluded that the oral agreement changed the character of the property thereafter acquired during marriage to separate property. Based on that characterization, the court divided the property and made other determinations that are at issue on appeal.

¶ 9 Shauna appeals.

CHARACTERIZATION OF PROPERTY

¶ 10 Shauna challenges the division of property on several grounds. First, she contends there was no enforceable oral agreement to change the character of the property the parties acquired during marriage from community to separate. Second, she argues that if the oral agreement was effective to change the character of the parties' property, it should not be enforced because it was not fair. Third, she contends the property division is not fair and equitable, as Washington law requires in property divisions in dissolutions. Fourth, she argues that the trial court erred in considering evidence of John's unilateral intent in construing the agreement. Finally, she challenges several of the trial court's findings of fact.

¶ 11 We hold that there was no oral agreement changing the presumptive character of the property as community. Thus, we need not reach her other arguments.

¶ 12 The trial court's characterization of property as community or separate is a question of law that we review de novo.¹⁰ The factual findings supporting the court's characterization require substantial evidence to support them.¹¹ All property acquired during a marriage is presumed to be community property.¹² The law favors characterization of property as community property unless there is no question of its separate character.¹³

¶ 13 A spouse may overcome this heavy presumption with clear and convincing evidence of the property's separate character.¹⁴ Simply placing one's own earnings into a bank account in that spouse's name for management purposes is not sufficient to change the legal character from community to separate property.¹⁵ Likewise, one spouse's control over community funds does not change the character of the property.¹⁶

¶ 14 Spouses may change the status of their community property to separate property by entering into mutual agreements.¹⁷ These agreements may be oral or written.¹⁸ A spouse seeking to enforce an agreement, whether oral or written, that purports to convert community property into separate property must establish with clear and convincing evidence both (1) the existence of the agreement and (2) that the parties mutually observed the terms of the agreement throughout their marriage.¹⁹ Because oral agreements are more difficult to prove, courts will overturn an oral property agreement if the parties do not consistently adhere to the agreement during their marriage.²⁰

¶ 15 Courts interpret agreements between spouses like they do other types of contracts.²¹ In construing contracts, a court's objective is to determine the parties' mutual intent.²² Extrinsic evidence may be consulted to elucidate the meaning of the contract's terms, but not to contradict the objective manifestations of intent.²³

¶ 16 In a spousal agreement case such as this one, where the evidentiary standard is clear and convincing, we uphold the trial court's findings of fact if they are supported by "highly probable" substantial evidence.²⁴ Reviewing a trial court decision under this standard does not permit us to weigh evidence, which is a trial court function. We merely review the factual findings to determine whether they are properly supported by substantial evidence, and whether they in turn support the legal conclusions.²⁵

¶ 17 Shauna argues that the trial court erred in concluding that the agreement effectively converted community property into separate property. We agree and hold that John has not met his burden to overcome the community property presumption.

¶ 18 Washington courts have held "on several occasions" that placing one's paycheck into a bank account in that person's own name is insufficient to rebut the presumption that wages earned during a marriage are community property.²⁶ Likewise, a spouse's physical management and control over community property is allowed by statute and does not change its legal character.²⁷ More is required.

¶ 19 In contrast, the court in Dewberry v. George found clear and convincing evidence of an oral pre-nuptial agreement to convert each spouse's respective income into that spouse's separate property.²⁸ There, the terms of the agreement were "clear and simple."²⁹ One spouse testified regarding the terms, and "several witnesses" also testified knowing specifically about the oral pre-nuptial agreement.³⁰ This evidence supported the existence of four specific terms to which both parties had explicitly, orally agreed, including a provision that each party's income would be the separate property of that party.³¹ In addition, the court held that the parties "continually affirmed" the agreement with "painstaking and meticulous effort" over the years through their words and actions.³² Although the husband later denied the agreement, the trial court specifically found the wife's testimony more credible.³³

¶ 20 Here, John fails to provide clear and convincing evidence of the first element, the existence of the agreement. He has not proven that the parties agreed to change the legal status of his income from community property to separate property. Rather, he has only shown that they agreed to manage their community income separately.

¶ 21 The trial court made the following finding of fact:

It is undisputed that in 1986, after [Shauna] stopped working at Citibank, the parties entered into an oral agreement to divide the remainder of [John's] income after the payment of joint expenses. ("the Agreement' [sic]) The parties concur that the Agreement was intended to reduce fights between the parties regarding money matters.³⁴

This finding is supported by the record. No one challenges this finding to the extent of what it says.

¶ 22 But the trial court's legal conclusion, that this oral agreement to manage funds changed the legal character of the property, does not follow from this finding of fact. Unlike the wife in Dewberry, John offered no evidence that Shauna intended to change the legal ownership of the property. He did not mention the legal status of the property in his conversations with Shauna or explain to her that she would be waiving her community interest in his half of the income. There is simply no evidence in the record that this agreement to manage funds separately was any more than an agreement to manage their community property.

¶ 23 Shauna testified that she understood the...