Smith v. Smith
| Decision Date | 14 April 1960 |
| Docket Number | No. 34891,34891 |
| Parties | Marion T. SMITH, Respondent, v. Viston R. SMITH, Appellant. |
| Court | Washington Supreme Court |
Rummens, Griffin, Short & Cressman, Seattle, for appellant.
Helsell, Paul, Fetterman, Todd & Hokanson, Mr. Richard W. Bartke, Seattle, for respondent.
The plaintiff wife obtained a divorce from the defendant on October 18, 1950. The property settlement agreement of the parties approved by the trial court was set forth, in part, in the divorce decree and provided as follows:
'1. The wife shall have as her sole and separate property the following:
'(a) The home of the parties hereto located at 925-35th Ave., Seattle, King County, Washington, legally described as:
'East 10 feet of Lots eight (8) and nine (9), and all of lots eleven (11) and twelve (12), block three (3), Washington Heights, an Addition to the City of Seattle, according to plat thereof recorded in Volume 3 of plats, page 110, records of King County, Washington; and, Lot three (3), block one (1), Randell's Addition to Seattle, according to plat thereof recorded in Volume 3 of plats, page 60, records of King County, Washington.'
'provided that if the wife shall at any time sell the said home, the wife hereby agrees that the husband shall be entitled to receive from all the net proceeds derived from the sale of the said home in excess of $6,500.00, the sum of $1,000.00 or 1/3 of said net proceeds in excess of $6,500.00, whichever of said sums is the lesser.'
On February 24, 1958, the plaintiff sold the above described property for the sum of ten thousand five hundred dollars, making no payment to the defendant. The defendant filed a motion for an order requiring the plaintiff to show cause why she should not account for proceeds from the sale of the house, and pay the sum of one thousand dollars to the defendant, in pursuance of the above provision in the divorce decree. The show cause order was issued. The case was submitted upon affidavits only.
It is admitted that at the time of the divorce the property was subject to a mortgage with a balance due thereon of $6,332.27, although no reference was made to the mortgage in the property settlement agreement or the divorce decree.
It is the defendant's contention that the purpose of the sixty-five hundred dollar payment to the plaintiff was to reimburse her for the mortgage she assumed on the property she received; that when the property was sold the sixty-five hundred dollar payment, plus expenses of sale, was to be deducted to arrive at net proceeds; that to deduct the sixty-five hundred dollars and also the mortgage, plus expenses of sale, would under no circumstances result in any net proceeds remaining, since the fair market value of the property at the time of the divorce was only eleven thousand dollars. Plaintiff denied there were any net proceeds.
The trial court found:
'* * * that the term 'net proceeds' as referred to in paragraph 1(a) of the Final Decree of Divorce herein means net proceeds remaining after payment of all expenses of sale and the mortgage as the same existed at the time of the entry of said Final Decree of Divorce, * * *'
The trial court concluded that there should be deducted from the sale price of ten thousand five hundred dollars, the mortgage as it existed at the time of the divorce, plus expenses of sale. This would then leave net proceeds, from which sixty-five hundred dollars should be deducted for the plaintiff wife, thereby exceeding the sale price and leaving no other proceeds of the sale. An order was thereupon entered dismissing the order to show cause from which the defendant appeals.
The sole question to be answered is: What is the meaning of the term 'net proceeds' as used in the divorce decree? Respondent argues that the term 'net proceeds' has a well-established meaning, and in this context means a sum of money received by a seller after the deduction of all obligations, which must be discharged before the transaction can be closed. A review of the authorities cited supports this contention. See Daly v. Crawford, 1932, 279 Mass. 262, 181 N.E. 396, 398, and Webster's New International Dictionary (2d ed.), p. 1643 (1954).
However, the property settlement agreement must be considered in the light of all the circumstances surrounding its execution, where there is an ambiguity. The ambiguity in the instant case is raised by the admission of the parties of the existence of a mortgage and balance due thereon in the amount of $6,332.27, whereas no mention is made of a mortgage in the property settlement agreement or the divorce decree; and by it further appearing the real estate in question has been treated by the court in its division of the property as an asset of the community free and clear of encumbrances. The failure of any mention of the mortgage in the property settlement agreement and divorce decree, supports the contention of the appellant that the $6,500 payment to the wife was in lieu of the balance due against the property by virtue of the existing mortgage.
The appellant correctly states the rule of construction that, where one construction would make a contract unreasonable, and another, equally consistent with its language, would make it reasonable, the interpretation which makes it a rational and probable agreement must be adopted. Ball v. Stokely Foods, Inc., 1950, 37 Wash.2d 79, 221 P.2d 832. Applying the above rule of construction to the property settlement agreement as implemented by the divorce decree, it is at once clear that the respondent's construction leads to an unreasonable and irrational result. The market value of the property was eleven thousand dollars at the time of the divorce. After paying off the mortgage balance of $6,332.27, which existed at the time of the divorce, and paying sixty-five hundred dollars to the respondent, the value of the property would be exceeded by $1,832.27, plus the costs of sale. For the appellant to enter into such an agreement, expecting to participate in the net proceeds of the sale of the property under such an interpretation, would be a useless act and would lead to an unreasonable and irrational result. The appellant's construction is reasonable and consistent with the language of the agreement, when considered under the circumstances surrounding its execution. The trial court erred in its construction to the contrary.
The respondent argues that it was the intention of the court to make provision for the support of the children in adjusting the property rights; that it was necessary for loans to be made against the property for the children's support to the extent that the respondent realized nothing whatsoever from the proceeds of the sale.
Undoubtedly, the trial court did have in mind to provide a home for the children in awarding the home to the mother. However, in the event of a sale, there were conditions attached whereby the appellant received a vested interest in the proceeds. This was a disposition of the community property. The rights of the parties thereto became final upon the entry of the decree, there being no appeal taken therefrom. Millheisler v. Millheisler, 1953, 43 Wash.2d 282, 261 P.2d 69. This interest of the appellant could not be appropriated by the respondent for child support. If the changed conditions asserted by the respondent require an increase in the support money payments, her remedy would be by an application to the trial court for a modification of the divorce decree.
On the basis of the above interpretation of the proviso in the divorce decree, as to the meaning of 'net proceeds,' and from an examination of the record, the following would be a correct accounting of the proceeds of the sale by the respondent:
Gross Sale Price $10,500.00
Expenses of Sale
Real Estate Commission .............. $525.00
Title Insurance ....................... 55.00
Excise Tax ........................... 105.00
Revenue Stamps ......................... 8.40
Real Estate Tax Proration ............. 19.70 713.10
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Net Sale Price ................................ $ 9,786.90
Less Payment to Respondent ...................... 6,500.00
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Net Proceeds in Excess of $6,500.00 ........... $ 3,286.90
One-third of the excess of Net
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