Seattle Attorneys Blog
Property division can be complicated when the parties to a Washington divorce co-own property with a third party. In a recent case, a wife appealed a property division that did not consider the mortgage on the wife’s brother’s share of the property in the valuation.
The husband petitioned for divorce in 2019. According to the opinion of the appeals court, the parties purchased a piece of property with the wife’s brother during the marriage. The parties paid cash for their 50% interest, while the wife’s brother took out a mortgage.
At trial, the husband testified he did not think there was any debt on the wife’s interest in the property. The wife’s brother testified he paid for his share of the property with a mortgage, but testified if he were to default, “it’s her responsibility.”
The wife argued the husband overvalued the property by not factoring in the lien. She said she “help[ed] pay for some of [the mortgage].” She acknowledged the mortgage was in her brother’s name, but said that she signed something saying she would “take responsibility” if he could not pay. She also said she paid $375 each month for “property taxes and other parts of the mortgage.” She did not, however, provide a copy of the document she said she signed or evidence that the money she paid went to the mortgage.
In its order dividing the property, the court gave the wife 60% and the husband 40% of all real community property. The trial court concluded the parties’ interest in the property was community property and ordered the wife to pay the husband 40% of their interest in the property without deducting the mortgage when calculating the value of the parties’ interest.
There were a number of hearings. The court ultimately adopted an appraisal for $585,000 and did not deduct the mortgage before calculating the value of the community interest. Half of the value of the property was $292,500. The court then required the wife to pay the husband $117,000, representing his 40% of the parties’ 50% interest.
The wife appealed, arguing the court erred in finding she was not liable for the mortgage. She therefore argued the court should have deducted the mortgage from the total value of the property before determining the value of the parties’ 50% interest.
The court had valued the community’s interest in the property at $292,500. The appeals court concluded substantial evidence supported this finding. The wife and her brother testified the wife was secondarily liable for the mortgage and had made payments. The appeals court noted, however, that the wife did not provide any documentation to support the testimony and the mortgage documents only listed her brother’s name. The husband had testified he did not think the wife was responsible for the mortgage. The appeals court concluded that a rational person could conclude the wife was not liable for the mortgage.
The wife argued that the mortgage encumbered the whole property, even if she was not liable for it. She argued the mortgage should have been deducted from the total value before the court calculated the parties’ 50% interest.
Washington law presumes property bought by two or more people is bought as tenants-in-common, unless something to the contrary is specified. Each cotenant has a separate interest and can sell, convey, or mortgage that interest.
The appeals court noted the parties and the wife’s brother bought the property together and there was no evidence it was purchased as anything other than as tenants-in-common. They therefore had a separate title and estate in the property. The brother could take out a mortgage on his own interest that would not encumber the parties’ separate interest in the property.
The appeals court found no error in the court’s conclusion the parties were not liable for the mortgage and that their interest was unencumbered by the mortgage. There was therefore no abuse of discretion in not subtracting the mortgage before calculating the value of the parties’ interest.
The appeals court affirmed the trial court’s judgment, but remanded so the trial court could correct a clerical error.
This case was complicated by the parties’ ownership of property with someone else. If you are facing divorce with complex assets, contact an experienced Washington divorce attorney to help you protect your assets. Call Blair & Kim, PLLC, at (206) 622-6562 to set up a consultation.