259 P.3d 256
Wash.2011Background
- Married since 1987; separation in 2004; PACCAR stock options (≈15,000) earned during marriage; CR 2A Agreement divided options but they remained with Daniel to exercise, Teresa to receive share.
- Daniel fraudulently exercised all community stock options before decree; Teresa unaware of withdrawal and later discovered proceeds; Daniel sold options for about $444,665.
- Final dissolution decree divided options but did not reflect that options had been exercised; Teresa sought CR 60(b) relief for damages to be made whole, based on present-value valuation.
- Teresa’s expert computed loss at $617,553 using projected growth; court awarded $487,325 present-value award; discount rate set at 6% after hearings and submissions.
- Court of Appeals affirmed; Washington Supreme Court affirmed, holding trial court did not abuse discretion and could use a present-value (tort-like) damages framework rather than a single universal stock-option valuation method.
- Dissent by Wiggins would adopt a different damages approach, arguing the award exceeded Teresa’s actual loss and urged evidentiary proof of her exercise intent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Damages measure for fluctuating stock options in dissolution | Farmer supports highest-value rule post-conversion | Farmer argues Langham requires value at conversion or just after | No single rule; present-value method permitted; court not bound to one approach |
| Whether present-value damages with 6% discount is appropriate | Teresa's expert valuation justified by equity and future value | Defendant challenged model as speculative | Court may use present-value approach; 6% discount upheld as reasonable |
| whether award is punitive or to restore pre-conversion position | Damages are restorative, not punitive | Damages could be punitive if misapplied | Damages construed as restorative; not punitive; equity-based remedy affirmed |
Key Cases Cited
- In re Marriage of Langham, 153 Wash.2d 553, 106 P.3d 212 (2005) (Wash. 2005) (authorized use of conversion-damages framework; value at time of conversion or thereafter)
- Brougham v. Swarva, 34 Wash.App. 68, 661 P.2d 138 (1983) (Wash. App. 1983) (damages for fluctuating-value property converted; highest value between conversion and reasonable time after notice)
- Greene v. Safeway Stores, Inc., 210 F.3d 1237 (10th Cir. 2000) (10th Cir. 2000) (evidence of optimal exercise timing can affect damages; consistency with intent)
- Scully v. U.S. WATS, Inc., 238 F.3d 497 (3d Cir. 2001) (3d Cir. 2001) (rejects speculative post-hoc exercise dates; evidence of intent required)
- Dailey v. North Coast Life Ins. Co., 129 Wash.2d 572, 919 P.2d 589 (1996) (Wash. 1996) (punitive damages disfavored; public policy against windfalls)