In re the Marriage of Farmer
259 P.3d 256
Wash.2011Background
- Married Daniel and Teresa Farmer separated in 2004 and executed a CR 2A agreement dividing community assets, including about 15,000 PACCAR stock options Daniel had received during the marriage; options were nontransferable and both parties retained rights to choose when to exercise their shares.
- Daniel fraudulently exercised all PACCAR stock options before entry of the dissolution decree and Teresa’s share was not disclosed; Daniel netted about $444,665 from sale.
- The dissolution decree allocated Teresa half of the community stock options based on the CR 2A agreement, unaware that the options had already been exercised and no longer existed.
- Teresa sought relief under CR 60(b) to recover damages, presenting Nelson’s expert valuation ($617,553) based on projected future gains.
- The trial court awarded Teresa damages based on present value of the converted options; court discounted to present value and entered judgment for Teresa; Daniel appealed.
- Court of Appeals affirmed, deferring to the trial court’s equitable discretion to make Teresa whole.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of damages for converted stock options in dissolution | Teresa: use tort-style damages to restore as if not converted | Daniel: adopt a uniform rule (highest value or other) for fluctuating stock | Damages may use a tort-measure framework; no single rule governs all cases. |
| Whether present-value (discounted) calculation is permissible | Teresa: present value appropriately reflects loss | Daniel: present-value method alone may overstep fairness | Present-value method supported; court did not abuse discretion. |
| Whether the discount rate used was appropriate | Teresa's expert rate (6%) reflects risks in holding options | Daniel argued for higher rates (15–20%) | Court properly adopted 6% discount rate; did not abuse discretion. |
| Whether damages were speculative or properly evidenced | Teresa: damages grounded in credible expert analysis | Daniel: Daubert-like critique; evidence speculative | Damages based on expert calculations; not speculative. |
| Attorney fees under CR 2A Agreement | Teresa seeks fees due to Daniel's bad-faith conduct | Daniel challenged none of the fee basis | Fees awarded as authorized by the CR 2A Agreement. |
Key Cases Cited
- In re Langham, 153 Wn.2d 553 (Wash. 2005) (damages for conversion measured to make victim whole; vectors of fluctuating value discussed)
- Brougham v. Swarva, 34 Wn. App. 68 (Wash. App. 1983) (damages for conversion of fluctuating-value property may use highest value after notice)
- Scully v. US WATS, Inc., 238 F.3d 497 (3d Cir. 2001) (rejects overly speculative post-hoc exercise timing; requires credible evidence of intent)
- Greene v. Safeway Stores, Inc., 210 F.3d 1237 (10th Cir. 2000) (evidence of intent to exercise can support damages without speculation)
- In re Marriage of Kraft, 119 Wn.2d 438 (Wash. 1992) (abuse-of-discretion standard in dissolution remedies)
- In re Marriage Wright, 147 Wn.2d 184 (Wash. 2002) (lump-sum vs pay-as-it-comes valuation approaches in property divisions)