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Diana v. Guardado

Court of Appeals of Washington, Division 2

August 22, 2017

DIANA V. GUARDADO, Respondent,
v.
OTTO M. GUARDADO, Appellant.

          Maxa, A.C.J.

         Otto Guardado appeals the trial court's modification, pursuant to CR 60(b)(11), of a 2008 dissolution decree entered in an action dissolving his marriage to Diana Guardado. The decree had awarded Otto[1] the couple's house but did not remove Diana's obligation on the house's mortgage. Because the obligation adversely affected Diana's credit, the court modified the dissolution decree by ordering Otto to sell the house. However, Diana filed her CR 60(b)(11) motion not in the dissolution action, but in a separate action in which she alleged that Otto breached an oral contract to remove her name from the mortgage.

         We hold that the trial court erred in granting Diana's CR 60 (b)(11) motion because it did not have authority under CR 60(e)(1) to modify the dissolution decree in the separate breach of contract action. In the unpublished portion of this decision, we discuss Otto's additional arguments and we vacate the trial court's award of attorney fees to Diana. Accordingly, we reverse and vacate the trial court's modification of the dissolution decree and award of attorney fees to Diana, and we remand for further proceedings.

         FACTS

         Dissolution and Property Distribution

         In 2008, Otto and Diana filed an action in Skamania County to dissolve their marriage. The trial court entered a dissolution decree on October 17, 2008. The couple's primary asset was the family home in Vancouver. The decree awarded the property to Otto as his separate property and allocated to him liability on a mortgage secured by the property. The decree did not include a provision for removing Diana from the mortgage. Diana apparently also remained on the title.

         Mortgage Payments and Modification

         Otto had trouble making mortgage payments. Diana claimed that he missed 42 payments through 2012. During this time, the mortgage's principal balance was greater than the house's value.

         In 2012, Otto sought to modify the mortgage. As part of this process, Otto wrote a letter requesting that Diana be removed from the loan. The bank required that Otto obtain a quit claim deed from Diana for her interest in the property. Diana executed the quit claim deed in November 2012 under the belief that her name would be removed from the mortgage. The bank modified the mortgage in April 2013, restructuring the loan and extinguishing Otto's delinquent payments. However, the modification did not remove Diana from the mortgage.

         Diana apparently was never forced to make any mortgage payments herself. But Otto's failure to make mortgage payments adversely impacted Diana's credit.

         Diana's Breach of Contract Lawsuit

         In October 2014, Diana filed a lawsuit against Otto in Skamania County for breach of contract. She alleged that she and Otto had a verbal contract that Otto breached by not removing her from the mortgage. She requested damages, attorney fees, and other just and equitable relief.

         On April 14, 2016, the parties proceeded to trial. Both parties testified on the first day of trial, and Diana rested.

         The trial court then requested that the parties submit additional briefing on two issues. First, the court stated, "I want to know what authority the court has to order specific performance, in equity, when I would be effectively resulting in modifying [sic] a divorce decree." Report of Proceedings (RP) at 85. Second, the court asked, "[W]hat authority, absent any agreement between the parties, expressed or implied, do I have to modify a decree, if equity demands it?" RP at 85. The court clarified, "I want to know, if they didn't have that oral contract, what authority do I have in equity to make it happen anyway?" RP at 86.

         Both parties submitted briefing on April 29, the second day of trial. Diana also filed a motion for relief from the dissolution decree pursuant to CR 60(b)(11), requesting that the court order Otto to refinance or sell his house. Diana filed the motion under the cause number for the breach of contract action, not under the cause number for the parties' dissolution.

         Trial Court Ruling and Judgment

         At the end of the second day of trial, the court ruled that "[a] dissolution decree . . . can be vacated or modified for extraordinary circumstances to overcome a manifest injustice, under CR 60(b)(11)." RP at 151. The court noted that the dissolution decree did not address the situation if Otto fell behind in mortgage payments or could not remove Diana's name from the mortgage, and that Diana had been harmed as a result. The court concluded that "[t]he easy, simple, elegant solution to this problem . . . is simply to sell the house." RP at 153. Therefore, the court found extraordinary circumstances under CR 60(b)(11) to modify the dissolution decree.

         The trial court ordered Otto to sell the house "to give meaning to the [hold] harmless provision [in the dissolution decree], and to bring this matter to a close, in equity." RP at 155-56. The court entered findings of fact and conclusions of law reflecting this ruling. The court also awarded reasonable attorney fees to Diana because it found that Otto had acted in bad faith "by inducing the plaintiff to sign a quitclaim deed, and in withholding the easy solution to the harm he caused the plaintiff." Clerk's Papers (CP) at 348. ...


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