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Result of Commingling Community and Separate Property

Posted on : August 8, 2016, By:  Christopher Hildebrand
Result of Commingling Separate and Community Property

Result of Commingling Community and Separate Property

Under Arizona law, when one spouse earns income from separate property, that income is usually considered separate property. However, if the spouse does not keep them separate from community funds, the court can treat them as community property.

In Franklin v. Franklin 253 P.2d 337 (1953) the Arizona Supreme Court addressed this issue.

Facts of the Case

Mrs. Franklin and Mr. Franklin married in 1917. Fred worked on the railroad and wife had separate funds from an inheritance. However, she did not keep these funds separate and apart from community funds.
Commingling Separate and Community Property
During the marriage, the couple bought a house in Tucson from wife’s father and paid for it with her inheritance. Mr. Franklin signed a quitclaim on it in favor of Mrs. Franklin. She received about $14,000 in rents from it during the marriage, but commingled the amounts with community funds.

The couple used community funds to buy a building in Gila Bend (worth $500) and a property on Fort Lowell Road. They improved both of these properties during the marriage.

In the divorce, the court awarded the Tucson house to Mrs. Franklin as her separate property. It gave each spouse a 50% interest in the Fort Lowell Road property. It gave the Gila Bend property to Mr. Franklin. It awarded wife a promissory note given by her sister when the couple lent her money. From this property division, wife appeals.

Status of Income from Separate Property

In Arizona, income earned from the separate rental property of one spouse is usually separate property. However, sometimes the spouse mixes the separate funds with community funds. If the funds are so mixed that it’s impossible to segregate them, the court treats all as community funds.

Here, wife made no attempt to segregate or keep track of her separate funds. Husband worked or received disability pay during the entire marriage and Mrs. Franklin intermixed their funds. Therefore, the trial court was correct in treating the Gila Bend and the Fort Lowell Road property as community property.

Alimony and Grandchild Support

The trial court denied Bernice’s request for alimony. The Supreme Court said that this was within its discretion, since she had income from the Tucson property.

The trial court also denied wife’s request for support for the couple’s grandchild. They had been taking care of the child as its de facto parents. However, the child’s father was alive and could take care of the child financially.

Disposition

The Arizona Supreme Court affirmed the trial court decision.


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