Unequal Division of Property and Assets in a Divorce in Arizona
When a marriage ends in divorce in Arizona, the couple’s community property is usually divided equally between them. However, in rare cases a superior court judge can decide that an even split this is not a fair division and that some items of community property should be awarded to one spouse.
In the case of In Re Marriage of Flower, 225 P.3d 588 (Ariz. Ct. App. 2010) the Arizona Court of Appeals discussed when a divorce court can divide community property equitably instead of equally.
Judy and Norman Flower married in 2006 when she was 55 and he was 76. Just over a year later, he asked the court to annul the marriage, claiming that she never loved him romantically but was only interested in obtaining his property. She counter sued for divorce.
During the brief marriage, Norman transferred his residence, the “Sugar Creek” house, to both of them as community property, then took out a line of credit on that house to make improvements to Judy’s separate residence, the “Queen Valley” house, where the two of them planned to live. Judy did not transfer her house to community property.
Norman asked the divorce court to give him back the Sugar Creek house rather than dividing it between the spouses. The court did give Norman the Sugar Creek house, but also held him liable for part of the loan taken to fix up Judy’s house. Judy appealed.
The Sugar Creek House Was a Gift by Norman to Marriage
Judy argued that the superior court was wrong in giving the Sugar Creek house to Norman. The general rule in Arizona is that this type of property transfer – from separate property to community property – constitutes a gift to the other spouse. A spouse arguing that a transfer was not a gift must prove that he did not intend it to be a gift when he made the transfer, a showing Norman was not able to make. Therefore, Judy argued, the superior court had to divide the Sugar Creek house equally.
However, the Court of Appeals rejected her argument. Had Norman proved that he didn’t intend to make a gift, the house would clearly be his separate property. However, the Court noted that sometimes community property can be distributed equitably, rather than equally.
Superior Courts Have Authority to Divide Community Property Equitably
In Arizona, community property implies equal ownership, so in most cases, it is fair to divide jointly held property equally. However, the Court of Appeals said, under the Arizona Supreme Court decision in Toth v. Toth, an equal division is not always equitable.
The Court noted that determining what is “equitable” depends on the facts of a particular case. Under Toth v. Toth, an Arizona divorce court has broad authority to decide which spouse gets particular community assets and debts in some cases.
Marriage Length Is Just One Factor to Consider
Judy argues that because her marriage lasted 13 months – over one year – the Toth v. Toth ruling allowing an equitable rather than an equal division does not apply. But the Court of Appeals said that marriage length was just one factor a superior court could look at to make the determination.
The Lower Court Reviewed Appropriate Factors in Unequal Division of Property
The Court of Appeals noted that the superior court in charge of the Flower divorce considered appropriate factors in determining who should get the Sugar Creek house.
First, the superior court looked to the source of funds used to acquire the community property house and the contributions made by each spouse toward the improvement of it. Usually community property is money earned during the marriage by both spouses, and community property real estate is purchased with money earned during the marriage.
In this case, Norman bought the house with his own separate funds before the marriage and Judy did not contribute money or labor toward fixing it up at all. The property did not benefit from the marriage at all, and in fact its value diminished because of the loan taken out on it that was used to fix up Judy’s separate property.
The superior court also considered the improvements made to Judy’s separate residence by the couple. Most of the some $60,000 of improvements came from a home equity loan on the Sugar Hill house.
Generally, when community funds are expended to improve the separate property of one spouse, the community has a claim for reimbursement of that money. An equal division of these debts would result in both Judy and Normal ending up with on one-half of the total debt and each being awarded one-half of the value of the improvements made.
But the Court of Appeal said, an equal division was not required. The superior court allocated about $42,000 of the debt the couple incurred to fix up the Judy’s house to Norman, the other $16,000 to Judy. It also awarded the value of the improvements to Judy.
In making the overall division of community property, the Court of Appeals found, the superior court balanced the equities of the situation. The Court declined to second-guess the court and affirmed its decision.