A Claim of Waste in an Arizona Divorce for the Loss of Equity in a Home
The Short Answer
The short answer to the question can there be waste of the equity in a marital home in Arizona is, yes, the court will recognize a claim of waste of the equity in a home during a divorce in Arizona; either because a spouse did not take care of the home or intentionally losing equity in the home due to a foreclosure that could have been avoided by making the house payments. To learn more, read on about the Arizona Court of Appeals decision in the case of Woehler vs. Stough.
The Long Answer
The Arizona Court of Appeals in the case of Woehler vs. Stough had to address whether a spouse in a divorce case in Arizona can
be awarded a larger share of the proceeds from the sale of a home based upon the theory that the equity in the home was reduced because of the wasteful conduct of the other spouse. Mr. Woehler (“Husband”) and Ms. Stough(“Wife”) were married in 1992 and acquired their marital residence approximately eleven years later in 2003. The term “acquired” is used because the residence was transferred to them by a deceased friend and the deed remained in the deceased friend’s name throughout the twelve years of Husband and Wife’s marriage. In July 2015, both parties filed for dissolution. In October 2015, at a resolution management conference, Wife was given 60 days exclusive use of the marital residence at which time the residence would be prepared for sale. It was during this time in December 2015 that Wife requested that a Special Real Estate Master (“Special Master”) be appointed to sell the residence. The reasons were given for requesting a Special Master were that the deed was still in the deceased friend’s name and Husband had not recorded the deed and even denied possessing it.
Wife asserted that these conditions would make the residence harder to be sold. The request for the Special Master was originally denied by the court, but one was appointed in March 2016 and the court also ordered Husband to record the deed no later than March 29 of that year. Husband recorded the deed April 14 of that year. Just three months later, on July 26, 2016, the residence was sold at a trustee’s sale for $360,000, with $153,000 remaining after satisfying the mortgage. The case for dissolution and the case for the sale of the property were consolidated.
During the trial for dissolution in February 2017, both Husband and Wife requested attorneys’ fees and costs under A.R.S. § 25-324 as well as an unequal distribution of the proceeds from the sale of the residence with each party requesting they be given a higher percentage of the proceeds than their partner. They each felt they had valid reasons for requesting the unequal distribution. Husband requested that he be given a higher percentage of the proceeds because he claimed Wife had exclusive use of the property for 60 days and failed to maintain it, which caused the property to decrease in value. Wife requested that she be given a higher percentage of the proceeds because she claimed that Husband was in control of the mortgage information and foreclosure notices and she had no notice of the trustee’s sale until the Special Master informed her of that situation in April of 2016.
She claimed that the decreased value of the residence was because Husband had stopped making mortgage payments and thus caused the foreclosure and subsequent devaluing of the property. Husband said that Wife had a copy of the deed and could have recorded it at the beginning of the proceedings. Wife said Husband told her she had to have the “original” for recording and even though the court ordered him to record by March 29, he didn’t record it until April 14. Wife also claimed that Husband continued to delay the sale of the residence even after the recording of the deed which eventually caused the foreclosure action. Prior to the trustee’s sale, the house had been valued at between $400,000 and $485,000 according to a market analysis showing the sales of comparable homes.
The Court Finds Husband’s Actions are Waste
The decree of dissolution was issued in family court in March 2017. The court found that Husband’s actions of delay were intentional and had caused the foreclosure which caused the property to be sold for a lesser price. The court awarded Wife the $122,500 she had requested from the excess proceeds. The court also awarded Wife attorneys’ fees and costs (though they did not determine the amount at that time) due to the fact that Husband had acted “unreasonably” during the litigation by causing delays in multiple situations. The court directed its order as, “a final appealable order under Arizona Rule of Family Law Procedure 78(B)” which is a certificate of finality. Husband appealed the decree of dissolution in April 2017 but did not file a notice of appeal for the award to the wife of attorneys’ fees and costs, which the court ultimately awarded in the amount of $22,000 in May.
Because Husband filed an appeal in April 2017 and the family court had not determined the amount of Wife’s attorneys’ fees and costs until May 2017, the court lacked jurisdiction to deal with that portion of Husband’s appeal. Husband was actually premature in his appeal. On the matter of the court awarding Wife an unequal distribution of the excess proceeds, the court “will not disturb family court rulings absent a clear abuse of discretion”. Husband used a variety of arguments against the family court in their award of unequal distribution of the residential proceeds to Wife. Husband’s lengthiest argument claimed that the reasons for the family court award of unequal distribution did not match exactly to the wording in A.R.S. § 25-318(C). He also insisted that the factors, in this case, did not match exactly with the factors in several cases provided for comparison. For these reasons, Husband argued that the family court had abused its discretion.
Husband also argued that both parties, through neglect, had caused the decline in the property and thus its lower value. He also contended that the decision by the family court to award Wife a larger portion of the proceeds was based solely on Husband’s tardy recording of the deed and that Wife should have recorded the deed herself. He argued that the late recording of the deed did not diminish the value of the property and that the family court did not have sufficient proof that the property could have sold at a higher price. Following the trustee’s sale in 2016, the civil division under A.R.S. § 33-812, divided the excess proceeds of the sale equally between Husband and Wife. Husband argued that family court should have honored that decision. Husband’s arguments were answered.
In the separate civil division proceeding where the proceeds from the sale of the property were evenly distributed between Husband and Wife, the civil division is bound by A.R.S. § 33-812 which “requires” that the proceeds be divided equally. However, under A.R.S. § 25-318(A), the family court is required to divide community property “equitably, though not necessarily in kind”. In Husband’s argument that the wording and situations did not match in A.R.S. § 25-318(C), the court found that family court did not abuse its discretion in awarding Wife more of the proceeds, since A.R.S. § 25-318(C) takes in, “any other equitable factors that bear on the outcome of an equitable division”. Wife provided multiple reasons, to include Husband’s purposeful delay, ignoring and misleading tactics to justify an unequal division of proceeds. It was found that family court did not abuse its discretion.
Wife was awarded the requested amount of $122,500 from the excess proceeds obtained through the sale of the parties’ marital residence and $22,000 in attorneys’ fees and costs. The appellate court affirmed.
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