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Cash Compensation for the Other Spouse’s Waste of Community Assets

Posted on : December 27, 2016, By:  Christopher Hildebrand
Cash Compensation for the Other Spouses Waste of Community Assets

Cash Compensation for the Other Spouse’s Waste of Community Assets

Arizona law gives family courts authority to divide community property equitably between divorcing spouses. This can mean giving one spouse more property if the other has wasted or disposed of community assets. But how about money? Can a court order one spouse to pay the other money to compensate for a waste of community assets? In Martin v. Martin, 752 P.2d 1038 (Ariz. 1988), the Arizona Supreme Court addressed this issue.

Facts and Procedure

Mrs. Martin and Mr. Martin were married for 29 years and traveled widely for Mr. Martin’s job. In 1979, husband’s work took him to California. The couple bought a retirement home in Arizona. Wife moved there in December 1979 and husband sent her living expenses and paid the mortgage. Throughout the next three years, Mr. Martin had total control over the parties’ assets. In 1982, wife sued for dissolution.

In April 1983, the parties stipulated that Mr. Martin would pay Mrs. Martin temporary monthly maintenance payments of $1,725. Under the same agreement, Mr. Martin got the authority to withdraw certain amounts from their joint savings accounts.

Cash Compensation for the Other Spouses Waste of Community Assets.

Cash Compensation for the Other Spouses Waste of Community Assets.

In the decree of dissolution, the trial court divided the parties’ community property. The court awarded assets totaling $184,843 to wife and $215,211 to the husband. He also ordered Mr. Martin to pay Mrs. Martin $46,688. This represented her share of the community income earned during their three years of separation. It was based on their gross income with certain deductions, like tax payments and mortgage payments.

 

The trial court ordered the husband to pay Mrs. Martin the additional sum of $9,473. The court found that he withdrew more money from the community accounts than was allowed under the order. Husband appealed.

The Court of Appeals ruled that trial court did not have the authority to make money awards. It reversed the awards of $46,688 and $9,473 and remanded the case to the superior court for entry of a revised judgment.

The Supreme Court accepted Mrs. Martin’s petition for review.

Arizona Law

The Arizona Supreme Court reviewed the statutes setting out a superior court’s authority in a divorce case. The statutes direct the superior court first to assign each spouse his or her sole and separate property.

Next, they direct the court to equitably divide community property and other property held in common. When dividing the property, the statute allows the court to consider wrongful, unreasonable and improper uses of the common property.

The court can compensate one spouse for the misuse of the common property by the other. The statute specifically allows it to award the innocent spouse a greater share of community property to offset the lost property.

The Supreme Court found a clear legislative intent to ensure a fair division of common property. The Court also noted another statutory method to compensate an innocent spouse for the misuse or destruction of common property by the other. Under A.R.S. § 25-319(B)(11), the superior court can consider excessive or abnormal expenditures as factors in making an award of spousal maintenance. The trial court, in this case, did not award wife more marital property to compensate her for any dissipation. Nor did it factor the dissipation into a larger award for maintenance.

The trial court simply arrived at the amounts improperly expended and ordered Mr. Martin to pay Mrs. Martin her share.

Hildeband Law, PC.

Authority to Order Money Judgment

The Arizona Supreme Court cited its ruling in Weaver v. Weaver, 643 P.2d 499 (1982). That case held that no Title 25 statute authorized monetary compensation to one spouse for the destruction of separate property by the other.

However, the present case does not involve separate property but community property. In statutory interpretation, the courts must determine and give effect to the legislative intent. Here, however, the history of the statute does not provide assistance in determining its meaning. It came from the Uniform Marriage and Divorce Act but was amended extensively. Therefore, the Court found little assistance from the uniform act.

Instead, the Court analyzed the language used in the statute to describe its purpose. Its obvious purpose was to provide a standard for the disposition of community and common property in a dissolution proceeding.

The core is an equitable division of property made without regard to marital misconduct. However, under the law, a court can consider excessive or abnormal expenditures of the community property. The court can make the division of property equitably. It does not necessarily need to be made in kind.

Financial Compensation for Waste of Community Assets by a Spouse.

Financial Compensation for Waste of Community Assets by a Spouse.

This language supports the position that the statute authorizes the court to make a compensatory award of money. Sometimes, the Supreme Court noted, it is impossible to effectively divide the property of the spouses.

The statute authorizes the court to make an equitable division of property in that case. It can award the property to one spouse and money to the other spouse representing that spouse’s share of the property. Similarly, A.R.S. § 25-318(C) allows a court to impress a lien upon the marital property awarded to a spouse. This can be done to secure the payment the other spouse’s interest. And A.R.S. § 25-318(A) permits the court to award a sum of money to one spouse to compensate for their interest in community assets awarded to the other.

The Court found that this authority also allows a money award for the value of community assets dissipated by one spouse. It found case law to that effect from Delaware, Maryland, and Missouri. The Supreme Court ruled that this should also be the rule applied in Arizona.

Disposition

The Arizona Supreme Court vacated that portion of the opinion of the Court of Appeals dealing with the issue decided here. It affirmed the judgment of the superior court.


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