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Determining if a Household is Separate-Property or Community Property in Arizona

Posted on : December 28, 2016, By:  Christopher Hildebrand
Determining if a Household is Separate Property or Community Property in Arizona

Determining if a Household is a Separate-Property or Community Property in Arizona

In Bowart v. Bowart, 625 P.2d 920 (1980) the Arizona Court of Appeals addressed the issue of property division.

Mrs. Bowart and Mr. Bowart married in Arizona in 1969. Mrs. Bowart had substantial assets before marriage. She was a beneficiary of the estate of a successful Gulf Oil founder, her grandfather, and her father’s estate.

Her trust fund income totaled some $250,000 per year. Mr. Bowart was a writer and publisher. He received sporadic income from his writing efforts. Before marriage, wife purchased real estate known as the Old Sabino Canyon Road property. She paid for it with her own funds and took title her name alone.

Determining if a Household is Separate-Property or Community Property in Arizona.

Determining if a Household is Separate-Property or Community Property in Arizona.

During the marriage, the couple bought various pieces of real estate. One was known as the Snowmass property. They held it as joint tenants with right of survivorship. Mrs. Bowart fronted all funds for the property, and the couple agreed to split profits when it was sold.

During the marriage, they bought another property called the Aspen property for $618,306.46. They financed it by assuming a mortgage of $148,308.46, trading in the Snowmass property, and obtaining a $420,000 loan. The loan, signed by both Mrs. Bowart and Mr. Bowart, was from the Mellon Bank and secured by Mrs. Bowart’s separate property.

Like the Snowmass property, the Aspen property was purchased with the understanding that Mrs. Bowart would pay for it and all profits would be split. After the court entered a dissolution order, both spouses appealed.

The appeals largely concerned three pieces of real estate, the Old Sabino Canyon Road property, the Aspen property and the Barnes property.

The Old Sabino Canyon Road Property

The trial court ruled that Mrs. Bowart owned the Old Sabino Canyon Road property as her separate property.

Husband claims that the court should have awarded the community a lien for the improvements made on the property. He claims that funds in the household account were used to pay for the improvements. The Court of Appeals disagreed. It held that when separate funds are placed in the joint checking account, no gift presumption arises.

Here, the household account came almost entirely from Mrs. Bowart’s separate trust funds. Husband’s contributions were sporadic and meager and they did not make the entire household account community property. Mr. Bowart also claims that Mrs. Bowart told him that the Old Sabino Canyon Road property was his home as well as hers.

Mrs. Bowart admitted this but said that she did not mean legally. In addition, wife took the title in her own name, prior to marriage, and paid for it entirely. This sustains the trial court’s ruling.

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The Aspen Property

The trial court ordered the Aspen property to be sold for the first bona fide cash offer of at least $900,000. From the proceeds, Mrs. Bowart was to be reimbursed from the proceeds of sale for sums she paid towards the Aspen property, including the $420,000 borrowed from the Mellon Bank and the interest she had paid on the loan since December 31, 1978.

Mr. Bowart now claims that awarding wife her investment before dividing the property was an error. However, both spouses testified that there was an oral agreement between them regarding the Aspen property. The trial court simply followed its terms.

Mr. Bowart makes an argument the oral agreement was unenforceable under the statute of frauds. The Court rejected this since the statute of frauds effects property sales, not property division agreements. It also disagreed with his argument that the trial court lacked jurisdiction to order the sale of the Colorado property.

The trial court had in personam jurisdiction over the parties. A.R.S. Sec. 25-318(A) provides that the court shall divide joint tenancy property equitably. This gives the court the authority to order a sale of the property such as was done here.

Wife claims she should have been awarded reimbursement for the interest she paid on the Mellon Bank loan before December 31, 1978. The Court of Appeals agreed with this position.

The Barnes Property

The real estate known as the Barnes property was held in joint tenancy. The trial court found that Mrs. Bowart, who paid for the property, made a gift of one-half of it to Mr. Bowart. There was no agreement regarding reimbursement of Mrs. Bowart’s contribution.

Mrs. Bowart claims that she is entitled to reimbursement for the separate funds she spent on the Barnes property. She paid the mortgage and taxes totaling over $15,000. Arizona law provides that when one joint tenant expends sums to benefit the other joint tenant, she is entitled to reimbursement. Mrs. Bowart is therefore entitled to a reimbursement in the amount of $15,457.24.

Spousal Maintenance

The trial court ordered Mrs. Bowart to pay Mr. Bowart spousal maintenance of $2,000 per month for 15 months and $12,500 for attorney’s fees and costs. Husband claims he should have more spousal maintenance, while wife argues for less.

Figuring Out if a Household is Separate-Property or Community-Property in Arizona.

Figuring Out if a Household is Separate-Property or Community-Property in Arizona.

The Court found that the spousal was appropriate. It noted that after an appropriate length of time, Mr. Bowart should be self-supporting. It also found that the trial court was correct in not granting him attorney’s fees incurred after trial and on appeal. The Court found that Mr. Bowart had received substantial property in the divorce.

The trial court could have concluded that he was able to pay his own attorney’s fees.

Disposition

The Court of Appeals modified the judgment to include reimbursement to Mrs. Bowart for all interest amounts paid for the Mellon Bank loan. It also amended the judgment to award wife $15,457.24 for separate fund payments on the Barnes property and to impose a lien on Mr. Bowart’s portion of the Barnes property in that amount. The Court affirmed the judgment as modified.



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