Dividing Property Not Included in Arizona Divorce Decree
One purpose of a divorce proceeding in Arizona is to divide up martial property between the spouses. However, the superior court cannot divide a property if the spouses omit mention of it in the case. Whether the court can later step in to resolve disagreements between the ex-spouses about the disposition of that property depends on several factors.
In the case of Thomas v. Thomas, 205 P.3d 1137 (Ariz. Ct. App. 2009) the Arizona Court of Appeals discussed whether a superior court has authority to order one former spouse to transfer an interest in real property to the other when the couple deliberately omitted the property from the divorce case.
James and Jonnie Thomas divorced in 1998 after 38 years of marriage. At the time of their divorce, they owned a condominium in California. They made their own agreement about what would happen to the condominium, and deliberately chose not to mention it to the superior court handling the divorce or to mention it in the divorce agreement.
Their private accord about the California property went awry seven years after the divorce and James brought the matter to the attention of the divorce court, asking it to order Jonnie to give him half of the equity in the condominium. The lower court made the order, but the matter was appealed to the Court of Appeals.
The California Condo Was Not Mentioned in the Divorce Decree
In the Thomas case, the couple made the deliberate decision not to mention the California condominium in the divorce. They opted to keep it in both their names and divide the use of it between them.
After the divorce, James wanted to take out a loan on another property the couple owned together and asked Jonnie to transfer her interest in that property over to him to allow him to get the loan. In exchange, he gave her a signed deed transferring his share in the California condominium to her. This was to serve as security for her and she agreed not to record it unless he died or failed to pay off the loan on the other property.
However, Jonnie recorded the deed giving her 100% of the California property. When she began to treat the condominium as her own, James asked the divorce court for an order that half of the equity in it was his.
Property Omitted from a Divorce Decree Is Held as Tenants in Common
Jonnie argued that the divorce court did not have authority to make any orders about the California condominium. She asserted that the property was no longer marital or community property after the judgment was entered, but, rather, ownership converted tenants-in-common shares held by the couple. The Court of Appeals agreed.
It noted that, under Arizona law, it is the superior court’s job in a divorce to divide all community property held by a couple between them. Any community property that is not mentioned in a divorce decree is transformed into property held as tenants in common. That means that, after the divorce decree was entered, each spouse was the owner of 50% of that property as tenants in common.
The Divorce Court Lacks Authority to Resolve Post-Divorce Tenant-in-Common Issues
A party to a divorce can ask the superior court for relief under Rule 60(c) when marital property is accidentally omitted from a divorce decree; however, that is not the case when both spouses agreed to omit the property. In the case of deliberate omission, the property transforms from marital to separate property – with each spouse holding a 50% separate interest.
The Court of Appeals ruled that the Thomas couple who decided together to omit property from their divorce decree cannot expect the divorce court to resolve later disputes over the property. Instead, claims like those brought between James and Jonnie, arising from conduct that happened after the divorce, are based on the parties’ relationship as tenants in common, which is governed by principles of law unrelated to their relationship as former husband and wife.