Logo
Call Now(480)305-8300

Purchasing Property with Separate Funds to Be Held Jointly

Posted on : December 21, 2016, By:  Christopher Hildebrand
Purchasing Property with Separate Funds to Be Held Jointly

Purchasing Property with Separate Funds to Be Held Jointly

Generally, property acquired before marriage remains the separate property of the spouse. In some cases, however, it transmutes to community property. This can happen when a spouse purchases property with separate funds to be held jointly. What is the status of separate funds invested in joint property? In In Re Marriage of Berger, 680 P.2d 1217 (Ariz. Ct. App. 1983), the Arizona Court of Appeals addressed transmutation issues.

Facts and Procedure

Mrs. Berger had substantial personal assets when she married Mr. Berger in 1968. Mr. Berger had little and did not earn much during the marriage. The couple lived largely on wife’s separate money.

Two of Mr. Berger’s businesses are relevant here. In 1971, he started Jackie’s Dress Shops, Inc. He financed this by borrowing $60,000 of Mrs. Berger’s separate funds. He signed promissory notes for the loan, providing that the funds would be repaid with his own separate property.

The business failed and the corporation was dissolved. Mrs. Berger filed a civil complaint on the notes in August 1979. It was consolidated with her dissolution petition.

The second relevant business transaction was when the couple bought a lot in Paradise Valley for $25,000. Again, wife’s money paid for the land, but the title was taken in joint tenancy. They built a house on the site for about $170,000, with $65,000 borrowed and the rest funded by Mrs. Berger’s assets.

Mrs. Berger petitioned for a dissolution of the marriage in June 1979. The trial court disposed of the couple’s assets, determined Mr. Berger’s obligation on the promissory notes, and issued orders concerning support. Both parties have appealed.

Purchasing Property with Separate Funds to Be Held Jointly.

Purchasing Property with Separate Funds to Be Held Jointly.

The court determined that Mrs. Berger paid for the Paradise Valley property with her separate funds. However, the deed was taken in joint tenancy. In Arizona, when one spouse uses separate property to purchase jointly-held property, she gifts an interest to the other spouse. Mrs. Berger acknowledges that Mr. Berger owns a one-half interest in the land.

The court also found that Mrs. Berger gifted a one-half interest in the not house built on the land with her separate funds. She asserts that this was an error. She argues that the gift presumption does not extend to improvements subsequently placed upon the property.

She maintains that a co-tenant improving joint tenancy property with separate funds is entitled to reimbursement. In finding that the improvements constituted a gift to husband, the court emphasized that the lot purchase and home construction plans were close in time. It did not inquire into Mrs. Berger’s actual intent but simply applied the gift presumption to both.

However, the Court of Appeals found that the proximity of the construction plans to the lot purchase was not relevant to donative intent. It ruled that extending the gift presumption to improvements placed on the property soon after its acquisition was improper. For this, it cited Collier v. Collier, 242 P.2d 537 (1952) and Bowart v. Bowart, 625 P.2d 920 (1980).

Mr. Berger argues that the record supports a finding of the gift of the improvements, irrespective of any legal presumption. Inter Vivos gifts of real property require clear, unmistakable and unequivocal intention on the donor’s part to make a gift.

The donative intent is ascertained in light of all surrounding circumstances. Mr. Berger says that the parties’ 1973 income tax return proves wife’s donative intent. Before buying this lot, the couple owned a home in Phoenix in joint tenancy. In 1974, they filed Form 2119 for the “Sale or Exchange of Personal Residence”.

The couple indicated that their own interests in the old and new residence were the same. Mr. Berger characterizes this as an “admission” that he owned a one-half interest in the new home. Mrs. Berger claims that Mr. Berger’s ownership interest is not inconsistent with her right to reimbursement. The Court of Appeals agreed that the 1973 return is not evidence of a donative intent.

Jennifer, thank you for being my attorney. I could not have been more pleased with the outcome of my family court hearing. Everything you have done for me throughout this case reflects in the final ruling of the judge. You helped me keep my head together and taught me a lot about myself as a person. I learned so much about my life from observing and listening to you. I will take all the advice you gave me to continue taking responsibility for my choices, continue to put the kids' needs first, and always stay truthful. Your diligence, dedication, and persistence in my case made what seemed impossible, possible. You are a wonderful person and an amazing attorney and I am stronger and more confident because of you.
A Google User
A Google User
20:31 20 Sep 17
I just want to again thank the Firm for working with me all that it has. I could not have done anything without everyone's assistance. You, Chris and Stacey have been and continue to provide me with compassion and hard work towards my case. Also a very special thanks to Kip for taking my case in the beginning. Also continued support from him and his dedication to providing me with his expertise in this matter.
A Google User
A Google User
21:41 07 Nov 17
After interviewing several law firms, I came across Jennifer Shick, and her firm, who I hired to represent me for my Family Court case. Jennifer has extensive knowledge of the law and is determined to bring the truth to every issue involved within the case. Throughout my case, Jennifer was prepared meticulously as well as went above and beyond all of my expectations. Even when the other party tried to differ from the truth, lie to the Judge, and turn situations around, Jennifer remained attentive and provided substantial evidence to show the judge the facts as well as the proof to support what was the best interests of my children. Additionally, Jennifer helped me endure many difficult experiences, situations and inspired me to remain positive throughout the entirety of my case. Her kindness, compassion, and professionalism helped me through very difficult times and made the process feel a thousand times lighter on my shoulders. She truly has my children and my best interest at heart and I trust her perspective as well as her honesty on each and every aspect of my case. She lessened the burden on my shoulders and even when I felt like the case was not going to go in my favor, Jennifer was open-minded and reassured me that the Judge would, in fact, see the truth, which he did and the case went in my favor. After nine months of court, everything finally came together. I cannot declare how much Jennifer has been an outstanding attorney. She addressed each and every issue with diligence, she cares about her clients and their families. Jennifer genuinely cares about her clients and her dedication to the details of the case was remarkable. Overall, I am extremely pleased with Jennifer’s services and I am truly thankful that I was so blessed to have her represent my children and me. I highly recommend Jennifer as one of the best attorneys in Arizona and if the situation ever arises, I will definitely have her represent my children and me again.
Google User
Google User
14:58 04 Oct 17
Dear Stacey and Kip, How can I ever thank you enough for helping me through the most difficult time in my life? I couldn't put into words my heartfelt gratefulness. You both were so compassionate and professional at every given moment throughout this process with me. I thank you from the bottom of my heart. You helped me to regain my freedom.
A Google User
A Google User
16:03 22 Nov 17
I was a client of Attorney Kevin Park for the dissolution of a divorce in 2016. And since I had never had the need to hire an attorney before for any purpose, I was somewhat apprehensive of the process. But the very calm and professional demeanor of Mr. Park eased my fears. He adeptly answered all my questions and I clearly knew the process and what to expect. And the skilled manner he communicated with opposing counsel was perfect. When it came down to negotiating with my spouse’s counsel, I knew I had selected the best attorney for my situation. What I noticed and appreciated was that he was using just the right amount of pressure with opposing counsel as was necessary. If you find yourself in this situation, you will want a seasoned professional like Mr. Park on your side. I'm very grateful that he was my attorney and not the opposition!
A Google User
A Google User
22:14 28 Jun 17
Chris is a smart and aggressive attorney for his clients. Chris always tries to reach a fair settlement of his cases. I’ve represented clients when Chris was the opposing counsel and while he is professional and amicable to work with, he does not back off on what he needs to do for his client
A Google User
A Google User
18:16 18 Sep 17
Kevin Park of Arizona Estate Planning Attorneys was just what I needed for my divorce. He was very approachable and personable. He was quick to recognize what I needed and provided it quickly and efficiently. I hope to never need a divorce lawyer again, but if I know anyone else who does, I will definitely recommend Kevin.
A Google User
A Google User
19:22 23 Aug 17
I feel that Tracey Van Wickler is certainly one of the best family lawyers around. She is logical, intelligent, and truly cares. Tracey always does what is in the clients best interest, does it well, timely and with integrity. She is good at keeping her clients informed as to what is going on and clear in her communication both written and verbally. I have recommended Tracey to other people and will continue to recommend her. I recommended Tracey to someone who was having issues with their ex-wife and his response was, “I know how good she is because I went up against her and she ate me for lunch”. This same person was so impressed with her, he even recommended her to someone else, WOW, that is impressive! I am exceptionally happy with her attention to detail, her ability to explain things in ways that are easy to understand, as well as her ability to keep everyone focused on the most important things. I would recommend Tracey to anyone who may be in need of her services.
A Google User
A Google User
17:44 23 Jun 16
I retained Hildebrand Law after interview a number of firms in the valley. Working with Michael C. was incredibly easy and informative. My case progressed in such a organized and thought out way to ensure that my needs were met. Michael was incredibly proactive and was able to see far ahead into my case to steer clear of some roadblocks. I would not hesitate to recommend Michael Clancy, and Hildebrand Law in general, to anyone.
Bassam Ziadeh
Bassam Ziadeh
21:20 02 Apr 18
I have worked with Hildebrand law for about 8 years. They are always ready to serve, provide guidance and give you a few options. When they provide you options they also take the time to walk you through the pros and cons of each and give you a recommendation of what is best, but will listen to you and support whatever course you choose after making and educated choice. I’d recommend them to my closest friends and feel Chris Hildebrand is now a friend to me.
Larry Flint
Larry Flint
21:53 27 Feb 18
Despite the unfortunate situation I found myself in, Chris Hildebrand @ Hildebrand Law helped me maneuver every step with professionalism, expertise, and even a sensitivity that was an added bonus.Chris and his staff helped me even when I didn't know I needed the help. In other words. . . they made sure we did not leave anything undone. And in the rare instance we needed the expertise of another professional, Chris knew exactly who to recommend.Chris also knew, because of his experience, what to anticipate down the road of litigation. That meant we were better prepared to meet the challenges head on, which lead to a more equitable and fair outcome. I appreciated that Chris did his best to meet my every need in a timely fashion, even if I had a simple question that required only a phone call or e-mail or if we needed to talk face-to-face.I highly recommend Chris Hildebrand @ Hildebrand Law, PC.
Sam Franchimone
Sam Franchimone
22:09 12 Sep 13

Determining Reimbursement Measure

Mrs. Berger argues that the measure of recovery is one-half of the enhancement value. She claims she should recover one-half the amount by which her separate-fund improvements enhanced the value of the property.

Where a co-tenant makes permanent improvements in real property, the court awards him the resulting increase in the value. Mr. Berger contends that the right to reimbursement is equitable and that it would be inequitable to award wife the enhanced value.

However, the general rule uses the “value” measure of contribution. Here, the Court found, it would be inequitable to repay Mrs. Berger’s 1972 investment with 1983 dollars. Mr. Berger will benefit from the increased value of the improvements made with her separate funds.

Husband’s Liability on Promissory Notes

The trial court ruled that husband owed wife the sum of $60,000 principal plus interest at 7%. Mr. Berger contends that he is not liable on the notes. He argues that the loans specified they must be repaid by his “sole and separate property.” He claims this means Mrs. Berger must point to a specific fund from which to seek repayment.

Since he has no specific separate property fund, he argues that he cannot be ordered to repay the loans. However, Arizona cases dealing with “specific funds” involve very limited and narrowly defined sources of payment.

Property Purchases with Separate Capital to Be Held Jointly.

Property Purchases with Separate Capital to Be Held Jointly.

Here, no particular separate property was designated as the source of payment. Instead, payment was limited generally to husband’s separate property. Although he has none at the moment, he might obtain some.

The Court found that husband was indebted to Mrs. Berger on the promissory notes, payable only from his sole and separate property. The trial court properly entered judgment on the notes in favor of the wife. The Court of Appeals next addressed the interest rate issue.

Mrs. Berger appealed the trial court’s computing the post-decree interest rate at 7%. The statute provides that interest on a judgment shall be 10%. The only exception is if an agreement bearing a higher interest rate than 10% is reduced to judgment. In that case, the judgment bears interest as provided in the underlying agreement.

Here, the agreement bore interest at the stated rate of 7%. This was less than 10%. Therefore, the trial court erred in ruling that post-judgment interest should be 7%. The Court directed that post-judgment interest is fixed at 10%.

Spousal Maintenance, Child Support, and Attorney Fees

Mr. Berger appeals the trial court’s orders with regard to his request for spousal maintenance, child support, and attorneys’ fees. In making its orders regarding child support and attorneys’ fees, the trial court was required to consider the financial resources of both spouses.

When ruling on spousal maintenance, the court was required to determine whether husband lacks property to provide for his reasonable needs. Here, the trial court clearly considered Mr. Berger’s award of a substantial equity interest in the home to be a primary source of income. The ruling on appeal significantly reduced the value of Mr. Berger’s interest in the Paradise Valley residence.

The Court of Appeals told the trial court to reconsider its rulings about support, maintenance, and attorneys’ fees.

Hildeband Law, PC.Other Issues

The Court of Appeals approved the trial court’s division of community property. Although Mrs. Berger got substantially more, she paid for most of it with community funds. The Court noted that an equivalent distribution of property is not required if sound reason justifies an unequal distribution.

The Court also affirmed the trial court’s granting Mrs. Berger an option to purchase Mr. Berger’s share of the home. It ordered the trial court to readjust the option price in light of its ruling on reimbursement for the joint tenancy improvements.

Lastly, Mr. Berger raised an issue concerning the disposition of $18,000 in his attorneys’ trust account. The trial court found that the $18,000 was community property, to be divided equally between the parties. The Court of Appeals declined to make any orders concerning this account but stated that the trial court has the power to divide it equitably.

Disposition

The Court vacated the trial court’s orders concerning the parties’ respective interests in the Paradise Valley residence. It also vacated the trial court’s orders concerning the option price, to the extent they are inconsistent with this opinion. The trial court’s orders regarding child support, spousal maintenance, and attorneys’ fees are vacated. The trial court is ordered to make new orders in light of the changed circumstances. The Court affirmed the trial court’s orders with respect to the promissory notes and the community furnishings.


As Seen on CBS News, ABC News, NBC News, and Fox News

Arizona Estate Planning Attorneys, PC As Seen in the News.

Arizona Estate Planning Attorneys, PC As Seen in the News.


What’s Hot – Blog