Opinion
No. 1 CA-CV 20-0184 FC
02-02-2021
In re the Matter of: HUGH ARTHUR RICHARDSON, Petitioner/Appellee, v. LISA ANN RICHARDSON, Respondent/Appellant.
COUNSEL Ortega & Ortega, P.L.L.C., Phoenix By Alane M. Ortega Counsel for Petitioner/Appellee Curry, Pearson & Wooten, P.L.C., Phoenix By Kristen M. Curry Co-Counsel for Respondent/Appellant Gillespie, Shields, Goldfarb & Taylor, Mesa By Mark A. Shields Co-Counsel for Respondent/Appellant
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
Appeal from the Superior Court in Maricopa County
No. FN2018-005247
The Honorable Justin Beresky, Judge
REVERSED AND REMANDED
COUNSEL
Ortega & Ortega, P.L.L.C., Phoenix
By Alane M. Ortega
Counsel for Petitioner/Appellee
Curry, Pearson & Wooten, P.L.C., Phoenix
By Kristen M. Curry
Co-Counsel for Respondent/Appellant
Gillespie, Shields, Goldfarb & Taylor, Mesa
By Mark A. Shields
Co-Counsel for Respondent/Appellant
MEMORANDUM DECISION
Presiding Judge David B. Gass delivered the decision of the Court, in which Judge Michael J. Brown and Judge David D. Weinzweig joined.
GASS, Judge:
¶1 Lisa Ann Richardson appeals a superior court order awarding sole and separate property to Hugh Arthur Richardson without granting her a community lien. Because the superior court committed legal error, we reverse the order and remand the case for a determination of the community lien's value.
FACTUAL AND PROCEDURAL HISTORY
¶2 Husband and wife married in October 1998. They lived in a home on West Highland Avenue in Phoenix. The Highland property was husband's sole and separate property before the marriage, which he owned free of any liens and encumbrances.
¶3 During the marriage, husband borrowed money through a series of loans and used the Highland property as collateral for each. For one loan, wife was a co-borrower. The couple used these loans, in turn, to purchase more properties. Among these properties was a home on West Coolidge street in Phoenix, which they purchased for their own use, but later sold. The couple then used the proceeds to repay one of the loans secured by the Highland property.
¶4 The Richardsons also made improvements on the Highland property during the marriage, including landscaping, fencing, a pool, and a new master bedroom. Husband maintains his company paid for the improvements. He says wife's only involvement was helping select designs for the pool, picking colors and hardware for the new areas of the house, and putting plants outside the house. Wife maintains the community paid for the improvements.
¶5 Husband filed for dissolution. After trial, the superior court found husband and wife took out a loan, using the Highland property as collateral, to pay some community expenses but mostly to pay for two properties in Surprise and acquire the Coolidge residence. The superior court, however, said this loan was not a "mortgage" on the Highland
property, but rather "a new community debt which was a line of credit that simply used the sole and separate property as collateral for the line of credit." Though "[t]he community serviced the loan with community funds and largely paid off the loan with community funds when the Coolidge residence sold," the superior court found the Highland property remained husband's sole and separate property, adding that the community invested no significant resources on the property. Accordingly, the superior court denied wife's request for a community lien on the Highland property.
¶6 Wife moved to alter or amend the decree, now claiming she was entitled to a community lien based on improvements made to the Highland property. The superior court denied the motion, stating the argument "was not explicitly made at or before the time of trial but appears for the first time as an alternative theory" in wife's motion to alter or amend the decree.
¶7 Wife timely appealed. This court has jurisdiction under Article 6, Section 9, of the Arizona Constitution, and A.R.S. §§ 12-120.21.A.1 and -2101.A.1.
ANALYSIS
¶8 The existence and value of an equitable lien presents mixed questions of fact and law. Valento v. Valento, 225 Ariz. 477, 481, ¶ 11 (App. 2010). This court defers to the superior court's factual findings unless clearly erroneous or unsupported by any credible evidence but draws its own legal conclusions from those facts. Id.
I. The loans were mortgages on the Highland property toward which the community made payments, entitling the community to a lien on the property.
¶9 Wife argues the superior court erred when it declined to award her a community lien on the Highland property for loans the community paid because the superior court failed to categorize those loans as mortgages.
¶10 Property a spouse acquires before marriage is that spouse's separate property, but "when community funds are later used to make mortgage payments on the property, the community is entitled to some form of compensation and has an equitable lien against the property." Barnett v. Jedynak, 219 Ariz. 550, 553-54, ¶ 14 (App. 2009). In Arizona, "[e]very transfer of an interest in real property, other than in trust, or a trust
deed . . . made only as a security for the performance of another act, is a mortgage." See A.R.S. § 33-702.A.
¶11 Here, the superior court focused on only one of the loans in its findings and characterized it as "a new community debt which was a line of credit that simply used the sole and separate property as collateral for the line of credit." The superior court's characterization of the loan as just a "line of credit" using the Highland property as collateral ignores how this use as collateral is the essence of a mortgage. See id.; see also Random House Webster's Unabridged Dictionary 1252 (2d ed. 2001) (defining "mortgage," in part, as the "conveyance of an interest in property as security for the repayment of money borrowed"). The superior court found, and the record reflects, "[t]he community serviced the loan with community funds and largely paid off the loan with community funds when the Coolidge residence sold." And as noted above, the superior court did not account for the totality of all the loans. The community, then, is entitled to an equitable lien based on the total amount paid for all the mortgages on the Highland property. See Barnett, 219 Ariz. at 553-54, ¶ 14.
¶12 Husband argues the question is when the mortgage was executed, citing Drahos v. Rens, 149 Ariz. 248 (App. 1985). In Drahos, one spouse owned property with a preexisting mortgage and the community made payments on the mortgage after the couple married. See id. at 249. Accordingly, the other spouse was entitled to an equitable lien for those payments. Id. But as wife notes, no Arizona case, including Drahos, makes a meaningful distinction based on when the mortgage is executed. The relevant inquiry is if "any community funds [were] expended to pay [a] mortgage or enhance the value of the house." See Bell-Kilbourn v. Bell-Kilbourn, 216 Ariz. 521, 524, ¶ 12 (App. 2007).
II. Wife did not waive her claim for a community lien based on improvements to the Highland property made during the marriage.
¶13 Before and during trial, wife did not expressly argue the improvements created a community lien on the Highland property. Indeed, she did not raise the issue until she filed her post-trial motion to alter or amend the decree. The superior court, essentially, deemed the issue waived. On appeal, wife reasserts her entitlement to a community lien on the Highland property because of improvements made on the property during their marriage. Husband contends the superior court correctly declined to grant a community lien based on improvements to the property and argues wife waived the issue.
¶14 Generally, when a party fails to raise an issue before the superior court, the issue is waived on appeal. See Nold v. Nold, 232 Ariz. 270, 273, ¶ 10 (App. 2013). Waiver, however, is a discretionary doctrine and not "an unalterable rule." See id. Accordingly, because the superior court has an "obligation to equitably divide" community property, "the division of an asset is not automatically waived when one or both of the parties fails to list the asset in a pretrial statement, if exhibits are admitted and testimony regarding the asset is given at trial." See id. at 274, ¶ 20 (citing A.R.S. § 25-318.A).
¶15 Here, because the parties did not make opening statements or closing arguments, the pretrial statements stand alone to explain or clarify the parties' theories. In her pretrial statement, wife mentions the Highland property and focuses on the community paying down loans as the basis for a community lien. Though it does not mention the improvements or the value they added, wife's pretrial statement mentions the asset and lays claim to a community lien. See id. Husband's pretrial statement expressly refers to the improvements on the Highland property at several points and goes on to say "[t]here is absolutely no evidence from which the amount of increased value of the Highland Home is attributable to any community labor, management, or contribution." Further, husband testified about the improvements on direct examination, minimizing wife's role and any potential community labor. Wife also briefly testified about the improvements.
¶16 We conclude wife did not waive the improvements issue, and the superior court erred by not fully considering it after her motion to alter or amend the decree. See id. True, wife only clearly articulated the issue in her post-trial motion, to which she attached new exhibits not admitted into evidence at trial. But the asset and wife's claim to a community lien were identified in her pretrial statement. See id. Husband was aware of the issue when he raised it in his pretrial statement and testified to the improvements at trial. See id. Accordingly, the improvements issue was not waived despite wife failing to expressly include it in her pretrial statement. See id.
¶17 When the community makes improvements on one spouse's sole and separate property with community funds, the community is entitled to reimbursement. See Lawson v. Ridgeway, 72 Ariz. 253, 261 (1951). The superior court must evaluate the disputed evidence from trial and determine whether husband has met his burden of establishing the improvements and increased value to the Highland property were not the result of community efforts. See Cockrill v. Cockrill, 124 Ariz. 50, 52 (1979) ("[W]hen the value of separate property is increased the burden is upon the
spouse who contends that the increase is also separate property to prove that the increase is the result of the inherent value of the property itself and is not the product of the work effort of the community."). We recognize wife did not clearly present the issue during the trial and, therefore, do not fault the superior court. We also note the superior court permissibly disregarded wife's post-trial exhibits attached to her motion and may similarly disregard them on remand without abusing its discretion unless it elects to accept more evidence.
CONCLUSION
¶18 We reverse the superior court's order denying a community lien on the Highland property. We remand the case to the superior court to determine: (1) the community lien's value as reflected by the total amount of mortgage payments the community paid; (2) whether husband carried his burden to prove no community efforts added value to the Highland property based on the property's improvements; and (3) if not, the value of the community lien arising out of those improvements. The superior court's ruling should hinge on the evidence at trial unless the superior court elects to accept more evidence. In our discretion, we deny wife her attorney fees.