Buckholtz v. Buckholtz

• Decision Date: 15 January 2019
• Docket Number: No. 1 CA-CV 17-0596 FC,1 CA-CV 17-0596 FC
• Parties: In re the Marriage of: Billy William BUCKHOLTZ, Petitioner/Appellant, v. Mirta Elizabeth BUCKHOLTZ, Respondent/Appellee.
• Court: Arizona Court of Appeals

246 Ariz. 126

435 P.3d 1032

In re the Marriage of: Billy William BUCKHOLTZ, Petitioner/Appellant,

v.Mirta Elizabeth BUCKHOLTZ, Respondent/Appellee.

No. 1 CA-CV 17-0596 FC

Court of Appeals of Arizona, Division 1.

FILED January 15, 2019

Udall Shumway PLC, Mesa, By Steven H. Everts, Counsel for Petitioner/Appellant

Berkshire Law Office, PLLC, Tempe, By Keith Berkshire (argued), Erica L. Gadberry, Counsel for Respondent/Appellee

Judge Paul J. McMurdie delivered the opinion of the Court, in which Presiding Judge Jennifer B. Campbell and Judge Kent E. Cattani joined.

McMURDIE, Judge:

¶1 Billy William Buckholtz ("Husband") appeals the decree dissolving his marriage to Mirta Elizabeth Buckholtz ("Wife"). We hold when a marital separation agreement is presented to the superior court under Arizona Revised Statutes ("A.R.S.") section 25-317, the superior court must determine whether the agreement is enforceable, and if the agreement is enforceable, determine whether it is "unfair." We also hold that parties to a separation agreement may consider their sole and separate property when creating an agreement, and if they do so, the superior court also may consider the parties’ sole and separate property in determining whether the agreement is unfair under A.R.S. § 25-317. We emphasize, however, that this is so only if they have acted with full knowledge of the nature of the property involved, including knowing whether the property at issue is a community or separate asset. For the following reasons, we reverse and remand the decree in this case for proceedings consistent with this opinion.

FACTS AND PROCEDURAL BACKGROUND

¶2 Husband and Wife were married in 1978. On June 3, 2013, after individually consulting with attorneys, they signed a Marriage Separation Agreement (the "Agreement") to divide their property and debts. The Agreement stated Husband "will remain" in their marital residence and the parties "agreed upon a division of all assets, owned or possessed by them as marital property or separate property ... [and] are in possession of all of those assets to which he or she is respectively entitled." The parties also agreed that any "debt accumulated as of the date of this Agreement is the debt of the individual party, regardless if the debt was incurred as a result of joint credit." The Agreement did not specifically reference any other assets or debts.

¶3 The parties have raised arguments regarding two significant assets. The first asset is the parties’ home. Approximately one month before signing the Agreement, the house was appraised at $257,500. Around the time the Agreement was signed, Wife quit-claimed all right, title, or interest in the house to Husband. Husband refinanced the house, and the same day the parties signed the Agreement, Husband transferred $127,435 to Wife, approximately one-half of the house’s equity.

¶4 The other significant asset is Wife’s 401(k) account. After the parties married, Wife began working for an airline and in April 2013, her 401(k) was valued at $152,122. On June 3, 2013, in a separate document, Husband quit-claimed all right, title, or interest in Wife’s 401(k) to Wife "as her sole and separate property." It is unclear why the parties used a "quit-claim deed" to transfer Husband’s interest in Wife’s 401(k), but Husband testified he knew that by signing the document he was giving up his rights to Wife’s 401(k).

¶5 The Agreement, however, did not reference Wife’s 401(k) account or the equity in the community home. The Agreement also did not reference a monthly benefit payment Husband receives from the military related to his service before the parties married. The parties and the superior court referred to Husband’s military benefit as both a disability payment and a pension. Regardless of the type of military benefit, both parties agree on appeal the benefit is Husband’s sole and separate property.

¶6 More than three years after Husband and Wife signed the Agreement and the "quit claim deeds," Husband petitioned for dissolution of the marriage. Neither party sought spousal maintenance and they do not have any minor children; therefore, the only issue before the court was division of the parties’ assets and debts. In his petition, Husband admitted that the parties entered into the Agreement, but alleged that provisions of the Agreement were not fair and equitable. At an evidentiary hearing, Husband argued the Agreement unfairly and inequitably divided the parties’ home and Wife’s 401(k) because Wife received approximately half the equity in the house and all of her 401(k) account. Husband claimed he was entitled to fifty percent of the value of Wife’s 401(k) as of the date the parties signed the Agreement, plus any increase in value he would have obtained from his share between that date and the termination of the community estate.

¶7 Following the evidentiary hearing, the superior court entered a decree of dissolution. The court found the parties freely, knowingly, and voluntarily entered into the Agreement, and that the Agreement was valid and binding and fairly and equitably divided the community property and debts as of June 3, 2013. The court then incorporated the Agreement into the decree. The court affirmed the house as Husband’s separate property pursuant to the Agreement; affirmed the payment of $127,435 to Wife as her share of the community interest in the house; and awarded Wife her 401(k), with Husband having no claim to the account. The court confirmed Husband’s "military pension" was his sole and separate property, with Wife having no claim to the benefit. The court also distributed the parties’ community debts and other community assets, including household furnishings, cars, life insurance policies, and bank accounts.

¶8 Pursuant to Arizona Rules of Family Law Procedure 82 and 83,¹ Husband moved to correct the findings of fact, for an amended judgment, and for a new trial. The court denied the motions. Husband timely appealed, and we have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

A. When a Marital Separation Agreement is Presented to the Court, the Court Must First Determine Whether the Agreement is Enforceable.

¶9 "To promote amicable settlement of disputes between parties to a marriage attendant on their separation or the dissolution of their marriage, the parties may enter into a written separation agreement containing provisions for disposition of any property owned by either of them." A.R.S. § 25-317(A). In a dissolution proceeding, the terms of a separation agreement "except those providing for the support, custody and parenting time of children, are binding on the court unless it finds, after considering the economic circumstances of the parties and any other relevant evidence produced by the parties, on their own motion or on request of the court, that the separation agreement is unfair ." A.R.S. § 25-317(B) (emphasis added).

¶10 A marital separation agreement is a contract, see Muchesko v. Muchesko , 191 Ariz. 265, 268, 955 P.2d 21, 24 (App. 1997), and when a property settlement agreement is incorporated into a decree, contract law governs the agreement, MacMillan v. Schwartz , 226 Ariz. 584, 588, ¶ 12, 250 P.3d 1213, 1217 (App. 2011). For an enforceable contract to exist, there must be "an offer, acceptance, consideration, a sufficiently specific statement of the parties’ obligations, and mutual assent." Muchesko , 191 Ariz. at 268, 955 P.2d at 24 (citing Savoca Masonry Co. v. Homes & Son Constr. Co. , 112 Ariz. 392, 394, 542 P.2d 817, 819 (1975) ). The validity and enforceability of a contract is a mixed question of law and fact, which we review de novo . Armiros v. Rohr , 243 Ariz. 600, 605, ¶ 16, 416 P.3d 864, 869 (App. 2018).

¶11 "[B]efore a binding contract is formed, the parties must mutually consent to all material terms. A distinct intent common to both parties must exist without doubt or difference, and until all understand alike there can be no assent." Hill-Shafer P’ship v. Chilson Family Tr. , 165 Ariz. 469, 473, 799 P.2d 810, 814 (1990). Mutual assent is based on objective evidence, not on the hidden intent of the parties, and objective evidence includes both written and spoken words, as well as acts. Johnson v. Earnhardt’s Gilbert Dodge, Inc. , 212 Ariz. 381, 384, ¶ 11, 132 P.3d 825, 828 (2006). A misunderstanding "must be reasonable before a court may properly find a lack of mutual assent." Hartford v. Indus. Comm’n , 178 Ariz. 106, 112, 870 P.2d 1202, 1208 (App. 1994). "Relief is proper if the writing evidencing the purported agreement is uncertain or ambiguous." Hill-Shafer , 165 Ariz. at 474, 799 P.2d at 815. But, "some extrinsic facts could create ‘a latent ambiguity in otherwise clear and intelligible language.’ " Id. (quoting Buckmaster v. Dent , 146 Ariz. 521, 523, 707 P.2d 319, 321 (App. 1985) ).

¶12 In this case, the superior court found the Agreement was valid and binding. Finding Wife’s testimony about discussions between the parties to be credible, the court also found that "when the parties entered into the [Agreement], they had full knowledge of the community property in their respective possession. In addition, the totality of the evidence showed that the parties held deliberative discussions about the distribution of the community property." We agree that the evidence presented shows the parties had a binding agreement regarding the disposition of some assets listed in the decree, including their vehicles, life insurance policies, and bank accounts. However, the record does not support a conclusion that the parties had a binding agreement concerning Husband’s payment of the home equity to Wife.

¶13 Based on the evidence in the record, we cannot say Husband and Wife shared a common understanding regarding Husband’s home equity payment to Wife such that there was mutual assent. See Hill-Shafer , 165 Ariz. at 473, 799 P.2d at 814. Husband and Wife both testified it was their understanding Husband would "kee...