In re Marriage of Jones

• Docket Number: 2 CA-CV 2022-0093-FC
• Decision Date: 08 June 2023
• Parties: In re the Marriage of Christian Jones, Petitioner/Appellant, and Debra Norton, Respondent/Appellee.
• Court: Arizona Court of Appeals

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In re the Marriage of Christian Jones, Petitioner/Appellant, and Debra Norton, Respondent/Appellee.

No. 2 CA-CV 2022-0093-FC

Court of Appeals of Arizona, Second Division

June 8, 2023

Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Superior Court in Maricopa County No. FN2020096853 The Honorable Adele Ponce, Judge

Alexander R. Arpad, Phoenix Counsel for Petitioner/Appellant

Buntrock Harrison &Gardner Law PLLC, Mesa By Shane D Buntrock Counsel for Respondent/Appellee Vice Chief Judge Staring authored the decision of the Court, in which Judge Sklar and Judge O'Neil concurred.

MEMORANDUM DECISION

Staring, Vice Chief Judge

¶1 Christian Jones appeals from the trial court's decree of dissolution of his marriage to Debra Norton. He challenges the court's characterization of the parties' former marital residence as community property, alternatively arguing the court erred in ordering equal division of the home's equity. For the following reasons, we affirm in part, vacate in part, and remand.

Factual and Procedural Background

¶2 "We view the facts in the light most favorable to sustaining the trial court's judgment." Harris v. City of Bisbee, 219 Ariz. 36, ¶ 3 (App. 2008) (quoting Cimarron Foothills Cmty. Ass'n v. Kippen, 206 Ariz. 455, ¶ 2 (App. 2003)). Jones and Norton married in February 2020. The parties subsequently contracted for the purchase of a home, the Clipper Lane residence. They planned to use proceeds from the sale of Jones's separately owned property to finance this purchase. When the sale of Jones's home fell through, Jones and Norton asked family members to loan them money to allow them to purchase their new home while waiting for Jones's property to sell. Members of both families agreed to loan money to the couple, and Jones also borrowed from his insurance business $10,000 for the earnest money and an additional $88,000 to put towards the down payment at closing.

¶3 In July, Jones and Norton took title to their new home as community property with right of survivorship. Later that month, Jones's property sold, and he deposited the proceeds from the sale into a joint account. Both Jones and Norton wrote checks out of the account to repay some of the family loans.

¶4 In August 2020, the parties jointly deeded the Clipper Lane house into a trust (the Golden Goose Family Trust) containing Jones's property. The deed defined "grantor" as Jones and Norton, "husband and wife, as community property with right of survivorship" and defined "grantee" as Jones, "Trustee of the Golden Goose Family Trust." The deed stated as follows: "FOR GOOD AND SUFFICIENT CONSIDERATION, the above-named Grantors do hereby GRANT and CONVEY unto the abovenamed Grantee, the real property above described, together with the appurtenances, as community property."

¶5 The same day, Jones and Norton met with an attorney, and Jones signed his trust. Norton was not a party to the trust and therefore did not sign it. Section 1.03(d) of the trust-which related to the transfer of property into the trust-provided that "[a]ny community property transferred to [Jones's] trust, including the property's income and the proceeds from the property's sale or exchange, will retain its character as community property during [Jones's] life and the life of [Norton], to the same extent as if it had not been transferred to [Jones's] trust." However, Section 13.05, entitled "Effect of Legal Separation or Dissolution of Marriage," stated in pertinent part that

[i]f [Norton] or [Jones] file[s] a petition for legal separation or dissolution of marriage and unless and until the petition is dismissed, [Norton], her parents, all of her descendants who are not [Jones's] descendants and all spouses of such persons who are not descendants of [Jones's] parents will be deemed to have died intestate on the date of the filing for all purposes of this instrument (except Section 13.01, above). Any exercise or exercises of any power of appointment by any person identified in this paragraph that has not become effective prior to the filing date will be null and void.

The trust was revocable solely by Jones and included provisions purporting to control disposition of trust property.

¶6 In September 2020, Jones filed for legal separation, and Norton subsequently filed a cross-petition for dissolution of marriage. Jones asserted the marital residence was his "sole and separate property" based on the terms of the trust. And he claimed he had been the source of most of the funds used to purchase the home. Norton argued that she and Jones jointly owned the residence and that there was no evidence that she had "authorize[d] the execution of [her] loss of interest" in the property. Norton asserted that during the appointment to create Jones's trust, he had "suggested that [they] put the . . . house into his sole and separate trust" in order to protect the community asset in case a "lawsuit . . . occur[red] with his insurance business."

¶7 In June 2021, following an evidentiary hearing, the trial court issued a decree of dissolution. It found the parties' residence was community property, stating that although Norton had "signed a document placing her interest in the . . . house into a trust, she did not enter a valid agreement to deprive her of any interest in the home in the event of a dissolution." Further, the court found "it [was] not appropriate to deviate from the general rule that . . . an equitable property division should be substantially equal." Accordingly, the court ordered the property to "be placed on the market to be sold within 45 days," with equal division of the home's equity between the parties "after payment of any loans and other costs associated with the sale."

¶8 Jones filed a motion to alter or amend the decree pursuant to Rule 83, Ariz. R. Fam. Law P., requesting that the trial court "award[] the Clipper Lane property as his sole and separate property . . . or in the alternative . . . order an unequal division of the Clipper Lane property." The court denied Jones's motion, reasoning,

The trust in this case defined each spouse's property rights in the event of divorce. Yet [Norton] was not a party to its creation, had no representation when she transferred her interest in the trust, and . . . there was no evidence presented indicating the trust was created when divorce was contemplated. [She] did not sign a disclaimer deed-rather she signed a special warranty deed to place her community interest into a trust, which trust provided she would be treated as dying intestate upon the filing of a petition for dissolution. This was neither fair nor equitable. The Court affirms its prior determination that [Norton] did not enter a valid agreement to deprive her of any interest in the . . . [h]ouse at the time of dissolution.

This appeal followed. ^[1] We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1), (2).

Discussion

¶9 On appeal, Jones argues the trial court erred in dividing the house as community property without regard to the terms of his trust. Alternatively, he contends, if we conclude the house was properly divided as community property, the court nevertheless erred in "[d]ividing the Clipper Lane house equally." Jones further asserts the court erred in failing to "allocate any 2020 tax consequences" to Norton and in concluding only $100,000 was owed on the house.^[2]

Characterization of House

¶10 Jones first argues the trial court erred in dividing the parties' residence as community property. The court's characterization of property as separate or community is a question of law we review de novo. See Bell-Kilbourn v Bell-Kilbourn, 216 Ariz. 521, ¶ 4 (App. 2007). Additionally, we review the interpretation of instruments such as deeds and trusts de novo. See In re Indenture of Tr. Dated Jan. 13, 1964, 235 Ariz. 40, ¶ 7 (App. 2014); Squaw Peak Cmty. Covenant Church of Phx. v. Anozira Dev., Inc., 149 Ariz. 409, 412 (App. 1986).

¶11 "Property takes its character as separate or community at the time of acquisition and retains that character throughout the marriage." Schickner v. Schickner, 237 Ariz. 194, ¶ 22 (App. 2015) (quoting Bell-Kilbourn, 216 Ariz. 521, ¶ 5). "Property acquired by either spouse during marriage is presumed to be community property" unless demonstrated otherwise by clear and convincing evidence. Cockrill v. Cockrill, 124 Ariz. 50, 52 (1979); accord Sommerfield v. Sommerfield, 121 Ariz. 575, 577 (1979); see A.R.S. § 25-211(A). "[M]arried couples are free to determine at any time what the status of their property is to be," and "spouses may convey their separate or community property interests to one another." Bender v. Bender, 123 Ariz. 90, 93 (App. 1979). "Arizona courts have placed the requirement that such a conveyance between spouses not only must be by a written instrument, but must have a contemporaneous conduct coupled with such instrument indicating an intention that the grantee/spouse should have the property." Id.; accord In re Sims' Estate, 13 Ariz.App. 215, 217 (1970).

¶12 Jones argues on appeal that the special warranty deed was sufficient to convert the home to his separate property "for all practical purposes," but, regardless of the home's characterization as separate or community, "once the parties conveyed the [house] into the trust, the terms of the trust rather than the default rules set by Arizona community property law were controlling." Norton responds that the trial court correctly concluded the warranty deed and the terms of Jones's trust were "not valid to deny [her] community property claim to" the marital home.

¶13 It is undisputed that the parties' house was acquired during the marriage and was thus presumed to be community...