Leas v. Leas
| Decision Date | 11 July 2013 |
| Docket Number | 1 CA-CV 11-0712 |
| Parties | In re the Marriage of: NATHANIEL R. LEAS, Petitioner/Appellee, v. CHERYL F. LEAS, Respondent/Appellant. |
| Court | Arizona Court of Appeals |
See Ariz. R. Supreme Court 111(c); ARCAP 28(c);
(Not for Publication -
Rule 28, Arizona Rules of
Civil Appellate Procedure)
Appeal from the Superior Court in Maricopa County
The Honorable Thomas L. LeClaire, Judge
Law Offices of Stone & Davis, P.C.
By Kiilu Davis
Attorneys for Respondent/Appellant
Scottsdale
Berkshire Law Office, PLLC
By Keith A. Berkshire
Attorneys for Petitioner/Appellee
Phoenix
¶1 Cheryl Leas ("Wife") appeals (1) from a dissolution decree that assigns mortgage, tax, and loan balances to her, and(2) from the denial of her Rule 85(C)(1)(b) motion to set aside the decree. For the reasons that follow, we affirm in part, vacate in part, and remand for further proceedings consistent with this decision.
¶2 Wife and Nathaniel Leas ("Husband") married in April 1989. During the marriage, Wife obtained student loans to fund both tuition and living expenses while she pursued a master's degree in management at Cornell University. She resided in Ithaca, New York, while studying for the degree.
¶3 Following graduation, Wife returned to Arizona and, in 2004, became Vice President for Brand Strategy and Marketing Research at SHR Perceptual Management, Inc. ("SHR"). Wife's starting salary was $77,000, a $30,000 increase from her pre-Cornell earnings; eventually, her salary rose to $137,000.
¶4 After five years at SHR, Wife co-founded CSK Strategic Marketing Group, Inc. ("CSK"), a Colorado corporation, with two former SHR colleagues. At trial, Frank Pankow, a business valuation expert, estimated Wife's reportable share of CSK to be $229,000, and subsequent to his evaluation Wife received a $50,000 bonus.
¶5 The parties owned residences in Phoenix and Colorado Springs, Colorado as joint tenants. The parties were jointly responsible for the mortgage on the Colorado Springs residence,as well as the mortgage and home equity line of credit ("HELOC") for the Phoenix residence. At the time of trial, the Colorado Springs residence had an estimated $46,474.21 in equity, and the combined mortgage and HELOC debt on the Phoenix residence exceeded its estimated value by $125,168.37.
¶6 Husband petitioned for dissolution on July 2, 2010. As set forth in their joint pretrial statement, the parties stipulated to an equitable allocation of their bank accounts, IRAs, and vehicles and an equitable division of their credit card debts. As pertinent here, the primary contested issues at trial were: (1) the valuation of CSK, (2) the classification and allocation of Wife's student loan debt, (3) the allocation of 2010 tax liability, (4) the allocation of a promissory note executed by the parties in favor of CSK, and (5) the allocation of the real properties with the related debts. In its decree of dissolution, the trial court awarded the Phoenix residence to Husband, and the Colorado Springs residence to Wife. The parties were assigned the indebtedness associated with their respective properties, but the court ordered the parties to "share equally" the net "negative equity" on the properties in the amount of $78,694.16 ($125,168.37 "negative equity" in the Phoenix residence less $46,474.21 equity in the Colorado Springs residence).
¶7 The decree characterized the student loans as Wife's sole and separate debt and required Wife to pay the entire balance. Wife received her interest in CSK, which the trial court valued at $239,000, and Husband received $119,500 for his community share in that interest. Finally, the trial court entered a judgment against Wife for a $70,630.80 equalization payment to Husband, reflecting the court's balance of the assets and debt, and required each party to bear their respective attorneys' fees and costs.1
¶8 Addressing Wife's post-trial motions, the trial court amended the decree, correcting some mathematical errors and finding that because Husband was "starting at a negative equity of ($47,847.13), Wife shall pay to Husband a sum of $181,107.60," which would result in each party having "50% of the total equity of $133,260.47 each." The court corrected the business valuation to $229,000 and ordered each party to bear their own 2010 income taxes, without filing a joint return or obtaining contribution from the other party. The amended decree further directed that "Husband shall have until 120 days afterthe date of the final payment on the judgment to refinance the house into his own name, or list the house for sale, under the same provisions in the Decree."
¶9 Wife appealed, but subsequently filed a timely motion to set aside the decree under Rule 85(C)(1)(b) of the Arizona Rules of Family Law Procedure based upon the SHR lawsuit. This court stayed the pending appeal and revested jurisdiction in the trial court to allow consideration of the motion. Following the denial of Wife's motion, she filed an amended notice of appeal and we have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(A)(1) and (A)(2).
¶10 Wife does not contest the valuation or award of the Phoenix residence to Husband. Instead, she argues the trial court abused its discretion by ordering her to share in the net "negative equity" of the residences. Specifically, Wife asserts that Husband is currently receiving all the benefits of owning the Phoenix property and may be "unjustly rewarded" if he is able to sell the property at a future time when the real estate market recovers.2
¶11 Pursuant to A.R.S. § 25-318(A), the trial court is obligated to "divide the community, joint tenancy and other property held in common equitably, though not necessarily in kind[.]" The court "may consider all debts and obligations that are related to the property[.]" A.R.S. § 25-318(B).
¶12 "In apportioning community property between the parties at dissolution, the superior court has broad discretion to achieve an equitable division, and we will not disturb its allocation absent an abuse of discretion." Boncoskey v. Boncoskey, 216 Ariz. 448, 451, ¶ 13, 167 P.3d 705, 708 (App. 2007). "[T]he court may abuse its discretion if it commits an error of law in the process of exercising its discretion." Id. (internal quotation omitted). We will consider the evidence in the light most favorable to upholding the court's ruling and will sustain that ruling if the evidence reasonably supports it. Id.
¶13 Dividing jointly held property into equal shares generally is the most equitable approach, unless a sound reason exists for making a different division. Toth v. Toth, 190 Ariz. 218, 221, 946 P.2d 900, 903 (1997). Relevant considerations include "the length of the marriage; the contributions of each spouse to the community, financial or otherwise; the source of funds used to acquire the property to be divided; the allocation of debt; as well as any other factor that may affect theoutcome." In re Marriage of Inboden, 223 Ariz. 542, 547, ¶ 18, 225 P.3d 599, 604 (App. 2010).
¶14 Here, it is undisputed that the parties jointly owned the residences and used community funds to pay the mortgages. Each party was awarded a house with a value of $240,000. The parties were also assigned the debts associated with their respective homes. At the time of the decree, the combined debt on the Phoenix residence totaled $365,168.37 while the debt on the Colorado Springs residence equaled $193,525.79. Even accounting for the equal division of the net "negative equity" ordered by the family court in the amount of $39,347.88 to each party (net "negative equity" of $78,694.26 divided equally), Wife's combined real property debt obligation is notably less than Husband's corresponding debt obligation. Wife's Colorado Springs mortgage obligation ($193,525.79) plus her one-half share in the net "negative equity" ($39,347.08) equals $232,872.87, whereas Husband's combined Phoenix mortgages ($365,168.37) less Wife's net "negative equity" equalization payment on the properties ($39,525.79) equals $325,642.58. Thus, to the extent the family court's allocation of the real property (each party receiving a parcel of equal value) and associated indebtedness was not substantially equal, any inequity arguably inured to the benefit of Wife. Under these unique circumstances, we find no abuse of discretion relating tothe trial court's division of the marital debt associated with the parties' residences.3
¶15 Wife alternatively argues that the family court abused its discretion by failing to either order the Phoenix residence sold or include an indemnification provision in the decree protecting Wife from liability in the event Husband defaulted on the Phoenix residence mortgages. As noted by Husband, Wife did not request either form of relief in the trial court. Rather, in the joint pretrial statement, Wife advocated that the parties "remain co-owners" of both properties, with Wife paying Husband $565 per month "as the difference in the mortgage payments related to the respective properties," until the Phoenix real estate market values "stabilize." Therefore, Wife waived these claims and we do not address them. See Trantor, 179 Ariz. at 300-01, 878 P.2d at 658-59.
¶16 Wife also challenges the trial court's failure to revalue the parties' respective community interests in CSK in light of the SHR lawsuit filed within weeks of the decree's entry. In addition, she argues that the trial court erroneously failed to allocate the $10,000 promissory note (the "Note") she had executed in favor of CSK during the marriage.
¶17 Wife moved to set aside the dissolution decree based upon ...
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