Martinez v. Block

• Decision Date: 29 July 1993
• Docket Number: No. 13402,13402
• Citation: 1993 NMCA 93,115 N.M. 762,858 P.2d 429
• Parties: Jason MARTINEZ, Personal Representative of James H. Block, Deceased, Petitioner-Appellee, v. Beverley S. BLOCK, Respondent-Appellant.
• Court: Court of Appeals of New Mexico

Page 429

858 P.2d 429

115 N.M. 762

Jason MARTINEZ, Personal Representative of James H. Block Deceased, Petitioner-Appellee, v. Beverley S. BLOCK, Respondent-Appellant.

No. 13402.

Court of Appeals of New Mexico.

July 29, 1993.

Judith C. Herrera, Herrera, Baird & Long, P.A., Santa Fe, for petitioner-appellee.

David L. Walther, David Henderson, Rothstein, Donatelli, Hughes, Dahlstrom, Cron & Schoenburg, Santa Fe, for respondent-appellant.

OPINION

BIVINS, Judge.

Beverley S. Block (Wife) appeals from the final decree of the trial court resolving the property issues in an action for dissolution of marriage. On appeal, she argues: (1) that the trial court erred in determining that $5000 of the proceeds of the sale of the Ojo Caliente residence was community property to be split between the parties; and (2) that the trial court erred in subjecting her separate property in Cerrillos to an equitable community lien in the amount of $39,225. We discuss the facts relevant to each issue in our discussion of the issue. We affirm the order of the trial court determining that $5000 of the proceeds of the sale of the Ojo Caliente residence was community property. We reverse the order of the trial court subjecting Wife's separate property residence in Cerrillos to an equitable community lien.

James H. Block (Husband) died during the pendency of this appeal and his personal representative was substituted. Notwithstanding this substitution, we will refer to the parties as they appeared below.

I. The Ojo Caliente Residence

The Ojo Caliente residence was purchased by the parties during the marriage. It was sold during the pendency of dissolution proceedings, and the proceeds were deposited in a bank account pending determination of an appropriate distribution by the trial court. At the outset of the hearing on the merits, the parties informed the court that they had agreed that the Ojo Caliente residence was community property, and had agreed to divide equally all but $5000 of the proceeds. Thus, the only issue presented to the trial court concerned distribution of the $5000.

It was undisputed below that the $5000 represented an amount equal to a loan from Wife's father. The loan was used for the down payment on the Ojo Caliente residence. The trial court found that the loan created a community debt, and this finding is not challenged on appeal. Some time after the acquisition of the Ojo Caliente residence and before the parties separated in September 1989, Wife's parents died. At the hearing, Wife testified that the operative will was her mother's will because her father predeceased her mother. A copy of her mother's will was admitted at the hearing without objection. The will provides in pertinent part: "I forgive any debts owed to my husband and me by any of our children." At the hearing, both parties testified that they believed that the will provision forgave the entire amount of the debt.

At the hearing below and on appeal, Wife argues that the forgiveness of the $5000 loan in her mother's will amounts to a separate bequest to her of the entire amount of the loan. See NMSA 1978, Sec. 40-3-8(A)(4) (Repl.Pamp.1989) ("property acquired by either spouse by gift, bequest, devise or descent" is separate property). Husband challenges this contention.

On the facts of this case, we do not believe that the trial court was required to treat the forgiveness of the debt as a separate bequest to Wife. When a parent has loaned money to a child and the child's spouse for the purchase of real property, and then the parent dies, leaving a will forgiving debts owed by the child to the parent, courts have interpreted the will provision in question to forgive the entire amount of the debt, even though the debt was a joint debt and the spouse was not mentioned in the will. See Trott's Estate v. Hanson, 294 N.W. 777, 778, 780 (Iowa 1940); In re Zielinski's Will, 193 Misc. 826, 84 N.Y.S.2d 89, 91-92 (Sur.Ct.1948). Under these circumstances, we agree with Husband that the will provision forgiving the community debt merely created a community asset of $5000. Thus, we hold that the trial court did not err in dividing the $5000 equally between the parties.

II. Cerrillos Separate Property

After her parents died, Wife used part of her inheritance to purchase a house in Cerrillos. Wife and Husband moved into the Cerrillos home under a lease purchase agreement in May 1988. The purchase was consummated on August 1, 1988. The documents connected with the transaction show that the purchase price was $85,000, and that Wife took title as "Beverley Block, a married woman dealing in her sole and separate property." The parties stipulated that the purchase price was paid from her sole and separate funds.

After the house was purchased, Wife undertook extensive renovations and improvements to the property. These included installation of a wood stove, skylights, ceiling fans, windows, doors, a patio, exterior stairs and walls, a hot tub, a gazebo, a cabana, a swimming pool, a septic tank, and the remodelling of the garage. Much of the work involved was done by persons hired and paid by Wife from her separate funds. It is undisputed that Husband worked on the renovations and improvements, although the extent of his work on the property was contested at trial.

The parties stipulated that Wife spent $93,486.43 of her sole and separate funds on improvements to the Cerrillos property. Ultimately, the parties agreed that the value of the Cerrillos property was equal to the amount of money spent purchasing and remodelling it, $178,486.43. Both parties recognized the difficulty of obtaining an appraisal of the value of Husband's work on the renovations. Thus, Husband argued that the trial court should consider the value of his services instead of the value added to the property by his labor.

The trial court found and concluded that the Cerrillos home was Wife's sole and separate property, and was subject to a community equitable lien of $39,225. The trial court indicated that "[t]his lien is based upon the value of the community labor of the parties, and substantial justice is accomplished in establishing the lien in said amount."

On appeal, Wife contends that the community is entitled to a lien against the Cerrillos home only if the community can demonstrate that community funds or labor enhanced the value of the property or increased the equity interest in the property. Husband contends that he is not required to show an enhanced value of the property due to his labor, and that the trial court is entitled to use any method of apportionment that achieves substantial justice on the facts of each case. As discussed below, we agree with Wife that under New Mexico law the community is entitled to an equitable lien against her separate property only to the extent that the community...