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Lincoln Fire Insurance Company of New York v. Barnes

Supreme Court of Arizona

March 27, 1939

LINCOLN FIRE INSURANCE COMPANY OF NEW YORK, a Corporation, Appellant,
v.
J. C. BARNES and RUBY C. BARNES, Husband and Wife, STANDARD INVESTMENT COMPANY, a Corporation, and CHARLES HARRIS, Appellees

APPEAL from a judgment of the Superior Court of the County of Maricopa. E. G. Frazier, Judge. Judgment affirmed.

Messrs. Snell & Strouss and Mr. Mark Wilmer, for Appellant.

Messrs. Cunningham & Carson, for Appellees J. C. Barnes, Ruby C. Barnes and Standard Investment Company.

Messrs. Gust, Rosenfeld, Divelbess, Robinette & Coolidge, for Appellee Charles Harris.

OPINION

[53 Ariz. 266] LOCKWOOD, J.

This is an appeal by the Lincoln Fire Insurance Company of New York, a corporation, hereinafter called plaintiff, from a declaratory judgment which held that a lease of certain real property in the City of Phoenix was the sole and separate property of Ruby C. Barnes, and that her husband, J. C. Barnes, and the community, consisting of Ruby C. Barnes and J. C. Barnes, had no interest therein.

Page 534

The only question necessary for us to consider is whether the evidence sustains the finding of the trial court that the lease in question was the sole and separate property of Ruby C. Barnes. This evidence shows the following facts: J. C and Ruby C. Barnes were married on the 14th day of May, 1919, and ever since have been husband and wife. At that time he had been engaged in the insurance business in Nogales for some three or four months, his assets being a very small equity in this business and two $50 Liberty Bonds. His wife at the time of the marriage possessed between $12,000 and $15,000 as her separate estate which she had acquired from her father. In 1925 one Dumazert offerd Barnes a commission of $1,000 if he would sell certain valuable real estate in Nogales belonging to Dumazert. As a result of this offer Dumazert and Barnes entered into a contract for the sale of the property to the latter for $75,000, $1,000 in cash and the balance in deferred payments. About a year later Barnes assigned his interest in the property to his wife as a gift. At this time the plaintiff was in no manner a creditor of either of the Barnes.

In the spring of 1931 Mrs. Barnes sold her equity in the Dumazert property for $28,000 and her interest in the Citizens Investment Company of Nogales, which was also her separate property, for $17,500 and in the fall of that year she purchased the lease on the [53 Ariz. 267] San Carlos Hotel in Phoenix, which is the subject matter of this suit, together with certain furniture and fixtures in the hotel, from Charles Harris. The purchase price for the lease and furniture was $185,000, $45,000 being paid in cash and the balance evidenced by a note secured by a chattel mortgage. This lease was originally for twenty-five years and still had twenty years to run. The $45,000 cash paid for the lease came entirely from the proceeds of the sale of the equity in the Dumazert building and the stock in the Citizens Investment Company of Nogales, both of which, as we have stated, were the separate property of Mrs. Barnes at the time.

The Barnes operated the hotel business for approximately six years. During this time Barnes was paid a salary of from $100 to $150 per month as manager of the hotel, while Mrs. Barnes had a drawing account of about $300 per month. Mrs. Barnes devoted practically her entire time to assisting in managing the hotel, with the exception of a period of some six or seven months when she was ill, and Mr. Barnes devoted part of his time to the management of the hotel and part to the operation of an independent garage.

From 1931 to 1937 there was paid to Harris on the mortgage for the balance of the purchase price above referred to nearly $100,000, all of which came out of the earnings of the hotel business operated by the Barnes under their lease as aforesaid. In November, 1937, Harris repurchased the lease and furniture for $100,000, $40,600 of which was paid by the satisfaction of the note and mortgage, which were originally given by Mrs. Barnes at the time of the purchase of the lease in 1931, and the balance of $59,400 in cash. These are all the material facts bearing upon the question of whether the lease was community property of J. C. and Ruby C. Barnes, as claimed by plaintiff, or [53 Ariz. 268] the separate property of Ruby C. Barnes, as found by the trial court.

We have frequently had occasion to review various phases of the law determining whether property acquired by residents of the state of Arizona is community or separate, and have laid down the rules governing such situations as follows: (a) All property acquired by either spouse during coverture, except through gift, devise or descent, is presumed community property of the two, no matter in whose name the title may stand. Horton v. Horton, 35 Ariz. 378, 278 P. 370; Blackman v. Blackman, 45 Ariz. 374, 43 P.2d 1011; La Tourette v. La Tourette, 15 Ariz. 200, 137 P. 426, Ann. Cas. 1915B 70. (b) This presumption may be overcome by proof that it was the intention of the spouses at the time of acquisition that the property should be the separate property of one or the other. Jones v. Rigdon, 32 Ariz. 286, 257 P. 639. (c) Either spouse may give his interest in community to the other after the property has been acquired, so long as the rights of creditors are not affected by such gift. Colvin v. Fagg, 30 Ariz. 501, 249 P. 70. And (d) that the burden is upon the one claiming the property acquired during coverture to be separate property to establish such fact by clear and satisfactory evidence. Rundle v. Winters, 38 Ariz. 239, 298 P. 929.

At the time of the marriage there is no question ...


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