Court of Appeals of Arizona, First Division, Department E
July 11, 2013
In re the Marriage of: DUMITRU STEFANIGA, Petitioner/Appellant,
EUNICE STEFANIGA, Respondent/Appellee.
Not for Publication -Rule 28, Arizona Rules of Civil Appellate Procedure
Appeal from the Superior Court in Maricopa County Cause No. FC2011-053114 The Honorable Gerald Porter, Judge
Daniel J. Siegel, P.C. Daniel J. Siegel Attorney for Petitioner/Appellant.
Gerald D. Sherrill Attorney for Respondent/Appellee.
MICHAEL J. BROWN, Judge.
¶1 Dumitru Stefaniga ("Husband") appeals the superior court's dissolution decree characterizing the marital home as community property and awarding the home to Eunice Stefaniga ("Wife") . For the following reasons, we vacate that portion of the decree as well as the court's award of attorney's fees and remand for proceedings consistent with this decision.
¶2 Husband and Wife married on April 7, 1998. Three months before their marriage, Husband purchased a house (the marital residence) with a down payment of $2800.
¶3 In July 2011, Wife obtained an order of protection that granted her exclusive use of the marital residence. On October 3, 2011, Husband filed a petition for dissolution of marriage asserting he acquired the marital residence as his sole and separate property and therefore he should be awarded the residence upon dissolution. On October 14, 2011, after Husband filed the petition for dissolution, Wife obtained a subsequent order of protection, which again granted her exclusive use and possession of the residence.
¶4 In Wife's response to the petition for dissolution, she admitted that Husband purchased the marital residence as his sole and separate property. Likewise, in the parties' joint prehearing statement, Wife again acknowledged that the marital residence is "technically" Husband's sole and separate property. Wife requested, however, that the equity in the marital home "be considered community property" and that she be awarded the residence and ordered to pay Husband his one-half interest of the equity in the home. For reasons not clear from the record,  at trial Wife took the position that the residence is community property. Thus, both parties asked the court to award them the residence.
¶5 The superior court subsequently issued its decree dissolving the marriage. As pertinent here, the court found that the marital residence was community property, "with the exception of the down payment of $2800" which the court found to be Husband's sole and separate property. The court awarded Wife the residence and ordered her to pay Husband $14, 987.50 for his one-half interest in the community equity. The court also ordered Wife to refinance the home to remove Husband's name from the mortgages or sell the home at Wife's expense. The court ordered Husband to pay $4000 to Wife for her attorneys' fees and costs.
¶6 Following the superior court's denial of Wife's motion for a new trial, Husband timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(A)(2).
¶7 Husband contends the superior court erred by characterizing the marital residence as community property and awarding the property to Wife. Specifically, Husband argues the marital residence is his sole and separate property and Wife is therefore entitled only to a one-half interest in the community's equitable lien on the property.
¶8 "In Arizona, property owned or acquired by either spouse prior to marriage is separate property and does not change its character after the marriage except by agreement or operation of law." Drahos v. Rens, 149 Ariz. 248, 249, 717 P.2d 927, 928 (App. 1985); see also A.R.S. § 25-213. "[A] residence which is separate property does not change its character because it is used as a family home and mortgage payments are made from community funds." Drahos, 149 Ariz. at 249, 717 P.2d at 928. We review de novo the characterization of property as community or separate. In re Marriage of Pownall, 197 Ariz. 577, 581, ¶ 15, 5 P.3d 911, 915 (App. 2000).
¶9 Here, Wife concedes that Husband purchased the marital residence before marriage using his sole and separate funds for the down payment. The record is undisputed that Husband never transferred any title interest in the residence to Wife during the marriage. Therefore, as acknowledged by Wife on appeal, the residence is Husband's separate property and the superior court erred by awarding the property to Wife.
¶10 Nonetheless, the community is entitled to an equitable lien against the property "even though the character of that property has not changed." Drahos, 149 Ariz. at 249, 717 P.2d at 928. When mortgage payments have been made using community funds, we apply the "value-at-dissolution/enhanced-value formula" set forth in Drahos to determine the amount of the community's equitable lien. Id. at 250, 717 P.2d at 929; Valento v. Valento, 225 Ariz. 477, 481, ¶ 13, 240 P.3d 1239, 1243 (App. 2010) (explaining the "value-at-dissolution" approach is generally "appropriate to value a community lien").
¶11 Husband does not dispute that all mortgage payments were made with community funds nor does he contend that the property appreciated before marriage. Therefore, applying the simplified Drahos formulation set forth in Barnett v. Jedynak, 219 Ariz. 550, 554, ¶ 16, 200 P.3d 1047, 1051 (App. 2009), the community's equitable lien on the property equals $15, 794.12 ($13, 425 (community contributions to the principal) [($13, 425 (community contributions to the principal/$93, 500 (purchase price)) x $16, 500 (appreciation in value of the property since purchase)]. Each party is therefore entitled to a one-half interest in the community lien, $7, 897.06, unless the superior court determines that the equitable principles governing the allocation of property demand an alternative division.
¶12 Next, Husband argues the superior court erred by awarding wife attorneys' fees. Husband contends that his positions in the superior court were reasonable and correct, and therefore an award of attorneys' fees to Wife pursuant to A.R.S. § 25-324 is not justified.
¶13 We review the superior court's decision to award attorneys' fees for an abuse of discretion. Burnette v. Bender, 184 Ariz. 301, 306, 908 P.2d 1086, 1091 (App. 1995). A court may order a party to pay the other party's reasonable costs and expenses incurred in defending a dissolution proceeding "after considering the financial resources of both parties and the reasonableness of the positions each party has taken throughout the proceedings." A.R.S. § 25-324(A).
¶14 The superior court in this case entered the fee award based on "the positions taken by the parties, in particular [Husband's] position on the home and his failure to comply with the temporary orders of [the] Court and the relative financial resources of the parties." Because the court's fee award was based, at least in part, on Husband's correct assertion that the marital residence is his sole and separate property, we set aside the fee award and remand to allow the court to reevaluate the factors of § 25-324 and determine whether a fee award is nonetheless justified.
¶15 Both parties request an award of their attorneys' fees incurred on appeal under § 25-324. In our discretion, we deny both fee requests. As the prevailing party, however, Husband is entitled to his taxable costs on appeal subject to his compliance with Arizona Rule of Civil Appellate Procedure 21(a).
¶16 For the foregoing reasons, we vacate the portion of the dissolution decree characterizing and allocating the marital residence, set aside the attorneys' fee award, and remand for proceedings consistent with this decision.
CONCURRING: PATRICIA K. NORRIS, Presiding Judge, JOHN C. GEMMILL, Judge.