In re Marriage of Buckholtz

          Appeal from the Superior Court in Maricopa County No. FN2016-091038 The Honorable Theodore Campagnolo, Judge

          Udall Shumway PLC, Mesa By Steven H. Everts Counsel for Petitioner/Appellant

          Berkshire Law Office, PLLC, Tempe By Keith Berkshire (argued), Erica L. Gadberry Counsel for Respondent/Appellee

          Judge Paul J. McMurdie delivered the opinion of the Court, in which Presiding Judge Jennifer B. Campbell and Judge Kent E. Cattani joined.

          OPINION

          MCMURDIE, JUDGE.

         ¶1 Billy William Buckholtz ("Husband") appeals the decree dissolving his marriage to Mirta Elizabeth Buckholtz ("Wife"). We hold when a marital separation agreement is presented to the superior court under Arizona Revised Statutes ("A.R.S.") section 25-317, the superior court must determine whether the agreement is enforceable, and if the agreement is enforceable, determine whether it is "unfair." We also hold that parties to a separation agreement may consider their sole and separate property when creating an agreement, and if they do so, the superior court also may consider the parties' sole and separate property in determining whether the agreement is unfair under A.R.S. § 25-317. We emphasize, however, that this is so only if they have acted with full knowledge of the nature of the property involved, including knowing whether the property at issue is a community or separate asset. For the following reasons, we reverse and remand the decree in this case for proceedings consistent with this opinion.

         FACTS AND PROCEDURAL BACKGROUND

         ¶2 Husband and Wife were married in 1978. On June 3, 2013, after individually consulting with attorneys, they signed a Marriage Separation Agreement (the "Agreement") to divide their property and debts. The Agreement stated Husband "will remain" in their marital residence and the parties "agreed upon a division of all assets, owned or possessed by them as marital property or separate property . . . [and] are in possession of all of those assets to which he or she is respectively entitled." The parties also agreed that any "debt accumulated as of the date of this Agreement is the debt of the individual party, regardless if the debt was incurred as a result of joint credit." The Agreement did not specifically reference any other assets or debts.

         ¶3 The parties have raised arguments regarding two significant assets. The first asset is the parties' home. Approximately one month before signing the Agreement, the house was appraised at $257, 500. Around the time the Agreement was signed, Wife quit-claimed all right, title, or interest in the house to Husband. Husband refinanced the house, and the same day the parties signed the Agreement, Husband transferred $127, 435 to Wife, approximately one-half of the house's equity.

         ¶4 The other significant asset is Wife's 401 (k) account. After the parties married, Wife began working for an airline and in April 2013, her 401(k) was valued at $152, 122. On June 3, 2013, in a separate document, Husband quit-claimed all right, title, or interest in Wife's 401(k) to Wife "as her sole and separate property." It is unclear why the parties used a "quit-claim deed" to transfer Husband's interest in Wife's 401(k), but Husband testified he knew that by signing the document he was giving up his rights to Wife's 401(k).

         ¶5 The Agreement, however, did not reference Wife's 401(k) account or the equity in the community home. The Agreement also did not reference a monthly benefit payment Husband receives from the military related to his service before the parties married. The parties and the superior court referred to Husband's military benefit as both a disability payment and a pension. Regardless of the type of military benefit, both parties agree on appeal the benefit is Husband's sole and separate property.

         ¶6 More than three years after Husband and Wife signed the Agreement and the "quit claim deeds," Husband petitioned for dissolution of the marriage. Neither party sought spousal maintenance and they do not have any minor children; therefore, the only issue before the court was division of the parties' assets and debts. In his petition, Husband admitted that the parties entered into the Agreement, but alleged that provisions of the Agreement were not fair and equitable. At an evidentiary hearing, Husband argued the Agreement unfairly and inequitably divided the parties' home and Wife's 401(k) because Wife received approximately half the equity in the house and all of her 401(k) account. Husband claimed he was entitled to fifty percent of the value of Wife's 401(k) as of the date the parties signed the Agreement, plus any increase in value he would have obtained from his share between that date and the termination of the community estate.

         ¶7 Following the evidentiary hearing, the superior court entered a decree of dissolution. The court found the parties freely, knowingly, and voluntarily entered into the Agreement, and that the Agreement was valid and binding and fairly and equitably divided the community property and debts as of June 3, 2013. The court then incorporated the Agreement into the decree. The court affirmed the house as Husband's separate property pursuant to the Agreement; affirmed the payment of $127, 435 to Wife as her share of the community interest in the house; and awarded Wife her 401(k), with Husband having no claim to the account. The court confirmed Husband's "military pension" was his sole and separate property, with Wife having no claim to the benefit. The court also distributed the parties' community debts and other community assets, including household furnishings, cars, life insurance policies, and bank accounts.

         ¶8 Pursuant to Arizona Rules of Family Law Procedure 82 and 83, ^[1] Husband moved to correct the findings of fact, for an amended judgment, and for a new trial. The court denied the motions. Husband timely appealed, and we have ...