Femiano v. Maust

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

In re the Marriage of:

ANNAMARIE FEMIANO, Petitioner/Appellant,

v.

DOUGLAS G. MAUST, Respondent/Appellee.

No. 1 CA-CV 18-0582 FC
FILED 4-23-2020

Appeal from the Superior Court in Maricopa County
No. FN2016-053412
The Honorable Adam Driggs, Judge

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

COUNSEL

Rose & Associates, PLLC, Phoenix
By Timothy J. Rose
Counsel for Petitioner/Appellant

Hall Underwood, PLLC, Scottsdale
By Jay J. Hall, Emi Koyama

Novo Law Firm, Chandler
By Caitlin L. Andrade
Co-Counsel for Respondent/Appellee
 FEMIANO v. MAUST
Opinion of the Court

OPINION

Judge Kent E. Cattani delivered the opinion of the Court, in which
Presiding Judge Maria Elena Cruz and Judge Kenton D. Jones joined.

C A T T A N I, Judge:

¶1 AnnaMarie Femiano (“Wife”) appeals from the dissolution
decree dissolving her marriage to Douglas G. Maust (“Husband”). At issue
is the marital community’s equitable interest in a home purchased during
the marriage with community funds but titled in Husband’s name only. For
reasons that follow, we affirm the superior court’s determination that,
based on a disclaimer deed signed by Wife, the home was Husband’s
separate property. We reverse, however, the court’s reliance on the formula
described in Drahos v. Rens, 149 Ariz. 248 (App. 1985), in calculating the
community lien for capital contributions to the property. The Drahos
formula credits the community for contributions to the loan principal and
improvements to the property and a portion of the home’s appreciation in
value during the marriage. But that formula was crafted in a context of a
separate property residence on which both separate and community funds
were expended. We conclude that this case is distinguishable and hold that
if the community pays all costs associated with purchasing and improving
a separate property residence acquired during marriage—with no separate
capital contributions—and the property appreciates in value, any increase
in equity is fully attributable to community contributions, and the
community is thus entitled to an equitable lien for the full increase in equity.

FACTS AND PROCEDURAL BACKGROUND

¶2 Husband and Wife married in late 2005. During the marriage,
Husband worked as an electrician earning over $100,000 annually; Wife
worked part time as a cosmetologist earning around $10,000 per year.

¶3 In 2015, the couple paid $235,000 for a house that would be
their marital home for the remainder of their marriage. Because of issues
with Wife’s credit, Husband obtained a home loan in his name only and
took title to the house as his sole and separate property; at the time of
closing, Wife executed a disclaimer deed to that effect. Separate title
notwithstanding, the down payment and all payments on the loan were
made with community funds.

2
 FEMIANO v. MAUST
Opinion of the Court

¶4 In December 2016, Wife filed a dissolution petition seeking
property division and an award of spousal maintenance. The superior
court issued a preliminary injunction prohibiting the sale of community
property, and in mid-2017, the court entered temporary orders awarding
Wife $500 per month in temporary spousal maintenance. Later that year,
Husband sold the marital home for $284,999.

¶5 In April 2018, the superior court held a dissolution trial at
which Wife and Husband testified. Over Husband’s objection, the court
permitted Wife to testify regarding her contention that the disclaimer deed
had been procured by fraud and that the marital home should thus be
classified as community property.

¶6 In the June 2018 dissolution decree, the superior court
implicitly rejected Wife’s fraud claim, classifying the marital home as
Husband’s separate property, while imposing an equitable lien for
payments the community made toward the principal owed on the home
loan. Additionally, the court applied the Drahos formula and thus credited
the community with a portion of the increased value in the property, with
the result being a community lien for $16,095.78, with Wife entitled to
$8,047.89. The court also awarded Wife spousal maintenance of $500 per
month for one year. The court denied both parties’ requests for attorney’s
fees and costs.

¶7 Wife filed a motion for new trial, which the superior court
denied. The superior court entered judgment awarding Husband $1,750 in
attorney’s fees associated with the post-decree proceedings, and Wife filed
a notice of appeal challenging the dissolution decree. We have jurisdiction
under A.R.S. § 12-2101(A)(1).

DISCUSSION

I. Marital Home.

¶8 Wife argues that the superior court erred by classifying the
home as Husband’s separate property and by calculating an inadequate
community lien.

A. Classification.

¶9 We review de novo the legal question of whether property
should be classified as community or separate. Bell-Kilbourn v. Bell-
Kilbourn, 216 Ariz. 521, 523, ¶ 4 (App. 2007). We consider the evidence in
the light most favorable to upholding the decree, giving deference to the

3
 FEMIANO v. MAUST
Opinion of the Court

superior court’s assessment of witness credibility. Id. at 522 n.1; Gutierrez v.
Gutierrez, 193 Ariz. 343, 347, ¶ 13 (App. 1998).

¶10 Property acquired during marriage is presumed to be
community property. A.R.S. § 25-211(A); Brebaugh v. Deane, 211 Ariz. 95,
97–98, ¶ 6 (App. 2005). The spouse seeking to rebut that presumption must
prove by clear and convincing evidence that the property is separate.
Brebaugh, 211 Ariz. at 98, ¶ 6. A signed disclaimer deed, however, provides
such proof and, absent fraud or mistake, rebuts the community
presumption. Bell-Kilbourn, 216 Ariz. at 524, ¶¶ 10–11. The party
attempting to nullify the effect of a disclaimer deed has the burden to show
by clear and convincing evidence that the deed was the result of fraud or
mistake. Powers v. Guaranty RV, Inc., 229 Ariz. 555, 562, ¶ 27 (App. 2012).

¶11 Here, the marital home was purchased during the marriage
and as such was presumed to be community property. See A.R.S. § 25-
211(A). But Husband met his burden to rebut the community-property
presumption and proved that the home was his separate property by
providing clear and convincing evidence to that effect: the disclaimer deed
signed by Wife. See Bell-Kilbourn, 216 Ariz. at 524, ¶ 11. At trial, Wife
challenged the validity of the disclaimer deed, arguing that it was the result
of fraud. The superior court implicitly rejected Wife’s claim, concluding
that the marital home was Husband’s separate property.

¶12 Wife faults the superior court for not making an express
finding on her fraud allegation. Although an explicit finding on this type
of allegation is preferable, the superior court generally need not expressly
state findings of fact or conclusions of law unless a party asks it to do so,
and here, Wife made no such request. See Ariz. R. Fam. Law P. 82(a)(1)
(requiring the court to make express findings of fact and conclusions of law
“[i]f requested before trial”); Bender v. Bender, 123 Ariz. 90, 92 (App. 1979).
Under these circumstances, we assume that the court “found every
controverted fact necessary to sustain the judgment,” and we will uphold
such an implicit finding if supported by the record. Bender, 123 Ariz. at 92.
Here, the court’s ultimate ruling classifying the marital home as Husband’s
separate property necessarily implies that Wife failed to prove fraud.

¶13 Wife further argues that her testimony established all the
elements of fraud and that the court thus erred by crediting the disclaimer
deed. Wife testified that she signed the disclaimer deed in reliance on
Husband’s promise to put her name on the title anyway and that she would
not have signed the deed had she known doing so gave up her rights to the
home. Husband testified to the contrary that he believed Wife understood

4
 FEMIANO v. MAUST
Opinion of the Court

the import and impact of the disclaimer deed, particularly because this was
the second house they had purchased in this manner during the marriage.

¶14 Despite Wife’s contention that Husband failed to refute her
claim and disprove the asserted fraud, as the party seeking to invalidate the
disclaimer deed, Wife had the burden to prove fraud by clear and
convincing evidence. See Powers, 229 Ariz. at 562, ¶ 27. And the superior
court was not obligated to find her testimony alone persuasive, particularly
when Wife first raised the issue of fraud immediately before trial,
inconsistent with her request in the dissolution petition that Husband keep
the home and the home loan. See Gutierrez, 193 Ariz. at 347, ¶ 13. By
declining to find fraud, the court necessarily found Wife’s testimony
insufficient to establish fraud, and on appeal, we do not reweigh conflicting
evidence. Id.; see also Hart v. Hart, 220 Ariz. 183, 188, ¶ 18 (App. 2009)
(noting that the superior court is presumed to apply the correct legal
standard unless the record clearly shows otherwise).

¶15 Accordingly, we affirm the superior court’s ruling that
Husband held title to the marital home as his sole and separate property,
subject to a community lien for community contributions.1

B. Amount of the Community Lien.

¶16 Wife further argues that the superior court erred in
calculating the value of the community lien against the home. “The
existence and the value of an equitable lien present mixed questions of fact
and law.” Valento v. Valento, 225 Ariz. 477, 481, ¶ 11 (App. 2010). While we
defer to the superior court’s factual findings unless clearly erroneous, we
draw our own legal conclusions from those express or implicit findings. Id.

¶17 A separate property residence remains separate property
even if the community contributes funds and uses the residence as a family
home. Drahos, 149 Ariz. at 249. Arizona has long recognized, however, that
capital contributions made with community funds create a community

1 Additionally, Wife argues that the superior court should have held
Husband in contempt for selling the marital residence, purportedly in
violation of the preliminary injunction. See A.R.S. § 25-315(A)(1)(a), (5). But
the preliminary injunction only prohibited sale of “joint, common or
community property,” A.R.S. § 25-315(A)(1)(a). Because the marital
residence was Husband’s separate property, the injunction did not apply to
it.

5
 FEMIANO v. MAUST
Opinion of the Court

interest in the separate asset that may be vindicated through an equitable
lien. See Lawson v. Ridgeway, 72 Ariz. 253, 261–62 (1951).

¶18 Applied to real property, the amount of the lien will reflect
not just the amount of community funds expended but also the increase in
value attributable to the community contribution during the marriage. See
Honnas v. Honnas, 133 Ariz. 39, 41 (1982); Lawson, 72 Ariz. at 262. Early
appellate decisions held that the community lien should account for any
increase in equity created by community-funded loan principal payments
and capital improvements. See Lawson, 72 Ariz. at 261; Hanrahan v. Sims, 20
Ariz. App. 313, 317 (App. 1973); see also Barnett v. Jedynak, 219 Ariz. 550, 554,
¶ 15 (App. 2009). The community lien was later expanded to also include
a proportional share of market-based appreciation. See Honnas, 133 Ariz. at
40; Drahos, 149 Ariz. at 250.

¶19 Generally, the community’s interest in appreciated separate
𝐶
property can be calculated using the Drahos formula: 𝐶 + [𝐵 × 𝐴], where A
= appreciation, B = purchase price, and C = community contributions to
principal. See also Valento, 225 Ariz. at 482, ¶¶ 14–16 (applying the logic
underlying the Drahos formula to account for separate property that
depreciates in value); Barnett, 219 Ariz. at 555, ¶ 21 (applying the Drahos
formula when separate property appreciates both before and after the
marriage begins). The Drahos formula thus credits the community for its
capital contributions, then divides any appreciation proportional to the
𝐶
respective contributions from separate and community property (𝐵
representing the community’s proportionate share).

¶20 But Drahos calculated the community lien on an asset
acquired prior to marriage and on which both separate and community
funds had been expended; because both separate and community funds
were used, it made sense to divide the appreciation proportionally. 149
Ariz. at 249; see also Honnas, 133 Ariz. at 40 (describing the scope of the
community lien as the share of enhanced value attributable to the
community contribution); cf. Cockrill v. Cockrill, 124 Ariz. 50, 54 (1979)
(“[P]rofits, which result from a combination of separate property and
community labor, must be apportioned accordingly.”); Tester v. Tester, 123
Ariz. 41, 44 (App. 1979) (noting that the measure of the community’s share
is the increase in value due to the community’s contribution).

¶21 The Drahos formula has not been applied to circumstances
such as those presented here: a separate property residence, purchased
during marriage, paid for solely with community funds. And we conclude

6
 FEMIANO v. MAUST
Opinion of the Court

that under these circumstances—when an asset is purchased during the
marriage and no separate funds have ever been expended on it—the Drahos
formula should not apply. Instead, when the community pays all costs
associated with purchasing and improving the separate property, any
appreciation in value and the resulting increase in equity is fully
attributable to the community, and the community is thus entitled to an
equitable lien for the full increase in equity. This process gives effect to the
residence’s separate property classification: the spouse who holds title
retains title to the property. But it also gives appropriate credit to the
community for the community payments that were the sole driving force
building equity in the separate asset.

¶22 Here, the superior court found the property’s purchase price
to be $235,000 and the sale price to be $284,999, yielding $49,999 in
appreciation, with community contributions to principal totaling $13,272.
And we defer to those factual findings.2 See Valento, 225 Ariz. at 481, ¶ 11.

¶23 But because only community funds were used to purchase the
separate property home, the court’s reliance on Drahos to calculate a
community lien in the amount of $16,095.78 was flawed. Instead, the

2 Wife argues the superior court erred in valuing several variables in
the Drahos formula. First, she suggests that the court should have used the
initial amount of the home loan ($230,743) as the purchase price, but the
court properly considered the down payment when determining the total
purchase price ($235,000).
Next, Wife argues that the court improperly used the sale price
($284,999) rather than the amount of a pre-sale appraisal ($295,000) to
determine the amount the property had appreciated in value. But absent
evidence that the sale was something other than an arms-length transaction,
the court reasonably relied on the sales price (rather than the estimate
reflected in an appraisal) as better evidence of the actual value of the
property (and thus the amount of appreciation in value).
Finally, Wife asserts that the superior court should have credited the
community with over $33,000 in improvements to the residence.
Community-funded improvements may be considered as contributions to
principal, but only when those improvements “can be proven to have
increased market value and thereby increased equity.” Valento, 225 Ariz. at
482, ¶ 13 n.5. In any event, to the extent any of the expenditures increased
the market value of the residence, Wife (through the community lien for the
full increase in equity) has properly been credited for the community-
funded improvements.

7
 FEMIANO v. MAUST
Opinion of the Court

community was entitled to a lien for its full $13,272 contribution to principal
plus the full $49,999 in appreciation, totaling $63,271.

¶24 Accordingly, we reverse the superior court’s valuation of the
community lien and remand with direction that the dissolution decree
instead reflect a $63,271 community lien, of which Wife’s share is
$31,635.50.

II. Other Issues.

¶25 Wife further argues that the superior court erred in
determining the duration and amount of spousal maintenance and by
denying her request for attorney’s fees. Although we discern no error in
the superior court’s analysis, the ultimate resolution of those issues may be
affected by our redetermination of the community lien against the marital
home, and we thus remand for further consideration by the superior court.3

III. Attorney’s Fees on Appeal.

¶26 Both Husband and Wife request attorney’s fees on appeal
under A.R.S. § 25-324, and Husband under A.R.S. § 12-349. Having
considered the relevant factors and in an exercise of our discretion, we
decline to award either party attorney’s fees. We award Wife her costs on
appeal upon compliance with ARCAP 21.

3 Wife’s appellate briefs also challenge the superior court’s post-
decree rulings denying her request for a new trial and awarding Husband
attorney’s fees. But Wife’s notice of appeal specified only that she was
appealing from the dissolution decree itself—“the judgements/orders
entered on June 15, 2018”—not the post-decree rulings. See ARCAP 8(c)(3)
(requiring a notice of appeal to “[d]esignate the judgment or portion of the
judgment from which the party is appealing”); Ruesga v. Kindred Nursing
Ctrs., L.L.C., 215 Ariz. 589, 599, ¶ 38 (App. 2007) (“[O]ur review on appeal
is limited to the rulings specified in the notice of appeal.”). Moreover, this
court explicitly ordered “that if [Wife] wishes the ruling on the motion for
new trial to be reviewed in this appeal, [Wife] must file a timely amended
notice of appeal.” Wife did not do so. Accordingly, we decline to address
Wife’s challenges to the post-decree rulings.

8
 FEMIANO v. MAUST
Opinion of the Court

CONCLUSION

¶27 For the foregoing reasons, we affirm the decree in part but
reverse the valuation of the community lien on the home and remand for
further proceedings, as appropriate, consistent with this opinion.

AMY M. WOOD • Clerk of the Court
FILED: AA

9