Ortiz v. Diejuez

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

In re the Marriage of:

PEDRO ORTIZ, Petitioner/Appellant,

v.

JUANA DIEJUEZ, Respondent/Appellee.

No. 1 CA-CV 18-0606 FC
FILED 4-7-2020

Appeal from the Superior Court in Maricopa County
No. FC2017-009466
FC2017-096002
(Consolidated)
The Honorable Joan M. Sinclair, Judge

AFFIRMED IN PART; VACATED IN PART; REMANDED

COUNSEL

Alexander R. Arpad, Phoenix
By Alexander R. Arpad
Counsel for Petitioner/Appellant
Gillespie, Shields, Goldfarb & Taylor, Mesa
By Mark A. Shields
Co-Counsel for Respondent/Appellee

The Hogle Law Firm, PLC, Mesa
By Dana R. Hogle, Robert J. Moon
Co-Counsel for Respondent/Appellee

MEMORANDUM DECISION

Presiding Judge Lawrence F. Winthrop delivered the decision of the Court,
in which Judge Maria Elena Cruz and Judge David B. Gass joined.

W I N T H R O P, Judge:

¶1 Pedro Ortiz (“Father”) appeals several rulings in the decree
dissolving his marriage to Juana Diejuez (“Mother”). Father argues the
court erred in the division and characterization of real property and erred
in calculating his income for the purposes of determining child support and
spousal maintenance. Finding the superior court erred in both respects, we
vacate the family court’s characterization of the real property and the other
portions of the decree at issue. We affirm the remainder of the decree and
remand for further proceedings consistent with this decision.

FACTS AND PROCEDURAL HISTORY

¶2 Father and Mother were married for 22 years and have six
children together. Father filed a petition for dissolution of marriage on
September 21, 2017. Before the dissolution hearing, the parties agreed on
several minor financial issues, but were unable to agree on issues such as
child support, spousal maintenance, and division of the real property.

¶3 The court held the dissolution hearing on August 1, 2018. At
the hearing, the court heard evidence on Father’s income to determine
proper child support1 and spousal maintenance payments. Father’s tax
returns were received in evidence by stipulation and showed Father’s
adjusted gross income was $29,229 in 2016; $35,949 in 2015; and $37,531 in

1 At the time of the dissolution hearing, the parties had five minor
children.

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2014. Father testified that he earns a total of approximately $2,604 per
month—$2,200 per month from his landscaping business and an additional
net of $404 per month from the couple’s real property after expenses such
as the mortgage payments are deducted—which totals $31,248 annually.
Mother disagreed with Father’s testimony and testified that Father earns
over $5,000 a month—or approximately $67,000 annually—as evidenced by
deposits made in the couple’s joint bank account from December 2016 to
November 2017. Bank records reflecting those deposits were received in
evidence by stipulation.

¶4 Also at issue in the dissolution were two apartment buildings
located at 1715 East Fifth Avenue (the “1715 building”) and at 1717 East
Fifth Avenue (the “1717 building”). In their pretrial statements, both
parties agreed that the 1715 building is owned by Father and his father
(“Grandfather”) as joint tenants. However, Mother’s pretrial statement
claimed that despite Grandfather being “a title co-owner of the 1715
property,” Grandfather had “no equitable interest in the property” because
he never paid the mortgage or expenses on the 1715 building and never
received any of the rental income generated by the 1715 building. Mother
argued she was entitled to 50% of the equity in the 1715 building because
Father treated it “as if he owned full fee title” and because the community
paid all expenses associated with the 1715 building and received all revenue
generated.2 Father’s position in his pretrial statement was that Mother had
a 25% interest in the 1715 building. The 1717 building is titled in Father’s
name alone, but both parties’ pretrial statements agreed Mother has a 50%
interest in the 1717 building.

¶5 The parties reiterated their positions regarding the real
property at the dissolution hearing. Father testified that he and
Grandfather co-own the 1715 building as joint tenants with rights of
survivorship and argued Mother’s interest in the 1715 building is 25% (half
of Father’s half). Mother testified at trial that even though Father did not
hold full fee title to the 1715 building, he treated it as “his own,” and so
Mother asked the court to give her 50% of the equity in the 1715 building.
Father testified he was the sole owner of the 1717 building. Both parties
acknowledged that the community paid all expenses associated with the
real property and deposited all revenue generated into the parties’ joint

2 A letter from Grandfather was received in evidence by stipulation in
which Grandfather confirmed he does not pay the mortgage or receive rent
payments for the 1715 building.

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bank account. Accordingly, the parties agreed that Mother should receive
50% of the community’s interest in the 1717 building.

¶6 The warranty deeds for both properties were received in
evidence by stipulation on the day of the hearing. The 1715 building deed
shows Father received his interest in the building as his sole and separate
property from Grandfather and states Father and Grandfather own the
property as joint tenants with rights of survivorship. The 1717 building
deed also shows Father received the 1717 building as his sole and separate
property. Mortgage statements on both properties were also admitted,
which show the mortgage on the 1715 building is in Grandfather’s name
and the mortgage on the 1717 building is in Father’s name.

¶7 After consideration of all evidence, the court issued the
decree of dissolution. Father was ordered to pay $1,485.57 per month in
child support.3 The court stated it “did not find [Father’s] testimony
relative to his income to be credible,” and calculated Father’s monthly
income for the purposes of child support “by averaging the deposits made
in the bank statements” of the parties’ joint account. The annualized total
of the attributed income would be $67,104. The decree also ordered spousal
maintenance of $1,000 per month for thirty-six months, inexplicably finding
Father “has historically earned an average of approximately $33,000 per
year.”

¶8 Regarding the real property, the court found both buildings
were community property and ordered both be placed on the market within
ninety days of the decree, with each party to receive 50% of the proceeds
from each sale. Specific to the 1715 building, the court found

[Father] claimed that the 1715 property was a joint tenancy
owned by him and his father, however, the mortgage for this
property was paid by the marital community and the rental
income was income to the marital community. Additionally,
[Grandfather] wrote a note supporting the evidence that the
debts and income of that property were completely part of the
marital community. [Father] treated the 1715 property as his

3 The court later updated Father’s monthly child support obligation to
be $1,159 per month. This updated amount reflected Father’s spousal
maintenance obligations and fixed a clerical error made in a previous child
support worksheet submitted by the State. The change did not address
Father’s arguments on appeal regarding his income.

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own so the Court will consider this marital community
property.

¶9 Father filed a timely notice of appeal from the final decree.
We have jurisdiction under Arizona Revised Statutes (“A.R.S.”) section 12-
2101(A)(1).

ANALYSIS4

I. Interest in the Apartment Buildings

¶10 On appeal, Father argues the court erred in finding the
apartment buildings were community property because his interest in each
building was deeded to him as sole and separate property.5 Father
contends the court also erred in finding the 1715 building was 100%
community property when the property is owned by Father and
Grandfather as joint tenants.6 Father claims the court did not have
jurisdiction to determine Grandfather’s interest in the 1715 building
without joining Grandfather as a party.

¶11 In response, Mother argues the court did not abuse its
discretion because Father acknowledged in his pretrial statement that

4 Because neither Father nor Mother requested the court make
findings of fact or conclusions of law pursuant to Arizona Rule of Family
Law Procedure 82(a), we presume the court found every fact necessary to
sustain its decision. See Elliott v. Elliott, 165 Ariz. 128, 135 (App. 1990).

5 Mother argues Father cannot challenge the characterization of the
real property because he represented in his pretrial statement that the
buildings were community property. However, Father took an inconsistent
stance in the proceedings below, stating the buildings are community
property while at the same time introducing evidence of the warranty
deeds which designated the properties as Father’s “sole and separate
property.” Because Father took an inconsistent position, and because the
characterization of property is a question of law, we believe it is appropriate
for the court to review the characterization of the real property.

6 Mother claims any argument concerning Grandfather’s interest is
waived because it was not asserted below. We disagree. The record reflects
Father consistently acknowledged Grandfather’s interest in the 1715
building, plainly stating the building was held in joint tenancy with
Grandfather.

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Mother had a community interest in both buildings. Mother contends the
court properly divided the 1715 building, “notwithstanding the joint
tenancy deed,” because A.R.S. § 25-318 allows the court to “divide the
community, joint tenancy and other property held in common equitably.”
Mother also argues Grandfather’s interest only constitutes a lien in the
property, not ownership, because Grandfather did not live at the property,
care for it, or receive the rental income from it.7

¶12 We review the family court’s distribution of property for an
abuse of discretion; however, the classification of property as separate or
community is a question of law that we review de novo. Bell-Kilbourn v. Bell-
Kilbourn, 216 Ariz. 521, 523, ¶ 4 (App. 2007). We also review de novo whether
the court has jurisdiction. Bank of N.Y. Mellon v. Dodev, 246 Ariz. 1, 6, ¶ 15
(App. 2018).

A. Characterization of the Real Property

¶13 Property acquired during marriage is presumed to be
community property. A.R.S. § 25-211(A). The party seeking to overcome
that presumption has the burden of establishing by clear and convincing
evidence the separate nature of the property. Schickner v. Schickner, 237
Ariz. 194, 199, ¶ 22 (App. 2015). “Property takes its character as separate or
community at the time of acquisition and retains that character throughout
the marriage.” Bell-Kilbourn, 216 Ariz. at 523, ¶ 5 (internal quotation
omitted). Once this character has been established, it does not change

7 Mother also claims Grandfather’s joint tenancy was “terminated”
because joint tenancy requires presence of the “four unities” (time, title,
possession, and interest). Mother asserts the unities were destroyed
because Grandfather “took no part in the possession, time, and interest of
the property” as the record shows he did not live at the property, take care
of it, or receive income from it. While a joint tenancy does require presence
of the four unities, Mother’s argument misunderstands this doctrine in two
ways. First, Mother does not apply the proper legal meaning to each unity
(e.g., unity of time requires “the joint tenants acquired the property and
executed the contract at the same time” not that that the joint tenants both
spent time at the property; for unity of possession, joint tenants must have
the same right to possess the property and “there is no requirement of actual
possession”). See Smith v. Tang, 100 Ariz. 196, 204 (1966) (emphasis added).
Second, even if one of the unities is destroyed and the joint tenancy is
severed, a tenant’s interest in the property is not terminated completely;
rather, the joint tenancy is converted into a tenancy in common. Brant v.
Hargrove, 129 Ariz. 475, 478 (App. 1981).

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except by agreement or operation of law. Schock v. Schock, 11 Ariz. App. 53,
56 (1969).

¶14 The warranty deeds for the properties reflect that Father
acquired his interest in both buildings “as his sole and separate property.”
In addition, the case record and public records reflect that recorded
disclaimer deeds exist for each property—both signed by Mother—
agreeing each building is the sole and separate property of Father and
disclaiming that Mother has any interest in the buildings. 8 A valid
disclaimer deed rebuts the presumption of community property and “must
be enforced in the absence of fraud or mistake.” Bell-Kilbourn, 216 Ariz. at
523-24, ¶¶ 7, 11. Fraud and mistake, however, are affirmative defenses that
must be proved by clear and convincing evidence. Bender v. Bender, 123
Ariz. 90, 94 (App. 1979); see also Powers v. Guar. RV, Inc., 229 Ariz. 555, 562,
¶ 27 (App. 2012); Gutierrez v. Gutierrez, 193 Ariz. 343, 347, ¶ 7 (App. 1998).
If Mother alleges these disclaimer deeds were obtained by fraud or mistake,
she can present that evidence to the trial court on remand.

¶15 Assuming without deciding that these properties were
received by Father as his sole and separate property, we note that, although
the community paid the mortgages and upkeep on both buildings, as well
as lived in one of the buildings, those actions did not change the legal
character of the property. See Drahos v. Rens, 149 Ariz. 248, 249 (App. 1985)
(“[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.”). On this record, the family court erred in finding both
the 1715 building and the 1717 building were community property without
adequate consideration for the character of the property at the time of
acquisition, including consideration of any related documents concerning
the respective interests of the parties at the time of acquisition. See Bell-
Kilbourn, 216 Ariz. at 523, ¶ 5. Accordingly, we vacate the family court’s

8 The superior court did not consider the disclaimer deeds in making
its decision because, inexplicably, the deeds were not produced by either
party until after the dissolution hearing. Husband filed a post-trial “Motion
for Relief Pursuant to Rule 85(C) of Arizona Rules of Family Law
Procedure” asking the court to consider the disclaimer deeds. The court
denied that motion. Because we are remanding the characterization of the
real property—among other issues—to the trial court, we presume the
timeliness of disclosure of these deeds will no longer be an issue, and the
trial court may, if appropriate, take judicial notice of the existence and
content of these deeds. See Ariz. R. Evid. 201(b)(2).

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characterization of the buildings as community property and also vacate
the order that the properties be placed on the market to be sold.

¶16 As previously noted, Father may on remand seek to introduce
evidence of the disclaimer deeds. See Johnson v. Provoyer, 245 Ariz. 239, 241-
42, ¶ 8 (App. 2018) (“The superior court has broad discretion in ruling on
disclosure and discovery matters.”). If the deeds are allowed, pursuant to
Arizona Rule of Evidence 201(b)(2) or on any other ground, Mother may
seek to rebut the disclosure deeds by presenting evidence of fraud or
mistake. See Bender, 123 Ariz. at 94. If the court determines the buildings
are Father’s separate property, the community may be entitled to an
equitable lien against the properties based on the community’s
contributions in the form of mortgage payments and maintenance costs.
A.R.S. § 25-318(E)(1); Drahos, 149 Ariz. at 249-50.

B. Grandfather’s Interest in the 1715 Building

¶17 The court has the power to “divide the community, joint
tenancy and other property held in common equitably.” A.R.S. § 25-318(A).
Contrary to Mother’s assertion, however, this statute only gives the court
the power to divide property held in joint tenancy between the parties to the
dissolution; it does not give the family court jurisdiction to determine third-
party interests in a property held in joint tenancy between one spouse and
a third party who is not joined in the proceedings.

¶18 The court has the power to join a third party when joinder is
“necessary for the exercise of its authority.” A.R.S. § 25-314(D); see also Ariz.
R. Civ. P. (“Rule”) 19(a) (detailing situations where a party is necessary,
including when the individual’s interests would be impaired or impeded
by a judgment). Alternatively, the court may divide a partial interest in
property without joining a third party if that third party was not an
indispensable party. Gerow v. Covill, 192 Ariz. 9, 15, ¶ 23 (App. 1998).

¶19 Here, the court adjudicated the full interest in the 1715
building without joining Grandfather, despite the warranty deed showing
Grandfather owns the 1715 building in joint tenancy with Father.9 Without
joinder, the court did not have jurisdiction to determine or disregard
Grandfather’s interest in the 1715 building. See Garn v. Garn, 155 Ariz. 156,

9 On February 11, 2020, Grandfather filed a “Motion to Intervene as
Party in Interest.” We deny this motion without prejudice to Grandfather
on remand filing a motion to intervene in the superior court.

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159 (App. 1987) (“Elementary principles of due process require that before
any person may have a valid judgment entered against him, that person
must have reasonable notice and an opportunity to appear and defend.”).
The conclusion that the 1715 building could become community property
simply because Father “treated the property as his own” has no legal
basis—Grandfather does not lose his ownership interest just because he did
not pay the mortgage or receive the rent payments from the apartment
building.

II. Father’s Income for the Purposes of Determining Child Support

¶20 Father argues the court erred in calculating his income for the
purposes of determining child support in two ways: first, by attributing all
rental income from the parties’ real property to Father without deducting
mortgage payments and other necessary expenses of maintaining the
properties10 and second, by attributing future income from the rental
properties to Father while also ordering the properties be sold.

¶21 We review a court’s award of child support for an abuse of
discretion. Sherman v. Sherman, 241 Ariz. 110, 112, ¶ 9 (App. 2016). “An
abuse of discretion occurs when the court commits an error of law that
underlies its exercise of discretion.” Id. at 113, ¶ 9. We will accept the
superior court’s factual findings unless clearly erroneous. Id. In addition,
“[w]e will defer to the trial court’s determination of witnesses’ credibility
and the weight to give conflicting evidence.” Gutierrez, 193 Ariz. at 347,
¶13.

¶22 We review de novo the court’s conclusions of law and
interpretation of the Arizona Child Support Guidelines (“Guidelines”),
including whether a particular receipt or expense should be included in the

10 Mother argues Father did not preserve this argument for appeal
because “he failed to produce any documentary or testimonial evidence of
his claimed deductions.” However, when questioned about his income,
Father testified he collected net revenue of $404 on the properties after
paying the mortgage, repairs, and utilities on the properties. In addition,
mortgage statements evidencing the payments were entered into evidence
by stipulation, and both parties have continuously asserted the community
paid the mortgages for the properties. We find Father has preserved the
argument that the necessary expenses related to the properties should be
subtracted from the gross rental income.

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child support calculation. Sherman, 241 Ariz. at 113, ¶ 9; Patterson v.
Patterson, 226 Ariz. 356, 358-59, ¶¶ 4, 7 (App. 2011).

¶23 Regarding Father’s first argument, the Guidelines make clear
that in calculating income from rent, “gross income means gross receipts
minus ordinary and necessary expenses required to produce income.”
A.R.S. § 25-320 app. § 5(C). Here, the court stated it “did not find [Father’s]
testimony relative to his income to be credible” and so calculated Father’s
income “by averaging the deposits made in the bank statements” of the
parties’ joint account. Although we will not reevaluate the court’s
determination of Father’s credibility, see Gutierrez, 193 Ariz. at 347, ¶ 13, the
court erred as a matter of law by calculating Father’s income using the bank
deposits alone (reflecting gross rental income) without also subtracting the
mortgage payments and other expenses necessary to continue generating
rental income from the two properties.11 Accordingly, we vacate the court’s
child support award and remand for a redetermination of Father’s net
income in accordance with this decision.

¶24 Finally, because we vacate the court’s order that the real
property be placed on the market to be sold, Father’s argument regarding
future rental income in light of the ordered sale of the properties is moot
and we need not address it.

III. Spousal Maintenance

¶25 Father argues the spousal maintenance award should be
reversed based on the court’s inconsistent findings of Father’s income and
because the decree will be altered significantly if the court recalculates child
support and reconsiders equitable property allocations. We agree.

¶26 We review an award of spousal maintenance for an abuse of
discretion, which occurs when the court makes an error of law in reaching

11 In his opening brief, Father argues the court “failed to deduct the
mortgage payments and other expenses of maintaining the apartment
buildings.” Father does not clearly identify what “other expenses” he
believes should have been considered, although he testified to paying the
utilities and maintenance expenses of the properties. We find the record
insufficient for this court to determine whether any “other expenses” were
necessary to the production of rental income from the properties. See A.R.S.
§ 25-320 app. § 5(C). We leave such determination to the family court on
remand.

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a discretionary conclusion. Boyle v. Boyle, 231 Ariz. 63, 65, ¶ 8 (App. 2012).
We review factual findings for clear error. Sherman, 241 Ariz. at 113, ¶ 9.

¶27 In the spousal maintenance portion of the decree, the court
found Father “has historically earned an average of approximately $33,000
per year.” Yet the child support worksheet now lists Father’s income as
$5,592 per month, which would total $67,104 per year. Further, as already
noted, that calculation does not accurately reflect Father’s net income
considering the expenses necessary to maintain the rental properties.

¶28 These inconsistent findings regarding Father’s income
represent clear error. See id. We vacate the court’s award of spousal
maintenance and remand this issue to the superior court to recalculate and
make consistent findings regarding Father’s income.

¶29 We also note it may be appropriate for the court to revisit the
issue of spousal maintenance on remand because our decision on child
support and property allocation substantially alters the status of the decree.
See Muchesko v. Muchesko, 191 Ariz. 265, 273 (App. 1997) (stating that when
an appellate decision “substantially alters the status of the decree as
written,” the trial court may reconsider related issues on remand).

IV. Attorneys’ Fees

¶30 Mother and Father both seek attorneys’ fees on appeal under
A.R.S. § 25-324. We do find that Mother has taken some unreasonable
positions on appeal, particularly as it relates to the characterization of
Father’s interest in the subject real properties and as to the court’s authority
to resolve issues concerning the 1715 building as to Grandfather, a non-
party. This is ameliorated to some extent by the inconsistent positions taken
by Father in his pretrial statement and throughout trial concerning his
interest in these properties. On the other hand, per the parties’ most recent
affidavits of financial information, Father’s financial position appears more
favorable. Section 25-324, however, provides that fees may be awarded
based either on disparate financial condition or the reasonableness of the
positions taken on appeal. Accordingly, we award Father some portion of
his reasonable attorneys’ fees on appeal and his costs on appeal, all
contingent on his compliance with Arizona Rule of Civil Appellate
Procedure (“ARCAP”) 21(a).

CONCLUSION

¶31 For the foregoing reasons, we vacate the portions of the
decree pertaining to the determination of child support, spousal

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maintenance, and division and characterization of the subject real property.
We affirm all other portions of the decree not challenged on appeal;
however, on remand, the court has discretion to reconsider all financial
aspects of the decree to ensure equitable division, recognizing that our
decision substantially alters the status of the decree as written. See
Muchesko, 191 Ariz. at 273. Finally, we award Father his taxable costs on
appeal and a portion of his reasonable fees, subject to compliance with
ARCAP 21(a).

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

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