Warner v. Driggs-Warner ( 2023 )

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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 Matter of:
PETER C. WARNER, Petitioner/Appellant,
v.
KIMBERLY DRIGGS-WARNER, Respondent/Appellee.
No. 1 CA-CV 21-0732 FC
FILED 3-9-2023
Appeal from the Superior Court in Maricopa County
No. FC2020-003670
The Honorable Suzanne Marie Nicholls, Judge
AFFIRMED IN PART, VACATED IN PART, REVERSED IN PART,
AND REMANDED
COUNSEL
Dickinson Wright, PLLC, Phoenix
By Marlene A. Pontrelli, Leonce A. Richard, III, James Lawson, Vail C.
Cloar, Alexandra Crandall
Counsel for Petitioner/Appellant
Mark J. DePasquale, PC, Phoenix
Co-Counsel for Respondent/Appellee
Schmidt McElwee & Gordon, PLLC, Phoenix
By Paul G. Schmidt, Tracy Gordon
Co-Counsel for Respondent/Appellee
WARNER v. DRIGGS-WARNER
Decision of the Court
MEMORANDUM DECISION
Judge Peter B. Swann1 delivered the decision of the court, in which
Presiding Judge Maria Elena Cruz and Judge Angela K. Paton joined.
S W A N N, Judge:
¶1 Peter C. Warner (“Husband”) appeals from the decree
dissolving his marriage to Kimberly Driggs-Warner (“Wife”). Husband
challenges the superior court’s evidentiary rulings, characterization and
valuation date of several financial accounts, spousal maintenance award,
child support award, and attorney’s fees award. We vacate and remand the
court’s division of Husband’s retirement accounts. We reverse Wife’s
spousal maintenance award. We vacate and remand Husband’s child
support obligation. In all other aspects, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 Husband and Wife divorced after more than twenty years of
marriage. In November 2020, the superior court set trial for June 2021.
Husband, a retired attorney, moved unsuccessfully to continue the trial.
After obtaining new counsel, Husband again asked the court to continue
the trial. The court granted Husband’s continuance in an order filed June
9, 2021, and reset the date for a one-day trial in July. The June order also
specified the new deadlines for discovery and disclosure.
¶3 On July 2, Wife moved to preclude Husband’s expert witness
and over 1,000 pages of documents as untimely disclosed on July 1. On July
20, the court granted Wife’s request. Husband’s expert witness had
performed a tracing analysis concerning certain accounts, and the court
precluded that evidence. The additional documents the court precluded
1 Judge Peter B. Swann was a sitting member of this court when the
matter was assigned to this panel of the court. He retired effective
November 28, 2022. In accordance with the authority granted by Article 6,
Section 3, of the Arizona Constitution and pursuant to A.R.S. § 12-145, the
Chief Justice of the Arizona Supreme Court has designated Judge Swann as
a judge pro tempore in the Court of Appeals for the purpose of participating
in the resolution of cases assigned to this panel during his term in office and
for the duration of Administrative Order 2022-162.
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contained some of Husband’s financial statements, tax returns, tax forms,
and letters.
¶4 The court held a one-day trial on July 27, 2021. Three
witnesses testified at the trial: Husband, Wife, and Wife’s father, Jerry
Driggs. During the trial, the court denied Husband’s request to use four
demonstrative charts during his testimony and to have additional trial time.
¶5 Two months later, the court issued its dissolution decree. The
court adopted the parties’ agreement concerning the division of their real
property, most personal property, and most financial accounts. The court
also addressed the characterization of certain financial accounts, which the
parties disputed.
¶6 At issue in this appeal are the following rulings:
The court found that Husband failed to prove that the funds
used to start his retirement accounts, the E*Trade Roth IRA
#3012 and the Rollover IRA #3019, were his sole and separate
property. The court found the accounts to be community
property and divided them equally. The court also awarded
Husband the withdrawals of the Rollover IRA #3019 after the
date of service as his sole and separate property and found
any related tax liability his sole responsibility.
The court found that the Merrill Edge 529 plan account was
community property because Husband failed to prove that
fifty percent of the original funds used to open the account
were his sole and separate property.
The court found that the funds used to open the
Commonwealth account x7788 were Wife’s sole and separate
property and awarded her the account.
The court found that Wife qualified for spousal maintenance
and awarded Wife spousal maintenance of $2,000 per month
for three years. The court attributed Husband’s income to be
$45,000 and ordered Husband to pay $1,577 per month in
child support.
Lastly, the court found after consideration of financial
resources and reasonableness of positions that Husband shall
pay a portion of Wife’s reasonable attorney’s fees and costs
pursuant to A.R.S. § 25-324(A) and A.R.S. § 25-415. The court
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issued a judgment and order requiring Husband to pay Wife
$110,000 in attorney’s fees.
¶7 Husband appeals.
DISCUSSION
I. THE COURT DID NOT ABUSE ITS DISCRETION BY EXCLUDING
HUSBAND’S DOCUMENTARY EVIDENCE, EXPERT WITNESS,
AND CHARTS CREATED BY HUSBAND’S EXPERT.
A. Documentary Evidence and Husband’s Expert Witness
¶8 Husband first contends that the court erroneously precluded
his documentary evidence and his expert witness because they were timely
disclosed. The trial court has broad discretion in ruling on disclosure and
discovery matters, and we do not disturb those rulings absent an abuse of
discretion. Marquez v. Ortega, 231 Ariz. 437, 441, ¶ 14 (App. 2013). We
review the court’s interpretation of its own June order de novo. See Cohen
v. Frey, 215 Ariz. 62, 66, ¶ 10 (App. 2007).
¶9 On Husband’s motion, the court continued the trial to July 27,
2021. The court also amended the disclosure and discovery deadlines in the
June order:
1. Both parties shall complete all disclosure requirements
required by Rules 49, 50 and 91, Arizona Rules of Family Law
Procedure, including an exchange of all relevant information,
documents and exhibits at least 30 days prior to trial unless
the Court set another discovery deadline. . . . .
2. All depositions and discovery contemplated by Rules 49
through 65, Arizona Rules of Family Law Procedure, shall be
completed and any motions regarding discovery shall be filed
no later than July 2, 2021.
¶10 Husband disclosed his expert witness and over 1,000 pages of
documents on July 1, 2021—one day before the inarguably final day for
completion of discovery. Wife filed a motion in limine to preclude
Husband’s documentary evidence and expert witness as untimely
disclosures, and the court granted Wife’s motion.
¶11 Husband contends that his expert witness and documentary
evidence were timely disclosed because he provided them by July 2, 2021.
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But the June order expressly differentiated between the “discovery” and
“disclosure” deadlines. The first paragraph references “disclosure
requirements”; the second paragraph references “all depositions and
discovery.”
¶12 The court correctly found that Husband failed to meet the
deadline for disclosure. Under any reasonable interpretation of the court’s
order or the rules, disclosure that occurs one day before the close of
discovery is untimely. Such last-minute disclosure provides the opposing
party no meaningful opportunity to conduct discovery based on the
disclosures and amounts to little more than sandbagging. Our rules
contemplate that disclosure precedes discovery, and the court rightly found
a violation. Husband, a retired lawyer himself, did not argue that the late
disclosure was his counsel’s fault. And because no children’s interests were
at stake in this case, the court acted within its discretion when it precluded
Husband’s untimely disclosed evidence.
B. Charts Created by Husband’s Expert
¶13 Husband also contends that the court erroneously precluded
him from presenting four demonstrative charts during his testimony. We
review the superior court’s evidentiary rulings for abuse of discretion and
resulting prejudice. James A. v. Dep’t of Child Safety, 244 Ariz. 319, 321, ¶ 7
(App. 2018).
¶14 At trial, Husband did not mark the charts as exhibits,
representing instead that they were for demonstrative purposes only.
Husband testified that the charts summarized only information contained
in Exhibits 30 and 31, which related to his retirement accounts, but
acknowledged that he provided the data for the charts but did not prepare
them himself. Wife objected to the use of the charts, because (1) they were
prepared by the expert whose testimony and report the court had already
precluded, and (2) they summarized information not contained within the
admitted exhibits.
¶15 Arizona Rule of Evidence 1006 permits use of a summary or
chart as an alternative to voluminous records. “The person creating a
summary will ordinarily be required to lay the foundation and be available
for cross-examination.” Ariz. R. Evid. 1006 cmt. to original 1977 rule.
Though the voluminous records do not need to be placed into evidence,
they must be admissible and made available to the opposing party for
inspection. Rayner v. Stauffer Chem. Co., 120 Ariz. 328, 333–34 (App. 1978).
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The Rule is not an alternate means of introducing inadmissible evidence or
evidence the court has precluded.
¶16 Husband contends that he sought to use the charts merely as
pedagogical tools to summarize already admitted Exhibits 30 and 31 in a
visual form. But the charts clearly went beyond the scope of admitted
Exhibits 30 and 31, containing information not admitted into evidence. See
Standard Charted PLC v. Price Waterhouse, 190 Ariz. 6, 47–48 (App. 1996)
(pedagogical devices may not represent nonexistent or inaccurate
evidence); see also U.S. v. Wood, 943 F.2d 1048, 1053 (9th Cir. 1991)
(pedagogical devices summarize documents already admitted into
evidence). The court did not abuse its discretion by prohibiting Husband
from referencing the charts created by Husband’s expert.
C. Due Process
¶17 Husband argues that the preclusion of his expert witness,
documentary evidence, and charts had the cumulative effect of denying
him due process. We review constitutional issues, including alleged
violations of due process, de novo. Wassef v. Ariz. State Bd. of Dental Exam’rs,
242 Ariz. 90, 93, ¶ 11 (App. 2017).
¶18 Due process requires “notice and opportunity to be heard in
a meaningful manner and at a meaningful time.” Id. at ¶ 12 (citation
omitted). Due process includes the “right to offer evidence.” Gaveck v. Ariz.
Bd. of Podiatry Exam’rs, 222 Ariz. 433, 437, ¶ 14 (App. 2009). “[D]ue process
requires the court to allow parties a reasonable opportunity to present
testimony whenever resolution of a material contested issue hinges on
credibility.” Volk v. Brame, 235 Ariz. 462, 466, ¶ 14 (App. 2014).
¶19 But due process does not excuse noncompliance with
reasonable procedural rules or deadlines, and Husband’s failure to comply
with such deadlines—not lack of opportunity—deprived him of the
opportunity to present some of his evidence. The court’s June order, the
Arizona Rules of Family Law Procedure, and the Arizona Rules of Evidence
placed the parties on notice about the procedural rules governing evidence
admissibility and expert testimony. See Ariz. R. Evid. 1006; ARFLP 49(j).
Husband forfeited his opportunity to present evidence by failing to comply
with the court’s reasonable procedural rules. The court did not deprive
Husband of his due process rights.
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II. THE COURT DID NOT ABUSE ITS DISCRETION OR COMMIT
LEGAL ERROR BY DENYING HUSBAND’S REQUEST FOR
ADDITIONAL TRIAL TIME.
¶20 Husband next contends that the court erred in denying his
request for additional trial time. “The court may impose reasonable time
limits appropriate to the proceedings.” ARFLP 22(A). We review the
enforcement of trial time limits for abuse of discretion and will not reverse
unless a party can demonstrate that it suffered prejudice because of the time
limits. Brown v. U.S. Fid. & Guar. Co., 194 Ariz. 85, 90–91, ¶¶ 29–30 (App.
1998).
¶21 Both parties received notice multiple times before the trial,
beginning November 12, 2020, about the one-day trial limit. The parties
agreed before the trial on many issues, so fewer issues remained for trial.
Also, the parties had time to prepare for trial, knowing the time constraints,
from November 2020 to July 2021.
¶22 Due process demands that “the court [ ] afford litigants
adequate time to present their evidence.” Volk, 235 Ariz. at 468, ¶ 19.
During the trial, the court assisted the parties with timekeeping, tracking
their time and reminding them about time remaining. There has been no
showing that Husband lacked the opportunity to present relevant evidence
in a proper manner, and the court did not abuse its discretion or violate due
process by denying him additional trial time.
III. THE COURT ERRED IN ITS CLASSIFICATION OF HUSBAND’S
RETIREMENT ACCOUNTS, AND CORRECTLY
CHARACTERIZED THE WITHDRAWALS FROM HUSBAND’S
ROLLOVER IRA #3019, THE 529 PLAN ACCOUNT, AND WIFE’S
COMMONWEALTH ACCOUNT X7788.
¶23 Husband contends that the court erred in the classification of
property in his retirement accounts, the 529 plan account, and the
Commonwealth account x7788.
¶24 We review the superior court’s characterization of property
as separate or community property de novo. In re Marriage of Pownall, 197
Ariz. 577, 581, ¶ 15 (App. 2000). We defer to the superior court’s
“determination of witnesses’ credibility and the weight to give conflicting
evidence.” Gutierrez v. Gutierrez, 193 Ariz. 343, 347, ¶ 13 (App. 1998). We
review the record in the light most favorable to affirming when examining
the nature of the property as community or separate. Sommerfield v.
Sommerfield, 121 Ariz. 575, 577 (1979).
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¶25 Property acquired by the parties during the marriage is
presumed to be community property, unless acquired by gift, devise, or
descent, or after the service of a petition for dissolution of marriage. A.R.S.
§ 25-211. The spouse contending that the property acquired after the
marriage is his or her separate property has the “burden of establishing the
separate character of the property by clear and convincing evidence.”
Cockrill v. Cockrill, 124 Ariz. 50, 52 (1979). A spouse’s real and personal
property owned before the marriage is that spouse’s separate property.
A.R.S. § 25-213(A). Whether property is community or separate “becomes
fixed at the time it is acquired.” Porter v. Porter, 67 Ariz. 273, 281 (1948)
(citation omitted). A mere change in form does not change the property’s
character as community or separate. Id. at 283.
¶26 When separate and community property are commingled,
resulting in the loss of the separate property’s identity in a combined fund,
the character of the property can be transmuted from separate to
community. Id. at 282–83. The court presumes the commingled funds to
be community property unless the separate property can be explicitly
traced. Id. at 281–82.
A. Husband’s Retirement Accounts
¶27 First, Husband contends that the court erred by
characterizing his retirement accounts as community property.
1. Husband’s E*Trade Roth IRA #3012
¶28 Husband argues that the court erred by characterizing his
E*Trade Roth IRA #3012 account as community property. We agree. The
court found that Husband did not prove the funds used to start the original
account derived from his sole and separate property.
¶29 Although it is undisputed that Husband opened the E*Trade
Roth IRA #3012 account during the marriage, the evidence demonstrates
that Husband’s separate property funded the account. Husband’s
accounting statements clearly show Husband had sole and separate
property in his Rollover IRA through the Salomon Smith Barney Account
from before the marriage. Husband had a total value of $107,447.93 in his
Rollover IRA Salomon Smith Barney account on December 31, 1999.
¶30 Even though the record is sparse, Husband testified that he
converted his Rollover IRA to a Roth IRA in 2012. Although the court found
Husband to not be credible, his testimony is supported by the statement
containing the line “Rollover Conversion” showing a deposit made in
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December 2012 to his Just 2 Trade account. Husband testified that he
contributed to the account once during the marriage, in 2012, using
community funds. The deposit would not cause the separate property to
lose its character because the separate property is still traceable. The court
failed to provide any tracing analysis identifying the portion of the E*Trade
Roth IRA #3012 that was Husband’s separate property. We therefore
vacate that portion of the decree and remand for further proceedings.
2. Husband’s Rollover IRA #3019
¶31 Husband argues that the court erred by characterizing his
Rollover IRA #3019 account as community property. We agree. The court
found that Husband failed to prove the funds used to start the original
account were his sole and separate property.
¶32 Even though Husband opened the Rollover IRA #3019 during
the marriage, once more, Husband’s accounting statements clearly show
Husband had separate property in his money purchase plan from before
the marriage. A.R.S. § 25-213. Husband had $110,382.97 in his money
purchase plan as of December 31, 1999. Husband testified that he rolled
over $115,165 from his money purchase plan to his profit-sharing plan in
2003. Husband also testified that he then rolled over the profit-sharing plan
in May 2013 to the Rollover IRA #3019. Again, even though the court found
Husband to not to be credible, his tax returns corroborate that in 2003 the
profit-sharing plan received the $115,165 from a source other than
contributions.
¶33 Husband testified that he made six contributions throughout
the marriage to the account from 2000 to 2009 using community funds.
Husband provided supporting documentation of each contribution made.
Husband also stated that he made no more contributions after 2009. The
court did not identify and allocate any of Husband’s sole and separate
property. Because Husband clearly has separate property from before the
marriage that formed part of the account, we vacate the court’s order
dividing Husband’s Rollover IRA #3019 and remand.
3. Husband’s Withdrawals from Rollover IRA #3019
¶34 Husband also argues that the court erred by finding the
withdrawals he made after the date of service from the Rollover IRA #3019
to be from his separate and sole property, along with any tax liability.
¶35 Husband began taking disbursements from the Rollover IRA
#3019 in May 2020. Husband withdrew over $130,000 from the account.
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Husband testified that he used the withdrawals made after the date of
service for community expenses.
¶36 But Husband failed to introduce any financial statements or
documents at trial corroborating his testimony. Husband asserted he ran
out of time at trial to introduce any trial exhibits supporting his testimony,
but we do not perceive any lack of opportunity to refer to the exhibits.
Finding no error, we affirm this portion of the decree.
4. QDRO Specialist
¶37 Husband also contends that the court erred by not allowing a
QDRO specialist to perform a tracing analysis of the retirement accounts.
But the court is not required to appoint experts to help Husband prove his
case. On remand, if implementation of the decree would benefit from the
services of a QDRO specialist, the parties are free to engage one.
B. 529 Plan Account
¶38 Second, Husband contends that the court erred by
characterizing the 529 plan account as community property.
¶39 It is undisputed that the parties opened the 529 plan account
during the marriage. The parties opened the account with $50,000 from
Husband’s Merrill Lynch account and $50,000 from an undisputed
community property source. Husband argues that the Merrill Lynch
account is his sole and separate property, so half of the 529 plan account
likewise is his separate property.
¶40 Though some funds in the Merrill Lynch account may have
been his separate property, Husband deposited a substantial amount of
presumptively community property funds into the Merrill Lynch account
during the marriage. The deposit commingled with any separate property
in the account, rendering the Merrill Lynch account community property.
Porter, 67 Ariz. at 281–82. At trial, Husband failed to provide evidence to
trace the source of this deposit. Husband asserts that he has documents to
trace the deposit, but those were precluded as not timely disclosed, a ruling
we have affirmed. Therefore, the Merrill Lynch funds used to open the 529
plan account are community property, so the 529 plan account is fully
community property. The court did not err by awarding Wife one-half of
the 529 plan account.
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C. Wife’s Commonwealth Account x7788
¶41 Third, Husband also contends that the court erred by
characterizing Wife’s Commonwealth account x7788 as her sole and
separate property. The court found that Wife provided clear and
convincing evidence tracing the funds used to open the Commonwealth
account from her separate property.
¶42 It is undisputed that Wife opened the Commonwealth
account during the marriage. Wife sold real property, undisputedly
characterized as her separate property from before the marriage, in January
2003 for $154,391.45. Wife deposited the proceeds from the property’s sale
into her separate bank account on January 2, 2003. Wife deposited her
paychecks, which were community property, into the bank account during
2003, thereby commingling the community property with her separate
property.
¶43 Husband contends that Wife did not trace her separate
property after commingling her bank account. But the $100,000 from Wife’s
bank account used to open the Commonwealth account on December 22,
2003, can be traced to the separate property funds from her property’s sale.
Wife opened the Commonwealth account in the same year she received the
proceeds from her property’s sale. Wife only made about $36,000 in income
during 2002 and 2003, so the $100,000 could not have derived from her
income. Additionally, before Wife deposited the sale’s proceeds in her bank
account, she only had $5,728 in the account. Thus, sufficient evidence exists
that Wife used her separate property’s proceeds to fund the $100,000 used
to open the Commonwealth account.
¶44 Husband also argues that the court’s failure to divide the
Commonwealth account is inconsistent with its rulings about Husband’s
retirement accounts and Wife’s American Funds IRA #7210. We have
vacated and remanded with respect to the issue regarding Husband’s
retirement accounts. Wife’s American Funds IRA #7210 is a different
account with different evidence provided. We conclude that the court did
not commit legal error by awarding Wife the Commonwealth account as
her sole and separate property.
IV. THE COURT DID NOT ABUSE ITS DISCRETION BY DIVIDING
THE COMMUNITY SHARE OF THE E*TRADE #3880 ACCOUNT
AS OF THE DATE OF SERVICE.
¶45 Husband contends that the court erred in dividing the
E*Trade #3880 account held in Wife’s name as of the date of service. He
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argues that the account increased in value after the marital community
terminated in June 2020, and the account should be divided as of the date
of distribution.
¶46 We review valuation dates for abuse of discretion. Sample v.
Sample, 152 Ariz. 239, 241–42 (App. 1986). The valuation date chosen by the
court “rests within the wide discretion of the trial court and will be tested
on review by the fairness of the result.” Id. at 242–43.
¶47 Before the trial, the parties agreed that the E*Trade #3880
account was community property awarded to Wife, subject to an offset to
Husband for his one-half community interest. Before trial, the parties
disputed the account’s value, but they did agree to reduce the account by
$7,088 for the parties’ 2018 amended returns. Although Husband now
argues for the account’s division as of the date of distribution, he admitted
that he provided no evidence at trial to support his position that the account
appreciated in value. Rather, only Wife testified about the E*Trade account,
stating its division should be as of the date of service, when its balance was
$125,522.
¶48 We perceive no abuse of discretion in the selection of the date
of service as an appropriate and fair valuation date. We affirm the division
of the account as of the date of service.
V. THE COURT ERRED IN ITS AWARD OF SPOUSAL
MAINTENANCE.
¶49 Husband contends that the court erred by awarding Wife
spousal maintenance. The court awarded Wife $2,000 per month for three
years. We review spousal maintenance awards for an abuse of discretion.
Gutierrez, 193 Ariz. at 348, ¶ 14. We review whether the court properly
applied the law to its factual findings de novo. See Pownall, 197 Ariz. at 580,
¶ 7.
¶50 To be eligible for spousal maintenance, the spouse must meet
at least one of the criteria enumerated in A.R.S. § 25-319(A). At the time
relevant to this case, the statute required that the spouse seeking spousal
maintenance either (1) lack sufficient property to provide for that spouse’s
reasonable needs; (2) be unable to be self-sufficient through appropriate
employment; (3) have made a significant financial or other contribution to
the education, training, vocational skills, career or earning ability of the
other spouse; (4) have a marriage of long duration and is of an age that may
preclude becoming self-sufficient; or (5) have significantly reduced his or
her spouse’s income or career opportunities for the benefit of the other
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spouse. A.R.S. § 25-319(A). The purpose of spousal maintenance is to
“achieve an independence for both parties and to require an effort toward
independence by the [spouse] requesting maintenance.” Schroeder v.
Schroeder, 161 Ariz. 316, 321 (1989).
¶51 Although the court made factual findings about all the
criteria, none of its findings support an award. First, the court found, and
the record supports, that Wife received and has substantial assets—several
hundred thousand dollars—not that she lacked the resources necessary to
meet her needs. See A.R.S. § 25-319(A)(1). Second, the court found, and the
record supports, that Wife is highly skilled and holds assets with potential
to produce future income. The court found that Wife’s income has been
averaging $45,000 per year over the last ten years. Wife earned $107,611 in
2019, showing that Wife can maintain appropriate employment to be self-
sufficient. See A.R.S. § 25-319(A)(2).
¶52 For the third and fifth criteria, the court found no evidence to
suggest that Wife should receive spousal maintenance. See A.R.S. § 25-
319(A)(3), (5). Lastly, for the fourth criterion, the court did acknowledge
that the parties had a marriage of long duration, over twenty years. But the
court did not find that Wife’s age precludes her from gaining employment
adequate to be self-sufficient. The court found that Wife is fifty-one years
old, and that she can maintain employment. Although the court found that
her income would not be at a level to meet her current lifestyle, it
established that Wife is highly skilled and consistently employed.
¶53 Based on its own factual findings, the court erred in its
conclusion that Wife is entitled to spousal maintenance. We reverse the
spousal maintenance award.
VI. THE COURT ERRED IN ITS CALCULATION OF HUSBAND’S
INCOME FOR PURPOSES OF CHILD SUPPORT.
¶54 Husband also contends that the court erred by finding that his
income was $45,000 per month for purposes of child support. Husband
argues that the court erred in calculating his income by including
unrealized gains instead of actual, realized gains from Husband’s sole and
separate brokerage accounts.
¶55 We review a court’s award of child support for abuse of
discretion, but we review its interpretation of the then-applicable version
of the Arizona Child Support Guidelines (“Guidelines”), A.R.S. § 25-320
app. (2018), de novo. Hetherington v. Hetherington, 220 Ariz. 16, 21, ¶ 21
(App. 2008). When interpreting the Guidelines “we look first to their plain
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language . . . [and] strive to interpret the relevant section in conjunction
with other provisions of the Guidelines and consistent with their overall
purpose.” Milinovich v. Womack, 236 Ariz. 612, 615, ¶ 10 (App. 2015).
¶56 Husband calculated his income to be somewhat over $8,000
monthly. For her part, Wife calculated Husband’s income to be $45,000
monthly. The difference in the parties’ calculations appears to derive from
Husband’s monthly unrealized capital gains from his interactive brokerage
account, as the account increased in value approximately $174,000 over the
course of five months, or about $35,000 monthly. The court calculated child
support using $45,000 as Husband’s income because it found Wife’s
testimony, not Husband’s, to be credible regarding Husband’s earnings.
¶57 Gross income, for purposes of child support, includes
“income from any source, and may include, but is not limited to . . . capital
gains. Cash value shall be assigned to in-kind or other non-cash benefits.”
Guidelines § 5(A) (2018). The court must value unexercised, vested,
matured stock options on a case-by-case basis, and it is not required to
follow any single valuation method. Engel v. Landman, 221 Ariz. 504, 514,
¶¶ 40–41 (App. 2009); see also In re Marriage of Robinson, 201 Ariz. 328, 334,
¶ 16 (App. 2001). Although vested, unexercised stocks have some value as
income, the “investment decisions or whims of the employee parent”
should not determine child support. Robinson, 201 Ariz. at 333, ¶ 12; Engel,
221 Ariz. at 513–14, ¶¶ 38, 40. The assumption that options will appreciate
each year “does not comport with the realities of the market.” Engel, 221
Ariz. at 513, ¶ 39. The valuation method selected by the court should
consider “the nature of the stock options, market conditions, tax
consequences, ease of application, and other facts and circumstances
peculiar to each case.” Robinson, 201 Ariz. at 334, ¶ 16; see also Engel, 221
Ariz. at 514, ¶ 42.
¶58 Regarding Husband’s interactive brokerage account,
Husband asserts that he “never sold the assets in question and therefore did
not realize any capital gains or income.” There is no evidence that he
realized any income from these market gains. Similarly, in Engel, the court
calculated the father’s income by including the appreciation in value of his
vested, unexercised stocks. 221 Ariz. at 513, ¶¶ 34–35. The court erred by
using this valuation method in Engel because it relied on market
fluctuations that did not affect funds available for child support. Id. at ¶ 39.
Here, the court also erred by including Husband’s unrealized capital gains
in his gross income.
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WARNER v. DRIGGS-WARNER
Decision of the Court
¶59 The court abused its discretion by calculating Husband’s
monthly gross income to be $45,000. We vacate and remand Husband’s
child support obligation in accordance with this decision.
VII. THE COURT DID NOT ABUSE ITS DISCRETION IN AWARDING
WIFE ATTORNEY’S FEES.
¶60 Husband contends that the court erred by requiring him to
pay Wife $110,000 in attorney’s fees. We review a fee award for abuse of
discretion. MacMillan v. Schwartz, 226 Ariz. 584, 592, ¶ 36 (App. 2011). The
court may order a party to pay a reasonable amount to the other party for
attorney’s fees after considering the financial resources and the
reasonableness of the parties’ positions throughout the litigation process.
A.R.S. § 25-324(A).
¶61 The court found that Husband has considerably more
financial resources available to him than Wife, and that he acted
unreasonably during the litigation process. The court specified how
Husband had been unreasonable: he cancelled mediation without good
cause; failed to participate in good faith settlement discussions; advanced
numerous claims of community interest in properties he knew the
community did not have an interest in; failed to provide timely disclosures
and discovery; insisted Wife provide further disclosure; withdrew money
from the Rollover IRA #3019 without Wife’s knowledge after the date of
service; and tried to undo a Rule 69 agreement without good cause. The
court also found Husband knowingly advanced a false claim under A.R.S.
§ 25-415.
¶62 These findings are adequate to justify an award of fees, and
the record supports them. We affirm the award.
ATTORNEY’S FEES ON APPEAL
¶63 Both Husband and Wife request attorney’s fees on appeal
pursuant to A.R.S. § 25-324 and ARCAP 21. In the exercise of our discretion,
we deny their requests for attorney’s fees on appeal. Husband is entitled to
his costs on appeal, pending compliance with ARCAP 21.
15
WARNER v. DRIGGS-WARNER
Decision of the Court
CONCLUSION
¶64 We vacate and remand the court’s division of Husband’s
retirement accounts. We reverse Wife’s spousal maintenance award. We
vacate and remand the court’s child support calculation. In all other
aspects, we affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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