Toth v. Toth , 190 Ariz. 218 ( 1997 )

OPINION

MARTONE, Justice.

We granted review to decide whether an equitable distribution of marital joint property upon dissolution under A.R.S. § 25-318(A) requires an equal distribution of the assets in this case. We conclude that it does not. We also hold that joint tenancy property and community property should be treated alike under A.R.S. § 25-318(A).

I. Introduction

Anthony Toth and Gloria Snyder Toth met at a senior citizens dance in Mesa in 1992. Anthony was 87 and Gloria was 66. They married a year later on December 13, 1993. The following day, Anthony used $140,000 of his sole and separate funds to buy a house for the couple. They took title as joint tenants with the right of survivorship. About two weeks later, Anthony moved out of the marital bedroom, and on January 10, 1994, he filed for an annulment. The court ultimately entered a final decree of dissolution on September 19, 1995. The house was the only property to be divided. The court awarded Gloria $15,000 as her share. She appealed.

The court of appeals decided that A.R.S. § 25-318(A)¹ requires a substantially equal division of joint property, absent sound reason to the contrary. The court indicated that sound reason is limited to the statutory factors of fraud, excessive or abnormal expenditures, destruction, or concealment. It then held that the trial court had abused its discretion in ordering a substantially unequal division of the property and reversed. Judge Kleinschmidt dissented, believing that “equitable” had a broader meaning than the majority gave it. Believing that an important issue of law had been decided incorrectly, we granted Anthony’s petition for review. Rule 23(c)(4), Ariz. R. Civ.App. P.

II. Analysis

A. Treatment of joint tenancy property under A.R.S. § 25-318

Gloria argues that the gifted portion of the property is her sole and separate property and, therefore, the court must award her half its value under A.R.S. § 25-318(A).

Section 25-318(A) provides that “the court shall assign each spouse’s sole and separate property to such spouse.” It then provides that the court shall “divide the community, joint tenancy and other property held in common equitably, though not necessarily in kind, without regard to marital misconduct.”

Joint tenancy property is separate, not community, property. Becchelli v. Becchelli 109 Ariz. 229, 234, 508 P.2d 59, 64 (1973); Collier v. Collier, 73 Ariz. 405, 411, 242 P.2d 537, 541 (1952). See Richard W. Effland, Arizona Community Property Law: Time for Review and Revision, 1982 Ariz. St. L.J. 1, 11-14. Although joint tenancy property is considered separate property, section 25-318(A) treats it in two ways — first by stating that separate property is assigned to the owner spouse, then by directing that joint tenancy property be divided equitably.

Before 1973, section 25-318(A) did not include joint tenancy property in the equitable (then “just and right”) division, and, as now, prohibited divesting either spouse of sepárate property upon dissolution. From that, we concluded that joint tenancy property could not be divided equitably. E.g., Becchelli 109 Ariz. at 234, 508 P.2d at 64; Collier, 73 Ariz. at 412, 242 P.2d at 542. The statute now expressly lists joint tenancy property as part of the property to be equitably divided. In Wayt v. Wayt, 123 Ariz. 444, 445, 600 P.2d 748, 749 (1979), we held that the modification of section 25-318 allowed joint tenancy property to be divided upon dissolution “in the same manner as ... property held by the community or in common.” We-did not address the potential anomaly in treating separate property as community property upon dissolution.

From the 1973 modification, one could argue that the legislature abrogated the rule that joint tenancy property is separate property. But whether property is treated as separate or community has consequences beyond dissolution, particularly with respect to tax liability and the rights of creditors. See Charles Marshall Smith, Arizona Community Property Law §§ 4:4, 4:5 (1995). The statute does not provide that marital joint tenancy property is now, in all respects, community property. It only allows it to be treated as community property upon dissolution. Joint tenancy property remains separate property, but is excepted from the requirement that separate property be assigned to each spouse separately upon dissolution. Justice Holohan observed in his dissent in Becchelli 109 Ariz. at 236, 508 P.2d at 66, that a 1962 amendment to section 25-318² gave the court “the opportunity to make an equitable distribution of all the [joint] property even though some of the property would be in the category of separate property rather than community.” Joint tenancy property would remain separate property during marriage, and upon dissolution, “the court may not divest a person of separate property except the listed forms of joint ownership and as to these the court may divide the property in the same fashion as the community property.” Id. The 1973 amendment to the statute achieved this result.

Thus, under the statute, joint tenancy property and community property are to be treated alike only for dissolution purposes. For that purpose, the court should divide all such property equitably. We thus reject Gloria’s argument that we must treat her share of property held in joint tenancy as separate property upon dissolution.

Gloria also argues that because her share of the property is designated as a “gift” from Anthony, it should be considered irrevocable under the law of gifts. Ordinarily, when property is purchased in the name of one person with money furnished by another, a resulting trust arises in favor of the person furnishing the purchase money. Becchelli 109 Ariz. at 232, 508 P.2d at 62; Restatement (Second) of Trusts § 440 (1959). But in the marital context, the presumption changes.

When one spouse buys property with separate funds and places it in joint tenancy, there is a presumption that the spouse intended to make a gift to his spouse of onehálf of the property. Becchelli 109 Ariz. at 232-33, 508 P.2d at 62-63; Valladee v. Valladee, 149 Ariz. 304, 308, 718 P.2d 206, 210 (App.1986). But gifts of joint tenancy property are not irrevocable inter vivos transfers. They are made in expectation of a permanent relationship, but if cut short, fully subject to equitable divestment under the statute. Since marital joint tenancy property is subject to equitable division upon dissolution generally, if we treated “gifted” joint tenancy as requiring an equal, not equitable, division, we would be giving greater property rights to a non-contributing spouse than to a contributing one. Instead, the “gift” in the non-purchasing spouse of joint tenancy property is an equitable right in the property, not an irrevocably gifted interest in half. Under A.R.S. § 25-318, all marital joint tenancy property, “gifted” or otherwise, is to be divided equitably.

B. Meaning of equitable division under A.R.S.§ 25-318

Although A.R.S. § 25-318(A) requires an equitable division of joint property, it also provides that nothing shall prevent the court from considering “excessive or abnormal expenditures, destruction, concealment or fraudulent disposition” of the property in making that equitable division. Gloria argues that the statute requires an equal division of joint property absent exceptional circumstances. She contends that those circumstances are limited to the parties’ relationship to the property, rather than to each other. She characterizes other factors, such as the duration of the marriage, as inquiring into fault, which the statute prohibits.

We disagree for two reasons. First, the legislature’s intent that the division be equitable, not equal, is clearly evidenced by the legislative history of the dissolution statute. In 1973, a proposed version of the statute required an equal division of all common assets. S.B. 1007, as introduced, 31st Leg., 1st Reg. Sess. (Ariz.1973). Senator O’Con-nor then moved to replace “equally” with “equitably,” to be defined as “equally absent compelling reasons to the contrary.” Minutes of the Senate Judiciary Committee, Feb. 12, 1973, at 2. The version eventually adopted states only that the court shall make an “equitable” division. The legislature clearly contemplated that the trial court should not be bound by any per se rule of equality, but rather intended the court to have discretion to decide what is equitable in each ease.

Second, the statute does not limit the inquiry to conduct regarding the property. Instead, it expressly instructs the court to divide the marital property equitably. Although the statute forecloses an argument that the listed factors are not relevant, it does not purport to define the universe' of relevance. “Equitable” means just that — it is a concept-of fairness dependent upon the facts of particular cases.

This is not a departure from the general principle that all marital joint property should be divided substantially equally unless sound reason exists to divide the property otherwise. E.g., Hatch v. Hatch, 113 Ariz. 130, 133, 547 P.2d 1044, 1047 (1976). That approach simply reflects the principle that community property implies equal ownership. William Q. de Funiak & Michael J. Vaughn, Principles of Community Property, 1-3 (2d ed.1971). In most cases, therefore, an equal distribution of joint property will be the most equitable.

However, there may be sound reason to divide the property otherwise. The trial court has discretion in this decision. Wayt, 123 Ariz. at 446, 600 P.2d at 750; Hatch, 113 Ariz. at 133, 547 P.2d at 1047. The trial judge in this case found sound reason to divide the Toths’ property unequally, and we agree.

In this case, equal is not equitable. Community property rests on the assumption that the two spouses worked together to accumulate property for the community, each contributing in pecuniary or other ways. Anthony paid, for this property entirely from his separate funds. Gloria made no contribution — pecuniary or otherwise — to the purchase of the house. The marriage lasted two weeks, allowing no time for a marital relationship to develop, or for other equities to come into play. This is not a determination of fault; why the marriage dissolved is irrelevant. This unusual case is one of those “rare occasions when the circumstances and facts are such that, in all fairness to the parties, the property should not be characterized as community and should, instead, be awarded [in large measure] to one spouse accordingly.” Barbara J. Torrez, Comment, Arizona Property Division Upon Marital Dissolution, 1979 Ariz. St. L.J. 411, 437.

The court of appeals found that the trial judge’s division in this case was contrary to Whitmore v. Mitchell, 152 Ariz. 425, 733 P.2d 310 (App.1987) and Valladee v. Valladee, 149 Ariz. 304, 718 P.2d 206 (App.1986). In those eases, the court of appeals found that the trial judge had abused his discretion by ordering an unequal division of joint tenancy property solely to reimburse the purchasing spouse. But in Valladee, the parties had been married for sixteen years and had four children. And in Whitmore, the parties had been married over a year, and had a prenuptial agreement regarding their property, which the trial judge ignored. In both cases, as is likely in any real marriage of any significant duration, other equities made a division based solely on reimbursement clearly inappropriate. The facts here, of course, are vastly different. This is not a ease in which an equitable division is based “solely” on reimbursement. Source of funds can be a factor in determining what is equitable. Wayt, 123 Ariz. at 446, 600 P.2d at 750. The “marriage” lasted two weeks. Every judge who has reviewed this case saw that equal was not equitable. The trial judge so found. The majority of the court of appeals said it seemed “somewhat unfair” for Gloria to receive half the value of the house in these circumstances, but thought the law required that result. Mem. Decision at 3-4. The dissenting judge thought equitable was broader than equal. We agree that an equal distribution here is not equitable. Indeed, if this is not a case in which “equitable” means something other than “equal,” we would be hard pressed to imagine one.

C. Consideration of marital misconduct

Gloria argues that the trial court made a finding of fault when it stated that she had not made a “good faith effort to create a viable marriage.” Amended Decree of Dissolution of Marriage, Sept. 19, 1995, at 3. While the statement does connote fault, it is unclear whether the trial court relied on it in dividing the property. The statement is part of the court’s description of the facts of the case. But in its findings, the court noted only that the marriage was of extremely short duration, and that the husband had paid the entire purchase price of the house, as well as subsequent maintenance costs, solely from his separate property. We note that the court received evidence on the parties’ ages, needs, health, income and personal situations. It heard evidence that Gloria sold her house, that Anthony continued to pay household expenses after he moved out and that Gloria lived in the house for 1½ years thereafter. The court found that Gloria should not receive an equal portion of the residence, and allocated $15,000 as her equitable share. Thus, it may be that the court did not use the “good faith” finding in dividing the property. But we cannot be sure.

III. Conclusion

We vacate the memorandum decision of the court of appeals and remand to the superior court for further consideration of the evidence in light of today’s opinion. The court may allocate equitably rather than equally and the court may consider source of funds. The court may consider other equitable factors as they may bear on the outcome, but the court may not consider fault. It may be, that after reconsideration, the court will conclude that it did not consider fault and affirm its prior allocation. We remand only to ensure that fault played no role in the court’s determination.

JONES, V.C.J., and FELDMAN, J., concur.

1 . Section 25-318(A) provides that:

In a proceeding for dissolution of the marriage, or for legal separation ... the court shall assign each spouse's sole and separate property to such spouse. It shall also divide the community, joint tenancy and other property held in common equitably,- though not necessarily in kind, without regard to marital misconduct____ Nothing in this section shall prevent the court from considering excessive or abnormal expenditures, destruction, concealment or fraudulent disposition of community, joint tenancy and other property held in common.

2 . That amendment gave courts the authority to "order division of [joint] property, or enter an order directing partition of such property.” A.R.S. § 25-318(A) (1962); Becchelli, 109 Ariz. at 233, 508 P.2d at 63.