Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02975/USCOURTS-azd-2_06-cv-02975-1/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

In re DAWN PETERSEN, )

) No. CIV 06-2975 PHX RCB

Debtor, )

______________________________) (BK 02-1937- PHS SCC)

)

DAVID A. PETERSEN, ) Adversary No. 02-0576

) 

Appellant, ) BAP No. AZ-00-0000 

)

vs. ) ORDER

)

DAVID BIRDSELL, )

)

Appellees. ) )

On November 13, 2006, the bankruptcy court entered a final

judgment against appellant/defendant David A. Petersen

(“defendant”), ordering him to pay to the Trustee/appellee, David

Birdsell (“Trustee”), $70,462.87. That sum represents debtor Dawn

Petersen’s share of property from her dissolved marriage to 

defendant David Petersen. Defendant timely filed a Notice of

Appeal from that judgment on November 22, 2006. He also timely

filed a Statement of Election, in accordance with 28 U.S.C. 

Case 2:06-cv-02975-RCB Document 16 Filed 09/25/07 Page 1 of 18
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1 Because debtor’s action was commenced prior to October 17, 2005, the

effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of

2005, all chapter and sections references to the Bankruptcy Code, and all rule

references to the Federal Rules of Bankruptcy Procedure are as they existed prior

to the enactment of that of that Act. 

2 That statute provides in relevant part that “district courts . . .

shall have jurisdiction to hear appeals . . . from final judgments . . . of

bankruptcy judges[.]” 28 U.S.C. § 158(a)(1).

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§ 158(c) and Fed. R. Bank. Pro. 8001(e),1 electing to have his

appeal heard by this district court rather than by a three judge

panel of the bankruptcy appellate panel service. Pursuant to 28

U.S.C. § 158(a),2

 this district court has jurisdiction to hear this

appeal. Background

This is the second time this matter has been before the court. 

The primary issue continues to be the value of the residence

located at 841 East Desert Park Lane, Phoenix, Arizona (the

“property” or “subject property”) in which the Petersens resided

“[d]uring most of their marriage[.]” Rec., exh. 9 thereto at 3. 

Because Mr. Petersen inherited that house from his mother, it was

his “sole and separate property.” Rec. (exh. 4 thereto at 2

(citation omitted). At the date of transfer to Mr. Petersen the

house had “a value of $180,000.00[,]" which appreciated to

$300,000.00 over the course of the marriage. Id., exh. 9 thereto

at 3; see also id., exh. 4 thereto at 2 (citation omitted); and

exh. 5 thereto at 3, n.2. 

Following the first trial in this matter, “without any

explanation or citation[,]” the bankruptcy court “simply declared .

. . that this entire [appreciated] amount belonged to the

community.” Id., exh. 4 thereto at 5. Explaining that “[t]he

amount of the community’s interest in the house can only be

Case 2:06-cv-02975-RCB Document 16 Filed 09/25/07 Page 2 of 18
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28 3 Rec., exh. 5 thereto at 3, n.2. 

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determined once there has been a factual finding of what portion of

the $120,000 of appreciation was due to expenditure of community

funds and what portion was due simply to the inherent nature of the

separate property[,]” this court vacated the bankruptcy court’s

judgment and remanded, inter alia, for a “factual determination” as

to that issue. Id., exh. 4 thereto at 6.

Between the time of this court’s decision (March 29, 2004) and

the trial on remand (May 9, 2005), Mr. Petersen sold the subject

property. Id., exh. 9 thereto at 3 (footnote and citation

omitted). During that intervening period the property “increased

in value[,]” and sold for $430,000.003 as compared to the “value

allocated to it at the initial trial[,]” i.e. $300,000.00. See

Rec., exh. 5 thereto at 5. An issue thus arose as to the proper

valuation date -- the date of dissolution or the sale date. See

id. at 2. 

In its August 15, 2005, order addressing the valuation date

issue, the bankruptcy court acknowledged this court’s reliance upon

Honnas v. Honnas 648 P.2d 1045 (Ariz. 1982), to support a “valueat-dissolution date[.]” Id. at 3. Nonetheless, because the subject

property had been sold in the interim, the bankruptcy court

“separately researched the issue o[f] the appropriate valuation

date.” Id. at 4. In so doing, the bankruptcy court expressly

found “the analysis provided by” Sample v. Sample, 731 P.2d 604

(Ariz. App. 1986), “to be relevant to the facts currently before

it, rather than those set forth in” Honnas. Id. at 5. Reading

Sample as “holding that . . . the selection of a valuation date

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rest[s] within the sound discretion of the trial court,” with the

“only limitation” being “that the division of assets result in

substantial equality[,]” the bankruptcy court held that the date of

sale was the proper valuation date. Id. at 5 and 6. As further

support for its use of the date of sale, the bankruptcy also relied

upon Kelsey v. Kelsey, 918 P.2d 1067 (Ariz. Ct. App. 1996), wherein

the court held that “[t]he valuation of assets is a factual

determination that must be based on the facts and circumstances of

each case.” Kelsey, 918 P.2d at 1069 (citation omitted). Based

upon the foregoing, the bankruptcy court “conclusively determined”

that the property “shall be valued as of the date of sale[,]”

rather than as of the dissolution date. Rec., exh. 5 thereto at 6. 

In light of that finding, the bankruptcy court “reopen[ed] the

evidentiary record on th[e] discrete issue” of the value of the

subject property at the date of sale. Id. The bankruptcy court 

“specifically” sought “expert testimony as to the mortgage payments

made on the Property by the community, the repairs that were made

to the Property and by whom, and any market forces which would have

affected the property from the purchase of the Property to the

point of its sale.” Id.

After weighing the testimony of the Trustee’s expert, Roy E.

Morris, III, and defendant’s expert, Jan Sell, based upon a 2004

sale price of $430,000.00, the court assigned a value of $87,921.00

as “the appreciation due to market conditions alone (inherent value

of the Property)[.]” Rec., exh. 9 thereto at 13. Further, the

bankruptcy court found that “the marital community should be

entitled to the sum of $162,079 for the increase in the value of

the Property over the years and the increase in value due solely to

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the improvements from community funds.” Id. Of that amount, the

bankruptcy court held that the bankruptcy estate was only entitled

to one-half, “the other half being appreciation that would enure to

the benefit of [defendant][.]” Id.

Discussion

On this appeal, defendant assigns ten separate errors to the

bankruptcy court’s decision, nearly all of which pertain to the

property valuation issue. Before addressing those claimed errors,

the court must address the Trustee’s procedural argument that this

appeal should be dismissed due to defendant’s supposed failure to

adequately cite to the record. At a minimum, the Trustee contends

that “statements that are not supported by the record must be

stricken.” Tr. Brief (doc. 8) at 4.

I. Lack of Citations to Record

Rule 8010 mandates, as the Trustee notes, that “[t]he brief of

the appellant . . . contain . . . citations to the authorities,

statutes and parts of the record relied on.” Fed. R. Bankr.

8010(a)(1)(E). The Trustee asserts that defendant did not comply

with this Rule because more often than not he did not cite to the

record; he “mis-cite[d] the record[;]” or he cited to documents

which were not part of the record. Tr. Brief (doc. 8) at 4. 

This court is well aware, as the Trustee argues, that case law

exists to support dismissal “for failure to provide adequate

citations of the record[.]” See In re Tevis, 347 B.R. 679, 686 (BAP

9th Cir. 2006) (citations omitted). Dismissal is not warranted in

the present case, however, because in contrast to Tevis,

defendant’s briefs herein are not “entirely deficient in making

reference to the evidentiary record.” See id. Likewise, also in

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contrast to Tevis, citations to the record are not “wholly missing”

from defendant’s briefs. See id. at 687. 

To be sure, as the Trustee observes, there are no cites to the

record in section A(5) of defendant’s “Opening Brief.” Def. Brief

(doc. 7) at 9-10. Other citations are scattered throughout that

brief, however, as well as throughout his reply brief. Thus,

although defendant’s briefs could have benefitted from additional

cites to the record, he has sufficiently “compl[ied] with [the]

rules to enable [this court] to examine those materials that bear

on [his] arguments.” See Everett v. Perez (In re Perez), 30 F.3d

1209, 1217 n. 12 (9th 1994). This is not a situation where

“[n]umerous and egregious procedural violations may warrant

dismissal of [the] appeal.” See Ward v. Circus Circus Casinos,

Inc., 473 F.3d 994, 997 (9th Cir. 2007) (citation omitted). 

Accordingly, the court will not dismiss this appeal due to

inadequate cites to the record. Likewise, the court finds no basis

for striking statements in defendant’s briefs which are “not

supported by the record.” See Tr. Brief (doc. 8) at 4. 

Having resolved this procedural issue, the court is now free

to consider the substantive errors which form the basis of

defendant’s appeal.

II. Standard of Appellate Review

“The bankruptcy court’s conclusions of law, . . . , are

reviewed de novo and its factual findings are reviewed for clear

error.” In re International Fibercom, Inc., 2007 WL 2610892, at *4

(9th Cir. Sept. 12, 2007) (citation omitted). “A finding is

‘clearly erroneous’ when although there is evidence to support it,

the reviewing court on the entire evidence is left with the

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definite and firm conviction that a mistake has been committed.” 

United States v. Gypsum Co., 333 U.S. 364, 395 (1948). “As long as

findings are plausible in light of the record viewed in its

entirety, a reviewing court may not reverse even if convinced it

would have reached a different result.” Snider v. Sherman, 2007 WL

1174441, at *18 (E.D. Cal. April 19, 2007) (citing Wardley Int’l

Bank, Inc. v. Nasipit Bay Vessel, 841 F.2d 259, 262 n.1 (9th Cir.

1988)) (footnote omitted).

III. Alleged Errors

A. Valuation Date

The first error which defendant ascribes to the bankruptcy

court is its “conclusive[] determination” that the property should

be “valued as of the date of sale[,]” rather than as of the date of

dissolution of the marriage. See Rec., exh. 5 thereto at 6. The

Trustee’s response is two-fold. First he argues, albeit not in

precisely this way, that defendant waived his right to object to

the date of sale valuation date because he did not object earlier. 

Second, the Trustee argues that even if the issue of the valuation

date is properly before this court on appeal, there is no merit to

defendant’s challenge to that date. 

Procedurally, the defendant retorts that the bankruptcy

court’s 2005 order setting the sale date as the date of valuation

was an interlocutory order. Hence, defendant reasons, the

valuation date issue is properly before this court “in conjunction

with this appeal of the final judgment in this case.” Def. Reply

(doc. 9) at 4. Substantively, the defendant responds that the

Trustee’s analysis of the valuation date (like the bankruptcy

court’s) fails to take into account the distinction between

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4 An appellate court may consider a “new issue if: (1) there are

exceptional circumstances why the issue was not raised in the trial court; (2) the

new issue arises while the appeal is pending because of a change in the law; or (3)

the issue present is a pure question of law and the opposing party will suffer no

prejudice as a result of the failure to raise the issue in the trial court.”

Raich, 2007 WL 754759, at *14 (citation omitted). The Trustee claims that he would

be “severely prejudiced” if this court were to invoke this last exception because

“re-open[ing] the date of valuation issue now, almost two years after the entry of

the Order in question and one year after trial, would require another expert

evaluation and another trial.” Tr. Brief (doc. 8) at 10. 

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separate and community property. 

1. Scope of Appeal

To support his waiver argument, the Trustee relies upon the

“long-standing rule in the Ninth Circuit that, generally,” an

appellate court “will not consider arguments that are raised for

the first time on appeal.” Raich v. Gonzales, 2007 WL 754759, at

*14 (9th Cir. March 14, 2007) (internal quotation marks and

citation omitted). The Trustee further asserts that none of the 

three exceptions to that rule apply here.4 Thus, the Trustee

concludes that the valuation date issue is “not properly before

this Court[.]” Tr. Brief (doc. 8) at 11. Defendant counters, as

previously noted, that the valuation date order is “properly on

appeal” because it is an interlocutory order. 

Defendant has the stronger argument, by far. First of all,

the Trustee’s waiver argument is wholly misplaced. The valuation

date issue is not a new issue, which is being raised for the first

time on this appeal. In its 2005 order, the bankruptcy court

noted at the outset the “parties[’] disagree[ment]” on “two

critical points[,]” one of which was the property valuation date. 

See Rec., exh. 5 thereto at 2. Indeed, after the initial trial on

remand, it was the Trustee who raised the valuation date issue,

“question[ing]” the bankruptcy court’s continued reliance on the

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value-at-dissolution date in light of the subsequent sale of the

property. Id. The fact that it was the Trustee who raised the

issue of the valuation date renders particularly disingenuous his

contention that that issue was raised for the first time on this

appeal. 

Not only did this dispute as to the valuation date result in

the bankruptcy court’s August 2005 order, but the change in

valuation date as reflected in that order required a continuance of

the trial on remand to allow expert testimony as to the value of

the subject property on the date of sale. Plainly then, the issue

of the valuation date was before the bankruptcy court. It is not a

new issue raised for the first on this appeal. For the Trustee to

suggest otherwise strains credulity. Thus, as the foregoing shows,

despite the Trustee’s assertion to the contrary, the “general rule”

that an appellate court “will not consider issues raised for the

first time on appeal[]” does not apply here. See United States v.

Carlson, 900 F.2d 1346, 1349 (9th Cir. 1990) (citations omitted). 

The Trustee’s argument that the August 15, 2005, order “is not

subject to appeal” also fails to take into account that that order

was interlocutory, not final. That oversight is significant

because, as will be more fully discussed below, the interlocutory 

nature of that August 2005 order brings it within the scope of this

appeal.

“[O]nly ‘final’ rulings of the bankruptcy court may be

appealed as of right” in accordance with 28 U.S.C. § 158(a).

Elliott v. Four Seasons Properties (In re Frontier Properties,

Inc.), 979 F.2d 1358, 1362 (9th Cir. 1992). On the other hand,

interlocutory orders or decrees require “leave of the court” before

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they can be appealed. See 28 U.S.C. § 158(a). “The final judgment

rule was designed to prevent piecemeal litigation, conserve

judicial energy, and eliminate delays caused by interlocutory

appeals.” Frontier Properties, 979 F.2d at 1362 (citing Catlin v.

United States, 324 U.S. 229, 233-34 (1945)). A final decision, as

the Supreme Court has defined it, “is one that ‘ends the litigation

on the merits and leaves nothing for the court to do but execute

the judgment.’” Id. (quoting Catlin, 324 U.S. at 233) (other

citation omitted). 

In the bankruptcy context, the Ninth Circuit, “in addition to

th[at] conventional test of finality,” has adopted a “ pragmatic

approach[,]” which “focuses on whether the decision appealed from

effectively determined the outcome of the case.” Id. at 1363. 

(internal quotation marks and citations omitted). “Specifically,”

the Ninth Circuit has held that “[a] bankruptcy order is final and

thus appealable where it 1) resolves and seriously affects

substantive rights and 2) finally determines the discrete issue to

which it is addressed.” Schulman v. Cal. (In re Lazar), 237 F.3d

967, 985 (9th Cir. 2001)(internal quotations marks and citations

omitted). So, for example, “[o]rders requiring disgorgement

resolve and seriously affect substances rights[,]” and hence are

final. Mosier v. United Education & Software, 285 B.R. 442, 445

(C.D.Cal. 2002) (citing Law Offices of Nicholas A. Franke v.

Tiffany (In re Lewis), 113 F.3d 1040, 1043-44 (9th Cir. 1997)). In

contrast, an order that leaves unresolved the amount of damages,

usually is not final. See Frontier Properties, 979 F.3d at 1362-63

(citing cases). 

Applying these well-settled principles to the present case

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mandates the conclusion that the August 15, 2005, bankruptcy court

order is not final. Arguably that order did satisfy the second

part of the finality test in that it “finally determine[d]” the

“discrete issue” of the valuation date. See Frontier Properties,

979 F.2d at 1362. Importantly, however, that August 15, 2005 order

did not satisfy the first prong of the finality test. As the court

persuasively reasoned in Ashoka Enterprises, Inc. v. Ford Motor

Credit Corp., 156 B.R. 343 (S.D. Fla. 1993), a “bankruptcy court’s

order determining the date of valuation [wa]s not a final order”

because:

[it] did not pass title to any property and 

did not direct delivery of any property. It 

did not award execution and did not determine 

the merits of the case or the substantive rights 

of the parties. Furthermore, the bankruptcy 

ruling on the issue of the proper date of valuation

did not settle liability, [and] [it] did not 

establish damages[.]

Id. at 345. That reasoning applies with equal force here. Rather

than “end[ing] the litigation on the merits[,]” Catlin, 324 U.S. at

233), the August 15, 2005, order left unresolved the issue of the

amount of damages. Hence, that order required the parties to

“‘engage in protracted litigation” as to the property value, before

that order would “have any direct impact in the case.’” See Mosier,

285 B.R. at 445 (quoting Frontier Properties, 979 F.2d at 1362-63)

(other citation omitted). For these reasons, this court has little

difficulty finding that that bankruptcy order was not final. 

Moreover, adopting the Trustee’s argument that the defendant 

waived his right to object to the valuation date order because he

did not immediately appeal it would run afoul of the Ninth

Circuit’s “flexible approach to finality[]” in the bankruptcy

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setting. See Frontier Properties, 979 F.2d at 1363. 

Significantly, that flexible, “‘pragmatic approach’ was designed to

add an opportunity for appeal in bankruptcy proceedings at the

interlocutory stage,” not, as the Trustee suggests “to create less

opportunity by making interlocutory appeal exclusive.” See id. at

1363-64. That pragmatic approach also “is concerned with

preventing irreparable harm to the losing party rather than any

prejudice to the prevailing party ([the Trustee] here) from delayed

appeal.” Id. at 1364 (internal quotation marks and citation

omitted). In light of the foregoing, there is no basis for the

Trustee’s suggestion of prejudice arising from defendant’s failure

to immediately appeal the valuation date order. Indeed, the Ninth

Circuit has expressly “reject[ed] an application” of the pragmatic

approach to finality “that would require any point that is

determined in either party’s favor in an interlocutory order in

bankruptcy to be appealed immediately or forever waived.” Id.

What is more, the Ninth Circuit has “never held that failure

to appeal an interlocutory order barred raising the decided issue

after entry of a final judgment.” Id. “Rather,” as that Court

explained in Frontier Properties, “where an issue is determined in

an interlocutory order and later incorporated into a final order,

the determination of the original issue is appealable upon an

appeal of the final order thereby providing the district court with

an ultimate review on all the combined issues.” Id. (internal

quotation marks and citations omitted). In the present case, the

bankruptcy court’s September 20, 2006, memorandum decision

incorporated the prior finding of a date of sale valuation date. 

Rec., exh. 9 thereto at 3. Therefore, that valuation date issue is

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properly before this court on the appeal from that decision and

final judgment entered thereon. 

2. Date-of-Sale v. Date-of-Dissolution

Having found that the valuation date issue falls within the

scope of this appeal, the next issue is whether, as the defendant

contends, the bankruptcy court’s use of the date of sale is

“reversible error[.]” Def. Br. (doc. 7) at 10. Defendant first

asserts that the bankruptcy court improperly relied upon Sample to

support using the date of sale to value the subject property

because, unlike the present case, Sample involved community

property. The bankruptcy court’s choice of the date of sale was

also error, according to the defendant, because “Arizona case law

is clear that the . . . separate real property of one spouse shall

be valued as of the dissolution date for determining the

community’s claims for contributions to the property.” Def. Br.

(doc. 7) at 11 (citing Drahos v. Drahos, 717 P.2d 927 (Ariz. Ct.

App. 1985); and Honnas, supra, 648 P.2d 1045). Defendant is right

on both counts.

The bankruptcy court’s reliance upon Sample is misplaced

because, as just noted, the issue there was the valuation date for 

community property, not, as here, the valuation date for separate

property. Initially in Sample the trial court had awarded shares

of stock to the husband as his separate property. The wife

appealed, and the court of appeals reversed specifically

“mandat[ing] that on remand the shares be treated as community

property.” Sample, 731 P.2d at 606 (emphasis added). While on

appeal, “the stock significantly appreciated in value[.]” Id. On

remand the trial court valued some of “the stock as of a date

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during the pendency of the appeal[,]” but it “chose yet a later

valuation date” for other stock. Id.

The husband and wife filed cross-appeals “primarily

challeng[ing] the trial court’s choice of valuation date regarding

the . . . stock.” Id. “The husband argue[d] that the stock should

be valued as of . . . the date of the original dissolution

decree[,]” but the court of appeals disagreed. See id. 

The court of appeals began its analysis of the valuation issue

by declaring that “the trial court was required to divide community

interest in the stock shares pursuant to A.R.S. § 25-318(A).” Id.

That statute reads in relevant part as follows:

In a proceeding for a dissolution of the 

marriage, . . . , 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[.]

Id. at 607, n.3 (quoting A.R.S. § 25-318(A))(emphasis added). 

Based upon that statute, the court of appeals held that the “trial

court’s choice of valuation date was legally correct[.]” Id. at

606-607. 

In so holding, the court in Sample offered the following

rationale. Section 25-318(A) vests “broad discretion” in trial

courts to “determin[e] the scope of property awards in divorce

actions.” Id. at 607. So broad is that discretion, in fact, that

the Sample court found that the “[t]he only limitation . . . is

that the division of community assets results in substantial

equality.” Id. (citations omitted). Reasoning that “the

equitableness of a given distribution is the very touchstone of a

proper apportionment[,]” the Sample court opined that “a trial

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court must be allowed to utilize alternative valuation dates.” Id.

“Only in th[at] fashion[,]” the Sample Court further opined, can

courts “make truly equitable awards as dictated by A.R.S. § 25-

318(A).” Id. Finally, the court explained that “it would

contravene the very purpose of A.R.S. § 25-381(A) for [it] to

develop a general valuation rule, let alone the valuation at

dissolution formula proposed by [the] husband.” Id. (footnote

omitted). 

As is evident, critical to the analysis of the valuation issue

in Sample was the considerable latitude given to courts under

section 25-318(A) when making equitable divisions of community

property thereunder. As the defendant in the present case is quick

to point out though, the first sentence of that statute, which

pertains to separate property such as the property at issue in this

case, does not include an “equitable requirement[.]” See Def. Br.

(Doc. 7) at 11. Equity only comes into play under section 25-

318(A) when the property to be divided is “community, joint tenancy

and other property held in common[.]” See A.R.S. § 25-318(A). 

Thus, because the present case involves solely separate property,

the equitable considerations which supported a valuation date other

than the date of the dissolution decree in Sample are not present

here. Equitable considerations are not permitted under A.R.S. 

§ 25-318(A) when assigning separate property upon marital

dissolution. Accordingly, the court disagrees with the bankruptcy

court that Sample “appears directly on point.” See Rec., exh. 5

thereto at 4. 

The Trustee attempts to bring this case within the ambit of

Sample by asserting that it “revolves around community property –

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namely the community interest in the subject property.” Tr. Brief

(doc. 8) at 10. This ignores the fact that the subject property is

separate property, and it retains that separate property status

regardless of the expenditure of community funds. See Potthoff v.

Potthoff, 627 P.2d 708, 715 (Ariz. Ct. App. 1981) (citation

omitted) (“[I]f in fact community funds are used to improve

separate real property, the underlying real property does not

become community property.”) The Trustee’s position also ignores

the fact that because separate property is at issue here, as

opposed to community property, this is not a situation like Sample

where “[t]he court, in effect, simply returned to the wife that

which was already hers.” Sample, 731 P.2d at 607 (internal

quotation marks and citation omitted). In short, the court finds

that the bankruptcy court erred by employing the date of sale,

rather than the date of dissolution, as the valuation date for the

subject separate property. 

The bankruptcy court’s reliance upon Kelsey, supra, is

similarly misplaced. As recited by the bankruptcy court, Kelsey

does provide that “[t]he valuation of assets is a factual

determination that must be based on the facts and circumstances of

each case.” Kelsey, 918 P.2d at 1069 (citation omitted); see also

Rec., exh. 5 thereto at 6. Arguably that broad statement, read in

isolation, could support using the date of sale to value the

property at issue herein.

A close reading of Kelsey shows, however, that not only is it

factually distinguishable, but the issue of a valuation date never

arose in that case. At issue in Kelsey was whether a hair

transplant business should be valued as a service or as a medical

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practice. In finding that the trial court erred in concluding that

that business was a service rather than a medical practice, the

court of appeals did recognize that “trial court[s] ha[ve]

discretion to rely on various methods of valuing a professional

practice[.]” Id. (citation omitted). Nothing in that discussion

even remotely suggests that that discretion encompasses use of a

valuation date other than the dissolution date where, as here, the

community is being reimbursed for community funds expended for the

benefit of separate property. 

The Kelsey court’s silence on that narrow issue is

understandable. First, as just noted, the valuation date was not

an issue in Kelsey. Second, and perhaps more importantly, as

discussed in this court’s prior order, the Arizona Supreme Court in

Honnas unequivocally “reaffirm[ed]” the value-at-dissolution

formula” when “community funds are expended for the benefit of

separate [real] property.” Honnas, 648 P.2d at 1046-47 (citations

omitted). For all of these reasons, upon de novo review the court

must conclude that the bankruptcy court’s use of the date of sale

for valuing the subject property was incorrect as a matter of law. 

As an alternative to the date of dissolution, defendant

contends that the date of service of the petition for dissolution

is appropriate given its effect under Arizona law. More

specifically, defendant accurately notes that upon service of such

a petition, property acquired thereafter is the separate property

of that spouse, provided that the petition results in a decree of

dissolution. See A.R.S. §§ 25-211(2); and 25-213(B). In the

present case, because debtor Dawn Petersen filed the petition for

dissolution on April 10, 2000, defendant is urging use of that date

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5 This court’s determination that remand is required on the valuation

date issue renders moot the other issues which defendants raise on this appeal.

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for valuing the subject property. Obviously, as defendant points

out, use of that April 10, 2000 date would mean that “the

appreciation attributable to the improvements would be

substantially less.” Def. Brief (doc. 7) at 12. Therefore,

defendant maintains that the court should remand this action yet

again; this time “for a determination of the value of the

improvements as of April 10, 2000.” Id. 

While the court agrees that remand is proper and, indeed,

necessarily, it declines to find that April 10, 2000, is the proper

valuation date. The court leaves to the bankruptcy court in the

first instance the determination as to the appropriate valuation

date consistent with this order.5

IT IS ORDERED that the November 13, 2006, judgment of the

bankruptcy court (Rec., exh. 10 thereto) is VACATED; and

IT IS FURTHER ORDERED that this case is REMANDED to the

bankruptcy court for proceedings not inconsistent with this order.

DATED this 24th day of September, 2007.

Copies to counsel of record

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