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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE

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IN THE 

## A RIZONA 

## C OURT OF 

## A PPEALS

D IVISION O NE

In re the Matter of:

HOLLY LYN BUTLER

- HINTZ , P etitioner/ Appellant /Appellee
,

v.

FREDERICK ERNEST HINTZ
, Respondent /Appellee /Appellant

.
No. 1 CA

- CV 18

- 0428 FC

Appeal from the Superior Court in Maricopa County

No. FN2017

- 052438 The Honorable Roy C. Whitehead
, Judge

AFFIRMED IN PART; REVERSED A ND REMANDED IN PART

COUNSEL

The Law Office of Carrie M. Wilcox
, PLLC, Phoenix By Carrie M. Wilcox, Sa bra Barnett Counsel for P etitioner

/Appellant

/Appellee

Frederick Ernest Hintz
, Glendale Respondent

/Appellee /Appellant FILED 9-26-2019BUTLER

- HINTZ v. HINTZ Decision of the Court

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

C R U Z , Judge:

¶1 Frederick Ernest Hintz (“Husband”) appeals the superior court’s dissolution finding of a community lien on Husband’s condominium and the calculation of the community’s share of the sale of the parties’ business

. Holly Lyn Butler

- Hintz (“Wife”) cross

- appea ls the judgment giving Husband and Wife joint custody o ver their two dogs. For the following reasons, we affirm in part, and reverse and remand in part

.

FACT S AND PROCEDURAL HISTORY

¶2 On May 26, 1990, the parties were married in Phoenix. In 2006, Husband purchased a condominium to use as his insurance company’s place of business in Peoria. In 2008, Wife signed a disclaimer deed waving any interest in the condominium. The parties agre e the condominium is Husband’s sole and separate property. Prior to filing of the petition for dissolution, Husband sold the insurance business to his adult daughter from a previous relationship

. Initially
, Husband disclosed the sales price as $175,000. Then, during the pendency of the divorce, Husband executed a contract addendum purportedly reduc ing the purchase price to $50,285.95. Still, t he superior court accepted $175,000 as the final purchase price.

¶3 On the scheduled trial date, instead of proceeding to trial, the parties participated in a settlement conference with the superior court. As a result of that settlement conference the parties entered into an agreement under Arizona Rule of Family Law Proc edure 69

. That agreement included final resolution on distribution of personal property and refinancing of the loan secured by the marital residence. The parties agreed to have the court resolve the following issues based on briefing and without a trial: ( 1) negative equity of the marital residence, ( 2 ) determination as to any community interest in Husband’s condominium, ( 3) distribution of the parties’ dogs, and ( 4) each parties’ application for attorneys ’ fees

.BUTLER

- HINTZ v. HINTZ Decision of the Court

3 ¶4 After considering each of the parties’ briefs, the court issued

an u nder advisement ruling via minute entry

. Of relevance here, the court ruled that , because community funds were used to benefit the property, th ere is a community lien o n Husband’s condomi nium and Wife is entitled
to one

- half of th at lien. The court also ruled that the value

- at

- dissolution formula in Drahos v. Rens , 149 Ariz. 248, 2 50 (App. 1985) , should be applied to calculate the amount of the community ’s lien. To that end , the superior court ordered an appraisal

. ¶5 The court

- ordered appraisal noted that Husband purchased the condominium for $206,860 in 2006
, and that by April 2018 the value had appreciated to $210,000. However, i n calculating the value of the community lien the superior court used Wife’s proposed purchase price of $170,000. T he superior court also ruled the insurance business was sold for $175,000 and Wife was entitled to half of that amount. Lastly, o ver Wife’s objection, the co urt ordered joint custody of the parties’ two dogs.

¶6 Husband appeals the imposition of a community lien on the condominium a s well as the purchase price used to calculate Wife’s share of the sale of the business. Wife cross

- appeals the dog custody and visitation ruling. We have jurisdiction pursuant to Arizona Revised Statutes (“ A.R.S. ”) section 12

- 2101(A)( 1 ).

DISCUSSION

I. Standard of Review

¶7 “In apportioning community property between the parties at dissolution, the superior court has broad discreti on to achieve an equitable division, and we will not disturb its allocation absent an abuse of discretion.” Boncoskey v. Boncoskey , 216 Ariz. 448, 451 , ¶ 13 (App. 2007). The superior court abuses its discretion when it “commits an error of law in the process of exercising its discretion.” Kohler v. Kohler , 211 Ariz. 106, 107
, ¶ 2 (App. 2005). “[W]e consider the evidence in the light most favorable to upholding the superior court’s ruling and will sustain the ruling if it is reasonably supported by th e evidence.” Boncoskey , 216 Ariz. at 451
, ¶ 13

.

II. Community Lien on Husband’s Condominium

¶8 Separate property of a spouse does not become community property only because community funds are used to pay the mortgage. Drahos , 149 Ariz. at 249. “The community, which contributed capital to the separate property, is nevertheless entitled to some form of compensation.” Id. “The community has the right to an equitable lien against the separateBUTLER

- HINTZ v. HINTZ Decision of the Court

4 property even though the character of that property has not changed.” Id. ;

s ee also Honnas v. Honnas , 133 Ariz. 39, 4 0 (1982) (“[T]he community is entitled to share in the enhanced value of the property due to th is expenditure of [community] funds

. . . . ”).

¶9 Husband argues the superior court abused its discretion when it imposed a community lien on the increase in value of Husband’s separate ly

- owned condominium because
, according to him, the condominium is not residential property, but rather a business proper ty

. ¶10 We now examine the proper characterization of Husband’s condominium. A rizona’s tax law defines “ [b] usiness” as “includ[ ing ] all activities or acts, personal or corporate, that are engaged in or caused to be engaged in with the object of gain, benefit or advantage, either directly or indirectly .” A.R.S. § 42

- 5001(1). “ Real estate,” on the other hand, is defined

as “includ[ing]

. . . any estates in land as defined in title 33, chapter 2, articles 1 and 2, regardless of whether located in this state

. ” A.R.S. § 32

- 2101(48) (footnote omitted)

. The condominium used for the parties’ insurance business is an estate in land
, a tangible building with a legal description identifying a discreet location within this state. Even if used for a business
purpose, the condominium at issue here is real estate

. ¶11 Husband misunderstands our holding in Drahos , which is more expansive and “applies when community funds are used to benefit but not necessarily improve separate property.” Drahos , 149 Ariz. at 250. Like in Dr ahos , here community funds were used to pay the mortgage during the duration of the marriage, a benefit to one of the spouse’s separate property

. In addition, the condominium increased in value during the marriage. Much like in the case at bar, in Drahos “ it was only alleged that community funds were used to pay the mortgage

. ” Id. “ There was no indication in the record that the increased value of the residence [was] in any way attributable to anything besides the general trend of rising real estate valu es. ” Id

. Thus, the community was entitled to a lien for part of the increase in value of the property.

¶12 Here, i t was Husband’s burden, as the party opposing the community lien, to show separate funds were used to pay his condominium’s mortgage. I d. at 251. In stead of making such a showing, Husband argues the community has benefitted from his sole and separate
pro perty by receiving a tax advantage, and by providing a place for the community business to conduct its operation. He also argues Wife’s community efforts were not responsible for any increase in the value of the business condominium. Lastly, Husband asse rts that the moniesBUTLER

- HINTZ v. HINTZ Decision of the Court

5 withdrawn by Wife from the business accounts should be counted against the community as a further benefit.

¶13 “[I]t was within the trial court’s discretion to start with the presumption that all of the growth in [ the h usband’s separate pro perty] was community property and then look to the evidence presented by [the h] usband to see if he had managed to overcome that presumption.” Rueschenberg v. Rueschenberg , 219 Ariz. 249, 257 , ¶ 35 (App. 2008)

. ¶14 T he parties agree d the condominium mortgage payments were paid from the insurance business account

. The parties also agree d that the insurance business was a community asset. Consequentially, t he superior court found that “ community funds were used to benefit the property and that the property has experienced an increase [ in value ] during the marriage.” Therefore, t he superior court did not abuse its discretion in also finding the community was entitled to a lien against it.

III. Applicability of Drahos Val ue

- at

- Dissolution Formula

¶15 Husband also argues that the superior court abused its discretion when it applied the value

- at

- dissolution formula in Drahos
, to determine the value of any community lien. 1 H e argues the superior court should have used the formul a in Rueschenberg to assess the active and passive contributions of Wife to the increase in value

. We disagree.

¶16 Arizona courts are not bound by any one method when calculating a community lien. Rueschenberg , 219 Ariz. at 255 , ¶ 25

. In Drahos , we held that when community funds are used to benefit separate property, applying a value

- at

- dissolution formula to calculate a community lien up on real property is appropriate. Drahos , 14 9 Ariz. at 250; see also

1 The Drahos formula is as follows:

The separate property interest is determined by adding the down payment to the product of the down payment plus principal payments made with separate property divided by the purchase price times the appreciation [ in value ]

. The community property equitabl e lien interest is determined by adding the principal balance paid by the community to the product of the community property principal payments divided by the purchase price times the appreciation in value. Drahos , 149 Ariz. at 250

.BUTLER

- HINTZ v. HINTZ Decision of the Court

6 Honnas , 133 Ariz. at 4 1 (reaffirming a v alue

- at

- dissolution formula for real property cases).

¶17 Moreover, Rueschenberg is inapposite here. In that case the property at issue was a business, not real property. R ueschenberg , 219 Ariz.
at 250. There the court

- appointed special master conducted a b usiness valuation using the capitalization of earnings method, which factored in the business’ normalized earnings and the community’s labor in determining the rate at which the community should be credited for the increase in value of the business. Id. at 251. By contrast, real property , unless used as a rental property, is a form of passive investment that does not typically generate regular earnings during the time it is owned. Payments made toward the purchase obligation, along with fluctuations in the real estate market, and in some instances labor, are factors that contribute to the overall increase in its value. Increase in value of a business and of real property is determined by different types of calculations. In c alculating the value of a bu siness , the business valuation is generally used to establish the value of assets and of

some stream of income

. But in c alculating the value of appreciation of real property , the appraisal seek s to determine the appreciation in value of a property from th e time of purchase to a predetermined date. Regardless of the fact that the condominium was used for a commercial purpose, a value

at

- dissolution formula may be used. Lawson v. Ridgeway , 72 Ariz. 253 (1951) (applying a value

- at

- dissolution formula to ren tal home business). T he refore, the superior court did not err when it applied the Drahos value

at

- dissolution formula in determining the value of the community lien to be placed up on the condominium.

IV. Drahos Calculation

¶18 “A factual finding is clearly erroneous if no substantial evidence supports it.” C i ty of Tucson v. Clear Channel Outdoor, Inc. , 218 Ariz. 172, 189, ¶ 58 (App. 2008)

. We evaluate each of Husband’s arguments regarding the purchase price and mortgage balance used to calculate the

commun ity lien on the condominium in turn

. However, f or the reasons stated below we do not address Husband’s arguments regarding the appraisal date used by the superior court.

A. Purchase Price

¶19 Husband argues the superior court erred when it used the incorrect pur chase price of the condominium to calculate the community lien. H e alleges that he bought the condominium for $270,000, including mandatory tenant improvements , and used separate funds provided by hisBUTLER

- HINTZ v. HINTZ Decision of the Court

7 m other which left a balance of $170,000

. Th e parties agree the mortgage balance of the condominium was $170,000

. Although Wife ’s position is t hat the purchase price of the condominium was $170,000
, she a rgued in her final brief that “[c]ommunity funds were used to make the purchase [] and pay the m ortgage , ” implicitly acknowledging that the purchase price exceeded the amount of the mortgage

. ¶20 B efore the decree of dissolution was entered
, Husband and Wife acknowledged that evidence provided by Husband support ed a purchase price of $206,860. Additiona lly, the court

- ordered appraisal also identified a purchase price of $206,860. Despite the acquiescence of the parties and the evidence before the superior court, the decree of dissolution adopted a purchase price of $170,000, as suggested by Wife in her final brief and in her proposed decree. Whether the additional funds above the mortgage amount were contributed by Husband out of his separate funds or by the community is a question of fact for the superior court to resolve. Regardless of that determination, b ecause the superior court’s findin g of a $170,000 purchase price is not supported by substantial evidence, it is clearly erroneous. Accordingly, we reverse and remand for a n application of the Drahos formula utiliz ing a purchase price supported by the evidence

.
B. Mortgage Balance

¶21 Husband argues that the superior court used an incorrect remaining mortgage balance to calculate the community lien

. ¶22 In his final brief Husband presented the superior court with what was characterized as a loan payoff document s tating that the remaining ba lance on the mortgage as of June 5, 201 7, 2 was $124,867.37. Wife , consistent with her position in the joint pretrial statement , and in Husband’s representation in his brief regarding the community lien
, listed

a mortgage balance of $121,090.67 in her proposed decree. The superior court adopted Wife’s suggested mortgage balance when it adopted her proposed decree.

¶23 The superior court’s factual finding regarding the contested issue of the remaining balanc e on the condominium’s mortg age was not clearly erroneous. Accordingly, the superior court did not err in accepting the mortgage loan figure proposed by Wife as part of the Drahos calculation.

2 The actual date of s ervice was over a month earlier, on April 25, 2017.BUTLER

- HINTZ v. HINTZ Decision of the Court

8 C. Appraisal Date

¶24 Husband did not object to the appraisal date in the superior court. Theref ore, H usband’s argument on appeal that the appreciation in value of the condominium should be measured by use of the appraised value on the date of service of the petition is waived and we do not entertain it now. See Airfreight Exp. Ltd

. v. Evergreen Air C tr. , Inc. , 215 Ariz. 103, 109

- 10 , ¶ 17 (App. 2 0 07) (holding an argument waived on appeal by failing to raise it to the superior court).

V. Sale of Business

¶25 Husband argues the trial court erred in calculating the community’s interest in proceeds of the insurance business’ sale when it used a sale price of $175,000. “We defer to the trial court’s factual findings unless clearly erroneous.” Clear Channel Outdoor, Inc. , 218 Ariz. at 189, ¶ 58

. “N evertheless, we draw our own legal conclusions from the facts found or implied by the family court.” Valento v. Valento , 225 Ariz. 477, 481 , ¶ 11 (App. 2010)

. ¶26 According to Husband, after Wife filed her petition for dissolution of the marriage
, the sale pr ice of the business was reduced to $50,285.95. Nonetheless, the superior court made a factual determination that Husband sold the business to his daughter for $175,000. Husband’s sole argument on appeal regard ing the sale of the business is that Wife fai led to disclose the contract addendum showing the lower amount as the sales price

. He does not explain why he could not similarly have submitted the addendum to the superior cour t , or why the court’s credibility determination was clearly erroneous. Because there is evidence to support th e court’s f inding, w e hold the superior court did not err in ruling that the total sale s price of the insurance business was $175,000.

VI. Dogs

¶27 Wife ap peals the superior court’s decree of dissolution granting Husband and Wife joint custody and visitation of the parties’ dogs. Husband takes no position on appeal.

¶28 Wife argues that Arizona law does not authorize the superior court to grant joint custody an d visitation of dogs and that said orders are contrary to the purpose of the law

— to provide finality to the parties

. Therefore, Wife argues that the superior court ’s decision awarding the parties joint custody and visitation of the dogs should be reversed

. Husband did not file an answering brief addressing this matter

. “When aBUTLER

- HINTZ v. HINTZ Decision of the Court

9 debatable issue is raised on review, the failure to file an answering brief generally constitutes a confession of error.” Gibbons v. Indus

. Comm ’n
, 197 Ariz. 108, 111, ¶ 8 (App. 1 999). Accordingly, we treat Husband’s failure to respond as a confession of error and reverse the superior court’s orders mandating that the two dogs be kept together and exchanged between the parties on a monthly basis. We remand this issue to the superior court for a final allocation of ownership of the dogs among the parties.

VII. Attorneys ’ Fees and Costs

¶29 Both parties request an award of attorneys ’ fees and costs under A.R.S. § 25

- 324 and Arizona Rule of Civil Appellate Procedure 21. In the exercise of our discretion we decline to award either party their attorneys ’ fees. Because both parties partially prevailed on appeal, we also decline to award costs to either party.

CONCLUSION

¶30 For the foregoing reasons, we affirm in part, and reverse and remand i n part, for further proceedings consistent with this decision

.