Court Opinion

ID: 9370683
Source: CourtListenerOpinion
Date Created: 2023-02-14 16:02:41.258208+00
Date Added: 2024-06-11T17:16:22.394975
License: Public Domain

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 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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

                                    IN THE
             ARIZONA COURT OF APPEALS
                                DIVISION ONE

                             In re the Marriage of

                 MICHELLE WARREN, Petitioner/Appellee,

                                        v.

               KENNETH STEPHENS, Respondent/Appellant.

                           No. 1 CA-CV 22-0337 FC
                             FILED 2-14-2023

           Appeal from the Superior Court in Maricopa County
                          No. FC2017-097032
                  The Honorable Lisa S. Wahlin, Judge

                                  AFFIRMED

                                   COUNSEL

Tiffany & Bosco, P.A., Phoenix
By Amy D. Sells, David M. Barlow
Counsel for Petitioner/Appellee

The Murray Law Offices, PC, Scottsdale
By Stanley D. Murray
Counsel for Respondent/Appellant
                         WARREN v. STEPHENS
                          Decision of the Court

                      MEMORANDUM DECISION

Judge Cynthia J. Bailey delivered the decision of the Court, in which
Presiding Judge Samuel A. Thumma and Vice Chief Judge David B. Gass
joined.

B A I L E Y, Judge:

¶1            Kenneth Stephens (“Husband”) appeals from the superior
court’s post-decree property and debt division order and the denial of his
motion to alter or amend that order. For the following reasons, we affirm.

                 FACTS AND PROCEDURAL HISTORY

¶2            Husband and Michelle Warren (“Wife”) married in 1994.
Wife petitioned for dissolution in November 2017. While that petition was
pending, in September 2018, Husband filed a Chapter 13 bankruptcy
petition.1 In his petition, Husband claimed a homestead exemption in the
parties’ marital home. See Ariz. Rev. Stat. (“A.R.S.”) § 33-1101(A)(1).2 Then,
in January 2019, the superior court issued its decree dissolving the parties’
marriage and addressing legal decision-making, parenting time, and child
support. But because of the stay imposed by Husband’s ongoing
bankruptcy proceedings, see 11 U.S.C. § 362(a), the court did not divide the
parties’ property and debts.

1      In a Chapter 13 bankruptcy, creditors recover the debtor’s future
earnings through a court-approved payment plan and the debtor keeps any
assets. Meredith Johnson, Note, At the Intersection of Bankruptcy and Divorce:
Property Division Debts Under the Bankruptcy Reform Act of 1994, 97 Colum.
L. Rev. 91, 94 (1997).

2       We cite the statute version in place when the petition was filed, as
bankruptcy exemptions are determined by the state law in place at the time
of filing. See In re Jacobson, 676 F.3d 1193, 1199 (9th Cir. 2012).

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¶3            The next month, Wife filed her own Chapter 7 bankruptcy
petition.3 In her petition, Wife also claimed an exemption in the parties’
marital home. See A.R.S. § 33-1101(A)(1). In January 2020, the bankruptcy
court approved a settlement agreement in Wife’s bankruptcy. Under the
settlement, Husband paid about $5,000 to Wife’s bankruptcy estate and in
return received the estate’s interest in certain property, including Wife’s
non-exempt community equity in the marital home. Wife then received her
discharge from bankruptcy.

¶4            In May 2021, the bankruptcy court lifted the stay in
Husband’s bankruptcy to allow the superior court “to divide the
community property and non-dischargeable debt of the parties.” Wife then
filed in superior court a “Motion to Enforce Final Judgment of Dissolution
of Marriage and Petition for Undivided Retirement Assets.” The superior
court set an evidentiary hearing to determine the proper division of the
parties’ community property and debts. The contested issues included the
division of equity in the marital home, the division of Husband’s Allstate
Retirement Plan (“Allstate Plan”), and the division of community debts. At
the close of the hearing, the superior court denied Husband’s request for
more time to present evidence but permitted the parties to submit
supplemental briefing.

¶5           After taking the matter under advisement, the superior court
awarded Wife the full $150,000 of equity in the marital home protected by
the homestead exemption, ordered Husband’s Allstate Plan divided by
Wife’s proposed Qualified Domestic Relations Order (“QDRO”), and
ordered each party responsible for their separate debts. Husband timely
moved to alter or amend the court’s order. See Ariz. R. Fam. Law P. 83.
After responsive briefing, the court amended its order to reflect that
Husband’s bankruptcy proceedings were ongoing and to clarify that the
parties were entitled to any personal property in their possession and that
Husband was awarded the marital home, subject to the mortgage. The
court denied Husband’s additional requested relief.

¶6            Husband timely appealed, and we have jurisdiction under
A.R.S. § 12-2101(A)(1) and (2).

3      Unlike Chapter 13, in Chapter 7, the trustee collects the debtor’s non-
exempt property, then liquidates it, distributing the proceeds to creditors.
See Johnson, supra note 1, at 94.

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                               DISCUSSION

¶7              We review for an abuse of discretion the division of
community property, Boncoskey v. Boncoskey, 216 Ariz. 448, 451, ¶ 13 (App.
2007), and the denial of a motion to alter or amend, Stock v. Stock, 250 Ariz.
352, 354, ¶ 5 (App. 2020). “[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 the evidence.” Boncoskey, 216 Ariz.
at 451, ¶ 13 (citing Kohler v. Kohler, 211 Ariz. 106, 107, ¶ 2 (App. 2005)). The
superior court’s division of community property must be “equitabl[e],
though not necessarily in kind.” A.R.S. § 25-318; accord Toth v. Toth, 190
Ariz. 218, 221 (1997).

I.     Marital Home

¶8            For the first time on appeal, Husband argues Wife could not
claim any marital home equity protected by Arizona’s homestead
exemption. See A.R.S. § 33-1101(A)(1). Husband contends that because his
separate pretrial statement raised the homestead exemption and marital
home equity issues, he has not waived this argument. But in superior court,
Husband argued that Wife was entitled to one half the equity preserved by
the homestead exemption, not that she had no equity claim. His argument
to the superior court thus expressly contemplated that Wife properly
claimed a homestead exemption, at least in some amount. Because
Husband did not argue Wife had no claim to a homestead exemption to the
superior court, he waived it. See BMO Harris Bank N.A. v. Espiau, 251 Ariz.
588, 594, ¶ 25 (App. 2021).

¶9            Husband also argues that awarding the “entire homestead
exemption” to Wife was inequitable. Wife concedes that when making its
award, the superior court incorrectly reasoned that “[b]ecause Husband
filed a separate bankruptcy that included the home, Wife is not entitled to
half of the equity in the home.” But we may affirm the superior court’s
order if it is correct for any reason apparent in the record. Forszt v.
Rodriguez, 212 Ariz. 263, 265, ¶ 9 (App. 2006).

¶10           Wife filed for bankruptcy in February 2019, a month after the
superior court entered the decree ending the parties’ marriage. Upon her
filing for bankruptcy protection, Wife’s community interest in the marital
home became a part of her bankruptcy estate. See 11 U.S.C. § 541(a). But
because Wife claimed a homestead exemption, her bankruptcy estate did
not include $150,000 of the home’s community equity. See A.R.S § 33-
1101(A)(1). As Husband properly notes, when he bought Wife’s non-

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exempt community interest in the home from her bankruptcy estate after
he was served Wife’s petition for dissolution, it became his separate
property. See A.R.S. § 25-213(B). The balance of the home’s equity,
including the amount protected by the homestead exemption, remained
community property.

¶11            Husband’s argument that awarding the entire homestead
exemption to Wife was inequitable ignores that the court was dividing not
only the homestead exemption, but the home’s remaining community
interest. See In re White, 851 F.2d 170, 171 (6th Cir. 1988) (noting that when
the automatic stay is lifted in bankruptcy court proceedings, state courts
may divide marital property, including property in a spouse’s bankruptcy
estate). Though the superior court’s order stated that the property at issue
was the “$150,000 Homestead Exemption,” the amended order awarding
Husband the marital home subject to the mortgage makes clear the court
was dividing the marital home’s community interest, which included the
interest Husband surrendered to his bankruptcy estate and the $150,000 in
equity protected by the homestead exemption.

¶12           At the evidentiary hearing, Husband introduced evidence
that when Wife petitioned for dissolution, she estimated the marital home’s
value at $150,000. But the superior court properly exercised its discretion
and valued the home as of the hearing date, see Sample v. Sample, 152 Ariz.
239, 242 (App. 1986), and accepted Wife’s uncontradicted testimony that the
home’s value as of the hearing was approximately $900,000, and the home
is subject to a $320,000 mortgage, leaving slightly more than $550,000 in
equity.

¶13           Using the marital home’s valuation as of the hearing,
Husband’s separate property interest in the home—Wife’s non-exempt
community interest he bought from her bankruptcy estate—was
approximately $125,000: half the $550,000 in equity, less the $150,000
protected by Wife’s homestead exemption. The rest of the home’s $425,000
of equity, including the $150,000 protected by the homestead exemption,
remained community property. The superior court awarded Wife the full
$150,000 in equity protected by the homestead exemption. But Husband
was not left without a share of the community interest in the home. After
Wife’s award, Husband retained $275,000 of equity in the home. And as
Husband notes, the home is not at risk in his bankruptcy proceedings
because he is in a Chapter 13 bankruptcy and current on his plan payments.
Even if Husband were to lose the home in his bankruptcy, he would retain
the $150,000 protected by his claimed homestead exemption, equal to
Wife’s award. Husband has shown no abuse of discretion in the superior

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court’s $150,000 equity award to Wife where Husband received the home
with a greater amount of equity.

¶14           Husband also argues Wife’s award should have been offset to
account for payments he made toward community debt after the
community terminated. It is true that “when a party voluntarily makes
post-service payments toward community debt with separate funds, the
superior court must account for the payments in its equitable property
distribution.” Ferrill v. Ferrill, 253 Ariz. 393, 396, ¶ 10 (App. 2022) (citing
Bobrow v. Bobrow, 241 Ariz. 592, 596, ¶ 19 (App. 2017)). But here, though the
superior court heard testimony about community debts, Husband
presented no evidence as to the debt amounts or his post-service payments.
As such, the superior court had no basis to equitably offset Wife’s award.
On this record, the superior court did not abuse its discretion in denying
Husband’s motion to alter or amend and awarding Wife $150,000 of equity
in the marital home.

II.    Allstate Retirement Plan

¶15           Husband argues the superior court erred in dividing
Husband’s Allstate Plan by using Wife’s proposed QDRO because it “is not
supported by the evidence and is contrary to law.” Even so, he
acknowledges the portion of the Allstate Plan earned during the parties’
marriage is community property subject to equitable division. See
Boncoskey, 216 Ariz. at 451, ¶ 14.

¶16            The community interest in a spouse’s pension plan can be
calculated under either the “present cash value method” or the “reserved
jurisdiction method.” Johnson v. Johnson, 131 Ariz. 38, 41 (1981). Though
the present cash value method is preferred, the reserved jurisdiction
method is appropriate if the pension rights cannot be accurately valued,
and the marital estate has insufficient property to satisfy the non-employee
spouse’s claim. Id. at 42. Here, as Husband acknowledges in his opening
brief, the superior court properly applied the reserved jurisdiction method
to calculate the community interest in the Allstate Plan because the parties
presented no evidence of the plan’s present cash value and no other
equivalent community property existed to satisfy Wife’s claim. See id.

¶17           Under the reserved jurisdiction method, the pension’s
community share is calculated “by dividing the length of time worked
during the marriage by the total length of time worked toward earning the
pension.” Boncoskey, 216 Ariz. at 452, ¶ 18 (quoting Johnson, 131 Ariz. at 41
n.4). Wife’s proposed QDRO states the community portion of the plan

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                          WARREN v. STEPHENS
                           Decision of the Court

       shall be determined by multiplying [Husband’s] Accrued
       Benefit by a coverture fraction, the numerator of which is the
       number of months of the [Husband’s] creditable service in the
       [p]lan earned during the marriage (from February 20, 1994, to
       November 20, 2017), and the denominator of which is the
       number of months of service credited to [Husband] under the
       terms of the [p]lan up to the earlier of [Husband’s] benefit
       commencement date or commencement of benefit payments
       to [Wife].

(Emphasis omitted.) Husband argues this language assumes Husband
worked at Allstate throughout the parties’ marriage and uses an incorrect
formula to calculate the plan’s community interest because it “lists the
length of the parties’ marriage as the numerator and length of time to
distribution of the retirement benefit as the denominator.” But the QDRO
does not in fact state the length of the marriage is the numerator. It states
that the numerator is the length of Husband’s employment during the
marriage, then provides the marriage dates for Allstate to use in
determining the number of months Husband was employed during the
marriage. And the denominator is the number of months Husband was
employed under the plan. The QDRO thus properly calculates the
community interest in the Allstate Plan. See id.

¶18           In his motion to alter or amend, Husband argued that the
QDRO “does not contain the relevant dates of Husband’s employment with
Allstate, which is a necessary component for calculating Wife’s” interest.
Though including Husband’s employment dates may have added clarity to
the QDRO, presumably Allstate has Husband’s employment dates and
needed only the parties’ marriage dates to accurately calculate the
community interest under the QDRO formula listed. The superior court
did not abuse its discretion in denying Husband’s motion to alter or amend
and ordering the Allstate Plan to be divided by Wife’s proposed QDRO.

III.   Due Process

¶19           Husband argues the superior court violated his right to due
process by denying his request for more time to present evidence of
community debts and his post-service payments on those debts. Whether
Husband was afforded due process is a question of law we review de novo.
Backstrand v. Backstrand, 250 Ariz. 339, 346, ¶ 28 (App. 2020).

¶20           “The touchstone of due process under both the Arizona and
federal constitutions is fundamental fairness.” Id. at ¶ 29 (quoting Jeff D. v.

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Dep’t of Child Safety, 239 Ariz. 205, 207, ¶ 7 (App. 2016)). This requires that
litigants be heard “at a meaningful time and in a meaningful manner.” Id.
(quoting Mathews v. Eldridge, 424 U.S. 319, 333 (1976)). But we recognize the
superior court has “broad discretion to impose reasonable time limits on
proceedings and control the management of its docket.” Id. (citations
omitted). Thus, due process allows the superior court to impose reasonable
time limits on proceedings, but if those time limits “prove insufficient to
allow a substantive hearing,” they become unreasonable and can amount
to a denial of due process. Id. (quoting Volk v. Brame, 235 Ariz. 462, 468,
¶ 21 (App. 2014)). Whether more time is necessary is “committed to the
[superior] court’s discretion.” Id. (citing Volk, 235 Ariz. at 469, ¶ 22).

¶21           In an October 2021 minute entry, the superior court set a two-
hour evidentiary hearing. At the hearing, Husband’s counsel began by
arguing a motion for sanctions filed two business days before the hearing.
Husband’s counsel then chose to break up his testimony to have Husband’s
bankruptcy attorney testify to the effect of Husband’s bankruptcy on the
division of community property. Only as the hearing was ending did
Husband request more time and seek to introduce an exhibit showing his
post-service separate property payments toward community debt. The
superior court denied Husband’s request, informing him that “[t]he
evidence . . . is closed.” The court did, however, permit both parties to
submit supplemental briefing. Husband later moved to alter or amend the
court’s order, arguing the superior court improperly denied his request for
more time to present evidence. The court denied Husband’s motion on this
ground.

¶22           Husband argues the complex issues in this case “demonstrate
how inadequate a two-hour trial time limitation was.” But Husband had
ample notice of the two-hour time limitation and failed to request more
time until the end of the hearing. And Husband received a meaningful
opportunity to present evidence of community debts and his claims for
offsets. His counsel was free to divide his allotted time between his two
witnesses and he received the same time allotment as Wife. The failure to
properly manage the time allotted does not amount to a denial of due
process. See Volk, 235 Ariz. at 469, ¶ 22 (noting due process does not require
the superior court to “indulge inefficient use of time by parties or their
counsel”). Husband has shown no error in the superior court’s denial of
his request for more time to present evidence or its denial of his motion to
alter or amend.

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                          WARREN v. STEPHENS
                           Decision of the Court

IV.   Attorneys’ Fees and Costs on Appeal

¶23           Both parties request attorneys’ fees incurred in this appeal
under A.R.S. § 25-324. Having considered the relevant factors, in our
discretion, we deny both requests. As the prevailing party, Wife is entitled
to her taxable costs upon compliance with Arizona Rule of Civil Appellate
Procedure 21.

                              CONCLUSION

¶24          We affirm.

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

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