Court Opinion

ID: 4508939
Source: CourtListenerOpinion
Date Created: 2020-02-20 16:03:43.630656+00
Date Added: 2024-06-11T09:37:47.202900
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  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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:

                    TERRY STEVENS, Petitioner/Appellant,

                                         v.

                    IRENA STEVENS, Respondent/Appellee.

                            No. 1 CA-CV 18-0434 FC
                                 FILED 2-20-2020

            Appeal from the Superior Court in Maricopa County
                            No. FC2017-093662
              The Honorable Theodore Campagnolo, Judge

       AFFIRMED IN PART; REVERSED IN PART; REMANDED

                                    COUNSEL

Liszewski Law Group, Mesa
By Matthew D. Liszewski
Counsel for Petitioner/Appellant

Stevens & Van Cott, PLLC, Scottsdale
By Laurence B. Stevens and Charles Van Cott
Counsel for Respondent/Appellee
                          STEVENS v. STEVENS
                           Decision of the Court

                      MEMORANDUM DECISION

Presiding Judge Paul J. McMurdie delivered the decision of the Court, in
which Judge Jennifer B. Campbell and Vice Chief Judge Kent E. Cattani
joined.

M c M U R D I E, Judge:

¶1            Terry Stevens (“Husband”) appeals the superior court’s
decree of dissolution, which: (1) classified a home equity line of credit
(“HELOC”) debt exercised during marriage as Husband’s debt with no
offset or reimbursement by the community; (2) calculated his income based
primarily on bank statements and business filings; (3) awarded spousal
maintenance to Irena Stevens (“Wife”); and (4) awarded attorney’s fees and
costs to Wife. 1 We reverse the court’s classification and division of the
HELOC debt but otherwise affirm the decree.

             FACTS AND PROCEDURAL BACKGROUND

¶2               Husband, an American, and Wife, a Ukrainian, married on
July 11, 2013, in the Ukraine, where they remained for a few months. In
August 2013, a month after their marriage, Husband withdrew $49,446
through a HELOC he had obtained in 2006 on a home he owned before the
marriage. Husband did not have debt on the HELOC before the
withdrawal. Husband and Wife used the HELOC funds to “live in Ukraine
and start . . . [their] marriage.” The couple moved to the United States later
in 2013, where Wife could stay on a tourist visa if she returned to the
Ukraine at least once every six months.

¶3            During their four-year marriage, Husband worked for Five
Points Excavating, L.L.C., (“Five Points”) a swimming pool excavation
company he founded in 1999. Wife was unable to work as a condition of the
tourist visa but cared for their child, Nicole, who was born in 2015. Wife
became pregnant with their second child, Oscar, in 2017. However, before
Oscar’s birth in 2017, the couple separated. Husband eventually filed for
dissolution.

1      We grant Wife’s motion to voluntarily withdraw her cross appeal.

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¶4            At the dissolution hearing, Husband testified that about six
weeks before filing the petition for dissolution, he was no longer working
because he had reinjured his back, aggravating a ten-year-old injury. He
also stated he no longer owned Five Points because he transferred the
business to his mother in 2013. Husband claimed that during the marriage,
his income was only $17,149, $15,887, and approximately $18,000 in 2015,
2016, and 2017 respectively. He sold his house in October 2017 and used the
funds to pay off the HELOC and other debts. He alleged that there was no
money left from the sale after paying the debt.

¶5            Wife controverted Husband’s claims and testified that
Husband never missed a day of work due to back pain, he was still the
owner of Five Points, and his income was significantly greater than what
he claimed. Wife also testified that she was unable to work during the
marriage due to the restrictions of the tourist visa and because she did not
speak English. After the petition for dissolution was filed, Wife obtained an
abused-spouse visa that allowed her to work. See 8 U.S.C.
§ 1154(a)(1)(A)(v)(I)(cc). She maintained, however, that she needed spousal
maintenance to pay for English classes to help her work. Husband argued
that he could not afford to pay spousal maintenance based on his income.

¶6            Husband’s mother, the alleged owner of Five Points, also
testified. Contrary to Husband’s testimony, she claimed to have always
been the owner of Five Points.

¶7            The superior court entered a decree of dissolution terminating
the marriage. The court found that Wife was eligible for spousal
maintenance because she lacked enough property to provide for her
reasonable needs and was unable to be self-sufficient. The court awarded
Wife $1500 per month for 18 months and found that Husband was
reasonably capable of paying that amount. Further, the court found the
HELOC debt to be Husband’s separate debt obligation because he gifted
the proceeds from the loan to the community. The court then divided the
personal property equitably. Lastly, the court granted Wife’s claim for
attorney’s fees and costs because of the “substantial disparity of financial
resources between the parties” and denied Husband’s request because he
“acted unreasonably in the litigation.” Husband timely appealed the decree
and we have jurisdiction under Arizona Revised Statutes (“A.R.S.”)
sections 12-2101(A)(1), -120.21(A)(1), and Arizona Rule of Family Law
Procedure 78(c).

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                           STEVENS v. STEVENS
                            Decision of the Court

                                DISCUSSION

¶8            “We apply an abuse of discretion standard when reviewing
the superior court’s division of property, but review the court’s
characterization of property de novo.” Helland v. Helland, 236 Ariz. 197, 199,
¶ 8 (App. 2014). We also review an award of attorney’s fees and spousal
maintenance for an abuse of discretion. Myrick v. Maloney, 235 Ariz. 491,
494, ¶ 6 (App. 2014) (attorney’s fees); Leathers v. Leathers, 216 Ariz. 374, 376,
¶ 9 (App. 2007) (spousal maintenance). “A court abuses its discretion if it
commits an error of law in reaching a discretionary conclusion, it reaches a
conclusion without considering the evidence, it commits some other
substantial error of law, or the record fails to provide substantial evidence
to support the trial court's finding.” Walsh v. Walsh, 230 Ariz. 486, 490, ¶ 9
(App. 2012) (quotations omitted). However, “we view the evidence in the
light most favorable to affirming the [superior] court’s ruling and will
affirm if the evidence reasonably supports it.” Lehn v. Al-Thanayyan, 246
Ariz. 277, 283, ¶ 14 (App. 2019).

A.     The HELOC Debt Secured by Husband’s Separate Property Is a
       Community Debt Because it was Exercised During Marriage and
       Used for Community Purposes.

¶9            The court found that Husband gifted Wife the funds from the
HELOC to pay community expenses. It is unclear whether the court found
that Husband intended to undertake the debt as his sole obligation at the
time the debt was incurred, or that Husband’s use of separate funds, i.e.,
the proceeds of the sale of his separate property to pay the community debt,
was a gift. Regardless, the record lacks reasonable evidence to support
either conclusion.

¶10           The HELOC was a community debt because it was incurred
during the marriage for the benefit of the community. Generally, “all debt
incurred by either spouse during marriage is presumed a community
obligation.” In re Marriage of Flower, 223 Ariz. 531, 535, ¶ 12 (App. 2010).
This presumption applies to debt secured by separate property if that debt
is incurred for the benefit of the community. Johnson v. Johnson, 131 Ariz. 38,
45 (1981) (“[W]e [do not] see any reason why the [community obligation]
presumption should be negated by the fact that the husband used his
separate property to secure the community loans.”); Hammett v. Hammett,
247 Ariz. 556, 562, ¶ 29 (App. 2019).

¶11           The superior court erred by classifying the debt as Husband’s
separate obligation. Hammett, 247 Ariz. at 559, ¶ 13 (error to misapply the

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law or predicate a decision on incorrect legal principles). Husband obtained
the HELOC before the marriage but did not draw on the credit line until
during the marriage. The superior court found—and the parties
admit— that the HELOC funds were used for community expenses,
including their wedding, travelling, and living expenses. Wife argues that
she believed the funds were from a bonus Husband received and “would
not have agreed to spend so much [money] on the [wedding] celebration
and other expenses had she known [Husband] funded them with debt.”
However, Wife’s knowledge was not required to bind the community to the
obligation. Either spouse can bind the community except for under certain
circumstances not present here. A.R.S. § 25-214(C); Hammett, 247 Ariz. at
562, ¶ 29. Therefore, the HELOC debt was a community obligation.

¶12          Classifying the obligation as community does not end the
inquiry. After the petition for dissolution was served, Husband
extinguished the debt with his separate funds when he sold his separate
property. Because the proceeds from the sale were separate and used to pay
a community obligation, Wife would ordinarily be obligated to reimburse
Husband for her share of the community obligation. Bobrow v. Bobrow, 241
Ariz. 592, 596, ¶ 19 (App. 2017) (“A spouse who voluntarily services
community debt and maintains community assets with separate property
should not be penalized . . . [when] such payments are made, they must be
accounted for in an equitable property distribution.”).

¶13            Wife maintains that the extinguishment of the HELOC debt
was a gift. Wife presented no evidence that supports a gift claim. Husband’s
payment of the debt after the sale of his separate property does not
constitute evidence of a gift because the sale occurred after he petitioned
for the dissolution of the marriage. Bobrow, 241 Ariz. at 596, ¶ 15. Further,
to sell the house, Husband was required to pay off the HELOC debt. 12
C.F.R. § 1026.40(e); Consumer Financial Protection Bureau, What You
Should Know About Home Equity Lines of Credit (January 2014) at 9,
https://files.consumerfinance.gov/f/201401_cfpb_booklet_heloc.pdf
(sellers are required to pay off the HELOC debt in full immediately upon
the sale of a home). No evidence in the record supports an intent to gift Wife
the post-petition payment of the debt.

¶14           There is no evidence of an agreement to gift Wife the funds
after the post-petition sale of the house, nor any agreement during the
marriage that the debt would be Husband’s responsibility. Although Wife
asserted that she was unaware of the debt until after the sale of the home,
her lack of knowledge of the debt does not establish that Husband intended

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                           Decision of the Court

to gift Wife the funds required to pay off the HELOC. Thus, the court
abused its discretion by not equitably accounting for the HELOC debt.

¶15        We reverse the superior court’s order denying Husband
reimbursement and remand for further proceedings.

B.     The Superior Court Did Not Abuse its Discretion by Attributing
       More Income to Husband Than What He Claimed.

¶16            Husband claims that he cannot afford to pay spousal
maintenance. The superior court found that “Husband’s tax returns are not
accurate portrayals of his actual income, and that Husband has taken
specific actions to disguise his actual income in an attempt to avoid paying
spousal maintenance.” Further, the court determined that over 50 percent
of charges made on the Five Points business account were personal. As a
result, the court found Five Points’ bank statements were more reliable
indicators of Husband’s income, and calculated Husband’s income by
halving the amount of money deposited into the company bank account
during the marriage and then dividing that amount by the number of years
Husband and Wife were married to get an average computation of his
income per year, which equaled $95,856. Husband claims the superior
court’s calculation was erroneous and that the court abused its discretion
by not considering Husband’s accountant-prepared income tax statement
and the evidence that multiple family members had simultaneous access to
the account. We find no error.

¶17            There is reasonable evidence to support the superior court’s
finding that Husband was not credible and that his income was much more
significant than he claimed. First, Husband’s testimony at trial that his
mother was the owner of Five Points was undermined by other evidence.
Husband testified that his mother had taken over the company in 2013, but
there was no evidence of the change in ownership until a month after the
petition for dissolution was filed. Five Points’ 2011–2015 annual reports also
identify Husband as the only person “holding more than 20% of any class
of shares issued by the corporation, or having more than 20% beneficial
interest in the corporation.” Husband’s assertion was further undermined
by his mother, who claimed she owned Five Points since the business
began, almost 14 years earlier than Husband claimed. Husband never
transferred his stock in Five Points to his mother and Five Points’ corporate
income tax returns in 2015 and 2016 show Husband as the 100 percent
owner of the company.

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                          STEVENS v. STEVENS
                           Decision of the Court

¶18           Second, as the owner of Five Points, Husband earned
significant income. At trial, Husband claimed to have never made $20,000
annually during the marriage. But on his income tax returns, Husband
reported “nonpassive income” from Five Points of $74,749 in 2015 and
$29,687 in 2016. He also signed a credit application in 2015 reporting an
annual income of $72,000. Meanwhile, Five Points reported $248,809 and
$185,380 in gross sales in 2015 and 2016, respectively. Five Points also had
bank deposits totaling approximately $158,000 in 2014, $286,000 in 2015,
$185,000 in 2016, and $129,000 in 2017, belying Husband’s claim that his
income was less than $20,000 per year.

¶19          Husband also tried to establish a lower income amount by
explaining that other users on the account made personal purchases and by
stating that he was no longer able to work due to an injury. Father’s
testimony on these points was not credible. Husband and Wife dined out
almost every day, sometimes three times per day, and traveled frequently.
Husband offered no testimony concerning which family members were
making purchases from the Five Points account and what those purchases
were.

¶20          Lastly, Husband’s testimony about his injury was
inconsistent with evidence that he only saw a doctor once between May
2017 and January 2018 for Valley Fever, and he was not on medications.
Likewise, Husband also frequently worked as an estimator for Five Points,
which did not require physical labor.

¶21           The evidence supports the court’s determination that
Husband earned a significant income, owned Five Points, was not injured,
and exaggerated his business’ deductions. The court reasonably formulated
Husband’s income based on the mix of personal and business expenditures
from the business account, including purchases in the Ukraine and abroad,
frequent restaurant bills, video streaming services, movie rentals, and
grocery store purchases. See also In re Estate of Newman, 219 Ariz. 260, 271
¶ 40 (App. 2008) (“[I]t is not the function of this court to reweigh the facts
or to second-guess the credibility determinations of the judge who had the
opportunity to evaluate the witnesses’ demeanor and make informed
credibility determinations.”). Thus, the court did not abuse its discretion by
imputing half of Five Points’ bank deposits as income and averaging the
amount from 2014 to 2017 to calculate a reasonable salary for Husband.

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                          STEVENS v. STEVENS
                           Decision of the Court

C.    The Superior Court Did Not Abuse its Discretion by Awarding
      Wife Spousal Maintenance.

¶22          The superior court awarded Wife $1500 a month for 18
months in spousal maintenance. Husband claims Wife should not be
entitled to an amount of support beyond what she needs to meet her
reasonable needs, and because she incurred no debt after separating from
Husband and made no attempt to work, the court’s award is unreasonable.

¶23         A.R.S. § 25-319(A) provides that the superior court may
award spousal maintenance if it finds that a spouse:

      1. Lacks sufficient property, including property apportioned
      to the spouse, to provide for that spouse’s reasonable needs.

      2. Is unable to be self-sufficient through appropriate
      employment or is the custodian of a child whose age or
      condition is such that the custodian should not be required to
      seek employment outside the home or lacks earning ability in
      the labor market adequate to be self-sufficient.

If the court finds that a spouse is eligible for an award under A.R.S.
§ 25-319(A), then it must consider the factors outlined in § 25-319(B) to
determine the “amount” and “period of time” needed for a just award.

¶24            The superior court found Wife met the eligibility provisions
of A.R.S. § 25-319(A)(1)–(2) and considered all 13 factors in § 25-319(B).
Wife requested $4200 per month for three years in spousal maintenance
because of her lack of property and inability to be self-sufficient. However,
the court found that Wife was able to speak English more proficiently than
she testified and “is capable of working at least a minimum wage job.”
Nonetheless, the court concluded Wife “cannot at this time meet her own
needs independently” and stated she could benefit from “educational
activities to improve her English and allow her to find employment.” Thus,
the court reduced the spousal maintenance amount Wife sought to $1500 a
month for 18 months. We find no abuse of discretion.

¶25           As discussed above, the superior court concluded Husband
earned a yearly salary of approximately $95,000 and made “attempts to
minimize his income to avoid paying spousal maintenance.” The record
confirms the superior court’s finding that Wife speaks English more
proficiently than she claimed and could probably find minimum-wage
employment, and the superior court accounted for these findings in its
ruling by reducing her award in both duration and amount. The record also

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                          STEVENS v. STEVENS
                           Decision of the Court

indicates Wife did not work or receive any education during their marriage,
that her English competency is still minimal, and that she lacks resources to
help her meet her own needs independently, including paying for
healthcare and rent. Accordingly, we find there is sufficient evidence in the
record to support the court’s finding that Wife is eligible for spousal
maintenance under A.R.S. § 25-319(A) and that the award was reasonable.
See Thomas v. Thomas, 142 Ariz. 386, 390 (App. 1984) (“An award of spousal
maintenance will not be disturbed if there is any reasonable evidence to
support the judgment of the [superior] court.”).

D.    Wife Was Entitled to Reasonable Attorney’s Fees and Costs.

¶26           The superior court found that a substantial disparity of
financial resources existed between the parties, and Husband acted
unreasonably during the litigation. Consequently, the court granted Wife’s
attorney’s fees and costs. Husband claims the court abused its discretion by
basing its decision on his improperly calculated income. We find no error.

¶27           The superior court may grant an award of attorney’s fees
“after considering the financial resources of both parties and the
reasonableness of the positions each party has taken throughout the
proceedings.” A.R.S. § 25-324(A). As discussed above, there is a substantial
financial disparity between Husband and Wife when considering his
income during the marriage versus her ability to achieve self-sustaining
independence. Al-Thanayyan, 246 Ariz. at 286, ¶ 30 (“[A]ll a party need
show is that a relative financial disparity in income and/or assets exists
between the parties.”(quoting Magee v. Magee, 206 Ariz. 589, 589, ¶ 1 (App.
2004))). Thus, the court did not abuse its discretion by concluding,
“Husband has considerably more resources to contribute toward Wife’s
attorney fees and costs.” The superior court’s award is further supported
by Husband’s unreasonable attempts to minimize his income and deny
ownership of Five Points.

                    ATTORNEY’S FEES AND COSTS

¶28           Both parties request an award of attorney’s fees under A.R.S.
§ 25-324. After considering the financial resources of both parties, we award
Wife her reasonable attorney’s fees and costs incurred on appeal contingent
upon her compliance with Arizona Rule of Civil Appellate Procedure 21.

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                         STEVENS v. STEVENS
                          Decision of the Court

                            CONCLUSION

¶29           We reverse the superior court’s classification of the HELOC
debt, remand for further proceedings consistent with this decision, and
otherwise affirm the decree.

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

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