Husband and Appellant Wife contested the trial court’s calculation of the marital community’s interest in a home Husband owned as his separate property. Before the marriage, Husband and Wife lived in the home and Wife made payments toward the mortgage during that time as well as during the marriage. The dissolution decree stated that the community had a lien against the separate property. To calculate the community’s interest, the court ordered that the mortgage amount and other liens be deducted from the current fair market value and that the remaining equity be divided equally. The trial court granted Husband’s subsequent Motion to Amend Judgment and applied a new formula. The new formula first measured the proportion of community contribution divided by Husband’s separate contribution, the community’s contributions, and the value of the home on the date of marriage, less the mortgage balance. The community’s interest, in turn, was determined by multiplying that proportion by the amount the home appreciated during the marriage. Wife timely appealed.
In a unanimous opinion, Judge Orozco reversed and remanded. At the outset, the Court rejected Wife’s contention that her pre-marriage contributions entitled the community to an interest in the home’s appreciation prior to the marriage. The Court noted that, although Husband and Wife cohabitated, there was no evidence of an express or implied agreement to acquire the home jointly.
Turning to the issue of calculating community interest, the Court noted that underArizona law, the community is entitled to both reimbursement for contributions to principal and an amount of the appreciation during marriage. First, the Court held that the trial court’s formula wrongly excluded reimbursement to the community for contributions to principal. Second, the Court held that the formula incorrectly measured the percentage of the community’s contributions because it divided the community’s contribution by both Husband’s separate contributions and the community’s contributions. This method reduced the value of the percentage by increasing the size of the denominator in the equation, but there was no basis for such a reduction. Finally, the Court approved a modification of calculations in prior cases, holding that when separate property appreciates both prior to and after the marriage date, the community interest in the appreciation is proportional to the community’s contributions to principal divided by the value at the time of marriage, not the purchase price.
Judge Orozco authored the opinion; Judges Johnsen and Weisberg concurred.