AZAPP Blog

Flower v. Flower (2/25/2010):  Arizona Court of Appeals Division One Holds that the Family Court May Order a Substantially Unequal Distribution of Marital Assets and Debts Based On, Among Other Factors, the Relative Contributions Made By Each Spouse to the Community, the Division of Other Marital Assets and Debts, and the Length of the Marriage.

Husband and Wife married in 2006.  At the time, Husband and Wife each owned a residence.  After the wedding, Husband deeded his residence to the community.  The community also incurred $61,000 in debt during the marriage, largely stemming from improvements to Wife’s residence.  Thirteen months after the marriage, Husband filed a petition for annulment and Wife filed a cross-petition for dissolution.  The trial court denied the petition for annulment, and split the community property.  In so doing, the trial court awarded Husband’s residence solely to Husband, but required Husband to pay all but $16,000 of the debt incurred to improve Wife’s residence.  Wife appealed.

The Arizona Appeals Court affirmed the trial court’s division of property.  The Court explained that ordinarily marital assets and debts should be divided equally, but in rare circumstances the family court may make an unequal distribution.  In considering whether to make an unequal distribution, the family court should consider, along with any other relevant factor, the relative contributions made by each spouse to the community, the division of other marital assets and debts, and the length of the marriage.  Here, Wife did not claim that she made any contribution, monetary or otherwise, to the community, the trial court made Husband largely responsible for the community debt to improve Wife’s residence, and the marriage began deteriorating only eight months after it began.  Accordingly, the family court did not abuse its discretion in awarding Husband’s residence solely to Husband, despite that Husband deeded the residence to the community.

Judge Brown authored the opinion; Judges Hall and Portley concurred.

Posted By: Michael S. Catlett

Aksamit v. Krahm (3/18/2010): Arizona Court of Appeals Division One Holds That A “Best Interests” Attorney May Not Make Reports to the Court

The Appellee (the “Mother”) filed a petition for dissolution of her marriage to the Appellant (the “Father”). The Mother and Father were parents of two minor children. In accordance with Arizona Rules of Family Law 10(E), the court appointed a best interested attorney (BIA) to represent the children’s interests. Rule 10 states that a BIA “shall not submit a report or testify in court.” At the beginning of the trial, the court asked the BIA to give a report. The BIA made an oral report opining that the Mother should retain custody of the children. The BIA’s report also included supporting factual information. When the court issued its findings, it made multiple references to the information provided by the BIA. The Father appealed, arguing that the court erred when it considered the BIA’s report in making its decision. The Arizona Appeals Court vacated the trial court’s custody order and remanded, holding that a BIA may not provide information or reports which are treated as evidence upon which the court’s decision is based.

Judge Barker authored the opinion; Judges Norris and Swann concurred.

Posted By: James K. Rogers

Strategic Development and Construction, Inc. v. 7th & Roosevelt Partners, LLC (3/18/2010): Arizona Court of Appeals Division One Holds That, In Connection with a Motion to Dismiss, a Trial Court Has Discretion to Consider Documents That Are a Matter of Public Record or Central to the Complaint Without Converting it to a Motion for Summary Judgment.

Strategic Development and Construction ("Strategic") sued 7th & Roosevelt Partners ("Partners") for breach of contract, unjust enrichment, and foreclosure of a mechanics’ lien.  Partners filed a motion to dismiss.  The court granted the motion because Strategic did not respond.  Strategic asked the court to reconsider, requesting more time to respond and arguing that the court should have treated the motion to dismiss as a motion for summary judgment because Partners had included facts outside the complaint in its motion.  The court denied the motion for reconsideration, noting that the deadline for a response to a summary judgment motion had also passed.  The court did not rule on the request for additional time to respond and Strategic never filed a response to the motion to dismiss.  Strategic appealed.

Writing for a unanimous Court, Judge Johnsen upheld the trial court’s rulings on the motions, but reversed and remanded so that the trial court could rule on Strategic’s request for an extension of time.  First, The Court held that the motion to dismiss did not convert to a motion for summary judgment.  Generally, if a motion to dismiss contains “matters outside the pleading,” then the court should treat the motion as one for summary judgment.  That general rule, however, is subject to several exceptions.  A Rule 12(b)(6) motion that (1) refers to a contract or other document attached to the complaint, (2) presents a document that is a matter of public record, or (3)  refers to a document “central to the complaint” need not be treated as a motion for summary judgment.  In this case, Partners referred to Strategic’s contract, which was an exhibit to the complaint and therefore was not a matter “outside the pleading.”  In addition, Partners’ argument that the unjust enrichment claim should be dismissed as a matter of law had “assumed the truth” of Strategic’s allegations and thus did not go beyond the scope of a motion to dismiss.  Finally, Partners’ reference to publicly recorded documents – Strategic’s mechanics’ lien – did not convert the motion into a motion for summary judgment because (1) the lien was a matter of public record and, alternatively, (2) the lien was “central” to one of Strategic’s claims for relief.

Second, the Court held that the trial court properly granted Partners’ motion to dismiss.  Under Rule 7.1, if a party fails to respond to a motion to dismiss, the court has discretion to summarily grant the motion. 

Third, the Court held that the trial court properly denied the motion for reconsideration because Strategic had not responded within the time permitted for either a motion to dismiss or summary judgment. 

Finally, noting that the trial court had not ruled on Strategic’s request for an extension of time to respond to the motion to dismiss, the Court reversed the judgment and remanded the case so that the trial court could consider the request.

Judge Johnsen authored the opinion; Judges Orozco and Thompson concurred.

PRACTICE NOTE: The Court rejected Strategic’s argument that it was entitled to delay responding to the motion to dismiss until the trial court signaled whether it was converting the motion to a summary judgment motion.  The Court explained that, although a court must give a non-moving party an opportunity to present its own facts before entering summary judgment, the non-moving party must make a timely response to the motion.  If the motion is clearly subject to conversion, then the response must be made within the time allowed for a summary judgment motion.  If a party is uncertain about conversion, the Court suggested that the parties together propose a briefing schedule to the court or respond to the motion to dismiss and also ask for additional time to supplement the record if the motion is converted.

Posted By: Joseph N. Roth

Dreamland Villa Community Club, Inc. v. Raimey (3/16/2010):  Division One of the Arizona Court of Appeals Holds That Deed Restrictions for a Community with No Common Areas May Not Be Amended By Majority Vote to Require Membership in a New Homeowners’ Association When No Similar Covenant Existed Before.

Dreamland Villa is a residential community with eighteen sections, each of which is governed by its own set of deed restrictions.  The deed restrictions provide that they may be amended “in whole or in part or revoked in their entirety by a vote of the owners of a majority of the lots.”  Dreamland Villa has no common areas.  Dreamland Villa Community Club, Inc. (“DVCC”) is a separate nonprofit corporation organized to provide recreational facilities and plan activities for club members.  After a vote of Dreamland Villa homeowners, DVCC recorded new deed restrictions for each section, essentially making all Dreamland Villa residents members of DVCC, and requiring each lot owner to pay annual and special assessments levied by DVCC.

DVCC sued some homeowners for failing to pay assessments, and the homeowners counterclaimed.  On cross motions for summary judgment, the trial court ruled in favor of DVCC, concluding that the homeowners had impliedly consented to the amendment by purchasing lots with restrictions that allowed amendment by majority vote of homeowners.

The Court of Appeals reversed.  As the Court explained, A,R.S. § 10-3601(B) addresses admission of members to a nonprofit corporation such as DVCC, and provides that “[n]o person shall be admitted as a member without that person’s consent. Consent may be express or implied.” Each homeowner in this case needed to consent to be a member of DVCC, a nonprofit corporation. Although such consent can arise by a property owner accepting a deed restriction,  the Court found it “noteworthy that there were no common areas within Dreamland Villa” and that the original “restrictive covenants pertain[ed] [only] to each lot owner’s personal residence.”  The amendment requiring membership in and payments to DVCC thus “markedly changed the obligations of the implicated lot owners.”  In finding in favor of the homeowners, the Court said:  “It is not reasonable to use the amendment provision to direct that one group of lot owners may, in effect, take the property of another group in order to fund activities that do not universally benefit each homeowner’s property or areas owner in common by all.”

Judge Thompson authored the opinion; Judges Barker and Timmer concurred.

Riendeau v. Wal-Mart Stores, Inc. (2/25/2010): Arizona Court of Appeals Division One Holds that the Tardy Filing of a Cost Bond on Appeal from Compulsory Arbitration Does Not Render the Appeal to Superior Court Jurisdictionally Defective.

Plaintiffs, husband and wife, sued for damages resulting from the wife’s slip and fall at a Wal-Mart store.  The case proceeded to compulsory arbitration pursuant to Ariz. R. Civ. P. 72-77 and the arbitrator rendered a decision.  After prematurely filing a notice of appeal to superior court, Plaintiffs were tardy in filing the cost bond required by Rule 77(b).  The superior court denied Wal-Mart’s motion to strike the notice of appeal based the untimely filing of the cost bond.  The superior court later entered judgment against plaintiffs, and they appealed.

The Court of Appeals affirmed the judgment by unpublished memorandum decision.  The published opinion considered solely the Court’s jurisdiction.  The Court held that the superior court had jurisdiction of the appeal from compulsory arbitration, and that the Court of Appeals thus had jurisdiction to review the superior court judgment.  

The premature appeal to superior court from compulsory arbitration was not jurisdictionally defective.  Instead, the appeal became effective upon entry of the final arbitration award.  See Guinn v. Schweitzer, 190 Ariz. 116, 117-18, 945 P.2d 837, 838-39 (App. 1997).  The tardy filing of the cost bond also did not deprive the superior court of jurisdiction.  A.R.S. § 12-133(H) allows perfection of an appeal “within the time limited by rule of court” and Rule 6(b) authorizes the superior court to extend time for all filings, with exceptions not applicable here. 

The Court disagreed with Varga v. Heburn, 116 Ariz. 539, 570 P.2d 226 (App. 1977), which held that Rule 6(b) did not allow the superior court to extend the time to file a cost bond on appeal from compulsory arbitration.  The Court found Varga’s holding at odds with A.R.S. § 12-133(H).

Judge Kessler wrote the opinion; Judges Irvine and Brown concurred.

Posted by: Mark P. Hummels

Inboden v. Inboden (2/25/2010):  Division One Holds That Upon Dissolution of a Marriage, an Unequal Division of Jointly Held Property Cannot be Made Solely to Reimburse Each Spouse for Separate Funds That Were Used to Purchase the Jointly Held Property.

Shortly before her marriage, wife purchased an undeveloped lot in Yuma, Arizona with her separate funds and she and her future husband took title to the lot as joint tenants.  Following their marriage, husband and wife built a house on the lot and transferred the lot and house to themselves as married persons as joint tenants with rights of survivorship.  Each spouse contributed financially to the construction of the house from their separate funds.  The couple also obtained a loan against the property.  Within months of completing the house, husband moved out and the couple later petitioned for dissolution of their marriage.

The family court concluded that the house was jointly held marital property subject to equitable division, and after deducting the amount of the lien from the value of the house, determined the parties were entitled to reimbursement for their separate financial contributions.  The court awarded possession of the house to wife and ordered her to make an equalization payment to husband.  Husband timely appealed. 

 The Arizona Appeals Court vacated the portion of the dissolution decree related to the division of property held in joint tenancy and remanded the action for further proceedings.  A.R.S. § 25-318(A) governs the division of marital property upon dissolution and provides that each spouse is to be assigned his or her separate property and all jointly held property is to be divided equitably.  The family court has broad discretion in allocating the property but an unequal division of jointly held property cannot solely be made to reimburse each spouse for separate funds that were used to purchase the jointly held property. The Court reasoned that the family court’s order indicates that the property division was based solely on the relative contributions of separate property made toward the purchase of the jointly held property.  Thus, the Court found that the family court abused its discretion.  The Court explained that in making an equitable division of community property upon dissolution of marriage, the family court should consider all factors that bear on the equities of the division.     

Judge Brown authored the opinion, Judges Hall and Portley concurred.

Posted By: Kristin L. Windtberg 

In re the General Adjudication of All Rights to Use Water in the Gila River System & Source (2/19/2010):  Arizona Supreme Court Holds That Its 1991 Special Order Governing the Adjudication of Water Rights Is Constitutional and Appropriately Limits the Scope of Review of Settlements Concerning Water Rights.   

This case involves ongoing adjudication of water rights in the Gila River System and Source.  In 2006, the Gila River Indian Community (“GRIC”) and a number other parties applied to the adjudication court to approve a settlement in which GRIC would receive a certain amount of water from a number of sources, and in exchange would waive certain claims.  The adjudication court ordered the Arizona Department of Water Resources (“ADWR”) to prepare an assessment of the settlement to aid in reviewing the settlement.  A number of tribes referred to collectively as the “Apache Tribes,” a number of entities referred to as the “Lower Gila Water Users” or “LGWUs”, and ASARCO LLC objected to the settlement.  The settling parties responded to the objections and moved for summary disposition, and the Apache Tribes and ASARCO cross-moved for summary disposition.

The adjudication court limited its inquiry to matters specified in the Arizona Supreme Court’s 1991 Special Procedural Order Providing for the Approval of Federal Water Right Settlements, Including Those of Indian Tribes (“Special Order”), which only allows a claimant to object if (1) approval of the settlement would cause material injury to its water rights, (2) conditions warranting the initiation of special proceedings have not been satisfied, or (3) the settlement agreement provides a tribe water rights more extensive than it could prove at trial.  The adjudication court held (1) the Apache tribes had no valid objections because the settlement did not affect their water rights, and (2) the LGWUs and ASARCO’s objections failed because the water quantity GRIC would receive under the settlement was not more extensive than GRIC could show at trial.  Accordingly, it approved the settlement.  The Apache Tribes, LGWUs, and ASARCO requested interlocutory appeal, which the Arizona Supreme Court Granted.

In a unanimous opinion, the Arizona Supreme Court affirmed.  The Court confirmed that the Special Order applied, and held that it did not unfairly or unconstitutionally prevent the objecting parties from challenging the settlement and instead served important purposes.  The Court noted the size and complexity of this general stream adjudication, and explained that the Special Order benefits both settling and non-settling parties by reducing the claimed water rights below the amount a party could have proven at trial.

Turning to the objecting parties’ specific objections, the Court rejected the Apache Tribes’ contention that the adjudication court had a duty to consider the constitutionality, legality, and fairness of the settlement, explaining that these objections fell outside the Special Order.  The Court further explained that San Carlos Apache Tribe v. Superior Court, 193 Ariz. 195, 972 P.2d 179 (1999), cited by the Apache Tribes, did not apply because there were no separation of powers issues presented by the adjudication court’s application of the Special Order.  The Court next rejected the Apache Tribes’ contention that they would not be materially injured by the settlement, explaining that (1) the settlement expressly preserves their water rights, and (2) does not affect their water rights.  The Court also rejected their claim that ADWR failed to comply with the adjudication court’s order, explaining that ADWR’s assessment properly considered the impact of the settlement on other claimants.  The Court also rejected the Apache Tribes’ claim that the adjudication court did not review the executed version of the settlement.  Finally, the Court rejected their claim that GRIC would receive more water by settlement than it could prove at trial, explaining that the settlement provided for less water than claimed on behalf of GRIC, its current water use, and GRIC’s Globe Equity Decree rights.  The Court further noted that this inquiry is limited to water quantity, not quality, under the Special Order.

The Court next addressed and rejected the LGWUs’ objections.  The Court held that the LGWUs will not be materially injured by the settlement because (1) the water from the Gila River system allocated to GRIC retains its pre-existing attributes, and (2) the LGWUs are not bound by the settlement.  The Court next rejected their contention that the Special Order violates their substantive and procedural due process rights, explaining that there were insufficient reasons for the Court to deviate from the Special Order at this late date.  The Court also rejected their argument that they are bound by the settlement, explaining that they are not settling parties and did not enter into any other ancillary agreements.  The Court also rejected their constitutional and statutory challenges, noting that such challenges fall outside the Special Order’s limited scope of review, and that the settlement’s safe harbor provision is appropriate.  The Court also rejected the LGWUs’ claim that CAP and Blue Ridge stored water should have been included when considering the amount of water provided to GRIC in the settlement.  Finally, the Court rejected the LGWUs’ claim that settlement agreement breached the 1945 Arlington Agreement, explaining that the settlement did not alter the rights given to Arlington in that agreement.

Lastly the Court rejected ASARCO’s objections.  The Court rejected ASARCO’s claim that the settlement violates a prior 1977 Water Rights Settlement and Exchange Agreement, noting that this contract claim falls outside the scope of review allowed by the Special Order, and that any claims involving that 1977 agreement must be brought in federal court.  The Court next held that ASARCO will not be materially injured by the settlement because its rights to the San Pedro River will not be impacted.  The Court also rejected ASARCO’s claim that the settlement’s safe harbor provision denies it equal protection and confers special benefits to GRIC under the Arizona Constitution, explaining that this claim fell outside the purview of the Special Order, and in any event, the settlement did not violate ASARCO’s equal protection rights nor confer special benefits to GRIC.  The Court next rejected ASARCO’s claim that the settlement allows GRIC to select which upstream users will be called to fulfill its water rights, explaining that the Special Order only allows a quantitative, not qualitative review.  Finally, the Court rejected ASARCO’s argument that it would be materially injured by the “rebound call” provision in the settlement, noting that this argument was premature and speculative.

Justice Pelander authored the unanimous opinion.

Posted by Sharad H. Desai.

Ad Hoc v. Reiss / Schmuki v. Our Lady of the Sun (2/23/2010): Arizona Court of Appeals Division One Holds That, Under the Ecclesiastical Abstention Doctrine, Courts Lack Jurisdiction to Resolve Disputes That Require an Inquiry Into Church Doctrine or Belief and that the Ecclesiastical Abstention Doctrine Applies Equally to Congregational and Hierarchical Churches

Our Lady of the Sun Catholic Church, Inc. (“OLS”) is an independent church organized outside the structure of the Diocese of Phoenix. It was organized to conduct the Tridentine Latin Mass and promote the traditional doctrine, rites, and liturgy of the Roman Catholic faith. After Father Francis LeBlanc, the original founder and priest of OLS passed away, the OLS board of directors elected Father Paul Andrade to replace him. One director and a member of the congregation brought a derivative suit against OLS and against current and former OLS board members, alleging that the board had failed to select Father Andrade in accordance with OLS’s articles of incorporation, which required that OLS’s priest must have been ordained according to pre-1968 Roman Catholic rites. Their suit also involved two claims involving a dispute over the disposition of some of Father LeBlanc’s property. The superior court dismissed the claims regarding the improper hiring of Father Andrade on grounds of standing and lack of subject matter jurisdiction under the ecclesiastical abstention doctrine; the court dismissed the claims regarding Father LeBlanc’s property because the superior court was not the right forum for the claims. A related suit was also filed by the Ad Hoc Committee of Parishioners of Our Lady of the Sun Catholic Church (the “Committee”), an unincorporated association of members of OLS. The Committee alleged that Father Andrade had later been improperly suspended by the OLS board, and that the board had improperly used OLS funds. The superior court dismissed this complaint on the issue of standing.

The Arizona Appeals Court affirmed the dismissal of both actions. The Appeals Court held that, because of the ecclesiastical abstention doctrine, the superior court did not have subject matter jurisdiction over the claims from the first complaint alleging that Father Andrade was improperly hired and the claims from the second complaint alleging that he was improperly suspended. Under the ecclesiastical abstention doctrine, courts lack jurisdiction over claims which involve ecclesiastical disputes which require an “inquiry into church doctrine or belief.” The Court held that, contrary to the appellants’ argument, the ecclesiastical abstention doctrine applies equally to disputes involving hierarchical churches and congregational churches like OLS. Additionally, secular courts will not involve themselves in disputes related to “hiring, firing, discipline, or administration of clergy.” Because the dispute over the hiring of Father Andrade would require a court to determine whether Father Andrade had been ordained according to pre-1968 Roman Catholic rites, and because the second dispute would involve a dispute involving a priest’s employment relationship with his church, the ecclesiastical abstention doctrine applied and the superior court had no jurisdiction. Because the Committee did not allege conversion in its claims regarding the board’s improper use of OLS funds, and because the Committee did not seek a return of the funds to OLS, the Court affirmed the dismissal of these claims on First Amendment grounds. The First Amendment prohibited resolution of the Committee’s claims because it would require the court to determine which uses of the funds were in compliance with the purposes of OLS in conducting church business. The Court held that the claims regarding the disposition of Father LeBlanc’s property were properly dismissed under the doctrine of abatement, because there was already a parallel probate proceeding regarding the property in question.

Judge Barker authored the opinion; Judges Norris and Swann concurred.


Posted By: James K. Rogers