Opinion
1 CA-CV 23-0366 FC
06-04-2024
In re the Matter of: STEPHANIE D. GOODELL, Petitioner/Appellee, v. STEPHEN S. GOODELL, Respondent/Appellant.
Swiren & Witzleb PLLC, Phoenix By Sara A. Swiren Co-Counsel for Petitioner/Appellee Stanley David Murray, Scottsdale Co-Counsel for Petitioner/Appellee Cervone Law PC, Phoenix By Kristina L. Cervone Counsel for Respondent/Appellant
Appeal from the Superior Court in Maricopa County No. FN2020-004813 The Honorable Daniel G. Martin, Judge
Swiren & Witzleb PLLC, Phoenix By Sara A. Swiren Co-Counsel for Petitioner/Appellee
Stanley David Murray, Scottsdale Co-Counsel for Petitioner/Appellee
Cervone Law PC, Phoenix By Kristina L. Cervone Counsel for Respondent/Appellant
Judge Jennifer M. Perkins delivered the opinion of the Court, in which Presiding Judge Andrew M. Jacobs and Judge David D. Weinzweig joined.
OPINION
PERKINS, JUDGE
¶1 Stephen Goodell ("Husband") challenges the superior court's division of property in its decree of dissolution and rulings on the parties' post-decree motions. He argues the court erred in: characterizing his father's house ("San Carlos Way Home") as community property; denying his reimbursement claim; dividing unvested Restricted Stock Units ("RSUs"); the award to Stephanie Goodell ("Wife") for her waste claim related to his extramarital affair; and awarding Wife her attorney fees.
¶2 For the following reasons, we affirm the rulings on Husband's reimbursement claim and Wife's attorney fees. We reverse and remand as to the San Carlos Way Home. And we vacate and remand as to the unvested RSUs and the award to Wife for her extramarital affair waste claim. Given these rulings, we also vacate and remand to reapportion spousal maintenance and the equalization payment. We award Wife her reasonable attorney fees and costs.
FACTS AND PROCEDURAL HISTORY
¶3 We view the evidence in the light most favorable to sustaining the superior court's decision. Cullum v. Cullum, 215 Ariz. 352, 354, ¶ 9 (App. 2007) (as amended).
¶4 Husband and Wife married in 1990 and have no minor children. Husband worked as a Broadcom applications engineer for 21 years until beginning a new job in March 2022. Wife is a sixth-grade teacher. She filed for divorce in 2020.
¶5 After unsuccessful mediation attempts, the case was tried in August 2022. Before trial, the parties agreed to sell the marital home and that Husband would continue paying for Wife's living expenses until the entry of the decree. See Ariz. R. Fam. Law P. 69. The court adopted that Rule 69 agreement in June 2022. The parties submitted pre-trial statements and offered evidence at trial regarding their joint bank accounts, properties, and businesses. The following summarizes the trial evidence relevant to this appeal.
¶6 San Carlos Way Home. In 2018, Husband's father needed care in an assisted living facility but could not afford one. To help secure assisted living expenses, Husband and his father agreed to transfer title to the San Carlos Way Home. Husband wrote and executed a deed transferring ownership to Husband and Wife. Husband and Wife never resided in this home, did not contribute community funds to the purchase or maintenance of the home, and referred to the home as Husband's "dad's house" throughout litigation.
¶7 Wife asserted that the San Carlos Way Home is community property, while Husband maintained it is his separate property. Husband testified that his father intended to gift the San Carlos Way Home to him and his two brothers when his father died, but Husband mistakenly deeded the home to himself and Wife. Wife acknowledged that the purpose of the transfer was to help pay for Husband's father's assisted living expenses, and that Husband did not intend to transfer ownership solely to Husband and Wife. Wife did not object to testimony regarding the parties' intentions and understanding related to the deed. But during closing arguments, Wife argued the court should disregard evidence of the father's intent underlying the deed.
¶8 The superior court concluded the San Carlos Way Home was community property and awarded Wife half the value of the home.
¶9 Reimbursement. Husband asserted a reimbursement claim for $106,563 to cover his payments toward Wife's living expenses. Wife argued Husband's claim was untimely. She also testified to her "impression that [Husband] was going to be paying all of [their] expenses through [their] joint account until [they] were finished with [the] divorce," and this was the reason she did not request temporary spousal maintenance. The superior court denied Husband's reimbursement claim.
¶10 Restricted Stock Units. While employed at Broadcom, Husband acquired RSUs that vest over a period of time. He kept the RSUs that vested before service of the dissolution petition in a separate account. Of the remaining RSUs, 454 vested after service of the petition but during the divorce proceedings, and he forfeited the remaining 750 unvested RSUs when he began working for another employer in March 2022.
¶11 Wife argued Husband committed marital waste when he switched jobs after service of the dissolution petition and forfeited the 750 unvested RSUs. She asserted the marital community lost the value of the unvested RSUs and Husband received personal financial gain that Wife was unable to realize. Husband testified he did not leave Broadcom to deprive Wife of the unvested RSUs. Rather, he was worried about his job security at Broadcom due to recent layoffs reducing his department from 80 to 1.5 employees. Husband testified he would have lost the unvested RSUs had he been laid off. When he accepted the offer from another company, he asked for a later start date to receive the last vesting of RSUs.
¶12 The superior court found the community value of all the vested RSUs was $139,938.56, and wife was entitled to one-half that amount, $69,969.28. The court agreed with Wife that the forfeited, unvested RSUs were community property. The court applied a combination of two formulas and took the average to estimate a total community value of $296,138 for the unvested RSUs. It awarded Wife a net value of $96,245.
¶13 Waste. Wife asserted a waste claim for expenditures Husband made toward an extramarital affair. Wife originally claimed Husband spent more than $70,000 and requested an equalization of $35,106. But during a trial recess, Husband's counsel showed Wife's counsel a document accounting for $20,000 not spent on the affair. Based on her agreement that this reduced the total asserted waste to about $50,000, Wife requested an equalization of $25,106. The court acknowledged Wife's reduced claim, but the document accounting for the $20,000 was not offered or admitted into evidence. The court awarded Wife $35,106.50 for her waste claim.
¶14 Attorney Fees. Both parties sought attorney fees, and both argued the other acted unreasonably throughout litigation. There is no dispute that Husband has superior financial resources. The superior court granted Wife attorney fees and spousal maintenance.
¶15 After the decree, Wife's counsel contacted Husband's counsel to discuss equalization and attorney fees. Wife's counsel estimated Wife's fees totaled $97,000, of which $48,000 was already paid with joint credit cards. Husband's counsel replied that she did not have an answer for the equalization issue but that Husband would pay $50,000 for Wife's attorney fees. Husband later disputed agreeing to pay the $50,000 in fees. The court found that the email exchange between counsel created a binding Rule 69 agreement and ordered Husband to pay Wife $50,000 in attorney fees.
¶16 Husband timely appealed, and we have jurisdiction. A.R.S. § 12-120.21(A)(1).
DISCUSSION
¶17 Husband challenges the superior court's rulings on the San Carlos Way Home, reimbursement claim, unvested RSUs, award for Wife's extramarital affair waste claim, and Wife's attorney fees. We review the superior court's division of property for an abuse of discretion, but we review de novo the characterization of property as community or separate. In re Marriage of Pownall, 197 Ariz. 577, 581, ¶ 15 (App. 2000).
¶18 Husband did not file trial transcripts with this court but attached them as appendices to his opening brief. To become part of the record, parties must file certified transcripts separately with this court. ARCAP 11; see In re Property Located at 6757 S. Burcham Ave., 204 Ariz. 401, 404-05, ¶ 11 (App. 2003). Appendices may only include "portions of the record." ARCAP 13.1(b) (emphasis added). Given Wife did not object to this procedure, and Husband provided the complete transcripts, we treat Husband's filing as a request to supplement the record, which we grant.
I. San Carlos Way Home
¶19 The superior court concluded that the San Carlos Way Home was community property, subject to equitable division. In doing so, the court noted that "[t]he evidence could not have been plainer that the house was not community property, and that Wife was seizing on a legal technicality to assert leverage over Husband in the divorce." Wife's legal technicality is the court's application of the unambiguous text of the deed transferring the property to both Husband and Wife. But the evidence included uncontroverted evidence-extrinsic evidence-about what the parties intended to accomplish with the deed.
¶20 Husband argues that Wife needed to object to the admission of this extrinsic evidence in her pre-trial statement and at trial. By not doing so, he contends, she waived any argument that the evidence was inadmissible. "The parol evidence rule prohibits the admission of extrinsic evidence to vary or contradict the terms of a written contract, and a deed may be treated as a contractual agreement." Valento v. Valento, 225 Ariz. 477, 483, ¶ 22 (App. 2010) (cleaned up). In family court, trial objections are waived if "not raised in the [pre-trial] statement." Ariz. R. Fam. Law P. 76.1(i).
¶21 Wife did not challenge the admissibility of the extrinsic evidence. Rather, in her closing argument she asserted that the evidence was legally irrelevant given the unambiguous text of the deed and this court's holding in Valento. 225 Ariz. at 483, ¶ 22. When the language of the deed is unambiguous, "parol evidence concerning the grantors' intent has no place in the determination of the property's character." Id. The language of the deed unambiguously conveyed the property to Husband and Wife. Thus, the court did not err in concluding that the San Carlos Way Home was community property.
¶22 After entry of the decree, Husband asked the court to either reconsider its community property characterization or alter its award to an unequal distribution. The court summarily rejected Husband's post-decree request.
¶23 Our legislature directs that community property be divided equitably rather than equally. A.R.S. § 25-318(A). That distinction means community property should be divided based on "a concept of fairness dependent upon the facts of particular cases." Toth v. Toth, 190 Ariz. 218, 221 (1997). This fact-driven evaluation is left to the discretion of the superior court. Id. Section 25-318 provides several factors to consider, but "the court may consider other factors that bear on the equities of a particular case." In re Marriage of Flower, 223 Ariz. 531, 535, ¶ 14 (App. 2010).
¶24 The superior court's equal division of the San Carlos Way Home is not congruent with its statement in the decree that "[t]he evidence could not have been plainer that the house was not community property." And the court expressed concern that Valento limited its discretion "to look behind the transaction and assess the bona fides of a claim for community interest in real property." Taken together, the court appears to have believed it lacked the ability to resolve the inequitable result of the community property characterization. To the extent the court's allocation rested on its perceived lack of discretion to resolve this inequity, that was error. Nothing prevents the court from considering parol evidence when dividing the property, see Flower, 223 Ariz. at 535, ¶ 14, because the parol evidence rule only applies to contract interpretation, see Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152-54 (1993) (analyzing several approaches to the parol evidence rule, all within contract interpretation).
¶25 The superior court's division of the San Carlos Way Home rested on an error of law-namely, that the superior court lacked discretion. The court expressed its belief that it lacked discretion and thus divided the San Carlos Way Home equally. The court's reasoning indicates the court wanted to award Husband a larger portion of the San Carlos Way Home to account for the stated inequity. We reverse the denial of the motion to alter or amend the division of the San Carlos Way Home, and remand for the court to divide the property equitably, considering all relevant evidence.
II. Husband's Reimbursement Claim
¶26 Husband argues he is entitled to reimbursement for Wife's post-petition expenses that he paid. Wife argues that because Husband made these payments as required by their Rule 69 agreement, he is not entitled to reimbursement. The validity and enforceability of a separation agreement is a mixed question of law and fact we review de novo. Ertl v. Ertl, 252 Ariz. 308, 312, ¶ 11 (App. 2021). "Arizona has long recognized that parties can enter a separation agreement disposing of rights to property as they desire." Id. at 312, ¶ 12 (citing A.R.S. § 25-317). A Rule 69 agreement "is presumed valid, and a party who challenges the validity of an agreement has the burden to prove any defect in the agreement." Ariz. R. Fam. Law P. 69(c).
¶27 In a Rule 69 agreement filed and adopted by the court in June 2022, Husband and Wife agreed that "Husband shall continue to pay for all of Wife's separate living expenses from the joint checking account [Wells Fargo xx8707] once she moves out of the [marital home] until there is further agreement or divorce is finalized."
¶28 Husband has not shown that he made any of these payments outside the Rule 69 agreement or that he expected reimbursement. The agreement does not provide for a reimbursement to Husband and he has not contested its validity. See Ariz. R. Fam. Law P. 69(a)-(c).
¶29 Husband also argues that because the court rejected his reimbursement claim, Wife received a "double dip" of funds. Specifically, he argues that because he withdrew funds from the Fidelity account to pay for Wife's post-petition living expenses, and Wife then received 50% of the value of the withdrawals, she received the benefit of those funds twice. He thus contends the superior court erred in denying his post-decree motion to alter or amend in which he raised the "double dip" argument.
¶30 The parties' Rule 69 agreement for Husband to cover Wife's post-petition expenses eliminated the need for Wife to seek temporary orders. And Husband had discretion for how to fund those payments; he chose to do so by moving money from the Fidelity account into the parties' joint account. But the Fidelity account remained an asset subject to later equitable distribution. The court did not abuse its discretion when dividing the value of that account.
III. Unvested Broadcom Restricted Stock Units
¶31 Wife argued at trial that Husband committed community waste when he left his job at Broadcom and forfeited his unvested RSUs. The superior court, like the parties on appeal, focused primarily on whether the unvested RSUs were community property. The superior court concluded that the unvested RSUs were community property and then divided them. The court did not rule explicitly on Wife's waste claim but in dividing the unvested RSUs gave wife property that was no longer accessible to the community.
¶32 RSUs and "[u]nvested stock options are analogous to pension plans." Brebaugh v. Deane, 211 Ariz. 95, 98, ¶ 7 (App. 2005); see Barroso v. Barroso, No. 1 CA-CV 17-0347 FC, 2018 WL 4018034, *3, ¶ 17 (Ariz.Ct.App. Aug. 23, 2018) (mem. decision) (RSUs and stock options given similar treatment in division of property). Stock options provided as compensation for past performance during marriage are community property; unvested options intended "to induce future employment" are separate property. Brebaugh, 211 Ariz. at 98, ¶ 8. Once the court determines the nature of the stock options, it applies one of two formulas for division of the assets. See id. at 98-101, ¶¶ 8, 19, 25. If the options were granted for past or current performance, they are community property, and the court should divide them using the formula set out in In re Marriage of Hug, 154 Cal.App.3d 780 (1984). Brebaugh, 211 Ariz. at 101, ¶ 25. But if the options are for future performance, the court should use the formula in In re Marriage of Nelson, 177 Cal.App.3d 150 (1986), to allocate the unvested portions. Brebaugh, 211 Ariz. at 101, ¶ 25. In other words, the Hug and Nelson formulas are mutually exclusive, serving different purposes.
¶33 Although the superior court concluded that the unvested RSUs were community property, it never reached the critical issue- whether the RSUs were intended for past performance or as a future incentive. And the court's subsequent decision to apply a combination of the Hug and Nelson formulas does not clarify the court's thinking.
¶34 The record offers little clarity on the point. The parties presented minimal evidence at trial regarding the nature and purpose of the unvested RSUs. Husband contends he received the RSUs for future performance, noting that the RSUs required Husband to remain employed at Broadcom to have value. Husband's Broadcom earnings statements establish that, in addition to the RSUs and salary, he received annual cash performance bonuses. Both serve as evidence that the RSUs are not community property. Wife offered no evidence or argument that the RSUs related to past performance. The court's conclusion that the RSUs are community property is, thus, arguably inconsistent with the evidence presented.
¶35 Even if we assume the RSUs are community property, Wife failed to meet her burden of establishing waste. In the equitable division of property, the court may consider "excessive or abnormal expenditures, destruction, concealment or fraudulent disposition" of community property. A.R.S. § 25-318(C). A finding of waste under this section allows the court to "compensate one spouse for the misuse of the common property by the other spouse by awarding the innocent spouse a greater share of the community property to offset the value of the lost property." Martin v. Martin, 156 Ariz. 452, 456 (1988). The burden is on the party arguing waste-here Wife-to establish that the other party's disposition of community property was "excessive or abnormal" or constituted "destruction" of the community property. Id. at 457.
¶36 Wife must establish that Husband acted unreasonably in forfeiting the RSUs to prove waste. See id. (contrasting an "innocent spouse" with the "other spouse" or the "spending spouse"); A.R.S. § 25-318(C) (allowing court to consider excessive or abnormal expenditures that are not reasonably explained). In evaluating reasonableness, the court must consider the timing of the alleged waste. A spouse's pre-petition conduct must be for the affirmative benefit of the community. Gutierrez, 193 Ariz. at 346-47, ¶ 7. But post-petition conduct need only be reasonable under the circumstances; we do not require post-petition spouses to make unreasonable financial decisions in service of a community that no longer exists.
¶37 The record evidence is that Husband feared for his continued employment at Broadcom due to ongoing reductions in his department; he found another position that will enable him to meet his financial obligations to the community (including equalization payments and ongoing spousal maintenance); and he negotiated a later start date to benefit the community by enabling an additional vesting of RSUs. Based on these facts, the superior court must determine if Husband acted unreasonably in changing jobs, resulting in the destruction of community property.
¶38 And so, the superior court erred in two ways. First, it erred in failing to make a finding whether Broadcom gifted the RSUs as compensation for past performance or as an incentive for future loyalty- the factual findings necessary to a determination that the RSUs were community property. Second, after concluding the RSUs were community property, the court failed to analyze whether Husband engaged in waste when he accepted a job with a different employer and consequently forfeited a portion of the unvested RSUs. Because the unvested RSUs are forfeited and no longer available to Husband or the community, the court should only award Wife a portion of those RSUs if Husband committed waste. See A.R.S. § 25-318(C). We vacate the portion of the decree related to the unvested RSUs and remand for reconsideration.
IV. Wife's Waste Claim Regarding Husband's Extramarital Affair
¶39 Husband does not challenge the superior court's conclusion that he owed Wife for marital waste based on money he spent toward his extramarital affair. Rather, he argues the superior court erred when it ordered him to pay $35,106.50 instead of the adjusted $25,106.50 Wife requested during trial. Wife stipulated during trial to reduce her initial request because Husband established to her satisfaction that the request was based on error. The superior court erred when it failed to credit the stipulation. We vacate the award of $35,106.50 and remand for the court to instead award $25,106.50.
V. Wife's Attorney Fees
¶40 Husband argues the superior court erred in awarding Wife her attorney fees. We review the award of attorney fees for an abuse of discretion. MacMillan v. Schwartz, 226 Ariz. 584, 592, ¶ 36 (App. 2011). The court must consider the parties' relative financial resources and the reasonableness of their positions. A.R.S. § 25-324(A). "There is no obligation for the trial court to make findings of fact under A.R.S. § 25-324." MacMillan, 226 Ariz. at 592, ¶ 39.
¶41 It is undisputed that Husband has greater financial resources than Wife. Husband argues the court "did not make any findings regarding the parties' reasonableness." But the court explicitly considered the reasonableness provision and noted that it "consider[ed] all relevant information presented." Unless requested by the parties, Section 25-324 does not require written fact-finding, and it does not require an affirmative determination of unreasonableness to support a fee award. While the court must consider both factors, either is sufficient to support a fee award. See Magee v. Magee, 206 Ariz. 589, 591, ¶ 8 n.1 (App. 2004) ("[A]n applicant need not show both a financial disparity and an unreasonable opponent in order to qualify for consideration for an award."). The court did not abuse its discretion in awarding attorney fees.
¶42 Husband also argues that the court should not have enforced the parties' agreement that Husband would pay $50,000 of Wife's attorney fees. A marital separation agreement is a contract, Buckholtz v. Buckholtz, 246 Ariz. 126, 129, ¶ 10 (App. 2019), and "the validity and enforceability of a contract is a mixed question of law and fact, which we review de novo," Armiros v. Rohr, 243 Ariz. 600, 605, ¶ 16 (App. 2018). Signed emails between counsel can create a binding Rule 69 agreement. Ertl, 252 Ariz. at 312-13, ¶¶ 13-14 ("Parties must mutually assent to all material terms, but need not have worked out all the basic terms of the agreement."); Murray v. Murray, 239 Ariz. 174, ¶¶ 12-13 (App. 2016).
¶43 After trial, Wife's counsel contacted Husband's counsel seeking an agreement regarding equalization and attorney fees. Counsel then discussed both issues during a phone call. After Wife's counsel followed up on the call, Husband's counsel replied via email: "I don't yet have an answer for you on the equalization. However, [Husband] agrees to pay $50,000 towards [Wife's] attorney fees to avoid you having to file an application for attorney fees." Wife's counsel responded: "I will prepare the Stipulated Order, to reflect the parties' agreement that [Husband] will pay an additional $50,000 towards [Wife's] attorney fees, and [Wife] will not file her fee application." Husband's counsel did not respond.
¶44 Husband argues this is not a valid agreement because he only intended to reach agreement if all issues raised in the email would be resolved together. But neither counsel gave any indication that the fee agreement was offered contingent to the equalization issue. The superior court did not err when it enforced the agreement memorialized in the email for Husband to pay $50,000 in Wife's attorney fees.
ATTORNEY FEES AND COSTS ON APPEAL
¶45 Both parties request attorney fees under A.R.S. § 25-324. After considering their financial resources and the reasonableness of their positions, we award Wife her reasonable attorney fees and costs on appeal upon compliance with ARCAP 21(b).
CONCLUSION
¶46 We affirm the superior court's rulings on Husband's reimbursement claim and Wife's attorney fees. We affirm the court's characterization of the San Carlos Way Home as community property, but we reverse the court's denial of Husband's motion to alter or amend and remand for the court to divide the San Carlos Way Home equitably. We vacate the court's ruling on the RSUs and remand for reconsideration consistent with this opinion. Finally, we vacate the award for Wife's extramarital affair waste claim and remand for the court to award Wife $25,106.50 on that claim.
¶47 In awarding spousal maintenance, the court must consider "the financial resources of the party seeking maintenance, including marital property apportioned to that spouse." A.R.S. § 25-319(B)(9). Because this decision changes the property apportioned to Wife, we vacate the spousal maintenance award subject to the court's recalculation. We also vacate the post-trial equalization payment and remand for recalculation consistent with this decision. On remand, the court may conduct an evidentiary hearing if it determines a hearing is necessary.