Arizona Court of Appeals

Malmquist v. Malmquist

Summary

Malmquist v. Malmquist was a memorandum decision where the Arizona Court of Appeals reversed the portion of the family court’s divorce decree where it characterized a business purchased during the marriage as the Husband’s sole separate property.

Background

The parties were married in 1982 and physically separated in June 2010. Wife filed for divorce that year, but the petition was subsequently dismissed. The parties remained physically separated and managed separate finances until Wife again filed for divorce in January 2015.

A few months before Wife filed her petition, Husband purchased a business. Husband executed two promissory notes to finance the purchase and advance working capital.

During their trial, Husband argued that the business was his sole and separate property because the parties had physically separated years earlier and he was the only party on the purchase agreement and resulting debt.

After the family court agreed and awarded the business to Husband, Wife filed this appeal.

Presumption of Community Property

Pursuant to A.R.S. § 25-211, property acquired by either spouse during the marriage is presumed to be community property unless it is obtained by inheritance or gift, or is acquired after service of a petition for dissolution, legal separation, or annulment that results in a final decree.

This presumption is not absolute and it can be overcome by “clear and convincing evidence” that proves the property is the separate property of one spouse. The burden of proof belongs to the party who seeks to overcome the presumption of community property.

That last sentence is important because here the Court of Appeals found that the presumption of community property applied and that Husband failed to rebut it with clear and convincing evidence. It explained that the marital community persisted even though the parties physically separated and managed separate finances. It also rejected Husband’s argument that the presence of only his name on the promissory notes determined the character of the property. With limited exceptions, each spouse may individually incur debt to bind the marital community.

Full Decision