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Ross v. Negron-Ross

Court of Appeals of New Mexico

April 25, 2017

GARY M. ROSS, Petitioner-Appellee,
v.
STEPHANIE NEGRON-ROSS, Respondent-Appellant.

         APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY Alisa A. Hadfield, District Judge

          L. Helen Bennett, P.C. L. Helen Bennett Albuquerque, NM for Appellee

          Stephanie Negron Ocean Park, PR Pro Se Appellant

          OPINION

          TIMOTHY L. GARCIA, Judge.

         {1} This case arises from a question of first impression regarding whether a marital community estate is entitled to an equitable lien on a spouse's sole and separate property when community funds have contributed to the equity in the property but the property has diminished in value due to declining market conditions. We hold that the community's contributions to the sole and separate property create the right to a community lien even when the property decreased in value. We adopt the formula utilized by the Arizona Court of Appeals in Valento v. Valento, as the method for calculating the community lien in this case and as an extension of the principles set forth in our prior case law. See 240 P.3d 1239, 1243-45 (Ariz.Ct.App. 2010). As a result, we reverse the district court on this issue. On remand, we leave it to the discretion of the district court to determine the proper apportionment of this community lien. We further hold that the district court did not abuse its discretion in determining that (1) substantial evidence existed regarding Wife's breach of her fiduciary duty to Husband through the embezzlement of funds from his dental practice, and (2) the parties were required to pay their own attorney fees.

         BACKGROUND

         {2} This appeal comes before this Court following the dissolution of marriage and division of property owned by the parties. Gary M. Ross (Husband) and Stephanie Negron-Ross (Wife) were married on September 11, 2010. At the time they were married, both parties owned assets of significant value. Husband, age fifty-eight at the time of the marriage, was a dentist and owned a private dental practice. Husband also owned several rental properties held by a limited liability corporation, the commercial property where his practice resides, and his personal residence in Albuquerque, New Mexico (the Spring Creek residence). Husband purchased the Spring Creek residence in 2004 for $799, 000. Husband paid $160, 000 as a down payment on the Spring Creek residence. The Spring Creek residence subsequently depreciated in value and was appraised at $700, 000 at trial. Additionally, the Spring Creek residence was subject to two mortgages totaling $559, 131 at the time of trial.

         {3} Prior to the marriage, Wife, age fifty-four at the time of the marriage, worked in marketing for seventeen years and owned her own business for twelve years. Wife testified that she donated real property in Puerto Rico to her daughters in September 2009. However, she continued to make mortgage payments and receive rent from the property. The district court characterized the donation as "alleged" and found that Wife's testimony was not credible. During the marriage, Wife worked at Husband's dental practice earning a gross monthly income of $5, 000. The district court found that during the marriage, "Wife breached her fiduciary duty and embezzled money and stole property from Husband's dental practice [in] the sum of $48, 341." Husband was subsequently reimbursed through insurance for those losses.

         {4} The parties separated on September 9, 2012, after less than two years of marriage, and Husband filed for a petition for dissolution of marriage on October 26, 2012. A minute order, filed on February 22, 2013, set an interim division of income and expenses. At the time the interim order was entered, Husband's monthly income was found to be $9, 026 and Wife's monthly income was found to be $2, 860. The district court entered a partial divorce decree dissolving the parties' marriage on June 21, 2013. Following several days of trial, the district court entered a final decree and judgment (final judgment) on October 4, 2013.

         {5} The district court's final judgment included factual findings and rulings regarding the distribution of the parties' property including the real estate, bank accounts, and other assets. We only address those findings and rulings that are relevant to this appeal. With regard to the Spring Creek residence, the district court found that "[a]fter deducting the mortgage debt and Husband's sole and separate down payment the Spring Creek residence has a negative value" and that "the expenditures on the Spring Creek residence during the marriage" did not increase its value. Husband was awarded the Spring Creek residence as his sole and separate property, and the district court found "no community lien" to have been created against this residential property. Based upon several enumerated factors, the district court also ruled that "[e]ach party shall pay their own attorney fees[.]"

         {6} On appeal, Wife contests three of the district court's findings of fact or legal rulings: (1) that the Spring Creek residence was not subject to a community lien, (2) that Wife breached her fiduciary duty to Husband by embezzling a significant amount of money from his dental practice, and (3) that each party pay their own attorney fees.

         DISCUSSION

         I. The Community is Entitled to a Lien on Separate Property That Depreciates in Value When Community Funds Were Used to Pay the Mortgage That Benefitted the Separate Property

         {7} Wife argues that the district court erred in declaring that no community property lien was created against Husband's separate property assets. Whether the district court erred in finding no community lien on the Spring Creek residence is a question of law that we review de novo. See NMSA 1978, § 40-3-8(A), (B) (1990) (defining separate and community property); Styka v. ...


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