1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO 2 Opinion Number: ___________ 3 Filing Date: April 25, 2017 4 NO. 33,418 5 GARY M. ROSS, 6 Petitioner-Appellee, 7 v. 8 STEPHANIE NEGRON-ROSS, 9 Respondent-Appellant.
10 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY 11 Alisa A. Hadfield, District Judge
12 L. Helen Bennett, P.C. 13 L. Helen Bennett 14 Albuquerque, NM
15 for Appellee
16 Stephanie Negron 17 Ocean Park, PR
18 Pro Se Appellant 1 OPINION 2 GARCIA, Judge. 3 {1} This case arises from a question of first impression regarding whether a marital 4 community estate is entitled to an equitable lien on a spouse’s sole and separate 5 property when community funds have contributed to the equity in the property but the 6 property has diminished in value due to declining market conditions. We hold that the 7 community’s contributions to the sole and separate property create the right to a 8 community lien even when the property decreased in value. We adopt the formula 9 utilized by the Arizona Court of Appeals in Valento v. Valento, as the method for 10 calculating the community lien in this case and as an extension of the principles set 11 forth in our prior case law. See 240 P.3d 1239, 1243-45 (Ariz. Ct. App. 2010). As a 12 result, we reverse the district court on this issue. On remand, we leave it to the 13 discretion of the district court to determine the proper apportionment of this 14 community lien. We further hold that the district court did not abuse its discretion in 15 determining that (1) substantial evidence existed regarding Wife’s breach of her 16 fiduciary duty to Husband through the embezzlement of funds from his dental 17 practice, and (2) the parties were required to pay their own attorney fees. 18 BACKGROUND 19 {2} This appeal comes before this Court following the dissolution of marriage and
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1 division of property owned by the parties. Gary M. Ross (Husband) and Stephanie 2 Negron-Ross (Wife) were married on September 11, 2010. At the time they were 3 married, both parties owned assets of significant value. Husband, age fifty-eight at 4 the time of the marriage, was a dentist and owned a private dental practice. Husband 5 also owned several rental properties held by a limited liability corporation, the 6 commercial property where his practice resides, and his personal residence in 7 Albuquerque, New Mexico (the Spring Creek residence). Husband purchased the 8 Spring Creek residence in 2004 for $799,000. Husband paid $160,000 as a down 9 payment on the Spring Creek residence. The Spring Creek residence subsequently 10 depreciated in value and was appraised at $700,000 at trial. Additionally, the Spring 11 Creek residence was subject to two mortgages totaling $559,131 at the time of trial. 12 {3} Prior to the marriage, Wife, age fifty-four at the time of the marriage, worked 13 in marketing for seventeen years and owned her own business for twelve years. Wife 14 testified that she donated real property in Puerto Rico to her daughters in September 15 2009. However, she continued to make mortgage payments and receive rent from the 16 property. The district court characterized the donation as “alleged” and found that 17 Wife’s testimony was not credible. During the marriage, Wife worked at Husband’s 18 dental practice earning a gross monthly income of $5,000. The district court found 19 that during the marriage, “Wife breached her fiduciary duty and embezzled money
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1 and stole property from Husband’s dental practice [in] the sum of $48,341.” Husband 2 was subsequently reimbursed through insurance for those losses. 3 {4} The parties separated on September 9, 2012, after less than two years of 4 marriage, and Husband filed for a petition for dissolution of marriage on October 26, 5 2012. A minute order, filed on February 22, 2013, set an interim division of income 6 and expenses. At the time the interim order was entered, Husband’s monthly income 7 was found to be $9,026 and Wife’s monthly income was found to be $2,860. The 8 district court entered a partial divorce decree dissolving the parties’ marriage on June 9 21, 2013. Following several days of trial, the district court entered a final decree and 10 judgment (final judgment) on October 4, 2013. 11 {5} The district court’s final judgment included factual findings and rulings 12 regarding the distribution of the parties’ property including the real estate, bank 13 accounts, and other assets. We only address those findings and rulings that are 14 relevant to this appeal. With regard to the Spring Creek residence, the district court 15 found that “[a]fter deducting the mortgage debt and Husband’s sole and separate 16 down payment the Spring Creek residence has a negative value” and that “the 17 expenditures on the Spring Creek residence during the marriage” did not increase its 18 value. Husband was awarded the Spring Creek residence as his sole and separate 19 property, and the district court found “no community lien” to have been created
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1 against this residential property. Based upon several enumerated factors, the district 2 court also ruled that “[e]ach party shall pay their own attorney fees[.]” 3 {6} On appeal, Wife contests three of the district court’s findings of fact or legal 4 rulings: (1) that the Spring Creek residence was not subject to a community lien, (2) 5 that Wife breached her fiduciary duty to Husband by embezzling a significant amount 6 of money from his dental practice, and (3) that each party pay their own attorney fees. 7 DISCUSSION
8 I. The Community is Entitled to a Lien on Separate Property That 9 Depreciates in Value When Community Funds Were Used to Pay the 10 Mortgage That Benefitted the Separate Property
11 {7} Wife argues that the district court erred in declaring that no community 12 property lien was created against Husband’s separate property assets. Whether the 13 district court erred in finding no community lien on the Spring Creek residence is a 14 question of law that we review de novo. See NMSA 1978, § 40-3-8(A), (B) (1990) 15 (defining separate and community property); Styka v. Styka, 1999-NMCA-002, ¶ 8, 16 126 N.M. 515, 972 P.2d 16 (“[W]e review questions of law de novo.”). 17 {8} “In New Mexico, property takes its status as community or separate property 18 at the time and by the manner of its acquisition.” Zemke v. Zemke, 1993-NMCA-067, 19 ¶ 18, 116 N.M. 114, 860 P.2d 756 (internal quotation marks and citation omitted). 20 “[A]ll property brought to . . . marriage by either spouse or acquired during marriage
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1 by gift, bequest, devise or descent, together with its rents, issues and profits[,]” is 2 separate property. Portillo v. Shappie, 1981-NMSC-119, ¶ 12, 97 N.M. 59, 636 P.2d 3 878. All property “acquired by either or both spouses during marriage, which is not 4 separate property,” as well as its rents, issues, and profits, is community property. Id. 5 However, “[a]pportionment is appropriate when separate property is enhanced 6 through community efforts [(funds),] or when an asset is acquired with both separate 7 and community funds.” Trego v. Scott, 1998-NMCA-080, ¶ 5, 125 N.M. 323, 961 8 P.2d 168. “The [district] court must apportion the value enhanced by community 9 funds between the separate and community estates.” Id. ¶ 13. The community is, 10 therefore, entitled to a lien against the separate property of a spouse for the 11 contributions made by the community that enhanced the value of the property during 12 the marriage. See Jurado v. Jurado, 1995-NMCA-014, ¶ 10, 119 N.M. 522, 892 P.2d 13 969. 14 {9} Previously, this Court has stated that it is the “increase in the value of the 15 [separate property] asset that is apportioned among separate and community 16 interests.” Id. As such, this Court has adopted different formulas to calculate the 17 apportionment, all of which assume an appreciation in the property’s value, and 18 incorporate varying factors depending on the pertinent facts. See id. ¶ 11 (“Any 19 increase in the value of separate property is presumed to be separate unless it is
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1 rebutted by direct and positive evidence that the increase was due to community funds 2 or labor.”). However, our prior case law fails to adequately address the community’s 3 interest, if any, in separate property that has depreciated in value due to market 4 conditions that are present during the marriage. 5 {10} In Valento, the Arizona court addressed a residential mortgage payment issue 6 that is substantially similar to the one being disputed by the parties in the present 7 case. 240 P.3d at 1242-45.The Arizona court reasoned that when a separate property 8 residence depreciates but positive equity remains in the asset, the court should 9 recognize a community lien in an amount “equal to the reduction [of the] principal 10 indebtedness attributable to the community contribution.” Id. at 1244. By making 11 community contributions toward principal that does create an increase in equity, “the 12 presence of [any] positive equity means that the owner-spouse can actually realize the 13 benefit conferred by the community.” Id. “If the community contributions were not 14 recognized in the form of a lien, the owner-spouse would receive a windfall from the 15 community.” Id. However, in the event that the property has negative equity, “[i]t 16 would be illogical . . . to hold that the community should receive the full benefit of 17 its contributions to principal when a portion of the equity it created can no longer be 18 realized.” Id. The Arizona court therefore applied the following formula when the 19 value of a separate property asset has decreased during the marriage but positive
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1 equity remains in the property and the community has paid contributions toward the 2 principal indebtedness against that property:
3 C-[C/B x D]; where D = depreciation in value of the property during the 4 marriage, B = value on the date of the marriage, and C = community 5 contributions to principal or market value.
6 Id. The application of this Arizona formula is a logical extension of New Mexico case 7 law to calculate a community lien when community funds are used to enhance the 8 equity in an owner-spouse’s separate property even where other factors have caused 9 the value of the property to decrease during the term of the marriage. 10 {11} In the present case, the community—through its contribution to pay the 11 principal mortgage against the Spring Creek residence—is entitled to a lien against 12 Husband’s remaining equity in the Spring Creek residence even though the residence 13 declined in value during the marriage. It is undisputed by the parties that Husband 14 purchased the Spring Creek residence prior to his marriage to Wife, the residence is 15 his sole and separate property, and the residence declined in value during the parties’ 16 marriage. Additionally, Husband does not dispute that community funds contributed 17 to the payment of the mortgage. Applying principles and the formula now adopted 18 from Valento, the district court must determine the value of the community lien that 19 exists against the Spring Creek residence. 20 {12} Husband argues that the district court’s finding of no community lien on the
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1 Spring Creek residence remains equitable under the circumstances of this case. He 2 contends that the district court could have balanced other factors against Wife’s 3 community property claims, including its findings that “the community substantially 4 depleted Husband’s separate property investment accounts” and that “Wife breached 5 [her] fiduciary duty.” However, our holding and adoption of the principles from 6 Valento is exclusively an issue of law, and we will not intervene to address how the 7 district court should apply its continuing equitable discretion to apportion the 8 community lien that was created. See Gomez v. Gomez, 1995-NMCA-049, ¶¶ 2, 5, 9 119 N.M. 755, 895 P.2d 277 (recognizing that legal error is addressed first, especially 10 where its resolution would be determinative on the district court’s remaining 11 decisions), superseded by statute on other grounds as stated in Erickson v. Erickson, 12 1999-NMCA-056, ¶ 25, 127 N.M. 140, 978 P.2d 347. On remand, the district court 13 must still address how to apportion the community lien that was created in order to 14 achieve substantial justice. See Dorbin v. Dorbin, 1986-NMCA-114, ¶ 15, 105 N.M. 15 263, 731 P.2d 959 (“At divorce, the asset is apportioned between separate and 16 community interests in a manner which achieves substantial justice.”). The district 17 court is given broad discretion to consider all relevant factors when making this 18 equitable division of community property. See Scott, 1998-NMCA-080, ¶ 22 (noting 19 that the district court has broad discretion when it exercises its power to divide
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1 community property equally between the parties). We therefore remand this matter 2 to the district court to calculate the community lien against the Spring Creek 3 residence and to make a proper apportionment of this lien as it deems appropriate.
4 II. The District Court’s Remaining Findings and Conclusions Were 5 Supported by Substantial Evidence and Were Not an Abuse of Discretion
6 {13} Wife makes two additional arguments on appeal. First, she argues that “[t]he 7 district court erred in finding that [she] breach[ed] her fiduciary duty to [H]usband 8 and embezzled a significant amount of funds from [H]usband’s dental practice.” 9 Second, Wife contends that the district court erred in not requiring Husband to pay 10 her attorney fees. The district court made several consecutive findings relating to 11 these arguments: 12 83. Husband earns significantly more income than Wife[;] 13 84. Both parties have assets with significant value[;] 14 85. Husband prevailed at trial[;]
15 86. Wife breached her fiduciary duty to Husband and embezzled a 16 significant amount of funds from Husband’s dental practice[; and]
17 87. Balancing the competing factors enumerated in paragraphs 83 18 to 86, each party shall pay their own attorney fees.
19 A. The District Court’s Determination That Wife Breached Her Fiduciary 20 Duty and Embezzled Money From Husband’s Dental Practice Was 21 Supported by Substantial Evidence and Was Not an Abuse of Discretion
22 {14} Wife argues that the district court’s finding eighty-six— that she “breached her
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1 fiduciary duty to Husband and embezzled a significant amount of funds from 2 Husband’s dental practice”—was an abuse of discretion, not in accordance with the 3 law and not supported by substantial evidence. However, Wife does not address the 4 numerous findings and conclusions entered by the district court that were also related 5 to its determination regarding the issues of embezzlement and breach of fiduciary 6 duty, specifically, findings sixty-seven, sixty-eight, and eighty, as well as conclusions 7 of law. See Rhoades v. Rhoades, 2004-NMCA-020, ¶ 5, 135 N.M. 122, 85 P.3d 246 8 (“Unchallenged findings of fact are conclusive on appeal.”). Furthermore, Wife has 9 failed to indicate what remedy or result she is seeking if we only reverse finding 10 eighty-six. See Morris v. Merchant, 1967-NMSC-026, ¶ 24, 77 N.M. 411, 423 P.2d 11 606 (recognizing that our appellate courts “will not correct errors which, even if 12 corrected, will not change the result”). Because Wife does not develop any of her 13 other arguments and only directs this Court to finding eighty-six, we are left with just 14 one remaining argument—that finding eighty-six was not supported by substantial 15 evidence. See Clayton v. Trotter, 1990-NMCA-078, ¶¶ 16-17, 110 N.M. 369, 796 16 P.2d 262 (stating that the appellate court will review the arguments of 17 self-represented litigants to the best of its ability, but cannot respond to unintelligible 18 arguments); see also Headley v. Morgan Mgmt. Corp., 2005-NMCA-045, ¶ 15, 137 19 N.M. 339, 110 P.3d 1076 (stating that an appellate court need not review an
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1 undeveloped argument). We, therefore, limit our review to the issue of whether the 2 district court’s finding eighty-six, that Wife breached her fiduciary duty to Husband 3 and embezzled a significant amount of funds from Husband’s dental practice, was 4 supported by substantial evidence. 5 {15} In our review of the challenged finding, we view the evidence “in the light 6 most favorable to the findings and judgment entered [by the district court].” 7 Jurado,1995-NMCA-014, ¶ 8. “If substantial evidence exists, then the conclusion of 8 law must be upheld absent an abuse of discretion. This Court indulges in all 9 reasonable inferences that can be drawn from the evidence in support of the 10 judgment.” Id. (citations omitted). 11 {16} Substantial evidence was presented by Husband regarding monies taken from 12 his dental practice, including exhibits and expert testimony. Although Wife 13 challenged the truthfulness and credibility of this evidence, she does not otherwise 14 substantively dispute its content or the inferences and conclusions that it supported. 15 See id. (“This Court indulges in all reasonable inferences that can be drawn from the 16 evidence in support of the judgment.”). The district court also accepted the credibility 17 of Husband’s testimony and evidence but did not find Wife’s testimony to be 18 credible. As a result, we determine that substantial evidence was presented to support 19 the district court’s finding eighty-six. We affirm the district court’s ruling on this
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1 issue.
2 B. The District Court’s Determination That Each Party Pay His or Her Own 3 Attorney Fees Was Not an Abuse of Discretion
4 {17} “We review a [district] court’s decision whether to award attorney fees in a 5 marital dissolution and property division case for abuse of discretion.” Muse v. Muse, 6 2009-NMCA-003, ¶ 71, 145 N.M. 451, 200 P.3d 104. When reasons both supporting 7 and detracting from a decision exist, there is no abuse of discretion. Talley v. Talley, 8 1993-NMCA-003, ¶ 12, 115 N.M. 89, 847 P.2d 323. 9 {18} Rule 1-127 NMRA governs the award of attorney fees in domestic relations 10 cases. In such cases, “the district court is to consider a number of factors including 11 disparity of the parties’ resources, prior settlement offers, the total amount of fees and 12 costs expended by each party, and the success on the merits.” Weddington v. 13 Weddington, 2004-NMCA-034, ¶ 27, 135 N.M. 198, 86 P.3d 623. No single factor 14 is dispositive. See id. ¶ 28 (holding that “disparity is only one factor to be considered 15 and disparity cannot support reversal where the other factors weigh in favor of the 16 award of attorney fees”). Wife’s breach of fiduciary duty and embezzlement of 17 monies, a separate issue that Husband prevailed upon in the district court, is only 18 modestly relevant to the above factors. As such, even though we affirm that finding 19 eighty-six was supported by substantial evidence, it is not a significant consideration 20 in determining whether Wife was entitled to an award of attorney fees. We, therefore,
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1 focus primarily on the district court’s other three findings in determining whether the 2 court erred when it ruled that each party should pay their own attorney fees. 3 {19} The remaining three findings by the district court are set forth in paragraphs 4 eighty-three through eighty-five. We recognize that the district court did not enter any 5 findings regarding prior settlement offers or the total amount of fees and costs 6 expended by either party. The district court instead looked to the disparity of the 7 parties’ resources and each party’s success on the merits. The finding by the district 8 court that Husband earns significantly more than Wife is a finding in her favor for an 9 award of attorney fees, but the court’s finding that Husband prevailed at trial weighs 10 against her. The district court’s finding that both parties have assets of significant 11 value also factors into any determination regarding the disparity of the parties’ 12 resources and further supports the determination that each party has the financial 13 ability to pay his or her own attorney fees. See Allen v. Allen, 1982-NMSC-118, ¶¶ 14 16-18, 98 N.M. 652, 651 P.2d 1296 (noting that when neither party is economically 15 oppressed, the district court acts within its discretion to require each party to pay its 16 own attorney fees). As these factors can be balanced out neutrally and support the 17 district court’s decision to require each party to pay their own attorney fees, we 18 conclude that the district court did not abuse its discretion. See Talley, 1993-NMCA- 19 003, ¶ 12.
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1 CONCLUSION 2 {20} We reverse the district court’s failure to recognize the existence of a 3 community lien and to calculate the community lien against the Spring Creek 4 residence. We remand this matter to the district court for further proceedings in order 5 to address the community lien against the Spring Creek residence and to make a 6 proper apportionment of this lien as it deems appropriate. We uphold the district 7 court’s remaining rulings, including the requirement that each party pay his or her 8 own attorney fees. 9 {21} IT IS SO ORDERED.
10 __________________________________ 11 TIMOTHY L. GARCIA, Judge
12 WE CONCUR:
13 ___________________________________ 14 JAMES J. WECHSLER, Judge
15 ___________________________________ 16 M. MONICA ZAMORA, Judge