CourtListener opinion 9881645

Evidence quotes

Clean opinion text

IN THE
 ARIZONA COURT OF APPEALS
 DIVISION ONE

 In re the Matter of:

 FRED BERNARD WALKER, Petitioner/Appellee,

 v.

 STEPHANIE CAROL WALKER, Respondent/Appellant.

 No. 1 CA-CV 23-0036 FC
 FILED 10-3-2023

 Appeal from the Superior Court in Maricopa County
 No. FN2021-070725
 The Honorable Lori Ash, Judge Pro Tempore

 JURISDICTION ACCEPTED/RELIEF GRANTED

 COUNSEL

Law Office of Paula Lorona, Peoria
By Marty J. Zalevsky
Counsel for Petitioner/Appellee

Ellsworth Family Law PC, Mesa
By Glenn D. Halterman
Counsel for Respondent/Appellant
 WALKER v. WALKER
 Opinion of the Court

 OPINION

Judge Paul J. McMurdie delivered the Court's opinion, in which Presiding
Judge D. Steven Williams and Judge Samuel A. Thumma joined.

M c M U R D I E, Judge:

¶1 Stephanie Walker ("Wife") appeals from the decree
dissolving her marriage to Fred Walker ("Husband"). The decree directs
the preparation of a qualified domestic relations order ("QDRO") and states
that "no further matters remain pending." Ariz. R. Fam. Law P. ("Rule")
78(c). But the decree did not divide potential survivor benefits of a
retirement account. Because the decree did not divide the potential survivor
benefits, it did not resolve all issues and thus was not appropriately
certified as appealable under Rule 78(c). As a result, this court lacks
appellate jurisdiction. At our discretion, however, we treat Wife's appeal as
a special action and address Wife's claims.

¶2 On the merits, we grant relief to Wife, holding that the court
erred by deviating from Drahos/Barnett1 based on equity concerns about
awarding Wife her separate property. We also find no evidence of
community waste and vacate the court's finding.

 FACTS AND PROCEDURAL BACKGROUND

¶3 Husband and Wife married in 1990. In 2016, the parties
bought a home and took the title in Wife's name. Husband signed a
disclaimer deed acknowledging Wife's sole interest in the house. Wife
made a $14,410 down payment with funds from a USAA bank account
containing community funds. The parties used community income during
the marriage to pay the mortgage and upkeep of the house. After the
purchase, Husband made several repairs and improvements to the home.

¶4 Husband moved out of the house in 2021 and petitioned for
dissolution a few months later. Around this time, Wife secured a home
equity loan and deposited $85,243 in loan proceeds in a bank account. Less

1 See Drahos v. Rens, 149 Ariz. 248 (App. 1985); Barnett v. Jedynak, 219
Ariz. 550 (App. 2009).

 2
 WALKER v. WALKER
 Opinion of the Court

than a week later, Wife wrote five checks for $9,500 each and one for $4,000
to family members for "familial debts."

¶5 Wife sold the home before the trial and paid off the home
equity loan. At a temporary orders hearing, the superior court ordered Wife
to account for the home sale proceeds pending trial. At the trial, the parties
agreed the community had an equitable lien in some portion of the sale
proceeds but disputed the amount. They stipulated that applying the
Drahos/Barnett formula led to each spouse's equitable lien of $9,211 ($18,422
total).

¶6 At the trial, the court excluded Husband's appraiser because
of untimely disclosure. The appraiser would have provided an opinion
about the home's value before and after Husband's home improvements.
Instead, Husband testified about his various repairs and improvements to
the house, which he estimated increased its value by $50,000.

¶7 The court found that applying the Drahos/Barnett formula was
inequitable. The court rejected Husband's estimated value increase as too
high and awarded Husband $35,000 for his share of the community's
equitable lien. The court also found that the checks written to Wife's family
totaling $47,500 constituted marital waste and awarded Husband $23,750.

¶8 As for Wife's 401(k), the parties asked for it to be divided
equitably. In the decree, the court awarded each party 50% of the
community portion of Wife's 401(k), to be divided via a QDRO. The decree
provided that "[t]o the extent there may be survivor benefits associated
with any of the retirement accounts, the QDRO drafter shall be appointed
as a Rule 72 Special Master to make recommendations to the [c]ourt as to
whether the non-employee spouse should be awarded a survivor benefit."
The decree included Rule 78(c) language stating that "[n]o further matters
remain pending." Wife filed a notice of appeal from the decree.

 DISCUSSION

 Appellate Jurisdiction.

¶9 This court directed supplemental briefing on whether the
decree's Rule 78(c) language was appropriate, given the decree's direction
that (1) a QDRO be prepared and (2) the QDRO drafter recommend
disposition of any survivor benefit.

¶10 For appellate jurisdiction to exist, a statute or constitutional
provision must grant a substantive right to appeal, and the judgment must

 3
 WALKER v. WALKER
 Opinion of the Court

comply with applicable procedural rules. State v. Birmingham, 96 Ariz. 109,
111-12 (1964); Yee v. Yee, 251 Ariz. 71, 74-75, ¶ 8 (App. 2021). Under A.R.S.
§ 12-2101(A)(1), this court has jurisdiction over an appeal from a final
judgment in an action commenced in superior court. Brumett v. MGA Home
Healthcare, L.L.C., 240 Ariz. 420, 426, ¶ 4 (App. 2016). A dissolution decree
generally constitutes an appealable judgment in a family court action. See
Craig v. Craig, 227 Ariz. 105, 106, ¶ 6 (2011).

¶11 A judgment must include language certifying it is appealable.
Brumett, 240 Ariz. at 426, ¶ 6; Banner Univ. Med. Ctr. Tucson Campus, LLC v.
Gordon, 252 Ariz. 264, 266-67, ¶ 11 (2022); see also Yee, 251 Ariz. at 75, ¶ 9
(quoting Ariz. R. Fam. Law P. 78(c)). Rules 78(b) and (c) set out the required
language for a judgment in a family court action to be appealable.2 If a
decree resolves all claims and issues against all parties, the certification
must recite "that no further matters remain pending and that the judgment
is entered under Rule 78(c)." Ariz. R. Fam. Law P. 78(c). If the decree
resolves less than all claims and issues, it can be appealable if the court
expressly determines "there is no just reason for delay and recites that the
judgment is entered under Rule 78(b)." Ariz. R. Fam. Law P. 78(b); see also
Davis v. Cessna Aircraft Corp., 168 Ariz. 301, 304 (App. 1991) (applying
textually similar Ariz. R. Civ. P. 54(b)). This court lacks jurisdiction over an
appeal from a family court judgment that resolves less than all claims and
does not include Rule 78(b) language. Camasura v. Camasura, 238 Ariz. 179,
181–82, ¶¶ 7–8 (App. 2015).

¶12 In a dissolution action, the superior court must divide the
community property, including retirement plans such as a 401(k). A.R.S.
§ 25-318(A); see also Caswell v. Caswell, 99 Ariz. Cases Dig. 4, 9-10, ¶¶ 27-28
(App. June 20, 2023) (Morse, J. and Cruz, J., specially concurring)
(questioning whether a decree that does not resolve all issues about the
division of retirement benefits is appealable under Rule 78(c)). The division
of a retirement plan is generally accomplished by the court establishing the
percentage of a retirement plan each spouse is to receive, with a domestic

2 Effective August 29, 2022, the term "final" was removed from Rules
78(b) and (c) and replaced with "appealable." Ariz. Sup. Ct. No. R-22-0005
(Aug. 29, 2022). The Rules thus do not affect the finality of any judgment,
but help the court determine whether a judgment in a family court action is
appealable.

 4
 WALKER v. WALKER
 Opinion of the Court

relations order3 to be entered later. Brett R. Turner, Equitable Distribution of
Property, § 6:20 (4th ed. 2023). The QDRO directs the plan administrator to
pay the non-owning spouse per the substantive division outlined in the
decree. Id.

¶13 The question is whether the direction for entry of a QDRO
leaves a substantive issue pending, which would make the Rule 78(c)
finding an error. See Baker v. Bradley, 231 Ariz. 475, 481, ¶ 19 (App. 2013)
(explaining the need to determine whether substantive or ministerial issues
are pending when addressing a premature notice of appeal).

¶14 When a court specifies the division of a retirement plan
between divorcing spouses and directs entry of a separate QDRO, the
general rule in modern practice is that the second order, the QDRO, "is not
a substantive order at all" but is instead a "procedural device[] for enforcing
the terms of the underlying substantive order." Turner, supra § 6:20.
Viewing the QDRO as a procedural device permits it to be more easily
modified given future events and plan administrators' decisions "as needed
to ensure fair implementation of the generally unmodifiable terms of the
substantive order." Id. Recent Arizona caselaw reflects this understanding.
See Hodges v. Hodges, 1 CA-CV 22-0091, 2022 WL 4102880, at *2, ¶ 7 (Ariz.
App. Sept. 8, 2022) (mem. decision) (The court held that the decree gave
"Wife ‘immediate, present, and vested separate property interest' in her
community share of Husband's retirement accounts," and that seeking to
have QDROs prepared "is simply seeking compliance of the [property
settlement agreement] and Decree."); Vincent v. Shanovich, 1 CA-CV
16-0431, 2018 WL 4585984, at *3, ¶ 10 (Ariz. App. Sept. 25, 2018) (mem.
decision) (The court reversed the denial of the motion to set aside a QDRO
containing a clerical mistake that did not accurately reflect the decree.).

¶15 Thus, if a dissolution decree resolves the substantive division
of a retirement account, a QDRO should be treated as a special order
entered after the final judgment under A.R.S. § 12-2101(A)(2) for appeal
purposes. See Boncoskey v. Boncoskey, 216 Ariz. 448, 451, ¶ 12 (App. 2007).
An appeal from the entry of a QDRO involves different issues than "those
that would arise from an appeal from the underlying judgment." Arvizu v.

3 Whether a domestic relations order must be "qualified" is a
determination for the plan administrator, not the state courts. Brett R.
Turner, Equitable Distribution of Property, §§ 6:19, 6:20 (4th ed. 2023). In this
opinion, we use the term QDRO to refer to all domestic relation orders for
simplicity.

 5
 WALKER v. WALKER
 Opinion of the Court

Fernandez, 183 Ariz. 224, 226-27 (App. 1995); see also In re Marriage of Dorman,
198 Ariz. 298, 300, ¶ 3 (App. 2000).

¶16 And because a QDRO may be entered months or years after a
decree, policy considerations preferring finality of the decree favor viewing
a QDRO as a procedural mechanism to enforce a final decree rather than as
a substantive order required to be prepared before an appeal can be taken.
See Joshua A. Dean, Wilson v. Wilson: The Effect of QDROs on Appealing
Divorce Decrees, 42 Akron L. Rev. 639, 673–77 (2009) (discussing the
ramifications of the delay in having QDROs prepared); see also Caswell, 99
Ariz. Cases Dig. at 5, ¶ 1 (amended QDRO prepared 18 months after the
dissolution decree); Boncoskey, 216 Ariz. at 449, 451, ¶¶ 2, 12 (QDRO entered
three years after the dissolution decree). A dissolution decree's retirement
account division resolves the claim even if a QDRO is to be prepared later.
An appeal from a dissolution decree should not be delayed because a
QDRO has not been prepared and filed.

¶17 Thus, we hold that when a dissolution decree resolves all
issues and divides a retirement account by awarding a specific percentage
to each party but orders a QDRO to be prepared consistent with its orders,
the decree is appealable if it contains Rule 78(c) language indicating no
other pending matters.

¶18 But here, the dissolution decree awarded 50% of the
community portion of Wife's 401(k) to Husband and directed that a QDRO
be prepared. But it also provided that "[t]o the extent there may be survivor
benefits associated with any of the retirement accounts, the QDRO drafter
shall be appointed as a Rule 72 Special Master to make recommendations
to the [c]ourt as to whether the non-employee spouse should be awarded a
survivor benefit." A court may appoint an attorney or other professional to
recommend a division of retirement benefits or implement a division the
court ordered. Ariz. R. Fam. Law P. 72.1(a). But if "the professional finds
the division requires the use of discretion, the professional must submit its
recommendation to the court for approval." Ariz. R. Fam. Law P. 72.1(e).
Dividing property is a discretionary determination, not a ministerial
matter. See In re Marriage of Inboden, 223 Ariz. 542, 544, ¶ 7 (App. 2010).

¶19 Mentioning potential survivor benefits but failing to
determine whether they exist and dividing any such benefits means the
decree did not resolve all claims and issues, which precludes certification
under Rule 78(c). The judgment is not appealable if it includes Rule 78(c)
language when potential issues or claims remain pending. See Madrid v.
Avalon Care Center-Chandler, L.L.C., 236 Ariz. 221, 224, ¶ 11 (App. 2014)

 6
 WALKER v. WALKER
 Opinion of the Court

(There is no appellate jurisdiction over a judgment that includes Ariz. R.
Civ. P. 54(c) language when claims remain pending.); Caswell, 99 Ariz.
Cases Dig. at 10, ¶ 29 (Morse, J. and Cruz, J., specially concurring)
(Piecemeal litigation is disfavored.).

¶20 In Wife's supplemental memorandum addressing
jurisdiction, she asserts, without citation to the record, that the 401(k) does
not have a survivor benefit. Because the record does not support that there
are no survivor benefits, the decree is not appealable because it does not
divide a potentially listed asset and lacks Rule 78(b) language. See Camasura,
238 Ariz. at 181-82, ¶¶ 7-8 (A dissolution decree is not an appealable
judgment because issues remained pending and there was no Rule 78(b)
language.).

¶21 We, therefore, find that including Rule 78(c) language in the
decree was inaccurate because a substantive issue about property division
remained unresolved, meaning this court lacks appellate jurisdiction. Even
so, we exercise our discretion to treat the appeal as a special action and
resolve the claims raised. See Brionna J. v. Dep't of Child Safety, 247 Ariz. 346,
350, ¶ 13 (App. 2019) (A court without appellate jurisdiction may
"exercise . . . discretionary special action jurisdiction under appropriate
circumstances, even when the parties have not requested such relief."); see
also A.R.S. § 12-120.21(A)(4) (court of appeals has "[j]urisdiction to hear and
determine petitions for special actions brought pursuant to the rules of
procedure for special actions, without regard to its appellate jurisdiction").

 Merits.

¶22 Wife challenges two rulings in the decree. First, she contends
the evidence does not support the amount of the community's equitable
lien on her separate property home. Second, she argues the court erred by
finding she wasted community funds.

A. The Evidence Does Not Support a Deviation from the
Drahos/Barnett Formula.

¶23 We review the superior court's allocation of property for an
abuse of discretion. Saba v. Khoury, 253 Ariz. 587, 590, ¶ 7 (2022). "The
determination of the amount of the community interest in separate
property resulting in an equitable lien is a mixed question of fact and
law . . . so we defer to the [superior] court's factual findings but review legal
conclusions de novo." Id. (citations omitted).

 7
 WALKER v. WALKER
 Opinion of the Court

¶24 Wife was entitled to the sale proceeds from her separate
property home. See A.R.S. § 25-213(A) (An increase in value of a spouse's
separate property is that spouse's separate property.). But the marital
community is entitled to an equitable reimbursement for its contributions
to that separate property home. Saba, 253 Ariz. at 592, ¶ 15. Our supreme
court held that the Drahos/Barnett formula is a useful, consistent starting
point, but courts may depart from that formula when warranted. Id. at 592,
¶ 16. An example of when to "modify the value generated by the
Drahos/Barnett formula" is when community funds or efforts are used to
improve the home. Id. at 592, ¶ 16, n.4. Saba noted that "fair return may be
more accurately calculated by appraising the increase in the value of the
home immediately before and after the improvements." Id. Thus, Saba
allows courts to consider other options to reimburse the community for its
contributions to separate property.

¶25 The superior court found this case warranted a deviation
from "an equal division of property" because, after thirty years of marriage,
Husband had no other significant separate property and awarding Wife "all
the funds from the sale of the residence" would lead to a windfall to her.
But the home (and the proceeds from its sale) was Wife's separate property,
not community property subject to equitable division under § 25-318(A).
See Saba, 253 Ariz. at 592–93, ¶ 17. Even so, the community has a right to an
equitable reimbursement for contributions to one spouse's separate
property. And despite framing its analysis of the equitable lien as a
"division of community property," it appears the superior court, in
substance, found the application of the Drahos/Barnett formula inequitable.

¶26 The court found Husband's efforts increased the home's
value and awarded him $35,000 for his share of the community lien.
Although the court had the discretion to conclude that Husband's efforts
justified deviating from the Drahos/Barnett formula, Saba, 253 Ariz. at 592,
¶ 16, n.4, the record does not support a $35,000 award.

¶27 Husband testified to a list of general home maintenance and
improvements he performed. He provided photos of his projects but no
appraisals. The superior court found that Husband's $50,000 estimate was
too high. But an award of $35,000 for Husband's share means the total
community lien would be $70,000. Even if we account for the $18,422 of
community funds contributed—as the parties stipulated—the difference of
$51,578 represents the increased value from Husband's efforts. This amount
contradicts the court's conclusion that Husband's $50,000 estimate was too
high.

 8
 WALKER v. WALKER
 Opinion of the Court

¶28 Husband argues the court's finding that the $50,000 increase
in value was too high was dicta, and this court can also consider market
appreciation as a basis to affirm the ruling. But Husband presented no
evidence of market appreciation. Moreover, Husband's suggested
approach would require us to ignore the court's express finding and
presume that the increase in value was higher than Husband's estimate. We
cannot ignore the court's finding. Because the court rejected Husband's
estimation, the record does not support the award of $35,000 as Husband's
share of the community's equitable lien on Wife's separate property. We
vacate the order awarding Husband $35,000 as his share of the equitable
lien.

¶29 Wife argues that because there was no other competent
evidence showing how much Husband's efforts increased the home's
value, the only option is to remand and apply the stipulated Drahos/Barnett
formula. We agree. Husband had the burden of showing the amount of the
increase in value. Hefner v. Hefner, 248 Ariz. 54, 60, ¶ 17 (App. 2019) (A
spouse claiming he increased the value of the other spouse's separate
property through community labor and funds has the burden of showing
the increased amount.). The court rejected Husband's evidence, and he did
not appeal that ruling. As a result, the only evidence of the community's
contribution was the stipulated Drahos/Barnett formula. Thus, we vacate the
award of $35,000 to Husband for his share of the community's equitable
lien and remand with instructions to apply the stipulated formula.

B. The Superior Court Erred by Finding Wife Transmuted Her
Separate Property by Depositing it in a Commingled Bank Account, so
the Waste Finding Is Based on an Erroneous Legal Conclusion.

¶30 We review the superior court's characterization of separate or
community property de novo. Bell-Kilbourn v. Bell-Kilbourn, 216 Ariz. 521,
523, ¶ 4 (App. 2007). The court accepted Husband's position that the home
equity loan proceeds became community property because Wife deposited
them into an account containing community funds. This was error.

¶31 "The mere fact that the property was commingled does not
cause it to lose its separate identity, as long as the separate property can still
be identified." In re Marriage of Cupp, 152 Ariz. 161, 164 (App. 1986); accord
Cooper v. Cooper, 130 Ariz. 257, 259 (1981); Noble v. Noble, 26 Ariz. App. 89,
95 (1976) (Commingling does not cause transmutation "so long as the funds
remain traceable."); O'Hair v. O'Hair, 109 Ariz. 236, 239 (1973) (When a
spouse's separate funds are deposited in a joint bank account, the marital
relationship alone does not presume a gift.). Thus, the finding of waste is

 9
 WALKER v. WALKER
 Opinion of the Court

based on an erroneous premise. If the funds remained traceable, the
commingling did not transmute them. If not transmuted, the funds
remained Wife's separate property and thus could not support a marital
waste finding. See A.R.S. § 25-318(C) (permitting consideration of waste as
to "community joint tenancy and other property held in common").

¶32 Wife showed that the bank account had a balance of $10,889
when she deposited the loan proceeds. Husband does not dispute that the
loan proceeds were Wife's separate funds. Wife wrote five identifiable
checks less than a week after depositing her separate funds. Thus, the funds
were traceable and did not lose their identity. See Cupp, 152 Ariz. at 164
(Separate funds remained traceable where spouse bought "easily
identifiable assets" with commingled separate funds "within a very short
time after receiving those funds.").

¶33 Husband argues that because the checks repaid community
debts and expenses, Wife gifted the funds to the community, rendering
them commingled and untraceable. But a spouse's use of separate funds to
pay a community debt does not transmute the balance of the separate funds
into community property. See Battiste v. Battiste, 135 Ariz. 470, 473 (App.
1983). But contrary to Husband's position, the superior court found that
Wife's payments to her family were not community debts, and using
community funds for this purpose was waste. The loan proceeds were
traceable and remained Wife's separate property, meaning she could spend
them on non-community expenses without consequence. See Blaine v.
Blaine, 63 Ariz. 100, 113 (1945) (There is a presumption that separate
expenses are paid out of the separate funds in a commingled account.).

¶34 The loan proceeds did not lose their separate property
identity just because they were placed in a commingled account. The funds
were traceable and thus remained Wife's separate property. The court erred
by finding Wife committed waste by paying her family $47,500. We vacate
the order awarding Husband $23,750.

 ATTORNEY'S FEES

¶35 The parties request an award of attorney's fees and costs on
appeal under A.R.S. § 25-324. In exercising our discretion, we decline to
award fees. As the successful party, Wife is entitled to costs on appeal upon
compliance with ARCAP 21. See A.R.S. § 12-342.

 10
 WALKER v. WALKER
 Opinion of the Court

 CONCLUSION

¶36 We reverse the award of $35,000 to Husband as his share of
the community's equitable lien on Wife's home and remand with
instructions to apply the stipulated Drahos/Barnett formula. We vacate the
finding of waste and the corresponding award to Husband. The decree is
otherwise affirmed.

 AMY M. WOOD • Clerk of the Court
 FILED: AA

 11