Less than a month ago, the Court of Appeals of Arizona heard a case from a wife who accused her husband of using $530,578 “for non-community purposes” [1]. But what does that mean? To fully understand the gravity of the situation (and to understand why it is even worse than that allegation suggests), you will first need to understand a couple of family law concepts.

Community Property vs. Separate Property in Arizona:

Community property is property that is jointly owned by both spouses, meaning each spouse has equal control over it [2]. But it is not limited to property that was acquired through equal contributions by each spouse—not at all, actually. With a few exceptions [3], Arizona defines community property as any property that is acquired during the marriage, including property acquired in other states [4]. All other property is referred to as “separate property” [5].

How Community Property is Divided in Arizona:

The distinction between community property and separate property becomes most relevant during divorce. There, the court equitably (not necessarily equally) distributes the community property between the two parties [6]. A.R.S. § 25-318(A) specifies several factors courts may consider in dividing the property equitably, but expressly forbids courts from considering marital misconduct. In practice, courts consider many other factors than just those stated in A.R.S. § 25-318(A) to equitably divide community property, all depending on the particular facts of each case [7].

How Marital Waste Works in Arizona:

One of the factors specifically enumerated in the statute is known as “marital waste” or “dissipation of assets.” When a spouse spends community assets on excessive or abnormal purchases, or destroys, conceals, or fraudulently disposes of community property, courts may apply the principle of marital waste to “compensate one spouse for the misuse of the [community] 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” [8]. Determining what is “wasteful” is not so straightforward, however. For example, is it a waste to seek rehab and then later relapse?  Is it wasteful to gamble? Is it wasteful to make a bad investment? Is it wasteful to buy a nice car? Is it wasteful to accrue late fees on a forgotten credit card? The answer to many of these questions is unclear.

Although “there is very little case law on the issue of marital waste” [9], Arizona courts have produced some cases that explain what is an “excessive and abnormal expenditure,” and what constitutes “destruction,” “concealment,” or “fraudulent disposition”:

1. Excessive and abnormal expenditures are any unreasonable expenses that hurt the marriage or only benefit the spender. Unsurprisingly, gambling without the other spouse’s knowledge or consent is an excessive and abnormal expenditure [10]. In contrast, spending hundreds of thousands of dollars on step-children without the other party’s consent is a reasonable expenditure not constituting waste [11].
2. For allegations of destruction, the party claiming waste must prove that damage was sustained and that the act was not made in good faith as a reasonable decision. In the case of a jointly-owned business, for example, committing a crime that potentially damages the business’s reputation does not constitute waste without a clear showing that the conviction devalued the business [12]. Forfeiting rights to stock in a company by leaving that company for a different one is also not destruction, but is instead merely a reasonable judgment of future employability [13].
3. Concealment refers to a deliberate scheme to hide funds from the other spouse, such as by maintaining a separate bank account not known to the other spouse [14]. Merely handling the couple’s finances, when the other spouse has opportunities to discover the couple’s finances, is not concealment [15].
4. Fraudulent dispositions occur when a spouse attempts to defraud the other out of their right to community property for the purpose of obtaining financial benefits not related to the marriage; unlike excessive and abnormal expenditures, fraudulent dispositions need not be unreasonable [16]. Examples include conveying community property to an extramarital partner, using a jointly-owned company credit card to purchase personal items, and selling the couple’s vehicle at a discount for personal expenses [17].

Burden of Proof for Marital Waste in Arizona:

Another wrinkle in the world of marital waste is the burden of proof. Upon the initial accusation, the spouse claiming waste must make a “prima facie” showing of marital waste—produce evidence supporting the claim that the other party engaged in “excessive or abnormal expenditures, destruction, concealment or fraudulent disposition” of community property [18]. Oftentimes, this is as simple as pointing to large, unexplained withdrawals from a bank account or retirement account, or to a loan secured for an unknown or unreasonable purpose [19]. Because the spouse who withdrew the funds or secured the loan is in the best position to justify the expenditures, the burden of proof shifts to that spouse to rebut the presumption that the funds were not used for excessive or abnormal purchases [20].

What Happened in This Case:

Now that you understand how community property is divided and how marital waste can affect that division, we can apply the legal theories to the details of this case. The wife alleged that, over the course of twelve years, the husband withdrew more than $500,000 from their joint account for uses that did not benefit the community (i.e. their marriage). When the burden of proof shifted to the husband, he was able to produce a spreadsheet tracking the expenditures, but he could not justify them. In his deposition, the husband admitted that he spent nearly one million dollars on sex workers, strip clubs, and extramarital affairs [21].

And yet, the husband insisted on appeal that his one-million-dollar infidelity spree was not marital waste. He argued that the court cannot simply add up twelve years of ATM withdrawals to calculate the total amount he allegedly wasted. Under his view, his wife must prove that each individual ATM withdrawal constituted waste. However, the Court of Appeals disagreed, reiterating Arizona’s shifting burden of proof and highlighting that he admitted in his deposition to wasting well over $500,000. Unsurprisingly, the Court of Appeals of Arizona ruled in favor of the wife, holding that infidelity expenditures are unreasonable and excessive [22].

In applying the rules of marital waste to this case, the court reached the correct result. By providing evidence that her husband used more than $500,000 for unexplained purposes, the wife adequately pled a prima facie case of marital waste, which properly shifted the burden of proof to her husband that he could not overcome. First, an infidelity spree totaling nearly one million dollars (taken from the couple’s joint account) is clearly an unreasonable use of community property that hurts the marriage, making it unreasonable and excessive. Second, despite being a waste of money, it was not destruction of community property. Third, though the funds might have been used without the wife’s knowledge, there was no evidence that they were funneled through a hidden bank account or otherwise hidden as part of a deliberate scheme, so as a matter of law, the husband did not conceal the funds. Fourth, because the expenditures are a deliberate attempt to defraud the wife out of her ownership right to community property for the sole benefit of the husband, they amount to fraudulent disposition. Only one of the prongs must be met, so because the husband’s expenditures were fraudulent dispositions that were excessive and abnormal, the court correctly held that the husband’s use of one million dollars on sex workers, strip clubs, and extramarital affairs constituted marital waste [23].

[1] Skoglund v. Barbour, No. 1 CA-CV 22-0514 FC, 2024 Ariz. App. LEXIS 103, at *22 (Ct. App. Aug. 27, 2024).

[2] A.R.S. § 25-318.

[3] Excluded from community property are gifts, inheritances, and property acquired after service of a petition for dissolution of marriage. See A.R.S. § 25-211.

[4] Id.; A.R.S. § 25-318(A).

[5] But even property acquired prior to the marriage may sometimes become community property. For example, commingling prior property with community property can transform the prior property into community property. See, e.g., Guthrie v. Guthrie, 73 Ariz. 423, 426 (1952).

[6] Goodell v. Goodell, 551 P.3d 1177, 1183 (Ariz. Ct. App. 2024).

[7] Id.

[8] Martin v. Martin, 156 Ariz. 452, 456 (1988).

[9] Bradshaw v. Greenwald, 2019 Ariz. Super. LEXIS 205, at *3.

[10] See, e.g., Parmeley v. Estate of Parmeley, 2018 Ariz. Super. LEXIS 1408, at *8; Gutierrez v. Gutierrez, 193 Ariz. 343, 347 (Ct. App. 1998).

[11] Beckler v. Beckler, 2017 Ariz. App. Unpub. LEXIS 1632, at *8 (Ct. App. Oct. 31, 2017); see also Bradshaw v. Greenwald, 2019 Ariz. Super. LEXIS 205, at *3.

[12] Helland v. Helland, 236 Ariz. 197, 201 (Ct. App. 2014).

[13] Goodell, 551 P.3d at 1186.

[14] Thomas v. Thomas, 142 Ariz. 386, 392 (Ct. App. 1984).

[15] See, e.g., Beckler, LEXIS 1632, at *8; Bradshaw; LEXIS 205, at *3.

[16] Mezey v. Mezey, No. DR 97-10848 (Maricopa County), aff’d, 204 Ariz. 599, 605-07 (Ct. App. 2003) (overruled on other grounds).

[17] Id.; Muzyka v. Herko, No. 1 CA-CV 12-0794, 2013 Ariz. App. Unpub. LEXIS 1369, at *13 (Ct. App. Dec. 12, 2013); Olivares v. Teran, No. 1 CA-CV 11-0270, 2013 Ariz. App. Unpub. LEXIS 84, at *5 (Ct. App. Jan. 17, 2013).

[18] A.R.S. § 25-318(C); Gutierrez, 193 Ariz. at 347.

[19] Skoglund, LEXIS 103, at *22; Gutierrez, 193 Ariz. at 347; Parmeley, LEXIS 1408, at *8.

[20] Gutierrez, 193 Ariz. at 347.

[21] Skoglund, LEXIS 103, at *22.

[22] Id.

[23] However, the court only allocated the amount wife claimed in marital waste, roughly $500,000.

Leslie A. Satterlee is a partner at Woodnick Law and has been practicing family law exclusively since graduating cum laude from ASU’s Sandra Day O’Connor College of Law. Her practice involves complex asset driven divorce matters.

Sam Fraser is a 2l at Sandra Day O’Connor College of Law. As a law clerk at Woodnick Law PLLC, Sam has the opportunity to assist with real cases and to research areas of interest relating to his future practice of law.