Stewart v. Stewart, 1 CA-CV 21-0442-FC

Background

Husband had a Fidelity UTMA custodial account created for him as a minor; the account vested in him but his father remained custodian and controlled it after Husband reached adulthood.
Husband and Wife married in 2013; during the marriage the father deposited community funds into the account on several occasions.
The custodial account was used to purchase interests in five businesses during the marriage (Cotton Lane Group, Gulf Mobile Home Park, Landings Resort, Sunshine RV Resort, Sunny Grove MHP).
At dissolution, the superior court accepted Husband’s expert testimony and characterized the Fidelity account and four of the business interests as Husband’s separate property; only Cotton Lane Group was held community and divided equally.
Wife appealed, arguing commingling/transmutation and that the community had a proportional interest in the account and in the investments funded by it.

Issues

Issue	Plaintiff's Argument (Wife)	Defendant's Argument (Husband)	Held
Was the UTMA account transferred to Husband at majority and thus separate?	The custodian’s failure to transfer meant issues about ownership; account treated as community.	The account vested in Husband at creation under the Act and was separate property brought into the marriage.	The court agreed the account vested in Husband at creation; it was his separate property initially.
Did commingling of community deposits transmute the account to community property?	Commingling presumptively makes the fund community absent explicit tracing.	The separate and community portions were identifiable; therefore no transmutation.	The court held tracing was possible here because separate and community contributions were delineated, so the commingling presumption did not apply.
Could Husband’s expert allocate the business purchases entirely to separate funds because separate portion alone could cover withdrawals?	The expert’s method improperly ignored the community’s identifiable contributions and awarded no credit to community.	Expert argued majority separate balance at times funded purchases.	The court rejected the expert’s methodology as unreliable under Rule 702 and refused to adopt an all-or-nothing allocation.
What is the proper characterization/allocation of the business interests bought from the account?	The community is entitled to a proportional interest in investments equal to the community portion of the account that funded them.	Husband argued investments were funded by separate property and thus separate.	The court reversed and remanded: the community has a proportional interest in the listed investments (except Cotton Lane Group, which was not disturbed).

Key Cases Cited

In re Marriage of Pownall, 197 Ariz. 577 (App. 2000) (characterization of property reviewed de novo)
Cooper v. Cooper, 130 Ariz. 257 (1981) (commingled fund presumed community unless separate property can be explicitly traced)
In re Marriage of Cupp, 152 Ariz. 161 (App. 1986) (commingling does not destroy separate identity if traceable)
Noble v. Noble, 26 Ariz. App. 89 (1976) (commingling/tracing principles)
Bender v. Bender, 123 Ariz. 90 (App. 1979) (transmutation requires written agreement plus contemporaneous conduct showing intent)
Bourne v. Lord, 19 Ariz. App. 228 (1973) (form documents are prima facie and do not alter separate-property status absent evidentiary support)
Horton v. Horton, 35 Ariz. 378 (1929) (asset purchased partly with community funds is community to the proportional extent)
Liristis v. Am. Fam. Mut. Ins. Co., 204 Ariz. 140 (App. 2002) (waiver is a procedural rule that may be forgone when justice requires)