April 6, 2020- Lana S. Pozen v. Raymond Mark Fickler, No. A-1-CA-37682

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Court of Appeals of New Mexico
Petitioner Appellant, ~~
Mark Reynolds

Vv. No. A-1-CA-37682
RAYMOND MARK FICKLER,

Respondent-A ppellee.
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Gerard J. Lavelle, District Judge
Lana S. Pozen
Albuquerque, NM
Pro Se Appellant
Raymond Mark Fickler
Albuquerque, NM
Pro Se Appellee

MEMORANDUM OPINION

DUFFY, Judge.
{1} Lana Pozen (Wife) petitioned for the dissolution of her mamiage to Mark

Fickler (Husband) and fora division of their property, including one real property in
Sedona, Arizona, and another in Albuquerque, New Mexico. The district court
detenmined that both properties were 100% community property and awarded Wife
and Husband a one-half interest in each. Wife appeals. We reverse and remand.

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BACKGROUND	1
{2} 	Wife and Husband were married on October 24, 1993. It is undisputed that	2
Wife had purchased three properties in the state of Washington prior to their	3
marriage, two of which are at issue in this appeal.1 She bought the first property,	4
known as “Lake Hills,” in 1989, and the second property, known as “Clyde Hill,” in	5
1991. Although Wife and Husband lived in the Clyde Hill property briefly after their	6
marriage, both Lake Hills and Clyde Hill were primarily rental properties. The	7
parties refinanced the debt on both properties in 1998 and Husband’s name was	8
added to the deeds; in addition, all mortgage payments were made from a joint	9
account and the rental proceeds were comingled in the parties’ joint bank account.	10
Husband also contends that marital funds were used to subsidize and maintain Clyde	11
Hill.	12
{3} 	In 2000, the parties sold the Lake Hills property and applied $80,033.43 from	13
the proceeds of the sale to purchase a property in Sedona, Arizona (Sedona), titled	14
in joint tenancy with rights of survivorship. In 2005, the parties sold the Clyde Hill	15
property and applied $193,657.10 from the proceeds of the sale to purchase a	16
property on Oakland Avenue in Albuquerque, New Mexico (Oakland Avenue), also	17
1 The State of Washington, like New Mexico, is a community property state.
See, e.g., Seizer v. Sessions, 940 P.2d 261, 266 (Wash. 1997) (en banc).

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titled in joint tenancy with rights of survivorship.2 While both Sedona and Oakland	1
Avenue were originally purchased as rental properties, the parties were living in the	2
Oakland Avenue property at the time Wife filed a petition for divorce on February	3
8, 2017.	4
{4} 	During the divorce proceedings, the parties resolved the majority of their	5
disputes before trial, but were unable to agree on ownership of Sedona and Oakland	6
Avenue. Wife claimed that both properties were her separate property because they	7
could be traced and identified to her separate property acquired before marriage,	8
whereas Husband claimed that Sedona and Oakland Avenue were 100% community	9
property, arguing that Wife’s separate interest had been transmuted over the years.	10
A domestic relations hearing officer conducted a two-day hearing on the merits in	11
June 2018 to determine the parties’ separate and community interests in the real	12
properties, after which she submitted a report to the district court with her findings	13
and recommendations. Although the hearing officer found it was undisputed that	14
Wife purchased Lake Hills and Clyde Hill before marriage and that those properties	15
“began as Wife’s sole and separate property,” the hearing officer nevertheless found	16
2 Both Lake Hills and Clyde Hill were sold and exchanged for Sedona and
Oakland Avenue, respectively, via the IRS 1031 exchange process, which is a tax
shelter tool that allows a person to exchange real property held as an investment
solely for other investment property that is the same type or “like-kind.”

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that the two replacement properties, Sedona and Oakland Avenue, were 100%	1
community property and proposed to divide the equity equally between the spouses.	2
{5} 	The hearing officer noted the presumption that all property acquired during	3
marriage is community property and found that Wife had not met her burden to	4
overcome that presumption because she had not proven her separate property interest	5
by a preponderance of the evidence. In particular, the hearing officer stated that	6
“Wife was unable to demonstrate a tracing of her separate interest in any of the	7
original . . . properties, in that there is no record of initial purchase price, down	8
payment and equity at time of purchase. There is no evidence of how funds were or	9
were not spent during the marriage, and no evidence of the management of the	10
properties through the year 2000.” Consequently, the hearing officer concluded that	11
the “burden shifting to Husband to prove transmutation need not be addressed, as	12
Wife has not proven her first step of tracing and identifying her separate interest.”	13
Over Wife’s objections, the district court adopted the hearing officer’s report as its	14
final order without a further hearing. Wife appeals.	15
DISCUSSION	16
{6} 	On appeal, Wife argues that the district court erred in characterizing the	17
Sedona and Oakland Avenue properties as 100% community property because they	18
were purchased as a direct exchange for the sale of her separate properties. We	19

5
review Wife’s challenges to the district court’s findings of fact regarding the subject	1
properties for substantial evidence, viewing the evidence “in the light most favorable	2
to support the district court’s findings, resolving all conflicts and indulging all	3
permissible inferences in favor of the decision below.” Gabriele v. Gabriele, 2018-	4
NMCA-042, ¶ 18, 421 P.3d 828 (alteration, internal quotation marks, and citation	5
omitted), cert. denied, 2018-NMCERT___ (No. S-1-SC-36945, May 4, 2018). But	6
we review de novo the district court’s conclusions of law respecting the Sedona and	7
Oakland Avenue properties, “including threshold determinations regarding whether	8
property is separate or community or whether the community has acquired an	9
interest in separate property.” Id.	10
{7} 	Wife presented evidence showing that Lake Hills and Clyde Hill were	11
“exchanged” for Sedona and Oakland Avenue, respectively, as well as the specific	12
amounts applied from the sale of Lake Hills and Clyde Hill to purchase the current	13
properties. The hearing officer’s report, adopted by the district court, incorporated	14
and relied on that evidence, noting that “part of the purchase price of what is now	15
the Sedona rental . . . included $80,033.43 in funds received” from the sale of the	16
Lake Hills property, and $193,657.10 from the sale of the Clyde Hill property	17
transferred 	“directly 	to 	the 	purchase 	[of] 	the 	Oakland 	Avenue 	property.”	18
Notwithstanding this, the hearing officer and the district court concluded that Wife	19

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had failed to adequately trace her separate property interest, stating that “[m]ultiple	1
transfers from sole ownership to joint tenancy, with all maintenance costs and	2
proceeds going in and out of joint accounts, combined with an absence of	3
documentation showing or tracing the initial separate funds—ultimately results in	4
the total failure and inability to trace the separate interest.”	5
{8} 	In New Mexico, property is designated as separate or community at the time	6
it is acquired “and is fixed by the manner of its acquisition.” Nichols v. Nichols,	7
1982-NMSC-071, ¶ 22, 98 N.M. 322, 648 P.2d 780 (internal quotation marks and	8
citation omitted). Property acquired during marriage by either or both spouses is	9
presumed to be community property. Id.; see NMSA 1978, § 40-3-8(B) (1990)	10
(defining community property as “property acquired by either or both spouses during	11
marriage which is not separate property”). “A party asserting that such property is	12
separate has the burden of presenting evidence that would rebut the presumption by	13
a preponderance of the evidence.” Nichols, 1982-NMSC-071, ¶ 22.	14
{9} 	In this case, it is undisputed that Wife bought the Lake Hills and Clyde Hill	15
properties before the marriage and that both properties were her separate property.	16
See § 40-3-8(A)(1) (defining separate property as “property acquired by either	17
spouse before marriage”); Bayer v. Bayer, 1990-NMCA-106, ¶ 12, 110 N.M. 782,	18
800 P.2d 216 (“Property acquired in community property states takes its status as	19

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community or separate at the time it is acquired, and by manner of acquisition.”).	1
When tracing Wife’s separate interest in those properties throughout the duration of	2
the marriage, we note that “[o]nce the property’s separate character has been	3
established, it maintains that character until it is shown to be community property	4
by direct and positive evidence.” Zemke v. Zemke, 1993-NMCA-067, ¶ 18, 116 N.M.	5
114, 860 P.2d 756; see Campbell v. Campbell, 1957-NMSC-001, ¶ 80, 62 N.M. 330,	6
310 P.2d 266 (“[I]f acquired as separate property, it retains such character even	7
though community funds may later be employed in making improvements or	8
discharging an indebtedness thereon.”). As well, “the income, fruits, and natural	9
increase in the value of separate property remain separate property.” Bayer, 1990-	10
NMCA-106, ¶ 13; 	see Gabriele, 2018-NMCA-042, ¶¶ 24-26 (stating that the	11
separate property interest “may include the increased equity in one spouse’s separate	12
real property” and that “[a]ny increase in the value of separate property is presumed	13
to be separate [property]”). And finally, “the proceeds of the sale of separate property	14
and property acquired therewith or that which is purchased with money which was	15
separate property or taken in exchange for separate property ordinarily continue to	16
be separate property.” Burlingham v. Burlingham, 1963-NMSC-068, ¶ 20, 72 N.M.	17
433, 384 P.2d 699 (internal quotation marks and citation omitted). Applying these	18
principles here, we conclude that Wife established an initial separate property origin	19

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in the amounts of $80,033.43 and $193,657.10—the proceeds from the sale of her	1
Lake Hills and Clyde Hill properties, respectively, used to purchase the Sedona and	2
Oakland Avenue properties. See Bayer, 1990-NMCA-106, ¶¶ 12-13 (discussing how	3
the husband traced proceeds to the sale of his separate property).	4
{10} 	Based on the separate property origin of the Washington properties, all of the	5
equity from those properties would be classified as Wife’s separate property unless	6
the community acquired a community lien or the parties changed the character of	7
the properties from separate to community through transmutation—at any time	8
during the marriage, including after purchase of the Sedona and Oakland Avenue	9
properties. Gabriele, 2018-NMCA-042, ¶ 25 (stating that “the separate interest is	10
entitled to the full value of the property” unless the community has acquired an	11
interest in the separate property); Zemke, 1993-NMCA-067, ¶ 18 (“Any increase in	12
the value of separate property is presumed to be also separate unless rebutted by	13
direct and positive evidence that the increase was due to community funds or	14
labor.”); see Nichols, 1982-NMSC-071, ¶ 22 (“The determination of its legal status	15
as separate or community property is merely the initial inquiry, however, because	16
the spouses are permitted to change the property’s status.”). Although the district	17
court ultimately concluded that Wife had failed to establish that her separate assets	18
were used to acquire the Sedona and Oakland Avenue properties—and thus, that	19

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Wife was not entitled to the equity from the Lake Hills and Clyde Hill properties as	1
her separate property—the court specifically declined to engage in an analysis of	2
whether transmutation had occurred, stating, “Although there is also evidence of	3
transmutation and that the parties intended to run all of the properties as a joint	4
family enterprise, the second step, [the] burden shifting to Husband to prove	5
transmutation need not be addressed, as Wife has not proven her first step of tracing	6
and identifying her separate interest.” Because the district court could not have	7
concluded that Wife had failed to identify and trace her separate property without	8
also concluding that the Washington properties had been transmuted or that the	9
community had acquired a lien in their equity, its order is contradictory as a matter	10
of law.	11
{11} 	Having concluded that Wife met her legal burden of establishing an initial	12
separate property origin in the amounts of $80,033.43 and $193,657.10 as applied,	13
respectively, to the Sedona and Oakland Avenue properties, we reverse the district	14
court’s contrary ruling. On remand, the district court must determine whether the	15
Washington properties, or their equity, were transmuted or whether the community	16
acquired an equitable lien in them. See Allen v. Allen, 1982-NMSC-118, ¶ 13, 98	17
N.M. 652, 651 P.2d 1296 (“Transmutation is a general term used to describe	18
arrangements between spouses to convert property from separate property to	19

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community property and vice versa.”); see also Nichols, 1982-NMSC-071, ¶¶ 23-30	1
(providing a detailed analysis of transmutation by commingling and transmutation	2
by gift); Bayer, 1990-NMCA-106, ¶ 20 (discussing community liens and stating that	3
“[w]hen community efforts, labor, industry, or funds enhance the value of separate	4
property, such enhancement is community property for which the community is	5
entitled to reimbursement” (internal quotation marks and citation omitted)). It was	6
Husband’s burden to establish the community interest. See Allen, 1982-NMSC-118,	7
¶ 3 (“[T]he party alleging the transmutation must establish the transmutation of	8
property to community property by clear, strong and convincing proof.”); Gabriele,	9
2018-NMCA-042, ¶ 26 (“The party claiming the existence of a community lien on	10
separate property bears the burden of proving that the property’s appreciation is	11
attributable to 	the expenditure of community, rather than separate, funds.”).	12
Although 	the 	hearing 	officer’s 	findings 	demonstrate 	that 	Husband 	presented	13
evidence relevant to his claims,3 we cannot be certain that the district court found	14
3 For example, the hearing officer found that the original properties were
refinanced after marriage and titled into both Husband and Wife’s names, and then
sold by Husband and Wife. As well, the rental income was deposited into a joint
bank account where it was commingled, all mortgage payments were made from a
joint account, and the evidence presented at the hearing included a document stating
that the transfer of the properties into joint tenancy status was “to establish
community property.” Compare Blake v. Blake, 1985-NMCA-009, ¶ 74, 102 N.M.
354, 695 P.2d 838 (stating that “the fact of the deed in the name of the parties as
grantees does not alone establish transmutation, nor does the passing of funds

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that transmutation had occurred by clear and convincing evidence, or that the	1
community acquired a lien and its amount, nor can we weigh the evidence on appeal.	2
Duke City Lumber Co. v. Terrel, 1975-NMSC-041, ¶ 5, 88 N.M. 299, 540 P.2d 229	3
(“New Mexico decisions involving the burden of proof by clear and convincing	4
evidence have expressly stated or clearly implied that it is for the finder of the facts,	5
and not the appellate courts, to weigh conflicting evidence and decide where the	6
truth lies.”).	7
{12} 	The district court’s findings and conclusions with respect to these matters will	8
determine whether any of the equity from Lake Hills and Clyde Hill that was applied	9
toward the purchase of the Sedona and Oakland Avenue properties remained Wife’s	10
separate property. If so, the district court must determine the extent of the respective	11
community and separate interests in Sedona and Oakland Avenue, and then proceed	12
to apportion the equity in those properties between Wife’s separate interest and the	13
community’s interest in accordance with New Mexico case law. See Gabriele, 2018-	14
through a joint account”), 	with Nichols, 1982-NMSC-071, ¶¶ 21-22 (finding
transmutation by gift when husband sold a separate property home, deposited funds
into the parties’ joint bank account, and purchased a new home on a real estate
contract in both parties’ names, reasoning that while the contract is not conclusive,
it constitutes some evidence of intent to transmute, coupled with the husband’s
testimony that inferred he intended for the wife to have a legal interest in the house
and the commingling of the separate funds with community funds).

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NMCA-042, ¶ 27. Finally, because the issue may arise on remand, we note that even	1
if Wife contributed separate property toward the purchase of Sedona and Oakland	2
Avenue, the district court did not necessarily err in classifying those properties as	3
community assets. Compare Dorbin v. Dorbin, 1986-NMCA-114, ¶¶ 31-33, 105	4
N.M. 263, 731 P.2d 959 (stating that a spouse may be entitled to reimbursement or	5
apportionment for the value of the separate property contribution toward an asset	6
purchased with mixed-monies), with Allen, 1982-NMSC-118, ¶ 11 (holding that a	7
property purchased after the parties’ remarriage was “clearly identifiable as [the	8
wife’s] separate property because it was uncontested that it was purchased by [the	9
wife] with funds from her separate bank account in which [the husband] admits he	10
had absolutely no interest”).	11
CONCLUSION	12
{13} 	For the foregoing reasons, we reverse and remand for further proceedings	13
consistent with this opinion.	14
{14} 	IT IS SO ORDERED.	15
______________________________	16
MEGAN P. DUFFY, Judge	17

GON

on:

WE CONCUR:

2 MbaMe—

J. MILES HANISEE, Chief Judge

ZACHARY A| IVES, Judge

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