Arizona Court of Appeals

Hefner v. Hefner

Decided:

December 10, 2019

Reporters:

Not reported yet
No. 1 CA-CV 18-0404 FC

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Community Property
Divorce

In Hefner v. Hefner, a published opinion, the Arizona Court of Appeals held that a non-injured spouse has the burden to prove whether any portion of an injured spouse’s personal injury settlement constitutes community property.

The parties were married for approximately 34 years when Wife filed for divorce in 2015. Around that time, Husband was negotiating settlements for injuries he sustained in two separate car accidents.

The divorce proceeded to trial where the family court determined Husband’s personal injury damages were community property and divided the settlements equally between the spouses.

The court also divided other property subject to the appeal and awarded Wife a portion of her attorney’s fees pursuant to A.R.S. § 25-324. After the court resolved post-decree motion practice, Husband appealed and Wife cross-appealed.

Husband primarily argued that the family court erred when it characterized the personal injury settlements as community property because it erroneously placed the burden on Husband to prove which portions of the settlements were separate property.

Wife appealed the court’s determination that a business Husband operated was his separate property, its denial of her request for post-service expenses paid, and its award of only a portion of her attorney’s fees.

It is true that almost all property acquired by either spouse during the marriage is presumed to be community property. It is also true that ordinarily the spouse who seeks to rebut the presumption of community property has the burden of proof to prove that certain property belongs separately to one spouse.

But along with gift and inheritance, personal injury settlements are excepted from the presumption as compensation related to the separate property of the spouse — the spouse’s body.

Another case, Jurek v. Jurek, held that “the body which [the spouse] brought to the marriage is certainly [that spouse’s] separate property.”

That same burden of proof described earlier also applies to a spouse who contends that presumptively separate property belongs to the community. Here, it was Wife’s burden to prove the amount of the personal injury settlement, if any, that belonged to the marital community.

The family court erred when it awarded half of the settlement to Wife without any evidence that the community was entitled to any of the funds. The Court of Appeals vacated this award and remanded it back to family court to determine what portion of the settlement was community property.

In her cross-appeal, Wife argued that the family court erred when it determined the business Husband operated was his separate property.

The family court found that the business was created during the marriage to facilitate transfer of business assets gifted to Husband from his father. Gifts to one spouse received during the marriage, as discussed previously, are separate property of the recipient spouse.

The Court of Appeals rejected Wife’s argument that the business entity — the corporation, not its assets — was the community asset that needed to be divided. It cited to another case, Rowe v. Rowe, that held “incorporation during marriage d[oes] not transmute the character of the property.”

“Transmute” is the word Arizona law uses primarily to refer to the conversion of separate property to community property (or vice versa).

Wife argued the family court abused its discretion when it awarded “only” $20,000 of the approximately $46,000 she allegedly owed her divorce attorney. She re-argued that Husband enjoyed comparatively greater financial resources and acted unreasonably in the litigation, factors under A.R.S. § 25-324 that the family court already considered when it entered its original fee award.

This is another reminder that litigants should not count on reimbursement of attorney’s fees in family court litigation. Fee awards are totally discretionary and even if a litigant is eligible, there is no guarantee the award will match the amount owed to the attorney. Be smart when choosing a divorce attorney.