Arizona Court of Appeals

Alcantara v. Alcantara


December 12, 2019


No. 1 CA-CV 19-0113 FC


Community Property
Prenuptial Agreements

In Alcantara v. Alcantara, an unpublished memorandum decision, the Arizona Court of Appeals affirmed the family court’s divorce decree and award of attorney’s fees.

Memorandum decisions are not mandatory authority and should not be cited except in compliance with Supreme Court Rule 111(c)

Before their marriage, the parties executed a premarital or prenuptial agreement. Both parties retained an attorney to assist with the preparation of the agreement.

The prenuptial agreement provided that all property Husband owned prior to the marriage would remain separate property. So far, this is consistent with default Arizona law.

However, the parties also agreed that the community would not acquire any interest in the separate property if it appreciated during the marriage even if Husband used community funds to pay the mortgage, taxes, insurance, and maintenance expenses.

Ordinarily, when community funds are used to pay for or improve the value of one spouse’s separate property, the marital community is entitled to an equitable lien — a community lien — against the community funds used and the proportionate share of the equity gained.

After six years of marriage, Husband filed for divorce. Husband later notified the family court that the parties reached a “comprehensive” settlement agreement.

Wife disputed Husband’s characterization that the settlement was comprehensive and claimed it failed to resolve the community’s claim for reimbursement of funds used toward the marital residence, Husband’s separate property. Wife requested that the litigation continue and a resolution management conference be set.

Husband responded to Wife’s filing and argued that the parties’ prenuptial agreement precluded Wife’s claim. He further requested reimbursement of attorney’s fees pursuant to A.R.S. § 25-324(B).

The family court set a resolution management conference where Wife’s attorney argued that the prenuptial agreement was rescinded by operation of law when the parties executed their settlement agreement.

After the attorneys presented their arguments, Wife’s attorney requested an opportunity to fully brief the issue. The family court granted this request and explicitly warned Wife and her attorney that it likely would award attorney’s fees to Husband if Wife’s claims were unsuccessful.

Wife filed her brief and Husband filed a response where he reiterated that the prenuptial agreement precluded or barred Wife’s community lien claim and again requested for attorney’s fees.

The family court agreed with Husband, enforced the parties’ prenuptial agreement, and awarded $5,000 in attorney’s fees to Husband incurred to defend against contest the judge deemed unreasonable.

The parties then submitted competing parenting plans. The family court adopted Husband’s and entered its decree of dissolution.

When Wife appealed, Husband initially challenged the timeliness of the appeal. Husband argued that Wife failed to file her notice of appeal within thirty days of the family court’s ruling that upheld the prenuptial agreement and its entry of judgment related to attorney’s fees.

Although the Court of Appeals found that the ruling regarding the community lien was not a final order and therefore was timely appealed after it was incorporated into the family court’s divorce decree, it agreed with Husband that Mother’s appeal of the attorney’s fees award was untimely filed.

The appeal was limited only to the enforceability of the prenuptial agreement and what, if any, community lien existed against Husband’s separate property.

Wife renewed her argument that the parties’ settlement agreement rescinded the prenuptial agreement. Alternatively, Wife argued that the family court misinterpreted the prenuptial agreement and it did not foreclose her claim to a community lien against Husband’s separate property.

The Court of Appeals declined to address either argument because it found that the parties’ settlement agreement actually foreclosed Wife’s claim to a community lien.

It reached this conclusion based on the language of the settlement agreement which awarded the home to Husband as sole and separate property and subsequently read, “Husband’s attorney shall draft the final documents consistent with the foregoing.”

The appellate panel interpreted this language to reflect the finality of all claims and to imply that a consent decree would be prepared and filed. The Court of Appeals further reasoned that even if the language in the settlement agreement was ambiguous, the parties’ settlement negotiations proved their intent to resolve all claims.

A few months before the parties executed the settlement agreement, Wife’s attorney sent a letter characterized as “global settlement” to Husband’s attorney.

The term “global” is used by attorneys to indicate that the offer is meant to be comprehensive and resolve all contested issues.

As an aside, many attorneys will specify that if the receiving party rejects any single term of a global offer, it is deemed rejection of the entire offer. In other words, the receiving party cannot pick and choose which term(s) to accept and which to reject. It is “all or nothing.”

The letter Wife’s attorney sent specifically “acknowledge[d] that she d[id] not have any specific legal” claim to an interest in Husband’s property but asked anyway if Husband would “consider some monetary token of appreciation for all the work that [Wife] put in the home.”

In her reply brief, Wife argued for the first time that this letter was subject to Rule 408, Arizona Rules of Evidence, and could not be considered.

At the risk of a serious tangent here, most of the Arizona Rules of Evidence do not apply to family court absent a Rule 2 notice.

However, Rule 408 does apply and it generally prohibits litigants from using statements made by the other party during settlement negotiations to prove or disprove a disputed claim.

Notably, this rule does not bar use of those protected statements for other purposes, including to prove existence of an agreement or elements of an equitable defense like estoppel.

Estoppel is a defense that may exist whenever a party asserts a claim inconsistent with his/her previous positions to the prejudice of the other party who relied on the pervious positions.

No doubt this sounds like complete nonsense, so here is a more concrete application:

Imagine Party A maintains throughout litigation that she is entitled to a community lien against Party B’s separate property. After the trial where the family court calculates the lien and awards one half to Party A, she files a motion for a new trial where she alleged for the first time that the property was community property and not Party B’s separate property. Party B may use the defense of estoppel to bar Party A’s claim because it is inconsistent with the position she previously maintained.

In this case, Wife acknowledged in her “global” settlement offer that she maintained no legal interest in the property. Husband relied on this representation when he entered into the settlement agreement.

Wife unsuccessfully challenged several other aspects of the family court’s decree, including the fairness of the parties’ settlement agreement; the adoption of Husband’s parenting plan; and the commencement date of child support.

The Court of Appeals affirmed all of the family court’s orders and awarded Husband a portion of his attorney’s fees based on the unreasonableness of Wife’s positions.

Although it probably seems really obvious, your choice of who you hire to represent you in a divorce or subsequent appeal is extremely important and can dramatically affect the outcome. This warning is not directed at any attorney specifically, but divorce attorneys who market themselves as “aggressive” often escalate conflict that increases their client’s fees and exposes the client to sanctions, including orders to reimburse the other party’s attorney’s fees.