Arizona Court of Appeals

Stevens v. Stevens

Summary

Stevens v. Stevens was an unpublished memorandum decision where the Arizona Court of Appeals reversed the family court’s determination that a home equity line of credit, secured by separate property, was one spouse’s sole and separate debt.

Background

The parties were married in 2013. About a month after their marriage, Husband withdrew $49,446 through a home equity line of credit (“HELOC”) secured by a home he owned prior to the marriage. The parties used the funds to pay living expenses.

During their marriage, Husband worked for a company he founded prior to the marriage. Wife, who could not work as a condition of her tourist visa, cared for the parties’ child. In 2017, the parties physically separated shortly before Husband filed for divorce.

At trial, Wife sought spousal maintenance while she worked to improve her English proficiency to enable self-sufficiency. Husband claimed he could not afford spousal maintenance. He testified that he no longer worked due to a back injury and that he transferred ownership of his business to his mother in 2013. He claimed he earned less than $20,000 per year during the marriage.

The family court entered its decree where it determined the HELOC to be Husband’s sole and separate debt. The court awarded spousal maintenance to Wife in the amount of $1,500 per month for eighteen months. Based on the “substantial disparity of financial resources between the parties” and Husband’s unreasonable positions, the court ordered Husband to pay Wife’s attorney’s fees.

Husband appealed.

Debt Secured By Separate Property

All debt incurred during a marriage by either spouse is presumed to bind the marital community, i.e. both spouses. This presumption even applies to debt that is secured by one spouse’s separate property.

Here, Husband borrowed the funds during the marriage and used the funds for the benefit of the community and there was no evidence presented to rebut the presumption that the debt bound the community. The Court of Appeals reversed the family court’s characterization of the debt as Husband’s separate obligation.

Because Husband paid off the HELOC with proceeds from the sale of his separate property, he requested reimbursement from Wife for her share of the debt. The Bobrow v. Bobrow decision held that a spouse who voluntarily uses separate funds to make payments toward community debts after termination of the marital community may be entitled to reimbursement.

Wife argued that Husband gifted his separate funds to the marital community when he paid off the community’s debt. The Court of Appeals rejected this argument and found no evidence that Husband intended to make any gift to the community. It remanded the reimbursement issue back to family court to be reconsidered.

Attributed Income

Husband also contested the spousal maintenance award and argued that the family court erred when it declined to accept Husband’s account-prepared tax returns as evidence of his income.

The family court found that Husband’s “tax returns are not accurate portrayals of his actual income” and that Husband attempted to “disguise his actual income … to avoid paying spousal maintenance.” It found that more than fifty percent of the charges from his business account were for personal use and used those bank statements to impute annual income of almost $100,000 to Husband.

The Court of Appeals affirmed the family court’s decision and found reasonable evidence to support its attribution of income. Husband and his mother provided inconsistent testimony that was further contradicted by the financial records in this case. His bank statements reflected an average of almost $190,000 of deposits each year during the marriage.

Attorney’s Fees

Based largely on the same argument regarding attributed income, Husband appealed the order that he pay Wife’s attorney’s fees. Pursuant to A.R.S. § 25-324, family courts may order a party to pay the other party’s attorney’s fees after consideration of the parties’ respective financial resources and reasonableness during the litigation.

The family court found that Husband earned nearly $100,000 per year while Wife’s English proficiency and employment history limited her opportunities to a minimum wage job. It also found that Husband acted unreasonably when he tried to conceal his income.

To make matters worse, the Court of Appeals awarded Wife additional attorney’s fees related to the appeal even though Husband partially prevailed. This is a very real risk that attorneys must take special care to communicate to their clients. The current system is not entirely merit based, though Husband’s positions certainly did not help him. We take great pride in our ability to protect our clients from awards of attorney’s fees.

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