Prenuptial Agreements: An Appeal

Schlaefer v. Financial Management, 196 Ariz. 336 (App. 2000)

This case had a far-reaching impact on Arizona law. It was the first appeal I had done. As it was back in the days of snail-mail, I actually found out about the Court of Appeals’ opinion when a reporter called to interview me about it. He said he wanted to discuss the opinion with me, as he believed it would have a serious impact on Arizona law. The only problem was, I didn’t even know the Court of Appeals had ruled yet; it hadn’t reached me, but the reporter got it straight from the Court of Appeals. Still, it was great to hear I had won the first appeal I had!

Our firm had drafted a prenuptial agreement for our client a few years prior. That agreement provided that each spouse’s income, assets, and obligations would remain the separate property and responsibility of that spouse throughout the marriage. This is permissible under the Uniform Premarital Agreement Act, although the superior court judge in this case disagreed. More on that later.

During the marriage, the wife was admitted to the hospital for medical care. The hospital asked the husband to sign as the responsible party for the soon-to-be-coming bills. He declined and told the hospital that the parties had a prenuptial agreement that made the bill the wife’s sole responsibility.

Later, after their marriage had ended, the hospital debt was still unpaid. The hospital sent the account to a collection agency. Now – and this is important – Arizona law is clear that a creditor such as this debt collection agency is not bound by a divorce decree. Any creditor can and will go after whichever party gives them the best chance to collect the debt, regardless of how the judge allocated responsibility for the bill. In this case, that meant the hospital was going after our client. When the debt collection agency filed suit against our client, we claimed that the prenuptial agreement entitled him to summary judgment. That means that the central facts are not in dispute, and it is only a question law, so no jury or any other type of trial should be necessary.

The superior court judge held, just as I said above, that Arizona law allows a creditor to collect from either spouse because of Arizona law. We knew that. We argued instead that the prenuptial agreement changed that law in this situation between the two spouses.

The judge held that prenuptial agreements did not allow one spouse to avoid a debt contracted during the marriage.

We disagreed. In fact, I thought this case was a slam dunk and was shocked at the judge’s ruling against us.

To the Court of Appeals, I argued that A.R.S. § 25-203(A)(1) specifically says that agreements may cover “rights and obligations,” and an “obligation” was exactly what we were fighting about. Therefore, the prenuptial agreement should be binding as an exception to the rule that creditors are not bound by the divorce decree. Therefore, the agreement should bar collection of the debt from my client.

The Court of Appeals agreed.

Not only did the Court of Appeals instruct the superior court to vacate the ruling it had entered, but it also instructed the superior court to enter judgment in favor of us, and they awarded us attorneys’ fees. I had never seen a victory that complete.

This was a very rare level of victory, but there was a lot of backlash in the legal community over this case. The creditor’s attorney told me this was the first case his client had ever lost. Other attorneys called him, urging him to take it up to the Supreme Court. In response to this case, the legislature passed a new statute designed to expand the rights of creditors in divorces. (Because creditors have the money to hire lobbyists, and consumers don’t, but that’s another topic.) The ASU Law Journal included an article about the case later that year. 32 Ariz.St.L.J. 1051 (2000). To this day, if you google the subject of prenuptial agreements in Arizona, you will see several law firms with an article about this case posted on their website.

Now, there’s another nuance to this case. I confess, there was one argument the other side could have raised but did not. I’m not going to put it in writing here, of course, but I tell you this to help you understand one more thing that is vital to your case: Your lawyer has to understand both the strengths and the weaknesses of your case. Your lawyer has to anticipate what the other side will argue. In this case, the other side had an argument to make (that I knew about, but they apparently did not) but left it on the table. I had a pretty good argument ready if they had raised the argument, but we are grateful to have left with the victory in this case.

To summarize, you want and need an experienced and knowledgeable lawyer to guide you through an issue involving a prenuptial agreement or a marital debt. There is likely far too much at stake to risk an incomplete understanding of the law or a mind that does not focus on details.

Relocating with Children: A Gray Area in Appeals Court

Buencamino v. Noftsinger, 223 Ariz. 162 (App. 2009)

Most family lawyers will agree: Relocating to another state with children is one of the most difficult things to do in family court. Most judges simply do not want to let it happen. Still, the statute gives the judge wide discretion to do whatever he or she feels is in the children’s best interests, so some judges feel very differently about the subject.

Understanding the law – the specific statute that controls the issue – can therefore be crucial in guiding the judge to make the proper decision.

This case involved one parent who lived in Arizona and another parent who lived in Maryland at the time the action was filed. The trial court issued an order for equal parenting time, notwithstanding the distance between the two parents. The father appealed, arguing in part that the trial court erred by failing to apply the relocation statute, A.R.S. § 25-408 because, as I mentioned above, relocating is a very difficult thing to do when a judge properly follows that statute.

My argument on this subject was extremely short, sweet, and to the point. (I find that is usually the best way to convince a judge, whenever possible. It is my experience that Albert Einstein’s observation also applies to law: Everything should be made as simple as possible, but not any simpler.) My argument consisted of just a few sentences pointing out that the relocation statute did not apply under its own terms because the parties were in separate states at the time the action was filed.

The Court of Appeals agreed and apparently felt strongly that many judges were overlooking such a simple part of the statute. For that reason, the Court of Appeals deemed the issue worthy of a reported case to help guide other judges and litigants.

This case, however, comes with a warning: Relocations are still very tricky, despite this case and other reported cases on the subject since then. In my opinion, the statute still needs clarification in other ways, and only the Court of Appeals or Supreme Court can give that clarification. Some judges apply the statute in circumstances where I really don’t think it should be applied. Some judges don’t apply it where I really think it should be applied. There is still some gray area, and that gray area can be tricky and painful to navigate.

Please do not try to navigate a relocation alone, regardless of whether you are seeking it or opposing it.

Non-modifiable Spousal Maintenance

In re Marriage of Waldren, 212 Ariz. 337 (App.2006); 217 Ariz. 173 (2007)

One of the sad truths about being a lawyer is that sometimes you do your best work in cases that you don’t win. Sadly, this one was such a case.
In Waldren, the husband signed a consent decree that he never should have signed. It was painfully egregious in many ways, but he believed he had no choice but to sign it, as the wife’s lawyer told him that signing it was necessary to avoid his “immediate incarceration.”

Sometime after signing it, he came to our firm, where Founder and Family Law Attorney DeeAn Gillespie did everything humanly possible to minimize the damage caused long before the client came to us. The client had fallen off a roof and was genuinely disabled. However, he was still bound by the terms of this onerous divorce decree, specifically with respect to paying spousal maintenance.

DeeAn and I strategized heavily on the case. We knew we couldn’t do a typical support modification under A.R.S. § 25-327 because the spousal maintenance was designated as non-modifiable in the decree. (You may have heard of this as “alimony.” However, that term is not used in Arizona. Instead, it’s called “spousal maintenance” here.)

At the same time, the client was genuinely disabled and clearly not able to pay maintenance for the next several years, as called for by the decree. We had to get seriously creative to help this client.

And we did. We argued that there was a provision in one of the rules of procedure that allowed the Court to end an order when “applying it prospectively is no longer equitable.” The Court of Appeals agreed with us! We were so pleased! We had helped a client in a genuinely deserving situation. We had succeeded in swimming up a waterfall to do it, and the Court of Appeals just gave our efforts a great big seal of approval.

But remember how I stated that a party can ask the Arizona Supreme Court to review a Court of Appeals’ ruling? That’s what happened here. This case sparked a lot of response among lawyers and judges. Many family law practitioners were genuinely shocked at the Court of Appeals’ opinion and convinced some people that the sky was falling in family court. A large team of lawyers was recruited to challenge the Court of Appeals’ ruling, and the Supreme Court ended up reversing the opinion.

There was one silver lining to the ruling. I’ll tell you more about it in another article.

I will go to my grave believing that the Supreme Court got some parts of this ruling wrong because I’m stubborn. Being stubborn also means I’m a devoted advocate, and that’s the kind of lawyer you want.

I have called other areas of law tricky; I will call this one flat out dangerous. Please seek the advice and experience of a lawyer when dealing with the subject of spousal maintenance. It is evolving regularly, and there are many things you need to know about it that only an experienced lawyer can realistically tell you.

Fraud on the Court: A Spousal Maintenance Appeal

McNeil v. Hoskyns, 236 Ariz. 173 (App. 2014)

In Waldren, the Arizona Supreme Court pretty much rendered a non-modifiable award of spousal maintenance (again, you may know this by its non-Arizona name of “alimony”) bulletproof. I say “pretty much” because the Supreme Court left one very small door open. A footnote in the Supreme Court case states that the Court was not expressing any opinion as to whether a doctrine called fraud on the court could or could not be used to get out of an otherwise non-modifiable order.

The Supreme Court opened the door just a crack, and DeeAn and I barged through it in this case.

Our client was a dentist who, like the husband in Waldren, had fallen on hard times. Through a mix-up in his office, his wife was actually receiving not one but two checks for $5,000 each month for 17 months while the divorce was pending. This was a huge overpayment. Since the accounting was being done by an outside source, the only one who noticed the overpayment was the wife. She literally sat back and watched the money roll in – money that wasn’t hers.

When the divorce went through, the husband was going through those aforementioned hard times. In this vulnerable state, the wife convinced him that he had actually underpaid his temporary support obligation, when in fact he had overpaid by a whopping $85,000. She knew this. He didn’t. In fact, she outright lied to the Court by claiming that he had underpaid, and he was in no mental condition to catch the error, and we were not representing him at the time.

The final decree went through with an order for non-modifiable maintenance extending well into the future.

To make it even worse, the wife received several more double payments after the divorce.

When the husband was no longer able to keep up financially, he missed a few months of payments, and the wife pounced, filing a contempt petition.

Based on the wife’s representations, which again did not note any of the double payments, the superior court found that the Husband owed $59,000 in back support.

He then came to our office in a most vulnerable and downtrodden condition. That’s when DeeAn found the overpayment, and we filed an action to address the wife’s multiple acts of dishonesty.

As you would hope, the judge was not pleased with the wife’s misconduct. He found that her conduct amounted to fraud on the court.
This is a unique and rarely used argument / legal doctrine that few people understand. It is not the typical fraud that you might associate with a bad real estate transaction or something like that.

Having found fraud on the court, the trial court vacated the non-modifiable spousal maintenance and sanctioned the wife severely for her dishonesty towards the court. This was the best ruling we could have hoped for.

The wife then appealed, arguing under Waldren (I told you that case was a big deal!) that the trial court could not do what it did because the maintenance (aka alimony) was designated as non-modifiable.

The Court of Appeals found, just as we had argued, that the Supreme Court carved out this niche doctrine of fraud on the court as a proper legal avenue to set aside a non-modifiable maintenance award. (Note: Setting aside or, specifically in this case, declaring an order void is different from modifying it. The distinction is subtle but important.)

In short, fraud on the court occurs when one party to a lawsuit prevents the other party from having his claims fairly heard and decided. This can come in the form of concealing important facts. In this case, the important facts went straight to the issue of how much was owed. It was undeniable that the wife had lied directly to the court on this central issue. It was not a he-said-she-said issue that comes up all the time in court, and they’re pretty much impossible to beat on appeal; this was more because the facts were undisputed.

I am surprised that this case is not followed or relied on more widely. Under the right facts, this doctrine, as fully explained in McNeil could be used to help many clients. If you think you might be one of them, please, let’s talk!

Jurisdiction Under the UCCJEA: Grandparents Rights

Greenbank v. Vanzant, 250 Ariz 644 (App. 2021)

In many child custody cases, the parents or people acting as parents live in different states. This often leads to disputes about which state, or which jurisdiction, should decide the case. To bring some sanity and uniformity to these disputes, 49 states, the District of Columbia, Puerto Rico, Guam, and the US Virgin Islands have all adopted the Uniform Child Custody Jurisdictional and Enforcement Act, known more simply as the UCCJEA. This law also has been held to govern adoptions, not just divorces and typical custody cases.

For some reason, our firm has been a magnet for attracting jurisdictional disputes. We know what we are doing in this area. With so much practice, we had better. One of the many jurisdictional cases we have had is Greenbank v Vanzant, a reported opinion from the Court of Appeals that deals with losing jurisdiction to enforce an order. Most UCCJEA cases deal with courts taking original jurisdiction, so apparently the Court of Appeals thought this case was important enough to be a reported opinion because it deals with the other side of the coin.

In Greenbank, the child’s father had passed away. The mother remained here in Arizona for a short while, during which time an order for grandparent visitation was entered. The mother and child then moved to Canada, where the mother filed her own action to cover the issue of grandparent visitation. In the meantime, the parties became severely disaffected, and the child wanted nothing to do with the grandparent living in Arizona. Robert Newell of our office came onboard to represent the mother.

Because neither parent nor anyone acting as a parent (that’s an overlooked part of the statute) lived in Arizona. Therefore, Robert argued, Arizona lost jurisdiction to enforce the grandparent visitation order. When a new judge was assigned to the case, he agreed with Robert, and dismissed the Arizona action in favor of the case in Canada.

The grandmother did not want to go to Canada to fight the case. She had already lost a court case there, and the judge there was not sympathetic to her. This is a perfect illustration of why the UCCJEA is so important: Different jurisdictions have different laws that may be more helpful to a party’s case.

Very upset at this ruling and not willing to go to Canada, the grandmother enlisted a large Phoenix firm to appeal. I took over the case on appeal after being involved on the sidelines in the trial court because we anticipated an appeal. The Court of Appeals agreed with us. We had been right all along, and the Court of Appeals finally affirmed that.

Jurisdictional disputes are often very difficult cases. For one, they require a lot of work and time just to get to the starting line. We don’t even get to the merits of a case until we finish fighting a jurisdictional dispute. But our firm has done so many of them that we are as efficient and as effective as possible.

Community Liens: Appealing in Arizona

Barnett v. Jedynak, 219 Ariz. 550 (App. 2009)

In Barnett, the husband purchased a home prior to the marriage. Under Arizona law, that makes the home the husband’s separate property. However, this case had a few facts that made it unique and distinguishable. Read on.

The parties lived together in the home before getting married. The future wife claimed to have made the mortgage payments on the home prior to the marriage while the future husband was unemployed. The Court of Appeals did not accept this argument, but that did not end the inquiry in this case.

While they were married, community property (the parties’ joint incomes while they were married) was used to pay the mortgage. Since the home was the husband’s separate property, the community property funds used to pay down the mortgage increased the equity in the home. That does not change the ownership of the home; it’s still the husband’s home since he bought it before the marriage.

However, the payment of community funds to increase the equity in property, either through paying down the mortgage principal or through improvements to the property, does entitle the other spouse to what is called a community lien. That is well settled in Arizona law.

However, the calculation of that community lien is a not-so-well-understood part of Arizona law. Almost exclusively, trial courts will look to the case of Drahos v. Rens, 149 Ariz. 248 (App. 1985). The problem with Drahos is that the formula given in it rarely if ever perfectly applies to the facts of most divorces where a community lien is being calculated.

In Drahos, the husband bought the home literally the day before the marriage. That made it his sole and separate property, but it also made the amount of the community lien deceptively easy to calculate when the parties got divorced.

To calculate a community lien properly, multiple values are involved: the value at the time of purchase, the value at the time of marriage, and the value at the time of the dissolution. Because the home was purchased at essentially the same time as the marriage, two of those values were identical. Realistically, this won’t happen in any divorce case.

That means that the judge will almost certainly be using the wrong formula to calculate the community lien because he or she will almost certainly be relying on Drahos when the facts of Drahos just don’t match the facts of the case before the judge.

I did not handle this case in the trial court, but the attorney who did recognized that the Drahos formula would not fit in this case because the home had time to appreciate prior to marriage, unlike the home at issue in Drahos. So, that attorney proposed a different numerical formula (flashback to high school algebra) that he believed fit the facts of the case and accounted for the pre-marriage appreciation that should not be part of the community lien.

The rationale made perfect sense, but the Court of Appeals disagreed with the formula. So, yes, I lost the case, but there was really nothing I could do. The Court of Appeals wanted – and needed – to give a formula that fit the facts of this case and most other cases to calculate a proper community lien.

This case is significant because hardly any other lawyers or even judges know about this case. When I have cited it to judges, they have given me a strange look, as if they have never heard it before. Instead, they go straight to Drahos and its formula without even thinking. Hardly any lawyers know enough to redirect the judge towards this case, which is the real and proper law governing community liens in almost all cases.

This should not be! Even though I lost this case, it still made me a better lawyer because it put our firm and me in the small minority of practitioners who know and follow the actual law. Granted, this may help you or hurt you, depending on which side of the equation you’re on. Either way, this is the actual law that is followed too infrequently.