Posted on : October 10, 2016, By: Christopher Hildebrand
Community Lien in Arizona
The Arizona appellate court in the matter of Rowe v. Rowe was faced with an appeal concerning the characterization of a business as Jack’s sole and separate property or the parties’ community property, as well as the correct valuation methodology to use to value that business or any community lien attaching community lien attaching to that business that business. The facts are straightforward. Jack owned an unincorporated business prior to his marriage to Patricia. Jack made the decision to incorporate that business shortly after the parties’ marriage. In doing so, Jack issued all of the shares in the newly formed corporation to himself and named himself as an officer of the company. Jack also named Patricia as an officer of the company. Shortly before filing for divorce, Jack removed Patricia as an officer of the company.
The Arizona trial court found that the business was Husband’s sole and separate property and that the community had been fairly compensated for any increase in the equity of the home. The trial court used the “reasonable value of community services” valuation methodology, as opposed to the “fair rate of return on the initial capital investment” approach in valuing the business.
Jennifer, thank you for being my attorney. I could not have been more pleased with the outcome of my family court hearing. Everything you have done for me throughout this case reflects in the final ruling of the judge. You helped me keep my head together and taught me a lot about myself as a person. I learned so much about my life from observing and listening to you. I will take all the advice you gave me to continue taking responsibility for my choices, continue to put the kids' needs first, and always stay truthful. Your diligence, dedication, and persistence in my case made what seemed impossible, possible. You are a wonderful person and an amazing attorney and I am stronger and more confident because of you.
I just want to again thank the Firm for working with me all that it has. I could not have done anything without everyone's assistance. You, Chris and Stacey have been and continue to provide me with compassion and hard work towards my case. Also a very special thanks to Kip for taking my case in the beginning. Also continued support from him and his dedication to providing me with his expertise in this matter.
After interviewing several law firms, I came across Jennifer Shick, and her firm, who I hired to represent me for my Family Court case. Jennifer has extensive knowledge of the law and is determined to bring the truth to every issue involved within the case. Throughout my case, Jennifer was prepared meticulously as well as went above and beyond all of my expectations. Even when the other party tried to differ from the truth, lie to the Judge, and turn situations around, Jennifer remained attentive and provided substantial evidence to show the judge the facts as well as the proof to support what was the best interests of my children. Additionally, Jennifer helped me endure many difficult experiences, situations and inspired me to remain positive throughout the entirety of my case. Her kindness, compassion, and professionalism helped me through very difficult times and made the process feel a thousand times lighter on my shoulders. She truly has my children and my best interest at heart and I trust her perspective as well as her honesty on each and every aspect of my case. She lessened the burden on my shoulders and even when I felt like the case was not going to go in my favor, Jennifer was open-minded and reassured me that the Judge would, in fact, see the truth, which he did and the case went in my favor. After nine months of court, everything finally came together. I cannot declare how much Jennifer has been an outstanding attorney. She addressed each and every issue with diligence, she cares about her clients and their families. Jennifer genuinely cares about her clients and her dedication to the details of the case was remarkable. Overall, I am extremely pleased with Jennifer’s services and I am truly thankful that I was so blessed to have her represent my children and me. I highly recommend Jennifer as one of the best attorneys in Arizona and if the situation ever arises, I will definitely have her represent my children and me again.
Dear Stacey and Kip, How can I ever thank you enough for helping me through the most difficult time in my life? I couldn't put into words my heartfelt gratefulness. You both were so compassionate and professional at every given moment throughout this process with me. I thank you from the bottom of my heart. You helped me to regain my freedom.
I was a client of Attorney Kevin Park for the dissolution of a divorce in 2016. And since I had never had the need to hire an attorney before for any purpose, I was somewhat apprehensive of the process. But the very calm and professional demeanor of Mr. Park eased my fears. He adeptly answered all my questions and I clearly knew the process and what to expect. And the skilled manner he communicated with opposing counsel was perfect. When it came down to negotiating with my spouse’s counsel, I knew I had selected the best attorney for my situation. What I noticed and appreciated was that he was using just the right amount of pressure with opposing counsel as was necessary. If you find yourself in this situation, you will want a seasoned professional like Mr. Park on your side. I'm very grateful that he was my attorney and not the opposition!
Chris is a smart and aggressive attorney for his clients. Chris always tries to reach a fair settlement of his cases. I’ve represented clients when Chris was the opposing counsel and while he is professional and amicable to work with, he does not back off on what he needs to do for his client
Kevin Park of Arizona Estate Planning Attorneys was just what I needed for my divorce. He was very approachable and personable. He was quick to recognize what I needed and provided it quickly and efficiently. I hope to never need a divorce lawyer again, but if I know anyone else who does, I will definitely recommend Kevin.
I feel that Tracey Van Wickler is certainly one of the best family lawyers around. She is logical, intelligent, and truly cares. Tracey always does what is in the clients best interest, does it well, timely and with integrity. She is good at keeping her clients informed as to what is going on and clear in her communication both written and verbally. I have recommended Tracey to other people and will continue to recommend her. I recommended Tracey to someone who was having issues with their ex-wife and his response was, “I know how good she is because I went up against her and she ate me for lunch”. This same person was so impressed with her, he even recommended her to someone else, WOW, that is impressive! I am exceptionally happy with her attention to detail, her ability to explain things in ways that are easy to understand, as well as her ability to keep everyone focused on the most important things. I would recommend Tracey to anyone who may be in need of her services.
I retained Hildebrand Law after interview a number of firms in the valley. Working with Michael C. was incredibly easy and informative. My case progressed in such a organized and thought out way to ensure that my needs were met. Michael was incredibly proactive and was able to see far ahead into my case to steer clear of some roadblocks. I would not hesitate to recommend Michael Clancy, and Hildebrand Law in general, to anyone.
I have worked with Hildebrand law for about 8 years. They are always ready to serve, provide guidance and give you a few options. When they provide you options they also take the time to walk you through the pros and cons of each and give you a recommendation of what is best, but will listen to you and support whatever course you choose after making and educated choice. I’d recommend them to my closest friends and feel Chris Hildebrand is now a friend to me.
Despite the unfortunate situation I found myself in, Chris Hildebrand @ Hildebrand Law helped me maneuver every step with professionalism, expertise, and even a sensitivity that was an added bonus.Chris and his staff helped me even when I didn't know I needed the help. In other words. . . they made sure we did not leave anything undone. And in the rare instance we needed the expertise of another professional, Chris knew exactly who to recommend.Chris also knew, because of his experience, what to anticipate down the road of litigation. That meant we were better prepared to meet the challenges head on, which lead to a more equitable and fair outcome. I appreciated that Chris did his best to meet my every need in a timely fashion, even if I had a simple question that required only a phone call or e-mail or if we needed to talk face-to-face.I highly recommend Chris Hildebrand @ Hildebrand Law, PC.
I cannot express enough how thankful I am that I found Hildrebrand Law. Chris Hildebrand is an excellent attorney who has my best interests in mind and always encourages me to do the right thing regardless of what the opposing party is doing. Chris knows family law very well and relies on that knowledge to format options and solutions for each situation that may arise. He knows what the Court expects and what will and will not be tolerated. He has attempted to settle this case quickly and as inexpensively as possible from the start. His paralegal, Laura, is remarkable. She is organized, quick to respond, and compassionate. Chris is well prepared with a binder full of detailed and organized information and that is likely due to her thorough skills and expertise. While getting a divorce that was unexpected is a painful and difficult process, Chris and Laura treat my family and I like friends rather than another just "client." I am hopeful that I do not need to recommend divorce lawyers to anyone in the future but if I do, Hildebrand Law will be a recommendation I would give hands down.
Patricia’s argument at trial was that the incorporation of the business owned prior to marriage turned it into community property in Arizona by the mere creation of the newly incorporated business. The Arizona appellate court disagreed. Specifically, the appellate court held that the Arizona case of Bender v. Bender does provide a rebuttable presumption that property acquired during a marriage is presumed to be community property. However, the appellate court also pointed out the ruling in Cockrill v. Cockrill providing that property acquired prior to marriage remains the separate property of the spouse who acquired that property unless and until the parties agree otherwise.
Arizona Community Lien.
The appellate court agreed with the trial court’s reliance on the case of Porter v. Porter, which held that a simple change in the form of a company as a result of incorporation during the marriage does not change that separate property into community property.
The trial court found the value of the business had no increased and that the community was fairly compensated for the work Jack provided to his company from the earnings that flowed through to the community during the parties’ marriage. The appellate court one step further to cite Michelson v. Michelson and Katson v. Katson in support of the proposition that a spouse should not be required from withholding his or her labors during marriage towards their sole and separate business out of fear of converting the sole and separate business into a community asset.
Patricia, however, argued that the day to day balances in Jack’s business accounts varied on a regular basis and that those funds were earned from Jack’s community labors and, therefore, the business accounts were commingled and, therefore, were transmuted to community accounts. Patricia relied upon existing Cooper v. Cooper, which held that the commingling of separate and community funds into accounts may transmute those accounts into community property.
The Arizona appellate court disagreed. The appellate court distinguished the Cooper v. Cooper rule by holding business accounts are treated differently than personal accounts because the commingling of sole and separate funds with community funds in a personal account may make the identity of the separate funds too difficult to determine and it appears as those spouses intended to treat such personal accounts as community property. Such was not the case here where the business accounts remained in the sole name of the community and the trial court found that community had been adequately compensated for Jack’s labors spent in his business during the parties’ marriage.
How is a Community Lien Calculated
Community Lien in Arizona.
Patricia then challenged the business valuation methodology adopted by the Court. Patricia argued that the “fair compensation to the community” approach in the California case of Van Camp v. Van Camp emphasizes the focus upon the capital of the business, whereas the “fair rate of return on initial investment” approaches in the California case of Pereira v. Pereira case focuses on the community efforts expended on the business by a spouse during the marriage. Patricia argued the latter approach was more appropriate because the increase in the value of the business was not related to the initial premarital capital investment but, instead, the labors of Jack during the parties’ marriage.
The appellate court relied upon the Cockrill v. Cockrill decision and held that the Cockrill decision made it clear that all businesses and situations in a divorce will be uniquely different and, further, that there needed to be different valuation methodologies based upon those differences. In a situation wherein the growth was solely the result of the capital investment or, on the other extreme, solely the result of labor then Patricia’s argument may have prevailed. However, there will rarely be a situation that falls into either extreme scenario.
The appellate court then cited the language in Cock rill that provided a trial court is not bound by any one methodology and must select the business valuation methodology that will achieve substantial justice. The appellate court agreed with the trial court that the value of the business was not based solely on Jack’s initial investment but the ten years of pre-marital labor he invested in that business.
Community Lien and Fair Compensation Approach
The appellate court, therefore, confirmed the trial judge’s use of the “fair compensation to the community” approach and affirmed the trial court’s ruling.