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Defense to Reimbursement in a Divorce in AZ | Hildebrand Law, PC

Posted on : August 2, 2018, By:  Chris Hildebrand
Defense to Reimbursement in a Divorce in AZ

The Arizona Court of Appeals in the case of Bobrow v. Bobrow held a spouse who pays community bills during a divorce in Arizona may assets a claim to have the other spouse pay reimbursement for his or her share of those bills.

The question becomes is there a defense to such a claim in an Arizona divorce case.

The simple answer is, yes, there is a defense to a Bobrow claim in an Arizona divorce.

The Arizona Court of Appeals in another appeal in the case of Barron v. Barron addressed whether there was a defense to such a claim in a divorce.

In Barron, Husband requested an equalization payment from Wife.

During the divorce and after the divorce petition had been served, the husband paid over $36,000.00 in community bills.

Since the divorce petition had been served, the funds used to pay these community bills were from earnings which are considered to be his separate property.

Employment earnings for work performed after the date of service are considered the separate property of each spouse.

There are exceptions to that general rule, but none of those exceptions existed in this case.

In this case, Husband worked and Mother was unemployed.

The parties also lived in the same house together during the divorce.

The trial court found that “in fairness” it could not order an equalization payment without also retroactively modifying temporary support orders because Wife had an “equitable right to financial assistance” from Husband given their financial situation.

Husband argues on appeal that the trial court was required to order the wife to pay him an equalization payment pursuant to the prior ruling in the Bobrow case.

The Court of Appeals, therefore, had to review its earlier decision in the Bobrow case to determine if the trial judge failed to follow the law or abused his or her discretion in denying Husband’s reimbursement claim.

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The Impact of a Spousal Maintenance Claim on a Bobrow Claim

The Arizona Court of Appeals concluded the trial court did not come to the unsupportable conclusion that Husband gifted his separate income to the community when the husband paid community bills with separate property.

So, the trial court did not violate the ruling in Bobrow as to that issue.

The Court of Appeals concluded that given the financial disparity between the parties, the trial court had the authority at trial to retroactively award Wife spousal maintenance.

The appellate court found ample evidence suggesting Wife would not have been able to contribute to the payment of those community bills absent an award of spousal maintenance.

This ruling, essentially, is that a spouse who may have been eligible for spousal maintenance may mitigate against or defeat a Bobrow claim by showing a financial inability to contribute to the payment of those bills and demonstrating a need for alimony at trial even if the spouse did not seek a temporary award of alimony during the divorce.

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Ferrill vs. Ferrill: Ouster from the Community Home and Fair Market Rental Value as a Defense to Reimbursement

In 1990 Wife and Husband married. However, in July of 2019 Husband decided to move out of the marital home. Wife remained in the marital home, and in October of 2019 Wife filed a petition for dissolution of marriage. Husband was served with the petition that same month.

After the petition was served, Wife continued to make payments towards the community mortgage using her separate funds. These payments totaled around $74,000.

At the trial, Wife sought reimbursement for the payments she made towards the community mortgage after husband had been served with the petition for dissolution of marriage.

Husband argued that the wife should not be reimbursed for the payments made because Wife had sole use of the home during the pendency of the dissolution proceedings. Husband argued that Wife received a benefit by having exclusive use and control of the marital home.

A Spouse is Eligible For Reimbursement of Payments if the Other Spouse Was Not Ousted

Learn About a Defense to Reimbursing Your Spouse for Paying Bills in an Arizona Divorce

The Court held that when an occupying spouse makes payments towards a community mortgage using their separate-property funds during the pendency of their dissolution, “the court has the discretion to offset the reimbursement by up to one-half of the home’s fair rental value under equitable principles, but only if the occupying spouse ousted the other.” Hence, Husband’s exclusive-use argument is not determinative of any reimbursement that Wife is potentially owed.

The Court went on to explain that when a spouse makes payments towards a community mortgage using separate funds during the marriage, such payments are presumed to be a gift to the community. However, when such payments are made after the petition for dissolution of marriage, such payments are not presumed to be a gift to the community.

When a spouse makes post-service payments towards a community debt, the Court must consider those payments in its equitable distribution of property. Such payments are generally entitled to reimbursement, even if the paying spouse continues to occupy the marital home post-service.

However, the leaving spouse may be entitled to offset the reimbursement claim if the occupying spouse “ousted” the leaving spouse from the marital property. If the leaving spouse was ousted, the leaving spouse can offset the reimbursement claim by up to one-half of the fair market rental value of the home.

The court noted that exclusive possession of the marital home, standing alone, does not prove that a spouse has been ousted. To prove ouster, a leaving spouse must point to specific facts showcasing that the occupying spouse has “claimed as an individual more than their due.”

The Court went on to state that each spouse is entitled to use the marital home after the service of dissolution is filed and served.

When determining whether a leaving spouse has been ousted, courts will generally look at whether one spouse has denied the other’s right to occupy the marital home. “The court may base its finding of exclusion on any evidence that one party possessed the property with the intent to occupy the premises in a way that excludes or denies the rights of the other.”

Ultimately, the Court did not decide the issue of whether or not Husband had been ousted, instead choosing to remand the issue back to the trial court. But, the Court did note that it appeared Husband had left and stopped living in the home voluntarily.

The Court also noted that when Husband did appear at the marital home to inventory some of the home’s community property, Wife denied him access.

The Court went on to state that a party claiming ouster will have the burden of proving that an ouster occurred and when it occurred; the spouse claiming ouster will also have the burden of proving the fair market rental value of the property.

Huey v. Huey: Denial of a Claim for Reimbursement of the Payment of Community Expenses in Lieu of Spousal Maintenance

In the appellate case of Huey v. Huey, the husband appealed a decision of the Arizona Superior Court denying Husband reimbursement of community expenses Husband paid in accordance with temporary orders during the pendency of the divorce.

Husband cites Bobrow v. Bobrow in support of his claim. Under Bobrow, “post-petition expenditures paid by one spouse with separate property to service community debt are not presumptively gifts to the community, and the paying spouse thus is generally entitled to reimbursement.”

Additionally, reimbursement for such payments can be achieved in a variety of ways. For example, an Arizona court can reimburse such payments through a more equitable distribution of property. Hammett v. Hammett. In another example, an Arizona court could “retroactively apply such payments as temporary spousal maintenance.” Barron v. Barron.

During the beginning stages of the parties’ divorce the Arizona Superior Court entered temporary orders requiring “(1) Husband pay certain community expenses related to the marital residence, the parties’ insurance, and the parties 2018 quarterly tax payments, and (2) Husband pay Wife $1,000 per month (later increased to $1,500 per month) in temporary spousal maintenance effective May 2018.”

During the trial held by the Arizona Superior Court, the parties disputed whether the Arizona Superior Court should adjust the amount of spousal maintenance and whether Husband should be reimbursed for Husband’s payment of community expenses.

In Wife’s pretrial statement however Wife did agree with Husband that the 2018 tax payments should be reimbursed to Husband.

The Arizona Superior Court then entered an order requiring Husband to pay a lump-sum of $20,000 in retroactive spousal maintenance and denied Husband’s request for reimbursement of post-petition expense.

The Arizona Superior Court explained that the order requiring Husband to pay the residence and interest made “in the context of an appropriate award of spousal maintenance early in the case.” But, “the Arizona Superior Court did not mention reallocation of the 2018 tax payments.”

Husband argues that under Bobrow, the Arizona Superior Court cannot “deny reallocation of his post-petition residence and insurance payments while concurrently ordering an additional $20,000 in retroactive spousal maintenance.” The Arizona Court of Appeals disagreed with Husband.

The Arizona Court of Appeals stated that under Bobrow the Arizona Superior Court can “account for such post-petition payments (if appropriate) by applying them as a retroactive award of temporary spousal maintenance.”

In the case at hand, the Arizona Court of Appeals determined that the Arizona Superior Court “exercised its discretion to deny reallocation precisely because those payments formed a part of what the Arizona Superior Court deemed ‘an appropriate award of temporary spousal maintenance early in the case.’”

The Arizona Court of Appeals gave deference to the Arizona Superior Court’s finding of a significant financial disparity between Husband and Wife.

Ultimately, under all the facts, the Arizona Court of Appeals determined the Arizona Superior Court did not abuse its discretion when ordering Husband to pay a lump-sum of $20,000 while declining to reallocate Husband’s post-petition payments made on the residence and post-petition insurance expenses.

However, the Arizona Court of Appeals determined that the Arizona Superior Court erred when Husband’s 2018 tax payments were not reallocated or reimbursed.

In 2018 Husband paid the community’s taxes in compliance with the Arizona Superior Court’s orders, which was “nearly $10,000.”

Although the Arizona Superior Court’s orders were silent as to whether the tax payments would be reallocated and essentially reimbursed, “there is no evidence that Husband intended the payments to be a gift to Wife.”

“To the contrary, in the joint pretrial statement, both Wife and Husband agreed that the 2018 tax payments should be reallocated.”

Since the Arizona Superior Court failed to provide an explanation on the matter, the Arizona Court of Appeals vacated the decision denying Husband reallocation of Wife’s portion of the 2018 tax payments.

The issue was then remanded back to the Arizona Superior Court with a reminder that reallocation of Wife’s portion of the 2018 tax payments Husband paid can be made in a multitude of ways, such as a more equitable division of community assets

Arizona Attorneys Representing Clients in Community Property Reimbursement Claims

If you have questions about defense to reimbursement in an Arizona divorce case, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property and family law attorneys have over 100 years of combined experience successfully representing clients in community property and family law cases.

Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.

Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona community property or family law case around today.

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