In re the Matter of: KAREN K. HEFNER, Petitioner/Appellee-Cross Appellant,
GARY S. HEFNER, Respondent/Appellant-Cross Appellee.
from the Superior Court in Maricopa County No. FN2015-050301
The Honorable Jennifer E. Green, Judge
Dickinson Wright, PLLC, Phoenix By Leonce A. Richard III
Counsel for Petitioner/Appellee-Cross Appellant
Ellsworth Family Law, P.C., Mesa By Steven M. Ellsworth,
Glenn D. Halterman (argued) Counsel for
Paul J. McMurdie  delivered the opinion of the Court, in
which Presiding Judge Michael J. Brown joined.
Gary Hefner ("Husband") appeals, and Karen Hefner
("Wife") cross-appeals, from a decree dissolving
their marriage. Between them, the parties assert that the
superior court erred by: (1) treating personal injury damages
related to two automobile accidents as community property;
(2) finding an auto-repair business was Husband's
separate property and Wife was not entitled to a community
lien on the property; (3) denying both parties reimbursement
for expenses paid during the dissolution proceedings; and (4)
awarding Wife only a portion of her attorney's fees. For
the following reasons, we affirm the orders regarding
attorney's fees and costs, business assets, and
reimbursements; but vacate the court's order regarding
the classification of the personal-injury settlement monies
and remand for correction of the decree on that issue.
AND PROCEDURAL BACKGROUND
In 2015, Wife petitioned for dissolution of the parties'
thirty-four-year marriage. At that time, Husband was in the
process of negotiating settlements for personal injuries he
sustained in two separate automobile accidents. Since 1998,
Husband operated Hefner Auto Repair, Inc. ("the
business"), an auto-repair shop purportedly gifted to
him by his father, Frank Hefner.
After the January 2017 trial on the petition for dissolution,
the superior court determined the personal-injury damages
were community property and divided them equally between the
parties. The court found the business was Husband's
separate property and awarded it to Husband. The court denied
the parties' competing claims for reimbursement of
expenses paid during the proceedings but awarded Wife a
portion of her attorney's fees because Husband had
greater financial resources.
The superior court resolved several post-trial motions in a
manner that did not affect the provisions of the decree
relevant to this appeal but granted a hearing to consider
whether Wife was entitled to a share of the increased value
of the business attributable to the community's
contribution. After reviewing the additional evidence and
argument, the court denied Wife's motion. Husband
appealed and Wife cross-appealed. We have jurisdiction under
Arizona Revised Statutes ("A.R.S.") sections
12-120.21(A)(1), -2101(A)(1), and -2101(A)(5)(a), and Arizona
Rule of Family Law Procedure 78(c) (2019).
Husband argues the superior court erred by treating his
personal-injury damages related to the two automobile
accidents as community property because it was not his burden
to prove what parts of the awards were separate property.
Wife argues the superior court erred by classifying
Husband's business as separate property, denying her
reimbursement for paying post-dissolution expenses, and
awarding her only a portion of her attorney's fees.
The superior court's characterization of property is a
question of law that we review de novo. In re Marriage of
Pownall, 197 Ariz. 577, 581, ¶ 15 (App. 2000).
However, we review the division of property and debts,
factual determinations, and award of attorney's fees
under A.R.S. § 25-324 for an abuse of discretion
"and reverse only when clearly erroneous." In
re Marriage of Gibbs, 227 Ariz. 403, 406, ¶ 6 (App.
2011); Helland v. Helland, 236 Ariz. 197, 199,
¶ 8 (App. 2014) (division of property); Valento v.
Valento, 225 Ariz. 477, 481, ¶ 11 (App. 2010)
(factual determinations); Murray v. Murray, 239
Ariz. 174, 179, ¶ 20 (App. 2016) (attorney's fees).
A trial court abuses its discretion when it misapplies the
law or predicates its decision on incorrect legal principles.
Hammett v. Hammett, 2019 WL 5556953, *3, ¶ 13
(App. Oct. 29, 2019).
Husband's Personal-Injury Settlements Are Presumptively
His Separate Property, and the Community Proponent Has the
Burden to Show Otherwise.
The superior court held that all of Husband's injury
awards were community assets because he had "not
sustained his burden as to proving what portion of the
[injury settlements] should be considered sole and separate
property." Wife concedes that "damages for pain and
suffering belong to the injured spouse as his or her separate
property," citing Jurek v. Jurek, 124 Ariz. 596
(1980). However, she argues that it was Husband's burden
to prove what portion of his injury settlements were his
separate property because the proceeds were acquired during
the couple's marriage. Conversely, Husband argues
Jurek creates a presumption that funds intended to
compensate a spouse for personal injury are separate property
and places the burden upon the non-injured spouse to prove
what portion, if any, represents compensation for community
losses. He contends the superior court erred by burdening him
with the responsibility of establishing the personal-injury
proceeds were his separate property.
All property acquired during the marriage, except that
obtained through gift, devise, or descent, is community
property. A.R.S. § 25-211(A). But a spouse's
"personal property that is owned by that spouse before
marriage . . . is the separate property of that spouse."
A.R.S. § 25-213(A). "Acquired" as used in
A.R.S. § 25-211(A) "was not meant to apply to
compensation for an injury to the person which arises from
the violation of the right of personal security, which right
a spouse brings to the marriage." Jurek, 124
Ariz. at 598. This is because "the body which [the
spouse] brought to the marriage is certainly [that
spouse's] separate property." Id.
Accordingly, compensation for an injury to a spouse's
personal well-being belongs to that spouse as separate
property. Id.; see also Koelsch v. Koelsch, 148
Ariz. 176, 180, n.4 (1986) ("In Jurek we held
that recoveries for personal injuries were separate property
since a spouse brings the right to personal security into the
marriage." (citation omitted)).
The spouse seeking to overcome a presumption of asset
characterization has the burden of establishing the character
of the property by clear and convincing evidence. Hatcher
v. Hatcher, 188 Ariz. 154, 159 (App. 1996); see also
Guthrie v. Guthrie, 73 Ariz. 423, 426 (1952) (separate
property remains separate if it can be identified). As
applied here, that means the non-injured spouse must
establish the amount of the personal-injury settlement to
which the community is entitled-if any. See Valento,
225 Ariz. at 481 ("When the community contributes
capital to separate property, it acquires an equitable lien
against that property."); Hanrahan v. Sims, 20
Ariz.App. 313, 318 (1973) ("The remedy of the possessor
of an equitable lien is to come into a court of equity and
have his lien recognized, declared, and if necessary,
Because Husband's separate property-his body-sustained
the injury, the presumption is that any proceeds awarded to
him for his "cause of action" remain his separate
property until proven otherwise by the non-injured spouse.
Jurek, 124 Ariz. at 598. Accordingly, it was
Wife's burden ...