Opinion
No. 1 CA-CV 20-0081 FC
12-22-2020
In re the Matter of: RANDY LEE JONES, Petitioner/Appellant, v. JENNIFER JEAN JONES, Respondent/Appellee.
COUNSEL Law Office of Louis Lombardo PC, Chandler By Louis K. Lombardo Counsel for Petitioner/Appellant Burggraff Tash Levy PLC, Scottsdale By Randi Burggraff, Bryan K. Levy, Michael Dinn, Jr. Counsel for Respondent/Appellee
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
Appeal from the Superior Court in Maricopa County
Nos. FC 2016-096729 FC 2018-052461 (Consolidated)
The Honorable Suzanne S. Marwil, Judge
VACATED AND REMANDED
COUNSEL
Law Office of Louis Lombardo PC, Chandler
By Louis K. Lombardo
Counsel for Petitioner/Appellant
Burggraff Tash Levy PLC, Scottsdale
By Randi Burggraff, Bryan K. Levy, Michael Dinn, Jr.
Counsel for Respondent/Appellee
MEMORANDUM DECISION
Presiding Judge Jennifer B. Campbell delivered the decision of the Court, in which Judge Lawrence F. Winthrop and Chief Judge Peter B. Swann joined.
CAMPBELL, Judge:
¶1 Randy Jones ("Husband") appeals from the superior court's orders denying both his request to rescind a settlement agreement and his motion to hold an evidentiary hearing on the matter. He also appeals from the decree dissolving his marriage to Jennifer Jones ("Wife") and the court order requiring him to pay a portion of her attorneys' fees. For the following reasons, we vacate and remand the orders and decree for proceedings consistent with this decision.
BACKGROUND
¶2 Before the dissolution of their marriage, Husband and Wife participated in private, bifurcated mediation. To resolve child-related issues, the parties met with a mediator and negotiated a partial settlement agreement regarding parenting time. See Ariz. R. Fam. Law P. ("Rule") 69. To resolve financial matters, the parties met with another mediator ("the financial mediator") on two occasions. The first meeting was unfruitful. At the second meeting, the parties entered a Rule 69 financial settlement agreement ("the FSA") addressing the division of property and debts, spousal maintenance, attorneys' fees, and the payment of insurance. Both Husband and Wife expressly acknowledged entering the agreement voluntarily, without threat or undue influence, and avowed that it was both fair and equitable.
¶3 Within a week of signing the FSA, Husband moved to rescind it, asserting "the coercive nature of the mediation" led to "an unfair result." Husband argued his attorney "joined forces" with the financial mediator to pressure him to settle. Given the complexity of the case, the financial mediator and counsel warned Husband that if he proceeded to trial, the superior court would likely award Wife one-half of all assets, regardless of their character as separate or community property. Even though he purportedly had evidence demonstrating that many of the parties' assets were, in fact, his separate property, Husband alleged he succumbed to the
pressure and signed the FSA. In an addendum to the motion to rescind, Husband asserted that he was impaired by exhaustion and pain (caused by a chronic health condition) at the time he entered the agreement and claimed that at least one of his separate assets had been improperly characterized and divided as community property.
¶4 Without a hearing, the superior court summarily denied Husband's motion to rescind the FSA, stating it would "not revisit the issues contained in the Rule 69 agreements." Shortly thereafter, the court entered an order adopting the FSA.
¶5 Before the case proceeded to trial on an unresolved, child-related issue, Husband requested an evidentiary hearing, asking the superior court to independently determine the fairness of the FSA under A.R.S. § 25-317. Husband acknowledged he would not be "entitled to an evidentiary hearing" if sufficient evidence supported a finding of fairness, but asserted that no such evidence had been presented to the court. The court, however, summarily denied Husband's request, noting it "already determined . . . that it w[ould] not revisit a Rule 69 agreement negotiated by able counsel" at mediation.
¶6 At the outset of trial, counsel for both parties asked the superior court to enter an explicit finding regarding the fairness of the FSA. Explaining it had implicitly found the FSA fair in its prior rulings, the court stated that it adopted the FSA because it was brokered through a "fair and equitable" process in which "both parties were represented by able attorneys." The court concluded that Husband intelligently entered the FSA and his allegations regarding pressure from the financial mediator and his attorney "did not rise to the level of . . . coercion or duress."
¶7 Consistent with its statements at trial, the superior court incorporated the terms of the FSA into the decree of dissolution and specifically found that the FSA is both "fair and equitable." Explaining the basis for its determination, the court again noted that the FSA "was adopted after formal mediation before the parties['] chosen mediator with both parties having the benefit of able counsel." The court then ordered Husband to pay a portion of Wife's attorneys' fees because he "unreasonably" sought "to disavow" the FSA. Husband timely appealed.
DISCUSSION
¶8 Husband contends that the superior court improperly adopted the FSA, over objection, without independently determining whether the agreement provided for a fair division of the parties' assets. As
a corollary, Husband asserts that the court improperly denied his request for an evidentiary hearing because the record lacks sufficient evidence to accurately assess the fairness of the FSA.
¶9 "To promote [the] amicable settlement of disputes," parties to a dissolution of marriage "may enter into a written separation agreement containing provisions for disposition of any property owned by either of them." A.R.S. § 25-317(A). In a dissolution proceeding, the terms of such a financial settlement agreement "are binding on the court unless it finds, after considering the economic circumstances of the parties and any other relevant evidence produced by the parties, . . . that the separation agreement is unfair." A.R.S. § 25-317(B); see also Wick v. Wick, 107 Ariz. 382, 385 (1971) (explaining a court is "duty-bound" to distribute parties' property in a fair manner, even if doing so is contrary to the terms of their settlement agreement).
¶10 While a Rule 69 agreement is presumed valid, and a party challenging its validity "has the burden to prove any defect" therein, Rule 69(c), the superior court must independently assess its fairness. See Buckholtz v. Buckholtz, 246 Ariz. 126, 128, ¶ 1 (App. 2019). When a party contests the fairness of a financial settlement agreement, the superior court must "determine what assets comprise the community estate and whether the party challenging the agreement had full knowledge of the property involved." Sharp v. Sharp, 179 Ariz. 205, 210 (App. 1994) (superseded on other grounds by Rule 69). Although parties may consider their separate property to structure a financial settlement agreement, they may only do so if acting "with full knowledge of the nature of the property involved, including knowing whether the property at issue is a community or separate asset." Buckholtz, 246 Ariz. at 128, ¶ 1.
¶11 If the record contains sufficient evidence to permit the court to independently determine whether a financial settlement agreement provides for a fair distribution of property, an evidentiary hearing is unnecessary. Hutki v. Hutki, 244 Ariz. 39, 42-43, ¶¶ 15-17 (App. 2018). But in the absence of such evidence, the court must conduct an inquiry to determine whether the agreement is unfair. See Buckholtz, 246 Ariz. at 130-31, ¶¶ 12, 16.
¶12 We uphold a superior court's distribution of property absent an abuse of discretion. In re Marriage of Flower, 223 Ariz. 531, 535, ¶ 14 (App. 2010). A court abuses its discretion when: (1) the record is "devoid of competent evidence to support" its decision, Hurd v. Hurd, 223 Ariz. 48, 52, ¶ 19 (App. 2009), or (2) "it misapplies the law or predicates its decision on
incorrect legal principles." Hammett v. Hammett, 247 Ariz. 556, 559, ¶ 13 (App. 2019). Although we defer to a superior court's findings of fact unless they are clearly erroneous, we review "[c]onclusions of law and the interpretation of statutes and rules" de novo. Alvarado v. Thomson, 240 Ariz. 12, 14, ¶ 11 (App. 2016).
¶13 As reflected in its written orders denying Husband's motions, as well as its trial statements explicitly addressing the fairness of the FSA, the superior court considered the procedural fairness of the mediation. Noting each party was represented by "able counsel" in a formal process with a neutral third party presiding, the court found no unfairness. And, addressing Husband's specific claims that he felt coerced and impaired, the court concluded that Husband's allegations, if true, did not demonstrate coercion or duress that warranted setting aside the FSA.
¶14 A settlement agreement, which constitutes a contract between the parties, is unenforceable if procured under duress. Buckholtz, 246 Ariz. at 129, ¶ 10; Dunbar v. Dunbar, 102 Ariz. 352, 355-56 (1967). "By definition," only "wrongful" acts or threats constitute duress. Dunbar, 102 Ariz. at 355-56. Here, Husband alleges that the financial mediator and his attorney warned him that he would likely receive a less favorable result if he refused settlement and proceeded to trial. While these admonitions, if true, certainly encouraged Husband to settle, they did not place him "in such fear" that he could not exercise "free will and judgment" when he entered the FSA. Id. Likewise, to the extent Husband argues that he was hampered during the mediation by fatigue and pain from a chronic illness, his physical complications were not the result of any wrongdoing. See Sharp, 179 Ariz. at 210 (holding Wife was not entitled to an evidentiary hearing to determine the procedural fairness of a settlement agreement based on her claim that she felt "distress due to external circumstances," including pending criminal charges and financial difficulties). Moreover, nothing in the record suggests that Husband asked to continue the mediation due to his medical condition or that he otherwise alerted the financial mediator, his attorney, or Wife that he was experiencing physical distress. Accordingly, on this record, the superior court did not abuse its discretion by finding the mediation process, and the resulting settlement agreement, procedurally fair.
¶15 This does not end our inquiry, however. Husband contends that the superior court failed to consider the substantive fairness of the FSA. He also asserts that based on the lack of information presented to the court, such an analysis would have been impossible.
¶16 In response to Husband's substantive fairness challenge, Wife first cites the FSA itself, which reflects that Husband was awarded most of the enumerated assets, including a business, numerous parcels of real estate, and most accounts. It is uncontroverted, however, that Husband came to the marriage with substantial assets, and the FSA neither identifies the character of nor provides a valuation for the assets (apart from approximate balances in two accounts). Because Husband acquired most of the assets allocated to him before marriage, they are his separate property absent transmutation (though Wife claimed a community lien on many of the assets). See In re Marriage of Cupp, 152 Ariz. 161, 164 (App. 1986) ("Separate property can be transmuted into community property by agreement, gift or commingling."). While the FSA arguably provides for a reasonable allocation of the enumerated assets (based on other information contained in the record regarding the assets' character, discussed infra ¶¶ 18-19), it also requires that Husband tender a $500,000 equalization payment to Wife. Given that provision, the FSA, on its face, does not provide sufficient evidence for the court to determine its substantive fairness.
¶17 Second, Wife counters that the parties' resolution statements provided the superior court with an adequate evidentiary basis to evaluate the fairness of the FSA. As reflected in their respective resolution statements, Husband and Wife disputed the character of the business, real properties, and investment accounts that Husband acquired before the marriage. According to Wife, the community had an interest in each because: (1) Husband used community funds to pay off the mortgages and maintain the properties; (2) Husband used community funds to grow the business; and (3) Husband's community use of his separate accounts transmuted their character. Notwithstanding her claimed interest, Wife did not identify, much less present evidence, to establish the value of the disputed assets or the amount she was seeking in community liens. Other than providing some tracing of separate property contributions to his business, Husband, like Wife, failed to provide valuations for the assets in his resolution statement. Therefore, the parties' resolution statements do not provide sufficient evidence to determine that the FSA is substantively fair.
¶18 Third, Wife points to Husband's motion to rescind the FSA, arguing he supplied sufficient evidence to support a finding of fairness within the motion. While the motion (and attachments) provided specific information regarding the maintenance and valuation of the business and real estate Husband acquired before marriage, none of the accountings and financial reports support a finding that Husband owed Wife a $500,000
equalization payment. To the contrary, Husband argued at length that he meticulously preserved the separate character of the business and real property assets by using only his separate funds to maintain them. Of particular note, Husband also asserted that during the mediation he mistakenly agreed that his life insurance policy was a community asset, but discovered afterward that he had, in fact, acquired the policy before the marriage. Accordingly, Husband's motion to rescind does not provide sufficient evidence that the FSA is substantively fair.
¶19 Finally, Wife contends that Husband's email to his attorney following the mediation, attached to his motion to rescind, supports a finding that the FSA is substantively fair. In his letter, Husband explained that he responded to the warnings that he would not fare well at trial by "throwing everything in" at the mediation, trying to "sweeten the pot" to induce Wife to settle. He claimed, however, that he was "shocked at the total" and did not realize, until after signing the FSA, that Wife had received a share of his separate assets. While the correspondence shows that Husband actively participated in the settlement negotiations, supporting the superior court's finding of procedural fairness, it does not demonstrate that the terms of the FSA are substantively fair.
¶20 On this record, it is unclear whether the superior court considered the substantive fairness of the FSA, but given the disputed facts and lack of evidence concerning the character and value of the parties' assets, the court had no evidence from which to determine that the FSA was substantively fair. Compare Hutki, 244 Ariz. at 43, ¶ 17 (concluding the superior court did not need to hold an evidentiary hearing to determine the fairness of a Rule 69 agreement because "evidence supporting the [superior] court's fairness determination was already in the record"). Put succinctly, nothing in the record supports a finding that the FSA fairly distributes the parties' assets.
CONCLUSION
¶21 For the foregoing reasons, we vacate the orders denying Husband's requests to rescind the FSA and hold an evidentiary hearing, the decree of dissolution, and the order requiring Husband to pay a portion of Wife's attorneys' fees. In our discretion, we deny wife's request for attorneys' fees on appeal, and we remand for proceedings consistent with this decision.