NOTICE: NOT FOR PUBLICATION.

UNDER ARIZ. R. SUP. CT. 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT

AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.

IN THE

ARIZONA COURT OF APPEALS DIVISION ONE

In re the Marriage of:

BARBARA STEWART, Petitioner/Appellee,

v.

GARY STEWART, Respondent/Appellant.

No. 1 CA-CV 12-0747

Appeal from the Superior Court in Maricopa County

No. FN2011-002414

The Honorable Sam J. Myers, Judge

AFFIRMED IN PART, REVERSED IN PART; REMANDED 

COUNSEL

Dickinson Wright/Mariscal Weeks PLLC, Phoenix

By Marlene A. Pontrelli

Counsel for Petitioner/Appellee

Pearlstein Law Office PLLC, Phoenix

By Lynn M. Pearlstein

Counsel for Respondent/Appellant
STEWART v. STEWART

Decision of the Court

2

MEMORANDUM DECISION

Presiding Judge Lawrence F. Winthrop delivered the decision of the 

Court, in which Judge Margaret H. Downie and Judge Diane M. Johnsen 

joined.

W I N T H R O P, Presiding Judge:

¶1 Gary Stewart (“Husband”) appeals from the allocation of 

property in the parties’ decree of dissolution and the award of attorneys’ 

fees to Barbara Stewart (“Wife”). For the following reasons, we reverse 

that portion of the decree related to the issue of Husband’s compensation; 

we reverse the portions of the decree related to the issues of the life 

insurance policy, the loan to Husband’s separate property business, and 

the Chase joint accounts, and remand for further proceedings consistent 

with this decision. We affirm the portions of the decree related to the 

Wells Fargo investment account and the award of attorneys’ fees to Wife.

FACTS AND PROCEDURAL HISTORY

¶2 Husband and Wife were married in 1996; each brought to 

the marriage a separately owned and operated business, and they 

continue to operate those businesses. Husband is also an officer of his 

business. In June 2011, Wife filed a petition for dissolution of marriage.

¶3 Relevant to this appeal, the parties disputed at trial: (a) 

whether the community was adequately compensated during marriage 

for Husband’s work at his separate property business; (b) the community 

nature of a life insurance policy insuring Husband and Wife; (c) the 

community nature of a Wells Fargo investment account (8700); (d) 

whether and to what extent Husband’s pre-marital loan of $185,000 to his 

separate property business had been re-paid during marriage; and (e) the 

allocation of community funds in certain Chase joint accounts (5871) and 

(3014). The parties also disputed whether Wife was entitled to attorneys’ 

fees.

¶4 The family court ruled: (a) Wife was entitled to half the 

amount the court found Husband’s separate property business had undercompensated the community for Husband’s labor in the last four years of 

marriage; (b) the entire life insurance policy was a community asset,
STEWART v. STEWART

Decision of the Court

3

awarding each party half of its $900,000 cash-surrender value; (c) 

Husband’s separate pre-marital deposits into the Wells Fargo investment 

account (8700) had been comingled and transmuted so the account had 

become community property; (d) Husband failed to demonstrate the premarital loan to his separate property business had not been paid back 

during marriage; and (e) Husband used community funds from the Chase 

joint bank accounts (5871) and (3014) for purposes not benefiting the 

community and, therefore, Wife was entitled to equalization payments 

totaling $71,612.70. The court also awarded Wife $54,160.57 in attorneys’ 

fees and costs based on the disparity of the parties’ financial resources. 

Husband filed a timely notice of appeal. We have appellate jurisdiction 

pursuant to the Arizona Constitution, Article 6, Section 9, and Arizona 

Revised Statutes (“A.R.S.”) section 12-2101(A)(1), (2) (West 2014).1

DISCUSSION

I. Compensation During Marriage

¶5 Husband argues the family court erred when it determined 

the community had been under-compensated as a result of Husband’s 

decision to reduce his annual salary from his separate business in the four 

years preceding the petition for dissolution of marriage, and in awarding 

Wife half of the amount of under-compensation. The court concluded

“Husband breached his fiduciary obligation to the community by failing 

to take fair compensation for the community labor expended” from 2008 

to 2011.

¶6 It is undisputed that as the owner of his separate property 

business Husband could set his own pay as an officer of the company.

The parties also agree, and the record demonstrates, that beginning in 

2008 Husband’s salary as an officer decreased in comparison to previous 

years.

¶7 At trial, Wife sought to demonstrate that from 2008 to 2011 

Husband’s separate property business “under-compensated” the marital 

community for the labor expended by Husband and this “undercompensation” was the result of Husband’s unilateral decision to take a 

 1 We cite the current Westlaw versions of the applicable statutes and 

court rules unless changes material to our analysis have since occurred.
STEWART v. STEWART

Decision of the Court

4

reduced salary.2 Under Wife’s under-compensation theory, the 

community could recover the difference between the compensation 

Husband should have received and the compensation Husband actually 

received because such deliberate under-compensation is a breach of 

Husband’s fiduciary duty to the marital community. Implicit in Wife’s 

argument is the conclusion that any under-compensation is community 

property. The classification of property as separate or community is a 

question of law we review de novo. Bell-Kilbourn v. Bell-Kilbourn, 216 Ariz. 

521, 523, ¶ 4, 169 P.3d 111, 113 (App. 2007).

¶8 To demonstrate the compensation the community should 

have received for Husband’s labor, Wife determined an annual “fair 

compensation” figure based on a standardized annual salary for corporate 

officers in the relevant industry using data provided by Husband’s 

expert.3 Wife then compared Husband’s annual actual compensation to 

this “fair compensation” figure and argued that from 2008 to 2011 the 

marital community was under-compensated by $304,415. To show that 

the “fair compensation” figure was realistic, Wife’s expert testified that 

Husband’s business had sufficient cash flow to pay Husband the higher 

“fair compensation” amount during those years. Wife argued this undercompensation in the four years preceding dissolution proved a breach of 

fiduciary duty.

¶9 Husband rebutted this evidence by testifying that his 

declining compensation from 2008 to 2011 was the result of the general 

contraction of the economy and the negative economic trends in the 

relevant industry based on technological advances that reduced consumer 

 2 For the purposes of this “under-compensation” analysis, pursuant 

to the expert reports and the arguments of counsel, the court appears to 

have considered as compensation only Husband’s salary and the income 

from stock ownership of the separate property business. See also Section 

II, infra (discussing the payment of life insurance premiums as an 

additional form of compensation).

3 Husband argues Wife inappropriately relied on the data supplied 

by his expert and intended for separate property business valuation 

pursuant to Cockrill v. Cockrill, 124 Ariz. 50, 52, 601 P.2d 1334, 1336 (1979),

and Rueschenberg v. Rueschenberg, 219 Ariz. 249, 257, ¶ 34, 196 P.3d 852, 860 

(App. 2008). We disagree. Regardless of what Husband intended this 

data to demonstrate, this evidence was properly before the family court to 

consider in determining “fair compensation.”
STEWART v. STEWART

Decision of the Court

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demand. Using the same “fair compensation” measurement as Wife, 

Husband also argued the community was actually over-compensated

throughout the life of the marriage because his annual actual 

compensation from 1996 to 2007 exceeded the “fair compensation” figure, 

off-setting any under-compensation from 2008 to 2011.

¶10 The family court found that, as a result of Husband’s 

unilateral business decision, the community was under-compensated from 

2008 to 2011. As a result of this finding, the court concluded Husband 

breached his fiduciary duty to the community and awarded Wife half of 

the additional $304,415 of compensation the community would have 

received had Husband elected to take “fair compensation” during those 

years.

¶11 Arizona courts acknowledge the existence of a fiduciary 

duty between spouses. See Gerow v. Covill, 192 Ariz. 9, 18, ¶ 40, 960 P.2d 

55, 64 (App. 1998).4 “Removal of community assets without spousal 

notice and/or approval can constitute a breach of [fiduciary] duty.” Id. at 

18, ¶ 40, 960 P.2d at 64. Wife relies entirely on her analysis of Husband’s 

salary falling below the industry standard of “fair compensation,” 

coupled with his ability to set his own pay, to establish Husband’s breach 

of fiduciary duty to the community. In support of this argument, Wife 

cites Gerow and Smith v. Smith, 860 P.2d 634 (Idaho 1993). The facts of 

those two cases, however, belie Wife’s argument.

¶12 In Gerow, the husband was self-employed as an independent 

consultant through a sole proprietorship. Gerow, 192 Ariz. at 11-12, ¶¶ 2-

5, 960 P.2d at 57-58. A few months after the wife filed a petition for 

dissolution, the husband incorporated a second, similar business with his 

sister-in-law listed as the sole shareholder, concealing this business from 

the wife. Id. The court concluded the husband’s conduct breached his 

fiduciary duty to the marital community because he concealed the 

incorporation of the second business from the wife and used this 

concealed business to remove community assets without notice to the wife 

 4 Husband urges us to distinguish Gerow from this case by focusing 

on the Gerow court’s analysis of Arizona’s Fraudulent Conveyance Act.

Gerow, 192 Ariz. at 17, ¶¶ 33-36, 960 P.2d at 63. We note, however, the

court in Gerow explicitly analyzed the claim of breach of fiduciary duty

independent of the Act. See id. at 17-18, ¶¶ 37-40, 960 P.2d at 63-64.
STEWART v. STEWART

Decision of the Court

6

and without compensation for the community. Id. at 18, ¶ 40, 960 P.2d at 

64.

¶13 In Smith, the husband was a lawyer. In one case, the 

husband agreed to receive a reduced fee after his client elected to avoid an 

appeal by taking a settlement rather than attempting to collect the full 

court award. Smith, 860 P.2d at 643. The reduced fee was less than half 

the husband’s hourly rate and also less than a one-third contingency fee

on the settlement amount. Id. The court concluded the husband breached 

his fiduciary duty to his wife by accepting the reduced fee. Id.

¶14 In this case, Husband’s conduct does not bear any of the 

indicia of a breach of fiduciary duty as established in Gerow or Smith. 

First, Wife had notice of the reduced compensation to the community by 

way of jointly filed tax returns from 2008 to 2010.5 Second, Wife does not 

point to anything in the record suggesting she objected at the time to 

Husband’s decision to take reduced compensation from his separate 

property business. Third, the breach in Gerow occurred after the filing of 

the petition for dissolution of marriage; in this case, Husband’s declining 

compensation began four years prior to the filing of the petition for 

dissolution, and Wife does not point to anything in the record that 

suggests Husband’s declining salary was a form of so-called “divorce 

planning.” Fourth, the degree to which Husband’s annual actual 

compensation varied from the annual “fair compensation” figure is not so 

drastic as to demonstrate that, on this evidence alone, Husband breached 

a fiduciary duty. In 2008, the first year in which Husband’s salary fell 

below “fair compensation,” the actual compensation was ninety-eight 

percent of the “fair compensation” figure; in 2009, the actual 

compensation was eighty-two percent of the “fair compensation” figure; 

and in 2010, actual compensation was fifty percent of the “fair 

compensation” figure.6 Although the fifty percent shortfall in 2010 raises 

 5 We note the record does not contain tax returns from 2011.

6 In its decree, the family court found Husband received $25,000 of 

compensation in 2011; however, this figure only takes into account 

Husband’s salary and does not include income earned through stock 

ownership. Similarly, the decree appears to compare a full year’s “fair 

compensation” to Husband’s reported half-year of actual compensation. 

On remand, for the purposes of the analysis recommended by Section II of 

this decision, the trial court should properly assess the actual 
STEWART v. STEWART

Decision of the Court

7

a concern, Husband adequately explains this shortfall by justifying his

reduced salary on the basis of economic trends from 2008 to 2011, the 

undisputed evidence that his separate property business substantially 

declined in value over the life of the marriage, and evidence that, over the 

entirety of the marriage, his salary trended downward in comparison to 

the “fair compensation” benchmark.7 This explanation is contrasted with 

Wife’s bare assertion that Husband breached his fiduciary duty based on a 

comparison between the “fair compensation” figure and Husband’s 

annual actual compensation. Thus, on this record, we conclude the family

court erred by finding Husband’s conduct breached a fiduciary duty

pursuant to Gerow.8 We therefore vacate the under-compensation portion 

of the trial court’s award to Wife totaling $152,207.50.

II. Life Insurance Policy

¶15 Husband argues the family court erred by classifying the life 

insurance policy as community property and distributing half of the cashsurrender value of the policy to Wife. We review de novo the family

court’s classification of property as separate or community. Bell-Kilbourn, 

216 Ariz. at 523, ¶ 4, 169 P.3d at 113.

¶16 Under the statutory framework differentiating separate 

property from community property, (1) “A spouse’s real and personal 

property that is owned by that spouse before marriage . . . and the 

increase, rents, issues and profits of that property, is the separate property 

of that spouse,” A.R.S. § 25-213(A), and (2) “All property acquired by 

either [spouse] during the marriage is the community property of [both 

spouses] except for property that is . . . [a]cquired by gift, devise or 

descent,” A.R.S. § 25-211(A). Thus, “Property takes its character as 

 

compensation for 2011, taking into account the prorated share of 

compensation prior to the petition of dissolution.

7 The expert report valued the separate property business at 

$2,610,090 at the date of marriage and $1,118,250 at the date of dissolution. 

At the beginning of the marriage, Husband’s salary was 314% of the 

annual “fair compensation” figure; by 2007, Husband’s salary was 145% of 

the annual “fair compensation” figure.

8 We reach this result without needing to address Husband’s 

concerns regarding any selection bias from the family court’s focus on the 

last four years of marriage rather than the full length of the marriage.
STEWART v. STEWART

Decision of the Court

8

separate or community at the time [of acquisition] and retains [that] 

character throughout the marriage.” Bell-Kilbourn, 216 Ariz. at 523, ¶ 5, 

169 P.3d at 113 (quotation and citation omitted). As a result, “there is a 

strong presumption, rebuttable only by clear and convincing evidence, 

that all earnings during [marriage] are community in nature.” Cockrill v. 

Cockrill, 124 Ariz. 50, 52, 601 P.2d 1334, 1336 (1979) (citation omitted).

A. Community Interest in the Policy

¶17 The family court found (a) Husband acquired the insurance 

policy in 1995 “in contemplation of marriage to Wife,” (b) “Both Husband 

and Wife continue[d] to be named insureds on the policy” during 

marriage, (c) “Husband failed to show whether any premiums were paid 

prior to marriage,” and (d) “Although Husband claims Trade Printers . . . 

paid the premiums, Husband[] admits that he was the owner of the 

policy.” From these facts, the court concluded Husband did not “show by 

clear and convincing evidence that the policy, in which the premiums 

were paid for by Husband’s separate property business during the 

marriage, is the separate property of Husband,” and therefore Wife was 

entitled to half the cash-surrender value of the policy.

¶18 Contrary to the conclusion of the family court, the record 

demonstrates the insurance policy was acquired by Husband in 1995 prior 

to marriage.9 Thus, the policy is Husband’s separate property. See A.R.S. 

§ 25-213(A).

¶19 That determination, however, does not end the analysis. See

Rueschenberg v. Rueschenberg, 219 Ariz. 249, 257, ¶ 34, 196 P.3d, 860 (App. 

2008). Instead, the family court must determine on remand whether and 

to what extent the community contributed to premium payments during 

marriage. Cockrill, 124 Ariz. at 54, 601 P.2d at 1338 (“[P]rofits, which result 

 9 Wife argues on appeal the insurance policy is community property 

because “the policy is an asset initially acquired by Husband in 

contemplation of marriage.” (Emphasis added). However, because Wife 

does not provide any citations to the record or to legal authorities to 

develop this argument, we will not consider it on appeal. See ARCAP

13(a)(6) (requiring an opening brief to set forth “[a]n argument which 

shall contain the contentions of the appellant with respect to the issues 

presented, and the reasons therefor, with citations to the authorities, 

statutes and parts of the record relied on.”); ARCAP 13(b) (same 

requirement for answering brief).
STEWART v. STEWART

Decision of the Court

9

from a combination of separate property and community labor, must be 

apportioned accordingly.”). In this case, the community could have 

contributed to the premiums during marriage by direct payment or by 

considering the premium payments made by Husband’s separate 

property business as income-substitutes drawn from the profits of that 

business in the years the business did not otherwise provide Husband 

with “fair compensation.” See Section I, supra.

¶20 In Cockrill, our supreme court addressed the methods by 

which a family court might “achieve substantial justice between the 

parties” by apportioning the profits or increase in value from one spouse’s 

separate property during the life of the marriage. 124 Ariz. at 54, 601 P.2d 

at 1338. Although the family court may choose any method that will 

achieve substantial justice between the parties, Rueschenberg, 219 Ariz. at

255, ¶ 26, 196 P.3d at 858, one of the methods addressed in Cockrill may be 

particularly appropriate in this case.

¶21 The court may “determine the reasonable value of the 

community’s services and allocate that amount to the community, and 

treat the balance as separate property attributable to the inherent nature of 

the separate estate.” Cockrill, 124 Ariz. at 54, 601 P.2d at 1338 (citation 

omitted). In the context of an insurance policy, the court might achieve 

substantial justice between the parties by apportioning the cash-surrender 

value of the policy on the basis of the respective contributions to the 

premium payments made by the community and by Husband’s separate 

property business.

¶22 This analysis would require the family court to determine 

whether any premium payments made by Husband’s business should be 

treated as payments by the community. Under this approach, for any year 

in which the business made a premium payment, the court would need to 

identify the annual “fair compensation” for the year and compare 

Husband’s annual actual compensation to this figure. If Husband’s actual 

compensation met or exceeded “fair compensation,” the court would 

allocate the premium payment made that year to the separate property

business. If actual compensation that year fell below “fair compensation,” 

the insurance premium would be treated as compensation and allocated 

to the community until a “fair compensation” benchmark is reached; after 

“fair compensation” is reached, the remainder of the annual premium 

would be allocated to Husband’s separate property. The court would 

then determine the proportion of the total premium amounts paid by the 

community and by Husband’s separate property business, and apportion 

the cash-surrender value of the policy accordingly.
STEWART v. STEWART

Decision of the Court

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¶23 A simple example illustrates this method. Just prior to 

marriage, a spouse acquires an insurance policy; the marriage dissolves

ten years later. The annual premium for the policy is fixed at $10. At the 

time of dissolution, premium payments total $100 and the policy has a 

cash-surrender value of $120. In two years during the life of the marriage, 

the annual premium on the policy was paid by a check written on the 

community savings account. The other eight premiums were paid by a 

business that is the sole and separate property of the spouse who 

originally acquired the policy. The family court finds that in five of those 

years, the separate property business under-compensated the community 

by $4 each year. To achieve “substantial justice between the parties,” the 

court would treat $4 worth of premium payments as having been made by 

the community in each of the five years in which the community was 

under-compensated by the separate business. Thus, out of the total $100 

in premium payments, the court would treat $40 (or forty percent) as 

having been paid by the community and $60 (or sixty percent) as having 

been paid by the spouse’s separate property. The court then would 

allocate 40 percent of the cash-surrender value of the policy to the 

community and 60 percent to the spouse who acquired the policy.

B. Gift

¶24 In this case, the family court alternatively concluded that 

Husband gifted the insurance policy and its cash-surrender value to the 

community by naming both parties as insureds on the policy as a form of 

estate planning. The record does not support this conclusion. The family

court relied on In re Marriage of Inboden, which held that “when a spouse

places separate property in joint tenancy with the other spouse a 

presumed gift occurs[.]” 223 Ariz. 542, 544, ¶ 9, 225 P.3d 599, 601 (App. 

2010). Assuming without deciding that Inboden would apply to non-real 

property, the evidence does not establish that Husband and Wife ever 

“jointly-owned” the life insurance policy. Although “the mere form of a 

life insurance policy is [not] conclusive on either the issue of ownership or 

whether a gift has been made[,]” Neely v. Neely, 115 Ariz. 47, 51, 563 P.2d 

302, 306 (App. 1977), there was no evidence presented at trial to establish 

the essential elements of a gift. To establish a gift, “there must be donative 

intent, delivery and a vesting of irrevocable title upon such delivery.” Id.; 

see also In re Marriage of Berger, 140 Ariz. 156, 160, 680 P.2d 1217, 1221 

(App. 1983) (holding that donative intent is based on all circumstances 

and “not inferred simply because of a marital relationship”).

¶25 On this record, Wife cannot establish donative intent. 

Obtained in 1995 prior to marriage, the insurance policy was a “first-to-
STEWART v. STEWART

Decision of the Court

11

die” policy with Husband and Wife named as the insureds. According to 

the policy, in the event of Wife’s death, Husband was the named 

beneficiary; in the event of Husband’s death, prior to 2003 his estate was 

the named beneficiary and after 2003 his separate property business was 

the named beneficiary.10 Thus, if Husband died first, Wife would receive 

a portion of the policy only inasmuch as she received a portion of his 

estate, either directly as a beneficiary or through testamentary transfer of 

Husband’s separate business; Wife was never a direct beneficiary of this 

policy. Further, on this sparse record, the only indication of the parties’ 

intent is Husband’s testimony that this insurance policy was not intended 

to be an estate planning tool. There was no evidence suggesting that 

Husband intended to gift Wife an ownership interest in the policy. We 

therefore reject this alternative conclusion.

C. On Remand

¶26 Two related issues must be addressed on remand. First, the 

family court must identify the source and amount of the premium 

payments. While the court found Husband’s separate property business 

paid $900,000 in premiums during the marriage, citing a report by Wife’s 

financial expert, that report does not provide any direct proof of those 

payments. Instead, the business’ corporate tax returns show that it paid 

for “officer life insurance premiums” during the marriage, in addition to 

expenditures paid in 1995 and 1996 before the marriage.11

¶27 Second, although the issue is not raised by either party on 

appeal, on remand the court must also determine how to treat the 

$300,000 loan made against the life insurance policy. We have held that 

the life insurance policy was Husband’s separate property, but that the 

 10 The family court concluded Husband breached his fiduciary duty 

to Wife by converting a community asset to his separate property when 

Husband substituted his separate property business for his estate as a 

beneficiary of the policy. Because the insurance policy remained 

Husband’s separate property during marriage, this substitution is 

irrelevant.

11 There are no corporate tax returns for 2000, 2001, or 2011 for 

Husband’s separate property business in the record. Nor do the parties 

point to complete records of premium payments during the marriage. 

Thus, on this record, it is unclear which annual payments were made from 

which sources.
STEWART v. STEWART

Decision of the Court

12

community may be entitled to be some share of the value of the policy 

based on the premiums paid during the marriage. We express no opinion 

on the apportionment of this $300,000 loan between community and 

separate property. This issue also does not affect our decision regarding 

the Wells Fargo investment account (8700) into which the $300,000 

amount was deposited. See Section III, infra.

¶28 In sum, we conclude the family court erred in characterizing 

the life insurance policy as community property. The policy is Husband’s 

separate property because he acquired it before marriage. However, some 

portion of the cash-surrender value of the policy appropriately may be 

allocated to the community as a result of premium payments made with 

community funds or with funds owed to the community by Husband’s 

separate property business for his labor. We therefore reverse that portion 

of the decree concluding that the life insurance policy is a community 

asset and the award of half the policy’s cash-surrender value to Wife. We 

remand the resolution of this issue to the family court for further analysis 

and judgment consistent with our decision.

III. Wells Fargo Investment Account (8700)

¶29 The family court concluded the entire Wells Fargo 

investment account (8700) should be considered community property and 

divided equally between the parties because the assets of the account 

included comingled community and separate property. Husband argues 

the court erred by awarding Wife half of the investment account, 

contending most of the money is his separate property acquired prior to 

marriage and any community assets are easily traceable on the basis of 

deposits.

¶30 The character of property is determined at the time of 

acquisition, Bell-Kilbourn, 216 Ariz. at 523, ¶ 4, 169 P.3d at 113, and 

property acquired by a spouse prior to marriage remains that spouse’s 

separate property, A.R.S. § 25-213(A). However, separate property may 

be transmuted into community property when there is commingling to 

the degree that “the identity of the property as separate or community is 

lost.” Potthoff v. Potthoff, 128 Ariz. 557, 562, 627 P.2d 708, 713 (App. 1981). 

Although the mere fact of commingling is insufficient to transmute the 

entire account to community property, see Guthrie v. Guthrie, 73 Ariz. 423, 

426, 242 P.2d 549, 551 (1952), “the burden is upon the person claiming that 

the commingled funds, or any portion of them, are separate to prove that 

fact and the amount by clear and satisfactory evidence.” Cooper v. Cooper, 

130 Ariz. 257, 259-60, 635 P.2d 850, 852-53 (1981) (citation omitted).
STEWART v. STEWART

Decision of the Court

13

¶31 In this case, Husband opened a Franklin Templeton account

solely in his name prior to marriage, and the account was worth 

approximately $508,000 on the date of marriage; at that time, the assets of 

this account were his separate property. In 2004, when the assets of the 

Franklin Templeton account were transferred to a Wells Fargo advisory 

account (5581), this account had increased in value to approximately 

$670,000. In August 2005, the separate property funds in the Wells Fargo 

advisory account (5581), by then valued at approximately $780,000, were

transferred to Wells Fargo investment account (8700), the account at issue 

on appeal. Although both Wells Fargo accounts were held solely in 

Husband’s name, Husband acknowledges he deposited community funds 

into Wells Fargo investment account (8700). From the creation of that 

account to the date of dissolution, the account’s investment holdings 

included a mixture of cash, money market accounts, fixed income 

securities, and mutual funds. In June 2011, when the petition for 

dissolution was served, the Wells Fargo investment account (8700) had a 

balance of $1,267,909.20.12

¶32 Husband argues the identity of the community and separate 

property is not lost because the deposits of community funds are traceable 

and there were no withdrawals from the investment account after the 

deposit of community funds.13 Although Husband is correct that the 

 

12 The decree states the Wells Fargo investment account (8700) had a 

balance of $1,234,677 as of January 31, 2011, while Husband states the

account had a balance of $1,266,053 as of the date of trial. The relevant 

balance is that as of June 22, 2011, the date the petition was served,

because that is the date the community’s interest in the account ended. 

See A.R.S. § 25-211(A)(2).

13 There was, however, one withdrawal of $296,000 contemporaneous 

with a $300,000 deposit. The source of this deposit is the life insurance 

policy discussed in Section II. Unlike the other community deposits, this 

deposit is fully traceable because it remained in the account for only a few 

days before withdrawal and had only a negligible effect on the earnings of

this account. On remand, the trial court must consider whether this 

$300,000 amount is community or separate property. The court should 

not base its decision on the sum’s brief stay in the community account; 

instead, the court should analyze this sum pursuant to the principles 

discussed in Section II of our decision.

Wife also asserts that Husband made “cash withdrawals” from the 

account; however, because Wife cites nothing in the record to support that 
STEWART v. STEWART

Decision of the Court

14

deposits are traceable, the testimony by Wife’s expert and the nature of the 

investment account at issue in this case lead us to conclude the earnings on

those deposits are not traceable on this record. The investment account 

included money market accounts, fixed income securities, and mutual 

funds associated with varying yields, so that the community and separate 

funds have comingled to the point of obscurity. Wife’s expert also 

testified that he could not determine which account investments belonged 

to which source of funds.

¶33 On appeal, Husband suggests this court treat the value of 

the account prior to the transfer of assets into Wells Fargo investment 

account (8700) as separate property, awarding Husband that amount from 

the total value at the date of dissolution; Husband then suggests this court 

treat all deposits into and increases in the value of the account after that 

point as community property. While this may have been an approach to 

suggest to the family court, we are not the trier of fact. We further note 

that Husband’s proposed solution does not apportion the losses suffered 

by the account during the relevant time period.14

¶34 Husband also argues the family court erred because the 

community deposits make up a negligible part of the whole account. Cf. 

Noble v. Noble, 26 Ariz. App. 89, 95-96, 546 P.2d 358, 364-65 (1976) (“The 

[principle that] commingling of separate and community funds into one 

account does not transmute the entire account into a community account 

so long as the funds remain traceable . . . is especially true where the 

community funds commingled are negligible in comparison to the 

separate funds.” (citation omitted)). We disagree with Husband’s 

characterization of the community funds as “negligible.” The New 

Oxford American Dictionary defines “negligible” as “so small or 

unimportant as to be not worth considering.” The New Oxford American 

Dictionary 1137 (2d ed. 2005). Here, the deposits Husband concedes are 

community funds make up a non-negligible twenty-three percent of the 

total value of the account at the time the petition for dissolution was 

served, even without accounting for any return on those community 

 

statement, we will not consider this argument on appeal. See ARCAP

13(a)(6), (b).

14 For example, the total account value decreased from August 2008 to 

August 2009.
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deposits.15 For these reasons, we affirm the award to Wife of half the total 

balance of the funds in Wells Fargo investment account (8700).

IV. Loan to Husband’s Separate Property Business

¶35 Husband’s sole and separate business borrowed $185,000 

from Husband before the marriage, and hundreds of thousands of dollars 

more from the community during the marriage. The family court found 

the business had repaid $307,304 but owed $594,454 at the time of 

dissolution. Evidence at trial was that loan payments from the business 

during the marriage were deposited into the community bank account, 

and Wife’s expert testified that the business had not repaid the loan 

Husband made prior to the marriage.

¶36 Husband argues the court erred when it impliedly 

concluded the business had repaid the $185,000 he loaned the company 

before marriage. He argues the $594,454 that the court found the business 

owed to the community should be reduced by $185,000, the amount still 

owing on his pre-marital loan to the business. The court found Husband 

failed to prove the existence of the pre-marital loan because it was not 

evidenced in writing. Accordingly, the decree of dissolution treats the 

loan as a loan from the community, requires Husband to pay half of the 

present $594,454 loan balance to Wife and awards the note to Husband. 

We review the family court’s factual findings under a clearly erroneous 

standard, see Hrudka v. Hrudka, 186 Ariz. 84, 91, 919 P.2d 179, 186 (1995), 

but we review the characterization of the note as separate or community 

property de novo. See Bell-Kilbourn, 216 Ariz. at 523, ¶ 4, 169 P.3d at 113.

¶37 As a preliminary matter, we conclude the family court erred 

by finding Husband failed to prove the existence of a pre-marital loan 

from Husband to his separate property business. The court relied on the 

absence of a written note to find that no loan existed prior to marriage.

The absence of a written note evidencing a loan, however, does not negate 

uncontroverted testimony at trial of the existence of such a loan. Cf. A.R.S. 

 15 Husband also appears to invoke that part of the decree that permits 

the parties to stipulate to the retention of a third-party mediator to 

determine the apportionment of co-mingled accounts; however, by its 

terms this portion of the decree is inapplicable without the consent of both 

parties and Wife does not appear to stipulate to this proposed method of 

apportionment. As a result, we need not reach the merits of such an 

approach.
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§ 12-543(1) (entitled “Oral debt”). In this case, ample evidence in the 

record demonstrates the existence of a pre-marital loan: Husband cites the 

business valuations conducted in 1996 and 1997 as proof of the existence 

of a pre-marital loan; Wife testified that she knew of the $185,000 premarital loan balance in 1996; and Wife’s expert also testified about 

Husband’s pre-marital loan and assumed in his report that it had not been 

repaid.

¶38 With the existence of the pre-marital $185,000 loan 

established, the issue becomes whether Husband’s separate property 

business repaid the pre-marital loan prior to service of the petition for 

dissolution.

¶39 Property acquired during marriage is presumed to be 

community property. A.R.S. § 25-211(A). “[T]he spouse seeking to 

overcome the presumption has the burden of establishing a separate 

character of the property by clear and convincing evidence.” Thomas v. 

Thomas, 142 Ariz. 386, 392, 690 P.2d 105, 111 (App. 1984). Therefore, the 

court erred by placing the burden on Husband to demonstrate the loan 

payments by his separate property business were community property; 

instead, Wife bears the burden to prove that these payments to the 

community were, in fact, payments to Husband on the pre-marital portion 

of the loan.

¶40 Turning to the evidence, Husband’s expert report stated the 

separate property business had paid the community $307,304 during the 

marriage. The record does not establish whether these loan payments 

were applied to the balance on the separate pre-marital loan or the 

subsequent community loans. In her testimony, Wife could not say 

whether the pre-marital loan had been paid. The evidence establishes that 

payments from the separate property business went into a community 

bank account. Assuming that at least a portion of these payments were 

loan repayments, Wife failed to establish that any loan payments were 

designated to repay the pre-marital loan. Because Wife failed to meet her 

burden, we reverse that portion of the decree awarding Wife half the 

outstanding loan balance and remand for reconsideration of this issue 

consistent with this decision.

V. Division of Chase Joint Accounts (5871) and (3014)

¶41 The family court found Husband used Chase joint accounts 

(5871) and (3014) to pay separate expenses and concluded Wife was 

entitled to half the amount Husband spent on these expenses. We review 
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the court’s distribution of community property for an abuse of discretion,

Bell-Kilbourn, 216 Ariz. at 523, ¶ 4, 169 P.3d at 113, and we will not disturb 

the court’s decision “[u]nless it clearly appears that the trial judge has 

mistaken or ignored the evidence.” Armer v. Armer, 105 Ariz. 284, 289, 463 

P.2d 818, 823 (1970).

¶42 Husband contends the court’s findings of fact are clearly 

erroneous and Wife was not entitled to reimbursement because she had

already withdrawn her share of the funds in these community accounts.

Wife did not respond to this issue on appeal. Although failure to respond 

to a contested issue may constitute a confession of error, Hecla Mining Co. 

v. Indus. Comm’n, 119 Ariz. 313, 314, 580 P.2d 774, 775 (App. 1978), we 

exercise our discretion to address the merits of Husband’s argument and 

to clarify any issues that might arise on remand.

¶43 The decree stated Wife received $15,600 from these 

community accounts. Wife admitted in her testimony, however, that she 

withdrew an additional $35,000 from the joint accounts after service of the 

petition for dissolution; the July 2011 statement for Chase joint account

(5871) appears to reflect this withdrawal. Husband identified the $35,000

withdrawal in the joint pretrial statement and in his proposed findings of 

fact and conclusions of law order, but the family court apparently 

overlooked this evidence and did not account for this $35,000 in allocating 

the funds in the joint accounts.

¶44 Husband also contends that he used this account to pay 

$12,015.88 of expenses that benefitted Wife. Wife testified that Husband 

paid the utilities for her Flagstaff home from this account, and there is 

evidence that Husband paid Wife’s American Express charges after the 

date the petition for dissolution was served. Although there was no direct 

testimony regarding Husband’s payment of Wife’s credit card charges, the 

exhibits establish these payments, and Husband raised this issue in his 

proposed findings of fact regarding reimbursement.

¶45 We reverse that portion of the decree awarding Wife 

reimbursement for Husband’s use of the community funds in the Chase 

joint accounts (5871) and (3014). On remand, the family court should 

consider the total amount of funds Wife received and any expenses

Husband paid on Wife’s behalf from these joint accounts in calculating 

any reimbursement to Wife.
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VI. Award of Attorneys’ Fees

¶46 The family court awarded Wife $54,160.57 in attorneys’ fees 

and costs based on the disparity in the parties’ financial resources and the 

reasonableness of the parties’ positions. We review the family court’s 

award of attorneys’ fees under an abuse of discretion standard. Hrudka,

186 Ariz. at 94-95, 919 P.2d at 189-90.

¶47 The decree does not indicate whether it found Husband’s 

positions unreasonable; the decree does state that Husband has 

substantially greater assets than Wife. Pursuant to A.R.S. § 25-324(A), the 

trial court may award fees where there is a financial disparity between the 

parties. See Magee v. Magee, 206 Ariz. 589, 593, ¶ 18, 81 P.3d 1048, 1052 

(App. 2004) (holding that an applicant need not be unable to pay his or 

her own fees, but that relative financial disparity “is the benchmark for 

eligibility.”). Given the resolution on appeal, the financial disparity 

between the parties will likely not change on remand. Accordingly, the 

court did not abuse its discretion in awarding Wife her attorneys’ fees and 

costs at trial.

¶48 Wife requests an award of attorneys’ fees on appeal 

pursuant to A.R.S. § 25-324. After considering the statutory factors, in an 

exercise of our discretion we decline to award Wife attorneys’ fees.

CONCLUSION

¶49 We reverse that portion of the decree of dissolution of 

marriage related to the issue of compensation and vacate the award to 

Wife associated with this issue. We reverse and remand that portion of 

the decree related to the life insurance policy and vacate the award 

associated with this issue; on remand, the community is entitled to 

reimbursement for the premiums paid by community funds or labor, but 

not the entire cash-surrender value. We reverse that portion of the decree 

related to the loan to Husband’s separate property business, vacate the 

associated award of half the loan value to wife, and remand the issue to 

the family court consistent with the presumption that loan payments 

received during the marriage were repayments of the community loan.

We affirm that portion of the decree related to the apportionment of 

comingled funds in Wells Fargo investment account (8700). We reverse 

that portion of the decree related to the division of assets in the Chase 

joint accounts (5871) and (3014), vacate the associated award, and remand 

the issue to the family court for reconsideration, including the total funds 

Wife received from the accounts and any expenses Husband paid on 
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Decision of the Court

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Wife’s behalf from these accounts after the petition for dissolution was 

served. Finally, we affirm the award of attorneys’ fees and costs to Wife at 

trial. Wife has requested an award of fees on appeal. In the exercise of 

our discretion we deny that request.