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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

In re the Marriage of:

PATRYCIA JEWEL NACKARD, Petitioner/Appellant,

v.

PATRICK NACKARD, Respondent/Appellee.

No. 1 CA-CV 20-0621 FC

Appeal from the Superior Court in Maricopa County

No. FN 2018-091830

The Honorable Alison Bachus, Judge

AFFIRMED

COUNSEL

Burt Feldman Grenier, Scottsdale

By Elizabeth Feldman, Mary K. Grenier

Counsel for Petitioner/Appellant

Jeffrey G. Pollitt PC, Phoenix

By Jeffrey G. Pollitt, Lindsay Cohen, Jennika McKusick

Co-Counsel for Respondent/Appellee

Berkshire Law Office PLLC, Tempe

By Keith Berkshire, Erica Leavitt

Co-Counsel for Respondent/Appellee

FILED 10-14-2021
NACKARD v. NACKARD

Decision of the Court

2

MEMORANDUM DECISION

Presiding Judge Jennifer B. Campbell delivered the decision of the Court, 

in which Judge Samuel A. Thumma and Chief Judge Kent E. Cattani joined.

C A M P B E L L, Judge:

¶1 Patrycia Nackard (Wife) appeals from the decree dissolving 

her marriage to Patrick Nackard (Husband). She challenges the superior 

court’s classification and allocation of certain businesses and its denial of 

her request for an award of attorneys’ fees. Because Husband inherited the 

businesses as his sole and separate property and the community enjoyed 

the profits and increase from the businesses during the marriage, the 

superior court properly allocated the businesses to Husband. Additionally, 

the superior court acted within its discretion in denying Wife’s request for 

fees. Accordingly, we affirm.

BACKGROUND

¶2 After 36 years of marriage, Wife petitioned for dissolution. 

The superior court adopted the parties’ partial settlement agreement, 

entered summary judgment rulings designating some businesses as

community property (the community businesses) and other businesses as 

Husband’s separate property (the contested businesses), held a two-day 

trial on contested issues, and entered a decree of dissolution. 

¶3 In the decree, and specific to this appeal, the superior court: 

(1) reaffirmed its summary judgment rulings;

1 (2) found the community 

“enjoyed the profits” from the contested businesses during the marriage 

and therefore “no additional apportionment of Husband’s separate 

entities” was warranted; (3) determined Husband’s distribution of profits 

from the contested businesses to the community “did not constitute 

1 Despite the superior court’s prior ruling on Husband’s motion for 

summary judgment, the character of the contested businesses was fully 

litigated at trial. Wife was not foreclosed from presenting any evidence on

any issue, and at the conclusion of the trial, the court confirmed its prior 

ruling: “After carefully considering the evidence presented at trial, the 

Court continues to find that the [contested businesses] are Husband’s sole 

and separate property.” 
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Decision of the Court

3

transmutation or commingling”; (4) awarded the community businesses to 

Husband with corresponding offsets to Wife for her one-half share in each; 

(5) ordered Husband to pay Wife an equalization payment of $665,057.99; 

(6) reaffirmed the parties’ property settlement agreement, which, among 

other things, awarded Wife $1.9 million in unencumbered real estate and 

financial accounts totaling more than $700,000; (7) awarded Wife indefinite 

spousal maintenance of $10,000 per month; and (8) denied both parties’ 

requests for attorneys’ fees and costs. Wife timely appealed. 

DISCUSSION

I. Characterization of the Contested Businesses

¶4 Wife challenges the superior court’s characterization of the 

contested businesses as Husband’s separate property.

¶5 “The characterization of property as separate or community 

is a question of law we review de novo.” Schickner v. Schickner, 237 Ariz. 

194, 199, ¶ 22 (App. 2015). In conducting our review, we “defer to the 

[superior] court’s determination of witnesses’ credibility and the weight to 

give conflicting evidence.” Gutierrez v. Gutierrez, 193 Ariz. 343, 347, ¶ 13 

(App. 1998); see also Hurd v. Hurd, 223 Ariz. 48, 52, ¶ 16 (App. 2009) (“Even 

though conflicting evidence may exist, we affirm the [superior] court’s 

ruling if substantial evidence supports it.”).

¶6 The character of property is established at its acquisition, 

Myrland v. Myrland, 19 Ariz. App. 498, 503 (1973), and property acquired by 

a spouse during marriage “by gift, devise or descent . . . is the separate 

property of that spouse,” A.R.S. § 25-213(A). While it is “possible” to change 

the separate character of property, in the absence of an “agreement, gift or 

commingling,” separately acquired property remains separate in nature. 

Myrland, 19 Ariz. App. at 503-04. 

¶7 The parties married in 1982. Although Husband owned some 

interest in his family’s businesses before the parties’ marriage, he acquired 

the balance of the businesses two years after the marriage. Specifically, 

upon his father’s death, Husband inherited a soft drink bottling 

distributorship (the bottling company), a land subsidiary, a wholesale 

liquor subsidiary, and a trucking subsidiary. 

¶8 Wife does not dispute that these inherited businesses, the 

predecessors to the contested businesses (the predecessor companies), 

became Husband’s separate property at the time of their acquisition. 

Instead, she argues that she acquired a community property interest in the 
NACKARD v. NACKARD

Decision of the Court

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contested businesses because Husband “transmuted and commingled [the

inherited] separate property into community property.” 

¶9 “Mere mutations of form do not of themselves work a 

transmutation of the character of property.” Porter v. Porter, 67 Ariz. 273, 

283 (1948), declined to follow on other grounds by Cockrill v. Cockrill, 124 Ariz. 

50 (1979). Rather, “separate property remain[s] separate as long as it can be 

identified,” and it is only when “the identity of separate property is lost” 

and cannot be traced that “transmutation takes place.” Id. 

¶10 At trial, Wife testified that during most of the marriage, she 

believed the parties jointly held the contested businesses as community 

property. As support for this contention, Wife presented: (1) corporate 

meeting minutes of the predecessor companies, which for a time identified 

her as a “shareholder,” and (2) expert opinion testimony that she is a 

“beneficial owner” of the contested businesses, though not a record 

shareholder. 

¶11 Husband, in turn, testified that he owns the contested 

businesses as his separate property. When confronted with the corporate 

meeting minutes identifying Wife as a shareholder of the predecessor

companies, Husband testified that the designations were erroneous, noting 

that Wife was the one who had drafted the documents. See Porter, 67 Ariz. 

at 284-85 (holding the inclusion of wife’s name on notes, mortgages, and 

contracts relating to the purchase of real property with husband’s separate 

funds did not transmute the separate property to community property 

because no evidence demonstrated “that the insertion of the wife’s name in 

the conveyances was by the direction of the husband”). Husband also 

pointed out that Wife was not included as a shareholder, owner, or officer 

in the 2008 operating and restructuring agreements converting the 

contested businesses from C corporations to S corporations. Finally, 

Husband presented evidence that the only time Wife held any shares in 

either the predecessor companies or the contested businesses was on a 

single day in 1992, when, for estate-planning purposes, he transferred 25% 

of his ownership interest in the bottling company to Wife, which she then 

immediately transferred to trusts for the benefit of the parties’ two children. 

¶12 Wife first argues that a community interest in the contested 

businesses is evidenced by corporate documents that identify her both as a 

corporate officer and a shareholder. Pointing to her designation on certain 

liquor licenses, Wife asserts that she served as a corporate officer for the 

contested businesses and is therefore an owner. In his trial testimony, 

Husband denied Wife’s claim to an officer role, testifying that she never 
NACKARD v. NACKARD

Decision of the Court

5

held any management position and operated only in an administrative 

capacity. Regardless, Wife cites no authority for the proposition that a

corporate officer necessarily maintains an ownership interest in that

corporation, and our research reveals none. See A.R.S. § 10-802 (“A director 

need not be . . . a shareholder of the corporation.”). Nor does Wife cite any 

authority for the proposition that an individual’s “shareholder” 

designation on corporate minutes necessarily establishes that individual’s 

ownership interest in the corporation absent any other evidence 

demonstrating an actual acquisition of shares. See A.R.S. § 10-140(44) 

(defining a “shareholder” as a “person in whose name shares are registered 

in the records of a corporation or the beneficial owner of shares to the extent 

of the rights granted by a nominee certificate on file with a corporation”); 

see also Potthoff, 128 Ariz. at 565 (holding evidence that husband’s separate 

property was listed as community property on some of the parties’ federal 

income tax returns did not transmute the separate property into community 

property); Myrland, 19 Ariz. App. at 503 (holding wife’s deposit of her 

separate business monies into a jointly held bank account did not constitute 

a gift to the community); cf. Grant v. Grant, 119 Ariz. 470, 471-72 (App. 1978) 

(concluding wife gifted husband a community interest in her separate stock 

by specifically instructing her attorney to place the stock in joint tenancy 

ownership). 

¶13 Here, Wife’s expert did not testify that she was a shareholder. 

Instead, Wife’s expert opined that she was a beneficial owner only, and 

Wife does not challenge Husband’s assertion that she was only an actual

shareholder of one predecessor company for a single day as part of an estate 

planning device to transfer shares to the parties’ children. Therefore, 

consistent with the superior court’s findings, none of the cited corporate 

documents conclusively establish a community interest in the contested 

businesses.

¶14 Next, Wife asserts that the community acquired an interest in 

the contested businesses when (1) Husband changed the name of the 

trucking subsidiary and (2) the community acquired a snack and vending

subsidiary. Again, Wife cites no authority for her assertion that simply

changing the name of a separately held business during marriage 

transmutes the character of the business from separate to community, and 

our research reveals none. Further, Wife fails to explain how the 

community’s acquisition of the snack and vending subsidiary transmuted 

the separate nature of the predecessor companies. At trial, Husband 

testified that he used his separate funds from the bottling company to retire 

debts owed by the community’s subsidiary company, effectively 

consolidating all outstanding debts from the various businesses into the 
NACKARD v. NACKARD

Decision of the Court

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bottling company. Had Husband used the community’s assets to pay off 

his separate property debt, transmutation of the separate property, in the 

absence of clear tracing, may have occurred. See Potthoff, 128 Ariz. at 562 

(explaining “transmutation of separate to community property by 

operation of law” occurs only when “property of identical character, such 

as money, is so mixed together that a court is unable to tell how much 

money was originally separate and how much was originally community,”

and the satisfaction of a “separate obligation with [traceable] community 

funds . . . at most . . . [provides the community with] a claim for 

reimbursement”); see also Nace v. Nace, 104 Ariz. 20, 23 (1968) (“[T]he mere 

commingling of funds does not have the effect of destroying the identity of 

. . . separate property as long as it can be identified.”). But contrary to Wife’s 

apparent contention, a spouse’s use of separate monies to extinguish a 

community debt does not transmute the nature of that spouse’s remaining

separate property. See Battiste v. Battiste, 135 Ariz. 470, 473 (App. 1983) 

(explaining the occasional use of separate funds for community purposes 

does not transmute the character of the underlying source of the funds or 

convert the remaining balance of the separate funds to community 

property).

¶15 In sum, the superior court properly characterized the 

contested businesses as Husband’s separate property. The uncontroverted 

record reflects that Husband, alone, inherited the predecessor companies

from his father. Wife failed to present compelling evidence that he

transmuted the nature of his separate property by agreement, gift, or 

commingling.2

II. Allocation of the Contested Businesses

¶16 Wife next challenges the superior court’s allocation of the 

contested businesses to Husband. Citing her labor contribution to the 

contested businesses on behalf of the community and the length of the 

2 We find no merit to Wife’s contention that Husband, in omitting her 

from the restructuring of the contested businesses, violated a fiduciary duty 

owed to her. Because the contested businesses were Husband’s separate 

property, he owed Wife no fiduciary duty in his management of them. See

A.R.S. § 25-214(A) (“Each spouse has the sole management, control and 

disposition rights of each spouse’s separate property.”); cf. Gerow v. Covill, 

192 Ariz. 9, 18, ¶ 40 (App. 1998) (explaining “that a fiduciary relationship 

between spouses does exist with respect to community assets,” and the 

“[r]emoval of community assets without spousal notice and/or approval 

can constitute a breach of that duty”).
NACKARD v. NACKARD

Decision of the Court

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parties’ marriage, Wife argues that the use of any apportionment 

methodology “must be rejected” in this case.

¶17 We review a superior court’s apportionment of property for 

an abuse of discretion. Bell-Kilbourn v. Bell-Kilbourn, 216 Ariz. 521, 523, ¶ 4 

(App. 2007). Although the “increase” and “profits” of a spouse’s separate 

property are “the separate property of that spouse,” A.R.S. § 25-213(A), 

“[a]ll property acquired by either husband or wife during the marriage is 

. . . community property . . . except for property that is . . . [a]cquired by gift, 

devise, or descent.” A.R.S. § 25-211(A). The supreme court resolved the

potential conflict between these statutory provisions by adopting an 

apportionment rule that allocates the profits or increase of separate 

property “in accordance with whether they are the result of the individual 

toil and application of a spouse or the inherent qualities of the business 

itself.” Cockrill, 124 Ariz. at 52. 

¶18 When the value of separate property has increased, a spouse 

asserting that the increase is separate must “prove that the increase is the 

result of the inherent value of the property” and “not the product of the 

work effort of the community.” Id. But even if the spouse fails to carry this 

burden, only “profits or the increase in value” of the separate property 

“may become community property.” Id. Meaning, “the separate property 

of the spouse remains separate.” Id. This principle holds even when both 

spouses have “work[ed] to improve the property during marriage.” Id.; see 

also Myrland, 19 Ariz. App. at 502-04 (holding that husband’s employment 

by wife’s businesses, both before and during the marriage, did not change 

the character of wife’s businesses from separate to community).

¶19 Without adopting a “precise criterion or fixed standard” for 

allocating the profits or increase of separate property, the supreme court 

has presented two approaches for equitable apportionment that are 

applicable to this case: (1) “determine the reasonable value of the 

community’s services[,] allocate that amount to the community, and treat 

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

separate estate,” or (2) “allocate to the separate property a reasonable rate 

of return on the original capital investment,” with “[a]ny increase above 

this amount” allocated to the community. Cockrill, 124 Ariz. at 54 (citation 

omitted); see Rueschenberg v. Rueschenberg, 219 Ariz. 249, 254, ¶ 19 (App. 

2008) (“The entire purpose of . . . implementing apportionment was to 

achieve a more equitable result.”). 

¶20 Both before and after her father-in-law’s death, Wife worked 

for the predecessor companies in various capacities, including sales, 
NACKARD v. NACKARD

Decision of the Court

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training, administration, and payroll. While her employment was not 

continuous and her office presence waned after the parties had children, 

Wife remained involved with the contested businesses for most of the 

parties’ marriage and received significant annual compensation in the 

several years preceding the divorce. 

¶21 At trial, both parties’ experts testified that the contested 

businesses did not generate a reasonable rate of return during the marriage, 

failing even to keep pace with inflation. In fact, Wife’s expert agreed that 

had Husband simply liquidated the predecessor companies when he 

inherited them and invested the money in stock, the stock would have a 

greater present-day value than the contested businesses. The parties also 

agreed that either the community or the parties’ children received all net 

distributable earnings from the contested businesses, not Husband 

individually, and that the parties shared all compensation. As explained by 

Husband’s expert, had the profits not been distributed to the community, 

the contested businesses would have experienced substantially higher 

growth and a reasonable rate of return. But because the community enjoyed 

all that increase during the marriage, there was no increase to allocate upon 

divorce. 

¶22 Reframing her transmutation argument, Wife first contends

that because the net distributable earnings “were hopelessly commingled” 

with other community assets and “never traced back to separate property,” 

the contested businesses became community property and “what began as 

an inherited business is now a community asset subject to equitable 

division.” Without question, the character of the net distributable earnings 

was transmuted from separate to community when the funds were 

distributed to the community, and Husband has never claimed otherwise. 

But contrary to Wife’s contention, the transmutation of the character of the 

profits did not simultaneously transmute the character of the source of 

those profits. In other words, the contested businesses remained distinct

and separate from the disbursements. See Cockrill, 124 Ariz. at 52. 

¶23 Turning to equitable principles, Wife next asserts that “[i]t is 

illogical and unconscionable” that she would gift an interest in “an entity 

to which she allegedly has no interest to her children.” In making this claim, 

Wife fails to acknowledge the uncontroverted evidence that Husband 

transferred a portion of his separate property shares in the bottling 

company to her for estate planning purposes, and that she only held those 

shares momentarily before transferring them to the parties’ children. Given 

the sequence of these transfers, and this “straw person” transaction 

apparently undertaken to satisfy legal requirements for the transfer to the 
NACKARD v. NACKARD

Decision of the Court

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children, Wife’s contention that she would not have made the gifts to the 

parties’ children had she not detrimentally relied on Husband’s 

representations that the predecessor companies were community assets is 

unpersuasive. The superior court could have concluded that a reasonable 

person in Wife’s position would have realized that the predecessor 

companies were not community property simply because of her 

participation in the “straw-person” transaction used as an estate planning 

mechanism to transfer an interest in the company to the children. In fact, 

had Wife owned an interest in the company, the initial stock transfer would 

have been unnecessary.

¶24 Further, Wife contends that she was deprived of the contested 

businesses’ increase because the profits were disbursed and spent, leaving 

no allocatable rate of return. This claim lacks merit. At trial, Wife detailed 

the parties’ robust lifestyle during the marriage, and apart from subsidizing 

the parties’ living expenses, the net distributable earnings also funded the 

community’s accumulation of wealth. As the joint owner of these

accumulated community assets, Wife received substantial property in the 

dissolution decree, including unencumbered real property worth at least 

$1.9 million and nearly $1.5 million in liquid assets. While Wife would have 

received a portion of the contested businesses’ increase had Husband 

simply reinvested the companies’ profits rather than disbursing them to the 

community, she instead benefited from the companies’ profits throughout 

the marriage and received her one-half share of the community assets 

acquired during the marriage at divorce―assets that were unquestionably 

acquired, at least in significant part, with disbursement proceeds from 

Husband’s separate property business. Simply put, the trial evidence shows 

that the community received the benefit of the contested businesses’ 

increase during the marriage and that Wife received her community share 

of that accumulated benefit upon divorce. For these reasons, we also reject 

Wife’s contention that the community’s payment of taxes on the net 

disbursement earnings transmuted the contested businesses. The 

community, not Husband alone, received the benefit of the contested 

businesses’ increase in value and paid the taxes accordingly. 

¶25 In sum, we find no merit to Wife’s contention that she 

received nothing from the contested businesses’ increase despite her 

community labor contribution during the marriage. The uncontroverted 

record reflects that she received both compensation for her labor and a 

community interest in the contested businesses’ profits. Notwithstanding 

the length of the parties’ marriage and Wife’s contribution of labor on 

behalf of the community, substantial justice does not require an allocation 

of Husband’s separate property to the community. Wife is not entitled to 
NACKARD v. NACKARD

Decision of the Court

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dispossess Husband of his inheritance, which was and remains his sole and 

separate property.

3

III. Denial of Request for Attorneys’ Fees

¶26 Wife argues the superior court improperly denied her request 

for an award of attorneys’ fees under A.R.S. § 25-324, which authorizes an 

award of attorneys’ fees after considering both parties’ financial resources 

and the reasonableness of their positions throughout the proceedings. We 

review the superior court’s ruling on an attorneys’ fees request under this 

statute for an abuse of discretion. Myrick v. Maloney, 235 Ariz. 491, 494, ¶ 6 

(App. 2014).

¶27 Both parties requested an award of attorneys’ fees and costs. 

Considering both prongs of A.R.S. § 25-324, the superior court found that 

Husband has “considerably more resources” and that “both parties acted 

unreasonably,” with neither acting “more unreasonable than the other.” 

Without further explanation, the court denied both parties’ requests. 

¶28 The record supports each of the superior court’s findings. 

Although Husband has greater financial resources available to contribute 

toward attorneys’ fees, a financial “disparity alone does not mandate an 

award of fees.” Myrick, 235 Ariz. at 494, ¶ 9. Because A.R.S. § 25-324 is 

permissive, not mandatory, the superior court “has the discretion to deny a 

fee request even after considering both statutory factors.” Id. We conclude 

the superior court did not abuse its discretion in denying Wife’s fee request.

3 We also find no merit to Wife’s contention that the superior court 

“committed reversible error” by failing to recognize that it could reject all 

allocation methods and simply find the character of the contested 

businesses community in nature to achieve substantial justice. In making 

this argument, Wife correctly notes that the superior court found no 

recognized methodology for awarding a spouse a 50% “sweat equity” 

interest in the other spouse’s separate property, as Wife requested. But the 

superior court further found no basis to apply a “sweat equity” 

apportionment analysis because the “community enjoyed the profits of 

Husband’s separate properties during the marriage” and “that enjoyment 

constitutes ‘substantial justice’ under the case law.” 
NACKARD v. NACKARD

Decision of the Court

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CONCLUSION

¶29 For the foregoing reasons, we affirm the decree of dissolution. 

Both parties request an award of attorneys’ fees on appeal under A.R.S. 

§ 25-324. In our discretion, we deny both requests but award Husband his 

taxable costs upon compliance with ARCAP 21.