Court Opinion

ID: 4462778
Source: CourtListenerOpinion
Date Created: 2019-12-10 16:02:07.912619+00
Date Added: 2024-06-11T13:33:23.493339
License: Public Domain

IN THE
             ARIZONA COURT OF APPEALS
                               DIVISION ONE

                             In re the Matter of:

                            KAREN K. HEFNER,
                     Petitioner/Appellee-Cross Appellant,

                                      v.

                           GARY S. HEFNER,
                    Respondent/Appellant-Cross Appellee.

                          No. 1 CA-CV 18-0404 FC
                            FILED 12-10-2019

           Appeal from the Superior Court in Maricopa County
                          No. FN2015-050301

                  The Honorable Jennifer E. Green, Judge

    AFFIRMED IN PART; VACATED IN PART AND REMANDED

                                 COUNSEL

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 Respondent/Appellant-Cross Appellee
                           HEFNER v. HEFNER
                           Opinion of the Court

                                  Opinion

Judge Paul J. McMurdie 1 delivered the opinion of the Court, in which
Presiding Judge Michael J. Brown joined. Judge Kenton D. Jones concurs in
part and dissents in part.

M c M U R D I E, Judge:

¶1            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.

             FACTS AND PROCEDURAL BACKGROUND 2

¶2            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.

¶3           After the January 2017 trial on the petition for dissolution, the
superior court determined the personal-injury damages were community

1       Due to the untimely passing of the Honorable Jon W. Thompson
after this case was submitted, Judge Paul J. McMurdie substituted for him
on the panel.

2       We view the facts in the light most favorable to sustaining the
superior court’s findings and orders. Alvarado v. Thomson, 240 Ariz. 12, 13,
¶ 1, n.1 (App. 2016).

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                            HEFNER v. HEFNER
                            Opinion of the Court

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.

¶4             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).

                               DISCUSSION

¶5            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.

¶6            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).

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                           HEFNER v. HEFNER
                           Opinion of the Court

A.     Husband’s Personal-Injury Settlements Are Presumptively His
       Separate Property, and the Community Proponent Has the Burden
       to Show Otherwise.

¶7             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.

¶8            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)).

¶9            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.”);

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                            HEFNER v. HEFNER
                            Opinion of the Court

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, enforced.”).

¶10           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 to establish the amount of the settlement to which the community
was entitled.

¶11            The Dissent maintains that we put too much weight on the
dispositional paragraph in Jurek to overcome the “enduring precedent” of
what constitutes acquired property. Infra, at ¶¶ 27–28. We can hardly be
faulted for ordering the exact same relief as our supreme court ordered in
Jurek with the same instructions to the superior court. Jurek, 124 Ariz. at
598–99 (“The superior court should determine the actual loss to the
community . . . . [and] [t]he remainder of any recovery, after deduction of
the community expenses and loss, shall be awarded to the appellant as his
sole and separate property.”); see Resolution Tr. Corp. v. Segel, 173 Ariz. 42,
44 (App. 1992) (a statement from a court expressly declaring a guide for
future conduct is considered authoritative and must be followed). Likewise,
courts reviewing Jurek claims have followed the dispositional order of the
court. 3 If our supreme court wishes to modify its holding in Jurek, it is

3      See Helland, 236 Ariz. at 200, ¶ 11 (“[C]ompensation for a spouse’s
personal injuries—even if received during the marriage—belongs to that
spouse as separate property.” (citing Jurek, 124 Ariz. at 598)); Am. Express
Travel Related Servs. Co., Inc. v. Parmeter, 186 Ariz. 652, 654 (App. 1996)
(“Applying [the Jurek] principles to this case, we cannot say the trial court
erred in finding that the attorney’s fees [the injured spouse] incurred in
defending his separate property are themselves separate property.”); Bugh
v. Bugh, 125 Ariz. 190, 192 (App. 1980) (“[P]ersonal injury recoveries are the
separate property of the injured spouse except insofar as the recovery is for
lost wages and expenses for hospital and medical care incurred during the
marriage.” (citing Jurek, 124 Ariz. at 598)).

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                             HEFNER v. HEFNER
                             Opinion of the Court

certainly free to do so; but we are not. 4 City of Phoenix v. Leroy’s Liquors Inc.,
177 Ariz. 375, 378 (App. 1993) (court of appeals is bound by decisions of the
supreme court and may not “overrule, modify, or disregard them”); Powers
v. Taser Int’l, Inc., 217 Ariz. 398, 404, ¶ 21 (App. 2007) (same).

¶12           The court erred by awarding Wife half of the personal-injury
awards without evidence that the community was entitled to any of the
award. On appeal, Husband recognizes some portion of the awards may
represent community reimbursement. We, therefore, vacate and remand
that portion of the decree allocating to Wife a part of the injury settlements.
On remand, Wife may seek to prove what portion of the awards were
reimbursement to the community, and the remainder shall be awarded to
Husband as his separate property.

B.     The Superior Court Correctly Characterized Husband’s Business
       Assets as Separate Property.

               1.     Husband’s Business is His Separate Property.

¶13           On cross-appeal, Wife argues the superior court erred by
awarding the business to Husband as his separate property. Specifically,
Wife argues the court erred when it “lost sight of the marital asset actually
at issue,” the corporate entity, and focused instead on the accounts,
building, and property held by the corporation. We disagree that this
distinction is material. “[I]ncorporation during marriage d[oes] not
transmute the character of the property.” Rowe v. Rowe, 154 Ariz. 616, 619
(App. 1987). superseded by statute on other grounds as stated in Myrick v.

4      Even though the issue of whether Jurek was correctly decided is not
before us, we would note practical reasons why the supreme court could
have reached their conclusion. There are varying economic and
non-economic components of an injury settlement—pain and suffering, lost
wages, and medical expenses. See Hatcher, 188 Ariz. at 158 (personal injury
recoveries “have various component parts” that may be subject to division
upon dissolution) (Thompson, J.). To a great extent, the latter two categories
are subject to objective proof, but pain and suffering—typically the
remaining part of a verdict or settlement—is subjective. For that reason,
equity supports our interpretation of Jurek that the burden should be on the
party wanting to use the objective data to prove a community interest in the
recovery. The burden for the non-injured party is less because the evidence
is more objective; and, although the dissent disagrees, to reverse the burden
would require the injured person to offer proof against his or her interest.

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                            HEFNER v. HEFNER
                            Opinion of the Court

Maloney, 235 Ariz. 491, 494, ¶ 8 (App. 2014). To suggest otherwise elevates
semantics over substance. See Gerow v. Covill, 192 Ariz. 9, 15, ¶ 27 (App.
1998) (the nature of the asset does not transmute “by merely changing the
form of its ownership through incorporation”).

¶14             The court found that Hefner Auto Repair, Inc. was created to
facilitate the transfer of the business assets Frank Hefner intended to gift to
Husband upon Frank’s retirement. 5 After its creation, Husband served as
the corporation’s sole director and shareholder. See Rowe, 154 Ariz. at 619
(stock issued solely in one spouse’s name evidenced the corporation was
spouse’s separate property). Frank later gave the real property and building
associated with the business to Husband as “a married man as his sole and
separate property.” Husband, Frank, and Frank’s attorney all understood
it to be Frank’s intent that Husband receive the business as his separate
property as an advance upon his inheritance. The court’s findings are
supported by the record and support the conclusion that both the
corporation and the assets associated with the business were Husband’s
separate property.

¶15           Although Wife points to evidence that she worked for the
business and that the business periodically borrowed funds from the
community, “[t]he status of property in Arizona, as to whether it is
community or separate property, is established at the time of its
acquisition.” Bender v. Bender, 123 Ariz. 90, 92 (App. 1979). Therefore, these
circumstances are not determinative. See Rowe, 154 Ariz. at 619 (concluding
a spouse’s separate-property business was not transformed into a
community asset where the community was adequately compensated for
services provided to the business by the other spouse); Drahos v. Rens, 149
Ariz. 248, 249 (App. 1985) (“[A] residence which is separate property does
not change its character because it is used as a family home and mortgage
payments are made from community funds.”). We cannot say the superior
court’s findings and conclusions characterizing the business as Husband’s
separate property are not supported by the record. Accordingly, we affirm
the court’s ruling that the business is Husband’s separate property.

5      Although Wife criticizes the superior court for not itemizing the
specific assets transferred with the business, she does not identify in the
record where she denied knowledge of what the transfer entailed. Wife
cannot decline to call to the superior court’s attention the lack of a specific
finding on a critical issue and then urge this court to reverse on that basis.
Christy C. v. ADES, 214 Ariz. 445, 452, ¶ 21 (App. 2007).

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                           HEFNER v. HEFNER
                           Opinion of the Court

              2.     There Was No Evidence that the Business Increased
                     in Value.

¶16             Wife also argues the superior court erred when it declined to
apportion an increased value of Husband’s separate business to the
community. See Rueschenberg v. Rueschenberg, 219 Ariz. 249, 254, ¶ 20 (App.
2008) (“[T]he trial court must equitably apportion the . . . increase in value
(whether goodwill or otherwise) of the separate business if the efforts of the
community caused a portion of that increase and substantial justice requires
it.”). She first argues the court applied the wrong burden of proof, a legal
question we review de novo. Am. Pepper Supply Co. v. Fed. Ins. Co., 208 Ariz.
307, 309, ¶ 8 (2004).

¶17            Although Wife is correct that the spouse claiming property
acquired during a marriage is separate must prove it so by clear and
convincing evidence, what is at issue here is not the characterization of the
asset as community or separate, but rather, whether its value increased at
all. 6 When a spouse argues she has increased the value of the other spouse’s
separate property through community labor and funds, “the burden is on
the claimant to show the amount of the increase.” Tester v. Tester, 123 Ariz.
41, 44 (App. 1979). Thus, to the extent Wife claimed the value of the business
increased during the marriage, she had the burden of proving the increased
value.

¶18          Wife next argues the superior court erred by finding that the
evidence was “inconclusive . . . as to whether the business gained or lost
value from the time of acquisition to the time of service.”

¶19           An appellant who “contend[s] on appeal that a judgment,
finding or conclusion[] is unsupported by the evidence or is contrary to the
evidence . . . must include in the record transcripts of all proceedings
containing evidence relevant to that judgment, finding or conclusion.” Ariz.
R. Civ. App. P. (“ARCAP”) 11(c)(1)(B). Wife did not provide a transcript of

6      Wife asserts the superior court had already found that the business
had increased in value during the parties’ marriage when it granted her
motion for a new trial. The court’s order, however, specifically states the
issue for the evidentiary hearing as “whether the Court should determine
and apportion the profits or increase in value of Husband’s separate
property between separate and community property.” This language
indicates the Court had not yet determined whether the business’s value
had increased.

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                            HEFNER v. HEFNER
                            Opinion of the Court

the evidentiary hearing on the motion for a new trial where evidence
regarding the existence and extent of any increased value of the business
was presented. Because we are unable to review the evidence, we assume
it would support the court’s findings and conclusions, see Baker v. Baker, 183
Ariz. 70, 73 (App. 1995), including the court’s finding that Wife’s expert
testified that he did not know if the business value had increased and
acknowledged the value could have decreased. On this record, we cannot
say the superior court erred.

¶20           Wife alternatively claims she was unable to provide a
valuation of the business at the time it was acquired because Husband
routinely destroyed or refused to maintain the necessary financial records.
The superior court rejected this argument, finding instead that Husband
had provided Wife access to both his business records and his accountant,
but she never attempted to obtain the information. Thus, the court found
“Wife could have produced a baseline value for the business at the time of
acquisition had she accessed the records.”

¶21           Wife argues specific evidence suggests that information
dating back to the Husband’s acquisition of the business was no longer
available. Husband’s written closing argument indicates he testified
otherwise. Because Wife did not provide a transcript of the evidentiary
hearing, we presume it supports Husband’s assertion, and the superior
court’s findings that the evidence existed and Wife elected not to pursue it. 7
On this record, we find no error.

C.     The Superior Court Did Not Abuse its Discretion by Denying
       Wife’s Post-Petition Reimbursement Claims.

¶22           Wife argues the superior court erred when it denied her
request for an order requiring Husband to reimburse her for the cost of his

7      Although we are sensitive to Wife’s suggestion that it would be
unfair to punish a spouse who is unable to calculate the value of a separate
business at the time it was acquired because the other spouse, whether
through routine or malice, destroyed or failed to maintain records related
to the business, that is not the case here. Moreover, we believe such
circumstances, if and when they arise, can be addressed on a case-by-case
basis through the superior court’s broad discretion to remedy discovery
violations, see, e.g., Seidman v. Seidman, 222 Ariz. 408, 411, ¶ 18 (App. 2009),
and to value property based upon the particular circumstances, see, e.g.,
Kelsey v. Kelsey, 186 Ariz. 49, 51 (App. 1996).

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                           HEFNER v. HEFNER
                           Opinion of the Court

health insurance. Wife argues this expenditure did not benefit the
community and should have been paid solely by Husband.

¶23           Both parties requested reimbursement for expenses paid
during the pendency of the dissolution. Wife does not dispute the superior
court’s findings that it could not clearly delineate “what portion of all of
these expenses was for the benefit of the community, or simply for the
benefit of one of the parties” but was nonetheless convinced the expenses
were necessary; and both parties substantially contributed in equal shares
to the effort. These uncontested findings support the court’s collective
denial of both parties’ reimbursement requests, regardless of the specific
nature of one category of expenses. Accordingly, the superior court did not
abuse its discretion.

D.     The Superior Court Did Not Abuse its Discretion by Limiting
       Wife’s Attorney’s Fees Award.

¶24           Wife argues the superior court abused its discretion when it
awarded her only $20,000 of approximately $46,000 she spent in attorney’s
fees. Wife reasons she should have been awarded a more significant
amount of her fees because Husband has a financial advantage and acted
unreasonably when he denied that any portion of the business was
community property. But the superior court acknowledged and considered
that Husband had greater financial resources when it made the award. The
court also explicitly rejected Wife’s claim that Husband acted unreasonably,
“especially not in asserting the business was his sole and separate
property.” That finding is supported by both the record and our
conclusions on appeal affirming the award of the business to Husband as
his separate property. Finally, Wife does not dispute the court’s finding that
she acted unreasonably during the proceedings. Therefore, Wife has failed
to show the court erred by awarding her only a portion of her attorney’s
fees.

                    ATTORNEY’S FEES AND COSTS

¶25            Both parties request an award of attorney’s fees on appeal
under A.R.S. § 25-324. Having considered the relevant financial resources
of the parties and the reasonableness of the positions asserted on appeal,
we deny both parties’ requests. Husband, as the successful party, is entitled
to his costs on appeal upon compliance with ARCAP 21.

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                            HEFNER v. HEFNER
                            Opinion of the Court

                              CONCLUSION

¶26           The portions of the judgment concerning Husband’s business,
post-petition health insurance reimbursements, and attorney’s fees are
affirmed. The judgment’s characterization of the personal-injury
settlements as community property is vacated and remanded to dispose of
the property consistent with this opinion.

J O N E S, J., concurring in part, dissenting in part

¶27            In Arizona, with limited exception, property acquired during
marriage is presumed to be community property. A.R.S. § 25-211(A).
Husband argues, and the majority agrees, that Jurek v. Jurek, 124 Ariz. 596
(1980), 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. I disagree. “Personal injury damages” are not
necessarily “personal,” but rather, represent the mechanism by which the
totality of the losses incurred from an accident are paid. These funds may
include compensation for injuries to the person as well as compensation for
losses suffered by the marital community to which the injured party
belongs. Although our supreme court has clearly abandoned the traditional
view that personal injury damages are, without exception, community
property, I do not read Jurek to alter either the presumption of community
property or the burden of proving otherwise.

¶28           In Arizona, “recovery for personal injuries is comprised of
various component parts which may be either community or separate in
nature.” Hatcher v. Hatcher, 188 Ariz. 154, 157 (App. 1996) (citing Jurek, 124
Ariz. at 597-98). But the statutory presumption that all property acquired
during the marriage is community property is both “fundamental to
Arizona community property law,” Cockrill v. Cockrill, 124 Ariz. 50, 52
(1979), and “strong,” In re Marriage of Foster, 240 Ariz. 99, 101, ¶ 9 (App.
2016) (quoting Carroll v. Lee, 148 Ariz. 10, 16 (1986)). Our supreme court has
long recognized the tenacity of that presumption:

       This presumption [of community property] can be rebutted
       only by strong, satisfactory, convincing, clear and cogent, or
       nearly conclusive evidence. In this respect it differs from most
       legal presumptions that are dispelled immediately upon the
       production of any evidence negativing the presumption. The
       court must be satisfied that the property really is separate

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                             HEFNER v. HEFNER
               Jones, J., Concurring in part, Dissenting in part

       before it can state that the presumption has been dispelled. As
       long as there is any doubt, the property acquired during
       coverture must be presumed to be community property.

Porter v. Porter, 67 Ariz. 273, 279 (1948) (internal quotations omitted); accord
Carroll, 148 Ariz. at 16 (“The spouse claiming particular property as
separate must prove the separate nature by ‘clear and convincing’ or nearly
conclusive evidence.”). Although damages for personal injury may qualify
as “profits” of a spouse’s separate property, as the majority suggests, Jurek
does not specifically disclaim the presumption — confirming instead that
the community is still entitled to recover for certain losses arising from a
spouse’s personal injury. 124 Ariz. at 598. Thus, I am not convinced our
supreme court intended to abandon this enduring precedent simply
because a portion of personal injury damages may ultimately qualify as
separate property.

¶29         The majority relies on the guidance provided to the trial court
at the conclusion of Jurek as evidence of an intent to abandon the
community-property presumption and shift the burden of proof. In Jurek,
our supreme court stated that, on remand:

       The superior court should determine the actual loss to the
       community for loss of wages and medical expense and make
       an equitable division of any recovery for such items. The
       remainder of any recovery, after deduction of the community
       expenses and loss, shall be awarded to the appellant as his
       sole and separate property.

124 Ariz. at 598-99. This Court summarized Jurek in similar terms as holding
that “personal injury recoveries are the separate property of the injured
spouse except insofar as the recovery is for lost wages and expenses for
hospital and medical care incurred during the marriage.” Bugh v. Bugh, 125
Ariz. 190, 192 (App. 1980) (citing Jurek, 124 Ariz. at 598). I, again, do not read
our supreme court’s guidance in Jurek, or the summary in Bugh, as
evidencing any intent to abandon entirely the premise that the spouse
claiming particular property as separate has the burden of proving it is so
by clear and convincing evidence. The direction provided in Jurek merely
reflects the practicalities in ascertaining what portion of personal injury
damages is intended to compensate the injured spouse’s personal well-
being; the portion of the recovery that represents the injured spouse’s
separate property may well be calculable only by determining what
remains after the tangible and objectively determinable damage to the
community has been satisfied.

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                            HEFNER v. HEFNER
              Jones, J., Concurring in part, Dissenting in part

¶30           Although not specifically addressed in the majority, Husband
argues that requiring him to prove what portion of personal injury damages
are his separate property is illogical because it requires him to produce
evidence that would be detrimental to him — namely, evidence of
objectively determinable damage to the community that would reduce the
value of his separate property. However, if the spouse asserting a separate
property interest chooses not to produce evidence sufficient to permit the
court to evaluate the nature and extent of that claim, he risks a
determination that he has failed to overcome the presumption of
community property. In such circumstances, the entirety of the property
will be deemed a community asset. See Gersten v. Gersten, 223 Ariz. 99, 106
(App. 2009) (affirming the characterization of benefits as community
property where the receiving spouse “did not demonstrate to the family
court what portion of his . . . benefits, if any, constituted compensation for
injury to his personal well-being”). Accordingly, I cannot say the party
asserting the separate property interest is not adequately incentivized to
produce necessary evidence, even if it results in a determination that some
portion of the personal injury damages belong to the community.

¶31             For these reasons, I would affirm the general principle that
damages awarded for a spouse’s personal injury that occurred during a
marriage are presumed to be community property, and therefore, Husband
bore the burden of proving by clear and convincing evidence what portion,
if any, of the funds were his separate property. The family court here found
Husband’s evidence “did not show a credible breakdown” between the
funds intended to compensate the community versus those intended to
compensate Husband for injury to his personal well-being. Deferring to the
fact-finder’s credibility determination, as we must, Vincent v. Nelson, 238
Ariz. 150, 155, ¶ 18 (App. 2015) (citing Goats v. A. J. Bayless Mkts., Inc., 14
Ariz. App. 166, 169 (App. 1971), Husband did not rebut the presumption in
favor of community property with clear and convincing evidence.
Accordingly, I would likewise affirm the court’s determination that the
entirety of the personal injury proceeds constituted community property.

¶32           In all other respects, I concur with the majority.

                          AMY M. WOOD • Clerk of the Court
                          FILED: AA

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