IN THE COURT OF APPEALS
STATE OF ARIZONA
In Re the Marriage of:
ANN L. GEROW,
BRUCE E. COVILL,
1 CA-CV 97-0187
Redesignated per Order
Appeal from the Superior Court of Maricopa County
Cause No. DR 94-08375
The Honorable David R. Cole, Judge
BRYAN CAVE, LLP
by Neil Vincent Wake
JENSEN & KELLEY, P.A.
by Robert A. Jensen
Attorneys for Petitioner-Appellee
MARISCAL, WEEKS, MCINTYRE & FRIEDLANDER, P.A.
by Michael S. Rubin
Robert L. Schwartz
Attorneys for Respondent-Appellant
LANKFORD, Presiding Judge[A]s between petitioner and respondent,
petitioner is and shall be the owner of one-half of the capital stock in Cyber Publishing,
Inc. Upon resolution, whether by consent or
by adjudication, as against Ann Covill that
the stock ostensibly in her name is in fact
owned by husband or the marital community of
husband and wife, the ownership of the stock
on the books and records of Cyber Publishing,
Inc. shall also be changed to reflect wife's
one-half ownership interest as provided
¶1 Bruce E. Covill ("Husband") appeals from that part of a
domestic relations judgment pertaining to Cyber Publishing, Inc.
("Cyber"). The trial court found that Husband had fraudulently
conveyed his consulting business. The court accordingly awarded
Ann L. Gerow ("Wife") a fifty percent ownership of that business,
¶2 The facts are as follows. Husband and Wife married in
1974. Twenty years later, in May 1994, Wife filed a petition for
¶3 At the time of filing, Husband was self-employed as an
independent consultant working with information systems and
information delivery, with a focus on electronic media. He worked
primarily with the travel industry. By August 1994, Husband was
involved in a new business entity, Cyber.
¶4 Cyber began as the result of conversations among Husband
and his brother and sister-in-law, Jeff and Ann Covill. Cyber was
to produce electronic brochures for businesses interested in having
a presence on the Internet. Husband was named the president and a
director of the company and was responsible for the day-to-day
management of company affairs. Incorporation occurred in August
1994, with Ann Covill listed as the sole shareholder. She had
contributed $2500 for start-up costs. No shareholder, officer,
director or employee of Cyber has ever contributed any further
¶5 Shortly after incorporation, Wife learned of Cyber when
she found the incorporation papers in Husband's office in their
shared home. Husband disclosed information about Cyber to Wife in
a letter sent a few weeks later.
¶6 Two of the four clientsSee footnote 1 Husband had worked with in his
independent consulting business in recent years became Cyber's
major clients. Cyber provided Internet services for both
companies, The Hotel Industry Switch Company ("THISCO") and Best
¶7 Though he had maintained his sole proprietorship through
the first few months of Cyber's existence, Husband had ceased his
business completely and worked solely for Cyber by February 1995.
His salary was increased from $2500 per month to $10,000 per month
and he received a $30,000 bonus in 1994. Husband received no
designated payment for any intangible assets he brought to Cyber
from his sole proprietorship, such as goodwill or a client list.
¶8 In the joint pretrial statement, Wife raised the issue of
the true ownership of Cyber. She claimed that instead of merely
being an employee of the company, Husband actually was an owner.
She sought equitable distribution of Cyber as a community asset.
The joint pretrial statement was filed June 7, 1995. Though the
trial had originally been set to begin in July 1995, it was
continued and began September 21, 1995, and concluded on
January 17, 1996, after a total of nine trial days.
¶9 The parties submitted their proposed findings of fact and
conclusions of law. Husband objected to Wife's proposed findings
and conclusions. The court adopted substantially all of Wife's
proposals, but later acknowledged that it had not considered the
objections. Implicit in Rule 3.7(c), Rules of the Superior Court
of Maricopa County, is that the court will consider the objections
before entertaining findings and conclusions. However, the
objections here generally related to the sufficiency of the
evidence. Such concerns may be and indeed were in this case
addressed in a motion for new trial. Sufficiency of the evidence
objections can be made even when not raised as objections to
proposed findings and conclusions. Ariz. R. Civ. P. 52(b).
Therefore, though it may have been error to fail to consider the
objections, the error is harmless because any substantive errors in
the findings and conclusions were raised by motion for new trial
and have been preserved for appeal.
¶10 The court made extensive findings of fact. It stated
that it disbelieved Husband's statement that he was financially
unable to start Cyber himself in light of his historical six-figure
income and the expenditure of "tens of thousands of dollars" in
gifts and loans to a female friend. The court saw the
incorporation of Cyber as an attempt to "remove the business and
its asset from the marital community." The court also found that
all of Cyber's revenue-producing clients were either prior clients
of Husband's or derived from his prior business contacts, which had
developed during the marriage. The court noted that Cyber had been
"remarkably successful and highly lucrative for a start-up
business." The court also found that Husband had breached a
fiduciary duty owed to Wife by "permitting his sole proprietorship
to be incorporated and wholly owned by his sister-in-law."
¶11 As a result of these findings, the court ordered in its
judgment and decree that:
The court denied Husband's motion for new trial.
¶12 Husband advances eight contentions on appeal. They are
1. Because the court awarded Wife one-half
of Cyber stock, but ordered a stock ownership
record change reflecting that award only after
the issue of Husband's ownership was decided
as against Ann Covill, the judgment is
conditional and therefore void.
2. Wife failed to join indispensable parties
-- Ann Covill and Cyber -- in the divorce
3. The evidence does not support the trial
court's finding that Husband transferred
community property to Cyber.
4. The decree violates Husband's
constitutional right against indentured
5. No fraudulent conveyance was shown
because the necessary elements were not proven
by clear and convincing evidence.
6. The court erred in finding that Husband
owed Wife a fiduciary duty and that Husband
breached that duty.
7. Wife did not properly and timely disclose
and raise the issues concerning the formation
8. Pursuant to Arizona Civil Appellate
Procedure Rule 21(c), Husband is entitled to
¶13 We have jurisdiction over this appeal pursuant to Arizona
Revised Statutes Annotated ("A.R.S.") sections 12-120.21(A)(1), 12-2101(B), and 12-2101(F)(1). On appeal, we view the evidence in the
light most favorable to the prevailing party and affirm if any
evidence supports the judgment. Paul Schoonover, Inc. v. Ram
Constr., Inc., 129 Ariz. 204, 205, 630 P.2d 27, 28 (1981). We are
not bound, however, by the trial court's decisions on questions of
law. Premier Fin. Servs. v. Citibank (Arizona), 185 Ariz. 80, 87,
912 P.2d 1309, 1316 (App. 1995).
¶14 The first issue is Husband's allegation that the judgment
is void because it is conditional. The trial court stated that "as
between petitioner and respondent, petitioner is and shall be the
owner of one-half of the capital stock in Cyber Publishing, Inc."
(Emphasis added). The court then stated that change would be later
reflected on Cyber's books only after the ownership of the stock
was decided. Husband asserts that the unsettled ownership issues
against Ann Covill, the record owner of Cyber's stock, make the
judgment between Husband and Wife conditional and therefore, void.
¶15 While conditional judgments are generally void, there are
exceptions to this rule. Peterson v. Overson, 52 Ariz. 203, 205,
79 P.2d 958, 959 (1938). One exception is an alternative or
conditional judgment that "is of such a nature that it may be
determined therefrom definitely what rights and obligations pertain
to the respective parties." Id. at 206, 79 P.2d at 959. Here, the
rights and obligations of Husband and Wife may be determined with
such certainty. As between them, Wife has a right to one-half of
the value of that portion of Cyber determined to be Husband's.See footnote 2
Husband has the obligation to release that amount to Wife. The
domestic relations court made the assumption that his actual
ownership was one hundred percent, but recognized that his
ownership as against Ann Covill would be determined separately.See footnote 3
The contingency, the Husband's ownership, does not change the
rights and obligations between the spouses.
¶16 Equitable judgments constitute another exception. Wright
v. Mayberry, 158 Ariz. 387, 389, 762 P.2d 1341, 1343 (App. 1988)
(recognizing equitable exceptions to the rule); 49 C.J.S. Judgments
§ 83 (1997). A domestic relations court sits in equity. Guzman v.
Guzman, 175 Ariz. 183, 188, 854 P.2d 1169, 1174 (App. 1993). "When
a court of equity renders a conditional decree . . . [i]t is simply
adjusting the equities between the parties and granting to one or
the other certain relief to which the litigants may be entitled
. . . ." Mason v. Ellison, 63 Ariz. 196, 203, 160 P.2d 326, 329
(1945); see also In re Marriage of Zeliadt, 390 N.W.2d 117, 120
(Iowa 1986) ("The court sitting in equity has the power and
flexibility to impose equitable terms upon parties as conditions of
granting equitable relief."). Here, the domestic relations court
merely used its power as an equity court to "adapt its relief and
mold its decree to satisfy the requirements of the case and to
conserve the equities of the parties . . . ." Mason, 63 Ariz.
at 203, 160 P.2d at 329 (citation omitted).
¶17 Though Husband cited Peterson and Wright in support of
his contention that all conditional judgments are void, both cases
recognize exceptions to the general rule. Husband also cites
Weiner v. Ash, 157 Ariz. 232, 756 P.2d 329 (App. 1988), a case in
law and not in equity. In Weiner, the court found that where the
award appeared to be based on the possibility that that defendant
might again seek to kill the plaintiff and it would be for any
future damage that might result from that occurrence, the judgment
was void as "an actual award of compensation for probable future
damages." Id. at 235, 756 P.2d at 332. The contingencies involved
a speculative future event and the amount of damages from that
event. In the present action, the amount of damages has already
been established and the ownership of Cyber will be decided in
Maricopa County cause number CV 96-13730.
¶18 The second issue raised by Husband is Wife's failure to
join as parties Cyber and Ann Covill. Cyber is not directly
interested in who owns its stock and thus in the change wrought by
the divorce court. Husband does not argue otherwise. We do not
address this point any further.
¶19 However, Husband does assert that Ann Covill is an
indispensable party because she is the alleged third party in the
fraudulent conveyanceSee footnote 4 and as such, he implies, Wife could not
obtain an effective judgment in Ann Covill's absence. The
indispensability of parties is a question of law. Connolly v.
Great Basin Ins. Co., 6 Ariz. App. 280, 285, 431 P.2d 921, 926
(1967). We review questions of law de novo. See Tovrea Land &
Cattle Co. v. Linsenmeyer, 100 Ariz. 107, 114, 412 P.2d 47, 51
(1966). We note that though this issue was not raised below, the
defense of failure to join is not waivable and may be raised for
the first time at the appellate level. City of Flagstaff v.
Babbitt, 8 Ariz. App. 123, 127, 443 P.2d 938, 942 (1968).
¶20 Ann Covill could have been joined pursuant to Arizona
Civil Procedure Rule 20. Additionally, A.R.S. section 25- 314(D)
allows the court to join parties "necessary for the exercise of its
authority." Roden v. Roden, ___ Ariz. ___, 949 P.2d 67, 69 (App.
1997), permits the dissolution court to decide related matters.
However, Ann Covill was not an indispensable party, without whom
the action could not proceed.
¶21 The court decides who is an indispensable party after it
finds that the party is necessary but cannot be joined. Ariz. R.
Civ. P. 19(b). A necessary party is: (1) one in whose absence
complete relief is not possible among those already parties, or
(2) one whose interests would be impaired or impeded by a judgment,
or (3) one whose absence would leave those already parties subject
to multiple or inconsistent obligations. Ariz. R. Civ. P. 19(a).
The court also considers possible resulting prejudice and adequacy
of remedy before determining indispensability.See footnote 5
¶22 Ann Covill is not an indispensable party. If an action
is brought for a wrongful transfer of real or personal property and
it is possible to fashion relief which does not adversely affect
the transferee's interest, the transferee need not be joined in an
action for a judgment of damages against the defendant. 3A James W.
Moore et al., Moore's Federal Practice ¶ 19.09 at 19-186 (2d ed.
1985); see also Harvey Aluminum, Inc. v. American Cyanamid Co.,
203 F.2d 105 (2d Cir. 1953) (holding that when a plaintiff seeks
damages only against the defendant who transferred the property and
not against the party in possession, the possessing party is not
indispensable). The "present holder of legal title to property
alleged to have been transferred fraudulently is [not]
indispensable if . . . the relief sought against the defendant does
not injuriously affect the absent transferee's title." Moore,
supra at 19-188.
¶23 The court was able to fashion relief despite Ann Covill's
absence. The court, pursuant to A.R.S. section 12-318, decided a
claim between the spouses. It awarded Wife an interest against
Husband without affecting any rights Ann Covill may have. Ann
Covill is not an indispensable party.
¶24 The third issue raised by Husband is that the evidence
does not support the trial court's finding that Husband transferred
community property to Cyber. Reviewing the sufficiency of
evidence, we will not reweigh the evidence; we determine only if
substantial evidence supported the court's action. Rowe v. Rowe,
154 Ariz. 616, 620, 744 P.2d 717, 721 (App. 1987). Absent clear
error, we are bound by the trial court's findings. Aztec Film
Productions v. Tucson Gas & Elec. Co., 11 Ariz. App. 241, 243,
463 P.2d 547, 549 (1969). In this case, we look to see if the
evidence supports the existence and transfer of a community asset.
¶25 Husband argues that though the trial court found that his
"contacts," "expertise," and "knowledge" were the assets
transferred to the corporation, these are not community assets.
Actually, the court never stated specifically that these were the
community assets removed by Husband, and indeed the court was never
precise in its description. However, the court recognized that
intangible assets were involved. Because Husband received a
substantial salary and bonuses, he was compensated for his labor
and the expertise and knowledge he employed in his work. Wife has
not attempted to take any portion of Husband's income. As long as
he is compensated for those intangibles, the corporation does not
retain them as its own assets.
¶26 Other intangible assets may constitute community
property. For example, the "goodwill" developed in connection with
Husband's sole proprietorship during the marriage is considered a
community asset. See Mitchell v. Mitchell, 152 Ariz. 317, 320,
732 P.2d 208, 211 (1987). Goodwill is defined as an intangible
asset that is "an element responsible for profits in a business."
Wisner v. Wisner, 129 Ariz. 333, 337, 631 P.2d 115, 119 (App. 1981)
(citation omitted). Goodwill may also be defined as one's
reputation. Id. A spouse has a claim for a share of goodwill as
a community asset:
Under the principles of community property
law, the wife, by virtue of her position as
wife, made to that value [goodwill] the same
contribution as does a wife to any of the
husband's earnings and accumulations during
marriage. She is as much entitled to be
recompensed for that contribution as if it
were represented by the increased value of
stock in a family business.
152 Ariz. at 320, 732 P.2d at 211 (citation omitted).
¶27 Husband cannot change the community nature of the
goodwill asset by merely changing the form of its ownership through
incorporation. Rowe, 154 Ariz. at 619, 744 P.2d at 720. The
goodwill created was due to Husband's labors expended during
marriage and the community is entitled to the asset he created.
See Garrett v. Garrett, 140 Ariz. 564, 568, 683 P.2d 1166, 1170
¶28 Wife has asked for and received only a portion of those
community assets developed during the marriage and transferred to
Cyber for no consideration.See footnote 6 Because Husband concedes that Cyber
well compensated him for his labor, the award of Cyber stock
necessarily represents a division of the capital of Cyber and not
an award based on the value of Husband's labor.See footnote 7
¶29 The evidence supports the court's decision. All of the
revenue-producing clients of Cyber were developed through Husband's
previous clientele and associations acquired during the marriage.
Cyber was conceived of and developed by Husband during the
marriage. Negotiations for one of the Cyber contracts were
undertaken by Husband during his sole proprietorship before Cyber's
incorporation. If Husband had incorporated Cyber, instead of
allowing Ann Covill to do so, Cyber would have been a community
asset and subject to asset distribution pursuant to the
¶30 Husband cites a number of cases in support of his
contention that no community asset was created or transferred.
While the cases he cites find no community property in professional
licenses or degrees, in post-dissolution separate earnings, or in
contingent fees paid after dissolution, Husband overlooks that the
cases do recognize goodwill as a community asset. See, e.g.,
Wisner, 129 Ariz. 333, 631 P.2d 115 (holding that a professional
degree or license is separate property but professional goodwill of
a business earned during marriage is community property); Koelsch
v. Koelsch, 148 Ariz. 176, 181, 713 P.2d 1234, 1239 (1986) (holding
that post-dissolution earnings or benefits are separate property,
but those earnings and/or retirement benefits earned during
marriage are community property); Miller v. Miller, 140 Ariz. 520,
523, 568, 683 P.2d 319, 322 (App. 1984) (holding similar to
Koelsch); Garrett, 140 Ariz. 564, 683 P.2d 1166 (holding that the
portion of contingent fee earned during marriage is community
property though any portion earned post-dissolution is separate
property). We hold that the trial court properly found and
distributed a community asset.
¶31 As his fourth issue, Husband claims the trial court's
award violated his constitutional right against indentured
servitude. He contends that the court improperly conveyed an
interest in his post-dissolution income and earning potential.
This argument ignores the nature of the relief awarded. Wife has
been awarded only half of the stock, representing her portion of an
intangible asset, goodwill, created during the marriage. She
received no portion of Husband's future income.
¶32 The fifth issue is Husband's claim that the elements of
fraudulent conveyance were not sufficiently proven.See footnote 8 We review
the evidence in a light most favorable to supporting the trial
court's judgment. Premier Fin. Servs., 185 Ariz. at 85, 912 P.2d
¶33 Fraudulent conveyance may be shown by clear and
satisfactory evidence of an "actual intent to hinder, delay or
defraud any creditor of the debtor" or of a debtor receiving no
reasonable consideration for a transfer or obligation under certain
circumstances. A.R.S. § 44-1004(A)(1); see Sackin v. Kersting,
105 Ariz. 464, 465, 466 P.2d 758, 759 (1970); Transamerica Ins. Co.
v. Trout, 145 Ariz. 355, 360, 701 P.2d 851, 856 (App. 1985).
Actual intent may be shown by direct proof or by circumstantial
evidence from which actual intent may be reasonably inferred.
Benge, 151 Ariz. at 223, 726 P.2d at 1092; Premier Fin. Servs.,
185 Ariz. at 85, 912 P.2d at 1314. The statute provides a non-exclusive list of factors to consider when determining if actual
intent to hinder, delay or defraud exists. A.R.S. § 44-1004. No
further evidence of the common law elements of fraud are needed
once actual intent is shown. See Benge, 151 Ariz. at 223, 726 P.2d
¶34 Though Husband reviews seven of the "badges of fraud" in
an attempt to show that they were not proven by clear and
convincing evidence, he fails to realize that the badges are merely
"signs or marks of fraud" from which intent may be inferred, and
are not required elements. Torosian v. Paulos, 82 Ariz. 304, 312,
313 P.2d 382, 388 (1957); A.R.S. § 44-1004. "[T]hey are facts
having a tendency to show the existence of fraud, although their
value as evidence is relative and not absolute . . . Often a single
one of them may establish and stamp a transaction as fraudulent.
When, however, several are found in the same transaction, strong,
clear evidence will be required to repel the conclusion of
fraudulent intent." Torosian, 82 Ariz. at 312, 313 P.2d at 388;
see also Cashion Gin Co. v. Kulikov, 1 Ariz. App. 90, 97, 399 P.2d
711, 718 (1965) (recognizing that one or two badges of fraud may be
sufficient to prove fraudulent conveyance).
¶35 In responding to the badges of fraud found by the court,
Husband relies heavily on his assertion that no asset was ever
transferred. As discussed above, however, the trial court properly
found that an asset was transferred.
¶36 The following discussion considers the pertinent "badges
of fraud." One, Husband transferred the goodwill of his sole
proprietorship to an insider, a family member. Two, he retained
control of the asset by retaining substantive control of Cyber.
Three, the transfer was concealed until Wife discovered the
incorporation papers. Four, before the transfer was made, Husband
had already become a party to a legal action, the dissolution.
Five, Husband transferred all or substantially all of his sole
proprietorship's assets. By the time the sole proprietorship
ceased operation, no further assets remained. Six, no payment was
ever made for the goodwill Husband brought to Cyber. We hold that
Husband's actual intent to hinder, delay or defraud Wife could be
reasonably inferred from the presence of these factors, which
sufficiently supports a finding of fraudulent conveyance.
¶37 Husband contends, as his sixth issue, that the court
erred when it found that Husband owed Wife a fiduciary duty and
that the duty was breached. Whether a duty exists is a question of
law, so we review it de novo. See Tovrea Land & Cattle Co.,
100 Ariz. at 114, 412 P.2d at 51.
¶38 Husband concedes that a fiduciary duty exists between
spouses, but he contends that duty ceases upon notice of intent to
dissolve the marriage. He cites Applebaum v. Applebaum, 566 P.2d
85, 87 (Nev. 1977), in which the court, confronted with the
settlement negotiations between divorcing spouses, found that
continued shared residence or the absence of animosity did not
create a fiduciary duty between the parties. Unlike the present
action, the court addressed only the existence of a fiduciary duty
in settlement negotiations between the spouses who continue to
reside together amicably during dissolution proceedings. This
narrow holding may not be extended to cover the question of a
continuing fiduciary duty between spouses regarding the transfer of
community assets to outside parties before termination of the
¶39 More on point, though, are the cases Wife cites. In
Smith v. Smith, 860 P.2d 634, 643 (Idaho 1993), the Idaho Supreme
Court held that the fiduciary duty of spouses does not cease until
termination of the marriage. In Smith, the husband had earned
approximately $94,000 in fees during the marriage but settled for
considerably less than half that amount, thereby depriving the
community of an asset. In In re Marriage of Modnick, 663 P.2d 187,
191 (Cal. 1983), the California Supreme Court recognized the
confidential and fiduciary relationship between spouses and found
that the duty continues until dissolution and property distribution
are complete. In that case, the court found a breach of fiduciary
duty where the husband had concealed bank accounts to which he had
contributed during the marriage. Though Husband here asserts that
no assets were concealed, the effect of removal or concealment of
marital assets is the same.
¶40 Agreeing with the Idaho and California courts, we hold
that a fiduciary relationship between spouses does exist with
respect to community assets until the marriage is terminated.
Removal of community assets without spousal notice and/or approval
can constitute a breach of that duty. Here, Husband removed a
community asset, the goodwill of the sole proprietorship, from the
marital community without notice to Wife. He gifted that community
property asset to an outside party, though the marital community
was never compensated for its loss. The trial court had evidence
from which it could conclude that Husband breached his fiduciary
duty to Wife.
¶41 The seventh issue is Husband's allegation that Wife did
not properly and timely disclose and raise the issues concerning
the formation of Cyber in the trial court.See footnote 9 Arizona Civil
Procedure Rule 26.1 states that information regarding legal
theories on which claims are based must be disclosed within 30 days
of their discovery and no later than 60 days before trial, unless
the court grants more time. Because the court has discretion to
consider prejudice to either side from the inclusion or exclusion
of the claim as well as the parties' actions and diligence (General
Motors Corp. v. Arizona Dep't of Revenue, 189 Ariz. 86, 99,
938 P.2d 481, 494 (App. 1996)), we review the court's decision to
allow Wife to raise the issue for abuse of discretion only. See id.
¶42 The rules regarding disclosure are born out of a policy
that the facts and issues to be litigated must be fairly exposed,
as should be witnesses and exhibits. Bryan v. Riddel, 178 Ariz.
472, 477, 875 P.2d 131, 136 (1994). The purpose of the disclosure
rule is give to the parties "a reasonable opportunity to prepare
for trial or settlement -- nothing more, nothing less" (id. at 476
n.5, 875 P.2d at 135 n.5) and to "maximize the likelihood of a
decision on the merits." Allstate Ins. Co. v. O'Toole, 182 Ariz.
284, 287, 896 P.2d 254, 257 (1995). The rule should be applied
with common sense to promote that end, rather than being used as a
technical weapon by opposing counsel. Id.
¶43 Keeping the purpose of Rule 26.1 in mind, we find no
abuse of discretion by the trial court. Though the pretrial
statement and memorandum raising the issue of fraudulent conveyance
would have been late had the trial been held as originally planned,
the continuance gave Husband more than 60 days to prepare his
response at trial. Indeed, he declined a further continuance
offered to him. The purpose of Rule 26.1 was fulfilled because
Husband had adequate notice and time to prepare.
¶44 The last issue is Husband's request for attorneys' fees
pursuant to Rule 21(c), Ariz. Civ. App. R. Wife also requests
attorneys' fees under A.R.S. sections 12-341.01(C) and 12-349 for
a groundless or bad faith claim made without substantial
justification, and under the domestic relations statute, A.R.S.
¶45 Husband cites Arizona Civil Appellate Rule 21(c) and
Nelson v. Nelson, 164 Ariz. 135, 138, 791 P.2d 661, 664 (App.
1990), in support of his claim for attorneys' fees. The Nelson
court relied on A.R.S. section 25-324, which gives the court the
discretion to award attorneys' fees after considering the financial
resources of each party. Husband provides no information about the
financial resources of either party nor does he provide evidence
supporting his claim for fees. We decline to award Husband's
¶46 Wife contends that she is entitled to attorneys' fees due
to Husband's groundless and/or bad faith appeal. A.R.S. § 12-341.01(C). Additionally, she contends that a groundless or bad
faith claim also subjects Husband to an award of her attorneys'
fees under A.R.S. section 12-349(A), as a claim without substantial
justification. She also requests attorney's fees on this appeal
under A.R.S. section 25-324. Attorneys' fee awards under this
statute are based on the financial positions of the parties. The
trial court did not find that either parties' financial resources
warranted such an award, and neither party contends on appeal that
the court's decision was erroneous or that there has been any
change in their respective financial positions since then. We do
not believe that the appeal warrants attorneys' fees due either to
financial need or as a sanction, and accordingly deny this request.
¶47 For these reasons, the judgment of the superior court is
JEFFERSON L. LANKFORD
WILLIAM F. GARBARINO, Judge
SARAH D. GRANT, Judge
Footnote: 1 The remaining two clients Husband previously worked for
are no longer in business.
Footnote: 2 Though the decree language states that the award is
fifty percent of Cyber's stock, both parties conceded at oral
argument that the award would actually be fifty percent of
Husband's Cyber stock.
Footnote: 3 See also Ward v. Blair, 21 S.W.2d 123 (Ky. 1929)
(affirming a judgment made subject to future adjudication on the
rights of a non-party third party).
Footnote: 4 Husband does not argue that Ann Covill was indispensable
due merely to her status as the putative sole shareholder of Cyber.
Footnote: 5 Rule 19(b) states:
If a person as described in subdivision (a)(1)-(2) hereof
cannot be made a party, the court shall determine whether
in equity and good conscience the action should proceed
among the parties before it, or should be dismissed, the
absent person being thus regarded as indispensable. The
factors to be considered by the court include:
first, to what extent a judgment rendered in
the person's absence might be prejudicial to
the person or those already parties;
second, the extent to which, by protective
provisions in the judgment, by the shaping of
relief, or other measure, the prejudice can be
lessened or avoided;
third, whether a judgment rendered in the
person's absence will be adequate;
fourth, whether the plaintiff will have an
adequate remedy if the action is dismissed for
Footnote: 6 During oral argument on appeal, Husband argued that the
trial court could not distribute property on which no value had
been placed. This argument fails to recognize the court's broad
discretion in apportioning community assets as the court sees fit.
Neal v. Neal, 116 Ariz. 590, 594, 570 P.2d 758, 762 (1977). We see
no absolute need to value an asset if it may otherwise be
distributed proportionately between spouses.
Husband advanced a related contention during oral
argument for the first time. Husband contended that the court did
not have the power to award Wife any portion of the stock.
Instead, he argued the court was limited to awarding monetary
compensation for that portion of the stock determined to be Wife's.
Again, this ignores the well-established discretionary power of the
Footnote: 7 The capital of Cyber may include not only the goodwill
contributed by Husband, but also the cash contributed by Covill and
the goodwill developed by Cyber. However, Husband does not contend
that these considerations render the award of one-half of the stock
Footnote: 8 Husband actually begins his argument by saying that the
nine elements of fraud must be proven by clear and convincing
evidence in order to prove fraudulent conveyance.
While Husband is correct that the nine elements must be
proven by clear and convincing evidence to prove fraud (Poley v.
Bender, 87 Ariz. 35, 39, 347 P.2d 696, 698 (1959)), he is incorrect
in applying the rules of common law fraud to a fraudulent
conveyance. Though clear and convincing evidence of fraudulent
conveyance is required, proof of the nine elements of common law
fraud is not required. Linder v. Lewis, Roca, Scoville & Beauchamp,
85 Ariz. 118, 124, 333 P.2d 286, 290 (1958); In re Marriage of
Benge, 151 Ariz. 219, 223, 726 P.2d 1088, 1092 (App. 1986); see
A.R.S. § 44-1004.
Footnote: 9 Husband also argued for the first time in oral argument
before this Court that Wife did not timely disclose that she would
ask the court to award actual stock instead of monetary
compensation. Husband claims that he was surprised and prejudiced
by the court's decision to do so. But again, Husband overlooks the
court's discretionary power in community property distribution
(Neal, 116 Ariz. at 594, 570 P.2d at 762). We see no abuse of that
discretion and no prejudice.