Bobrow, Part I.

Bobrow, Part I.

The Bobrow decision (Arizona Court of Appeals) partially answers a question I’ve often had when acting as a mediator and trying to settle dissolution cases.     When the parties are trying hard to settle a case after the dissolution has been pending for months (or longer), and if one party has been paying most of the bills (mortgage, credit cards, insurance, auto payments, cash to the other party), does the person who’s been paying the bills get reimbursed for anything?    Or was it temporary support, or a gift to the other spouse?   If there are no temporary orders making it clear what those payments were, the issue of reimbursement often holds up settlement.

The person receiving the benefit of the payments often argues that if those payments weren’t being made voluntarily, he or she would have gone into court and requested temporary support orders (which is often true).   So that person is justifiably surprised when s/he’s asked to reimburse anything.  But the person who’s been paying often says “Well, I was sure I’d get paid back at some point, or I wouldn’t have made those payments.”   Who is right?

In Bobrow, the Arizona Court of Appeals says that where the parties’ Prenuptial Agreement provides that Wife will not receive spousal maintenance in the event of a divorce, Husband is entitled to some reimbursement for payments he voluntarily makes, if those payments benefit Wife.     So when Husband kept paying bills and other expenses during their divorce, Wife could not argue that he was paying her temporary support (spousal maintenance), because of the Prenuptial Agreement.    Wife had to claim that the payments were a gift to her, and the Court of Appeals said unequivocally “We hold there is no presumption of a gift once the petition for dissolution is filed.”    So in that case, under those facts, Husband was entitled to reimbursement from Wife for payments he made on her behalf (or presumably for half the payments he made which benefited both of them, such as joint credit cards).

Does Bobrow have any application to a dissolution case where the parties didn’t have a Prenuptial Agreement?

Wife’s argument that Husband paying the bills was a “gift”.

“This court has extended the gift presumption to a situation in which a spouse voluntarily uses separate property to pay community expenses during the marriage. Baum v. Baum, 120 Ariz. 140, 146 (App. 1978). In such a case, the spouse is entitled to reimbursement from the other spouse “[o]nly if there is an agreement to that effect.”

But wait — if a spouse pays community expenses with post-filing (separate) earnings, is he doing this voluntarily?  What if the paying spouse is making those payments to (a) keep the lights on; (b) prevent the residence from going into foreclosure or the car from being repossessed; or (c) keep insurance policies in effect?  Should these payments be considered a voluntary “gift”?   Keeping up payments and obligations to avoid “adverse consequences” are recognized, in Bobrow, as important considerations, so the presumption that these are gifts shouldn’t be applied against the payor.

“Ideally, all divorcing couples would work together toward a mutually agreeable resolution of a failed marriage. A spouse who voluntarily services community debt and maintains community assets with separate property should not be penalized when a mutual agreement cannot be reached.     When such payments are made, they must be accounted for in an equitable property distribution.”  (Emphasis added)   A footnote to this statement also recognized that the trial court erred in not taking Husband’s mortgage payments into account in dividing the residence value, which created an “unjustified windfall” to Wife.

How do we apply Bobrow to a case where the parties did not have a prenuptial agreement that clearly established that the payor has no financial obligation to the payee?  Without that prenupt provision, Wife can still argue that Husband was paying the mortgage and other bills in lieu of temporary support to her.  What do we do with those cases, where a formal temporary support amount was never established but the payor feels he’s entitled to reimbursement?

The best answer is to establish a formal support amount and everyone’s responsibility for the payment of household obligations immediately at the start of the case.    This is done to manage expectations and prevent misunderstandings.   If the payor is aware at the outset that he is NOT going to be reimbursed for these payments, or that he’s going to be reimbursed only for a specific portion, settlement at the end of the case is going to be far easier.   Establishing expectations requires both parties to take a hard look at whether the recipient spouse qualifies for an award of temporary maintenance.

If a formal temporary support amount is not established at the beginning of the case, the parties can consider establishing it at the end of the case.   If all else fails, they can agree to arbitrate the temporary support issue to establish what the payee would have gotten in temporary support, and then compare that amount to what was actually paid on his/her behalf during the case, to see whether the payor overpaid or the payee got shorted.   End-of-case arbitration of this issue could apply IF the payee had pled for spousal maintenance in the original pleadings.

A real question exists as to what happens if the original Petition for Dissolution did not mention spousal maintenance.    There is no statutory authority that allows a court to order spousal maintenance retroactively.   If spousal maintenance isn’t pled in the original Petition, the payee’s argument that she would have received temporary support may be invalid.

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