The newest Arizona cases (all unpublished decisions) on binding Rule 69 agreements of the parties are:
Prescott, Court of Appeals, Div. 1, April 7, 2022
Cooper, Court of Appeals, Div. 1, March 9, 2021
Jones, Court of Appeals, Div. 1, March 17, 2022
These three cases, issued about a year apart by Division 1 of the Arizona Court of Appeals, start to give us some input on what needs to be done to ensure that agreements reached pursuant to Rule 69, Arizona Rules of Family Law Procedure, are binding on the parties and will be adopted by the court into final orders.
Written and signed Rule 69 agreements are still presumptively valid, under Rule 69, ARFLP:
(c) Challenge to Validity. An agreement under section (a) is presumed valid, and a party who challenges the validity of an agreement has the burden to prove any defect in the agreement. Under A.R.S. § 25-324, the court may award a party the costs and expenses of maintaining or defending a challenge to the validity of an agreement that was made in accordance with this rule.
But this presumptive validity must be read alongside ARS 25-317(B):
B. In a proceeding for dissolution of marriage or for legal separation, the terms of the separation agreement, except those providing for the support, custody and parenting time of children, are binding on the court unless it finds, after considering the economic circumstances of the parties and any other relevant evidence produced by the parties, on their own motion or on request of the court, that the separation agreement is unfair.
Based on these cases, and taking the original Sharp decision into account, there is no question that the court must make a finding of fairness relating to the Rule 69 agreement before adopting it into final orders, and if fairness is contested, the court must make those findings based on specifics in the record. If the record doesn’t contain enough information to make a finding of fairness, an evidentiary hearing must be held.
The Prescott decision should not surprise us, based on the Cooper decision that came out about a year earlier. Under Sharp, which dates back to 1994, the court is required to make findings of fairness. Cooper tells us that with few exceptions, a hearing on that issue is required once the challenge to the Rule 69 agreement is raised on the issue of fairness. “In deciding whether an agreement is fair, the court must ‘necessarily’ consider evidence of the agreement itself, ‘together with all other evidence concerning the relation of the parties at the time of trial, their ages, financial conditions, opportunities, and the contributions of each to the joint estate.’ Further, the superior court must ‘determine what assets comprise the community estate and whether the party challenging the agreement had full knowledge of the property involved.’” (citing Sharp)
What evidence should be shown to the trial court to allow it to make findings of fairness? The Cooper decision makes specific reference to “tax returns, bank statements, pay stubs, appraisals, valuations, or any other documents that would provide evidence as to the extent of the community assets.” Anyone trying to promote evidence of the fairness of a Rule 69 agreement will be wise to document that these items were not only provided in disclosure in the case but were also made a part of the court record as soon as the claim of unfairness is raised.
(Cooper also has a discussion about what findings need to be made for a court to find that a Rule 69 agreement was reached under duress, which is helpful but beyond the scope of this post.)
See also Jones v. Jones, Court of Appeals, Div. 1, March 17, 2022. The fact that Rule 69 agreements are presumed valid and a party challenging their validity “has the burden to prove any defect,” was re-stated with the proviso that the superior court must independently assess the agreement for fairness. See Ariz. R. Fam. Law P. 69(c); see also Buckholtz v. Buckholtz, 246 Ariz. 126, 128, (2019). This independent assessment for fairness was undertaken in the Jones case.
To fulfill its independent obligation to ensure fairness, the superior court must have before it sufficient evidence to establish the parties had full knowledge of the property involved, including “whether the property at issue is community or separate.” [citing Buckholtz]
In Jones, importantly (and in contrast to Prescott), the superior court held a hearing to evaluate the substantive fairness of the Rule 69 agreement after a party challenged the fairness. Following that, the Jones’ record was “replete with tax returns, bank statements, pay stubs, appraisals, valuations, deeds, and other documents from the parties, detailing the extent of their separate and community assets at the time of the Agreement.”
The Jones record also included testimony on disputed issues from the parties and their experts, and the evidentiary hearing was followed by detailed factual findings (of approximately 31 pages) to support its conclusion of fairness about every piece of disputed property. This record was considered sufficient for the trial court to have made the required fairness finding under ARS 25-317B.
In Jones, the party disputing the Rule 69 agreement asked that the court’s obligation to review the settlement be expanded to require “a complete property division assessment” to then compare the new assessment with the terms of the Agreement. This expanded scope of review is not a requirement of ARS 25-317(B) and the Jones’ court did not expand the judicial requirement to that extent.