Arab Monetary Fund v. Jafar Hashim and Maryam Salass, husband and wife – 8/12/2008

August 15, 2008

Arizona Court of Appeals Division One Holds That an Attorneys' Fees Award Arising From a Lawsuit Against the Husband Relating to His Premarital Conduct Was a Premarital Separate Debt, Even Though the Attorneys' Fees Were Incurred After the Marriage.

In 1988, the Arab Monetary Fund (“AMF”) sued Dr. Jawad Hashim in London, England alleging that Dr. Hashim had embezzled approximately $80 million from the AMF during his tenure as its director-general from 1977 to 1982.  In May 1989, the AMF added Jafar Hashim (“Jafar”) to the English lawsuit, alleging that Jafar had received properties that had been purchased with money unlawfully taken from the AMF.  Later in 1989, Jafar married Maryam Salass.  The English lawsuit was litigated between 1988 and 1993.  In 1994, the English court entered a judgment finding Dr. Hashim liable for damages to the AMF and further finding that Jafar had received money and property that could be traced to AMF monies.  The English court also awarded attorneys’ fees, referred to as “costs” in the English legal system, to the AMF as the prevailing party.

Jafar and Maryam Salass had moved to Arizona in 1992.  In the fall of 1994, when the AMF sought to domesticate the judgment against Dr. Hashim in Arizona, Jafar filed for bankruptcy.  In 2003, the bankruptcy court denied Jafar’s bankruptcy discharge and the AMF sought to domesticate its English costs award against Jafar and his marital community in Maricopa County Superior Court.  The AMF took the position that the costs award was a post-marital obligation because the costs were incurred after the couple had been married.  Jafar and the marital community took the position that the costs award was a premarital obligation because the costs award related to Jafar’s pre-marital receipt of money and property that could be traced back to AMF monies.  The trial court granted summary judgment in favor of the AMF.

The Court of Appeals reversed.  It held that “treating the litigation costs resulting from defense of a claim arising out of premarital acts as a postmarital obligation would be inconsistent with the statutory scheme establishing limits on community liability for premarital debt.”  It noted that Arizona’s community property statutes provide that the community is liable for the premarital separate debts of one spouse to the extent of that spouse’s contribution to the community.  Thus, “[t]reating the costs imposed for defending premarital conduct as a separate postmarital debt would expand the liability of the community for premarital activities beyond that authorized by statute.”  The Court further reasoned that the trial court’s ruling would “have the unfortunate consequence of forcing a person faced with litigation for a premarital act to refrain from marrying if not yet married, refrain from mounting a defense even if the defense was meritorious, or put at risk the marital assets of his or her spouse who was otherwise not liable for those premarital acts.”  The Court also held that the English costs award was “inextricably linked” to Jafar’s premarital conduct and could not, therefore, be a post-marital obligation.

Judge Portley authored the opinion of the Court, and Judges Weisberg and Norris concurred.