Piccoli v. O’Donnell – 2/26/2015
Arizona Court of Appeals Division One holds attorney fees incurred in proving fraud in the marriage is a marital debt subject to satisfaction from assets in marital estate.
Katie O’Donnell filed for divorce from her husband Frank O’Donnell in Missouri. The Trustee of several of Frank’s trusts filed a probate action in Arizona seeking a declaration that Katie had no interest in the assets of the trusts. Katie hired counsel to represent her in that Arizona action, in which she obtained a ruling that she had a marital property interest in the trust assets. The trial court in that action ruled that Frank had committed fraud in the marriage by placing what should have been marital assets into trusts. Katie’s probate counsel withdrew prior to briefing on the appeal from that decision, which was ultimately upheld. That counsel then unsuccessfully sought to intervene in the Arizona probate action to protect their interests in the fees.
Kate and her former probate counsel arbitrated their fee dispute. The arbitration resulted in an award to the firm which stated that the award constituted a marital debt pursuant to Missouri law. Thereafter, the law firm filed a complaint in Arizona seeking a declaratory judgment that its arbitration award could be satisfied from the marital assets. The trial court granted the law firm summary judgment, reasoning that because the fees were incurred in combatting the fraud on the marriage the fees were a marital debt. The Trustee and Frank appealed.
The Court of Appeals affirmed. It first held that there was a justiciable controversy because the law firm and the Trustee and Frank disagreed whether the firm had a right to execute its arbitration award on the trusts. The Court of Appeals also affirmed that the Arizona court had the ability to decide whether the Arizona arbitration award was a marital debt, and that this decision would affect how Missouri equitably disposed of the assets in the divorce proceeding. In this regard, the Court noted that the Missouri court had asked the Arizona court to determine the status of the trust assets so that it could allocate the property. Finally, the Court of Appeals rejected Frank and the Trustee’s attempts to set aside the arbitration award because it was not collusive, did not exceed the bounds of the arbitrator’s authority, and did not violate Frank and the Trustee’s due process rights. The Court noted that there was simply no evidence of collusion on the arbitration award, and Frank and the Trustee had the opportunity to object to the award because they were joined in the action to confirm it.
Judge Thompson authored the opinion, and Judges Kessler and Johnsen concurred.