                                   IN THE
             ARIZONA COURT OF APPEALS
                               DIVISION ONE


                      In re the Marriage of:
         KARA D. HELLAND, Petitioner/Appellant/Cross-Appellee,

                                      v.

       STEVEN W. HELLAND, Respondent/Appellee/Cross-Appellant

                            No. 1 CA-CV 13-0227
                              FILED 10-30-2014


            Appeal from the Superior Court in Navajo County
                        No. S0900DO201000618
            The Honorable Robert B. Van Wyck, Judge Retired

                                 AFFIRMED


                                 COUNSEL

Sherman & Howard LLC, Phoenix
By Thomas M. Quigley
Counsel for Petitioner/Appellant/Cross-Appellee

Davis Miles McGuire Gardner PLLC, Tempe
By Douglas C. Gardner
Counsel for Respondent/Appellee/Cross-Appellant
                         HELLAND v. HELLAND
                          Opinion of the Court



                                OPINION

Judge Lawrence F. Winthrop delivered the opinion of the Court, in which
Presiding Judge Patricia K. Norris and Judge John C. Gemmill joined.


W I N T H R O P, Judge:

¶1            Kara D. Helland (Wife) appeals those portions of the superior
court’s Decree of Dissolution allocating a disability policy purchased by the
marital community to Steven W. Helland (Husband) as his separate
property. Wife also appeals the superior court’s determination that she had
not proven waste of the community-owned medical practice. Husband
appeals that portion of the decree awarding spousal maintenance to Wife.
For the following reasons, we affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2            Husband and Wife were married in 1989. Husband worked
as an anesthesiologist until 2000, when a disability left him unable to
perform that occupation. At that time, Husband began receiving benefits
pursuant to an “own occupation” disability insurance policy the
community purchased in 1995, which pays benefits to Husband because he
is no longer able to perform the occupation he held when the community
purchased the policy. Thus, Husband received benefits under the policy
because he can no longer practice anesthesiology, even though he remained
able to practice in other areas of medicine or work in another field. The
policy provides a monthly payment to Husband until he reaches the age of
sixty-five, does not require Husband to continue to pay policy premiums
during his disability, and automatically increases the monthly payments
each year. At the time of trial, Husband received $14,984.80 in benefits each
month.

¶3            After Husband’s disability, he retrained as a pain
management specialist and Husband and Wife established a pain
management medical practice in Show Low, Arizona. Wife managed the
business. As a result of Husband’s unrelated criminal activities, the
Arizona Medical Board revoked Husband’s medical license in July 2011;
thus, he could not continue to operate the medical practice. Before
Husband’s medical license was revoked, the parties sold the practice and
the building in which it operated to another physician for $750,000.


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                         HELLAND v. HELLAND
                          Opinion of the Court

¶4            Wife filed this dissolution action in November 2010. The
superior court conducted a three-day trial concerning the division of
community property and spousal maintenance. The court ruled that the
income from the disability insurance policy became Husband’s sole and
separate property when the marriage was terminated by the filing of the
dissolution action. The court rejected Wife’s argument that Husband’s
criminal activities constituted waste that destroyed part of the value of the
medical practice and denied her request for an equalization payment or
credit. The court determined Wife was entitled to spousal maintenance
pursuant to Arizona Revised Statutes (“A.R.S.”) section 25–319(A)1 and
awarded her $5,000 per month for seven years.

¶5            After the superior court ruled on Husband’s post-trial
motions, Wife timely appealed and Husband timely cross-appealed. We
have jurisdiction pursuant to A.R.S. § 12-2101(A)(1).

                                     ISSUES

¶6            Wife argues the superior court erred as a matter of law in
concluding that the benefits received from the disability insurance policy
after the termination of the marriage are Husband’s sole and separate
property. Wife also contends the court abused its discretion by ruling she
failed to prove her claim of waste concerning the medical practice.

¶7          Husband challenges the court’s decision to award Wife
spousal maintenance. He also challenges the amount and duration of the
award.

                                 ANALYSIS

       I.     Division of Property

¶8             We apply an abuse of discretion standard when reviewing the
superior court’s division of property, but review the court’s
characterization of property de novo. In re Marriage of Pownall, 197 Ariz. 577,
581, ¶ 15, 5 P.3d 911, 915 (App. 2000).




1      Unless otherwise noted, we cite the current version of all statutes
when no material revisions have occurred since the time of the events at
issue.


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                         HELLAND v. HELLAND
                          Opinion of the Court

              A.     Disability Insurance Policy

¶9            Wife argues the superior court erred in ruling that the
disability benefits Husband received after service of the petition were his
sole and separate property.

¶10            The primary purpose of disability insurance is to insure
against the risk of loss of the insured’s future earning capacity. Hatcher v.
Hatcher, 188 Ariz. 154, 158, 933 P.2d 1222, 1226 (App. 1996). “While the
marital community exists, a disabled spouse’s reduced earning capacity
results in a loss to the community. At dissolution, however, the loss to the
community ceases and any reduced earning capacity becomes the separate
loss of the disabled spouse.” Id. (citations omitted). Thus, Arizona law
establishes that any portion of disability proceeds that represents
compensation for post-dissolution earnings of the injured spouse is the
separate property of that spouse. In re Marriage of Kosko, 125 Ariz. 517, 519,
611 P.2d 104, 106 (App. 1980) (holding that “disability benefits are the
separate property of the disabled spouse after dissolution, just as the
income of a nondisabled spouse after dissolution is his or her separate
property”); McNeel v. McNeel, 169 Ariz. 213, 214-15, 818 P.2d 198, 199-200
(App. 1991) (holding wife was not entitled to share in monies paid to
husband as result of his medical disability because those benefits were
husband’s separate property). Nevertheless, Wife contends that because
the disability insurance policy was purchased, and all premiums were paid,
during the marriage, the policy remains a community asset and she is
entitled to share in its benefits.

¶11           Generally, property acquired during the marriage is
presumed to be community property, and property acquired after service
of a petition for dissolution is presumed to be separate property. A.R.S.
§ 25-211(A). However, the Arizona Supreme Court has rejected a narrow
construction of the word “acquired” and stated it must be applied “in the
light of the uses and purposes of community property and the
establishment of community right.” Jurek v. Jurek, 124 Ariz. 596, 598, 606
P.2d 812, 814 (1980). Therefore, compensation for a spouse’s personal
injuries – even if received during the marriage - belongs to that spouse as
separate property. Id.2 Moreover, we have previously rejected the
argument that the source of the payments for a disability policy establishes
its nature: “the determination that a disability insurance policy was

2     In such a case, the community may recover any amounts it paid for
medical expenses and any lost wages that resulted from the injury. Id.



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                           HELLAND v. HELLAND
                            Opinion of the Court

acquired with community funds does not necessarily lead to the conclusion
that the disability benefits are community property.” Hatcher, 188 Ariz. at
157, 933 P.2d at 1225.

¶12            Further, Wife’s argument misapprehends the nature of a
disability policy. Although the policy is contractual, it is not an annuity or
other investment with an expected rate of return, as disability benefits are
paid only under certain conditions and are contingent upon the insured’s
ongoing disability. Accordingly, the community did not acquire a right to
future disability benefits payments when it purchased the policy. See
generally Potthoff v. Potthoff, 128 Ariz. 557, 561, 627 P.2d 708, 712 (App. 1981)
(“Time of acquisition” for purposes of community property means the time
when “the right to obtain title occurs, not to the time when legal title
actually is conveyed.”(citation omitted)).3

¶13            Wife contends the superior court erred by not following this
court’s decision in Flowers v. Flowers, 118 Ariz. 577, 578 P.2d 1006 (App.
1978), in which we held that disability retirement benefits received from the
United States Civil Service were community property subject to
apportionment. Id. at 579, 578 P.2d at 1008. As we noted in Davies v. Beres,
224 Ariz. 560, 564 n.6, ¶ 14, 233 P.3d 1139, 1143 n.6 (App. 2010), the
reasoning of the Flowers decision is no longer sound because it was based
on an Arizona rule – abandoned by the Arizona Supreme Court in Jurek –
that damages recovered for personal injuries sustained during marriage
were community property. For the same reason, we decline to follow the
dicta set forth in Flowers that disability benefits purchased with community
funds should be considered community assets. Flowers, 118 Ariz. at 581,
578 P.2d at 1010 (Jacobson, J., specially concurring).


3       Van Loan v. Van Loan, 116 Ariz. 272, 569 P.2d 214 (1977), holding that
the marital community acquires a property right in unvested pension
benefits upon performance by the employee spouse, does not change this
analysis. The Van Loan decision was based on the court’s determination
that pension benefits are a form of deferred compensation and therefore
any portion of retirement benefits earned during marriage is property of
the community. Id. at 273, 569 P.2d at 215 (internal citations omitted).
Disability benefits, by contrast, are not “earned,” but are contingent upon
certain events that may never occur. Cf. Fund Manager, Pub. Safety Pers. Ret.
Sys. v. City of Phoenix Police Dep’t Pub. Safety Pers. Ret. Sys. Bd., 151 Ariz. 487,
489, 728 P.2d 1237, 1239 (App. 1986) (holding “a public employee’s right to
or interest in a disability pension vests upon the occurrence of the event or
condition which would qualify him for such pension-the injury”).


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                         HELLAND v. HELLAND
                          Opinion of the Court

¶14           Wife also asserts the superior court erred by relying on Bugh
v. Bugh, 125 Ariz. 190, 192, 608 P.2d 329, 331 (App. 1980), a decision in which
we determined that worker’s compensation benefits paid after dissolution
are the worker’s separate property. We reasoned that because worker’s
compensation is an award for lost earning capacity, not personal injuries or
pain-and-suffering, compensation paid during the marriage replaces
earnings that would otherwise belong to the community and is community
property and compensation paid after dissolution is the worker’s separate
property. Id. Our decision in Bugh is limited to worker’s compensation
awards. Our analysis was consistent, however, with Arizona law
concerning interpretation of the term “acquired” in A.R.S. § 25-211 and the
separate nature of an award intended to compensate a spouse for an
individual loss.

¶15           The superior court did not err by determining that the
disability benefits received after the date of service of the petition are
Husband’s sole and separate property.

              B.     Waste of a Community Asset

¶16         Wife contends the superior court erred by rejecting her
argument that Husband wasted a community asset by committing crimes
that devalued the parties’ medical practice, resulting in a reduced sale
price.4

¶17           The superior court is specifically authorized to consider a
spouse’s destruction of joint property when apportioning community
property. A.R.S. § 25-318(C); Gutierrez v. Gutierrez, 193 Ariz. 343, 346, ¶ 6,
972 P.2d 676, 679 (App. 1998). When the court determines one spouse has
wasted or dissipated marital assets, it may apportion the community
property in a manner designed to compensate the other spouse for the
waste. Martin v. Martin, 156 Ariz. 452, 458, 752 P.2d 1038, 1044 (1988). The
spouse alleging waste must make a prima facie showing to support his or
her claim; the other spouse then bears the burden to demonstrate the
absence of waste. Gutierrez, 193 Ariz. at 346–47, ¶ 7, 972 P.2d at 679–80.

¶18           In this case, Wife alleged the revocation of Husband’s medical
license made it impossible for the community to continue the medical
practice and the community was forced to sell the business at a non-market


4      On appeal, neither Husband nor Wife discuss whether criminal
activity could be considered waste. Accordingly, we do not address this
issue.


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                          HELLAND v. HELLAND
                           Opinion of the Court

rate. The superior court found Wife did not sustain her burden to show
that Husband’s criminal acts devalued the medical practice.

¶19            The evidence showed that the parties sold the medical
practice, after negotiations, to a third-party physician for $750,000 in March
2011. Husband testified it is very unusual for a medical practice to be sold,
and he received more for the practice than he expected. Husband also
offered expert testimony that the best indication of the medical practice’s
fair market value was the price a third-party buyer was willing to pay for
it.

¶20           Although Husband’s expert on cross-examination
acknowledged that a theoretical valuation model based on the medical
practice’s assets would assign a value $190,000 higher than the sale price,
that assessment is not inconsistent with his opinion that the actual sale price
is the best measure of the company’s value. Moreover, even if the practice
was sold at a discount, Wife did not establish a prima facie case that the
reduced price was due to Husband’s criminal acts, especially given the
evidence that there is a limited market for this type of business – a specialty
medical practice in a rural area.

¶21           The superior court was free to accept or reject part or all of
any expert’s opinion in determining the value of the business. See State v.
Bishop, 162 Ariz. 103, 107, 781 P.2d 581, 585 (1989) (stating that a trial judge
is not required to wholly accept or reject expert testimony). We find no
abuse of discretion in the superior court’s determination Wife did not carry
her burden to show Husband’s criminal acts decreased the value of the
medical practice and constituted waste of marital assets.

       II.    Spousal Maintenance

¶22          Husband contends the superior court erred in awarding Wife
spousal maintenance and also challenges the amount and duration of the
court’s award. We review the award of spousal maintenance for an abuse
of discretion and will affirm the judgment if there is any reasonable
evidence to support it. Cullum v. Cullum, 215 Ariz. 352, 354, ¶ 9, 160 P.3d
231, 233 (App. 2007).

              A.     Entitlement to Spousal Maintenance

¶23           As relevant here, Arizona Revised Statutes section 25-319(A)
provides that the superior court may award spousal maintenance if it finds
that a spouse:



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                         HELLAND v. HELLAND
                          Opinion of the Court

       2.     Is unable to be self-sufficient through appropriate
              employment or is the custodian of a child whose age
              or condition is such that the custodian should not be
              required to seek employment outside the home or
              lacks earning ability in the labor market adequate to be
              self-sufficient.

                                     ....

       4.     Had a marriage of long duration and is of an age that
              may preclude the possibility of gaining employment
              adequate to be self-sufficient.

¶24           The superior court may award spousal maintenance when
any one of the statutory factors is present. A.R.S. § 25-319(A); Cullum, 215
Ariz. at 354, ¶ 11, 160 P.3d at 233. We review the record for evidence
supporting the court’s ruling that Wife qualifies for maintenance pursuant
to A.R.S. § 25-319(A). Cullum, 215 Ariz. at 354, ¶ 11, 160 P.3d at 233.

¶25          The superior court found Wife was entitled to an award of
spousal maintenance because she is unable to be self-sufficient through
appropriate employment, the marriage was of a long duration, and her age
may preclude the possibility of gaining employment that would be
adequate to allow her to be self-sufficient. Husband argues Wife is fully
employable and received sufficient assets in the dissolution to provide for
her reasonable needs.

¶26            Wife offered evidence that she suffers from post-traumatic
stress disorder (PTSD), which prevents her from working. Her therapist
testified that PTSD is a debilitating condition from which she did not expect
Wife to recover for three to five years. Wife also presented the opinion of a
rehabilitation counselor and life-care planner that, given Wife’s age, work
history, and medical condition, it is unlikely she will be able to return to
work even if she recovers from her PTSD within three to five years.
Husband argues that despite this evidence, the court erred because Wife is
physically able to work, Wife’s therapist testified that she expects Wife will
make a full recovery, and Wife’s therapist acknowledged that even a partial
recovery would increase Wife’s ability to function. Considering the entire
record, Wife offered evidence to support the superior court’s finding that,
even after Wife recovers, she is unlikely to return to work.

¶27          The superior court also specifically considered the assets
awarded to Wife in the dissolution, but found they were not sufficient to
provide for her reasonable needs because while “significant in the abstract,


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                          HELLAND v. HELLAND
                           Opinion of the Court

. . . a great portion of the assets are in retirement accounts, and much of the
land and residential property is far from a liquid asset in this market.”5 See
Cullum, 215 Ariz. at 354, ¶ 11, 160 P.3d at 233 (stating a court should not
require a spouse seeking maintenance to “use up” property when
determining if he or she is eligible for maintenance, but should consider the
income potential of that property); Gutierrez, 193 Ariz. at 348, ¶ 20, 972 P.2d
at 681 (holding spouse “should not be compelled to withdraw the money
in the retirement account to supplement her modest income”). On this
record, we find no abuse of discretion in the superior court’s finding that
Wife is entitled to an award of spousal maintenance.

              B.     Amount and Duration of Spousal Maintenance

¶28          If the superior court determines a spouse is entitled to an
award of spousal maintenance, it must then consider the thirteen factors set
forth in A.R.S. § 25-319(B) to determine the amount and duration of the
award. An order for payment of spousal maintenance should promote a
transition to financial independence for the receiving spouse while
allowing a “reasonable approximation of the standard of living established
during the marriage.” Rainwater v. Rainwater, 177 Ariz. 500, 503, 869 P.2d
176, 179 (App. 1993) (internal citation omitted). Husband contends the
superior court’s decision to award Wife spousal maintenance of $5,000 per
month for seven years was an abuse of discretion.

¶29           Wife testified she had reduced her monthly expenses as much
as she could, but her reasonable needs still totaled approximately $8,655,
which, as established at trial, is consistent with the parties’ lifestyle during
the marriage. A significant portion of the assets Wife received in the
dissolution were held in retirement accounts that she could not access
without penalty. At the time of trial, Wife was fifty-five years old and
unable to work full-time for at least three to five years while she recovered
from her mental health conditions. Moreover, Wife offered credible
evidence that even if she recovered, her opportunities would be limited to
an administrative/clerical position and it was unlikely she would find
employment. Further, although Husband receives approximately $15,000

5       The assets apportioned to Wife include the marital residence and
furnishings, an undeveloped residential property, her vehicle, and one half
of the community’s interest in various retirement accounts. The court also
awarded Wife a second vehicle and a motorboat and trailer, each valued at
less than $5,000, and several pieces of artwork, which the parties agreed had
little value.



                                       9
                         HELLAND v. HELLAND
                          Opinion of the Court

per month in disability benefits, his current monthly expenses are de
minimus as a result of his incarceration. Given this evidence, we find no
clear error in the superior court’s decision to award Wife $5,000 per month
as spousal maintenance.

¶30           We also reject Husband’s argument that the court erred by
awarding Wife spousal maintenance for a period of seven years. There was
significant evidence that Wife is unlikely to ever return to work, given her
age and mental health conditions. The court’s award of spousal
maintenance for seven years will continue until Wife is sixty-three, when
she is more likely to be able to achieve financial independence through
withdrawals from her retirement accounts and/or receipt of Social Security
benefits.

¶31          Both Husband and Wife request an award of attorneys’ fees
and costs on appeal pursuant to A.R.S. § 25-324, which permits a court to
make such an award after it considers the financial resources of both parties
and the reasonableness of the positions each party has taken throughout the
proceedings. In the exercise of our discretion, we deny both requests.

                              CONCLUSION

¶32          For the foregoing reasons, we affirm.




                                          :10/30/2014




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