Standage v. Standage

711 P.2d 612, 147 Ariz. 473, 1985 Ariz. App. LEXIS 739
CourtCourt of Appeals of Arizona
DecidedJune 11, 1985
Docket1 CA-CIV 7931
StatusPublished
Cited by36 cases

This text of 711 P.2d 612 (Standage v. Standage) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Standage v. Standage, 711 P.2d 612, 147 Ariz. 473, 1985 Ariz. App. LEXIS 739 (Ark. Ct. App. 1985).

Opinion

OPINION

GREER, Judge.

This is an appeal from an amended decree of dissolution of marriage entered on *475 May 30, 1984. We hold that the trial court erred only in its award of attorney fees, and reverse the decree solely on that issue.

On April 26, 1982, Cheryl Standage filed a petition for dissolution of marriage. The petitioner and her husband, Keith, the respondent, had six children, four of whom were living at home at the time.

The case went to trial in a bifurcated hearing. The property and support portions of the petition were heard in May 1983, and the custody issues went before the trial judge in September of that year. A decree of dissolution was filed on December 16, 1983, after which the husband filed a motion for new trial. Following argument on the motion, and certain additional post-trial issues, an amended decree of dissolution, with amended findings of fact, was filed on May 30, 1984. The husband timely appealed.

Eight separate issues are presented for our determination:

1) Did the court err in piercing the corporate veil of the Stansen Corporation?
2) Did the court err in awarding to appellee half of the “McKellips property,” a major asset of the Stansen Corporation?
3) Was the trial court’s award of attorney's fees and costs contrary to the Arizona statutory mandate (A.R.S. § 25-324)?
4) Was the trial court’s award of spousal maintenance contrary to law?
5) Did the court err in its characterization of certain cash transfers to and from a business associate of the husband?
6) Was the court’s finding that certain stock was the sole and separate property of the wife erroneous?
7) Did the court abuse its discretion in the award of child support?
8) Was the court biased against the respondent-husband?

We address the Stansen Corporation issues together, and then address the remaining questions in turn.

I. PIERCING THE CORPORATE VEIL OF STANSEN CORPORATION

In the amended decree of dissolution, the trial court found that “it is necessary and appropriate for the court in law and equity to pierce the corporate veil of the Stanson Corporation in order to fully and completely protect the interests of Wife therein.” The husband concedes that the trial court could properly evaluate the assets of the corporation; however, he contends that the court erred in taking the further step of disposing of these corporate assets without formal dissolution of the corporation. Specifically, he argues that the evidence did not support a finding that the corporation was the “alter ego” of the husband individually, and that justice did not require piercing the corporate veil in order to dispose of the assets. We disagree.

The Stansen Corporation was a real estate development company owned, at the time of the dissolution proceedings, by the husband and wife. Its assets consisted of proceeds received from earlier unrelated litigation, and certain rental property located at 2401 East McKellips Road in Phoenix.

The court also found an additional $95,-000 to be an asset of the corporation. 1 In the amended decree, the court awarded one-half of the litigation receipts, plus $68,-425 to the wife, and apparently also awarded the McKellips property jointly to each party. The $68,425 consisted of one-half of the $95,000 fund ($47,500), one-half of the proceeds remaining from a July 5, 1983, removal by the husband of a portion of the litigation assets ($12,125), $5,000 as an award to the wife of attorney’s fees, and $3,800 to represent the wife’s one-half interest in a California condominium.

A basic axiom of corporate law is that a corporation will be treated as a separate entity unless sufficient reason appears to disregard the corporate form e.g., *476 Dietel v. Day, 16 Ariz.App. 206, 492 P.2d 455 (1972). As a separate entity, the personal assets of an individual stockholder may not normally be reached to satisfy corporate debts. Honeywell, Inc. v. Arnold Construction Co., Inc., 134 Ariz. 153, 654 P.2d 301 (App.1982). An obvious corollary to that proposition is that assets of a validly formed corporation should be distinct and protected from the debts of individual shareholders. However, where the corporation is shown to be the alter ego or business conduit of a person, and where observing the corporate form would work an injustice, a court may properly “pierce the corporate veil.” Dietel, supra, 16 Ariz.App. at 208, 492 P.2d 455. This “alter ego” status exists where there is “such unity of interest and ownership that the separate personalities of the corporation and owners cease to exist.” Dietel, supra, at 208, 492 P.2d 455. For purposes of appellate review, the decision of the trial court will be upheld if there is substantial evidence in support of the judgment. Chapman v. Field, 124 Ariz. 100, 602 P.2d 481 (1979).

In the present case, the trial court found that the husband was the member of the community responsible for management and operation of the corporation. The court further found that the husband had failed to file corporate income tax returns for 1977 through the time of trial, 2 that he had failed to file the proper Arizona Corporation Commission reports for several years, that he had failed to maintain appropriate books and records, that he had failed to observe corporate formalities, and that he had failed to advise the wife as an equal shareholder of the business decisions and affairs of the corporation.

In our opinion, the evidence sufficiently supported the findings of the trial court. Clearly, there was a unity of interest such that the corporation became the alter ego of the husband as an individual. Further, since the husband and wife were the sole shareholders of the corporation, and since the corporation’s assets constituted a substantial portion of the community property, it is apparent that allowing no disbursement would work an injustice to the wife. The husband argued at trial that he should be awarded all assets of the corporation. Conceivably, the trial court could have awarded the husband all the corporate assets, and equalized the property division by awarding other community property to the wife. However, a trial court is accorded great discretion in the apportionment of community assets. Neal v. Neal, 116 Ariz. 590, 570 P.2d 758 (1977).

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Bluebook (online)
711 P.2d 612, 147 Ariz. 473, 1985 Ariz. App. LEXIS 739, Counsel Stack Legal Research, https://law.counselstack.com/opinion/standage-v-standage-arizctapp-1985.