Hrudka v. Hrudka

• Decision Date: 21 November 1995
• Docket Number: No. 1,CA-CV,1
• Citation: 186 Ariz. 84,919 P.2d 179
• Parties: In re the Marriage of Denise B. HRUDKA, and Trustee of the Estate of Denise B. Hrudka, Petitioner/Appellant, v. Joe HRUDKA, Respondent/Appellee. 93-0155.
• Court: Arizona Court of Appeals

Page 179

919 P.2d 179

186 Ariz. 84

In re the Marriage of Denise B. HRUDKA, and Trustee of the Estate of Denise B. Hrudka, Petitioner/Appellant, v. Joe HRUDKA, Respondent/Appellee.

No. 1 CA-CV 93-0155.

Court of Appeals of Arizona Division 1, Department B.

Nov. 21, 1995.

Reconsideration Denied Dec. 21, 1995.

Review Denied July 2, 1996. ^*

[186 Ariz. 87] S. Alan Cook, P.C. by S. Alan Cook, Phoenix, for petitioner/appellant.

Burch & Cracchiolo, P.A. by Daniel Cracchiolo, Daryl Manhart, Donald W. Lindholm, Phoenix, for respondent/appellee.

OPINION

EHRLICH, Judge.

Denise Hrudka ("Wife") appeals from the decree of dissolution, contesting various trial court rulings in favor of her former husband, Joe Hrudka ("Husband"). Married on August 20, 1978, the couple had significant assets and lived a lavish lifestyle before Wife filed a petition for dissolution on February 5, 1991. Both the dissolution proceeding and this appeal focus on the proper classification of the parties' property and debts, either as separate or community, and the distribution and assignment thereof. Wife raises the following issues 1. Whether the trial court abused its discretion in denying Wife's motion to disqualify Husband's counsel;

2. Whether the trial court correctly refused to enforce the antenuptial agreement;

3. Whether the trial court erred in treating the CIT debt as a community obligation;

4. Whether the trial court properly determined that Husband did not give certain jewelry to Wife and that the jewelry therefore was community property;

5. Whether the trial court properly concluded that the 1987 Rolls Royce was community property rather than Wife's separate property;

6. Whether the trial court abused its discretion in entering a judgment for waste against Wife;

7. Whether the trial court erred in ordering community property sold to pay community debt;

8. Whether the trial court abused its discretion in ordering Wife to reimburse Husband for using his separate property to satisfy community debt;

9. Whether the trial court erred in refusing to award Wife her attorneys' fees and costs incurred in the dissolution proceeding. ¹

A. Wife's Motion to Disqualify Husband's Counsel.

Throughout the dissolution proceedings, attorney Donald Lindholm of Burch & Cracchiolo represented Husband. However, prior to Husband retaining Lindholm, Wife had begun to consider filing for dissolution. In the spring of 1989, a mutual friend asked Michael Gallagher, another Phoenix attorney, to help Wife find an effective domestic relations lawyer. Gallagher suggested that Wife interview three attorneys, one of whom was David Derickson, a partner at Burch & Cracchiolo. He then accompanied Wife to Burch & Cracchiolo's offices to meet Derickson.

Wife did not retain Derickson. Several months passed before she asked Gallagher to provide another attorney reference. Gallagher sent Wife to Philip Weeks, whom she retained. Weeks prepared and filed Wife's petition for dissolution on February 5, 1991. Husband then retained Lindholm, who filed a notice of appearance one month later.

The parties litigated the dissolution case for over eighteen months, conducting substantial discovery and arguing numerous motions. During the course of the proceedings, Wife visited the offices of Burch & Cracchiolo on several occasions to attend depositions, sign documents and pick up checks. She also received numerous letters on Burch & Cracchiolo letterhead which identified both Lindholm and Derickson as attorneys of the firm. Neither Wife nor any of her attorneys suggested that Lindholm (and Burch & Cracchiolo) had a conflict of interest in this matter until Rad Vucichevich appeared as co-counsel for Wife on August 5, 1992. ² Vucichevich made no motion but advised the trial court that he believed that Husband's counsel had a conflict of interest disqualifying his firm from representing Husband in this case. The court, noting that the issue was newly-raised on the eve of trial, asked Vucichevich for Wife's position on the issue. Vucichevich responded that she had not yet expressed an opinion on the matter and the court set an evidentiary hearing on the disqualification issue.

At the hearing, Vucichevich made an oral motion to disqualify Husband's counsel. Wife testified that she did not consider Derickson to be her attorney. She also acknowledged that Gallagher had accompanied her to interview various attorneys but that she did not consider him to be her attorney either. Both Gallagher and Derickson testified that the focus of Wife's meeting with Derickson was to gauge his experience with domestic relations cases and that it was Wife who had interviewed Derickson. Derickson acknowledged that there was a cursory discussion regarding the parties' property and prenuptial agreement and Wife's concern that Husband might try to conceal property. Wife had asked that they keep the conversation confidential, but Gallagher testified that Wife's concern regarding confidentiality was that no one learn she was contemplating dissolution. Derickson testified that he never opened a file for Wife, never charged her a fee and did not render any legal advice. He and Gallagher testified that they did not consider Wife to be a client of either one of them.

The trial court found unbelievable Wife's testimony that she was unaware that Lindholm and Derickson were associated with the same firm given her interview with Derickson at Burch & Cracchiolo's office, her repeated visits to that office to meet with Husband and Lindholm, and the extensive correspondence she had received bearing the firm's letterhead which identified both Lindholm and Derickson as lawyers with the firm. ³ The court further found that Wife's conversation with Derickson did not rise to the level of a privileged communication. ⁴

The trial court did not abuse its discretion in denying Wife's motion to disqualify Husband's counsel. Foulke v. Knuck, 162 Ariz. 517, 519, 784 P.2d 723, 725 (App.1989) (trial court's denial of motion to disqualify counsel subject to abuse of discretion standard). In considering the formation of any attorney-client relationship between Wife and Derickson, we must determine if the Wife sought and received advice and assistance from Derickson "in matters pertinent to the legal profession." Id. at 520, 784 P.2d at 726. The test is a subjective one, requiring us to examine factors such as the nature of the services rendered, the circumstances under which Wife divulged confidences, Wife's belief that she was consulting a lawyer in that capacity and her manifested intention to seek professional legal advice. Id. The payment of a fee, although not required, is indicative that an attorney-client relationship has been established. Id.

Here, the record is sufficient to uphold the trial court's ruling that no such relationship was formed. Derickson did not bill time for the meeting, open a file or charge Wife any fee. Rather, the evidence indicated that the meeting with Derickson was one of several interviews of attorneys Wife had to determine whom she might want to retain if she filed for dissolution. Little, if any, personal information was revealed during the interview. Moreover, Wife did not demonstrate a reasonable expectation that any information revealed would remain confidential. To the contrary, she admitted that she did not consider Derickson to be her attorney. Furthermore, she stated that she did not consider Gallagher to be her attorney, yet she allowed him to accompany her on interviews with the recommended attorneys and to remain in the offices while they discussed her possible dissolution.

Even if we were to find that Wife and Derickson had formed an attorney-client relationship, disqualification would be an excessive result in this case. In resolving conflicts of interest, courts should attempt to reach the solution that is the least burdensome upon the client. Id. at 521, 784 P.2d at 727. Disqualification may be avoided if the hardship to the new client far outweighs the injustice to the former client who requests disqualification. Id. at 523, 784 P.2d at 729.

The parties actively litigated this case for a year and a half and were on the brink of trial before Wife raised the issue of disqualification. Unlike Foulke, this is "a situation where disqualification is sought after months or years of representation in a complicated litigation." Id. As such, we find that disqualification would be an excessive penalty and we affirm the trial court's denial of the motion for disqualification.

B. The Antenuptial Agreement.

Prior to the marriage, Husband had an estimated net worth of $8 to $10 million. He owned several parcels of real estate, significant stock in W.R. Grace Company, ⁵ homes in Palm Springs and Cleveland, an extensive car collection, and had a considerable investment account at the investment firm of Goldman Sachs. Two days before the wedding, Husband presented Wife with an antenuptial agreement ("Agreement"), stating that the wedding would be canceled if she did not sign it. This was the first time that Husband had suggested such an agreement to Wife. After consulting with an attorney, Wife was advised not to sign the Agreement. At trial, she testified that she did not understand the Agreement and never saw a disclosure of Husband's assets. Despite her misgivings, she signed the Agreement, feeling pressured by the imminent plans and relying on Husband's representations that he would not enforce the Agreement. The wedding took place as set.

During the dissolution proceedings, Husband initially sought enforcement of the Agreement and Wife opposed it. The parties changed their positions on this issue in the midst of the case, Husband arguing that the circumstances surrounding Wife's execution of the Agreement rendered it unenforceable, and Wife, though continuing to maintain that she had been under duress, urging enforcement. The trial court found that "[t]he agreement per se [did] not...