Cockrill v. Cockrill
In Cockrill v. Cockrill, 124 Ariz. 50, 53, 601 P.2d 1334, 1337 (1979), the Arizona Supreme Court noted the rule from Nace. 124 Ariz. at 53, 601 P.2d at 1337.
It stated that "this language seems to imply that if the community were paid a fair salary for its labor, the increase or profits from the separate property would remain separate.
Only if such a salary had not been paid, or was not reasonable, would the all or none rule be applied." Id. The Cockrill court went on to describe this provision as an exception to the all or none rule and "in effect, apportionment of the increased value is allowed so long as the parties have segregated the profits themselves by paying the community a salary." Id.
Cockrill then rejected the all or none rule in favor of an apportionment rule, stating that "profits and/or increase, which result from a combination of separate property and community labor, must be apportioned accordingly." Id. at 54, 601 P.2d at 1338.
The Arizona Supreme Court then gave several methods of possible apportionment. Id.
The first requires the court to "determine the reasonable value of the community's services and allocate that amount to the community, and treat the balance as separate property attributable to the inherent nature of the separate property." Id.
The second is to "allocate to the separate property a reasonable rate of return on the original capital investment. Any increase above this amount is community property." Id.
The court went on to make explicitly clear that "different circumstances require the application of a different method of apportionment.
The Court, therefore, hold that the trial court is not bound by any one method, but may select whichever will achieve substantial justice between the parties." Id.
Cockrill thus rejected any requirement that the trial court follow one method of apportionment over another. The clear direction from Cockrill is that the method of apportionment applied must "achieve substantial justice between the parties." Id.