Long term relationships that involve joint business dealings prior to marriage can lead to complicated divorces. In a recent case, a wife challenged a trial court’s finding that she and her husband had formed a business partnership in 1995 and that properties purchased in her name belonged to the partnership.
The wife filed for divorce, alleging the parties married in 2009. The husband alleged the parties had been informally married since 1984. He also alleged, in the alternative, that they had entered into a farming and ranching business partnership in 1995.
The parties began a romantic relationship in 1984. In 1995, the wife bought a property in her name and made all related payments. The husband moved into the property to work on the house. The wife also worked on the house on weekends.
She bought another property in 2002. The husband also did work on that house and property.
The husband bought some miniature pigs and kept them on the property purchased in 1995. The wife paid the related expenses and the profits went into her bank account. The wife reported the loss from the pig business on her tax returns. Those returns showed no indication of a partnership. The husband did not file taxes between 1990 and 2009.
In 2004, the husband helped the wife’s family sell some property and was paid either $15,000 or $30,000. The wife applied this payment to the mortgage on the property bought in 2002.
The wife purchased other properties. The husband handled the real estate transactions through a power of attorney for the wife. In 2008, the parties started raising cattle. The husband either bought the cattle’s feed with money from the sales or the wife ultimately paid for it.
The husband testified they intended to buy the properties and engage in a farming and ranching business jointly and equally. He claimed the wife told him the property was “community property.” The wife testified she did not intend to form a business partnership, and had paid for all of the property herself, except the one payment on the property bought in 2002.
The trial court found a partnership was formed in 1995 and the real estate purchased between 1995 and 2008 was partnership property. The court dissolved the partnership and divided the property between the parties.
The wife appealed, arguing the evidence was insufficient to support a finding the parties entered a partnership in 1995 and that the property belonged to the partnership. Because the wife had not filed a verified denial of the existence of a partnership, the issue before the appeals court was whether the evidence supported a finding a partnership was formed in 1995. Under Texas law, a partnership is “an association of two or more persons to carry on a business for profit as owners,” whether they intend to create a partnership or not. Courts consider five factors: receipt of or right to receive a share of the business’s profits; an expression of intent to be partners; right to participate in control of the business; sharing or an agreement to share in the business’s losses or liability for third party claims; and agreement to contribute or contributing money or property. Tex. Bus. Orgs. Code § 152.052.
The evidence showed the parties wanted to leave the city after the wife had been the victim of criminal activity. The property bought in 1995 was in the wife’s name only. She paid everything on it, including the taxes. The husband testified the parties intended for the wife to work in Houston and him to work on the property.
The appeals court found no evidence the parties intended to use the property to operate a business in 1995. None of the factors were met. The appeals court found the first reference to any kind of business was when the pigs were purchased. The appeals court found the evidence was legally insufficient for the trial court to find a partnership had been formed in 1995.
The wife also argued there was insufficient evidence to support the finding the real property belonged to the partnership.
The trial court found the parties intended for each property to be partnership property when it was purchased. Under Texas law, property acquired in the name of one partner is presumed to be that partner’s property if it was not acquired with partnership property and the deed does not indicate the person’s capacity as partner or the existence of a partnership. Tex. Bus. Orgs. Code § 152.102. The appeals court found this presumption applied and the husband had the burden to rebut it.
The husband argued he would not have spent years working on the properties without compensation if he did not have equal ownership of the property. He argued this testimony was sufficient to rebut the presumption.
There was no testimony regarding the purpose for the purchases, however. The husband testified the wife wanted to raise chickens and plant an orchard on one tract, but there was no evidence as to whether it would be a business. There was no reference to a partnership on the deeds. The wife made all of the payments, except the single payment that may have been attributable to the husband.
The appeals court found the evidence was legally insufficient to support the finding that the properties were purchased with the intent by both parties to be partnership properties.
The appeals court reversed the judgment and remanded to the trial court for a new trial to address the issue of partnership formation.
This case shows how complicated a divorce case can be. Although this was a divorce case, much of the property division turned on business law. When you have complex assets or joint business dealings, it is even more important to have the guidance and support of an experienced Texas divorce attorney. Call 214.692.8200 to schedule an appointment with McClure Law Group.