The parties married in 2014, and the wife petitioned for divorce the next year. The husband included several bonuses in his asset inventory. He listed a $0 value for the bonuses that would only be payable after the divorce if he remained employed on the designated date. He testified they had no value because they were conditional on future events.
The wife argued the future bonuses were deferred compensation for work performed during the marriage and estimated their value at more than $4 million.
Trial Court Does Not Value Future Bonuses in Divorce
In its letter ruling, the court equally divided the bonus that would be paid before the divorce was finalized, but did not include any other bonuses.
At a subsequent hearing, the court explained it considered the future bonuses “contingent assets” that had not yet been earned. Because the assets were “speculative,” they did not have any value. In the divorce decree, the court did not refer to any of the future bonuses.
The wife requested findings of fact, but the court did not issue any.
Wife Sues Husband for Post-Divorce Division of Future Bonuses
The wife ultimately appealed, but then moved to dismiss her own appeal. Several months later she sued the husband for a post-divorce division of property that was not divided in the divorce. She argued the future bonuses had been “described and identified,” but not divided in the decree. She again asserted the bonuses were deferred compensation and, therefore, were community property.
The husband moved for summary judgment, arguing that res judicata precluded the suit. The trial court granted the summary judgment.
The wife moved for a new trial. The husband argued the trial court had found the future bonuses were not community property during the divorce so they were not subject to division post-divorce. The husband argued the wife should have addressed any issues through an appeal and that res judicata prevented her from re-litigating the issue in a new suit.
The court granted the wife a new trial.
The wife argued the court did not award the future bonuses to either party despite the employment agreements being entered during the marriage and the bonuses being a community asset.
Trial Court Awards Wife Portion of Husband’s Future Bonuses – Husband Appeals
The court found that the bonuses paid to the husband between October 2017 and October 2018 were worth $5,412,782, and the wife’s share was $1,044,176.88. The husband appealed.
A party who files suit for a post-divorce division has the burden to show the community property existed at the time of the divorce and was not divided when the court rendered the divorce decree.
Separate property is not subject to division in a divorce. A trial court’s categorization of property as separate property may not be re-litigated post-divorce, even if the court erred in its characterization.
The wife argued the appeals court was limited to considering the terms of the decree and could not consider the court’s statements from the bench during the hearing.
The husband argued that the materials that were evidence in the post-divorce case were part of the appellate record, including trial transcripts, his asset inventory, the rendition letter, and certain pleadings.
The appeals court agreed with the husband and found the materials that were admitted into evidence by the trial court were part of the appellate record and relevant in determining whether res judicata applied.
The appeals court found the parties had clearly litigated the characterization of the future bonuses during the divorce. The compensation agreements were in evidence. Both parties listed the future bonuses in their inventories and testified about them.
Appeals Court Finds that Future Bonuses had been Characterized as Separate Property
The appeals court also found the trial court analyzed how to characterize the future bonuses. At the entry-of-judgment hearing, the trial court stated it did not believe the bonus had yet been earned and would not be earned until after the divorce. The discussion at the hearing showed the trial court did not include the future bonuses in the property division, because it determined they would be earned “post divorce.” Income earned after the divorce is separate property, not community property. The appeals court found the trial court had characterized the future bonuses as separate property even though it did not expressly use those words.
The wife argued that the evidence of how much the parties had litigated the future bonuses was irrelevant, because they were not referenced in the divorce decree. She argued that omission allowed her to pursue a post-divorce division if she could show bonuses were community property.
The appeals court rejected this argument, finding the record showed the trial court had characterized the future bonuses as separate property. The characterization of the bonuses as separate property constituted a disposition because separate property is not subject to division. The wife’s remedy was to challenge that characterization through a direct appeal. Res judicata barred litigating it in another suit. The post-divorce trial court erred in awarding the wife a share of the bonuses after the divorce trial court had determined they were separate property. The appeals court reversed and vacated the post-divorce court’s judgment and remanded the case.
Characterization of Property is Complex – Call the Astute Divorce Attorneys at McClure Law Group Today
Assets such as future bonuses can complicate a divorce when the stakes are high. If you are anticipating divorce involving complex assets or bonuses, a skilled Texas high-net-worth divorce attorney can help you. Schedule a consultation with McClure Law Group by calling 214.692.8200.