Characterization and valuation of property can be heavily contested issues in Texas divorces, especially in cases involving a high net worth or businesses. A wife recently challenged the court’s characterization of certain property and property division.
The husband petitioned for divorce just a year and eight months after the marriage. The court’s judgment confirmed certain property as his separate property and divided the community property. The court awarded specific items to each party, and granted a judgment for half the value to the other party, resulting in a generally equal division of the community property. The court also divided cash and bank accounts equally.
The court awarded the wife an equalization judgment of $232,878.85 and the husband an equalization judgment of $56,300. The court also awarded the husband a judgment of $80,000 for his separate property that the court found the wife had converted.
The wife appealed, challenging the characterization of certain property as the husband’s separate property.
Characterization
There is a presumption that property possessed by either spouse is community property. Community property is everything acquired during the marriage that is not separate property. Tex. Fam. Code Ann. § 3.002. Separate property is property acquired by a spouse before the marriage, property received by inheritance or gift, and compensation for personal injuries except loss of earning capacity. Tex. Fam. Code Ann. § 3.001.
According to the appeals court’s opinion, the most contested issue at trial was the characterization and division of arrowheads. The court found the parties owned 1541 arrowheads. The court found the husband had bought 307 of them and found 527 of them before the marriage. The court therefore found that those 834 arrowheads were the husband’s separate property.
The husband initially testified he found about 500 of them and bought 500 before the marriage. He testified the next day, after counting the ones in his possession, that he had found 427 and bought 290 of them before the marriage. He also testified the wife had another 100 he found before they got married. The trial court found the wife had 17 arrowheads that the husband bought before the marriage.
The wife, however, alleged the parties had a total of 2000 arrowheads and had acquired 1900 of them during the marriage. The trial court did not find her testimony credible.
The wife argued the husband had not shown the arrowheads were his separate property by clear and convincing evidence because he did not trace them to his separate property.
The appeals court noted tracing is only required when there is a claim separate property had somehow been converted into another asset. The husband had not claimed he acquired any of the arrowheads with his separate property, but testified he had acquired them before the marriage. The trial court found that the arrowheads were acquired prior to the marriage.
The appeals court held that a reasonable fact finder could believe, based on the testimony, that 834 arrowheads were the husband’s separate property, meaning the evidence was legally sufficient. The only controverting evidence was the wife’s testimony, which the appeals court had disregarded because the trial court found it was not credible. Thus, the evidence was also factually sufficient.
The husband was also the managing member of a limited liability company that owned a business. Property for one of the business’s locations was acquired while the parties were married. The wife argued the husband had not traced that property to his separate funds.
The husband testified he bought a lot before the marriage, but an electric co-op wanted the lot. He agreed to transfer the lot to the co-op in exchange for a different lot. He transferred his lot to the co-op and the other lot was transferred to him.
Previous case law has held that property that is traded for separate property is also separate property. The wife did not present any evidence contradicting the husband’s testimony. The appeals court held there was legally and factually sufficient evidence that the property was separate property that had been acquired in exchange for the husband’s separate property.
Reimbursement
The wife did not dispute the characterization of the marital home as the husband’s separate property but sought reimbursement for the mortgage payments made during the marriage.
A spouse may be entitled to reimbursement if community property is used to confer a benefit on the other spouse’s separate property, resulting in unjust enrichment if not repaid. Tex. Fam. Code Ann. § 3.402. The trial court has broad discretion in determining if reimbursement is appropriate.
The appeals court noted Texas appeals courts are split on whether there is a presumption that funds used to pay a debt during the marriage are community funds. The Austin court of appeals has held the party requesting reimbursement has the burden of showing community funds were used to pay the debt. Because this case was transferred from the Austin court of appeals, the appeals court had to follow that precedent. There was evidence the payments had been made during the marriage, but not evidence of the source of the funds used to make the payments. The appeals court therefore determined there was insufficient evidence showing the mortgage was paid with community funds and found no abuse of discretion in the court’s denial of the reimbursement claim.
Property Division
The wife argued the court had completely ignored certain assets, specifically a necklace, a sword, a bow and arrow, and a herd of deer.
The appeals court rejected the wife’s argument these items were ignored. The appeals court pointed out the court had found the community estate included fallow deer, which it valued at $4500. The court awarded the deer to the husband and awarded the wife a judgment of $2250. The appeals court also concluded the trial court had awarded the husband the other items because it awarded him the “goods, art objects, [and] collectibles” in his possession and control.
The appeals court acknowledged, however, that the wife’s real issue seemed to be the alleged disproportionate property division because the husband received these items.
According to the appeals court, there was a significant discrepancy in the parties’ testimony regarding the value of these items. According to the wife’s testimony, the total value of these items was $126,500, while the husband testified they were worth $8,500.
The appeals court noted the trial court determines credibility and the weight to give evidence. There was some evidence supporting the trial court’s decision and the court could have reasonably found the value of the property was what the husband testified. The appeals court found no abuse of discretion in the property division.
Because there was sufficient evidence supporting the trial court’s judgment, the appeals court affirmed the judgment.
Call a Dallas Divorce Lawyer
The parties in this case were married less than two years, but there was still a significant dispute over characterization and the value of the parties’ property. If you have a high net worth or business assets and are considering ending your marriage, a skilled Texas family law attorney can help you fight to protect your assets. Set up a consultation with McClure Law Group by calling 214.692.8200.