In a Texas divorce, the trial court must divide the estate in a just and right manner, but the division does not have to be equal. Property possessed by either party during or on dissolution of the marriage is presumed to be community property. To rebut the presumption, a party must generally trace the property back to separate property. Without tracing, a party’s testimony they purchased the property with separate funds will generally not be sufficient to rebut the presumption. However, a presumption of separate property arises if a deed includes a separate property recital stating the property is transferred as separate property. If a spouse is party to a transaction, they may not contradict the deed’s express recitals with parol or extrinsic evidence without evidence of fraud, accident or mistake. If a spouse is not party to the transaction, however, they may use parol evidence to contradict the recitals.
A husband recently challenged the characterization of property in his divorce.
Both parties requested a disproportionate share of the community estate. The husband also requested reimbursement based on alleged waste and actual fraud by the wife.
The husband testified he deposited his paychecks into a joint account to be used for bills. He testified $33,951 was transferred from the joint account to what he believed was the wife’s private account between June and December of 2016.
The wife executed the deed for property called Lot 205 as “a married person as her separate property.” The husband testified he put money in the joint account to buy it together and was unaware the deed was only in her name.
The wife testified she bought it “on [her] own,” it was only in her name, and the deed expressly stated it would be her separate property. She testified the husband had “seen all the paperwork.” She acknowledged she did not have proof other than her testimony that he was aware of the deed.
The trial court concluded that the parol evidence rule prevented it from considering evidence outside the deed and that the husband had not overcome the presumption the recital was correct. The trial court therefore concluded Lot 205 was the wife’s separate property. The trial court also awarded the wife a $31,782 judgment to equalize the property division. It did not address the husband’s fraud and reimbursement claims.
The husband appealed. He argued the trial court applied the wrong legal standard and had legally insufficient evidence to support the separate property characterization.
Separate Property Characterization
The property was purchased during the marriage, but the separate property recital in the deed negated the community property presumption and created a rebuttable separate property presumption.
The husband testified he was not present at the deed’s execution and did not know the wife was the only grantee. He further testified he thought the property would be purchased as community property. The wife testified he was aware of the deed, but the appeals court noted his knowledge the deed existed was not sufficient to show he consented to the use of community funds to buy Lot 205 as the wife’s separate property. The appeals court concluded he was not party to the deed’s execution and could therefore use parol evidence to prove the community nature of the purchase.
The husband testified he made a deposit specifically to buy Lot 205 as community property. He provided evidence the wife transferred funds to her own account. She did not offer evidence of other sources for the funds used to buy the property and there was no record of her income or employment for the prior three years. There was sufficient evidence for a reasonable factfinder to determine the husband rebutted the separate property presumption. The wife did not trace the funds and therefore had not met the shifted burden to show the property was separate. The trial court erred in concluding Lot 205 was separate.
Reimbursement and Fraud Claims
The husband also argued the trial court impliedly rejected his reimbursement and fraud claims without legally sufficient evidence.
Spouses have a fiduciary duty with regard to the community property in their respective control and commit a “fraud on the community” if they breach it. There does not have to be evidence of dishonesty or an intent to deceive to show a constructive fraud on the community, also known as waste. There is a presumption of constructive fraud when a spouse breaches the fiduciary duty and disposes of the other spouse’s interest in community property without their knowledge or consent. Evidence of unaccounted for funds or use of excessive funds without the other spouse’s consent may constitute waste. When a court finds a spouse committed fraud on the community, it must calculate the amount of the reconstituted estate and divide it in a just and right manner. Tex. Fam. Code § 7.009.
The wife did not admit she transferred community funds. The appeals court noted, however, that there can be a waste judgment when community funds are unaccounted for. There was evidence funds had been transferred, but the wife offered no reason why. Her inventory showed a much lower balance for her account than was transferred from the joint account.
The husband argued his fraud claim was uncontested and he had successfully rebutted the presumption the trial court had made necessary findings to support its determination. He had provided sufficient evidence to shift the burden to the wife to show that the transfers were fair or that she did not misuse the funds. With no evidence conflicting the husband’s testimony and evidence, the court did not have discretion to reject his fraud on the community claim. The appeals court concluded there was insufficient evidence to support a finding the husband failed to prove fraud on the community.
The appeals court found no evidence in the record that would support a disproportionate share of the marital estate to the wife. She claimed disparity in earning power, but there was no evidence of her employment status, salary, or earning capacity. There was also no evidence of the parties’ health, fault in the divorce, or the husband’s financial condition to support the disproportionate award.
The trial court appeared to intend an equal division, but actually achieved a 36%/64% division due to the error in rejecting the fraud claim. The husband’s share of the misclassified community property was approximately 14% of the total community estate. The appeals court concluded this was more than a de minimis effect on the division and required remand.
The appeals court reversed the trial court’s judgment and remanded the case.
Contact a Knowledgeable Dallas Divorce Lawyer
A spouse claiming separate property must be able to prove the property’s separate nature. An experienced Texas divorce attorney can work with you to identify the evidence needed to support your claim. Set up a consultation with McClure Law Group at 214.692.8200.