Business

Texas Appeals Court Concludes Company Was Husband’s Separate Property

Published on: January 20, 2025 | by Kelly McClure

Division of a business in a Texas divorce can complicate a Texas divorce. As with other property, a business interest possessed during the marriage is presumed to be community property, but that presumption can be rebutted by clear and convincing evidence that it is separate property. In a recent case, a husband appealed a property division involving a business interest and property owned by the business.

The trial court signed a final divorce decree in July 2023 and subsequently filed findings of fact and conclusions of law.

The property at issue was a 125-acre tract of land that the husband’s father previously owned. The trial court found the husband and his father each received 50 shares of company stock on the day the company was created in May 2008. A few days later, the husband’s father deeded the property to the company. The parties got married in June 2009.

Texas Court Appoints Receiver in Divorce with Complex Estate and International Assets

Published on: November 27, 2024 | by Francesca Blackard

During a Texas divorce case, the court may appoint a receiver to preserve and protect the parties’ property. Tex. Fam. Code § 6.502(a)(5). The receiver’s role is to receive and preserve property for all of the parties, not just the party who applied for a receiver. Protecting assets can be particularly important in a complex estate involving business interests, real property and other assets under the control of one spouse. A husband recently appealed appointment of a receiver in his divorce case.

According to the appeals court’s opinion, the parties had been married for about 12 years when the wife petitioned for divorce. The wife requested appointment of a receiver, alleging the husband had transferred community assets. The husband argued that some of the assets were his separate property and that a receiver should not be appointment when there was another available remedy. He argued the wife had filed a lis pendens on the real property.

The Hearing

At the hearing, the wife’s attorney argued the husband was a successful doctor who had transferred assets worth millions to Lebanon and Syria. She argued he had cancelled the credit card and closed the joint bank account. She stated they did not know where the money went because the husband did not answer discovery. The attorney argued the hearing was urgent because it would be hard to enforce the orders once the funds were in Syria or Lebanon, noting there had been previous injunctions against transfers of money and sales of property.

Texas Court Rejects Wife’s Argument Husband Sold Commercial Goodwill

Published on: July 7, 2024 | by Francesca Blackard

The court must divide marital property in a just and right manner in a Texas divorce. In some cases, the parties only have tangible or clearly identifiable assets such as real estate and back accounts. In other cases, however, there may be more abstract assets involved. A former wife recently challenged a property division, arguing the court had not properly divided the assets in light of the husband’s sale of commercial goodwill.

The Husband’s Agreement

The parties got married in 1998. The husband worked as a financial advisor starting in the early 2000s. He entered into a “Non-Compete Representative Agreement” with a financial services company in late 2014. The agreement stated he would solicit security purchases as an independent contractor of the company and be compensated on a commission basis. He earned 35% for business written after June 1, 2014, and 52% for business written before April 1, 2014. He could increase his earning to 64% for business written before April if the “net GDC” was greater than $700,001. The agreement also provided that the husband could only continue business with the clients listed in Exhibit B after the agreement was terminated, but no Exhibit B was generated.

The divorce decree was signed at the end of February 2023. The court found the right to receive a greater commission for business written before April 1, 2014 was not a material asset to be divided but was income earned for services and constituted the husband’s “future separate property.” The court also found no commercial good will was transferred to the company because of the husband’s employment with the company or the agreement.

Fraud on the Community in Texas Divorce

Published on: February 10, 2024 | by Francesca Blackard

Spouses have a fiduciary duty toward each other with regard to the community estate and commit fraud on the community if they breach a legal or equitable duty in violation of the fiduciary relationship. Fraud on the community often occurs when assets are transferred to a third party, but can also occur when it is unaccounted for.

If a court determines a spouse committed fraud, it must determine the amount the community estate was depleted and the total value it would have had absent the fraud. The trial court then divides the reconstituted estate in a just and right manner, which may include awarding the other spouse a disproportionate share of the community estate, a money judgment, or both. Tex. Fam. Code § 7.009. A husband recently appealed the trial court’s finding of fraud, judgments, and property division in his Texas divorce.

The Marriage

According to the appeals court’s opinion, the husband owned a home when the parties married in 2002.

Texas Appeals Court Upholds Business Property Valuation in Divorce Case

Published on: August 28, 2023 | by Francesca Blackard

Businesses can be difficult to accurately value in a Texas divorce. A wife recently challenged a property division involving two businesses, arguing the court had insufficient evidence to make the just and right division.

When the husband filed for divorce, each party pleaded the marriage was insupportable. The wife also pleaded the husband had committed adultery.

According to the appeals court’s opinion, the significant assets were a business operated by the wife, an interest in a pool-installation business operated by the husband, the houses each party lived in, two rental properties, a house in Mexico, an interest in two lots where the pool installation business was located, several vehicles, and several bank accounts and a CD.

How Do Texas Courts Value a Medical Practice During Divorce Proceedings?

Published on: February 17, 2023 | by Kelly McClure

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Valuing a closely-held medical practice during a divorce in Texas requires a complex understanding of the measures of value, methods of valuation, and Texas statutes. Although business valuations do not adhere to precise mathematical processes, general methods, procedures, and principles exist. In Texas, determining the value of medical practice is often a critical and hotly contested aspect of divorce proceedings. Understanding how a court will incorporate the value of medical practice to come to a “just and right” division of property is crucial to securing a favorable outcome in a divorce.

TEXAS ASSETS DURING A DIVORCE

Texas is a community property state, meaning only property created or accrued during the marriage is subject to division during a divorce. Community property may include real estate, businesses, medical practices, cars, money, and retirement accounts. Under the law, courts must make divisions that are “just and right.” It is important to note that “just and right” does not necessarily equate to a 50 percent division.

OWNERSHIP OF MEDICAL PRACTICE AFTER A DIVORCE

Medical practices fall under an important caveat of Texas’ property division laws. The Corporate Practice of Medicine (CPOM) doctrine prohibits non-physicians, entities, or corporations from practicing medicine. Thus, a court cannot divide the ownership of a medical practice to a non-physician spouse; instead, the court can only determine and divide the value of the practice.

Property Owned by Business Entity in Texas Divorce

Published on: August 12, 2022 | by Kelly McClure

iStock-483613578-300x204 Business entities and business property can complicate the property division in a Texas divorce. Property owned by a business entity is not considered either separate or community property of the spouses, but instead belongs to the entity. In a recent case, a husband challenged the trial court’s denial of his request for reimbursement for mortgage payments he made.

Wife Enforces Property Division

The wife petitioned for enforcement of the property division several months after the final decree was signed. The husband filed a counter-petition also seeking enforcement of the property division, alleging each party owned an undivided 50% share in property identified as “The Terraces.” The husband alleged he had paid $10,000 on the property’s delinquent mortgage. He requested an accounting to determine each party’s obligation and actual payments related to the property and a money judgment for what the wife had not paid. Additionally, he sought an order requiring the wife to pay her share of future mortgage payments and costs.

The court entered an enforcement order in November 2018 that determined the husband’s claims with regard to The Terrace were not ripe because the property had not been sold. After the approved sale in January 2020, the husband filed an amended motion for reimbursement and enforcement of property division. The trial court denied his requests and the husband ultimately appealed.

Separate Property and Tort Claims in Texas Divorce

Published on: April 7, 2022 | by Francesca Blackard

Divorce-property-fraud-300x273 Property in the possession of either spouse at the time of dissolution of marriage is presumed to be community property under Texas family law. A spouse may rebut this presumption by tracing and clearly identifying the separate property. That spouse must present evidence of the time and means of acquisition of the property. The property remains separate if the spouse can trace the assets back to separate property. Testimony is generally not enough to overcome the community-property presumption. The spouse must have clear and convincing evidence the property is separate. Tex. Fam. Code § 3.003.

An appeals court recently considered tort claims within a divorce case arising from the purchase of a business. When the parties married in 2014, the wife owned a 49% interest in her optometry practice. She offered to buy the remaining interest in 2015. Her husband and another attorney in his firm helped negotiate the deal.

Wife Brings Tort Claims in Divorce Suit

The wife petitioned for divorce in September 2018. She added claims of fraud, theft, and breach of fiduciary duty to her petition, arguing husband failed to structure that purchase as separate property and allowed her separate property to be converted to community property.

Texas Appeals Court Upholds Arbitration Award in Divorce Case

Published on: November 27, 2021 | by Francesca Blackard

iStock-1287431987-300x200 When a couple enters into a Texas pre-marital agreement or post-marital agreement, they may include an arbitration provision in the agreement. Arbitration can be a cost-effective way to resolve disputes, but an arbitration decision often cannot be appealed. In a recent case, a wife appealed a final divorce decree confirming an arbitration award, arguing the arbitrator exceeded her authority.

Husband and Wife Enter into Post-Nuptial Agreement During Marriage

During the marriage, the parties signed an agreement to make “what would otherwise be community property instead be separate property.” The agreement included an arbitration provision.

When the agreement was executed, the husband was president of a company and the wife was vice president. The agreement stated that the parties agreed each of them would “be guaranteed to receive equal pay and bonuses as both President and Vice President. . .”

Texas Divorce Court Must Compel Arbitration of Dispute Regarding Buyout Provision of Company Agreement

Published on: November 3, 2021 | by Kelly McClure

iStock-1287431987 A family business can complicate the property division in a Texas divorce. A recent case considered whether a husband could compel arbitration to enforce a buyout provision in a company agreement during the divorce proceeding.

The parties formed a limited-liability company together during the marriage, with each owning a 50% membership interest. The husband subsequently petitioned for divorce and the wife filed a counterpetition. Both attached the standing order required by the Travis County District Clerk to protect the parties and preserve their property while the case is pending. The standing order applies to all divorce suits filed in Travis County (and many other counties have similar standing orders, such as Dallas, Collin, Denton, Rockwall, and Tarrant Counties) and prohibits parties from taking certain actions that would harm or reduce the value of the property and from selling or otherwise alienating property belonging to either party.

Wife Seeks to Compel Arbitration on Business Disputes

The husband sought injunctive relief and temporary orders to address disputes relating to operation of the business. The wife asked for those disputes to be resolved according to the company agreement, which required any court proceeding brought by one owner against the other be submitted to mediation first and then to binding arbitration if not resolved. The parties were required to go to mediation and arbitration and the arbitrator entered an award regarding management and control of the business. The wife moved to enforce the arbitration award and the court entered temporary orders in accordance with that award.