Divorce

Texas Appeals Court Rules on Separate Property Equity in Real Estate

Published on: January 6, 2025 | by Francesca Blackard

The property division in a high net worth Texas divorce may require one party to convey their interest in certain assets to the other spouse. In some cases, the parties may agree to liquidated damages in the event one party fails to cooperate and take the actions necessary to transfer their interests. In a recent case, a former spouse challenged a liquidated damages judgment against him.

The parties, S.K.F. and K.J.W., entered into a mediated settlement agreement, which included an agreement incident to divorce (“AID”). The agreed final divorce decree incorporated the AID and ordered the parties to do the things necessary to effectuate their agreement.

The AID confirmed as K.J.W.’s sole and separate property two condominiums in Puerto Vallarta. It awarded S.K.F. $550,000 for the condominiums, as his sole and separate property. The AID set out the payment schedule of: a check for $150,000 the date the MSA was signed, a check for $275,000 on the date the agreed final divorce decree was signed, and $125,000 paid to a law firm to be held in trust to ensure S.K.F. signed the deeds for the condos. It further provided if K.J.W. did not submit a formal written request to sign the deeds within 12 months after the divorce, he was to instruct the firm to pay S.K.F. half of the funds. If he did not make a formal request between the 12^th and 24^th month after the divorce, K.J.W. was to instruct the firm to pay S.K.F. the other half. If, however, S.K.F. signed the deeds as required to transfer his interest in the condos at any point during the 24 months after the divorce, K.J.W. was to instruct the firm to pay the entire balance of the funds to S.K.F. immediately. S.K.F. agreed that, upon receiving the written notice, he would have 90 days to arrange travel to Puerto Vallarta and sign the deeds on the date specified. K.J.W. agreed to pay for his reasonable travel expenses up to $1,300. S.K.F. further agreed that if he failed to sign the deeds within 24 months, K.J.W. would be awarded $600,000 in liquidated damages. The AID also included a general cooperation provision in which both parties agreed “to sign any and all additional documents necessary to effectuate the transfer of any asset, liability or interest in any entity or stock(s) to the other party.”

Texas Court Denies Petition to Enforce Provisions of 1993 Divorce Decree in High Net Worth Divorce

Published on: January 6, 2025 | by Kelly McClure

The conflict in a Texas divorce does not always end when the divorce is finalized, especially a high net worth divorce or one that involves complex assets. A Texas appeals court recently considered an appeal of a denial of a petition to enforce certain property division provisions from a divorce decree from 1993. The ex-husband was deceased when the petition for enforcement was filed, so his widow, as heir to the property, was the real party in interest in the proceedings.

Divorce Decree

The divorce decree incorporated and adopted a “Property Statement and Settlement,” an agreement between the ex-husband and ex-wife addressing the division of assets and liabilities. The decree awarded the ex-husband a particular property in Williamson Count as his sole and separate property. It provided that the ex-wife was divested of any right and title in the homestead. The ex-husband would be solely responsible for all liabilities and benefits associated with the dwelling. The decree further provided that if the husband failed to make the monthly mortgage payments, the house and/or property would be sold. “In the event of sale of said dwelling and/or acreage,” the wife would be entitled to ½ of the net profit. The ex-wife was not to be held liable for any mortgage payments, taxes, or other expenses related to the property.

The decree awarded the ex-wife 100% of the proceeds from the sale of a different property, as well as all benefits associated with it. The decree also awarded her a vehicle, jewelry, a savings account, and a checking account. All debt was awarded to the ex-husband.

Texas Appeals Court Finds Wife Failed to Meet Purchase Option Requirements on Marital Residence in Divorce Decree

Published on: December 21, 2024 | by Francesca Blackard

In a property division of a complex estate in a Texas divorce, one party may be given the option to purchase the other spouse’s interest in real property or a business. The divorce decree may include terms regarding the purchase option, including deadlines, contingencies, and requirements that the other spouse cooperate by signing documents. In a recent case, a former wife sought a bill of review after she did not complete the purchase of the marital residence from the former husband by the deadline stated in the decree.

The trial court signed a Final Decree of Divorce Nunc Pro Tunc in March 2020. Both parties “approved and consented to” the form and substance of the decree. The decree gave the wife the right to purchase the marital residence, which was in the husband’s name. However, if she failed to purchase the property and close by September 1, 2020, she would waive any interest in the property and it would remain the husband’s sole and separate property.

On August 27, 2020, she sent a letter and real estate contract with a September 24 closing date to the husband. He did not respond and the wife failed to buy the property and close by the deadline.

Characterization of Gifted Property in a Texas Divorce

Published on: November 30, 2024 | by Kelly McClure

When individuals with a high net worth marry, they often bring significant separate assets to the marriage. When marriages with complex estates end, there may be disputes over whether property is community property or the separate property of one of the spouses. The trial court in a divorce must divide the community estate of the parties in a just and right manner. The trial court generally may not divest a spouse of their separate property by awarding it in whole or in part to the other spouse. Community property is the property, other than separate property, acquired by either spouse during the marriage. Tex. Fam. Code § 3.002. Separate property includes property the spouse owned before the marriage and property gifted, devised, or descended to the spouse during the marriage. Tex. Fam. Code § 3.001. Texas law has a rebuttable presumption that property possessed by either spouse at the time of the divorce is community property. Tex. Fam. Code § 3.003. The spouse claiming property is separate has the burden of proving the property’s character by clear and convincing evidence. In a recent case, a husband appealed a property division he claimed improperly divested him of his separate property.

The Property

The parties got married in 2008. The wife petitioned for divorce in 2021 and subsequently amended her complaint to allege adultery. The primary issue at trial was the characterization of a particular piece of real property.

According to the appeals court’s opinion, the husband’s parents gave him a tract of land in 1995. The wife testified it was her understanding the husband’s parents had given the property to him as a gift in 1995. The husband testified that he had a house moved onto the land the same year.

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 Appeals Court Affirms Confirmation of Arbitration Award in High Asset Divorce

Published on: November 21, 2024 | by Kelly McClure

Parties to a high net worth Texas divorce may choose to arbitrate disputes because arbitration can be less expensive, less contentious, and more private than litigation. An arbitration award can be difficult to challenge, however. Under the Texas Arbitration Act, a trial court may only vacate an arbitration award based on one of the grounds listed, including the arbitrator exceeding his authority. Tex. Civ. Prac. & Rem. Code Ann. § 171.088. The arbitrator’s power is based on the arbitration agreement between the parties. In Texas, arbitration awards are presumed to be valid. When a party seeks to vacate an arbitration award, they have the burden of establishing the grounds based on the complete record. An appeals court presumes there was sufficient evidence to support the arbitration award if there is not a transcript of the arbitration hearing. A Texas appeals court recently considered a wife’s challenge to an arbitration award addressing the division of certain disputed personal property after the parties reached a mediated settlement agreement as to the property division.

The parties entered into a mediated settlement agreement (“MSA”) and memorialized it in an agreement incident to divorce (“AID”). Pursuant to the AID, the wife would receive $17 million in cash, in addition to multiple pieces of real property, vehicles, and multiple accounts. The parties were to agree in writing to the division of personal property from two of their homes and submit any items they could not agree on to arbitration. The court incorporated the AID into the final divorce decree.

Arbitration Proceedings

They later signed a binding arbitration agreement to address the disputed personal property from the two homes. Pursuant to the arbitration agreement, each party would be allowed to present a position statement orally in writing. The wife submitted a list of disputed personal property she sought to be awarded to her, including some items that were to go to her pursuant to the AID.

Financial Consequences for Engaging in Prohibited Behaviors

Published on: November 6, 2024 | by Kelly McClure

Parties in a high profile divorce might want to enter an agreement that goes beyond dividing the property. Celebrities, business owners, or CEOs might seek an agreement that prohibits their former spouse from disclosing private information, disparaging them or their business, or engaging in other behaviors that might damage their reputation or their business. The agreement can include liquidated damages for violations. In a recent case, a former wife, her former husband, and his business all appealed a judgment confirming an arbitration award relating to an agreement incident to divorce.

The Agreement

At the time of the divorce, the parties entered into an agreement incident to divorce providing for arbitration if a party engaged in certain conduct prohibited by the agreement. The agreement provided for an award of the greater of $500,000 or actual damages. Additionally, the wife would forfeit interest in a trust as liquidated damages if she engaged in certain behaviors. The parties agreed to arbitrate any issue of whether a party committed a prohibited behavior, whether the wife violated specified provisions in the agreement, and whether the wife’s interest in the trust would be forfeited as a result of violating provisions of the agreement. Binding arbitration was to occur within 90 days of notice of a violation. Pursuant to the Agreement, the losing party would pay the arbitration costs and the other parties’ costs and fees. The husband’s company was a third party to the divorce and to the agreement. The decree incorporated the agreement.

Arbitration Demand

The husband and his company subsequently demanded arbitration, alleging the wife violated the agreement. The wife objected and argued the forfeiture and liquidated provisions were unenforceable and that the arbitration clause was therefore also unenforceable.

Divorce Decree Entered by Submission Thrown Out For Failure of Court to Conduct Trial

Published on: October 30, 2024 | by Francesca Blackard

In a high net worth divorce, the parties may want to reach an amicable resolution of property division. In a recent Texas divorce case, a husband challenged the final divorce decree that upheld the parties settlement agreement without giving him notice and a hearing.

The parties got married in March 2021 and stopped living together in January 2023. The entered into a Mediated Settlement Agreement (“MSA”) shortly thereafter.

Proceedings

The wife petitioned for divorce in 2023, asking the court to divide the estate according to the terms of the MSA. The MSA was signed by both parties and notarized. Additionally, both parties had initialed each page. The MSA addressed the division of the community property and liabilities, including personal property, real property, business interests, and debt.

Husband’s Inherited Home Confirmed as Separate Property Not Subject to Division in Divorce

Published on: October 27, 2024 | by Kelly McClure

The court in a Texas divorce case must divide the parties’ estate in a just and right manner. Tex. Fam. Code § 7.001. Complex estates may include both community and separate property, acquired from various sources. The court can only divide community property, which is any property acquired by a spouse during the marriage except separate property. Separate property includes property owned by the spouse before the marriage and property acquired by a spouse during the marriage through gift, devise, or descent. Tex. Fam. Code § 3.001(2). There is a presumption property either spouse possesses during or on dissolution of the marriage is community property and a spouse claiming property is separate has the burden of proof to a clear and convincing standard. Tex. Fam. Code § 3.003.

In a recent case, a former wife appealed the court’s property division in the final divorce decree. The parties got married in 1999 and had one child. The husband petitioned for divorce in 2017. He asked the court to confirm two pieces of real property were his separate property. The wife sought reimbursement to and reconstitution of the community estate and spousal maintenance. The court filed the final divorce decree in January 2024 and the wife appealed.

Separate Property

On appeal, the wife challenged the trial court’s characterization of the “69^th Street property” as the husband’s separate property. She argued the husband had not presented sufficient evidence to support his testimony that he had inherited it.

Texas Court May Classify Attorney’s Fees Awarded in Divorce as Non-Dischargeable in Bankruptcy

Published on: October 13, 2024 | by Francesca Blackard

“Domestic support obligations” as defined by the U.S. Bankruptcy Code are generally exempt from discharge in bankruptcy. Therefore, child support or spousal maintenance generally cannot be discharged in bankruptcy and must be paid. The treatment of other types of awards that may be granted in a Texas divorce, however, may not be so clear. In a recent case, a former wife appealed a divorce decree that expressly stated that an award of attorney’s fees against her was a domestic support obligation pursuant to the U.S. Bankruptcy Code.

The parties got married in September 2021 and the wife filed for divorce that December. The husband subsequently filed a counterpetition, alleging adultery by the wife. He asked the court to order the wife to pay his attorney’s fees and costs and classify them as a domestic support obligation for purposes of bankruptcy.

The court granted the divorce based on adultery and awarded attorney’s fees to the husband. The court granted an award of $38,306 to the husband’s attorney and the firm. The divorce decree stated that the attorney’s fees would be “considered a domestic support obligation. . .”