Texas Divorce Attorney Blog

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.

Determining Law Governing Pre-Marital Agreement in High Net Worth Divorce

Published on: November 13, 2024 | by Francesca Blackard

A pre-marital agreement can be a valuable way to protect assets in a high net worth Texas divorce. A pre-marital agreement can help protect a spouse’s interest in a business, identify property that will remain separate, or describe how a complex estate will be divided in the event of a divorce. In some cases, however, a party may challenge the validity of the pre-marital agreement. The Texas Family Code sets forth the circumstances under which a pre-marital agreement will not be enforced, but matters may become more complicated if the agreement was signed in another state. A wife recently challenged an order applying Louisiana law to the validity and enforceability of a pre-marital agreement.

The Pre-marital Agreement

The parties got married in Louisiana in 1990. They purportedly signed a pre-marital agreement pursuant to Louisiana law a few days before the marriage. The agreement provided that only the husband’s salary from a particular company would be community property. All other income generated by his efforts would remain his separate property. All revenue generated by the wife’s efforts would be her separate property.

Applicable Law

The wife petitioned for divorce in Texas in 2019. The husband asked the trial court to enforce the agreement. The wife asserted a number of defenses to enforcement of the agreement under Texas law.

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.

Court of Appeals Finds No Harm In Trial Court Failing to Submit Mother’s Request for Primary Residence of the Children to Jury

Published on: October 20, 2024 | by Kelly McClure

When a parent petitions for modification of a Texas custody order, the parties may raise multiple issues. In a recent case, a mother challenged a modification order, arguing the trial court had erred in not submitting one of her proposed questions to the jury.

Original Modification Proceedings

The parties had two children together. The trial court initially appointed them both joint managing conservators with neither having the exclusive right to designate the children’s primary residence, pursuant to the parties’ Mediated Settlement Agreement.

The father subsequently petitioned for modification, alleging both parents being joint managing conservators was not in the children’s best interest. He sought sole managing conservatorship, or, alternatively, the exclusive right to designate the children’s primary residence.

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. . .”

Texas Appeals Court Upholds Custody Order Treating Children Differently

Published on: October 6, 2024 | by Kelly McClure

Texas custody cases involving multiple children can be complex, because the children may not have the same needs. In a recent case, a father challenged a modification that gave the mother rights with regard to the youngest child that he was awarded for the older two children.

The parents got married in 2006 and divorced in 2017. They had three children. In the agreed divorce decree, both parents were named joint managing conservators with shared possession of the children. In November 2020, the father petitioned for modification, alleging a material and substantial change in circumstances related to one child’s emotional health and welfare. He subsequently amended the petition to alleged the same regarding another of the children, and ultimately filed an amended petition seeking relief for all three of the children.

The court held a bench trial and signed a partially handwritten memorandum, with a note that the mother’s attorney would draft the final order. Although the memorandum was entered in early November 2022, the parties did not receive it until April 2023.

Reconstitution of Community Estate Due to Waste or Fraud in Texas Divorce

Published on: September 30, 2024 | by Francesca Blackard

A court dividing property in a Texas divorce may consider a number of factors, including fraud or waste of community assets by a party. A spouse may commit constructive fraud or waste by unfairly depriving the other spouse of the benefit of community assets. There is a presumption of constructive fraud when a spouse disposes of the other’s interest in community property without their knowledge or consent. A former husband recently challenged a property division after the court found he had committed fraud and waste on the community estate.

The parties married in February 2011 and the wife petitioned for divorce in July 2018. Both parties alleged constructive fraud and wasting of community assets by the other and sought reconstitution and a disproportionate share of the community estate.

The court granted divorce and ultimately confirmed $46,000 in an IRA as the husband’s separate property. The court found the husband committed fraud on the community estate and reconstituted the community estate. Included in the reconstitution was $71,483.33 for depletion of an IRA, $81,321.98 for dissolution of the husband’s interest in a limited liability company, and $17,000 for unpaid medical expenses for the children. The court also awarded the wife a disproportionate share of the community estate.

Texas Appeals Court Reverses Default Divorce Based on Errors in Service

Published on: September 26, 2024 | by Kelly McClure

A party who does not participate in a Texas divorce hearing may have a default judgment entered against them. If they meet certain criteria, however, they may be eligible for a restricted appeal. Those criteria are: filing notice of the restricted appeal within six months of the judgment being signed; having been a party to the lawsuit; not participating in the hearing, filing any timely motions after the judgment, or requesting findings of fact and conclusions of law; and an error that is apparent on the face of the record. Pike-Grant v. Grant. In determining if there was an error on the face of the record, the appeals court may only consider the evidence that was before the trial court.

In a recent case, a former husband challenged a default divorce decree based on an error on the face of the record.

Omitted Language in the Citation

If the defendant was not served in strict compliance with the Texas Rules of Civil Procedure, rendition of a no-answer default judgment is reversible error. The husband argued that the citation did not include all of the language required by Rule 99(c). Specifically, it had omitted language stating that the party may be required to make initial disclosures within 30 days after filing a written answer and directing the party to TexasLawHelp.org for more information. An amendment to the rule added this language at the beginning of 2021. The citation was issued more than three years after the effective date of the amendment, so the language was required.