Texas Divorce Attorney Blog
Property’s characterization as either separate or community property in a Texas divorce is generally determined by its character at inception. The Texas Family Code includes a presumption that property either spouse possesses during or on dissolution is community property. Tex. Fam. Code § 3.003(a). The Code defines “community property” as the property acquired during the marriage by either spouse, except separate property. § 3.002. Personal income and income produced by separate property is generally community property. Spouses may, however, enter contracts changing their rights and obligations with regard to property. Although premarital agreements are contracts and generally interpretated according to the rules of contract interpretation, they are narrowly construed in favor of the community estate. A former husband recently appealed the property division in his divorce, argued the court had failed to apply the terms of the premarital agreement.
Premarital Agreement
The parties had signed a premarital agreement two days before their wedding. The husband drafted the agreement based on a form from the internet. The agreement was partially typed and partially handwritten. The agreement included a Separate Property Provision that provided that the separate property each party brought to the marriage would stay their separate property. It also included an Acquired Property Provision that provided, “All property acquired by each during the marriage shall be deemed [th]eir property.” The agreement also stated that the husband’s 401(k), along with “income profits, Deferred Retirement Option (D.R.O.P.) or any benefits of any kind accruing from it” would remain his separate property. The agreement further provided that the wife’s “personal income or retirement will remain her separate property.”
The dispute was over the meaning of the Acquired Property Provision, specifically related to the marital home and a vehicle. The husband bought the house four years into the marriage with funds received from the sale of a house in Hurst, Texas, he had purchased with his separate property in 2006. The parties had lived in the home in Hurst from 2006 until 2014. The wife said she paid for improvements to both.
Both parties worked and maintained separate bank accounts during the marriage. They also bought a number of vehicles while they were married. The husband claimed a pickup truck was his separate property, but the wife argued it had been purchased with “a refi cashout. . . from the house.” The husband admitted the wife paid to maintain the houses, but argued she benefited from living there and had not contributed to the house payments.
The husband argued the marital home and pickup truck were his separate property based on the premarital agreement because he acquired them during the marriage. The wife argued the Acquired Property Provision only applied to “tangible items” or the “furniture and stuff.”
Final Divorce Decree
The final decree awarded the pickup truck and an interest in the house to the wife. The court concluded the premarital agreement was valid, but contained “ambiguity and uncertainty.” The court interpreted the word “their” in the Acquired Property Provision to be plural, “essentially meaning belonging to or possessed by ‘them.’” The court concluded the agreement was vague and ambiguous and should be interpreted against the drafter. The court also applied the community property presumption.
The Husband’s Appeal
The husband appealed, arguing the trial court misinterpreted the agreement and divested him of his separate property. He argued the agreement was unambiguous and provided that all property acquired during the marriage was the separate property of the spouse who acquired it. He argued that “their” was unambiguously used as a singular, gender neutral pronoun. He further argued that the parties did not intend to create any community property.
The wife argued the agreement was ambiguous, and pointed out that there was not another instance where “their” was used to refer to a party’s separate property. She argued the court properly interpreted the word as a plural possessive pronoun.
The husband cited to two legal style guides for the proposition that “their” can be a singular pronoun when there is an indefinite singular antecedent.
The appeals court noted, however, that according to the cited legal style guides, this usage had not commonly been accepted in formal writing. Furthermore, according to the appeals court, the edition of one of the style guides available at the time the agreement was signed “expressly admonished” the use of plural pronouns as singular pronouns. The appeals court also noted the other provisions referred to “each person’s separate property” instead of “their” property. The appeals court concluded this supported an intent for the Acquired Property Provision to work differently.
The appeals court also noted that portions of the other provisions would be rendered superfluous under the husband’s interpretation.
The appeals court also considered the wife’s interpretation “problematic.” She argued the agreement could be interpreted as an agreement to identify certain property as separate and property acquired later as community property. The appeals court noted that some of the property was not separate at inception, and the wife’s interpretation would lead to conflict between the Acquired Property Provision and the other provisions of the agreement.
The court noted that specific provisions in a contract control over more general provisions. The provisions related to the 401(k) and the parties’ personal income could be treated as exceptions to the Acquired Property Provision and could convert personal income and retirement benefits acquired during the marriage to separate property.
The appeals court disagreed with the trial court that the Acquired Property Provision was ambiguous. The appeals court concluded the agreement unambiguously made the property acquired by either spouse during the marriage community property, but specifically excepted the wife’s personal income and retirement account benefits.
The appeals court affirmed the final divorce decree.
Seek Legal Advice
Downloading a form from the internet can lead to ambiguous or unfavorable terms that are not necessarily aligned with the parties’ intent. Before signing a premarital agreement, you should seek the advice of a knowledgeable Texas family law attorney. Call 214.692.8200 for an appointment with McClure Law Group.