Articles Posted in Business Entities

iStock-483613578-300x204Business 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.

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iStock-1287431987-300x200When 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. . .”

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iStock-1287431987A 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.

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iStock-1215119911A trial court must divide community property in a “just and right” manner in a Texas divorce.  The court must properly characterize the property before it in order to achieve a just and right division. Characterization can be complex when the parties have significant assets acquired through various means.  It can get even more complicated when the parties have ownership interests in business entities that also own property.

A husband recently appealed the property division in his divorce decree, arguing the court had improperly awarded him property owned by business entities as his separate property. The parties got married in 1993.  They lived in Connecticut, but the wife moved to Texas in 2018 for a job.  The husband remained in Connecticut where his construction businesses were located. He told the wife, however, that he would move to Texas in a year to a year and a half, but ultimately did not do so.

Wife Files for Divorce

The wife petitioned for divorce in 2019.  The husband’s father and his company filed suit against three of the husband’s businesses a few days before the divorce trial. The lawsuit alleged the husband’s companies owed his father’s company $770,644 for equipment rental.

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iStock-1215119911A Texas premarital agreement can help protect each party’s assets in the event a marriage ends in divorce. Premarital agreements may also include other provisions, including a requirement to submit certain issues to binding arbitration instead of for determination before a judge or jury. In a recent case, a husband attempted to vacate an arbitrator’s decision, arguing he had exceeded his authority.

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What is a Mediated Settlement Agreement?

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A mediated settlement agreement (“MSA”) in a Texas divorce is binding if it meets certain requirements.  It must state that it is not subject to revocation in bold letters, capital letters or underlined text.  It must also be signed by each party and the party’s attorney, if present. Tex. Fam. Code Ann. § 6.602.  Some Texas courts have held that an MSA may be unenforceable if it is obtained by fraud, duress or coercion.

A husband recently challenged an MSA, partly on the grounds that he allegedly signed it under duress.

The parties had been married since 1981.  Some of the property acquired during the marriage was held by a limited partnership in which the parties owned a 95% interest.  In August 2017, the husband was arrested after the wife reported he had threatened her with a firearm.  The wife filed for divorce the very next day.

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