Articles Posted in Divorce

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.

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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.

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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 “69th 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.

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“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. . .”

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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.

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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.

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Texas spousal maintenance is generally intended to provide temporary rehabilitative support to spouses who are unable to support themselves.  The appeals court recently reviewed a case in which spousal maintenance was ordered “in lieu of child support” for the parties’ now adult daughter, who is disabled.

The parties divorced in 1998. The trial court issued a modification order in 2014 that, “upon agreement of the parties,” the father would pay $1,096.55 per month in spousal maintenance in lieu of child support, purportedly to allow the daughter to qualify for more disability benefits.  Additionally, any payments received for the benefit of the child, including from the Social Security Administration, were to be credited against the spousal maintenance.

Enforcement and Modification Proceedings

Each of the parents remarried.  The mother’s husband passed away in 2020.  She petitioned for enforcement of the spousal maintenance in early 2022, alleging the father had not made payments from June to December of 2021.  The father filed a counter-petition, seeking to terminate the maintenance based on his retirement and the daughter getting half his Social Security Old Age Benefits (“SSOAB”), totaling $1,466 monthly plus increases for cost-of-living.

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Under Texas family law, community property is the property acquired by either spouse during the marriage that is not separate property.  Separate property includes property a spouse owned or claimed before the marriage, property acquired by gift or inheritance during the marriage, and recovery for personal injuries, except recovery for lost earning capacity during the marriage.  In a recent case, a former wife challenged a property division characterizing certain property as the husband’s separate property.

According to the appeals court, the parties got married in 2018.  The husband inherited about $650,000 from his mother during the marriage. He bought a pickup truck and a home with those funds.  The title and the deed each listed both parties as owners.

The husband petitioned for divorce in January 2023, asking the court to confirm his separate property and order reimbursement for the home and the pickup truck.  The wife alleged both the truck and property were part of the community estate.

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A trial court in a Texas divorce must divide the community estate in a just and right manner.  The court has broad discretion in determining what is just and right, and, when there is a reasonable basis for doing so, the court may order a disproportionate division.  The court may consider a party’s claims for waste or fraudulent transfer of community property in its property division. Waste, or constructive fraud,  occurs when one spouse wrongfully depletes the community estate without the knowledge or consent of the other spouse.  Actual fraud occurs when a spouse transfers community property or uses community funds for the primary purpose of depriving the other spouse of their use and enjoyment. A reimbursement claim arises when the assets of one estate are used for the benefit of another estate without benefit to the first, such as community funds being used to pay for repairs to one spouse’s separate property.  A former wife recently appealed the property division in her divorce, arguing the court abused its discretion by not awarding her a disproportionate share due to her fraud and reimbursement claims.

Divorce Proceedings

According to the appeals court, the parties each owned property when they married and acquired property together during the marriage.  The husband granted a gift deed to a half interest in his separate property, identified by the court as “Bayou Shore.” The wife’s separate property was sold to her brother to resolve a community debt during the marriage.

Both parties alleged fraud and made claims for reimbursement and waste.

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After rendering a Texas divorce decree, the trial court retains continuing subject-matter jurisdiction to enforce its property division.  Tex. Fam. Code § 9.002.  The court may issue additional orders to enforce the property division. Tex. Fam. Code § 9.006. An order to enforce may help in implementing or clarify the previous order, but it may not make substantive changes to the property division.  Tex. Fam. Code §  9.007.  The court generally has broad discretion to enforce the property division.

In a recent case, a former husband appealed a court order requiring him to sign documents to effectuate the transfer of stocks that were awarded to the wife in the divorce.

The divorce decree awarded the wife all shares of a particular stock owned by the husband or in his name.  It also ordered the husband to appear at a particular law office on or before September 15, 2022 to sign the documents to transfer the shares.

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