Property Owned by Business Entity in Texas Divorce

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.

On Appeal, Husband Alleges Error

The husband argued the trial court erred in denying his motions for reimbursement because, although the decree had not awarded The Terraces to either party, it did require each to pay obligations incurred in their own names.

The appeals court acknowledged that the decree required the wife to indemnify and hold the husband harmless for any failure to discharge debts or obligations incurred in her name unless the decree expressly stated otherwise.  The appeals court noted, however, that the mortgage was not in the wife’s name, but was instead incurred by “THE TERRACES, INC.”  The parties had signed guaranty agreements to pay the mortgage, but there was no legal authority providing that a guaranty would transform the debt into an obligation in the wife’s name.  The appeals court found no abuse of discretion in the trial court determining the divorce decree did not entitle the husband to reimbursement for the mortgage payments.

Appeals Court Finds No Error

The husband argued The Terraces was a community asset and liability and the parties were required to resolve their “mutual responsibilities for the expenses” after the sale.  Property owned by an entity cannot be characterized as separate property or community property of the individual spouses. The appeals court found the decree did not require the parties to pay the mortgage.  The husband had made them voluntarily to avoid the loan being accelerated and the property being sold in foreclosure.  The appeals court found any reimbursement to the husband was to come from net proceeds from the sale of the property, but there were none.  The appeals court therefore found no error in the trial court’s denial of the husband’s reimbursement claims.

Business Assets Can Complicate Texas Divorces – Call McClure Law Group Today.

Rental and investment property is often conveyed to an entity for legal or financial reasons. Spouses should understand, however, that such property is no longer owned by them individually and is therefore not subject to property division in a divorce.  A skilled Texas divorce lawyer can help you understand your options with regard to the entity and address it in the divorce.  Set up an appointment with McClure Law Group at to discuss your case.

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