Texas Appeals Court Finds Property Was Separate Despite Use of Community Funds

imagesIn a Texas divorce case, property acquired during the marriage is presumed to be community property. A spouse claiming property is their separate property must show that it is separate by clear and convincing evidence.  Separate property is generally property that is owned before the marriage, property that the spouse acquired as a gift or inheritance, or property recovered as damages in a personal injury case.  Community property is generally property acquired after the marriage that is not characterized as separate property.

In a recent case, a wife challenged the court’s characterization of certain property as the husband’s separate property.  The wife filed for divorce. The parties agreed they had married in India in 1976, but disagreed on the date they stopped living together as husband and wife.

Husband and Wife Enter into Settlement – But Leave One Issue for Trial

The case went to trial, but, before trial, the parties entered into a Mediated Settlement Agreement (“MSA”).  In the MSA, the parties agreed their community property located in India would be divided by Indian courts.  The parties agreed to the characterization and division of everything except two pieces of land in India, referred to as the “Fifteen-Cent” property and the “One-and-a-half-Acres” property. The MSA stated they would “defer to characterization and confirmation of separate property” of those two parcels to the trial court.

The trial court admitted evidence of a deed of sale showing the Fifteen-Cent property was transferred to the husband and the parties’ son.  The husband said his mother gave him money and told him to buy property in the son’s name, which the husband thereafter did.

The husband also testified the One-and-a-half-Acres property was given to him in his mother’s will.  He provided a copy of a receipt, the translation of which stated his sister had recorded the receipt in accordance with their parents’ “last testament” to show their children had received the listed properties. One of the schedules listed the properties that were his share and he testified that the document traced his separate property interest in that property.

The MSA characterized another property, the “Ninety-three-Cent” property, as community property.  This property was adjacent to the One-and-a-half-Acres property. The husband testified he and his siblings helped their parents pay to build a house that was on both properties.  He estimated the house to be worth about $200,000.  He had paid about $30,000 from his retirement to build this house. The trial court found the “Primary Residence” located on the Ninety-three-Cent property was to be divided by the Indian courts pursuant to the parties’ MSA.

Wife Appeals Trial Court’s Separate-Property Findings

The wife appealed.  She argued the trial court erred in finding the One-and-a-half Acre property and Fifteen-Cent property were the husband’s separate property. She argued it had been established there was commingling of community assets to the One-and-a-half-Acre property and that the husband had not traced the community assets from the separate property.   The appeals court noted that the testamentary document signed by the husband’s sister showed the husband’s parents bequeathed that property to him. The husband also testified he had inherited the property.  There was no contradictory evidence in the record.

The wife argued the house that straddled that property and the Ninety-three-Cent property was built with community funds and that the husband failed to trace separate assets from the community property.

The appeals court found the One-and-a-half-Acre parcel was separate property because the husband inherited it from his parents.  That characterization did not change just because the property had been improved with community funds or used for community purposes.  Under Texas law, community funds that have been used for separate property may be reimbursed.  The appeals court found the trial court could have reasonably interpreted the MSA’s provision to allow an Indian court to distribute the community property in India as an agreement to let the Indian court decide how to divide the house that was primarily sitting on the Ninety-three-Cent property, which was community property pursuant to the MSA. The appeals court found the trial court had not erred in characterizing the One-and-a-half-Acre parcel as the husband’s separate property because there was some substantive and probative evidence supporting that finding.

The wife also argued the Fifteen-Cent property was purchased during the marriage and testimony that it had been bought with separate funds was insufficient to rebut the presumption it was community property.

The appeals court noted, however, that the husband’s testimony that his mother gave him the money to buy property in his son’s name constituted “some evidence” that any interest he had was his separate property.  The son had testified he knew property had been purchased in India in his name, but he did not know the specifics.  He also testified that his father or his father’s parents owned the only “family” land he was aware of in India.  Additionally, the deed to the property showed it had previously belonged to the husband’s grandfather and was passed down through inheritance ultimately to the husband’s sisters.  The sisters subsequently transferred the property to the husband and his son.  The appeals court again found that there was “some evidence” supporting the court’s finding, and nothing in the record that contradicted that evidence. Additionally, the MSA provided that the parties agreed to “defer to characterization and confirmation of separate property” of that parcel to the trial court. Thus, there was no error in the trial court’s finding the Fifteen-Cent property was the husband’s separate property.

The appeals court therefore affirmed the divorce decree.

Property Characterization is Complex; Call the Knowledgeable Divorce Attorneys at McClure Law Group

Divorce involving significant assets can be incredibly complex, especially when some of the property and assets are outside the country.  If you are facing a divorce, an experienced Texas divorce attorney can help you protect your rights and your assets. Set up an appointment with McClure Law Group by calling 214.692.8200.

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