Texas Appeals Court Finds Wife Did Not Commit Fraud by Nondisclosure

divorce-property-fraudIn some cases, a party to a Texas divorce may agree to a settlement that seemingly has less-than-favorable terms.  For example, a party may agree to their spouse receiving property with a higher monetary value to ensure they receive property that has personal value to them. In a recent case, a husband alleged the wife committed “fraud by nondisclosure” by entering into a Mediated Settlement Agreement (“MSA”) without disclosing that the FBI had possession of certain items that were to be awarded to him under that MSA.

Husband is Awarded Certain Items He Believes are in Wife’s Possession

The parties agreed to the MSA, which gave the wife the personal property in her possession with certain exceptions, including a laptop and cell phone.  These items were explicitly given to the husband in the MSA. When the husband learned that the wife did not actually have possession of these items, he moved to set aside the MSA. The husband testified that the wife having those items was “a key factor” in his agreement to the MSA and the wife receiving so much joint property and custody of their child. He said the contents on those devices could have a negative effect on his military career. He had initially believed they were in the wife’s possession, because he had left them at the home and she had pictures and videos from the devices.  He had previously petitioned for those items to be returned to him, and the wife had subsequently asked to keep all of the possessions in the marital home.

Husband Moves to Set Aside MSA – But is Denied

After he signed the MSA, the husband learned the FBI had both devices. He moved to set aside the MSA in May, arguing the wife committed fraud when she failed to disclose that she did not have the devices. The trial court denied the motion, and the husband appealed.

The husband argued the trial court denied his motion finding there was no “affirmative misrepresentation fraud,” but he had instead raised the issue of fraud by nondisclosure.

The trial court found the wife had not made any representations that she had actual possession of the devices despite entering into an MSA that awarded them to the husband. The husband testified at the hearing on his motion. According to the appeals’ court’s opinion, the husband’s testimony as to the elements of fraud by nondisclosure was conclusory, which held no weight.  The husband argued the wife had a duty to inform him the devices were not in her possession.

Husband Argues Wife had a Duty to Disclose her Non-Possession

Texas courts have recognized there may be a duty to disclose when there is a fiduciary or other special relationship, when the party has already disclosed some of the information but not all of it, when the party has made a representation that would be rendered misleading or untrue by new information, and when a partial disclosure makes a false impression.

The husband agreed there was not a fiduciary relationship. He argued, however, that the wife had voluntarily disclosed partial information by voluntarily disclosing photos and videos from the devices to his employer. He argued she also created the impression she had the devices when she asked to get the personal property in the home soon after the husband requested them.  He argued she had a duty to inform him that she did not have the items, why she did not have them, and that she had used them to try to initiate a federal investigation against him.

The appeals court found, however, that the husband failed to show the wife had a duty to disclose where the devices were based on his argument of voluntary partial disclosure.

The husband also argued that the wife delivering the device to the FBI was new information that made the information he knew about the laptop misleading. The appeals court, however, found he had not cited any legal authority supporting his argument she had made a representation and failed to disclose new information that would make it misleading.

Husband Failed to Ask Wife About Possession

The husband also argued the wife had made a partial disclosure that created a false impression. The appeals court noted that the husband had failed to ask the wife about where the devices were.  The appeals court further pointed out that the wife had not partially disclosed the location of the devices or affirmatively disclosed information to create a false impression she had them. The “Husband made assumptions . . .” without asking if the wife had the devices.

The husband also argued he was denied an equal opportunity to discover the truth. He had not asked her where the devices were during the discovery nor mediation processes.  The appeals court rejected his argument, finding he had an equal opportunity to discover where the devices were through the discovery and mediation processes.

The appeals court found the husband had not inquired about the location of the cell phone and laptop when he had multiple opportunities to do so.  Additionally, there was not legally sufficient evidence to show the wife had a duty to inform him she no longer had the devices.  The husband therefore had not shown the wife had committed fraud by nondisclosure. The appeals court found no abuse of discretion and affirmed the trial court’s ruling.

Property Issues are Crucial – Hire the Diligent Attorneys at McClure Law Group

This case illustrates the importance of inquiring about key information regarding property or assets that influence whether a party agrees to a settlement. If the award of certain assets or property are important to you, you should consult with a skilled Texas attorney about your options.  Call McClure Law Group at 214.692.8200 to schedule an appointment.

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