Texas Divorce Attorney Blog
The dissolution of a marriage involving spouses who serve as co-owners or partners in a closely held business presents unique challenges under Texas law. When marital discord overlaps with corporate governance, the court must navigate the complexities of both the Texas Family Code and the Texas Business Organizations Code. These cases frequently involve high-stakes litigation where the fiduciary duties owed to a business entity intersect with the duties owed to the community estate.
In a recent matter originating in San Antonio, a jury awarded a verdict exceeding $20 million in a dispute involving a prominent automotive dealership partnership. The litigation involved long-term business partners who were also spouses, illustrating the volatility that arises when a professional partnership is entangled with a crumbling marriage.
The dispute centered on allegations of breach of fiduciary duty and the mismanagement of dealership assets during the pendency of the divorce. The divorcing couple has a variety of other lawsuits and countersuits against each other, also awaiting decisions in the Texas court system.
Property Division and Business Interests
Texas law operates under a community property regime, where all property acquired during the marriage is presumed to be community property. Tex. Fam. Code § 3.002. However, under Texas Family Code § 3.001, the characterization of a business interest often depends on whether the entity was formed prior to the marriage or with separate property funds.
When spouses are partners in a business, the trial court is tasked with a “just and right” division of the community estate, which may include the valuation and partition of complex business interests. Tex. Fam. Code § 7.001. In high-net-worth divorces involving entrepreneurs, the valuation of the business is often the most contested issue at trial.
Furthermore, Texas does not recognize the status of legal separation, meaning the community estate continues to accumulate until the final divorce decree is signed. Any assets acquired or liabilities incurred by the partnership during the litigation remain subject to characterization and division by the trial court. This lack of legal separation necessitates precise accounting to ensure that business operations during the divorce do not result in the wasting of community assets.
Fiduciary Duties and Fraud on the Community
Spouses owe one another a fiduciary duty, which requires them to act in good faith regarding community property. Partners also owe duties of loyalty and care to the partnership and the other partners. Tex. Bus. Org. Code §§ 152.204-206. When a spouse utilizes their control over a business to disadvantage the other spouse’s interest in the community estate, they may be liable for.
A claim for fraud on the community does not create an independent cause of action for damages but is instead considered by the trial court when calculating a “just and right” division. Schlueter v. Schlueter, 975 S.W.2d 584, Tex. 1998. Under Texas Family Code § 7.009, the court may award a money judgment or a larger share of the remaining community estate to the wronged spouse to compensate for the breach.
Protect Your Financial Assets with a Dallas Divorce Attorney
This San Antonio verdict underscores the significant financial exposure that can result when a jury determines that a business partner has breached these fundamental duties. At McClure Law Group, our attorneys work to protect your personal and business financial interests in preparation for and throughout a divorce proceeding. We provide comprehensive legal analysis for individuals navigating complex property divisions. Contact our team today by calling (214) 692-8200.