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Acceptance of Benefits Doctrine in Texas Divorce

flowersIn a recent Texas Supreme Court case, the Court considered the acceptance-of-benefits doctrine, which stops a litigant from challenging judgments after voluntarily accepting any benefits provided by the judgment. The Court considered the case because divorces regularly divide assets in situations in which a party can possess and control assets before the final divorce decree, which can make the rigid application of the doctrine untenable.

The case arose from a nine-year marriage involving one child and a $30 million marital estate. The couple settled a bitter divorce with two agreements after two years. One of the agreements had to do with child custody, while the other was about property distribution. After the final agreement was executed, the court held an evidentiary hearing. The court approved the settlement agreements, after the husband testified the conservatorship was in their child’s best interest and the division of property was fair and equitable.

A year later, the rulings were written down as a final divorce decree. Between the hearing and the writing, the wife revoked consent and tried to get the property distribution set aside on the ground that it was fraudulently gotten. She claimed the husband forged her signature on real estate documents and concealed major assets, which resulted in an inequitable division.

The husband disputed her claims and said that all of the information had been disclosed to her. He also argued she’d waited almost a year to challenge the agreement. After the oral approval of the court, the husband had sold property, and she’d collected rental income from the properties that had been allocated to her. The trial court sanctioned the wife and awarded the husband over $32,000 in attorneys’ fees. It rendered a final divorce decree. The wife argued that the provisions in the final decree were different than what they’d agreed to choose. These were corrected, but the wife didn’t get what she wanted—a new trial.

She appealed, arguing that the agreement was invalid, among other things. The husband argued she was prohibited from challenging the final divorce decree because she collected at least $20,000 each month in rental income from the property awarded to her, and immediately after she filed a motion to set aside the agreement, she tried to enforce it by asking to get personal property allocated to her from a property that had been allocated to the husband. The appellate court granted the husband’s motion and dismissed the appeal, finding the wife was prohibited from pursuing the appeal because she’d gotten the benefits of $20,000 per month in rental proceeds from the divorce decree.

The wife asked the Texas Supreme Court to review. She argued that dismissing her appeal was inappropriate unless her acceptance of benefits prejudiced the other spouse or she’d otherwise acquiesced to the divorce decree.

The Court agreed to clarify whether prejudice had a role in applying the acceptance of benefits doctrine. It explained the acceptance of benefits doctrine would bar an appeal if someone accepted the benefits, thereby disadvantaging the opposing party. The Court agreed with the wife that prejudice played a basic role in deciding whether it was unconscionable to stop an appeal from going forward. However, an acceptance wasn’t voluntary if it was made under financial duress. It explained that before denying an appeal, the court should decide whether the appealing party intended to acquiesce in the judgment and whether the assets had been dissipated such that they cannot be recovered if the judgment is reversed, as well as whether the party opposing the appeal would be unfairly prejudiced.

Factors to be considered include whether assets were dissipated, whether the right to possession and control preceded the judgment that is appealed or exists only because of the judgment, whether the acceptance of benefits was the result of financial duress or was voluntary, whether the appealing party is entitled to a benefit as a matter of right or because of a concession by the other party, whether the appeal could result in a more favorable judgment, whether the appealing party affirmatively tried to enforce rights that exist only because of the judgment, whether the issue to be appealed can be severed from accepted benefits, and whether there is prejudice and whether it is curable.

The Court reasoned that the circumstances didn’t show the wife’s clear intent to acquiesce in the judgment and that there was no prejudice to the husband in the appeal. It concluded that the appellate court had erred in dismissing the wife’s appeal.

If your divorce involves matters related to property division, or you need to appeal, contact the Texas attorneys at the McClure Law Group at 214.692.8200.

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