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The Property Owner Rule in Valuing Texas Property for Distribution Purposes

scottish-cow-1365844-e1490131408410In a recent Texas appellate case, the court considered the lower court’s division of a marital estate. The couple was married in 1990 and bought two businesses while married, one an insurance agency operated by the wife and the other a livestock auction house operated by the husband. The wife sued for divorce in 2010.

At a bench trial in 2013, the lower court admitted the wife’s testimony, inventory of assets and exhibits related to their value. She offered two experts to testify about their appraisal of property, including the livestock auction house. The experts were supposed to testify on the value of the assets as well as the wife’s theory that the husband had committed fraud on the estate by arranging the sale of cows through the auction house and concealing the proceeds from her.

The husband objected, and the court agreed with him. The court prevented one expert from testifying and found that the other’s testimony wasn’t credible. The wife didn’t challenge these rulings when she appealed. The husband’s exhibits were mostly not admitted. The court deferred judgment after trial and asked the couple to go to mediation.

A draft divorce decree was sent to the properties, but the wife moved the court to reconsider and made a motion to divide the community property. The divorce was granted with a property distribution, and the husband’s adultery was listed as the reason. The court awarded the husband sole ownership of the livestock auction house, as well as several vehicles and trailers in his name and any goods in his possession.

The wife was awarded the insurance agency and a bank account. She got 55% of the estate, and her husband got 45% of the estate. The trial court entered an offsetting judgment and lien against the husband to the wife to achieve the division it had ordered.

Along with motions to modify, the wife filed another petition for divorce and asked for prejudgment interest for the first time. The court granted her motion to modify, and increased the offsetting judgment against the husband. The husband also moved to modify, asking for a reduction. This motion was denied. The wife asked for a new trial, and ultimately appealed. The appellate court sent the case back to the lower court, which was asked to enter factual findings and legal conclusions. Among other things, the lower court rejected the wife’s fraud theory and determined the judgment should be modified to provide the wife prejudgment interest. However, it didn’t modify the judgment to give her that interest.

The wife appealed again, arguing that the trial court had made mistakes in valuing assets, in delaying rendition of judgment so that the property values were outdated, failing to grant a new trial and failing to give her prejudgment interest.

The appellate court explained that the court is supposed to divide the estate of the parties in a way that is just and right under Texas Family Code section 7.001. Community assets are usually determined as of the divorce date. Market value of property is the price property will bring if it is offered to be sold by someone who wants to sell but isn’t obliged to do so and purchased by someone who wants to sell but doesn’t find it necessary to do so.

Under the property owner rule, an owner can be qualified to testify on market value even if he’s not an expert. In this case, the husband had testified the value of the auction house was slightly more than $1.4 million. He’d been working in cattle auction houses since he was 18. The wife argued that the husband didn’t handle the company’s bookkeeping and his testimony showed he wasn’t aware of many categories of business expenses.

The appellate court found that the husband showed a minimum basis of knowledge necessary to invoke the property owner rule and it deferred to the lower court’s decision to follow the husband’s valuation. The judgment was partially affirmed and partially reversed on other grounds.

If your divorce involves matters related to property distribution, contact the Texas attorneys at the McClure Law Group at 214.692.8200.

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