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Texas Divorce Court May Reconstitute Community Estate to Account for Waste and Dissipation

Property division in a Texas divorce must be equitable.  In dividing the property, the court may consider amounts from the community estate that a party has dissipated or wasted.  In a recent case, a husband appealed the divorce decree arguing that there was insufficient evidence to support the division and that the division was manifestly unjust and unfair.

The couple had been married for about 40 years when the wife filed for divorce.  An associate judge issued a final divorce decree in 2015. The wife filed a motion for a new trial, which was granted.

The couple lived in a trailer home on an undivided tract of land.  The husband ran his electrician business from the trailer and stored the heavy equipment he used for the business in the barn.  This real property was awarded to the husband in the original trial.  After the second trial, the property was partitioned into two tracts.  The property division awarded Tract A with the trailer to the husband and Tract B with the barn to the wife.

 

The couple also owned a commercial building. When the loan matured in 2015, the bank agreed to work with the wife to renew the loan.  The bank’s vice president testified that he had talked to the husband about signing a deed to allow the refinancing and that the husband said he needed to speak with his attorney.  The husband never signed, and the wife was unable to renew the loan. The property went into foreclosure. After the first trial, the court ordered the couple to sell the property and split the proceeds or liability evenly.  A friend of the wife agreed to a dollar amount and told the bank she would buy the property if the husband signed the deed.  The husband refused to sign, and the sale did not occur.  The property was ultimately foreclosed.  The wife stated they would not have lost their equity if the husband had signed the deed to either renew the mortgage or sell to the buyer.

After the first trial, the associate judge ordered the wife to turn over an insurance check to pay for storm damage to the home and ordered the husband to use the check for the repairs.  According to the opinion, he used the funds either to pay off the mortgage on the trailer or for expenses related to his business.

At the second trial, the wife argued the husband had misused the insurance funds.  A certified appraiser opined that repairs would increase the home’s value, but not in the amount of the insurance check.

The wife testified that when she arrived to pick up her personal property, it was sitting out by the road, damaged and muddy.  The husband said he put it out because he was told to have it ready and thought the time had been arranged.  He also testified he didn’t want the wife inside his home.

During the second trial, the wife asked the court to reconstitute the community estate to account for the alleged waste resulting from the foreclosure of the commercial property and the insurance check.  She asked the court to award her some of the heavy equipment and asked that her husband be awarded the debt owed to her sister and owed on the equipment.  The trial court gave the wife what she asked for and awarded the electrician business and all of its debt to the husband.

On appeal, the husband argued the court erred in reconstituting the estate because there was not sufficient evidence of actual or constructive fraud.  He argued constructive fraud is based on the fiduciary duty between spouses, but that the fiduciary duty between the parties had ended because the associate judge had already granted the first divorce. The appeals court disagreed, finding the divorce had been set aside when the trial court granted the wife’s motion for new trial.  The fiduciary duty therefore continued.  Furthermore, a trial court is not limited to allegations of fraud in reconstituting the estate but may also consider misuse or dissipation of the community estate.

The husband further argued there was insufficient evidence to support the reconstitution. The appeals court, however, found sufficient evidence for the trial court to reasonably find that the husband misused and dissipated the estate.  He had not cooperated in preventing the foreclosure and had not used the insurance proceeds to repair the storm damage.

The husband argued the property division was manifestly unjust and unfair, in part because it was disproportionate and because the court assigned some of the heavy equipment to the wife and the debt related to the equipment to the husband.

The appeals court noted the trial court could have reasonably disbelieved the husband’s testimony that he could not run his business profitably without the equipment awarded to the wife.  The appeals court also found the debt that had been assigned to the husband had been used to finance the husband’s business.  The appeals court found no abuse of discretion.

The appeals court found the husband had not considered the amount of the reconstituted community estate in his calculations.  The court also found that, considering the reconstituted amount, the husband received more than the wife.  However, the trial court assigned various debts to the husband to balance out the amounts.  The court rejected the husband’s argument that the division was so disproportionate as to be manifestly unjust and unfair. The appeals court affirmed the divorce decree.

Property divisions can be very complex, especially when there is secured debt on some of the property.  If you are facing divorce, a skilled Texas divorce attorney can help you.  Call McClure Law Group at 214.692.8200.