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THE LATEST CAUSES OF ACTION IN FAMILY LAW

CHARLA BRADSHAW CONNER KOONS, FULLER, VANDEN EYKEL & ROBERTSON, P.C. 320 West Eagle Drive Suite 200 Denton, Texas 76262 [email protected]

State Bar of Texas 35TH ANNUAL ADVANCED FAMILY LAW COURSE August 3-6, 2009 Dallas CHAPTER 9

PROFESSIONAL & CLE ACTIVITIES Member, State Bar of Texas Family Law Council, since April, 2005; Committee Chair of Awards Committee; Legislative Committee Chair, Section 14, State Bar of Texas Grievance Committee (since 2008) Officer, Texas Academy of Family Law Specialists (since September 2005) (Director 2002-2005) (Member since 2000) Delegate, Family Law Council of Community Property States (2002 - 2005) Member, State Bar of Texas, Texas Family Law Practice Manual Form Book Committee since 1998 Fellow, American Academy of Matrimonial Lawyers, 2006 to present TAFLS Trial Institute 2008 Course Director New Frontiers, Course Director 2008 Editor, TAFLS Newsletter, "Family Law Forum" (2002 - 2005) Member, Collaborative Law Institute of Texas and of Denton County Member, Denton, Tarrant, Collin & Dallas County Bar Associations Member, College of the State Bar of Texas Member, Texas Family Law Foundation Member, State Bar of Texas, Family Law Section PUBLICATIONS Author, Texas Annotated Family Code (LexisNexis-Matthew Bender, 2005 Edition, 2007 Edition, 2008 Edition) Co-Author, SBOT, Texas Family Law Council Checklist Committee for "Checklist" Publication, Volumes I and II 2009 AFLC: "The Latest Causes of Action in Family Law" 2009 AFLC: "Exploring Employment Plans and Benefits, and Drafting QDROs" 2008 AFLC: "How to Calculate, Prove & Present Financial Issues" st 2008 AFLC: "New or Developing Causes of Action in the 21 Century in Family Law: Including Fiduciary Litigation 2008 Marriage Dissolution Institute "Retirement Benefits" 2008 Small Business Seminar "Mixing Love and Business" 2007 AFLC: Moderator of Retirement Workshop: "What Every Lawyer Should Know About Dividing and Drawing Orders Which Divide Qualified Retirement Plans" 2007 Marriage Dissolution Course: "Employee Benefits ­ QDROs" 2007 & 2006 Small Business Seminar: "Avoiding Divorce Disasters" 2006 AFLC: "What Every Lawyer Should Know About Dividing and Drawing Orders Which Divide Qualified Retirement Plans" 2006 AFLC: "Some of that Retirement is Mine: The Current State of Qualified Retirement Plans (Defined Contribution & Defined Benefit)" 2006 Marriage Dissolution Course: "Drafting QDROs" 2006 TAFLS Trial Institute: "Litigating the Case: Children's Issues" 2005 AFLC: "Avoiding the Equal Property Division: When Equitable Doesn't Mean Equal" 2005 Family Law Council of Community Property States: "Economic Contribution and Reimbursement" 2004 AFLC: "Retirement: QDROs for Defined Benefit and Contribution Qualified Plans under ERISA" 2004 TAFLS Trial Institute: "Twenty-Five Essential Factors When Drafting or Reviewing QDROs" 2004 Family Law Council of Community Property States: "Business Valuation" 2003 Family Law Practice Seminar, University of Houston: "Retirement: QDROs for Qualified Plans under ERISA (including using QDROs for Child Support)" 2003 AFLC: "Retirement: QDROs for Qualified Plans under ERISA (including using QDROs for Child Support)" 2002 AFLC: "ERISA Retirement Plans: An Analysis of the New Texas Family Law Practice Manual QDRO Forms and QDRO Drafting Tips" 2001 AFLC: "Handling ERISA Retirement Plans: An Overview and Explanation of the Texas Family Law Practice Manual QDRO Forms and Drafting tips for Alternative Clauses" 2000 AFLC: "Retirement Plans: What to Do When No QDRO is Honored" 1999 Family Law Practice Seminar, University of Houston Law Center: "QDROs and Retirement Benefits" 1999 AFLC: Expert Witness Workshop

CHARLA BRADSHAW CONNER Koons, Fuller, Vanden Eykel & Robertson, P.C. (Partner) 303 N. Carroll Blvd., Suite 100 Denton, TX 76201 940.387.1600 * 940.387.2173 fax [email protected] EDUCATION J.D. Southern Methodist University 1993 B.S., Summa Cum Laude Texas Woman's University & Candidate for M.S., Marriage & Family Therapy (ABT) LICENSURE * CERTIFICATION State Bar of Texas, 1993 Texas Supreme Court, 1993 U.S. Supreme Court, 1998 Board Certified in Family Law by Texas Board of Legal Specialization, 2000 Certified Mediator & Credentialed-Advanced Mediator (TMCA) Collaborative Lawyer AWARDS * RECOGNITION Best CLE Article of 2007, State Bar of Texas, Family Law Section Listed in Texas Super Lawyers®, Texas Monthly Magazine, 2003, 2004, 2005, 2006, 2007, 2008, 2009 Listed in Texas Super Lawyers®, Texas Monthly Magazine, Top Fifty Female Attorneys in Texas, 2005 Listed in Texas Super Lawyers®, Texas Monthly Magazine, Top 100 Super Lawyers® in Dallas/Fort Worth, 2005 Martindale-Hubbell AV® Peer Review Rated PERSONAL Charla Bradshaw Conner was born in Post, Texas in 1962. She is married to Coye Conner, Jr. and she has two daughters, Rachel and Erin Bradshaw.

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1998 AFLC: "Retirement Overview and a Walk Through the QDRO" 1998 Family Law Practice Seminar, University of Houston: "QDROs: What You Don't Know Can Hurt You" 1997 AFLC: "Retirement, Pensions and that Ugly Word...QDROs" 1996 Distinctive Lifestyles of Northeast Tarrant County: "New Alimony Law in Texas Adds Protection", March/April 1996 edition 1995 AFLC: "QDROs and Checklists"

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TABLE OF CONTENTS I. INTRODUCTION................................................................................................................................................... 1

II. STATUTORY LAW FOR DIVISION.................................................................................................................... 1 III. CAUSES OF ACTION/FACTORS FOR DIVISION ............................................................................................. 1 A. The Landmark Case on Division: Murff v. Murff ............................................................................................ 1 B. Case and Statutory Analysis of Causes of Action/Factors for Division .......................................................... 2 1. Fraud ........................................................................................................................................................ 2 2. Fault/NoFault ........................................................................................................................................... 8 3. Length of Marriage .................................................................................................................................. 9 4. Disparity of Earning Power ..................................................................................................................... 9 5. Custody of Children............................................................................................................................... 10 6. Tax Consequences and Liabilities ......................................................................................................... 10 7. Size of Separate Estate .......................................................................................................................... 12 8. Benefits the Innocent Spouse May Have Derived From the Continuation of the Marriage .................. 12 9. Health of the Spouses ............................................................................................................................ 12 10. Age of the Spouses ................................................................................................................................ 13 11. Education and Future Employability ..................................................................................................... 13 12. Need for Future Support ........................................................................................................................ 13 13. Foreign Realty ....................................................................................................................................... 13 14. Credit for Temporary Alimony Paid...................................................................................................... 14 15. Wasting and Concealing of Community Assets .................................................................................... 14 16. Attorney's Fees ...................................................................................................................................... 15 17. Nature of the Property ........................................................................................................................... 15 18. Debts and Liabilities .............................................................................................................................. 15 19. Reimbursement ...................................................................................................................................... 16 20. Physical Abuse ...................................................................................................................................... 17 21. Fiduciary Duties Between Spouses ......................................................................................................... 17 22. Alter Ego ............................................................................................................................................... 32 23 Property Related Torts ........................................................................................................................... 41 C. Intentional and Unintentional torts ................................................................................................................ 46 1. Elements­Intentional Torts.................................................................................................................... 46 2. Elements­Unintentional Torts ............................................................................................................... 46 3. Redressing Wrongs ................................................................................................................................ 47 4. Joinder of Actions and Parties ............................................................................................................... 47 5. Res Judicata and Collateral Estoppel--Distinction ............................................................................... 47 6. Procedural Bars And Defenses To Bringing Actions And Limiting Damages ..................................... 47 D. Statutory and Common Law Torts ................................................................................................................ 49 E. Case Law Upholding Disproportionate Division Awards ............................................................................. 50 1. Garcia v. Garcia ..................................................................................................................................... 50 2. Lucy v. Lucy .......................................................................................................................................... 50 3. Loaiza v. Loaiza .................................................................................................................................... 50 4. In re Marriage of Becerra ...................................................................................................................... 50 5. Phillips v. Phillips .................................................................................................................................. 51 6. Sprick v. Sprick ..................................................................................................................................... 51 7. Kimsey v. Kimsey ................................................................................................................................. 51 8. Abernathy v. Fehlis................................................................................................................................ 51 9. Tschirhart v. Tschirhart ......................................................................................................................... 51 10. Matter of Marriage of DeVine ............................................................................................................... 51 11. Finch v. Finch ........................................................................................................................................ 51 12. Falor v. Falor ......................................................................................................................................... 51 13. Faram v. Gervitz-Faram ........................................................................................................................ 52 14. Golias v. Golias ..................................................................................................................................... 52 15. Frommer v. Frommer ............................................................................................................................ 52 16. Vandiver v. Vandiver ............................................................................................................................ 52

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17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

Morrison v. Morrison ............................................................................................................................ 53 Conroy v. Conroy .................................................................................................................................. 53 Kluck v. Kluck....................................................................................................................................... 53 Eikenhorst v. Eikenhorst........................................................................................................................ 53 Oliver v. Oliver ...................................................................................................................................... 53 Rafidi v. Rafidi ...................................................................................................................................... 53 Rutledge v. Rutledge ............................................................................................................................. 53 Huls v. Huls ........................................................................................................................................... 54 Roberts v. Roberts ................................................................................................................................. 54 Gaston v. Gaston.................................................................................................................................... 54 Hourigan v. Hourigan ............................................................................................................................ 54 Haulsler v. Haulsler ............................................................................................................................... 54 Whittenburg v. Whittenburg .................................................................................................................. 54 Waggener v. Waggener ......................................................................................................................... 54 Duncan v. Duncan ................................................................................................................................. 54 Bokhoven v. Bokhoven ......................................................................................................................... 54 Vannerson v. Vannerson........................................................................................................................ 54 Zamora v. Zamora ................................................................................................................................. 54 Massey v. Massey .................................................................................................................................. 54 Goren v. Goren ...................................................................................................................................... 55 Walston v. Walston................................................................................................................................ 55 In re Marriage of Rice ........................................................................................................................... 55 Zorilla v. Wahid ..................................................................................................................................... 55 Magill v. Magill ..................................................................................................................................... 55

IV. PLEADINGS FOR DISPROPORTIONATE DIVISION ..................................................................................... 55 V. ARGUMENTS AND IDEAS FOR DISPROPORTIONATE DIVISION ............................................................ 56 A. Know Your Judge and Be Willing to Persuade Your Judge If You Have To ............................................... 56 B. Know your Assets and Ask for the Best ........................................................................................................ 56 C. Winning the Battle and Losing the War--The Cost of Litigation................................................................. 56 D. Advocate Your Arguments ............................................................................................................................ 57 1. Adultery ................................................................................................................................................. 57 2. Disparity of Income ............................................................................................................................... 58 3. Difference in the Size of the Separate Estates ....................................................................................... 58 4. Custody of the Children ......................................................................................................................... 59 VI. TOOLS AND TECHNIQUES .............................................................................................................................. 59 A. Proposed Division ......................................................................................................................................... 59 B. Financial Planner/Financial Expert ............................................................................................................... 59 C. Charts and Graphs ......................................................................................................................................... 59 D. Witnesses and Mental Health Professionals .................................................................................................. 59 E. Scorecard Argument ...................................................................................................................................... 60 VII. CONCLUSION ..................................................................................................................................................... 61

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THE LATEST CAUSES OF ACTION IN FAMILY LAW I. INTRODUCTION This article is designed to help you be a more persuasive advocate in cases where you are arguing for a disproportionate division of the community estate. This article will provide a full reference for case law and statutory law on the subject and would be an excellent resource for your trial notebook and as a checklist for drafting pleadings. When trying property cases, we seem to fall into the same routine--we think we know what our judges will do and we do not bring home to the court the "out of the box" claims applicable to the facts of the particular case. It is our responsibility to bring life to the case. This article provides you full references, ideas, insights to argue effectively, and the inspiration to be more creative, more insightful and more persuasive when you ask the court for a disproportionate division of the community estate and to consider other claims that may be brought. I want to thank Kevin Fuller for his generosity in allowing me to reference his article on this subject, "Getting the Biggest (Or the Best) Piece of the Community Pie: Factors, Strategies, and Techniques for Disproportionate Divisions and How to Effectively Prove Them Up," given at the 2001 Advanced Family Law Course. I especially want to thank my friend and mentor John F. Nichols Sr. for his graciousness in allowing me to use his the use of his numerous papers given at the Advanced Family Law Course on the topic of causes of action and fiduciary litigation, primarily "New or Developing Causes of Action in the Twenty First (21st) Century in Family Law Including Fiduciary Litigation" and Appendix 3 to that paper entitled "Fiduciary Litigation: Conflicts and Overlaps" (AFLC 2008). II. STATUTORY LAW FOR DIVISION The statutory authority for a disproportionate division of community property is Texas Family Code (hereinafter "the Code") section 7.001. This brief but important section of the Code provides, in its entirety as follows: "7.001 General Rule of Property Division. In a decree of divorce or annulment, the court shall order a division of the estate of the parties in a manner that the court deems just and right, having due regard for the rights of each party and any children of the marriage." [emphasis added] Section 7.001 of the Code is the most important section in Title 1 of the Code. The origin of this statute dates back to 1841 and the mandate has

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consistently been for the courts to divide the property in a manner that is "just and right", not necessarily 50/50 or equally. The advocate must argue the facts and circumstances so as to convince the court that justice and rightness would not be served by an equal division and that to award an equal division, the court would have to ignore case law and what is just and right. III. CAUSES OF ACTION/FACTORS FOR DIVISION There is an abundance of case law upholding and supporting disproportionate divisions of community property for a variety of reasons. Following is a list of factors trial courts have used to award a disproportionate division of community property and case law to support these factors. Further, I have provided a list of cases that have supported disproportionate divisions of community property. The most important thing to remember in trying your case is to develop arguments to persuade the trial court that to award an equal division in your case would be to ignore the equities and justice of case law and the facts of the case. A. The Landmark Case on Division: Murff v. Murff In the legendary case of Murff v. Murff, 615 S.W.2d. 696 (Tex. 1981), the Texas Supreme Court set out the most important factors for a court to consider in making a "just and right" division of the community estate as follows: 1. The disparity of incomes or earning capacities of the spouses 2. The spouses' capacities and abilities 3. Benefits which the party not at fault would have derived from a continuation of the marriage 4. Business opportunities of the spouses 5. Education of the spouses 6. Relative physical conditions of the spouses 7. Relative financial conditions of the spouses 8. Differences in the size of each spouse's separate estate 9. The nature of the property to be divided 10. Fault in the break up of the marriage 11. Attorneys fees of the parties In Murff, the Texas Supreme Court explained: "The trial court in a divorce case has the opportunity to observe the parties on the witness stand, determine their credibility, and evaluate their needs and potentials, both social and economic. As the trier of fact, the court is empowered to use its legal knowledge and its human understanding and experience. Although many divorce cases have similarities, no two of them are exactly alike.

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Mathematical precision in dividing property in a divorce is usually not possible. Wide latitude and discretion rests in these trial courts and that discretion should only be disturbed in the case of clear abuse." Murff, at 700. B. 1. Case and Statutory Analysis of Causes of Action/Factors for Division Fraud

funds. As might be expected, whether an investment is potentially lucrative or risky is easier to discern in hindsight and is ordinarily fact specific. "Fraud as an Economic Tort Fraud in the divorce context, as in other civil litigation, may be actual or constructive. Actual fraud is predicated upon the intent to deceive. The elements are: (1) that a material representation was made; (2) that it was false; (3) that when the speaker made it, he knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by the party; (5) that the party acted in reliance upon it; and (6) that he suffered thereby. Stone v. Lawyers Title Insurance Corp., 554 S.W.2d 183, 185 (Tex.1977). "[C]onstructive fraud is the breach of some legal or equitable duty which, irrespective of moral guilt, the law declares fraudulent because of its tendency to deceive others, to violate confidence, or to injure public interests." Archer v. Griffith, 390 S.W.2d 735, 740 (Tex.1964). In other words, intent is irrelevant. Because of the confidential relationship between a husband and wife, the marital partnership is fiduciary in nature. Matthews v. Matthews, 725 S.W.2d 275, 279 (Tex.App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.). A breach of this fiduciary duty is frequently termed a "fraud on the community." In re Marriage of Moore, 890 S.W.2d 821, 827 (Tex.App.-- Amarillo 1994, no writ). Generally speaking, the allegation is one of constructive rather than actual fraud: Any such conduct in the marital relationship is termed fraud on the community because, although not actually fraudulent, it has all the consequences and legal effects of actual fraud in that such conduct tends to deceive the other spouse or violate confidences that exist as a result of the marriage. Id. at 827. "Constructive fraud includes actions of one spouse in unfairly disposing of or encumbering the other spouse's interest in community property or unfairly incurring community indebtedness without the other spouse's knowledge or consent. Massey v. Massey, 807 S.W.2d 391, 402 (Tex.App.-Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex.1993). In the absence of fraud, a spouse has the right to control and

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a. In Sprick v. Sprick, 25 S.W.3d 7 (Tex.App.--El Paso 1999, pet. denied), the court held that: (1) there was sufficient evidence that an 81-year-old friend of husband's family, over whose finances husband had power of attorney, made a $118,900 unsecured loan to the community, to support an implied finding that the indebtedness did not constitute a fraud on the community; (2) wife could not overcome the presumption that the loan was on the credit of community; but (3) award of 76.6% of the net assets of the community property estate to wife was equitable at divorce. Justice Ann McClure's concurrence in the Sprick case is an excellent explanation on the concept of fraud and is quoted as follows: "Creative and inventive theories of recovery abound for economic torts committed against the community estate. These range from waste, depletion of assets, the community opportunity doctrine and its inverse partner, the community jeopardy doctrine [FN3] to the generic tort of fraud, which encompasses a number of varieties such as breach of fiduciary duty, fraudulent conveyance, excessive gifts to children, and community funds expended on paramours, just to name a few. The intermediate courts have not been consistent in their determination of whether an independent economic tort is actionable between spouses for damages to the community estate. It now appears that the Supreme Court has not been entirely consistent either. "[FN3] The community opportunity doctrine derives from the corporate opportunity doctrine and stands for the proposition that a spouse has an obligation to maximize the community estate by taking advantage of an opportunity to invest in a lucrative venture using community, rather than separate, funds. The community jeopardy doctrine operates in the reverse and suggests that a spouse also has an obligation to protect the community estate from risky pursuits by investing separate, rather than community,

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dispose of community property subject to his sole management. [FN4] Id. at 401, citing Mazique v. Mazique, 742 S.W.2d 805, 807 (Tex.App.--Houston [1st Dist.] 1987, no writ). Although the managing spouse need not obtain approval or consent for dispositions made of special community property, the fiduciary relationship between husband and wife requires that a spouse's disposition of special community property be "fair" to the other spouse. Massey, 807 S.W.2d at 402, citing Horlock v. Horlock, 533 S.W.2d 52, 55 (Tex.Civ.App.--Houston [14th Dist.] 1975, writ dism'd). The managing spouse carries the burden of establishing that the disposition of property was fair. Id. "FN4. During marriage, each spouse has the sole management, control, and disposition of the community property that the spouse would have owned if single, including personal earnings, revenue from separate property, recoveries for personal injury, and the increase and mutations of, and the revenue from, all property subject to the spouse's sole management, control, and disposition. Tex. Fam. Code Ann. § 3.102(a). Community property subject to a spouse's sole management and control is sometimes referred to as "special community property," particularly in older case law. All other community property is subject to the joint management, control and disposition of the spouses unless the spouses provide otherwise by power of attorney in writing or other agreement. Tex. Fam. Code Ann. § 3.102(c). "The Supreme Court has recently reiterated that Texas recognizes the concept of fraud on the community, which it has defined as a wrong committed by one spouse which may be considered by the trial court in its division of the community estate and which may justify a disproportionate division. Schlueter v. Schlueter, 975 S.W.2d 584, 588 (Tex.1998). It is not, however, an independent tort giving rise to a cause of action between spouses. Id. at 586. Nor may it give rise to a recovery for punitive damages, inasmuch as "recovery of punitive damages requires a finding of an independent tort with accompanying actual damages." Schlueter, 975 S.W.2d at 589, quoting Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex.1995). Instead,

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the claim of fraud on the community is a means to an end, seeking either to recover specific assets wrongfully conveyed or to obtain a greater share of the community estate upon divorce as compensation for the loss of community property. Schlueter, 975 S.W.2d at 588, quoting Belz v. Belz, 667 S.W.2d 240, 247 (Tex.App.--Dallas 1984, writ ref'd n.r.e.). Where the economic tort depletes the community estate so as to leave insufficient property available to the wronged spouse, the courts may impose a money judgment in order to achieve an equitable division. Schlueter, 975 S.W.2d at 588, citing Murff v. Murff, 615 S.W.2d 696, 699 (Tex.1981). The money judgment serves to recoup the value of the wronged spouse's share of the estate which has been lost through the fraud. Schlueter, 975 S.W.2d at 588, citing Mazique v. Mazique, 742 S.W.2d 805, 808 (Tex.App.--Houston [1st Dist.] 1987, no writ). "Because the amount of the judgment is directly referable to a specific value of lost community property, it will never exceed the total value of the community estate." Schlueter, 975 S.W.2d at 588. On the heels of Schlueter, the Court was presented with some rather egregious facts in Vickery v. Vickery, 999 S.W.2d 342 (Tex.1999)(J. Hecht, dissenting). The underlying court of appeals' opinion was unpublished. The Supreme Court denied the petition for review, with Justice Hecht dissenting from the denial in a published opinion which incorporates as an appendix both the intermediate court's opinion on the merits and Justice Andell's dissent from that court's denial of rehearing en banc. At issue was Mrs. Vickery's recovery in a bill of review proceeding. The jury found Mr. Vickery, himself an attorney, liable for fraud and breach of fiduciary duty and assessed Mrs. Vickery's damages at $6.7 million for loss of marital property and $1.3 million for mental anguish, together with $1 million in punitive damages. The jury also found that Mrs. Vickery's attorney breached her fiduciary duty, resulting in damages of $100,000 in lost marital property and $350,000 in mental anguish damages. As Justice Hecht notes in his dissent, "[a]pplying Schlueter would require that the actual and punitive damages awarded Mrs. Vickery against her former husband be reversed and the case remanded to the district court to reconsider what division of

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the community is just and right. The district court may consider Mr. Vickery's 'dishonesty of purpose or intent to deceive' and 'the heightened culpability of actual fraud' as found by the jury." The fact that the Supreme Court, by denying review, allowed the actual and punitive damages to stand gives me some concern as to what the current state of the law is for economic torts committed against the community estate." Id. at 14. Schlueter, Before and After This section discusses the impact of Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998) on Texas family law practice. (1) Reference Material The author has found the following reference material (via John F. Nichols, Sr.) by other authors to be of excellent quality and has borrowed liberally from these comments and papers. The author wishes to express appreciation to these legal writers for their contributions to this paper and especially to the late Ted Terry, Kristin Proctor, and James LaRue for gracious and generous permission to use excerpts from their paper: Ted Terry, Kristin Proctor, and James LaRue, Breach of Fiduciary Duty and NonPhysical Tort Claims, 24th Annual Advanced Family Law Course, (1998), Tab VV.; Bradley L. Adams, The Doctrine of Fraud on the Community, 49 BAYLOR L. REV 445, (1997); Barbara Anne Kazen, Division of Property at the Time of Divorce, 49 BAYLOR L. REV 417, (1997); and Tom Oldham, Special Property Problems, 23rd Annual Advanced Family Law Course, (1997). (2) Schlueter v. Schlueter ­ Briefed Question Answered. Schlueter answered the question of what remedies are available to a spouse alleging "fraud on the community" committed by the other spouse. Facts. The husband transferred various community assets to his father shortly before he filed for divorce. The wife brought independent tort claims against her husband and father-in-law, seeking damages for fraud, breach of fiduciary duty and conspiracy in her counterclaim for divorce. Based on favorable jury findings the trial court ordered a disproportionate division of the community estate in favor of the wife, and rendered judgment for the wife against the husband and his father for actual and exemplary damages. Holding that a tort cause of action for fraud on the community exists independent of a divorce

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proceeding, the Austin Court of Appeals affirmed, 929 S.W.2d 994. The Texas Supreme Court (hereinafter referred to as the "Court") granted petition for review to resolve the conflict among the Courts of Appeals on this question. Holding. Because a wronged spouse has an adequate remedy for fraud on the community through the "just and right" property division upon divorce, the Court held there is no independent tort cause of action between spouses for damages to the community estate. Accordingly, the Court reversed the judgment against the husband and remanded the cause for a new division of the marital estate. The Court affirmed the remainder of the Austin Court of Appeals judgment. Discussion. The Court discussed its prior decisions in Bounds v. Caudle, 560 S.W.2d 925, 927 (1977), Price v. Price, 732 S.W. 2d 316, 319 (1987), and Twyman v. Twyman, 855 S.W.2d 619, 624 (1993) and found that the salient characteristics distinguishing Bounds, Price and Twyman from the case at hand was that Bounds, Price and Twyman involved independent causes of action for personal injury torts. Bounds, 560 S.W.2d 926 [wrongful death]; Price, 732 S.W.2d 316 [negligence claim for personal injury]; and Twyman, 855 S.W.2d 621 [intentional infliction of emotional distress]. The Court also compared Cleaver v. George Staton Co., Inc., 908 S.W.2d 468, 471 n.2 (Tex. App.--Tyler 1995, writ denied). Cleaver distinguished Twyman, which involved outrageous spousal conduct, and noted that the trial court could sort out the husband's claims against the wife for breach of fiduciary duty and fraud on the community estate in the property division but not by a separate independent cause of action. The Court further reasoned that there was no potential for double recovery for pain and suffering in a personal injury claim because this recovery is the separate property of the injured spouse and does not add to the marital estate. Reasoning. The Court's reasoning for its opinion was: There is a statutory remedy for fraud on the community already in place. This state's community property system provides that upon divorce, the trial court must enter a division of the married couple's estate "in a manner that the court deems just and right," considering rights of the parties and any children of the marriage. Tex. Fam. Code Ann. §7.001. Such a standard may at times lead to disproportionate division of

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assets and liabilities for the parties, depending on the circumstances that courts may consider in refusing to divide the marital estate equally. "The just and right" standard is the sole method to be used. As stated in Cameron v. Cameron, 641 S.W.2d 210, 223 (Tex. 1982), "Community property owes its existence to the legal fact of marriage, and when the parties to the compact determine their relationship should end, the property acquired during marriage is and should be divided among them in a just and right manner." This is distinguishable from a recovery of separate property through an independent tort, which the Court allowed Twyman because "separate property ... owes its existence too wholly extramarital factors, things unrelated to the marriage. In relation to that property, the parties are in essence, strangers; they are separate." Cameron, 641 S.W.2d 223. With these differences in mind, the Court held that the well developed "just and right" standard should continue to be the sole method used to account for and divide community property. "Fraud on the Community" damages may be considered. There are also aspects of the Texas community property system that provides additional remedies against a spouse for improper conduct involving the community estate. Texas recognizes the concept of fraud on the community, which is a wrong by one spouse that the court may consider in its division of the estate of the parties and that may justify an unequal division, citing Belz v. Belz, 667 S.W.2d 240, 247 (Tex, App.--Dallas, 1984, writ ref'd n.r.e) [a claim for fraud on the community is a means to an end, either to recover specific property wrongfully conveyed, ... or ... to obtain a greater share of the community estate upon divorce, in order to compensate the wronged spouse for his or her lost interest in the community estate]. See also Massey v. Massey, 807 S.W.2d 391 (Tex.--Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993), where an owelty equalization money judgment was awarded as a part of the division of community property based upon a spouse's fraud, and this followed the Belz rationale. A money judgment may be considered. The Court further noted that it is well settled that a trial court may award a money judgment to one spouse against the other in order to achieve an equitable division of the community estate, citing Murff v. Murff, 615 S.W.2d 696, 699 (Tex. 1981) [allowing money judgment against husband in division of community property where he had substantial sums in savings before separation that had disappeared by the

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time of trial]. The Court further reasoned that the money judgment can only be used as a means for the wrong spouse to recoup the value of his/her share of the community estate loss through the wrongdoer spouse's actions, citing Mazique v. Mazique, 742 S.W.2d 805, 808 (Tex. App.--Houston [1st Dist.] 1987, no writ). The Court further noted that because the amount of the judgment is directly referable to a specific value of lost community property, it will never exceed the total value of the community estate, that is, he or she should not suffer just because when it is time to divide the community estate, the other spouse has depleted the estate such that there is not enough money or property left to effect a just and right division. No independent tort for actual or constructive fraud exists in a divorce context. The Court relied on In re Marriage of Moore, 890 S.W.2d 821, (Tex. App.--Amarillo 1994, no writ) which concluded that the only course available to a wronged spouse is breach of fiduciary duty to the community estate, that is, an action for fraud on the community. Id. at 827. The Court in Schlueter found the Court of Appeals correctly determined that no independent cause of action existed in Texas to recover separate damages when the wrongful act defrauded the community estate. Id at 829. Waste of community assets may be considered. Additionally, the Court reasoned that trial courts have wide discretion and are allowed to take many factors into consideration in making a just and right division including waste of community assets. See Murff, 615 S.W.2d at 698- 99. Waste of community assets is similar to the allegations in Schlueter, that is, without the wife's knowledge or consent, the husband wrongfully depleted the community of assets of which the wife was entitled to a share. Such behavior is properly considered when dividing a community estate. No punitive damages allowed in a just and right division. As to punitive damages, the Court reasoned that heightened culpability does not change the essential character of the wrong: a deprivation of community assets as opposed to a tort committed against a person or his or her separate property. A recovery of punitive damage requires a finding of an independent tort with accompanying actual damages. Twin City Fire Insurance Co. v. Davis, 904 S.W.2d 663, 665 (Tex. 1995); Federal Express Corp. v. Dutschman, 846 S.W.2d 282, 284 (Tex. 1993); cf. Emco Prod. Co. v. Alexandra, 627, S.W.2d 563. 571 (Tex. 1981). The Court held, because of the holding in Schlueter there is no independent tort cause of action for wrongful disposition by spouse of community

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assets, the wronged spouse may not recover punitive damages from the other spouse. The Court did however state that despite the inappropriateness of the punitive damages, it is a logical extension of a standard that calls for a just and right division to allow the Court to consider that a spouse not only deprives the community of assets to the detriment of the other spouse, but may have done so with dishonesty of purpose or intent to deceive. See Land v. Marshall, 426 S.W.2d 841, 846 n.3 (Tex. 1968). The Court concluded its reasoning stating that while it held that a separate and independent tort action for actual fraud and accompanying exemplary damages against one's spouse does not exist in the context of a deprivation in community assets, if the wronged spouse can prove the heightened culpability of actual fraud, the trial court may consider it in the property division. Dissents. (1) Justice Hecht, joined by Chief Justice Phillips, dissented and pointed out the only rationale for treating fraud on a spouse differently from other intentional torts is that fraud does not involve personal injuries; that there seemed to be a distinction between personal and economical damages without any rational reason therefore; and the rule announced results in a full recovery being allowed for mental anguish as well as punitive damages for non-economic torts but only a limited recovery for economic tort damages that can be determined to the penny. The dissent commented regarding the effect of Schlueter on Vickery v. Vickery, 999 S.W.2d 342 (Tex. 1999), and opined that Schlueter reverses the lower court opinion in Vickery based on the application of the rule announced in Schlueter. (2) Justice Spector observed in her dissent the wronged spouse should be able to receive the punitive damages portion of the verdict. Justice Spector pointed out that in Mazique v. Mazique, 742 S.W.2d 805, 807-08 the wronged spouse was awarded a money judgment for actual and punitive damages against the other spouse who defrauded the spouses interest in the community estate. Still further, Justice Spector reasoned that punitive damages punished wrongdoers and served as an example to others, citing Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 17 (Tex. 1994); Hofer v. Lavender, 679 S.W.2d 470, 474 (Tex. 1984). For example, in a related context, a partner in a partnership may recover punitive damages from other partners for breach of their fiduciary duty, a duty analogous to that owed between spouses . See Hawthorne v. Guenther, 917 S.W.2d 924, 936 (Tex. App.-- Beaumont, 1996, writ denied) ["An award of exemplary damages is, therefore, supported by a finding that the partner's breach of fiduciary duty was willful and intentional."], citing International Bankers Life Ins. Co. v. Holloway 368 S.W.2d 567, 583-84

6

(1963). Justice Spector concluded, the Court is able to fashion remedies to right wrongs, quoting Yamini v. Gentle, 488 S.W.2d 839, 843 (Tex. App.--Dallas 1972, writ ref'd, n.r.e.) ["Equity leaves the way open to punish frauds and to redress wrongs perpetrated by means of fraud in whatever form it may appear."]. c. In Lucy v. Lucy, 162 S.W.3d 770 (Tex.App.--El Paso 2005, no writ), the court considered whether the trial court mislabeled the property theory of recovery: Is it error to compensate the community estate for economic torts committed by a spouse simply because the court labeled the relief as "reimbursement?" The court stated: "Texas recognizes the concept of fraud on the community which the trial court may consider in rendering a disproportionate division. Schlueter v. Schlueter, 975 S.W.2d 584, 588 (Tex.1998), citing Belz v. Belz, 667 S.W.2d 240, 247 (Tex.App.-Dallas 1984, writ ref'd n.r.e.). A claim of fraud on the community is a means either to recover specific property wrongfully conveyed or to obtain a greater share of the community estate upon divorce in order to compensate the wronged spouse for her lost interest in the community estate. Belz, 667 S.W.2d at 246-47. A trial court may also award a money judgment to one spouse against the other in order to achieve an equitable division of the community estate. Schlueter, 975 S.W.2d at 588, citing Murff, 615 S.W.2d at 699 (allowing money judgment against husband in division of community property where he had substantial sums in savings before separation that had disappeared by the time of trial). Because the amount of the judgment is directly referable to a specific value of lost community property, it will never exceed the total value of the community estate. Id. A wronged spouse should not suffer simply because the other spouse has depleted the community such that there is not enough left to effect a just and right division. Id. Joan asked the court for a disproportionate division, including a money judgment if necessary, to compensate the community estate for Paul's fraudulent conduct. Schlueter also recognized that wasting community assets may give rise to a similar claim. Schlueter, 975 S.W.2d at 589. Mrs. Schlueter alleged that her husband had, without her knowledge or consent, wrongfully depleted the community assets. "Such behavior is properly considered when

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dividing a community estate." Id. In this context, we review the evidence. Paul admitted receiving the rental payments and cashing the checks. He testified that he would use the funds to pay the mortgage and for incidental living expenses. While he claimed to have given Joan a portion of the money, Joan testified that he kept the cash and didn't give her any. Paul acknowledged that the income was community property, but complained that if his expenditures did provide some basis for reimbursement, then the reimbursement should be limited to net income. Penick, 783 S.W.2d at 197. [FN4] "FN4. He alleged that the income totaled $36,300 rather than $43,200 and that he was entitled to a deduction for maintenance expenses of at least $2,000 and mortgage payments of $17,400 ($580 x 30 mos.), which would equal reimbursement of $16,900. "With regard to the bank account, Paul complains that the trial court failed to explain its calculation, merely stating that the award was based on the evidence. He argues that Joan admitted the account was community property and that she was not entitled to reimbursement absent a tracing of her separate property funds in the account. He also claims that she did not show that Paul's separate estate benefited at the expense of her separate property or the community estate. In each of these instances, Paul acknowledges the conflicting evidence. Nevertheless, the trial court as the trier of fact was the sole judge of the credibility of the evidence, what weight was to be assigned to it, and how to resolve inconsistencies. Carrasco, 623 S.W.2d at 772. The court obviously disregarded Paul's testimony and believed Joan's. Paul's underlying argument is that Joan was not entitled to "reimbursement" on that basis or that she failed to establish the amount of the offsetting benefit to the wronged estate. The findings are limited to characterization and value; they do not encompass the factors which the trial court may have considered in making a disproportionate division. We conclude that the evidence supports a disproportionate division and that Paul's conduct was a factor which the trial court could rightly consider. Simple mathematical

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calculations derived from the findings of fact reveal that the trial court valued the community estate at $100,922. Without the equalizing judgment, the court effectuated roughly a 55%-45% division in favor of Paul. Imposition of the judgment results in a 73%- 27% division in favor of Joan. We conclude that the constituent elements are properly aligned: the pleadings support the evidence, the evidence supports the findings of fact, and the findings support the judgment. We find no abuse of discretion in attaching a misnomer to the remedy employed. Finding no abuse of discretion, we overrule both issues for review and affirm the judgment of the trial court." In determining the division of community property, the court may consider proof of one spouse's dishonesty or intent to deceive, constituting actual fraud, regarding the community assets, Schleuter v. Schleuter, 975 S.W.2d 584 (Tex. 1998), and may also consider evidence of one spouse's constructive fraud in transactions involving community property, taking into account Massey v. Massey, 807 S.W.2d 391 (Tex. App.­Houston [1st Dist.] 1991, writ denied): a. the size of the property disposed of in relation to the total size of the community property the adequacy of the remaining estate to support the other spouse the relationship of the parties involved in the transaction

b.

c.

Unfairly disposing of the other spouse's community property results in a presumption of constructive fraud. Connell v. Connell, 889 S.W.2d 534 (Tex. App. ­ San Antonio 1994, writ denied). However, the mere fact that a community property business venture lost money because of the acts of one spouse, even if it ended in bankruptcy, does not constitute fraud. Connell v. Connell, 889 S.W.2d 534 (Tex. App. ­ San Antonio 1994, writ denied); see also Andrews v. Andrews, 677 S.W.2d 171 (Tex. App. ­ Austin 1984, no writ) (a spouse's good faith, but unwise, investment of community funds resulting in losses to the community estate does not justify an unequal distribution of the remaining community property upon divorce). Additionally, the trial court may take into account a spouse's dissipation of the estate. See Massey v. Massey, 807 S.W.2d 391 (Tex. App.­Houston [1st Dist.] 1991, writ denied) (based on jury verdict that husband committed constructive fraud, trial court was entitled to award wife equalization for property

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depleted unfairly from community estate); Reaney v. Reaney, 505 S.W.2d 338, 340 (Tex.Civ.App.--Dallas 1974, no writ) (court took into account the husband's dissipation of approximately $53,000 of community assets when dividing the estate); Pride v. Pride, 318 S.W.2d 715, 718 (Tex.Civ.App.--Dallas 1958, no writ) (trial court rendered a money judgment against the husband for the wife's share of $3,000 he concealed). 2. a. Fault/NoFault Generally The court may consider evidence of one spouse's fault contributing to the breakup of the marriage, even in an action in which insupportability is the only ground for divorce pled, Velasco v. Haberman, 700 S.W.2d 729 (Tex. App. ­ San Antonio 1985, orig. proceeding); In Re Marriage of Jackson, 506 S.W.2d 261 (Tex. Civ. App. ­ Amarillo 1974, writ dism'd); See also Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.). The courts however may also decline to consider such evidence. Guttierez v. Guttierez, 791 S.W.2d 659 (Tex. App. ­ San Antonio 1990, no writ); Massey v. Massey, 807 S.W.2d 391 (Tex. App.­Houston [1st Dist.] 1991, writ denied) (court may consider fault, but is not obligated to do so). The court may consider the fault of one of the parties in its division whether the divorce is granted solely on fault grounds, or on both fault and no-fault grounds; and further, when a divorce is granted on the basis of fault, the trial court may, though it need not, consider the fault in breaking up the marriage as a factor in making a property division which favors one spouse. Young v. Young, 609 S.W.2d 758 760-62 (Tex. 1980); Murff v. Murff, 615 S.W.2d 696, 698 (Tex. 1981); Hourigan v. Hourigan, 635 S.W.2d 556, 556-57 (Tex. App.­El Paso 1981, no writ). In addition, a court has the discretion to hear evidence of fault if it decides to hear the case on no-fault grounds. Vautrain v. Vautrain, 646 S,W.2d 309, 312 (Tex. App.­Fort Worth 1983, writ dism'd). In Clay v. Clay, 550 S.W.2d 730 (Tex.Civ.App.--Houston [1st Dist.] 1977, no writ), notwithstanding a jury finding of cruel treatment, the trial court was authorized to enter a divorce under no fault provisions. In Phillips v. Phillips, 75 S.W.3d 564 (Tex.App.--Beaumont 2002, no pet. h.), the trial court awarded a disproportionate amount of the community estate to Nancy. Nancy contends the trial court properly awarded her approximately 60% of the community estate with the remaining 40% of the community estate going to James. In his brief, James contends that the division was even more lopsided in favor of Nancy and he pointed out that he was awarded a mere 23.5% while Nancy was actually awarded 76.5%. The trial court entered a finding that James was

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at "fault" for the breakup of the marriage and awarded Nancy a disproportionate share of the community estate. The court went on to state that even where "fault" is properly pleaded and proved, an unequal division of the community estate may not be awarded to "punish" the party at fault. The court stated the following: "...a trial court has broad discretion in dividing the community estate in a divorce action. Schlueter, 975 S.W.2d at 589; Murff, 615 S.W.2d at 698. The trial court exercises this discretion by considering many factors. Id. at 699. Excluding the "fault" factor, the nonexclusive list includes the following: (1) the spouse's capacities and abilities, (2) business opportunities, (3) education, (4) relative physical conditions , (5) relative financial conditions and obligations, (6) disparity of ages, (7) sizes of separate estates, (8) the nature of the property, and (9) disparity in earning capacities or of incomes. Id. The trial court may also consider whether one of the parties to the marriage has wasted community assets. See Schlueter, 975 S.W.2d at 589; Beard v. Beard, 49 S.W.3d 40, 66 (Tex.App.-Waco 2001, pet. denied). The fact that there are ten "non-fault" factors, as well as the fact that the list is nonexclusive, should continue to give a trial court very broad discretion in making its "just and right" division notwithstanding our holding that where insupportability is the sole ground pleaded, a trial court may not factor in "fault" in its "just and right" division of the community estate in order to award a disproportionate quantity of the community estate to one spouse. Nevertheless, even if, as in the instant case, the petitioner has failed to both plead and prove a traditional "fault" ground for dissolution of the marriage resulting in the trial court's erroneously attributing "fault in the breakup of the marriage" to the respondent, said respondent must still demonstrate that the trial court abused its discretion in making its ultimate "just and right" division of the community estate. See Tate v. Tate, 55 S.W.3d 1, 6 n. 3 (Tex.App.El Paso 2000, no pet.); Lindsey v. Lindsey, 965 S.W.2d 589, 592 n. 3 (Tex.App.-El Paso 1998, no pet.). This is so because the trial court is still permitted to consider any other "non-fault" factor(s) in awarding a disproportionate amount of the community estate to one spouse." Id. at 572.

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Cruel Treatment The court may also consider a spouse's cruel treatment of the other spouse in dividing the property, even though the court grants the divorce on the nofault ground of insupportability. Barnard v. Barnard, 133 S.W.3d 782 (Tex.App.--Fort Worth 2004, pet. denied). In In re Marriage of Rice, 96 S.W.3d 642 (Tex.App.--Texarkana 2003), the court gave an excellent explanation of the present state of the law on cruel treatment and stated the following: "Although infrequently used since the introduction of no-fault divorce, a Texas court may still grant a divorce on the ground of cruel treatment. Henry v. Henry, 48 S.W.3d 468, 473 (Tex.App.-Houston [14th Dist.] 2001, no pet.). A spouse's conduct rises to the level of cruel treatment when his or her conduct renders the couple's living together insupportable. Id. (citing Tex.Fam.Code Ann. § 6.002 (Vernon 1998); Finn v. Finn, 185 S.W.2d 579, 582 (Tex.Civ.App.-Dallas 1945, no writ)). "Insupportable" means "incapable of being borne, unendurable, insufferable, and intolerable." Id. (citing Cantwell v. Cantwell, 217 S.W.2d 450, 453 (Tex.Civ.App.-El Paso 1948, writ dism'd)). Mere disagreements or trifling matters will not justify granting a divorce for cruelty. Shankles v. Shankles, 445 S.W.2d 803, 807 (Tex.Civ.App.-Waco 1969, no writ). If, for instance, the complaining spouse suffers only nervousness or embarrassment, a trial court may not grant the divorce on the ground of cruelty. Golden v. Golden, 238 S.W.2d 619, 621 (Tex.Civ.App.-Waco 1951, no writ). Abuse need not be limited to bodily injury; nonetheless, physical abuse will support granting a divorce on cruelty grounds. Waheed v. Waheed, 423 S.W.2d 159, 160 (Tex.App.-Eastland 1967, no writ); Cote v. Cote, 404 S.W.2d 139, 140 (Tex.App.-San Antonio 1966, writ dism'd); Blackburn v. Blackburn, 163 S.W.2d 251, 255 (Tex.App.-Amarillo 1942, no writ). Acts occurring after separation may be used to support a finding of cruelty. Redwine v. Redwine, 198 S.W.2d 472, 473 (Tex.Civ.App.-Amarillo 1946, no writ)." Id.at 648. c. Adultery In Abernathy v. Fehlis, 911 S.W.2d 845 (Tex.App.--Austin 1995, no writ), the trial court declared in its decree that Daniel's adultery caused the

9

b.

"breakup" of the marriage and justified a disproportionate division of the parties' community property. Further, in Bell v. Bell, 540 S.W.2d 432 (Tex.Civ.App.--Houston [1st Dist.] 1976, no writ), the court found the acts of adultery are not limited to adultery committed before separation. In Morrison v. Morrison, 713 S.W.2d 377 (Tex. App.­ Dallas 1986, dism'd), the court stated that: "Furthermore, the trial court found David at fault in the breakup of the marriage because of his adultery. We presume that the trial court also considered this factor when it divided the community. Gutierrez, 643 S.W.2d at 787. Based on the evidence of Carolyn's right to reimbursement and David's adultery, we hold that the trial court did not abuse its discretion in awarding a disproportionate amount to Carolyn. See Murff, 615 S.W.2d at 698." Id. at 379. 3. Length of Marriage Courts consider the length of the marriage in deciding whether to award a disproportionate division of community property. In the following cases, the courts listed the length of the marriage as one of the factors to be considered: Cappellen v. Cappellen, 888 S.W.2d 539 (Tex.App.--El Paso 1994, writ denied); Vannerson v. Vannerson, 857 S.W.2d 659 (Tex.App.--Houston [1st Dist.] 1993, writ denied); Massey v. Massey, 807 S.W.2d 391 (Tex.App.-- Houston [1st Dist.] 1991, writ denied); Cluck v. Cluck, 647 S.W.2d 338 (Tex.App.--San Antonio 1982, writ dism'd); Trevino v. Trevino, 555 S.W.2d 792 (Tex.Civ.App.--Corpus Christi 1977, no writ) (Court divided estate equally after three year marriage); Patt v. Patt, 689 S.W.2d 505 (Tex. App. ­ Houston [1st Dist.] 1985, no writ) (wife who had never worked outside home and possessed no marketable skills awarded family home after long marriage). Disparity of Earning Power The court may consider the disparity of earning power between the spouses, as well as their respective business opportunities, capacities and abilities. In Rafidi v. Rafidi, 718 S.W.2d 43 (Tex.App.-- Dallas 1986, no writ), the evidence showed that Husband was a petroleum engineer with three college degrees. At the time of trial he was fifty-seven years old. There was no evidence of health problems. Wife, on the other hand, had only a high school education. She had difficulty obtaining employment and was handicapped by a finger injury. The Rafidis' teen-aged daughter lived with the Wife along with three adult children. The evidence permits the inference that the Husband's earning capability exceeds Wife's. An unequal division of the community estate was justified. 4.

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In Robbins v. Robbins, 601 S.W.2d 90 (Tex.Civ.App. Houston [1st Dist.] 1980), the court held that it was not an abuse of discretion to award the wife, who had been out of the business world for a substantial period of time, 58% of community property, and to award husband, who had much greater earning capacity than wife, 42% of the community estate. See also Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.). In Bokhoven v. Bokhoven, 559 S.W.2d 142 (Tex. Civ. App. - Tyler 1977, no writ), the appellate court, after reviewing the entire record of the trial proceeding, upheld a disproportionate property division stating: "In this particular instance, the trial court's division of community property could be based solely upon the difference in earning capacities of the parties as set out in the findings of fact." Id. at 144. Although the court may award a larger portion of the community estate to the spouse with less education and employment experience, it need not do so, and may be less likely to do so if the community estate is very large and an equal division would satisfy the less employable spouse's financial needs. Hanson v. Hanson, 672 S.W.2d 274 (Tex.App.--Houston [14th Dist.] 1984, writ dism'd w.o.j.). Custody of Children Section 7.001 of the Code states that the courtordered division of community property shall have due regard for any children of the marriage. In Young v. Young, 609 S.W.2d 758 (Tex. 1980), the court was presented with the question of whether the reference to "any children" in Section 3.63 of the Code (now section 7.001 of the Code) included adult children. At the time of divorce the Young's had a thirty-two year old adult son who contracted multiple sclerosis as an adult. Physically disabled, this son lived with Mrs. Young. Mr. Young contended that "any children" meant minor children. The Supreme Court construed the statute to include adult children: "...the only word modifying children in section 3.63 is any." [emphasis added]. See also McKnight v. McKnight, 535 S.W.2d 658 (Tex. Civ. App.--El Paso) rev'd on other grounds, 543 S.W.2d 863 (Tex. 1976), where the Court held that it was an abuse of discretion to leave husband without sufficient liquid assets to take over the responsibilities assigned to him in fact and by divorce decree; namely the care of two adult children and custody of three minor children. In Boriack v. Boriack, 541 S.W.2d 237 (Tex. Civ. App.--Corpus Christi 1976, writ dism'd), the husband was awarded custody of all 3 of the parties' children. Wife complained of an unequal division of property. The Court said the fact that Dr. Boriack was awarded custody in itself would justify an unequal division favoring him." [emphasis added].

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In Liddell v. Liddell, 29 S.W.2d 868, 871 (Tex.Civ.App.--San Antonio 1930, no writ), the court of appeals held that one of several factors justifying an unequal division of the property was "the burden of the care and maintenance of the child." See also Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.). Tax Consequences and Liabilities Chapter 7 of the Code allows consideration of tax consequences: 6.

for

the

Sec. 7.008. CONSIDERATION OF TAXES. In ordering the division of the estate of the parties to a suit for dissolution of a marriage, the court may [emphasis added]consider: (1) whether a specific asset will be subject to taxation; and (2) if the asset will be subject to taxation, when the tax will be required to be paid. This section applies to a suit for dissolution of marriage pending before a trial court on or filed on or after the effective date of the Act, which is September 1, 2005. This statute seems to codify case law. Courts have often considered tax consequences stemming from the division of community property. Grossnickle v. Grossnickle, 935 S.W.2d 830 (Tex. App. ­ Texarkana 1996, writ denied); Baccus v. Baccus, 808 S.W.2d 694 (Tex. App. ­ Beaumont 1991, no writ). Although the Grossnickle court stated that the trial court is not required to consider the tax ramifications in the division, another court has stated that it is reversible error for the court to refuse to do so, particularly when the tax liability is substantial and one of the parties is without means to pay it. Baccus v. Baccus, 808 S.W.2d 694 (Tex. App. ­ Beaumont 1991, no writ). In Grossnickle, the court stated that in dividing community property, "the trial court can appropriately consider existing tax liability for the sale of capital assets that has been realized by parties at time of divorce, i.e. existing tax liabilities. Penick, 783 S.W.2d at 197; Robbins v. Robbins, 601 S.W.2d 90, 92 (Tex.Civ.App.--Houston [1st Dist.] 1980, no writ)." However, the court went on to state that "where the question of future taxation arises, a trial court errs in allowing a credit for a future tax figure that must be derived from speculation or surmise. Harris v. Holland, 867 S.W.2d 86, 88 (Tex.App.--Texarkana 1993, no writ)." In the Grossnickle case, early withdrawal triggering an additional tax would be at the election of

5.

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Lee Ann Grossnickle after the divorce. The tax rate would depend upon the tax bracket of the taxpayer at that time and also the income tax law in effect at that time. This approach would be analogous to allowing a discounted value on every piece of property because there might be future tax consequences if sold at a profit. The trial court did not abuse its discretion by failing to consider potential tax liability which might be incurred when the assets are withdrawn and this point of error was overruled. In Baccus v. Baccus, 808 S.W.2d 694 (Tex. App. ­ Beaumont 1991, no writ), the court's decision to assess all of the federal income tax liability for the tax years in which parties were married and living together solely against husband was not an abuse of discretion. The court stated that: "repeatedly, appellate courts have held that tax consequences stemming from the division of property as well as any unpaid tax liabilities are proper factors to be considered by the trial court in deriving at a fair and just division of the community properties. McCartney v. McCartney, 548 S.W.2d 435 (Tex.Civ.App.--Houston [1st Dist.] 1976, no writ history). Furthermore, it is reversible error for a court to refuse to consider tax liability, particularly when it is substantial and one of the spouses is without means to pay the obligation. See McCartney, supra; Cole v. Cole, 532 S.W.2d 102 (Tex.Civ.App.--Dallas 1975) aff'd 568 S.W.2d 152 (1978)." Id. at 700. The court may properly assign all of the couple's tax liability to one of the spouses. Vannerson v. Vannerson, 857 S.W.2d 659 (Tex.App.--Houston [1st Dist.] 1993, writ denied) (assignment to husband of liability for delinquent federal income taxes was not abuse of discretion where wife testified that husband had told her he had filed the returns, and she had not known that he and not done so); Baccus v. Baccus, 808 S.W.2d 694 (Tex. App. ­ Beaumont 1991, no writ) (court properly assessed all of federal income tax liability for tax years in which parties were marred and living together solely against husband, where husband had invested in tax shelter without disclosing investment to wife and investment contributed to tax liability of the parties, husband had withheld from wife information concerning the tax liability resulting from the investment, and husband took no steps to pay the income tax liability, including the penalty and interest, when it was at its lowest amount, even though he had sufficient funds to do so). Although lacking the power to relieve either spouse of personal liability to the taxing authority, the court may take tax liability into consideration, and

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may even require one party to assume the other party's liability for taxes or require reimbursement for taxes paid. Able v. Able, 725 S.W.2d 778 (Tex. App. Houston [ 14th Dist.] 1987, no writ) ; Benedict v. Benedict, 542 S.W.2d 692 (Tex. Civ. App. - Ft. Worth 1976, writ dism'd); Cole v. Cole, 532 S.W.2d 102 (Tex. Civ. App. - Dallas 1975, no writ). Further, in McCartney v. McCartney, 548 S.W. 2d 435 (Tex. Civ. App - - Houston [ lst Dist. ] 1977, no writ) , the Court stated: The trial court was not required to afford any greater weight to the issue of tax liability than to the other factors bearing upon the fair and just division of the community properties. However, the trial court should have taken into consideration the issue of tax liability, as with other pertinent factors affecting the justness of its decree. Id. at 439. In McCartney, the judgment of the trial court was therefore reversed with respect only to the matter of the tax liabilities, and the case was remanded to the trial court with instructions to hear only such additional evidence as may be necessary to effect an appropriate disposition of the party's income tax liability. In Janik v. Janik, 634 S.W.2d 323 (Tex.App.-- Houston [14th Dist.] 1982, no writ), in dividing the liabilities of parties, the trial court followed a very logical approach in ordering that each debt follow the asset that secured it and that each party pay one half of income tax; and, considering the nature of debts and husband's greater earning capacity, the total debt with which husband was burdened did not come out to an improper division. In Robbins v. Robbins, 601 S.W.2d 90 (Tex.Civ.App. Houston [1st Dist.] 1980, no writ), in its decree, the trial court found that if the proceeds from the sale of the parties' residence are not reinvested in another house within the period of time provided by the income tax laws, a capital gains tax liability may occur. The trial court therefore decreed that the husband should assume and hold the wife harmless with respect to 60% of such tax liability. In his second point of error the husband contended that the trial court abused its discretion in requiring that he assume and hold the wife harmless against such income tax liability. The trial court properly considered the income tax liability of the parties in dividing their community estate, citing McCartney. The entire amount of the capital gains realized on the sale of the parties' residence was recognized at the time of the sale. The fact that the appellant's tax liability might be later reduced through a "rollover" of the recognized capital gain upon reinvestment of the sales proceeds in

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another residence did not render the parties' potential tax liability incapable of determination. The Fort Worth Court of Appeals held it permissible for a trial court to hold a spouse responsible for federal income tax liability arising out of the sale of the other spouse's separate property. Mullins v. Mullins, 785 S.W.2d 5 (Tex. App. - Fort Worth 1990, no writ). While tax liability is not technically a debt, the trial court may take the couple's tax liability into consideration in dividing the property. Mullins v. Mullins, 785 S.W.2d 5 (Tex. App. - Fort Worth 1990, no writ); Grossnickle v. Grossnickle, 935 S.W.2d 830, 848 (Tex.App.--Texarkana 1996, writ denied). Size of Separate Estate Even though a court may not divest a spouse of his or her separate property, the court may consider the size of a spouse's separate property estate when dividing the community estate. Padon v. Padon, 670 SW.2d 354, 358-59 (Tex. App.­San Antonio 1984, no writ; Lucy v. Lucy, 162 S.W.3d 770 (Tex.App.--El Paso 2005, no writ); Massey v. Massey, 807 S.W.2d 391 (Tex.App.--Houston [1st Dist.] 1991, writ denied); Walter v. Walter, 127 S.W.3d 396 (Tex.App.--Dallas 2004, no pet'n); Madrid v. Madrid, 643 S.W.2d 186 (Tex.App.--El Paso 1982, no writ); Capellen v. Capellen, 888 S.W.2d 539 (Tex.App.--El Paso 1994, writ denied); Stafford v. Stafford, 726 S.W.2d 14 (Tex. 1987); Vannerson v. Vannerson, 857 S.W.2d 659 (Tex.App.--Houston [1st Dist.] 1993, writ denied); Patt v. Patt, 689 S.W.2d 505 (Tex.App.-- Houston [1st Dist.] 1985, no writ); Smith v. Smith, 836 S.W.2d 688 (Tex.App.--Houston [1st Dist.] 1992, no pet.); and Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.). In Tate v. Tate, 55 S.W.3d 1 (Tex.App.--El Paso 2000, no pet.), the judge awarded the Wife a disproportionate division of the community estate and in awarding her 51 percent of the community estate, the trial judge may well have taken into consideration the $50,172.60 in the brokerage account and the $8,000 in travelers' checks which had been confirmed as her separate property and which were available for her future support. It is equally plausible that had the trial court characterized those assets as community property, the estate would have been divided disproportionately, given Wife's established need for future support. In the absence of findings of fact and conclusions of law, the Husband cannot show otherwise. On this record, we cannot conclude that a comparative 55 percent to 45 percent distribution in the Wife's favor constitutes an abuse of discretion. In sum, the court may properly consider the size of the separate estates of the spouses in its division of the community estate. Murff v. Murff, 615 S.W.2d 696 (Tex. 1981).

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7.

Benefits the Innocent Spouse May Have Derived From the Continuation of the Marriage In making a just and right division of the estate of the parties, the court may consider the benefits which the spouse not at fault would derive from continuing the marriage. Hedtke v. Hedtke, 112 Tex. 404, 248 S.W. 21 (1923). For example, this concept includes the medical benefits to which a former spouse would have been entitled as a wife of a retired Air Force officer. Hopkins v. Hopkins, 540 S.W.2d 783, 787 (Tex. Civ. App. - Corpus Christi 1976, no writ). In Young v. Young, 609 S.W.2d 758 760-62 (Tex. 1980) the court recognized that it is possible for the trial court to make a "fair and just" division by considering fault as well as other considerations, including the benefits the innocent spouse would have received from the continuation of the marriage. Likewise, in Duncan v. Duncan, 374 S.W.2d 800 (Tex.Civ.App.--Eastland 1964, no writ) an unequal division of property was justified based on the probable future need for support, fault in breaking up the marriage and the benefits the innocent spouse would have received from a continuation of the marriage. The court in Duncan further stated that the circumstances of each marriage dictate what factors should be considered in the property division upon divorce. Health of the Spouses The physical condition of each spouse offers an additional factor to be considered in the division of the estate. Hahne v. Hahne, 663 S.W.2d 17 (Tex. App. Houston [14th Dist.] 1984, no writ); Phillips v. Phillips, 75 S.W.3d 564 (Tex.App.--Beaumont 2002, no pet. h.); Kimsey v. Kimsey, 965 S.W.2d 690 (Tex. App.­ El Paso 1998, pet. denied); Vannerson v. Vannerson, 857 S.W.2d 659 (Tex.App.--Houston [1st Dist.] 1993, writ denied); Twyman v. Twyman, 855 S.W.2d 619 (Tex. 1993); Patt v. Patt, 689 S.W.2d 505 (Tex. App. ­ Houston [1st Dist.] 1985, no writ); Price v. Price, 591 S.W.2d 601 (Tex.Civ.App.--Tyler 1979, no writ); Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.); and, Magill v. Magill, 816 S.W.2d 530 (Tex.App.-- Houston [1st Dist.] 1991, writ denied). In Cravens v. Cravens, 533 S.W.2d 372 (Tex. Civ. App. - El Paso 1975, no writ), the appellate court upheld a disproportionate division based on the wife's poor physical condition and stated: "In this case, the Appellee testified concerning injuries she received as the result of an attack upon her by Appellant shortly before their separation. She also testified as to her disability resulting from her injuries, and her present inability to do tasks that she previously could have performed. Based 9.

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upon such evidence, the trial court could have awarded her a disproportionate share of the property." Id. at 376. 10. Age of the Spouses Age is a valid consideration of the courts in considering a proper division of community property. Mogford v. Mogford, 616 S.W.2d 936 (Tex.Civ.App--San Antonio 1981, writ ref'd n.r.e.); Tate v. Tate, 55 S.W.3d 1 (Tex.App.--El Paso 2000, no pet.). The court in Thomas v. Thomas, 603 S.W.2d 356 (Tex.Civ.App.--Houston [14th Dist.] 1980, writ dism'd) held that based on the evidence, a 70/30 division of the community estate did not constitute an abuse of discretion, considering the parties' comparative ages, earning capability, education level, probable need for future support, and the facts which led to divorce. In Roberts v. Roberts, 535 S.W.2d 373 (Tex. Civ. App.--Tyler 1976, no writ), the Court stated that Edna (wife) at age 63 is more than 20 years older than A.L. (husband) and that the trial court may well have considered this age discrepancy in awarding the 149.78 acre tract to Edna. Id. at 374. The appellate court held that there was no abuse of discretion in the award of the real property to the wife. 11. Education and Future Employability The Court in McCartney v. McCartney. 548 S.W.2d 435 (Tex. Civ. App.--Houston [lst Dist.] 1976, no writ), considered the future employability of the wife in the division of the estate and stated: "The wife's physical disability and her lack of training will likely require her to deplete the estate awarded to her under the decree, while the husband's future earnings will likely increase the overall value of the estate awarded to him." Id. at 439. Educational background is but another factor to be considered in the division of the community property estate. Cooper v. Cooper, 513 S.W.2d 229 (Tex. Civ. App. ­ Houston (lst Dist.) 1974, no writ); Walter v. Walter, 127 S.W.3d 396 (Tex.App.--Dallas 2004, no pet'n); Zorilla v. Wahid, 83 S.W.3d 247 (Tex.App.-- Corpus Christi 2002, no pet.); Toles v. Toles, 45 S.W.3d 252 (Tex.App.--Dallas 2001, pet. denied); Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.-- Corpus Christi 1999, no pet. h.); Vannerson v. Vannerson, 857 S.W.2d 659 (Tex.App.--Houston [1st Dist.] 1993, writ denied); and Massey v. Massey, 807 S.W.2d 391 (Tex.App.--Houston [1st Dist.] 1991, writ denied).

12. Need for Future Support The court of appeals in Goren v. Goren, 531 S.W.2d 897, 899 (Tex. Civ. App.--Houston [ lst Dist.] 1975, writ dism'd), held in that making its determination the trial court was justified in considering the parties' respective financial obligations and future earning capacity, and their probable respective needs for support...An important factor, if not the most important factor, is the parties' probable respective needs for future support. The Court in Pickett v. Pickett, 401 S.W.2d 846 (Tex. Civ. App.--Tyler 1966, no writ), went further, theorizing that the probable future need for support seems to be the most important factor in determining the court's exercise of its discretion in dividing the community estate of the parties in a divorce. See also Burgess v. Burgess, 834 S.W.2d 538 (Tex.App.-- Houston [1st Dist.] 1992, no writ); Roever v. Roever, 824 S.W.2d 674 (Tex.App.--Dallas 1992, no writ); Padon v. Padon, 670 S.W.2d 354 (Tex.App.--San Antonio 1984, no writ); Thomas v. Thomas, 603 S.W.2d 356 (Tex.Civ.App.--Houston [14th Dist.] 1980, writ dism'd); Benedict v. Benedict, 542 S.W.2d 692 (Tex. Civ. App. - Ft. Worth 1976, writ dism'd); and, Roberts v. Roberts, 663 S.W.2d 75 (Tex. App.­ Waco 1983, no writ); Patt v. Patt, 689 S.W.2d 505 (Tex. App. ­ Houston [1st Dist.] 1985, no writ); Mogford v. Mogford, 616 S.W.2d 936 (Tex.Civ.App.--San Antonio 1981, writ ref'd n.r.e.) (the probable need for future support can also be considered in the division of property); Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.); Foster v. Foster, 583 S.W.2d 868 (Tex.Civ.App.--Tyler 1979, no writ). In Tate v. Tate, 55 S.W.3d 1 (Tex.App.--El Paso 2000, no pet.), the judge awarded the Wife a disproportionate division of the community estate. In awarding her 51 percent of the community estate, the trial judge may well have taken into consideration the $50,172.60 in the brokerage account and the $8,000 in travelers' checks which had been confirmed as her separate property and which were available for her future support. It is equally plausible that had the trial court characterized those assets as community property, the estate would have been divided disproportionately, given Wife's established need for future support. In the absence of findings of fact and conclusions of law, Husband cannot show otherwise. On this record, we cannot conclude that a comparative 55 percent to 45 percent distribution in Wife's favor constitutes an abuse of discretion. 13. Foreign Realty The court may consider the value of foreign realty in making its division. Although the Texas court lacks jurisdiction to determine title to such land, it may

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consider its existence when dividing the property over which it does have jurisdiction. In Walker v. Walker, 231 S.W.2d 905 (Tex. Civ. App.--Texarkana 1950, no writ), the appellate court upheld the trial court's consideration of the value of funds used by husband to purchase land in Florida, a common law jurisdiction, where wife's community interests were not recognized. The Court stated:\ "The trial court in order to effect a fair, just and equitable division of the whole of the community estate was clothed with the power and authority to take into consideration the value of the community funds so invested in the Florida realty in a foreign jurisdiction and to charge the husband with one-half of the value of such funds in the allocation as here to the wife of property, real, personal or mixed, situated within the court's jurisdiction in Texas." Id. at 906. In setting aside to one spouse property within its jurisdiction, the court may consider the property beyond its jurisdiction in possession of the other spouse. Risch v. Risch, 395 S.W.2d 709 (Tex. Civ. App.--Houston 1965, writ dism'd, cert. denied 386 U.S. 10 (1965). Also see, Ismail v. Ismail, 702 S.W.2d 216 (Tex. App.--Houston [lst Dist.] 1985, writ ref'd n.r.e.). 14. Credit for Temporary Alimony Paid In Edsall v. Edsall,, 240 S.W.2d 424 (Tex. Civ. App.--Eastland 1951, no writ), the wife was paid $250 per month temporary alimony and the husband was allowed $100 per month. The trial court found that the wife had received $2,200 more than the husband during the pendency of the divorce and charged the wife's interest in the community estate with $1,100 or one-half of such excess payments received by her. The appellate court held that the trial court's decision was not an abuse of discretion. The Court of Civil Appeals assumed in Schecter v. Schecter, 579 S.W.2d 502 (Tex. Civ. App.--Dallas 1978, no writ) , that the trial court had taken into consideration the temporary alimony paid to the wife since it awarded the husband the larger share of the community estate. Note, however, the case involved a premarital agreement which prohibited the wife from seeking temporary alimony. The case could be read to mean that the trial court considered the premarital agreement's prohibition, rather than temporary alimony in general. In Loaiza v. Loaiza, 130 S.W.3d 894 (Tex.App.-- Fort Worth 2004, no pet.), the amount of temporary support received and saved by wife during separation, and awarded to her in the divorce, was correctly

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omitted when calculating the portion of the community estate awarded to wife; both parties received temporary spousal support, but husband spent all of his; and, husband was not to be allowed to inflate wife's percentage of her award by taking into account her share of temporary support and omitting husband's share from consideration. 15. Wasting and Concealing of Community Assets In Reaney v. Reaney, 505 S.W.2d 338, (Tex. Civ. App.--Dallas 1974, no writ), the husband testified that he went to Puerto Rico with approximately $53,000. He testified that he squandered this money, lost it and very imprudently went through it. He lost some of it gambling and that he gave some of it away, that he spent it very foolishly and that at the time of the trial he did not have any of it. The Court held that "...in the light of the undisputed facts in this case the trial court could not make a fair and just division of the remaining community assets without taking into account Appellant's profligate loss of a large portion of the community estate." Id. at 340. In Grothe v. Grothe, 590 S.W.2d 238 (Tex. Civ. App.--Austin 1979, no writ), since the husband, during the pendency of the divorce, wrongfully and willfully converted a substantial amount of community funds to his own personal use, intending to deprive the wife of her interest in such property, the court was justified in awarding a disproportionate portion of the estate to the wife. In Matter of Marriage of Moore, 890 S.W.2d 821 (Tex.App.--Amarillo 1994, no writ), the trial court held that: (1) former wife could not receive damages on a separate cause of action for "fraud on the community" or related mental anguish; (2) evidence supported a reimbursement award in favor of former wife for former husband's unfair disposition of community assets; and (3) trial court did not abuse its discretion in dividing the marital estate so that former wife received slightly more than half of the net estate. In Osuna v. Quintana, 993 S.W.2d 201 (Tex.App.--Corpus Christi 1999, no writ), the court stated that "money spent on another woman out of community property during the marriage requires an accounting to the community, Simpson v. Simpson, 679 S.W.2d 39, 42 (Tex.App.--Dallas 1984, no writ). This type of gift or expenditure amounts to fraud upon the community estate. Grossnickle v. Grossnickle, 935 S.W.2d 830, 848 (Tex.App.--Texarkana 1996, writ denied)." Id. at 209. In Loaiza v. Loaiza, 130 S.W.3d 894 (Tex.App.-- Fort Worth 2004, no pet.), the court held that the evidence conclusively established that husband breached his fiduciary duty to wife and committed fraud on community estate. The record established that trial court considered evidence that husband committed fraud and waste of the community estate.

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The trial court did not abuse its discretion when it made a disproportionate award of community estate; and, the trial court's dismissal, for insufficient evidence, of wife's tort claims against husband for fraud, waste, and breach of fiduciary duty, did not require reversal of divorce decree. Money spent by a spouse on a paramour during the pendency of a divorce is a factor to be considered by the court in dividing the estate. Leal v. Leal, 628 S.W.2d 168 (Tex. App.--San Antonio 1982, no writ), Simpson v. Simpson, 679 S.W.2d 39 (Tex. App.--Dallas 1984, no writ). However, bad investments and poor judgment alone in the absence of fraud will not justify a disproportionate division of the community estate. Andrews v. Andrews, 677 S.W.2d 171 (Tex. App.--Austin 1984, no writ). Due to the trust relationship between spouses as to community property controlled by each, the burden of proof is upon the disposing spouse to prove the fairness of the disposition of community assets. Mazique v. Mazique, 742 S.W.2d 805 (Tex.App.-- Houston [lst Dist.] 1987, no writ), Morrison v. Morrison, 713 S.W.2d 377 (Tex.App.-- Dallas 1986, writ dism'd). If the trial court finds that a spouse has concealed community property, it may award that property to that spouse as their share of the community estate. Rafidi v. Rafidi, 718 S.W.2d 43 (Tex.App.--Dallas 1986, no writ): Arrington v. Arrington, 613 S.W.2d 565 (Tex. Civ.App.--Fort Worth 1981, no writ). 16. Attorney's Fees The award of attorney's fees is another factor to be considered in making an equitable division of the estate in a divorce. Thomas v. Thomas, 525 S.W.2d 200, 201 (Tex. Civ.App.--Houston [lst Dist.] 1975, no writ); Simpson v. Simpson, 727 S.W.2d 662 (Tex.App.--Dallas 1987, no writ); Harleaux v. Harleaux, 154 S.W.3d 925 (Tex.App.--Dallas 2005); and Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.-- Corpus Christi 1999, no pet. h.). Another factor the court can consider in a divorce proceeding in making an equitable division of the community estate is appellate attorney's fees. In re Garza, 153 S.W.3d 97 (Tex.App.--San Antonio 2004). A decree that one party pay the other's attorney's fees may be to award the paying party less of the estate. This is but one factor to be considered in making an equitable division of the estate. Carle v. Carle, 234 S.W.2d 1002, 1005 (Tex. 1950). See also Haggard v. Haggard, 550 S.W.2d 374, 378 (Tex.Civ.App.--Dallas 1977, no writ); Fortenberry v. Fortenberry, 545 S.W.2d 40 (Tex.Civ.App.--Waco 1976, no writ).

17. Nature of the Property Among the many factors considered in its division, the court may consider the nature of the property itself. In Waggener v. Waggener, 460 S.W.2d 251 (Tex.Civ.App.--Dallas 1970, no writ) and Thomas v. Thomas, 525 S.W.2d 200 (Tex.Civ.App.-- Houston [ lst Dist.] 1975, no writ), the appellate courts recited this factor as part of a pre-Murff laundry list. In Jones v. Jones, 699 S.W.2d 583, (Tex. App.-- Texarkana 1985, no writ), the trial court found the nature of the property to be a very important factor in its division. The husband's community partnership interests were closely related to and dependent upon his brother's separate business interests. See also Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.-- Corpus Christi 1999, no pet. h.). Numerous cases cite this factor when citing the Murff laundry list, however most cases citing this factor do not give clear examples of what is meant by "nature of the property." "Nature of the property" may be synonymous with size of the community estate or sizes of the spouses' respective separate estates. "Nature of the property" could also refer to cases where the primary assets are not readily partitionable, such as stock in a closely-held corporation controlled by one spouse or a partnership interest controlled by one spouse, or not available for disposition. 18. Debts and Liabilities Imposition of liability for the discharge of an obligation is yet another factor to be considered in the division. Failure to do so may be error. Cole v. Cole, 532 S.W.2d 102 (Tex.Civ.App.--Dallas 1975, no writ) (substantial liabilities left with the wife justifies a disproportionate division in her favor); McKnight v. McKnight, 535 S.W.2d 658 (Tex.Civ.App.--El Paso) rev'd on other grounds), 543 S.W.2d 863 (Tex. 1976); Horlock v. Horlock, 533 S.W.2d 52 (Tex.Civ.App.-- Houston [14th Dist.] 1975, writ dism'd) (community estate's debt structure considered in detail by trial court). See also Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.). It is important to also see the section herein above on tax consequences and tax liabilities. A debt created by a spouse during marriage is presumed to be an obligation of the community, and the court must divide the parties' debts as well as their assets upon divorce. Taylor v Taylor, 680 S.W.2d 645 (Tex.App.--Beaumont 1984, writ refused, n.r.e.). In dividing the couple's debt as part of its division of the community property, the court may not modify the creditor's rights with regard to the debt. Blake v. Amoco Federal Credit Union, 900 S.W.2d 109 (Tex.App.--Houston [14th Dist.] 1995, no writ) (divorce court cannot alter ex spouse's liability on joint debt).

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In Smith v. Smith, 143 S.W.2d 206, (Tex.App.-- Waco, 2004), the court ordered Karen to assume three community debts of an unspecified amount. Because the debt owed by a spouse is a legally relevant factor in dividing the community estate, a court may abuse its discretion if it fails to consider such a factor, citing Murff (spouse's debt as a factor in property division). The record did not disclose the amount of these debts, so the court could not have considered the amount of these debts in dividing the community estate, which was error. Vannerson v. Vannerson, 857 S.W.2d 659 (Tex.App.--Houston [1st Dist.] 1993, writ denied). Appellant contended the trial court erred in assigning to him all income tax liabilities of the parties from the date of marriage through the calendar year 1986, and all debts incurred by either party during marriage and not expressly assumed by Mrs. Vannerson. The court stated: "The division of debts was made by the trial court as part of its division of community property. The parties' liabilities are factors to be considered in making a just and right division. Finn v. Finn, 658 S.W.2d 735, 748 (Tex.App.Dallas 1983, writ ref'd n.r.e.). A divorce court has authority and discretion to impose the entire tax liability of the parties on one spouse. Benedict v. Benedict, 542 S.W.2d 692, 698 (Tex.Civ.App.--Fort Worth 1976, writ dism'd) (husband failed to file tax returns and trial court assigned all tax liability to him). Considering appellee's testimony that she did not know that appellant did not file tax returns, it cannot be said the trial court abused its discretion in assigning responsibility for the taxes to appellant. Additionally, given appellee's testimony of the numerous judgments against Mr. Vannerson, it was not error for the trial court to assign responsibility for those judgments to appellant." Id. at 673. In Horlock v. Horlock, 533 S.W.2d 52, 61 (Tex.Civ.App.--Houston [14th Dist.] 1975, writ dism'd) the court of civil appeals held that factors which may be considered by the trial court in dividing the property include support provisions for the parties' son and the debts and other liabilities imposed on the husband. 19. Reimbursement Rather than ordering an immediate payment or money judgment, the trial court may adjust the division of the estate to compensate the spouse entitled to reimbursement. Morrison v. Morrison, 713 S.W.2d 377 (Tex.App.--Dallas 1986, writ dism'd); Jones v.

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Jones, 699 S.W.2d 583, 586 (Tex.App.--Texarkana 1985, no writ). See also Kimsey v. Kimsey, 965 S.W.2d 690 (Tex.App.­ El Paso 1998, pet. denied). Further, there was sufficient evidence to support the trial court's consideration of the community estate's right of reimbursement due to the enhancement of husband's separate estate after the date of cause of the action. Jones v. Jones, 699 S.W.2d 583, (Tex. App.-- Texarkana 1985, no writ). See also Harrell v. Harrell, 591 S.W.2d 324 (Tex.Civ.App.--Corpus Christi 1979, no writ). In Beavers v. Beavers, 675 S.W.2d 296 (Tex.App.--Dallas 1984), the court did not abuse its discretion in concluding that a community claim for reimbursement from wife's separate property was approximately equal to a community claim for reimbursement from husband's separate property and in excluding the reimbursement claims from further consideration in dividing the community property. In Vandiver v. Vandiver, 4 S.W.3d 300 (Tex.App.--Corpus Christi 1999, no pet. h.), the trial court found that evidence was presented supporting the following factors for consideration by the court: (1) E. L.'s greater earning power and ability to support himself; (2) his education and further employability; (3) his fault in the breakup of the marriage; (4) Joan's need for further support; (5) the nature of the property involved in the division; (6) E. L.'s failure to follow court orders; (7) Joan's health problems; (8) needs of the child of the marriage; (9) community indebtedness and liabilities; (10) reimbursement; (11) the size and nature of the separate estates; and (12) attorney's fees to be paid by each party. We hold that the trial court did not abuse its discretion in finding that the division of the property is just and right. In Morrison v. Morrison, 713 S.W.2d 377 (Tex. App.­ Dallas 1986, dism'd), the trial court stated that: "Carolyn was entitled to reimbursement to her half of the community property because of David's misuse of community funds. The right of reimbursement is an equitable right which may be considered by the trial court in determining the division of community property. Horlock v. Horlock, 533 S.W.2d 52, 60-61 (Tex.Civ.App.--Houston [14th Dist.] 1975, writ dism'd). We presume, therefore, that when the court divided the community, it awarded Carolyn a substantial reimbursement for the assets David diverted from her half of the community. See Robbins v. Robbins, 519 S.W.2d 507, 51011 (Tex.Civ.App.--Fort Worth, 1975, no writ) (the appellate court presumed that the wife's entitlement to reimbursement of her separate estate was taken into calculation by the trial court when it divided the parties'

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community property); TEX.R.CIV.P. 299. Furthermore, the trial court found David at fault in the breakup of the marriage because of his adultery. We presume that the trial court also considered this factor when it divided the community. Gutierrez, 643 S.W.2d at 787. Based on the evidence of Carolyn's right to reimbursement and David's adultery, we hold that the trial court did not abuse its discretion in awarding a disproportionate amount to Carolyn. See Murff, 615 S.W.2d at 698." Id. at 379. 20. Physical Abuse Courts seem especially willing to divide the property unequally when one spouse has physically abused the other. See, for instance, Faram v. GervitzFaram, 895 S.W.2d 839 (Tex. App. ­ Fort Worth 1995, no writ) (72.9% of the community property was awarded to wife, based in part on husband's violent and abusive nature which contributed to the divorce); Finch v. Finch, 825 S.W.2d 218 (Tex. App. ­ Houston [1st Dist.] 1992, no writ) (65% of community assets awarded to wife who testified that her husband had abused her and her daughter). 21. Fiduciary Duties Between Spouses a. Fiduciary duty between spouses

(2). Good faith and fair dealing The term "fiduciary" contemplates good faith and fair dealing. The term includes informal relations which exist whenever one party trusts and relies on another. The origin of the confidence may be moral, social, domestic, or personal. Texas Bank and Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex. 1980). (3) Confidential relationship Texas recognizes that a confidential relationship exists between spouses. Spouses have a particular relationship of trust and confidence requiring good faith and fair dealing as to the community property managed or controlled by each. Carnes v. Meador, 533 S.W.2d 365 (Tex. Civ. App.Dallas 1975, writ ref'd n.r.e.); Spruill v. Spruill, 624 S.W.2d 694 (Tex. App.-El Paso 1981, writ dism'd). Because of the nature of the spousal relationship, conduct of a spouse affecting the property rights of the other spouse may be fraudulent even though identical conduct would not be fraudulent as between other persons. See, State Bar of Texas, Texas Pattern Jury Charges-Family PJC 206.1 (2006). (4) Fraud on the community estate The breach of a legal or equitable duty which violates the fiduciary relationship existing between spouses is termed "fraud on the community," a judicially created concept based on the theory of constructive fraud. In re Estate of Herring, 970 S.W.2d 583, 586 (Tex. App.-Corpus Christi 1998, no writ); Zieba v. Martin, 928 S.W.2d 782, 789 (Tex. App.-Houston [14th Dist.] 1996, no writ); Jackson v. Smith, 703 S.W.2d 791 (Tex. App.-Dallas 1985, no writ). b. Management of Property

(1) The relationship that exists between a husband and a wife has been held to create a fiduciary duty, requiring the duty of utmost good faith. Matter of Marriage of Moore, 890 S.W.2d 821, 827 (Tex. App.Amarillo 1994, no writ); Matter of Marriage of DeVine, 869 S.W.2d 415, 428 (Tex. App.-Amarillo 1993, writ denied). In re Marriage of Moore, 890 S.W.2d 821, 827 (Tex. App.­Amarillo 1994, no writ); see also, Sprick, 25 S.W.3d at 15 (McClure, J., concurring) (because of the confidential relationship between a husband wife, the marital partnership is fiduciary in nature). As expressed by Texas Pattern Jury Charge ­ Family, PJC 206.1 (2006). A relationship of confidence and trust exists between a husband and wife with regard to that portion of the community property that each controls. This relationship requires that the spouses use the utmost good faith and frankness in their dealings with each other. Because of the nature of the spousal relationship, conduct of a spouse affecting the property rights of the other spouse may be fraudulent even though identical conduct would not be fraudulent between non-spouses. See also, Restatement (Second) of Torts §551 (in most states, a marriage creates a relationship of trust and confidence between the spouses, requiring the utmost good faith in their dealing with each other).

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(1) Management and control of joint and community property Texas law requires both the husband and wife to join in the management, control, and disposition of joint community property unless the parties otherwise agree. Tex. Fam. Code Ann. §3.102(c). (2) Transfer of joint community property A court will declare void a transfer if the alleging spouse proves only that an asset was joint community property and that he or she did not join in its transfer. The transferor spouse then bears the burden to show why the court should affirm the transaction. Dalton v. Don J. Jackson, Inc., 691 S.W.2d 765 (Tex. App.Austin 1985, no writ).

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(3) Separate property and special community property During marriage, each spouse has the right to sole management and control of: (1) his or her separate property; and (2) his or her "special" community property that the spouse would have owned if single, including personal earnings, revenue from separate property, recoveries for personal injuries, and the increase and mutations of, and the revenue from all property subject to his or her sole management, control and disposition. Tex. Fam. Code Ann. ' 3.102(a). (4) Transfer of special community property In the absence of fraud, each spouse may transfer his or her special community property without the approval of the other spouse, though both spouses have an undivided one-half interest in that property. Massey v. Massey, 807 S.W.2d 391, 401 (Tex.App.Houston [1st Dist.] 1991, writ denied), 867 S.W.2d 766 (Tex. 1993)(per curiam); Mazique v. Mazique, 742 S.W.2d 805, 807 (Tex. App.- Houston [1st Dist.]1987, no writ). (5) Management rights and the Trust Fund Doctrine Management rights are limited by the fiduciary obligation created by the existence of the marital relationship. A trust relationship exists between a husband and wife as to the community property controlled by each spouse, and the managing spouse becomes a fiduciary to the other spouse in the management and disposition of special community property. The managing spouse has a duty not to dispose, transfer or diminish the special community under his or her control in fraud of the other spouse's ownership rights to that property. See Carnes v. Meador, 533 S.W.2d 365, 370 (Tex. Civ. App.-Dallas 1975, writ ref'd n.r.e.); Matter of Marriage of Moore, 890 S.W.2d 821 (Tex. App.-Amarillo 1994, no writ); Fanning v. Fanning, 828 S.W.2d 135 (Tex. App.Waco 1992), aff'd in part, rev'd in part on other grounds, 847 S.W.2d 225 (Tex. 1993). However, see Cleaver v. Cleaver, 935 S.W.2d 491 (Tex. App.­Tyler 1996) where the wife filed a divorce action and husband countersued. The trial court entered a divorce decree and husband appealed. The court held that wife's interest as beneficiary in a trust was her separate property since her interest was established before her marriage and was conveyed by gift or devise. The court further held that the interest held by a partnership in which the trust was a member was not part of the community estate. The earnings of two corporations in which the trust was a stock holder was not community property and the interest earned on funds held in trust for the wife not timely distributed to the wife constituted community property.

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Additionally, the managing partner of the partnership did not have a fiduciary duty to wife and the husband to distribute partnership earnings to the trust. The husband lacks standing to bring a shareholder derivative action against the corporations on the basis that the corporation was required to disburse earnings and dividends. Finally the court held that the trustee did not breach any fiduciary duty to the trustee to trust beneficiary or the beneficiary's husband by serving concurrently as controlling corporate board member that decided that corporate earnings were not to be distributed to the trust. As to the partner's decision that partnership earnings would be retained by the partnership, the husband contended that by the nature of the partnership relationship, income passes through the partners as it is earned and may not be retained by the partnership. The court disagreed. Partnership management may withhold earnings. Here, the partner controlled all of the partnership interest individually and as trustee. He was the managing partner. He had the exclusive authority to determine the amount of the partnership earnings that should be distributed. No cause of action may be asserted against a managing partner absent of breach of trust or fiduciary duty to another partner as by converting partnership assets to his own use. A fiduciary duty arose in favor of husband and wife because they were not members of the partnership. The court also held that the husband lacks standing to bring a shareholder derivative action against the corporations on the basis that the corporation was required to disburse earnings as dividends. The court noted that a similar rational applied to corporate management decisions. The claim that corporate dividends had been suppressed implies a breach of duty by the management to the corporation itself not to the shareholders. It is established that corporate management may invest company earnings and corporate assets rather than distributing those earnings to shareholders. Texas Business Corporation Act does not empower even stockholders to participate in or to control, the management of the corporation; that is the province of the managing board. Under the "business judgment" rule, alleged unwise, inexpedient, negligent or other imprudent decisions or conduct will not sustain a suit against the management of a corporation by the shareholders. Of particular note is that the court held that no fiduciary duty existed between the husband and wife as to the handling of the Wife's separate estate as distinguished from the spouses' community property; but see the "Trust Fund Doctrine" which stands for the proposition that if the managing spouse is in fact handling both community property and the other spouse's separate property, then the managing spouse has the burden of producing records and tracing the community portion. If he fails to meet his burden, then under the trust principles

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announced in Farrow v. Farrow, 238 S.W.2d 255 (Tex. Civ. App. - Austin 1951, no writ), and Sibley v Sibley, 286 S.W. 2d 659 (Tex. Civ. App. - Dallas 1955, writ dism'd), the interests of the managing spouse in the community are lost and the mixture becomes the other spouse's separate property. Farrow v. Farrow, 238 S.W.2d 255 (Tex. Civ. App. - Austin 1951, no writ) applied the trust fund doctrine to the tracing or commingling of community and separate funds in a marriage, and determined that: (1) if a man mixes trust funds with his own, the whole will be treated as trust property, except so far as he may be able to distinguish what is his own; and (2) an owner who wrongfully permits the property of another to become so intermingled and confused with his own property as to render impossible the identification of either, is under the burden of disclosing such facts as will ensure a fair division, and if he fails or refuses to do so, the combined property or its value will be awarded to the injured party. Under Sibley v. Sibley, 286 S.W.2d 657, 659 (Tex. Civ. App. - Dallas 1955, writ dism'd), the application of the trust fund doctrine in a divorce case means that "the trustee (husband) is presumed to have checked out his money first." The primary concern in tracing cases applying the trust fund doctrine is to see that a wrongdoer does not prosper by his actions. In Andrews v. Brown, 10 S.W.2d 707, 709 (Tex. Com.App.,1928, ) cited with approval in Mooers v. Richardson Petroleum Company, 146 Tex. 174, 204 S.W. 2d 606.1947, the following appears: "If a man mixes trust funds with his own,' it is said, `the whole will be treated as trust property, except so far as he may be able to distinguish what is his own.' *** That principal seems to have recognition in most if not all, American jurisdictions.*** "Analogous doctrines are part of the law of accession and specification***, and of confusion of goods***. The principal, we apprehend, is but a part of the equity's declination to extricate the wrongdoer from self-imposed hard conditions, or to tax the innocent, where one or two not in pari delicto must suffer." In 9 Tex. Jur. "Title Confusion of Goods," Sec.2, we find these principals. It states: "An owner who wrongfully permits the property of another to become so intermingled and confused with his own property as to render impossible the identification of either is under the burden of disclosing such facts as will insure a fair division , and he fails or refuses to do so, the combined property or its value will be awarded to the injured party. The rule applies where there has

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been an intermingling of cattle, community property or its value or what-not. There must be a willful or wrongful invasion of right in the order to induce the condign consequences of the forfeiture. This doctrine of the law has often been discussed, and it may be considered as having been clearly and distinctly settled." (6) Presumption of constructive fraud A presumption of constructive fraud arises where one spouse disposes of the other spouse's one-half interest in community property without the other's knowledge or consent. Zieba v. Martin, 928 S.W.2d 782, 789 (Tex. App.- Houston [14th Dist.] 1996, no writ); see paragraph D [Constructive Fraud] immediately below for a detailed discussion of constructive fraud. Camp v. Camp 972 S.W.2d 906 (Tex. App.-Corpus Christi 1998, writ denied). c. Constructive Fraud

(1) Constructive fraud The terms "constructive fraud" and "fraud on the community" are essentially the same tort. Matter of Marriage of Moore, 890 S.W.2d 821, 827 (Tex. App.Amarillo 1994, no writ). A spouse commits a fraud on the community or constructively defrauds the other spouse if he or she makes an improper transfer of community property in breach of the fiduciary duty that he or she owes the other spouse. Massey v. Massey, 807 S.W.2d 391, 402 (Tex. App.-Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993) (per curiam). (2) Based on fiduciary duty Constructive fraud is based upon the existence of a fiduciary duty requiring utmost good faith. Matter of Marriage of Moore, 890 S.W.2d 821, 827 (Tex. App.Amarillo 1994, no writ); Matter of Marriage of DeVine, 869 S.W.2d 415, 428 (Tex. App. Amarillo 1993, writ denied). Constructive fraud is the breach of some legal or equitable duty which, irrespective of moral guilt, the law declares fraudulent because of its tendency to deceive others, to violate confidence, or to injure public interests. Land v. Marshall, 426 S.W.2d 841 (Tex. 1968); Matthews v. Matthews, 725 S.W.2d 275 (Tex. App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.). A fiduciary relationship exists as a matter of law during marriage, and in at least one case, during mediation, when both sides are represented by counsel. A fiduciary relationship can also arise premarriage. If it arises premarriage, there is a fact question as to whether or not the fiduciary relationship exists.

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(3) Intent to deceive not required Constructive fraud does not require an intent to deceive. It is the consequence of a breach of the relationship of trust and confidence between spouses involving a transfer, gift or waste or dissipation of community property that is capricious, excessive or arbitrary resulting in unfairness to the other spouse. Mazique v. Mazique, 742 S.W.2d 805, 807 (Tex. App.-Houston [1st Dist.] 1987, no writ); Carnes v. Meador, 533 S.W.2d 365 (Tex. Civ. App.-Dallas 1975, writ ref'd n.r.e.); Murphy v. Metropolitan Life Ins. Co., 498 S.W.2d 278 (Tex. Civ. App. -Houston [14th Dist.] 1973, writ ref'd n.r.e.). The jury instruction for constructive fraud was based on these cases and is found in State Bar of Texas, Texas Pattern Jury Charges Family, PJC 206.3A (2002). (4) Disposal of other spouse's interest in community property It is constructively fraudulent for one spouse to dispose of the other spouse's interest in community property without the other's knowledge or consent. Matter of Marriage of DeVine, 869 S.W.2d 415 (Tex. App.- Amarillo 1993, writ denied). (5) Presumption of constructive fraud A presumption of constructive fraud arises when one spouse unfairly disposes of the other spouse's onehalf interest in the community property without the other spouse's knowledge or consent. Carnes v. Meador, 533 S.W.2d 365 (Tex. Civ. App.-Dallas 1975, writ ref'd n.r.e.); Zieba v. Martin, 928 S.W.2d 782 (Tex. App.- Houston [14th Dist.] 1996, no writ). (6) Burden of proof Once alleged by the complaining party, the responding party must carry the burden of rebutting the presumption of constructive fraud by proving the fairness of the transaction. See Mazique v. Mazique, 742 S.W.2d 805, 807 (Tex. App.-Houston [1st Dist.] 1987, no writ); Massey v. Massey, 807 S.W.2d 391, 402 (Tex. App.- Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993) (per curiam). (7) Moderate gifts to third parties A spouse may make moderate gifts, transfers, or expenditures of community property to a third party. Matter of Marriage of DeVine, 869 S.W.2d 415, 422 (Tex. App.-Amarillo 1993, writ denied); Mazique v. Mazique, 742 S.W.2d -805, 808 (Tex. App.-Houston [1st Dist.] 1987, no writ). (8) Capricious or excessive gifts A gift of community funds that is capricious, excessive, or arbitrary may be set aside as a constructive fraud on the other spouse. Osuna v. Quintana, 993 S.W.2d 201 (Tex. App.-Corpus Christi

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1999, no writ); Horlock v. Horlock, 533 S.W.2d 52, 55 (Tex. Civ. App.-Houston [14th Dist.] 1975, writ dism'd w.o.j.). (9) Factors considered by court The factors considered by the court in determining whether a spouse's actions constitute constructive fraud: (1) the relationship between the spouse and the recipient; (2) the size of the gift or transfer in relation to the total size of the community estate; (3) the adequacy of the estate remaining in spite of the gift or transfer; and (4) any special justifying factors for the gift or transfer. Massey v. Massey, 807 S.W.2d 391, 402 (Tex. App.­ Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993) (per curiam). (10) Cases involving constructive fraud The following cases are examples of constructive fraud: Change of life insurance beneficiaries (1) Givens v. Girard Life Ins. Co. of America, 480 S.W.2d 421 (Tex. Civ. App.--Dallas 1972, writ ref'd n.r.e.) (husband replaced wife as beneficiary of life insurance policy with his paramour-insurance proceeds held to be community property and change in beneficiary held to constitute constructive fraud on wife's share of the community estate in the absence of a showing of "special justifying factors"); (2) Redfearn v. Ford, 579 S.W.2d 295 (Tex. Civ.App.--Dallas 1979, writ ref'd n.r.e.) (husband had changed beneficiary designation on life insurance policy from wife to their son held transaction was not unfair to wife because it diminished her obligation to provide support for the minor child and was not an unreasonable, excessive or arbitrary transfer); (3) Murphy v. Metropolitan Life Ins. Co., 498 S.W.2d 278 (Tex. Civ. App.--Houston [14th Dist.] 1973, writ ref'd n.r.e.) (change in beneficiary designation constituted constructive fraud on wife even though husband had right of sole management and control of the policy and husband's attempt to gift wife's share of the policy to his mother was set aside); (4) Hudspeth v. Stoker, 644 S.W.2d 92 (Tex. App.-- San Antonio 1982, writ ref'd) (husband who changed life insurance beneficiary from his former wife to new wife violated his legal duty under the decree and trial court was justified in imposing constructive trust on proceeds); (5) Korzekwa v. Prudential Ins. Co. of America, 669 S.W.2d 775 (Tex. App.--San Antonio 1984, writ dism'd) (husband changed beneficiary designation of

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life insurance policy from his wife to his daughter during the divorce action in violation of a temporary restraining order entered by the divorce court. The court held the change was not void even though the policy was community property because the defrauded spouse could be reimbursed from other assets in the estate); (6) Madrigal v. Madrigal, 115 S.W.3d 32 (Tex. App.--San Antonio 2003, no writ) (husband acquired a life insurance policy while married to his new wife and changed the beneficiary of the policy to his former wife. Constructive fraud existed because the policy was funded with community funds for the benefit of someone outside the community). Gifts outside the community (1) In re McCurdy's Marriage, 489 S.W.2d 712 (Tex. Civ. App.-Amarillo 1973, no writ) (during marriage, husband's gifts to educational fund for parties' children held to be constructive fraud on wife where wife not fully informed of gifts); (2) Marshall v. Marshall, 735 S.W.2d 587 (Tex. App.­ Dallas 1987, writ ref'd n.r.e.) (wife's claim of constructive fraud for husband's gifts to his children from a prior marriage was denied where gifts were equal to 11 percent of the husband's total earnings during their brief marriage, and where wife was advised of the gifts and although she did not actively consent, she raised no objection to the gifts at the time they were made); (3) Mazique v. Mazique, 742 S.W.2d 805 (Tex. App.--Houston [1st Dist.] 1987, no writ) (during the 25 year marriage, husband engaged in numerous extramarital affairs which he funded with community funds. Husband paid for trips, meals, gifts and hotels for the third parties with the community funds. No accounting of the gifts was made to the wife. The court found the husband had committed constructive fraud); (4) Zieba v. Martin, 928 S.W.2d 782 (Tex. App.Houston [14th Dist.] 1996, no writ) (trial court found husband owed a fiduciary duty to wife and to community estate at time of divorce, but court failed to find that he breached that duty by not properly accounting for the withdrawal of community funds, wasting community funds, or spending community funds without wife's knowledge or consent); (5) Grant v. Grant, 1999 WL 1063433 (Tex. App.-Houston [1st Dist.] 1999), unpublished opinion (husband used community property to fund a trust for his son from a former marriage. Court found gift was

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constructive fraud because husband failed to prove the disposition was fair to the wife. Waste (1) Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998) (J. Hecht dissenting); (2) Faram v. Gervitz-Faram, 895 S.W.2d 839, 844 (Tex.App.-Fort Worth 1995, no writ) (husband committed waste of the community estate by acquiring property, incurring debt, and escalating attorney's fees after separation); (3) Reaney v. Reaney, 505 S.W.2d 338, 340 (Tex. Civ. App.-Dallas 1974, no writ) (court took into account husband's dissipation of community assets when dividing estate); (4) Loaiza v. Loaiza, 130 S.W.3d 894 (Tex. App.­Fort Worth 2004, not pet.) ­ (wife made claims of waste of assets, breach of fiduciary duty and fraud against husband for expenditures out of community funds without wife's knowledge or consent. The expenditures were made to husband's girlfriend in the amount of $854,573.59. [husband played baseball for the Texas Rangers and later the Toronto Blue Jays.] The Court held that husband's expenditures made for the benefit of his girlfriend conclusively established a breach of fiduciary duty and constructive fraud. The Court also held that since the expenditures were made without the wife's knowledge or consent, the burden shifted to the husband to show the fairness in disposing of the community assets); (5) Strenk v. Strenk, 2001 WL 1379924 (Tex. App.-- Austin 2001), opinion unreported. (the court found that husband had wasted community assets by selling stock before the divorce for $15,000 when the reasonable value was found to be $168,000); (6) Falor v. Falor, 840 S.W.2d 683 (Tex. App.-- San Antonio 1992, no writ) (husband dispersed $28,000 worth of community assets. The court gave the following reasons for finding waste of community property: (1) the appellant disbursed community funds to his father, brother, and long time friend; (2) the funds were disbursed three days after the appellee left the appellant; (3) the appellee had no knowledge of and did not consent to the disbursement of community funds; (4) some of the debts were not legitimate since the appellant, with his friend and family members, typically bartered services without demanding cash payment; and (5) some of the debts were separate property debts since they were acquired before marriage.

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Practice Note: Simply spending money, or losing money in business or investments is not waste. See Connell v. Connell, 889 S.W.2d 534, 544 (Tex. App.San Antonio 1994, writ denied). Generally, a spouse will not be required to account for funds spent during the marriage or lost in trading or business ventures. However, the spouse will be accountable for disposing, wasting or hiding assets in order to defraud the other spouse of his or her interest in the property. See Reaney v. Reaney, 505 S.W.2d 338 (Tex. Civ. App.-Dallas 1974, no writ); Swisher v. Swisher, 190 S.W.2d 382 (Tex. Civ. App.-Galveston 1945, no writ); Pride v. Pride, 318 S.W.2d 715 (Tex. Civ. App.Dallas 1958, no writ). Gifts to paramours (1) Spruill v. Spruill, 624 S.W.2d 694, 697 (Tex. App.­ El Paso 1981, writ dism'd) (court took a dim view toward gifts to paramours and gifts to "strangers" of the marriage, "particularly of the female variety"); (2) Osuna v. Quintana, 993 S.W.2d 201 (Tex. App.Corpus Christi 1999, no writ) (joint and several judgment against husband and mistress upheld, which represented total community funds diverted by husband to mistress); (3) Fanning v. Fanning, 828 S.W.2d 135, 148 (Tex. App.-Waco 1992), aff'd in part, rev'd in part on other grounds, 847 S.W.2d 225 (Tex. 1993); (4) Mazique v. Mazique, 742 S.W.2d 805 (Tex. App.Houston [1st Dist.] 1987, no writ) (wife awarded $30,000 in actual damages and $5,000 in exemplary damages for husband spending varying sums on women for trips out of town, meals, gifts, dresses and local hotel bills); (5) Morrison v. Morrison, 713 S.W.2d 377 (Tex. App.- Dallas 1986, writ dism'd) (husband admitted spending substantial amounts on paramours and trial court's disproportionate division of the community estate in the amount of 83 percent to wife was affirmed on appeal); (6) Loaiza v. Loaiza, see "Waste" immediately Above; (7) Zimmerman v. Zimmerman, 1999 WL 1076981 (Tex. App.--Dallas 1999), unpublished case. (husband spent $10,000 on gifts for his girlfriend and was unable to account for $16,500 in checks. The court gave wife an unequal portion of the estate based on these facts); (8) Ramirez v. Ramirez, 873 S.W.2d 735 (Tex. App.­ El Paso 1994, no writ) (husband's testimony concerning gifts to paramours was sufficient evidence,

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standing alone, was sufficient for a finding of constructive fraud). Management of community property (1) Andrews v. Andrews, 677 S.W.2d 171 (Tex. App. Austin 1984, no writ); (an investment decision entered into in good faith is not actionable, even if it turns out to be bad). Cf. Sprick v. Sprick, 25 S.W.3d 7, 14-15 (Tex. App.--El Paso 1999, pet. denied), and the discussion by Judge Ann Crawford McClure of the various tort doctrines, including the "community opportunity doctrine," which may be described as the duty by a spouse to put the interests of the community estate before the spouse's separate estate when making investment decisions. For example, if a spouse is faced with the opportunity of making an investment decisions that will deliver a financial result, that spouse has a fiduciary duty to make the investment on behalf of the community estate if funds exact; (2) Grossnickle v. Grossnickle, 935 S.W.2d 830 (Tex. App.-Texarkana 1996, writ denied) (wife who was given right to live in community home during divorce proceeding and did not maintain the home causing serious damage (mildew, leaks, vandalism, neglect, etc.) was held responsible for the $80,000 damage); (3) Massey v. Massey, 807 S.W.2d 391 (Tex. App.Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993) (per curiam) (court upheld a jury finding that the husband's investments in expenditures operated as a constructive fraud on the wife); (4) Jackson v. Smith, 703 S.W.2d 791 (Tex. App.-- Dallas 1985, no writ) (husband found to have perpetrated constructive fraud by inducing his common law wife to sign life insurance policy naming husband's sister as beneficiary as a gift for taking care of his children). Schlueter v. Schlueter ­ No Independent Cause of Action Between Spouses for Damages to the Community Estate Schlueter answered the question of what remedies are available to a spouse alleging "fraud on the community" committed by the other spouse. Here, the husband transferred various community assets to his father shortly before he filed for divorce. The wife brought independent tort claims against her husband and father-in-law, seeking damages for fraud, breach of fiduciary duty and conspiracy in her counterclaim for divorce. Based on favorable jury findings the trial court ordered a disproportionate division of the community estate in favor of the wife, and rendered judgment for the wife against the husband and his father for actual and exemplary damages. Holding that a tort cause of action for fraud on the community d.

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exists independent of a divorce proceeding, the Austin Court of Appeals affirmed, 929 S.W.2d 994. The Texas Supreme Court (hereinafter referred to as the "Court") granted petition for review to resolve the conflict among the Courts of Appeals on this question. (1) No separate cause of action for fraud on the community estate There is no separate tort cause of action between spouses for fraud on the community estate independent of divorce proceedings. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998); Belz v. Belz, 667 S.W.2d 240 (Tex. App.-Dallas 1984, writ ref'd n.r.e.); Matter of Marriage of Moore, 890 S.W.2d 821 (Tex. App.- Amarillo 1994, no writ); Harper v. Harper, 8 S.W.3d 782 (Tex. App.- Fort Worth 1999, pet. denied) (a decedent's estate does not have a cause of action against the surviving spouse or a third party for fraud on the community). (2) "Just and right" property division A wronged spouse has an adequate remedy for fraud on the community through the "just and right" property division upon divorce. Tex. Fam. Code Ann. § 7.001; Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998). (3) Division of marital estate in "just and right" manner The community property system in Texas provides that upon divorce, the trial court must enter a division of the married couple's estate "in a manner that the court deems just and right," considering the rights of the parties and any children of the marriage. Tex. Fam. Code Ann. § 7.001. Such a standard may at times lead to disproportionate division of assets and liabilities for the parties, depending on the circumstances that courts may consider in refusing to divide the marital estate equally. (4) "Fraud on the community" damages Texas recognizes the concept of fraud on the community, which is a wrong by one spouse that the court may consider in its division of the estate of the parties and that may justify an unequal division. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998); Belz v. Belz, 667 S.W.2d 240, 247 (Tex. App.-Dallas 1984, writ ref'd n.r.e.). (5) Fraud on the community not abolished. Although the Schlueter case has limited the method and extent of recovery, the doctrine of fraud on the community has not been abolished. Fraud on the community can arise in the following situations: waste/dissipation; improper conveyance; excessive gifts; transfers or gifts to paramours and similar

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conduct. These claims are based on allegations of breach of fiduciary duty existing between spouses. (6) Actual fraud regarding separate estates Following Schlueter, one spouse can still sue another as an independent cause of action for actual fraud concerning the defrauded spouse's separate estate. In such a case, punitive damages should be available. See Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998) (J. Hecht dissenting). (7) Personal injury tort claims Spouses can still sue each other for personal injury tort claims and this is an independent cause of action. Schlueter v. Schlueter, 975 S.W.2d 584, 587 (Tex. 1998); Twyman v. Twyman, 855 S.W.2d 619, 625 (Tex. 1993) (recovery for personal injuries of a spouse, including pain and suffering, is the separate property of the injured spouse, and therefore does not add to the marital estate). The Schlueter Court noted that there was no potential for double recovery for pain and suffering in a personal injury claim because this recovery is the separate property of the injured spouse and does not add to the marital estate. Schlueter v. Schlueter, 975 S.W.2d 584, 587 (Tex. 1998). (8) Money judgment is available The Schlueter court held that a court may award a money judgment to one spouse against the other in order to achieve an equitable division of the community estate. Schlueter v. Schlueter, 975 S.W.2d 584, 588 to 589 (Tex. 1998). (9) Money judgment for fraud on the community estate The Schlueter court approved of the usage In the Matter of the Marriage of Moore that: A trial court may award a money judgment to one spouse, even as damages for the spouse's fraud on the community. However, that type of personal judgment is merely a means for recouping the defrauded spouse's share of the community property lost as a result of the wrongdoing spouse's breach of the trust relationship. Such a recovery is not awarded as 'separate damages' for an independent cause of action. See also Murff v. Murff, 615 S.W.2d 696, 699 (Tex. 1981) (allowing money judgment against husband in division of community property where he had substantial sums in savings before separation that had disappeared by the time of trial). (10) Amount of money judgment The Schlueter court further held that the money judgment can only be used as a means for the wronged spouse to recoup the value of his/her share of the community estate loss through the wrongdoer

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spouse's actions. Schlueter v. Schlueter, 975 S.W.2d 584, 589 (Tex. 1998) (citing Mazique v. Mazique, 742 S.W.2d 805, 808 (Tex. App.-Houston [1st Dist.] 1987, no writ). The court further noted that because the amount of the judgment is directly referable to a specific value of lost community property, it will never exceed the total value of the community estate. However, the wronged spouse should not suffer just because, when it is time to divide the community estate, the other spouse has depleted the estate such that there is not enough money or property left to effect a just and right division. Schlueter v. Schlueter, 975 S.W.2d 584, 589 (Tex. 1998). (11) Waste of community assets considered The Schlueter court reasoned that trial courts have wide discretion and are allowed to take many factors into consideration in making a just and right division of the marital estate including waste of community assets. See also Murff v. Murff, 615 S.W.2d 696, 698 to 699 (Tex. 1981). Injured spouses may recover an appropriate share of not only that property existing in the community at the time of divorce, but also that which was improperly depleted from the community estate. Schlueter v. Schlueter, 975 S.W.2d 584, 589 to 590 (Tex. 1998). (12) No punitive damages allowed As to punitive damages, a recovery of punitive damages requires a finding of an independent tort with accompanying actual damages. Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex. 1995). Because there is no independent tort action for actual fraud and accompanying exemplary damages against one's spouse in the context of a deprivation of community assets, if he wronged spouse can prove the heightened culpability of actual fraud, the trial court may consider it in the property division. Schlueter v. Schlueter, 975 S.W.2d 584, 589 to 590 (Tex.1998). (13) The Effect of Schlueter The Court discussed its prior decisions in Bounds v. Caudle, 560 S.W.2d 925, 927 (1977), Price v. Price, 732 S.W. 2d 316, 319 (1987), and Twyman v. Twyman, 855 S.W.2d 619, 624 (1993) and found that the salient characteristics distinguishing Bounds, Price and Twyman from the case at hand was that Bounds, Price and Twyman involved independent causes of action for personal injury torts. Bounds, 560 S.W.2d 926 [wrongful death]; Price, 732 S.W.2d 316 [negligence claim for personal injury]; and Twyman, 855 S.W.2d 621 [intentional infliction of emotional distress]. The Court also compared Cleaver v. George Staton Co., Inc., 908 S.W.2d 468, 471 n.2 (Tex. App.--Tyler 1995, writ denied). Cleaver distinguished Twyman, which involved outrageous

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spousal conduct, and noted that the trial court could sort out the husband's claims against the wife for breach of fiduciary duty and fraud on the community estate in the property division but not by a separate independent cause of action. The Court further reasoned that there was no potential for double recovery for pain and suffering in a personal injury claim because this recovery is the separate property of the injured spouse and does not add to the marital estate. (14) Then along came Vickery v. Vickery In Vickery v. Vickery, 999 S.W.2d 342 (Tex. 1999), questions about Schlueter and the current state of the law for economic torts committed against the community estate come into play. In Vickery, the underlying court of appeals' opinion was unpublished. The Texas Supreme Court denied the petition for review, with Justice Hecht dissenting from the denial in a published opinion which incorporates as an appendix the full court of appeals opinion on the merits. In Vickery, the wife filed an action for bill of review to set aside a divorce decree, a redivision of the community estate, and for actual and punitive damages against her husband and a third party. The husband, an attorney, convinced the wife they should divorce to protect their assets from a possible recovery by the plaintiff in a legal malpractice suit which was pending. The husband had another attorney prepare and file a petition for divorce on behalf of the wife without the wife's consent. The attorney also filed an answer and cross-petition for divorce for the husband. A few weeks later, the plaintiff in the malpractice suit offered to settle that claim within the limits of husband's malpractice insurance coverage, and the husband never disclosed this to wife. Meanwhile, he insisted to her that they divorce. She reluctantly agreed and signed a property settlement agreement that awarded her only a small fraction of the community estate. Within a few months, the husband married his wife's best friend. Jury award upheld The jury found the husband liable for fraud and breach of fiduciary duty and assessed the wife's damages at $6.7 million for loss of marital property and $1.3 million for mental anguish, plus $1 million as punitive damages. The court of appeals affirmed the trial court's judgment, which was prior to the supreme court's ruling in Schlueter, and the supreme court denied petition for review after its ruling in Schlueter. Dissent's view Justice Hecht was critical of the supreme court's refusal to follow the decision in Schlueter. As Justice Hecht noted in his dissent, applying Schlueter would

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require that the actual and punitive damages awarded against the husband be reversed and the case remanded to the trial court to reconsider what division of the community is just and right, in which case the trial court may consider the husband's "dishonesty of purpose or intent to deceive" and "the heightened culpability of actual fraud" as found by the jury. The fact that the supreme court, by denying review, allowed the actual and punitive damages to stand, gives some concern as to what the current state of the law is for economic torts committed against the community estate. Practice Note: Information on Actual Fraud can be found in this paper under the Property Related Torts Section. e. Inception and duration of fiduciary duty Texas law is conflicting regarding the duration of the fiduciary duty between spouses. Reported cases speak in terms of the formal fiduciary relationship (as a matter of law) but do not state that a fact based informal fiduciary relationship cannot exist. Fiduciary duty before marriage An informal fiduciary relationship and duty may arise before marriage. Andrews v. Andrews, 677 S.W.2d 171, 174 (Tex. App.-Austin 1984, no writ) (a fiduciary duty was held to have existed between a couple who had been living together for several years and had agreed to purchase a house together to use as their marital residence; even though the conduct occurred prior to marriage, it was held that the nature of the premarital circumstances created a fiduciary relationship). On a different but interesting note, see also, Jenkins v. Jenkins, 2001 W.L. 507221 (Tex. App.­Dallas 2001. pet. denied) [unpublished opinion] ­ in her petition, wife alleged husband breached his fiduciary duty owed to wife by representing himself to be a heterosexual, marrying wife, insisting she have children, then declaring himself to be a homosexual and leaving her. In his motion for summary judgment, husband argued that his alleged conduct does not constitute a breach of fiduciary duty, as a matter of law. In the alternative, husband argued there was no evidence to support the essential elements of a claim for breach of fiduciary duty, that is, the existence of a duty, and a breach of the duty, and damages caused by the breach. Considering the wife's allegations in her summary judgment evidence, the court concluded that no fiduciary duty existed between the parties prior to marriage that required husband to reveal any internal conflict he might have experienced. No fiduciary duty, answerable in tort damages, exists between spouses to remain married. The fiduciary duty that partners owe to one another does not encompass a duty to remain partners or answer in tort damages. Because no duty

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existed, the trial court properly rendered summary judgment in husband's favor on wife's claims for breach of fiduciary duty. Pre and post marital agreements It has been stated that the fiduciary duty does not exist as a matter of law between persons about to marry with respect to premarital agreements, although it does exist in the context of post-marital agreements. Marsh v. Marsh, 949 S.W.2d 734 (T ex. App.Houston [14th Dist.] 1997, no writ). In the Matter of the Marriage of Smith, 115 S.W.3d 126 (Tex. App.­ Texarkana 2003, pet. denied) after 29 years of marriage husband and wife entered into a Separation and Partition Agreement. Twenty years later [after 49 years of marriage] the husband filed for a petition for divorce. At issue was a broadly-worded residual clause in the Partition Agreement which mandated award of all of the retirement benefits of husband to him. The court noted that because of the confidential relationship between a husband and wife, Texas courts have closely scrutinized property agreements made by spouses during marriage and have imposed the same duties of good faith and fair dealing on spouses as required of partners and other fiduciaries. The court also noted that courts will not protect a party who knowingly enters into a lawful but improvident contract. The fact that a bargain is a hard one does not entitle a party to be relieved there from if he or she assumed it fairly and voluntarily. The record indicated that for approximately twenty years neither party took the position that the Agreement was unconscionable. Additionally, during those twenty years both parties accepted the benefits of the agreement without complaint of unconscionability. Fiduciary duty ends during contested proceeding The Fort Worth Court of Appeals has held that the fiduciary duty between a husband and wife does not continue when a divorce is filed and both sides are represented by independent counsel. Parker v. Parker, 897 S.W.2d 918, 924 (Tex. App.-Fort Worth 1995, writ denied); Bass v. Bass, 790 S.W.2d 113, 119 (Tex. App.-Fort Worth 1990, no writ); but see Faram v. Gervitz- Faram, 895 S.W.2d 839, 844 (Tex. App. Fort Worth 1995, no writ) (waste occurred by acquiring property, incurring debt, and escalating attorney's fees after separation). See however, Boyd v. Boyd, 67 S.W. 3d 398 (Tex. App.­Fort Worth 2002) ­ wife filed for divorce. The parties entered into a mediated settlement agreement that wife later rejected. The trial court held that the mediated settlement agreement was unenforceable and signed a divorce decree after a trial on the property issue. The failure of the husband to disclose his bonus in the mediated settlement agreement rendered it unenforceable. Where a person is under a duty to disclose material information and refrains in do so and thereby leads

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another to contract in reliance on a mistaken understanding of the facts, the resulting contract is subject to recession due to the potential nondisclosure. There is a duty to speak that arises from the fiduciary or confidential relationship or where a person is by force of circumstances under a duty to speak. The fiduciary duty arising from their marriage relationship is not continued when a husband and wife each hire independent professional counsel to represent them in a contested divorce proceeding. Nonetheless, a duty to speak exists where, as here, the parties to a mediated settlement agreement have represented to one another that they have each disclosed the marital property known to them. When one voluntarily discloses information, he has a duty to disclose the whole truth rather than making a partial disclosure that conveys a false impression. Fiduciary duty terminates on divorce The Texarkana Court of Appeals has held that the fiduciary duty between spouses terminates upon divorce. Grossnickle v. Grossnickle, 935 S.W.2d 830, 846 (Tex. App.-Texarkana 1996, writ denied). In the Matter of the Marriage of Notash, 118 S.W.3d 868 (Tex. App.­Texarkana 2003) ­ ex-husband appealed decision from family district court dividing the parties' community property and a finding of breach of fiduciary duty against him in connection with a Motion to Modify a previously granted foreign [Iranian] divorce decree. Held, the ex-husband did not owe the ex-wife a fiduciary duty based on their marital relationship after their divorce and that the evidence was legally insufficient to support a breach of fiduciary duty, or fraud on the community during the marriage. The court further held that when the trial court failed to divide property at the time of the divorce, the ex-spouses became tenants-in-common as to the ownership of the property and no fiduciary or agency relationship exists between co-tenants, or tenants-in-common in the absence of an agreement or contract providing for such. The court concluded that the husband did not owe the wife a fiduciary duty based solely on their relationship as co-tenants. Fiduciary duty did not expire on divorce The Dallas Court of Appeals held that the fiduciary duty did not expire upon the filing of the divorce where the wife sued the husband several years after the divorce to rescind the shareholders agreement she signed during the separation of the parties. Miller v. Miller, 700 S.W.2d 941 (Tex. App.-Dallas 1985, writ ref'd n.r.e.). Here the court applied a "special facts" relationship to impose a fiduciary duty. Practice Note: The subsequent actual receipt by the non-owning party of property awarded to the owner in a decree of divorce or annulment creates a fiduciary

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obligation in favor of the owner and imposes a constructive trust on the property for the benefit of the owner. Tex. Fam. Code §9.011 (2004). f. Statute of Limitations for Breach of Fiduciary Duty

Statute of limitations The Corpus Christi Court of Appeals held that since a claim of fraud or misrepresentation ordinarily is a claim for a debt and, as such, is governed by a four year statute of limitations, and as a breach of fiduciary duty subsumes a claim of constructive fraud, a breach of fiduciary claim is also governed by a four year statute of limitations. In re Estate of Herring, 970 S.W.2d 583 (Tex. App.-Corpus Christi 1998, no pet.); Tex. Civ. Prac. & Rem. Code Ann. § 16.051. Commencement of statute of limitations The statute of limitations does not commence to run until the fraud is discovered by the exercise of reasonable diligence. Further, when there has been a breach of fiduciary duty, the statute of limitations does not begin to run until the claimant knew or should have known of facts that in the exercise of reasonable diligence would have led to the discovery of the wrongful act. Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997); In re Estate of Herring, 970 S.W.2d 583 (Tex. App.-Corpus Christi 1998, no pet.); Steinhagen v. Ehl, 126 S.W.3d 623 (Tex. App.­Beaumont 2004) ­ the discovery rule defers the accrual of a cause of action until the Petitioner discovers or, in the exercise of reasonable diligence, should discover the nature of his or her injury. A cause of action accrues when the wrongful act causes some legal injury, even if the fact of the injury is not discovered until later, and even if all resulting damages have not yet occurred. The discovery rule is applied to a category of cases where the nature of the injury is inherently undiscoverable, and not to particular cases. In conversation cases, the general rule is that the statute of limitations begins to run at the time of the lawful taking, when the legal injury occurs. The "fraudulent concealment doctrine" may be pleaded as an avoidance of the accrual of the cause of action for conversion. However, the discovery rule and the fraudulent concealment doctrine are distinct concepts that exist for different reasons, citing Wagner & Brown, Limited LTD v. Horwood, 58 S.W. 3d 732, 736 (Tex. 2001). g. Claims and Remedies for Breach of Fiduciary Duty Against Third Parties

(1) Claims against third parties Claims against third parties may be joined in a suit for divorce. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998).

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(2) A third party who knowingly participates in the breach of a fiduciary duty may be liable. A third party who knowingly participates in the breach of a fiduciary duty may be liable for that fraud. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998); Mayes v. Stewart, 11 S.W.3d 440 (Tex. App.- Houston[14th Dist.] 2000, reh'g of pet. for review overruled); Connell v. Connell, 889 S.W.2d 534 (Tex. App.-San Antonio 1994, writ denied); Osuna v. Quintana, 993 S.W.2d 201 (Tex. App.-Corpus Christi 1999, no pet.); see also In re Estate of Herring, 970 S.W.2d 583 Tex. App.-Corpus Christi 1998, no pet.). In Mayes v. Stewart, 11 S.W.3d 440 (Tex. App.­Houston [14th Dist.] 2000, pet. denied) ­ former wife brought action against former husband and former husband's friend for fraud, conspiracy and breach of fiduciary duty with regard to proceeds of a lottery ticket. Texas courts long ago found an aggrieved spouse may maintain causes of action against third-parties for the fraudulent conveyance of community property. The court of appeals observed that in other cases that a wife who had no knowledge of her former husband's ownership in certain property at the time of their divorce in which he had secretly conveyed in trust, would be allowed to establish her ownership in the property as against her former husband's second wife; that a third party who knowingly participates in the breach of fiduciary duty may also be liable for the unfair disposal of community property; and that a fact issue exists as to whether a wife had been fraudulently deprived of her rights and proceeds of an insurance policy purchased by husband with community funds in a suit against the wife's former mother-in-law and recovery for one-half of the proceeds. In Stevenson v. Koutzarov, the court found a third party liable to husband for fraud. Stevenson v. Koutzarov, 795 S.W.2d 313 (Tex. App.--Houston [1st Dist.] 1990, writ denied). The third party sought reimbursement from husband for medical bills, furniture and cash advances on credit cards allegedly made for wife. Id. at 322. The court found the hospital bills were in fact for the third party and the furniture was delivered to the third party's home. Id. at 322. Also, the cash advances were deposited into the third party's personal account. Id. at 322. The court found this evidence sufficient to support a finding of fraud against the third party. Id. at 322. Conveyance of community as legal fraud A conveyance or disposition of community property may be a legal fraud even though there is an absence of intent. Hartman v. Crain, 398 S.W.2d 387 (Tex. Civ. App.-Houston 1966, no writ); Osuna v. Quintana, 993 S.W.2d 201 (Tex. App.-Corpus Christi 1999, no pet.).

Proof required If a third party paid valuable consideration for an asset fraudulently conveyed during marriage, the complaining spouse must prove that the third party either colluded in the fraud on the community or had actual or constructive notice of the managing spouse's lack of authority to exchange the special community property asset in order to receive the remedy of constructive trust. Tex. Fam. Code Ann. §3.104(b); see Thomas v. Casale, 924 S.W.2d 433 (Tex. App.Fort Worth 1996, writ denied). If an asset is transferred while a divorce is pending, the Family Code protects the third party from divestiture of his or her interest in the asset, and the alleging spouse bears the burden of proving that the third party had notice of the managing spouse's intent to injure the rights of the other spouse. Tex. Fam. Code Ann. § 6.707. Intent to defraud known A third party must repay community funds improperly expended for the third party's benefit if the person has the knowledge that the funds are community funds and is aware of a spouse's intent to defraud the non-transferor spouse. Tex. Fam. Code Ann. § 6.707; see Thomas v. Casale, 924 S.W.2d 433 (Tex. App.-Fort Worth 1996, writ denied). Constructive trust When there is a gift to a third party, courts are willing to impose a constructive trust for the transferred asset. Carnes v. Meador, 533 S.W.2d 365 (Tex. Civ. App.-Dallas 1975, writ ref'd n.r.e.). This is consistent with the court's view that transfers of special community property without consideration are constructively fraudulent, and the burden of proof shifts to the conveying spouse to show that the transfer was not fraudulent. Murphy v. Metropolitan Life Ins. Co., 498 S.W.2d 278, 282 (Tex. Civ. App.Houston [14th Dist.] 1973, writ ref'd n.r.e.); In re Marriage of DeVine, 869 S.W.2d 415, 422 (Tex. App.- Amarillo 1993, writ. denied). However, in Wilkerson v. Wilkerson, 992 S.W.2d 719 (Tex. App.­ Austin 1999) husband filed action for divorce. The trial court, in entering the divorce decree, imposed a constructive trust and lien as to real property in favor of the former wife on which real property husband had signed a contract for deed and began making payments before marriage to his wife. The court held that the wife sought to avoid the consequences of her failure to prove reimbursement by advancing the equitable theory of constructive trust. The court noted that a constructive trust arises where a conveyance is induced on the agreement on a fiduciary or confidant to hold in trust for a reconveyance or other purpose. It is a well settled general rule that if one person obtains the legal title to property, not only by fraud, or by violation of confidence of fiduciary relations but any

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other unconscientious manner, so that he cannot equitably retain the property which really belongs to another, equity carries out its theory of double ownership, equitable and legal, by impressing a constructive trust on the property in favor of the one who is good conscience and is entitled to it, and who is considered in equity as a beneficial owner. Wife's facts did not support constructive trust. Practice Note: The subsequent actual receipt by the non-owning party of property awarded to the owner in a decree of divorce or annulment creates a fiduciary obligation in favor of the owner and imposes a constructive trust on the property for the benefit of the owner. Tex. Fam. Code §9.011 (2004). Money judgments against third parties Judgments against third parties for participating in the fraud on the community are allowed. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998); Osuna v. Quintana, 993 S.W.2d 201 (Tex. App.-Corpus Christi 1999, no writ) (joint and several judgment against husband and mistress upheld, which represented total community funds diverted by husband to mistress). h. Remedies Available for Fraudulent Conduct

judgment is directly referable to a specific value of lost community property, it will never exceed the total value of the community estate. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998). (5) Owelty can equalize awards A money judgment is also known as an "owelty judgment," which means equalization. It may be used to equalize the property division for any reason. See Massey v. Massey, 807 S.W.2d 391 (Tex. App.Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993) (per curiam). (6) Evidence should be presented In order to obtain a money judgment, evidence of the amount of the gift, transfer or conveyance should be specifically presented. See Leal v. Leal, 628 S.W.2d 168 (Tex. App.-San Antonio 1982,no writ). (7) Constructive trust remedy available A constructive trust is an equitable remedy created by the courts to prevent unjust enrichment or to compensate the victim of a breach of a fiduciary or confidential relationship. In re Marriage of Loftis, 40 S.W.3d 160 (Tex. App.- Texarkana 2001, no pet.); Exploration Co. v. Vega Oil & Gas Co., 843 S.W.2d 123, 127 (Tex. App.-Houston [14th Dist.] 1992, writ denied); Hudspeth v. Stoker, 644 S.W.2d 92 (Tex. App.-San Antonio 1982, writ ref'd). The court will impose a constructive trust over an asset fraudulently conveyed if it is unique or if the estate is inadequate and the asset must be returned to the estate to effect an equitable division. Carnes v. Meador, 533 S.W.2d 365 (Tex. Civ. App.-Dallas 1975, writ ref'd n.r.e.); Hudspeth v. Stoker, 644 S.W.2d 92 (Tex. App.-San Antonio 1982, writ ref'd). (8) Express agreement An express agreement between the parties is not necessary to create a constructive trust. The constructive trust is imposed by law because the person holding the title to property would profit by a wrong or would be unjustly enriched if he or she were permitted to keep the property. Omohundro v. Matthews, 161 Tex. 367, 341 S.W.2d 401, 405 (1960). (9) Flexibility A constructive trust remedy is flexible and broad. Sever v. Massachusetts Mut. Life Ins. Co., 944 S.W.2d 486, 492 (Tex. App.- Amarillo 1997, writ denied). (10) Confidential relationship Before a constructive trust may be imposed, there must generally be a prior confidential relationship. Rankin v. Naftalis, 557 S.W.2d 940, 944 (Tex. 1977). Informal relationships can be sufficient to establish a constructive trust. Walter E. Heller ' Co. v. Barnes,

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(1) Disproportionate division of community estates A trial court may consider fraudulent conduct as one of the factors in determining a "just and right" division of the community. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex: 1998). Thus, an innocent spouse may be awarded a disproportionate share of the community estate, including a disproportionate share of the amount which was wrongfully gifted, transferred, wasted or conveyed. (2) Recovery by injured spouse An injured spouse may recover his or her appropriate share of not only that property existing at the time of the divorce, but also that which was improperly depleted from the community estate. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998). (3) Money judgment is viable remedy A money judgment is a viable remedy for achieving an equitable division of the marital estate of the parties. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998); see also Murff v. Murff, 615 S.W.2d 696, 699 (Tex. 1981) (money judgment allowed against husband for dissipating the parties savings). (4) Amount of money judgment A money judgment can only be used as a means for the wronged spouse to recoup the value of that spouses' share of the community estate lost through the other spouses' actions. Since the amount of the

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412 S.W.2d 747 (Tex. Civ. App.-El Paso 1967, writ ref'd n.r.e.) The confidential relationship may arise from moral, social or purely personal relationships. Weaver v. Stewart, 825 S.W.2d 183, 185 (Tex. App.Houston [14th Dist.] 1992, writ denied); Seymour v. American Grinding Co., 956 S.W.2d 49,61 (Tex. App.-Houston [1st Dist.] 1996, writ denied). (11) Proof Before a constructive trust may be imposed, there must be proof of fraud, either actual or constructive. Talley v. Howsley, 142 Tex. 81, 176 S.W.2d 158, 160 (1943); Mangione v. Jaffe, 61 S.W.3d 591,593 (Tex. App.-San Antonio 2001, pet. dism'd). (12) Examples of constructive trust where the court applied a constructive trust: Andrews v. Andrews, 677 S.W.2d 171 (Tex. App.Austin 1984, no writ) (court imposed a constructive trust on real property where the court found the fiduciary relationship between a couple who had been seeing each other for seven years and who were living together when they agreed to jointly purchase property for their marital residence, but where the future husband unilaterally took title to the property in his own name only); Ford v. Long, 713 S.W.2d 798 (Tex. App.-Tyler 1986, writ ref'd n.r.e.) (court imposed a constructive trust in favor of a sister and ordered a partition of property to prevent the wrongdoer from profiting from his wrongful act where the husband killed his wife and then claimed a homestead right in the community real property that the wife had left to her sister in the wife's will); Hudspeth v. Stoker, 644 S.W.2d 92 (Tex. App.-San Antonio 1982, writ ref'd) (husband who changed life insurance beneficiary from his former wife to new wife violated his legal duty under the decree and trial court was justified in imposing constructive trust on the proceeds of the policy); Ragland v. Ragland, 743 S.W.2d 758 (Tex. App.Waco 1987, no writ) (court held that a constructive trust could not be used to deprive a spouse who murdered another spouse of property lawfully acquired through a community interest already vested); In re Marriage of Braddock, 64 S.W.3d 581 (Tex. App.-Texarkana 2001, no pet.) (court imposed a constructive trust when common-law wife, who lived with ex-husband in her home for five years after being divorced, conveyed real property to husband to use as

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collateral on a bank loan, which he later refused to reconvey). (13) Resulting trusts Like the constructive trust, the doctrine of the resulting trust is invoked to prevent unjust enrichment. Nolana Development Assn v. Corsi, 682 S.W.2d 246, 250 (Tex. 1984); Savell v. Savell, 837 S.W.2d 836, 839 (Tex. App.- Houston [14th Dist.] 1992, writ denied). (14) When resulting trust arises A purchase money resulting trust is implied in law when one person pays for the purchase of an asset and the title is taken in another person's name. Nolana Development Assn v. Corsi, 682 S.W.2d 246, 250 (Tex. 1984); In re Marriage of Loftis, 40 S.W.3d 160 (Tex. App.-Texarkana 2001, no pet.). (15) Relationship of parties The party who paid the purchase money is the equitable owner of the property, and the titleholder is a mere trustee who holds the property for the benefit of those that furnished the consideration. Masterson v. Hogue, 842 S.W.2d 696, 697 (Tex. App.-Tyler 1992, no writ); Osuna v. Quintana, 993 S.W.2d 201, 210 (Tex. App.-Corpus Christi 1999, no writ). (16) Resulting trust not applicable A resulting trust does not arise when the transferee is a wife, child, or other natural object of bounty of the person by whom the purchase price was paid. Osuna v. Quintana, 993 S.W.2d 201, 210 (Tex. App.-Corpus Christi 1999, no writ); Amador v. Berrospe, 961 S.W.2d 205, 207 (Tex. App.- Houston [1st Dist.] 1996, no writ). (17) Burden of proof The party claiming the resulting trust bears the burden of proving that : (1) community funds were used to make a purchase; and (2) there was no intent of actual ownership to vest in the third party. Bell v. Smith, 532 S.W.2d (Tex. Civ. App.-Fort Worth 1976, no writ). (18) Proof of actual or constructive fraud It is not necessary to prove actual or constructive fraud, although those elements may be involved in the transaction. Bell v. Smith, 532 S.W.2d 680 (Tex. Civ. App.-Fort Worth 1976, no writ). (19) Texas Uniform Fraudulent Transfer Act The Texas Uniform Fraudulent Transfer Act (TUFTA), and the Tex. Bus. & Com. Code Ann. §§ 24.001 to 24.012, may be useful in seeking a remedy for breach of fiduciary duty, especially against third parties. See J.Michael Putman, M.D.P.A. Money

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Purchase Pension Plan v. Stephenson, 805 S.W.2d 16 (Tex. App.-Dallas 1991, no writ) (TUFTA was remedy used to set aside husband's conveyance of real property); see also Thomas v. Casale, 924 S.W.2d 433 (Tex. App.-Fort Worth 1996, writ denied). The court, in Thomas v. Casale, in declining to apply TUFTA, state at page 437 of its opinion: We first conclude that the Uniform Fraudulent Transfer Act is not applicable and that the trial court made no implied finding that it does apply. Although the term "creditor" is defined by section 24.002(4) of the Act, id., it include a spouse who has a claim for property fraudulently transferred by the other spouse, we presume that the trial court's conclusions of law do not mention the Act because there is no evidence in the record that Robert was insolvent during the time he shared an account with Patricia or that the sharing of the account left Robert with "unreasonably small" assets or debts beyond his ability to pay. The Act does not apply in the absence of such evidence. See id. § 24.005 (Vernon Supp. 1996), § 24.006 (Vernon 1987). The court in Thomas v. Casale, supra, refused to apply Tex. Fam. Code § 6.707 because the wife (petitioner) failed to prove that the husband's girlfriend knew about the transfer of community assets. Practice Note: Texas Family Code §6.707 [Transfers and Debts Pending Decree] provides:(a) A transfer of real or personal community property or a debt incurred by a spouse while a suit for divorce or annulment is pending that subjects the other spouse or the community property to liability is void with respect to the other spouse if the transfer was made or the debt incurred with the intent to injure the rights of the other spouse. (b) A transfer or debt is not void if the person dealing with the transferor or debtor spouse did not have notice of the intent to injure the rights of the other spouse. (c) The spouse seeking to void a transfer or debt incurred while a suit for divorce or annulment is pending has the burden of proving that the person dealing with the transferor or debtor spouse had notice of the intent to injure the rights of the spouse seeking to void the transaction. (20) Creditor defined Although it was enacted to cover debtor-creditor issues, "creditor" is defined under TUFTA as a person "including a spouse" who has a claim. Tex. Bus. & Com. Code Ann. § 24.002(4). The claim need not be reduced to judgment. (21) Transfer is fraudulent if elements met TUFTA provides that a transfer is fraudulent as to a creditor, whether the creditor's claim arose before or within a reasonable time after the transfer was made, if the debtor made the transfer (1) with actual intent to hinder, delay, or defraud any creditor of the

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debtor or (2) without receiving a reasonably equivalent value in exchange for the transfer, and the debtor (a) was engaged in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction or (b) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due. Tex. Bus. & Com. Code Ann. § 24.005; see Thomas v. Casale, 924 S.W.2d 433, 437 (Tex. App.-Fort Worth 1996, writ denied) (TUFTA does not apply absent evidence that the husband was insolvent during the time of sharing an account with his paramour or that sharing the account left husband with "unreasonably small" assets or debts beyond his ability to pay). (22) Transfer fraudulent as to a creditor TUFTA provides that a transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer and the debtor was insolvent at the time or the debtor became insolvent as a result of the transfer. Tex. Bus. & Com. Code Ann. § 24.006. (23) Burden of proof The party seeking to set aside the transfer must carry the burden of proof as to the elements of intent. Rucker v. Steelman, 619 S.W.2d 5 (Tex. Civ. App.Houston [1st Dist.] 1981, writ ref d n.r.e.); see Tex. Bus. & Com. Code Ann. § 24.005(b) for the factors to consider in determining intent. (24) Remedies Under TUFTA, a creditor may obtain the following remedies for relief against a transfer, subject to certain defenses available to the transferee as set forth in Section 24.009 of the Act, Tex. Bus. & Com. Code Ann. § 24.008: (1) avoidance of the transfer to the extent necessary to satisfy the creditor's claim; (2) an attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the Texas Rules of Civil Procedure and the Civil Practice and Remedies Code; or (a) an injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property; (b) appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or (c) any other relief the circumstances may require; and (d) judgment for the value of the asset transferred as provided by Section 24.009 of the Texas Business and Commerce Code. (25) Election of remedies The court cannot award a double remedy. Tort damages and a disproportionate division on the same

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conduct are not allowed. Twyman v. Twyman, 855 S.W.2d 619 (Tex. 1993) (both a disproportionate division of the community estate and an award for fraud may be contained in the same judgment, however, the record must reflect evidence to support a disproportionate division of the community estate on grounds other than the fraudulent transfer); Toles v. Toles, 45 S.W.3d 252 (Tex. App.­ Dallas 2001, pet. denied). (26) Punitive damages In Schlueter, the Texas Supreme Court concluded that since there was no independent tort cause of action for a spouse's wrongful disposition of community assets, the wronged spouse may not recover punitive damages from the other spouse. However, one spouse can still sue another for fraud relating to separate property and recover damages, including mental anguish damages and punitive damages, as in any other case. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998) (J. Hecht dissenting). i. Remedies

(1) Disgorgement The classic case involving disgorgement is Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509 (Tex. 1942). In Kinzbach, Kinzbach and Corbett were engaged in the oil field tool business. Corbett owned contractual rights to a patented tool known as a whipstock. Corbett desired to sell the contract right to Kinzbach but Kinzbach and Corbett were unfriendly with one another. Corbett contacted Turner, an employee of Kinzbach and offered to pay him a commission if Kinzbach bought the whipstock contract rights. Corbett instructed Turner that he would take $20,000 but he was not to mention price to Kinzbach. Turner approached Kinzbach and Kinzbach directed Turner to make inquiries about acquiring the whipstock contract rights. Kinzbach subsequently disclosed to Turner that he would be willing to pay as much as $25,000. Turner did not disclose that he was to earn a commission on the sale to Kinzbach and he did not disclose that Corbett would be willing to take $20,000. Kinzbach subsequently purchased the contract rights for $25,000 and then learned of the commission to be paid to Turner. Kinzbach terminated Turner and subsequently sue Corbett and Turner. Pining that Turner breached his duty of full disclosure, the court concluded that disgorgement was appropriate. The court rejected defendants' argument that Kinzbach suffered no damages because it received full value for the price paid. The court concluded that If the fiduciary takes any gratuity or benefit or acquires any interest adverse to his principal without a full disclosure, it is a betrayal of his trust and a breach of fiduciary duty. Id. at 514.

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(2) Fee Forfeiture An agent who breaches his fiduciary duty to his principal is not entitled to be compensated for his services and fee forfeiture is a fundamental remedy. Douglas, 695 S.W.2d at 319. The mere failure of the agent to discharge his duty of disclosure and reveal to the beneficiary all aspects of the transaction is in and of itself a breach of the duty justifying fee forfeiture. Russell v. Truitt, 554 S.W.2d 948, 954 (Tex. Civ. App.­Fort Worth 1977, writ ref'd n.r.e.). The Supreme Court has recognized that the function of fee forfeiture is not to compensate the principal for a violation of the duty of loyalty but to protect relationship based on trust by discouraging agents' disloyalty. Burrow v. Arce, 997 S.W.2d (Tex. 1999). Fee forfeiture has been considered by the courts to be an appropriate remedy without regard to whether the breach of fiduciary duty resulted in actual damages to the beneficiary. Id. at 240. The Court determined that whether an attorney must forfeit his fee is determined by applying Section 49 of the proposed RESTATEMENT (THIRD) OF LAW GOVERNING LAWYERS as well as additional factors based on the specific factual circumstances presented by each case. Id. at 245. The determination of the amount of forfeiture is to be made by the court. Id. at 246. The Court also ruled that when forfeiture of an attorney's fees is claimed, the trial court must determine whether a violation of duty occurred, whether forfeiture is appropriate, and whether all or only part of the attorney's fee should be forfeited. While some of these issues would be expected to present fact issues for the jury, the Court ruled that "factors like the adequacy of other remedies and the public interest in protecting the integrity of the attorney-client relationship, as well as the weighing of all other relevant considerations, present legal policy issues well beyond the jury's province of judging credibility and resolving factual disputes." Id. The court also noted the importance in determining whether forfeiture of fees is needed to satisfy public interest in protecting the attorney-client relationship. (3) Constructive Trust The equitable remedy of the imposition of a constructive trust is recognized by the courts for a violation of a fiduciary duty arising by virtue of a confidential relationship. Meadow v. Bierschwale, 516 S.W.2d 125 (Tex. 1974); Eglin v. Schober, 759 S.W.2d 950 (Tex. App.-Beaumont 1988, writ denied); Hamblet, 714 S.W.2d at 126. (4) Rescission The remedy of rescission is available to a beneficiary who demonstrates a breach of fiduciary duty by the agent in causing the principal to enter into

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a designated transaction. Miller v. Miller, 700 S.W.2d 941 (Tex. App.-Dallas 1985, writ ref'd n.r.e.). (5) Damages The injured beneficiary is entitled to recover actual and exemplary damages against the fiduciary which are the result of the breach of fiduciary duty. Manges, 673 S.W.2d at 180; Horton v. Robinson, 776 S.W.2d 260 (Tex.App. - El Paso 1989, no writ); Douglas, 695 S.W.2d at 319; TEXAS COMM. ON PATTERN JURY CHARGES, STATE BAR OF TEXAS, TEXAS PATTERN JURY CHARGES BUSINESS, CONSUMER & EMPLOYMENT PJC 110.18 (1998). However, a party must first be awarded actual damages before he can recover exemplary6 damages. See Balusik v. Kollatschny, 2002 WL 1822360 (Tex. App. ­ Houston [1st Dist.] 2002, no pet.). Recovery for exemplary damages should be governed by Chapter 41 of the Texas Civil Practice and Remedies Code. TEX. CIV. PRAC. & REM. CODE ANN. § 41.002 (Vernon 1997). See Aboud v. Schlichtmeier, 6 S.W.2d 742 (Tex. App. Corpus Christi 1999, pet. denied). 22. Alter Ego Outstanding references (via John Nichols) recommended, used, referred to or consulted for the preparation of the alter ego part of this article are: 1. Owner Liability Protection and Piercing the Veil of Texas Business Entities, by Elizabeth S. Miller, State Bar of Texas - Choice and Structuring of Entities After Margin Tax Filing Season and Texas Business Organization Code 2008, Chapter 4. 2. Overcoming Asset Protection Planning: Reaching Difficult Property Interests, by Bruce H. Clark, State Bar of Texas ­ Collections and Creditor Rights 2008, Chapter 9. 3. Relational Theories of Liabilities, by John W. Griffin, Jr., State Bar of Texas ­ Advanced Civil Course 2008, Chapter 10. 4. Fiduciary Duties in Family Law, by Rikky Rivers, State Bar of Texas ­ Fiduciary Litigation Course 2008, Chapter 9. 5. Owner Liability Protection and Piercing the Veil of Texas Business Entities, by Elizabeth Stone Miller, from Texas Business Organizations: Choice of Entity and Formation (2007). 6. Corporate Veil Piercing in Texas: The Single Business Enterprise Theory, by Jeff Joyce, State Bar of Texas ­ Civil Trial Course (2007). 7. Disregarding the Corporate Fiction, West's Texas Practice Guide, Sec. 8:539 [Marital Property] (2006). 8. Equitable Remedies for Disregarding Corporate Entity, West's Texas Practice Guide, Liability for Corporate and Non-Corporate Acts, Secs. 13:49 ­ 13:65 (2006).

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9. Liability for Corporate and Non-Corporate Acts, West's Texas Practice Guide, Section 13.69-70 [Business and Commercial Litigation], (2006). 10. Claims Against Entities Owned by the Parties: Fraud, Civil Conspiracy, Jensen, Alter Ego, and Representing the Entities, by Cheryl Wilson, State Bar of Texas ­ Advanced Family Law Course (2005), Tab 24. 11. Busting Trusts Upon Divorce, by Richard R. Orsinger, State Bar of Texas ­ New Frontiers in Marital Property Law (2003). 12. Asserting Community Property Claims: Complex Trust Issues, by Gary Stolbach, State Bar of Texas ­ Advanced Family Law Course (2002), Ch. 68. 13. Tending to Family Business: Special Issues Involving Closely-Held Business Entities, by Cheryl Wilson, State Bar of Texas ­ Advanced Family Law Course (2001), Tab 24. 14. Handling a Divorce Involving a Closely Held Corporation, by James M. Loveless, State Bar of Texas ­ Marriage Dissolution Institute (1998). 15. Piercing The Corporate Veil and Alter Ego, by Joe Shannon, Jr., State Bar of Texas ­ Advanced Family Law Course (1998), Tab WW. 16. Piercing the Corporate Veil in a Divorce: Application of the Alter Ego Theory, by James Loveless, State Bar of Texas ­ Advanced Family Law Course (1993). What is Alter Ego? In the Dictionary of Business Terms, 3rd Edition, by Jack P. Friedman, published by Barron's Educational Series, Inc., "alter ego" is defined as the other self. Under the doctrine of alter ego, the law will disregard the limited personal liability one enjoys when acting in a corporate capacity and will regard the act as his or her personal responsibility. To invoke the doctrine, it must be shown that the corporation was a mere conduit for the transaction of private business and that no separate identity of the individual and the corporation really existed. In West's Encyclopedia of American Law, published by Thomas Gale, "alter ego" is defined as a doctrine used by the courts to ignore the corporate status of a group of stockholders, officers and directors of a corporation in reference to their limited liability in order to hold them personally liable for their actions when they have acted fraudulently or unjustly, or when to refuse to do so will deprive an innocent victim of redress for an injury caused by them. A corporation is considered the alter ego of its stockholders, directors, or officers when it is used merely for the transaction of their personal business for which they want immunity from individual liability. A parent corporation is the alter ego of a subsidiary corporation is it controls and directs its activities as that it will have limited liability for its wrongful acts. The alter ego doctrine is also a.

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known as the instrumentality rule because the corporation becomes an instrument for the personal advantage of its parent corporation, stockholders, directors, or officers. When a court applies it, the court is said "to pierce the corporate veil." (1) Piercing In the Non-Family Law Context Simply stated, under the alter ego doctrine in the non-family law context, the court disregards and pierces the corporate veil (entity) and holds individuals responsible for acts knowingly and intentionally done in the name of the corporation. Black's, supra at p. 77; Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986). (2) Reverse Piercing In the Family Law Context Under the alter ego doctrine, in the family law context, the court disregards and reverse pierces the corporate veil (entity) and characterizes corporate assets as part of the community estate. Zisblatt v. Zisblatt, 693 S.W.2d 944 (Tex. Civ. App.--Fort Worth 1985, writ dism'd) [on a claim by the wife that almost every asset normally associated with a community estate was claimed by the husband to be owned by his separate property company ­ the court ruled that corporate assets were to be considered community property because the husband's separate property corporation was his alter ego, where, for example, the corporation owned such items as the family home and its furnishings]; West's Texas Practice Guide, Marital Property, Sec. 8.539 ­ Disregarding the Corporate Fiction (2007). Practice Note: A copy of the Zisblatt, supra, and Lifshutz, infra, opinions should be in the lawyer's briefcase in every instance a claim for alter ego arises. b. Leading Cases on Alter Ego in Family Law, Business Relationships, and Trusts and Estates Relationships

App.--Dallas 2005, no pet.); 5. Southwest Livestock & Trucking Company v. Dooley, 884 S.W.2d 805 (Tex. App.-San Antonio 1994, writ denied); 6. Zisblatt v. Zisblatt, 693 S.W.2d 944 (Tex. Civ. App.-Fort Worth 1985, writ dism'd); 7. Spruill v. Spruill, 624 S.W.2d 694 (Tex. App.­ El Paso 1981, writ dism'd); 8. Humphrey v. Humphrey, 593 S.W.2d 824 (Tex. App.-Houston [14th Dist.] 1980, writ dism'd); 9. Dillingham v. Dillingham, 434 S.W.2d 459 (Tex. Civ. App.-Fort Worth 1968, writ dism'd). Business Relationships 1. Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986, reh'g denied). 2. Matlock v. McCormick, 948 S.W.2d 308 (Tex. App. ­ San Antonio 1997, no pet.). 3. Mancorp, Inc. v. Culpepper, 802 S.W.2d 226 (Tex. 1990). 4. Tigrett v. Pointer, 580 S.W.2d 375 (Tex. App. ­ Dallas 1978, writ ref'd n.r.e.). 5. Cebcor Service Corporation v. Landscape Design and Construction, Inc., No 05-07-00092-CV, (Tex. App. ­ Dallas 2008), memorandum opinion. 6. Hall v. Timmons, 987 S.W.2d 248 (Tex. App. ­ Beaumont 1999, no pet.). 7. J.E. Ross v. International Bank, N.A., 705 S.W.2d (Tex. Civ. App, ­ Houston [1st Dict.] 1986, writ ref'd n.r.e.). 8. Country v. Village Homes, Inc. v. Patterson, No. 01- 03-01240-CV, (Tex. App. ­ Houston [1st Dist.] 2007), memorandum opinion. 9. Menetti v. Chavers, 974 S.W.2d 168 (Tex. App. ­ San Antonio 1998,no pet.). 10. Angus v. Air Coils, Inc., 567 S.W.2d 931 (Tex. App. ­ Dallas 1978, no writ). 11. Duke v. Duke, 605 S.W.2d 408 (Tex. Civ. App.-- El Paso 1980, writ dism'd). 12. Spruill v. Spruill, 624 S.W.2d 694 (Tex. Civ. App.--El Paso 1981, writ dism'd). 13. Zisblatt v. Zisblatt, 693 S.W.2d 944 (Tex. App.-- Fort Worth 1985, writ dism'd). 14. Chunn v. Chunn, 1999 WL 626733 (Tex. App.-- Houston [1st Dist.] 1999, pet. denied). 15. Lifshutz v. Lifshutz, 61 S.W.3d 511 (Tex. App.-- San Antonio 2001, pet. denied). 16. Young v. Young, 168 S.W.3d 276 (Tex. App.-- Dallas 2005, no pet.). Trusts and Estates Relationships 1. In Re Marriage of Long, 542 S.W.2d 712 (Tex. Civ. App.--Texarkana 1976, no writ). 2. In Re Marriage of Burns, 573 S.W.2d 555 (Tex. Civ. App.--Forth Worth 1978, writ dism'd).

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Family Law The following cases are the leading cases on alter ego in family law: 1. Marcum v. Marcum, No. 01-04-01062-CV, (Tex. App. ­ Houston [1st Dist.] 2008), memorandum opinion. 2. In Re Brian Kenefick, No. 14-08-00203-CV, (Tex. App, ­ Houston [14th Dist.] 2008), majority memorandum opinion. 3. Lifshutz v. Lifshutz, 61 S.W.3d 511 (Tex. App.San Antonio 2001, pet. denied); rev'd, 2006 (LWC-3235) (Tex.App. 2006); 199 S.W.3d 9 (Tex. App.--San Antonio 2006). 4. Young v. Young, 168 S.W.3d 276 (Tex.

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c.

Elements of Alter Ego Claim--Corporations

(1) Business Law In the leading case of Castleberry v. Branscum, the Texas Supreme Court established that alter ego exists when there is such a unity between the shareholders and the corporation. After this is found, harm to the plaintiff must be shown to trigger piercing. The court set forth 6 situations in which harm can be found: 1. when the fiction is used as means of perpetrating fraud; 2. when a corporation is organized and operated as a mere tool or business conduit of another corporation; 3. where the corporate fiction is resorted to as a means of evading an existing legal obligation; 4. where the corporate fiction is employed to achieve or perpetrate a monopoly; 5. where the corporate fiction is used to circumvent a statute; or 6. where the corporate fiction is relied upon as a protection of a crime or to justify wrong. Castleberry, 721 S.W.2d at 272; see also Texas [Business Law] Pattern Jury Charges 108.1 and 108.2. In response to Castleberry, the Legislature, in 1989, in Tex. Bus. Corp. Act. Ann. art. 2.21 recodified at Tex. Bus. Orgs. Code §§21.223-21.226 narrowed the circumstances in which a shareholder can be held liable for the debts of a corporation. Under this statute, a shareholder "may not be held liable to the corporation or its obligees with respect to . . . any contractual obligation of the corporation . . . on the basis that the holder . . . is or was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory . . . ." Willis v. Donnelly, 199 S.W.3d 262 (Tex. 2006). There are two exceptions to the statute: (1) where the shareholder "expressly . . . agrees to be personally liable to the obligee for the obligation"; and (2) where the shareholder "caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the" shareholder. Willis, 199 S.W. 3d 262, at 272. (2) Family Law In family law alter ego cases, as stated above in paragraph III.A.2. the doctrine or process of "reverse piercing" applies. Reverse piercing seeks to make the corporation and its assets liable to community property characterization, where in "traditional piercing," as stated above in paragraph III.A.1. the plaintiff is seeking to hold the individual shareholder

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liable. The leading case on reverse piercing is Zisblatt v. Zisblatt, 693 S.W.2d 944, supra. The State Bar of Texas also publishes a list of elements for reverse piercing in its publication, Texas Pattern Jury Charges, Family Law, 2006. Zisblatt v. Zisblatt In Zisblatt, the Fort Worth Court of Appeals listed two necessary elements that must be present for reverse piercing to occur. "The corporate entity will not be disregarded unless: (1) it is made to appear that there is such a unity that the separateness of the corporation has ceased to exist; and (2) the facts are such that an adherence to the fiction of the separate existence of the particular circumstances, sanction fraud or promote injustice. Zisblatt, 693 S.W.2d 944, at p. 950. Boyo v. Boyo In Boyo, the Beaumont Court of Appeals recently added the additional element that no reimbursement is available for reverse piercing claims. The court lists three elements: (1) there is a unity of the corporation and the spouse; (2) the spouse's improper use of the corporation has damaged the community estate; and (3)the loss cannot be remedied by reimbursement. Boyo v. Boyo, 196 S.W.3d 409, (Tex. App.-- Beaumont 2006, no pet.). In addition to adding an element to the reverse piercing claim, the court also set out that the alter ego theory may be used to establish jurisdiction. The court stated, "The alter ego theory may be applied under appropriate circumstances to "fuse" entities for "minimum contacts" jurisdiction purposes. Id. In establishing jurisdiction under this theory, only the defendant's contacts with the forum are considered. Id. Marcum v Marcum In Marcum v. Marcum, No. 01-04-01062-CV, (Tex. App. ­ Houston [1st Dist.] 2008), the court stated: A trial court generally pierces a corporation veil in a divorce case because the community would otherwise have virtually no property. Lifshutz v. Lifshutz, 61 S.W.3d 511, 516- 17 (Tex. App. ­ San Antonio 2001, pet. denied) (citing Zisblatt v. Zisblatt, 693 S.W.2d 944, 953 (Tex. App. ­ Forth Worth 1985, writ dism'd) and Spruill v. Spruill, 624 S.W.2d 694, 695-96 (Tex. App. ­ El Paso 1982, writ denied)). In a divorce case, a finding of alter ego sufficient to justify piercing the corporate veil requires, at least: (1) unity between the separate property corporation and the

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spouse such that the separateness has ceased to exist and (2) the spouse's improper use of the corporation damaged the community estate beyond that which might be remedied by a claim of reimbursement. Young v. Young, 168 S.W.3d 276, 281- 82 (Tex. App. ­ Dallas 2005, no pet.) (citing Lifshutz, 61 S.W.3d at 517). "A right of reimbursement arises when the funds or assets of one estate are used to benefit and enhance another estate without itself receiving some benefit." Vallone v. Vallone, 644 S.W.2d 455, 459 (Tex. 1982). "A party claiming the right of reimbursement must plead and prove that the expenditures and improvements were made and that they are reimbursable." Hailey v. Hailey, 176 S.W.3d 374, 384 (Tex. App. ­ Houston [1st Dist.] 2004, no pet.) (citing Vallone, 644 S.W.2d at 459). Texas Family Law Pattern Jury Charges ­ 2008 PJC 205.1 Mere Tool or Business Conduit (Alter Ego) A corporation is an entity distinct from its shareholders. However, the distinct corporate identity of the corporation may be disregarded if there is such unity between the corporation and a shareholder that the separateness of the corporation has ceased and the shareholder's improper use of the corporation has damaged the community estate. In deciding whether there is such unity between a corporation and a shareholder that the separateness of the corporation has ceased, you are to consider the total dealings of the corporation and the shareholder, including-- 1. the degree to which the corporation's property has been kept separate from that of the shareholder; and 2. the amount of financial interest, ownership, and control the shareholder maintains over the corporation; and 3. whether the corporation has been used for personal purposes. It is not necessary that each of the factors be present or that each be given equal weight; rather, you should determine from the totality of the circumstances whether the distinct corporate identity of the corporation should be disregarded. Mere domination of corporate affairs by a sole shareholder or financial unity between shareholder and corporation will not justify a disregard of the corporate identity. Comment: (1) Source. The foregoing instruction is derived from Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986), and Lifshutz v. Lifshutz, 61 S.W.3d 511 (Tex.

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App. ­ San Antonio 2001, pet. Denied). The language of Castleberry has been modified to reflect the provisions of Tex. Bus. Corp. Act art. 2.21(A)(3), which eliminated the failure to observe corporate formalities as a consideration for piercing the corporate veil. The court in Lifshutz, 61, S.W.3d at 517, stated one of the requirements for disregarding the corporate identity to be that "the spouse's improper use of the corporation damaged the community estate beyond that which might be remedied by a claim for reimbursement." The words "beyond that which might be remedied by a claim for reimbursement" have been omitted from the charge because it is for the court to determine whether the damage to the community exceeds that which might be remedied by reimbursement. (2) When to use. The foregoing instructions should be used with the question in PJC 205.3 (disregarding corporate identity of corporation owned entirely by spouses) if a party claims that the corporate form should be disregarded on the basis of alter ego. See the comments below entitled "Other cases for disregarding corporate identity" and "Coveat" and the comment in PJC 205.3 entitled "Not for corporations with third party owners or to affect creditors' claims." (3) Rewording instruction. In an appropriate case, the phrase the shareholders should be substituted for the phrase a shareholder in the foregoing instruction, the word shareholders should be substituted for the word shareholder, the word shareholders' should be substituted for the word shareholder's, and the phrase shareholders maintain should be substituted for the phrase shareholder maintains. (4) Other bases for disregarding corporate identity. The Supreme Court of Texas in Castleberry, 721 S.W.2d at 272, listed six circumstances under which the corporate fiction has historically been disregarded. The basis used in the foregoing instruction, alter ego, "is only one of the bases of disregarding the corporate fiction: `where a corporation is organized and operated as a mere tool or business conduit of another corporation.'" Castleberry, 721 S.W.2d at 272. The other bases, which are separate from alter ego, are reflected in PJC 205.2 (other unfair device) in this chapter. (5) Caveat. There are differences between the instructions and basic question found in chapter 108 (Piercing the Corporate Veil) in Texas Pattern Jury Charges ­ Business, Consumer, Insurance & Employment and those found in this chapter 205 (Disregarding Corporate Form). In the context of marital dissolution, "reverse piercing" is sought to allow the trial court to move assets out of the corporation and divide them between the spouses as a part of the community estate. See Lifshutz, 61 S.W.3d at 516. The Committee expresses no opinion on whether this instruction could be adapted for use in a

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non-family law case. A corporation is an entity distinct from its shareholders. However, the distinct corporate identity of the corporation may be disregarded even though the corporate formalities have been observed and even though corporate assets have been kept separated from individual property if one or more of the following has occurred and if recognizing the distinct corporate identity would damage the community: [Use only the items that are relevant in the particular case.] 1. The corporate form has been used as a sham to perpetrate a fraud; or 2. The corporate form has been resorted to as a means of evading an existing legal obligation; or 3. The corporate form has been employed to achieve or perpetrate a monopoly; or 4. The corporate form has been used to circumvent a statute; or 5. The corporate form has been relied on as a protection of crime or to justify wrong. Comment: (1) Source. The foregoing instruction is derived from Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986), and Lifshutz v. Lifshutz, 61 S.W.3d 511 (Tex. App. ­ San Antonio 2001, pet. denied). The court in Lifshutz, 61 S.W.3d 517, stated one of the requirements for disregarding the corporate identity to be that "the spouse's improper use of the corporation damaged the community estate beyond that which might be remedied by a claim for reimbursement." The words "beyond that which might be remedied by a claim for reimbursement" have been omitted from the charge because it is for the court to determine whether the damage to the community exceeds that which might be remedied by reimbursement. (2) When to use. The foregoing instruction should be used with the question in PJC 205.3 (disregarding corporate identity of corporation owned entirely by spouses) if a party claims that the corporate form should be disregarded because "the corporate form has been used as part of a basically unfair device to achieve an inequitable result." Castleberry, 721 S.W.2d at 271. See the comment below entitled "Caveat" and the comment in PJC 205.3 entitled "Not for corporations with third-party owners or to affect creditors' claims." This instruction should not be used to assert alter ego as the basis for disregarding the corporate form. The court in Castleberry listed six circumstances under which the corporate fiction has historically been disregarded. Alter ego "is only one of the bases for disregarding the corporate fiction" `where a corporation is organized and operated as a mere tool or business conduit of another corporation.'" Castleberry, 721 S.W.2d at 272. The

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alter ego basis for disregarding the corporate form is reflected in PJC 205.1 (mere tool or business conduit (alter ego)) in this chapter, and the other five bases are reflected in this PJC 205.2. (3) Use of "or." The items in the list above are separated by the word or because a finding that any of the listed items has occurred with regard to a particular corporation (together with the requisite harm to the community estate) would support an affirmative answer to Question 1 in PJC 205.3 as to that corporation. (4) Rewording instruction. Include only those of the listed items that are appropriate in the particular case. If only one item is appropriate for inclusion, the following form may be used, substituting the wording from the relevant item for the words the corporate form has been used as a sham to perpetrate a fraud in the instruction below: A corporation is an entity distinct from its shareholder. However, the distinct corporate identity of the corporation may be disregarded even though the corporate formalities have been observed and even though corporate assets have been kept separated from individual property if the corporate form has been used as a sham to perpetrate a fraud and if recognizing the distinct corporate identity would damage the community estate. (5) Additional instruction. If use of the corporate form as a sham to perpetrate a fraud is included in the charge, the following instruction should be included: "Fraud" is the breach of some legal or equitable duty that, irrespective of moral guilt, the law declares fraudulent because of its tendency to deceive others, to violate confidence, or to injure public interests. This definition is based on Castleberry, 721 S.W.2d at 273. (6) Caveat. There are differences between the instructions and basic question found in chapter 108 (Piercing the Corporate Veil) in Texas Pattern Jury Charges ­ Business, Consumer, Insurance & Employment and those found in this chapter 205 (Disregarding Corporate Form). In the context of marital dissolution, "reverse piercing" is sought to allow the trial court to move assets out of the corporation and divide them between the spouses as a part of the community estate. See Lifshutz, 61 S.W.3d at 516. The Committee expresses no opinion on whether this instruction could be adapted for use in a non-family law case.

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PJC 205.3 ­ Disregarding Corporate Identity of Corporation Owned Entirely by Spouses (Question) Question 1 Should the distinct corporate identity of CORPORATION be disregarded? Answer "Yes" or "No." Answer: _______________ If you have answered Question 1 "Yes," then answer Questions 2 and 3 and do not answer Question 4 or 5. If you have answered Question 1 "No," then answer Question 4 and do not answer Question 2 or 3. Question 2 What percentage, if any, of each of the following assets of CORPORATION is the separate property of PARTY A? When the distinct corporate identity of a corporation is disregarded, the assets nominally owned by the corporation are owned by a party or by the parties. Answer by stating the percentage that is the separate property of PARTY A and the percentage that is community property. The percentages in your answer must total 100 percent for each asset. To find all or part of an asset to be the separate property of PARTY A, you must do so by clear and convincing evidence. "Clear and convincing evidence" is that measure or degree of proof that produces a firm belief or conviction that the allegations sought to be established are true. Any percentage of an asset that is not the separate property of PARTY A is community property. PARTY A's Community Separate Property Property ASSET A ________% + ________% = 100% ASSET B ________% + ________% = 100% ASSET C ________% + ________% = 100% Question 3 State in dollars the value of each of the following assets: ASSET A $ _________________ ASSET B $ _________________ ASSET C $ _________________ Do not answer Question 4 or 5 unless you have answered Question 1 "No." Question 4 What percentage, if any, of the interest in the ownership of CORPORATION is the separate property of PARTY A? Answer by stating the percentage that is the separate property of PARTY A and the percentage that is community property. The percentages in your answer must total 100 percent. To find all or part of the interest to be the separate property of PARTY A,

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you must do so by clear and convincing evidence. "Clear and convincing evidence" is that measure or degree of proof that produces a firm belief or conviction that the allegations sought to be established are true. Any percentage of the interest that is not the separate property of PARTY A is community property. PARTY A's Separate Community Property ___________ % +__________%= 100% If your answer to Question 4 reflects any community property, then answer Question 5. Otherwise, do not answer Question 5. Question 5 State in dollars the value of the community-property interest in the ownership of CORPORATION. Answer: $_______________ Comment: (1) When to use. The foregoing series of questions should be used if a party claims that the corporate form should be disregarded on the basis of alter ego or because the corporation has been used as part of a basically unfair device to achieve an inequitable result. (2) Not for corporations with third-party owners or to affect creditor's claims. The questions and instructions are written only for situations involving closely held corporations owned entirely by spouses. They are not designed for use in situations in which any third party owns an interest, whether that ownership interest is nominal or significant, nor are they intended to affect the interests of creditors or other persons with security interests in corporate property. The variety of situations possible when persons other than the spouses may assert a claim is too great to be comprehensively covered in this book. (3) Include these additional instructions. The foregoing questions should be accompanied by the instruction in PJC 205.1 (mere tool or business conduit (alter ego)), the instruction in PJC 205.2 (other unfair device), or both. Applicable portions of the injunctions in PJC 202.1 (separate and community property) through PJC 202.10 (agreement to convert separate property to community property) should be included in the charge. (4) In only one asset is in issue. If the characterization of only one corporate asset is in issue, the description of the asset should be substituted for the phrase each of the following assets in Questions 2 and 3. In such a case, the phrase "for each asset" should be omitted from the second sentence of the third paragraph in Question 2, and the word the should

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be substituted for the word an in the third and fifth sentences of that paragraph. (5) If both parties assert separate-property claims. Questions 2 and 4 are written for situations in which only one of the parties asserts a claim that the corporation or its assets constitute that party's separate property. If both parties asserts separate-property claims, the questions, instructions, and answer blanks can be appropriately modified; see PJC 202.12 (separate property ­ both parties claiming separate interests). PJC 205.4 Disregarding Corporate Identity of Corporation ­ Additional Instructions and Questions (Comment) Claims that the distinct identity of a corporation should be disregarded can arise in a number of fact situations that require the submission of additional instructions and jury questions. These situations present too wide a variety of possibilities to be comprehensively covered in this book. d. Pleadings involving alter ego claims against corporations

reference, of copies of contract or any other instrument(s) constituting, in whole or in part, the claim sued on; (17) damages, including attorney fees, or other relief sought, such as declaratory judgment; (18) prayer for relief; (19) injunctive relief; (20) declaratory relief; (21) actual damages; (22) exemplary damages; (23) interest, including prejudgment interest and postjudgment interest; (24) attorney's fees, including attorney's fees in the event of an appeal; (25) costs; (26) signature and other identifying information; (27) signature, State Bar of Texas identification number, address, telephone number, and fax number, if any, of unrepresented party; and (28) verification, if required. Liability for Corporate and Non-Corporate Acts, West's Texas Practice Guide, Section 13.69-70 (2009) [Business and Commercial Litigation]. Practice Note: The party claiming alter ego must join the target entity into the suit (a third party). Otherwise, all findings are not binding on the corporation. In Re Brian Kenefick, No. 14-08-00203-CV(Tex. App. ­ Houston [1st Dist] 2008), majority memorandum opinion. (2) Respondent and Third Party Entities and Persons The respondent or third party's answer to a claim of alter ego must include: (1) caption; (2) title of pleading; (3) introduction; (4) defensive pleadings which must be raised prior to any other pleadings, such as special appearance and motion to transfer venue; (5) dilatory pleadings such as plea in abatement or special exceptions; (6) general denial; (7) verified denials; (8) affirmative defenses, including plea of payment, if appropriate; (9) compulsory or permissive counterclaims and crossclaims arising out of the transaction or occurrence that is the subject matter of the action, together with damages; (10) prayer for relief, including any affirmative relief requested; (11) signature and other identifying information;

(1) Petitioner The petitioner's pleadings for alter ego in an action involving a corporation must include: (1) caption; (2) title of pleading; (3) introduction; (4) discovery control plan; (5) designation and status of parties; (6) name of corporation, including any assumed name; (7) status of corporation; (8) name and representative capacity of any additional parties affiliated with corporation, such as directors, officers, promoters, shareholders, employees, or agents; (9) name and status of other parties; (10) instructions for service of process on defendant; (11) if corporation is defendant, name and street address of agent for service of process on corporation, such as the president, a vice-president, or the corporation's registered agent for service of process. If corporation must be served through Secretary of State, allege facts allowing substituted service; (12) for other defendants, name and street address of person on whom process will be served; (13) allegations of fact establishing jurisdiction and venue; (14) allegations of facts establishing alter ego claim (15) allegation that all conditions precedent have been performed or have occurred; (16) annexation to petition, and incorporation by

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(12) signature, State Bar of Texas identification number, address, telephone number, and fax number, if any, of at least one attorney of record; (13) if party is not represented by attorney, signature, address, telephone number, and fax number, if any, of unrepresented party; (14) verification, if required; and (15) certificate of service. Liability for Corporate and Non-Corporate Acts, West's Texas Practice Guide, Section 13.69-70 (2009) [Business and Commercial Litigation]. Practice Note: Affirmative Defenses - The third party, entity or person may plead the following affirmative defenses against a claim of alter ego: Estoppel ­ In Southwest Livestock & Trucking Co. v. Dooley, the court found that the plaintiff could not recover through an alter ego claim because the plaintiff did not have "clean hands." Southwest Livestock & Trucking Company v. Dooley, 884 S.W.2d 805 (Tex. App.--San Antonio 1994, writ denied). In the case, the court found that alter ego did exist, but the plaintiff could not avail herself of this doctrine because she participated in the acts which gave rise to the alter ego existing. Breach of Fiduciary Duty ­ Corporate officers owe a fiduciary duty to the corporations they serve. International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 576 (Tex.1963); Faour v. Faour, 789 S.W.2d 620, 621-22 (Tex. App.­ Texarkana 1990, writ denied); Duncan v. Lichtenberger, 671 S.W.2d 948, 952 (Tex. App.-Fort Worth 1984, writ ref'd n.r.e.); Canion v. Texas Cycle Sup., 537 S.W.2d 510, 513 (Tex. App.-Austin 1976, writ ref'd n.r.e.). Corporate officers do not owe a fiduciary duty to an individual shareholder unless there is some contract or "special facts" relationship between them in addition to the corporate relationship. Faour, 789 S.W2d at 621-22; Miller v. Miller, 700 S.W.2d 941 (Tex. App.­ Dallas 1985, writ ref'd n.r.e.) In Miller, the court held that the former husband owed a fiduciary duty to his former wife by virtue of his position as the founder, officer and director of the corporation. This was a suit by the former wife to rescind a shareholders' agreement regarding corporate stock acquired by the husband before the parties' divorce and allegedly not disposed of by the parties' divorce decree. The court applied a "special facts" exception to the general rule that a director or officer does not stand in a fiduciary relation to a stockholder in respect to his stock, which special facts exception impasses on the officer or director a limited fiduciary duty to disclose any knowledge of special matters relating to the corporate business, e.g., merger, assured sale, etc. that may

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affect the value of the stock. Caveat: That gun kicks just like it shoots. In Southwest Livestock & Trucking Company v. Dooley, 884 S.W.2d 805 (Tex. App.­San Antonio 1994, writ denied) wife sued husband for divorce, and joined corporations, claiming that corporations were the alter ego of the husband and that the assets of the corporations should be divided in the community estate. The corporations filed a counterclaim against the wife and cross-claim against the husband seeking an accounting of husband and wife's assets and constructive trust on those assets, pursuant to allegations that the husband and wife misappropriated corporate funds. The court held that husband and wife breached their fiduciary duty of loyalty to the stockholders since they were officers and directors of the corporations. Corporate officers and directors are fiduciaries and transactions in which they receive personal gain in their dealings with the corporation are subject to the closest examination, and any property is held in constructive trust for the corporation. Additionally, the court held that wife could not avail herself of the equitable doctrine of alter ego when she participated in the very act which gave rise to her cause of action, disregarding the corporate structure. An accounting of the community property of husband and wife was necessary in order to determine the identity of the property or the amount of money owed to the corporations. 3. Date of the Marriage ­ It is inequitable for the court to divest the corporation of property owned by the corporation before a marriage based the principles of separate property. Cameron v. Cameron, 641 S.W.2d 210 (Tex. 1982). e. Evidenced Required--Corporations

(1) Duke v. Duke ­ Evidence insufficient In Duke, the trial court relied on the following facts: (1) all stock was in respondent's name; (2) respondent controlled all financial aspects of the corporation; (3) the incorporation was used for tax purposes; and (4) respondent used corporate funds to make four monthly alimony pendente lite payments to plaintiff. Duke v. Duke, 605 S.W.2d 408 (Tex. Civ. App.--El Paso 1980, writ dism'd). The corporation was formed during the marriage with the husband's separate funds. Id. at 410. The appellate court found that these facts do not rise to the level of "such unity that the separateness of the corporation has ceased to exist, or that the conduct of the Appellant, as president and sole stockholder, has resulted in any fraud upon or injustice to the Appellee, or to any third party." Id. at 412.

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(2) Spruill v. Spruill ­ Evidence sufficient Mr. Spruill owned 48% of the corporation before marriage, and after marriage purchased the remaining 52% of the business with community funds. Spruill v. Spruill, 624 S.W.2d 694, 695-96 (Tex. Civ. App.--El Paso 1981, writ dism'd). The evidence presented to the court showed that Mr. Spruill paid all of his living expenses from corporation funds including food and other necessities. Id. at 696. The home where the parties lived, the motor vehicles and furniture were also owned by the corporation. Id. at 696. In the time leading up to the divorce, Mr. Spruill executed notes in favor of his business partner and pledged the corporate stock of his corporations to defraud his wife of her community interest in the stock, the family residence, the furniture, and every other community asset. Id. at 696. The court held Mr. Spruill and his company were one in the same and that the corporation became the alter ego of Mr. Spruill as a result of his fraud on the community. Id. at 696. The court awarded Mrs. Spruill all interest Mr. Spruill had in the company, occupancy of the home, the furniture, and all personal property of the company. Id. at 696. (3) Zisblatt v. Zisblatt ­ Evidence sufficient Mr. Zisblatt, the sole owner of a corporation, put every community asset into this separate property corporation. Zisblatt v. Zisblatt, 693 S.W.2d 944, Tex. App.--Fort Worth 1985, writ dism'd). Even though stock in the company was periodically held by friends and relatives, this was done for solely technical reasons and ownership was purely symbolic. Id. at 953-55. The company owned parties' home, owned the furniture in the home, borrowed money using community funds as collateral, and borrowed community funds without repaying them. Id. at 947. The company also paid for everyday expenses such as utilities, medical expenses and transportation. Id. at 947. This created a fraud on the community estate, and based on this, the court disregarded the corporate form through the alter ego doctrine. Id. at 950. The court held, "there seems to be little reason to punish errant shareholders, unless their actions are directed toward defrauding another party." Id. at 950. The court noted that the reason the alter ego doctrine was applied in this case rested on Mr. Zisblatt's attempt to evade his legal obligation to the community. Id at 955. (4) Chunn v. Chunn ­ Evidence sufficient Wife showed husband was the sole owner and operator of the company. Chunn v. Chunn, 1999 WL 626733 (Tex. App.--Houston [1st Dist.] 1999, pet. denied). She also showed he used company funds to cover his debts and took advances and bonuses in pay freely. Id. at 4. The court also found husband

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fraudulently allowed the depreciate in value. Id. at 4.

company's

stock

to

(5) Lifshutz v. Lifshutz ­ Evidence insufficient Even though the court found that Mr. Lifshutz paid personal expenses through the business, failed to follow formalities, and purchased notes for him and his wife at the expense of the corporation, the court held there was no evidence community property was converted to separate property corporations. Lifshutz v. Lifshutz, 61 S.W.3d 511, at 518 (Tex. App.--San Antonio 2001, pet. denied). Mr. Lifshutz's dominance was not enough to support a finding of alter ego when the community property was not harmed. Id. at 517. (6) Young v. Young ­ Evidence sufficient Prior to the marriage, Mr. Young formed a company. He was the sole employee of the company, kept his income in the company account, used the company account for personal expenses, bought a home in the corporation's name, paid himself a noticeably small salary in relation to the profits made by the company, and commingled separate and community funds. Mr. and Mrs. Young purchased a house with community funds, but without Mrs. Young's knowledge, Mr. Young put the house in the corporation's name. The court ruled that this evidence supported a finding that the corporation was the alter ego of Mr. Young. Young v. Young, 168 S.W.3d 276, at 280, 282 (Tex. App.--Dallas 2005, no pet.). The court also went on to say that testimony accusing a spouse of purchasing property with separate funds is insufficient. Id. at 283. "Testimony without any documentary evidence to trace funds is insufficient to overcome the community presumption." Id. at 283. f. Alter Ego Doctrine ­ Trusts

(1) Alter Ego Doctrine May Be Applied To Trusts It is suggested that the alter ego doctrine can also be applied to trusts where "constructive control" over the assets of the trust is held by the beneficiary by virtue of his/her relationship with the trustee(s). In Re Marriage of Long, 542 S.W.2d 712 (Tex. Civ. App.-- Texarkana 1976, no writ) [where a spouse had sufficient "ownership" of trust assets the assets will be treated as marital property, even if legal title to such assets is in the trust, not the spouse. See also, In Re Marriage of Burns, 573 S.W.2d 555, 557 (Tex. Civ. App.--Texarkana 1978, writ dism'd) where the same court of appeals as Long, supra, pointedly observed that the wife in Burns had not challenged the husband's trust as being the alter ego of the husband.

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Practice Note: The Tex. Prop. Code Ann. 112.008 (c) provides that a settlor and beneficiary may be a trustee, except where merger would occur. Therefore, a trust may be operated as an alter ego of the settlor, beneficiary or trustee. Evidence Required ­ Trusts In Re Marriage of Long ­ Evidence sufficient The court found the husband had a present possessory interest in trust assets because they were distributable to him as a beneficiary of the trust. In Re Marriage of Long, 542 S.W.2d 712, at 717 (Tex. Civ. App.-- Texarkana 1976, no writ). The trust was established by husband's parents and stated that husband would be entitle to half the money upon reaching the age of 25 and would be entitled to the rest upon reaching the age of 30. Id at 715. Even though the trust assets were found to be nominally owned by the trust, the court found that they were still his property because of his present right of possession. Id. at 25, husband allowed the money to continue to be managed by the trust and to be distributed to him at a later date. Id. at 716. The court will apply the alter ego doctrine to classify trust assets as marital property even if the trust has legal title when a spouse has sufficient ownership of the assets. Id. In Re Marriage of Burns ­ Evidence insufficient The court refused to apply the alter ego doctrine to six trusts owned by the husband based on the statutory definition of community property which states, "Community property consists of property, other than separate property, acquired by either spouse during marriage." In Re Marriage of Burns, 573 S.W.2d 555 (Tex. Civ. App.--Fort Worth 1978, writ dism'd). Husband was the settler of three of the trusts and his parents were the settlors of the remaining three trusts. Id. at 556. All of the trusts were established prior to the marriage except for one which was established three months after the marriage with separate property. Id. at 556. The trust funds set up by husband's relatives contained spendthrift clauses, barring attachment by creditors. Id. at 556. The court held that the income from the five discretionary trusts and one nondiscretionary trust was not marital property because the income was not "acquired" by the spouse. Id. The court found that since the income had not been distributed, it was property of the trust. Id. The beneficiary was not the trustee of any of the trusts in this case. Id. (2) Conduct Indicating Alter Ego Status ­ Trusts Dallas attorney Gary Stolbach pointed out in his 2002 State Bar of Texas Advanced Family Law Course (Chapter 68) article "Asserting Community Property Claims: Complex Trust Issues," when a

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professional trustee (e.g. trust company) has not been appointed, or has resigned, or has been replaced in a family trust, the following conduct may be indicative of alter ego status: 1. Moving assets into and outside of the trust to meet the convenience of the beneficiary or the trust, through distributions to the beneficiary, contributions to the trust, loans, bargain sales, etc. 2. Distributions to the beneficiary which are clearly not justified under the terms of the trust agreement, especially if the beneficiary is also the trustee. 3. Provisions in the trust document that relieve the beneficiary, as trustee, of the need to account to any beneficiary other than himself. At pages 12-13 Mr. Stolbach's article. See also, Busting Trusts Upon Divorce, by Richard R. Orsinger, State Bar of Texas ­ New Frontiers In Marital Property Law (2003), Chapter 3.2. 23. Property Related Torts a. Actual Fraud (1) Definition Actual fraud involves dishonesty of purpose or intent to deceive. Land v. Marshall, 426 S.W.2d 841 (Tex. 1968); Horlock v. Horlock, 533 S.W.2d 52 (Tex. Civ. App.- Houston [14th Dist.] 1975, writ dism'd w.o.j.) (the fact that husband intentionally deprived wife of knowledge of gifts of money to children of a prior marriage did not constitute actual fraud); See, State Bar of Texas, Texas Pattern Jury ChargesFamily PJC 206.2A (2006). (2) Intent to harm Actual fraud requires intent to harm by transferring or expending community property to deprive the other spouse of the use and enjoyment of the assets involved in the transaction. Matter of Marriage of DeVine, 869 S.W.2d 415, 421 (Tex. App.-Amarillo 1993, writ denied). (3) Fraud on the property The Pattern Jury Charges, by law, set out all of the necessary questions, definitions and instructions for the submission of actual fraud on the property. (4) Fraud on the person The concept and submission of "fraud on the person" took on new meaning in the case of Vickery v. Vickery, 999 S.W.2d 342 (Tex. 1999). Under special circumstances, as set out in the Vickery case, and here the loss is not entirely economic, a spouse may recover mental anguish damages for fraud on the person. In Vickery, the wife alleged that the husband committed actual fraud against her individually, by fraudulently binding her into agreeing to a divorce and a contractual division of property. Wife's claims were that, but for his misrepresentations about the reason

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for the divorce, she would have never agreed to the divorce or signed a contract dividing the community property. Thus, the Court of Appeals, Houston ­ First District, held that wife's claim was not one of constructive fraud on the community, but of actual fraud perpetrated against the wife individually. In a common law fraud action, which is an intentional tort, the plaintiff may recover damages for mental anguish. Formosa Plastics Corp. v. Prisedio Eng'rs & Contractors, 960 S.W.2d 41, 47 (Tex. 1998). (5) Elements for proof of actual fraud The elements for proof of actual fraud are the following: (1) a material misrepresentation was made; (2) it was false; (3) when the speaker made it he or she knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made it with the intention that it should be acted upon by the party; (5) the party acted in reliance upon it; and (6) the party thereby suffered injury. Johnson and Johnson Medical, Inc. v. Sanchez, 924 S.W.2d 925, 929-30 (Tex. 1996). (6) Misrepresentation A "misrepresentation" may consist of the concealment of a material fact when there is a duty to speak. A duty to speak or to disclose arises when one party knows that the other party is ignorant of the material fact and does not have an equal opportunity to discover the truth. New Process Steel Corp., Inc. v. Steel Corp. of Texas, Inc., 703 S.W.2d 209, 214 (Tex. App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.). (7) Burden of proof The burden of proof for a claim of actual fraud is on the complaining party. Horlock v. Horlock, 533 S.W.2d 52 (Tex. Civ. App.--Houston [14th Dist.] 1975, writ dism'd w.o.j.); but see Buckner v. Buckner, 815 S.W.2d 877 (Tex. App.--Tyler 1991, no writ) husband had the burden of demonstrating the fairness of the transaction). (8) Suits between spouses regarding separate property Following Schlueter v. Schlueter, although there no longer exists a separate tort cause of action between spouses for fraud on the community estate independent of divorce proceedings, one spouse can still sue another for actual fraud concerning the defrauded spouse's separate estate. Schlueter v.

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Schlueter, 975 S.W.2d 584 (Tex. 1998) (J. Hecht dissenting). (9) Third parties jointly and severally liable Third parties are held jointly and severally liable for actual fraud along with the fraudulent spouse if there is sufficient evidence to prove that they knew about the spouse's fraudulent intent to injure the other spouse's rights. Thomas v. Casale, 924 S.W.2d 433, 437 (Tex. App.-Fort Worth 1996, writ denied). Practice Note: Very few family law opinions address the elements of actual fraud because the burden of proof for constructive fraud requires no intent to deceive. The elements for actual fraud have evolved from business transactions as opposed to the breach of fiduciary duty in the marital context. Many actions between spouses do not rise to the level of actual fraud because there is no intent to deceive. Fraud Generally Spouses are burdened with reciprocal fiduciary duties in the management, control and disposition of community property. There is also a fiduciary duty owed by one spouse to the other in the reasonable management and control of a spouse's special community property. Vallone v. Vallone, 644 S.W.2d 455 (Tex. 1982); Kruegar v. Williams, supra; Horlock v. Horlock, supra; Carnes v. Meador, 533 S.W.2d 365 (Tex. App.--Dallas 1975, writ ref'd n.r.e.). A breach of fiduciary duty occurs when one spouse exercises the power of his special community property or over the community estate in excess, capricious or arbitrary manner, Horlock v. Horlock, supra. The fraudulent disposition of existing community property or fraudulent conduct in the acquisition of property can give rise to a breach of fiduciary duty or fraud, either actual or constructive. Spruill v. Spruill, 624 S.W.2d 694 (Tex. App.--El Paso 1981, writ dism'd); Horlock v. Horlock, 533 S.W.2d 52 (Tex. App.--Houston [14th Dist.] 1975, writ dism'd). The right of one spouse to dispose of community property requires an absence of fraud, either actual or constructive. Givens v. Gerard Life Ins. Co. of America, 480 S.W.2d 421 (Tex. App.--Dallas 1972, writ ref'd n.r.e.). The burden is on the managing spouse to prove the disposition was not unfair to the rights of the other spouse. Constructive fraud is an equitable doctrine which does not require an intent to deceive. Rafidi v. Rafidi, 718 S.W.2d 43 (Tex. App.-- Dallas 1986, no writ); Archer v. Griffith, 390 S.W.2d 735 (Tex. 1964). Rather, constructive fraud is characterized by deception, a violation of confidence or injury to the public interest. Carnes v. Meador, supra; Matthews v. Matthews, 725 S.W.2d 275 (Tex. App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.). b.

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(1) Burden of Proof on Disposing-of-Property Spouse The "disposing-of-property spouse" must prove the fairness of all three factors to rebut the presumption of constructive fraud, to-wit: the size of the gift in relation to the total size of the community property, the adequacy of the remaining estate to support the complaining spouse in spite of the gift, and the relationship of donor and donee. Jackson v. Smith, 703 S.W.2d 791 (Tex. App.--Dallas 1985, no writ); Estate of Bridges v. Mosebrook, 662 S.W.2d 116 (Tex. App.--Fort Worth 1983, no writ); Horlock v. Horlock, supra. However, a spouse's good faith but unwise investment of community funds with loss to the community estate does not justify an unequal distribution of the remaining community property at divorce. Andrews v. Andrews, 677 S.W.2d 171 (Tex. App.--Austin 1984, writ ref'd n.r.e.). (2) Conclusion No independent tort for actual or constructive fraud exists in a divorce context. The Court relied on In re Marriage of Moore, 890 S.W.2d 821, (Tex. App.--Amarillo 1994, no writ). concluded that the only course available to a wronged spouse is breach of fiduciary duty to the community estate, that is, an action for fraud on the community. Id. at 827. The Court in Schlueter found the Court of Appeals correctly determined that no independent cause of action existed in Texas to recover separate damages when the wrongful act defrauded the community estate. Id at 829. c. Pleading for Common-Law Fraud The petitioner's pleadings for common-law fraud must include: (1) caption; (2) title of pleading; (3) discovery control plan; (4) parties; (5) jurisdiction; (6) venue; (7) facts of the case; (8) facts establishing common-law fraud; (9) facts establishing fraud by nondisclosure; (10) facts establishing negligent misrepresentation; (11) equitable relief; (12) jury demand; (13) request for disclosure; and (14) prayer. O'Connor's Texas Causes of Action ­ Pleadings (2009) [Form 12A:1 Common-Law Fraud ­ Petition].

d.

Answer to Claim of Common-Law Fraud The respondent's answer to a claim of commonlaw fraud must include: (1) caption; (2) title of pleading; (3) general denial; (4) plea to the jurisdiction; (5) verified pleas; (6) other defenses; (7) exemplary damages; (8) jury demand; (9) special exceptions; (10) request for disclosure; and (11) prayer. O'Connor's Texas Causes of Action ­ Pleadings (2009) [Form 12A:2 Common-Law Fraud ­ Answer]. e. Pleading for Fraud by Nondisclosure The petitioner's pleadings for fraud nondisclosure must include: (1) caption; (2) title of pleading; (3) discovery control plan; (4) parties; (5) jurisdiction; (6) venue; (7) facts of the case; (8) facts establishing fraud by nondisclosure; (9) facts establishing common-law fraud; (10) facts establishing negligent misrepresentation; (11) equitable relief; (12) jury demand; (13) request for disclosure; and (14) prayer. O'Connor's Texas Causes of Action ­ Pleadings (2009) [Form 12B:2 Fraud by Nondisclosure ­ Petition]. f. Answer to a Claim for Fraud by Nondisclosure The respondent's answer to a claim of fraud by nondisclosure must include: (1) caption; (2) title of pleading; (3) general denial; (4) plea to the jurisdiction; (5) verified pleas; (6) other defenses; (7) exemplary damages; (8) jury demand; (9) special exceptions; (10) request for disclosure; and (11) prayer.

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by

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O'Connor's Texas Causes of Action ­ Pleadings (2009) [Form 12B:2 Fraud by Nondisclosure ­ Answer]. g. Texas Business Pattern Jury Charges ­ 2006

transaction. Such fraud involves dishonesty of purpose or intent to deceive. PJC 206.2B ­ Actual Fraud by Spouse Against Community Estate -- Questions: QUESTION 1 Did PARTY A commit fraud with respect to the community-property rights of PARTY B? Answer "Yes" or "No." Answer: _______________ If you have answered Question 1 "Yes," then answer Question 2. Otherwise, do not answer Question 2. QUESTION 2 State in dollars the loss, if any, suffered by the community estate of PARTY A and PARTY B as a result of the fraud of PARTY A. Answer: $_______________ Comment: (1) Source. The instruction in PJC 206.2A is derived from Land v. Marshall, 426 S.W.2d 841 (Tex. 1968); Archer v. Griffith, 390 S.W.2d 735 (Tex. 1965; and Horlock v. Horlock, 533 S.W.2d 52 (Tex. Civ. App. ­ Houston [14th Dist.] 1975, writ dism'd). Such fraud could involve the incurring of an indebtedness rather than a direct transfer of property or expenditure of funds. (2) Other actual fraud theories. The foregoing submission reflects only one of many theories of actual fraud that might be presented in a case involving spouses. See, e.g., Stone v. Lawyers Title Insurance Corp., 554 S.W.2d 183 (Tex. 1977); Uniform Fraudulent Transfer Act, Tex. Bus. & Com. Code §§24.001-.013. The variety of possible theories is too great to be comprehensively covered in this book, but the submission may be altered to present other theories. (3) No independent cause of action. A spouse has no independent cause of action against the other spouse for actual fraud on the community, but the court may consider such fraud in arriving at a "just and right" division of the community estate. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998). (4) Include this additional instruction. The instruction in PJC 206.1 (confidence and trust relationship between spouses) should be given with the foregoing instruction and questions. PJC 206.3A ­ Actual Fraud by Spouse Against Separate Estate ­ Instruction: A spouse commits fraud if that spouse transfers separate property of the other spouse or expends separate funds of

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PJC 105.4 ­ Instruction on Common-Law Fraud ­ Failure to Disclose When There is a Duty to Disclose: Fraud occurs when-- a. a party fails to disclose a material fact within the knowledge of that party, b. the party knows that the other party is ignorant of the fact and does not have an equal opportunity to discover the truth, c. the party intends to induce the other party to take some action by failing to disclose the fact, and d. the other party suffers injury as a result of acting without knowledge of the undisclosed fact. h. Texas Family Pattern Jury Charges ­ 2008

PJC 206.1 ­ Confidence and Trust Relationship Between Spouses: A relationship of confidence and trust exists between a husband and wife with regard to that portion of the community property that each controls. This relationship requires that the spouses use the utmost good faith and frankness in their dealings with each other. Because of the nature of the spousal relationship, conduct of a spouse affecting the property rights of the other spouse may be fraudulent even though identical conduct would not be fraudulent as between nonspouses. Comment: (1) Source. The foregoing instructions are modeled on Weir V. King, 166 S.W.2d 187 (Tex. Civ. App. ­ Dallas 1942, writ ref'd w.o.m.); see Buckner v. Buckner, 815 S.W.2d 877 (Tex. App. ­ Tyler 1991, n.w.h.); cf. Miller v. Miller, 700 S.W.2d 941 (Tex. App. ­ Dallas 1985, writ ref'd n.r.e.). (2) Fiduciary relationships with regard to separate property. The duty described in the foregoing instruction regarding the community property managed by a spouse could apply as well if one spouse manages the separate property of the other spouse. PJC 206.2A ­ Actual Fraud by Spouse Against Community Estate -- Instruction: A spouse commits fraud if that spouse transfers community property or expends community funds for the primary purpose of depriving the other spouse of the use and enjoyment of the assets involved in the

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the other spouse for the primary purpose of depriving the other spouse of the use and enjoyment of that property or those funds. Such fraud involves dishonesty of purpose or intent to deceive. PJC 206.3B ­ Actual Fraud by Spouse Against Separate Estate ­ Questions: QUESTION 1 Did PARTY A commit fraud with respect to the separate property rights of PARTY B? Answer "Yes" or "No." Answer: _______________ If you have answered Question 1 "Yes," then answer Question 2. Otherwise, do not answer Question 2. QUESTION 2 What sum of money, if paid now in cash, would fairly and reasonably compensate the separate estate of PARTY B for the damages, if any, resulting from the fraud of PARTY A? Answer in dollars. Answer: $_______________ Comment: (1) Source. The instruction in PJC 206.3A is derived from Land v. Marshall, 426 S.W.2d 841 (Tex. 1968); Archer v. Griffith, 390 S.W.2d 735 (Tex. 1965); and Horlock v. Horlock, 533 S.W.2d 52 (Tex. Civ. App. ­ Houston [14th Dist.] 1975, writ dism'd). Such fraud could involve the incurring of an indebtedness rather than a direct transfer of property or expenditure of funds. (2) Other actual fraud theories. The foregoing submission reflects only one of many theories of actual fraud that might be presented in a case involving spouses. See, e.g., Stone v. Lawyers Title Insurance Corp., 554 S.W.2d 183 (Tex. 1977); Uniform Fraudulent Transfer Act, Tex. Bus. & Com. Code §§24.001-.013. The variety of possible theories is too great to be comprehensively covered in this book. But the submission may be altered to preset other theories. (3) Include this additional instruction. This instruction in PJC 206.1 (confidence and trust relationship between spouses) should be given with the foregoing instruction and questions. PJC 206.4A ­ Constructive Fraud by Spouse Against Community Property ­ Instruction: A spouse may make moderate gifts, transfers, or expenditures of community property for just causes to a third party. However, a gift, transfer, or expenditure

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of community property that is capricious, excessive, or arbitrary is unfair to the other spouse. Factors to be considered in determining the fairness of a gift, transfer, or expenditure are-- 1. the relationship between the spouse making the gift, transfer, or expenditure and the recipient; 2. whether there were any special circumstances tending to justify the gift, transfer, or expenditure; and 3. whether the community funds used for the gift, transfer, or expenditure were reasonable in proportion to the community estate remaining. PJC 206.4B­ Constructive Fraud by Spouse Against Community Property ­ Question: QUESTION 1 Was the transfer made by PARTY A to THIRD PARTY fair? Answer "Yes" or "No." Answer: _______________ If you have answered Question 1 "No," then answer Question 2. Otherwise, do not answer Question 2. QUESTION 2 State in dollars the loss, if any, suffered by the community estate of PARTY A and PARTY B as a result of the transfer made by PARTY A to THIRD PARTY. Answer: $_______________ Comment: (1) Source. The instruction in PJC 206.4A is modeled on Mazique v. Mazique, 742 S.W.2d 805 (Tex. App. ­ Houston [1st Dist.] 1987, writ ref'd n.r.e.), and Carnes v. Meador, 533 S.W.2d 365 (Tex. Civ. App. ­ Dallas 1975, writ ref'd n.r.e.). (2) Other constructive fraud theories. The foregoing submission reflects only one of many constructive fraud theories that might be presented in a case involving spouses. The variety of possible theories is too great to be comprehensively covered in this book, but the submission may be altered to present other theories. (3) No independent cause of action for fraud against community estate. A spouse has no independent cause of action against the other spouse for constructive fraud on the community estate, but the court may consider such fraud in arriving at a "just and right" division of the community estate. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998). (4) Include this additional instruction. The instruction in PJC 206.1 (confidence and trust relationship between spouses) should be given with the foregoing instruction and questions. (5) If transaction is disputed. The instruction as written assumes that there is no dispute that the gift, transfer, or expenditure of community property was

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made. If the transaction is in dispute, the foregoing submission should be conditioned on a finding that the transaction occurred. (6) If separate estate was defrauded. If constructive fraud by a spouse against the other spouse's separate estate is in issues, Question 2 should be submitted as follows: What sum of money, if paid now in cash, would fairly and reasonably compensate the separate estate of PARTY B for the damages, if any, resulting from the transfer made by PARTY A to THIRD PARTY? Answer in dollars Answer: $______________________ PJC 206.5A ­ Fraud Action Against Nonspouse Party ­ Instruction: A person commits fraud if that person participates with a spouse in a transfer of community property for the primary purpose of depriving the other spouse of the use and enjoyment of the assets involved in the transaction. Such fraud involves dishonesty of purpose or intent to deceive. PJC 206.5B ­ Fraud Action Against Nonspouse Party ­ Questions: QUESTION 1 Did NONSPOUSE PARTY commit fraud with respect to the community-property rights of PARTY B? Answer "Yes" or "No." Answer: _______________ If you have answered Question 1 "Yes," then answer Question 2. Otherwise, do not answer Question 2. QUESTION 2 What sum of money, if paid now in cash, would fairly and reasonably compensate the community estate of PARTY A and PARTY B for the damages, if any, resulting from the fraud of NONSPOUSE PARTY? Answer in dollars. Answer: $_______________ Comment: (1) Source. The instruction in PJC 206.5 is derived from Land v. Marshall, 426 S.W.2d 841 (Tex. 1968); Archer v. Griffith, 390 S.W.2d 735 (Tex. 1965; and Horlock v. Horlock, 533 S.W.2d 52 (Tex. Civ. App. ­ Houston [14th Dist.] 1975, writ dism'd). Such fraud could involve the incurring of an indebtedness rather than a direct transfer of property or expenditure of funds; similarly, it could involve separate, rather than community, property. (2) Other actual fraud theories. The foregoing submission reflects only one of many theories of actual fraud that might be presented in a case involving spouses. See, e.g., Stone v. Lawyers Title Insurance Corp., 554 S.W.2d 183 (Tex. 1977); J.

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Michael Putman, M.D.P.A. Money Purchase Pension Plan v. Stephenson, 805 S.W.2d 16 ((Tex. App. ­ Dallas 1991, no writ);Uniform Fraudulent Transfer Act, Tex. Bus. & Com. Code §§24.001- .013. Many theories of constructive fraud might also be presented in a case involving spouses. See, e.g., Mazique v. Mazique, 742 S.W.2d 805 (Tex. App. ­ Houston [1st Dist.] 1987, writ ref'd n.r.e.), and Carnes v. Meador, 533 S.W.2d 365 (Tex. Civ. App. ­ Dallas 1975, writ ref'd n.r.e.) The variety of possible theories is too great to be comprehensively covered in this book, but the submission may be altered to present other theories. (3) If separate estate was defrauded. In an appropriate case, the word community should be replaced with the word separate in Question 1 in PJC 206.5B, and the phrase community estate of PARTY A and PARTY B should be replaced with the phrase separate estate of PARTY B in Question 2. (4) Exemplary damages. Exemplary damages may be available in appropriate circumstances. See Tex. Civ. Prac. & Rem. Code ch. 41. Reference to damages submissions suggested for other types of cases that ate contained in other volumes of the Texas Pattern Jury Charges series may be helpful in formulating an appropriate submission for the particular case. C. Intentional and Unintentional torts In distinguishing between intentional and unintentional torts, the Supreme Court of Texas in Reed Tool Co. v. Copelin, 686 S.W.2d 404 (Tex. 1985) stated at p. 404, "[T]he fundamental difference between negligent injury or even grossly negligent injury, and intentional injury, is the specific intent to inflict injury." The Restatement (Second) of Torts defines intent to mean that "the actor desires to have caused consequences of his act or that he believes that the consequences are substantially certain to result from it." Sec. 8A (1965). 1. Elements­Intentional Torts The elements of intentional torts are:

(1) intentional conduct that breaches a recognized duty; and (2) actual damages. Foreseeability is not required in determining damages for an intentional or knowing tort if recovery is sought for the immediate and direct consequences of the tort. Thompson v. Hodges, 237 S.W.2d 757, 759 (Tex. Civ. App. ­ San Antonio 1951, writ ref'd n.r.e.). 2. Elements­Unintentional Torts The elements of unintentional torts are:

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(1) unintentional conduct that breaches a recognized duty; (2) foreseeability [proximate or producing cause]; and (3) actual damages. 3. Redressing Wrongs All torts discussed herein necessarily include the above stated elements, depending on whether they are intentional or unintentional torts. An injury without a wrong does not create a "cause of action", but to give a right or redress there must not only be an injury but it must have been occasioned by a commission of a legal wrong or violation of a legal right and breach of a legal duty. State v. Brewer, 169 S.W.2d 468 (Tex. 1943). A "tort" is a wrongful act [generally] not involved in a breach of contract for which a civil action may be maintained. Smith v. International Printing Pressman and Assistants Union of North America, 190 S.W.2d 769 (Tex. Civ. App.­Dallas, 1946), reversed 198 S.W.2d 729 (Tex. 1946). A tort may be based on misfeasance or omission to act, as well as an act of commission. Montgomery Ward & Co. v. Scharrenbeck, 204 S.W.2d 508 (Tex. 1947). 4. a. Joinder of Actions and Parties

Actions Joinder of tort and matrimonial actions is a function of the subject matter jurisdiction of the courts. For example, Texas blends it's courts of equity with courts of law so that all district courts are courts of general jurisdiction and may hear matrimonial and tort actions. Twyman v. Twyman, 855 S.W.2d 619 (Tex. 1993); Massey v. Massey, 807 S.W.2d 391 (Tex. App.--Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993) H.N. 4, 5 and 6; Mogford v. Mogford, 616 S.W.2d 936 (Tex. Civ. App.--San Antonio 1981, writ ref'd n.r.e.). The courts balance judicial economy in hearing the "entire controversy " versus the argument of prejudice to the party resisting joinder. b. Parties Joinder of non-spouse third parties is governed by T.R.C.P. 37 [Additional Parties], 38 [Third-Party Practice], 39 [Joinder of Persons needed for Just Adjudication], 40 [Permissive Joinder of Parties] and [Misjoinder & nonjoinder of Parties]. Carful attention is suggested to the deadlines set by the rules for joinder of third parties before and after leave of court is required. 5. Res Judicata and Collateral Estoppel-- Distinction Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex. 1984). "Res judicata is frequently characterized as claim preclusion because it bars

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litigation of all issues connected with a cause of action or defense which, with the use of diligence, might have been tried in a prior suit. [citing case] When a prior judgment is offered in a subsequent suit in which there is identity of parties, issues and subject matter, such judgment is treated as an absolute bar to retrial of claims pertaining to the same cause of action on the theory that they have merged into the judgment. [citing cases]. ... Collateral estoppel is narrower than res judicata. It is frequently characterized as issue preclusion because it bars re-litigation of any ultimate issue of fact actually litigated and essential to the judgment in a prior suit, regardless of whether the second suit is based upon the same cause of action. ... A party suing to invoke the doctrine of collateral estoppel must establish (1) the facts sought to be litigated were fairly litigated in the prior action; (2) those facts were essential to the judgment in the first action; and, (3) the parties were cast as adversaries in the first action." "Res judicata, or merger and bar, precludes re-litigation of the same claim [cause of action] while collateral estoppel precludes re-litigation of the same issue." McCoy v. Cook, 419 N.W.2d 44, 46 (Mich. App. 1988). Therefore, res judicata = claim preclusion, and collateral estoppel = issue preclusion. In K. F. v. Faour, 762 S.W.2d 361 (Tex. App.-- Houston [1st Dist.] 1989) a sexual abuse claim was not precluded because neither the pleadings nor the terms of the divorce decree showed that the issue was asserted and determined in the divorce court. See, contra, Brinkman v. Brinkman, 966 S.W.2d 780 (Tex. App.--San Antonio 1998, pet. denied) and criticism of Brinkman in "Brinkman v. Brinkman: Where Res Judicata has gone too far," 13 BYU J. Pub. L. 379, 390 (1999) 6. Procedural Bars And Defenses To Bringing Actions And Limiting Damages a. Divorce Cases Tex. Fam. Code Ann §7.001 provides for a court ordered equitable ["just and right"] division of marital property having due regard for the rights of each party and any children of the marriage. This standard for equitable distribution has existed in Texas since 1841, when Texas was still a Republic, and which gives the court wide discretion in dividing the estate of the parties, correctable only when an abuse of discretion has been shown. Murff v. Murff, 615 S.W.2d 696 (Tex. 1981); Hedtke v. Hedtke, 112 Tex. 404, 248 S.W.2d (1923). As such, the trial court may consider any number of factors, including the economic, financial and social histories of the parties. If a two, four or even ten year statute of limitations applied to the equitable division of property, inequitable results would occur. Since there is no statute of limitations for bringing an action for divorce of a formal or informal

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marriage, a good faith argument can be made that no statute of limitations should be applied to the equitable division of property by the trial court at the time of divorce. No cases have been found where a statute of limitations was applied in the context of a division of property under Tex. Fam. Code Ann. §7.001, or any of its predecessors statutes. However, in post-divorce divisions of undisclosed or undivided property, Tex. Fam. Code Ann. §9.202 provides for a two year statute of limitations and states: (a) a suit under this subchapter must be filed before the second anniversary of the date a former spouse unequivocally repudiates the existence of the ownership interest of the other former spouse and communicates that repudiation to the other former spouse; and, (b) the two-year limitations period is tolled for the period that a court of this state does not have jurisdiction over the former spouses or over the property. b. Non-Divorce Cases Several appellate courts in non-divorce cases have held that an independent action for breach of fiduciary duty is controlled by the two year statute of limitations. Clade v. Larsen, 838 S.W.2d 277, 281 (Tex. App.--Dallas 1992, writ denied); El Paso Associates, Ltd. v. J.R. Thurman & Co., 786 S.W.2d 17, 20 (Tex. App.--El Paso 1990, no writ); Redman Industries Inc. v. Couch, 613 S.W.2d 787 (Tex. App.--Houston [14th Dist.] 1981, writ ref'd n.r.e.). However, one court held that since a claim for fraud or misrepresentation ordinarily is a claim for a debt and is governed by a four year statute of limitations, a breach of fiduciary duty claim subsumes a claim of constructive fraud. Therefore, the Corpus Christi Court of Appeals held a breach of fiduciary duty claim is also governed by a four year statute of limitations. In re Estate of Herring, 970 S.W.2d 583 (Tex. App.-- Corpus Christi 1998, no writ). But see Maxon v. Travis County Rent Account, 21 S.W. 3d 311 (Tex. App. - Austin 1999, pet. dism'd by argmt) where the Austin Court of Appeals declined to follow Herring's four year statute of limitations ruling in breach of fiduciary duty cases and applied the two year statute of limitations in breach of fiduciary duty cases under Tex. Civ. Prac. & Rem. Code, § 16.003. This issue has not been settled by the Texas Supreme Court. In Little v. Smith, 943 S.W.2d 414 (Tex. 1997) the Court addressed a case in which the issue of the statute of limitations was applicable. Unfortunately the period of time was well beyond the four year statute of limitations and the asserting party probably cared little as to whether the two or four year statute applied. The Court did not address this issue

c.

Limitations of Actions A primary concern is whether marriage tolls the bringing of an interspousal tort action. Whitley v. Whitley, 436 S.W.2d 607 (Tex. Civ. App.--Houston 1968) [alienations action - fact that plaintiff was married did not toll statute of limitations after cause of action arose]. It can be argued in "fiduciary torts" that as long as a fiduciary relationship exists between spouses, the statute of limitations is tolled until discovery of the tort [conversion, etc.], much the way it is in other fiduciary relationships, such as attorney and client or stockbroker and client. Pace v. McEwen, 574 S.W.2d 792 (Tex. Civ. App.--El Paso 1978, writ ref'd n.r.e.)[stockbroker]. See Little v. Smith, supra and Belt v. Oppenheimer, Blend, Harrison, and Tate, Inc., 192 S.W. 3d 780 (Tex. 2006). However, these tort suits are generally based on deceptive, fraudulent conduct. Practice Note: Since the disability of coverture in domestic tranquility arguments does not prevent the running of limitations in interspousal property and contract actions [Dyer v. Dyer, 616 S.W.2d 663, 665 (Tex. Civ. App.--Corpus Christi 1981, no writ)], it is difficult to see how suits based in tort would have the effect of destroying domestic tranquility. The disability of coverture argument was rejected in Whitley v. Whitley, 436 S.W.2d 60 (Tex. Civ. App.-- Houston 1968, no writ) [alienation action]. The general rule is that a cause of action sounding in tort accrues when the tort is completed, that is, the act is committed and damage is suffered. Atkins v. Crosland, 417 S.W.2d 150 (Tex. 1967). This rule is supported by the public policy expressed in 12 statutes of limitations, which favor repose and discourages the assertion of stale demands. McClung v. Johnson, 620 S.W.2d 644 (Tex. Civ. App.--Dallas 1981, writ ref'd n.r.e.). d. Defense to Limitations--The "Relation Back" Doctrine The doctrine of "relation back" has been codified in Texas and states: "If a filed pleading relates to a cause of action, cross action, counterclaim, or defense that is not subject to a plea of limitation when the pleading is filed, a subsequent amendment or supplement to the pleading that changes the facts or grounds of liability or defense is not subject to a plea of limitation unless the amendment or supplement is wholly based on a new, distinct, or different transaction or occurrence." Tex. Prac. & Rem. Code § 16.068. This is effective for pleading additional causes of action after discovery is completed. See Peek v. De Barry, 871 S.W.2d 520 (Tex. App.--San Antonio 1994, writ denied) and Cain v. State, 882 S.W.2d 515 (Tex. App.--Austin 994, no writ).

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e.

Defense to Limitations- Aggravation of PreExisting Conditions Most domestic torts will not be of the "continuing" variety; for example, an assault and battery has a beginning and end; beginning when the act or event occurs and the ending when damage is suffered. Most often domestic torts of this variety will go through periods of quiescence followed by a period of new assaults. Flashbacks from prior assaults generally occur and make worse the effects of new assaults. In Texas, the tortfeasor takes his victim as he finds him. Padget v. Gray, 727 S.W.2d 706, 711 (Tex. App.--Amarillo 1987, no writ). As the court stated in Thompson v. Quarles, 297 S.W.2d 321, 329 (Tex. Civ. App.--Galveston 1956, writ ref'd n.r.e.), when quoting from 15 Am. Jur., Damages, Sec. 81, page 490: "The general rule seems to be that where the result of the accident is to bring into activity a dormant or incipient disease, or one to which the injured person is predisposed, the defendant is liable for the entire damages which ensue, for it cannot be said that the development of the disease as a result of the injury was not the consequence which might naturally or ordinarily follow as a result of the injury, and therefore, the negligent person may be held liable therefore. In other words, if a latent condition itself does not cause pain, suffering, etc., but that condition plus an injury caused such pain, the injury, and not the latent condition, is the proximate cause."[emphasis added] Practice Note: This reasoning would also apply to intentional torts. f. Defense to Limitations- Discovery Rule Fraud, be it actual or constructive, can be inherently undiscoverable. A breach of fiduciary duty claim is subject to the "discovery rule". Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997). Where there has been a breach of fiduciary duty, the statute of limitations does not begin to run until the claimant knew, or should have known, of the facts in existence or facts that in the exercise of reasonable diligence would have led to discovery of the wrongful act. See also Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, 394 (1945); Belt v. Oppenheimer, 192 S.W. 3d 780 (Texas 2006) g. Defense to Limitations--Continuing Tort Conceptually, a continuing tort is a tolling provision allowing the avoidance of a limitation defense. Twyman v. Twyman, 790 S.W.2d 819, 820 (Tex. App.--Austin 1990), reversed on other grounds, 855 S.W.2d 619 (Tex. 1993). A matter in avoidance of the statute of limitations, not raised affirmatively by the pleadings is deemed waived. See Woods v. William M. Mercer, Inc., 769 S.W.2d 515,

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518 (Tex. 1988) (stating this principle in the context of a case dealing with the discovery rule). A continuing tort involves both continuing wrongful conduct and continuing injury. Upjohn Co. v. Freeman, 885 S.W.2d 542 (Tex. App.--Dallas 1994, writ denied). False imprisonment, for example is a continuing tort for which a cause of action accrues when the detention ceases. Adler v. Beverly Hills Hospital, 594 S.W.2d 153, 156 (Tex. Civ. App.-- Dallas 1980, no writ). Traditionally, continuing tort theories apply to such causes of action as nuisance, trespass and false imprisonment, Jim Arnold Corp. v. Bishop, 928 S.W.2d 761, 766-67 (Tex. App.-- Beaumont 1996, no writ) and intentional infliction of emotional distress. Newton v. Newton, 895 S.W.2d 503, 506 (Tex. App.--Fort Worth 1995, no writ) (verbal abuse). A continuing tort involves wrongful conduct inflicted over a period of time that is repeated until desisted, and each day creates a separate cause of action. See Two Pesos, Inc. v. Gulf Ins. Co.,901 S.W.2d 495, 500 (Tex. App.--San Antonio 1983, writ ref'd n.r.e.) A cause of action for continuing tort does not accrue until the defendant's tortious act ceases. See Tectonic Realty Ins. Co. v. CNA Lloyd's of Texas Ins. Co., 812 S.W.2d 647, 654 (Tex. App.--Dallas 1991, writ denied). Because continuing tort causes of action are grounded in the idea of a continuing injury to the Plaintiff, tort claimants may sue for acts that occurred beyond the two-year statute of limitations, as long as the cause of action accrued within the applicable statute of limitations. Twyman v. Twyman, 790 S.W.2d 819, 821 (Tex. App.--Austin 1990), reversed on other grounds, 855 S.W.2d 619 (Tex. 1993). D. Statutory and Common Law Torts Recognized torts in Texas that have found, or will find, their way into the family law arena are statutory and common law in nature, to-wit: 1. 1. Statutory Torts

Texas Deceptive Trade Practices Consumer Protection Act. Tex. Bus. & Com. Code, §§17.4163; Tex. Pattern Jury Charges Business/Consumer, Chapter 102 (2006). 2. Texas Fraud in Real Estate and Stock Transactions Act. Tex. Bus. & Com. Code, §27.01 (Vernon 2002, and Supp. 2007). 3. Texas Uniform Fraudulent Transfer Act. Tex. Bus. & Com. Code, §§24.001-.013 (Vernon 2002 and Supp. 2007). 4. Texas Family Code - Transfer and Debts Pending Decree. Tex. Fam. Code. Ann.,§6.707. 5. Texas Kidnapping Act. Tex. Fam. Code Ann., §§42.001-.009.

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6. Texas Theft Liability Act. Tex. Civ. Prac. & Rem. Code, §§123.001-.005. 7. Texas Civil Wiretap Act. Tex. Civ. Prac. & Rem. Code, §§123.001-.004. 8. Texas Principal and Income Act. Tex. Prop. Code, §§116.001-.171. 9. Texas Prudent Investor Act. Tex. Prop. Code, §§117.001-.012. 2. Statutory and Common Law Torts The following statutory and common law causes of actions covered herein are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. Abuse of Process. Assault. False Imprisonment. Intentional Infliction of Emotional Distress. Intentional or Negligent Transmission of Venereal Disease. Invasion of Privacy-Intrusion on Seclusion and Solitude. Invasion of Privacy-Public Disclosure of Private Facts. Defamation - Slander. Interception of Wire, Aural and Electronic Communications. Conversion. Economic Duress. Forgery. Fraudulent Transfer of Community Property. Accounting. Actual Fraud on the Person and Property. Breach of Fiduciary Duty Under the Trust Fund Doctrine. Breach of Fiduciary Relationship - Business and Personal. Constructive Fraud on the Person and Property. Identifying Information. Misapplication of Fiduciary Property. Breach of Contract and Money Had and Received. Rescission. Promissory Estoppel. Usurpation of Community Opportunity. Waste of Assets. Alter-Ego Corporations. Single Business Enterprise. Joint Venture/Partnership. Alter-Ego Trusts. Civil Conspiracy. Wrongful Interference with Existing Contract. Tortious Interference with Prospective or Business Relations. Oral Gift of Land. Estoppel. Trespass to Chattels/Replevin Damages.

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Case Law Upholding Disproportionate Division Awards 1. Garcia v. Garcia Garcia v. Garcia, ---S.W.3d.---, 2005 WL 1315026 (Tex.App.--El Paso 2005). The Garcia court held that the reimbursement award to wife which resulted in 62 percent to 38 percent division in wife's favor was not grossly disproportionate in overall division of the community estate; husband was awarded community assets totaling $18,440 which included community property and equity in the home, wife was awarded community property valued at $5,900, husband assumed indebtedness of $2,500 while wife assumed debts of $6,000, net award to husband was $15,940 and net to wife was negative $100, taking into consideration reimbursement award, and $10,000 was added to wife's award, so husband ended up with $5,940, while wife received $9,900. 2. Lucy v. Lucy Lucy v. Lucy, 162 S.W.3d 770 (Tex.App.--El Paso 2005, no writ). The court held that fraud on the community may be considered in rendering a disproportionate division of community property. The court further held that a disproportionate division of property in favor of wife was warranted in this divorce action under an equitable right of reimbursement; husband received rental payments, which were community assets, and would not give any of the payments to wife, wife added husband's name to her checking account, and the value of the checking account dropped over $43,000 during marriage. 3. Loaiza v. Loaiza In Loaiza v. Loaiza, 130 S.W.3d 894 (Tex.App.-- Fort Worth 2004, no pet.), the court's disproportionate award of the community estate to wife indicated the trial court had considered evidence of fraud and waste in making property division. 4. In re Marriage of Becerra In re Marriage of Becerra, 100 S.W.3d 637 (Tex.App.--Texarkana 2003, no pet.). In Becerra the evidence was legally sufficient to support the trial court's finding that a disproportionate division of community property in favor of wife was appropriate based on husband spending extraordinary sums of money on other women during the parties' marriage; wife produced evidence that husband paid $3,933.00 to his ex-wife and $9,864.73 to another woman during their marriage. Further, the evidence was legally sufficient to support the trial court's finding that the disproportionate division of community property favoring wife was justified based on testimony from husband stating that he did not love wife but was going to marry her since she would help him build a house; husband's ex-wife testified that he told her that he

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didn't love wife, that he was marrying wife so she would help him build a house, that while husband was married to her he wrote to his first wife and stated that he didn't love ex-wife but couldn't financially afford to leave her, that he attempted to a cash a check from her without her consent, and that he cashed a check from wife's retirement account without her consent. 5. Phillips v. Phillips

Phillips v. Phillips, 75 S.W.3d 564 (Tex.App.--Beaumont 2002, no pet. h.). In Phillips, the trial court awarded a disproportionate

amount of the community estate to Nancy. Nancy contends the trial court properly awarded her approximately 60% of the community estate with the remaining 40% of the community estate going to James. In his brief, James contends that the division was even more lopsided in favor of Nancy and he pointed out that he was awarded a mere 23.5% while Nancy was actually awarded 76.5%. The trial court entered a finding that James was at "fault" for the breakup of the marriage and awarded Nancy a disproportionate share of the community estate. 6. Sprick v. Sprick Sprick v. Sprick, 25 S.W.3d 7 (Tex.App.--El Paso 1999, pet. denied). In Sprick, the award of 76.6% of the net assets of the community property estate to wife was equitable at divorce, even though finding that wife's infidelity was the reason for the dissolution would have justified a disproportionate division of the community estate in favor of husband. Kimsey v. Kimsey Kimsey v. Kimsey, 965 S.W.2d 690 (Tex. App.­ El Paso 1998, pet. denied). The husband in Kimsey complained that although he was awarded 62.2% of the community assets, he was awarded 96.5% of the community debts. There was a great disparity with respect to the relative earning capacities and abilities of the parties. Each party was 59 years of age. The wife attended college but did not obtain a degree. Husband, on the other hand, obtained a degree in business administration and completed one semester of a post graduate program in petroleum engineering. After leaving school and active duty in the army, the husband became self-employed in the oil and gas business. Over the years, the husband was successful in his business ventures. The trial court found that the husband had significantly greater future business opportunities than the wife and an ability to retire the debts. 8. Abernathy v. Fehlis Abernathy v. Fehlis, 911 S.W.2d 845 (Tex.App.--Austin 1995, no writ). In Abernathy, the

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trial court's division of community property and joint obligations was not so disproportionate and inequitable as to be abuse of discretion, though the decree awarded the former wife property valued at $52,061 while assigning the former husband property and liabilities that resulted in a negative value of $35,589, where provision of the decree requiring former husband to pay the home mortgage debt of $43,000 was a patent fiction, since the mortgage was extinguished by his father's forgiveness, and the former husband had a higher total cash income and a disproportionately larger separate estate. 9. Tschirhart v. Tschirhart Tschirhart v. Tschirhart, 876 S.W.2d 507, Partial Publication, (Tex.App.--Austin 1994, no writ). In Tschirhart, the trial court found the evidence at trial revealed that, compared with Suzanne, James had a greater earning capacity and income, more business opportunities, a higher level of formal education, and a valuable separate estate. The trial court granted the divorce on no-fault grounds of insupportability and awarded Suzanne a disproportionate division of the community property. When the court considered the division of property in light of this evidence and the nature of the property awarded to each party, the court was not found to have abused its discretion. 10. Matter of Marriage of DeVine Matter of Marriage of DeVine, 869 S.W.2d 415 (Tex.App.--Amarillo 1993, writ denied). In DeVine, the court held that: (1) evidence was sufficient to support a finding that wife perpetrated actual fraud on husband; (2) evidence established that wife committed constructive fraud when she transferred stock owned by community to nonprofit corporation; (3) evidence established that $400,000 fairly compensated the community estate for wife's constructive fraud; and (4) compensating community estate for wife's fraud, then awarding wife only 40 percent of community estate because of her fraud, did not result in a double recovery by husband. 11. Finch v. Finch Finch v. Finch, 825 S.W.2d 218 (Tex. App. Houston [1st Dist.] 1992, no writ). The court in Finch awarded the wife approximately 65% of the community estate. In Finch, the husband had greater business opportunities than the wife. Further, the record showed that the husband abused the wife and the wife's daughter, and the husband had a greater earning capacity. 12. Falor v. Falor Falor v. Falor, 840 S.W.2d 683 (Tex. App. ­ San Antonio 1992, no writ). The Falor court held that the trial court did not abuse its discretion when it awarded

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the wife a much greater share of the community estate. The Falor court found that the husband disposed of approximately $28,000 worth of community assets without the wife's knowledge and consent for noncommunity purposes. The trial court also considered the existence of the husband's separate estate, relative earning capacities of the parties (the husband earned about $36,000 per year, while the wife earned about $16,000 per year), and the wife's obligations as the sole managing conservator of the couple's two children. 13. Faram v. Gervitz-Faram Faram v. Gervitz-Faram, 895 S.W.2d 839 (Tex. App. ­ Fort Worth 1995, no writ). The court in Faram found that the trial court did not abuse its discretion in dividing the marital estate. In Faram, the wife was awarded 72.9% of the community estate. The trial court took into consideration the husband's abusive and violent nature. Further, the husband earned a steady income and retirement benefits, and the wife had never worked out of the home. The husband also had received a large portion of the personal property acquired during the marriage. The trial court also found that the husband committed waste of the community estate by acquiring property, incurring debt, and escalating attorney's fees after the couple's separation. Further, because of the husband's conduct during the lawsuit, including his failure to disclose evidence during discovery, the trial court ordered him to pay the wife's attorney's fees of over $22,000. Based on these factors alone, the appellate court could not say that the trial court abused its discretion. However, the husband contends that after dividing the community estate the trial court erroneously awarded wife a judgment in the amount of $40,612.75, which he argues was inequitable, punitive, and tantamount to the award of alimony. The husband also complained that the judgment decreased his share of the community estate to a negative value. After reviewing the divorce decree, the court of appeals was satisfied that the judgment was appropriate. The award of a judgment as part of the division of the community estate is often necessary where there are outstanding community obligations. Consequently, the possibility exists that one party may end up with a negative award of community property. In this case, the judgment accounted for wife' attorneys' fees ($22,237.75), credit card debts ($5,400.00), reimbursement to her separate property estate ($9,000.00), and a one-half interest in a loan to her children ($3,975.00). The divorce decree also entitled the husband to a credit on the judgment for all payments of principal on the credit card debts and all payments on the loan to wife's children. Once again, the court of appeals could not conclude that

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the trial court abused its discretion in awarding the judgment in favor of the wife 14. Golias v. Golias Golias v. Golias, 861 S.W.2d 401 (Tex. App. ­ Beaumont 1993, no writ). In Golias, the court held that the property division was within the trial court's discretion. The court did not find that the trial court had abused its discretion in awarding the wife 79% of the community estate, even though the trial court stated it was going to award 75% of the community estate to the wife. 15. Frommer v. Frommer Frommer v. Frommer, 981 S.W.2d 811 (Tex. App. ­ Houston [1st Dist.] 1998, no pet.). In Frommer, the court upheld a disproportionate division in favor of the wife. The husband was a medical doctor, had an annual income of approximately $750,000 and was likely to continue to make between $45,000 and $65,000 per month. The wife, on the other hand, had only a high school diploma. During the marriage, the wife did not work outside the home and, prior to her marriage, she earned approximately $2,000 per month as an interior decorator. Further, the husband had substantial separate property including $250,000 equity in a home, his professional association that was valued around $300,000, including art and furnishings purchased for approximately $150,000, a Mercedes-Benz car, and a one-quarter interest in a partnership owning and receiving profits from the operation of a dialysis unit. The wife's separate property, on the other hand, consisted of only an automobile and certain jewelry which was given to her by the husband during their marriage. 16. Vandiver v. Vandiver Vandiver v. Vandiver, 4 S.W.3d 300 (Tex. App. ­ Corpus Christi 1999, no pet. h.). The court in Vandiver upheld a division of property in favor of the wife. The trial court considered several factors in granting the wife a disproportionate division, including the husband's greater earning power and ability to support himself, his education and future employability, his fault in the break up of the marriage, the wife's need for future support, the nature of the property involved in the division, the husband's failure to follow court orders, the wife's health problems, the needs of the child of the marriage, community indebtedness and liabilities, reimbursement, the size and nature of the separate estates, and attorney's fees to be paid by the parties. The court stated: "Community property need not be equally divided. See Murff v. Murff, 615 S.W.2d

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696, 699 (Tex.1981). In making a division of the property, the trial court may consider such factors as the spouses' capacities and abilities; benefits which the party not at fault would have derived from continuation of the marriage; business opportunities, education, relative physical conditions, relative financial condition and obligations; disparity of ages; size of separate estates; and the nature of the property. Id. The consideration of a disparity in earning capacities or incomes is proper and need not be limited by necessitous circumstances. Id. We must presume that the trial court exercised its discretion properly, and we are not to disturb that discretion on appeal unless a clear abuse of discretion has been shown. See Vallone v. Vallone, 644 S.W.2d 455, 460 (Tex.1982). The trial court found that evidence was presented supporting the following factors for consideration by the court: (1) E. L.'s greater earning power and ability to support himself; (2) his education and further employability; (3) his fault in the breakup of the marriage; (4) Joan's need for further support; (5) the nature of the property involved in the division; (6) E. L.'s failure to follow court orders; (7) Joan's health problems; (8) needs of the child of the marriage; (9) community indebtedness and liabilities; (10) reimbursement; (11) the size and nature of the separate estates; and (12) attorney's fees to be paid by each party. We hold that the trial court did not abuse its discretion in finding that the division of the property is just and right. E.L. makes no claim that the evidence does not support these findings or that these factors, taken together, do not support the trial court's division of the property as being a just and right division, assuming the disputed property is community property." Id. at 302. 17. Morrison v. Morrison Morrison v. Morrison, 713 S.W.2d 377 (Tex. App.­ Dallas 1986, dism'd). The court upheld an 83.5% division in favor of wife where husband in a 35-year marriage had spent substantial community funds on other women, committed adultery, and was found to be at fault for the break-up of the marriage. 18. Conroy v. Conroy Conroy v. Conroy, 706 S.W.2d 745 (Tex. App. ­ El Paso 1986, no writ). The court found that a disproportionate division of the community estate in favor of the wife was not an abuse of discretion where the wife was 47 years old and had not worked outside

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the home at any time during the 24 year marriage, the husband had income in excess of $3,000 per month, the wife had no income and poor prospects for any immediate alleviation of debt, and the wife assumed responsibility of the child and the mortgage on the family home, and the husband was at fault in the break up of the marriage. 19. Kluck v. Kluck Kluck v. Kluck, 647 S.W.2d 338 (Tex. App. ­ San Antonio 1982, writ dism'd). An award of the bulk of the community estate to the wife was not an abuse of discretion where the wife had not been employed during the marriage and did not have promising employment prospects, and the husband was a successful attorney who received his professional practice in total. 20. Eikenhorst v. Eikenhorst Eikenhorst v. Eikenhorst, 746 S.W.2d 882 (Tex. App.­Houston [1st Dist.] 1988, no writ). In Eikenhorst, the wife was awarded 56% of the community estate. The husband was a radiologist who earned approximately $220,000 per year plus an additional $30,000 that was contributed to his pension plan. The wife earned $10.00 per hour as a part-time nurse. The court awarded the wife custody of the children and found that the husband was at fault in the breakup of the marriage. 21. Oliver v. Oliver Oliver v. Oliver, 741 S.W.2d 225 (Tex. App.­Fort Worth 1987, no writ). In Oliver, the wife was awarded 80% of the community estate. The husband was a computer programmer, and the wife was a maid who lacked a college education. 22. Rafidi v. Rafidi Rafidi v. Rafidi, 718 S.W.2d 43 (Tex. App.­ Dallas 1986, no writ). In Rafidi, the wife was awarded between 85% and 90% of the community estate. The husband was a petroleum engineer with three college degrees and the wife had only a high school education. The wife also had a medical problem and a minor daughter and three adult children living with her. The court further found that the husband had hidden community assets. 23. Rutledge v. Rutledge Rutledge v. Rutledge, 709 S.W.2d 389 (Tex. App.­Fort Worth 1986, writ ref'd n.r.e.). The wife in Rutledge was awarded 60% of the community estate. The husband was a retired airline pilot in his late sixties with income from oil investments; the wife was in her late forties and had no marketable job skills and no separate property.

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24. Huls v. Huls Huls v. Huls, 616 S.W.2d 312 (Tex. Civ. App.­ Houston [1st Dist.] 1981, no writ). The court in Huls awarded the family business to the husband and awarded the wife 85% of the community estate where the wife was a quadriplegic. 25. Roberts v. Roberts Roberts v. Roberts, 663 S.W.2d 75 (Tex. App.­ Waco 1983, no writ). The court awarded the wife more than 50% of the community property. The wife was 55 years of age and had health problems, and her daughter had health problems and medical expenses from an automobile accident. The wife lacked steady income, and the husband received $40,000 annual salary plus pension benefits. The court found that the husband was at fault in the breakup of the marriage. 26. Gaston v. Gaston Gaston v. Gaston, 608 S.W.2d 332 (Tex. Civ. App.­Tyler 1980, no writ). The husband was awarded more than 50% of the community property where he was unable to work due to a heart condition. 27. Hourigan v. Hourigan Hourigan v. Hourigan, 635 S.W.2d 556 (Tex. Civ. App.­El Paso 1981, no writ). The court awarded the husband most of the community estate because the wife had abandoned the husband and child. The court reasoned that the wife's duty to support the child would be satisfied out of her share of the community property. 28. Haulsler v. Haulsler Hausler v. Hausler, 636 S.W.2d 874 (Tex. App.­ Waco 1982, no writ). The court awarded the wife more than 50% of the community estate considering the fact that both adult children lived with her and would probably look to her for support. 29. Whittenburg v. Whittenburg Whittenburg v. Whittenburg, 523 S.W.2d 797 (Tex. Civ. App. - Austin 1975, no writ). The trial court referred to the expected inheritance of the husband as a factor to be weighed in making a just and right division of the estate. 30. Waggener v. Waggener Waggener v. Waggener, 450 S.W.2d 251 (Tex.Civ.App.--Dallas 1970, no writ). The division of community estate in divorce action between parties who had been married for 26 years so that wife, who had not been employed for more than 20 years, who had limited college training of 11/2 years and who received custody of children, was awarded a greater share than husband who made judicial admission of

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acts of cruelty alleged by wife was not manifestly unjust and was not an abuse of discretion. 31. Duncan v. Duncan Duncan v. Duncan, 374 S.W.2d 800 (Tex.Civ.App.--Eastland 1964, no writ). Factors to be looked to as justification for an unequal division of the community property between divorced spouses are the probable future need for support, fault in breaking up the marriage, and benefits the innocent spouse would have received from continuance of marriage. 32. Bokhoven v. Bokhoven Bokhoven v. Bokhoven, 559 S.W.2d 142 (Tex.Civ.App.--Tyler 1977, no writ). In dividing community property, the trial court may take into consideration the difference in earning capacity, capacity and abilities of the parties, business opportunities, the probable future need for support, fault in breaking up marriage, and benefits the innocent spouse would have received from continuation of marriage. The court stated that "In this particular instance, the trial court's division of community property could be based solely upon the difference in earning capacities of the parties as set out in the findings of fact." Id. at144. 33. Vannerson v. Vannerson Vannerson v. Vannerson, 857 S.W.2d 659 (Tex.App.--Houston [1st Dist.] 1993, writ denied). The trial court may consider many factors in making an unequal division of marital property, including education, respective earning power, business and employment opportunities, physical health, probable future need for support, award of custody, size of parties' separate estates, length of marriage, and fault in its break-up; additionally, trial court may take into account spouse's dissipation of the estate. 34. Zamora v. Zamora Zamora v. Zamora, 611 S.W.2d 660 (Tex.Civ.App.--Corpus Christi 1980, no writ). The trial court may consider many factors in determining whether one party requires a greater portion of the community estate on divorce, some of which are relative earning capacities and business experience of the parties, education or background of the parties, size of separate estates, the age, health and physical condition of the parties, fault in breaking up the marriage, the benefits the innocent spouse would have received had the marriage continued and probable need for future support. 35. Massey v. Massey Massey v. Massey, 807 S.W.2d 391 (Tex.App.-- Houston [1st Dist.] 1991, writ denied). The trial court may consider many factors in making an unequal

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division of the community property in a divorce action including education, respective earning power, business and employment opportunities, physical health, probable future need for support, award of custody, size of parties' separate estates, length of marriage and fault in its breakup. 36. Goren v. Goren In Goren v. Goren, 531 S.W.2d 897 (Tex.Civ.App.--Houston [1st Dist.] 1975, writ dism'd), in making the division of community property of parties in connection with divorce decree, trial court was justified in considering parties' respective financial obligations and future earning capacity, and their probable respective need for support. 37. Walston v. Walston Walston v. Walston, 119 S.W.3d 435 (Tex.App.--Waco 2003, no pet.). The factors that may be considered by the trial court in making a just and right division of the community estate in a divorce include not only obvious facts, such as the existence and value of the assets which comprise the current community estate, but waste of community assets during the relevant time period. 38. In re Marriage of Rice In re Marriage of Rice, 96 S.W.3d 642 (Tex.App.--Texarkana 2003). Evidence was sufficient to support an award of a disproportionate share of marital property to wife, including award of income-producing properties to wife, to effect an equitable distribution; husband had a higher earning capacity than wife, the managing conservatorship of the couple's youngest child was awarded to wife, husband had used wife's credit card without her knowledge, and husband had later failed to pay credit card bills on time, thereby ruining wife's credit. 39. Zorilla v. Wahid Zorilla v. Wahid, 83 S.W.3d 247 (Tex.App.-- Corpus Christi 2002, no pet.). The trial court acted within its discretion in awarding approximately 60% of marital property to wife and 40% percent to husband, where the record contained evidence indicating that husband contributed less than equal share to family's finances, dissipated family's assets, and failed to make court-ordered payments, but there was also evidence from which the court could have inferred that wife attempted to conceal assets by transferring them into friend's name, misrepresented her income, and quit or cut back on her employment to obtain additional funds from husband. Further, a spouse's failure to make court-ordered temporary support payments or failure to obey a court's temporary order restricting use of community assets

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may justify disproportionate award of the community estate. 40. Magill v. Magill In Magill v. Magill, 816 S.W.2d 530 (Tex.App.-- Houston [1st Dist.] 1991, writ denied), in ordering a division of community property, the trial court stated that a court may consider a number of factors including the disparity of income or earning power of the parties, the spouses' capacities and abilities, relative physical conditions, relative financial condition and obligations, size of separate estates, and the nature of the property, citing Murff. To effect a just and proper division of the property, the trial court may, in its discretion, determine that one party is entitled to a greater share of the community. The record reflected that that appellee was awarded two items of property where appellant was not awarded property of equal value. Appellee had accumulated $14,000 in her teacher retirement fund. Testimony revealed that school districts do not contribute to the social security program, consequently, upon retirement a teacher cannot collect social security. Appellee was awarded the $14,000 as part of the property division. The record further reflects that the community purchased an annuity, through the John Alden Insurance Company, to pay for the education of appellee's daughter. The annuity had a present value of $12,000, but there was no evidence regarding the original cost of that annuity or its accumulated interest. It was awarded to appellee as part of the property division. There is evidence indicating the appellee had no separate estate and was in poor physical health. Upon consideration of all of these circumstances, the trial court was entitled to award the appellee a greater share of the community estate, provided the award was not so disproportionate as to be unjust and unfair. Appellant has failed to demonstrate that the division of property was manifestly unjust and that the mischaracterization of his separate property created any inequality that constituted an abuse of discretion. IV. PLEADINGS FOR DISPROPORTIONATE DIVISION In order to avoid an objection to presenting evidence or arguments in support of a disproportionate division based on specific equitable grounds the best practice is to plead the grounds affirmatively in your petition for divorce. Simply requesting a "just and right" division in your petition for divorce should be enough to allow you to present whatever evidence and arguments in support of a disproportionate division you can think of to present, however if you have facts to support, for example adultery or cruel treatment, or facts to support any of the other specific grounds for divorce as set out in Title 1, Subtitle C, Chapter 6, you need to plead

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those grounds separately along with the no-fault ground. However, if you have not pled a specific theory and your trial court believes you had to plead the theory, you should request a trial amendment under Tex. R. Civ. P. 66, or cite the court the case of Jackson v. Jackson, 506 S.W. 2d 261 (Tex.Civ.App.--Amarillo 1974, writ dism'd) allowing consideration of fault in the break-up of the marriage when only insupportability had been pled. V. ARGUMENTS AND IDEAS FOR DISPROPORTIONATE DIVISION Knowing the law is only the beginning. The remainder of this outline will be dedicated to a discussion of themes, arguments and trial tips to make you a more persuasive advocate when requesting a disproportionate division from the trial court. Overall, the idea is to make your case more compelling than simply reciting the law to the trial court and hoping for the best. Effective advocacy means taking the law and the facts and arranging them together into a compelling argument. Remember, your judge has heard all this before. Persuasiveness is the key in family law--you must get the judge interested in your case and make the judge want to help your client. A. Know Your Judge and Be Willing to Persuade Your Judge If You Have To One of the first considerations in preparing a case for trial where you will be asking for a disproportionate division is to find out about your trial judge. Most judges have a theory that each party is entitled to fifty percent of the estate and the judge must be persuaded to give one side more than the other. Find out if your judge has a reputation as a "fifty-fifty" judge. Find out if the judge has any hot or cold buttons regarding adultery, abuse or cruelty. Find out the judge's background on financial issues, i.e. experience in accounting. In other words, how can you formulate your arguments and plan your case if you do not know your audience? Put another way, when you try a case to the court you are essentially "selling" your case to the trial judge. Before you go to court, you need to know something about the "market," as you would if you were selling a product. If the judge is well known for being a "fifty-fifty" judge, you likely should acknowledge to the court you are aware of the court's customary fifty-fifty" policy but believe the court will be compelled to vary from that policy in your case. This will get the judge's attention from the start. If you put on your evidence in a persuasive manner and make compelling arguments highlighting the short and long term effects of the facts of your case, you may sway even a "fifty-fifty" judge to give you a disproportionate division and perhaps even get the judge to reexamine their "fifty-fifty" policy. You

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must persuade the court that to award a "fifty-fifty" division would be to ignore the Code, because this division would not be "just and right" and to ignore case law. B. Know your Assets and Ask for the Best Another consideration to keep in mind as you prepare your case, especially in front of a "fifty-fifty" judge, is the fact that assets with the same "value" do not necessarily have the same worth or are not readily ascertainable. For instance an unimproved piece of real estate worth $100,000.00 and a certificate of deposit for a $100,000.00 are not really worth the same. The certificate of deposit earns interest income, has no tax consequences, no selling costs and no maintenance costs. The real estate may carry with it the financial burdens of taxes, maintenance, improvements, and selling costs. You must always keep in mind the cost basis of assets for assets that stand alone or are located in accounts (e.g. stock). When you are preparing your proposed division for the court, one way to achieve a true disproportionate division is to ask for an award of those assets which are liquid, generate income, have no adverse tax consequences, no selling costs and no maintenance costs. This way, the division may appear more equal. I suggest giving the court a spread sheet of the property and the values. Depending on the case, I may or may not propose a division. Many times the division of property can appear to be "fifty-fifty" on its face but in reality the two "halves" do not have the same or equal value. C. Winning the Battle and Losing the War--The Cost of Litigation While you are plotting away on how to persuade the trial court to give your client 75% of the community estate, don't forget to consider the high cost of doing business down at the courthouse and the lack of client satisfaction after trial. Most cases settle without going to trial and clients, studies show, are happier with their settlements and their attorneys when the case is resolved prior to a contested trial. The principal reason for settlement in many cases is that it simply costs too much to litigate ­ even if you win. At the initial consult look at a property sketch of values and determine what 10% of the estate is. Talk to the client about going to trial to pick up an extra 10% pursuant to a disproportionate division, and then the cost of litigation to gain that 10%. In the "bread and butter" divorces, this 10% isn't enough to cover the attorney's fees. In fact, to go to the courthouse, the estate may even be reduced by 20% or so. In this situation, you could lose money for your client, which in turn the client will more than likely to blame you, and further you will probably add immensely to the anger between the parties. The point is, be sure your

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battle is worth the cost of the war before you use all these great ideas on arguing for a disproportionate division. D. Advocate Your Arguments 1. Adultery Many times when cases involving adultery are tried to the court, we simply put on the adultery facts through testimony and then expect the court to react to those facts with a significant disproportionate division. You must find the "X" factor when presenting these cases. You must shock the judge's conscience. You must show the judge the "aggravating" circumstances. To be more of an advocate and more compelling with adultery facts, try in the opening statement, testimony, or in closing arguments to advance some of the following themes or arguments. a. The Partnership has been Abandoned One argument that might help you tie adultery to justifying a disproportionate division without asking for "punishment" or "retribution" would be to emphasize the partnership nature of both marriage and the community property system and the loss of same. In some stereotypical marriages the husband's job is to be the breadwinner and the wife's job is to raise the children and keep the home. The long-term goal of this partnership is to raise the kids and provide for their education and then hopefully save for retirement. The "work and raise the children" partnership may take many years to fulfill financially with the last 10 to 20 years often providing the greatest financial rewards for retirement. If the husband in this scenario bails out on the marriage in the 20th year by having an affair, this would leave his wife with a much smaller than planned estate for the retirement years. To divide this estate equally is not "just and right" and would in fact ignore the factors set out in Murff and other case law as set out herein above. A factual and emotional presentation and argument showing that the husband has abandoned this partnership and now wants to keep his highest income earning years for himself, his girlfriend and his retirement, instead of sharing these things with his partner and wife is one way to make adultery facts financially and emotionally compelling. The wife in this situation must be able to convey her feelings to the court. It is highly important to put on all evidence of each and every Murff factor, for whichever factors the facts warrant, to give credence to the arguments and the case. In addition, show the court how fast he will make up the extra percentage wife would be awarded. The gist of this argument is that the husband and the wife have spent all these years taking care of the goose that lays the golden eggs (i.e. hubby's career) and just when the goose is getting really good at laying lots and lots of golden eggs, hubby wants to run off with the

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goose and share it not with his wife but, with his girlfriend. Prepared and presented this way, an argument for a disproportionate division may seem more compelling to the court. Let's face it, you would be disturbed if a husband told his wife to make 4 Easter baskets for a needy family his office adopted, which were really for his girlfriend's children, but you may not be as disturbed by an affair wherein the wife did not give her husband sex for 10 years for no valid reason. b. Choices and Consequences Another possible theme in an adultery situation may be to talk about choices and consequences. In this argument you should remind the court that you are not asking the court to punish the adultery but to recognize that the decision to have an affair is a conscious choice that has real and significant financial and emotional consequences for the other spouse and children. This argument might go something like this: "Mr. Jones made a choice to have an affair. He has made a choice to continue the affair and evidently after this case is over, he has made a choice to marry his girlfriend. Mr. Jones' choices have financial consequences both for him and for Mrs. Jones. For Mr. Jones the financial consequences of his choice will not be threatening to his lifestyle. He'll continue to earn his six figure income for so long as he continues to enjoy his career. Mr. Jones will have no worries financially and will have all the money he wants to happily live out the choices he has made. For Mrs. Jones, there were also choices and now she will suffer the consequences. Early in this marriage Mrs. Jones made a choice to abandon her education and her career goals and to be a stay at home mom. When she made that choice she didn't know that 25 years later her husband would leave her. The financial consequence now of Mrs. Jones' decision 25 years ago to be a wife and a mom is that she is 48 years old, has no marketable education, no marketable career or career skills and no meaningful income earning ability. The courts of appeals tell us you are not to punish adultery with a disproportionate division of property. The adultery has hurt her enough and ruined her dreams. We are asking that you not punish Mrs. Jones for her decision to keep her vows, to raise the kids, and to support her husband, as was planned. If the court does not award her a disproportionate division, the financial consequences of her husband's choice to leave her for another woman will have harsh financial and emotional consequences for Mrs. Jones and the children for the rest of her life. The "just and right" division in this case is one of a disproportionate division in favor of Ms. Jones and for the benefit of the children. We must not forget that the children are one of the most important factors in the "just and right"

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division and a disproportionate division in their mother's favor would also be just and right to them." c. Make the Requested Division Financially Fair and Not Emotionally Punitive Whatever theme, theory or argument you create, it should tell a financial story at the end of the day. Just simply asking the court to award a disproportionate division because there has been adultery will not likely persuade a judge all that much. You need to fashion financial evidence, emotional evidence, and arguments that show you're requested disproportionate division truly is fair, just and right. 2.

chosen for the low income earning spouse to reflect the reality that most likely less money will be available for savings because the low income earning spouse will have to spend more of their income on living expenses. c. Fifty-Fifty Won't Be Fair Long It may be useful to point out to the court the effect of a "fifty-fifty" division over time. In situations where there is a great disparity in income earning capacity, the division will not stay "fifty-fifty" for long. Assume the following: Husband and wife have been married for 30 years and are 50 years old at the time of divorce. Husband makes $250,000.00 a year and wife, although she hasn't worked in over 20 years, has found a job paying her $25,000.00 per year. The parties have a $500,000.00 liquid estate that is fully invested and will earn 8% per year. Further assume that because of husband's high income he'll be able to save 20% of his income for retirement and because of wife's lower income, she'll only be able to save 10% of her income for retirement. Under these basic assumptions, if the court were to divide the estate "fifty-fifty" at the time of divorce, the division of property would certainly not stay "fiftyfifty" over time. After 5 years the division would look like a 64% division in favor of the husband and after 10 years a 69% division in favor of the husband and after 15 years a 72% division in favor of the husband. If you combine these financial projections with an argument that husband has abandoned the marital partnership you will be able to make a very compelling argument for the fairness of a greatly disproportionate division at the time of divorce. d. Trading One Year's Salary for the Next Twenty If the parties have been married 15 or 20 years and husband makes $250,000.00 a year, one argument to make might involve asking for a disproportionate division in an amount equal to just one year of husband's $250,000.00 per year salary. Basically the argument is that husband will make upwards of $250,000.00 per year for the rest of his life, so it is unfair to ask that wife receive the equivalent of "just one year" of husband's salary as a disproportionate division? 3. Difference in the Size of the Separate Estates If the facts involve a situation where the value of one of the spouse's separate estate far exceeds the value of the community estate, you should try to do more than simply point this fact out to the court. Think creatively and craft some arguments to make the most of this important factor.

Disparity of Income Most judges believe this factor is the most persuasive in making a decision to make a disproportionate division. However, just introducing evidence that one spouse makes a lot more money than the other, and pointing that fact out in closing argument, falls far short of what can be done with disparity of income facts. The following are some ideas about how to spice up a presentation of disparity of income facts and arguments. a. The Spouse Will Make it Back If you are asking for disproportionate division that amounts to an extra $100,000.00, one demonstration you might consider making is how quickly the high income earner will earn back the extra $100,000.00 you are seeking. In a case where the husband makes several hundred thousand dollars a year, this financial fact can be very persuasive especially if the disputed amount can be earned back by the high income earner in a very short period of time. How long it would take a spouse making $250,000.00 a year to save $250,000.00 if you assume the spouse saves 20% of their income and those savings earn 8% per year. The total time required would be 4.2 years. b. The Other Spouse will Never Catch Up The inverse of the "the other spouse will make it back" demonstration is a showing of how long it will take the lower income earning spouse to save the money sought in the disproportionate division. Depending on the financial facts of the case sometimes it can be shown that it will take a spouse beyond their lifetime to save the amount in dispute in the disproportionate division. How long it would take a spouse making $25,000.00 a year to save $250,000.00 if you assume the spouse saves 10% of their income and those savings earn 8% per year. The total time required would be 27.4 years, over 6.5 times longer than the high income earning spouse. A 10% savings rate was

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a.

It Won't be Missed and the Kids Can Eat If the husband has a $2,000,000.00 separate estate and the community has a $250,000 value after a long marriage where there are still minor children, you shouldn't be shy about asking for the majority of the smaller community estate. If most of the assets awarded to the wife in such a case would be used to support the children this would be an especially compelling argument. b. Don't Finish Last Sometimes you see situations where wife has a large separate estate and the community estate is made up almost entirely of the value of husband's retirement that he has worked his whole career to save. Another fact sometimes present in these situations is that the husband and wife have spent husband's community salary in order to keep from spending wife's separate estate. In this type of situation, argue the inequities of the financial situation to the court and ask for a disproportionate division of the remaining community assets in favor of the husband. A chart or graph showing the assets that will be available to each of the parties at retirement age might be graphically demonstrative of the financial realities. Custody of the Children One of the factors that may be considered in making a disproportionate division is who will be awarded custody of the children. The parent who is awarded primary custody of the children also assumes most of the financial responsibilities and career restraints that come with full time child rearing duties. Creating a chart or graph documenting these expenses and burdens can be a useful tool to use in argument. And, remember that 7.001 of the Code are not limited to minor children! Another demonstration that might be useful in the appropriate case is to document the disparity of income available to the respective spouses given the added expenses of raising the children. For instance, if husband will have post divorce disposable income of $250,000.00 and wife will have post divorce disposable income of only $60,000.00, including her child support award to support her and the five children, this economic fact should be demonstrated in a chart or graph. The long term effect of such a situation will likely be that the wife will be depleting the community estate awarded to her while the husband will likely be adding to his wealth. VI. TOOLS AND TECHNIQUES A. Proposed Division Critical to almost any argument requesting a disproportionate division is a spreadsheet or summary telling the court exactly how you want the court to divide the property and the value of each piece of property. Simply asking the court for a

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disproportionate division and hoping the court will magically come up with the right division of assets for your client is very dangerous. Better practice is to tell the court exactly how you are requesting that the property be divided and to walk the court through the how and why of your requested division using the proposed division as a road map. Remember to look at the nature of the assets you are asking for and ask for the unencumbered, ascertainable, and/or lucrative assets, with thought given to cost basis. I think it is helpful to have the following columns on any spreadsheet: Description of Asset Husband's Value Source of Husband's value Wife's Value Source of Wife's value Husband's Column Wife's Column Judge's Value Column Column for Husband's award by Judge Column for Wife's award by Judge

4.

Tie the item numbers directly to the inventory and appraisement of your client. B. Financial Planner/Financial Expert Perhaps one of the most useful tools to utilize in creating and demonstrating arguments for a disproportionate division is a certified financial planner or an accountant. Such an expert can create charts and graphs depicting the present and long term effects of possible divisions of the community estate. Having a financial expert walk the trial court through the short and long term effects of the disparity of income power or the effect of a "fifty-fifty" or "ninetyten" division over time can be very compelling. C. Charts and Graphs Even without a financial expert, by doing some very simple mathematical calculations you can create numerous charts and graphs which will visually demonstrate the financial facts and arguments you are trying to convey to the court. Sometimes a picture is worth a thousand words. Every opportunity you get, in opening statements, the testimony, and closing arguments, try to visually show the court what you are talking about. D. Witnesses and Mental Health Professionals What is more persuasive to the court than good witnesses? Fewer and stronger witnesses are better than a large number of witnesses. Be sure to interview these witnesses and never call a witness cold to the stand. Make sure these witnesses' backgrounds are checked and that you ascertain what they could say

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that is not in your client's favor. Mental health professionals can also be invaluable evidence to show the court how your client has been affected by the actions of the other spouse. If your client has been seeking therapy, it shows the sincerity of the hurt your client has been suffering. E. Scorecard Argument The most important item you can take with you from this paper, besides the case law, is the scorecard argument previously proposed by Kevin Fuller. It is one of the most effective and demonstrative ways to persuade a court to give you a disproportionate division. What follows is an argument to use for what Ken Fuller calls the "scorecard" argument. In this argument you want to make an exhibit to list all the factors the court may consider in dividing the property that are relevant to your case and leave a blank beside each listed factor. I would suggest some case law be listed under each area you are submitting to the court. The following factors are recommended: Fault in the breakup of the marriage Fraud on the community Benefits the innocent spouse may have derived form the continuation of the marriage Disparity of earning power of the spouses and their ability to support themselves Health of the spouses The spouse to whom custody is awarded The needs of the children of the marriage (adult or minor) Education and future employability of the spouses Community indebtedness and liabilities Tax consequences of the division Ages of the spouses Earning power, business opportunities, capacities and abilities of the spouses Need for future support Nature of the property involved in the division Wasting of community assets Credit for temporary support paid by a spouse Community funds used to purchase out-of-state property Gifts to or by a spouse during the marriage Increase in the value of separate property through community effort by time, talent, labor and effort Excessive community property gifts to the parties' children Reimbursement Expected inheritance of a spouse Attorney's fees Creation of community property through the use of a spouse's separate estate

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The size and nature of the separate estates Creation of community property by the efforts or lack thereof of the spouses Actual fraud committed by a spouse Constructive fraud committed by a spouse Physical violence

In closing argument make an argument something similar to the following argument. "Judge, the Supreme Court of Texas in Murff vs. Murff and numerous courts of appeals tell us there are a number of factors the court should consider in deciding whether or not to make a disproportionate division of the community estate in a fault or no-fault case. In this case I believe there are 6 relevant factors to consider, which are all supported by the case law and the Texas Supreme Court: The disparity of income earning power the length of the marriage Custody of the children Fault in the break up of the marriage Size of the parties separate estates

Business opportunities available to the spouses Judge, if we start with the idea that assuming all things equal there should be a fifty-fifty division, I believe that the court should consider each of these 6 factors and decide if the facts and evidence justify a disproportionate division after considering each of the above-listed factors. Further, I would ask the court in the inverse to look at the facts and to decide whether to award a fifty-fifty division is just and right, because I would submit to the court a fifty-fifty division is not just and right. Now looking at our list of factors the court is to consider, I'm going to go through each factor and write down what I think the appropriate percentage difference should be from a fifty-fifty division considering each of these items, one by one. Your honor may score each factor differently than I do, but I think under the evidence and equities of this case some percentage difference should be assigned to each one of these factors in my client's favor." After walking through each of these items the scorecard might look like this: The disparity of earning power The length of the marriage Custody of the children Fault in the breakup of the marriage Size of the separate estates Business opportunities available to the spouses TOTAL 10% 5% 5% 5% 10% 5%

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Towards the end of this argument you can suggest that the court or your opponent score the scorecard as they may deem appropriate. If you have made your factual presentation compelling on the issue of disparity in these various factors, it will be extremely hard for the court or your opponent to argue that the appropriate consideration to be given each factor is zero. You should further argue that it would be neither just nor right for the court not to assign at least some percentage difference to each of the relevant factors and that to not do so is ignoring what is just and right! VII. CONCLUSION This article is designed to give you some ideas or spark your imagination to enhance your pleadings with disproportionate division factors and other causes of action, and make your courthouse requests for a disproportionate division more compelling and more persuasive. Perhaps you choose to brief the issue to the court and find this article helpful. The key in any argument is to have the facts, figures, and numbers and tell a compelling story that clearly demonstrates the need for equity to be done by NOT awarded a fifty-fifty division; and, pleading other causes of action that fit your facts is vital to success in your case. When it comes to trying cases, get out of the box and dare the other side to join you. Good luck.

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