Sunday, March 2, 2008

Community vs. Separate Property: Characterization issue revisited in second appeal

Witte v. Witte (Tex. App.- Houston [14th Dist.] Feb. 21, 2008)(Edelman) (family law, divorce property
separate and community property)
AFFIRMED: Opinion by Justice Edelman
Before Justices Fowler, Edelman and Frost
14-05-00768-CV Gerard Alan Witte v. Cynthia Grace Witte
Appeal from 312th District Court of Harris County (
Judge James D. Squier)
Concurring Opinion by Justice Frost in Witte v. Witte (Tex.App.- Houston [14th Dist.] Feb. 21, 2008)
(Concurrence by Frost)

P L U R A L I T Y M E M O R A N D U M[1] O P I N I O N

In this divorce case, Gerard Alan Witte appeals the divorce decree (the Adecree@) on the grounds that the trial court erred by mischaracterizing community property as Cynthia Witte=s separate property and by awarding Cynthia reimbursements from the community estate. We affirm.

Standard of Review

An appeals court reviews a trial court's division of community property[2] only for an abuse of discretion. McKnight v. McKnight, 543 S.W.2d 863, 866 (Tex. 1976). An abuse of discretion occurs where a division of community property is manifestly unfair. See Mann v. Mann, 607 S.W.2d 243, 245 (Tex. 1980).

A property division need not be equal and may take into consideration many factors, such as the spouses' respective abilities, benefits that the party not at fault (if applicable) would have derived from a continuation of the marriage, business opportunities, education, relative physical condition, relative financial condition and obligations, disparity in age, size of separate estates, the nature of the property, and disparity in income and earning capacity (the "Murph factors"). Murff v. Murff, 615 S.W.2d 696, 699 (Tex. 1981). A trial court is presumed to have properly exercised its discretion in applying these factors, and a property division will be reversed on appeal only when an abuse of discretion has been shown. Id. at 698.

This abuse of discretion standard is illustrated in Bell, where the husband in a divorce action was awarded all of the stock in two corporations he had owned before the marriage. See Bell v. Bell, 513 S.W.2d 20, 21 (Tex. 1974). The trial court's conclusions of law stated that the property acquired by the corporations during the marriage of the parties was not part of the community estate, and the court's findings of fact further stated that:

Regardless of the legal status of such corporations and the nature of the property acquired by such corporations during the marriage of the parties, the Court finds that considering the circumstances of the parties all of the stock or other interest in such corporations . . . is set aside to [the husband].

Id. at 21-22. On appeal, the wife sought to have the increase in stockholders' equity that occurred in the corporations during the marriage divided equally. Id. at 22. The court of appeals reversed and remanded, ordering the trial court to take the two corporations into consideration in making a division. Id. at 21.

In reversing the decision of the court of appeals and affirming the judgment of the trial court, the Texas Supreme Court found that the trial court had not failed to take the two corporations into account in its property division, but instead had concluded that, considering the circumstances of the parties, all of the stock in the corporations should be awarded to the husband regardless of the separate or community property character of the stock and the property the corporations had acquired during the marriage. Id. at 22. From this decision, it logically follows that, if a trial court=s division of everything that is or may be community property is not an abuse of discretion, the property division will not be reversible for a mischaracterization of some of that community property as separate property[3] or a failure to characterize it as community or separate property at all. See Vandiver v. Vandiver, 4 S.W.3d 300, 302-305 (Tex. App.- Corpus Christi 1999, pet. denied).[4]

Abuse of Discretion Showing

Although Gerard's issues challenge five individual items in the property division, and his brief asserts in a conclusory fashion that the award of those items had a material effect on the overall property division, his brief makes no attempt to show how those items have a material effect on the property division[5] or how any error in awarding those items could have caused the overall property division to be an abuse of discretion in light of the Murph factors.[6] Gerard's issues thus fail to afford any basis to grant relief. Additional reasons for overruling specific issues are set forth below.


Gerard's first three issues challenge the factual sufficiency[7] of the evidence to rebut the presumption that all of the shares of stock that Cynthia acquired during the marriage in three closely-held family corporations, SEI Metal Tek, Inc. ("SEI"), BKC Properties, Inc. ("BKC"), and F&S Production LLC ("F&S"), were Cynthia's separate property because she failed to trace the stock as her separate property with clear and convincing evidence. However, although Gerard's second and third issues challenge the sufficiency of the evidence to support the characterization of the BKC and F&S stock as Cynthia's separate property, his brief provides no discussion to support those contentions. Therefore, those issues present nothing for our review and are overruled. Tex. R. App. P. 38.1.

As for the SEI stock, Gerard's brief asserts that there were a total of 389,374 shares, of which he agrees that 109,167 shares were Cynthia=s separate property, but disputes the character of the remaining 280,207 shares on various grounds. However, his brief also acknowledges that Cynthia had executed a promissory note (the "note") for $700,000 for the purchase of some of this stock (for which repayment the stock was pledged as collateral) and that no more than $10,000 of this debt had been repaid. The decree does not expressly address the community or separate property character of this debt or assign it to either party.

Gerard's brief does not indicate what amount, if any, the SEI stock was worth on the date of divorce (or at any other time), let alone cite to any evidence supporting any value. It thus fails to demonstrate that the stock had any value, particularly in excess of the outstanding note balance.[8] Therefore, even if the stock and note should have both been characterized as community, rather than separate, property, as Gerard contends, there is no evidence that the two items netted any positive community property value, such that the alleged error in characterization could have had a material effect on the community property division.

Stated Ground for Divorce

Gerard's ninth issue contends that the trial court erred by including fault as a factor for making an unequal division of the marital estate even though the divorce was granted on no fault grounds. The Texas Supreme Court has not decided whether this is proper,[9] but this court has held that it is.[10] Moreover, even in the case cited by Gerard as holding that fault may not be considered in dividing the community estate where a divorce is granted solely on insupportability, the court ultimately held that doing so was not reversible error because, as here, it had not been shown that the overall property division was an abuse of discretion in light of the other Murph factors.[11] Therefore, Gerard's ninth issue is without merit and is overruled.

Supplemental Brief

Gerard sought to raise additional issues for the first time in a supplemental brief, which we did not accept, and again in his reply brief. Because issues not raised in an appellant's original brief are waived,[12] we do not address those issues. Accordingly, the

judgment of the trial court is affirmed.

/s/ Richard H. Edelman

Senior Justice

Judgment rendered and Plurality and Concurring Memorandum Opinions filed February 21, 2008.

Panel consists of Justices Fowler, Frost, and Edelman.* (Frost, J., concurring) (Fowler, J., concurring without opinion).

[1] Because the issues in this case are not settled, Senior Justice Edelman opposes designation of this opinion as memorandum; but because he has not written a concurrence or dissent, the decision to designate it as memorandum is determined by a majority of the panel. See Tex. R. App. P. 47.2(a), 47.4.

[2] In a divorce decree, the trial court shall order a division of the community property 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. Tex. Fam. Code Ann. ' 7.001 (Vernon 2006). Community property consists of the property, other than separate property, acquired by either spouse during marriage. Id. ' 3.002 (Vernon 2006). As relevant here, separate property consists of the property owned by a spouse before marriage and that acquired by the spouse during marriage by gift, devise, or descent. Id. ' 3.001(1), (2).

Property possessed by either spouse during or upon dissolution of marriage, is presumed to be community property. Id. ' 3.003(a). A party asserting that property is separate property must provide clear and convincing evidence to rebut the community property presumption. Id. ' 3.003(b). To make such a showing, a spouse must trace and clearly identify the property as separate property. See Estate of Hanau v. Hanau, 730 S.W.2d 663, 667 (Tex. 1987). Conversely, if the evidence shows that separate and community property have been commingled so as to defy segregation and identification, the burden is not discharged, and the community property presumption prevails. Id.

[3] Conversely, any mischaracterization of separate property as community is reversible because a divorce decree can only divide community property, and the rights of a spouse in his or her separate property are constitutionally protected. See Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 139-140 (Tex. 1977).

[4] To the extent that appeals court decisions, such as McElwee or Stavinoha, have held that a mischaracterization of more than a de minimis amount of community property as separate property, alone, is reversible error, without a showing by the appellant that the trial court=s division of all of the community property (if all was properly characterized) would be manifestly unjust under the Murph factors, such holdings are incompatible with Bell. See Stavinoha v. Stavinoha, 126 S.W.3d 604, 607 (Tex. App.- Houston [14th Dist.] 2004, no pet.); McElwee v. McElwee, 911 S.W.2d 182, 189 (Tex. App.- Houston [1st Dist.] 1995, writ denied). Any such holdings would also suggest that a single overall property division can either be within or outside the discretion of the trial court, depending arbitrarily on how the trial court labels the community property in the decree. Lastly, a greater-than-de minimis standard is directly at odds with the manifestly unfair standard.

[5] Neither the decree, the trial court's findings of fact, nor Gerard's brief, reflect a total dollar value of the community estate. Instead, the decree and findings list the various items of property, mostly without dollar values, and one of the trial court's findings of fact merely states that "the division of property computes to 53% of the community estate to Cindy and 47% of the community estate to Gerard . . . ." Although there are at least five exhibits in the record that contain different calculations of the property values and divisions, neither the parties' briefs, nor anything we can find in the record, indicate which, if any, of these exhibits the trial court adopted in making its property division.

[6] The decree specifies that it considered the following factors in making the property division: (1) fault in the breakup of the marriage; (2) benefits the innocent spouse may have derived from the continuation of the marriage; (3) disparity of earning power of the spouses and their ability to support themselves; (4) education, training, and future employability of the spouses; (5) ages of the spouses; (6) earning power, business opportunities, capacities, and abilities of the spouses; (7) custody of the children and providing for the children's emotional needs; and (8) length of the marriage. Gerard's brief addresses only the first of these factors.

[7] Because we do not address the factual sufficiency challenge on the merits, we need not recite the factual sufficiency standard of review.

[8] In this regard, Cynthia's brother, Kevin Grace ("Kevin"), the CEO of SEI, testified that he believed Cynthia's total interest in SEI was worth less than the amount of this debt.

[9] See Young v. Young, 609 S.W.2d 758, 761 (Tex. 1980).

[10] See Mohindra v. Mohindra, No. 14-06-00056-CV, 2007 WL 3072057, at *2 (Tex. App.- Houston [14th Dist.] Oct. 23, 2007, no pet.) (mem. op.); Bishop v. Bishop, No. 14-02-00132-CV, 2003 WL 21229476, at *3 (Tex. App.- Houston [14th Dist.] May 29, 2003, no pet.) (mem. op.). Although Janik has also been cited in support of this proposition, Janik did not address this issue. See Janik v. Janik, 634 S.W.2d 323, 324-25 (Tex. App.- Houston [14th Dist.] 1982, no writ).

[11] See Phillips v. Phillips, 75 S.W.3d 564, 572-75 (Tex. App.- Beaumont 2002, no pet.).

[12] See Tex. R. App. P. 38.3; Yazdchi v. Bank One, Texas, N.A., 177 S.W.3d 399, 404 (Tex. App. Houston [1st Dist.] 2005, pet. denied), cert denied, 127 S.Ct. 206 (2006); Zamarron v. Shinko Wire Co., 125 S.W.3d 132, 139 (Tex. App.- Houston [14th Dist.] 2003, pet. denied).

* Senior Justice Richard H. Edelman sitting by assignment.

No comments: