Reyes Community Property Outline

Community Property Outline Fall 2011 Allison Reyes

Community Property- Spring 2011 Community Property States:

Chapter 1: An Overview of the Community Property System A. Marriage as a Partnership At least 3 categories of property: Community, Husband, Wife. o Then also joint ventures, etc. Theoretically property can be one of the above or both Community Property: anything that isnt separate property plus assets accumulated during marriage Separate Property: acquired before marriage plus gifts by devise or descent. o Ex. Haddock gives W and H Blackacre separate property (50/50). o If Haddock sells W and H Blackacre community property. Gift from one spouse to another becomes separate property anything arising from it. Zaruba v. Zaruba (p.4): held that b/c the comingled funds could be traced (following the money/ asset) to show the original separate property, a judgment in favor of W was appropriate. Spouses continue to accumulate community property until divorce, regardless of the length of separation. Shea v. Shea (p.7): held that fringe benefits are not community property when the entire employment was performed before marriage. B. Alimony TX: can award temporary alimony to a spouse while divorce action is pending. o Post- divorce alimony only awarded in limited circumstance C. Dissolution of the Partnership At death, decedent can devise of the community estate, and the survivor retains the other . o Each spouse retains all rights to separate estate. At divorce, Ct. can divide community estate equitably, each spouse retains separate estate.

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Community Property- Spring 2011 Chapter 2: Common- law Marriage and Putative Marriage A. Ceremonial Marriage Ceremony is necessary for a marriage to exist, and ceremonial marriages are recognized in every state. 13 states, including TX: CL marriage recognized. In chapter 2 of the family code. Most in TX marry ceremonially obtain marriage license, participate in marriage ceremony conducted by person authorized by the statute. B. Common- law Marriage Common- law marriage: holding out to be married (must have lived together at some time). Claveria v. Claveria (p.11): held that must have a little bit more than CL marriage, 3 elements: (1) agreement, (2) living together, (3) holding to be so. Consolidated Underwrites v. Kelly (p.14): held that was CL marriage even though W was married to another when the W cohabitated with the H. (the former H had died). TX: matters of marital property have a constitutional dimension Article XVI, Section 15 of the TX constitution: o Prop owned/ claimed before marriage= sep. o Prop acquired by either during marriage by gift/ devise/ descent= sep. o Written instrument, without intention to defraud, may partition btwn all or part of their property or exchange btwn the com interest of one spouse. o Written instrument may agree that income or prop from all or part of the sep prop then owned will be sep prop. o One spouse makes gift of prop to other, includes all income etc. o In writing may agree that all/ part of com prop becomes prop of surviving spouse at death. o In writing, all or part of sep prop owned by either or both will be com prop. C. The Putative Spouse Putative spouse: One who in good faith, believes that he/she is married when their partner is already married. Lazzarevich v. Lazzarevich (p.19): held that W can only recover for time that was in good faith about spouses other marriage. Estate of Vargas (p.19): held that decedents estate (who had two families), should be divided equally among the two families as both have valid claims. Vryonis v. Vryonis (p.21): held that even though W and H had a private ceremonial marriage, non-cohabitation, and not holding themselves out to be married, there was no CL or religious marriage. Once a spouse learns that her H did not divorce his first W, the second W no longer can accrue putative spouse benefits.

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Community Property- Spring 2011 TX Family Code 2.401 Proof of Informal Marriage: Declaration signed, agreed to be married, live in same state, represent to others, if proceeding to prove marriage is not commenced before the 2 nd anniversary of the date of separation and ceased living together it is presumed the parties did not enter into agreement, cant informally marry under 18 years in any form.

Chapter 3: Disputes Between Unmarried People A. Engagement Disputes 1. Breach of Promise of Marriage Engagement historically treated like a contract (many argue that should be abolished). Stanard v. Bolin (p. 27): held that W can recover only for loss of prospective economical/ social advantage (b/c no longer property transaction cannot recover for expected financial/ social position). asked if there was a breach of promise to marry? Held that there is as a quasi contract/ tort action. Breach of promise to marry has been criticized but not abolished by cts. Scanlon v. Crim (p.32): held that after the future H went and married another woman, the W had a cause of action under breach of promise. o Sex not an issue, H could bring the same action. 2. Engagement Gifts TX 2003: Fault based conditional gift rule when donee breaks engagement must return gift, so if donor fails the gift will be kept (absent written agreement). Curtis v. Anderson (p.34): held that TX does follow the fault based conditional gift rule (above). TX: conditional gift rule to engagement ring where the ring will be returned to the donor if the donee is at fault for terminating the engagement. TX Family Code 1.108: A promise or agreement made on consideration of marriage or nonmarital conjugal cohabitation is not enforceable unless the promise or agreement or memorandum of the promise or agreement is in writing and signed by the person obligated by the promise or agreement. B. Disputes between Cohabitants 1. In General If 2 people know they are not validly married to each other, live together, share a sexual relationship, and neither believes that a valid marriage exists, the people are cohabitants (another term is meretricious relationship). Under the traditional severability exception, the illegality doctrine (unmarried cohabitants claims barred) only barred enforcement of a contract btwn. cohabitants if the contract was directly related to the immoral relationship.

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Community Property- Spring 2011 Marvin v. Marvin (2 cases- p. 38 & 43): held in the first case that a nonmarital partner may recover in quantum meruit for the reasonable value of household services rendered less the reasonable value of support received if he can show that he rendered services with the expectation of monetary reward. o The second case held that the D did never have any obligation to provide P with a reasonable sum for her support and maintenance and no damage, no unjust enrichment and no wrongful act on the part of the D with respect to either the relationship or its termination has no basis in equity or law. 2. The Implied Contract to Share Alderson v. Alderson (p.45): held that was implied contract as they lived together, had expectations of the W which did not include sexual services. (enforceable under Marvin). 3. Other Views New TX statute: a promise or agreement on consideration of nonmarital conjugal cohabitation is not enforceable unless written (not all claims will be barred). OFarrill Avila v. Gonzalez (p.48): held that promise of H to pay W $5000 a month and promise regarding purchase of home were valid even though the two were never married. 4. Cohabitants Disputes and General Contract Doctrine Most states permit an action based upon an express contract (normal rules will apply). 5. Conflicts of Law 6. Relevance of Partnership Doctrine Harrington v. Harrington (p.53): held that purchased property was community b/c INTENTION of the parties was to hold it so. 7. Less Conventional Relationships Jones v. Daly (p.56): held that same sex couples cohabitation was very based on sexual services and inseparable part of cohabiters agreement. Small v. Harper (p.58): held that there are no public policy considerations of the state that would prevent a same sex (female) couple from being able to recover. C. Disputes at Divorce Regarding Premarital Expenditures Nelson v. Nelson (p.61): held that money used, before marriage, to purchase and work on a house was the Ws separate property thus she is entitled to reimbursement as the house was then on Hs property. D. Disputes between People Who Date but Do Not Cohabit Cochran v. Cochran (p.63): held that couple in a long term, nonmarital relationship that resulted in child (who did not live together but frequently practiced normal marital domestic habits) was sufficient to raise a Marvin agreement that they did cohabitate in a sense. Adams v. Jensen- Thomas (p.67):

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Community Property- Spring 2011 Above cases suggest that Marvin should be limited to those cohabitation cases involving stable and significant relationships. E. Tort Claims Stephen K v. Roni L. (p.69):held that no liability for W for wrongful birth, who falsely represented the use of contraception b/c public policy of birth control is best left to the individuals involved. Kathleen K v. Robert B. (p. 71): held that H was liable for damages caused by contracted herpes b/c the constitutional right of privacy does not apply when it is against the right of the state to protect the health, welfare and safety of its citizens. Perry v. Atkinson (p. 75): held that against public policy to enforce promise to impregnate. Chapter 4: Pensions and Other Fringe Benefits of Employment A. Pensions 1. In General Retirement benefits earned from employment have become the primary source of wealth for many people. Before 1970s: Only vested rights constituted property; contingent rights frequently were considered mere expectancies. Johnson v. Johnson (p. 81): held that vested retirement fund was incorrectly discounted b/c no consideration was given to the fact that the fund was already earning interest in which the value of the plan is the present amount credited to the account. Extent that retirement benefits are earned during the marriage they are considered com prop. 2 Different methods of dividing com prop benefits in divorce: o 1) Non- employee spouse is awarded prop equivalent to of the benefits and the employee spouse receives all of the retirement befits (TX: the division is equitable but not always equal). o 2) Reserved Jurisdiction method: actual division of the benefits occurs in the future, where a present cash value method is presumably preferable, especially if the retirement of the parties will not occur for many years. Most common type of pension plans: o Defined benefit plans: Employer agrees to pay employee (who has satisfied min. requirements) a monthly retirement payment pursuant to a certain formula set forth in the pension plan. (Prior to retirement funds are not contributed to employees account funds go to a general retirement fund). Employee is entitled to benefit as part of her compensation. Always unvested- if employee dies etc. before vesting date the employee has no interest in the plan. At some point benefits will vest, however it is possible that the employee will receive nothing).

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Community Property- Spring 2011 Benefits mature at a specific date when the employee has the right to retire. o Defined contribution plans: also a defined contribution plan, separate accounts are kept for each employee where contributions are made periodically based on some formula. Direct contributions by the employer and sometimes the employee into the employees retirement account. Retirement benefits are sep or com prop according to the marital statues when they are earned not when they are received. o Contributions are immediately vested. Cearley v. Cearley (p.85): held that W was entitled to future contingent interest in military retirement benefits of H in the apportionment of half of the number of years active service until retirement even if not available or subject to possession at divorce. o View abandoned. Taggart v. Taggart (p. 89): held that W owned a future interest in the contingency military benefits even though they had not matured. o Uses Pro Rata deferred payment approach: also called time rule, the fractional community interest in the pension received is years work while married divided by total years worked at the time of retirement. In re Marriage of Poppe (p. 92): held that apportionment based on time was not appropriate as it was unfair b/c the Hs pension was not substantially related to the number of years he served in the Naval Reserve. In re Marriage of Henkle (p. 94): held that the present value method of apportionment would be better suited where a certain number years of service during the marriage did not contribute to the pension plan. o Since only 4 years of the 6 years of marriage were counted toward the 30 years needed to compute the amount of retirement pay. In re Marriage of Cox (p. 96): held that the W was entitled to $ from the life expectancy portion (27.7 years) of a non-disability military retirement (when the H retired during the marriage and had only worked for 2 years previously) not just what the monthly rate was at the time of divorce. Berry v. Berry (p.97): held that not every month of employment contributes equally to pension rights, and for the defined benefit plan, the last years of employment were worth more than earlier years since during the last years of employment the employees salary increased due to promotions and raised (H retired 12 years after divorce and his pension was based on that extra time). May v. May (p.101): held that benefits in a retirement plan that were earned during marriage but had not vested at the time of divorce were comm. prop. where the value would be the amount at the date of

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Community Property- Spring 2011 divorce, not retirement. NO port- divorce cost- of- living increases in his benefits. o Also held that the benefits had to be valued as of the date of the divorce, the denominator of the apportionment fraction had to be calculated as of the same date. Hudson v. Hudson (p.108): held that the fractional apportionment method was appropriate in calculating the amount the W would get b/c a division based upon any formula other than that would have not only produced an inequity but also divested Hs separate property interest in the pension. Harvey v. Harvey (p. 110): held that the W could clarify a divorce decree to include payments as a surviving spouse in the event that the H died before the retire plan began to make payments to the W b/c her future interest had not matured and that there was no showing that the parties intended to exclude survivor benefits. Grier v. Grier (p.114): held that the W was entitled to a percentage of the Hs military retirement benefits that was based on the retirement pay, which corresponded to the rank that H held on the date of divorce was proper not his rank at retirement. Gillmore v. Gillmore (p.116): held that the W could receive immediate distribution of her share of the retirement benefit b/c the H couldnt time his retirement to deprive W of her share, the H was free to continue working but that he would have to reimburse the W for her share that she lost as a result of that decision and that any inequities caused by the retirement distribution could be resolved through adjustments in spousal support. Whorrall v. Whorrall (p.120): 2. Pension Rights and the Death of a Spouse If the spouse dies while married, the spouse can devise of each item of community property. If the person has divorced before the date of death, all property given to the decedent in the divorce goes to the decedents estate. Some states: hold pension rights an exception In re Estate of Allen (p. 122): held that an inheritance tax on benefits from a pension plan in which the H was receiving of was improper b/c the com. Prop. Interest of the non- employee spouse did not pass to her H at her death but simply terminated. o Also held that the terminable interest rule in Waite v. Waite is still viable and that a public pension plan is equally applicable to private pension plans like the one above. Terminable interest= interest in prop. That will end upon the occurrence of a certain event or contingency, after a certain time period, or on the failure of an event or condition to occur. Valdez v. Ramirez (p. 124): held that a Hs interest in a civil service retirement benefit that belonged to the W did not pass to the Hs

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Community Property- Spring 2011 children (from a diff. marriage) at his death b/c the property was a probate asset that is governed by life-time transfer rules not by deathtime. o Considered benefit a special community asset that was under the Ws sole management and control where she selected the joint survivor option and given that she survived the H there was no right to annuity to his children. Allard v. Frech (p.127): held that after the W died (no divorce), she still had interest in of his retirement benefits and of a joint savings account (where they passed to a person designated by the decedent). o Declined to adopt the terminable interest rule. B. The Community Interest in Other Fringe Benefits 1. Severance Pay Wright v. Wright (p.130): held that the W was not entitled to receive $ from a lump-sum severance payment that was paid after the parties separated b/c it was not a bonus for past services but for lost wages. In re Marriage of DeShurley (p.133): held that the Hs severance pay was not an absolute right (which is comm. prop.) b/c it was not deferred compensation but present compensation for loss of future earnings. o Severance Pay: (1) it is not derived from a K but rather stems from a court order, (2) it represents an option between returning to work and foregoing the right to return to work in exchange for a payment and (3) its amount is based on the number of years worked. 2. Disability Benefits Andrle v. Andrle (p.135): held that b/c the private disability insurance was purchased and was vested during the marriage it constituted comm. prop. (Rights to disability compensation are a property right not a mere expectancy). o REVERSED adopted CAs replacement approach 3. Stock Options In re Marriage of Nelson (p.137): held that the characterization and apportionment of Hs stock options in a divorce action was proper where the TC used an equitable formula in deciding what portion to declare as comm. prop. 4. Other Benefits Lorenz v. Lorenz (p.141): held that vacation pay could have no monetary value to be placed upon it thus it is not comm. prop. And term life insurance unlike whole life insurance, is generally accepted as having no value since once its term has expired it is worthless. A fundamental premise of com prop doctrine all effort, skill and labor of a married individual is in reality the effort, skill, and labor of the marital community. o Classification of direct compensation of employees might be a fairly simple task.

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Community Property- Spring 2011 o The pay should be classified according to the marital status of the employee at the time the income was earned. Chapter 5: Goodwill and Professional Degrees A. Goodwill Goodwill: The advantage or benefit, which is acquired by an establishment, beyond the mere aggregate value of the capital stock, funds and property on hand, in consequence of general public patronage. o Value= The expectation of continued public patronage. o Commercial goodwill= community property. Nail v. Nail (p. 145): held that the Hs goodwill was not earned or vested right at the time of the divorce as it did not possess value or constitute an asset separate apart from his person or form individual ability to practice his profession. o Also held that the goodwill could not be extinguished in the even of such occurrences as his death, disability, or retirement. Some professions unethical to sell a practice b/c it is considered selling clients. Personal goodwill is difficult to transfer since the clients allegiance is to the individual not the business. Commercial goodwill can be easily sold Geesbreght v. Geesbreght (p.148): held that the value of the Hs company (Providing Dr.s to diff hospital) was enhanced by some goodwill which was existent as applied to that professional corp. apart from the person of the H. Simpson v. Simpson (p.149): held that a Dr. whose business was based entirely on himself and one other doctor did not have substantial goodwill and could not be considered into com. prop.. Finn v. Finn (p.150): held that goodwill in a Hs law firm was not community property. o Did so on a 2 pronged test: Is the GW independent or on ability? (instant case: independent) If GW exists then it must be determined whether that GW has a commercial value in which the community estate is entitled to share? (instant case: has no commercial value) Some states (not TX): have concluded that personal GW is just as valuable as commercial goodwill and should be divided. Rathmell v. Morrison (p. 154): held that professional GW has the following attributes- (1) it attaches to the person of the professional as a result of confidence in his skill or ability, (2) It does not possess value or constitute an asset separate and apart from the professionals person or from his individual ability to practice, (3) it will be extinguished in the event of death, retirement or disablement.

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Community Property- Spring 2011 o Also held that GW exists separate and apart from a professionals personal skills, ability, and reputation is divisible upon divorce provided the community is entitled to share in the commercial value of good will. o Hs goodwill in his companies was not part of community property. Golub v. Golub (p.157): held that the Ws celebrity status GW was community property as skills of an artist, actor, professional athlete or any person whose expertise in her career has enabled her to become an exceptional wage earner should be valued as marital property even though they are neither professional or a license. B. Professional Education Frausto v. Frausto (p. 160): held that a professional education acquired during marriage is not a property right and is not divisible upon divorce and cannot be considered reimbursement b/c community funds were not applied to the enhancement of the property of the other. TX: a person has a constitutionally protected liberty interest in a graduate education Reimbursement Theory: the community estate is only entitled to reimbursement if community assets have been expended to improve a spouses separate property. o Once a spouses earning capacity is deemed not to be property, reimbursement is not possible. o Different if com. Funds had been used to pay for school loans, etc. Chapter 6: Presumptions, Tracing and Commingling A. Presumptions 1. The General Community Presumption TX code: All property possessed by the spouses at divorce will be deemed com property unless some evidence is offered to rebut the presumption. o Need clear and convincing evidence. If spouse can prove an item of property possessed at divorce was acquired before marriage, or acquired after marriage by gift or inheritance, the presumption is rebutted Separate property source can be exchanged during marriage for another thing and not lose its status of sep. property as long as the property possessed at divorce can still be TRACED to separate property source. Tracing Theory: Property is of the same character as that given in exchange or sold. 2. Rebutting the Community Presumption by Tracing Andrews v. Andrews (p. 166): held that an oral K from father to son, to give the son all his property, was com. Property and given to the W

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Community Property- Spring 2011 even though the W would testify that it was intended to be given to the son. Estate of Clark (p.167): held that oil property rights, given by a son at his death to the H, were acquired by compromise of a statutory right which was in itself property and which was owned prior to marriage. o Since H had the statutory right before marriage, it remained separate property after marriage even though the actual property was given during the marriage. Hamilton v. Hamilton (p. 168): held that shower gifts were com. Property were the intent of the donors is controlling and absent any proof it must be presumed that gifts of the nature here are for the use of both parties. Fair arguments can be made for treating such gifts as either separate property of the wife. TX: If it is determined that the donor intended a gift to both parties, the gift is 50% separate property of each spouse at divorce, unless the parties agreed to a division of the gifts, all would have to be sold and the proceeds equally divided. Holby v. Holby (p. 169): held that stock given from Ws employer to W at Christmas was com. Property b/c it is classified as a remuneratory gift which was in consideration of services rendered. 3. Spousal Gift Presumption Property is normally determined by tracing however acts of the spouses after acquisition of the property can change the character of the property. If spouses acquire property using separate funds, and yet record title includes the name of the other spouse, some cts have concluded that a presumption arises that the spouse is intended to make a gift to the other spouse. (rebuttable) Johnson v. Johnson (p. 170): held that the presumption that the property was com. Was overcome when the parties stipulated that the house and land were paid for out of separate funds of the H and that the K to purchase was before marriage. o Also held the presumption that the H intended to give the W a undivided interest in the property is overcome as she did not claim any interest and made no effort. 4. Presumptions That Cannot be Rebutted Significant Recital: NOT rebuttable, where if the title document states that the property is the sep. property of one spouse and the other spouse participated in the transaction, this title creates a presumption that cannot be rebutted that the property is the separate property of the record owner. o Basic requirement: other spouse did not object and has seen the title. B. Commingling 1. In General

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Community Property- Spring 2011 Commingling sep. and com. Property does not itself transmute sep. funds to com.. When the funds are so commingled that it is impossible to trace the source of the funds, the whole will be treated as com. Property. sometimes called the strict tracing approach. Sep. property bank account does not become com. Property merely b/c com. Property is deposited. 2 basic types of bank account disputes: o (1) Disputes regarding the character of withdrawal. o (2) Disputes involving the amount remaining in the account at divorce. See v. See (p. 173): held that commingling of com. And sep. property in 2 bank accounts was in fact com. Property b/c the H cannot expect reimbursement as there is an obligation to support W and family, the H has the option to protect by not commingling, and did not show that the com. Property expenses exceeded the com. Income which would have been classified as sep. property. McKinley v. McKinley (p. 175): held that one certificate was sep. property and the other was com. Property as the P made no attempt to trace any of the funds or to identify any amount to be claimed as sep.. Interest earned during marriage in a sep. property account is com. Property. Identical sum inference: the Ct. infers from the withdrawal of an unusual amount from a commingled account that it was a withdrawal of com. Property interest, when the withdrawal was made soon after the interest was posted and the withdrawal was in an amount exactly equal to the interest. Snider v. Snider (p. 177): held that subsequent to certain interest earned, deposits and withdrawals in Hs bank account a remainder portion would be com. property. Community Out First Rule: any withdrawals during marriage are deemed com. property until all com. deposits have been offset 2. Equitable Limits to Commingling When it is contrary to common sense, courts can apply some limits to the commingling rule. Horlock v. Horlock (p.180): held that when no tracing was made at trial, and was found to be impossible, reimbursement to the H could be given when it was found that sep. funds were used to enhance, improve, and increase the value of the com. estate. 3. Tracing Livestock and Inventory Offspring born during marriage to animals alive at the time of the wedding are community property. Chapter 7: Torts and Damage to Property A. Damage to Property

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Community Property- Spring 2011 Trahan v. Trahan (p.187): held that property and the Fire Insurance policy on it, bought during Hs previous marriage, was separate property even though the insurance proceeds were paid during the current marriage. o Even though some of the premiums were paid out of com. funds, they did not make the proceeds com. property themselves. However, a claim for reimbursement might be justified. B. Personal Injury Jurek v. Jurek (p. 188): held that b/c Hs injuries were personal to himself and the body which he bought to the marriage was sep. property, any expenses incurred by the com. for medical care and treatment and any loss of wages resulting form the personal injury should be considered com. property but the rest should be separate property. Commingling problem can be solved if the amount of the com. recovery is clear. Loss of Consortium= sep. property. TX: after the Family Code was adopted, interspousal tort immunity for intentional torts was abolished. o Cts. have not wanted to let the wrongdoer share in this portion of the recovery, so some exceptions to the normal characterization rules have been created when this issue has arisen in other com. property states. Russell v. Russell (p. 191): S & M!!!! held that there should be a division of a portion of the Ws settlement that was attributable to medical expenses, and as the insurance policy was com. property, H had an interest in the proceeds. Twyman v. Twyman (p. 195): held that while TX does not recognize a tort of negligent infliction of emotional distress, there is intentional infliction of emotional distress, however there was no need to bring a separate tort claim when remedy can be made through the divorce proceedings. NO DOUBLE RECOVERY. TX ct.'s can consider fault of a spouse in a connection with the property division. TX: no independent cause of action for negligent interference with the family relationship. Schlueter v. Schlueter (p. 200): THIS DUDE SUCKS. Held that there was no cause of action between spouses for damages to the community estate due to fraud b/c adequate remedy was available in the consideration of just and right property division. o Haddock loves the lil dissent babies: Justice Heght, joined by Chief Justice Phillips, notes that if one spouse assaults the other, the wronged spouse might obtain both a disproportionate share of the estate and a judgment for actual damages and possibly punitive damages. Justice Spector makes similar points, stating that the wronged spouse should be able to reach the defrauding

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Community Property- Spring 2011 spouses separate property to recover punitive damages, in addition to a share of the community, for actual fraud on the community. TX: limits on punitive damages (doesnt apply if the Ds conduct would constitute felonies). Vickery v. Vickery (p. 207): dissent held that the majority was incorrect in awarding W damages based on the Hs fraud b/c of the holding in Schlueter (above), in which the ct. is picking and choosing the cases in which fraud will be allowed.

Chapter 8: Reimbursement and Acquisitions Over Time A. Comparing the Pro Rata Approach to the Inception of Title Approach 1. In General McCurdy v. McCurdy (p.211): held that proceeds of life insurance policies issued to the H before marriage naming his estate as beneficiary as sep prop. with reimbursements for premiums paid with com. prop. using the inception of title approach. Inception of title approach: the determinative time is the time when either spouse first acquires an interest in the property where the character is determined by the consideration transferred at that time. Asset is characterized according to the consideration transferred at the time either spouse acquires interest. V. Pro Rata Approach: Sep. prop. payments are totaled and compared to the aggregate amount of payments made. o The portion of the sep. prop. contribution would constitute the fractional interest held by the sep. estate. o The com. would own the remainder of the item. o Tracing process, where the portion of any sep prop contributed to the acquisition represents the fractional interest held by the estate, the remainder is com prop. In re Estate of Logan (p.213): held that the W had no com. interest in Hs term life insurance policy b/c when the policy was still in effect, it was not divisible com. prop. as the policy was of no value (still alive) and the com. had fully received what it had bargained for (protection against the contingency of death). Term life insurance covering a spouse who remains insurable is com. prop. Only for the period beyond the date of separation for which com. funds were used to pay the premium. If the insured dies during that period the proceeds of the policy are fully com.. o If the insured becomes uninsurable during the term paid with com. funds then the right to future insurance coverage which cannot otherwise be purchased is com. asset to be divided upon dissolution. o Most cts. hold that term insurance is valueless at divorce. Whole life policies have cash value. 2. Designating a Life Insurance Beneficiary 14

Community Property- Spring 2011 TX: when the 1st spouse dies, that spouse has the right to devise of each item of com. prop., however each spouse during the marriage may make reasonable gifts of com. prop.. o Life insurance beneficiary designation= Inter vivos gift. Jackson v. Smith (p. 217): held that the decedent was able to dispose of his interest as he pleased from a life insurance policy (gave attorneys fees to insurance co., to W and to P/ Sister of H). o 3 factors in determining the fairness of the disposition: 1) relationship btwn the beneficiary and the decedent. 2) whether special circumstances tend to justify the gift. 3) Whether the com funds used were reasonable in proportion to the remaining com assets. Disposing spouse or donee has the burden to prove these factors. If a gift of com. prop. Is unreasonable and both spouses are alive and still married, the non-donor spouse can recover the total gift for the com. estate. o If the donor spouse has died, the other spouse can only recover of the gift as the survivors sep. prop.. B. Inception of Title and Credit Purchases 1. In General Bell v. Bell (p.219): held that the character of marital prop. is determined by those conditions which exist at the inception of title and where prop. is purchased partly with sep. case and partly with com. credit, there comes into existence a tenancy in common between the sep. and com. estates. Under Inception of title: the character of a down payment is not the only consideration relevance but also takes into account the credit contribution. o Prop. can be partially com. and partially sep., if both types of prop. were contributed at the time of purchase. o Credit obtained during marriage is not always com. contribution. Ex. If the lender agrees with the borrower that the lender will only look to the borrowers sep. estate to recover funds borrowed, the loan is sep. prop. loan. TX: credit received during marriage normally is deemed a com. contribution, it does not matter whether one or both spouses receives the credit. Wierzchula v. Wierzchula (p.221): held that the agreement btwn. the borrower and the creditor is one of the primary indicators of the character of the loan to be made where the lenders intention appears to be clear that it was only looking at the H. Most cts. look to the consideration contributed on the closing date to characterize prop..

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Community Property- Spring 2011 Option Ks: It could be argued that the character of the option payment should determine the character of the prop. since the value of the option derives from the option payment. 2. Reimbursement Hawkins v. Hawkins (p.223): held that while there was proof that there were payments made toward debt retirement, there has been no showing as to whether the amount paid for taxes, insurance and interest was greater than the benefit received by the com. Estate where the excess amount would give way to reimbursement. 3. Equitable Limits to Inception of Title Andrews v. Andrews (p.225): held that the ct. could impose a constructive trust for Ws benefit where the H/W both agreed to purchase the prop. Jointly yet the H only paid and executed the down payment in his name. o A fiduciary relationship existed btwn. the parties when they agreed to purchase the residence jointly where the trust was appropriate. o The ct. reversed a holding for the H to execute a promissory note payable to W b/c absent fraud on the com., there can be no reimbursement. 4. Family Living Expenses Trevino v. Trevino (p.227): held that when no com. funds available, the sep. funds spent for com. living are deemed a gift to the com. for its well being and use. TX: In a case like Trevino, it has been held that no reimbursement is permitted. Hilton v. Hilton (p.228): held that a defense that the benefits bestowed by the expenditure is greater than the benefit received is unnecessary b/c a sep. estate which is not specifically subject to com. liabilities cannot directly benefit from the use of sep. funds to retire that com. debt.. o The spouse who expends his separate funds to reduce the com. Estate indebtedness is entitled to reimbursement w/out the necessity of proof that such expenditures exceeded the benefits received. C. Other Acquisitions Over Time In re Marriage of Garrett (p.230): held that, even though an attorney is not entitled to the full benefit of his contingency K until the contingency upon which it is based is fulfilled, contingency fee Ks does not involve a mere expectancy where it is a valuable prop. right and is com. prop.. TX: cts. Have applied the inception of title approach to all acquisitions over time other than pensions and other fringe benefits of employment. Garfein v. Garfein (p. 232): held that a debt is com. Or sep. at the time it is incurred; it does not change its character merely b/c the beneficial effect of the consideration received may survive the marital cohabitation.

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Community Property- Spring 2011 Chapter 9: Rents and Profits All increases in value of sep prop during marriage due to natural enhancement remain sep prop. Also if sep prop is exchanged during the marriage for some other item of prop, the mutation of the sep prop remains sep. TX: rents and profits (income) generated by sep prop during marriage are com prop. Rents generated during marriage by sep prop realty would be com prop. Profits generally doe not include any increase in value of sep prop due to natural enhancement. Exception: If a spouses primary business s buying and selling the prop involved, all increase in value of the sep prop involved is a com prop profit regardless of the reason for the increase in value proprietorship business. Rents and profits are net concepts, so all applicable expenses should be deducted before the com claim is calculated. Dividends in the form of stock, and stock splits, are considered sep prop mutations and remain sep prop. O&G: Delay rentals = com prop. Stringfellow v. Sorrels (p.236): held that the use of mules and the products of their labor compensated the marital com for what it provided for their support. Dixon v. Sanderson (p. 237): held that the money is received through a lottery ticket became the prop of the W through the gift of the H where if the H had ample means remaining within the reach of his creditors at the time he made the gift to satisfy all their claims, then the gift to his W was not fraudulent. Scofield v. Weiss (p. 239): held that separate ownership of stock in a corp may not be converted in part into com ownership by the device of declaring stock dividends. o Rule important b/c if a spouse starts a business before marriage (or during marriage with sep prop capital) and devotes all of her efforts to the business during marriage, all the increase in value during marriage is separate. If the business form is conceptualized as a separate entity, such as a corp, income earned by the corp during marriage is attributed to the business, not the owning spouse, unless and until the income is paid to the owning spouse as cash dividends. o If the business is not considered a sep entity, such as a proprietorship, income earned by the business during marriage is attributed to its owners, and would be com prop regardless whether it is actually paid to the owner. Commissioner of Internal Revenue v. Wilson (p. 240): held that where incomes received by 2 men as beneficiaries of the same trust were sep

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Community Property- Spring 2011 prop as well as the bonus and royalties paid to it by an oil and gas lease. Chapter 10: Business Interests A. Corporations 1. In General Allen v. Allen (p. 245): held that a Ws beauty salon was com prop as the W failed to property trace and the money used to capitalize the corp was com prop b/c the business was incorporated while the couple was married (even though the business was started prior to marriage). The marital statues of the spouse at the time corporate stock is acquired is not determinative; the consideration given for the shares determines their character. The goodwill of the ongoing sep prop proprietorship could have been deemed a sp prop contribution to the newly formed corp. 2. The Separate Property Corporation that Increases in Value During Marriage If a corp is formed during marriage and com funds are used to pay for the stock, the stock is com prop, including all increase in value during marriage. If sep prop is used to pay for the stock, the stock is sep prop. Vallone v. Vallone (p. 254): held that any prop or rights acquired by one of the spouses after marriage by toil, talent, industry or other productive faculty belongs to the com estate however a spouse may expend a reasonable amount of talent or labor in the management and preservation of his or her sep estate w/out impressing a com character upon that estate. o W argued the corp existed as Hs alter ego (second self, referring to the theory that the business was a mere conduit for the transaction of Hs business and he and the business were essentially one and the same). Combining separate property with com time, talent and labor can give rise to conflicting principles of marital prop law: o Property acquired during marriage by toil, talent, and industry of one of the spouses belongs to the com; o A spouse may expend a reasonable amount of talent or labor in the management and preservation of her or his sep estate without making it com prop. The rule of reimbursement: Reimbursement is purely an equitable remedy applied when one marital estate in some way improves another marital estate, as when the com estate improves the sep estate of one of the spouses o A right of reimbursement btwn marital estates arises when funds of one marital estate are used to benefit and enhance another marital estate o A right of reimbursement also arises when com time, talent and labor are utilized to benefit and enhance a spouses separate 18

Community Property- Spring 2011 estate above and beyond ordinary maintenance and preservation of the sep estate. o The party claiming the right of reimbursement has the burden of pleading and proving that (1) the expenditures and improvements were made and (2) that they are reimbursable o Reimbursement is not available as a matter of law but is rather discretionary. The family code gives the trial ct wide latitude and discretion in dividing the com estate and the appellate cts will presume that the ct exercised its discretion properly. Jensen v. Jensen (p. 257): held that the "reimbursement" theory provides that the stock, as it appreciates, remains the sep prop of the owner spouse but that the com is entitled to reimbursement for the reasonable value of the time and effort of both or either of the spouses which contributed to the increase in value of the stock. o V. The community ownership theory where any increase in the value of the stock as a result of the time and effort of the owner spouse becomes com prop. o The time, toil, and talent claim involves subtracting the value of time needed to manage and preserve the prop from the overall value of the services contributed during marriage. o All salary received during marriage from the corp, as well as dividends paid to the spouse during marriage, are to be offset against any com reimbursement claim.

Chapter 11: Management Powers A. In General Ownership Separate Property of W Community Property Management Sole Management of W 1. Sole Management of W 2. Joint Management of W and H 3. Sole Management of H Sole Management of H

Separate Property of H

4. Sole Management Property 3.101. Managing Separate Property: Each spouse has the sole management, control, and disposition of that spouse's separate property. 4. Joint Management Property 3.102. Managing Community Property (a) During marriage, each spouse has the sole management, control, and disposition of the community property that the spouse would have owned if single, including: (1) personal earnings; (2) revenue from separate property; (3) recoveries for personal injuries; and (4) the increase and mutations of, and the revenue from, all property subject to the spouse's sole management, control, and disposition. 19

Community Property- Spring 2011 o (b) If community property subject to the sole management, control, and disposition of one spouse is mixed or combined with community property subject to the sole management, control, and disposition of the other spouse, then the mixed or combined 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. o (c) Except as provided by Subsection (a), 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. Property that is not 3.102 (a) property is 3.102 (b) or (c) joint management com prop unless the parties have agreed that the prop could be managed solely by one spouse. Spouses homestead is joint management prop regardless whether it is sep or com prop. Vallone v. Miller (p.274): held that in this joint management com prop, the H had no basis to dispose of the entire joint management com prop so no K. The statutes give fairly clear guidelines as to whether particular assets are subject to sole management of one of the spouses or joint management of both spouses. Some com prop states characterize the management of com prop in terms of equal management rather than joint/ sole management. Focusing on management and control, all assets of a married couple subject to TX law can be placed in 3 categories, just as in ownership. But the categories are not the same as ownership categories. Either spouse may be the sole manager of a substantial amount of com prop..

Hs Sole Management Joint Management Ws Sole Management Property Some com prop Property Hs sep and some com Ws Sep and some com Hs sole management Joint management com Ws sole management sep prop prop sep prop Hs sole management Ws sole management com prop com prop Chronology makes a big difference in marital prop, since there have been numerous changes in the pertinent laws. In the 19th century, for example, married women were not considered competent in the legal sense to manage prop. In fact, even in law, equality btwn married men and women in this respect did not come about until 1967. From 1840 and 1913, the H managed not only com prop but also the sep prop of both spouses. Starting in 1913, lawmakers began to address this sexist inequality, but it wasnt until 1967 that the legal framework of equality was completed. B. Reliance Upon Title

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Community Property- Spring 2011 Cumming v. Johnson (p. 275): held that even if the Ds wife had a presumptive com prop interest in the certificates, her interest could not prevent enforcement of the oral stock transfer agreement. C. Duties of the Manager One spouse can have sole management power over com prop. He or she is managing prop for the benefit of the other spouse who own a interest in the prop. Andrews v. Andrews (p. 278): held that a fiduciary relationship existed btwn the parties and that they agreed to purchase the residence jointly even though the deed was only in his name, where a promissory note was also given to the W, it was reversed b/c absent a fraud on the com, the TC could not order reimbursement for gifts of com prop made during marriage. 3.103. Managing Earnings of Minor: Except as provided by Section 264.0111, during the marriage of the parents of an unemancipated minor for whom a managing conservator has not been appointed, the earnings of the minor are subject to the joint management, control, and disposition of the parents of the minor, unless otherwise provided by agreement of the parents or by judicial order. 3.104. Protection of Third Persons: (a) During marriage, property is presumed to be subject to the sole management, control, and disposition of a spouse if it is held in that spouse's name, as shown by muniment, contract, deposit of funds, or other evidence of ownership, or if it is in that spouse's possession and is not subject to such evidence of ownership. (b) A third person dealing with a spouse is entitled to rely, as against the other spouse or anyone claiming from that spouse, on that spouse's authority to deal with the property if: (1) the property is presumed to be subject to the sole management, control, and disposition of the spouse; and (2) the person dealing with the spouse: o (A) is not a party to a fraud on the other spouse or another person; and o (B) does not have actual or constructive notice of the spouse's lack of authority. A spouses good faith but unwise investment of com funds is not actionable. Other states have adopted an equal management system for most com prop where either spouse may manage prop. Most cts agree that if a spouse uses com funds for dates before or after separation, the com estate should be reimbursed for all amounts spent on the date. Arrington v. Arrington (p. 280): held that where a TC made W managing conservator of their dog, it is not a human being but personal prop and the dog was a gift to W. Mazique v. Mazique (p. 281): held that where H had shown little regard for the preservation of the familys com assets, the he had continuously used com funds to meet his own personal needs (SEX), failed to

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Community Property- Spring 2011 overcome the presumption that the disposition of the com prop was not unfair to W constituted constructive fraud. Devine v. Devine (p. 283): held that the W did commit actual fraud against the Hs com prop rights in investments and b/c the ct could have found that the Ws intent was to deceive and was dishonest, also committed constructive fraud with respect to Hs rights in stock in an unfair way, the award was not excessive where the H could recover for fraud and receive a disproportionate share of the estate. Fields v. Michael (p. 287): held that the H committed actual fraud in making unauthorized gifts that were sufficient to show that he was accountable to the W for wrongfully disposing of the prop. o As the manager of the com estate, H had a fiduciary duty to protect the assets. D. Expenditure of Community Funds for Separate Debts Debts incurred during the marriage generally are incurred for family living expenses and it is appropriate to use com funds to pay such debts. Debts before marriage are considered sep debts. o If com funds are used to pay such debs the com should be reimbursed, unless the com has enjoyed an offsetting benefit from any prop subject to the debt. TFC 3.402 and 3.409: address reimbursement claims, 3.409 bars reimbursement for payment of child support or spousal maintenance as well as for they payment of a student loan. 3.201. Spousal Liability: (a) A person is personally liable for the acts of the person's spouse only if: (1) the spouse acts as an agent for the person; or (2) the spouse incurs a debt for necessaries as provided by Subchapter F, Chapter 2, (b) Except as provided by this subchapter, community property is not subject to a liability that arises from an act of a spouse. (c) A spouse does not act as an agent for the other spouse solely because of the marriage relationship. 3.202. Rules of Marital Property Liability: (a) A spouse's separate property is not subject to liabilities of the other spouse unless both spouses are liable by other rules of law. (b) Unless both spouses are personally liable as provided by this subchapter, the community property subject to a spouse's sole management, control, and disposition is not subject to: (1) any liabilities that the other spouse incurred before marriage; or (2) any nontortious liabilities that the other spouse incurs during marriage. (c) The community property subject to a spouse's sole or joint management, control, and disposition is subject to the liabilities incurred by the spouse before or during marriage. (d) All community property is subject to tortious liability of either spouse incurred during marriage. (e) For purposes of this section, all retirement allowances, annuities, accumulated contributions, optional benefits, and money in the various public retirement system accounts of this state that are community property subject to the participating spouse's sole

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Community Property- Spring 2011 management, control, and disposition are not subject to any claim for payment of a criminal restitution judgment entered against the nonparticipant spouse except to the extent of the nonparticipant spouse's interest as determined in a qualified domestic relations order under Chapter 804, Government Code. 3.203. Order in Which Property is Subject to Execution: (a) A judge may determine, as deemed just and equitable, the order in which particular separate or community property is subject to execution and sale to satisfy a judgment, if the property subject to liability for a judgment includes any combination of: (1) a spouse's separate property; (2) community property subject to a spouse's sole management, control, and disposition; (3) community property subject to the other spouse's sole management, control, and disposition; and (4) community property subject to the spouses' joint management, control, and disposition. (b) In determining the order in which particular property is subject to execution and sale, the judge shall consider the facts surrounding the transaction or occurrence on which the suit is based. 4.204. Management of Converted Property: Except as specified in the agreement to convert the property and as provided by Subchapter B, Chapter 3, and other law, property converted to community property under this subchapter is subject to: (1) the sole management, control, and disposition of the spouse in whose name the property is held; (2) the sole management, control, and disposition of the spouse who transferred the property if the property is not subject to evidence of ownership; (3) the joint management, control, and disposition of the spouses if the property is held in the name of both spouses; or (4) the joint management, control, and disposition of the spouses if the property is not subject to evidence of ownership and was owned by both spouses before the property was converted to community property. E. Gifts of Community Property TX: a spouse can make a gift of a reasonable amount of com prop. o Some states do not allow one spouse to make a gift of any com prop w/out the consent of the other spouse. Whether a gift is reasonable? o Most cts agree that this determination depends upon the relationship btwn the spouse and the donee, and the amount of the gift compared to the size of the com estate. If one spouse discovers that an unreasonable gift of com prop has been made by the other spouse, the objecting spouse can attempt to recover the gift from the donee for the benefit of the com. o If discovered after the death of the donor spouse, 50% of the gift could be recovered as the sep prop of the objecting spouse. Chapter 12: Creditors Rights

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Community Property- Spring 2011 Management rights of the spouses can be altered by agreement: This can affect the rights of the contract creditors of one spouse. LeBlanc v. Waller (p. 293): held that the W had no knowledge of the liability to H until shortly before the inception of this action, W did not participate in the business and did not realize or have the opportunity to gain from it. o No evidence of assent, implied or expressed on the Ws part to incurring the debt. TXs creditors rights rules are found in TX FC 3.202 A contract creditor of a spouse can attach all prop over which the spouse has sole or joint management power. o For the creditors rights, it does not matter whether the debt arose before or during marriage, however the com may be entitled to reimbursement if com prop is used to pay a sep debt. Tort claims: if the liability was incurred during marriage, all com prop can be attached. If liability was incurred prior to marriage, only prop over which the D has management power can be attached. Under 3.202, it is clear that a spouses sep prop is never attachable for the contract debts or torts committed by the other spouse. One spouse can be liable for the act of the other if that spouse is acting as an agent for the other spouse. TX FC 2.501: If a spouse fails to discharge the duty of support the spouse is liable to any person who provides necessaries to the other spouse. o If a creditor provides a necessity to one spouse, all of the prop of the other spouse can be attached to collect such a debt. **Diagram of Marital Property Liability on p. 296** Cockerham v. Cockerham (p. 297): held that debts accrued by Ws dress shop could be enforced against com interest in a land tract and dairy business as they were both under joint management where the parties who gave the W credit made no agreement to only look at her sep estate. If the H ratifies his Ws K debts, his sep prop, as well as his 3.102 (a) com prop is available to the creditors. Tex. Fam. Code 3.202: the concept of com debt has no application to creditors rights rules. TX: NO COM DEBT. TX Creditors rights: Only two types of K debts o The debts of one spouse: As long as the debt is not a necessity, the creditor may only attach the sep prop of the debtor, as well as all joint management com prop and the debtors 3.102(a) com prop. o The debts of both: Creditor may attach all non- exempt prop owned by either spouse. Patel v. Kuciemba (p. 307): held that although the W operated some of the business, he involvement did not include decisions or knowledge of 24

Community Property- Spring 2011 the Hs business borrowing where while the checks were used on the couples joint account to secure the notes were not signed by the wife making it under the Hs sole management, control, and disposition. o The W did nothing to lead the holders to believe the H had authority to sign the note as her agent and there are not facts that full knowledge of the notes could be imputed to the W. Inwood National Bank of Dallas v. Hoppe (p. 310): held that the debt, contracted for during Ws marriage, was com debt where the divorce had no legal effect on the rights of creditor to resort to the entire nonexempt com prop. Ex. If both spouses signed a note during marriage, even if the divorce ct orders one spouse to pay the note, the creditor may sue the other spouse after divorce for nonpayment. Pope Photo Records v. Malone (p. 311): held that a creditor could not collect a debt off a deceased Hs life insurance proceeds given to the W. Under the totality of circumstances was insufficient to remove the insulation of TX law that protects the Ws sep prop from the debt incurred by her H. Mock v. Mock (p. 314): held that credit card debt acquired solely in the Hs name during marriage are presumptively com obligations and may be satisfied by the W.

Chapter 13: Constitutional Limits A. State Constitution 1. The Scope of Separate Property Arnold v. Leonard (p. 321): held that Acts that undertook to make rents and revenues from the Ws separate lands a part of her sep estate were invalid however provisions prior that make those rents and revenues free from liability of the Hs debts are valid. o The constitutional definition of sep prop was intended to be exclusive and that it may not be altered or enlarged by an act of the legislature (also Graham v. Franco). o Casts a shadow over the ability of spouses to reclassify prop. o The ct says that the test to determine whether a Ws acquisition is her sep prop is simply the gift-devise-or-descent method (only that acquired by one of those methods is the Ws sep estate). Under this doctrine, acts of 1917 and 1921, which ought to make rents and revenues from a Ws sep lands sep prop, were simply invalid. o The ct also makes clear that the power of a H alone to dispose of com prop does not negate the ownership of the com. In terms of ownership rights, there are com assets, sep prop assets, and potentially numerous combinations of ownership by the several marital estates (referencing all the assets of a married couple, including the sep prop of each spouse, the com prop, and any combination of sep/ com prop). 25

Community Property- Spring 2011 With rules regarding management, another layer is essentially added to the marital prop scheme. o Com prop can be subject to sole management by either spouse or joint management of the two spouses. Graham v. Franco (p. 324): held that recovery for personal injuries, past and future, is sep prop of that spouse and any statute which provides that such recovery will be the sep prop of that spouse is constitutional. o Later cases apply an affirmative test: focusing on com prop as assets acquired by com effort, labor, etc. o Analysis leads to the conclusion that the rule that negligence of the H should be imputed to the W (b/c he would profit from his own wrong) should not be applied to the extent the recovery for the Ws injuries is her sep prop. 2. Property Divisible at Divorce Before Family Code, divorce cts could divide sep personalty, if necessary, but not sep realty. New section: not clear whether all sep prop is divisible, no sep prop divisible, or only sep personalty was divisible. Eggemeyer v. Eggemeyer (p. 326): held that a ct may set aside either spouses sep real prop, its income, rents, or revenues for the support of minor children where the parent owes a duty to support his child, it can be enforced against the parent and his sep prop. o A receiver or trustee can be named to assure compliance w/ order for support but the fee to the sep prop may not be divested. o Dissent: a ct can divest title to one spouses sep real prop and award that prop to the other spouse as his/ her sep prop in exceptional circumstances and the constitution does not prohibit it. Cameron v. Cameron (p. 332): held that as com prop is acquired through the corroborative efforts of both spouses, a W was entitled to a % of savings bond and a % of military retirement pay (however in a diff time proportion). o Found no justifiable reason for treating sep personalty in a dif manner than sep realty in divorce proceedings. TX: no sep prop (personalty or realty) can be divided in ct. o Parties may agree in a separation agreement to divide sep prop; Eggemeyer/ Cameron can only bar the ct from ordering such a division in a decree. o Most disputes now pertain to character of prop. Duke v. Duke (p. 342): held that a ct cannot order the deed of trust on a spouses sep realty. Vs. Rider v. Rider: where a ct could impose an equitable lien on a spouses out of state sep realty to secure a property division obligation. Cts have upheld the granting of a lien if the com claim related to the prop to which the lien attached.

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Community Property- Spring 2011 If prop is party sep and partly com, the ct may order the sale of the prop, as long as the holder of the sep prop portion receives at least that fraction of the sales proceeds. Cohen v. Cohen (p. 343): held that the provisions for interest on a divorce decree was valid as it was merely a method by which the H would be allowed to use the funds in exchange for paying 10% interest. 3. Discrimination Based Upon Sex Glud v. Glud (p. 344): held that where the judge made a person comment affirmatively showing that the determination of custody was based upon the consideration of the sex of the parent, deprived the H of his right to have his qualifications as custodian the children considered w/out regard to his sex was a violation. o POOR LIL MOMMMA BEAR LEFT ALONE BC THE JUDGE WAS STUPID. 4. Retroactivity of Changes in the Law Division and Disposition of Certain Property Under Special Circumstances: 7.001 and 7.002 TFCSections 7.001 and 7.002 are the most important sections in Title 1. [Title 1 is titled The Marriage Relationship.] The origins of these statutes date from 1841; the mandate consistently has been for the courts to divide the property in a manner that the judge deems just and right, not 50/50" or equally as many people seem to think. The Supreme Court of Texas has held that these sections apply only to community property and that they do not authorize the divesting or division of a spouses separate property. While the statutory mandate to divide the property in a just and right manner may seem simple, its application is fraught with complexity. The valuation of the marital assets, factors to be considered in making a just and right division of the property, and the technique for dividing the marital assets can be very complicated.

B. Federal Constitution 1. Jurisdiction Hoffman v. Hoffman (p. 349): held that this ct had juris over the divorce but was not able to divide property outside of the state of TX. o TX Fam Code 3.26: relates to obtaining personal juris over a nonresident respondent and does not in any way take away from the trial cts in rem juris to grant a divorce and divide prop located w/in this state. o In other words, a court has jurisdiction to grant a divorce even without jurisdiction over one of the spouses, but without personal jurisdiction over the spouse, the court may not divide property outside of Texas. (Citing Shaffer v. Heitner, the court also states

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Community Property- Spring 2011 that the court may also lack jurisdiction to divide property within the state.) Divisible divorce is accepted in American family law: the state where one spouse is domiciled can divorce the parties, regardless of the contacts, if any, the other spouse has w/ the state. o If the state wishes to divide the parties prop or award child support, the ct must have in personam juris over both parties. If prop is located in the forum, that state will almost always have sufficient contacts w/ the prop and the parties to exercise juris regarding that prop. Dawson- Austin v. Austin (p. 351): held that TX cts had no personal juris over the W b/c she had substantially no contacts w/ the state and the H could not assert juris unilaterally over the W merely by moving to TX and filing for divorce here. o Most matters relating to prop are governed by state law rather than national law. Federal law can preempt st law and that fed cts have recently been increasingly inclined to conclude that certain types of fed benefits were intended by Congress to be the sep prop of the employee.

2. Property Located Outside the State Is authority for the view that a cts divorce decree which purports to affect title to a foreign realty is not entitled to full faith and credit. o Cts normally require the parties, while they are before the ct to execute deeds regarding the subject prop. Personalty located in another state may be divided by the divorce ct, if the ct has personal juris over both spouses. 3. Federal Preemption Fed cts have recently been increasingly inclined to conclude that certain types of fed benefits were intended by Congress to be the sep prop of the employee, even though the benefits were earned pursuant to services rendered during marriage. a. Military Retirement McCarty v. McCarty (p. 354): held that a Hs non- disability retirement benefits were his sep prop as the member may designate a beneficiary, Congress intended for the pay to be considered personal entitlement, and Congress intended that military retired pay actually reach the beneficiary. o The reduction of retired pay by a com prop award not only discourages retirement by reducing the retired pay available to the service member, but gives him a positive incentive to keep workings, since current income after divorce is not divisible as com prop. o Important case.

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Community Property- Spring 2011 Segrest v. Segrest (p. 358): held that the decision in McCarty could not be applied or operate retroactively so that the divorce decree should be viewed as being erroneous or voidable as opposed to void. o Res judicata barred the Hs suit for declaratory judgment of a past decree. o 3 pronged test for determining whether and to what extent a judicially modified or abrogated rule of law should be given retroactive operation: Whether the holding in question decided an issue of first impression whose resolution was not clearly foreshadowed by earlier cases. Whether retrospective operation will further or retard the operation of the holding in question. Whether retroactive application could produce substantial inequitable results in individual cases. McCarty concluded that Congress intended military retirement benefits to be the separate prop of the employee. Segrest clarified that McMarty would not be given retroactive effect; it would only apply to actions not yet final when the decision was announced. One year after McCarty, Congress enacted the Uniform Services Former Spouses Protection Act, USFSPA, effective Feb. 1 1983, which made 3 types of TX divorces involving military retirement: (1) those final before McCarty, (2) those that became final after but before Feb. 1 1983 (GAP divorce), (3) those that became final after Feb. 1 1983. Under USFSPA, a state ct may divide military retirement benefits only if the military member resides in or is a domiciliary of the state, or if the member consents to the cts juris. Voronin v. Voronin (p. 360): held that where the USFSPA act was overturned, and this case was ongoing, that the W was entitled to a share (equal to the months of marriage while the appellee was in the military/ the number of months of his military service. Allison v. Allison (p. 363): held that where there is a disposition of retirement benefits in the express terms of a divorce decree renders those benefits not subject to later partition. o From Eddy: partition is available as a means of dividing prop formerly held by spouses as com prop not divided upon divorce, however com prop, including retirement benefits, specifically allocated by the express terms of a divorce decree is not later subject to partition. Eddy v. Eddy (p. 363): held that H/W were tenants in common w/ respect to military retirement benefits accrued during their marriage, as they were subject to partition under the USFSPA (permitting the division of military retirement benefits accrued during marriage, overruling the McCarty decision).

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Community Property- Spring 2011 o Where military benefits are not allocated by the express terms of a divorce decree that became final during the gap period, the Act negates any effect that McCarty had on the characterization of this prop at the time of divorce Tenants in common. o Vs. If the final divorce decree had contained express language from which one could reasonably conclude that the divorce ct actually and expressly adjudicated ownership of the military retirement benefits, res judicata would bar a subsequent suit for partition of the military retirement benefits. After 9.203 of the Fam Code: if military retirement benefits earned during marriage are not mentioned in the decree, in a later partition action they will be divided in a manner deemed just and right by the divorce ct. A 1990 amendment to the USFSPA: a state divorce ct cannot treat military retirement as divisible prop if the decree was issued before June 25, 1981 and did not treat the retirement as part of the marital estate. o Governs all judgment issued before, on or after Nov. 5, 1990. USSC clarified McCarty, after the adoption of the USFSPA in Mansell v. Mansell: the USFSPA bars the division of military disability benefits. o Disposable retired or retainer pay, which the USFSPA established state divorce cts may divide, is defined to exclude disability benefits. o The ct concluded that divorce cts could not divide such benefits. After Mansell, it is clear that only disposable retirement benefits may be divided at divorce o Disposable benefits are defined in the statue as a net concept, computed after deducting such things as retirement pay waived to receive disability benefits. TX SC: construed retroactivity of Mansell in the same manner as McCarty, a decree that divided military disability benefits that became final before Mansell was decided is not affected by Mansell. b. Other Federal Benefits c. ERISA Preemption

Chapter 14: Representing the Divorce Client A. The First Interview It is desirable to encourage the client to consider marriage counseling, wait for a short period or be sure the client has reached a final decision to initiate divorce. Several determinations before initiating divorce action on lawyers side. B. Handling the Case Mediation can prove useful.

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Community Property- Spring 2011 TELL YOU CLIENT HEY DONT SLEEP AROUND WHEN THE KIDS ARE HOME OR SHOW OFF YOUR HOTT NEW BF/GF WHEN YOU KNOW YOUR EX IS AROUND. C. Counseling the Client The client must believe you are listening. D. Maintaining Good Client Relations Family lawyers frequently do not pay enough attention to the personal aspect of family law representation. DONT SLEEP WITH THE CLIENT. DUH MPRE. E. Collaborative Law W/ the concern that judges will want to move their docket where they would put pressure on the parties rather than giving them a reasonable period to try and reach an amicable settlement w/out litigation. The FC gives the parties 2 years to settle the case w/out litigation, if the parties so choose. Texas Family Code 15.001-15.116 Collaborative Law

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Community Property- Spring 2011

15.001. Policy It is the policy of this state to encourage the peaceable resolution of disputes, with special consideration given to disputes involving the parent-child relationship, including disputes involving the conservatorship of, possession of or access to, and support of a child, and the early settlement of pending litigation through voluntary settlement procedures. 15.002. Conflicts Between Provisions If a provision of this chapter conflicts with another provision of this code or another statute or rule of this state and the conflict cannot be reconciled, this chapter prevails. 15.003. Uniformity of Application and Construction In applying and construing this chapter, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact a collaborative law process Act for family law matters. 15.052. Definitions This section includes definitions of fourteen terms, including (1) Collaborative family law communication, (2) Collaborative family law participation agreement, (3) Collaborative family law matter, (4) Collaborative family law process, (5) Collaborative lawyer, (6) Law firm, (7) Nonparty participant, (8) Party, (9) Proceeding, and (10) Prospective party. 15.102. Beginning and Concluding Collaborative Family Law Process (a) A collaborative family law process begins when the parties sign a collaborative family law participation agreement. (b) A tribunal may not order a party to participate in a collaborative family law process over that party's objection. (c) A collaborative family law process is concluded by: (1) Resolution of a collaborative family law matter as evidenced by a signed record; (2) Resolution of a part of a collaborative family law matter, evidenced by a signed record, in which the parties agree that the remaining parts of the matter will not be resolved in the process; or (3) Termination of the process under Subsection (d). (d) A collaborative family law process terminates: (1) When a party gives notice to other parties in a record that the process is ended; (2) when a party: (A) begins a proceeding related to a collaborative family law matter without the agreement of all parties; or (B) in a pending proceeding related to the matter: (i) without the agreement of all parties, initiates a pleading, motion, or request for a conference with the tribunal; (ii) initiates an order to show cause or requests that the proceeding be put on the tribunal's active calendar; or (iii) takes similar action requiring notice to be sent to the parties; or (3) except as otherwise provided by Subsection (g), when a party discharges a collaborative lawyer or a collaborative lawyer withdraws from further representation of a party.

Chaptercollaborative lawyer shall give prompt notice in a record to Estate at Divorce lawyer's discharge or withdrawal. 15: Dividing the Community all other parties of the collaborative (e) A party's A. A party may terminate a collaborative family law process with or without cause. (f) Fault Young v. Young (p. 399): held that as the fault of the H was considered (g) Notwithstanding the discharge or withdrawal of a collaborative lawyer, a collaborative family law process continues if, not later than the 30th day after the date the notice of the collaborative lawyer's discharge orprop, the TC Subsection as fault may not be considered in in the division of withdrawal required by erred (e) is sent to the parties: dividing the com estate collaborative lawyer; and (1) the unrepresented party engages a successorof the parties. o REVERSED. TX has held that in a fault- based divorce, evidence of (2) in a signed record: fault could be considered by a ct in connection w/ the division of (A) the parties consent to continue the process by reaffirming the collaborative family law participation agreement; com estate. After Young in a fault based divorce TX cts do not have to consider isfault but they can ifcollaborative lawyer; and (B) the agreement amended to identify the successor choose.(C) the successor collaborative lawyer confirms the lawyer's representation of a party in the collaborative process. (h) A collaborative family law process does not conclude if, with the consent of the parties to a signed record resolving all or part of the collaborative matter, a party requests a tribunal to approve a resolution of the collaborative family law matter or any part of that matter as evidenced by a signed record. (i) A collaborative family law participation agreement may provide additional methods of concluding a collaborative family law process.

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Community Property- Spring 2011 Brown v. Brown (p. 401): held that there was sufficient evidence to prove cruelty by a preponderance of the evidence and that the findings of the TC were not clearly wrong and unjust. o Cruelty which will support a divorce is defined as willful and persistent infliction of unnecessary suffering, whether in realization or apprehension, whether of mind or body, and as acts that endanger or threaten life, limb, or health of the aggrieved party and inflict mental anguish. B. Other Equitable Concerns Murff v. Murff (p. 403): held that fault and disparity in earning power or capacity may be considered in dividing the prop where the ct has wide discretion dividing the estate of the parties and that division should be corrected on appeal only when an abuse of discretion is shown. o TC in making a just and right division can consider factors such as: 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. Nature of the prop. TFC 6.711: Upon request, the judge must state in writing its findings of facts and conclusions of law concerning (1) the characterization of each partys assets, and (2) the value or amount of the com estates assets and liabilities. TFC 9.008: A final prop division decree may not be modified. However, an ambiguous decree may be clarified. Putegnat v. Putegnat (p. 406): held that a cts award to W of 25% of Hs inheritance of sep prop was valid b/c the award did not render the decree void and could not be subject to collateral attack. An unappealed decree that divests sep prop is not void. Cluck v. Cluck (p. 407): held that the ct could not award a country club membership that had been started in the Hs name to the W. o A country club is a voluntary association that has the sole right to determine who would be members. Patt v. Patt (p. 409): held that the cts award to W of interest in the marital home with exclusive use and possession for the rest of her life was reasonable b/c given her age and lack of work experience the use of the home could be used to generate rental income. LeBlanc v. LeBlanc (p. 410): held that Ws life estate interest in Hs sep prop was not just and right, divesting H of his fee interest in the prop. C. Characterization Errors

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Community Property- Spring 2011 If a ct mischaracterizes sep prop as com prop and divides it, this automatically is reversible error. If the ct merely mischaracterizes prop, this is not automatically reversible error, according to most cts. McElwee v. McElwee (p. 412): held that the AC does not have the power to render a new division but in light of Jacobs, when a mischaracterization has more than a mere de minimis effect upon the TCs division, the AC must remand the com estate to the TC for a just and right division based upon the correct characterization of the prop. It is not automatic reversible error if sep prop is mischaracterized as com and the prop is awarded to the owner. It would be automatic reversible error, however, if the prop would be awarded to the nonowner. TFC 7.001 General Rule of Prop Division: provides for a just and right division of the estate of the parties in divorce. 7.002 Division and Disposition of Certain Prop under Special Circumstance addresses the division of prop other than the estate of the parties. Sections 7.001 and 7.002 are the most important sections in Title 1. [Professor Haddocks note: Title 1 is captioned The Marriage Relationship and includes the Code provisions on the marriage relationship, marital property rights and liabilities, premarital and marital property agreements, homestead rights, dissolution of marriage, award of marital property, maintenance, and post-decree proceedings. In other words, these two sections (7.001 and 7.002) are very important.] TFC 3.401- .410 and 7.007 (2003 additions): (b) Logically, because property acquired in another jurisdiction that would have been community property if acquired in Texas is treated in the same manner as community, property acquired in another jurisdiction that would have been separate property if acquired in Texas requires identical treatment. o (c) This will give statutory sanction to the practice of divorcing spouses filing separate tax returns and reporting their individual earnings at the end of the year of divorce, thus avoiding the need to suffer the complication of reporting one half of each others income up to the day of divorce. Jacobs v. Jacobs (p. 414): held that once a reversible error affecting the just and right division of the com estate is found, the AC must remand the entire com estate for a new division. o An AC could not substitute its discretion for that of the TC b/c a just and right division of the com estate was a matter lying solely w/in the discretion of the TC. o It is impossible to excise the reimbursement claims from the com prop division, absent a remand of the com prop division b/c such claims are not represented in the divorce decree by any specific, identifiable award of money, nor are they traceable to any specific prop.

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Community Property- Spring 2011 D. Miscellaneous Property Division Issues When dividing the com estate, cts consider who will have the custody of any minor children, and the needs of those children. The needs of the children can be satisfied via a child support award or the prop division. Hourigan v. Hourigan (p. 416): held that where the ct awarded a greater portion to the H b/c of the Ws inability to make child support payments to the H (managing conservator of the child) was proper. o W had the duty to support the child either in lump payment or periodic payments and as she cannot do so, her child support obligation could be taken from the marital prop. Gordon v. Blackmon (p. 418): held that once a party had a fair trial on a divorce decree, uncomplained of and unaffected by error, there should not be another trial. o Subsequent to the final decree the Uniformed Services Former Spouses Protection Act took effect making the H/W subject to that act where the ct reversed the judgment insofar as it divided the prop but denied that the W could request a new division of the com estate. o TX law around Gordon confusing: stems from general rule that issue of divorce and prop division may not be severed. So that the parties may not continue to accumulate com prop.** Leal v. Leal (p. 420): held that where a W claimed that the TC failed in considering monies spent by H during the pendency of the divorce, there was no abuse of discretion as there was no proof. o Spouses have great discretion regarding the manner in which com funds should be spent prior to divorce, unless a ct order is obtained that limits that freedom. o Cts only become concerned when money is totally squandered during separation or when money is spent on dates. Archambault v. Archambault (p. 421): held that the TC did not err where a jury found for a higher award for the W and that the H only need pay $800/ month for child support b/c a division does not need to be equal where an unequal division must be supported by some reasonable basis. Abrams v. Abrams (p. 422): held that the child support order requiring H to increase child support payments periodically is arbitrary, unreasonable, and not based on the facts. o TFC Ann. Sec. 14.08(c)(2): Any increase in child support must be supported by evidence that the circumstances of the child or a person affected by the order have materially and substantially changed since the entry of the order. DeGroot v. DeGroot (p. 423): held that the original divorce decree was valid as opposed to 2 subsequent divorce decrees as the cts plenary power had expired even with arbitration b/c it is not binding. E. Independent Claims in a Divorce Action Spouses apparently may now bring tort actions against one another.

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Community Property- Spring 2011 May be brought either in connection w/ the divorce action or in a sep action (assault and battery). Increasing acceptance of various types of claims that can be brought by one cohabitant against the other. F. Death Abates a Divorce Action If a spouse dies while the divorce action is pending, this normally abates the divorce action, and the decedents prop passes according to the rules governing marriage dissolution by death. In re Marriage of Joyner (p. 428): held that a divorce was final at the final hearing where by oral pronouncement the judge had officially absolved it even though the H/W still had to resolve some personal prop issues in mediation. (LOTTO TICKET WINNER). G. Alimony Until 1995, TX was the only st that didnt allow a ct to order postdivorce alimony for a spouse (only temp until divorce final). The new alimony statute was a compromise with its purpose being to provide spousal maintenance primarily as a temporary rehabilitate measure for a divorced spouse whose ability for self support is lacking or has deteriorated through the passage of time while the spouse was engaged in homemaking activities and whose capital assets are insufficient to provide support. Spousal support should be terminated in the shortest time possible, not to exceed 3 YEARS, in which the former spouse is able to be employed or to acquire the necessary skills to become self supporting. (TFC 8.054). Only in circumstances in which the former spouse cannot become selfsupporting by reason of incapacitating physical or mental disability should maintenance be extended beyond