Marital Property Outline
Professor George, Spring 2011
INTRODUCTION
Overview of Texas Constitution & Marital Property
i. Texas is a Community Property state — which extends from Spanish Law
1. There are currently 9 CP states
ii. All property in Texas is either separate or community
iii. Separate Property is a matter of constitutional law and is specifically defined in Article 16 § 15 “property owned or claimed before marriage or property received by gift, devise or descent.”
1. Individuals or the legislature cannot re-characterize property, although the legislature may change the spouses rights/responsibilities to the already characterized property (i.e. management & liability)
2. Anything that is not separate is going to be community
iv. There is no definition of community property in the constitution
1. Defined in the Family Code & case law
Overview of the Statutes & Marital Property
i. Tex Fam. Code §3.001: “Separate Property”
1. A spouses separate property consists of:
a. the property owned or claimed by the spouse before the marriage
b. property acquired by the spouse during marriage by gift, devise or descent
c. recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage
ii. §3.002: “Community Property”
1. Community Property consists of the property, other than separate property, acquired by either spouse during marriage
The Community Property Presumption and Characterization
i. Martial property must be “characterized”
ii. Property is either:
1. Determined in a manner that would make it separate property OR
2. Presumed to be community property
iii. §3.003:
1. (a) Property possessed by either spouse during or on dissolution of marriage is presumed to be community property
2. (b) presumption can only be rebutted by clear & convincing evidence
iv. Two way community property arises:
1. Onerous title
2. Implied Exclusion
CONSTITUTIONAL EVOLUTION
Texas Consitution 1876-1947
i. “All property, both real and personal of the wife, owned or claimed by her before marriage, and acquired afterward by gift, device or descent, shall be her separate property; and laws shall be passed more clearly defining the rights of the wife, in relation as well to her separate property as that held in common with her husband.
1. Notice:
a. No mention of the husband bc it was assumed that the H had property rights
b. At this time, W owned SP, but H managed it
c. Woman were given these rights because bc rich oil tycoons wanted their daughters to keep the family riches
ii. Character of Crops: Deblane v. Hugh Lynch
1. Start w/ community property presumption: “The principle which lies at the foundation of the whole system of CP is that whatever is acquired by the joint efforts of the H and W, shall be their CP.”
a. Note: it doesn’t matter if W did nothing to help earn, the earnings are assumed to be ½ W’s
2. The “increase” of land held as SP is CP – therefore, crops grown on W’s SP are CP, while the land itself remains SP
3. The “increase” ( ie Dividends, interests, rents, crops, animal progeny) from separate property are community property
a. Exception Wyly amend exception:
i. If a spouse gives a gift of income producing property TO OTHER SPOUSE (notice: only spouses can do this), it is presumed that the giving spouse is “gifting” the income from the property to the receiving spouse
iii. Character of Livestock: Stringfellow v. Sorrells
1. The “increase” of SP does not include the increase in value of the SP — this remains the spouses SP
2. However, the “increase” of SP livestock (i.e. their progeny) is CP, while the original SP livestock + its increase in value remains SP
3. Lottery Ticket Winnings are Community Property
a. Even if ticket is bought with SP, winnings are CP
i. Winnings are classified as “passive income”
ii. Rationale is that when you bought the ticket with your dollar, the dollar mutated into ticket, so as ticket still SP. However, when you cash it in it becomes CP—because it is essentially the same as collecting a dividend
iv. Spousal Power to Change Character: Kellet v. Trice
1. OLD RULE – Husband and wife cannot by their mere agreement or by straw man transactions alter the character given to the property at acquisition
a. Note: properties character as SP or CP determined at acquisition
2. NEW RULE – CAN convert SP to CP
3. A spouse cannot divest the other spouse of his/her SP at divorce
4. What spouses can do to re-characterize property:
a. One spouse can gift some of his/her SP to the other spouse — it will become part the other spouses separate property
b. Spouses can sell the SP of the spouse and re-buy the property with community funds making it CP
c. More in Chapter 4 of the Family Code @ changing SP to CP
5. There can be no gifts to the community — gifts by their nature make the gift SP to one spouse
Stuatory changes, 1911-1917
i. The changes made by the legislature primarily:
1. Attempted to define rents/revenue from W SP as SP
2. Made personal injury recovery spouses SP
3. Made W “special CP” immune from debts of H
ii. Implied Exclusion: Arnold v. Leonard
1. Note: Article 16, §15 states that the legislature may “make laws more clearly defining what SP is”
2. Issue in this case was whether the legislative changes making rents/revenues of SP to be SP was constitutional
a. HELD: Unconstitutional — the legislature can further define management and liability but cannot broaden the definition of SP
3. Used “implied exclusion:” if not specifically stated in the Constitution, then it was impliedly excluded — the only way to extend the definition of SP is to have a constitutional amendment
4. The legislature cannot change the characterization of property or expand the definition of SP by simply passing a statute
iii. Implied Exclusion Applied: Northern Texas Traction Co v. Hill
1. Legislature passed a statute that made all personal injury damages of a spouse, that spouses separat
njury to the body of the spouse is the separate property of that spouse bc the spouse “enters the marriage w/ his body”, all other DAS are compensating the community for funds used/not received.
5. Spanish & Mexican CL: found that choice in action (COA) and therefore, personal injury claims, where personal and regarded as separate.
6. Contributory Negligence: [when both spouses involved in case] contributory negligence of spouse A cannot bar spouse B from recovering damages that are separate property of that spouse (i.e. pain/suffering) — “the personal injuries are severed”
a. BUT with DAS that are community in nature (medical bills, lost wages) the jury could consider the other spouses contributory negligence when re-imbursing the community
ix. Premarital Unconstitutional But for Homestead Waiver: Williams v. Wiliams
1. Homestead right (Texas Cons. XVI § 52): after death of one spouse, the other spouse has the right to live in their marital house (no matter who the house is devised to) until her death. The devisee still has the title to the house at the time of death — but the homestead rights prevents them from partitioning the house until after the surviving spouses death.
2. Homestead right can be waived through a pre-marital agreement
3. Either spouse may make a gift of a piece of their separate property to be the separate property of the other spouse
4. When certain provisions of the pre-marital agreement are unconstitutional, this does not render the whole agreement void — the agreement can be severed
5. There can be no gifts to the community
a. Barred by the constitutional definition of separate property
i. Property becomes ½ separate of W and ½ separate of H
x. Income producing gifts: (stocks, dividends)
1. If one spouse gifts to another stock, the stocks are the separate property of the donee AND the income produced from the stocks is separate
a. Note: this would not occur if the gift was from a third party, in that instance the income would be CP
2. Whether a gift has been made or not is a question of fact to be answered by the fact finder
Current Texas Constitutional Provisions
i. Clause 1: Separate Property defined
1. words changed to be genderless
2. “All property, both real and personal, of a spouse claimed before marriage, and that acquired afterwards by gift, devise or descent, shall be the separate property of that spouse”
ii. Clause 2: Partition & Exchange for Spouses & FUTURE SPOUSES!
1. “persons about to marry & spouses, without intention to defraud creditors, may between themselves partition or exchange property that is then existing OR to be acquired, which will become the separate property of that spouse.”
