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Community Property/Marital Property
South Texas College of Law Houston
George, Pamela E.

MARITAL PROPERTY      PROFESSOR GEORGE      FALL 2012
I.                    Texas Marital Property System
§  Intro: The 1876 Texas constitution has been amended several times, but the definition of SP has remained constant. In Hilley v. Hilley Justice Walker stated that all marital property is either community or separate.
                               Separate Property Defined: All property, both real and personal of the spouse owned or claimed before marriage, and that acquired afterward by gift, devise or descent, shall be the separate property of that spouse. The legislature has the power to more clearly define these rights. (note management and liability)
                               Strict adherence: there has always been strict adherence to the constitutional definition of SP.
                               Constitutional changes: the equal rights amendment in 1972 made the texas constitution, including the definition of SP gender neutral.
                               CP is not defined in the Texas Constitution but there are 2 approaches:
v  Doctrine of Onerous Title: CP is whatever is acquired by the joint efforts of H and W. [Test: was it acquired by the labor of the spouses?] v  Doctrine of Implied Exclusion: that which does not meet the definition of SP is CP.
                               Court Divestment: court cant divest u of ur SP. Ex. Couple buys 100K house, spouse uses ½ inheritance and ½ community property. This is a TIC and on divorce the court will sell the house and split the proceeds.
                               Texas Jury: tx is the only state that allows a jury to decide the characterization of property (and fate of child) the judge then decides the equitable division of the property.  
                               Gift: by constitutional and stat. definition, “as a matter of law one cannot make a gift of property to the community,” because a gift is always SP. It is impossible to make a gift to the community estate. Such a gift is owned as tenants in common when made to both spouses, or as SP of one spouse.
v  Note: income from a gift is CP, unless it is a gift b/w spouses (wyly amendment)  
v  When the original deed recites consideration then it is not a gift.
                               Time of Acquisition: Texas uses time of acquisition test for determining CP, so it is determined at the time of purchase. 
                               Rules of procedure always yield to statutes.
§  An Overview of the Statutes and Marital Property
                               Even though the texas constitution only defines separate property, the texas family code provides a separate and community property definition. 
v  SP= same as const. definition but adds “separate property consists of the recovery for personal injuries sustained by spouse during marriage, except for recovery for loss of earning capacity during marriage”
v  CP= Community property consists of the property, other than separate property, acquired by either spouse during marriage.
§  Community Property Presumption and Characterization: property possessed by either spouse during or on the dissolution of marriage is presumed to be CP, but this presumption is rebuttable by “clear and convincing” evidence that the property is SP.
                               Increase of Land and Livestock
v  Land: increase in value of the SP remains the SP, but income derived from the land (produce, and rents) is CP.
v  Crops: the crops produced from land that is SP is CP. (DeBlane v. Hugh Lynch)
       Issue: timber and crops which potentially take a long time to grow are split.
v  Livestock: “rule of increase” the progeny of livestock become CP, but the fathering/mothering animal remains SP, as does any increase in the value of the original livestock.  (Stringfellow v. Sorrels)
v  Fixtures on land follow the characterization of the land.
                               Income from SP: dividends, interest, rents and revenues from a spouse’s SP is taken as CP. (Arnold v. Leonard)
v  The legislature cannot change the character of property, they must make a constitutional amendment. They can however change the rights of control and power, b/c the constitutional definition of SP gives them this power.
                               Personal Injury: recovery awarded for personal injuries sustained by either spouse (disfigurement/physical pain/suffering past or future) during the marriage is SP, except for the loss of earning capacity during marriage, which is CP. (Northern Texas Traction v. Hill)
v  All recoveries for PI are either community or separate and other spouse does not need to be added to the suit in order to recover. (SW Bell v. Thomas)
v  Medical Expenses Rule: recovery for medical and related expenses is for the community.
v  Contributory Negligence: Also, Neither W, nor W’s children are imputed based on the negligence of H. Contributory negligence no longer matters. Does not bar claim. (Schwing v. Bluebonnet).
                               Workers Compensation: workers comp is CP and a W does not have to join her H in the suit in order to recover.
a.        Homestead Rights Waivable by Agreement:
a.        Probate Homestead: a surviving spouse has a constitutional right to live in the community home until death or when he/she moves out. This provision can be waived by consenting adults. (Williams v. Williams)
                                                   i.      Waiver of Constitutional Rights: A premarital agreement can waive the right of a surviving spouse to a homestead and other exempt property, as well as sever the clauses in an agreement. The homestead right can be waived as long as the agreement is not unconstitutional or against PP, and when severing, it can not go against the main purpose of the agreement.
§  Conversion of Property: prior to our current constitution, or the amendment of 1948, the doctrine of implied exclusion kept 2 people from making an agreement to change the character of property. In 1948, the ct allowed for partition or exchange as long as it did not prejudice pre-existing creditors.
                               Changing SP to CP: the only way in which SP can be changed to CP is through the sale of SP to the Community for the FMV, with the proceeds from the sale remaining SP.
                               Changing CP to SP: Allowed through Partition or Exchange: only spouses could partition or exchange in writing their CP held presently into SP (not future interests).
v  Partition: agreement to create separate estates within a single community asset by either dividing portion into 2 and giving a portion to each separate estate, or saying that asset is held 50/50 as JT.  
       can partition land, property, and bank accounts. [Can avoid property from being CP by setting up agreements to partition every year] v  Exchange: can only exchange that which exists at the time of exchange. Not which could be acquired in the future [Community interest exchanged for other community interest] v  Agreements: mere agreement to change character of property is not enough b/c it is determined at time of acquisition (Kellet v. Trice). Additionally, mere agreement to partition and exchange is not enough, must be in writing. A contract clause that says everything is separate even w/o P & E is NOT valid.
v  Specificity and Inequality: equal property need not be given in the P&E, but the doc does have to specify the property that will be included in P&E, and that which is not included.  
v  Prejudice: allowed so long as u are not prejudicing pre-existing creditors, today—so long as you don’t defraud them.
v  BANK ACCTs—JTWROS: CP could not be used in JTWROS to a spouse, b/c such a transaction was not an interspousal gift (Hilley v. Hilley). One must partition FIRST, to make it SP. Until 1988, this was the rule. (Williams v. McKnight)
       Ex. If one was going to set up a JTWROS, so that on a H’s death his SP became all of W’s SP the couple must partition or exchange first.
       This 2-step process was strictly interpreted in writing with a card of partition/joint tenancy, and when signed in the wrong order it was held invalid. (Jameson v. Bain)
v  Valid interest in 3rd Party exception: don’t have to partition CP if it used to create a valid interest in a 3rd party [ex. Child of spouse].
The current constitutional provisions
§  Article XVI § 15 Amended as of 1980/1987/1999
                               Separate Property Definition: [1] All property, both real and personal of the spouse owned or claimed before marriage, and that acquired afterward by gift, devise or descent, shall be the separate property of that spouse
                               Spouses and Future Spouses Partition and Exchange of CPàSP: [2] and laws shall be passed more clearly defining the rights of spouses, in relation to separate and community property, provided that persons about to marry and spouses, w/o the intention to de-fraud pre-existing creditors, may by written instrument from time to time partition b/w themselves all or part of their property, then existing or to be acquired, or exchange between themselves the community interest of one spouse or future spouse in any other community property then existing or to be acquired where upon the portion or interest set aside to each spouse shall be and constitute a part of the SP and estate of s

her party and
o    Disclosure: must be given before signing of agreement. (at time it is signed). Unconscionabilty applies at the time of disclosure. LIST EVERYTHING.
       Did not voluntarily and expressly waive in writing such a disclosure and
       Did not have or reasonably could not have had adequate knowledge of the property or financial obligations of the other party.
o    Counter-Arg: based on lifestyle other party had reason to know of property.
v  Factors: Involuntariness/Duress: don’t have legal right to do what u are threatening. Not duress/involuntary if the party has a legal right to do it.
       Ex. Telling future W that u wont marry her and threatening bank account loan withdrawal= no duress.
       BUT Threatening to not return children unless pre-nup is signed IS duress.
       Q of law for TC
                               This is the exclusive manner to set aside pre/post marital agreement however u can argue CL defenses to assist in showing involuntariness {duress, lack of capacity, fraud, undue influence, or lack of bargaining power}. ≠ elements  
v  Note: Premarital Agreement different from a will b/c u are giving up a constitutional right. Pre-marital becomes valid on divorce.
                               Making sure that your pre/post Nup is enforceable:
v  Must be signed by both parties, and in writing. But no consideration is required.
v  videotape the signing, and include clause that she/he is giving up everything. And-
v  Separate disclosure agreement: *When any pre/post marital agreement is drafted, a separate disclosure agreement should be drafted and at the time of signing which precedes the signing of the pre/post marital agreement should be established.
v  Note: A partition or exchange during this time will be reviewed in the light of a post-marital agreement and must comport with 4.105.
v  An Agreement incident to divorce can be set aside.
v  Unconstitutional provisions are severable
v  Inferences: Cannot infer things from an agreement, pre-marital agreement should be interpreted according to the true intentions of the parties expressed in the instrument. If it is not listed in the pre-marital it is CP.
                               Will contracts—interspousal will contracts do not constitute a change in the constitutional definition of SP.
                               Separation Agreements: Tx does not recognize a legal separation, but tx courts may issue order pending appeal governing all aspects of the separation that precede the legal divorce.
                               Implied Validation Doctrine: an unconstitutional law will become constitutional under a constitutional amendment as of the statutes original date of inception, (not the date of the constitutional amend)
 
II.                  Characterization of Marital Property
§  Community property presumption and its rebuttal: property possessed by either spouse during or on the dissolution of marriage is presumed to be CP. This applies to all property possessed, not just property acquired after the marriage.
v  If SP is used to purchase property it is SP
v  If SP and CP are used to purchase the property it is owned as TIC. The spouses’ have proportionate interests.
v  If CP is used to purchase property, and a note is paid off with SP, it is CP and there is a claim for reimbursement. (Vice Versa- The estate must pay entirely for the property for it to be CP, if the community merely makes payments it is entitled to reimbursement.)
v  Must be a party to suit for separate ownership to be subject: Since a spouse’s ownership is separate, they are not bound by proceedings in bankruptcy against the spouse unless the other spouse was a party to the suit. (Foster v. Christensen)