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

GEORGE—MARITAL PROPERTY—FALL 2013

Texas Marital Property System

I. Introduction

a. Marital Property governs ownership, management, liability, and disposition of all property possessed during and upon dissolution of a marriage.

b. Community Property

i. TX is 1 of 9 CP states

c. Characterization: Process of determining whether MP was acquired at a time or in a manner which would deem it SP or whether it will simply be presumed to be CP, based on its character at the time of acquisition.

II. Texas Family Code & Marital Property

a. The Texas Family Code has sought to clarify the distinction between CP & SP.

i. Separate Property: Tex. Fam. Code §3.001

1. Property owned or claimed before marriage;

2. Property acquired during marriage by gift, devise, or descent; AND

3. Recovery for personal injuries sustained by a spouse during marriage, except for any recovery for loss of earning capacity during marriage.

ii. Community Property: Tex. Fam. Code §3.002

1. All property other than SP acquired by either spouse during marriage.

2. Note: May arise in 2 ways:

a. Doctrine of Implied Exclusion

b. Doctrine of Onerous Title: Whatever is acquired by the joint efforts of H & W shall be their CP.

b. CP Presumption

i. Tex. Fam. Code §3.003: CP Presumption

1. Property possessed by either spouse during or on dissolution of marriage is presumed to be CP.

2. Presumption may only be rebutted by C&C Evidence proving SP (not CP).

TX Constitution of 1876

I. Introduction

a. Focus: Most Important Provision

i. Article XVI, §15: “All property, both real and personal of the wife, owned or claimed by her before marriage, and acquired afterward by gift, devise, or descent, shall be her SP; and laws shall be passed more clearly defining the rights of the wife, in relation to her SP as well as that held in common with her husband.”

ii. Note: Defines Marital Property in terms of SP (doesn’t give a definition of CP).

II. Interpretation: 1845-1847

a. Increase to One Spouse’s SP

i. General Rule: Doctrine of Onerous Title à The benefits produced by one spouse’s SP constitute CP.

ii. Examples:

1. Annual crops grown on one spouse’s SP land = CP.

a. Example: DeBlane v. Hugh Lynch & Co. (cotton)

2. Dividends, interest, rent, and other income derived from one spouse’s SP = CP.

3. Offspring from livestock = CP.

a. Counterexample: Stringfellow v. Sorrells (b/c mules can’t reproduce)

iii. Counterexamples: An increase in value of one spouse’s SP remains SP.

1. Once-in-a-lifetime products from land (i.e., oil royalties, minerals, lumber) remain SP because considered to be a piecemeal part of the land.

2. Increased value of a horse after it wins the KY Derby.

3. Example: Stringfellow v. Sorrells (increased value of mules)

b. Changing Character of Property by a Spousal Agreement (SP à CP)

i. Old Rule: Spouses cannot change the character of property by mere agreement.

1. Example: Kellet v. Trice

a. W could not convey her SP to a trustee and have the trustee convey it back to both H & W as CP.

ii. New Rule: Since 1/1/2000, spouses can convert SP to CP if: 3 Elements

1. Spouses agree that all or part of SP owned by either or both;

2. Converted from SP to CP;

3. Agreement is in writing.

(Tex. Fam. Code §4.203)

III. Statutory Changes: 1911-1917

a. Doctrine of Implied Exclusion: The only way property can be deemed SP is if it falls within the explicit language of the definition on the TX Constitution – either acquired by gift, devise, or descent, or acquired prior to marriage. If it does not fall within either of these, it is implicitly excluded from SP and therefore is CP.

i. Example: Arnold v. Leonard

1. Legislative statute providing that rents and revenues arising from W’s SP would remain her SP was unconstitutional.

2. However, note that the court held that W’s rents/revenues could not be levied against by H’s creditor.

ii. Example: Gorman v. Gous

1. Premarital agreement that there would be no CP during the marriage was held to be void because the parties cannot change the character of property as it is set forth in the TX Constitution.

iii. Example: Northern TX Traction Co. v. Hill

1. Statute providing that all property and money received as compensation for personal injuries shall be treated as SP except the actual and necessary expenses for hospital fees and medical bills was unconstitutional (because treats lost wages as SP rather than CP).

2. Note: No longer good law.

IV. 1948 Amendments to the TX Constitution

a. Converting the Character of Property

i. Provision added to Article XVI, §15 à Post-marriage partition or exchange of CP permitted.

ii. 2 Steps to Converting:

1. Partition: Divide existing CP and make it SP.

a. Equal & Divided Interest

b. Severalty / Equal & Undivided Interest

2. Exchange: Parties exchange CP rights in two pieces of CP and create SP rights therein.

iii. 3 Requirements:

1. Must be post-marriage by spouses.

2. Partition or exchange must be in writing.

3. Must be done without prejudice to preexisting creditors.

b. Creating a Joint Tenancy with Right of Survivorship (JTWROS)

i. General Rule: Spouses must first partition property into SP and then create a JTWROS (in that order).

1. Counterexample: Hilley v. Hilley

a. H & W did not validly partition their property into SP because did not partition before setting up the joint tenancy.

2. Counterexample: Williams v. McKnight

a. H & W did not validly partition their property before creating the JTWROS.

3. Counterexample: Jamieson v. Bain

a. The bank form with the JTWROS on front and the Partition on back was improper because partition must occur first, before creation of JTWROS.

ii. Note: NO LONGER GOOD LAW (Constitution amended in 1988 to change this rule).

c. Joinder Rules

i. General Rules:

1. A spouse may sue and be sued without the mandatory joinder of the other spouse when suing for community funds.

2. Statutes supersede FRCPs and local rules.

a. Example: Few v. Charter Oak Fire Ins. Co.

i. W could sue Charter Oak for injuries suffered without joining H because FRCP 39 (mandatory joinder) was trumped by Article 4626 (each spouse shall have sole management, control, and disposition of CP that he/she would have owned if he/she was a single person, including personal earnings, revenues from SP, recoveries for personal injuries, etc.).

d. Characterization of Personal Injury Recoveries

i. General Rule: Damages for disfigurement, pain and suffering, mental anguish, etc. stemming from personal injury suffered by one spouse = SP.

1. Note: Rule applies to Exemplary Damages too! (Harrell v. Hochderffer)

2. Rationale: Recovery is a “replacement” to make the spouse whole again, not an “acquisition” of an asset by the community estate.

3. Example: Graham v. Franco

a. W’s recovery for injuries she suffered in a car accident constituted her SP, not H & W’s CP.

4. Exception: PI damages for loss of earning capacity and medical expenses are properly characterized as CP, not SP.

ii. Contributory Negligence

1. General Rule: One spouse’s contributory negligence will bar his/her claim for PI damages, but not the other spouse’s claim!

(Schwing v. Bluebonnet Express)

2. Exception: Contributory negligence will bar a recovery for medical expenses and earning capacity because recovery of these would be CP.

iii. Severance of PI Damages

1. If a recovery includes both CP and SP classes of damages, the court may sever the two and award some as CP and some as SP. (Sw. Bell Telephone Co. v. Thomas)

iv. One spouse’s child can stand in the shoes of that spouse if that spouse had a viable claim for PI damages. (Schwing v. Bluebonnet Express)

e. Homestead Waiver

i. General Rule: Spouses can waive a homestead right in a Premarital Agreement.

ii. Example: Williams v. Williams

1. After H died, his children could force W out of the home she and

operty and future property.

iii. May be for any percentage; no need to be equal.

iv. Preexisting creditors must now show no intent to defraud, rather than mere prejudice. (higher BOP)

III. Clause 3: Agreements are Limited to Spouses and to Income Producing Property

“. . . and the spouses may from time to time, by written instrument, agree between themselves that the income or property from all or part of the SP then owned by one of them, or which thereafter might be acquired, shall be the SP of that spouse.”

a. Important Note: Differs from Clause 2 because imposes strict limitations:

i. Only applies to spouses, not future spouses.

1. Future spouses can only use partition or exchange to recharacterize property; they cannot merely agree to do so.

a. Fanning: The 1980 amendment did not authorize persons intending to marry to enter into agreements that the income from one spouse’s SP would thereafter be the owner’s SP. So, 6.01 of the premarital agreement was unenforceable to the extent that the parties merely agreed that, as soon as legally possible (i.e., as soon as the amendment was adopted by vote), the income from their respective SP shall be their SP.

b. Exception: Some courts have been more liberal in their interpretations of agreements, concluding that some parties who are about to be married (i.e., future spouses) may agree to exchange their CP interests and thereby maintain as SP future income from SP and earnings acquired during marriage.

ii. Only applies to income-producing property, not salary.

1. Spouses can only use partition or exchange to re-characterize salary; they cannot merely agree to do so.

a. Exchange: Each has to exchange his interest in and to the other salary’s earnings from his particular employer.

b. Partition: Have to partition their bank account(s) and retain SP to their respective portions.

IV. Clause 4: Income Follows a Gift Between Spouses (Wyly Amendment)

Passed 11/4/80. Effective 11/25/80.

“. . . and if one spouse makes a gift of property to the other, that gift is presumed to include all of the income or property which might arise from that gift of property.”

a. Enacts the Wyly Amendment to make it possible for one spouse to completely give up his interest in a gift of property.

V. Clause 5: Spouses Can Establish Rights of Survivorship in CP

Passed 11/3/87. Effective 1/1/88

“. . . and spouses may agree in writing that all or part of their CP becomes the property of the surviving spouse on the death of a spouse.”

a. No need to partition first before creating JTWROS!

i. Jameson v. Bain overturned à Order of partition and creation of JTWROS no longer matters.

VI. Clause 6: Only Spouses Can Agree to Convert SP into CP

Passed 11/2/99. Effective 1/1/00.

“. . . and spouses may agree in writing that all or part of the SP owned by either or both of them shall be the spouses’ CP.”

a. Passed in the wake of Kellet v. Trice.

b. Note: Took so long because of fight between family attorneys and probate attorneys.

i. Family attorneys fought because once SP becomes CP, a divorce court may make a just and right division, which could result in less than 50% for one of the spouses (whereas CP is always equally divided).