Texas Marital Property Rights
Professor Musselman – Fall 2013
I. The Texas Marital Property System
1. Marital Property System governs: (1) Ownership; (2) Management; (3) Liability; and (4) Disposition of all property owned during marriage.
2. Tex. Fam. Code § 3.001 Separate Property: A spouse’s separate property consists of: (a) the property owned or claimed by the spouse before marriage; (b) the property acquired by the spouse during marriage by gift, devise or descent; (c) the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
3. Tex. Fam. Code § 3.002 Community Property: Community property consists of the property, other than separate property, acquired by either spouse during marriage.
4. Tex. Fam. Code § 3.003 Community Property Presumption: (a) Property possessed by either spouse during or on dissolution of marriage is presumed to be community property. (b) This presumption can only be rebutted by clear and convincing proof that the property in question is separate property.
B. The Constitution of 1876
1. Provisions: 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 separate property, and laws shall be passed more clearly defining the rights of the wife, in relation as well as to her separate property that is held in common with her husband. Laws shall also be passed providing for the registration of the wife’s separate property.
2. Statutes and Decisions, 1845–1947
a. DeBlane v. Hugh Lynch & Co. (1859) Debt judgment against H was levied on cotton produced from W’s separate land.
1) Rule: Crops produced on separate property land are community property.
2) Increase means increase in value of separate property.
b. Stringfellow v. Sorrels (1891) Judgment against H could not be levied against W’s separate property mules.
1) Rule: Livestock separate property of W. did not become community property because their value increased as they grew. Offspring of livestock would be community property.
c. Kellett v. Trice (1902) – H. attempted to change character of W’s separate property by deed.
1) Rule: Character of property could not be changed by agreement.
2) The W could sell it to community for FMV and the sales proceeds would be her separate property.
3) W. could give it to H. and it would become his separate property.
3. Statutory Changes, 1911–1917
a. Arnold v. Leonard (1925) – Creditor of H. attempted to obtain a judgment on rents from W’s separate property.
1) Rule: Under the Doctrine of Implied Exclusion, if it is not listed as separate property, it is community property.
2) Act of Legislature of 1913 could not change character of property, but could change rights of management and control of the property to be exempt from the debts of the H.
b. Northern Texas Tractor Co. v. Hill (1927) – Ex–W could not collect in personal injury suit from RR when her ex–H was contributorily negligent.
1) Rule: Personal injury suit was community property.
2) Personal injury proceeds were community property because of the Doctrine of Implied Exclusion.
C. The Constitution as Amended in 1948
1. Provisions – Allowed husband and wife to recharacterize property by partition or exchange to become separate property and to allow for joint tenancy.
2. Statutes and Decisions, 1948–1967
a. Williams v. McKnight (1966) – Spouses attempted to create bank accounts as joint tenancies with rights of survivorship under the probate code.
1) Rule: Property must be partitioned into separate property before a joint tenancy could be created.
3. Statutes and Decisions, 1968–1980
a. Few v. Charter Oak Fire Ins. Co. (1971) – Whether H was an indispensable party in a worker’s comp suit by W.
1) Rule: Worker’s comp claims are community property, but a spouse is not an indispensable party to a suit for same.
b. Graham v. Franco (1972) – Whether a statute allowing recovery for personal injuries to be separate property was constitutional.
1) Rule: Recovery for personal injuries to the body of the W., including personal disfigurement, and physical pain and suffering, past and future, is separate property of the W. Recovery of medical expenses and earning capacity belongs to the community.
2) Contributory negligence of the H. is not a bar to recovery by W.
c. Wyly v. Commissioner (1980)
1) Rule: Character of income from property gifted from one spouse to another is separate.
2) 1980 Amendment to Texas Constitution allows income from gifted property to be separate property.
d. Williams v. Williams (1978) – Whether a premarital agreement to waive homestead rights was valid.
1) Rule: Yes. Homestead rights could be validly waived by premarital agreement.
4. Interspousal Transfers – Either spouse possesses power to make a gift to the other spouse of his separate property or of his interest in community property, so that the property becomes the separate property of the donee spouse.
5. Equal Rights Amendment – Required the change to the constitution defining separate property in terms of both spouses.
D. The Constitution as Amended in 1980, 1987 and 1999
a. Spouse instead of wife – same rights to both.
b. Premarital Agreements – Future spouses can characterize all or part of their property then existing and future property. Becomes effective on marriage. Codified at Tex. Fam. Code § 4.001–.010.
c. Postnuptial Agreement – Allows partition or exchange of property between spouses. Codified at Tex. Fam. Code § 4.101–.106.
d. Interspousal Gift – If one spouse makes a gift of property to the other spouse, the gift is presumed to include all income and property that may arise from that property. Codified at Tex. Fam. Code § 3.005.
e. Survivorship – Allows community property to be held as joint property with rights of survivorship.
f. Spouses may recharacterize separate property to community property. Codified at Tex. Fam. Code § 4.101–.106. [4.102 allows partition of income w/partition of property] 2. Prenuptial Agreements – Premarital Agreements – Future spouses can characterize all or part of their property then existing and future property. Becomes effective on marriage. Codified at Tex. Fam. Code § 4.001–.010.
3. Postnuptial Agreements
b. Will Contracts – Do not constitute a change in the constitutional definition of separate property.
c. Joint Tenancy with Rights of Survivorship – Survivorship – Allows community property to be held as joint property with rights of survivorship.
4. Separation Agreements – There is no legal separation in Texas, however spouses may recharacterize their property by partition.
5. Statutes and Decisions, 1980 to Present
a. Patino v. Patino (1985) – Whether property division was a partition agreement or a settlement made in contemplation of divorce.
1) Rule: The agreement was made in contemplation of divorce and the action of the trial court in setting aside the agreement as not just, fair, and equitable was proper.
2) Tex. Fam. Code § 4.102 – Partition or Exchange of Community Property
3) Tex. Fam. Code § 4.105 – Enforcement
a. A partition or exchange agreement is not enforceable if the party against whom enforcement is requested proves that:
1. the party did not sign the agreement voluntarily; or
2. the agreement was unconscionable when it was signed
b. Bradley v. Bradley (1987) – During the marriage, the wife stayed at home and the husband was a doctor with his own professional corporation.
1) Issue: Whe
equate knowledge of the property or financial obligations of the other party.
b. An issue of unconscionability of a partition or exchange agreement shall be decided by the court as a matter of law.
c. The remedies and defenses in this section are the exclusive remedies or defenses, including common law remedies or defenses.
h. Fanning v. Fanning (1993) – The Supreme Court granted motion for rehearing to determine if the 1981 agreement was valid because the issue of unconscionability was not addressed.
II. Characterization of Marital Property
A. The Community Property Presumption – One of the basic tenets of Texas marital property system. There is a corresponding right to rebut that presumption.
1. Foster v. Christensen (1934) – H. was adjudged a bankrupt and land purchased from Ws parents was not homestead and was subject to sale in satisfaction of the debts.
a. Issue: Whether the land was separate property of W and not subject to satisfy creditors.
b. Rule: W. would not be bound by proceedings in bankruptcy and proof that payment was made out of her separate funds would give her an interest or equity in proportion to the payment by her. The purchaser acquired only such title as H. had.
2. Maples v. Nimitz (1978) – Executor of Ws estate sued executor of H’s estate to recover property.
a. Issue: Whether land conveyed by son to father during marriage was community or separate property.
b. Rule: The property is presumed to be community and the land lost its separate character when it was conveyed to H. during the marriage.
3. Kyles v. Kyles (1992) – H. received settlement for personal injury.
a. Issue: Whether proceeds from a personal injury settlement are separate property.
b. Rule: The property was presumed to be community. The burden of proof is on the spouse to demonstrate what portion of the settlement for a lawsuit is separate property.
4. Osborn v. Osborn (1997) – H. receives a personal injury settlement after divorce, but the trial court awarded 30% of the recovery to W.
a. Issue: Whether the trial court erred in characterizing a personal injury settlement as community property before it was received.
b. Rule: The characterization of a personal injury settlement is: P/I is separate property of H; loss of consortium was separate property of W; damages for lost wages, medical costs, and other expenses are community property.
B. The Doctrine of Inception of Title
1. Welder v. Lambert (1898) – Seminal case on inception of title.
a. Issue: Is the status of property to be determined by the acquisition of the final title or by the origin of the title?
b. Rule: Title of property relates to its origin and must take its character from it.
2. Acquiring by Homestead – 1800s: Settling open land & family had superior claim to title.
a. Title incepted when family actually moved on property under Mills. 1st essential was to move onto the land.
b. Rule: Character of property depends on whether it was acquired before or after marriage and the instant you acquire is when no one can divest you of the right.