MARITAL PROPERTY OUTLINE
CHAPTER 1: THE TEXAS MARITAL PROPERTY SYSTEM
· Marital Property System – governs ownership, management, liability, and disposition of all property possessed during and upon dissolution of a marriage.
· TFC § 3.001. Separate Property
o A spouse’s separate property consists of:
1) The property owned or claimed by the spouse before marriage;
2) The property acquired by the spouse during marriage by gift, devise or descent.
3) The recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage.
· TFC § 3.002. Community Property
o Community property consists of the property, other than separate property, acquired by either spouse during marriage.
· TFC § 3.003. Presumption of Community Property
o (a) Property possessed by either spouse during or on dissolution of marriage is presumed to be community property.
o (b) The presumption that all property possessed by either spouse either during marriage or upon dissolution of marriage is community, can only be rebutted by clear and convincing proof that the property in question is separate property.
· Management of Property (5 categories):
1) H’s separate property that he manages
2) W’s separate property that she manages
3) Community property that H solely manages
4) Community property that W solely manages
5) Community property that is jointly managed
B. THE CONSTITUTION OF 1876
· Texas Constitution of 1876, article XVI § 15,
o 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 to her separate property as that held in common with her husband. Laws shall also be passed providing for the registration of the wife’s separate property.
STATUTES AND DECISIONS, 1845 – 1947
· DeBlane v. Hugh Lynch & Co. page 4
o Judgment against H alone for a debt. Judgment was levied against cotton owned by the wife, which was produced by slaves and on land that are separate property of the wife.
o The principle which lies at the foundation of the whole system of community property is that whatever is acquired by the joint efforts of the husband and wife shall be their community property.
o Crops produced on separate property land are community property.
o An increase in value of land that is separate property remains separate property.
o “Increase” means the increase in value. So if wife’s separate property was worth $100 at the time of the marriage and upon divorce it was worth $1,000, that $900 is separate property. But growing crops or collecting rent on that separate property is community property.
· Stringfellow v. Sorrells page 6
o Judgment against H executed against W’s separate property mules. Are the mules, which H cared for and trained during the marriage still separate property of the W? YES
o Offspring of livestock that is separate property of the wife is community property. The livestock remains separate property, despite any increase in the weight or value of such livestock during the marriage.
· Kellet v. Tricepage 8
o H and W shortly prior to divorce joined in execution of a deed through a trustee where the W conveyed her separate property to the trustee and then the trustee conveyed back to the H as community property. In post-divorce litigation between the former H and W, the court held that the deeds were not effective to change the separate property of the W to community property.
o Character of property is set at the time of acquisition and an agreement cannot change what has been constitutionally defined.
§ The husband could have purchased the land with community funds and then the property would be community property. The wife would have the funds as separate property.
§ In Texas we have a just in right provision at divorce so the property can be divided up however. At death though it is split 50-50.
§ In 1948, spouse could change community to separate
§ In 1980, at any time, spouses may agree that all or part of the separate property owned by either or both spouses is converted to community property. Subchapter C. § 4.202 (p.613).
STATUTORY CHANGES, 1911 – 1917
· Wife acquired power to:
o Manage her separate property
o Power of control, management and disposition of “special community property” – personal earnings, rents from W’s real estate and interest and dividends on stocks and bonds.
o Exemption from liability for H’s debts on her “special community property” as well as her separate property.
· Arnold v. Leonard page 11
o H incurred debts. His creditors tried to levy the rents and revenues of W’s separate rental property. Creditors argued that the constitution does not define community property but it does define separate property and under The Doctrine of Implied Exclusion if the rents and revenues of separate property are not defined as separate property then they are community property. W argued that even if the property is community, they should be able to exempt the property from creditors based on statues defining parameters of he W’s liabilities.
o The property here is community property and the legislature can’t change the character buy they can exempt it from liability from spouse’s creditors.
o Legislature cannot change the character of property but they can change the rights of control and power.
· Doctrine of Implied Exclusion – The Negative Test
o If the Constitution says that this is the only way you can acquire a right in something, then anything not specifically listed is impliedly excluded.
· Doctrine of Onerous Title – The Affirmative Test
o Whatever is acquired by the joint efforts of the spouses is community property.
o Community property includes dividends, interest, rent, and income derived from property.
· Northern Texas Traction Co. v. Hill page 16
o W was passenger in ex-H’s car, when it was hit. W was injured and sued for negligence. The Defendants said W must list H also because he is contributorily negligent.
o The court denied the special exceptions because it was here separate property so the husband was not a necessary party.
o Article 4615. Revised Statutes of 1925 – All property or moneys received as compensation for personal injuries sustained by the wife shall be her separate property, except such actual and necessary expenses as may have accumulated against the husband for hospital fees, medical bills, and all other expenses incident to the collection of said compensation.
o Gorman v. Gause – doctrine of implied exclusion keeps two people from making an agreement to change the character of property. Doctrine of implied exclusion was applied to a prenuptial agreement, which had declared that no property acquired during the marriage would be community. The Court viewed this as an attempt by the parties to fix the character of marital property by means different from that recognized in the state constitution, and held the agreement to be void and unenforceable.
o Stickland v. Wester – Wife had purchased property from her husband with money she earned as a school teacher. The couple had entered into an agreement that her personal earnings would be her separate property. While that agreement was found to be invalid, because community property law cannot be changed by contract, the deed executed by the husband conveying the property was effective as a gift.
o King v. Bruce – A husband and wife attempted to partition their gold coins which were community property via an elaborate series of transactions. The court held that the couple’s attempt was ineffective, as it was not recognize by the constitution as a means of acquiring separate property.
§ Article 16 was amend to include §15 after this case.
C. THE CONSTITUTION ARTICLE 16 §15 AS AMENDED IN 1948
· 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 to her separate property as that held in common with her husband; provided that husband and wife, without prejudice to preexisting creditors, may from time to time by written instrument as if the wife were feme sole partition between themselves in severalty or into equal undivided interests all or any part of their existing community property, or exchange between themselves the community interest of one spouse in any property for the community interest to the other spouse in other community property, whereupon the portion or interest set aside to each spouse shall be and constitute a part of the separate property of such spouse.
o Partition – Husband and wife hold Whiteacre as community property. They decide to split it and one half becomes husbands separate property and one half becomes wife’s separate property.
o Exchange – Husband and wife hold Greenacre and Blackacre as separate property. Husband exchanges his community property interest in Blackacre for wife’s community property interest in Greenacre, and so then all of Greenacre is husband’s separate property and all of Black acre is wife’s separate property.
o These cannot be done in a prenuptial agreement, the couple must be married.
STATUTES AND DECISIONS, 1948 – 1967
· Hilley v. Hilley – Community property cannot be used to create a joint tenancy with right of survivorship between the spouses, because such a transaction was no an inter-spousal gift and you must partition or exchange first.
· Davis v. East Texas Savings & Loan Ass’n – spouses could utilize separate property to create a valid joint tenancy with right of survivorship, with the spouses as joint tenants.
· Kreuger v. Williams – a spouse, utilizing community property, could create a valid joint tenancy with right of survivorship with the spouse and a third part as joint tenants.
· Williams v. McKnight page 24
o H went in with W to set up bank accounts in 3 different banks, setting up JTWROS. There was no partition at all. Under the probate code, H and W may by written agreement create JT, but this violates the constitution. Courts strictly read the constitution- up until 1988, JTWROS had to be made by partition. W argued that her H set up bank accounts with their property as joint accounts with rights of survivorship, proven by the signature cards on the account.
o There can be no JTWROS arising from CP without partitioning it first.
o Jameson v. Bain – the partition/joint tenancy card was signed in the wrong order, so the spouses did not first partition the property, but did so after creating a joint tenancy…which was not valid due to the strict procedures in the constitution.
STATUTES AND DECISIONS, 1968 – 1980
· Few v. Charter Oak Fire Ins. Co. page 28
o Plaintiff (Few) won a judgment from Defendant after she was severely burned in an accident at work. Since her workers compensation was community property the Defendants argue that her husband should have been joined as a party to the lawsuit. Under rule 39.
o When a rule of the court conflicts with a legislative enactment, the rule yields. A wife does not have to join her husband in a suit for recovery of worker’s compensation benefits arising out of her own injuries. Worker’s compensation is community property, and her husband owns it jointly with her. But despite the joint ownership, he doesn’t have to be a party to the suit to recover them.
o §3.001(3): the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage, is separate property.
· Graham v. Franco page 31
o Mr. and Mrs. Franco were in a car that was struck by the defendant. Should the wife be able to recover for personal injury or is the husband’s contributory negligence a bar?
o The recovery awarded for personal injuries sustained by either spouse during marriage is the separate property of that spouse except for any recovery for loss of earning capacity during the marriage. The acts of negligence of the husband are not imputed to the wife so as to bar her recovery.
o PERSONAL INJURY RECOVERY IS SEPARATE PROPERTY
§ What day controls the characterization of property? The day the accident occurred.
§ The person who was injured has sole management of personal injury recoveries, even if some of them are characterized as community property.
§ Pain and suffering is separate
§ Medical expenses and lost wages are community property.
o Southwestern Bell v. Thomas – W’s recovery for damages for personal injuries is not barred by contributory negligence on H’s part.
o Schwing v. Bluebonnet Express – in a wrongful death action for the death of a W, contributory negligence of the H would be imputed to bar the H’s cause of action, but that it would not serve as a bar to the cause of action of the children.
· Wyly v. Commissioner page 39
o Three cases…1) H made irrevocable trust funded by community property; trust income was to be distributed to W and then to grandchildren upon her death. 2) H made gifts to his W of one-half of his community interesting bonds. 3) H transferred his community property interests in certain assets to his W.
o A gift of property from one spouse to the other or a gift of a spouse’s one-half community interest to the other spouse results in separate ownership in the donee.
o Income from separate property becomes the community property of both spouses, and the only way to change it to separate property is to partition it after it comes into existence. But the spouse who owns the separate property has a “special community” or a “sole management community” interest in the income.
§ Special Community Property – A spouse receiving income from his separate property holds what is known as “special community” or a “sole management community” interest.
· A spouse has an absolute right to manage their special community property, as long as there is not a fraud on the community.
§ Wyly Amendment –  If one spouse makes a gift of property to the other that gift is presumed to include all the income or property which might arise from that gift of property.
· NOTE: this amendment applies to SPOUSES ONLY!
· So, income from a rent house given to wife from her parents is community property.
§ What if before marriage, you give your fiancée stock certificates as gifts that produced dividends before marriage? The stock is separate property. Any income from the stock before marriage is separate. Any income from the stock after the marriage is community.
· Williams v. Williams page 49
o Husband and wife prior to marriage signed an agreement that their separate property would remain separate property including the income from that property.
o A premarital agreement can waive the constitutional and statutory rights of a surviving spouse to a homestead and other exempt property.
o Premarital agreements will be construed as broadly as possible in order to allow the parties as much flexibility to contract with respect to property. As long as the agreement does not violate constitutional and statutory definitions of separate and community property or the requirements of public policy.
§ The Texas Constitution was amended in 1980…the “Williams Amendment” is a result of this case.
§ Can a couple agree in a prenuptial agreement that all income from separate property will be separate property? No. Such a clause is invalid because it is in violation of the Constitution.
§ Homestead Right: the right of a surviving spouse to continue to occupy the marital home that is separate property of their dead spouse, until the surviving spouse either dies or abandons the home.
§ Result of this case: it is possible to waive your homestead rights.
4. INTERSPOUSAL TRANSFERS
· Inter-spousal Transfers
o 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.
o While property purchased by the community estate from the separate estate of a spouse for a valuable consideration is community property, it is not possible for a gift to be made to the community estate, because of the constitutional definition.
e educational background of the parties
§ The size of separate estates
§ The age, health, and physical condition of the parties
§ The fault in breaking up the marriage
§ The benefit the innocent spouse would have received had this marriage continued, and
§ The probably need for future support
o Here we have an enforceable agreement that did not accomplish the goal of the proponent.
· Collins v. Collins page 73
o When the couple got married, they each brought into the marriage a separate business and other significant separate property. During the marriage, the parties kept records in which they characterized the income from their separate property as separate property and carried forward such characterization into their joint income tax returns, all of which were signed by both parties. The court said that tax returns are not agreements to partition because they contain no language of agreement to partition. At best, they indicate a written memorandum of an oral or unstated agreement to partition.
o A joint income tax return signed by both spouses, in which the income of various assets is listed as separate and community, absent specific language indicating that the document is intended by the parties to constitute an agreement to partition, does not constitute a partition agreement in writing and signed by the parties as required by law.
§ The family code requires an agreement in writing signed by both parties which contains the language of an agreement to partition.
· Daniel v. Daniel page 75 (professor tried this case)
o A couple entered into an agreement after 5 years of marriage where each spouse agreed that all income on or after the date of agreement would be that spouse’s SP, all monies from spouse’s personal services are SP, and past distributions of trust will be SP. Both H and W had sizeable trusts, but the wife’s was huge. H wanted to break this post-marital agreement. This case never went to jury because H never raised a question of fact as to whether the agreement was valid. H claims on appeal that this agreement wasn’t valid (because there was no reasonable disclosure of her assets) and that the agreement was drafted when proponent (W) had the burden. The court looked at when they tried the case to determine that H (opponent) has the burden. The court directed verdict for Mrs. Daniel. The burden of proof fell on Mr. Daniel, which he failed to meet, because he failed to prove the agreement was unconscionable or that there was no disclosure; therefore, the agreement is valid.
o A postnuptial agreement will be treated the same as a partition and exchange of community property agreements.
o § 4.105 (c) is considered the Daniels amendment.
o When a spouse knowingly elects not to inquire into matters that affect his or her interest, they cannot later complain that they didn’t know the full circumstances of the transaction.
o Doctrine of Implied Validation: the legislature may impliedly validate an invalid statute by passing a constitutional amendment to cure it. This permits a constitutional amendment to impliedly validate a statute that was originally beyond the legislature’s power to enact if it does not impair the obligation of a contract or impair vested rights.
· Beck v. Beck page 83
o The couple entered into a premarital agreement in 1977 which said that all the income derived by separate property will remain separate property.
o Though the agreement was invalid per the constitution at the time, the legislature had adopted a constitutional amendment allowing future spouses to partition and exchange, and therefore the agreement was held valid.
· Fanning v. Fanning page 87 (she handled the appeal for Mr. Fanning)
o **IMPORTANT CASE** The Fannings, who were both lawyers, decided to divorce. The court awarded the majority of Fanning’s assets and custody of their children to the W upon divorce. A visiting judge gave W 100% of the CP. H sued. They had a premarital agreement enacted prior to 1980 amendment. There was an exchange in the premarital agreement where H kept his law practice and the money from his law practice and W kept her law firm and the salary from her law firm. The premarital agreement said that all income and revenue from separate property would be community property, but that if the constitutional amendment allowing for future spouses to partition and exchange is passed, then they agreed that the income and revenue would be separate property.
o The court said that the portion of the constitutional amendment validating the partition and exchange of property then existing or to be acquired applies to persons about to marry and spouses, the portion of the amendment validating written agreements concerning income or property derived from separate property applies only to spouses.
o We can have a premarital agreement and they are going to uphold 6.02 and the 50/50 agreement on the community property.
CHAPTER 2: CHARACTERIZATION OF MARITAL PROPERTY
A. THE COMMUNITY PROPERTY PRESUMPTION
· Foster v. Christensen page 101
o Mr. Newgent was bankrupt. He had listed some lands as part of his assets, but as homestead. Homestead cannot be sold to satisfy creditors. Part of the land, however, was not used as homestead, so it was sold to Christensen. At a bankruptcy sale, you can only purchase what title the bankrupt person has. Foster is suing to set aside the sale, because they are the parents of Mrs. Newgent and claim that this land was given to her as separate property. The land is presumed to be separate. No evidence of the separate property character of the land was offered at the bankruptcy hearing, so it could not be brought up in court. The Court of Appeals affirmed saying that if they brought it up now, it would be a collateral attack. Since wife was not a party to the bankruptcy hearing, so any claims she had on the property could not be adjudicated. So she’s not bound by that outcome, and this is not actually a collateral attack.
o Judgment of foreclosure and sale in a suit against the husband when the land is the separate property of the wife does not affect her title.
· Maples v. Nimitz page 104
Ruth and Frank were married in 1951. They both died without having had children of this marriage, but they both had children from prior marriages. Ruth’s daughter, Necil, and Frank’s son, Jack, are fighting over land owned by the couple upon their deaths. Necil said that the land was community property and so she has a one half interest in it. Jack says the land was Frank’s separate property and so he gets it all. The land was acquired by Frank in 1921, and was his separate